<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 24, 1997.
REGISTRATION NO. 333-
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------------
RED MAN PIPE & SUPPLY CO.
(EXACT NAME OF ISSUER AS SPECIFIED IN ITS CHARTER)
OKLAHOMA 5084 73-1013654
(STATE OR OTHER (PRIMARY STANDARD (I.R.S. EMPLOYER
JURISDICTION OF INDUSTRIAL IDENTIFICATION NO.)
INCORPORATION OR CLASSIFICATION CODE
ORGANIZATION) NUMBER)
8023 E. 63RD PLACE, SUITE 800
TULSA, OKLAHOMA 74133
(918) 250-8541
(ADDRESS, INCLUDING ZIP CODE, TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
L. CRAIG KETCHUM
PRESIDENT
8023 E. 63RD PLACE, SUITE 800
TULSA, OKLAHOMA 74133
(918) 250-8541
(NAME, ADDRESS, INCLUDING ZIP CODE, TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
COPIES TO:
C. RAYMOND PATTON, JR., ESQ. ROBERT F. GRAY, JR., ESQ.
CONNER & WINTERS, A PROFESSIONAL FULBRIGHT & JAWORSKI L.L.P.
CORPORATION 1301 MCKINNEY
3700 FIRST PLACE TOWER, 15 EAST 5TH HOUSTON, TEXAS 77010
STREET (713) 651-5151
TULSA, OKLAHOMA 74103-4344
(918) 586-5711
----------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after this Registration Statement becomes effective.
----------------
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [_]
If this Form is filed to register additional securities for an offering
pursuant to 462(b) under the Securities Act, check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
check the following box. [_]
----------------
CALCULATION OF REGISTRATION FEE
<TABLE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<CAPTION>
PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED OFFERING PRICE(1)(2) REGISTRATION FEE
- -------------------------------------------------------------------------------
<S> <C> <C>
Class A Common Stock
($0.01 par value)....................... $86,250,000 $25,444
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
</TABLE>
(1) Estimated solely for purposes of calculating the registration fee in
accordance with Rule 457. In accordance with Rule 457(o) under the
Securities Act of 1933, as amended, the number of shares being registered
and the proposed maximum offering price per share are not included in this
table.
(2) Includes shares subject to an over-allotment option to be granted to
the Underwriters by the Company.
----------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THE
REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION,
ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
PROSPECTUS (Subject to Completion)
Issued December 24, 1997
Shares
Red Man Pipe & Supply Co.
CLASS A COMMON STOCK
-----------
OF THE SHARES OF THE CLASS A COMMON STOCK BEING OFFERED HEREBY,
SHARES ARE BEING SOLD BY THE COMPANY AND SHARES ARE BEING SOLD BY THE
SELLING STOCKHOLDER. SEE "PRINCIPAL AND SELLING STOCKHOLDERS." THE
COMPANY WILL NOT RECEIVE ANY OF THE PROCEEDS FROM THE SALE OF THE CLASS
A COMMON STOCK BY THE SELLING STOCKHOLDER. PRIOR TO THIS OFFERING,
THERE HAS BEEN NO PUBLIC MARKET FOR THE CLASS A COMMON STOCK. IT IS
CURRENTLY ESTIMATED THAT THE INITIAL PUBLIC OFFERING PRICE PER
SHARE WILL BE BETWEEN $ AND $ . SEE "UNDERWRITERS" FOR A
DISCUSSION OF THE FACTORS CONSIDERED IN DETERMINING THE
INITIAL PUBLIC OFFERING PRICE.
THE COMPANY HAS TWO CLASSES OF COMMON STOCK OUTSTANDING. THE CLASS A COMMON
STOCK AND CLASS B COMMON STOCK ARE SUBSTANTIALLY IDENTICAL IN ALL
RESPECTS EXCEPT THAT HOLDERS OF CLASS A COMMON STOCK ARE ENTITLED TO
ONE VOTE PER SHARE AND HOLDERS OF CLASS B COMMON STOCK ARE ENTITLED
TO TEN VOTES PER SHARE ON ALL MATTERS SUBMITTED TO A VOTE OF
STOCKHOLDERS. FOLLOWING THE CLOSING OF THE OFFERING, THE
HOLDERS OF THE CLASS B COMMON STOCK WILL HAVE
APPROXIMATELY % OF THE COMBINED VOTING POWER OF THE
OUTSTANDING COMMON STOCK. SEE "DESCRIPTION OF
CAPITAL STOCK."
-----------
APPLICATION WILL BE MADE TO LIST THE CLASS A COMMON STOCK ON THE NEW YORK
STOCK EXCHANGE UNDER THE SYMBOL "RMN."
-----------
SEE "RISK FACTORS" BEGINNING ON PAGE 8 FOR INFORMATION THAT SHOULD BE
CONSIDERED BY PROSPECTIVE INVESTORS.
-----------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
-----------
PRICE $ A SHARE
-----------
<TABLE>
<CAPTION>
UNDERWRITING PROCEEDS
PRICE TO DISCOUNTS AND PROCEEDS TO TO SELLING
PUBLIC COMMISSIONS (1) COMPANY (2) STOCKHOLDER
-------- --------------- ----------- -----------
<S> <C> <C> <C> <C>
Per Share...................... $ $ $ $
Total (3)...................... $ $ $ $
</TABLE>
- -----
(1) The Company and the Selling Stockholder have agreed to indemnify the
Underwriters against certain liabilities, including liabilities under
the Securities Act of 1933, as amended. See "Underwriters."
(2) Before deducting estimated expenses of $ payable by the Company.
(3) The Company has granted the Underwriters an option, exercisable within
30 days of the date of this Prospectus, to purchase up to an aggregate
of Shares at the price to public less underwriting discounts and
commissions for the purpose of covering over-allotments, if any. If the
Underwriters exercise such option, the total price to public,
underwriting discounts and commissions and proceeds to Company will be
$ , $ and $ , respectively. See "Underwriters."
-----------
The Shares are offered, subject to prior sale, when, as and if accepted by
the Underwriters named herein and subject to approval of certain legal matters
by Fulbright & Jaworski L.L.P., counsel for the Underwriters. It is expected
that delivery of the Shares will be made on or about , 1998, at the
office of Morgan Stanley & Co. Incorporated, New York, New York, against
payment therefor in immediately available funds.
-----------
MORGAN STANLEY DEAN WITTER
SALOMON SMITH BARNEY
THE ROBINSON-HUMPHREY COMPANY
, 1998
<PAGE>
[MAP OF UNITED STATES IDENTIFYING LOCATIONS OF THE COMPANY'S FACILITIES.]
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE CLASS A COMMON
STOCK. SPECIFICALLY, THE UNDERWRITERS MAY OVER-ALLOT IN CONNECTION WITH THE
OFFERING, AND MAY BID FOR, AND PURCHASE, SHARES OF THE CLASS A COMMON STOCK IN
THE OPEN MARKET. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITERS."
2
<PAGE>
NO PERSON IS AUTHORIZED IN CONNECTION WITH ANY OFFERING MADE HEREBY (THE
"OFFERING") TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION NOT
CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE
COMPANY, BY ANY SELLING STOCKHOLDER OR BY ANY UNDERWRITER. THIS PROSPECTUS
DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY
SECURITY OTHER THAN THE CLASS A COMMON STOCK OFFERED HEREBY, NOR DOES IT
CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY
SECURITIES OFFERED HEREBY TO ANY PERSON IN ANY JURISDICTION IN WHICH IT IS
UNLAWFUL TO MAKE SUCH AN OFFER OR SOLICITATION TO SUCH PERSONS. NEITHER THE
DELIVERY OF THIS PROSPECTUS NOR ANY OFFER OR SALE MADE HEREUNDER SHALL UNDER
ANY CIRCUMSTANCES IMPLY THAT THE INFORMATION HEREIN IS CORRECT AS OF ANY DATE
SUBSEQUENT TO THE DATE HEREOF.
UNTIL , 1998 (25 DAYS AFTER THE COMMENCEMENT OF THE OFFERING), ALL
DEALERS EFFECTING TRANSACTIONS IN THE CLASS A COMMON STOCK, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS DELIVERY REQUIREMENT IS IN ADDITION TO THE OBLIGATION OF DEALERS TO
DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR
UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
----------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary....................................................... 4
Risk Factors............................................................. 8
The Company.............................................................. 13
Use of Proceeds.......................................................... 14
Dividend Policy.......................................................... 14
Dilution................................................................. 15
Capitalization........................................................... 16
Selected Financial Data.................................................. 17
Management's Discussion and Analysis of Financial Condition and Results
of Operations........................................................... 18
Business................................................................. 23
Management............................................................... 32
Certain Transactions..................................................... 37
Principal and Selling Stockholders....................................... 38
Shares Eligible for Future Sale.......................................... 39
Description of Capital Stock............................................. 40
Underwriters............................................................. 45
Legal Matters............................................................ 47
Experts.................................................................. 47
Available Information.................................................... 47
Index to Consolidated Financial Statements............................... F-1
</TABLE>
----------------
The Company intends to furnish to its stockholders annual reports containing
audited consolidated financial statements and quarterly reports for the first
three quarters of each fiscal year containing unaudited interim financial
information.
3
<PAGE>
PROSPECTUS SUMMARY
The following summary should be read in conjunction with, and is qualified in
its entirety by, the more detailed information and financial statements,
including the notes thereto, appearing elsewhere in this Prospectus. Unless
otherwise indicated, the information in this Prospectus (i) gives effect to the
reclassification of the Company's outstanding shares of Class A Common Stock
and Class B Common Stock effected December 12, 1997, and subsequent -for-one
stock split of its Class A Common Stock and Class B Common Stock outstanding
effected , 1998, and (ii) assumes that the Underwriters' over-allotment
option is not exercised. Unless otherwise indicated by the context, references
herein to the "Company" or "Red Man" mean Red Man Pipe & Supply Co., an
Oklahoma corporation, and references to "Common Stock" shall mean both the
Class A and Class B Common Stock.
THE COMPANY
Red Man is a leading distributor of products and services to the energy
industry. The Company distributes more than 55,000 products and tubular goods
through 42 service and supply centers and 11 sales locations strategically
located close to major hydrocarbon producing and refining areas of the United
States. In addition, through its membership in an association of distributors
with distribution centers in 35 states, the Company participates in certain
national accounts with other members. Due to the breadth of its products and
services, Red Man is able to serve the needs of companies in the upstream
(i.e., drilling and producing), midstream (i.e., gathering and transporting)
and downstream (i.e., processing, refining and manufacturing) sectors of the
energy industry. The Company believes it is one of only two companies that can
provide products and services to customers engaged in upstream-to-downstream
operations in major hydrocarbon producing and refining areas of the United
States.
The Company's operations involve the distribution of tubular goods, including
oil country tubular goods ("OCTG") and line pipe, and the operation of service
and supply centers which distribute maintenance, repair and operating ("MRO")
products utilized in the energy industry, as well as industrial products
consisting primarily of line pipe, valves, fittings and flanges ("PVF"). In
fiscal 1997, sales of tubular goods represented approximately 55% of total
sales, and sales of other products from service and supply centers represented
approximately 45% of total sales.
The Company distributes a broad range of OCTG and line pipe for oilfield and
industrial applications. The Company purchases OCTG and line pipe manufactured
by 23 domestic mills and four foreign mills and distributes these products
directly from the mills or from the Company's own inventory maintained in
storage yards strategically located throughout major hydrocarbon producing
regions of the United States. A significant portion of the Company's tubular
goods sales is made pursuant to stocking program arrangements with its
customers. Under such arrangements, the Company provides various specifications
of tubular goods at an agreed upon price generally for a period from three to
18 months.
The Company's oilfield and industrial service and supply centers provide MRO
and PVF products and various related services to the upstream, midstream and
downstream operations of the energy industry, as well as to engineering and
construction companies, fabricators, drilling contractors, utilities,
processing plants and energy industry service companies. In addition, the
Company markets gas measurement products, consisting of meter tubes and skid-
mounted meter stations, and distributes measurement-related products and
services from its various service and supply centers.
As major integrated and large independent oil and gas companies have begun
implementing cost-cutting and efficiency initiatives to focus on their core
business activities, many of these companies have begun outsourcing their
procurement and inventory management requirements. In response to these
initiatives, the Company provides a number of value added services, including
inventory procurement and management,
4
<PAGE>
warehouse management, integrated supply arrangements, management information
reporting and total project management. These value added services are designed
to enable the Company's customers to operate more efficiently by reducing their
total procurement costs and the number of suppliers utilized.
In addition, a number of major integrated and large independent oil and gas
companies are seeking strategic alliances with their suppliers and service
providers to establish service programs which enhance operating efficiencies.
The Company has developed and is actively pursuing strategic alliances with its
customers whereby a number of the Company's value added services may be
combined as needed to enable these customers to operate more efficiently. Red
Man also benefits from these alliances due to the longer term relationships
created. These relationships generally provide greater consistency and
predictability with respect to customer procurement requirements, improved
utilization of assets and increased inventory turnover. The Company initially
developed alliances to meet the needs of the upstream operations of its major
integrated and large independent oil and gas companies. However, the Company
has expanded certain of these alliances to provide products and services to the
midstream and downstream operations of its integrated customers. The Company's
major customers with which it has strategic alliances include Amoco Production
Company, Chevron USA, Inc., Coastal Management Corporation, Exxon Company,
U.S.A., Mobil Oil Corporation, OXY USA, Inc., Phillips Petroleum Company, Shell
Offshore Inc., Texaco, Inc., The Williams Companies, Inc. and Union Pacific
Resources Group, Inc. In addition, the Company has commenced developing
strategic alliances with industrial customers, including Kaiser Aluminum &
Chemical Corporation. The Company considers its efforts to obtain strategic
alliances with customers to be of major importance to its future growth.
The Company has grown its business operations both through acquisitions and
internal expansion. Sales have grown at a 25.3% compounded annual growth rate
from $184.2 million in fiscal 1993 to $454.4 million in fiscal 1997. Net income
has grown over the same period at a 39.0% compounded annual growth rate from
$1.9 million to $7.1 million.
The Company believes it is well positioned to continue as a leading
distributor of products and services to the energy industry. The Company
considers its competitive strengths to include: (i) business and geographical
diversification; (ii) value added services; (iii) relationships with customers;
(iv) experienced and incentivized management team; (v) relationships with mills
and suppliers; and (vi) the ability to manage growth and integrate
acquisitions.
STRATEGY
The Company's goal is to expand its existing market position in the upstream,
midstream and downstream sectors of the energy industry, while at the same time
increasing its earnings and cash flow per share to enhance overall stockholder
value. Key elements of the Company's strategy for achieving this goal are to:
(i) maintain and grow customer alliances; (ii) increase MRO agreements; (iii)
expand into selected international markets; (iv) increase integrated supply
arrangements; (v) increase tubular goods sales; and (vi) capitalize on the
Company's strong balance sheet.
5
<PAGE>
THE OFFERING
<TABLE>
<C> <S>
Class A Common Stock offered by:
The Company...................................... shares
The Selling Stockholder.......................... shares
Total.......................................... shares
Common Stock to be outstanding after the Offering:
Class A Common Stock............................. shares(1)
Class B Common Stock............................. shares(2)
Total.......................................... shares
Voting rights..................................... The Class A Common Stock is
entitled to one vote per
share and the Class B Com-
mon Stock is entitled to
ten votes per share. Imme-
diately following the Of-
fering, holders of the
Class B Common Stock will
control % of the voting
power of the Company's out-
standing shares of Common
Stock. See "Risk Factors--
Control by Certain Members
of Management," "Principal
and Selling Stockholders"
and "Description of Capital
Stock."
Use of Proceeds................................... To repay a portion of
existing indebtedness under
the Company's credit
facility (the "Credit
Facility") and redeem all
outstanding shares of Class
C Preferred Stock, par
value $2,500 per share (the
"Class C Preferred Stock"),
plus accrued dividends
thereon. See "Use of
Proceeds."
Proposed New York Stock Exchange Symbol........... RMN
</TABLE>
- --------
(1) Excludes an aggregate of shares of Class A Common Stock reserved for
issuance under the Company's Incentive Stock Plan (the "Incentive Plan").
See "Management--Incentive Plan," "Shares Eligible for Future Sale" and
Notes to the Company's Consolidated Financial Statements.
(2) See "Description of Capital Stock--Class A and Class B Common Stock"
regarding conversion rights.
RISK FACTORS
Prospective purchasers should consider all of the information contained in
this Prospectus before making an investment in shares of Class A Common Stock.
In particular, prospective purchasers should consider the factors set forth
herein under "Risk Factors."
6
<PAGE>
SUMMARY FINANCIAL DATA
The following summary financial data is derived from the audited Consolidated
Financial Statements contained elsewhere in this Prospectus and should be read
in conjunction with such Consolidated Financial Statements and the related
Notes thereto and "Selected Financial Data" and "Management's Discussion and
Analysis of Financial Condition and Results of Operations."
<TABLE>
<CAPTION>
FISCAL YEAR ENDED OCTOBER 31,
----------------------------------------
1995 1996 1997
------------ ------------ ------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Sales............................... $ 251,928 $ 348,446 $ 454,438
Costs and expenses:
Cost of products sold............. 223,818 308,349 403,774
Selling, general and
administrative expenses.......... 22,255 29,900 34,273
------------ ------------ ------------
Total costs and expenses........ 246,073 338,249 438,047
------------ ------------ ------------
Operating income.................... 5,855 10,197 16,391
------------ ------------ ------------
Other income (expense):
Interest expense.................. (3,604) (4,807) (5,606)
Other, net........................ 435 100 633
------------ ------------ ------------
(3,169) (4,707) (4,973)
------------ ------------ ------------
Income before income taxes.......... 2,686 5,490 11,418
Income tax expense.................. 928 2,137 4,350
------------ ------------ ------------
Net income.......................... $ 1,758 $ 3,353 $ 7,068
============ ============ ============
Earnings per common share, primary
and fully diluted.................. $ 8.50 $ 16.16 $ 35.50
Weighted average common shares
outstanding, primary and fully
diluted............................ 192 192 192
OTHER DATA:
EBITDA(1)........................... $ 6,318 $ 10,810 $ 17,078
Depreciation and amortization....... 463 613 687
Capital expenditures................ 288 2,431 2,720
</TABLE>
<TABLE>
<CAPTION>
AS OF OCTOBER 31, 1997
-----------------------
ACTUAL AS ADJUSTED(2)
-------- --------------
(IN THOUSANDS)
<S> <C> <C>
BALANCE SHEET DATA:
Working capital......................................... $105,169 $
Total assets............................................ 161,813
Total long-term debt, including current portion......... 81,446
Class C preferred stock................................. 5,000
Total stockholders' equity.............................. 22,956
</TABLE>
- -------
(1) EBITDA, or "earnings from continuing operations before interest expense,
interest income, other (net), income taxes, depreciation and amortization,"
is not a generally accepted accounting principle measure, but is a
supplemental financial measurement used by the Company in the evaluation of
its business. EBITDA should not be construed as an alternative to net
income or to cash flow from operations or any other measure of performance
in accordance with generally accepted accounting principles, and is
presented solely as supplemental disclosure. EBITDA is a supplemental
financial measure commonly used by investors in the oil services industry
and is being presented in this prospectus because management believes that
EBITDA provides supplemental information about the Company's ability to
meet its future requirements for debt service, capital expenditures and
working capital. Management utilizes EBITDA to aid it in assessing the
financial performance of the Company. Because EBITDA excludes some, but not
all, items that affect net income and this measure may vary among
companies, the EBITDA data presented above may not be comparable to
similarly titled measures of other companies.
(2) Adjusted to give effect to the Offering and the application of the net
proceeds to the Company therefrom of approximately $ million (assuming an
initial public offering price of $ per share). See "Use of Proceeds" and
"Capitalization."
7
<PAGE>
RISK FACTORS
In addition to the other information in this Prospectus, the following risk
factors should be considered carefully in evaluating the Company and its
business before purchasing the Class A Common Stock offered hereby. All
statements other than statements of historical facts included in this
Prospectus, including, without limitation, statements regarding the Company's
business strategy, plans and objectives of management of the Company for
future operations and future industry conditions, are forward-looking
statements. Although the Company believes that the expectations reflected in
such forward-looking statements are reasonable, it can give no assurance that
such expectations will be met. Important factors that could cause actual
results to differ materially from the Company's expectations are disclosed
below and elsewhere in this Prospectus.
DEPENDENCE ON ENERGY INDUSTRY AND VOLATILITY OF OIL AND GAS PRICES
The Company's business is substantially dependent upon the condition of the
energy industry and, in particular, the willingness of companies to make
capital expenditures on exploration, drilling, production, gathering,
transportation, refining and processing operations. The level of capital
expenditures is dependent in part on the prevailing view of future oil and gas
prices, which are influenced by numerous factors affecting the supply and
demand for oil and gas, including worldwide economic activity, interest rates
and the cost of capital, environmental regulation, tax policies, coordination
by the Organization of Petroleum Exporting Countries, the cost of exploring
for and producing oil and gas, the discovery rate of new oil and gas reserves
and technological advances. Oil and gas prices and the level of drilling and
production activity have been characterized by significant volatility in
recent years. Although hydrocarbon prices have improved in recent years and
the level of exploration, drilling and production activity has increased,
there can be no assurance that such price and activity levels will be
sustained and that there will not be continued volatility in the level of
drilling and production related activities. A significant and prolonged
decline in hydrocarbon prices would likely have a material adverse effect on
the Company's business, financial condition or results of operations. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Overview" and "Business--Industry Overview."
COMPETITION
The oilfield and industrial distribution services business is highly
competitive. The Company's sales and earnings can be affected by competitive
actions such as price changes, improved delivery and other actions by
competitors. Certain of its primary competitors are diversified multinational
companies with substantially larger operating staffs and greater capital
resources than those of the Company. See "Business--Competition."
RELIANCE ON SIGNIFICANT CUSTOMERS
The Company's business is dependent on securing and maintaining customers by
promptly delivering reliable, cost-efficient products and services. For fiscal
1997, one of the Company's customers, Chevron USA, Inc., accounted for
approximately 12% of total sales. In addition, sales to the Company's top ten
customers accounted for approximately 49% of total sales in fiscal 1997. While
the Company believes it has excellent relationships with these significant
customers, the loss of one or more of such customers could have a material
adverse effect on the Company's business, financial condition or results of
operations. The products that the Company may sell to any particular customer
depend in large part on the size of that customer's capital expenditure budget
in a particular year and on the results of competitive bids for major
projects. Consequently, a customer that accounts for a significant portion of
sales in one fiscal year may represent an immaterial portion of sales in
subsequent years. See "Business--Customers."
RELIANCE ON SIGNIFICANT SUPPLIERS
A substantial portion of the Company's tubular goods sales are purchased
from two manufacturers. The Company has no long-term supply contracts with
either of these manufacturers which would assure the Company of a continued
supply of tubular good products in the future. Although the Company believes
there are numerous
8
<PAGE>
manufacturers having the capacity to supply its tubular good products, the
loss of one of these major suppliers could have a material adverse effect on
the Company's business, financial condition or results of operations as such
loss would require the Company to rely more heavily on its other existing
suppliers or develop relationships with new suppliers, which may cause the
Company to pay higher prices for products due to a loss of the volume discount
benefits currently obtained from its two major suppliers.
FLUCTUATIONS IN PRODUCT PRICES
A significant amount of the Company's sales is derived from stocking program
arrangements, blanket contracts and MRO pricing agreements, each of which may
obligate the Company to sell products at a set price for the length of such
arrangement or agreement. Accordingly, the Company's operating margin could be
materially adversely affected by a significant increase in prices from its
suppliers that the Company is not able to pass on to its customers due to the
existing contractual relationship. The Company believes it can negotiate with
its customers in these circumstances to reduce the effects of unforseen price
increases because the Company has strong existing relationships with major
customers. However, there is no assurance that material price fluctuations
will not have a material adverse effect on the Company's business, financial
condition or results of operations.
The Company is also subject to the risk that the value of its inventory will
decline as a result of price reductions by mills or other manufacturers of
products sold by the Company. While the Company believes the risk of a
material reduction in the value of its inventory is mitigated due to the fact
that it does not carry a significant amount of speculative inventory and that
its significant supply commitments are generally for relatively short-term
periods, there is no assurance that a substantial decline in product prices
would not result in a write-down of the Company's inventory value having a
material adverse effect on the Company's business, financial condition or
results of operations.
MANAGEMENT OF GROWTH
Over the last ten years the Company has acquired a total of 42 service and
supply centers through five acquisitions, and it expects to continue to
evaluate acquisitions that can provide meaningful benefits by expanding the
Company's business and leveraging its existing infrastructure. However, there
are various risks associated with pursuing an acquisition strategy of this
nature, including problems inherent in integrating new operations. There is no
assurance that suitable acquisition candidates will be available, that
acquisitions can be completed on reasonable terms, that the Company will
successfully integrate the operations of any acquired entities or that the
Company will have access to adequate funds to effect any desired acquisitions.
Any inability on the part of the Company to integrate and manage the
operations of acquired businesses could have a material adverse effect on the
Company's business, financial condition or results of operations. In addition,
if the Company were to make any significant acquisition, it may be required to
incur substantial indebtedness, which may impose a significant interest and
principal repayment burden on the Company's operations, or issue equity
securities, which may result in significant dilution of the Company's then-
current stockholders' net book value per share.
DEPENDENCE ON KEY EMPLOYEES
The Company's success depends to a large extent on the continued services of
the Company's senior executive officers. The Company currently does not have
written employment agreements with any senior executive officer. The loss of
services of one or more of its senior officers could have a material adverse
effect on the Company's business, financial condition or results of
operations. Furthermore, there can be no assurance that the Company will
continue to attract and retain sufficient qualified personnel. See
"Management."
POTENTIAL PRODUCT LIABILITY CLAIMS
Certain products sold by the Company are used in potentially hazardous
applications that can cause personal injury, product liability and
environmental claims. A catastrophic occurrence at a location where products
sold by the Company are used may result in the Company being named as a
defendant in lawsuits asserting potentially large claims. Certain of these
risks are reduced by the fact that the Company is a distributor of products
produced
9
<PAGE>
by third-party manufacturers. In such circumstances, the Company generally
would have third-party indemnification and/or warranty claims against the
manufacturer of products alleged to have been defective. However, there is no
assurance that such third-party claims could fully protect the Company or that
the manufacturer would be able financially to provide such protection. The
Company also maintains insurance coverage that it believes is customary in the
industry. However, such insurance does not provide coverage for all
liabilities (including liability for certain events involving pollution), and
there is no assurance that its insurance coverage will be adequate to cover
claims that may arise or that the Company will be able to maintain adequate
insurance at rates it considers reasonable. Although the Company to date has
not experienced any losses from product liability claims, the occurrence of an
event not fully covered by insurance or indemnification could have a material
adverse effect on the business, financial condition or results of operations
of the Company.
CONTROL BY CERTAIN MEMBERS OF MANAGEMENT
Upon completion of the Offering, L. Craig Ketchum, Chief Executive Officer
and President of the Company, and Betty J. Ketchum, Chairman of the Board of
the Company, collectively will beneficially own approximately % ( % if the
Underwriters' over-allotment option is exercised in full) of the voting power
of all outstanding shares of Common Stock by virtue of their beneficial
ownership of all outstanding shares of Class B Common Stock. As a result, such
stockholders will be able to control the outcome of virtually all matters
requiring a stockholder vote, including the election of directors. In
addition, such ownership of Common Stock may have the effect of delaying or
preventing a change of control of the Company and may adversely affect the
voting and other rights of other stockholders. See "Management," "Certain
Transactions," "Principal and Selling Stockholders" and "Description of
Capital Stock."
INTERNATIONAL SALES
Approximately 11% of the Company's fiscal 1997 sales were derived from
export sales to foreign markets. The Company markets its products and services
in certain foreign oil and gas producing areas and is, therefore, subject to
the risks customarily attendant to sales in foreign countries. These risks
include, among others, nationalization, restrictive actions by local
governments, changes in tariffs and the adoption of foreign or domestic laws
limiting exports to certain foreign countries, any of which could have a
material adverse effect on the Company's ability to market its products
internationally. To date, the Company has not experienced any significant
problems in foreign countries arising from local government actions or
political instability, but there is no assurance that such problems will not
arise in the future. The Company believes there is significant potential for
establishing service and supply centers in select foreign countries,
particularly in South America, and is evaluating establishing a distribution
network in certain of these countries. If the Company were to open and
maintain a service and supply center in a foreign country, it may more
directly face risks customarily encountered in doing business in foreign
countries, including risks of foreign currency fluctuations. See "Business--
Strategy."
GOVERNMENTAL REGULATION AND ENVIRONMENTAL MATTERS
Many aspects of the Company's operations are affected by political
developments and are subject to both domestic and foreign governmental
regulations, including those relating to worker safety and the protection of
the environment. In addition, the Company depends on the demand for its
products from the energy industry and, therefore, is affected by changing
taxes, price controls and other laws and regulations relating to the energy
industry. The adoption of laws and regulations curtailing exploration and
development drilling for, or the transportation, processing and refining of,
oil and gas for economic or other policy reasons could have a material adverse
effect on the Company's business, financial condition or results of operations
by limiting demand for the Company's products. The Company cannot determine
the extent to which its future operations and earnings may be affected by new
legislation, new regulations or changes in existing regulations.
Products sold by the Company can be used in applications by customers which
are affected by numerous federal, state and local environmental laws and
regulations. The technical requirements of these laws and regulations are
becoming increasingly expensive, complex and stringent. These laws may provide
for "strict liability" for damages to natural resources or threats to public
health and safety, rendering a party liable for environmental damage without
regard to negligence or fault on the part of such party. Sanctions for
10
<PAGE>
noncompliance may include revocation of permits, corrective action orders,
administrative or civil penalties and criminal prosecution. Certain
environmental laws provide for joint and several strict liability for
remediation of spills and releases of hazardous substances. In addition,
companies may be subject to claims alleging personal injury or property damage
as a result of alleged exposure to hazardous substances, as well as damage to
natural resources. As a supplier of equipment utilized in petroleum and
industrial applications, the Company may have claims made against it as a
result of a failed or defective product which causes or contributes to
environmental damage that may have a material adverse effect on the Company's
business, financial condition or results of operations. See "Business--
Governmental Regulations."
SHARES ELIGIBLE FOR FUTURE SALE
Upon the completion of the Offering, the Company will have outstanding a
total of shares of Class A Common Stock and shares of Class B Common
Stock. Each share of Class B Common Stock may be converted into one share of
Class A Common Stock at any time at the election of the holder and will
automatically convert into Class A Common Stock upon transfer to a holder that
is not a member of the Ketchum Group. The Ketchum Group is defined in the
Company's Amended and Restated Certificate of Incorporation (the "Restated
Certificate of Incorporation") as Betty J. Ketchum and the lineal descendants
of Lewis B. Ketchum and Betty J. Ketchum (collectively, the "Ketchum Family"),
and any trusts, partnerships or other entities controlled by or for the
benefit of any member or members of the Ketchum Family. Of these outstanding
shares, the shares of Class A Common Stock offered hereby ( shares if
the Underwriters' over-allotment option is exercised in full) will be freely
tradeable without restrictions or registration under the Securities Act of
1933, as amended (the "Securities Act"), by persons other than "affiliates" of
the Company, as defined under the Securities Act. The remaining shares of
outstanding Class A Common Stock and all outstanding Class B Stock will be
restricted securities as that term is defined by Rule 144 as promulgated under
the Securities Act.
Approximately of the restricted shares of outstanding Class A Common
Stock and all of the restricted shares of outstanding Class B Common Stock
(assuming such shares are converted by the holders to Class A Common Stock)
will have been held for more than one year as of the date of this Prospectus
and will become eligible for sale 90 days after the closing of the Offering
subject to applicable conditions and limitations of Rule 144, including volume
limitations. In addition, a holder of shares of Class A Common Stock has
the right, commencing two years following the consummation of the Offering, to
require the Company to register its shares for future sale at any time. The
current stockholders of the Company have agreed that they will not, directly
or indirectly, sell any shares of Common Stock for a period of 180 days from
the date of this Prospectus without the prior written consent of Morgan
Stanley & Co. Incorporated. Future sales of substantial amounts of Class A
Common Stock in the public market following the Offering or the availability
of such shares for sale could adversely affect the market price of the Class A
Common Stock. See "Shares Eligible for Future Sale," "Description of Capital
Stock--Registration Rights" and "Underwriters."
NO INTENTION TO PAY DIVIDENDS
The Company currently intends to retain any earnings for the future
operation and development of its business and does not currently anticipate
paying any dividends in the foreseeable future. The Credit Facility restricts
the payment of dividends. See "Dividend Policy," "Management's Discussion and
Analysis of Financial Condition and Results of Operations--Liquidity and
Capital Resources" and Notes to the Company's Consolidated Financial
Statements.
CERTAIN ANTI-TAKEOVER EFFECTS OF AUTHORIZED BUT UNISSUED STOCK
One of the effects of the Company's authorized but unissued shares of Class
A Common Stock, Class B Common Stock and undesignated preferred stock may be
to enable the Board of Directors to render more difficult or discourage an
attempt to obtain control of the Company by means of a merger, tender offer,
proxy contest or otherwise, and thereby protect the continuity of the
Company's management. The Company's Restated
11
<PAGE>
Certificate of Incorporation grants the Board of Directors the broad power to
establish the rights and preferences of the authorized and unissued preferred
stock, one or more series of which could be issued entitling holders to vote
separately as a class on any proposed merger or consolidation, to convert
preferred stock into a larger number of shares of Class A Common Stock or
other securities, to demand redemption at a specified price under prescribed
circumstances related to a change in control or to exercise other rights
designed to impede a takeover. The issuance of shares of preferred stock
pursuant to the Board's authority described above may adversely affect the
rights of the holders of the Class A Common Stock. See "Description of Capital
Stock."
In the event the Company were to issue shares of Class B Common Stock or
preferred stock, or take other corporate action, the effect of which would be
to nullify, restrict or disparately reduce the per share voting rights of the
holders of the Class A Common Stock, such action could lead to proceedings of
the New York Stock Exchange, Inc. to have the Class A Common Stock removed
from listing on the New York Stock Exchange (the "NYSE"). The delisting of the
Class A Common Stock by the NYSE would likely have a material adverse effect
on the market value of the Class A Common Stock.
ABSENCE OF PRIOR PUBLIC MARKET
Prior to the Offering, there has been no public market for the Class A
Common Stock. The initial public offering price will be determined by
negotiation between the Company and the Underwriters and may not be indicative
of the price at which the Class A Common Stock will trade following the
completion of the Offering. See "Underwriters" for a discussion of the factors
to be considered in determining the initial public offering price. The
completion of the Offering provides no assurance that an active trading market
for the Class A Common Stock will develop or, if developed, that it will be
sustained. The market price of the Class A Common Stock could also be subject
to significant fluctuation and may be influenced by many factors, including
variations in results of operations, variations in oil and natural gas prices,
investor perceptions of the Company and the energy industry and general
economic and other conditions. The stock market has, on occasion, experienced
significant price and volume fluctuations that often have been unrelated or
disproportionate to the operating performance of the affected companies, and
such fluctuations could have a material adverse effect on the market price of
the Class A Common Stock. See "Underwriters."
DILUTION
Purchasers of Class A Common Stock in the Offering will experience immediate
and substantial dilution in the net tangible book value of their stock of $
per share (assuming an initial public offering price of $ per share) . See
"Dilution."
12
<PAGE>
THE COMPANY
GENERAL
Red Man was founded in 1976 by the late Lewis B. Ketchum, a member and
former Chief of the Delaware Indian Tribe headquartered in Oklahoma. The
heritage and tradition of the Delaware Indian was very important to Mr.
Ketchum and was the basis upon which he gave the Company the name "Red Man."
Mr. Ketchum had over nineteen years of experience in the oilfield supply
industry prior to founding the Company. Mr. Ketchum was committed to the
concept of growth through quality and service. After his death in 1995, Mr.
Ketchum was succeeded by his son, L. Craig Ketchum, current Chief Executive
Officer and President, and his wife, Betty J. Ketchum, Chairman of the Board,
both of whom had worked with Mr. Ketchum since the Company's earliest stages.
The Company began operations in 1977 as a distributor of tubular goods for
United States Steel Corporation (now USX Corporation) and Lone Star Steel
Company and it subsequently opened one oilfield service and supply center in
Oklahoma. By March 1987, the Company had opened three additional service and
supply centers in Texas, Louisiana and California. In March 1987, the Company
acquired 22 supply centers from Superior Supply Company. Of these 22 supply
centers, eight were consolidated into existing Company operations or were
subsequently sold. This acquisition provided the Company with additional
geographic coverage in Alabama, Kansas, New Mexico and Utah and significantly
increased the Company's ability to service major petroleum companies.
From 1988 to 1990, the Company made additional strategic acquisitions of
seven supply center locations (net after consolidations) in Mississippi, New
Mexico, Oklahoma and Texas and related equipment and inventory items which
further strengthened the Company's geographic coverage and competitive
position.
In April 1995, the Company diversified its business operations with the
acquisition of the assets of nine supply center locations of the supply
division of Vinson Supply Company (the "Vinson Acquisition"). These supply
centers primarily provided PVF industrial supplies for the downstream
refining, processing and chemical operations of the energy industry and
serviced major projects through competitive bidding. The Vinson Acquisition
positioned the Company to service upstream, midstream and downstream customers
and provide "one stop" shopping for its major integrated customers and
enhanced its geographic coverage in the major hydrocarbon producing and
refining regions of the United States.
The Company is incorporated in Oklahoma. The Company's principal executive
offices are located at 8023 East 63rd Place, Tulsa, Oklahoma 74133, and its
telephone number is (918) 250-8541.
RECLASSIFICATION AND STOCK SPLIT
The Company's Certificate of Incorporation was amended and restated in
December 1997 to increase and reclassify the Company's authorized Common Stock
from 500,000 shares of Class A Common Stock, par value $1.00 per share, having
one vote per share and 500,000 shares of non-voting Class B Common Stock, par
value $1.00 per share, to 50,000,000 shares of Class A Common Stock, par value
$.01 per share, having one vote per share and 50,000,000 shares of Class B
Common Stock, par value $.01 per share, having ten votes per share,
respectively. Simultaneously therewith, certain stockholders effected an
exchange of Common Stock which, after giving effect to a -for-one stock
split of the Class A and Class B Common Stock effected January , 1998, has
resulted in shares of Class A Common Stock and shares of Class B
Common Stock being outstanding at the date of this Prospectus. As a result of
the foregoing, L. Craig Ketchum, Chief Executive Officer and President of the
Company, and Betty J. Ketchum, Chairman of the Board of the Company,
collectively beneficially own all of the outstanding shares of Class B Common
Stock and, upon completion of the Offering, will beneficially own
approximately % ( % if the Underwriters' over-allotment option is exercised
in full) of the voting power of all outstanding shares of Common Stock. See
"Management," "Principal and Selling Stockholders" and "Description of Capital
Stock."
13
<PAGE>
USE OF PROCEEDS
The net proceeds to the Company from the Offering, assuming an initial
public offering price of $ per share and after deducting underwriting
discounts, commissions and estimated expenses, are estimated to be
approximately $ million ($ million if the Underwriters' over-allotment
option is exercised in full). The Company intends to use the net proceeds to
repay approximately $ of the Company's outstanding indebtedness under
the Credit Facility and redeem all the outstanding shares of Class C Preferred
Stock held by Consolidated Investment Services, Inc. ("Consolidated"), for the
face amount of $5.0 million, plus accrued dividends of $ . The Company will
not receive any of the net proceeds from the sale of Class A Common Stock by
the Selling Stockholder.
The Credit Facility terminates on October 31, 2000, subject to an automatic
one-year renewal. At October 31, 1997, $81.4 million was outstanding under the
Credit Facility, $10.0 million of which was outstanding under the term loan
(the "Term Loan") portion of the Credit Facility and $71.4 million of which is
outstanding under the revolving credit (the "Line of Credit") portion of the
Credit Facility. The Line of Credit bears interest at LIBOR plus a margin
based on a trailing 12-month calculation of EBITDA as defined in the Credit
Agreement (7.25% at October 31, 1997), and the Term Loan bears interest at the
interest rate on the Line of Credit plus .25%. The Company intends to repay
all of the Term Loan with the net proceeds to the Company from the Offering
and to reduce the Line of Credit by approximately $ million. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources."
The Company issued the 2,000 outstanding shares of Class C Preferred Stock
in connection with the financing of the Vinson Acquisition. The Class C
Preferred Stock bears an annual cumulative dividend of 5%, payable quarterly,
and the dividends paid on Class C Preferred Stock during fiscal 1997 totaled
$250,000. The Class C Preferred Stock is non-voting and subordinate to
indebtedness of the Company, but bears full preference to the Common Stock as
to dividends and to redemption in the event of liquidation of the Company. The
Class C Preferred Stock is subject to mandatory redemption on March 31, 2000.
See "Certain Transactions."
DIVIDEND POLICY
The Company currently intends to retain any earnings for the future
operation and development of its business and does not intend to pay cash
dividends on its Common Stock in the foreseeable future. The Board of
Directors will review this policy on a regular basis in light of the Company's
earnings, financial condition and market opportunities. The Credit Facility
restricts the payment of dividends on Common Stock. The holders of the
Company's issued and outstanding Class C Preferred Stock have received annual
dividends of $250,000 as required by the privileges designated to the Class C
Preferred Stock. However, the Company will utilize a portion of the net
proceeds to the Company from the Offering to redeem all outstanding Class C
Preferred Stock. See "Use of Proceeds," "Management's Discussion and Analysis
of Financial Condition and Results of Operations--Liquidity and Capital
Resources" and "Description of Capital Stock."
14
<PAGE>
DILUTION
As of October 31, 1997, the net tangible book value of the Company was
approximately $23.0 million, or approximately $ per share of Common Stock.
Net tangible book value per share represents the amount of the Company's
tangible book value (total book value of tangible assets less total
liabilities and redeemable preferred stock) divided by the total number of
shares of Common Stock outstanding. After giving effect to the Offering
(assuming an initial public offering price of $ per share and no exercise of
the Underwriters' over-allotment option), the pro forma net tangible book
value of the Common Stock outstanding at October 31, 1997, would have been $
per share, representing an immediate increase in net tangible book value of
$ per share to current stockholders and an immediate dilution of $ per
share (the difference between the assumed initial public offering price and
the net tangible book value per share after the Offering) to persons
purchasing Class A Common Stock at the assumed initial public offering price.
The following table illustrates such per share dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share...... $
Net tangible book value per share before the
Offering.......................................... $
Increase in net tangible book value per share
attributable to new investors.....................
-----------
Pro forma net tangible book value per share after
giving effect to the Offering.......................
------------
Dilution in net tangible book value per share to new
investors........................................... $
============
</TABLE>
The following table sets forth, on a pro forma basis as of October 31, 1997,
differences between the number of shares of Class A Common Stock acquired from
the Company, the total consideration price and the average price per share
paid to the Company by existing stockholders and investors purchasing shares
in the Offering (at the assumed initial offering price of $ per share and
assuming no exercise of the Underwriters' over-allotment option).
<TABLE>
<CAPTION>
SHARES TOTAL
PURCHASED(1) CONSIDERATION AVERAGE
--------------- ---------------- PRICE PER
NUMBER PERCENT AMOUNT PERCENT SHARE
------- ------- -------- ------- ---------
<S> <C> <C> <C> <C> <C>
Current stockholders(2)(3)........ % $ % $
New Investors(3)..................
------- ------ -------- ------ ------
Total........................... % $ % $
======= ====== ======== ====== ======
</TABLE>
- --------
(1) Does not include shares of Class A Common Stock reserved for future
issuance under the Company's Incentive Plan. See "Management--Incentive
Plan."
(2) Consists of an aggregate of shares of Class A Common Stock and
shares of Class B Common Stock.
(3) Sales by the Selling Stockholder in the Offering will reduce the number of
shares of Common Stock held by existing stockholders to , or % of the
shares of Common Stock outstanding after the Offering. New investors will
hold % of the shares of Common Stock outstanding after the Offering.
15
<PAGE>
CAPITALIZATION
The following table sets forth the total capitalization of the Company as of
October 31, 1997, and as adjusted to give effect to the sale of the shares
of Class A Common Stock offered by the Company hereby at an assumed initial
public offering price of $ per share and the application of the net proceeds
to the Company therefrom. See "Use of Proceeds." This table should be read in
conjunction with the Company's Consolidated Financial Statements and the
related Notes thereto included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
AS OF OCTOBER 31, 1997
--------------------------
ACTUAL AS ADJUSTED
----------- -------------
(IN THOUSANDS)
<S> <C> <C>
Short-term debt:
Current portion of long-term debt.................. $ 83 $
=========== ===========
Long-term debt, less current portion................. $ 81,363 $
Class C preferred stock, redeemable, $2,500 par
value, 2,000 shares authorized, issued and outstanding
(actual), no shares outstanding (as adjusted)........ 5,000
Stockholders' equity:
Class A common stock, $1 par value, 500,000 shares
authorized, 157,692 shares issued and outstanding
(actual), shares issued and outstanding
(as adjusted)(1)................................... 158
Class B common stock, $1 par value, 500,000 shares
authorized, 34,344 shares issued and outstanding
(actual), shares issued and outstanding (as
adjusted).......................................... 34
Additional paid-in capital......................... 3,505
Retained earnings.................................. 19,517
Treasury stock, at cost............................ (258)
----------- -----------
Total stockholders' equity........................ 22,956
----------- -----------
Total capitalization............................. $ 109,319 $
=========== ===========
</TABLE>
- --------
(1) Does not include shares of Class A Common Stock reserved for future
issuance under the Incentive Plan and shares of Class A Common Stock
issuable upon conversion of all outstanding shares of Class B Common
Stock. See "Management--Incentive Plan" and "Description of Capital
Stock."
16
<PAGE>
SELECTED FINANCIAL DATA
The selected financial data as of and for each of the fiscal years ended
October 31, 1995, 1996 and 1997 are derived from the audited consolidated
financial statements of the Company included elsewhere in this Prospectus. The
selected financial data presented below as of and for the fiscal years ended
October 31, 1993 and 1994 are derived from audited consolidated financial
statements of the Company not included in this Prospectus. The information set
forth below should be read in conjunction with "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and the
Consolidated Financial Statements and the related Notes thereto included
elsewhere in this Prospectus.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED OCTOBER 31,
------------------------------------------------
1993 1994 1995 1996 1997
-------- -------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Sales....................... $184,203 $178,992 $251,928 $348,446 $454,438
Costs and expenses:
Cost of products sold..... 165,395 160,480 223,818 308,349 403,774
Selling, general and
administrative expenses.. 14,638 15,356 22,255 29,900 34,273
-------- -------- -------- -------- --------
Total costs and
expenses............... 180,033 175,836 246,073 338,249 438,047
-------- -------- -------- -------- --------
Operating income............ 4,170 3,156 5,855 10,197 16,391
-------- -------- -------- -------- --------
Other income (expense):
Interest expense.......... (1,132) (1,765) (3,604) (4,807) (5,606)
Other, net................ 6 (19) 435 100 633
-------- -------- -------- -------- --------
(1,126) (1,784) (3,169) (4,707) (4,973)
-------- -------- -------- -------- --------
Income before income taxes.. 3,044 1,372 2,686 5,490 11,418
Income tax expense.......... 1,103 489 928 2,137 4,350
-------- -------- -------- -------- --------
Net income.................. $ 1,941 $ 883 $ 1,758 $ 3,353 $ 7,068
======== ======== ======== ======== ========
Earnings per common share,
primary and fully diluted.. $ 9.80 $ 4.57 $ 8.50 $ 16.16 $ 35.50
Weighted average common
shares outstanding, primary
and fully diluted.......... 192 192 192 192 192
OTHER DATA:
EBITDA(1)................... $ 4,470 $ 3,434 $ 6,318 $ 10,810 $ 17,078
Depreciation and
amortization............... 300 278 463 613 687
Capital expenditures........ 395 309 288 2,431 2,720
<CAPTION>
AS OF OCTOBER 31,
------------------------------------------------
1993 1994 1995 1996 1997
-------- -------- -------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital............. $ 28,719 $ 29,519 $ 64,611 $ 75,215 $105,169
Total assets................ 55,623 54,796 107,550 117,777 161,813
Total long-term debt,
including current portion.. 19,700 20,083 48,915 58,403 81,446
Class C preferred stock..... -- -- 5,000 5,000 5,000
Total stockholders' equity.. 10,351 11,229 12,926 16,070 22,956
</TABLE>
- -------
(1) EBITDA, or "earnings from continuing operations before interest expense,
interest income, other (net), income taxes, depreciation and
amortization," is not a generally accepted accounting principle measure,
but is a supplemental financial measurement used by the Company in the
evaluation of its business. EBITDA should not be construed as an
alternative to net income or to cash flow from operations or any other
measure of performance in accordance with generally accepted accounting
principles, and is presented solely as a supplemental disclosure. EBITDA
is a supplemental financial measure commonly used by investors in the oil
services industry and is being presented in this Prospectus because
management believes that EBITDA provides supplemental information about
the Company's ability to meet its future requirements for debt service,
capital expenditures and working capital. Management utilizes EBITDA to
aid it in assessing the financial performance of the Company. Because
EBITDA excludes some, but not all, items that affect net income and this
measure may vary among companies, the EBITDA data presented above may not
be comparable to similarly titled measures of other companies.
17
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following information should be read in conjunction with the Company's
Consolidated Financial Statements and the related Notes thereto included
elsewhere in this Prospectus.
OVERVIEW
Red Man is a leading distributor of products and services to the energy
industry. The Company distributes more than 55,000 products and tubular goods
through 42 service and supply centers and 11 sales locations strategically
located close to major hydrocarbon producing and refining areas of the United
States. In addition, through its membership in an association of distributors
with distribution centers in 35 states, the Company participates in certain
national accounts with other members. Due to the breadth of its products and
services, the Company is able to serve the needs of companies in the upstream,
midstream and downstream sectors of the energy industry.
The market for equipment, supplies and services used by energy companies is
driven primarily by the industry fundamentals affecting such companies. These
fundamentals have been improving in recent years, due in part to favorable oil
and gas prices. The key factors affecting the industry include (i) demand for
and supply of oil and natural gas, (ii) capital expenditures by upstream,
midstream and downstream energy companies, (iii) trends toward increased
outsourcing and formation of alliances, and (iv) consolidation of supply and
service companies.
Sales. The Company sells various products, including oil country tubular
goods, line pipe, valves, fittings and flanges, pumps, production equipment,
gas measurement equipment and hand tools. Sales are recorded as products are
shipped or accepted by the customer.
Sales of OCTG are derived either from shipments out of Company-owned
inventories maintained in strategically located storage yards or from
shipments directly from mill sources. The significant majority of OCTG sales
come from shipments out of these storage yards. There are two types of sales
transactions out of Company-owned inventories: "stocking program" sales and
"spot" sales. The Company believes the majority of its OCTG sales is derived
from stocking program arrangements. The Company enters into stocking program
arrangements with customers to provide various specifications of OCTG at an
agreed upon price generally covering a time-frame from three to 18 months. The
Company procures OCTG from its mill sources and agrees to stock the OCTG in a
designated area close to the exploration and development drilling operations
of the end-user customer. As OCTG is needed by the customer, the Company will
arrange for the delivery of the OCTG to the customer's designated location.
The other OCTG sales out of Company-owned inventories are derived from spot
sales into the market. These transactions typically are the result of the
Company's success in securing orders from customers who have sent the Company
"requests for quotation" for small quantities of OCTG needed for a single well
or for a small drilling program. The critical factors for success in obtaining
these orders are price and availability.
Sales of line pipe are derived either from shipments out of Company-owned
inventories maintained in strategically located storage yards or shipments
directly from mill sources. Line pipe sales are generally split equally
between shipments out of Company-owned inventories and direct mill shipments.
The majority of the line pipe sales is derived from spot sales into the
market, a significant portion of which is sold through the Company's
42 service and supply centers. These centers are strategically located close
to major hydrocarbon producing and refining areas of the United States. The
critical factors for success in obtaining these orders are price and
availability.
Sales of other products come primarily from sales through the Company's 42
service and supply centers. A significant amount of these sales is derived
from alliance relationships, blanket contracts and MRO pricing agreements. A
majority of these sales is based upon pre-determined pricing utilizing
manufacturers' list prices less discounts off of the list price. Sales are
also derived from spot sales of products through the quotation process.
18
<PAGE>
Approximately 11% of the Company's fiscal 1997 sales were derived from
products shipped from domestic locations to foreign markets. The Company is
evaluating establishing a distribution network in South America through the
opening of service and supply centers. The Company believes that there is
significant potential for increased sales through the establishment of
distribution operations in select foreign countries.
Cost of Products Sold. The Company's cost of products sold represents the
amounts paid to various suppliers including manufacturers, pipe coaters and
threaders, third-party inspectors and freight haulers. The Company attempts to
pass on supplier price increases to its customers. Margins on sales vary
between periods primarily due to variances in the mix of products sold.
Historically, margins on sales of OCTG have been lower than margins obtained
from the sales of other products and services.
Selling, General and Administrative Expenses. The Company's selling, general
and administrative expenses include all employee, marketing, sales,
warehousing, other distribution costs, other related administrative functions
and general corporate expenses. Historically, selling, general and
administrative expenses relating to the Company's tubular goods sales have
been relatively fixed in nature and have not varied significantly with the
level of tubular goods sales. Conversely, selling, general and administrative
expenses relating to the Company's service and supply center operations have
been more variable in nature and increase or decrease as sales from service
and supply centers increase or decrease.
RESULTS OF OPERATIONS
The following table, which is included as an aid to understanding changes in
the Company's Consolidated Statements of Operations, sets forth sales and
expense items expressed as a percentage of sales:
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
-------------------------
1995 1996 1997
------- ------- -------
<S> <C> <C> <C>
Sales.......................................... 100.0% 100.0% 100.0%
Cost of products sold.......................... 88.8 88.5 88.9
Selling, general and administrative expenses... 8.8 8.6 7.5
Operating income............................... 2.3 2.9 3.6
Interest expense............................... 1.4 1.4 1.2
Income tax expense............................. .4 .6 1.0
Net income..................................... .7 1.0 1.6
</TABLE>
YEAR ENDED OCTOBER 31, 1997, COMPARED TO YEAR ENDED OCTOBER 31, 1996
Sales. Sales increased 30.4% to $454.4 million in fiscal 1997 from $348.4
million in fiscal 1996. This increase was due to a 60.7% increase in sales of
OCTG and an 18.3% increase in sales of oilfield supplies and industrial
products, including MRO and PVF items. The increase in sales was primarily the
result of an increase in the volume of products sold. Activities in the
upstream, midstream and downstream sectors of the energy industry continued to
increase, which resulted in continued strong demand for the Company's products
and services.
Cost of Products Sold. The cost of products sold increased 30.9% to $403.8
million in fiscal 1997 from $308.3 million in fiscal 1996. The increase in
cost of products sold was due primarily to the increase in sales volumes. The
cost of products sold as a percentage of sales increased to 88.9% in fiscal
1997 from 88.5% in fiscal 1996. This increase is due primarily to an increase
in OCTG sales as a percentage of sales in fiscal 1997 as compared to fiscal
1996, resulting in slightly lower margins.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased 14.6% to $34.3 million in fiscal 1997 from
$29.9 million in fiscal 1996 primarily as a result of the increase in sales.
As a percentage of sales, these expenses decreased to 7.5% in fiscal 1997 from
8.6% in fiscal 1996. The decrease in selling, general and administrative
expenses as a percentage of sales resulted primarily because
19
<PAGE>
OCTG sales as a percentage of sales were larger in fiscal 1997 as compared
with fiscal 1996. Additionally, selling, general and administrative expenses
in relation to sales in the oilfield and industrial store operations decreased
due primarily to increased quantities of supplies and products sold through
more efficiently run operations.
Operating Income. Operating income increased 60.7% to $16.4 million in
fiscal 1997 from $10.2 million in fiscal 1996 primarily as a result of the
fiscal 1997 increase in sales and the decrease in selling, general and
administrative expenses as a percentage of sales. Operating income as a
percentage of sales increased to 3.6% in fiscal 1997 from 2.9% in fiscal 1996.
Interest Expense. Interest expense increased 16.6% to $5.6 million in fiscal
1997 from $4.8 million in fiscal 1996. The increase was primarily attributable
to increased borrowings due to increased working capital levels needed to
support the overall increase in sales. This increase was partially offset by a
decrease in the effective borrowing rates on the Company's Credit Facility.
Interest expense as a percentage of sales decreased to 1.2% in fiscal 1997
from 1.4% in fiscal 1996.
Income Tax Expense. Income tax expense increased to $4.4 million in fiscal
1997 from $2.1 million in fiscal 1996. The Company's effective tax rate was
38.1% for fiscal 1997 compared to an effective tax rate of 38.9% for fiscal
1996.
YEAR ENDED OCTOBER 31, 1996, COMPARED TO YEAR ENDED OCTOBER 31, 1995
Sales. Sales increased 38.3% to $348.4 million in fiscal 1996 from $251.9
million in fiscal 1995. This increase was due primarily to the Vinson
Acquisition which was consummated in April 1995. Also, overall activities in
the upstream and midstream sectors of the oil and gas business increased which
resulted in continued strong demand for the Company's products and services.
Cost of Products Sold. The cost of products sold increased 37.8% to $308.3
million in fiscal 1996 from $223.8 million in fiscal 1995. The increase in
cost of products sold was due to the increase in sales. The cost of products
sold as a percentage of sales in fiscal 1996 was 88.5% compared to 88.8% in
fiscal 1995. The cost of products sold as a percentage of sales remained
relatively constant due to the relative stability of the mix of products sold.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased 34.4% to $29.9 million in fiscal 1996 from
$22.3 million in fiscal 1995 primarily as a result of the increase in sales.
Selling, general and administrative expenses decreased as a percentage of
sales to 8.6% in fiscal 1996 from 8.8% in fiscal 1995. The decrease in
selling, general and administrative expenses as a percentage of sales resulted
primarily from productivity and efficiency gains in administrative functions
and general corporate expenses.
Operating Income. Operating income increased 74.2% to $10.2 million in
fiscal 1996 from $5.9 million in fiscal 1995 primarily as a result of the
fiscal 1996 increase in sales, the slight decrease in cost of products sold as
a percentage of sales and the decrease in selling, general and administrative
expenses as a percentage of sales. Operating income as a percentage of sales
increased to 2.9% in fiscal 1996 from 2.3% in fiscal 1995.
Interest Expense. Interest expense increased 33.4% to $4.8 million in fiscal
1996 from $3.6 million in fiscal 1995. The increase was primarily attributable
to increased borrowings incurred in connection with the Vinson Acquisition, as
well as increased working capital levels needed to support the overall
increase in sales to the upstream and midstream sectors of the oil and gas
business. Interest expense as a percentage of sales remained steady at 1.4% in
fiscal 1996 and fiscal 1995.
Income Tax Expense. Income tax expense increased to $2.1 million in fiscal
1996 from $1.0 million in fiscal 1995. This increase was primarily
attributable to the Company's greater pretax profit level in fiscal 1996. The
Company's effective tax rate of 38.9% in fiscal 1996 increased from the
effective rate of 34.5% in fiscal 1995 primarily because of nontaxable
proceeds received by the Company in fiscal 1995 from a life insurance policy
related to the death of Lewis B. Ketchum, the Company's former Chief Executive
Officer.
20
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary needs for funds are to support working capital
requirements and, to a lesser extent, capital expenditures for information
systems, service and supply center facilities and equipment. Historically, the
Company has met its funding needs with cash flows from operations and
borrowings under the Credit Facility.
Because the Company is in the distribution business, significant components
of the Company's assets are accounts receivable and inventories, which
historically have been financed with borrowings under the Credit Facility.
Generally, as the Company's operations expand and sales increase, long-term
borrowings under the Credit Facility will increase to finance the cash
utilized by the Company's operating activities. During fiscal 1995, 1996 and
1997, net cash used in operating activities was $14.7 million, $6.6 million
and $21.8 million, respectively. However, cash flows from operations before
changes in working capital was $2.4 million, $4.7 million and $8.4 million,
respectively, during the same periods. The Company is focusing its attention
on the continued improvement of these major assets. Accounts receivable are
managed through conservative credit granting guidelines and continual
monitoring of customer payment habits. Inventories are managed through various
inventory management procedures, including returning items to manufacturers,
transfers between Company locations, consolidations of product lines,
participation in customer planning requirements and improved replenishment
techniques with Company suppliers. During fiscal 1995, 1996 and 1997, the
average days sales outstanding of accounts receivable was 40.3, 43.6 and 40.6,
respectively, and the Company's inventory turnover was 2.5, 2.5 and 2.8 times,
respectively.
Net cash used in investing activities was $14.7 million, $2.2 million and
$.5 million in fiscal 1995, 1996 and 1997, respectively. Capital expenditures
were $.3 million, $2.4 million and $2.7 million in fiscal 1995, 1996 and 1997,
respectively. These expenditures were primarily for information systems
requirements, service and supply center facilities, furniture, fixtures and
certain equipment. Of the $14.7 million cash used in fiscal 1995, $14.5
million was attributable to the Vinson Acquisition. The Company does not
anticipate significant capital expenditures over the next few years. The
expenditures that are anticipated will be of the same nature as those in
fiscal 1996 and 1997 as described above unless the Company participates in
another acquisition. The Company does not anticipate any material expenditures
being required to ensure its information systems do not encounter future
problems processing information in the year 2000.
Net cash provided by financing activities was $28.8 million, $9.3 million,
and $22.9 million in fiscal 1995, 1996 and 1997, respectively. The cash
provided by these financing activities was almost exclusively obtained through
increased borrowings under the Credit Facility.
The Credit Facility consists of both the Line of Credit and the Term Loan.
The Company is permitted to borrow under the Line of Credit amounts up to the
lesser of (i) $100.0 million less the outstanding principal balance of the
Term Loan or (ii) an amount equal to the borrowing base amount. The borrowing
base amount is determined through a computation of eligible accounts
receivable and inventories as defined in the Credit Facility. At October 31,
1997, the amount of borrowings available under the Credit Facility was $18.6
million. The Company pays a fee on the unused portion of the Line of Credit
equal to .375% per year. Following the Offering, the Company intends to
renegotiate the terms of the Credit Facility, including possibly reducing the
size of the facility.
The Company intends to use the net proceeds to the Company from the Offering
to repay approximately $ of its outstanding indebtedness under the Credit
Facility and redeem the Class C Preferred Stock at its par value of $5.0
million, plus accrued dividends of $ . The Company believes that internally
generated cash from operations and availability under the Credit Facility will
be sufficient to finance the projected cash requirements of its current and
future operations over the next twelve months. The Company is continually
reviewing potential acquisitions in its markets. Depending upon the size,
nature and timing of an acquisition, the Company could require additional
capital in the form of either debt or equity.
21
<PAGE>
IMPACT OF INFLATION
Inflation has not had a significant effect on the Company's operating
results or financial condition in recent years. Management believes that price
increases from its various suppliers of products can generally be passed on to
its customers.
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 128, Earnings Per Share ("SFAS No.
128"). SFAS No. 128 will change the computation, presentation and disclosure
requirements for earnings per share. This pronouncement requires the
presentation of "basic" and "diluted" earnings per share. This statement is
effective for financial statements issued for periods ending after December
15, 1997, including interim periods, and requires restatement of all prior
period earnings per share amounts. The Company will adopt SFAS No. 128 in the
second quarter of fiscal 1998; however, this pronouncement is not expected to
have a material effect on its earnings per share when adopted.
22
<PAGE>
BUSINESS
GENERAL
Red Man is a leading distributor of products and services to the energy
industry. The Company distributes more than 55,000 products and tubular goods
through 42 service and supply centers and 11 sales locations strategically
located close to major hydrocarbon producing and refining areas of the United
States. In addition, through its membership in an association of distributors
with distribution centers in 35 states, the Company participates in certain
national accounts with other members. Due to the breadth of its products and
services, Red Man is able to serve the needs of companies in the upstream,
midstream and downstream sectors of the energy industry. The Company believes
it is one of only two companies that can provide products and services to
customers engaged in upstream-to-downstream operations in major hydrocarbon
producing and refining areas of the United States.
The Company's operations involve the distribution of tubular goods,
including OCTG and line pipe, and the operation of service and supply centers
which distribute MRO products utilized in the energy industry, as well as
industrial products consisting primarily of line pipe, valves, fittings and
flanges. In fiscal 1997, sales of tubular goods represented approximately 55%
of total sales, and sales of other products from service and supply centers
represented approximately 45% of total sales.
The Company distributes a broad range of OCTG and line pipe for oilfield and
industrial applications. The Company purchases OCTG and line pipe manufactured
by 23 domestic mills and four foreign mills and distributes these products
directly from the mills or from the Company's own inventory maintained in
storage yards strategically located throughout major hydrocarbon producing
regions of the United States. A significant portion of the Company's tubular
goods sales is made pursuant to stocking program arrangements with customers.
Under such arrangements, the Company provides various specifications of
tubular goods at an agreed upon price generally for a period from three to 18
months.
The Company's oilfield and industrial service and supply centers provide MRO
and PVF products and various related services to the upstream, midstream and
downstream operations of the energy industry, as well as to engineering and
construction companies, fabricators, drilling contractors, utilities,
processing plants and energy industry service companies. In addition, the
Company markets gas measurement products, consisting of meter tubes and skid-
mounted meter stations, and distributes measurement-related products and
services from its various service and supply centers.
As major integrated and large independent oil and gas companies have begun
implementing cost-cutting and efficiency initiatives to focus on their core
business activities, many of these companies have begun outsourcing their
procurement and inventory management requirements. In response to these
initiatives, the Company provides a number of value added services, including
inventory procurement and management, warehouse management, integrated supply
arrangements, management information reporting and total project management.
These value added services are designed to enable the Company's customers to
operate more efficiently by reducing their total procurement costs and the
number of suppliers utilized.
In addition, a number of major integrated and large independent oil and gas
companies are seeking strategic alliances with their suppliers and service
providers to establish service programs which enhance operating efficiencies.
The Company has developed and is actively pursuing strategic alliances with
its customers whereby a number of the Company's value added services may be
combined as needed to enable these customers to operate more efficiently. Red
Man also benefits from these alliances due to the longer term relationships
created. These relationships generally provide greater consistency and
predictability with respect to customer procurement requirements, improved
utilization of assets and increased inventory turnover. The Company initially
developed alliances to meet the needs of the upstream operations of its major
integrated and large independent oil and gas companies. However, the Company
has expanded certain of these alliances to provide products and services to
the midstream and downstream operations of its integrated customers. The
Company's major customers with which it has strategic alliances include Amoco
Production Company, Chevron USA, Inc.,
23
<PAGE>
Coastal Management Corporation, Exxon Company, U.S.A., Mobil Oil Corporation,
OXY USA, Inc., Phillips Petroleum Company, Shell Offshore Inc., Texaco, Inc.,
The Williams Companies, Inc. and Union Pacific Resources Group, Inc. In
addition, the Company has commenced developing strategic alliances with
industrial customers, including Kaiser Aluminum & Chemical Corporation. The
Company considers its efforts to obtain strategic alliances with customers to
be of major importance to its future growth.
The Company has grown its business operations both through acquisitions and
internal expansion. Sales have grown at a 25.3% compounded annual growth rate
from $184.2 million in fiscal 1993 to $454.4 million in fiscal 1997. Net
income has grown over the same period at a 39.0% compounded annual growth rate
from $1.9 million to $7.1 million.
The Company believes it is well positioned to continue as a leading
distributor of products and services to the energy industry. The Company
considers its competitive strengths to include the following:
. Business and Geographical Diversification. The Company provides products and
services to customers involved in the upstream, midstream and downstream
operations of the energy industry. Accordingly, the Company can provide "one
stop" shopping for its integrated customers while reducing its dependence on
the exploration and production activities of oil and gas companies. In
addition, the Company's 42 service and supply centers are located near major
hydrocarbon and refining regions in the United States, which enhances the
Company's ability to respond to customers quickly and reduces its dependence
on the level of activity in any one region. Further, management of these
centers is decentralized so that the Company can tailor its products and
services to meet the specific needs and requirements of its customers in
each location.
. Value Added Services. The Company is a leader in providing comprehensive and
innovative services to its customers, including inventory procurement and
management, warehouse management, integrated supply arrangements, management
information reporting and total project management. The Company has also
developed significant long-term strategic alliances with certain of its
customers whereby the Company may provide a combination of these services to
enable its customers to operate more efficiently and reduce costs.
. Relationships with Customers. Due to management's commitment to service, the
Company has developed long-term relationships with a high quality customer
base. These customers include major integrated and large independent oil and
gas companies, as well as significant industrial companies. The Company
believes it has generally been able to increase sales as its customers'
operations have grown and increase its market share for certain products.
The Company's ability to increase its sales and market share is due, in
part, to its ability to provide a range of innovative, value added services
in addition to quality equipment, supplies and products.
. Experienced and Incentivized Management Team. The Company's senior
management team has an average of 26 years experience in the oilfield and
industrial supply business. After the completion of the Offering, certain
officers of the Company will beneficially own all of the outstanding shares
of Class B Common Stock and the Company's Employee Stock Ownership Plan will
own % of the outstanding shares of Class A Common Stock ( % if the
Underwriters' over-allotment option is exercised in full).
. Relationships with Mills and Suppliers. By virtue of being a leading
distributor of oilfield tubular goods and MRO products, the Company believes
it has developed excellent relationships with its domestic mill and MRO
suppliers. The Company believes these relationships are crucial in order for
it to quickly respond to the specific requirements of its customers. For
fiscal 1997, the Company believes it was a leading distributor of tubular
goods manufactured by CF&I Steel, Inc., Lone Star Steel Company and the
U.S. Steel Group of USX Corporation.
. Ability to Manage Growth and Integrate Acquisitions. Over the last ten
years, the Company has acquired a total of 42 service and supply centers
through five acquisitions. Seventeen of these service and supply centers
were either subsequently consolidated with the Company's existing locations,
sold or closed. In addition, pursuant to its internal growth plans the
Company has opened 13 new service and supply centers over the
24
<PAGE>
same period. The Company believes its historical results of operations
reflect its ability to carefully plan and manage its growth and successfully
integrate the operations of acquired service and supply centers.
INDUSTRY OVERVIEW
The market for equipment, supplies and services used by energy companies is
driven primarily by the industry fundamentals affecting such companies. These
fundamentals have been improving in recent years, due in part to favorable oil
and gas prices. The key factors affecting the industry include (i) demand for
and supply of oil and natural gas, (ii) capital expenditures by upstream,
midstream and downstream energy companies, (iii) trends toward increased
outsourcing and formation of alliances, and (iv) consolidation of supply and
service companies.
Primary energy consumption in the United States from 1990 to 1995 has
outpaced production of crude oil and natural gas. During this period, oil
consumption increased from 16.3 million barrels of oil per day ("MMBPD") to
16.9 MMBPD, an annual growth rate of approximately .8%, compared to a decline
in production from 7.4 MMBPD to 6.6 MMBPD. Similarly, consumption of natural
gas increased from 51.3 billion cubic feet per day ("BCFD") to 59.3 BCFD, an
annual growth rate of approximately 3.0%, compared to an increase in natural
gas production from 49.5 BCFD to 53.8 BCFD, an annual growth rate of
approximately 1.7%. This has led to a significant increase in drilling
activity which has resulted in increased demand for oilfield equipment,
supplies and services. Since reaching a low of 718 in 1992, the U.S. average
rig count increased to 779 in 1996 and was in excess of 1,000 as of November
1997. Similarly, rig utilization rates increased from 59.7% in 1992 to 76.6%
in 1996 and were approximately 86.9% as of July 1997. Further, demand for
oilfield equipment, supplies and services has been favorably affected by the
trend toward drilling deeper wells, as shallow deposits have largely been
found and depleted. Deeper wells typically require more oilfield equipment,
supplies and services than shallow wells.
In addition to basic supply and demand fundamentals, technological advances
in exploration, development and production techniques have contributed to
increased activity by oil and gas companies. These techniques, including new
seismic data collection (3D/4D seismic) and drilling (deviated, horizontal and
multilateral wells) methods, have lowered the cost of exploration and
development and have increased demand for supplies and services in many phases
of a hydrocarbon field's development. As hydrocarbon basins mature, the need
increases for artificial lift, secondary and tertiary recovery methods to
extend the production life of such basins. The Company believes this trend is
further benefiting the demand for oilfield equipment, supplies and services.
Capital expenditures by energy companies have been increasing in recent
years. Exploration and production companies are increasing capital
expenditures as they focus on increasing reserves and production to meet
increased demand. Midstream companies are spending money to build gathering
facilities to connect new wells and gas gathering and natural gas liquids
plants to process the increased production. Downstream companies are focusing
their capital expenditures on increasing the productivity and yield of
refineries and chemical plants and on meeting increasingly stringent
environmental requirements. Drilling, exploration and production spending
increased from $16.0 billion in 1990 to $16.7 billion in 1996 and is projected
to continue to grow. Capital expenditures by downstream companies have grown
from $10.2 billion in 1990 to $10.6 billion in 1996.
In the past decade, the energy industry has undergone a period of
restructuring and rationalization in response to low margins, cost
inefficiencies and poor returns. Many energy companies have been redefining
the core areas of their businesses and have downsized their organizations to
concentrate their resources, maximize returns from existing assets and focus
on finding and developing new reserves. As a result, energy companies are
increasingly outsourcing responsibility for certain activities, including
inventory procurement, management and reporting requirements. In addition,
energy companies are moving away from individual contracts with a variety of
separate suppliers of equipment and services, all coordinated and managed by
the buyer, to a limited number of more cooperative arrangements to improve
operating efficiencies. These new relationships, which include integrated
supply agreements, maintenance, repair and operating agreements, joint
ventures, partnerships and alliances, are being implemented as cost cutting
strategies to enhance productivity and reduce capital and
25
<PAGE>
operating costs. The trend of outsourcing and the formation of alliances has
created new opportunities for the equipment, supplies and service industry.
The Company believes the oilfield and industrial equipment, supplies and
services industry in the United States is fragmented, with a few larger and
many smaller participants than the Company. The industry has undergone
consolidation due to the trend of energy companies towards reducing their
supplier base to focus on key suppliers who can service their requirements for
upstream, midstream and downstream operations and who have the broad product
line and financial resources to meet their needs in a number of geographic
regions. The Company believes this consolidation trend will continue and will
present opportunities to make strategic acquisitions.
STRATEGY
The Company's goal is to expand its existing market position in the
upstream, midstream and downstream sectors of the energy industry, while at
the same time increasing its earnings and cash flow per share to enhance
overall stockholder value. Key elements of the Company's strategy for
achieving this goal are to:
. Maintain and Grow Alliances. The Company has entered into and is seeking to
enter into alliances to better serve its customers and enable these
customers to operate more efficiently. The Company believes these alliances
result in improved utilization of its assets due to the improved consistency
and predictability of customer procurement requirements and increased
profitability due to an expansion in the volume and range of products sold.
In addition, these alliances often provide opportunities to supply
additional products and services through the close working relationships
developed. The Company plans to maintain and expand its alliances with major
integrated and independent oil and gas companies and is also actively
pursuing alliances with companies outside of the oil and gas industry. The
Company believes it is well positioned to form alliances as a result of its
(i) geographically diverse network of service and supply centers located in
major hydrocarbon producing and refining areas of the United States, (ii)
breadth of available product lines and value added services and (iii) strong
relationships with customers, mills and suppliers.
. Increase Maintenance, Repair and Operating Agreements. The Company has
numerous MRO agreements in place, primarily with upstream customers. These
agreements are generally non-exclusive contracts which provide a set price
for certain of the Company's products which may be required by a customer.
MRO agreements mutually benefit the customer and the Company by reducing the
transaction costs associated with the submission of bids for each order. The
Company believes there are additional opportunities to utilize MRO
arrangements for servicing the requirements of its midstream and downstream
customers and is actively pursuing such agreements.
. Expand into Selected International Markets. The Company distributes its
products to several foreign markets from certain domestic locations. The
Company believes there is significant potential for establishing service and
supply centers in select foreign countries, particularly in South America,
and is evaluating establishing a distribution network in certain of these
countries.
. Develop Integrated Supply Arrangements. The Company has entered into and is
pursuing integrated supply arrangements with certain of its customers. These
arrangements generally designate the Company as the single source provider,
either directly or indirectly, of the upstream, midstream and/or downstream
requirements of customers. The Company believes these arrangements allow it
to reduce the total costs to the customer and sell an increased volume of a
broader range of products. The Company believes it is well positioned to
obtain these arrangements due to its (i) geographically diverse network of
service and supply centers, (ii) breadth of available product lines and
value added services and (iii) strong relationships with customers, mills
and suppliers.
. Increase Tubular Goods Sales. The Company believes there exists an
opportunity to expand its market position in the distribution of tubular
goods, particularly with respect to line pipe. The Company believes that the
strong demand for tubular goods experienced in fiscal 1997 will continue and
that significant opportunities exist to grow this portion of the business,
particularly line pipe sales to the midstream and
26
<PAGE>
downstream market. The Company believes that its (i) geographically diverse
distribution network, (ii) favorable customer relationships, (iii) strong
relationships with mills and (iv) purchasing leverage due to the volume of
products sold favorably position the Company to capitalize on this
opportunity.
. Capitalize on Strong Balance Sheet. The Company plans to use the net
proceeds to the Company from the Offering to repay indebtedness under the
Credit Facility and redeem the outstanding shares of Class C Preferred
Stock. The Company believes that its strong balance sheet will provide it
with the financial flexibility to carry out its strategy to grow and develop
new and existing markets both domestically and internationally. The Company
intends to actively consider and pursue acquisition opportunities and
evaluate opening new service and supply centers. Although the Company
evaluates acquisition opportunities from time to time, it currently does not
have any understanding, contract or agreement to acquire any business or
assets.
PRODUCTS AND SERVICES
TUBULAR GOODS
The Company distributes a variety of widely used oil country tubular
products manufactured by third parties in diameters ranging in size from one-
inch tubing to 20-inch casing. OCTG primarily consists of well casing and
production tubing used in the drilling, completion and production of oil and
gas wells. Well casing is used to line walls of the well bore to provide
structural support. Production tubing provides the conduit through which the
oil or gas will be brought to the surface upon completion of the well.
The Company maintains a broad range of line pipe products for oilfield and
industrial customers. Line pipe inventories include carbon steel, stainless
steel and coated pipe. Line pipe specifications range from one-eighth-inch
through 36-inch diameters, in seamless, continuous weld, electric weld and
double submerged arc weld and in a wide range of grades and wall thicknesses.
Line pipe is used to gather and transport oil and gas production from
producing well locations to gas processing plants, refineries, chemical plants
and storage facilities.
Sales of OCTG are derived either from shipments out of Company-owned
inventories maintained in strategically located storage yards or from
shipments directly from mill sources. The significant majority of OCTG sales
come from shipments out of these storage yards. There are two types of sales
transactions out of Company-owned inventories: "stocking program" sales and
spot sales. The Company believes the majority of its OCTG sales is derived
from stocking program arrangements. The Company enters into stocking program
arrangements with customers to provide various specifications of OCTG at an
agreed upon price generally covering a time-frame from three to 18 months. The
Company procures OCTG from its mill sources and agrees to stock the OCTG in a
designated area close to the exploration and development drilling operations
of the end-user customer. As OCTG is needed by the customer, the Company will
arrange for the delivery of the OCTG to the customer's designated location.
The other OCTG sales out of Company-owned inventories are derived from "spot"
sales into the market. These transactions typically are the result of the
Company's success in securing orders from customers who have sent the Company
"requests for quotation" for small quantities of OCTG needed for a single well
or for a small drilling program.
OCTG is stocked at over 64 third-party locations in grades ranging from J-55
to Q-125, threaded with American Petroleum Institute ("API") and premium
connections. The Company's inventory of line pipe is stored in 31 yards. A
majority of the line pipe is stored in five of the Company's service and
supply centers and the balance is maintained in independent yards.
Substantially all of the Company's OCTG is marketed through the Company's
direct sales force operating out of 11 sales offices. Sales of line pipe are
made through the Company's direct sales force and through its 42 service and
supply centers. The Company believes its relationships with major domestic and
foreign mills
27
<PAGE>
provide it with a competitive advantage in regard to pricing and availability
of tubular goods. The Company believes it is a leading distributor for CF&I
Steel, Inc., Lone Star Steel Company and the U.S. Steel Group of USX
Corporation. The majority of sales of tubular goods are to domestic companies.
SERVICE AND SUPPLY CENTERS
The Company's distribution network of 42 service and supply centers offer
55,000 products manufactured by over 7,000 manufacturers for distribution to
oilfield and industrial customers. Thirty-two service and supply centers are
located strategically in or near petroleum producing areas and through these
centers the Company concentrates sales and marketing efforts on MRO needs of
major petroleum exploration, production, refining and chemical companies. Ten
service and supply centers are strategically located near major refining and
other downstream operations areas and through these centers the Company
concentrates sales and marketing efforts on industrial supplies and product
needs of refineries, pipelines, chemical plants and fabricators.
Each of the Company's service and supply centers offers a complete line of
MRO supplies as well as pipe, valves, fittings and flanges manufactured by
leading manufacturers in the industry. The supplies and equipment stocked at
the Company's service and supply centers vary by location depending on the
specific needs of the customers supported.
Valves. Valves offered by the Company include ball, butterfly, gate, check
production, needle, plug and relief valves manufactured from cast steel,
stainless steel, forged steel, carbon steel or ductile iron. The Company
distributes valve products manufactured by more than 40 manufacturers. Valves
are generally used in oilfield and industrial applications to control
direction, velocity and pressure of liquids and gases within a transmission
line.
Fittings. Fittings offered by the Company include welded carbon, welded
stainless, forged carbon, forged stainless, malleable and cast iron fittings,
manufactured by approximately 15 manufacturers. Fittings are generally
utilized to connect numerous arrays of piping configurations for hydrocarbon
transportation and processing.
Flanges. Flanges offered by the Company include carbon and stainless steel
flanges manufactured by approximately eight manufacturers. Flanges are
utilized as spacers and sealers between connection points and valves on
transmission lines.
The Company's service and supply centers generally employ from four to ten
persons, with larger centers employing up to 35 persons and the largest center
employing approximately 60 persons. Service and supply centers are
strategically located in major hydrocarbon and refining regions of the United
States which allows for short lead times between customer order and delivery.
In addition, each service and supply center is treated as an individual profit
center. Individual service and supply center managers are responsible for
certain management decisions, including product stocking decisions, marketing
and inventory control. The Company's service and supply centers generally are
available 24 hours a day, seven days a week, to serve the needs of its
petroleum and industrial customers. Each service and supply center will stock
specialty items at the request of the customer to provide "one stop" shopping
availability. The Company will also deliver its products directly to the field
locations of its customers.
Since 1981, the Company has operated fabrication facilities in Tulsa,
Oklahoma, to fabricate and assemble quality gas measurement products. The
Company believes it is an industry leader in the fabrication of meter tubes,
skid-mounted meter runs and packaged measurement stations utilized for the
accurate measurement of natural gas flows. The Company offers a variety of
measurement accessories and custom piping products including bleed rings, flow
recorders, headers, hookup kits, manifolds, meter houses, orifice fittings,
orifice flanges and orifice plates.
All meter tubes fabricated and assembled by the Company satisfy the
requirements of the latest American Gas Association ("AGA") and API standards.
Inventories maintained at the fabrication facility include Daniel
28
<PAGE>
Simplex and senior orifice fittings, two-inch through eight-inch diameter
cold-drawn seamless meter tubing, new and reconditioned Barton flow recorders
and walk-in and line-type meter houses. The Company's measurement fabrication
facility currently includes 7,500 square feet of shop space and 20,000 square
feet of inventory storage area. In addition to a wide range of fabrication
equipment, the fabrication facility maintains a complete set of testing and
inspection tools to produce meter tubes to the latest AGA/API specifications.
Sales of measurement products, which represent less than 5% of total sales,
have increased 200% from 1990 to 1997. Plans are currently being implemented
to relocate to a larger fabrication plant of more than 20,000 square feet
during the Spring of 1998 to increase the Company's capacity to produce larger
and more complex gas and liquid measurement packages.
VALUE ADDED SERVICES
As major integrated and large independent oil and gas companies have begun
implementing cost cutting and efficiency initiatives to focus on their core
business, many of these companies have begun outsourcing their procurement and
inventory management requirements. In response to these initiatives and to
satisfy customer service requirements, the Company provides a number of value
added services. These value added services include the following:
. Inventory Procurement and Management. Inventory procurement and management
services may range from procuring, storing and delivering products for
customers, whereby the Company seeks to eliminate customers' need to
maintain their own inventory storage facilities and related personnel, to
entering into stocking program arrangements, whereby major integrated and
large independent oil and gas companies will plan their OCTG and line pipe
requirements and set up stocking programs for an entire year or until the
completion of development programs for a major production or development
area.
. Warehouse Management. Warehouse management services generally provide for
the Company's total operation of a customer's warehouse facility, including
its related inventory, by providing personnel to work directly out of such
facilities.
. Integrated Supply Arrangements. Under integrated supply arrangements, the
Company acts as the single source provider for all of the upstream,
midstream and/or downstream requirements of its customers. In these
arrangements, the Company coordinates the procurement of products for which
it is the distributor as well as products provided by other suppliers.
. Management Information Reporting. Management information reporting services
include providing detailed product information reports, delivery and
schedule reports, on-time reports and "score cards" to track customer
savings resulting from services provided by the Company.
. Total Project Management. The Company also provides total project management
services whereby it will plan, schedule and stock the requirements of major
projects of the Company's midstream and downstream customers.
CUSTOMERS
The Company's principal customers are companies that actively participate in
the upstream, midstream and downstream sectors of the energy industry as well
as industrial companies.
The Company is not dependent on any one customer or group of customers. In
fiscal 1997, the Company's top ten customers represented approximately 49% of
sales, with Chevron USA, Inc. accounting for approximately 12% of sales. The
number and variety of the Company's products required in a given year by any
one customer depends primarily upon that customer's capital expenditure budget
in any single year and on the results of competitive bids for major projects.
Consequently, a customer that accounts for a significant portion of sales in
one fiscal year may represent an immaterial portion of sales in subsequent
years.
Due to the demanding operating conditions in the energy industry and high
costs associated with equipment failure, customers prefer highly reliable
products and vendors with established qualifications and experience. The
29
<PAGE>
Company strives to build strong long-term relationships with its customers by
maintaining its reputation as a supplier of high-quality, efficient and
reliable products and by responding promptly to customer orders.
COMPETITION
The oilfield and industrial distribution services business is highly
competitive. The primary competitive factors in the distribution of products
and services to the energy industry are price and the quality, breadth and
availability of products and services provided.
The Company's sales and earnings can be affected by competitive actions such
as price changes, improved delivery and other actions by competitors. The
Company's principal competitors in the United States distribution services
industry include Continental Emsco Company, Dupre Supply Company, McJunkin
Corporation, National-Oilwell, Inc. and Wilson Supply Company. The Company
also competes with a number of regional or local oilfield supply stores in
each geographic market. The Company's North American OCTG distribution
business competes primarily with Bourland & Leverich, Inc., National-Oilwell,
Inc., Premier Pipe, Inc., Sooner Pipe and Supply Corp., Vinson Supply Company
and Wilson Supply Company. In sales of line pipe, the Company competes with
Dixie Pipe Sales, Inc., McJunkin Corporation, Texas Pipe and Tube Corp. and
Wilson Supply Company, as well as direct shipments from domestic mills.
Several of the Company's primary competitors are diversified multinational
companies with substantially larger operating staffs and greater capital
resources than those of the Company.
PROPERTIES
The Company's principal office and headquarters is located in Tulsa,
Oklahoma, and consists of approximately 34,000 square feet of leased office
space. In addition, the Company owns or leases facilities at strategic
locations in ten states throughout the mid-southern, western and southwestern
United States. These facilities include 11 sales offices, 42 oilfield and
industrial service and supply centers and a single fabrication facility. Sales
offices are primarily responsible for the distribution of tubular goods,
whereas the service and supply centers maintain inventories of consumable
oilfield and industrial products and supplies and provide certain repair and
reworking services for down-hole pumps. See "Business--Products and Services."
The following is a complete list of the Company's service and supply centers
and sales offices:
<TABLE>
<CAPTION>
STATE LOCATION TYPE OF FACILITY
----- -------- ----------------
<S> <C> <C>
Alabama Flomaton Service and Supply Center
Mobile Service and Supply Center*
Arkansas Fort Smith Service and Supply Center
Colorado Denver Sales Office
Kansas Elkhart Service and Supply Center
Ulysses Service and Supply Center
Louisiana Cameron Service and Supply Center
Harvey Service and Supply Center/
Sales Office*+
Houma Service and Supply Center
Morgan City Service and Supply Center
New Iberia Sales Office
Mississippi Laurel Service and Supply Center
New Mexico Artesia Service and Supply Center
Farmington Service and Supply Center*+
Lovington Service and Supply Center
Oklahoma Ardmore Service and Supply Center
Elk City Service and Supply Center
Lindsay Service and Supply Center
Oklahoma City Sales Office
Ratliff City Service and Supply Center
Tulsa Service and Supply Center/
Sales Office*
Wilburton Service and Supply Center
Woodward Service and Supply Center
</TABLE>
<TABLE>
<CAPTION>
STATE LOCATION TYPE OF FACILITY
----- -------- ----------------
<S> <C> <C>
Texas Amarillo Sales Office
Andrews Service and Supply Center*+
Beaumont Service and Supply Center*
Borger Service and Supply Center*
Carthage Service and Supply Center
Conroe Service and Supply Center
Crane Service and Supply Center
Dallas Sales Office
Freeport Service and Supply Center
Galena Park International Sales/Supply Office/
Service and Supply Center*+
Gonzales Service and Supply Center
Houston Sales Office
Jourdanton Service and Supply Center
Laredo Service and Supply Center
Longview Service and Supply Center
Marshall Service and Supply Center
Midland Sales Office
Odessa Service and Supply Center+
Perryton Service and Supply Center
Snyder Service and Supply Center
Sundown Service and Supply Center
White Oak Service and Supply Center
Zapata Service and Supply Center
Utah North Salt Lake City Service and Supply Center*
Roosevelt Service and Supply Center
Salt Lake City Sales Office
Vernal Service and Supply Center
</TABLE>
- --------
* Distributes primarily industrial products.
+ Leased from related parties. See "Certain Transactions."
30
<PAGE>
In addition to these facilities, the Company maintains arrangements for
storage of OCTG and line pipe inventories at strategically located independent
storage yards in California, Colorado, Kansas, Louisiana, Nebraska, New
Mexico, Oklahoma, Texas and Wyoming. A majority of the Company's inventory of
line pipe is stored at five service and supply centers located in Louisiana,
Oklahoma, Texas and Utah.
EMPLOYEES
The total number of the Company's employees as of October 31, 1997 was 570,
all of which are located in the United States. Eighteen of the Company's
employees are covered by a collective bargaining agreement with the United
Steelworkers Union. This bargaining unit was in existence at one supply center
location acquired by the Company in the Vinson Acquisition. The Company
considers its employee relations to be good.
GOVERNMENTAL REGULATIONS
Many aspects of the Company's operations are affected by political
developments and are subject to governmental regulations, including those
relating to oil field operations, worker safety and the protection of the
environment. In addition, the Company depends on the demand for its services
from the energy industry and, therefore, is affected by changing taxes, price
controls and other laws and regulations relating to the energy industry
generally, including those specifically directed to exploration, production,
transportation, processing and refining operations. The adoption of laws and
regulations curtailing exploration and development drilling for, or the
transportation, processing and refining of, oil and gas for economic or other
policy reasons could adversely affect the Company's operations by limiting
demand for the Company's products.
Products sold by the Company can be used in applications by customers which
are affected by numerous federal, state and local environmental laws and
regulations. The technical requirements of these laws and regulations are
becoming increasingly expensive, complex and stringent. These laws may provide
for "strict liability" for damages to natural resources or threats to public
health and safety, rendering a party liable for the environmental damage
without regard to negligence or fault on the part of such party. Sanctions for
noncompliance may include revocation of permits, corrective action orders,
administrative or civil penalties and criminal prosecution. Certain
environmental laws provide for joint and several strict liability for
remediation of spills and releases of hazardous substances. In addition,
companies may be subject to claims alleging personal injury or property damage
as a result of alleged exposure to hazardous substances, as well as damage to
natural resources. As a supplier of equipment utilized in petroleum and
industrial applications, the Company may have claims made against it as a
result of a failure or defective product which causes or contributes to
environmental damage.
Based on the Company's experience to date, the Company does not currently
anticipate any material adverse effect on its business or consolidated
financial position as a result of future compliance with existing
environmental laws and regulations controlling the discharge of materials into
the environment. However, future events, such as changes in existing laws and
regulations or their interpretation, more vigorous enforcement policies of
regulatory agencies or stricter or different interpretations of existing laws
and regulations, may require additional expenditures by the Company, which may
be material.
LEGAL PROCEEDINGS
The Company is not a party to, nor is any of its property the subject of,
any pending legal proceedings that, in the opinion of management, are expected
to have a material adverse effect on the Company's business, financial
condition or results of operations.
31
<PAGE>
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth certain information regarding the Company's
directors and executive officers:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Betty J. Ketchum.............. 63 Chairman of the Board, Secretary and Director
L. Craig Ketchum.............. 40 President, Chief Executive Officer and
Director
T. Wayne Windham.............. 56 Vice President--International and Director
J. M. (Dee) Paige............. 44 Chief Financial Officer, Treasurer and
Director
Alf P. Slaatten............... 59 Vice President--Oilfield Stores
Dennis K. Niver............... 49 Vice President--Purchasing and Alliances
Robert F. Dvorak.............. 43 Vice President--Sales
Joe H. Philipp................ 51 Vice President--Industrial Stores
David L. Noss................. 64 Director
</TABLE>
The Company intends to appoint two independent non-employee directors
following consummation of the Offering. The Company has undertaken pursuant to
its listing application with the New York Stock Exchange, Inc., to appoint one
independent non-employee director immediately upon the closing of the Offering
and one additional independent non-employee director within 12 months from the
closing of the Offering. Each director holds office until the next annual
meeting of stockholders for the election of directors and until his or her
successor has been duly elected and qualified. Officers serve at the
discretion of the Board of Directors.
Betty J. Ketchum, the wife of the late founder of the Company, Lewis B.
Ketchum, serves as Chairman of the Board and Corporate Secretary and has
served as a Director of the Company since 1995. Mrs. Ketchum has worked in
various positions of increasing responsibility in the Company's operations
since its inception, including in treasury, taxation, accounting and human
resources. Mrs. Ketchum is the mother of L. Craig Ketchum.
L. Craig Ketchum has served as President and Chief Executive Officer since
1995 and as a Director of the Company since 1987. Since joining the Company in
1979, Mr. Ketchum has served in various positions of increasing
responsibility, including in store operations, sales and management, and has
previously served as Vice President--Sales and Executive Vice President. He is
the current Chairman of the Eastern North Mid-Continent District of the
Petroleum Equipment Suppliers Association, an active member and panelist for
the National Minorities Supplier Development Council, and an active member of
the Young Presidents' Organization. Mr. Ketchum received his degree in
Business Administration from the University of Central Oklahoma, Edmond,
Oklahoma. Mr. Ketchum is the son of Betty J. Ketchum.
T. Wayne Windham serves as Vice President--International Operations and has
been a Director since 1986. Mr. Windham joined the Company in 1978 and has
served as Southern Division Manager, Vice President--Sales, Vice President--
Tubular, and Vice President--International. He received his Bachelor of
Commerce degree from Rice University.
J. M. (Dee) Paige serves as Chief Financial Officer and Treasurer of the
Company and has been a Director since 1995. Since joining the Company in 1982,
Mr. Paige has held various positions of increasing responsibility, including
Controller and Vice President--Finance. Prior to joining the Company, Mr.
Paige worked at Arthur Andersen & Co. and Wyatt & Co. He received a Masters
Degree in Accounting from Oklahoma State University. Mr. Paige is a member of
the Oklahoma Society of Certified Public Accountants.
Alf P. Slaatten has served as Vice President--Oilfield Stores since joining
the Company in 1987. Mr. Slaatten has over 35 years of experience in the
oilfield supply business. Prior to joining the Company, he was employed for 25
years with Franklin Supply Company, serving in various capacities, from
warehouseman to Vice President--Stores and Sales Offices. He attended the
University of Central Oklahoma, Edmond, Oklahoma, where he obtained a Bachelor
of Science degree. He is a member of the Society of Petroleum Engineers.
32
<PAGE>
Dennis K. Niver has served as Vice President--Purchasing and Alliances since
January 1992. He joined the Company in 1977 and has over 25 years experience
in the oilfield supply business. He has served the Company in various
positions of increasing responsibility, including Manager of the Tulsa Sales
Office, Purchasing Manager, and Vice President--Purchasing. Mr. Niver is an
active member of the National Association of Purchasing Management, Tulsa
Chapter.
Robert F. Dvorak serves as Vice President--Sales. Mr. Dvorak joined the
Company in 1989 as Southwestern Division Manager in Dallas, Texas. Prior to
joining the Company, Mr. Dvorak was employed by Bovaird Supply Company and
Republic Supply Company. Mr. Dvorak holds a Bachelor of Science degree from
New Mexico State University.
Joe H. Philipp has served as Vice President--Industrial Stores since March
1997. He began his employment at the Company in March 1995 in connection with
the Vinson Acquisition. At that time, Mr. Philipp was serving as branch
manager of the Galena Park Facility of Vinson Supply Company in Texas. Mr.
Philipp originally joined Vinson Supply Company in 1981 and also served as
Vice President and Branch Manager of its Salt Lake City office. Mr. Philipp
holds a Bachelor of Arts degree from Loyola University.
David L. Noss has served as a Director of the Company since August 1976 and
is Assistant Secretary. Mr. Noss is a member of the law firm Noss, Monnet &
Edmiston in Tulsa, Oklahoma, where he practices corporate law, taxation law
and estate planning. Mr. Noss received a Bachelor of Science degree in
Business Administration and his Juris Doctorate degree from the University of
Tulsa.
COMMITTEES OF THE BOARD OF DIRECTORS
Following the completion of the Offering, there will be two committees of
the Board of Directors: an Audit Committee and a Compensation Committee. The
initial members of both committees will be the Company's independent non-
employee directors who will be appointed to the Board of Directors after
completion of the Offering. The Audit Committee will recommend the appointment
of independent public accountants to conduct audits of the Company's financial
statements and review with the independent accountants the plan and results of
the auditing engagement. The Audit Committee will also review the scope and
results of procedures for internal auditing of the Company and the adequacy of
the Company's system of internal accounting controls. The Compensation
Committee will approve, or, in some cases, recommend to the Board,
remuneration arrangements and other compensation plans involving the Company's
directors, executive officers and certain other employees whose compensation
exceeds specified levels. The Compensation Committee will also act on the
granting of stock options, including grants made under the Incentive Plan to
the Company's directors and executive officers.
DIRECTOR COMPENSATION
Prior to the Offering, the Company's directors had not received compensation
for their services as directors. Following the consummation of the Offering,
each director who is not an employee of the Company will receive an annual fee
of $10,000, plus a fee of $1,000 for attendance at each Board of Directors
meeting and $1,000 for each committee meeting (unless held on the same day as
a Board of Directors meeting). In addition, directors are eligible to receive
stock option grants or awards of restricted stock under the Incentive Plan.
All directors will be reimbursed for out-of-pocket expenses incurred in
attending meetings of the Board of Directors or committees thereof and for
other expenses incurred in their capacity as directors. Directors who are
employees of the Company will not receive additional compensation for serving
as directors.
LIMITATION OF LIABILITY AND INDEMNIFICATION MATTERS
The Restated Certificate of Incorporation provides that no director of the
Company shall be personally liable to the Company or its stockholders for
monetary damages for breach of fiduciary duty as a director, except for
liability (i) for any breach of the director's duty of loyalty to the Company
or its stockholders, (ii) for acts or
33
<PAGE>
omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) for unlawful payments of dividends or unlawful
stock repurchases or redemptions or (iv) for any transaction from which the
director derived an improper personal benefit.
The Company's Amended and Restated Bylaws (the "Bylaws") provide for the
indemnification of the Company's officers and directors and the advancement to
them of expenses, including attorney fees, in connection with proceedings and
claims, to the fullest extent permitted by the Oklahoma General Corporation
Act. The Bylaws include related provisions meant to facilitate the
indemnitee's receipt of such benefits. These provisions cover, among other
things, (i) specification of the method of determining entitlement to
indemnification and the selection of independent counsel that will in some
cases make such determination, (ii) specification of certain time periods by
which certain payments or determinations must be made and actions must be
taken and (iii) the establishment of certain presumptions in favor of an
indemnitee.
EXECUTIVE COMPENSATION
The following table sets forth certain summary information concerning the
compensation paid or accrued by the Company during the year ended October 31,
1997, to the Company's Chief Executive Officer and to each of the Company's
four other most highly compensated executive officers whose combined salary
and bonus from the Company during such period exceeded $100,000.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
---------------------------------
OTHER
ANNUAL ALL OTHER
NAME AND PRINCIPAL POSITION SALARY BONUS COMPENSATION(1) COMPENSATION(2)
- --------------------------- -------- -------- --------------- ---------------
<S> <C> <C> <C> <C>
Betty J. Ketchum............. $189,000 $180,000 -- $18,437
Chairman of the Board
L. Craig Ketchum............. 92,040 200,000 -- 3,700
Chief Executive Officer and
President
J. M. (Dee) Paige............ 87,400 60,000 -- 3,513
Chief Financial Officer and
Treasurer
Alf P. Slaatten.............. 85,413 40,000 -- 3,225
Vice President--Oilfield
Stores
Robert F. Dvorak............. 78,413 40,000 -- 2,939
Vice President--Sales
</TABLE>
- --------
(1) The value of perquisites and other personal benefits are excluded because
the aggregate amount of such compensation, if any, did not exceed the
lesser of $50,000 or 10% of the annual compensation earned by such
individual.
(2) Consists of (i) contributions by the Company to its 401(k) Retirement
Savings Plan in the amount of $2,850, $2,761, $2,622, $2,546 and $2,352
for each of Betty J. Ketchum, Messrs. Ketchum, Paige, Slaatten and Dvorak,
respectively; (ii) Company contributions to the ESOP in the amount of
$1,078, $1,078, $891, $679 and $587 for each of Betty J. Ketchum, Messrs.
Ketchum, Paige, Slaatten and Dvorak, respectively, and (iii) the dollar
value of the benefit to Betty J. Ketchum of a split-dollar life insurance
policy paid by the Company totaling $14,509.
INCENTIVE PLAN
General. The Company has established the Red Man Pipe & Supply Co. Incentive
Stock Plan (the "Incentive Plan"), the purpose of which is to provide those
persons selected to participate in such plan additional incentive to promote
the long-term success of Company, enable such persons to acquire an equity
interest in Company and enable Company to attract and retain individuals
instrumental in contributing to its success.
34
<PAGE>
Officers, employees and directors are eligible to receive grants and awards
under the Incentive Plan. The total amount of Class A Common Stock initially
authorized and reserved for issuance under the Incentive Plan is shares.
No awards have been granted under the Incentive Plan.
The Incentive Plan is administered by the Board of Directors; provided,
however, that the Board of Directors may delegate any and all of its duties to
a committee of the Board of Directors (as used in this description of the
Incentive Plan, the "Committee"). The Company anticipates that the
Compensation Committee will administer the Incentive Plan following the
Offering except with respect to members of the Compensation Committee for
which the full Board of Directors will administer the Incentive Plan. In the
course of administering the Incentive Plan, the Committee is given broad
discretion to construe and interpret the Incentive Plan and to adopt such
rules, regulations, guidelines, subplans and procedures for carrying out the
Incentive Plan as it deems necessary. In addition, the Committee is authorized
to identify plan participants, determine the types and amounts of awards to be
granted, establish the terms, conditions and provisions of awards, prescribe
forms of award agreements, establish, amend and rescind rules and regulations
relating to the Incentive Plan.
Summary of Awards. The Incentive Plan authorizes the grant of stock options
and award of restricted stock. Generally, awards under the Incentive Plan will
be granted for no consideration other than prior and future services. Stock
options granted to participants pursuant to the Incentive Plan may, at the
discretion of the Committee, be incentive stock options ("ISOs") within the
meaning of Section 422 of the Internal Revenue Code of 1986, as amended (the
"Code"), or non-qualified stock options. ISOs, however, may only be awarded to
employees of the Company. The exercise price of an ISO may not be less than
the fair market value of the Class A Common Stock on the date of grant (or
110% of such fair market value in the case of ISOs granted to employees who
own more than 10% of the combined voting power of all classes of stock of the
Company). In the case of non-qualified stock options, the exercise price shall
be as determined by the Committee in its sole discretion, except that such
price shall not be less than the fair market value of the Class A Common Stock
on the date of grant.
Stock options granted under the Incentive Plan are exercisable in whole or
in part at such time or times as may be determined by the Committee, except
that ISOs may not be exercised after the expiration of ten years from the date
granted (or five years in the case of ISOs granted to employees who own more
than 10% of the combined voting power of all classes of stock of the Company).
Generally, stock options may be exercised by the payment of cash, stock,
promissory notes, the withholding of shares otherwise issuable upon exercise
or a combination thereof.
A restricted stock award will consist of shares of Class A Common Stock that
are nontransferable or subject to risk of forfeiture until specific conditions
are met. The restrictions will lapse in accordance with the schedule or other
conditions as the Committee determines. During the restriction period, the
recipient of restricted stock will have certain rights as a stockholder,
including the right to vote the stock and receive dividends.
Changes Affecting Stock. In the event of a merger, consolidation,
reorganization, recapitalization, stock split, or stock dividend, or a
combination or reclassification of shares, the number of shares of Class A
Common Stock reserved under the Incentive Plan, the number of shares covered
by outstanding stock options and restricted stock, and the exercise prices of
outstanding options shall be adjusted proportionately.
Amendment to and Termination of the Incentive Plan. The Board of Directors
may amend, modify, suspend, discontinue or terminate the Incentive Plan
without the consent of stockholders or participants; provided, however, the
Board may not (i) increase the maximum number of shares reserved for issuance
under the Plan, except with stockholder approval, or (ii) decrease the
exercise price of any option previously granted. The Incentive Plan will
terminate on a date selected by the Board of Directors in its sole discretion.
EMPLOYEE BENEFIT PLANS AND ARRANGEMENTS
401(k) Plan. The Company has established a qualified Retirement and Savings
Plan (the "401(k) Plan") covering the Company's employees. The 401(k) Plan
incorporates the provisions of Section 401(k) of
35
<PAGE>
the Internal Revenue Code. The 401(k) Plan covers all employees who have
attained the age of 21 and have completed at least one year of service.
Participants are allowed to contribute a portion of their salary with employer
matching contributions based on the contributions of the participants.
Employee Stock Ownership Plan. The Company maintains a qualified Employee
Stock Ownership Plan (the "ESOP"), which is a noncontributory defined
contribution plan established for the employees of the Company. The ESOP
covers substantially all employees who have attained the age of 21 and have
completed one year of service on or before the last day of the plan year.
Vesting in the ESOP is based on years of continuous service. Vesting begins
after three years of service and is continuous through seven years of service,
at which time the participant is 100% vested. The purpose of the ESOP is to
purchase Company stock and other investments for the benefit of the employees
or their beneficiaries. Employer contributions are discretionary and are
determined annually by the Board of Directors. The Company's contribution to
the ESOP is allocated to the participants based on the ratio of their
compensation to the total compensation of all eligible participants.
Compensation is defined as total salary and wages for the plan year and will
include salary reduction contributions. The Company had no allocated shares,
shares committed-to-be released, unallocated shares or unearned shares at
October 31, 1995, 1996 and 1997. ESOP shares are treated as outstanding common
stock in the computation of earnings per share.
Discretionary Bonus Plan. It is the Company's philosophy to provide a
competitive salary structure within the industry for executive officers as
well as other employees and, based on performance standards of the Company, to
provide an annual cash bonus to substantially all employees of the Company.
Generally after fiscal year-end, certain executive officers and directors
review the Company's financial performance to determine the overall bonus
compensation for employees based primarily on growth in sales and net income.
The President generally determines a level of bonus for each of the Vice
Presidents and division managers and those individuals in turn determine bonus
compensation for employees within their divisions. The Compensation Committee
will determine bonus compensation for the Company's employee directors. Bonus
compensation has been paid to employees on a company-wide basis for all but
one year of the Company's 21-year existence.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
In the past, all matters with respect to the compensation of executive
officers of the Company were determined by the members of the Board of
Directors as a whole. Betty Ketchum and Messrs. Ketchum, Paige and Windham,
who also serve as executive officers of the Company, participated as Board
members in deliberations concerning compensation. Following the completion of
the Offering, the Company will establish a Compensation Committee to determine
compensation matters with respect to the Company's employee directors.
36
<PAGE>
CERTAIN TRANSACTIONS
The Company entered into an agreement effective October 30, 1997, with
Consolidated in connection with the Company's reclassification of its Common
Stock. Consolidated is the successor in interest under an agreement between
the Company and Otter, Inc., an Oklahoma corporation, effective July 12, 1988,
as amended effective October 24, 1990, and a purchase agreement between the
Company and Vinson Supply Company, a Delaware corporation, effective March 1,
1995. Pursuant to the agreement with Consolidated, Consolidated exchanged its
holdings of Class B Common Stock for Class A Common Stock and the Company
agreed to redeem all the outstanding shares of Class C Preferred Shares held
by Consolidated for $5.0 million, plus accrued dividends, with the net
proceeds to the Company from the Offering. See "Use of Proceeds." The
agreement further provided Consolidated with certain registration rights with
respect to its holdings of Class A Common Stock. See "Description of Capital
Stock--Registration Rights."
The Company leases five service and supply center locations from Sammons
Realty Corporation, an affiliate of Consolidated. These leases were assumed in
connection with Vinson Acquisition. In fiscal years 1995, 1996 and 1997,
payments to Sammons Realty Corporation aggregated $178,000, $665,000 and
$422,000, respectively. In each of October 1996 and April 1997, the Company
purchased one service and supply center from Sammons Realty Corporation for
$1,550,000 and $650,000, respectively.
The Company leases its fleet of vehicles for operations, including
approximately 156 light and heavy trucks, four forklifts and 36 passenger
automobiles, from Prideco, an Oklahoma limited partnership. Prideco is owned
by BJHK Limited Partnership, an Oklahoma limited partnership ("BJHK, L.P.").
The general partner of BJHK, L.P., is the Ketchum Family Trust, of which L.
Craig Ketchum is Trustee. Individual limited partners of BJHK, L.P., include
Kent H. Ketchum, Kevin B. Ketchum and Brian C. Ketchum, each of whom is a son
of Betty J. Ketchum and a brother of L. Craig Ketchum. Additional limited
partners include the Betty Jean Haun Ketchum Living Trust and the Lewis B.
Ketchum Living Trust, of which Mrs. Ketchum serves as Trustee, and the Lewis
Craig Ketchum Living Trust, of which L. Craig Ketchum and Susan L. Ketchum
serve as trustees. The Company believes that the leases with Prideco are on
terms at least as favorable to the Company as those obtainable from unrelated
third parties in the Company's area of operations. In fiscal years 1995, 1996
and 1997, the Company made aggregate payments to Prideco for vehicle leases of
$731,800, $755,800 and $874,800.
The Company leases its measurement fabrication facility in Tulsa, Oklahoma,
from Prideco pursuant to a real property lease agreement dated November 1,
1990. The primary term of the lease expired in October 1996, and the lease
arrangement will continue on a month-to-month basis until the Company
completes its new fabrication facility in the Spring of 1998, at which time
the lease will terminate. The lease payments paid to Prideco by the Company in
each of the fiscal years 1995, 1996 and 1997 aggregated $31,200.
In fiscal years 1995, 1996 and 1997, compensation paid to Kent H. Ketchum
totaled $103,675, $132,870 and $160,882, respectively, compensation paid to
Kevin B. Ketchum totaled $78,166, $97,950 and $125,000, respectively, and
compensation paid to Brian C. Ketchum totalled $74,635, $93,900 and $120,800,
respectively.
In fiscal years 1995, 1996 and 1997, the Company paid the law firm Noss,
Monnet & Edmiston, of which David Noss, a Director of the Company, is a
partner, $122,000, $105,000 and $157,000, respectively, for legal services and
expenses.
Betty J. Ketchum owns an undivided one-half interest in real property
located in Andrews, Texas, which is leased to the Company for use in its
operations. The term of the lease expires in January, 1998, and the Company
anticipates that such lease will be renewed. The aggregate lease payments made
to Mrs. Ketchum with respect to her ownership interest was $13,800 in each of
fiscal years 1995, 1996 and 1997. The Company believes that the lease terms
are at least as favorable to the Company as those obtainable from unrelated
third parties at such location.
37
<PAGE>
PRINCIPAL AND SELLING STOCKHOLDERS
The following table sets forth certain information regarding the beneficial
ownership of each class of the Company's common stock as of the date of this
Prospectus, and as adjusted to reflect the sale of the shares of Class A
Common Stock offered hereby, assuming no exercise of the Underwriters' over-
allotment option, (i) by each person who is known by the Company to own
beneficially more than 5% of each class of the Company's common stock, (ii) by
each of the Company's directors, (iii) by each executive officer of the
Company named in the Summary Compensation Table and (iv) by all executive
officers and directors as a group. Except as otherwise indicated, the Company
believes that the beneficial owners of the common stock listed below have sole
voting and investment power with respect to such shares.
<TABLE>
<CAPTION>
PRIOR TO OFFERING AFTER OFFERING
-------------------------------- ------------------------------------------------------
PERCENT OF PERCENT OF
NUMBER NUMBER SHARES OF NUMBER TOTAL NUMBER TOTAL
OF SHARES OF SHARES PERCENT OF CLASS A OF SHARES SHARES OF OF SHARES SHARES OF PERCENT OF
OF CLASS A OF CLASS B TOTAL COMMON OF CLASS A CLASS A OF CLASS B CLASS B TOTAL
COMMON COMMON VOTING STOCK COMMON COMMON COMMON COMMON VOTING
STOCK STOCK POWER(1) OFFERED(2) STOCK STOCK STOCK STOCK POWER(1)
---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Red Man Pipe & Supply
Co.
Employee Stock
Ownership Plan(3)... % % % %
Consolidated
Investment Services,
Inc.(4).............
BJHK Limited
Partnership(5)......
K.F. Enterprises,
L.L.C.(6)...........
L. Craig Ketchum(7)..
Betty J. Ketchum(8)..
T. Wayne Windham(9)..
J. M. (Dee)
Paige(10)...........
David L. Noss(11)....
Dennis K. Niver(12)..
Robert F.
Dvorak(13)..........
Alf P. Slaatten(14)..
Joe H. Philipp(15)...
All executive
officers and
directors as a group
(9 persons)
(7)(8)(11).......... % % % %
</TABLE>
- -------
* Less than 1%
(1) In calculating the percent of total voting power, the voting power of
shares of Class A Common Stock (one vote per share) and Class B Common
Stock (ten votes per share) is aggregated.
(2) Represents shares of Class B Common Stock prior to the Offering which
will be converted into an equal number of shares of Class A Common Stock
when sold pursuant to the Offering.
(3) This stockholder's address is 8023 E. 63rd Place, Suite 800, Tulsa,
Oklahoma 74133.
(4) This stockholder's address is 300 Crescent Court, Suite 700, Dallas,
Texas 75201.
(5) This stockholder's address is 8023 E. 63rd Place, Suite 800, Tulsa,
Oklahoma 74133.
(6) This stockholder's address is 8023 E. 63rd Place, Suite 800, Tulsa,
Oklahoma 74133.
(7) Includes shares of Class A Common Stock held by the ESOP for the
benefit of Mr. Ketchum. Includes shares of Class B Common Stock held
of record by BJHK Limited Partnership, an Oklahoma limited partnership,
of which the Ketchum Family Trust is general partner. Mr. Ketchum serves
as trustee of the Ketchum Family Trust and, by virtue thereof, may be
deemed the beneficial owner with respect to the shares held by BJHK
Limited Partnership.
(8) Includes shares of Class A Common Stock held by the ESOP for the
benefit of Mrs. Ketchum. Includes shares of Class B Common Stock held
of record by K.F. Enterprises, L.L.C., an Oklahoma limited liability
company. Mrs. Ketchum, as the beneficial owner of a majority in
membership interest in K.F. Enterprises, L.L.C., controls voting and
investment power with respect to such shares.
(9) Includes shares of Class A Common Stock held by the ESOP for the
benefit of Mr. Windham.
(10) Includes shares of Class A Common Stock held by the ESOP for the
benefit of Mr. Paige.
(11) Includes shares of Class A Common Stock held of record by the ESOP,
of which Mr. Noss, as trustee, has sole voting and investment power with
respect to such shares.
(12) Includes shares of Class A Common Stock held by the ESOP for the
benefit of Mr. Niver.
(13) Includes shares of Class A Common Stock held by the ESOP for the
benefit of Mr. Dvorak.
(14) Includes shares of Class A Common Stock held by the ESOP for the
benefit of Mr. Slaatten.
(15) Includes shares of Class A Common Stock held by the ESOP for the
benefit of Mr. Philipp.
38
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
Upon consummation of the Offering, the Company will have outstanding
shares of Class A Common Stock and shares of Class B Common Stock
(assuming the Underwriters' over-allotment option is not exercised). Each
share of Class B Common Stock is convertible into one share of Class A Common
Stock at any time at the option of the holder thereof and will automatically
convert into Class A Common Stock upon transfer to a holder that is not a
member of the Ketchum Group. The shares of Class A Common Stock sold in the
Offering will be freely tradeable without restriction or further registration
under the Securities Act, except for certain manner of sale, volume
limitations and other restrictions with respect to any shares purchased by an
affiliate of the Company. All remaining outstanding shares of Class A Common
Stock and all Class B Common Stock and shares of Class A Common Stock into
which such Class B Common Stock is convertible will be restricted securities
as that term is defined by Rule 144 promulgated under the Securities Act.
In general, under Rule 144 as currently in effect, beginning 90 days after
the Offering, a person (or persons whose shares are aggregated), including
persons who may be deemed "affiliates" of the Company, who has owned
restricted securities for at least one year is entitled to sell within any
three-month period a number of shares of Class A Common Stock that does not
exceed the greater of (i) 1% of the then-outstanding shares of Common Stock
(i.e., shares immediately after consummation of the Offering) and (ii) the
average weekly trading volume of the Class A Common Stock on the New York
Stock Exchange during the four calendar weeks preceding the date of the sale
is filed with the Commission. Sales under Rule 144 are also subject to certain
provisions as to the manner of sale, notice requirements and the availability
of current public information about the Company. In addition, under Rule
144(k), if a period of at least two years has elapsed since the later of the
date restricted securities were acquired from the Company or the date they
were acquired from an affiliate of the Company, a stockholder who is not an
affiliate of the Company at the time of sale and who has not been an affiliate
for at least three months prior to the sale would be entitled to sell shares
of Class A Common Stock in the public market immediately without compliance
with the foregoing requirements under Rule 144. Rule 144 does not require the
same person to have held the securities for the applicable periods. The
foregoing summary of Rule 144 is not intended to be a complete description
thereof.
Subject to certain exceptions, the Company and the existing stockholders of
the Company have agreed that, without the prior written consent of Morgan
Stanley & Co. Incorporated on behalf of the Underwriters, they will not,
during the period ending 180 days after the date of this Prospectus, offer for
sale, sell or otherwise dispose of any shares of Class A Common Stock or any
securities convertible into or exercisable for shares of Class A Common Stock.
See "Underwriters."
The Company has granted to Consolidated registration rights with respect to
shares of Class A Common Stock. Pursuant to such registration rights, the
holder may demand, at any time after two years from completion of the
Offering, that its holdings be registered under the Securities Act.
Additionally, if the Company effects a registration of its Class A Common
Stock, the Company is obligated to register such shares of the holder that it
may request in such registration. See "Certain Transactions."
Prior to the Offering, there has been no public market for the Class A
Common Stock and no prediction can be made as to the effect, if any, that
sales of Class A Common Stock or the availability of shares for sale will have
on the market price prevailing from time to time. Following the Offering,
sales of substantial amounts of Class A Common Stock in the public market or
otherwise, or the perception that such sales could occur, could have a
material adverse effect on the prevailing market price for the Class A Common
Stock.
39
<PAGE>
DESCRIPTION OF CAPITAL STOCK
The Company is authorized to issue (i) 50,000,000 shares of Class A Common
Stock, par value $.01 per share; (ii) 50,000,000 shares of Class B Common
Stock, par value $.01 per share; and (iii) 2,000 shares of preferred stock,
par value $2,500 per share. As of the date of this Prospectus, the Company had
issued and outstanding shares of Class A Common Stock, shares of Class
B Common Stock and 2,000 shares of Class C Preferred Stock. The following
summary does not purport to be complete, and reference is made to the more
detailed provisions of the Restated Certificate of Incorporation and Bylaws,
each of which is filed as an exhibit to the Registration Statement of which
this Prospectus is a part.
CLASS A AND CLASS B COMMON STOCK
Voting Rights. Each share of Class A Common Stock is entitled to one vote
and each share of Class B Common Stock is entitled to ten votes on all matters
submitted to a vote of the stockholders. Subject to applicable limitations of
law, the Class A Common Stock and the Class B Common Stock vote together as a
single class on all matters presented for a vote of the stockholders. The
holders of a majority of all outstanding shares of Class A Common Stock or
Class B Common Stock, voting as separate classes, must also approve amendments
to the Restated Certificate of Incorporation that adversely affect the shares
of their class. Shares of Class A Common Stock and Class B Common Stock do not
have cumulative voting rights.
Dividends. Each share of Class A Common Stock and Class B Common Stock is
entitled to dividends at the same rate if, as and when declared by the Board
of Directors from any assets legally available therefor, subject to any
preference in favor of any outstanding preferred stock. Any dividends so
declared and payable in cash, capital stock of the Company (other than Class A
Common Stock or Class B Common Stock) or other property will be paid pro rata
on the shares of Class A Common Stock and Class B Common Stock. If a dividend
or distribution is to be paid in shares of Common Stock, it must be declared
and paid proportionately to the holders of both classes of Common Stock either
(i) in Class A Common Stock to holders of both Class A and Class B Common
Stock or (ii) in Class A Common Stock to holders of Class A Common Stock and
in Class B Common Stock to holders of Class B Common Stock.
Convertibility. Class A Common Stock has no conversion rights. Each share of
Class B Common Stock is convertible at any time, at the option of and without
cost to the stockholder, into one share of Class A Common Stock upon surrender
of the certificate or certificates evidencing the Class B Common Stock to be
converted. Shares of Class B Common Stock will automatically convert to equal
shares of Class A Common Stock if such shares are sold, transferred or
otherwise disposed of to any third party other than a member of the Ketchum
Group. Once shares of Class B Common Stock are converted into shares of Class
A Common Stock, such shares may not be converted back into Class B Common
Stock.
Merger or Consolidation. The Company's Restated Certificate of Incorporation
further provides that upon any merger, consolidation, reorganization or other
business combination with any other entity, the consideration to be received
per share by the holders of Class A Common Stock and Class B Common Stock
shall be identical, except the voting rights of any securities received by
holders of Class A Common Stock may differ from the voting rights of any
securities received by holders of Class B Common Stock to the extent that the
voting rights differ between shares of Class A Common Stock and shares of
Class B Common Stock.
Liquidation Rights. In the event of the dissolution of the Company, whether
voluntary or involuntary, after payment of all liabilities and distribution to
the holders of Preferred Stock, if any, of amounts to which they may be
preferentially entitled, the holders of Class A Common Stock and Class B
Common Stock are entitled to share ratably in the assets of the Company
legally available for distribution to its stockholders.
40
<PAGE>
Other Rights. The holders of Common Stock are not entitled to preemptive or
subscription rights, and there are no redemption or sinking fund provisions
applicable to the Common Stock. The Common Stock currently outstanding is, and
the Class A Common Stock to be issued in the Offering will be, validly issued,
fully paid and non-assessable.
PREFERRED STOCK
The Board of Directors of the Company is empowered, without approval of the
stockholders, to cause shares of preferred stock to be issued in one or more
series, with the numbers of shares of each series to be determined by it. The
Board of Directors is authorized to fix and determine the powers,
designations, preferences and relative, participating, optional or other
rights (including, without limitation, voting powers, full or limited,
preferential rights to receive dividends or assets upon liquidation, rights of
conversion or exchange into Common Stock, preferred stock of any series or
other securities, redemption provisions and sinking fund provisions) between
series and between the preferred stock or any series thereof and the Common
Stock, and the qualifications, limitations or restrictions of such rights.
The Company has issued a series of preferred stock designated Class C
Preferred Stock. All of the 2,000 shares of Series C Preferred Stock currently
outstanding will be redeemed by the Company from the net proceeds to the
Company of the Offering. See "Use of Proceeds." The Company has no present
intention to issue additional shares of preferred stock. The issuance of
shares of preferred stock, or the issuance of rights to purchase such shares,
could be used to discourage an unsolicited acquisition proposal. For instance,
the issuance of a series of preferred stock might impede a business
combination by including class voting rights that would enable the holders to
block such a transaction, or such issuance might facilitate a business
combination by including voting rights that would provide a required
percentage vote of the stockholders. In addition, under certain circumstances,
the issuance of preferred stock could adversely affect the voting power of the
holders of the Common Stock. Although the Board of Directors is required to
make any determination to issue such stock based on its judgment as to the
best interests of the stockholders of the Company, the Board of Directors
could act in a manner that would discourage an acquisition attempt or other
transaction that some or even a majority of the stockholders might believe to
be in their best interests or in which stockholders might receive a premium
for their stock over the then market price of such stock. The Board of
Directors does not at present intend to seek stockholder approval prior to any
issuance of currently authorized stock, unless otherwise required by law or
the rules of any market on which the Company's securities are traded.
RESTRICTIONS ON TRANSFER OF CLASS B COMMON STOCK
The shares of Class B Common Stock held by BJHK Limited Partnership (the
"Partnership"), an Oklahoma limited partnership controlled by the Ketchum
Group, are restricted under the limited partnership agreement of the
Partnership from being sold by the Partnership except in connection with the
sale of all Class B Common Stock, including the Class B Common Stock held by
K.F. Enterprises, L.L.C. This restriction may be amended by the affirmative
vote of holders of 80% of the total Partnership units upon the Company
becoming a "public" company under the Exchange Act. The shares of Class B
Common Stock held of record by K. F. Enterprises, L.L.C., an Oklahoma limited
liability company ("Enterprises"), are also subject to substantially similar
restrictions prohibiting sale unless in connection with the sale of all the
shares of the Class B Common Stock. The operating agreement of Enterprises
provides that this restriction may be amended upon the affirmative vote of a
majority in ownership interests of Enterprises upon the Company becoming a
"public" company under the Exchange Act. Each of the limited partnership
agreement of the Partnership and operating agreement of Enterprises prohibit a
distribution of the shares of Class B Common Stock in kind to any person or
entity prior to the twentieth anniversary of the death of Betty J. Ketchum.
41
<PAGE>
OKLAHOMA TAKEOVER STATUTES
The Oklahoma General Corporation Act contains certain provisions (the
"Business Combination Provisions") that may have the effect of preventing,
discouraging or delaying a change in control of the Company. The Business
Combination Provisions prohibit certain business combinations between a
corporation and any person who has acquired 15% or more of the voting stock of
the corporation (an "interested stockholder") for a period of three years from
the date such stockholder became an interested stockholder, unless such
interested stockholder (a) prior to becoming an interested stockholder,
obtained the approval of the Board of Directors of either the business
combination or the transaction that resulted in such person becoming an
interested stockholder, (b) acquired at least 85% of the outstanding shares of
voting stock of the corporation (excluding shares owed by persons who are
directors or officers and by certain employee stock plans) in the same
transaction in which the interested stockholder became an interested
stockholder, or (c) if on or subsequent to the date the interested stockholder
became an interested stockholder, the business combination is approved by the
Board of Directors and is authorized at a meeting of stockholders by the
affirmative vote of at least two-thirds of the voting stock that is not owned
by the interested stockholder. The Business Combination Provisions define a
"business combination" to include (a) any merger of consolidation involving
the corporation and an interested stockholder, (b) any sale, transfer, pledge
or other disposition involving an interested stockholder of 10% or more of the
assets or outstanding stock of the corporation, (c) subject to certain
exceptions, any transaction which results in the issuance or transfer by the
corporation of any stock of the corporation to an interested stockholder, (d)
any transaction involving the corporation which has the effect of increasing
the proportionate share of the stock of any class or series of the corporation
beneficially owned by the interested stockholder, (e) the receipt by an
interested stockholder of any loans, guarantees, pledges or other financial
benefits provided by or through the corporation, or (f) any share acquisition
by the interested stockholder pursuant to certain provisions of the Oklahoma
General Corporation Act.
In general, an Oklahoma corporation must specifically elect, through an
amendment to its bylaws or certificate, not to be governed by the Business
Combination Provisions. The Company has not made such election and, therefore,
is subject to the terms of the statute.
The Oklahoma Control Shares Act provides that, except in limited
circumstances such as mergers, any person or group of persons that acquires
the power to vote one-fifth or more of certain corporations' shares shall not
have the right to vote such shares unless such person or group is granted
voting rights by the holders of a majority of the votes entitled to be cast
excluding "interested shares." If the approval of voting power for the shares
is obtained, additional stockholder approvals are required when a stockholder
acquires the power to vote one-third or more and a majority or more of the
voting power of the corporation's shares. In the absence of such approval, the
additional shares acquired by the stockholder may not be voted until the
expiration of three years after the date of a vote of stockholders failing to
approve the voting power of such shares.
The Oklahoma Take-Over Disclosure Act (the "Disclosure Act") prohibits any
person from making a takeover offer to purchase the equity securities of a
target company as defined in the Disclosure Act, or to acquire any such
securities pursuant to such offer, unless such offer is properly filed with
and approved by the Administrator of the Oklahoma Department of Securities.
The definition of a "take-over offer" under the Disclosure Act is the offer to
acquire any equity securities of a target company where, pursuant to the
offer, either: (a) the offeror would be directly or indirectly beneficial
owner of more than ten percent of any class of the outstanding equity
securities of the target company, or (b) the beneficial ownership of the
offeror of any class of the outstanding equity securities of the target
company would be increased by more than five percent.
The term "target company" is defined in the Disclosure Act as an "issuer of
publicly traded equity securities of which at least twenty percent of its
equity securities are beneficially held by residents of Oklahoma and which
have substantial assets in Oklahoma."
The tender offer must be filed with the Administrator with a registration
statement setting forth detailed information regarding (a) the identity of the
offeror and all other persons on whose behalf the acquisition is being
42
<PAGE>
affected; (b) the source or amount of funds to be used in the acquisition; (c)
if the purpose of the offer is to acquire control of the target company, all
plans to make material changes within the target, such as liquidation, changes
in management or changes in employment policies; (d) the number of equity
securities owned beneficially by the offeror; (e) the material terms of any
contractual arrangements whereby the persons filing the statement will
transfer or acquire additional securities to or from another; and (f) detailed
information regarding the offeror, including business activities for the past
three years.
In addition to this registration statement filed with the Administrator, the
offeror must deliver a copy of the registration statement to the target
company and publicly disclose the material terms of the proposed offer no
later than the date of filing. The Disclosure Act also contains penalties for
its violation.
The cumulative effect of the Business Combination Provisions, the Control
Share Act and the Disclosure Act may be to discourage or hinder a hostile
acquisition of the Company.
CERTAIN PROVISIONS OF THE RESTATED CERTIFICATE OF INCORPORATION AND BYLAWS
Oklahoma law authorizes corporations to limit or eliminate the personal
liability of directors to corporations and their stockholders for monetary
damages for breach of directors' fiduciary duty of care. The duty of care
requires that, when acting on behalf of the corporation, directors must
exercise an informed business judgment based on all material information
reasonably available to them. Absent the limitations authorized by Oklahoma
law, directors are accountable to corporations and their stockholders for
monetary damages for conduct constituting gross negligence in the exercise of
their duty of care. Oklahoma law enables corporations to limit available
relief to equitable remedies such as injunction or rescission. The Restated
Certificate of Incorporation limits the liability of directors of the Company
to the Company or its stockholders to the fullest extent permitted by the
Oklahoma General Corporation Act. Specifically, directors of the Company will
not be personally liable for monetary damages for breach of a director's
fiduciary duty as a director, except for liability (i) for any breach of the
director's duty of loyalty to the Company or its stockholders, (ii) for acts
or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) for unlawful payments of dividends or unlawful
stock repurchases or redemptions or (iv) for any transaction from which the
director derived an improper personal benefit. The inclusion of this provision
in the Restated Certificate of Incorporation may have the effect of reducing
the likelihood of derivative litigation against directors, and may discourage
or deter stockholders or management from bringing a lawsuit against directors
for breach of their duty of care, even though such an action, if successful,
might otherwise have benefited the Company and its stockholders. The Company's
Bylaws provide indemnification to the Company's officers and directors and
certain other persons with respect to certain matters.
The Company's Bylaws contain provisions requiring that advance notice be
delivered to the Company of any business to be brought by a stockholder before
an annual meeting of stockholders, and providing for certain procedures to be
followed by stockholders in nominating persons for election to the Board of
Directors of the Company. Generally, such advance notice provisions provide
that written notice must be given to the Secretary of the Company by a
stockholder (i) in the event of business to be brought by a stockholder before
an annual meeting, not less than 90 days prior to the anniversary date of the
immediately preceding annual meeting of stockholders of the Company (with
certain exceptions if the date of the annual meeting is different by more than
specified amounts from the anniversary date) and (ii) in the event of
nominations of persons for election to the Board of Directors by any
stockholder, (a) with respect to an election to be held at the annual meeting
of stockholders, not less than 90 days prior to the anniversary date of the
immediately preceding annual meeting of stockholders of the Company (with
certain exceptions if the date of the annual meeting is different by more than
specified amounts from the anniversary date) and (b) with respect to an
election to be held at a special meeting of stockholders for the election of
directors, not later than the close of business on the tenth day following the
day on which notice of the date of the special meeting was mailed to
stockholders or public disclosure of the date of the special meeting was made,
whichever first occurs. Such notice must set forth specific information
regarding such stockholder and such business or director nominee, as described
in the Company's Bylaws.
43
<PAGE>
REGISTRATION RIGHTS
The Company has entered into an agreement granting registration rights to
Consolidated with respect to shares of Class A Common Stock. Under the
agreement, Consolidated may demand, at any one time after two years following
the consummation of the Offering, that such holdings of Class A Common Stock
be registered under the Securities Act, and may request at any time when the
Company registers additional shares of Class A Common Stock that such holdings
of Class A Common Stock be included in such registration.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the Class A Common Stock is .
44
<PAGE>
UNDERWRITERS
Under the terms and subject to conditions contained in an Underwriting
Agreement dated the date hereof (the "Underwriting Agreement"), the
Underwriters named below, for whom Morgan Stanley & Co. Incorporated is acting
as Representative, have severally agreed to purchase, and the Company and the
Selling Stockholder have agreed to sell to them, severally, the respective
number of shares of Class A Common Stock set forth opposite the names of such
Underwriters below:
<TABLE>
<CAPTION>
NUMBER
NAME OF SHARES
---- ---------
<S> <C>
Morgan Stanley & Co. Incorporated................................
Smith Barney Inc. ...............................................
The Robinson-Humphrey Company, LLC...............................
---------
Total..........................................................
=========
</TABLE>
The Underwriting Agreement provides that the obligations of the several
Underwriters to pay for and accept delivery of the shares of Class A Common
Stock offered hereby are subject to the approval of certain legal matters by
their counsel and to certain other conditions. The Underwriters are obligated
to take and pay for all of the shares of Class A Common Stock offered hereby
(other than those covered by the Underwriters' over-allotment option described
below) if any such shares are taken.
The Underwriters initially propose to offer part of the shares of Class A
Common Stock directly to the public at the public offering price set forth on
the cover page hereof and part to certain dealers at a price that represents a
concession not in excess of $ a share under the public offering price. Any
Underwriter may allow, and such dealers may reallow, a concession not in
excess of $ a share to other Underwriters or to certain other dealers. After
the initial offering of the shares of Class A Common Stock, the offering price
and other selling terms may from time to time be varied by the Representative.
The Company has granted to the Underwriters an option, exercisable for 30
days from the date of this Prospectus, to purchase up to an aggregate of
additional shares of Class A Common Stock at the public offering price set
forth on the cover page hereof, less underwriting discounts and commissions.
The Underwriters may exercise such option solely for the purpose of covering
over-allotments, if any, made in connection with the offering of the shares of
Class A Common Stock offered hereby. To the extent such option is exercised,
each Underwriter will become obligated, subject to certain conditions, to
purchase approximately the same percentage of such additional shares of Class
A Common Stock as the number set forth next to such Underwriter's name in the
preceding table bears to the total number of shares of Class A Common Stock
set forth next to the names of all Underwriters in the preceding table.
The Underwriters have informed the Company that they do not intend sales to
discretionary accounts to exceed five percent of the total number of shares of
Class A Common Stock offered by them.
At the request of the Company, the Underwriters have reserved up to
shares of Class A Common Stock for sale at the initial public offering price
to the Company's employees, officers and directors and to other individuals
having relationships with the Company. The number of shares available for sale
to the general public will be reduced to the extent such individuals purchase
such reserved shares. Any reserved shares which are not so purchased will be
offered by the Underwriters to the general public on the same basis as the
other shares offered hereby. Reserved shares purchased by such individuals
will, except as restricted by applicable securities laws, be available for
resale following the Offering.
45
<PAGE>
The Company will apply to have the Class A Common Stock listed on the New
York Stock Exchange under the symbol "RMN."
Each of the Company and the directors, executive officers and other
stockholders of the Company has agreed that, without the prior written consent
of the Representative on behalf of the Underwriters, it will not, during the
period ending 180 days after the date of this Prospectus, (i) offer, pledge,
sell, contract to sell, sell any option or contract to purchase, purchase any
option or contract to sell, grant any option, right or warrant to purchase or
otherwise transfer, lend or dispose of, directly or indirectly, any shares of
Class A Common Stock or any securities convertible into or exercisable or
exchangeable for Class A Common Stock or (ii) enter into any swap or other
arrangement that transfers to another, in whole or in part, any of the
economic consequences of ownership of the Class A Common Stock, whether any
such transaction described in clause (i) or (ii) above is to be settled by
delivery of Class A Common Stock or such other securities, in cash or
otherwise. The restrictions in this paragraph do not apply to transactions by
any person other than the Company relating to shares of Class A Common Stock
or other securities acquired in open market transactions after the completion
of the Offering.
In order to facilitate the offering of the Class A Common Stock, the
Underwriters may engage in transactions that stabilize, maintain or otherwise
affect the price of the Class A Common Stock. Specifically, the Underwriters
may over-allot in connection with the Offering, creating a short position in
the Class A Common Stock for their own account. In addition, to cover over-
allotments or to stabilize the price of the Class A Common Stock, the
Underwriters may bid for, and purchase, shares of Class A Common Stock in the
open market. Finally, the underwriting syndicate may reclaim selling
concessions allowed to an Underwriter or a dealer for distributing the Class A
Common Stock in the Offering, if the syndicate repurchases previously
distributed Class A Common Stock in transactions to cover syndicate short
positions, in stabilization transactions or otherwise. Any of these activities
may stabilize or maintain the market price of the Class A Common Stock above
independent market levels. The Underwriters are not required to engage in
these activities, and may end any of these activities at any time.
The Company, the Selling Stockholder and the Underwriters have agreed to
indemnify each other against certain liabilities, including liabilities under
the Securities Act.
PRICING OF THE OFFERING
Prior to the Offering, there has been no public market for the Class A
Common Stock. The initial public offering price will be determined by
negotiations between the Company and the Representative. Among the factors to
be considered in determining the initial public offering price will be the
future prospects of the Company and its industry in general, sales, earnings
and certain other financial operating information of the Company in recent
periods, and the price-earnings ratios, price-sales ratios, market prices of
securities and certain financial and operating information of companies
engaged in activities similar to those of the Company. The estimated initial
public offering price range set forth on the cover page of this Prospectus is
subject to change as a result of market conditions and other factors.
46
<PAGE>
LEGAL MATTERS
The validity of the shares of Class A Common Stock offered by this
Prospectus will be passed upon for the Company by Conner & Winters, A
Professional Corporation, Tulsa, Oklahoma. Certain legal matters in connection
with the sale of the Class A Common Stock offered hereby will be passed upon
for the Underwriters by Fulbright & Jaworski L.L.P., Houston, Texas.
EXPERTS
The consolidated balance sheets as of October 31, 1996 and 1997 and the
consolidated statements of operations, preferred stock and stockholders'
equity, and cash flows for each of the three fiscal years in the period ended
October 31, 1997, included in this Prospectus and Registration Statement, have
been included herein in reliance on the report of Coopers & Lybrand L.L.P.,
independent accountants, given on the authority of that firm as experts in
accounting and auditing.
AVAILABLE INFORMATION
The Company has not previously been subject to the reporting requirements of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"). Upon
completion of the Offering, the Company will be subject to the informational
requirements of the Exchange Act, and in accordance therewith, will be
required to file periodic reports and other information with the Commission.
Such information can be inspected without charge after the Offering at the
public reference facilities of the Commission at Room 1024, Judiciary Plaza,
450 Fifth Street, N.W., Washington, D.C. 20549 and at the regional offices of
the Commission located at Suite 1400, Northwest Atrium Center, 500 West
Madison Street, Chicago, Illinois 60661 and Seven World Trade Center, 13th
Floor, New York, New York 10048. Copies of such material may also be obtained
at prescribed rates from the Public Reference Section of the Commission, 450
Fifth Street, N.W., Washington, D.C. 20549. The Commission also maintains a
Web site (http://www.sec.gov) that will contain all information filed
electronically by the Company with the Commission. The Company has applied to
list the Class A Common Stock on the New York Stock Exchange (the "NYSE") and
similar information concerning the Company may be inspected at the offices of
the NYSE at 20 Broad Street, New York, New York 10005.
The Company has filed the Registration Statement with the Commission under
the Securities Act with respect to the shares of Common Stock offered hereby.
This Prospectus, which constitutes a part of the Registration Statement, does
not contain all of the information set forth in the Registration Statement,
including the exhibits and schedules thereto. For further information with
respect to the Company and the Common Stock offered hereby, reference is made
to the Registration Statement, exhibits and schedules. Statements contained in
this Prospectus as to the contents of any contract or other document are not
necessarily complete, and, with respect to each such contract or document
filed as an exhibit to the Registration Statement, reference is made to the
copy of such contract or document filed as an exhibit to the Registration
Statement, and each such statement is qualified in all respects by such
reference. A copy of the Registration Statement, including the exhibits and
schedules thereto, may be inspected and copies thereof may be obtained as
described in the preceding paragraph with respect to periodic reports and
other information to be filed by the Company under the Exchange Act.
47
<PAGE>
RED MAN PIPE & SUPPLY CO.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<S> <C>
Report of Independent Accountants......................................... F-2
Consolidated Balance Sheets at October 31, 1996 and 1997.................. F-3
Consolidated Statements of Operations For The Years Ended October 31,
1995, 1996 and 1997...................................................... F-4
Consolidated Statements of Preferred Stock and Stockholders' Equity For
The Years Ended
October 31, 1995, 1996 and 1997.......................................... F-5
Consolidated Statements of Cash Flows For The Years Ended October 31,
1995, 1996 and 1997...................................................... F-6
Notes to Consolidated Financial Statements................................ F-7
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders
Red Man Pipe & Supply Co.
We have audited the accompanying consolidated balance sheets of Red Man Pipe
& Supply Co. and Subsidiaries as of October 31, 1996 and 1997, and the related
consolidated statements of operations, preferred stock and stockholders'
equity, and cash flows for each of the three years in the period ended October
31, 1997. These consolidated financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatements. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the consolidated financial
statements. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position
of Red Man Pipe & Supply Co. and Subsidiaries as of October 31, 1996 and 1997,
and the consolidated results of their operations and their cash flows for each
of the three years in the period ended October 31, 1997, in conformity with
generally accepted accounting principles.
As discussed in Note 2, during 1997 the Company changed its method of
accounting for inventories from the Last-In, First-Out method to the First-In,
First-Out method. Accordingly, previously reported amounts have been restated
to reflect this change in accounting.
Coopers & Lybrand L.L.P.
Tulsa, Oklahoma
November 26, 1997,
except as to Note 12,
for which the date is
December 17, 1998
F-2
<PAGE>
RED MAN PIPE & SUPPLY CO. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
OCTOBER 31, 1996 AND 1997
<TABLE>
<CAPTION>
1996 1997
-------- --------
(IN THOUSANDS)
<S> <C> <C>
ASSETS
Current assets:
Cash.................................................... $ 863 $ 1,511
Accounts receivable, less allowance for doubtful
accounts of $500,000 and $750,000 in 1996 and 1997,
respectively........................................... 41,709 55,592
Income tax receivable................................... 595 270
Inventories............................................. 70,496 99,825
-------- --------
Total current assets.................................. 113,663 157,198
-------- --------
Property, plant and equipment, net........................ 3,760 4,157
Other assets.............................................. 354 458
-------- --------
Total assets.......................................... $117,777 $161,813
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Trade accounts payable.................................. $ 31,946 $ 43,546
Accrued liabilities..................................... 4,618 5,890
Deferred income tax liabilities......................... 1,690 2,510
Current portion of long-term debt....................... 194 83
-------- --------
Total current liabilities............................. 38,448 52,029
-------- --------
Long-term debt, less current portion...................... 58,209 81,363
Deferred income tax liabilities........................... 50 465
Commitments and contingencies (Notes 4 and 6)
Class C preferred stock, redeemable, $2,500 par value,
2,000 shares authorized, issued and outstanding.......... 5,000 5,000
Stockholders' equity:
Common stock, voting, Class A, $1 par value, 500,000
shares authorized, 157,692 shares issued and
outstanding............................................ 158 158
Common stock, non-voting, Class B, $1 par value, 500,000
shares authorized, 34,344 shares issued and
outstanding............................................ 34 34
Additional paid-in capital.............................. 3,469 3,505
Retained earnings....................................... 12,699 19,517
-------- --------
16,360 23,214
Treasury stock, at cost................................. (290) (258)
-------- --------
Total stockholders' equity............................ 16,070 22,956
-------- --------
Total liabilities and stockholders' equity............ $117,777 $161,813
======== ========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-3
<PAGE>
RED MAN PIPE & SUPPLY CO. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED OCTOBER 31, 1995, 1996 AND 1997
<TABLE>
<CAPTION>
1995 1996 1997
------------- ------------- -------------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C>
Sales............................ $ 251,928 $ 348,446 $ 454,438
------------- ------------- -------------
Costs and expenses:
Cost of products sold.......... 223,818 308,349 403,774
Selling, general and
administrative expenses....... 22,255 29,900 34,273
------------- ------------- -------------
Total costs and expenses..... 246,073 338,249 438,047
------------- ------------- -------------
Operating income................. 5,855 10,197 16,391
------------- ------------- -------------
Other income (expense):
Interest expense............... (3,604) (4,807) (5,606)
Other, net..................... 435 100 633
------------- ------------- -------------
(3,169) (4,707) (4,973)
------------- ------------- -------------
Income before income taxes....... 2,686 5,490 11,418
Income tax expense............... 928 2,137 4,350
------------- ------------- -------------
Net income....................... $ 1,758 $ 3,353 $ 7,068
============= ============= =============
Earnings per common share,
primary and fully diluted....... $ 8.50 $ 16.16 $ 35.50
============= ============= =============
Weighted average common shares
outstanding, primary and fully
diluted......................... 192 192 192
============= ============= =============
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-4
<PAGE>
RED MAN PIPE & SUPPLY CO. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF PREFERRED
STOCK AND STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED OCTOBER 31, 1995, 1996 AND 1997
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
COMMON STOCK
---------------------------
CLASS C VOTING NON-VOTING
PREFERRED STOCK CLASS A CLASS B ADDITIONAL TREASURY STOCK
------------------ ------------- ------------- PAID-IN RETAINED ------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT CAPITAL EARNINGS SHARES AMOUNT
------- --------- ------ ------ ------ ------ ---------- -------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, October 31,
1994, as previously
reported............... -- $ -- 158 $158 34 $34 $3,440 $ 7,854 (9) $ (365)
Effect of change in
accounting for
inventories (Note 2)... -- -- -- -- -- -- -- 109 -- --
------ --------- --- ---- --- --- ------ ------- ------ --------
Balance, October 31,
1994, as restated...... -- -- 158 158 34 34 3,440 7,963 (9) (365)
Net income.............. -- -- -- -- -- -- -- 1,758 -- --
Issuance of preferred
stock.................. 2 5,000 -- -- -- -- -- -- -- --
Issuance of Treasury
Stock.................. -- -- -- -- -- -- 13 -- 1 50
Preferred stock
dividends ($62.50 per
preferred share)....... -- -- -- -- -- -- -- (125) -- --
------ --------- --- ---- --- --- ------ ------- ------ --------
Balance, October 31,
1995................... 2 5,000 158 158 34 34 3,453 9,596 (8) (315)
Net income.............. -- -- -- -- -- -- -- 3,353 -- --
Issuance of Treasury
Stock.................. -- -- -- -- -- -- 16 -- 1 25
Preferred stock
dividends ($125 per
preferred share)....... -- -- -- -- -- -- -- (250) -- --
------ --------- --- ---- --- --- ------ ------- ------ --------
Balance, October 31,
1996................... 2 5,000 158 158 34 34 3,469 12,699 (7) (290)
Net income.............. -- -- -- -- -- -- -- 7,068 -- --
Issuance of Treasury
Stock.................. -- -- -- -- -- -- 36 -- 1 32
Preferred stock
dividends ($125 per
preferred share)....... -- -- -- -- -- -- -- (250) -- --
------ --------- --- ---- --- --- ------ ------- ------ --------
Balance, October 31,
1997................... 2 $ 5,000 158 $158 34 $34 $3,505 $19,517 (6) $ (258)
====== ========= === ==== === === ====== ======= ====== ========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-5
<PAGE>
RED MAN PIPE & SUPPLY CO. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED OCTOBER 31, 1995, 1996 AND 1997
<TABLE>
<CAPTION>
1995 1996 1997
--------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C>
Cash flows from operating activities:
Net income.................................. $ 1,758 $ 3,353 $ 7,068
Adjustments to reconcile net income to net
cash provided by (used in) operating
activities:
Depreciation and amortization............. 463 613 687
Gain on disposal of assets................ (29) (100) (633)
Deferred income tax liabilities........... 175 878 1,235
--------- --------- ---------
2,367 4,744 8,357
Decrease (increase) in assets:
Accounts receivable..................... (22,950) (983) (13,883)
Income tax receivable................... 508 (403) 325
Inventories............................. (11,674) (6,584) (29,329)
Other assets............................ (30) (119) (104)
Increase (decrease) in liabilities:
Trade accounts payable.................. 15,723 (4,664) 11,600
Accrued liabilities..................... 1,331 1,380 1,272
--------- --------- ---------
Net cash used in operating activities....... (14,725) (6,629) (21,762)
--------- --------- ---------
Cash flows from (used in) investing
activities:
Purchases of property, plant and equipment.. (288) (2,431) (2,720)
Proceeds from disposal of property, plant
and equipment.............................. 159 198 2,269
Acquisition of assets....................... (14,526) -- --
--------- --------- ---------
Net cash used in investing activities....... (14,655) (2,233) (451)
--------- --------- ---------
Cash flows provided by financing activities:
Payments on long-term debt.................. (248,841) (359,148) (442,213)
Proceeds from long-term debt................ 277,735 368,636 465,256
Proceeds from issuance of treasury stock.... -- 41 68
Preferred stock dividends paid.............. (125) (250) (250)
--------- --------- ---------
Net cash provided by financing activities... 28,769 9,279 22,861
--------- --------- ---------
Net increase (decrease) in cash............... (611) 417 648
Cash, beginning of year....................... 1,057 446 863
--------- --------- ---------
Cash, end of year............................. $ 446 $ 863 $ 1,511
========= ========= =========
Supplemental cash flow data:
Interest paid............................... $ 3,357 $ 4,653 $ 5,493
========= ========= =========
Income taxes paid........................... $ 284 $ 1,610 $ 2,731
========= ========= =========
Supplemental schedule of noncash investing and
financing activities:
Acquisition of assets:
Fair value of assets acquired............. $ 19,526 $ -- $ --
Fair value of preferred stock issued...... (5,000) -- --
--------- --------- ---------
Net cash payments......................... $ 14,526 $ -- $ --
========= ========= =========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-6
<PAGE>
RED MAN PIPE & SUPPLY CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND NATURE OF OPERATIONS
Nature of Operations--Red Man Pipe & Supply Co. (the "Company") is a
distributor of tubular goods, including oil country tubular goods and line
pipe, and the operation of service and supply centers which distribute
maintenance, repair and operating products utilized in the energy industry as
well as industrial products consisting primarily of line pipe, valves,
fittings and flanges. The Company distributes products and tubular goods
through 42 service and supply centers and 11 sales locations strategically
located close to the major hydrocarbon producing and refining areas of the
United States.
Principles of Consolidation--The consolidated financial statements include
the accounts of Red Man Pipe & Supply Co. and its wholly-owned subsidiaries,
Red Man Ventures, Inc. and Red Man International, Inc. All significant
intercompany profits, transactions and balances have been eliminated. During
1995, 1996 and 1997, there were no significant assets or operations in these
subsidiaries.
Inventories--The Company values its inventories, all of which are finished
goods, at the lower of cost or market. In fiscal 1997 the Company changed its
method of determining cost for inventories from the Last-In, First-Out
("LIFO") method to the First-In, First-Out ("FIFO") method (See Note 2). The
change was made to improve interim financial reporting and to achieve a better
presentation and comparability of period to period operating and financial
results.
Property, Plant and Equipment--Property, plant and equipment are recorded at
cost and include expenditures for facilities as well as significant
improvements to existing facilities. When assets are retired or otherwise
disposed of, the cost and related accumulated depreciation are removed from
the accounts and any gain or loss is reflected in income for the period.
Maintenance and repairs are charged to expense as incurred.
Depreciation and amortization are computed utilizing both straight-line and
accelerated methods over the estimated useful lives of the property. The
ranges of estimated useful lives for financial reporting are as follows:
<TABLE>
<CAPTION>
YEARS
-----
<S> <C>
Buildings and improvements........................................... 5-40
Machinery, equipment and vehicles.................................... 5-12
Furniture and fixtures............................................... 5-7
Leasehold improvements............................................... 5-15
</TABLE>
Revenue Recognition--The Company recognizes revenue as products are shipped
or accepted by the customer.
Income Taxes--The Company follows the provisions of Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes" ("SFAS No. 109").
SFAS No. 109 requires the measurement of deferred tax assets and liabilities
based on the future tax consequences attributable to the differences between
the financial statement carrying amounts of existing assets and liabilities
and their respective tax bases.
Treasury Stock--The Company utilizes the cost method for accounting for its
treasury stock acquisitions and dispositions.
Use of Estimates--The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
F-7
<PAGE>
RED MAN PIPE & SUPPLY CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Earnings Per Share--Earnings per share amounts are based on the weighted
average number of shares of common stock outstanding during the respective
periods. Net income is adjusted for dividends on preferred stock.
Reclassifications--Certain reclassifications have been made to the balances
reported for fiscal years 1995 and 1996 to conform to fiscal year 1997
reporting.
Impact of New Financial Accounting Pronouncement--In February 1997, the
Financial Accounting Standards Board issued Statement of Financial Accounting
Standards No. 128, Earnings Per Share ("SFAS No. 128"). SFAS No. 128 will
change the computation, presentation and disclosure requirements for earnings
per share. Such pronouncement requires the presentation of "basic" and
"diluted" earnings per share. This statement is effective for financial
statements issued for periods ending after December 15, 1997, including
interim periods, and requires restatement of all prior period earnings per
share amounts. The Company will adopt SFAS No. 128 in the second quarter of
fiscal 1998; however, this pronouncement is not expected to have a material
effect on its earnings per share when adopted.
2. CHANGE IN ACCOUNTING FOR INVENTORIES
At the beginning of fiscal 1997, the Company changed its method of valuation
for inventories from the LIFO method to the FIFO method. The financial
statements for fiscal 1995 and 1996 have been restated to reflect the change.
Accordingly, the value of inventories was increased by $164,000 for fiscal
1995 and was decreased by $420,000 for fiscal 1996. The effect of the change
in accounting for inventories was to decrease net income by $7,000 ($.04 per
share) and $362,000 ($1.89 per share) for fiscal 1995 and 1996, respectively.
3. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consists of the following as of October 31,
1996 and 1997:
<TABLE>
<CAPTION>
1996 1997
------- -------
(IN THOUSANDS)
<S> <C> <C>
Land...................................................... $ 276 $ 200
Buildings and improvements................................ 2,143 1,516
Machinery, equipment and vehicles......................... 581 558
Furniture and fixtures.................................... 3,824 5,146
Leasehold improvements.................................... 148 240
------- -------
6,972 7,660
Less accumulated depreciation and amortization............ 3,212 3,503
------- -------
$ 3,760 $ 4,157
======= =======
</TABLE>
F-8
<PAGE>
RED MAN PIPE & SUPPLY CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
4. LONG-TERM DEBT
Long-term debt consists of the following:
<TABLE>
<CAPTION>
OCTOBER 31,
---------------
1996 1997
------- -------
(IN THOUSANDS)
<S> <C> <C>
Credit Facility:(A)
Revolving credit facility.............................. $56,853 $71,446
Term loan, payable in monthly installments of $83,333
through October 2000, with a balloon payment due on
October 31, 2000...................................... -- 10,000
Notes payable in monthly installments of $16,146 through
October 1999, with a balloon payment due on October 31,
1999, plus interest payable monthly at the lender's
prime rate plus 1% (9.25% at October 31, 1996).......... 1,550 --
------- -------
58,403 81,446
Less current portion..................................... 194 83
------- -------
$58,209 $81,363
======= =======
</TABLE>
- --------
(A) During fiscal 1997 the Credit Facility was amended permitting the Company
to borrow amounts up to the lesser of (i) $100.0 million or (ii) an amount
equal to the borrowing base plus the outstanding balance on the term loan
portion. On the revolving credit portion of the Credit Facility, the
Company is permitted to borrow amounts up to the lesser of (i) $100.0
million less the outstanding principal balance of the term loan portion or
(ii) an amount equal to the borrowing base amount. The borrowing base
amount is determined through a computation of eligible accounts receivable
and inventories as defined in the revolving credit facility. The amount of
unused borrowings available under this facility at October 31, 1997 is
$18,554,000. The borrowings under the revolving credit facility bear an
interest rate equal to the lesser of the bank's prime rate plus .25%
(8.75% at October 31, 1997) or LIBOR plus a margin based upon a trailing
12-month calculation of EBITDA, as defined in the Credit Facility (7.25%
at October 31, 1997). The $10,000,000 term loan portion of the revolving
Credit Facility bears interest at the lesser of the bank's prime rate plus
.5% (9.0% at October 31, 1997) or LIBOR plus a margin based upon a
trailing 12-month calculation of EBITDA, as defined in the Credit Facility
(7.50% at October 31, 1997). The Company pays a fee on the unused portion
of the Credit Facility equal to .375% per year.
During fiscal 1997, the term of the Credit Facility was extended to
October 31, 2000. At the conclusion of the term, such facility shall be
automatically extended by one year unless the Company or the lender does
not desire to extend the agreement and as long as no default has occurred.
The Company is advanced amounts under the revolving credit facility to
meet vendor and other obligations and all collections of revenues are used
to reduce the amount outstanding. The projected borrowing base during 1998
is expected to be in excess of amounts required and, accordingly, the
revolving credit facility is classified as long-term.
The Company is subject to a number of covenants under the Credit
Facility. The most restrictive covenants include maintenance of leverage
ratios and current ratios, minimum pre-tax earnings from operations and a
limit on new debt obligations. The Credit Facility is collateralized by
substantially all assets of the Company including accounts receivable,
inventories and equipment.
Based upon the borrowing rates currently available to the Company for
bank borrowings with similar terms, the Company believes that the carrying
amount of these borrowings at October 31, 1997, approximates fair value.
F-9
<PAGE>
RED MAN PIPE & SUPPLY CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Aggregate principal maturities of long-term debt are as follows (in
thousands):
<TABLE>
<S> <C>
Fiscal 1998..................................................... $ 83
1999.......................................................... 1,000
2000.......................................................... 80,363
-------
$81,446
=======
</TABLE>
5. STOCKHOLDERS' EQUITY
The Company has two classes of common stock. One class consists of 500,000
authorized shares of $1 par value voting Class A Common Stock, and the other
class consists of 500,000 authorized shares of $1 par value non-voting Class B
Common Stock. (See Note 12).
The Company also has 2,000 authorized and outstanding shares of $2,500 par
value Class C Preferred Stock. The Class C Preferred Stock bears an annual
cumulative dividend of 5%, payable quarterly. Dividends paid on Class C
preferred stock during 1995 totaled $125,000 and during both 1996 and 1997
totaled $250,000. The Class C Preferred Stock is non-voting and subordinate to
indebtedness of the Company, but bears full preference to the Common Stock as
to dividends and to redemption in the event of liquidation of the Company. The
Class C Preferred Stock is redeemable on March 31, 2000 at par value with no
option for early redemption. The stock was offered as part of the purchase
price in the Company's asset acquisition (See Notes 9 and 12).
6. LEASES
The Company occupies facilities and operates motor vehicles under long-term
operating leases that expire during 1998 through 2004. Certain of these leases
are subject to renewal or purchase options and escalation clauses. The
following is a schedule by year of future minimum lease payments required
under the operating leases that have initial or remaining noncancellable lease
terms in excess of one year as of October 31, 1997:
<TABLE>
<CAPTION>
YEAR ENDING
OCTOBER 31, AMOUNT
------------ --------------
(IN THOUSANDS)
<S> <C>
1998..................................................... $2,039
1999..................................................... 1,731
2000..................................................... 1,047
2001..................................................... 522
2002..................................................... 421
Thereafter................................................ 849
------
Total minimum lease payments................................ $6,609
======
</TABLE>
Rent expense on all operating leases amounted to approximately $1,697,000,
$2,274,000 and $2,442,000 in 1995, 1996 and 1997, respectively.
F-10
<PAGE>
RED MAN PIPE & SUPPLY CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
7. INCOME TAXES
The components of income tax expense are as follows:
<TABLE>
<CAPTION>
OCTOBER 31,
------------------
1995 1996 1997
---- ------ ------
(IN THOUSANDS)
<S> <C> <C> <C>
Current:
Federal tax expense................................... $582 $1,131 $2,813
State tax expense..................................... 171 128 302
Deferred tax expense.................................... 175 878 1,235
---- ------ ------
$928 $2,137 $4,350
==== ====== ======
</TABLE>
The components of the net deferred tax asset (liability) were as follows:
<TABLE>
<CAPTION>
OCTOBER 31,
----------------
1996 1997
------- -------
(IN THOUSANDS)
<S> <C> <C>
Current deferred tax liabilities:
Inventory............................................. $(1,419) $(2,157)
Accounts receivable................................... (271) (353)
------- -------
Current deferred tax liabilities........................ $(1,690) $(2,510)
======= =======
Non-current deferred tax liabilities:
Property, plant and equipment......................... $ (50) $ (465)
======= =======
</TABLE>
The difference between the effective tax rate provision for income taxes and
the U.S. federal statutory rate was as follows:
<TABLE>
<CAPTION>
OCTOBER 31,
----------------
1995 1996 1997
---- ---- ----
<S> <C> <C> <C>
Federal income statutory rate............................ 34.0% 34.0% 34.0%
State income tax......................................... 2.9 3.6 3.1
Life insurance proceeds.................................. (4.8) -- --
Other.................................................... 2.4 1.3 1.0
---- ---- ----
Effective tax rate....................................... 34.5% 38.9% 38.1%
==== ==== ====
</TABLE>
8. EMPLOYEE BENEFIT PLANS
The Company maintains a qualified Employee Stock Ownership Plan ("ESOP"),
which is a noncontributory defined contribution plan established for the
employees of the Company. The ESOP covers substantially all employees who have
attained the age of twenty-one (21) and have completed one year of service on
or before the last day of the plan year. Vesting in the ESOP is based on years
of continuous service. Vesting begins after three years of service and is
continuous through seven years of service, at which time the participant is
100% vested. The purpose of the ESOP is to purchase Company stock and other
investments for the benefit of the employees or their beneficiaries. Employer
contributions are discretionary and are determined annually by the Company's
Board of Directors. The employer's cash and accrued contributions to this plan
were approximately $84,000 in each of fiscal years 1995, 1996 and 1997. The
Company's contribution to the ESOP is allocated to the participants based on
the ratio of their compensation to the total compensation of all eligible
F-11
<PAGE>
RED MAN PIPE & SUPPLY CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
participants. Compensation is defined as total salary and wages for the plan
year and will include salary reduction contributions. The Company had no
allocated shares, shares committed-to-be released, unallocated shares or
unearned shares at October 31, 1995, 1996 and 1997. ESOP shares are treated as
outstanding common stock in the computation of earnings per share.
The Red Man Pipe & Supply Co. Retirement Savings Plan (the "Plan")
incorporates the provisions of Section 401(k) of the Internal Revenue Code.
The Plan covers all employees who have attained the age of twenty-one (21) and
have completed at least one year of service. Participants are allowed to
contribute a portion of their salary with employer matching contributions
based on the contributions of the participants. The employer matching
contributions were approximately $180,000, $222,000 and $254,000 for the years
ended October 31, 1995, 1996 and 1997, respectively.
The Company also has an employee Medical Reimbursement Plan ("MRP") which
entitles eligible employees to be reimbursed for certain medical and dental
expenses incurred by them or their family up to $500 per employee, per year.
All full-time employees are eligible to participate in the MRP after having
completed six months of employment with the Company. The Company's Board of
Directors determines annually whether or not the MRP will be funded for the
current year. The Company's contributions to the MRP were approximately
$165,000, $190,000 and $202,000 for the years ended October 31, 1995, 1996 and
1997, respectively.
9. ASSET PURCHASE
On April 3, 1995, the Company purchased substantially all of the inventory
and fixed assets of the supply division of Vinson Supply Company for a
purchase price of $19,526,000. Under the terms of the Purchase Agreement, the
Company gave cash, a short-term note, and 2,000 shares of Class C Preferred
Stock as consideration for the assets purchased.
10. RELATED PARTY TRANSACTIONS
The Company leases certain equipment from Prideco, a partnership related by
common ownership and control. The Company also leases certain buildings from
Prideco. Amounts paid to Prideco for building and equipment rental were
$763,000, $787,000 and $906,000 for 1995, 1996 and 1997, respectively.
In 1995, 1996 and 1997, the Company paid rent of approximately $178,000,
$665,000 and $422,000, respectively, to an affiliate of its Class C preferred
stockholder. In each of October 1996 and April 1997, the Company purchased one
service and supply store from an affiliate for $1,550,000 and $650,000,
respectively.
In fiscal years 1995, 1996 and 1997, the Company paid a law firm, of which a
director of the Company is a partner, legal fees and expenses totaling
$122,000, $105,000 and $157,000, respectively.
A stockholder leases a service and supply center to the Company for use in
its operations. The stated term of the lease will expire in January 1998. The
aggregate lease payments made to the stockholder totaled $13,800 in each of
fiscal years 1995, 1996 and 1997.
11. CONCENTRATION AND CREDIT RISK
Most of the Company's business activity is with customers in the energy
industry. In the normal course of business, the Company grants credit to these
customers. Trade accounts receivable are primarily from these customers. The
Company generally does not require collateral on its trade receivables. During
1995, 1996 and 1997, the Company had sales to one customer amounting to
approximately 14%, 11% and 12% of sales, respectively.
F-12
<PAGE>
RED MAN PIPE & SUPPLY CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
While the Company's normal business practice is to maintain minimal cash
balances on hand in its bank accounts, at October 31, 1997, the Company had
cash at one financial institution in excess of federal deposit insurance
limits. The account is swept each day and applied against the Company's
revolving credit facility; therefore, management believes that any risk
associated with cash deposits is negligible.
A substantial portion of the Company's tubular goods sales is purchased from
two manufacturers. The Company has no long-term supply contracts with these
manufacturers which would assure the Company of a continued supply of tubular
good products in the future. Although the Company believes there are numerous
manufacturers having the capacity to supply its tubular goods products, the
loss of one of these major suppliers could have a material adverse effect on
the Company's business, financial condition or results of operations as such
loss would require the Company to rely more heavily on its other existing
suppliers or develop relationships with new suppliers, which may cause the
Company to pay higher prices for products due to a loss of the volume discount
benefits currently obtained from its two major suppliers.
12. SUBSEQUENT EVENTS
Initial Public Offering
In December 1997 the Company filed a registration statement with the
Securities and Exchange Commission to register the sale of shares of its Class
A common stock (the "Offering").
In connection with the Offering, the Company's Certificate of Incorporation
was amended and restated in December 1997 to increase and reclassify the
Company's authorized Common Stock from 500,000 shares of Class A Common Stock,
par value $1.00 per share, having one vote per share and 500,000 shares of
non-voting Class B Common Stock, par value $1.00 per share, to 50,000,000
shares of Class A Common Stock, par value $.01 per share, having one vote per
share and 50,000,000 shares of Class B Common Stock, par value $.01 per share,
having ten votes per share, respectively. Simultaneously therewith, certain
stockholders effected an exchange of Common Stock. Additionally, in connection
with the Offering, the Company intends to effect a stock split of its Class A
Common Stock and Class B Common Stock. All shares and per share information
included within the audited financial statements and related footnotes reflect
historical amounts and have not been restated to reflect the increased and
reclassified common stock and stock split. Upon completion of the initial
public offering, the Company will reflect the increased and reclassified
common stock and stock split in the historical financial statements.
Incentive Stock Plan
In December 1997, the Company established the Red Man Pipe & Supply Co.
Incentive Stock Plan (the "Incentive Plan") in which officers, employees and
directors are eligible to participate. The Incentive Plan authorizes the grant
of incentive stock options, non-qualified stock options and awards of
restricted stock. Incentive stock options may only be awarded to employees and
the exercise price may not be less than the fair market value of the Class A
common stock on the date of grant (or 110% of such fair market value if
granted to employees who own more than 10% of the combined voting power of all
classes of the stock of the Company). The exercise price of non-qualified
stock options shall be determined by the Board of Directors or its committee
and shall not be less than the fair market value of the Class A Common Stock
on the date of grant. The vesting period for all options will be determined by
the Board of Directors or its committees at the time of the grant. The
incentive stock option may not be exercised after the expiration of 10 years
from the date of grant (or 5 years if granted to employees who own more than
10% of the combined voting power of all classes of stock of the Company). No
options have been granted under the Incentive Plan.
F-13
<PAGE>
RED MAN PIPE & SUPPLY CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
A restricted stock award will consist of shares of Class A Common Stock that
are nontransferable or subject to risk of forfeiture until specific conditions
are met. The restrictions will lapse in accordance with the schedule or other
conditions as determined by the Board of Directors or its committee. During
the restriction period, the recipient of restricted stock will have certain
rights as a stockholder, including the right to vote the stock and receive
dividends. No awards have been granted under the Incentive Plan.
F-14
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
All amounts, except SEC and NASD fees, are estimates.
<TABLE>
<S> <C>
Securities and Exchange Commission registration fee .............. $25,444
NASD filing fee................................................... 9,125
New York Stock Exchange listing fee............................... *
Transfer agent's fees............................................. *
Printing, engraving and shipping expenses......................... *
Legal fees and expenses........................................... *
Blue sky fees and expenses........................................ *
Accounting fees................................................... *
Miscellaneous..................................................... *
-------
Total......................................................... $
=======
</TABLE>
- --------
* To be supplied by amendment.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Company's Bylaws provide that the registrant shall indemnify its
officers and directors as permitted by the Oklahoma General Corporation Act.
Pursuant to Section 31 of the Oklahoma General Corporation Act, the registrant
generally has the power to indemnify its present and former directors and
officers against expenses and liabilities incurred by them in connection with
any suit to which they are, or are threatened to be made, a party by reason of
their serving in those positions so long as they acted in good faith and in a
manner they reasonably believed to be in, or not opposed to, the best
interests of the registrant, and with respect to any criminal action, they had
no reasonable cause to believe their conduct was unlawful. With respect to
suits by or in the right of the registrant, however, indemnification is
generally limited to attorneys' fees and other expenses and is not available
if the person is adjudged to be liable to the registrant unless the court
determines that indemnification is appropriate. The statute expressly provides
that the power to indemnify authorized thereby is not exclusive of any rights
granted under any bylaw, agreement, vote of stockholders or disinterested
directors, or otherwise. The Company also has the power to purchase and
maintain insurance for its directors and officers. The Company's Restated
Certificate of Incorporation also eliminates, subject to certain limitations,
the liability of the Company's directors for monetary damages for breach of
their fiduciary duty as directors.
The preceding discussion of the registrant's bylaws and Section 31 of the
Oklahoma General Corporation Act is not intended to be exhaustive and is
qualified in its entirety by the Company's Bylaws and Section 31 of the
Oklahoma General Corporation Act.
The form of Underwriting Agreement included as Exhibit 1.1 provides for
indemnification of the Company and certain controlling persons under certain
circumstances, including liabilities under the Securities Act of 1933, as
amended (the "Securities Act").
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
The following information is furnished as to securities sold within the past
three years which were not registered under the Securities Act. Unless
otherwise indicated, each of the issuances and sales described below was
effected in reliance upon an exemption from registration under Section 4(2) of
the Securities Act for transactions by an issuer not involving any public
offering. No underwriting discounts or selling commissions were paid in
connection with such issuances and sales.
II-1
<PAGE>
1. On April 3, 1995, in connection with the purchase of inventory and assets
of Vinson Supply Company ("Vinson") pursuant to the Purchase Agreement dated
March 2, 1995, between the Company and Vinson, the Company issued 2,000 shares
of Series C Preferred Stock, par value $2,500 per share.
2. On January 15, 1995, the Company issued 1,232 shares of Class A Common
Stock to the Company's Employee Stock Ownership Plan for consideration of
$62,832.
3. On April 30, 1996, the Company issued 638 shares of Class A Common Stock
to the Company's Employee Stock Ownership Plan for consideration of $41,470.
4. On March 31, 1997, the Company issued 794 shares of Class A Common Stock
to the Company's Employee Stock Ownership Plan for consideration of $67,490.
5. On December 11, 1997, the Company amended its Certificate of
Incorporation to increase and reclassify its authorized common stock from
500,000 shares of Class A Common Stock, par value $1.00 per share ("Old Class
A Common Stock"), having one vote per share and 500,000 shares of non-voting
Class B Common Stock, par value $1.00 per share ("Old Class B Common Stock"),
to 50,000,000 shares of Class A Common Stock, par value $.01 per share ("New
Class A Common Stock"), having one vote per share and 50,000,000 shares of
Class B Common Stock, par value $.01 per share ("New Class B Common Stock"),
having ten votes per share. In connection with the amendment to the Company's
Certificate of Incorporation, holders of 82,000 shares of Old Class A Common
Stock exchanged such shares for 82,000 shares of New Class B Common Stock and
holders of 34,344 shares of Old Class B Common Stock exchanged such shares for
34,344 shares of New Class A Common Stock. The exchange was effected in
reliance upon an exemption from registration under Section 3(a)(9) of the
Securities Act.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits:
<TABLE>
<CAPTION>
EXHIBIT NO. EXHIBIT
----------- -------
<C> <S>
*1.1 Form of Underwriting Agreement.
3.1 Amended and Restated Certificate of Incorporation of Red Man
Pipe & Supply Co. (the "Company").
3.2 Amended and Restated Bylaws of the Company.
4.1 Form of stock certificate for the Company's Class A Common
Stock, par value $0.01 per share.
*5.1 Opinion of Conner & Winters, A Professional Corporation.
10.1 Red Man Pipe & Supply Co. Incentive Stock Plan.
10.2 Loan and Security Agreement dated May 3, 1991, between the
Company and Barclay's Business Credit.
10.3 First Amendment to Loan and Security Agreement dated July 30,
1991, between the Company and Barclays Business Credit, Inc.
("Barclays").
10.4 Second Amendment to Loan and Security Agreement dated June 1,
1992, between the Company and Barclays.
10.5 Third Amendment to Loan and Security Agreement dated October 29,
1992, between the Company and Barclays.
10.6 Fourth Amendment to Loan and Security Agreement dated April 1,
1993, between the Company and Barclays.
10.7 Fifth Amendment to Loan and Security Agreement dated June 30,
1993, between the Company and Barclays.
10.8 Sixth Amendment to Loan and Security Agreement dated October 28,
1993, between the Company and Barclays.
10.9 Seventh Amendment to Loan and Security Agreement dated May 12,
1994, between the Company and Barclays.
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. EXHIBIT
----------- -------
<C> <S>
10.10 Eighth Amendment to Loan and Security Agreement dated October
31, 1994, between the Company and Barclays.
10.11 Ninth Amendment to Loan and Security Agreement dated April 3,
1995, between the Company and Shawmut Capital Corporation,
successor-in-interest to Barclays.
10.12 Tenth Amendment to Loan and Security Agreement dated March 7,
1996, between the Company and Fleet Capital Corporation,
formerly Shawmut Capital Corporation.
10.13 Eleventh Amendment to Loan and Security Agreement dated June 14,
1996, between the Company and Fleet Capital Corporation.
10.14 Twelfth Amendment to Loan and Security Agreement dated June 4,
1997, between the Company and Fleet Capital Corporation.
10.15 Thirteenth Amendment to Loan and Security Agreement dated August
29, 1997, between the Company and Fleet Capital Corporation.
10.16 Fourteenth Amendment to Loan and Security Agreement dated
September 26, 1997, between the Company and Fleet Capital
Corporation.
10.17 Form of automobile lease between the Company and Prideco and
related schedule of terms of additional lease agreements.
10.18 Agreement dated October 30, 1997, between the Company and
Consolidated Investment Services, Inc.
*10.19 Lease agreement dated January 31, 1995, between the Company and
Betty J. Ketchum.
*10.20 Lease agreement dated November 1, 1990, between the Company and
Prideco relating to gas measurement facility.
*10.21 Lease agreement dated April 3, 1995, between the Company and
Sammons Realty Corporation relating to Farmington, New Mexico
center.
*10.22 Lease agreement dated April 3, 1995, between the Company and
Sammons Realty Corporation relating to Odessa, Texas center.
*10.23 Lease Agreement dated April 3, 1995, between the Company and
Sammons Realty Corporation relating to Freeport, Texas center.
*10.24 Lease Agreement dated April 3, 1995, between the Company and
Sammons Realty Corporation relating to Houston, Texas center.
*10.25 Lease Agreement dated April 3, 1995, between the Company and
Sammons Realty Corporation relating to Harvey, Louisiana center.
*10.26 Registration Rights Agreement dated December 17, 1997, between
the Company and Consolidated Investment Services, Inc.
11.1 Statement Regarding Computation of Per Share Earnings.
23.1 Consent of Coopers & Lybrand L.L.P.
*23.2 Consent of Conner & Winters, A Professional Corporation
(included in Exhibit 5.1).
24.1 Power of Attorney (included in this Part II).
27.1 Financial Data Schedule.
</TABLE>
- --------
* To be filed by amendment.
(b) Financial Statement Schedules:
--Report of Independent Accountants on Financial Statement Schedule
--Schedule II, Valuation and Qualifying Accounts and Reserves
All other schedules are omitted as inapplicable or because the required
information is contained in the financial statements or included in the
footnotes thereto.
II-3
<PAGE>
ITEM 17. UNDERTAKINGS.
1. The undersigned Registrant hereby undertakes to provide to the
Underwriters at the closings specified in the Underwriting Agreement
certificates in such denominations and registered in such names as required by
the Underwriters to permit prompt delivery to each purchaser.
2. Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities
Act, and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
3. The undersigned Registrant hereby undertakes that:
(i) For purposes of determining any liability under the Securities Act,
the information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in the form
of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(ii) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
II-4
<PAGE>
SIGNATURES
THE REGISTRANT. Pursuant to the requirements of the Securities Act of 1933,
the Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Tulsa and
State of Oklahoma on the 15th day of December, 1997.
RED MAN PIPE & SUPPLY CO.
/s/ L. Craig Ketchum
By:__________________________________
L.Craig Ketchum
President and Chief Executive
Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each individual whose signature appears
below constitutes and appoints L. Craig Ketchum and Dee Paige, and each of
them, his true and lawful attorneys-in-fact and agents with full power of
substitution, for him and in his name, place and stead, in any and all
capacities, to sign any and all amendments (including post-effective
amendments) to this Registration Statement and any registration statement for
the offering covered by this Registration Statement filed pursuant to Rule 462
under the Securities Act of 1933, and to file the same, with all exhibits
thereto, and all documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorneys-in-fact and agents, full
power and authority to do and perform each and every act and thing requisite
and necessary to be done in and about the premises, as fully to all intents
and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, or his or their
substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ L. Craig Ketchum Director, President and December 15, 1997
____________________________________ Chief Executive Officer
L. Craig Ketchum (Principal Executive
Officer)
/s/ Betty J. Ketchum Director, Chairman of the December 15, 1997
____________________________________ Board and Secretary
Betty J. Ketchum
/s/ T. Wayne Windham Director and Vice President, December 15, 1997
____________________________________ International
T. Wayne Windham
/s/ Dee Paige Director, Chief Financial December 15, 1997
____________________________________ Officer and Treasurer
Dee Paige (Principal Financial and
Accounting Officer)
/s/ David L. Noss Director December 15, 1997
____________________________________
David L. Noss
</TABLE>
II-5
<PAGE>
RED MAN PIPE & SUPPLY CO.
INDEX TO CONSOLIDATED FINANCIAL STATEMENT SCHEDULE
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Accountants.......................................... S-2
Schedule II--Valuation and Qualifying Accounts and Reserves................ S-3
</TABLE>
S-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders
Red Man Pipe & Supply Co.
In connection with our audits of the consolidated financial statements of
Red Man Pipe & Supply Co. and Subsidiaries as of October 31, 1996 and 1997,
and for each of the three years in the period ended October 31, 1997, which
financial statements are included in the Prospectus, we have also audited the
financial statement schedule listed in Item 16 herein.
In our opinion, the financial statement schedule, when considered in
relation to the basic financial statements taken as a whole, presents fairly,
in all material respects, the information required to be included therein.
Coopers & Lybrand L.L.P.
Tulsa, Oklahoma
November 26, 1997
S-2
<PAGE>
SCHEDULE II
RED MAN PIPE & SUPPLY CO. AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
Allowance for Doubtful Accounts
<TABLE>
<CAPTION>
ADDITIONS
---------------------
CHARGED
CHARGED TO TO OTHER DEDUCTIONS BALANCE
BALANCE AT COSTS AND ACCOUNTS/ AND AT END OF
DESCRIPTION BEGINNING EXPENSES RECOVERIES WRITE-OFFS PERIOD
- ----------- OF PERIOD ---------- ---------- ---------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Year ended October 31,
1995................... $200 $240 $88 $(228) $300
Year ended October 31,
1996................... 300 562 43 (405) 500
Year ended October 31,
1997................... 500 875 48 (673) 750
</TABLE>
S-3
<PAGE>
EXHIBIT 3.1
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION OF
RED MAN PIPE & SUPPLY CO.
TO: THE SECRETARY OF STATE OF OKLAHOMA:
101 STATE CAPITOL BUILDING
OKLAHOMA CITY, OK 73105
The undersigned Oklahoma corporation, for the purpose of adopting an
Amended and Restated Certificate of Incorporation pursuant to Section 1080 of
the Oklahoma General Corporation Act, hereby states as follows:
1. The name of the Corporation is Red Man Pipe & Supply Co.
2. The date of filing its original Certificate of Incorporation with the
Secretary of State was August 17, 1976, which has been subsequently amended, the
last amendment being filed February 9, 1995.
3. The Certificate of Incorporation of this Corporation is hereby restated
as amended by this Certificate, to read in its entirety as follows:
ARTICLE I
---------
The name of the Corporation is Red Man Pipe & Supply Co.
ARTICLE II
----------
The address of the Corporation's registered office in the State of
Oklahoma is 111 West Fifth, Suite 300, Tulsa, Oklahoma 74103, and the name of
its registered agent is David L. Noss and his address is 111 West Fifth, Suite
300, Tulsa, Oklahoma, 74103. The address of the principal office or place of
business of the Corporation in Oklahoma is 8023 East 63rd, Suite 800, Tulsa, OK
74133.
ARTICLE III
-----------
The purposes of the Corporation are to engage in any lawful act or activity
for which corporations may be organized under the General Corporation Law of the
State of Oklahoma.
ARTICLE IV
----------
The total number of shares of all classes of stock which the Corporation
shall have authority to issue is One Hundred Million Two Thousand (100,002,000),
divided into classes designated as follows:
A. Fifty Million (50,000,000) shares of Class A Voting Common Stock, par value
One Cent ($0.01) per share (the "Class A Common Stock");
B. Fifty Million (50,000,000) shares of Class B Voting Common Stock, par value
One Cent ($0.01) per share (the "Class B Common Stock"); and
C. Two Thousand Shares (2,000) shares of Preferred Stock, par value Two
Thousand Five Hundred Dollars ($2,500.00) per share ("the Preferred
Stock").
The powers, preferences, privileges, voting and other special or relative
rights, and the qualifications, limitations or restrictions thereof, granted to
or imposed upon the shares of Common Stock and Preferred Stock shall be as
follows:
1
<PAGE>
1. Preferred Stock: The Board of Directors of the Corporation shall be
---------------
authorized, without action by the shareholders, to issue such Preferred
Stock from time to time in one or more series. The Board may also fix for
each series the number of shares, designation, liquidation and dividend
rights, preferences, voting rights, redemption rights and any other rights,
restrictions and qualifications or sinking fund provisions.
(a) The authority of the Board of Directors with respect to each series
shall include, but not be limited to, determination of the following:
(1) The number of shares constituting that series and the distinctive
designation of that series;
(2) The dividend rate on the shares of that series, whether the
dividend shall be cumulative, and if so, from which date or dates
and the terms and conditions on which dividends shall be paid;
(3) Whether that series shall have voting rights, in addition to the
voting rights provided by law, and if so, the terms of such
voting rights;
(4) Whether that series shall have conversion privileges, and if so,
the terms and conditions of such conversion, including provisions
for adjustment of the conversion rate in such event as the Board
of Directors shall determine;
(5) Whether or not the shares of that series shall be redeemable, and
if so, the terms and conditions of such redemption, including the
date or dates upon or after which they shall be redeemable, and
the amount per share payable in case of redemption, which amount
may vary under different conditions and at different redemption
dates and the terms of the sinking fund or redemption or purchase
account, if any;
(6) The rights of the shares of that series in the event of voluntary
or involuntary liquidation, dissolution or winding up or merger,
consolidation, distribution, or sale of the assets of the
Corporation;
(7) Provisions, if any, for the vote or consent of the holders of a
stated percentage of the outstanding shares of Preferred Stock of
such series with respect to changes in the rights, preferences or
limitations of the shares of such series, or the designation or
issuance of series of the Preferred Stock by the Board of
Directors, or the authorization or issuance of other classes or
series of preferred stock; and
(8) Any other relative rights, preferences and limitations of that
series.
(b) Dividends on outstanding shares of Preferred Stock shall be declared
and paid, or set apart for payment, before any dividends shall be
declared and paid or set apart for payment on the shares of Common
Stock with respect to the same dividend period.
2
<PAGE>
(c) No holder of shares of Preferred Stock shall be entitled to any
preemptive rights with respect to subscribing for or purchasing any
part of any new or additional issue or sale or reservation of stock or
securities of any class or kind whatsoever.
2. Class A and Class B Common Stock.
--------------------------------
(a) Neither the outstanding shares of Class A Common Stock nor the
outstanding shares of Class B Common Stock may be subdivided,
consolidated, reclassified or otherwise changed unless
contemporaneously therewith the outstanding shares of the other class
of common stock are subdivided, consolidated, reclassified or
otherwise changed in the same proportion and in the same manner.
(b) The holders of Class A Common Stock and Class B Common Stock shall
have the exclusive right to vote for the election of Directors (other
than in the case of newly created directorships and vacancies, which
may be filled by the remaining Directors) and on all other matters
requiring Stockholder action, with each share of Class A Common Stock
entitling the holder thereof to one (1) vote on any matter submitted
to the Stockholders for a vote, and each share of Class B Common Stock
entitling the holder thereof to ten (10) votes on any matter submitted
to the Stockholders for a vote, provided that such holder of the Class
B Common Stock is a member of the Ketchum Group (as hereinafter
defined); and every reference in this Restated Certificate of
Incorporation or the By-Laws of the Corporation, as in effect from
time to time, to a majority or other portion of stock shall refer to
such majority or other proportion of the votes of such stock;
provided, however, that, except as required by law, holders of Class A
Common Stock and Class B Common Stock shall, on every matter submitted
to the Stockholders for a vote, vote as a single class, and in no
case, except as required by law, shall the holders of Class A Common
Stock or Class B Common Stock be entitled to vote separately as a
class, and provided that the number of authorized shares of any class
or classes of stock may be increased or decreased (but not below the
number of shares thereof then outstanding) by the affirmative vote of
a majority of the votes of the voting stock of the Corporation; and as
used in this Restated Certificate of Incorporation, the "Ketchum
Group" shall mean Betty J. Ketchum, and the lineal descendants of
Lewis B. Ketchum and Betty J. Ketchum (collectively, the "Ketchum
Family"), and trusts, partnerships or other entities controlled by or
for the benefit of any member or members of the Ketchum Family.
(c) Upon any merger, consolidation, reorganization or other business
combination of the Corporation and any other entity, the consideration
to be received per share by the holders of the Class A Common Stock
and Class B Common Stock as a result of such merger, consolidation,
reorganization or other business combination shall be identical,
except that the voting rights of any securities received by holders of
Class A Common Stock may differ from the voting rights of
3
<PAGE>
any securities received by holders of Class B Common Stock to the
extent that the voting rights differ between shares of Class A Common
Stock and shares of Class B Common Stock.
(d) Upon the voluntary or involuntary liquidation, dissolution or winding
up of the Corporation, the net assets of the Corporation shall be
distributed pro rata to the holders of Class A Common Stock and Class
B Common Stock, without distinction as to class, in accordance with
the number of shares held by each such holder.
(e) There shall be no preemptive rights in the holders of shares of Class
A Common Stock or Class B Common Stock with respect to subscribing for
or purchasing any part of any new or additional issue or sale or
reservation of stock or securities of any class or kind whatsoever.
(f) Holders of Class A Common Stock and Class B Common Stock shall be
entitled to receive, on an equal basis, such dividends payable in cash
or otherwise, as may be declared thereon by the Board of Directors
from time to time out of the assets or funds to the Corporation
legally available therefor. With respect to any dividends or
distributions in cash, stock or property, each share of Class A Common
Stock shall have rights equal to the rights of Class B Common Stock;
provided, however, that in the case of dividends or distributions
payable in Common Stock of the Corporation, such dividend or
distribution must be made proportionately to the holders of Class A
Common Stock and Class B Common Stock, either: (i) in Class A Common
Stock to holders of both Class A Common Stock and Class B Common
Stock; or (ii) in Class A Common Stock to holders of Class A Common
Stock and in Class B Common Stock to holders of Class B Common Stock.
3. Conversion of Class B Common Stock to Class A Common Stock. Each share of
----------------------------------------------------------
Class B Common Stock may be converted, at any time and at the election of
the holder, into one share of Class A Common Stock. In addition, each
share of Class B Common Stock shall be converted automatically into one
share of Class A Common Stock at the time it is sold, transferred or
otherwise disposed of to any third party other than a member of the Ketchum
Group. Upon any conversion of the Class B Common Stock into Class A Common
Stock, the holder thereof shall be entitled to only one (1) vote per share
on any matter submitted to the Stockholders for a vote.
ARTICLE V
---------
In furtherance and not in limitation of the powers conferred by statute,
the Board of Directors is expressly authorized:
1. To adopt, amend or repeal the By-Laws of the Corporation.
2. By a majority of the whole Board of Directors, to designate one (1) or more
committees, each committee to consist of one (1) or more of the Directors
of the Corporation. The Board may designate one (1) or more Directors as
alternate members of any committee, who may replace any absent or
disqualified member at any meeting of the committee. Any such committee,
to the extent provided in the resolution or in the By-Laws of the
Corporation, shall have and may exercise the powers of the Board of
4
<PAGE>
Directors in the management of the business and affairs of the Corporation,
and may authorize the seal of the Corporation to be affixed to all papers
which may require it; provided, however, the By-Laws may provide that in
the absence or disqualification of any member of such committee or
committees, the member of members thereof present at any meeting and not
disqualified from voting, whether or not he or they constitute a quorum,
may unanimously appoint another member of the Board of Directors to act at
the meeting in the place of any such absent or disqualified member.
ARTICLE VI
----------
Whenever a compromise or arrangement is proposed between this Corporation
and its creditors or any class of them and/or between this Corporation and its
shareholders or any class of them, any court of equitable jurisdiction within
the State of Oklahoma, on the application in a summary way of this Corporation
or of any creditor or shareholder thereof, or on the application of any receiver
or receivers appointed for this Corporation under the provisions of Section 1106
of Title 18 of the Oklahoma Statutes or on the application of trustees in
dissolution or of any receiver or receivers appointed for this Corporation under
the provisions of Section 1100 of Title 18 of the Oklahoma Statutes may order a
meeting of the creditors or class of creditors, and/or of the shareholders or
class of shareholders of this Corporation, as the case may be, to be summoned in
such manner as the court directs. If a majority in number representing three-
fourths (3/4ths) in value of the creditors or class of creditors, and/or of the
shareholders or class of shareholders of this Corporation, as the case may be,
agree to any compromise or arrangement and to any reorganization of this
Corporation as a consequence of such compromise or arrangement, the compromise
or arrangement and the reorganization shall, if sanctioned by the court to which
the application has been made, be binding on all the creditors or class of
creditors and/or on all the shareholders or class of shareholders of this
Corporation, as the case may be, and also on this Corporation.
ARTICLE VII
-----------
Meetings of shareholders may be held within or without the State of
Oklahoma, as the By-Laws may provide. The books of the Corporation may be kept
(subject to applicable law) inside or outside the State of Oklahoma at such
place or places as may be designated from time to time by the Board of Directors
or in the By-Laws of the Corporation. Elections of Directors need not be by
written ballot unless the By-Laws of the Corporation shall so provide.
ARTICLE VIII
------------
To the fullest extent permitted by the Oklahoma General Corporation Act as
the same exists or may hereafter be amended, a Director of this Corporation
shall not be liable to the Corporation or its shareholders for monetary damages
for breach of fiduciary duty as a Director. No amendment to or repeal of this
Article shall apply to or have any effect on the liability or alleged liability
of any Director of the Corporation for or with respect to any acts or omissions
of such Director occurring prior to such amendment or repeal.
ARTICLE IX
----------
This Amended and Restated Certificate of Incorporation was set forth in a
resolution duly adopted by the Board of Directors which declared the
5
<PAGE>
adoption of the Amended and Restated Certificate of Incorporation to be
advisable and which ordered that the Amended and Restated Certificate of
Incorporation be considered by the shareholders of the Corporation entitled to
vote thereon.
Such Amended and Restated Certificate of Incorporation was duly adopted in
accordance with Section 1080 and Section 1073 of the Oklahoma General
Corporation Act by the written consent of the holders of all of the issued and
outstanding shares of capital stock of the Corporation in lieu of a special
meeting thereof dated November 12, 1997.
IN WITNESS WHEREOF, said Red Man Pipe & Supply Co. has caused its
corporate seal to be affixed hereto and this Amended and Restated Certificate of
Incorporation to be signed by its President and Secretary the 12th day of
November, 1997.
RED MAN PIPE & SUPPLY CO.
/s/ LEWIS CRAIG KETCHUM
__________________________________
Lewis Craig Ketchum, President
ATTEST:
/s/ BETTY J. KETCHUM
___________________________
Betty J. Ketchum, Secretary
6
<PAGE>
EXHIBIT 3.2
TABLE OF CONTENTS
AMENDED AND RESTATED BY-LAWS
OF
RED MAN PIPE & SUPPLY CO.
AN OKLAHOMA CORPORATION
<TABLE>
<CAPTION>
ARTICLE/SECTION CAPTION PAGE
- --------------- ------- ----
<S> <C> <C>
ARTICLE I OFFICES AND FISCAL YEAR....................... 1
1.01 Registered Office............................. 1
1.02 Other Offices................................. 1
1.03 Fiscal Year................................... 1
ARTICLE II MEETINGS OF SHAREHOLDERS...................... 1
2.01 Place of Meeting.............................. 1
2.02 Annual Meeting................................ 2
2.03 Business at Annual Meeting.................... 2
2.04 Special Meetings.............................. 4
2.05 Notice of Meetings............................ 4
2.06 Quorum, Manner of Acting and
Adjournment.................................. 5
2.07 Organization.................................. 6
2.08 Voting, Proxies............................... 6
2.09 Action by Shareholders in
Lieu of Meeting.............................. 7
2.10 Voting Lists.................................. 7
ARTICLE III BOARD OF DIRECTORS............................ 8
3.01 Powers........................................ 8
3.02 Number and Term of Office..................... 8
3.03 Nominations................................... 9
3.04 Resignations.................................. 11
3.05 Vacancies and Newly Created
Directorships................................ 11
3.06 Organization.................................. 12
3.07 Place of Meeting.............................. 12
3.08 Organization Meeting.......................... 12
3.09 Regular Meetings.............................. 12
3.10 Special Meetings.............................. 13
3.11 Conference Telephone Meetings................. 13
3.12 Quorum, Manner of Acting and
Adjournment.................................. 14
3.13 Committees.................................... 14
3.14 Consent of Directors in Lieu
of Meeting................................... 16
3.15 Presumption of Assent......................... 16
3.16 Compensation of Directors..................... 17
3.17 Holders of Preferred Stock.................... 17
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
ARTICLE/SECTION CAPTION PAGE
- --------------- ------- ----
<S> <C> <C>
ARTICLE IV NOTICES, WAIVERS....................... 18
4.01 Notice, What Constitutes............... 18
4.02 Waivers of Notice...................... 18
ARTICLE V OFFICERS............................... 19
5.01 Number, Qualification and
Designation........................... 19
5.02 Election and Term of Office............ 19
5.03 Other Officers, Committees
and Agents............................ 19
5.04 Chairman of the Board and Vice
Chairman............................... 20
5.05 President.............................. 21
5.06 Vice Presidents........................ 21
5.07 Secretary and Assistant Secretaries.... 22
5.08 Treasurer and Assistant Treasurers..... 22
5.09 Officers' Bonds........................ 23
5.10 Compensation........................... 23
5.11 Action with Respect to Securities
of Other Corporations................. 24
ARTICLE VI CAPITAL STOCK.......................... 24
6.01 Issuance............................... 24
6.02 Regulations Regarding Certificates..... 26
6.03 Stock Certificates..................... 26
6.04 Lost, Stolen, Destroyed or
Mutilated Certificates................ 26
6.05 Record Holder of Shares................ 27
6.06 Determination of Shareholders of
Record for Voting at Meetings......... 27
6.07 Determination of Shareholders of Record
for Dividends and Distributions....... 28
6.08 Determination of Shareholders of
Record for Written Consent............ 28
ARTICLE VII INDEMNIFICATION OF DIRECTORS, OFFICERS,
AND OTHER AUTHORIZED REPRESENTATIVES... 30
7.01 Indemnification of Authorized
Representatives in Third Party
Proceedings........................... 30
7.02 Indemnification of Authorized
Representatives in Corporate
Proceedings........................... 31
7.03 Mandatory Indemnification of
Authorized Representatives............ 32
7.04 Determination of Entitlement
to Indemnification.................... 32
</TABLE>
ii
<PAGE>
<TABLE>
<CAPTION>
ARTICLE/SECTION CAPTION PAGE
- --------------- ------- ----
<S> <C> <C>
7.05 Burden of Proof................ 33
7.06 Advancing Expenses............. 33
7.07 Employee Benefit Plans......... 33
7.08 Persons Other than Authorized
Representatives................ 34
7.09 Scope of Article............... 34
7.10 Reliance on Provisions......... 34
7.11 Insurance...................... 35
7.12 Rights Continue................ 35
7.13 References to Corporation...... 35
ARTICLE VIII GENERAL PROVISIONS............. 36
8.01 Dividends...................... 36
8.02 Annual Statements.............. 36
8.03 Contracts...................... 37
8.04 Checks......................... 37
8.05 Corporate Seal................. 37
8.06 Amendment of By-Laws........... 37
</TABLE>
iii
<PAGE>
AMENDED AND RESTATED BY-LAWS
OF
RED MAN PIPE & SUPPLY CO.
AN OKLAHOMA CORPORATION
ADOPTED ON ____________________
ARTICLE I
---------
OFFICES AND FISCAL YEAR
-----------------------
SECTION 1.01. REGISTERED OFFICE. The registered office of the Corporation
--------------------------------
shall be at 111 West Fifth, Suite 300, in the City of Tulsa, County of Tulsa,
State of Oklahoma, 74013, until otherwise established by a vote of the majority
of the Board of Directors in office, and a statement of such change is filed in
the manner provided by statute. The principal office until changed by the Board
of Directors shall be located at 8023 East 63rd, Suite 800, Tulsa, OK 74133.
SECTION 1.02. OTHER OFFICES. The Corporation may have other offices at
----------------------------
such other places, both within or without the State of Oklahoma, as the Board of
Directors may from time to time determine or the business of the Corporation may
require.
SECTION 1.03. FISCAL YEAR. The fiscal year of the Corporation shall end
--------------------------
on October 31 of each year unless otherwise fixed by resolution of the Board of
Directors.
ARTICLE II
----------
MEETINGS OF SHAREHOLDERS
------------------------
2.01. PLACE OF MEETING. All meetings of the Shareholders of the
------------------------
Corporation shall be held at the principal office of the Corporation or at such
other place within or without the State of
1
<PAGE>
Oklahoma as shall be designated by the Board of Directors in the notice of the
meeting.
SECTION 2.02. ANNUAL MEETING. An annual meeting of the Shareholders of
-----------------------------
the Corporation, for the election of Directors to succeed those whose terms
expire and for the transaction of such other business as may properly come
before the meeting, shall be held in each year on the second Tuesday in May at
9:00 a.m. or at such other date and time as may be established by the Board of
Directors. If such day is a legal holiday, the annual meeting shall be held on
the following business day.
SECTION 2.03. BUSINESS AT ANNUAL MEETING. No business may be transacted
-----------------------------------------
at an annual meeting of Shareholders other than business that is:
A. Specified in the notice of meeting (or any supplement thereto) given
by or at the direction of the Board of Directors (or any duly
authorized committee thereof);
B. Otherwise properly brought before the annual meeting by or at the
direction of the Board of Directors (or any duly authorized committee
thereof); or
C. Otherwise properly brought before the annual meeting by any
Shareholder of the Corporation who is entitled to vote at such annual
meeting in accordance with the following procedures.
In addition to any other applicable requirements, for business to be properly
brought before an annual meeting by a Shareholder, such Shareholder must have
given written notice thereof to the Secretary of the Corporation not less than
ninety (90) days prior to the anniversary date of the immediately preceding
annual
2
<PAGE>
meeting of Shareholders; provided, however, that if the annual meeting is called
for a date that is not within thirty (30) days before or after such anniversary
date, notice by the Shareholder must be given not later than the tenth (10th)
day following the day on which such notice of the date of the annual meeting was
mailed or public disclosure of the date of the annual meeting was made,
whichever first occurs. A Shareholder's notice to the Secretary must set forth
the name and record address of such Shareholder, the number and type of shares
of stock of the Corporation which are beneficially owned by such Shareholder,
and as to each matter such Shareholder proposes to bring before the annual
meeting:
(1) A brief description of the business desired to be brought before the
annual meeting and the reasons for conducting such business at the
annual meeting;
(2) A description of all arrangements or understandings between such
Shareholder and any other person or persons (including their names) in
connection with the business; and
(3) A representation that such Shareholder intends to appear in person or
by proxy at the annual meeting to bring such business before the
meeting.
The Corporation shall not be obligated to include in its proxy materials any
business proposed by a Shareholder. If the Chairman of the annual meeting
determines that business was not brought before the annual meeting by a
Shareholder in accordance with the foregoing procedures, such business shall not
be transacted.
3
<PAGE>
2.04. SPECIAL MEETINGS. Special meetings of the Shareholders of the
-----------------------
Corporation may be called at any time by the President, the Chairman of the
Board, if any, or a majority of the Board of Directors, for any purpose or
purposes for which meetings may be lawfully called. At any time, upon written
request of any person or persons who have duly called a special meeting, which
written request shall state the purpose or purposes of the meeting, it shall be
the duty of the President to fix the date of the meeting to be held at such date
and time as the President may fix, not less than ten (10) nor more than sixty
(60) days after the receipt of the request, and to give due notice thereof. If
the President shall neglect or refuse to fix the time and date of such meeting
and give notice thereof, the person or persons calling the meeting may do so.
SECTION 2.05. NOTICE OF MEETINGS. Written notice of the place, date and
---------------------------------
hour of every meeting of the Shareholders, whether annual or special, shall be
given by the Chairman of the Board, the President, a Vice President, the
Secretary or an Assistant Secretary of the Corporation to each Shareholder
having voting power with respect to the business to be transacted at such
meeting, not less than ten (10) nor more than sixty (60) days before the date of
the meeting. Each notice of a special meeting shall state the purpose or
purposes for which the meeting is being called. Any meeting at which all
Shareholders having voting power with respect to the business to be transacted
thereat are present, either in person or by proxy, shall be a valid
4
<PAGE>
meeting for the transaction of business, notwithstanding that notice has not
been given as hereinabove provided.
SECTION 2.06. QUORUM, MANNER OF ACTING AND ADJOURNMENT. A quorum at all
-------------------------------------------------------
meetings of the Shareholders for the transaction of business except as otherwise
provided by statute, by the Certificate of Incorporation or by these By-Laws,
shall consist of forty percent (40%) of the outstanding shares of common stock
(excluding treasury shares) present in person or represented by proxy,
multiplied by the number of votes represented by those shares. If, however,
such quorum shall not be present or represented at any meeting of the
Shareholders, the Shareholders entitled to vote thereat, present in person or
represented by proxy, shall have power to adjourn the meeting from time to time,
without notice other than announcement at the meeting, until a quorum shall be
present or represented. At any such adjourned meeting at which a quorum shall
be present or represented, any business may be transacted which might have been
transacted at the meeting as originally notified. If the adjournment is for
more than thirty (30) days or if after the adjournment a new record date is
fixed for the adjourned meeting, a notice of the adjourned meeting shall be
given to each Shareholder of record having voting power with respect to the
business to be transacted at such meeting. When a quorum is present at any
meeting, the vote of the holders of the majority of the votes represented by the
stock having voting power with respect to a question present in person or
represented by proxy shall decide any such question brought before such meeting,
unless the question is one upon
5
<PAGE>
which, by express provision of the applicable statute or these By-Laws, a
different vote is required, in which case such express provision shall govern
and control the decision on such question. Except upon those questions governed
by the aforesaid express provisions, the Shareholders present in person or by
proxy at a duly organized meeting can continue to do business until adjournment,
notwithstanding withdrawal of enough Shareholders to leave less than a quorum.
SECTION 2.07. ORGANIZATION. At every meeting of the Shareholders, the
---------------------------
President, or in the absence of the President, one of the following persons
present in the order stated: Chairman of the Board, if any; a chairman
designated by the Board of Directors, or a chairman chosen by the Shareholders,
shall act as chairman, and the Secretary, or in his absence, an Assistant
Secretary or a person appointed by the chairman of the meeting, shall act as
secretary of the meeting.
SECTION 2.08. VOTING, PROXIES. Except as provided in the Certificate of
------------------------------
Incorporation or in a resolution adopted by the Board of Directors pursuant to
Section 1032 of the Oklahoma General Corporation Act and subject to Section 1058
of such Act, each Shareholder shall at every meeting of the Shareholders be
entitled to vote in person or by proxy each share of capital stock having voting
power held by such Shareholder. No proxy shall be voted after three (3) years
from its date, unless the proxy provides for a longer period. Each proxy shall
be executed in writing by the Shareholder or by his duly authorized attorney-in-
fact and filed with the Secretary of the Corporation or the
6
<PAGE>
secretary of the meeting prior to being voted. A proxy, unless coupled with an
interest, shall be revocable at will, notwithstanding any other agreement or any
provision in the proxy to the contrary, but the revocation of a proxy shall not
be effective until notice thereof has been given to the Secretary of the
Corporation. A duly executed proxy shall be irrevocable if it states that it is
irrevocable and if, only as long as, it is coupled with an interest sufficient
in law to support an irrevocable power. A proxy may be made irrevocable
regardless of whether the interest with which it is coupled is an interest in
the stock itself or an interest in the Corporation generally. A proxy shall not
be revoked by death or incapacity of the maker unless, before the vote is
counted or the authority is exercised, written notice of such death or
incapacity is given to the Secretary of the Corporation.
SECTION 2.09. ACTION BY SHAREHOLDERS IN LIEU OF MEETING. Any action which
--------------------------------------------------------
may be or is required to be taken at an annual or special meeting of the
Shareholders of the Corporation may be taken without a meeting, without prior
notice and without a vote, only if all of the Shareholders of the Corporation
entitled to vote thereon consent to such action in writing.
SECTION 2.10. VOTING LISTS. The officer who has charge of the stock
---------------------------
ledger of the Corporation shall prepare and make, at least ten (10) days before
every meeting of Shareholders, a complete list of the Shareholders entitled to
vote at the meeting. The list shall be arranged in alphabetical order and show
the address of each Shareholder and the number of shares
7
<PAGE>
registered in the name of each Shareholder. Such list shall be open to the
examination of any Shareholder, for any purpose germane to the meeting, during
ordinary business hours, for a period of at least ten (10) days prior to the
meeting either at a place within the city where the meeting is to be held, which
place shall be specified in the notice of the meeting, or, if not so specified,
at the place where the meeting is to be held. The list shall also be produced
and kept at the time and place of the meeting during the whole time thereof and
may be inspected by any Shareholder who is present.
ARTICLE III
-----------
BOARD OF DIRECTORS
------------------
SECTION 3.01. POWERS. The Board of Directors shall have full power to
---------------------
manage the business and affairs of the Corporation, and all powers of the
Corporation, except those specifically reserved or granted to the Shareholders
by statutes, the Certificate of Incorporation or these By-Laws, are hereby
granted to and vested in the Board of Directors.
SECTION 3.02. NUMBER AND TERM OF OFFICE. The number of Directors
----------------------------------------
constituting the entire Board of Directors shall not be less than three (3), nor
more than fifteen (15), the exact number within such limits to be determined
from time to time by resolution adopted by the affirmative vote of a majority of
the entire Board of Directors; provided, however, that the number of Directors
shall not be reduced so as to shorten the term of any Director at that time in
office, and provided further, that the number of Directors constituting the
entire Board of Directors
8
<PAGE>
shall be five (5) until otherwise fixed by a majority of the entire Board of
Directors. All Directors of the Corporation shall be natural persons of legal
age. Directors need not be residents of Oklahoma, nor Shareholders of the
Corporation.
SECTION 3.03. NOMINATIONS. Nominations of candidates for election as
--------------------------
Directors of the Corporation at any meeting of the Shareholders may be made by
or at the direction of the Board of Directors or by any Shareholder entitled to
vote at such meeting, in accordance with the following procedures. Nominations
made by or at the direction of the Board of Directors may be made at any time.
At the request of the Secretary of the Corporation, each proposed nominee shall
provide the Corporation with such information concerning the proposed nominee as
is required under the rules of the Securities and Exchange Commission, to be
included in the Corporation's proxy statement soliciting proxies for the
nominee's election as a Director. Nominations, other than those made by or at
the direction of the Board of Directors, shall be made pursuant to notice in
writing to the Secretary of the Corporation. Such notice shall be given:
A. With respect to an election to be held at the annual meeting of
Shareholders, not less than ninety (90) days prior to the anniversary
date of the immediately preceding annual meeting of the Shareholders
of the Corporation; provided, however, if the annual meeting is called
for a date that is not within thirty (30) days before or after such
anniversary date, not later than the tenth (10th) day following the
day on which notice
9
<PAGE>
of the date of the annual meeting was mailed or public disclosure of
the date of the annual meeting was made, whichever first occurs, and
B. With respect to an election to be held at a special meeting of
Shareholders for the election of Directors, not later than the close
of business on the tenth (10) day following the day on which notice of
the date of the annual meeting was mailed or public disclosure of the
date of the annual meeting was made, whichever first occurs.
Such notice to the Secretary shall also set forth:
(1) The name and record address of such Shareholder;
(2) The number and type of shares of stock of the Corporation which are
beneficially owned by such Shareholder;
(3) The name, age, business address and residence address of each nominee
proposed in such notice;
(4) The principal occupation or employment of each such nominee;
(5) The number and type of shares of stock of the Corporation which are
beneficially owned by each such nominee;
(6) Such other information concerning each such nominee as would be
required under the rules of the Securities and Exchange Commission, in
a proxy statement soliciting proxies for the election of such
nominees;
(7) A description of all arrangements or understandings between such
Shareholder and any other person or persons (including their names) in
connection with the nomination of each such nominee and any material
interest of each such Shareholder in each such nomination; and
10
<PAGE>
(8) A representation that such Shareholder intends to appear in person or
by proxy at the meeting to nominate each such nominee.
Such notice shall include a signed consent of each such nominee to serve as a
Director of the Corporation, if elected. The Corporation shall not be obligated
to include in its proxy materials any person who is nominated by a Shareholder
as a candidate for election as a Director. In the event that a person who is
validly designated as a nominee in accordance with this Section shall thereafter
become unable or unwilling to stand for election to the Board of Directors, the
Board of Directors may designate a substitute nominee. If the Chairman of the
meeting determines that a nomination was not made in accordance with the
foregoing procedures, such nomination shall be void.
SECTION 3.04. RESIGNATIONS. Any Director of the Corporation may resign at
---------------------------
any time by giving written notice to the President or the Secretary of the
Corporation. Resignations shall become effective upon receipt or at such later
time as shall be specified therein and, unless otherwise specified therein, the
acceptance of such resignation shall not be necessary to make it effective.
SECTION 3.05. VACANCIES AND NEWLY CREATED DIRECTORSHIPS. Any vacancies in
--------------------------------------------------------
the Board of Directors for any reason, and any directorships resulting from any
increase in the number of Directors, may be filled by the Board of Directors,
acting by a majority of the Directors then in office, although less than a
quorum, and any Director so chosen shall hold office until the
11
<PAGE>
next election and until such Director's successor shall be elected and shall
qualify. If at any time, by reason of death or resignation or other cause, the
Corporation should have no Directors in office, then an election of Directors
may be held by the Shareholders or in the manner provided by statute.
SECTION 3.06. ORGANIZATION. At every meeting of the Board of Directors,
---------------------------
the Chairman of the Board, if any, or in the case of a vacancy in the office or
absence of the Chairman of the Board, the President or, in his absence, a
chairman chosen by a majority of the Directors present, shall preside, and the
Secretary or, in his absence, an Assistant Secretary or any person appointed by
the chairman of the meeting, shall act as secretary of the meeting.
SECTION 3.07. PLACE OF MEETING. The Board of Directors may hold its
-------------------------------
meetings, both regular and special, at such place or places within or without
the State of Oklahoma as the Board of Directors may from time to time appoint,
or as may be designated in the notice calling the meeting.
SECTION 3.08. ORGANIZATION MEETING. The first meeting of each newly
-----------------------------------
elected Board of Directors shall, unless otherwise specified by the President of
the Corporation, be held immediately after, and at the same place as, the annual
meeting of the Shareholders. Notice of such meeting to the newly elected
Directors shall not be necessary in order legally to constitute the meeting,
provided a quorum shall be present.
SECTION 3.09. REGULAR MEETINGS. Regular meetings of the Board of
-------------------------------
Directors may be held without notice at such time and
12
<PAGE>
place as shall be designated from time to time by resolution of the Board of
Directors. If the date fixed for any such regular meeting shall be a legal
holiday under the laws of the State where such meeting is to be held, then the
same shall be held on the next succeeding business day, not a Saturday, or at
such other time as may be determined by resolution of the Board of Directors. At
such meetings, the Directors shall transact such business as may properly be
brought before the meeting.
SECTION 3.10. SPECIAL MEETINGS. Special meetings of the Board of
-------------------------------
Directors shall be held whenever called by the Chairman of the Board, if any,
the President, or by two or more of the Directors. Notice of each such meeting
shall be given to each Director by telephone, telegram, facsimile, in writing or
in person at least twenty-four (24) hours (in the case of notice by telephone or
in person) or forty-eight (48) hours (in the case of notice by telegram or
facsimile) or five (5) days (in the case of notice by mail) before the time at
which the meeting is to be held. Each such notice shall state the time, place
and purpose of the meeting to be so held. Except as otherwise specifically
provided in these By-Laws, no notice of the objects or purposes of any special
meeting of the Board of Directors need be given, and unless otherwise indicated
in the notice thereof, any and all business may be transacted at any such
special meeting.
SECTION 3.11. CONFERENCE TELEPHONE MEETINGS. One or more Directors
--------------------------------------------
may participate in a meeting of the Board, or of a committee of the Board, by
means of conference telephone or similar communications equipment by means of
which all persons
13
<PAGE>
participating in the meeting can hear each other. Participation in a meeting
pursuant to this Section shall constitute presence in person at such meeting.
SECTION 3.12. QUORUM, MANNER OF ACTING AND ADJOURNMENT. At all meetings
-------------------------------------------------------
of the Board a majority of the Directors shall constitute a quorum for the
transaction of business. The vote of a majority of the Directors present at any
meeting at which there is a quorum shall be the act of the Board of Directors,
except on additions, amendments, repeal or any changes whatsoever in these By-
Laws, with respect to any of which the affirmative votes of at least a majority
of the members of the Board of Directors shall be necessary for the adoption of
such changes and except as may be otherwise specifically provided by statute or
by the Certificate of Incorporation. If a quorum shall not be present at any
meeting of the Board of Directors, the Directors present thereat may adjourn the
meeting from time to time, without notice other than announcement at the
meeting, until a quorum shall be present.
SECTION 3.13. COMMITTEES. The Board of Directors may, by resolution
-------------------------
adopted by a majority of the whole Board, designate an executive committee and
one (1) or more other committees, each committee to consist of one (1) or more
Directors of the Corporation. The Board may designate one (1) or more Directors
as alternate members of any committee, who may replace any absent or
disqualified member at any meeting of the committee. In the absence or
disqualification of a member, and the alternate or alternates, if any,
designated for such member, of any committee,
14
<PAGE>
the member or members thereof present at any meeting and not disqualified from
voting, whether or not he or they constitute a quorum, may unanimously appoint
another Director to act at the meeting in the place of any such absent or
disqualified member. A majority of the members of any committee, as at the time
constitute, shall be necessary to constitute a quorum thereof, and the act of a
majority of the members of any committee who are present at any meeting thereof
at which a quorum is present shall be the act of such committee. Any vacancy in
any committee shall be filed by a vote of a majority of the Directors at the
time in office.
Any such committee to the extent provided in the resolution establishing
such committee shall have and may exercise all the power and authority of the
Board of Directors in the management of the business and affairs of the
Corporation, except that no such committee shall have the authority of the Board
of Directors in reference to amending the Certificate of Incorporation,
approving a plan of merger or consolidation (other than a merger contemplated by
Section 1083 of the Oklahoma General Corporation Act), recommending to the
Shareholders the sale, lease or exchange of all or substantially all of the
property and assets of the Corporation, recommending to the Shareholders a
voluntary dissolution of the Corporation or a revocation thereof, amending,
altering or repealing these By-Laws or adopting new By-Laws for the Corporation,
filing vacancies in the Board of Directors or any such committee, filling any
Directorship to be filled by reason of an increase in the number of Directors,
electing or
15
<PAGE>
removing officers or members of any such committee, fixing the compensation of
any member of such committee, or altering or repealing any resolution of the
Board of Directors which provides for any of the foregoing or which by its terms
provides that it shall not be so amendable or repealable; and no such committee
shall have the power or authority to declare a dividend or to authorize the
issuance of shares of the Corporation. Such committee or committees shall have
such name or names as may be determined from time to time by resolution adopted
by the Board of Directors. Each committee so formed shall fix the time and place
of its meetings and its own rules of procedure and shall keep regular minutes of
its meetings and report from time to time to the Board of Directors.
SECTION 3.14. CONSENT OF DIRECTORS IN LIEU OF MEETING. Unless otherwise
------------------------------------------------------
restricted by the Certificate of Incorporation or these By-Laws, any action
required or permitted to be taken at any meeting of the Board of Directors or of
any committee thereof may be taken without a meeting, if all members of the
Board or the Committee consent thereto in writing, and the writing or writings
are filed with the minutes of proceedings of the Board or the committee.
SECTION 3.15. PRESUMPTION OF ASSENT. A Director who is present at a
------------------------------------
meeting of the Board of Directors at which action on any corporate matter is
taken shall be presumed to have assented to the action unless his dissent shall
be entered in the minutes of the meeting, or unless he shall file his written
dissent to such action with the person acting as Secretary of the meeting
16
<PAGE>
before the adjournment thereof or unless he shall forward such dissent by
registered mail to the Secretary of the Corporation immediately after the
adjournment of the meeting. Such right to dissent shall not apply to a Director
who voted in favor of such action.
SECTION 3.16. COMPENSATION OF DIRECTORS. Unless otherwise restricted by
----------------------------------------
the Certificate of Incorporation, the Board of Directors shall have the
authority to fix the compensation of Directors. The Directors may be paid their
expenses, if any, of attendance at each meeting of the Board of Directors and
may be paid a fixed sum for attendance at each meeting of the Board of Directors
or a stated salary as Director. No such payment shall preclude any Director
from serving the Corporation in any other capacity and receiving compensation
therefor. Members of special or standing committees may be allowed like
compensation for attending committee meetings.
SECTION 3.17. HOLDERS OF PREFERRED STOCK. Notwithstanding the foregoing,
-----------------------------------------
whenever the holders of any one (1) or more classes or series of Preferred Stock
issued by the Corporation shall have the right, voting separately by class or
series, to elect Directors at an annual or special meeting of Shareholders, the
election, term of office, filling of vacancies and other features of such
directorships shall be governed by the terms of the Certificate of Incorporation
applicable thereto.
17
<PAGE>
ARTICLE IV
----------
NOTICES, WAIVERS
----------------
SECTION 4.01. NOTICE, WHAT CONSTITUTES. Whenever, under the provisions
---------------------------------------
of the statutes of Oklahoma or the Certificate of Incorporation or these By-
Laws, notice is required to be given to any Director or Shareholder, it may be
given in writing by:
A. Mail or nationally recognized commercial delivery service, addressed
to such Director or Shareholder, at his address as it appears on the
records of the Corporation, with postage or other charges thereon
prepaid, or
B. Confirmed facsimile, addressed to such Director or Shareholder, at his
facsimile number as it appears on the records of the Corporation.
Notice given in accordance with this provision shall be deemed to be given at
the time when the same shall be deposited in the United States Mail or with such
a delivery service or transmitted by confirmed facsimile. Notice to Directors
of special meetings must be given in accordance with Section 3.10 of Article III
hereof.
SECTION 4.02. WAIVERS OF NOTICE. Whenever any notice is required to be
-------------------------------
given under the provisions of the Certificate of Incorporation, these By-Laws or
by statute, a waiver thereof in writing, signed by the person or persons
entitled to such notice, whether before or after the time stated therein, shall
be deemed equivalent to the giving of such notice. Neither the business to be
transacted at, nor the purpose of, any regular or special meeting of the
Shareholders, Directors or members of a committee of Directors need be specified
in any written waiver of notice of such meeting unless so required by the
Certificate of
18
<PAGE>
Incorporation or these By-Laws. Attendance by a person, either in person or by
proxy, at any meeting, shall constitute a waiver of notice of such meeting,
except where a person attends a meeting for the express purpose of objecting to
the transaction of any business because the meeting was not lawfully called or
convened.
ARTICLE V
---------
OFFICERS
--------
SECTION 5.01. NUMBER, QUALIFICATIONS AND DESIGNATION. The officers of the
-----------------------------------------------------
Corporation shall be chosen by the Board of Directors and shall be a President,
Secretary and such other officers as may be elected in accordance with the
provisions of Section 5.03 of this Article. One (1) person may hold more than
one office. Officers may be, but need not be, Directors or Shareholders of the
Corporation.
SECTION 5.02. ELECTION AND TERM OF OFFICE. The officers of the
------------------------------------------
Corporation, except those elected by delegated authority pursuant to Section
5.03 of this Article, shall be elected by the Board of Directors, and each such
officer shall hold his office at the pleasure of the Board of Directors and
until his successor shall have been elected and shall qualify, or until his
earlier death, resignation or removal. Any officer may resign at any time upon
written notice to the Corporation or may be removed, with or without cause, by
the Board of Directors.
SECTION 5.03. OTHER OFFICERS, COMMITTEES AND AGENTS. The Board of
----------------------------------------------------
Directors may from time to time elect such other officers, including without
limitation, a Chairman of the Board
19
<PAGE>
of Directors, a Vice Chairman of the Board of Directors, a Treasurer and one (1)
or more Vice Presidents, Assistant Secretaries and Assistant Treasurers, and
appoint such committees, employees and other agents as it deems necessary, who
shall hold their offices for such terms and shall exercise such powers and
perform such duties as are provided in these By-Laws, or as the Board of
Directors may from time to time determine. The Board of Directors may delegate
to any officer or committee the power to elect subordinate officers and to
retain or appoint employees or other agents, or committees thereof, and to
prescribe the authority and duties of such subordinate officers, committees,
employees or other agents.
SECTION 5.04. CHAIRMAN OF THE BOARD AND VICE CHAIRMAN. The Chairman of
------------------------------------------------------
the Board of Directors, if any, shall preside at all meetings of the Board of
Directors. He may sign, with the Secretary or any other proper officer of the
Corporation, thereunto authorized by the Board of Directors, and deliver on
behalf of the Corporation any deeds, mortgages, bonds, contracts, powers of
attorney and other instruments which the Board of Directors has authorized to be
executed, except in cases where the signing and execution thereof shall be
expressly delegated by the Board of Directors or these By-Laws to some other
officer or agent of the Corporation or shall be required by law to be otherwise
signed or executed, and he shall perform such other duties as may be prescribed
by the Board of Directors from time to time. The Vice Chairman, if any, shall,
at the request of the Chairman or in his absence or disability, perform the
duties and
20
<PAGE>
exercise the powers of the Chairman, and shall perform such other duties as the
Board of Directors shall prescribe.
SECTION 5.05. PRESIDENT. Unless otherwise designated by the Board of
------------------------
Directors, the President shall be the chief executive and chief operating
officer of the Corporation and shall have general charge and active management
of the business, properties and operations of the Corporation and shall see that
all orders and resolutions of the Board of Directors are carried into effect.
He shall preside at all meetings of the Shareholders and, if there is no
Chairman or Vice Chairman of the Board, or in their absence, all meetings of the
Board of Directors. He shall possess the power to execute and acknowledge, in
the name and under the seal of the Corporation, deeds, mortgages, bonds,
contracts, certificates and other instruments authorized by the Board of
Directors, except as may be otherwise provided or required by law, and except as
may be expressly delegated by the Board of Directors or by these By-Laws. He
may employ all agents and employees of the Corporation and may discharge any
such agent or employee, and in general, shall perform all duties incident to the
office of President, and such other duties as from time to time may be assigned
to him by the Board of Directors.
SECTION 5.06. VICE PRESIDENTS. Any Vice President shall, at the request
------------------------------
of the President or in his absence or disability, perform the duties and
exercise the powers of the President and such other duties as may from time to
time be assigned by the Board of Directors or by the President. At the
discretion of the
21
<PAGE>
Board of Directors, one (1) or more Vice Presidents may be designated as an
Executive Vice President or Senior Vice President.
SECTION 5.07. SECRETARY AND ASSISTANT SECRETARIES. Unless otherwise
--------------------------------------------------
directed by the Board of Directors, the Secretary shall attend all meetings of
the Shareholders and of the Board of Directors and shall record the proceedings
of the Shareholders and of the Directors and of committees of the Board in a
book or books to be kept for that purpose; see that notices are given and
records and reports properly kept and filed by the Corporation as required by
law; be the custodian of the seal of the Corporation and see that it is affixed
to all documents to be executed on behalf of the Corporation under its seal;
and, in general, perform all duties incident to the office of Secretary, and
such other duties as may from time to time be assigned to him by the Board of
Directors or the President. Any Assistant Secretary shall, at the request of
the Secretary or in his absence or disability, perform the duties and exercise
the powers of the Secretary and shall perform such other duties as the Board of
Directors or the President shall prescribe.
SECTION 5.08. TREASURER AND ASSISTANT TREASURERS. The Treasurer, if any
-------------------------------------------------
and unless otherwise designated by the Board of Directors, shall be the chief
financial officer of the Corporation. The Treasurer shall have or provide for
the custody of the funds or other property of the Corporation; whenever so
required by the Board of Directors, shall render an account showing his
transactions as Treasurer and the financial condition of the Corporation; and,
in general, shall discharge such other
22
<PAGE>
duties as may from time to time be assigned to him by the Board of Directors or
the President. Any Assistant Treasurer shall, at the request of the Treasurer or
in his absence or disability, perform the duties and exercise the powers of the
Treasurer and shall perform such other duties as the Board of Directors or the
President shall prescribe. If no Treasurer is elected, the President or such
other officer designated by the Board of Directors shall have the authority and
perform the duties of the Treasurer.
SECTION 5.09. OFFICERS' BONDS. No officer of the Corporation need provide
------------------------------
a bond to guarantee the faithful discharge of his duties unless the Board of
Directors shall by resolution so require a bond, in which event such officer
shall give the Corporation a bond (which shall be renewed if and as required) in
such sum and with such surety or sureties as shall be satisfactory to the Board
of Directors for the faithful performance of the duties of his office.
SECTION 5.10. COMPENSATION. The compensation of the officers and agents
---------------------------
of the Corporation elected by the Board of Directors shall be fixed from time to
time by the Board of Directors. Any employment contract, whether for an
officer, agent or employee, if expressly approved or specifically authorized by
the Board of Directors, may fix a term of employment, and any such contract, but
only if so approved or authorized, shall be valid and binding upon the
Corporation in accordance with the terms thereof; provided, however, these
provisions shall not limit or restrict in any way the right of
23
<PAGE>
the Corporation at any time in its discretion (which right is hereby expressly
reserved) to remove from office, discharge or terminate the employment or
otherwise dispense with the services of any such officer, agent or employee, as
provided in these By-Laws, prior to the expiration of the term of employment
under any such contract, provided only that the Corporation shall not thereby be
relieved of any continuing liability for salary or other compensation provided
for in such contract.
SECTION 5.11. ACTION WITH RESPECT TO SECURITIES OF OTHER CORPORATIONS.
----------------------------------------------------------------------
Unless otherwise directed by the Board of Directors, the Chairman of the Board
of Directors, if any, the President or any Vice President of the Corporation
shall have power to vote and otherwise act on behalf of the Corporation, in
person or by proxy, at any meeting of security holders, or with respect to any
action of security holders, of any other corporation in which the Corporation
may hold securities and shall have power to exercise any and all rights and
powers which the Corporation may possess by reason of its ownership of
securities in such other corporation.
ARTICLE VI
----------
CAPITAL STOCK
-------------
SECTION 6.01. ISSUANCE. The Directors may, at any time and from time to
-----------------------
time, if all of the shares of capital stock which the Corporation is authorized
by the Certificate of Incorporation to issue have not been issued, subscribed
for or otherwise committed to be issued, issue or take subscriptions for
additional shares of its capital stock up to the amount
24
<PAGE>
authorized in the Certificate of Incorporation. Unless otherwise provided by the
Certificate of Incorporation or these By-Laws, the Board of Directors may
provide by resolution that some or all of any or all classes and series of the
shares of capital stock of the Corporation shall be uncertificated shares,
provided that such resolution shall not apply to shares represented by a
certificate until such certificate is surrendered to the Corporation. The stock
certificates of the Corporation shall be numbered and registered in the stock
ledger and transfer books of the Corporation as they are issued. The Board of
Directors may also appoint one (1) or more transfer agents and/or registrars for
its stock of any class or classes and for the transfer and registration of
certificates representing the same and may require stock certificates to be
countersigned by one (1) or more of them. They shall be signed by the Chairman
or Vice Chairman of the Board of Directors or the President or a Vice President
and attested by the Secretary or an Assistant Secretary or the Treasurer or an
Assistant Treasurer, and shall bear the corporate seal, which may be a
facsimile, engraved or printed. Any or all the signatures upon such certificate
may be a facsimile, engraved or printed. In case any officer, transfer agent or
registrar who has signed, or whose facsimile signature has been placed upon, any
share certificate shall have ceased to be such officer, transfer agent or
registrar, before the certificate is issued, it may be issued with the same
effect as if he were such officer, transfer agent or registrar at the date of
its issue.
25
<PAGE>
SECTION 6.02. REGULATIONS REGARDING CERTIFICATES. Except as otherwise
-------------------------------------------------
provided by law, the Board of Directors shall have the power and authority to
make all such rules and regulations as it may deem expedient concerning the
issuance, transfer and registration or the replacement of certificates for
shares of capital stock of the Corporation.
SECTION 6.03. STOCK CERTIFICATES. Stock certificates of the Corporation
---------------------------------
shall be in such form as is provided by statute and approved by the Board of
Directors. The stock record books and the blank stock certificate books shall
be kept by the Secretary of the Corporation or by any agency designated by the
Board of Directors for that purpose.
SECTION 6.04. LOST, STOLEN, DESTROYED OR MUTILATED CERTIFICATES. The
----------------------------------------------------------------
President, or at his direction, a Vice President, may direct a new certificate
or certificates to be issued in place of any certificate or certificates
theretofore issued by the Corporation alleged to have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the person claiming
the certificate of stock to be lost, stolen or destroyed. When authorizing such
issue of a new certificate or certificates, the President or such Vice President
may, in his discretion and as a condition precedent to the issuance thereof,
require the owner of such lost, stolen or destroyed certificate or certificates,
or his legal representative, to give the Corporation a bond in such sum as the
President or such Vice President may direct as indemnity against any claim that
may be
26
<PAGE>
made against the Corporation with respect to the certificate alleged to have
been lost, stolen or destroyed.
SECTION 6.05. RECORD HOLDER OF SHARES. The Corporation shall be entitled
--------------------------------------
to recognize the exclusive right of a person registered on its books as the
owner of shares to receive dividends, and to vote as such owner, and to hold
liable for calls and assessments a person registered on its books as the owner
of shares, and shall not be bound to recognize any equitable or other claim to
or interest in such share or shares on the part of any other person, whether or
not it shall have express or other notice thereof, except as otherwise provided
by the laws of Oklahoma. Shares standing in the name of a deceased person may be
voted by his administrator, or executor, either in person or by proxy. Shares
standing in the name of a guardian, conservator or trustee may be voted by such
fiduciary, either in person or by proxy. Shares standing in the name of a
receiver may be voted by such receiver, and shares held by or under the control
of a receiver may be voted by such receiver without the transfer thereof into
his name, if authority to do so be contained in an appropriate order of the
court by which such receiver was appointed.
SECTION 6.06. DETERMINATION OF SHAREHOLDERS OF RECORD FOR VOTING AT
--------------------------------------------------------------------
MEETINGS. In order that the Corporation may determine the Shareholders entitled
- --------
to notice of or to vote at any meeting of Shareholders or any adjournment
thereof, or for the purpose of any other lawful action, the Board of Directors
may fix, in advance, a record date, which shall not be more than sixty (60)
27
<PAGE>
nor less than ten (10) days before the date of such meeting, nor more than sixty
(60) days prior to any other action. If no record date is fixed by the Board of
Directors, the record date for determining Shareholders entitled to notice of or
to vote at a meeting of Shareholders shall be at the close of business on the
day next preceding the day on which notice is given, or if notice is waived, at
the close of business on the day next preceding the day on which the meeting is
held. A determination of Shareholders of record entitled to notice of or to vote
at a meeting of Shareholders shall apply to any adjournment of the meeting;
provided, however, that the Board of Directors may fix a new record date for the
adjourned meeting.
SECTION 6.07. DETERMINATION OF SHAREHOLDERS OF RECORD FOR DIVIDENDS AND
------------------------------------------------------------------------
DISTRIBUTIONS. In order that the Corporation may determine the Shareholders
- -------------
entitled to receive payment of any dividend or other distribution or allotment
of any rights or the Shareholders entitled to exercise any rights in respect of
any change, conversion or exchange of stock, the Board of Directors may fix a
record date, which record date shall not precede the date upon which the
resolution fixing the record date is adopted, and which record date shall not be
more than sixty (60) days prior to such action. If no record date is fixed, the
record date for determining Shareholders for any such purpose shall be at the
close of business on the day on which the Board of Directors adopts the
resolution relating thereto.
SECTION 6.08. DETERMINATION OF SHAREHOLDERS OF RECORD FOR WRITTEN CONSENT.
--------------------------------------------------------------------------
In order that the Corporation may determine the
28
<PAGE>
Shareholders entitled to consent to corporate action in writing without a
meeting, the Board of Directors may fix a record date, which record date shall
not precede the date upon which the resolution fixing the record date is adopted
by the Board of Directors, and which date shall not be more than ten (10) days
after the date upon which the resolution fixing the record date is adopted by
the Board of Directors. If no record date has been fixed by the Board of
Directors, the record date for determining Shareholders entitled to consent to
corporate action in writing without a meeting, when no prior action by the Board
of Directors is required by statute, shall be the first date on which a signed
written consent setting forth the action taken or proposed to be taken is
delivered to the Corporation by delivery to its registered office in Oklahoma,
its principal place of business or an officer or agent of the Corporation having
custody of the book in which proceedings of meetings of Shareholders are
recorded. Delivery made to a Corporation's registered office shall be by hand or
by certified or registered mail, return receipt requested. If no record date has
been fixed by the Board of Directors, when prior action by the Board of
Directors is required by statute, the record date for determining Shareholders
entitled to consent to Corporation action in writing without a meeting shall be
at the close of business on the day on which the Board of Directors adopts the
resolution taking such prior action.
29
<PAGE>
ARTICLE VII
-----------
INDEMNIFICATION OF DIRECTORS,
-----------------------------
OFFICERS AND OTHER AUTHORIZED REPRESENTATIVES
---------------------------------------------
SECTION 7.01. INDEMNIFICATION OF AUTHORIZED REPRESENTATIVES IN THIRD PARTY
--------------------------------------------------------------------------
PROCEEDINGS. The Corporation shall indemnify any person who was or is an
- -----------
"authorized representative" of the Corporation (which shall mean for purposes of
this Article VII a Director, officer, employee or agent of the Corporation, or a
person serving at the request of the Corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise) and who was or is a "party" (which shall include for purposes
of this Article VII the giving of testimony or similar involvement) or is
threatened to be made a party to any "third party proceeding" (which shall mean
for the purposes of this Article VII any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative, other than an action by or in the right of the Corporation) by
reason of the fact that such person was or is an authorized representative of
the Corporation, against expenses (which shall include for purposes of this
Article VII attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by such person in connection with such third
party proceeding if such person acted in good faith and in a manner such person
reasonably believed to be in, or not opposed to, the best interests of the
Corporation, and, with respect to any criminal third party proceeding, had no
reasonable cause to believe such conduct was unlawful. The termination of any
third party proceeding by judgment, order,
30
<PAGE>
settlement, indictment, conviction or upon a plea of nolo contendere or its
equivalent, shall not of itself create a presumption that the authorized
representative did not act in good faith and in a manner which such person
reasonably believed to be in or not opposed to, the best interests of the
Corporation, or, with respect to any criminal third party proceeding, did not
have reasonable cause to believe that such conduct was unlawful.
SECTION 7.02. INDEMNIFICATION OF AUTHORIZED REPRESENTATIVES IN CORPORATE
-------------------------------------------------------------------------
PROCEEDINGS. The Corporation shall indemnify any person who was or is an
- -----------
authorized representative of the Corporation and who was or is a party or is
threatened to be made a party to any "corporate proceeding" (which shall mean
for purposes of this Article VII any threatened, pending or completed action or
suit by or in the right of the Corporation to procure a judgment in its favor or
investigative proceeding by the Corporation) by reason of the fact that such
person was or is an authorized representative of the Corporation, against
expenses (including attorneys' fees) actually and reasonably incurred by such
person in connection with the defense or settlement of such corporate proceeding
if such person acted in good faith and in a manner reasonably believed to be in,
or not opposed to, the best interests of the Corporation, except that no
indemnification shall be made in respect of any claim, issue or matter as to
which such person shall have been adjudged to be liable to the Corporation
unless and only to the extent that a district court or the court in which such
corporate proceeding was pending shall
31
<PAGE>
determine upon application that, despite the adjudication of liability but in
view of all the circumstances of the case, such authorized representative is
fairly and reasonably entitled to indemnity for such expenses which the district
court or such other court shall deem proper.
SECTION 7.03. MANDATORY INDEMNIFICATION OF AUTHORIZED REPRESENTATIVES. To
----------------------------------------------------------------------
the extent that an authorized representative of the Corporation has been
successful on the merits or otherwise in defense of any third party or corporate
proceeding referred to in Sections 7.01 or 7.02 above or in defense of any
claim, issue or matter therein, such person shall be indemnified against
expenses, including attorneys' fees, actually and reasonably incurred by such
person in connection therewith.
SECTION 7.04 DETERMINATION OF ENTITLEMENT TO INDEMNIFICATION. Any
-------------------------------------------------------------
indemnification under Sections 7.01, 7.02 or 7.03 of this Article VII (unless
ordered by a court) shall be made by the Corporation only as authorized in the
specific case upon a determination that indemnification of the authorized
representative is proper in the circumstances because such person has met the
applicable standard of conduct set forth in Sections 7.01, 7.02 or 7.03 of this
Article VII. Such determination shall be made:
A. By the Board of Directors by a majority of a quorum consisting of
Directors who were not parties to such action, suit or proceeding; or
B. If such a quorum is not obtainable, or, even if obtainable, a quorum
of disinterested Directors so
32
<PAGE>
directs, by independent legal counsel in a written opinion; or
C. By the Shareholders.
SECTION 7.05. BURDEN OF PROOF. In the event a claim for indemnification
------------------------------
by an authorized representative is denied by the Corporation (except for a claim
by a person described in Section 7.08 hereof), the Corporation shall, in any
subsequent legal proceedings relating to such denial, have the burden of proving
that indemnification was not required under Sections 7.01, 7.02 or 7.03 of these
By-Laws without regard to Section 7.04 hereof or under any other agreement or
undertaking between the Corporation and the authorized representative or was not
permitted under applicable law.
SECTION 7.06. ADVANCING EXPENSES. Expenses incurred by an officer or
---------------------------------
Director in defending a third party or corporate proceeding shall be paid by the
Corporation in advance of the final disposition of such third party or corporate
proceeding upon receipt of an undertaking by or on behalf of such officer or
Director to repay such amount if it shall ultimately be determined that such
person is not entitled to be indemnified by the Corporation as authorized in
this Article VII. Such expenses incurred by other employees and agents may be
so paid upon such terms and conditions, if any, as the Board of Directors deems
appropriate.
SECTION 7.07. EMPLOYEE BENEFIT PLANS. For purposes of this Article VII,
-------------------------------------
the Corporation shall be deemed to have requested an authorized representative
to serve an employee benefit plan where
33
<PAGE>
the performance by such person of duties to the Corporation also imposes duties
on, or otherwise involves services by, such person to the plan or participants
or beneficiaries of the plan; excise taxes assessed on an authorized
representative with respect to an employee benefit plan pursuant to applicable
law shall be included within the meaning of "fines;" and action taken or omitted
by such person with respect to an employee benefit plan in the performance of
duties for a purpose reasonably believed to be in the interest of the
participants and beneficiaries of the plan shall be deemed to be for a purpose
which is not opposed to the best interests of the Corporation.
SECTION 7.08. PERSONS OTHER THAN AUTHORIZED REPRESENTATIVES. The
------------------------------------------------------------
Corporation may, but is not required to, indemnify any person who is not also an
authorized representative if the determining group as specified in Section 7.04
A, B or C determines that such indemnification is proper in the specific case.
SECTION 7.09. SCOPE OF ARTICLE. The indemnification of and advancement of
-------------------------------
expenses to any authorized representatives, as authorized by this Article VII,
shall not be deemed exclusive of any other rights to which those seeking
indemnification or advancement of expenses may be entitled under any by-law,
agreement, vote of Shareholders or disinterested Directors or otherwise, both as
to action in an official capacity and as to action in another capacity while
holding such office.
SECTION 7.10. RELIANCE ON PROVISIONS. Each person who shall act as an
------------------------------------
authorized representative of the Corporation shall be
34
<PAGE>
deemed to be doing so in reliance upon rights of indemnification provided by
this Article VII, and the provisions of this Article VII shall be deemed a
contract between the Corporation and the authorized representative.
SECTION 7.11. INSURANCE. The Corporation shall have the power to, but
------------------------
shall not be obligated to, purchase and maintain insurance on behalf of any
person who is or was an authorized representative of the Corporation, or is or
was serving at the request of the Corporation as an authorized representative or
agent of another corporation, partnership, joint venture, trust or other
enterprise against any liability asserted against such person and incurred by
such person in any capacity, or arising out of such person's status as such,
whether or not the Corporation would have the power to indemnify such person
against such liability under the provisions of this Article VII.
SECTION 7.12. RIGHTS CONTINUE. The indemnification and advancement of
------------------------------
expenses provided by or granted pursuant to this Article VII, unless otherwise
provided when authorized or ratified, shall continue as to a person who has
ceased to be an authorized representative and shall inure to the benefit of the
heirs, executors and administrators of such a person.
SECTION 7.13. REFERENCES TO CORPORATION. For purposes of this Article
----------------------------------------
VII, references to "the Corporation" shall be deemed to include all constituent
corporations absorbed in a consolidation or merger, as well as the resulting or
surviving corporation so that any person who is or was a director, officer,
employee or agent of such a constituent corporation or is or was
35
<PAGE>
serving at the request of such constituent corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
enterprise shall stand in the same position under the provisions of this Article
VII with respect to the resulting or surviving corporation in the same capacity.
ARTICLE VIII
------------
GENERAL PROVISIONS
------------------
SECTION 8.01. DIVIDENDS. Subject to the provisions of the Certificate of
------------------------
Incorporation, if any, dividends upon the capital stock of the Corporation may
be declared by the Board of Directors at any regular or special meeting, in
accordance with law. Dividends may be paid in cash, in property or in shares of
the capital stock of the Corporation, subject to the provisions of the
Certificate of Incorporation. Before payment of any dividend, there may be set
aside out of any funds of the Corporation available for dividends such sum or
sums as the Board of Directors from time to time, in its absolute discretion,
thinks proper as a reserve or reserves to meet contingencies, or for repairing
or maintaining any property of the Corporation, or for such other purpose as the
Board of Directors shall think conducive to the interest of the Corporation, and
the Board of Directors may modify or abolish any such reserve in the manner in
which it was created.
SECTION 8.02. ANNUAL STATEMENTS. The Board of Directors shall present at
--------------------------------
each annual meeting, and at any special meeting of the Shareholders when called
for by vote of the Shareholders,
36
<PAGE>
a full and clear statement of the business and condition of the Corporation.
SECTION 8.03. CONTRACTS. The Chairman of the Board of Directors, the
------------------------
President or a Vice President of the Corporation shall sign, in the name and on
behalf of the Corporation, all deeds, bonds, contracts, mortgages and other
instruments, the execution of which shall be authorized by the Board of
Directors; provided, however, that the Board of Directors may authorize any
other officer or officers or any agent or agents to sign in the name and on
behalf of the Corporation, any such deed, bond, contract, mortgage or other
instrument. Such authority may be general or confined to specific instances.
SECTION 8.04. CHECKS. All checks, notes, bills of exchange or other
---------------------
orders in writing shall be signed by such person or persons as the Board of
Directors may from time to time designate.
SECTION 8.05. CORPORATE SEAL. The corporate seal shall have inscribed
-----------------------------
thereon the name of the Corporation and the state of its incorporation. The
seal may be used by causing it or a facsimile thereof to be impressed or affixed
or otherwise reproduced.
SECTION 8.06. AMENDMENT OF BY-LAWS. These By-Laws may be altered, amended
-----------------------------------
or repealed or new By-Laws may be adopted by the Shareholders or by the Board of
Directors at any regular or special meeting of the Shareholders or of the Board
of Directors, if notice of such alteration, amendment, repeal or adoption of new
By-Laws be contained in the notice of such special meeting.
37
<PAGE>
The undersigned, being all of the Directors, do hereby certify that the
foregoing Amended and Restated By-Laws are as approved and adopted by the Board
of Directors on the 15th day of December, 1997.
/s/ CRAIG KETCHUM /s/ BETTY KETCHUM
_____________________________ __________________________
Craig Ketchum Betty Ketchum
/s/ WAYNE WINDHAM /s/ DEE PAIGE
_____________________________ __________________________
Wayne Windham Dee Paige
/s/ DAVID L. NOSS
__________________________
David L. Noss
38
<PAGE>
EXHIBIT 4.1
INCORPORATED UNDER THE LAWS CLASS A COMMON STOCK
OF THE STATE OF OKLAHOMA PAR VALUE $.01
SHARES
THIS CERTIFICATE IS TRANSFERABLE
IN NEW YORK, NEW YORK CUSIP ____________________
SEE REVERSE FOR
CERTAIN DEFINITIONS
RED MAN PIPE & SUPPLY CO.
THIS CERTIFIES THAT
IS THE OWNER OF
FULLY PAID AND NON-ASSESSABLE SHARES OF THE CLASS A COMMON STOCK OF
RED MAN PIPE & SUPPLY CO., transferable on the books of the Corporation by the
holder hereof in person or by duly authorized attorney upon surrender of this
certificate properly endorsed. This certificate and the shares represented
thereby are issued and shall be held subject to all the provisions of the
Certificate of Incorporation of the Corporation, as amended, or as may be
amended (a copy of which is on file with the Transfer Agent), to all of which
the holder by acceptance hereof agrees and assents. This certificate is not
valid until countersigned by the Transfer Agent and the Registrar.
In Witness Whereof, the said Corporation has caused the facsimile
signatures of its duly authorized officers to be hereunto affixed.
CERTIFICATE OF STOCK
DATED:
COUNTERSIGNED AND REGISTERED:
President and Chief Executive Officer Transfer Agent and Registrar
By:
------------------------------
Treasurer Authorized Signature
<PAGE>
RED MAN PIPE & SUPPLY CO.
THE CORPORATION WILL FURNISH, UPON REQUEST AND WITHOUT CHARGE, A FULL
STATEMENT OF THE POWERS, DESIGNATIONS, PREFERENCES, LIMITATIONS, AND RELATIVE
RIGHTS OF THE SHARES OF EACH CLASS OF STOCK OF THE CORPORATION AUTHORIZED TO BE
ISSUED. SUCH REQUEST MAY BE MADE TO THE CORPORATION AT ITS PRINCIPAL PLACE OF
BUSINESS OR TO THE TRANSFER AGENT.
The following abbreviations, when used in the inscription on the face of
this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
<TABLE>
<S> <C> <C>
TEN COM -as tenants in common UNIF GIFT MIN ACT -_________________Custodian___________________
(Cust) (Minor)
TEN ENT -as tenants by the entities UNIF TRANS MIN ACT-_________________Custodian___________________
(Cust) (Minor)
JT TEN -as joint tenants with right of Under Uniform Gifts to Minors
survivorship and not as Act__________________________
tenants in common (State)
</TABLE>
Additional abbreviations may also be used though not on the above list.
For value received, __________________________________________ hereby sell,
assign and transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
[ ]
----------------------------------------------------------------
- -------------------------------------------------------------------------------.
Please print or typewrite name and address including postal zip code of assignee
, Assignee
- ------------------------------------------------------------- --------
shares of the capital stock represented by the within certificate and do hereby
irrevocably constitute and appoint
------------------------
Attorney to transfer the said stock on the books of the within-named Corporation
with full power of substitution in the premises.
Dated X
-------------------------------- --------------------------------------
X
--------------------------------------
Please sign here exactly as name(s) is
(are) shown on the face of this
certificate without any change or
alteration whatever.
SIGNATURE(S) GUARANTEED:
IMPORTANT NOTICE: When you sign your name to this Assignment Form without
filling in the name of your "Assignee" or "Attorneys," this stock certificate
becomes fully negotiable, similar to a check endorsed in blank. Therefore, to
safeguard a signed certificate, it is recommended that you either (i) fill in
the name of the new owner in the "Assignee" blank or (ii) if you are sending the
certificate to your bank or broker, fill in the name of the bank or broker in
the "Attorney" blank. Alternatively, instead of using this Assignment Form, you
may sign a separate "stock power" form (available from New York Stock Exchange,
commercial bank or trust company) and then mail the unsigned stock certificate
and the signed "stock power" in separate envelopes. For added protection, use
certified or registered mail for a stock certificate. If you have any questions
on the transfer procedure, please call the Registrar and Transfer Agent listed
on the face of this certificate.
<PAGE>
EXHIBIT 10.1
RED MAN PIPE & SUPPLY CO.
INCENTIVE STOCK PLAN 1997
SECTION 1
---------
PREAMBLE
--------
Red Man Pipe & Supply Co., an Oklahoma corporation (the "Company"), hereby
establishes the Red Man Pipe & Supply Co. Incentive Stock Plan 1997 (the "Plan")
as a means whereby the Company may, through awards of stock options and
restricted stock:
A. Provide Officers, Directors and key employees who have substantial
responsibilities for the direction and management of the Company and
its Subsidiaries with additional incentive to promote the success of
the business of the Company and its Subsidiaries;
B. Enable such employees to acquire equity interests in the Company; and
C. Enable the Company to attract and retain the services of key
employees upon whose judgment and effort the successful conduct of
its operations is largely dependent.
Except as specifically provided herein, the provisions of the Plan do not
apply to or affect any option or stock appreciation right hereafter granted
under any other plan of the Company or any Subsidiary, and all such options,
stock appreciation rights or stock issued thereunder continue to be governed by
and subject to the applicable provisions of the plan or agreement under which
they were granted.
SECTION 2
---------
DEFINITIONS
-----------
2.01 "Administrator" shall mean the Board of Directors or the Compensation
Committee as defined in Paragraph 2.08 of this Section 2.
2.02 "Award" shall mean a grant of an Option or the award of Restricted
Stock under the Plan.
2.03 "Award Agreement" shall mean an agreement between the Company and a
Participant which evidences the grant of an Option and/or the award of
Restricted Stock to a Participant and sets forth the terms and conditions of
such Option and/or Restricted Stock.
2.04 "Board" or "Board of Directors" means the Board of Directors of the
Company.
2.05 "Code" means the Internal Revenue Code of 1986, as it exists now and
as it may be amended from time to time.
2.06 "Common Stock" means the Class A Common Stock of the Company, one
cent ($0.01) par value per share.
2.07 "Company" means Red Man Pipe & Supply Co., an Oklahoma corporation,
and any successor thereto.
2.08 "Compensation Committee" means the committee appointed by the Board
of Directors to administer the Plan; provided, however, unless a majority of the
members of the Board determines otherwise: (i) the Committee shall be
constituted in a manner that satisfies the requirements of Rule 16b-3 under the
Exchange Act, which Committee shall administer the Plan with respect to eligible
Participants who are subject to Section 16(b) of the Exchange Act; and (ii) the
Committee shall be constituted in a manner that satisfies the
1
<PAGE>
requirements of Section 162(m) of the Code, which Committee shall administer the
Plan with respect to "covered employees" as defined in Section 162(m) of the
Code.
2.09 "Director(s)" means a member or members of the Board.
2.10 "Disability" means being unable to engage in any substantial gainful
activity by reason of any medically determinable physical or mental impairment
which can be expected to result in death or which has lasted or can be expected
to last for a continuous period of not less than twelve (12) months.
2.11 "Exchange Act" means the Securities Exchange of 1934, as it exists
now or from time to time may hereafter be amended.
2.12 "Fair Market Value" means for the relevant day:
A. If shares of Common Stock are listed or admitted to unlisted trading
privileges on any national or regional securities exchange, the last
reported sale price on the composite tape of that exchange on the day
Fair Market Value is determined.
B. If trading of the Common Stock is not reported on a stock exchange,
Fair Market Value will be determined by the Board in its discretion,
based upon the best available data.
2.13 "Incentive Stock Option" or "ISO" means an Option that complies with
the terms and conditions set forth in Section 422 of the Code and is designated
as an ISO at the time of its grant.
2.14 "Officer" means a corporate officer of the Company or any Subsidiary
or affiliate of the Company.
2.15 "Option" means the right of a Participant to purchase a specified
number of shares of Common Stock, subject to the terms and conditions of the
Plan.
2.16 "Option Date" means the date upon which an Option is granted, or
Restricted Stock is awarded, to a Participant under the Plan.
2.17 "Option Price" means the price per share at which an Option may be
exercised.
2.18 "Participant" means an individual to whom an Option or Restricted
Stock has been granted under the Plan.
2.19 "Plan" means the Red Man Pipe & Supply Co. Incentive Stock Plan 1997
herein and as from time to time amended.
2.20 "Restricted Stock" means Common Stock awarded to a Participant
pursuant to the Plan and subject to the restrictions contained or authorized in
Section 7 hereof.
2.21 "Securities Act" means the Securities Act of 1933, as it exists now
or from time to time may be hereafter be amended.
2.22 "Subsidiary" means any corporation or other entity of which the
majority voting power or equity interest is owned directly or indirectly by the
Company.
2.23 "Termination of Employment" means:
A. With respect to an employee, when the employee's employment
relationship with the Company and all of its Subsidiaries is
terminated, regardless of any severance arrangements. A transfer
2
<PAGE>
from the Company to a Subsidiary or affiliate of the Company or
Subsidiary, or vice versa, is not a termination of employment for
purposes of the Plan;
B. With respect to an Officer or Director, when such individual is no
longer serving as an Officer or Director of the Company or any of its
Subsidiaries.
2.24 "Rules of Construction"
A. Governing Law: The construction and operation of the Plan are
governed by the laws of the State of Oklahoma.
B. Undefined Terms: Unless the context requires another meaning, any
term not specifically defined in the Plan has the meaning given to it
by the Code.
C. Headings: All headings in the Plan are for reference only and are not
to be utilized in construing the Plan.
D. Gender: Unless clearly appropriate, all nouns of either gender refer
indifferently to persons of either gender and the neuter.
E. Singular and Plural: Singular terms refer also to the plural and vice
versa.
F. Severability: If any provision of the Plan is determined to be
illegal or invalid for any reason, the remaining provisions shall
continue in full force and effect and shall be construed and enforced
as if the illegal or invalid provision did not exist, unless the
continuance of the Plan in such circumstances is not consistent with
its purposes.
SECTION 3
---------
STOCK SUBJECT TO THE PLAN
-------------------------
Five Thousand (5,000) shares of the Company's Class A Common Stock have
been reserved for issuance under this Plan. Options may be:
A. Incentive Stock Options;
B. Other forms of statutory stock options; or
C. Non-statutory (non-qualified) options.
SECTION 4
---------
ADMINISTRATION
--------------
The Plan shall be administered by the Board of Directors, or it may
delegate all or part of the duties under the Plan to the Compensation Committee,
subject to such conditions and limitations as the Board may establish. In
addition to any other powers set forth in this Plan, the Administrator has the
exclusive authority:
A. To construe and interpret the Plan, and to remedy any ambiguities or
inconsistencies therein;
B. To establish, amend and rescind appropriate rules and regulations
relating to the Plan;
C. Subject to the express provisions of the Plan, to determine the
individuals who will receive Awards of Options and/or Restricted
Stock, the times when they will receive them, the number of shares to
be subject to each Award and the Option Price, payment terms, payment
method and expiration date applicable to each Award;
3
<PAGE>
D. To contest on behalf of the Company or Participants, at the expense
of the Company, any ruling or decision on any matter relating to the
Plan or to any Awards of Options and/or Restricted Stock;
E. Generally, to administer the Plan, and to take all such steps and
make all such determinations in connection with the Plan and the
Awards of Options and/or Restricted Stock as it may deem necessary or
advisable;
F. To determine the form in which tax withholding under the Plan will be
made; and
G. To amend the Plan or any Option or Restricted Stock granted or
awarded hereunder as may be necessary in order for any business
combination involving the Company to qualify for pooling-of-interest
treatment under APB No. 16.
SECTION 5
---------
ELIGIBLE PARTICIPANTS
---------------------
Subject to the provisions of the Plan, the persons who shall be eligible to
participate in the Plan and be granted Awards shall be those persons who are
Officers, Directors and key employees of the Company or any Subsidiary who shall
be in a position, in the opinion of the Administrator, to make contributions to
the growth, management, protection and success of the Company and its
Subsidiaries. In making any such selection and in determining the form of
Award, the Administrator may give consideration to the functions and
responsibilities of the person, to the person's contributions to the Company and
its Subsidiaries, the value of the individual's service to the Company and its
Subsidiaries and such other factors deemed relevant by the Administrator.
SECTION 6
---------
TERMS AND CONDITIONS OF OPTIONS
-------------------------------
The Administrator may, in its discretion, grant Options to any Participant
under the Plan. Each Option shall be evidenced by a written agreement between
the Company and the Participant. Unless the Administrator at the time of grant
specifically designates Options granted under the Plan as Incentive Stock
Options, all Options granted under the Plan shall be non-statutory options.
Each Option agreement, in such form as is approved by the Administrator, shall
be subject to the following express terms and conditions and to such other terms
and conditions, not inconsistent with the Plan as the Administrator may deem
appropriate:
A. Option Period: Each Option granted under the Plan shall be for such
period as is established by the Board, except that each ISO shall
expire no later than ten (10) years after the Option Date. Where
Options are exercisable in installments, the right to purchase any
shares shall be cumulative, so that when the right to purchase any
shares has matured, such shares may be purchased thereafter until the
expiration of the Option. The Board shall have the power to
accelerate the exercisability of installments for any Option granted
under the Plan.
B. Option Price: At the time when the Option is granted, the
Administrator will fix the Option Price; provided, however, that the
Option price shall be no less than the Fair Market Value on the
Option Date.
4
<PAGE>
C. Incentive Stock Options: ISO's may only be granted to employees of
the Company or of a Subsidiary. No more than five thousand (5,000)
shares of the Company's Class A Common Stock may be issued upon the
exercise of ISO's granted under this Plan and no ISO may be granted
under the Plan after the tenth (10th) anniversary of the date the
Plan is approved by the shareholders of the Company. The aggregate
Fair Market Value (determined as of the Option Date of the ISO) of
the Common Stock with respect to which ISO's are first exercisable by
a Company or Subsidiary employee during any calendar year under all
Option Plans of the Company shall not exceed One Hundred Thousand
Dollars ($100,000). An ISO granted to an employee who, at the time
the ISO is granted, owns Common Stock possessing more than ten
percent (10%) of the total combined voting power of all classes of
capital stock of the Company or a Subsidiary thereof, shall have an
exercise price equal to not less than one hundred ten percent (110%)
of the Fair Market Value on the Option Date. Notwithstanding any
other provision of this Plan, an ISO shall not be transferable or
assignable otherwise than by will or the laws of descent and
distribution. Any Participant who disposes of shares acquired upon
the exercise of an ISO either (i) within two (2) years after the
Option Date of the Option under which the shares were acquired, or
(ii) within one (1) year after the acquisition of such shares shall
notify the Company of such disposition and of the amount realized.
Failure by a Participant to so notify the Company of such a
disposition of shares shall entitle the Company to treat the shares
of Common Stock issued to such Participant as void ab initio or to
recover from the Participant the greater of the value of the shares
disposed of as of the date of disposition or the value of the shares
disposed of as of the date the Company learns of such disposition
from either (i) any amounts due to such Participant from the Company
or a Subsidiary, or (ii) otherwise. The Company may, at its
discretion, place a legend noting the possible consequences of a
Participant's failure to provide such disposition notice on shares of
Common Stock delivered upon the exercise of an ISO.
E. No person shall have any rights of a shareholder with respect to any
shares to be delivered upon the exercise of an Option until such time
as such Option is validly exercised.
SECTION 7
---------
TERMS AND CONDITIONS OF RESTRICTED STOCK AWARDS
-----------------------------------------------
The Administrator may grant Restricted Stock to any Participant under the
Plan, the purchase price of which shall be established by the Administrator,
which purchase price may be financed by the Company on terms established by the
Administrator. Each grant of Restricted Stock shall be evidenced by an Award
Agreement between the Company and the Participant. All shares of Common Stock
awarded to Participants under the Plan as Restricted Stock shall be subject to
the following express terms and conditions and to such other terms and
conditions, not inconsistent with the Plan, as the Board shall deem appropriate:
A. Restrictions on Transfer: Shares of Restricted Stock awarded to
Participants shall contain such restrictions on transfer as the Board
may determine in its sole discretion. Except as may be
5
<PAGE>
permitted under Section 11 of the Plan, shares of Restricted Stock
awarded to Participants may not be sold or transferred before such
restrictions on transfer lapse, and may only be pledged to the
Company or any Subsidiary to satisfy any obligations that the
Participant may have to the Company or the Subsidiary with respect to
the acquisition of such shares of Restricted Stock. Subject to the
provisions of subparagraphs B and C below and any other restrictions
imposed by law, the certificates for any shares of Restricted Stock,
the restrictions on which have lapsed, will be transferred to the
Participant, or in the event of his death, to the beneficiary or
beneficiaries designated by writing filed by the Participant with the
Board for such purpose or, if none, to his estate. Delivery of shares
in accordance with the preceding sentence shall be made within the
thirty (30) day period after such restrictions shall lapse.
B. Certificates Deposited with Company: Each certificate issued in
respect of shares of Restricted Stock awarded under the Plan shall be
registered in the name of the Participant and deposited with the
Company. Each such certificate shall bear the following (or a
similar) legend:
"The transferability of this certificate and the shares of stock
represented hereby are subject to the terms and conditions
(including forfeiture) relating to Restricted Stock contained in
the Red Man Pipe & Supply Co. Incentive Stock Plan 1997 and an
agreement entered into between the registered owner and Red Man
Pipe & Supply Co. Copies of such Plan and Agreement are on file
at the principal office of Red Man Pipe & Supply Co."
C. Shareholder Rights: Subject to the foregoing restrictions, each
Participant shall have all the rights of a shareholder with respect
to his shares of Restricted Stock, including, but not limited to, the
right to vote such shares.
D. Dividends: On each Common Stock dividend payment date, each
Participant shall receive an amount equal to the dividend paid on
that date on a share of Common Stock, multiplied by his number of
shares of Restricted Stock.
SECTION 8
---------
MANNER OF EXERCISE OF OPTIONS;
------------------------------
DEFERRAL OF RECEIPT OF SHARES
-----------------------------
To exercise an Option in whole or in part, a Participant (or, after his
death, his executor or administrator) or his assignee (as contemplated in
Section 11 hereof) must give written notice to the Administrator, or the person
designated by the Administrator, stating the number of shares with respect to
which he intends to exercise the Option. The Company will issue the shares with
respect to which the Option is exercised upon payment in full of the Option
Price. The Option Price may be paid:
A. In cash;
B. In shares of Common Stock held by the Participant, his executor,
administrator or assignee, and having an aggregate Fair Market Value,
as determined as of the close of business on the day on which such
Option is exercised, equal to the Option Price;
6
<PAGE>
C. If permitted by the Administrator, a promissory note in the amount of
the Option Price, which note shall provide for full personal liability
of the maker and shall contain such other terms and provisions as the
Administrator may determine, including without limitation the right to
repay the note partially or wholly with Common Stock;
D. If authorized by the Administrator in the Award Agreement for the
Option being exercised, by delivery of irrevocable instructions to a
broker to promptly deliver to the Company the amount of sale or loan
proceeds necessary to pay for all Common Stock acquired through such
exercise and any tax withholding obligations resulting from such
exercise;
E. If authorized by the Administrator in the Award Agreement for the
Option being exercised, by the withholding by the Company, pursuant to
a written election delivered by the Participant, his executor,
administrator or assignee, to the Administrator on or prior to the
date of exercise, from the shares of Common Stock issuable upon any
exercise of the Option that number of shares having a Fair Market
Value as of the close of business on the day on which such Option is
exercised equal to such Option Price;
F. As authorized by the Administrator in the Award Agreement for the
Option being exercised, by a combination of such methods.
SECTION 9
---------
VESTING
-------
A Participant may not exercise an Option until it has become vested. The
portion of an Option Award that is vested depends upon the vesting restrictions,
if any, established by the Administrator for such Option at the time of its
grant and the period that has elapsed since the Option Date.
SECTION 10
----------
ADJUSTMENTS TO REFLECT CHANGES IN CAPITAL STRUCTURE
---------------------------------------------------
If there is any change in the corporate structure or shares of the Company,
adjustments will be made as necessary to prevent accretion, or to protect
against dilution, in the number and kind of shares authorized by the Plan and,
with respect to outstanding Options and/or Restricted Stock, in the number and
kind of shares covered thereby and in the applicable Option Price. For the
purpose of this Section 10, a change in the corporate structure or shares of the
Company includes, without limitation, any change resulting from a
recapitalization, stock split, stock dividend, consolidation, rights offering,
spin-off, reorganization or liquidation and any transaction in which shares of
Common Stock are changed into or exchanged for a different number or kind of
shares of stock or other securities of the Company or another corporation.
SECTION 11
----------
NON-TRANSFERABILITY OF OPTIONS AND RESTRICTED
---------------------------------------------
STOCK; LIMITED EXCEPTION TO TRANSFER RESTRICTIONS
-------------------------------------------------
A. Unless otherwise expressly provided in this Section 11, by applicable law
or by any Award Agreement, as the same may be amended, evidencing the grant
or award of Restricted Stock or Options, Awards are non-transferable and
shall not be subject in any manner to sale, transfer, anticipation,
alienation, assignment, pledge, encumbrance or charge. Awards shall be
exercised only by the person to whom such Awards were
7
<PAGE>
granted or awarded (a "Recipient") and amounts payable or shares issuable
pursuant to Awards shall be delivered only to or for the account of a
Recipient.
B. Except as precluded by any applicable law, the Administrator may permit
Awards to be transferred to and exercised by and paid to certain persons or
entities related to the Recipient, including but not limited to members of
the Recipient's immediate family (parents, grandparents, children,
grandchildren, spouse, siblings), charitable institutions or trusts or
other entities whose beneficiaries or beneficial owners are members of the
Recipient's immediate family and/or charitable institutions, or to such
other persons or entities as may be approved by the Administrator, pursuant
to such conditions and procedures as the Administrator may establish. Any
permitted transfer shall be subject to the condition that the Administrator
receive evidence satisfactory to it that the transfer is being made for
estate and/or tax planning purposes on a gratuitous or donative basis and
without consideration other than nominal consideration.
C. The exercise and transfer restrictions in this Section 11 shall not apply
to:
(1) Transfers to the Company;
(2) The designation of a beneficiary to receive benefits in the event of
the Recipient's death or, if the Recipient has died, transfers to or
exercise by the Recipient's beneficiary, or, in the absence of a
validly designated beneficiary, transfers by will or the laws of
descent and distribution;
(3) Transfers pursuant to a domestic relations order;
(4) If the Recipient has suffered a disability, permitted transfers or
exercises on behalf of the Recipient by his or her legal
representative; or
(5) The authorization by the Administrator of "cashless exercise"
procedures with third parties who provide financing for the purpose of
(or who otherwise facilitate) the exercise of Awards consistent with
applicable laws and the express authorization of the Administrator.
D. In the event of a transfer of an Award pursuant to Subsection B or C of
this Section 11, the Recipient will remain liable for any taxes (including
withholding and social security taxes) due upon or as a consequence of the
exercise of or lapse of any restrictions in respect of an Award and neither
the Company nor the Administrator shall have any obligation to provide
notice to a transferee of any event or information that has, will or could
in any way affect an Award or its exercise.
SECTION 12
----------
RIGHTS AS SHAREHOLDER
---------------------
No person shall have any rights of a shareholder as to shares of Common
Stock subject to an Award under the Plan until, after proper exercise of the
Award or other action required, such shares shall have been recorded on the
Company's official shareholder records as having been issued or transferred.
Upon exercise of the Award or any portion thereof, the Company will have thirty
(30) days in which to issue the shares, and the Participant will not be treated
as a shareholder for any purpose whatsoever prior to such issuance. No
adjustment shall be made for cash dividends or other rights for which the
8
<PAGE>
record date is prior to the date such shares are recorded as issued or
transferred in the Company's official shareholder records, except as provided
herein or in an Agreement.
SECTION 13
----------
WITHHOLDING TAX
---------------
Upon the exercise of an Option, or the lapse of restrictions on Restricted
Stock, requiring tax withholding, the Participant will be required to pay to the
Company for remittance to the appropriate taxing authorities an amount necessary
to satisfy the employee's portion of federal, state and local taxes, if any,
incurred by reason of the exercise of an Option or the lapse of such
restrictions. A Participant may elect to have any tax withholding obligation
incurred upon the exercise of or lapse of restrictions in respect of an Award
satisfied by payment of cash by the Participant, by the withholding of cash
otherwise due the Participant, or, except in the case of ISO's, by the
withholding of shares of Common Stock issuable upon such occurrence and having
an aggregate Fair Market Value on the day prior to the day of exercise or lapse
sufficient to satisfy the applicable tax withholding requirement; provided,
however, that if the Participant elects to have shares of Common Stock withheld
from the shares deliverable upon such exercise or lapse, a Participant's
election must be delivered to the Administrator in writing on or prior to the
date of exercise of the Options or lapse of restrictions with respect to
Restricted Stock.
SECTION 14
----------
TERMINATION OF EMPLOYMENT
-------------------------
In the event of a Participant's Termination of Employment, the following
rules shall apply:
A. Resignation in order to assume employment, approved by the Company's
Chief Executive Officer, with a governmental, charitable or
educational institution, or business entity affiliated with the
Company: When a Participant resigns to assume employment, approved by
the Company's Chief Executive Officer, with a governmental, charitable
or educational institution, or business entity in which the Company
has an equity interest, the Administrator may (i) authorize the
continuation of Options granted or Restricted Stock awarded prior to
termination as if the Participant were still employed by the Company
and (ii) permit the exercise of such Options or lapse of restrictions
in respect of Restricted Stock during periods after such Termination
of Employment, but not beyond the original expiration date of the
Option. Such actions will not be authorized to the extent they would
cause outstanding ISO's to be considered to have been modified for
purposes of Section 424(h) of the Code. Unless the Administrator
determines otherwise, termination of such approved employment, except
to rejoin the Company or accept other employment which would qualify
under this Paragraph A, or divestiture by the Company of its equity
interest in such business entity, shall be treated as a termination of
employment pursuant to Paragraphs B, C or D of this Section 14.
B. Termination of Employment for any reason other than death, disability
or resignation for approved employment pursuant to Paragraph A of this
Section 14: Any Option or Restricted Stock shall expire forthwith;
provided, however, that with the approval of the Board evidenced by a
writing signed by an executive officer
9
<PAGE>
of the Company other than the Participant, unvested Options may be
accelerated to vest immediately; any Options exercisable at the time
of such termination may be exercised up to a date after such
termination that is determined by the Board, but not exceeding five
(5) years from the date of such termination and not beyond the date
the Option otherwise would have expired in accordance with the Award
Agreement evidencing such Option and/or the restrictions on Restricted
Stock may be eliminated so that such Restricted Stock is free of such
restrictions at the time of Termination of Employment and not
forfeited upon such Termination of Employment.
C. Death of a Participant: A Participant's estate or beneficiaries shall
have a period up to the later of one (1) year after the Participant's
death or the expiration date specified in the Award Agreement within
which to exercise the Option; provided, however, in the case of ISO's,
the Participant's estate or beneficiaries may exercise an Option only
until the expiration date specified in the Award Agreement. Any
Option may be immediately exercised in full by the Participant's
estate or beneficiaries. In the event the Participant's estate is
closed with exercisable Options then unexercised, the rights under
this Paragraph shall pass by will or the laws of descent and
distribution. In the case of Restricted Stock, the restrictions on
such Restricted Stock shall be deemed to have lapsed immediately
before such Participant's death.
D. Disability of a Participant: In the event of a Participant's
Disability during employment, the Participant, or his or her guardian
or legal representative, shall have a period up to the expiration date
specified in the Award Agreement within which to exercise the Option.
In the case of Restricted Stock, the restrictions on such Restricted
Stock shall be deemed to have lapsed immediately before the
Termination of Employment of such Participant.
SECTION 15
----------
NO RIGHT TO EMPLOYMENT
----------------------
Participation in the Plan will not give any Participant a right to be
retained as an employee of the Company or any Subsidiary, or any right or claim
to any benefit under the Plan, unless the right to claim has specifically
accrued under the Plan.
SECTION 16
----------
AMENDMENT OF THE PLAN
---------------------
Except as provided in this Section 16, the Board may amend, modify, suspend
or discontinue this Plan for the purpose of meeting any changes in legal
requirements or for nay other purpose permitted by law. Except for any
adjustments pursuant to Section 10, the Board may not:
A. Increase the maximum number of shares that may be issued under the
Plan; or
B. Decrease the exercise price with respect to any Option previously
granted.
The Board may from time to time amend or revise the terms of the Plan in whole
or in part and may, without limitation, adopt any amendment deemed necessary.
10
<PAGE>
SECTION 17
----------
NOTICE
------
Any written notice to the Company required by any of the provisions of the
Plan shall be addressed to the Administrator, if so required under the Plan, and
otherwise to the Chairman of the Board or to the Chief Executive Officer of the
Company, and shall become effective when it is received by the office of such
Administrator, Chairman or the Chief Executive Officer.
SECTION 18
----------
COMPANY BENEFIT AND COMPENSATION PLANS
--------------------------------------
Nothing contained in the Plan shall prevent any Participant prior to death,
or the Participant's dependents or beneficiaries after the Participant's death,
from receiving, in addition to any Options or Restricted Stock provided for
under the Plan, any salary, incentive or performance plan Awards, payments under
a Company retirement plan or other benefits that may be otherwise payable or
distributable to such Participant, or to the Participant's dependents or
beneficiaries under any other plan or policy of the Company or otherwise. To
the extent permitted by law, grants of Options or awards of Restricted Stock
under the Plan may be made in combination with, or as alternatives to, grants,
Awards or payments under other Company plans.
SECTION 19
----------
REPRESENTATIONS AND WARRANTIES
------------------------------
No person shall at any time have a right to be selected as a Participant in
the Plan, nor having been selected as a Participant for one Award, to be
selected as a Participant for any other Award, and no person shall have any
authority to enter into any agreement assuring such selection or making any
warranty or representation with respect thereto. A Participant shall have no
rights to or interest in any Option or Restricted Stock except as set forth
therein.
SECTION 20
----------
UNFUNDED PLAN
-------------
Insofar as it provides for grants of Options and Awards of Restricted
Stock, the Plan shall be unfunded. Although bookkeeping accounts may be
established with respect to Participants who are or may become entitled to
Common Stock under the Plan, any such accounts shall be used merely as a
bookkeeping convenience. The Company shall not be required to segregate any
assets that may at any time be represented by Common Stock, nor shall the Plan
be construed as providing for such segregation, nor shall the Company nor the
Board be deemed to be a trustee of any Common Stock issuable or deliverable
under the Plan. Any liability of the Company to a Participant with respect to a
grant of Options or award of Restricted Stock under the Plan shall be based
solely upon any contractual obligations that may be created by the Plan or an
Award Agreement; no such obligation of the Company shall be deemed to be secured
by any pledge or other encumbrance on any property of the Company. Neither the
Company nor the Board shall be required to give any security or bond for the
performance of any obligation that may be created by the Plan.
SECTION 21
----------
SHAREHOLDER APPROVAL
--------------------
Continuance of the Plan, and the validity of any Options granted or
Restricted Stock awarded under the Plan, shall be subject to approval by the
shareholders of the Company of the Plan within twelve (12) months after the date
the Plan is adopted by the Board.
11
<PAGE>
SECTION 22
----------
CONDITIONS UPON ISSUANCE OF SHARES
----------------------------------
An Option shall not be exercisable, a share of Common Stock shall not be
issued pursuant to the exercise of an Option, and restrictions on Restricted
Stock awarded shall not lapse until such time as the Plan has been approved by
the shareholders of the Company and unless the Award of Restricted Stock,
exercise of such Option and the issuance and delivery of such share pursuant
thereto shall comply with all relevant provisions of law, including without
limitation, the Securities Act, the Exchange Act, the rules and regulations
promulgated thereunder, and the requirements of any stock exchange upon which
the shares of Common Stock may then be listed, and shall be further subject to
the approval of counsel for the Company with respect to such compliance. As a
condition to the exercise of an Option, the Company may require the person
exercising such Option to represent and warrant at the time of any such exercise
that the Common Stock is being purchased only for investment and without present
intention to sell or distribute such shares if, in the opinion of counsel for
the Company, such a representation is required by any of the aforementioned
relevant provisions of law.
SECTION 25
----------
EFFECTIVE DATE AND TERMINATION OF PLAN
--------------------------------------
A. Effective Date: The Plan is effective as of the date of its adoption by
the Board, subject to its approval by the Shareholders of the Company,
pursuant to Section 21 hereof.
B. Termination of the Plan: The Board may terminate the Plan at any time with
respect to any shares that are not then subject to Options or Restricted
Stock. Termination of the Plan will not affect the rights and obligations
of any Participant with respect to Options or Restricted Stock awarded
before termination.
The undersigned, being the duly elected Secretary of Red Man Pipe & Supply
Co., does hereby certify that the foregoing Red Man Pipe & Supply Co. Incentive
Stock Plan 1997 was approved by the Board of Directors as of the 15th day of
December, 1997, and by the shareholders of Red Man Pipe & Supply Co. on
the 15th day of December, 1997.
/s/ BETTY J. KETCHUM
___________________________________
Secretary
12
<PAGE>
EXHIBIT 10.2
LOAN AND SECURITY AGREEMENT
THIS LOAN AND SECURITY AGREEMENT is made this 3rd day of May, 1991, by and
among BARCLAYS BUSINESS CREDIT, INC. ("Lender"), a Connecticut corporation, with
an office at 3811 Turtle Creek Boulevard, Suite 2100, Dallas, Texas 75219; and
RED MAN PIPE & SUPPLY CO. ("Borrower"), an Oklahoma corporation, having its
chief executive office and principal place of business at 7633 East 63rd Place,
Suite 400, Red Man Plaza, Tulsa, Oklahoma 74133.
SECTION 1. GENERAL DEFINITIONS
1.1. DEFINED TERMS. When used herein, the following terms shall have the
following meanings (terms defined in the singular to have the same meaning when
used in the plural and vice versa):
Accounts - all accounts, contract rights, chattel paper, instruments and
documents, whether now owned or hereafter created or acquired by Borrower or in
which Borrower now has or hereafter acquires any interest.
Account Debtor - any Person who is or may become obligated under or on
account of an Account.
Acknowledgments - the managers' acknowledgments to be executed by each
manager operating a retail store or warehouse for Borrower, in the form attached
as Exhibit "G".
Adjusted Net Earnings From Operations - with respect to any fiscal period,
means the net earnings of Borrower after provision for income taxes for such
fiscal period all as reflected on the financial statement of Borrower supplied
to Lender pursuant to Section 9.1(J) hereof, but excluding:
(i) any gain or loss arising from the sale of capital assets;
(ii) any gain arising from any write-up of assets;
(iii) earnings of any Subsidiary accrued prior to the date it became a
Subsidiary;
(iv) earnings of any corporation, substantially all the assets of which
have been acquired in any manner by Borrower, realized by such corporation prior
to the date of such acquisition;
(v) net earnings of any business entity (other than a Subsidiary) in
which Borrower has an ownership interest, unless such net earnings shall have
actually been received by Borrower in the form of cash distributions;
-1-
<PAGE>
(vi) any portion of the net earnings of any Subsidiary which for any
reason is unavailable for payment of dividends to Borrower;
(vii) the earnings of any Person to which any assets of Borrower shall have
been sold, transferred or disposed of, or into which Borrower shall have merged,
or been a party to any consolidation or other form of reorganization, prior to
the date of such transaction;
(viii) any gain arising from the acquisition of any Securities of Borrower;
(ix) any gain arising from extraordinary or non-recurring items; and
(x) payments on intercompany accounts receivable.
Adjusted Tangible Assets - all assets except: (i) any surplus resulting
from any write-up of assets; (ii) deferred assets, including prepaid insurance
and prepaid taxes; (iii) patents, copyrights, trademarks, trade names, non-
compete agreements, franchises and other similar intangibles; (iv) good will;
(v) Restricted Investments; (vi) unamortized debt discount and expense; (vii)
assets located and notes and receivables due from obligors outside of the United
States of America; and (viii) Accounts, notes and other receivables due from
Affiliates or employees.
Adjusted Tangible Net Worth - at any date means a sum equal to: (i) the
net book value (after deducting related depreciation, obsolescence,
amortization, valuation, and other proper reserves) at which the Adjusted
Tangible Assets of Borrower would be shown on a balance sheet at such date in
accordance with GAAP, less (ii) the amount at which Borrower's liabilities
(other than capital stock and surplus) would be shown on such a balance sheet in
accordance with GAAP, and including as liabilities all reserves for
contingencies and other potential liabilities.
Affiliate - a Person: (i) which directly or indirectly through one or more
intermediaries controls, or is controlled by, or is under common control with,
Borrower; (ii) which beneficially owns or holds 5% or more of any class of the
voting Securities of Borrower; or (iii) 5% or more of the voting Securities (or
in the case of a Person which is not a corporation, 5% or more of the equity
interest) of which is beneficially owned or held by Borrower or a Subsidiary of
Borrower. For purposes hereof, "control" means the possession, directly or
indirectly, of the power to direct or cause the direction of the management and
policies of a Person, whether through the ownership of voting Securities, by
contract or otherwise.
-2-
<PAGE>
Agreement - this Loan and Security Agreement, including all Exhibits
hereto, as the same may be modified, supplemented, extended or amended from time
to time.
Annual Business Plan - as defined in Section 9.1(L) of this Agreement.
Applicable Rate - rate of interest set forth in Section 3.1(A) of this
Agreement, as the same may be modified pursuant to Section 3.1(H), applicable to
the Loans, and, for purposes of Sections 3.1(D) and (E) of this Agreement, shall
include the Default Rate.
Average Daily Availability - the amount obtained by adding the difference
between the Borrowing Base and the unpaid balance of Loans owing by Borrower to
Lender at the end of each day during the period in question and by dividing such
sum by the number of days in such period.
Average Daily Loan Balance - the amount obtained by adding the unpaid
balance of Loans owing by Borrower to Lender at the end of each day for each day
during the period in question and by dividing such sum by the number of days in
such period.
Base Rate - the prime rate, base rate or reference rate per annum
(whichever shall be applicable) of interest announced or quoted from time to
time for commercial loans by Barclays Bank PLC, at its offices in New York, New
York, regardless of whether or not such rate is the lowest rate charged by said
bank to its most preferred borrowers. If the prime rate, base rate or reference
rate for commercial loans is discontinued by said bank as a standard, a
comparable reference rate designated by said bank as a substitute therefor shall
be the Base Rate.
Borrowing Base - as at any date of determination thereof, an amount equal
to the lesser of:
(a) the Commitment as of such date; or
(b) an amount up to:
(i) ninety percent (90%) of the net amount (after deduction of such
reserves as Lender deems proper and necessary in its sole discretion, including
a reserve for sales tax payables) of Eligible Accounts outstanding at such date;
PLUS
(ii) the lesser of (A) $6,000,000 or (B) sixty percent (60%) of the
value (after deduction of such reserves as Lender deems proper and necessary in
its sole discretion) of Eligible Inventory at such date consisting of tubular
goods held for
-3-
<PAGE>
sale in the ordinary course of Borrower's business, calculated on the basis of
the lower of cost or market;
PLUS
(iii) the lesser of (A) the Supply Inventory Maximum in effect on
such date or (B) the Supply Inventory Advance Rate in effect on such date
multiplied by the value (after deduction of such reserves as Lender deems proper
and necessary in its sole discretion) of Eligible Inventory at such date
consisting of consumable supplies held for sale in the ordinary course of
Borrower's business, calculated on the basis of the lower of cost or market;
MINUS (subtract from the sum of clauses (i), (ii) and (iii) above)
(iv) any amounts which Lender may be obligated to pay in the future
for the account of Borrower.
For purposes hereof, the net amount of Eligible Accounts at any time shall be
the face amount of such Eligible Accounts, less any and all returns, discounts
(which may, at Lender's option, be calculated on shortest terms), credits,
allowances or excise taxes of any nature at any time issued, owing, claimed by
Account Debtors, granted, outstanding or payable in connection with such
Accounts at such time.
Borrowing Base Certificate - means a written report (substantially in the
form of Exhibit "J" attached hereto and made a part hereof) executed by Borrower
and delivered to Lender, and certified as true and correct by an authorized
officer of Borrower setting forth in reasonable detail sufficient information
for Lender to calculate the Borrowing Base.
Business Day - a day on which the Federal Reserve Bank of Dallas is open
for business in Dallas, Texas.
Capital Expenditures - expenditures made and liabilities incurred for the
acquisition of any fixed assets or improvements, replacements, substitutions or
additions thereto which have a useful life of more than one year, including the
direct or indirect acquisition of such assets by way of increased product or
service charges, offset items or otherwise; provided, however, payments with
respect to Capital Lease obligations shall not be considered to be Capital
Expenditures for the purposes of this Agreement.
Capital Lease - as applied to any Person, any lease of any Property
(whether real, personal or mixed) required to be classified and accounted for as
a capital lease on the balance sheet of such Person in accordance with GAAP.
-4-
<PAGE>
Chapter 9 - the Louisiana Commercial Laws - Secured Transactions, Title 10,
Section 9-101 et.seq.
Closing Date - the date on which all of the conditions precedent in Section
10 are satisfied and the initial Loan is made hereunder.
Code - the Uniform Commercial Code as adopted and in force in the State of
Texas, as from time to time in effect.
Collateral - all of the Property and interests in Property described in
Section 4 hereof, and all other Property and interests in Property that now or
hereafter secure the payment and performance of any of the obligations.
Commitment - $25,000,000.
Current Assets - at any date means the amount at which all of the current
assets of Borrower would be shown on a balance sheet at such date in accordance
with GAAP.
Current Liabilities - at any date means the amount at which all of the
current liabilities of Borrower would be shown on a balance sheet at such date
in accordance with GAAP.
Default - an event or condition the occurrence of which would, with the
lapse of time or the giving of notice, or both, become an Event of Default.
Default Rate - as defined in Section 3.1(C) of this Agreement.
Distribution - in respect of Borrower means and includes any distribution
(whether in cash or Property) by Borrower to any shareholder whether by way of
dividend or otherwise.
Dominion Account - a special account of Lender established by Borrower
pursuant to this Agreement at a bank selected by Borrower, but acceptable to
Lender, in its sole discretion, and over which Lender shall have sole and
exclusive access and control for withdrawal purposes.
EBITDA - for any period, Net Income plus depreciation and amortization,
Interest Expense, and taxes for such period (in each case to the extent deducted
in determining Net Income).
Eligible Account - an Account arising in the ordinary course of Borrower's
business from the sale of goods or rendition of services which Lender, in its
sole credit judgment, deems to be an Eligible Account. No Account shall be an
Eligible Account if: (i) it arises out of a sale made by Borrower to an
Affiliate of Borrower or to a Person controlled by an Affiliate of Borrower; or
-5-
<PAGE>
(ii) it remains unpaid more than ninety (90) days after the original invoice
date thereof; or (iii) more than twenty percent (20%) of the total Accounts
owing by the Account Debtor remain unpaid more than ninety (90) days after the
original invoice date thereof, to the extent of all Accounts owing by such
Account Debtor; or (iv) the total unpaid Accounts of the Account Debtor exceed
twenty percent (20%) of the net amount of all Accounts, to the extent of such
excess; or (v) any covenant, representation or warranty contained in this
Agreement with respect to such Account has been breached; or (vi) the Account
Debtor is also Borrower's creditor or supplier, or the Account otherwise is or
may become subject to any right of setoff by the Account Debtor (provided, that
in such case the Account shall be deemed to be an Eligible Account if, and to
the extent, the balance of the Account exceeds all amounts owed by Borrower to
the Account Debtor or the amount of such setoff); or (vii) the Account Debtor
has disputed liability with respect to such Account (provided, that if the
amount disputed is less than twenty-five percent (25%) of the entire balance of
the Account, the Account shall be deemed to be an Eligible Account to the extent
the balance of the Account exceeds the amount disputed); or (viii) the Account
Debtor has commenced a voluntary case under the federal bankruptcy laws, as now
constituted or hereafter amended, or made an assignment for the benefit of
creditors, or a decree or order for relief has been entered by a court having
jurisdiction in the premises in respect of the Account Debtor in an involuntary
case under the federal bankruptcy laws, as now constituted or hereafter amended,
or if the Account Debtor has ceased to be Solvent or consented to or suffered a
receiver, trustee, liquidator or custodian to be appointed for it or for all or
a significant portion of its assets or affairs; or (ix) it arises from a sale to
an Account Debtor outside the United States; or (x) it arises from a sale to the
Account Debtor on a bill-and-hold, guaranteed sale, sale-or-return, sale-on-
approval, consignment or any other repurchase or return basis; or (xi) Lender
believes, in its sole judgment, that collection of such Account is insecure or
that payment thereof is doubtful or will be delayed by reason of the Account
Debtor's financial condition; or (xii) the Account Debtor is the United States
of America or any State or any department, agency or instrumentality thereof; or
(xiii) the Account Debtor is located in the State of New Jersey, unless Borrower
has filed a Notice of Business Activities Report with the New Jersey Division of
Taxation for the then current year; or (xiv) the Account is not subject to
Lender's duly perfected first priority security interest or is subject to a
Lien, other than a Permitted Lien which is junior to Lender's security interest;
or (xv) the goods giving rise to such Account have not been delivered to and
accepted by the Account Debtor or the services giving rise to such Account have
not been performed by Borrower and accepted by the Account Debtor or the Account
otherwise does not represent a final sale; or (xvi) the total unpaid Accounts of
the Account Debtor exceed a credit limit determined by Lender, in its reasonable
discretion, to the extent such Account exceeds such
-6-
<PAGE>
limit; or (xvii) the Account is evidenced by chattel paper or an instrument of
any kind, or has been reduced to judgment; or (xviii) Borrower has made any
agreement with the Account Debtor for any deduction therefrom, except for
discounts or allowances which are made in the ordinary course of business for
prompt payment and which discounts or allowances are reflected in the
calculation of the face value of each invoice related to such Account; or (xix)
Borrower has made an agreement with the Account Debtor to extend the time of
payment thereof.
Eligible Inventory - such Inventory of Borrower which Lender, in the
exercise of its sole credit judgment, deems to be Eligible Inventory. No
Inventory shall be Eligible Inventory unless, in Lender's opinion, it (i) is in
good, new and saleable condition, (ii) is not obsolete or unmerchantable, (iii)
meets all standards imposed by any governmental agency or authority, (iv)
conforms in all respects to the warranties and representations set forth in
Section 6.1 hereof, (v) is at all times subject to Lender's duly perfected,
first priority security interest and no other Lien, except a Permitted Lien
which is junior to Lender's security interest or a Permitted Lien described in
Section 9.2(E)(ix) of this Agreement, (vi) is situated at a location in
compliance with Section 4.3 hereof, and (vii) consists of finished tubular goods
or consumable supplies of Borrower held for sale in the ordinary course of
Borrower's business.
Environmental Laws - all federal, state and local laws, rules, regulations,
ordinances, programs, permits, guidances, orders and consent decrees relating to
health, safety and environmental matters.
Equipment - all machinery, apparatus, equipment, fittings, furniture,
fixtures, motor vehicles and other Tangible personal Property (other than
Inventory) of every kind and description used in Borrower's operations or owned
by Borrower or in which Borrower has an interest, whether now owned or hereafter
acquired by Borrower and wherever located, and all parts, accessories and
special tools and all increases and accessions thereto and substitutions and
replacements therefor.
ERISA - the Employee Retirement Income Security Act of 1974, as amended
from time to time, and all rules and regulations from time to time promulgated
thereunder.
Excess - as defined in Section 3.1(E) of this Agreement.
Excess Cash Flow - for any period an amount equal to the Net Income of
Borrower for such period, plus the aggregate amount of depreciation,
amortization and other non-cash charges of Borrower for such period, determined
in accordance with GAAP, which, in determining Net Income for such period, were
deducted from the gross income of Borrower; minus (a) Unfinanced Capital
Expenditures
-7-
<PAGE>
and Unfinanced Capitalized Lease Payments paid by Borrower during such period,
(b) Distributions paid by Borrower during such period, and (c) regularly
scheduled principal payments during such period (and, without duplication,
principal payments actually paid by Borrower during such period) on Indebtedness
(other than the Loans) of Borrower having a final maturity (or which is
renewable or extendable at the option of Borrower, for a period ending) more
than one year after the date of creation thereof.
Event of Default - as defined in Section 11.1 of this Agreement.
Financial Agreement - as defined in Section 9.2(F) of this Agreement.
Funded Indebtedness - all Indebtedness which would, in accordance with
GAAP, constitute long-term Indebtedness, but in any event shall include, without
duplication:
(a) any Indebtedness outstanding under a revolving credit or similar
agreement providing for borrowings (and renewals and extensions)
for a period of more than one year notwithstanding that any such
Indebtedness may be payable on demand or not more than one year
after its creation;
(b) any obligation with respect to a Capital Lease;
(c) any guarantees with respect to Funded Indebtedness of a type
described in clauses (a) and (b) of this definition of another
Person.
GAAP - generally accepted accounting principles in the United states of
America in effect from time to time.
General Intangibles - all general intangibles of Borrower, whether now
owned or hereafter created or acquired including, without limitation, all choses
in action, causes of action, corporate or other business records, deposit
accounts, inventions, designs, patents, patent applications, trademarks, trade
names, trade secrets, goodwill, copyrights, registrations, licenses, franchises,
customer lists, other Intellectual Property, tax refund claims, computer
programs, all claims under guaranties, security interests or other security held
by or granted to Borrower to secure payment of any of the Accounts by an Account
Debtor, all rights to indemnification and all other intangible property of every
kind and nature (other than Accounts).
Guarantor - Lewis B. Ketchum.
Guaranty - a limited guaranty agreement to be executed by Guarantor,
whereby Guarantor unconditionally guaranties payment to Lender of up to
$1,000,000 in principal of the obligations and all
-8-
<PAGE>
interest, costs and expenses associated therewith, as the same may be modified,
supplemented, extended or amended from time to time.
Indebtedness - as applied to a Person means, without duplication (i) all
items which in accordance with GAAP would be included in determining total
liabilities as shown on the liability side of a balance sheet of such Person as
at the date as of which Indebtedness is to be determined, including, without
limitation, Capital Lease obligations, (ii) all contingent liabilities of such
Person, including, without limitation, all obligations of other Persons which
such Person has guaranteed and (iii) in the case of Borrower (without
duplication), the Obligations.
Intellectual Property - all patents, patent applications, trademarks, trade
names, franchise agreements, license agreements, corporate names, company names,
business names, fictitious business names, trade styles, service marks, logos,
formulae, recipes, trade secrets, other source and business identifiers,
copyrights and all other similar general intangibles.
Interest Expense - means, for any period, total interest, whether paid or
accrued (including that attributable to obligations which have been or should
be, in accordance with GAAP, recorded as Capital Leases), of Borrower including,
without limitation, all commissions, discounts and other fees and charges owed
with respect to letters of credit and bankers' acceptance financing and net
costs under interest rate exchange or cap agreements providing interest rate
protection but excluding, however, interest expense not payable in cash
(including amortization of discount), all as determined in conformity with GAAP.
Inventory - all of Borrower's inventory, including, but not limited to, all
goods intended for sale or lease by Borrower, or for display or demonstration;
all work in process; all raw materials and other materials and supplies of every
nature and description used or which might be used in connection with the
manufacture, printing, packing, shipping, advertising, selling, leasing or
furnishing of such goods or otherwise used or consumed in Borrower's business;
and all documents evidencing and General Intangibles relating to any of the
foregoing, whether now owned or hereafter acquired by Borrower.
Leverage Ratio - at any date means the ratio of the Indebtedness of
Borrower to Adjusted Tangible Net Worth of Borrower.
Lien - any interest in Property securing an obligation owed to, or a claim
by, a Person other than the owner of the Property, whether such interest is
based on the common law, statute or contract, and including, but not limited to,
the security interest, security title or lien arising from a security agreement,
mortgage, deed of trust, deed to secure debt, encumbrance, pledge,
-9-
<PAGE>
conditional sale or trust receipt or a lease, consignment or bailment for
security purposes.
Loan Account - the loan account established on the books of Lender pursuant
to Section 2.3 hereof and in which Lender will record all Loans, payments made
on such Loans and other appropriate debits and credits as provided by this
Agreement.
Loans - all loans and advances made by Lender pursuant to this Agreement,
including, without limitation, all revolving credit loans made by Lender as
provided in Section 2.1 of this Agreement.
Maximum Legal Rate - as defined in Section 3.1(D) of this Agreement.
Net Income - for any period, the net income (or loss) after taxes of
Borrower for such period taken as a single accounting period, but before
extraordinary items, as determined in accordance with GAAP.
Obligations - all Loans and all other advances, debts, liabilities,
obligations, covenants and duties owing, arising, due or payable from Borrower
to Lender of any kind or nature, present or future, whether or not evidenced by
any note, guaranty or other instrument, whether arising under this Agreement or
any of the other Agreements or otherwise and whether direct or indirect
(including those acquired by assignment), absolute or contingent, primary or
secondary, due or to become due, now existing or hereafter arising and however
acquired. The term includes, without limitation, all interest, charges,
expenses, fees, attorney's fees and any other sums chargeable to Borrower under
this Agreement or any of the other Agreements.
Original Term - as defined in Section 3.3 of this Agreement.
Other Agreements - any and all agreements, instruments and documents
heretofore, now or hereafter executed by Borrower or delivered to Lender in
respect to the transactions contemplated by this Agreement, including, without
limitation, the Guaranty and the Acknowledgments, as the same may be modified,
supplemented, extended or amended from time to time.
Overadvance - as defined in Section 2.1.
Participating Lender - shall mean each Person who shall be granted the
right by Lender to participate in any of the Loans described in this Agreement
and who shall have entered into a participation agreement in form and substance
satisfactory to Lender.
Permitted Liens - any Lien of a kind specified in subparagraphs (i) through
(xi) of Section 9.2(E) of this Agreement.
-10-
<PAGE>
Person - an individual, partnership, corporation, joint stock company,
trust or unincorporated organization, or a government or agency or political
subdivision thereof.
Plan - an employee benefit plan now or hereafter maintained for employees
of Borrower that is covered by Title IV of ERISA.
Prohibited Transaction - any transaction set forth in Section 406 of ERISA
or Section 4975 of the Internal Revenue Code of 1986, as amended from time to
time.
Property - any interest in any kind of property or asset, whether real,
personal or mixed, or Tangible or intangible.
Purchase Money Lien - a Lien upon fixed assets granted by Borrower to
secure Indebtedness incurred by Borrower to purchase such fixed assets.
Reportable Event - any of the events set forth in Section 4043(b) of ERISA.
Restricted Investment - any investment in cash or by delivery of Property
to any Person, whether by acquisition of stock, Indebtedness or other obligation
or Security, or by loan, advance or capital contribution, or otherwise, or in
any Property, except the following: (i) Property to be used in the ordinary
course of business; (ii) Current Assets arising from the sale of goods and
services in the ordinary course of business of Borrower; (iii) investments in
direct obligations of the United States of America, or any agency thereof or
obligations guaranteed by the United States of America, provided that such
obligations mature within one year from the date of acquisition thereof; (iv)
investments in certificates of deposit maturing within one year from the date of
acquisition issued by a bank or trust company organized under the laws of the
United States or any state thereof having capital surplus and undivided profits
aggregating at least $100,000,000; (v) investments in certificates of deposit
with any federally insured institution which in the aggregate do not exceed
$100,000.00; (vi) investments in commercial paper given the highest rating by a
national credit rating agency and maturing not more than two hundred seventy
(270) days from the date of creation thereof; (vii) with respect to Borrower,
Borrower's investment in its Subsidiary, Red Man Ventures, Inc., outstanding as
of the date hereof or up to an additional $50,000 investment in such subsidiary
made in any fiscal year; and (viii) investments existing as of the date hereof
and described on Exhibit "E".
Schedule of Accounts - as defined in Section 5.4 of this Agreement.
Security - shall have the same meaning as in Section 2(1) of the Securities
Act of 1933, as amended.
-11-
<PAGE>
Solvent - as to any Person, such Person (i) owns Property whose fair
saleable value is greater than the amount required to pay all of such Person's
Indebtedness (including contingent debts), (ii) is able to pay all of its
Indebtedness as such Indebtedness matures and (iii) has capital sufficient to
carry on its business and transactions and all business and transactions in
which it is about to engage.
Subsidiary - any corporation of which a Person owns, directly or indirectly
through one or more intermediaries, more than 50% of the voting Securities at
the time of determination.
Supply Inventory Advance Rate - initially means forty percent (40%), but
shall automatically decrease by one percent (1%) a month on the first calendar
day of each month, beginning on November 1, 1991, until such time as the Supply
Inventory Advance Rate shall have been reduced to twenty-five percent (25%),
where it shall remain for the remainder of the term of this Agreement.
Supply Inventory Maximum - initially means $5,000,000, but shall
automatically decrease by $100,000 a month on the first calendar day of each
month, beginning on November 1, 1991, until such time as the Supply Inventory
Maximum shall have been reduced to $3,500,000, where it shall remain for the
remainder of the term of this Agreement.
Unfinanced Capital Expenditures and Unfinanced Capitalized Lease Payments -
Capital Expenditures and payments on Capital Leases by Borrower to the extent
not financed pursuant to Indebtedness of Borrower (other than the Loans) having
a final maturity (or which is renewable or extendable at the option of Borrower
for a period ending) more than one year after the date of creation thereof.
1.2. ACCOUNTING AND OTHER TERMS. All accounting terms not specifically
defined herein shall be construed in accordance with GAAP consistent with that
applied in preparation of the financial statements referred to in Section
9.1(J), and all financial data pursuant to the Agreement shall be prepared in
accordance with such principles. All other terms contained in this Agreement
shall have, when the context so indicates, the meanings provided for by the Code
to the extent the same are used or defined therein.
1.3. CERTAIN MATTERS OF CONSTRUCTION. The terms "herein", "hereof" and
"hereunder" and other words of similar import refer to this Agreement as a whole
and not to any particular section, paragraph or subdivision. Any pronoun used
shall be deemed to cover all genders. The section titles, table of contents and
list of exhibits appear as a matter of convenience only and shall not affect the
interpretation of this Agreement.
-12-
<PAGE>
SECTION 2. CREDIT FACILITY
2.1. THE LOANS. Provided that no Default or Event of Default has
occurred, Lender will make Loans on a revolving credit basis to Borrower from
time to time, in amounts as requested by Borrower, up to a maximum principal
amount at any time outstanding equal to the Borrowing Base at such time. It is
expressly understood and agreed that Lender may use the Borrowing Base as a
maximum ceiling on Loans outstanding to Borrower at any time. If the unpaid
balance of the Loans should exceed the Borrowing Base or any other limitation
set forth in this Agreement, such Loans shall nevertheless constitute
obligations that are secured by the Collateral and entitled to all benefits
thereof. Insofar as Borrower may request and Lender may be willing in its
discretion to make Loans to Borrower at a time when the unpaid balance of Loans
exceeds, or would exceed with the making of any such Loan, the Borrowing Base
(any such Loan or Loans being herein referred to individually as an
"Overadvance" and collectively as "Overadvances"), Lender shall enter such
Overadvances as debits in the Loan Account. All Overadvances shall be repaid ON
DEMAND. In consideration of Lender making any Overadvance to Borrower, Borrower
agrees to pay to Lender, contemporaneously with the making of such Overadvance,
an amount equal to one percent (1%) of the Overadvance, provided that the
payment of such amount does not cause the interest on the obligations to exceed
the Maximum Legal Rate. The Loans shall be used solely (i) for the satisfaction
of existing Indebtedness of Borrower to F&M Bank and Trust Company of Tulsa,
Oklahoma, (ii) for the satisfaction of certain trade payables and other
unsecured indebtedness owed to trade creditors of Borrower, (iii) for Borrower's
general operating capital needs to the extent not inconsistent with the
provisions of this Agreement, and (iv) for the payment of any of the fees
specified in Section 3.2 of this Agreement and, to the extent approved by
Lender, to the payment of any costs associated with the closing of the
transactions contemplated by this Agreement.
2.2. ALL LOANS TO CONSTITUTE ONE OBLIGATION. All Loans shall constitute
one general obligation of Borrower, and shall be secured by Lender's security
interest in and Lien upon all of the Collateral, and by all other security
interests and Liens heretofore, now or at any time or times hereafter granted by
Borrower to Lender.
2.3. LOAN ACCOUNT. Lender shall enter all Loans as debits to the Loan
Account and shall also record in the Loan Account all payments made by Borrower
on any Obligations and all proceeds of Collateral which are finally paid to
Lender, and may record therein, in accordance with customary accounting
practice, other debits and credits, including all charges and expenses properly
chargeable to Borrower and any other Obligation.
-13-
<PAGE>
2.4. INCREASED COSTS AND CAPITAL.
(A) If either (i) the introduction of or any change (including, without
limitation, any change by way of imposition or increase of reserve requirements)
in or in the interpretation of any law or regulation or (ii) the compliance by
Lender with any guideline or request from any central bank or other governmental
authority (whether or not having the force of law), shall result in any increase
in the cost to Lender of making, funding or maintaining any Loans, then Borrower
agrees to pay, from time to time, upon demand by Lender, to Lender additional
amounts sufficient to indemnify Lender against such increased cost. A
certificate as to the amount of such increased cost, submitted to Borrower by
Lender, shall in the absence of manifest error, be conclusive.
(B) If either (i) the introduction of or any change in or in the
interpretation of any law or regulation or (ii) compliance by Lender with any
guideline or request from any central bank or other governmental authority
(whether or not having the force of law) affects or would affect the amount of
capital required or expected to be maintained by Lender and Lender determines
that the amount of such capital is increased by or based upon the existence of
Lender's commitment to lend hereunder and other commitments of this type, then,
upon demand by Lender, Borrower shall immediately pay to Lender, from time to
time as specified by Lender, additional amounts sufficient to compensate Lender
in the light of such circumstances, to the extent that Lender reasonably
determines such increase in capital to be allocable to the existence of Lender's
commitment to lend hereunder. A certificate as to such amounts, submitted to
Borrower by Lender, shall, in the absence of manifest error, be conclusive and
binding for all purposes.
(C) Notwithstanding anything contained herein to the contrary, in the event
that Lender makes demand on Borrower pursuant to Section 2.4(A) or (B) hereof
for the payment of any additional amounts as specified therein, Borrower may,
within ninety (90) days following the date of the delivery by Lender of the
certificate(s) described in Section 2.4(A) or (B) hereof, at Borrower's option,
terminate this Agreement upon ten (10) days prior written notice to Lender.
Upon the effective date of such termination, Borrower shall pay to Lender the
then outstanding principal, accrued interest and other charges owing under this
Agreement and any of the other Agreements, and the termination charges or
prepayment premium provided for in Section 3.3(C) of this Agreement shall not be
payable as a result of Borrower's termination pursuant to this Section 2.4(C).
-14-
<PAGE>
SECTION 3. INTEREST, FEES, TERM AND REPAYMENT
3.1. INTEREST AND CHARGES.
(A) Subject to subsection (D) of this Section 3.1, interest shall accrue on
the principal amount of the Loans outstanding at the end of each day at a
fluctuating rate per annum equal to one and one-half percent (1.50%) above the
Base Rate.
(B) After the date hereof, the Applicable Rate shall be increased or
decreased, as the case may be, by an amount equal to any increase or decrease in
the Base Rate, with such adjustments to be effective as of the opening of
business on the day that any such change in the Base Rate becomes effective.
The Base Rate in effect on the date hereof shall be the Base Rate effective as
of the opening of business on the date hereof, but if this Agreement is executed
on a day that is not a Business Day, the Base Rate in effect on the date hereof
shall be the Base Rate effective as of the opening of business on the last
Business Day immediately preceding the date hereof. Interest on the unpaid
principal balance of the obligations shall be calculated on a daily basis
(computed on the actual number of days elapsed over a year of 360 days or, for
the purposes of determining interest at the Maximum Legal Rate, a year of 365 or
366 days, as applicable), commencing on the date hereof, and shall be payable
monthly, in arrears, on the first day of each month.
(C) Subject to subsection (D) of this Section 3.1, upon and after the
occurrence of an Event of Default, and during the continuation thereof, the
principal amount of the obligations shall bear interest, calculated daily
(computed on the actual days elapsed over a year of 360 days), at a fluctuating
rate per annum equal to two percent (2%) above the Applicable Rate set forth in
Section 3.1(A) (the "Default Rate").
(D) Notwithstanding the foregoing, (i) if at any time the amount of such
interest computed on the basis of the Applicable Rate would exceed the amount of
such interest computed upon the basis of the maximum rate of interest permitted
by applicable state or federal law in effect from time to time hereafter (the
"Maximum Legal Rate"), the interest payable under this Agreement shall be
computed upon the basis of the Maximum Legal Rate, but any subsequent reduction
in the Applicable Rate shall not reduce such interest thereafter payable
hereunder below the amount computed on the basis of the Maximum Legal Rate until
the aggregate amount of such interest accrued and payable under this Agreement
equals the total amount of interest which would have accrued if such interest
had been at all times computed solely on the basis of the Applicable Rate; and
(ii) unless preempted by federal law, the Applicable Rate from time to time in
effect hereunder may not exceed the "Indicated Rate Ceiling" from time to time
in effect
-15-
<PAGE>
under Section (c) of Article 5069-1.04, Title 79, Revised Civil Statutes of
Texas, 1925, as amended.
(E) No agreements, conditions, provisions or stipulations contained in this
Agreement or any other instrument, document or agreement between Borrower and
Lender or default of Borrower, or the exercise by Lender of the right to
accelerate the payment of the maturity of principal and interest, or to exercise
any option whatsoever contained in this Agreement or any other agreement between
Borrower and Lender, or the arising of any contingency whatsoever, shall entitle
Lender to collect, in any event, interest exceeding the Maximum Legal Rate and
in no event shall Borrower be obligated to pay interest exceeding such Maximum
Legal Rate and all agreements, conditions or stipulations, if any, which may in
any event or contingency whatsoever operate to bind, obligate or compel Borrower
to pay a rate of interest exceeding the Maximum Legal Rate, shall be without
binding force or effect, at law or in equity, to the extent only of the excess
of interest over such Maximum Legal Rate. In the event any interest is charged
in excess of the Maximum Legal Rate ("Excess"), Borrower acknowledges and
stipulates that any such charge shall be the result of an accident and bona fide
error, and such Excess shall be, first, applied to reduce the principal then
unpaid hereunder; second, applied to reduce the obligations; and third, returned
to Borrower, it being the intention of the parties hereto not to enter at any
time into a usurious or otherwise illegal relationship. Borrower recognizes
that, with fluctuations in the Applicable Rate and the Maximum Legal Rate, such
an unintentional result could inadvertently occur. By the execution of this
Agreement, Borrower covenants that (i) the credit or return of any Excess shall
constitute the acceptance by Borrower of such Excess, and (ii) Borrower shall
not seek or pursue any other remedy, legal or equitable, against Lender, based
in whole or in part upon the charging or receiving of any interest in excess of
the maximum authorized by applicable law. For the purpose of determining
whether or not any Excess has been contracted for, charged or received by
Lender, all interest at any time contracted for, charged or received by Lender
in connection with this Agreement, shall be amortized, prorated, allocated and
spread in equal parts during the entire term of this Agreement.
(F) The provisions of Section 3.1(E) shall be deemed to be incorporated
into every document or communication relating to the obligations which sets
forth or prescribes any account, right or claim or alleged account, right or
claim of Lender with respect to Borrower (or any other obligor in respect of the
obligations), whether or not any provision of Section 3.1(E) is referred to
therein. All such documents and communications and all figures set forth therein
shall, for the sole purpose of computing the extent of the obligations and other
obligations of Borrower (or other obligor) asserted by Lender thereunder, be
automatically recomputed by Borrower or such obligor, and by any court
considering the same,
-16-
<PAGE>
to give effect to the adjustments or credits required by Section 3.1(E).
(G) If the applicable state or federal law is amended in the future to
allow a greater rate of interest to be charged under this Agreement or the other
Agreements than is presently allowed by applicable state or federal law, then
the limitation of interest hereunder shall be increased to the maximum rate of
interest allowed by applicable state or federal law as amended, which increase
shall be effective hereunder on the effective date of such amendment, and all
then accrued interest owing to Lender by reason thereof shall be payable UPON
DEMAND.
(H) So long as no Default has occurred, in the event that Borrower achieves
the performance factors described below as of each of the calculation dates
specified below, then the Applicable Rate shall be reduced as follows:
(i) Performance Factors to be Achieved as of October 31, 1991. So long as
no Default has occurred, and so long as Borrower achieves the performance
factors set out below, upon the later of (i) receipt and review by Lender of
audited financial statements of Borrower provided pursuant to Section 9.1(J)
demonstrating compliance with the following performance factors, or (ii) receipt
by Lender of Borrower's Annual Business Plan for the twelve months ending
October 31, 1992, the Applicable Rate shall be reduced by 0.125%. Such
reduction shall be made effective November 1, 1991 by (a) crediting the Loan
Account by the difference between the amount of interest paid by Borrower to
Lender since such effective date and the amount of interest which would have
been paid by Borrower to Lender since such effective date had the Applicable
Rate been so reduced, and (b) recalculating all accrued but unpaid interest, and
all interest to accrue with respect to future transactions, at the Applicable
Rate as so reduced. The performance factors required to be achieved as of
October 31, 1991 in order to reduce the Applicable Rate are as follows:
(A) The Average Daily Availability for the six months ending October 31,
1991 shall equal or exceed twenty-five percent (25%) of the Average Daily Loan
Balance for such period;
(B) The Adjusted Net Earnings From Operations, plus taxes (to the extent
deducted therefrom), for the year ending October 31, 1991 shall be at least
$2,800,000; and
(C) Borrower's Leverage Ratio as of October 31, 1991 shall not exceed 3.4
to 1.0.
-17-
<PAGE>
Any rate reduction made pursuant to this Section 3.1(H)(i) shall remain in
effect only for so long as no Default has occurred and is continuing and
Borrower maintains the Leverage Ratio described in (C) above.
(ii) Performance Factors to be Achieved as of October 31, 1992. So long
as no Default has occurred, and so long as Borrower achieves the performance
factors set out below, upon the later of (i) receipt and review by Lender of
audited financial statements of Borrower provided pursuant to Section 9.1(J)
demonstrating compliance with the following performance factors, or (ii) receipt
by Lender of Borrower's Annual Business Plan for the twelve months ending
October 31, 1993, the Applicable Rate (as the same may or may not have been
reduced pursuant to Section 3.1(H)(i) above) shall be reduced by 0.25%. Such
reduction shall be made effective November 1, 1992 by (a) crediting the Loan
Account by the difference between the amount of interest paid by Borrower to
Lender since such effective date and the amount of interest which would have
been paid by Borrower to Lender since such effective date had the Applicable
Rate been so reduced, and (b) recalculating all accrued but unpaid interest, and
all interest to accrue with respect to future transactions, at the Applicable
Rate as so reduced. The performance factors required to be achieved as of
October 31, 1992 in order to reduce the Applicable Rate are as follows:
(A) The Average Daily Availability for the months ending October 31,
1992 shall equal or exceed twenty-five percent (25%) of the Average Daily
Loan Balance for such period;
(B) The Adjusted Net Earnings From operations, plus taxes (to the
extent deducted therefrom), for the year ending October 31, 1992 shall be
at least $2,500,000; and
(C) Borrower's Leverage Ratio as of October 31, 1992 shall not exceed
3.3 to 1.0.
Any rate reduction made pursuant to this Section 3.1(H)(ii) shall remain in
effect only for so long as no Default has occurred and is continuing and
Borrower maintains the Leverage Ratio described in (C) above.
(iii) Performance Factors to be Achieved by as of April 30, 1993. So
long as no Default has occurred, Borrower achieves the performance factors
described below, and the Applicable Rate has been and remains reduced pursuant
to each of Section 3.1(H)(i) and (ii) above, upon review and analysis by Lender
of the results of financial performance of Borrower for the period ending April
30, 1993 demonstrating compliance with the following performance factors, the
Applicable Rate
-18-
<PAGE>
shall be further reduced by 0.125%. Such reduction shall be made effective
May 1, 1993 by (a) crediting the Loan Account by the difference between the
amount of interest paid by Borrower to Lender since such effective date and the
amount of interest which would have been paid by Borrower to Lender since such
effective date had the Applicable Rate been so reduced, and (b) recalculating
all accrued but unpaid interest, and all interest to accrue with respect to
future transactions, at the Applicable Rate as so reduced. The performance
factors required to be achieved as of April 30, 1993 in order to reduce the
Applicable Rate are as follows:
(A) The Average Daily Availability for the six months ending April 30,
1993 shall equal or exceed twenty-five percent (25%) of the Average Daily
Loan Balance for such period;
(B) The Adjusted Net Earnings From operations, plus taxes (to the
extent deducted therefrom), for the six months ending April 30, 1993 shall
be at least $1,250,000; and
(C) Borrower's Leverage Ratio as of April 30, 1993 shall not exceed
3.2 to 1.0.
Any rate reduction made pursuant to this Section 3.1(H)(iii) shall remain in
effect only for so long as no Default has occurred and is continuing and
Borrower maintains the Leverage Ratio described in (C) above. In addition, in
the event that following any reduction in the Applicable Rate pursuant to this
Section 3.1(H)(iii), Borrower's annual audited financial statements delivered to
Lender pursuant to this Agreement reflect that Borrower was not entitled to such
reduction (notwithstanding that Borrower's unaudited financial statements
reflected that Borrower was entitled to such reduction), then Borrower shall (i)
immediately pay to Lender the difference between (a) the amount of interest paid
by Borrower to Lender since the date of the reduction of the Applicable Rate,
and (b) the amount of interest which would have been paid by Borrower to Lender
if the Applicable Rate had not been reduced, and (ii) the Applicable Rate shall
be immediately increased by 0.125% per annum with respect to all future
transactions.
3.2. FEES.
(A) Closing Fee. Borrower shall pay to Lender a closing fee of
$125,000, which shall be deemed fully earned and nonrefundable at the closing of
the transactions contemplated hereby and shall be paid concurrently with the
initial Loan hereunder. Such fee shall compensate Lender for the costs
associated with the origination, structuring, processing, approving and closing
of the transactions contemplated by this Agreement, including, but not limited
to, administrative, out-of-pocket,
-19-
<PAGE>
general overhead and lost opportunity costs, but not including any expenses for
which Borrower has agreed to reimburse Lender pursuant to any other provision of
this Agreement (for example, reasonable attorney's fees incurred by Lender) or
any other Agreement.
(B) Audit Fee. Borrower agrees to pay to Lender an audit fee payable
on a semiannual basis beginning on November 1, 1991 and continuing regularly
thereafter on the first day of each six-month period during the term of this
Agreement and upon termination hereof. The audit fee payable at any date shall
equal $2,000 plus all out of pocket costs and expenses incurred by Lender during
the preceding six month period in connection with administering the Loans,
provided the audit fee paid in any twelve-month period shall not exceed
$5,000.00 and shall not at any time be equal to or in excess of the amount which
would cause the interest on the obligations to exceed the Maximum Legal Rate.
This fee shall compensate Lender for certain aspects of administering the Loans,
including, without limitation, certain internal audits, appraisals and
collateral monitoring functions deemed necessary or appropriate by Lender, but
shall not include any expenses for which Borrower has agreed to reimburse Lender
pursuant to any other provision of this Agreement or any Other Agreement.
(C) Unused Facility Fee. Borrower agrees to pay to Lender a quarterly
unused facility fee, equal to one-half percent (0.50%) per annum of the average
daily unused portion of the Commitment, payable quarterly in arrears, beginning
August 1, 1991 and continuing regularly thereafter during the term of this
Agreement and upon the termination hereof.
3.3. TERM OF AGREEMENT; TERMINATION.
(A) The provisions of this Agreement shall be in effect for a period
of three (3) years from the date hereof, through and including May 3, 1994 (the
"Original Term"), unless terminated as provided in Section 3.3(B) hereof, or
extended pursuant to this Section 3.3(A). So long as no Default has occurred,
the original Term shall be automatically extended by one (1) year unless
Borrower has notified Lender, or Lender has notified Borrower, on or before
January 3, 1994, that it does not desire this Agreement to be extended pursuant
to this Section 3.3(A).
(B) Upon at least ninety (9O) days prior written notice to Lender,
Borrower may, at its option, terminate this Agreement; provided, however, no
such termination shall be effective until Borrower has paid all of the
obligations in immediately available funds, together with the termination charge
or prepayment premium provided for in Section 3.3(C) hereof, if any. It is
understood that Borrower may elect to terminate this Agreement in its entirety
only; no section or lending facility may be terminated singly. Lender may
terminate this Agreement without notice upon or after the occurrence of an Event
of Default.
-20-
<PAGE>
(C) At the effective date of such termination by Borrower, Borrower
shall pay to Lender (in addition to the then outstanding principal, accrued
interest and other charges, fees and expenses owing under this Agreement and any
of the other Agreements), as liquidated damages for the loss of the bargain and
not as a penalty, an amount equal to the applicable percentage set forth below
of the highest of the Average Daily Loan Balances outstanding for any month
during the applicable term set forth below during which such termination occurs:
Applicable Term Applicable Percentage
--------------- ---------------------
The date hereof through 3%
May 2, 1992
May 3, 1992, through 2%
May 2, 1993
May 3, 1993, through 1%
May 2, 1994
Thereafter 0%
If termination occurs on the last day of the original Term, Borrower shall not
be obligated to pay Lender any liquidated damages.
(D) All of the obligations shall be forthwith due and payable upon any
termination of this Agreement. Except as otherwise expressly provided for in
this Agreement or any of the other Agreements, no termination or cancellation
(regardless of cause or procedure) of this Agreement or any of the other
Agreements shall in any way affect or impair the powers, obligations, duties,
rights, and liabilities of Borrower or Lender in any way relating to (i) any
transaction or event occurring prior to such termination or cancellation or (ii)
any of the undertakings, agreements, covenants, warranties or representations of
Borrower contained in this Agreement or any of the other Agreements. All such
undertakings, agreements, covenants, warranties and representations shall
survive such termination or cancellation and Lender shall retain its Liens in
the Collateral, and all of its rights and remedies under this Agreement and the
other Agreements notwithstanding such termination or cancellation, until
Borrower has paid the obligations to Lender, in full, in immediately available
funds.
3.4. PAYMENTS. Except where evidenced by notes or other instruments
issued or made by Borrower to Lender specifically containing payment provisions
which are in conflict with this Section 3.4 (in which event the conflicting
provisions of said notes or other instruments shall govern and control), that
portion of the obligations consisting of:
-21-
<PAGE>
(A) Principal, payable on account of Loans made by Lender to Borrower,
shall be payable by Borrower to Lender immediately upon the earliest of (i) the
occurrence of an Event of Default in consequence of which Lender elects to
accelerate the maturity and payment of the Obligations, or (ii) termination of
this Agreement pursuant to Section 3.3 hereof; provided, however, that if the
principal balance of Loans outstanding at any time shall exceed the Borrowing
Base at such time, Borrower shall, ON DEMAND, repay the Loans in an amount
sufficient to reduce the aggregate unpaid principal amount of such Loans by an
amount equal to such excess;
(B) Interest accrued on the obligations shall be due on the earliest
of (i) the first day of each month (for the immediately preceding month),
computed through the last calendar day of the preceding month, (ii) the
occurrence of an Event of Default in consequence of which Lender elects to
accelerate the maturity and payment of the obligations or (iii) termination of
this Agreement pursuant to Section 3.3 hereof; provided, however, that Borrower
hereby irrevocably authorizes Lender, in Lender's sole discretion, to advance to
Borrower, and to charge to the Loan Account hereunder as a Loan, a sum
sufficient each month to pay all interest accrued on the obligations during the
immediately preceding month; and
(C) The remainder of the obligations requiring the payment of money,
if any, shall be payable by Borrower to Lender as and when provided in this
Agreement or the other Agreements.
3.5. APPLICATION OF PAYMENTS AND COLLECTIONS. Borrower irrevocably waives
the right to direct the application of any and all payments and collections at
any time or times hereafter received by Lender from or on behalf of Borrower,
and Borrower hereby irrevocably agrees that Lender shall have the continuing
exclusive right to apply and reapply any and all such payments and collections
received at any time or times hereafter by Lender or its agent against the
obligations, in such manner as Lender may deem advisable, notwithstanding any
entry by Lender upon any of its books and records. If as the result of
collections of Accounts as authorized by Section 5.2 hereof, a credit balance
exists in the Loan Account, such credit balance shall not accrue interest in
favor of Borrower, but shall be available to Borrower at any time or times for
so long as no Default or Event of Default exists.
3.6. STATEMENTS OF ACCOUNT. Lender will account to Borrower monthly with
a statement of Loans, charges and payments made pursuant to this Agreement, and
such account rendered by Lender shall be deemed final, binding and conclusive
upon Borrower, unless Lender is notified by Borrower in writing to the contrary
within thirty (30) days of the date each account was rendered. Such notice
shall only be deemed an objection to those items specifically objected to
therein.
-22-
<PAGE>
SECTION 4. COLLATERAL: GENERAL TERMS
4.1. SECURITY INTEREST IN COLLATERAL. To secure the prompt payment and
performance to Lender of the Obligations, Borrower hereby grants to Lender a
continuing security interest in and Lien upon all the Property and interests in
Property of Borrower, whether now owned or existing or hereafter created,
acquired or arising and wheresoever located, including, without limitation, the
following Property and interests in Property:
(A) Accounts;
(B) Inventory;
(C) Equipment;
(D) General Intangibles;
(E) All monies and other Property of any kind, now or at any time or
times hereafter, in the possession or under the control of Lender or a bailee of
Lender;
(F) All accessions to, substitutions for and all replacements,
products and cash and non-cash proceeds of (A), (B), (C), (D) and (E) above,
including, without limitation, proceeds of and unearned premiums with respect to
insurance policies insuring any of the Collateral; and
(G) All books and records (including, without limitation, customer
lists, credit files, computer programs, print-outs, and other computer materials
and records) of Borrower pertaining to any of (A), (B), (C), (D), (E) or (F)
above.
4.2. FINANCING STATEMENTS; WARRANTIES REGARDING PRIORITY OF THE LIENS OF
LENDER IN THE COLLATERAL.
(A) Borrower agrees to execute the financing statements provided for
by the Code and by Chapter 9, together with any and all other instruments,
assignments or documents, and shall take such other action as may be required to
create, perfect or to continue the perfection of Lender's security interest in
the Collateral. Unless prohibited by applicable law, Borrower hereby authorizes
Lender to execute and file any such financing statement on Borrower's behalf.
The parties agree that a carbon, photographic or other reproduction of this
Agreement shall be sufficient as a financing statement and may be filed in any
appropriate office in lieu thereof.
(B) Borrower is the owner of full legal and equitable title to the
Collateral, free and clear of any Liens, except Permitted Liens, and, other than
in connection with Permitted Liens, no financing statement covering the
Collateral or any part
-23-
<PAGE>
or proceeds thereof is on file in any public office, and the execution by
Borrower of this Agreement and the other Agreements to which it is a party and
the filing of the relevant financing statements in the appropriate jurisdictions
will create in favor of the Lender a valid, perfected first Lien against the
Collateral, subject to the Permitted Liens.
4.3. LOCATION OF COLLATERAL. All Collateral, other than Inventory in
transit and motor vehicles, will at all times be kept by Borrower at one or more
of the business locations set forth in Exhibit "A" and shall not, without the
prior written approval of Lender, be moved therefrom except, prior to an Event
of Default and Lender's acceleration of the maturity of the obligations in
consequence thereof, for sales of Inventory in the ordinary course of business,
dispositions of Equipment that are authorized by Section 7.2 hereof and
Inventory and Equipment in transit from one business location to another.
4.4. INSURANCE OF COLLATERAL. Borrower agrees to maintain and pay for
insurance upon such of the Tangible Collateral as shall be required by Lender,
wherever located, in storage or in transit in vehicles, including goods
evidenced by documents, covering casualty, hazard, public liability and such
other risks and in such amounts and with such insurance companies as shall be
reasonably satisfactory to Lender to insure Lender's interest in the Collateral.
Borrower shall deliver certificates for such policies to Lender with
satisfactory lender's loss payable endorsements naming Lender loss payee. Each
policy of insurance or endorsement shall contain a clause requiring the insurer
to give not less than thirty (30) days prior written notice to Lender in the
event of cancellation of the policy for any reason whatsoever and a clause, if
such a clause is permitted in policies issued in the State of Texas, that the
interest of Lender shall not be impaired or invalidated by any act or neglect of
Borrower or owner of the Property nor by the occupation of the premises for
purposes more hazardous than are permitted by said policy. If Borrower fails to
provide and pay for such insurance, Lender may, at Borrower's expense, procure
the same, but shall not be required to do so. Borrower agrees upon request by
Lender, to deliver to Lender, promptly as rendered, true copies of all reports
made in any reporting forms to insurance companies.
4.5. PROTECTION OF COLLATERAL. Borrower shall pay and discharge when due
all claims to and levies and charges upon any of the Collateral. Lender may, at
any time or times hereafter, in its sole discretion, without waiving or
releasing any obligations, liability or duty of Borrower under this Agreement or
the other Agreements, or any Event of Default, pay when due, acquire or accept
an assignment of any Lien or claim asserted by any Person against any of the
Collateral; provided, however, as long as no Event of Default has occurred,
Lender shall notify Borrower if any single such payment will be in excess of
$5,000. All sums paid by
-24-
<PAGE>
Lender in respect thereof and all costs, fees and expenses, including, without
limitation, attorney's fees and court costs, which are incurred by Lender on
account thereof, shall be payable UPON DEMAND by Borrower to Lender, together
with interest accruing at the Default Rate from the date of demand until paid
and shall be secured by the Collateral. Lender shall not be liable or
responsible in any way for the safekeeping of any of the Collateral or for any
loss or damage thereto or for any diminution in the value thereof, or for any
act or default of any warehouseman, carrier, forwarding agency, or other Person
whomsoever, but the same shall be at Borrower's sole risk.
SECTION 5. PROVISIONS RELATING TO ACCOUNTS
5.1. REPRESENTATIONS, WARRANTIES AND COVENANTS. With respect to all
Accounts, Borrower represents and warrants to Lender that Lender may rely, in
determining which Accounts are Eligible Accounts, on all statements and
representations made by Borrower with respect to any Account or Accounts, and,
unless otherwise indicated in writing to Lender, that with respect to each
Account: it is genuine and in all respects what it purports to be, and it is
not evidenced by a judgment; it arises out of a completed, bona fide sale and
delivery of goods or rendition of services by Borrower in the ordinary course of
its business and in accordance with the terms and conditions of all purchase
orders, contracts or other documents relating thereto; it is for a liquidated
amount maturing as stated in the duplicate invoice covering such sale or
rendition of services; such Account, and Lender's security interest therein, is
not, and, to the best of Borrower's knowledge, will not be in the future,
subject to any offset, Lien, deduction, defense, dispute, counterclaim or any
other adverse condition, except for disputes resulting in returned goods where
the amount in controversy is deemed by Lender to be immaterial, and, to the best
of Borrower's knowledge, each such Account is absolutely owing to Borrower and
is not contingent in any respect or for any reason; Borrower has made no
agreement with any Account Debtor thereunder for any deduction therefrom, except
discounts or allowances which are granted by Borrower in the ordinary course of
its business for prompt payment; to the best of Borrower's knowledge, there are
no facts, events or occurrences which in any way impair the validity or
enforceability thereof or tend to reduce the amount payable thereunder from the
face amount of the invoice and statements delivered to Lender with respect
thereto; to the best of Borrower's knowledge, the Account Debtor thereunder (i)
had the capacity to contract at the time any contract or other document giving
rise to the Account was executed and (ii) such Account Debtor is Solvent; and
Borrower has no knowledge of any fact or circumstance which would impair the
validity or collectibility of the Account.
5.2. COLLECTION OF ACCOUNTS. To expedite collection, Borrower shall
endeavor in the first instance to make collection of their Accounts for Lender.
All remittances received by Borrower on
-25-
<PAGE>
account of Accounts shall be held as Lender's property by Borrower as trustee of
an express trust for Lender's benefit and Borrower shall deposit same in the
Dominion Account. Lender retains the right, upon and after the occurrence of an
Event of Default, to notify Account Debtors that Accounts have been assigned to
Lender and to collect Accounts directly in its own name and to charge the
collection costs and expenses, including attorneys' fees, to Borrower. Lender
has no duty to protect, insure, collect or realize upon the Accounts or preserve
rights in them. For the purpose of computing interest hereunder, all items of
payment received by Lender shall be deemed applied by Lender on account of the
obligations (subject to final payment of such items) on the first Business Day
after Lender's withdrawal of such payment from the Dominion Account in
immediately available funds. Whenever reasonably practicable, Lender shall
withdraw all funds contained in the Dominion Account on a daily basis, for
application of such funds to the payment of the obligations as provided herein.
Borrower shall deposit all proceeds of the Collateral or cause the same to be
deposited in kind in the Dominion Account pursuant to an arrangement with such
banks as may be selected by Borrower and be acceptable to Lender. Borrower
shall deposit all payments or other remittances received by Borrower in their
operating accounts to the Dominion Account. After the occurrence of an Event of
Default Lender may, and Borrower shall at Lender's request, notify Account
Debtors and all other parties obligated on the Collateral to make payments
directly to the Dominion Account. All funds deposited in the Dominion Account
shall immediately become the Property of Lender, and Borrower shall obtain the
agreement by such banks to waive any offset rights against the funds so
deposited. Lender assumes no responsibility for such account arrangement,
including, without limitation, any claim of accord and satisfaction or release
with respect to deposits accepted by any bank thereunder.
5.3. ADMINISTRATION OF ACCOUNTS. Upon the granting of any discounts,
allowances or credits by Borrower that are not shown on the face of the invoice
for the Account involved, Borrower shall promptly report such discounts,
allowances or credits, as the case may be, to Lender and in no event later than
the time of its submission to Lender of the next Schedule of Accounts as
provided in Section 5.4. If an Account includes a charge for any tax payable to
any governmental taxing authority, Lender is authorized, in its sole discretion,
to pay the amount thereof to the proper taxing authority for the account of
Borrower and to charge Borrower's Loan Account hereunder therefor. Whether or
not a Default or an Event of Default has occurred, Lender shall have the right,
at any time or times hereafter, in the name of Lender, any designee of Lender or
Borrower, to verify the validity, amount or any other matter relating to any
Accounts, such verification to be in a format reasonably satisfactory to Lender
and Borrower or, if Lender decides, in its sole discretion, to use a different
format or method, such format or method regarding which Borrower shall have been
notified; provided, however, that after the occurrence of
-26-
<PAGE>
an Event of Default, Lender shall have the right to determine, in its sole
discretion, the format and method for such verification without the obligation
of giving notice to the Borrower of the format and method decided upon by
Lender. Borrower shall cooperate fully with Lender in an effort to facilitate
and promptly conclude any such verification process.
5.4. ASSIGNMENTS, RECORDS AND SCHEDULES OF ACCOUNTS. Borrower shall keep
accurate and complete records of its Accounts and all payments and collections
thereon. On or before the 20th day of each month from and after the date
hereof, Borrower shall deliver to Lender, in form acceptable to Lender, a
detailed aged trial balance of all Accounts existing as of the last day of the
preceding month, specifying the names, addresses, face value, dates of invoices
and due dates for each Account Debtor obligated on an Account so listed
("Schedule of Accounts"), along with, if requested by Lender, copies of proof of
delivery and the original copy of all documents, including, without limitation,
repayment histories and present status reports relating to the Accounts so
scheduled and such other matters and information relating to the status of then
existing Accounts as Lender shall reasonably request, and also with, if
requested by Lender, formal written assignments by Borrower to Lender of all of
Borrower's Accounts, together with copies of invoices or invoice registers
related thereto. If any amounts due and owing in excess of $10,000 are in
dispute between Borrower and any Account Debtor, Borrower shall provide Lender
with written notice thereof at the time of submission of the next Schedule of
Accounts, explaining in detail the reason for the dispute, all claims related
thereto, and the amount in controversy. In addition to and not in limitation of
the other provisions of this Section 5.4, if at any time a Default occurs,
Lender shall thereafter have the right to require that Borrower deliver to
Lender such other reports, information and materials regarding the Accounts as
shall be specified by Lender.
SECTION 6. PROVISIONS RELATING TO INVENTORY
6.1. REPRESENTATIONS, WARRANTIES AND COVENANTS. With respect to
Inventory, Borrower represents and warrants to Lender that Lender may rely, in
determining which items of Inventory constitute Eligible Inventory, on all
statements and representations made by Borrower with respect to any Inventory
and, unless otherwise indicated in writing to Lender, that: all Inventory is
presently and will continue to be located at Borrower's places of business
listed on Exhibit "A" and will not be removed therefrom, except as authorized by
Section 4.3 of this Agreement; no Inventory is now, nor shall any Inventory at
any time or times hereafter be, stored with a bailee, warehouseman or similar
party unless (i) Lender shall have granted its prior written consent thereto,
(ii) such bailee, warehousemen or similar party shall have delivered to Lender a
warehousemen's letter in the form requested by Lender, and (iii) all original
warehouse receipts or other documents relating
-27-
<PAGE>
to such Inventory shall have been delivered to Lender; and no Inventory is or
will be sold by consignment by any Person without Lender's prior written
consent, except as otherwise disclosed on Exhibit "A".
6.2. INVENTORY REPORTS. On or before the 20th day of each month from and
after the date hereof, Borrower agrees to furnish Lender with Inventory reports.
Such reports shall be in form and detail satisfactory to Lender. Borrower shall
conduct such physical inventory tests as are acceptable to the independent
certified public accountants of Borrower who are preparing the financial
statements referred to in Section 9.1(J) and Borrower shall provide to Lender,
upon request by Lender, an annual report regarding their physical inventory
based upon such testing procedures, as well as copies of any other inventory
tests conducted by or on behalf of Borrower, together with such supporting
information as Lender shall, in its discretion, request. In addition to and not
in limitation of the other provisions of this Section 6.2, if at any time a
Default occurs, Lender shall thereafter have the right to require that Borrower
deliver to Lender such other reports, information and materials regarding the
Inventory as shall be specified by Lender.
6.3. RETURNS OF INVENTORY. If at any time or times hereafter any Account
Debtor returns any Inventory with a cost or market value in excess of $10,000 to
Borrower, Borrower shall notify Lender of the same immediately, specifying the
reason for such return and the location and condition of the returned Inventory.
SECTION 7. PROVISIONS RELATING TO EQUIPMENT
7.1. REPRESENTATIONS, WARRANTIES AND COVENANTS. With respect to the
Equipment, Borrower represents, warrants and covenants to and with Lender that
Borrower has good and marketable title to the Equipment, that the Equipment is
in good operating condition and repair, and all necessary replacements of and
repairs thereto shall be made so that the value and operating efficiency of the
Equipment shall be maintained and preserved, reasonable wear and tear excepted.
Borrower will not permit any of the Equipment to become affixed to any real
Property leased to Borrower, so that an interest arises therein under the real
estate laws of the applicable jurisdiction, unless the landlord of such real
Property has executed a landlord waiver in favor of Lender, and Borrower will
not permit any of the Equipment to become an accession to any personal Property,
other than Equipment subject to first priority Liens in favor of Lender, subject
only to Permitted Liens. Immediately on request therefor by Lender, Borrower
shall deliver to Lender any and all evidence of ownership, if any, of any of the
Equipment (including, without limitation, certificates of title and applications
for title). Borrower shall maintain accurate records itemizing and describing
the kind, type, quality, quantity and value of its Equipment and all
dispositions made in accordance with
-28-
<PAGE>
Section 7.2 hereof, and shall furnish Lender with a current schedule containing
the foregoing information on at least an annual basis and more often if
requested by Lender.
7.2. DISPOSITIONS OF EQUIPMENT. Borrower will not sell, lease or
otherwise dispose of or transfer any of the Equipment or any part thereof
without the prior written consent of Lender; provided, however, that the
foregoing restriction on the sale, lease, disposition or other transfer of any
Equipment shall not apply, for so long as no Default or Event of Default exists,
to (i) dispositions of Equipment which, in the aggregate during any consecutive
twelve-month period, has a fair market value or book value, whichever is less,
of $100,000 or less, provided that all proceeds thereof are turned over to
Lender to be applied by Lender in accordance with Section 3.5 hereof, or (ii)
replacement of Equipment that is substantially worn, damaged or obsolete with
Equipment of like kind, function and value, provided that the replacement
Equipment shall be acquired prior to or concurrently with any disposition of the
Equipment that is to be replaced, the replacement Equipment shall be free and
clear of Liens, other than Permitted Liens, Borrower shall give Lender at least
five (5) days prior written notice of such disposition, and Borrower shall turn
over to Lender all proceeds realized from any such disposition to be applied by
Lender in accordance with Section 3.5 hereof.
SECTION 8. REPRESENTATIONS AND WARRANTIES
8.1. GENERAL REPRESENTATIONS AND WARRANTIES. To induce Lender to enter
into this Agreement and to make Loans hereunder, Borrower warrants, represents
and covenants to Lender that:
(A) Borrower is a corporation duly organized, validly existing and
in good standing under the laws of the State of oklahoma and that its Federal
Taxpayer Identification Number is 73-1013654; has duly qualified and is
authorized to do business and is in good standing as a foreign corporation in
all states and jurisdictions where the character of its Properties or the nature
of its activities make such qualification necessary, except to the extent
previously disclosed to Lender in writing; and has not been known as or used any
corporate names, except as disclosed on Exhibit "B" attached hereto and made a
part hereof and, to the best of its knowledge and belief, has not been known as
or used any fictitious or trade names, except as disclosed on Exhibit "B"
attached hereto and made a part hereof.
(B) Borrower has the power and is duly authorized to enter into,
deliver and perform this Agreement and each of the other Agreements to which it
is a party, and this Agreement is, and each of the other Agreements when
delivered under this Agreement will be, a legal, valid and binding obligation of
Borrower, enforceable against it in accordance with their respective terms.
-29-
<PAGE>
(C) Borrower is not engaged principally, nor as one of its important
activities, in the business of purchasing or carrying "margin stock" (within the
meaning of Regulation G or U of the Board of Governors of the Federal Reserve
System), and no part of the proceeds of any Loans to Borrower will be used to
purchase or carry any margin stock or to extend credit to others for the purpose
of purchasing or carrying any margin stock, or be used for any purpose which
violates or is inconsistent with the provisions of Regulation X of said Board of
Governors.
(D) Borrower has all governmental consents, approvals,
authorizations, permits, certificates, inspections, and franchises necessary to
conduct its business as heretofore or proposed to be conducted by it and to own
or lease and operate its Properties as now owned or leased by it.
(E) Exhibit "F" sets forth a complete and accurate list of all items
of Intellectual Property which, individually or in the aggregate, are material
to the business, operations, properties, assets or condition of Borrower.
Borrower owns or possesses all the patents, trademarks, service marks, trade
names, copyrights, licenses and other Intellectual Property necessary for the
present and planned future conduct of its business without any conflict with the
rights of others. Borrower has duly assigned and granted a first, prior and
perfected Lien to Lender in and to such Intellectual Property to secure the
obligations, and no consent, approval or authorization of any Person is or would
be required in connection with such assignment or granting of a Lien.
(F) Except as set forth on Exhibit "C" attached hereto and made a
part hereof, there are no actions, suits, proceedings or investigations pending,
or to the knowledge of Borrower, threatened, against or affecting Borrower or
any of its Properties in any court or before any governmental authority or
arbitration board or tribunal, and no action, suit, proceeding or investigation
shown on Exhibit "C" involves the possibility of materially and adversely
affecting the Properties or condition (financial or otherwise) of Borrower or
the ability of Borrower to perform this Agreement.
(G) Borrower has good, indefeasible and marketable title to and fee
simple ownership of, or valid and subsisting leasehold interests in, all of its
real Property, and good title to all of its other Property, in each case, free
and clear of all Liens, except Liens granted hereunder or under any other
Agreement and Permitted Liens.
(H) The balance sheets of Borrower as of February 28, 1991, and the
related statements of income, changes in stockholder's equity, and changes in
financial position for the periods ended on such dates, have been prepared in
accordance with GAAP (except for changes in application in which Borrower's
-30-
<PAGE>
independent certified public accountants concur), and present fairly the
financial positions of Borrower at such dates and the results of Borrower's
operations for such periods. Since February 28, 1991, there has been no
material change in the condition, financial or otherwise, of Borrower, as shown
on the balance sheet as of such date and no change in the aggregate value of
Property owned by Borrower, except changes in the ordinary course of business,
none of which individually or in the aggregate has been materially adverse.
(I) There is no fact which Borrower has failed to disclose to Lender
in writing which materially affects adversely or, so far as Borrower can now
foresee, will materially affect adversely the Properties, business, prospects,
profits, or condition (financial or otherwise) of Borrower or the ability of
Borrower to perform this Agreement.
(J) Borrower has not received any notice to the effect that it is
not in full compliance with any of the requirements of ERISA and the regulations
promulgated thereunder. No fact or situation, including, but not limited to, any
Reportable Event, or Prohibited Transaction exists in connection with any Plan.
(K) Borrower has filed all federal, state and local tax returns and
other reports it is required by law to file and has paid, or made provision for
the payment of, all taxes, assessments, fees and other governmental charges that
are due and payable.
(L) Borrower has duly complied with, and its Properties, business
operations and leaseholds are in compliance in all material respects with, the
provisions of all federal, state and local laws, rules and regulations
applicable to Borrower, its Properties or the conduct of its business.
(M) No Default or Event of Default will exist or result from the
execution and delivery of this Agreement or Borrower's performance hereunder.
(N) There are no claims for brokerage commissions, finder's fees or
investment banking fees in connection with the transactions contemplated by this
Agreement.
(O) Borrower has no Subsidiaries, other than Red Man Ventures, Inc.,
which has no operations, income or assets other than ownership of certain
undeveloped real estate and an interest in an aircraft.
(P) The issued and outstanding stock of Borrower consists of (i) an
aggregate of 134,764.69 shares of class A common stock, which is voting stock,
(ii) 34,344 shares of class B common stock, which is non-voting stock, and (iii)
10,000 shares of series B preferred stock. Borrower has delivered to Lender
true
-31-
<PAGE>
and correct copies of all agreements pursuant to which the holders of the series
B preferred stock are entitled to receive Distributions, including a true and
correct copy of the Financial Agreement.
8.2. REAFFIRMATION AND SURVIVAL OF REPRESENTATIONS. Each request for a
Loan made by Borrower pursuant to this Agreement or any of the other Agreements
shall constitute (i) an automatic representation and warranty by Borrower to
Lender that there does not then exist any Default or Event of Default and (ii) a
reaffirmation, as of the date of said request, of all of the representations and
warranties of Borrower contained in this Agreement and the other Agreements.
Borrower covenants, warrants and represents to Lender that all representations
and warranties of Borrower contained in this Agreement or any of the other
Agreements shall be true at the time of Borrower's execution of this Agreement
and the other Agreements, and shall survive the execution, delivery and
acceptance thereof by Lender and the parties thereto and the closing of the
transactions described therein or related thereto.
SECTION 9. COVENANTS AND CONTINUING AGREEMENTS
9.1. AFFIRMATIVE COVENANTS. During the term of this Agreement, and
thereafter for so long as there are any obligations to Lender, Borrower
covenants that, unless otherwise consented to by Lender in writing, it shall:
(A) Pay and discharge all taxes, assessments and governmental
charges upon it, its income and Properties as and when such taxes, assessments
and charges are due and payable, except and to the extent only that such taxes,
assessments and charges are being actively contested in good faith and by
appropriate proceedings, Borrower maintains adequate reserves on its books
therefor and the nonpayment of such taxes does not result in a Lien upon any
Properties of Borrower, other than a Permitted Lien. Borrower shall also pay and
discharge any lawful claims which, if unpaid, might become a Lien against any of
Borrower's Properties, except for Permitted Liens.
(B) File all federal, state and local tax returns and other reports
Borrower is required by law to file and maintain adequate reserves for the
payment of all taxes, assessments, governmental charges, and levies imposed upon
it, its income, or its Profits, or upon any Property belonging to it.
(C) Pay to Lender, ON DEMAND, any and all fees, costs or expenses
which Lender or any Participating Lender pays to a bank or other similar
institution (including, without limitation, any fees paid by the Lender to any
Participating Lender) arising out of or in connection with (i) the forwarding to
Borrower or any other Person on behalf of Borrower, by Lender or any
Participating Lender, proceeds of Loans made by Lender to Borrower pursuant to
this Agreement, and (ii) the depositing for collection, by Lender
-32-
<PAGE>
or any Participating Lender, of any check or item of payment received or
delivered to Lender or any Participating Lender on account of the obligations.
(D) Preserve and maintain its separate corporate existence and all
rights, privileges, and franchises in connection therewith, and maintain its
qualification and good standing in all states in which the failure to qualify
would have a materially adverse effect on Borrower, Borrower's business or
Lender's security interest in the Collateral.
(E) Maintain its Properties in good condition and make all necessary
renewals, repairs, replacements, additions and improvements thereto.
(F) Comply with all laws, ordinances, governmental rules and
regulations to which it is subject, and obtain and keep in force any and all
licenses, permits, franchises, or other governmental authorizations necessary to
the ownership of its Properties or to the conduct of its business, which
violation or failure to obtain might materially and adversely affect the
Properties or condition (financial or otherwise) of Borrower.
(G) (i) At all times make prompt payment of contributions required
to meet the minimum funding standards set forth in ERISA with respect to each
Plan; (ii) promptly after the filing thereof, furnish to Lender copies of any
annual report required to be filed pursuant to ERISA in connection with each
Plan and any other employee benefit plan of it and its Affiliates subject to
said Section; (iii) notify Lender as soon as practicable of any Reportable Event
and of any additional act or condition arising in connection with any Plan which
Borrower believes might constitute grounds for the termination thereof by the
Pension Benefit Guaranty Corporation or for the appointment by the appropriate
United States district court of a trustee to administer the Plan; and (iv)
furnish to Lender, promptly upon Lender's request therefor, such additional
information concerning any Plan or any other such employee benefit plan as may
be reasonably requested.
(H) Keep adequate records and books of account with respect to its
business activities in which proper entries are made in accordance with GAAP,
reflecting all its financial transactions.
(I) Permit representatives of Lender, from time to time, as often as
may be reasonably requested, but only during normal business hours, to visit and
inspect the Properties of Borrower, inspect and make extracts from its books and
records, and discuss with its officers, its employees and its independent
accountants, its business, assets, liabilities, financial condition, business
prospects and results of operations.
-33-
<PAGE>
(J) Cause to be prepared and furnished to Lender the following (all
to be kept and prepared in accordance with GAAP applied on a consistent basis,
unless Borrower's certified public accountants concur in any change therein and
such change is disclosed to Lender and are consistent with GAAP): (i) as soon as
possible, but not later than one hundred twenty (120) days after the close of
each fiscal year of Borrower, unqualified audited financial statements of
Borrower as of the end of such year, certified by a firm of independent
certified public accountants of recognized standing selected by Borrower, but
acceptable to Lender; (ii) as soon as possible, but not later than twenty (20)
days after the end of each month (other than each October) hereafter (and not
later than sixty (60) days after the end of each October hereafter), unaudited
profit and loss statements and balance sheets of Borrower as of the end of such
month, and of the portion of Borrower's fiscal year then elapsed, certified by
the principal financial officer of Borrower as fairly presenting the financial
position and results of operations of Borrower for such month and period.
Concurrently with the delivery of the financial statements described in clause
(i) of this Section 9.1(J), Borrower shall cause to be prepared and furnish to
Lender a certificate of the aforesaid certified public accountants certifying to
Lender that, based upon their examination of the financial statements of
Borrower, they are not aware of any Default or Event of Default, or, if they are
aware of such Default or Event of Default, specifying the nature thereof. At the
end of each fiscal quarter of Borrower, concurrently with the delivery of the
financial statements described in clause (ii) of this Section 9.1(J), Borrower
shall cause to be prepared and furnished to Lender a certificate from the Chief
Financial officer of Borrower certifying to Lender that, to the best of his
knowledge, Borrower has kept, observed, performed and fulfilled each and every
covenant, obligation and agreement binding upon Borrower in this Agreement and
the other Agreements and that no Default or Event of Default has occurred, or,
if such Default or Event of Default has occurred, specifying the nature thereof.
(K) At Lender's request, promptly execute or cause to be executed
and deliver to Lender any and all documents, instruments and agreements deemed
necessary by Lender to perfect or to continue the perfection of Lender's Liens,
to facilitate collection of the Collateral or otherwise to give effect to or
carry out the terms or intent of this Agreement or any of the other Agreements.
(L) Cause to be prepared and furnished to Lender as soon as
possible, but not later than ninety (90) days after the close of each fiscal
year of Borrower, a business plan forecasting, on a monthly basis, the income
statement and the balance sheet of Borrower (an "Annual Business Plan").
(M) Cause to be prepared and furnished to each fiscal quarter of the
Borrower, a certificate (the "Compliance
-34-
<PAGE>
Certificate"), which shall state the Borrower's compliance or non-compliance
with the financial covenants contained in Section 9.3 of this Agreement, the
Compliance Certificate to be substantially in the form of Exhibit "H" to this
Agreement, the Compliance Certificate for each of the first three fiscal
quarters in each fiscal year of the Borrower to be furnished to Lender on or
before the 20th day after the end of each such fiscal quarter, with the
Compliance Certificate for the fourth fiscal quarter in each fiscal year of the
Borrower to be furnished to Lender on or before the 120th day after the end of
such fourth fiscal quarter.
(N) Cause to be prepared and delivered to Lender periodic Borrowing
Base Certificates, Schedules of Accounts and Inventory Reports as frequently as
Lender may request for the period selected by Lender.
9.2. NEGATIVE COVENANTS. During the term of this Agreement, and
thereafter for so long as there are any obligations to Lender, Borrower
covenants that, unless Lender has first consented thereto in writing, it will
not:
(A) Merge or consolidate with any Person, nor acquire all or any
substantial part of the Properties of any Person.
(B) Make any loans or other advances of money (other than for
salary, travel advances, advances against commissions and other similar advances
in the ordinary course of business) to any Person.
(C) Enter into any transaction with any Affiliate or stockholder,
except in the ordinary course of and pursuant to the reasonable requirements of
Borrower's business and upon fair and reasonable terms which are fully disclosed
to Lender and are no less favorable to Borrower than would obtain in a
comparable arm's length transaction with a Person not an Affiliate or
stockholder of Borrower.
(D) Guarantee, assume, endorse or otherwise, in any way, become
directly or contingently liable with respect to the Indebtedness of any Person,
except by endorsement of instruments or items of payment for deposit or
collection.
(E) Create or suffer to exist any Lien upon any of its Property,
income or profits, whether now owned or hereafter acquired, except: (i) Liens at
any time granted in favor of Lender; (ii) Liens for taxes (excluding any Lien
imposed pursuant to any of the provisions of ERISA) not yet due or being
contested as permitted by Section 9.1(A) hereof, but only if in Lender's
judgment, such Lien does not affect adversely Lender's rights or the priority of
Lender's Lien in the Collateral; (iii) Liens securing the claims or demands of
materialmen, mechanics, carriers, warehousemen, and other like Persons for
labor, materials or
-35-
<PAGE>
supplies incurred in the ordinary course of Borrower's business, but only if the
payment thereof is not at the time required and only if such Liens are junior to
the Liens in favor of Lender; (iv) deposits made in the ordinary course of
business in connection with worker's compensation, unemployment insurance,
social security and other like laws; (v) attachment, judgment and other similar
non-tax Liens arising in connection with court proceedings, but only if and for
so long as the execution or other enforcement of such Liens is and continues to
be effectively stayed and bonded on appeal in a manner satisfactory to Lender
for the full amount thereof, the validity and amount of the claims secured
thereby are being actively contested in good faith and by appropriate lawful
proceedings and such Liens do not, in the aggregate, materially detract from the
value of the Property of Borrower or materially impair the use thereof in the
operation of Borrower's business; (vi) Purchase Money Liens securing
indebtedness incurred for the payment of Capital Expenditures permitted by this
Agreement; (vii) reservations, exceptions, easements, rights of way, and other
similar encumbrances affecting real Property, provided that, in Lender's sole
judgment, they do not in the aggregate materially detract from the value of said
Properties or materially interfere with their use in the ordinary conduct of
Borrower's business and, if said real Property constitutes Collateral, Lender
has consented thereto; (viii) Liens permitted pursuant to the provisions of any
other Agreement; (ix) Landlord or warehouseman liens with respect to any
premises leased by Borrower or upon which Borrower's goods are stored, as long
as Lender pursuant to Section 10.1(C) of this Agreement has deducted as a
reserve from the amount of the Borrowing Base an amount equal to the total
rental for the remaining lease term for such premises; (x) Liens specified on
Exhibit "D" attached hereto and (xi) such other Liens as Lender may hereafter
approve in writing.
(F) Make Distributions during any fiscal year, in excess of the
aggregate amount of $15O,OOO, other than (i) compensation of officers and
directors permitted pursuant to Section 9.2(M), and (ii) redemption of the
currently outstanding series B preferred stock of Borrower on October 31, 1993
pursuant to the terms of that certain Amended Financial Agreement dated October
24, l99O between otter, Inc. and Borrower (The "Financial Agreement"), provided,
immediately after giving effect to such redemption, the Borrowing Base as of
such date, less the aggregate amount of Loans outstanding as of such date,
equals or exceeds twenty-five percent (25%) of the Average Daily Loan Balance
for the six months preceding such date. Borrower shall not modify the terms of
the Financial Agreement.
(G) Hereafter create any Subsidiary or divest itself of any material
assets by transferring them to any Subsidiary to whose existence Lender has
consented.
-36-
<PAGE>
(H) Make Capital Expenditures or payments on account of Capital
Leases which exceed in the aggregate (i) for the period from May 1, 1991 to
October 31, 1991, $150,000, or (ii) $300,OOO for any fiscal year thereafter
occurring.
(I) Transfer its principal place of business or chief executive
office, or open manufacturing plants, or maintain or transfer Collateral or
records with respect to Accounts or Inventory, to or at any locations other than
those at which the same are presently kept or maintained, as set forth on
Exhibit "A" hereto, except upon at least thirty (3O) days prior written notice
to Lender and after the delivery to Lender of financing statements, if required
by Lender, in form satisfactory to Lender to perfect or continue the perfection
of Lender's Lien and security interest hereunder.
(J) Enter into any new business; make any material change in any of
Borrower's business objectives, purposes and operations; or incur any new
operating lease obligations resulting in additional lease expenditures of more
than $2OO,OOO during any fiscal year.
(K) Sell, lease, assign, transfer or otherwise dispose of any of its
Properties, including any disposition of Property as part of a sale and
leaseback transaction, to or in favor of any Person, except (i) sales of
Inventory in the ordinary course of Borrower's business for so long as no Event
of Default exists hereunder, or (ii) dispositions expressly authorized by this
Agreement.
(L) Use any corporate name (other than its own) or any fictitious
name, tradestyle or "d/b/a", except for names disclosed in writing to Lender on
or before the Closing Date.
(M) Permit the total annual compensation (including, without
limitation, salaries, fees, commissions and other payments, whether direct or
indirect, in money, or otherwise, but not including bonuses) of its officers and
directors to exceed during any fiscal year 12O% of the amount paid during the
preceding fiscal year. Permit the total amount of bonuses paid to its officers
and directors to exceed during any fiscal year 15O% of the amount paid during
the preceding fiscal year.
(N) Own, purchase or acquire (or enter into any contract to purchase
or acquire) any "margin security" as defined by any regulation of the Federal
Reserve Board as now in effect or as the same may hereafter be in effect unless,
prior to any such purchase or acquisition or entering into any such contract,
Lender shall have received an opinion of counsel satisfactory to Lender to the
effect that such purchase or acquisition will not cause this Agreement to
violate Regulations G, U, or X or any other regulation of the Federal Reserve
Board then in effect.
-37-
<PAGE>
(O) Make or have any Restricted Investment.
(P) Change its fiscal year.
(Q) Create, assume or suffer to exist any indebtedness for borrowed
money or issue or sell any obligation of Borrower (whether absolutely,
concurrently or otherwise), excluding only (i) the obligations; (ii) accounts
payable and accrued liabilities arising in the ordinary course of Borrower's
business; (iii) indebtedness incurred for the payment of Capital Expenditures
permitted by this Agreement; (iv) existing indebtedness of Borrower which shall
have been approved in writing by Lender, and which shall be set forth on Exhibit
"D" attached hereto and made a part hereof; (v) additional indebtedness of
Borrower not to exceed an aggregate of $1OO,OOO in principal outstanding at any
time on terms and conditions satisfactory to Lender and (vi) such other
indebtedness as Lender may hereafter approve in writing.
9.3. SPECIFIC FINANCIAL COVENANTS. During the term of this Agreement, and
thereafter for so long as there are any obligations to Lender, Borrower
covenants that, unless otherwise consented to by Lender in writing, Borrower
shall:
(A) Maintain a Leverage Ratio not greater than the ratio shown below
for the date corresponding thereto:
Date Amount
- ------------------------------------ ----------
May 1, 1991 to October 31, 1991 3.5 to 1.0
November 1, 1991 to April 3O, 1992 3.4 to 1.0
May 1, 1992 and Thereafter 3.3 to 1.0
(B) Maintain at all times a ratio of (i) Current Assets to (ii)
Current Liabilities plus, to the extent not included therein, the obligations,
of not less than 1.1 to 1.0.
(C) Maintain positive Net Income plus taxes (to extent deducted
therefrom) calculated as of the last day of month for the six-month period
ending on such day.
(D) Maintain a positive Excess Cash Flow calculated as of the last
day of each month for the six-month period ending on such day.
(E) Achieve Adjusted Net Earnings from operations, taxes (to the
extent deducted therefrom), equal to the specified below for the periods
specified below:
-38-
<PAGE>
Period Amount
- ------ ------
fiscal year ending October 31, 1991 $2,700,000
May 1, 1991 to April 30, 1992 $2,200,000
fiscal year ending October 31, 1992 $2,200,000
and each fiscal year thereafter
SECTION 10. CONDITIONS PRECEDENT
Notwithstanding any other provision of this Agreement or any of the other
Agreements, and without affecting in any manner the rights of Lender under the
other Sections of this Agreement, it is understood and agreed that Lender will
not make any Loan under Section 2 of this Agreement unless and until each of the
following conditions has been and continues to be satisfied, all in form and
substance satisfactory to Lender and its counsel:
10.1. DOCUMENTATION. Lender shall have received the following documents,
or provision of this Agreement or any of the other Agreements, all in form and
substance satisfactory to Lender and its counsel:
(A) Certified copies of Borrower's casualty insurance policies,
together with loss payable endorsements on Lender's standard form of loss payee
endorsement naming Lender as loss payee, and certified copies of Borrower's
liability insurance policies, together with endorsements naming Lender as a co-
insured;
(B) Copies of all filing receipts or acknowledgments issued by any
governmental authority to evidence any filing or recordation necessary to
perfect the Liens of Lender in the Collateral and evidence in a form acceptable
to Lender that such Liens constitute valid and perfected security interests and
Liens, having the Lien priority specified in Section 4.2(B) hereof;
(C) Landlord or warehouseman agreements with respect to all premises
leased by Borrower or upon which Borrower's goods are stored; provided, however,
if a satisfactory landlord or warehouseman agreement is not received by Lender
with respect to any premises leased by Borrower, then an amount equal to the
total rental for the remaining lease term for such premises shall be deducted as
a reserve from the amount of the Borrowing Base; provided, that Lender may
delete as a further reserve from the Borrowing Base such additional amount as
Lender deems proper and necessary, based upon Lender's analysis of the terms of
the lease or warehouseman agreement or other agreement regarding such premises
upon which Borrower's goods are stored;
-39-
<PAGE>
(D) A copy of the Articles or Certificate of Incorporation of
Borrower, and all amendments thereto, certified by the Secretary of State or
other appropriate official of its jurisdiction of incorporation;
(E) Good standing certificates for Borrower, issued by the Secretary
of State or other appropriate official of Borrower's jurisdiction of
incorporation and each jurisdiction where the conduct of Borrower's business
activities or the ownership of its Properties necessitates qualification;
(F) A closing certificate signed by Borrower, dated as of the date
hereof, stating that (i) the representations and warranties set forth in Section
8 hereof are true and correct on and as of such date, (ii) Borrower is on such
date in compliance with all the terms and provisions set forth in this Agreement
and (iii) on such date no Default or Event of Default has occurred or is
continuing;
(G) The other Agreements duly executed by the relevant Persons and
delivered by Borrower;
(H) The favorable, written opinion of Noss, Monnet & Edmiston,
counsel to Borrower, regarding Borrower, Guarantor, this Agreement, the other
Agreements, and the transactions contemplated by this Agreement and the other
Agreements, to be in form and content acceptable to Lender and its counsel;
(I) Duly executed agreement establishing the Dominion Account with a
financial institution acceptable to Lender for the collection or servicing of
the Accounts;
(J) The Annual Business Plan for 1991, a copy of which shall be
attached hereto as Exhibit "I";
(K) Such assignments of notes and liens as Lender may request, duly
executed by each holder of Indebtedness being refinanced by the obligations;
(L) Duly executed acknowledgement by the holder of the series B
preferred stock of Borrower to the effect that the subordination provisions of
the Financial Agreement inure to the benefit of Lender; and
(M) Such other documents, instruments and agreements as Lender shall
reasonably request in connection with the foregoing matters.
10.2. OTHER CONDITIONS. The following conditions have been and shall
continue to be satisfied, in the sole discretion of Lender:
-40-
<PAGE>
(A) No Default or Event of Default shall exist;
(B) Each of the conditions precedent set forth in the Other
Agreements shall have been satisfied;
(C) Since February 28, 1991, there shall not have occurred any
material adverse change in the business, financial condition or results of
operations of Borrower, or the existence or value of any Collateral, or any
event, condition or state of facts which would reasonably be expected materially
and adversely to affect the business, financial condition or results of
operations of Borrower;
(D) No action, proceeding, investigation, regulation or legislation
shall have been instituted, threatened or proposed before any court,
governmental agency or legislative body to enjoin, restrain or prohibit, or to
obtain damages in respect of, or which is related to or arises out of this
Agreement or the consummation of the transactions contemplated hereby or which,
in Lender's sole discretion, would make it inadvisable to consummate the
transactions contemplated by this Agreement or any of the other Agreements; and
(E) After giving effect to the initial Loan to be made hereunder,
the proceeds of which shall be used solely (i) for the satisfaction of existing
Indebtedness of Borrower to F&M Bank and Trust Company of Tulsa, Oklahoma, (ii)
for the satisfaction of at least $60O,OOO in trade payables and other unsecured
indebtedness owed to trade creditors of Borrower, and (iii) for the payment of
any of the fees specified in Section 3.2 of this Agreement and, to the extent
approved by Lender, to the payment of any costs associated with the closing of
the transactions contemplated by this Agreement, the Borrowing Base shall exceed
the amount of such initial Loan by at least $6,250,000.
SECTION 11. EVENTS OF DEFAULT; RIGHTS AND REMEDIES ON DEFAULT
11.1. EVENTS OF DEFAULT. The occurrence of any one or more of the
following events shall constitute an "Event of Default":
(A) Borrower shall fail to pay any of the Obligations on the due
date thereof (whether due at stated maturity, on demand, upon acceleration or
otherwise);
(B) any warranty, representation, or other statement made or
furnished to Lender by or on behalf of Borrower or in any instrument,
certificate or financial statement furnished in compliance with or in reference
to this Agreement or any of the other Agreements proves to have been false or
misleading in any material respect when made or furnished;
-41-
<PAGE>
(C) Borrower (i) shall fail or neglect to perform, keep or observe
any covenant contained in this Agreement (other than a covenant a default in the
performance or observance of which is dealt with specifically in clause (ii)
hereof or elsewhere in this Section 11.1) and the breach of such covenant is not
cured to Lender's satisfaction within fifteen (15) days after the sooner to
occur of Borrower's receipt of notice of such breach from Lender or the date on
which such failure or neglect becomes known to any officer of Borrower; or (ii)
shall fail or neglect to perform, keep or observe any covenant contained in
Sections 4.2, 4.3, 4.4, 4.5, 5.2, 5.4, 7.2, 9.1(A), 9.1(E), 9.1(F), 9.1(J),
9.1(K), 9.1(N), 9.2 or 9.3 of this Agreement;
(D) any event of default shall occur under, or Borrower or Guarantor
shall default in the performance or observance of any term, covenant, condition
or agreement contained in, any of the other Agreements and such default shall
continue beyond any applicable period of grace;
(E) there shall occur any default or event of default on the part of
Borrower under any agreement, document or instrument to which Borrower is a
party or by which Borrower or any of its Property is bound, creating or relating
to any Indebtedness if the payment or maturity of such Indebtedness is
accelerated in consequence of such event of default or demand for payment of
such Indebtedness is made;
(F) any material loss, theft, damage or destruction not fully
covered by insurance (as required by this Agreement and subject to such
deductibles as Lender shall have agreed to in writing), or sale, lease or
encumbrance of any of the Collateral or the making of any levy, seizure, or
attachment thereof or thereon, except in all cases as may be specifically
permitted by other provisions of this Agreement;
(G) there shall occur any material adverse change in the financial
condition or business prospects of Borrower;
(H) Borrower or Guarantor shall cease to be Solvent or shall suffer
the appointment of a receiver, trustee, custodian or similar fiduciary, or shall
make an assignment for the benefit of creditors, or any petition for an order
for relief shall be filed by or against Borrower or Guarantor under the
Bankruptcy Code (if against Borrower or Guarantor, the continuation of such
proceeding for more than thirty (30) days), or Borrower or Guarantor shall make
any offer of settlement, extension or composition to its unsecured creditors
generally;
(I) Guarantor shall cease to collectively own and control,
beneficially and of record, at least fifty-one percent (51%) of the issued and
outstanding voting capital stock of Borrower;
-42-
<PAGE>
(J) a Reportable Event shall occur which Lender, in its sole
discretion, shall determine in good faith constitutes grounds for the
termination by the Pension Benefit Guaranty Corporation of any Plan or for the
appointment by the appropriate United States district court of a trustee for any
Plan, or if any Plan shall be terminated or any such trustee shall be requested
or appointed.
11.2. ACCELERATION OF THE OBLIGATIONS. Without in any way limiting the
right of Lender to demand payment of any portion of the obligations payable ON
DEMAND in accordance with Section 3.4 hereof, upon and after the occurrence of
an Event of Default as above provided, all or any portion of the obligations due
or to become due from Borrower to Lender, whether under this Agreement, or any
of the other Agreements or otherwise, shall, at the option of Lender and without
notice or demand by Lender, become at once due and payable and Borrower shall
forthwith pay to Lender, in addition to any and all sums and charges due, the
entire principal of and interest accrued on the obligations.
11.3. REMEDIES. Upon and after the occurrence of an Event of Default,
Lender shall have and may exercise from time to time the following rights and
remedies:
(A) All of the rights and remedies of a secured party under the Code
or under other applicable law, including without limitation the provisions of
Chapter 9, and all other legal and equitable rights to which Lender may be
entitled, all of which rights and remedies shall be cumulative, and none of
which shall be exclusive, and shall be in addition to any other rights or
remedies contained in this Agreement or any of the other Agreements.
(B) The right to take immediate possession of the Collateral, and
(i) to require Borrower to assemble the Collateral, at Borrower's expense, and
make it available to Lender at a place designated by Lender which is reasonably
convenient to the parties, and (ii) to enter any of the premises of Borrower or
wherever any of the Collateral shall be located, and to keep and store the same
on said premises until sold (and if said premises be the Property of Borrower,
Borrower agrees not to charge Lender for storage thereof).
(C) The right to sell or otherwise dispose of all or any portion of
any Inventory or Equipment in its then condition, or after any further
manufacturing or processing thereof, at public or private sale or sales, with
such notice as may be required by law, in lots or in bulk, for cash or Section
credit, all as Lender, in its sole discretion, may deem advisable. Borrower
agrees that ten (10) days written notice to Borrower of any public or private
sale or other disposition of such Collateral shall be reasonable notice thereof,
and such sale shall be at such locations as Lender may designate in said notice.
Lender shall have the right to conduct such sales on Borrower's premises,
without charge therefor, and
-43-
<PAGE>
such sales maybe adjourned from time to time in accordance with applicable law.
Lender shall have the right to sell, lease or otherwise dispose of such
Collateral, or any part thereof, for cash, credit or any combination thereof,
and Lender may purchase all or any part of such Collateral at public or, if
permitted by law, private sale and, in lieu of actual payment of such purchase
price, may set off the amount of such price against the obligations.
(D) Lender is hereby granted a license or other right to use,
without charge, Borrower's labels, patents, copyrights, rights of use of any
name, trade secrets, tradenames, trademarks and advertising matter, or any
Property of a similar nature, as it pertains to the Collateral, in advertising
for sale and-selling any Collateral and Borrower's rights under all licenses and
all franchise agreements shall inure to Lender's benefit.
(E) The proceeds realized from the sale of any Collateral may be
applied, after allowing two (2) Business Days for collection, first to the
reasonable costs, expenses and attorneys' fees and expenses incurred by Lender
for collection and for acquisition, completion, protection, removal, storage,
sale and delivery of the Collateral; secondly, to interest due upon any of the
obligations, and thirdly, to the principal of the obligations. If any deficiency
shall arise, Borrower shall remain liable to Lender therefor.
11.5. REMEDIES CUMULATIVE: NO WAIVER. All covenants, conditions,
provisions, warranties, guaranties, indemnities, and other undertakings of
Borrower contained in this Agreement and the other Agreements, or in any
document referred to herein or contained in any agreement supplementary hereto
or in any schedule given to Lender or contained in any other agreement between
Lender and Borrower, heretofore, concurrently, or hereafter entered into, shall
be deemed cumulative to and not in derogation or substitution of any of the
terms, covenants, conditions, or agreements of Borrower herein contained.
11.6. SPECIAL LOUISIANA PROVISIONS. Insofar as the validity or perfection
of a security interest hereunder or the remedies hereunder are governed by the
laws of the State of Louisiana, the following provisions shall apply:
Borrower specifically acknowledges the obligations secured hereby, whether
now existing or to arise hereafter, and confesses judgment thereon in favor of
Lender if the same are not paid at maturity. Upon and after the occurrence of an
Event of Default, it shall be lawful for and Borrower does hereby authorize
Lender without making a demand or putting Borrower in default, the making of
demand and a putting in default being expressly waived, to cause all and
singular the Collateral to be seized and sold after due process of law, Borrower
waiving the benefit of any and all laws or
-44-
<PAGE>
parts of laws relative to the appraisement of the property seized and sold,
under executory process or other legal process, and consenting that the
Collateral be sold without appraisement, either in its entirety or in lots or
parcels, as Lender may determine, to the highest bidder for cash or on such
other terms as the plaintiff in such proceeding may direct. Furthermore, upon
the occurrence of an Event of Default, if Lender employs an attorney to enforce
Lender's rights in Louisiana against Borrower or any other Person which may be
obligated to Lender under this Agreement or any of the other Agreements,
Borrower agrees to pay Lender's reasonable attorney's fees in an amount equal to
5% of the unpaid obligations then due and owing.
Borrower hereby waives (a) the benefit of appraisement provided for in
Articles 2332, 2336, 2723, and 2724 of the Louisiana Code of Civil Procedure and
all other laws conferring the same; (b) the demand and three (3) days notice of
demand as provided in Articles 2639 and 2721 of the Louisiana Code of Civil
Procedure; (c) the notice of seizure provided for in Articles 2293 and 2721 of
the Louisiana Code of Civil Procedure; and (d) the three (3) days delay provided
for in Articles 2331 and 2722 of the Louisiana Code of Civil Procedure.
Borrower expressly authorizes and agrees that Lender shall have the right
to appoint a keeper of the Collateral pursuant to the terms and provisions of
La. R.S. 9:5136. The keeper may be Lender or its designated agent or nominee,
who or which shall be named by Lender in its pleadings to enforce Lender's
rights and remedies hereunder in a court of competent jurisdiction. The
compensation for the services of the keeper is hereby fixed at 5% of the amount
due or sued for or claimed or sought to be protected, preserved or enforced in
the proceeding for the recognition or enforcement of this Loan and Security
Agreement, and shall be secured by the security interest herein granted.
SECTION 12. MISCELLANEOUS
12.1. POWER OF ATTORNEY. Borrower hereby irrevocably designates, makes,
constitutes and appoints Lender (and all Persons designated by Lender) as
Borrower's true and lawful attorney (and agent-in-fact) and Lender, or Lender's
agent, may, without notice to Borrower and in either Borrower's or Lender's
name, but at the cost and expense of Borrower:
(A) At such time or times hereafter as Lender or said agent, in its
sole discretion, may determine, endorse Borrower's name on any checks, notes,
acceptances, drafts, money orders or any other evidence of payment or proceeds
of the Collateral which come into the possession of Lender or under Lender's
control; and
(B) At such time or times upon or after the occurrence of an Event
of Default as Lender or its agent in its sole
-45-
<PAGE>
discretion may determine: (i) enforce payment of the Accounts by legal
proceedings or otherwise and exercise generally all of Borrower's rights and
remedies with respect to the collection of the Accounts; (ii) settle, adjust,
compromise, discharge or release any of the Accounts or other Collateral or any
legal proceedings brought to collect any of the Accounts or other Collateral;
(iii) prepare, file and sign Borrower's name to a proof of claim in bankruptcy
or similar document against any Account Debtor or to any notice of lien,
assignment or satisfaction of lien or similar document in connection with any of
the Collateral; (iv) receive, open and dispose of all mail addressed to Borrower
and to notify postal authorities to change the address for delivery thereof to
such address as Lender may designate; (v) endorse the name of Borrower upon any
of the items of payment or proceeds relating to any Collateral and deposit the
same to the account of Lender on account of the obligations; (vi) endorse the
name of Borrower upon any chattel paper, document, instrument, invoice, freight
bill, bill of lading or similar document or agreement relating to the Accounts,
Inventory and any other Collateral; (vii) use Borrower's stationery and sign the
name of Borrower to verifications of the Accounts and notices thereof to Account
Debtors; (viii) make and adjust claims under policies of insurance; and (ix) do
all other acts and things necessary, in Lender's determination, to fulfill
Borrower's obligations under this Agreement.
12.2. INDEMNITY. Borrower hereby agrees to indemnify Lender and hold
Lender harmless from and against any liability, loss, damage, suit, action or
proceeding ever suffered or incurred by Lender as the result of Borrower's
operation of its business or its failure to observe, perform or discharge
Borrower's duties hereunder. Without limiting the generality of the foregoing,
this indemnity shall extend to any claims asserted against Lender by any Person
under any Environmental Laws or similar laws by reason of Borrower's or any
other Person's failure to comply with laws applicable to solid or hazardous
waste materials or other toxic substances. The obligation of Borrower under this
Section 12.2 shall survive the payment in full of the obligations and the
termination of this Agreement.
12.3. MODIFICATION OF AGREEMENT: SALE OF INTEREST. This Agreement may not
be modified, altered or amended, except by an agreement in writing signed by
Borrower and Lender. Borrower may not sell, assign or transfer any interest in
this Agreement or any of the other Agreements, or any portion thereof,
including, without limitation, Borrower's rights, title, interests, remedies,
powers, and duties hereunder or thereunder. Borrower hereby consents to Lender's
participation, sale, assignment, transfer or other disposition, at any time or
times hereafter, of this Agreement and any of the other Agreements, or of any
portion hereof or thereof, including, without limitation, Lender's rights,
title, interests, remedies, powers, and duties hereunder or thereunder.
-46-
<PAGE>
12.4. REIMBURSEMENT OF EXPENSES. If, at any time or times prior or
subsequent to the date hereof, regardless of whether or not an Event of Default
then exists or any of the transactions contemplated hereunder are concluded,
Lender or any Participating Lender employs counsel for advice or other
representation, or incurs legal expenses or other costs or out-of-pocket
expenses in connection with: (A) the negotiation and preparation of this
Agreement or any of the other Agreements, any amendment of or modification of
this Agreement or any of the other Agreements, any consent or waiver granted by
Lender in connection with this Agreement or any of the other Agreements, or any
sale or attempted sale of any interest herein to a Participating Lender; (B) the
administration of this Agreement or any of the other Agreements and the
transactions contemplated hereby and thereby; (C) any litigation, contest,
dispute, suit, proceeding or action (whether instituted by Lender, Borrower or
any other Person) in any way relating to the Collateral, this Agreement or any
of the other Agreements or Borrower's affairs; (D) any attempt to enforce any
rights of Lender or any Participating Lender against Borrower or any other
Person which may be obligated to Lender by virtue of this Agreement or any of
the other Agreements, including, without limitation, the Account Debtors; or (E)
any attempt to inspect, verify, protect, preserve, restore, collect, sell,
liquidate or otherwise dispose of or realize upon the Collateral; then, in any
such event, the attorneys' fees arising from such services and all expenses,
costs, charges and other fees of such counsel or of Lender or relating to any of
the events or actions described in this Section shall be payable, ON DEMAND, by
Borrower to Lender or to such Participating Lender, as the case may be, and
shall be additional obligations hereunder secured by the Collateral.
Additionally, if any taxes (excluding taxes imposed upon or measured by the net
income of Lender) shall be payable on account of the execution or delivery of
this Agreement, or the execution, delivery, issuance or recording of any of the
other Agreements, or the creation of any of the obligations hereunder, by reason
of any existing or hereafter enacted federal or state statute, Borrower will pay
all such taxes, including, but not limited to, any interest and penalties
thereon, and will indemnify and hold Lender harmless from and against liability
in connection therewith. Borrower hereby irrevocably authorizes Lender to enter
any and all expenses or other amounts owing to Lender by Borrower pursuant to
this Section 12.4 as debits in the Loan Account.
12.5. INDULGENCES NOT WAIVERS. Lender's failure, at any time or times
hereafter, to require strict performance by Borrower of any provision of this
Agreement shall not waive, affect or diminish any right of Lender thereafter to
demand strict compliance and performance therewith. Any suspension or waiver by
Lender of an Event of Default under this Agreement or any of the other
Agreements shall not suspend, waive or affect any other Event of Default under
this Agreement or any of the other Agreements,
-47-
<PAGE>
whether the same is prior or subsequent thereto and whether of the same or of a
different type.
12.6. SEVERABILITY. Wherever possible, each provision of this Agreement
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement shall be prohibited by or
invalid under applicable law, such provision shall be ineffective only to the
extent of such prohibition or invalidity, without invalidating the remainder of
such provision or the remaining provisions of this Agreement.
12.7. SUCCESSORS AND ASSIGNS. This Agreement and the other Agreements
shall be binding upon and inure to the benefit of the successors and assigns of
Borrower and Lender. This provision, however, shall not be deemed to modify
Section 12.3 hereof.
12.8. CUMULATIVE EFFECT: CONFLICT OF TERMS. The provisions of the other
Agreements are hereby made cumulative with the provisions of this Agreement.
Except as otherwise provided in Section 3.4 of this Agreement and except as
otherwise provided in any of the other Agreements by specific reference to the
applicable provision of this Agreement, if any provision contained in this
Agreement is in direct conflict with, or inconsistent with, any provision in any
of the other Agreements, the provision contained in this Agreement shall govern
and control.
12.9. EXECUTION IN COUNTERPARTS. This Agreement may be executed in any
number of counterparts and by different parties hereto in separate counterparts,
each of which when so executed and delivered shall be deemed to be an original
and all of which counterparts taken together shall constitute but one and the
same instrument.
12.10. NOTICE. Except as otherwise provided herein, all notices, requests
and demands to or upon a party hereto to be effective shall be in writing (and,
if sent by mail, shall be sent by certified or registered mail, return receipt
requested) or by telegraph or telex and, unless otherwise expressly provided
herein, shall be deemed to have been validly served, given or delivered when
delivered against receipt or one Business Day after deposit in the mail, postage
prepaid, or, in the case of telegraphic notice, when delivered to the telegraph
company, or, in the case of telex notice, when sent, answerback received,
addressed as follows:
(A) If to Lender: Barclays Business Credit, Inc.
3811 Turtle Creek Boulevard
Suite 2100
Dallas, Texas 75219
Attention: Joy L. Bartholomew
-48-
<PAGE>
With a copy to: Hughes & Luce
Bank One Plaza, Suite 2800
1717 Main Street
Dallas, Texas 75201
Attention: Larry A. Makel
(B) If to Borrower: Red Man Pipe & Supply Co.
7633 East 63rd Place, Suite 400
Red Man Plaza
Tulsa, Oklahoma 74133
Attention: Lewis B. Ketchum
With a copy to: Noss, Monnet & Edmiston
Suite 300 Grantson Building
111 West Fifth Street
Tulsa, Oklahoma 74103
Attention: David L. Noss
or to such other address as each party may designate for itself by like notice
given in accordance with this Section 12.10; provided, however, that any notice,
request or demand to or upon Lender pursuant to Section 3.3 shall not be
effective until received by Lender.
12.11. LENDER'S CONSENT. Whenever Lender's consent is required to be
obtained under this Agreement or any of the other Agreements as a condition to
any action, inaction, condition or event, Lender shall be authorized to give or
withhold such consent in its sole and absolute discretion and to condition its
consent upon the giving of additional collateral security for the obligations,
the payment of money or any other matter.
12.12. DEMAND OBLIGATIONS. Nothing in this Agreement shall affect or
abrogate the demand nature of any portion of the Obligations expressly made
payable ON DEMAND by this Agreement or by any instrument evidencing or securing
same, and the occurrence of an Event of Default shall not be a prerequisite for
Lender's requiring payment of such obligations.
12.13. TIME OF ESSENCE. Time is of the essence of this Agreement and the
other Agreements.
12.14. PARTICIPATING. Lender shall have the right at any time and from
time to time to grant participating in the Agreement and the other Agreements.
Each Participating Lender shall be entitled to receive all information received
by Lender regarding the creditworthiness of Borrower, including, without
limitation, information required to be disclosed to a participant pursuant to
Banking Circular 181 (Rev., August 2, 1984), issued by the Comptroller of the
Currency (whether the participant is subject to the circular or not).
-49-
<PAGE>
12.15. NONAPPLICATION OF CHAPTER 15 OF TEXAS CREDIT CODE. The provisions
of Chapter 15 of the Texas Credit Code (Vernon's Texas Civil Statutes) Article
5O69-15 are specifically declared by the parties hereto not to be applicable to
this Agreement or any of the other Agreements or to the transactions
contemplated hereby.
12.16. No PRESERVATION OR MARSHALING. Borrower agrees that Lender has no
obligation to preserve rights to the Collateral against prior parties or to
marshal any Collateral for the benefit of any Person.
12.17. GOVERNING LAW: CONSENT TO FORUM. THIS AGREEMENT HAS BEEN NEGOTIATED
AND SHALL BE DEEMED TO HAVE BEEN MADE IN THE STATE OF TEXAS. THIS AGREEMENT
SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE
STATE OF TEXAS AND NOT THE LAWS OF CONFLICTS OF THE STATE OF TEXAS; PROVIDED,
HOWEVER, THAT IF ANY OF THE COLLATERAL SHALL BE LOCATED IN ANY JURISDICTION
OTHER THAN TEXAS, THE LAWS OF SUCH JURISDICTION SHALL GOVERN THE METHOD, MANNER
AND PROCEDURE FOR FORECLOSURE OF LENDER'S LIEN UPON SUCH COLLATERAL AND THE
ENFORCEMENT OF LENDER'S OTHER REMEDIES IN RESPECT OF SUCH COLLATERAL TO THE
EXTENT THAT THE LAWS OF SUCH JURISDICTION ARE APPLICABLE AND ARE DIFFERENT FROM
OR INCONSISTENT WITH THE LAWS OF TEXAS. AS PART OF THE CONSIDERATION FOR NEW
VALUE THIS DAY RECEIVED, BORROWER HEREBY CONSENTS TO THE JURISDICTION OF ANY
STATE OR FEDERAL COURT LOCATED WITHIN DALLAS COUNTY OF THE STATE OF TEXAS AND
WAIVES PERSONAL SERVICE OF ANY AND ALL PROCESS UPON IT AND CONSENTS THAT ALL
SUCH SERVICE OF PROCESS BE MADE BY CERTIFIED OR REGISTERED MAIL DIRECTED TO
BORROWER AT THE ADDRESS STATED IN SECTION 12.10 HEREOF AND SERVICE SO MADE SHALL
BE DEEMED TO BE COMPLETED UPON ACTUAL RECEIPT THEREOF. BORROWER WAIVES ANY
OBJECTION TO JURISDICTION AND VENUE OF ANY ACTION INSTITUTED AGAINST IT AS
PROVIDED HEREIN AND AGREES NOT TO ASSERT ANY DEFENSE BASED ON LACK OF
JURISDICTION OR VENUE.
BORROWER HAS READ AND UNDERSTANDS
SECTION 12.17: /s/ LBK (INITIALS)
12.18. WAIVERS BY BORROWER. EXCEPT AS OTHERWISE PROVIDED FOR IN THIS
AGREEMENT, BORROWER WAIVES (I) THE RIGHT TO TRIAL BY JURY (WHICH LENDER HEREBY
ALSO WAIVES) IN ANY ACTION, SUIT, PROCEEDING OR COUNTERCLAIM OF ANY KIND ARISING
OUT OF OR RELATED TO THIS AGREEMENT OR ANY OF THE OTHER AGREEMENTS, THE
OBLIGATIONS OR THE COLLATERAL; (II) NOTICE PRIOR TO TAKING POSSESSION OR CONTROL
OF THE COLLATERAL OR ANY BOND OR SECURITY WHICH MIGHT BE REQUIRED BY ANY COURT
PRIOR TO ALLOWING LENDER TO EXERCISE ANY OF LENDER'S REMEDIES, INCLUDING THE
ISSUANCE OF AN IMMEDIATE WRIT OF
-50-
<PAGE>
POSSESSION; (III) ANY RIGHT BORROWER MAY HAVE UPON PAYMENT IN FULL OF THE
OBLIGATIONS TO REQUIRE LENDER TO TERMINATE IT8 SECURITY INTEREST IN THE
COLLATERAL OR IN ANY OTHER PROPERTY OF BORROWER UNTIL TERMINATION OF THIS
AGREEMENT IN ACCORDANCE WITH ITS TERMS AND THE EXECUTION BY BORROWER, AND BY ANY
PERSON WHOSE LOANS TO BORROWER IS USED IN WHOLE OR IN PART TO SATISFY THE
OBLIGATIONS OF AN AGREEMENT INDEMNIFYING LENDER FROM ANY LOSS OR DAMAGE LENDER
MAY INCUR AS THE RESULT OF DISHONORED CHECKS OR OTHER ITEMS OF PAYMENT RECEIVED
BY LENDER FROM BORROWER OR ANY ACCOUNT DEBTOR AND APPLIED TO THE OBLIGATIONS;
AND (IV) ANY RIGHT TO PRESENTMENT, PROTEST, NOTICE OF PROTEST AND NON-PAYMENT,
OR OTHER NOTICE OF DEFAULT, NOTICE ACCELERATION OR INTENT TO ACCELERATE.
BORROWER HAS READ AND UNDERSTANDS
SECTION 12.18:/s/ LBK (INITIALS)
12.19. DTPA WAIVER. BORROWER HEREBY WAIVES ALL PROVISIONS OF THE DECEPTIVE
TRADE PRACTICES - CONSUMER PROTECTION ACT ("DTPA"), OTHER THAN SECTION 17.555
(PERTAINING TO CONTRIBUTION AND INDEMNITY) OF THE DTPA, AND EXPRESSLY WARRANTS
AND REPRESENTS THAT BORROWER (A) HAS ASSETS OF S5,OOO,OOO OR MORE, (B) HAS
KNOWLEDGE AND EXPERIENCE IN FINANCIAL AND BUSINESS MATTERS THAT ENABLE BORROWER
TO EVALUATE THE MERITS AND RISKS OF THIS TRANSACTION, (C) IS NOT IN A
SIGNIFICANTLY DISPARATE BARGAINING POSITION RELATIVE TO LENDER, AND (D) HAS BEEN
REPRESENTED BY LEGAL COUNSEL IN CONNECTION WITH THE TRANSACTIONS CONTEMPLATED BY
THIS AGREEMENT.
BORROWER HAS READ AND UNDERSTANDS
SECTION 12.19: /s/ LBK (INITIALS)
12.20. ENTIRE, FINAL AGREEMENT. THIS WRITTEN LOAN AGREEMENT AND THE OTHER
AGREEMENTS, TOGETHER WITH ALL OTHER INSTRUMENTS, AGREEMENTS AND CERTIFICATES
EXECUTED BY THE PARTIES IN CONNECTION HEREWITH OR THEREWITH OR WITH REFERENCE
HERETO OR THERETO, REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT
BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL
AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE
PARTIES.
BORROWER HAS READ AND UNDERSTANDS
SECTION 12.20: /s/ LBK (INITIALS)
-51-
<PAGE>
IN WITNESS WHEREOF, this Agreement has been duly executed on the day and
year specified at the beginning hereof.
BORROWER:
RED MAN PIPE & SUPPLY CO.
By: /s/ LEWIS B. KETCHUM
Name: LEWIS B. KETCHUM
Title: President
LENDER:
BARCLAYS BUSINESS CREDIT, INC.
By: /s/ STUART A. TILLMAN
Name: STUART A. TILLMAN
Title: Assistant Vice President
DTPA WAIVER
The undersigned, legal counsel to Borrower, Red Man Pipe & Supply Co.,
executes this Agreement solely to acknowledge the waiver of the Texas Deceptive
Trade Practices - Consumer Protection Act contained in Section 12.19 of the
Agreement.
Borrower's Counsel:
NOSS, MONNET & EDMISTON
By: /s/ DAVID L. NOSS
DAVID L. NOSS
Exhibits:
Exhibit "A" - Locations of Collateral
Exhibit "B" - Fictitious or Trade Names
Exhibit "C" - Litigation
Exhibit "D" - Existing Indebtedness and Liens
Exhibit "E" - Existing Investments
Exhibit "F" - Intellectual Property
Exhibit "G" - Acknowledgments
Exhibit "H" - Form of Compliance Certificate
Exhibit "I" - 1991 Annual Business Plan
Exhibit "J" - Form of Borrowing Base Certificate
-52-
<PAGE>
EXHIBIT 10.3
FIRST AMENDMENT TO LOAN AND SECURITY AGREEMENT
[July 30, 1991]
This First Amendment to LOAN and Security Agreement (the "Amendment") is
made and entered into as of July 30, 1991, by and between RED MAN PIPE & SUPPLY
co., an oklahoma corporation ("Borrower"), and BARCLAYS BUSINESS CREDIT, INC., a
Connecticut corporation ("Lender").
PRELIMINARY STATEMENTS:
1. Borrower and Lender entered into that certain LOAN and Security
Agreement dated as of May 3, 1991, governing the terms of up to $25,000,000 in
revolving credit loans (the "Agreement").
2. Borrower and Lender desire to amend the Agreement to make certain
revisions more particularly described herein.
AGREEMENTS:
NOW, THEREFORE, in consideration of the agreements herein contained,
subject to the terms and conditions set forth herein, Borrower and Lender hereby
agree as follows, and agree that the amendments specified below shall be
effective from and after the date hereof and shall be incorporated into the
Agreement and shall supersede those provisions in the Agreement referenced as
follows:
1. Definitions. Terms used herein and defined in the Agreement shall have
the meanings set forth in the Agreement except as otherwise provided herein.
2. Interest and Charges.
(a) Section 3.1(H)(i)(A) of the Agreement is hereby deleted, and in
place thereof shall be the following:
"(A) The Average Daily Availability for the six months ending
October 31, 1991 shall equal or exceed twenty percent (20%) of the
Average Daily Loan Balance for such period;"
(b) Section 3.1(H)(ii)(A) of the Agreement is hereby deleted, and in
place thereof shall be the following:
"(A) The Average Daily Availability for the twelve months ending
October 31, 1992 shall equal or exceed twenty percent (20%) of the
Average Daily Loan Balance for such period;"
-1-
<PAGE>
(c) Section 3.1(H)(iii)(A) of the Agreement is hereby deleted, and in
place thereof shall be the following:
"(A) The Average Daily Availability for the six months ending April
3O, 1993 shall equal or exceed twenty percent (20%) of the Average
Daily Loan Balance for such period;"
3. Conditions. The obligation of Lender to be bound by the provisions
hereof shall be subject to the fulfillment of the following conditions precedent
on or before the date hereof:
(a) Lender shall have received the following, duly executed by each
party thereto, other than Lender:
(i) this Amendment; and
(ii) all other documents Lender may reasonably request with
respect to any matter relevant to this Amendment or the transactions
contemplated hereby.
(b) As of the date hereof, there shall exist no Default or Event of
Default.
(c) Borrower and Guarantor shall have performed and complied with all
agreements and conditions contained in the Agreement and the other
Agreements which are required to be performed or complied with by Borrower
or Guarantor before or on the date hereof.
(d) The representations and warranties contained in the Agreement, as
amended hereby, and the other Agreements shall be true and correct in all
material respects as of the date hereof, with the same force and effect as
though made on and as of this date.
(e) No material adverse change shall have occurred in the business
operations, financial condition or prospects of Borrower or Guarantor, and
no material adverse litigation shall be pending or, to the knowledge of
Borrower or Guarantor, threatened, against Borrower or Guarantor.
(f) All corporate and legal proceedings and all documents required to
be completed and executed by the provisions of, and all instruments to be
executed in connection with the transactions contemplated by, this
Amendment and any related agreements shall be satisfactory in form and
substance to Lender.
4. Expenses. Borrower shall pay all out-of-pocket expenses arising in
connection with the preparation, execution, delivery and
-2-
<PAGE>
administration of this Amendment, including, but not limited to, all reasonable
legal fees and expenses incurred by Lender.
5. Continued Effect. Except to the extent amended hereby, all terms,
provisions and conditions of the Agreement and all of the other Agreements shall
continue in full force and effect and shall remain enforceable and binding in
accordance with their respective terms. The Agreement, as amended hereby, shall
continue to secure the obligations described therein, and the other Agreements
shall continue to secure the obligations and indebtedness described therein,
whether or not such other Agreements shall be expressly supplemented or amended
in connection with this Amendment.
6. Counterparts. This Amendment may be executed in any number cf
counterparts, each of which shall for all purposes be deemed an original and
all of which are identical. All parties need not execute the same counterpart.
EXECUTED as of the date first above written.
RED MAN PIPE & SUPPLY CO.
By: /s/ DEE PAIGE
Name: DEE PAIGE
Title: V.P. - FINANCE
BARCLAYS BUSINESS CREDIT, INC.
By: /s/ MICHAEL A. PARKER
Name: MICHAEL A. PARKER
Title: S.V.P.
The undersigned Guarantor, having guaranteed to Lender the payment of the
Obligations as such term is defined in the Unconditional Limited Guaranty (the
"Guaranty") executed by Guarantor on May 3, 1991, hereby acknowledges, confirms,
and agrees that (i) the execution and delivery of this Amendment does not alter,
affect, diminish, release or reduce his liability under the Guaranty, and (ii)
the Guaranty is in full force and effect to secure the obligations described
therein.
/s/ LEWIS B. KETCHUM
LEWIS B. KETCHUM
-3-
<PAGE>
EXHIBIT 10.4
SECOND AMENDMENT TO LOAN AND SECURITY AGREEMENT
This Second Amendment to Loan and Security Agreement (the "Amendment") is
made and entered into as of June 1, 1992, by and between RED MAN PIPE & SUPPLY
CO., an Oklahoma corporation ("Borrower"), and BARCLAYS BUSINESS CREDIT, INC., a
Connecticut corporation ("Lender").
PRELIMINARY STATEMENTS:
1. Borrower and Lender entered into that certain Loan and Security
Agreement dated as of May 3, 1991, as amended by that certain First Amendment to
Loan and Security Agreement dated as of July 30, 1991, governing the terms of up
to $25,000,000 in revolving credit loans (as amended, the "Agreement").
2. Borrower has requested that the Agreement be amended to provide for a
term loan from Lender to Borrower.
3. To facilitate issuance of letters of credit for the account of
Borrower, Borrower has further requested that the Agreement be amended to
contemplate the issuance of letter of credit guaranties by Lender.
4. Borrower and Lender desire to amend the Agreement to make certain
other revisions more particularly described herein.
AGREEMENTS:
NOW, THEREFORE, in consideration of the agreements herein contained,
subject to the terms and conditions set forth herein, Borrower and Lender hereby
agree as follows, and agree that the amendments specified below shall be
effective from and after the date hereof and shall be incorporated into the
Agreement and shall supersede those provisions in the Agreement referenced as
follows:
1. DEFINITIONS.
(a) Terms used herein and defined in the Agreement shall have the
meanings set forth in the Agreement except as otherwise provided herein.
(b) The definitions of "Applicable Rate", "Average Daily
Availability", "Average Daily Loan Balance", "Borrowing Base", "Loans" and
"Other Agreements" contained in Section 1.1 of the Agreement are hereby
deleted, and in place thereof shall be the following:
-1-
<PAGE>
"Applicable Rate - the Annual Revolving Rate or the Annual Term
Rate, as the context may require, and, for purposes of Sections 3.1(D)
and (E) of this Agreement, shall include the Default Rate."
"Average Daily Availability - the amount obtained by adding the
difference between the Borrowing Base and the unpaid balance of
Revolving Credit Loans owing by Borrower to Lender at the end of each
day during the period in question and by dividing such sum by the
number of days in such period."
"Average Daily Loan Balance - the amount obtained by adding the
unpaid balance of Revolving Credit Loans owing by Borrower to Lender
at the end of each day for each day during the period in question and
by dividing such sum by the number of days in such period."
"Borrowing Base - as at any date of determination thereof, an
amount equal to the lesser of:
(a) the Commitment as of such date, minus the outstanding
principal amount of the Term Loan as of such date; or
(b) an amount up to:
(i) ninety percent (90%) of the net amount (after
deduction of such reserves as Lender deems proper and necessary
in its sole discretion, including a reserve for sales tax
payables) of Eligible Accounts outstanding at such date;
PLUS
(ii) the lesser of (A) $6,000,000 or (B) sixty percent
(60%) of the value (after deduction of such reserves as Lender
deems proper and necessary in its sole discretion) of Eligible
Inventory at such date consisting of tubular goods held for sale
in the ordinary course of Borrower's business, calculated on the
basis of the lower of cost or market;
PLUS
(iii) the lesser of (A) the Supply Inventory Maximum in
effect on such date or (B) the Supply Inventory Advance Rate in
effect on
-2-
<PAGE>
such date multiplied by the value (after deduction of such
reserves as Lender deems proper and necessary in its sole
discretion) of Eligible Inventory at such date consisting of
consumable supplies held for sale in the ordinary course of
Borrower's business, calculated on the basis of the lower of cost
or market;
MINUS (subtract from the sum of clauses (i), (ii) and (iii)
above)
(iv) an amount equal to the sum of (A) the face amount of
all LC Guaranties and Letters of Credit issued by Lender or
Affiliates of Lender and outstanding at such date and (B) any
amounts which Lender may be obligated to pay in the future for
the account of Borrower pursuant to this Agreement, the other
Agreements or otherwise.
For purposes hereof, the net amount of Eligible Accounts at any time
shall be the face amount of such Eligible Accounts, less any and all
returns, discounts (which may, at Lender's option, be calculated on
shortest terms), credits, allowances or excise taxes of any nature at
any time issued, owing, claimed by Account Debtors, granted,
outstanding or payable in connection with such Accounts at such time."
"Loans - all loans and advances made by Lender pursuant to this
Agreement, including, without limitation, all Revolving Credit Loans
and the Term Loan."
"Other Agreements - any and all agreements, instruments and
documents heretofore, now or hereafter executed by Borrower or
delivered to Lender in respect to the transactions contemplated by
this Agreement, including, without limitation, the Term Note, the
Guaranty, the Mortgages and the Acknowledgments, as the same may be
modified, supplemented, extended or amended from time to time."
(c) The following definitions are hereby added to Section 1.1 of the
Agreement:
"Annual Revolving Rate - as defined in Section 3.1(A) of this
Agreement."
-3-
<PAGE>
"Annual Term Rate - as defined in Section 3.1(A) of this
Agreement."
"LC Guaranty - a guaranty executed by Lender at Borrower's
request and in Lender's sole discretion in favor of a Person who has
issued a Letter of Credit."
"Letter of Credit - a letter of credit at any time issued for the
account of Borrower.
"Loan Documents - this Agreement and the Other Agreements."
"Mortgages - the mortgages and/or deeds of trust to be executed
by Borrower on or about a Term Loan Closing Date in favor of Lender
and by which Borrower shall grant and convey to Lender, as security
for the obligations, Liens upon the Real Property."
"Real Property - those certain parcels of real Property to be
purchased by Borrower from Superior Supply Company, and more
particularly described on Exhibit "L" attached hereto."
"Revolving Credit Loans - a Loan made by Lender as provided in
Section 2.1(A) of this Agreement."
"Term Loan - the Loan described in Section 2.1(B) of this
Agreement."
"Term Loan Closing Date - each date on which all of the
conditions precedent to an advance under the Term Loan are satisfied
and an advance under the Term Loan is made.
"Term Note - the term note to be executed by Borrower on or about
the first Term Loan Closing Date in favor of Lender to evidence the
Term Loan, which shall be in the form of Exhibit "K" attached hereto."
2. THE LOANS. Section 2.1 of the Agreement is hereby deleted, and in
place thereof shall be the following:
"2.1. THE LOANS AND LC GUARANTIES.
(A) Provided that no Default or Event of Default has occurred,
Lender will make Revolving Credit Loans to Borrower from time
to time, in amounts as requested by Borrower, up to a maximum
-4-
<PAGE>
principal amount at any time outstanding equal to the Borrowing Base
at such time. It is expressly understood and agreed that Lender may
use the Borrowing Base as a maximum ceiling on Revolving Credit Loans
outstanding to Borrower at any time. If the unpaid balance of the
Revolving Credit Loans should exceed the Borrowing Base or any other
limitation set forth in this Agreement, such Revolving Credit Loans
shall nevertheless constitute obligations that are secured by the
Collateral and entitled to all benefits thereof. Insofar as Borrower
may request and Lender may be willing in its discretion to make
Revolving Credit Loans to Borrower at a time when the unpaid balance
of Revolving Credit Loans exceeds, or would exceed with the making of
any such Revolving Credit Loan, the Borrowing Base (any such Revolving
Credit Loan or Loans being herein referred to individually as an
"Overadvance" and collectively as "Overadvances", Lender shall enter
such Overadvances as debits in the Loan Account. All Overadvances
shall be repaid ON DEMAND. In consideration of Lender making any
Overadvance to Borrower, Borrower agrees to pay to Lender,
contemporaneously with the making of such overadvance, an amount equal
to one percent (1%) of the Overadvance, provided that the payment of
such amount does not cause the interest ON the obligations to exceed
the Maximum Legal Rate. The Revolving Credit Loans shall be used
solely (i) for the satisfaction of existing Indebtedness of Borrower
to F&M Bank and Trust Company of Tulsa, oklahoma, (ii) for the
satisfaction of certain trade payables and other unsecured
indebtedness owed to trade creditors of Borrower, (iii) for Borrower's
general operating capital needs to the extent not inconsistent with
the provisions of this Agreement, and (iv) for the payment of any of
the fees specified in Section 3.2 of this Agreement and, to the extent
approved by Lender, to the payment of any costs associated with the
closing of the transactions contemplated by this Agreement.
(B) Subject to the terms and conditions of this Agreement,
Lender agrees to make a term loan to Borrower in the aggregate
principal amount of up to $500,000, which shall bear interest and be
repayable in accordance with the terms of the Term Note and shall be
secured by the Collateral. The Term Loan may be advanced in two
advances in the amounts of up to $385,000 and $115,000, respectively.
The proceeds of the first advance shall be used by Borrower solely for
the purpose of
-5-
<PAGE>
purchasing the Real Property other than the Real Property located in
Conroe, Texas, and the proceeds of the second advance shall be used
solely for the purpose of purchasing real Property.
(C) Provided that no Default or Event of Default has
occurred, Borrower may request from time to time that Lender provide
LC Guaranties to support Letters of Credit to be issued for the
account of Borrower, not to exceed the face amount of $500,000
outstanding at any time. Borrower acknowledges that execution of any
LC Guaranty requested by Borrower shall be in the sole discretion of
Lender, and that any Letter of Credit will be subject to the terms,
conditions and requirements of the Person issuing such Letter of
Credit. If at any time Lender is called upon under an LC Guaranty to
reimburse to the issuer of any Letter of Credit any draft drawn upon
such Letter of Credit, Borrower shall be deemed to have borrowed, as
of the date of such reimbursement, a Revolving Credit Loan in the
amount of such reimbursement."
3. INTEREST AND CHARGES.
(a) Section 3.1(A) of the Agreement is hereby deleted, and in place
thereof shall be the following:
"(A) The principal amount of the Term Loan outstanding from
day-to-day shall bear interest, calculated daily at a fluctuating rate
per annum equal to the lesser of (i) 2.5% above the Base Rate (the
"Annual Term Rate"), or (ii) the Maximum Legal Rate. The principal
amount of the Revolving Credit Loans outstanding from day-to-day shall
bear interest, calculated daily at a fluctuating rate per annum equal
to the lesser of (i) 2.0% (or such lesser percentage as may be
provided by subsection (H) hereof) above the Base Rate (the "Annual
Revolving Rate"), or (ii) the Maximum Legal Rate."
(b) All references in Section 3.1(H) of the Agreement to the
"Applicable Rate" are hereby amended to be references to the "Annual
Revolving Rate."
4. FEES. The following Sections 3.2(D) and 3.2(E) are hereby added to the
Agreement:
"(D) Term Loan Closing Fee. On or before the first Term
Loan Closing Date, Borrower shall pay to Lender a Term Loan closing
fee of $5,000, which shall be
-6-
<PAGE>
deemed fully earned and nonrefundable at the first Term Loan Closing Date
and shall be paid concurrently with the first advance under the Term Loan.
Such fee shall compensate Lender for the costs associated with the
origination, structuring, processing, approving and closing of the Term
Loan, including, but not limited to, administrative, out-of-pocket, general
overhead and lost opportunity costs, but not including any expenses for
which Borrower has agreed to reimburse Lender pursuant to any other
provision of this Agreement (for example, reasonable attorney's fees
incurred by Lender) or any other Agreement."
"(E) LC Guaranty Fee. Borrower agrees to pay to Lender a monthly
LC Guaranty Fee, equal to 2.5% per annum of the face amount of the Letters
of Credit (if any) outstanding during such month for which Lender has
issued LC Guaranties. The LC Guaranty Fee shall be payable monthly in
arrears, beginning July 1, 1992 and continuing regularly thereafter during
the term of this Agreement and upon the termination hereof. Such LC
Guaranty Fee shall be in addition to any fee charged by the issuer of any
Letter of Credit."
5. PAYMENTS. All references in Section 3.4 of the Agreement to "Loan" or
"Loans" are hereby amended to be references to "Revolving Credit Loan" or
"Revolving Credit Loans" and Section 3.4 is further amended by adding thereto
the following subsection (D):
"(D) Notwithstanding Section 3.5, any payment received on the
Loans by Lender from or on behalf of Borrower shall first be applied to the
payment of any principal and interest then due and payable under either
Loan in such manner as Lender shall determine in its sole discretion, with
the balance of any such payment being applied by Lender pursuant to the
provisions of Section 3.5. Borrower hereby irrevocably authorizes Lender,
in Lender's sole discretion and without any obligation, to advance to
Borrower, and to charge to the Loan Account hereunder as a Revolving Credit
Loan, a sum sufficient on any date to pay all principal and interest then
due and owing on any Loan.
6. APPLICATION OF PAYMENTS AND COLLECTIONS. A new sentence is hereby
added to the end of Section 3.5 of the Agreement, which sentence shall read as
follows:
"In no event shall such credit balance be applied or be deemed to have been
applied as a prepayment of the Term Loan unless as requested by Borrower,
but Lender may offset such credit balance against the obligations upon or
after the occurrence of an Event of Default."
-7-
<PAGE>
7. CONDITIONS PRECEDENT. The following Section 10.3 is hereby added to
the Agreement:
"10.3 CONDITIONS TO ADVANCES UNDER TERM LOAN. Notwithstanding any
other provision of this Agreement or any of the other Agreements, and
without affecting in any manner the rights of Lender under the other
Sections of this Agreement (including, without limitation, Sections 10.1
and 10.2), it is understood and agreed that Lender will not make any
advance under the Term Loan unless and until each of the following
additional conditions has been and continues to be satisfied, all in form
and substance satisfactory to Lender and its counsel:
(A) Borrower shall have executed and delivered to Lender the Term
Note;
(B) Borrower shall have provided evidence that Borrower has
purchased, or will purchase with the proceeds of such advance, the Real
Property to be purchased as described in Section 2.1(B) hereof, free and
clear of any and all Liens, other than the Lien created by the Mortgages;
(C) Borrower shall have executed and delivered to Lender the
Mortgages covering the Real Property to be purchased, which Mortgages shall
have been recorded with the appropriate filing officers or shall be duly
recorded immediately after acquisition of the Real Property by Borrower;
(D) Borrower shall have delivered to Lender, at Borrower's
expense, mortgagee title insurance policies (or commitments to issue
mortgagee title insurance policies, provided Borrower simultaneously pays
all premiums and satisfies all conditions necessary for issuance of such
policies) issued by a title insurance company satisfactory to Lender
insuring Lender as mortgagee; such policies shall be in form and substance
satisfactory to Lender and shall insure a valid first Lien in favor of
Lender on the Real Property to be purchased, subject only to those
exceptions acceptable to Lender and its counsel;
(E) Borrower shall have delivered to Lender such other documents,
including, without limitation, surveys of the Real Property to be
purchased, certificates of corporate resolutions and incumbency of
officers, opinions of counsel, and other documents and instruments as
Lender and its counsel may reasonably request relating to the Real
Property, the Term Note and the Mortgages;
-8-
<PAGE>
(F) The first Term Loan Closing Date must occur on or before June
15, 1992 and the second Term Loan Closing Date must occur on or before
September 30, 1992."
8. EXHIBITS. All references in the Agreement (as amended hereby) to
Exhibits "J", "K" and "L" shall hereafter be deemed to be references to Exhibits
"J", "K" and "L", respectively, attached hereto.
9. CONDITIONS. The obligation of Lender to be bound by the provisions of
this Amendment shall be subject to the fulfillment of the following conditions
precedent on or before the date hereof:
(a) Lender shall have received the following, duly executed by each
party thereto, other than Lender:
(i) this Amendment; and
(ii) all other documents Lender may reasonably request with
respect to any matter relevant to this Amendment or the transactions
contemplated hereby.
(b) Borrower and Guarantor shall have performed and complied with all
agreements and conditions contained in the Agreement and the other
Agreements which are required to be performed or complied with by Borrower
or Guarantor before or on the date hereof.
(c) The representations and warranties contained in the Agreement, as
amended hereby, and the other Agreements shall be true and correct in all
material respects as of the date hereof, with the same force and effect as
though made on and as of this date.
(d) No material adverse change shall have occurred in the business
operations, financial condition or prospects of Borrower or Guarantor, and
no material adverse litigation shall be pending or, to the knowledge of
Borrower or Guarantor, threatened, against Borrower or Guarantor.
(e) All corporate and legal proceedings and all documents required to
be completed and executed by the provisions of, and all instruments to be
executed in connection with the transactions contemplated by, this
Amendment and any related agreements shall be satisfactory in form and
substance to Lender.
10. EXISTING DEFAULTS. As of the date hereof, there exist Events of
Default under the Agreement. The execution of this Amendment is not intended to,
and shall not be deemed, a waiver of any such existing Events of Default.
-9-
<PAGE>
11. EXPENSES. Borrower shall pay all out-of-pocket expenses arising in
connection with the preparation, execution, delivery and administration of this
Amendment, including, but not limited to, all reasonable legal fees and expenses
incurred by Lender.
12. CONTINUED EFFECT. Except to the extent amended hereby, all terms,
provisions and conditions of the Agreement and all of the other Agreements shall
continue in full force and effect and shall remain enforceable and binding in
accordance with their respective terms.
13. COUNTERPARTS. This Amendment may be executed in any number of
counterparts, each of which shall for all purposes be deemed an original and all
of which are identical. All parties need not execute the same counterpart.
14. FINAL AGREEMENT. THIS WRITTEN AMENDMENT AND THE OTHER LOAN DOCUMENTS
REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY
EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE
PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
EXECUTED as of the date first above written.
RED MAN PIPE & SUPPLY CO.
By: /s/ DEE PAIGE
Name: DEE PAIGE
Title: VICE PRESIDENT OF FINANCE
BARCLAYS BUSINESS CREDIT, INC.
By: /s/ JOY L. BARTHOLOMEW
Name: JOY L. BARTHOLOMEW
Title: Regional Vice President
-10-
<PAGE>
The undersigned Guarantor, having guaranteed to Lender the payment of the
obligations, as such term is defined in the Unconditional Limited Guaranty (the
"Guaranty") executed by Guarantor on May 3, 1991, hereby acknowledges, confirms,
and agrees that (i) the execution and delivery of this Amendment does not alter,
affect, diminish, release or reduce his liability under the Guaranty, (ii) the
Guaranty is in full force and effect to secure the Obligations described
therein, and (iii) the obligations secured by the Guaranty include, without
limitation, any Term Loan advanced pursuant to the terms of this Amendment.
/s/ LEWIS B. KETCHUM
LEWIS B. KETCHUM
-11-
<PAGE>
EXHIBIT 10.5
THIRD AMENDMENT TO LOAN AND SECURITY AGREEMENT
[October 29th, 1992]
This Third Amendment to Loan and Security Agreement (the "Amendment") is
made and entered into as of October 29th, 1992, by and between RED MAN PIPE &
SUPPLY CO., an Oklahoma corporation ("Borrower"), and BARCLAYS BUSINESS CREDIT,
INC., a Connecticut corporation ("Lender").
PRELIMINARY STATEMENTS:
1. Borrower and Lender entered into that certain Loan and Security
Agreement dated as of May 3, 1991, as amended by that certain First Amendment to
Loan and Security Agreement dated as of July 30, 1991, and by that certain
Second Amendment to Loan and Security Agreement dated as of June 1, 1992,
governing the terms of up to $25,000,000 in revolving credit loans (as amended,
the "Agreement").
2. Borrower has requested that the Agreement be further amended.
3. Borrower has further requested that Lender waive certain Defaults now
outstanding.
4. Borrower and Lender desire to amend the Agreement to make certain
other revisions more particularly described herein.
AGREEMENTS:
NOW, THEREFORE, in consideration of the agreements herein contained,
subject to the terms and conditions set forth herein, Borrower and Lender hereby
agree as follows, and agree that the amendments specified below shall be
effective from and after the date hereof and shall be incorporated into the
Agreement and shall supersede those provisions in the Agreement referenced as
follows:
1. DEFINITIONS.
(a) Terms used herein and defined in the Agreement shall have the
meanings set forth in the Agreement except as otherwise provided herein.
(b) The definitions of "Commitment", "Real Property" and "Term Note"
contained in Section 1.1 of the Agreement are hereby deleted, and the
following shall be substituted therefor:
Commitment -$20,000,000
-1-
<PAGE>
Real Property - those certain parcels of real property to be
purchased by Borrower from Superior Supply Company, and more
particularly described on Exhibit "L" attached hereto, and those
certain parcels of real property to be purchase by Borrower in
connection with the second and third advances under the Term Loan.
Term Note - collectively, the three term notes to be executed by
Borrower on or about each Term Loan Closing Date in favor of Lender to
evidence the Term Loan, or a part thereof, each of which shall be in
substantially the same form of Exhibit "K" attached hereto.
2. The Loans. Section 2.1(B) of the Agreement is hereby deleted, and the
following shall be substituted therefor:
(B) Subject to the terms and conditions of this Agreement, Lender
agrees to make a term loan to Borrower in the aggregate principal
amount of up to $500,000, which shall bear interest and be repayable
in accordance with the terms of the Term Note and shall be secured by
the Collateral. The Term Loan may be advanced in three advances in
amounts of up to $385,000, $20,000, and $95,000, respectively. The
proceeds of the first and second advances shall be used by Borrower
solely for the purpose of purchasing Real Property other than the Real
Property located in Conroe, Texas and the proceeds of the third
advance shall be used solely for the purpose of purchasing the Real
Property located in Conroe, Texas.
3. Affirmative Covenants. Section 9.1(M) of the Agreement is hereby
deleted, and the following shall be substituted therefor:
(M) Cause to be prepared and furnished to Lender for each calendar
month, a certificate (the "Compliance Certificate"), which shall state
the Borrower's compliance or non-compliance with the financial
covenants contained in Section 9.3 of this Agreement, the Compliance
Certificate to be substantially in the form of Exhibit "H" to this
Agreement and to be furnished to Lender with respect to each calendar
month on or before the 20th day after the end of each such calendar
month.
4. Financial Covenants.
(a) Section 9.3(C) of the Agreement is hereby deleted, and the
following shall be substituted therefor:
-2-
<PAGE>
(C) Maintain positive Net Income plus taxes (to the extent
deducted therefrom), calculated as of the last day of each month,
for the six-month period ending on such day; provided, that for
the six-month period ending on October 31, 1992 Borrower shall not
be in default of this subsection if its Net Income plus taxes (to
the extent deducted therefrom), if a loss, does not exceed a
negative $150,000.
(b) Section 9.3(D) of the Agreement is hereby deleted, and the
following shall be substituted therefor:
(D) Maintain a positive Excess Cash Flow, calculated as of the
last day of each month, for the six-month period ending on such
day; provided that for the six-month period ending on October 31,
1992, Borrower shall not be in default of this subsection if its
Excess Cash Flow, if negative, shall not exceed a negative
$100,000.
(c) Section 9.3(E) of the Agreement is hereby deleted, and the
following shall be substituted therefor:
(E) Achieve Adjusted Net Earnings from Operations, plus taxes (to
the extent deducted therefrom), equal to the amounts specified
below for the periods specified below:
Period Amount
------ ------
Fiscal year ending A loss not greater
October 31, 1992 than a negative
$500,000
Fiscal year ending $2,200,000
October 31, 1993 and
each fiscal year
thereafter
5. Conditions to Advances under Term Loan. Section 10.3 of the Agreement
is hereby amended by deleting the present subsections (A) and (F) of such
Section 10.3, and substitutinq therefor the following:
(A) Borrower shall have executed and delivered to
Lender the Term Note in the principal amount of the advance in
question.
(F) The first Term Loan Closing Date must have occurred on or
before June 15, 1992 and the second
-3-
<PAGE>
and third Term Loan Closing Dates must occur on or before December 31,
1992.
6. Waivers. Upon the effectiveness of this Amendment as determined under
Section 7, Lender hereby waives any Default and any Event of Default resulting
from the following:
(a) Borrower's failure to comply with Section 9.3(C) for each six-
month period ending at the end of a calendar month from and including March
31, 1992 through September 30, 1992 inclusive.
(b) Borrower's failure to comply with Section 9.3(D) for each six-
month period ending at the end of a calendar month from and including April
30, 1992 through September 30, 1992 inclusive.
(c) Borrower's failure to comply with the provisions of Section 9.3(E)
for the period from May 1, 1991 to April 30, 1992.
There are no other waivers granted by Lender relating to the Agreement except
those specifically set forth above. The above waivers are effective only in the
specific instances and for the purposes for which given.
7. CONDITIONS. The obligation of Lender to be bound by the provisions of
this Amendment shall be subject to the fulfillment of the following conditions
precedent on or before the date hereof:
(a) Lender shall have received the following, duly executed by each
party thereto, other than Lender:
(i) this Amendment; and
(ii) all other documents Lender may reasonably request with
respect to any matter relevant to this Amendment or the transactions
contemplated hereby.
(b) Borrower and Guarantor shall have performed and complied with all
agreements and conditions contained in the Agreement and the other
Agreements which are required to be performed or complied with by Borrower
or Guarantor before or on the date hereof.
(c) The representations and warranties contained in the Agreement, as
amended hereby, and the other Agreements shall be true and correct in all
material respects as of the date hereof, with the same force and effect as
though made on and as of this date.
-4-
<PAGE>
(d) No material adverse change shall have occurred in the business
operations, financial condition or prospects of Borrower or Guarantor, and
no material adverse litigation shall be pending or, to the knowledge of
Borrower or Guarantor, threatened, against Borrower or Guarantor.
(e) All corporate and legal proceedings and all documents required to
be completed and executed by the provisions of, and all instruments to be
executed in connection with the transactions contemplated by, this
Amendment and any related agreements shall be satisfactory in form and
substance to Lender.
8. EXPENSES. Borrower shall pay all out-of-pocket expenses arising in
connection with the preparation, execution, delivery and administration of this
Amendment, including, but not limited to, all reasonable legal fees and expenses
incurred by Lender.
9. CONTINUED EFFECT. Except to the extent amended hereby, all terms,
provisions and conditions of the Agreement and all of the Other Agreements shall
continue in full force and effect and shall remain enforceable and binding in
accordance with their respective terms.
10. COUNTERPARTS. This Amendment may be executed in any number of
counterparts, each of which shall for all purposes be deemed an original and all
of which are identical. All parties need not execute the same counterpart.
11. FINAL AGREEMENT. THIS WRITTEN AMENDMENT ANN THE OTHER LOAN DOCUMENTS
REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY
EVIDENCE OF PRIOR. CONTEMPORANEOUS. OR SUBSEQUENT ORAL AGREEMENTS OF THE
PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
EXECUTED as of the date first above written.
RED MAN PIPE & SUPPLY CO.
By: /s/ DEE PAIGE
Name: DEE PAIGE
Title: VICE-PRESIDENT FINANCE
-5-
<PAGE>
BARCLAYS BUSINESS CREDIT, INC.
By: /s/ MICHAEL A. PARKER
Name: MICHAEL A. PARKER
Title: CSVP
The undersigned Guarantor, having guaranteed to Lender the payment of the
obligations, as such term is defined in the Unconditional Limited Guaranty (the
"Guaranty") executed by Guarantor on May 3, 1991, hereby acknowledges, confirms,
and agrees that (i) the execution and delivery of this Amendment does not alter,
affect, diminish, release or reduce his liability under the Guaranty, (ii) the
Guaranty is in full force and effect to secure the obligations described
therein, and (iii) the obligations secured by the Guaranty include, without
limitation, any Term Loan advanced pursuant to the terms of this Amendment.
Date: 10/29/92 /s/ LEWIS B. KETCHUM
LEWIS B KETCHUM
-6-
<PAGE>
EXHIBIT 10.6
FOURTH AMENDMENT TO LOAN AND SECURITY AGREEMENT
This Fourth Amendment to Loan and Security Agreement (the "Amendment") is
made and entered into as of April 1, 1993, by and between RED MAN PIPE & SUPPLY
CO., an Oklahoma corporation ("Borrower"), and BARCLAYS BUSINESS CREDIT, INC., a
Connecticut corporation ("Lender").
PRELIMINARY STATEMENTS:
1. Borrower and Lender entered into that certain Loan and Security
Agreement dated as of May 3, 1991, as heretofore amended, governing the terms of
up to $20,000,000 in revolving credit loans and term loans (as amended, the
"Agreement").
2. Borrower has requested that the Agreement be amended to decrease the
interest rate payable by Borrower and to extend the term of the Agreement.
AGREEMENTS:
NOW, THEREFORE, in consideration of the agreements herein contained and
subject to the terms and conditions set forth herein, Borrower and Lender hereby
agree as follows, and agree that the amendments specified below shall be
effective from and after the date hereof and shall be incorporated into the
Agreement and shall supersede those provisions in the Agreement referenced as
follows:
1. DEFINITIONS. Terms used herein and defined in the Agreement shall
have the meanings set forth in the Agreement except as otherwise provided
herein.
2. INTEREST AND CHARGES. Section 3.1(A) of the Agreement is hereby
deleted in its entirety and the following is substituted therefor:
"(A) The principal amount of the Term Loan outstanding from day-to-day
shall bear interest, calculated daily at a fluctuating rate per annum equal
to the lesser of (i) 2.0% above the Base Rate (the "Annual Term Rate"), or
(ii) the Maximum Legal Rate. The principal amount of the Revolving Credit
Loans outstanding from day-to-day shall bear interest, calculated daily at
a fluctuating rate per annum equal to the lesser of (i) 1.5% (or such
lesser percentage as may be provided by subsection (H) hereof) above the
Base Rate
<PAGE>
(the "Annual Revolving Rate"), or (ii) the Maximum Legal Rate."
3. TERM OF AGREEMENT. Section 3.3(A) of the Agreement is hereby amended
by deleting the present Section 3.3(A) in its entirety and substituting therefor
the following:
Section 3.3(A). The provisions of this Agreement shall be in effect
for the period through and including May 3, 1996 (the "original Term"),
unless terminated as provided in Section 3.3(B), or extended pursuant to
this Section 3.3(A). So long as no Default has occurred, the original Term
shall be automatically extended by one year unless Borrower has notified
Lender, or Lender has notified Borrower, on or before January 3, 1996, that
it does not desire this Agreement to be extended pursuant to this Section
3.3(A).
4. CONDITIONS. The obligation of Lender to be bound by the provisions of
this Amendment shall be subject to the fulfillment of the following conditions
precedent on or before the date hereof:
(a) Lender shall have received the following, duly executed by each
party thereto, other than Lender:
(i) this Amendment; and
(ii) all other documents Lender may reasonably request with
respect to any matter relevant to this Amendment or the transactions
contemplated hereby.
(b) Borrower and Guarantor shall have performed and complied with all
agreements and conditions contained in the Agreement and the Other
Agreements which are required to be performed or complied with by Borrower
or Guarantor before or on the date hereof.
(c) The representations and warranties contained in the Agreement, as
amended hereby, and the other Agreements shall be true and correct in all
material respects as of the date hereof, with the same force and effect as
though made on and as of this date.
(d) No material adverse change shall have occurred in the business,
operations, financial condition or prospects of Borrower or Guarantor, and
no material adverse litigation shall
<PAGE>
be pending or, to the knowledge of Borrower or Guarantor, threatened,
against Borrower or Guarantor.
(e) All corporate and legal proceedings and all documents required to
be completed and executed by the provisions of, and all instruments to be
executed in connection with the transactions contemplated by, this
Amendment and any related agreements shall be satisfactory in form and
substance to Lender.
(f) As of the date hereof, there shall exist no Event of Default under
the Agreement.
5. EXPENSES. Borrower shall pay all out-of-pocket expenses arising in
connection with the preparation, execution, delivery and administration of this
Amendment, including, but not limited to, all reasonable legal fees and expenses
incurred by Lender.
6. CONTINUED EFFECT. Except to the extent amended hereby, all terms,
provisions and conditions of the Agreement and all of the other Agreements shall
continue in full force and effect and shall remain enforceable and binding in
accordance with their respective terms.
7. COUNTERPARTS. This Amendment may be executed in any number of
counterparts, each of which shall for all purposes be deemed an original and all
of which are identical. All parties need not execute the same counterpart.
8. FINAL AGREEMENT. THIS WRITTEN AMENDMENT AND THE OTHER LOAN DOCUMENTS
REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY
EVIDENCE OF PRIOR CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE
PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
EXECUTED as of the date first above written.
RED MAN PIPE & SUPPLY CO.
By: /s/ DEE PAIGE
------------------------------
Name: Dee Paige
Title: VP--Finance
BARCLAYS BUSINESS CREDIT, INC.
By: /s/ JOY L. BARTHOLOMEW
-------------------------------
Name: Joy L. Bartholomew
Title: Regional Vice President
<PAGE>
EXHIBIT 10.7
FIFTH AMENDMENT TO LOAN AND SECURITY AGREEMENT
[June 30, 1993]
This Fifth Amendment to Loan and Security Agreement (the "Amendment") is
made and entered into as of June 30, 1993, by and between RED MAN PIPE &
SUPPLY CO., an Oklahoma corporation ("Borrower"), and BARCLAYS BUSINESS CREDIT,
INC., a Connecticut corporation ("Lender").
PRELIMINARY STATEMENTS:
1. Borrower and Lender entered into that certain Loan and Security
Agreement dated as of May 3, 1991, as heretofore amended (as amended, the
"Agreement").
2. Borrower has requested that the Agreement be further amended to
provide for additional term loans to acquire real property.
NOW, THEREFORE, in consideration of the agreements herein contained,
subject to the terms and conditions set forth herein, Borrower and Lender hereby
agree as follows, and agree that, subject to satisfaction of the provisions of
Section 4 herein, the amendments specified below shall be effective from and
after the date hereof and shall be incorporated into the Agreement and shall
supersede those provisions in the Agreement referenced as follows:
1. DEFINITIONS.
(a) Terms used herein and defined in the Agreement shall have the
meanings set forth in the Agreement except as otherwise provided herein.
(b) The definitions of "Real Property" and "Term Note" contained in
Section 1.1 of the Agreement are hereby deleted, and the following shall be
substituted therefor:
Real Property - those certain parcels of real property to be
purchased by Borrower from Superior Supply Company, and more
particularly described on Exhibit "L" attached hereto, and those
certain parcels of real property to be purchase by Borrower in
connection with additional advances under the Term Loan.
Term Note - collectively, the term notes to be executed by
Borrower on or about each Term Loan Closing
<PAGE>
Date in favor of Lender to evidence the Term Loan, or a part thereof,
each of which shall be in substantially the same form of Exhibit "K"
attached hereto.
2. The Loans. Section 2.1(B) of the Agreement is hereby deleted, and the
following shall be substituted therefor:
(B) Subject to the terms and conditions of this Agreement, Lender
agrees to make a term loan to Borrower in the aggregate principal
amount of up to $1,000,000, which shall bear interest and be repayable
in accordance with the terms of the Term Note and shall be secured by
the Collateral. The Term Loan may be advanced in multiple advances;
$500,000 of such $1,000,000 has been advanced to Borrower prior to
June 1, 1993. The proceeds of each advance shall be used by Borrower
solely for the purpose of purchasing Real Property. No advance shall
be for an amount in excess of the lesser of (i) the appraised value,
as determined by Lender in its sole discretion, of the Real Property
to be purchased in connection with such advance or (ii) the purchase
price of such Real Property.
3. Conditions to Advances under Term Loan. Section 10.3 of the Agreement
is hereby amended by deleting the present subsection (F) of such Section 10.3,
and substituting therefor the following:
(F) No Term Loan Closing Date shall occur after December 31,
1994.
4. CONDITIONS. The obligation of Lender to be bound by the provisions of
this Amendment shall be subject to the fulfillment of the following conditions
precedent on or before the date hereof:
(a) Lender shall have received the following, duly executed by each
party thereto, other than Lender:
(i) this Amendment; and
(ii) all other documents Lender may reasonably request with
respect to any matter relevant to this Amendment or the transactions
contemplated hereby.
-2-
<PAGE>
(b) Borrower and Guarantor shall have performed and complied with all
agreements and conditions contained in the Agreement and the other
Agreements which are required to be performed or complied with by Borrower
or Guarantor before or on the date hereof.
(c) The representations and warranties contained in the Agreement, as
amended hereby, and the other Agreements shall be true and correct in all
material respects as of the date hereof, with the same force and effect as
though made on and as of this date.
(d) No material adverse change shall have occurred in the business
operations, financial condition or prospects of Borrower or Guarantor, and
no material adverse litigation shall be pending or, to the knowledge of
Borrower or Guarantor, threatened, against Borrower or Guarantor.
(e) All corporate and legal proceedings and all documents required to
be completed and executed by the provisions of, and all instruments to be
executed in connection with the transactions contemplated by, this
Amendment and any related agreements shall be satisfactory in form and
substance to Lender.
(f) Borrower shall have paid to Lender a non-refundable closing fee of
$5,000.
5. EXPENSES. Borrower shall pay all out-of-pocket expenses arising in
connection with the preparation, execution, delivery and administration of this
Amendment, including, but not limited to, all reasonable legal fees and expenses
incurred by Lender.
6. CONTINUED EFFECT. Except to the extent amended hereby, all terms,
provisions and conditions of the Agreement and all of the other Agreements shall
continue in full force and effect and shall remain enforceable and binding in
accordance with their respective terms.
7. COUNTERPARTS. This Amendment may be executed in any number of
counterparts, each of which shall for all purposes be deemed an original and all
of which are identical. All parties need not execute the same counterpart.
-3-
<PAGE>
8. FINAL AGREEMENT. THIS WRITTEN AMENDMENT AND THE OTHER LOAN DOCUMENTS
REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY
EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE
PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
EXECUTED as of the date first above written.
RED MAN PIPE & SUPPLY CO.
By: /s/ DEE PAIGE
---------------------------
Name: Dee Paige
Title: VP--Finance
BARCLAYS BUSINESS CREDIT, INC.
By: /s/ JOY L. BARTHOLOMEW
---------------------------
Name: Joy L. Bartholomew
Title: Regional Vice President
The undersigned Guarantor, having guaranteed to Lender the payment of the
Obligations, as such term is defined in the Unconditional Limited Guaranty (the
"Guaranty") executed by Guarantor on May 3, 1991, hereby acknowledges, confirms,
and agrees that (i) the execution and delivery of this Amendment does not alter,
affect, diminish, release or reduce his liability under the Guaranty, (ii) the
Guaranty is in full force and effect to secure the obligations described
therein, and (iii) the Obligations secured by the Guaranty include, without
limitation, any Term Loan advanced pursuant to the terms of this Amendment.
Date: June 30, 1993 /s/ LEWIS B. KETCHUM
--------------------------
LEWIS B. KETCHUM
-4-
<PAGE>
EXHIBIT 10.8
SIXTH AMENDMENT TO LOAN AND SECURITY AGREEMENT
[October 28, 1993]
This Sixth Amendment to Loan and Security Agreement (the "Amendment") is
made and entered into as of October 28, 1993, by and between RED MAN PIPE &
SUPPLY CO., an Oklahoma corporation ("Borrower"), and BARCLAYS BUSINESS CREDIT,
INC., a Connecticut corporation ("Lender").
PRELIMINARY STATEMENTS:
1. Borrower and Lender have entered into that certain Loan and Security
Agreement dated as of May 3, 1991, as heretofore amended (as amended, the
"Agreement").
2. Borrower has requested that the Agreement be further amended to
decrease the interest rate payable by Borrower, extend the term of the Agreement
and increase the aggregate amount of the credit facilities made available to
Borrower by Lender.
3. Borrower and Lender desire to amend the Agreement to make the revisions
described above and make certain other revisions more particularly described
herein.
AGREEMENTS:
NOW, THEREFORE, in consideration of the agreements herein contained,
subject to the terms and conditions set forth herein, Borrower and Lender hereby
agree as follows, and agree that, subject to satisfaction of the provisions of
Section 8 hereof, the amendments specified below shall be effective from and
after the date hereof and shall be incorporated into the Agreement and shall
supersede those provisions in the Agreement referenced as follows:
1. DEFINITIONS.
(a) Terms used herein and defined in the Agreement shall have the
meanings set forth in the Agreement except as otherwise provided herein.
(b) The definitions of "Borrowing Base" and "Commitment" contained in
Section 1.1 of the Agreement are hereby deleted, and the following shall be
substituted therefor:
"Borrowing Base - as at any date of determination thereof, an
amount equal to the lesser of:
-1-
<PAGE>
(a) the Commitment as of such date, minus the outstanding
principal amount of the Term Loan as of such date; or
(b) an amount up to:
(i) ninety percent (90%) of the net amount (after
deduction of such reserves as Lender deems proper and
necessary in its sole discretion, including a reserve for
sales tax payables) of Eligible Accounts outstanding at such
date;
PLUS
(ii) the lesser of (A) $1,500,000 or (B) ninety
percent (90%) of the net amount (after deduction of such
reserves as Lender deems proper and necessary in its sole
discretion, including a reserve for sales tax payables) of
Eligible International Accounts outstanding at such date;
PLUS
(iii) the lesser of (A) $9,000,000 or (B) sixty percent
(60%) of the value (after deduction of such reserves as
Lender deems proper and necessary in its sole discretion) of
Eligible Inventory at such date consisting of tubular goods
held for sale in the ordinary course of Borrower's business,
calculated on the basis of the lower of cost or market;
PLUS
(iv) the lesser of (A) the Supply Inventory Maximum in
effect on such date or (B) the Supply Inventory Advance Rate
in effect on such date multiplied by the value (after
deduction of such reserves as Lender deems proper and
necessary in its sole discretion) of Eligible Inventory at
such date consisting of consumable supplies held for sale in
the ordinary course of Borrower's business, calculated on
the basis of the lower of cost or market;
-2-
<PAGE>
MINUS (subtract from the sum of clauses (i), (ii),
(iii) and (iv) above)
(iv) an amount equal to the sum of (A) the face amount
of all LC Guaranties and Letters of Credit issued by Lender
or Affiliates of Lender and outstanding at such date and (B)
any amounts which Lender may be obligated to pay in the
future for the account of Borrower pursuant to this
Agreement, the other Agreements or otherwise.
For purposes hereof, the net amount of Eligible Accounts or
Eligible International Accounts, as the case may be, at any time
shall be the face amount of such Eligible Accounts or such
Eligible International Accounts, less any and all returns,
discounts (which may, at Lender's option, be calculated on
shortest terms), credits, allowances or excise taxes of any
nature at any time issued, owing, claimed by Account Debtors,
granted, outstanding or payable in connection with such Accounts
at such time."
"Commitment - $25,000,000."
(c) The following definitions are hereby added to Section 1.1 of the
Agreement:
"Eligible International Accounts - an Account arising in the
ordinary course of Borrower's business from the sale of goods or
rendition of services to an Account Debtor outside the United States
which Lender, in its good faith credit judgment, deems to be an
Eligible International Account. Without limiting the generality of the
foregoing, no Account which arises from a sale to an Account Debtor
outside of the United States shall be an Eligible International
Account unless each of the following is true and correct of such
Account: (a) other than for clause (ix) of such definition, such
Account otherwise constitutes an Eligible Account, and (b) such
Account arises from a sale to an Account Debtor acceptable to Lender,
in its sole discretion."
2. INTEREST AND CHARGES.
(a) Section 3.1(A) of the Agreement is hereby deleted, and the
following shall be substituted therefor:
-3-
<PAGE>
"(A) The principal amount of the Term Loan outstanding from day-
to-day shall bear interest, calculated daily at a fluctuating rate per
annum equal to the lesser of (i) 1.5% (or such lesser percentage as
may be provided by subsection (H) hereof) above the Base Rate (the
"Annual Term Rate"), or (ii) the Maximum Legal Rate. The principal
amount of the Revolving Credit Loans outstanding from day-to-day shall
bear interest, calculated daily at a fluctuating rate per annum equal
to the lesser of (i) 1.0% (or such lesser percentage as may be
provided by subsection (H) hereof) above the Base Rate (the "Annual
Revolving Rate"), or (ii) the Maximum Legal Rate."
(b) Section 3.1(H) of the Agreement is hereby deleted, and the
following shall be substituted therefor:
"(H) So long as no Default has occurred, in the event that
Borrower achieves the performance factors described below as of each
of the calculation dates specified below, then the Applicable Rate
shall be reduced as follows:
(i) Performance Factors to be Achieved as of October 31,
1994. So long as no Default has occurred, and so long as Borrower
achieves the performance factors set out below, upon the later of
(i) receipt and review by Lender of audited financial statements
of Borrower provided pursuant to Section 9.1(J) demonstrating
compliance with the following performance factors, or (ii)
receipt by Lender of Borrower's Annual Business Plan for the
twelve months ending October 31, 1995, the Applicable Rate shall
be reduced by 0.25%. Such reduction shall be made effective
November 1, 1994 by (a) crediting the Loan Account by the
difference between the amount of interest paid by Borrower to
Lender since such effective date and the amount of interest which
would have been paid by Borrower to Lender since such effective
date had the Applicable Rate been so reduced, and (b)
recalculating all accrued but unpaid interest, and all interest
to accrue with respect to future transactions, at the Applicable
Rate as so reduced. The performance factors required to be
achieved as of October 31, 1994 in order to reduce the Applicable
Rate are as follows:
-4-
<PAGE>
(A) The Average Daily Availability for the six months
ending October 31, 1994 shall equal or exceed thirty percent
(30%) of the Average Daily Loan Balance for such period;
(B) The Adjusted Net Earnings from operations, plus
taxes (to the extent deducted therefrom), for the year
ending October 31, 1994 shall be at least $3,000,000; and
(C) Borrower's Leverage Ratio as of October 31, 1994
shall not exceed 3.2 to l.0.
Any rate reduction made pursuant to this Section 3.1(H)(i)
shall remain in effect only for so long as no Default has
occurred and is continuing and Borrower maintains the
Leverage Ratio described in (C) above.
(ii) Performance Factors to be Achieved as of October
31, 1995. So long as no Default has occurred, and so long as
Borrower achieves the performance factors set out below,
upon the later of (i) receipt and review by Lender of
audited financial statements of Borrower provided pursuant
to Section 9.1(J) demonstrating compliance with the
following performance factors, or (ii) receipt by Lender of
Borrower's Annual Business Plan for the twelve months ending
October 31, 1996, the Applicable Rate (as the same may or
may not have been reduced pursuant to Section 3.1(H)(i)
above) shall be reduced by 0.25%. Such reduction shall be
made effective November 1, 1995 by (a) crediting the LOAN
Account by the difference between the amount of interest
paid by Borrower to Lender since such effective date and the
amount of interest which would have been paid by Borrower to
Lender since such effective date had the Applicable Rate
been so reduced, and (b) recalculating all accrued but
unpaid interest, and all interest to accrue with respect to
future transactions, at the Applicable Rate as so reduced.
The performance factors required to be achieved as of
October 31, 1995 in order to reduce the Applicable Rate are
as follows:
-5-
<PAGE>
(A) The Average Daily Availability for the six months
ending October 31, 1995 shall equal or exceed thirty percent
(30%) of the Average Daily Loan Balance for such period
(B) The Adjusted Net Earnings from operations, plus
taxes (to the extent deducted therefrom), for the year
ending October 31, 1995 shall be at least $3,500,000; and
(C) Borrower's Leverage Ratio as of October 31, 1995
shall not exceed 3.0 to l.0
Any rate reduction made pursuant to this Section 3.1(H)(ii) shall
remain in effect only for so long as no Default has occurred and
is continuing and Borrower maintains the Leverage Ratio described
in (C) above."
3. TERM OF AGREEMENT. Section 3.3(A) of the Agreement is hereby deleted,
and the following shall be substituted therefor:
"(A) The provisions of this Agreement shall be in effect for the
period through and including October 31, 1996 (the "Original Term"),
unless terminated as provided in Section 3.3(B), or extended pursuant
to this Section 3.3(A). So long as no Default has occurred, the
Original Term shall be automatically extended by one year unless
Borrower has notified Lender, or Lender has notified Borrower, on or
before August 31, 1996, that it does not desire this Agreement to be
extended pursuant to this Section 3.3(A)."
4. EARLY TERMINATION FEE. Section 3.3(C) of the Agreement is hereby
deleted, and the following shall be substituted therefor:
"(C) At the effective date of such termination by Borrower,
Borrower shall pay to Lender (in addition to the then outstanding
principal, accrued interest and other charges, fees and expenses owing
under this Agreement and any of the Other Agreements), as liquidated
damages for the loss of the bargain and not as a penalty, an amount
equal to the applicable percentage set forth below of the highest of
the Average Daily Loan Balances outstanding for any month during the
applicable term set forth below during which such termination occurs:
-6-
<PAGE>
Applicable Term Applicable Percentage
October 28, 1993 through
October 31. 1994 3.0%
November 1, 1994, through
October 31, 1995 2.0%
November 1, 1995, through
October 31, 1996 1.0%
If termination occurs on the last day of the original Term or any
renewal term thereafter, Borrower shall not be obligated to pay Lender
any liquidated damages. The termination charge or prepayment premium
for amounts outstanding on the Term Loan shall be computed in
accordance with the provisions of the Term Note."
5. FINANCIAL COVENANTS. Section 9.3(A) of the Agreement is hereby
deleted, and the following shall be substituted therefor:
"(A) Maintain a Leverage Ratio not greater than the ratio shown below
for the date corresponding thereto:
Date Amount
October 28, 1993 to October 31, 1994 4.0 to 1.0
November 1, 1994 to October 31, 1995 3.5 to l.0
November 1, 1995 and Thereafter 3.2 to l.0"
6. CONDITIONS TO ADVANCES UNDER TERM LOAN. Section 10.3 of the Agreement
is hereby deleted, and the following shall be substituted therefor:
"(F) No Term Loan Closing Date shall occur after october 30, 1996."
7. EXHIBITS. A11 references in the Agreement (as amended hereby) to
Exhibit "J" shall hereafter be deemed to be references to Exhibit "J" attached
hereto.
8. CONDITIONS. The obligation of Lender to be bound by the provisions of
this Amendment shall be subject to the fulfillment of the following conditions
precedent on or before the date hereof:
(a) Lender shall have received the following, duly executed by each
party thereto, other than Lender:
(i) this Amendment; and
-7-
<PAGE>
(ii) all other documents Lender may reasonably request with
respect to any matter relevant to this Amendment or the transactions
contemplated hereby.
(b) Borrower and Guarantor shall have performed and complied with all
agreements and conditions contained in the Agreement and the other
Agreements which are required to be performed or complied with by Borrower
or Guarantor before or on the date hereof.
(c) The representations and warranties contained in the Agreement, as
amended hereby, and the other Agreements shall be true and correct in all
material respects as of the date hereof, with the same force and effect as
though made on and as of this date.
(d) No material adverse change shall have occurred in the business
operations, financial condition or prospects of Borrower or Guarantor, and
no material adverse litigation shall be pending or, to the knowledge of
Borrower or Guarantor, threatened, against Borrower or Guarantor.
(e) All corporate and legal proceedings and all documents required to
be completed and executed by the provisions of, and all instruments to be
executed in connection with the transactions contemplated by, this
Amendment and any related agreements shall be satisfactory in form and
substance to Lender.
9. LIMITED WAIVER. Upon satisfaction of the conditions precedent
specified in Section 8 hereof, Lender shall waive each Default or Event of
Default which occurred or existed prior to the effective date of this Amendment
relating to Borrower's failure during the period from May 31, 1993 through June
30, 1993, and for the month ended September 3O, 1993, to maintain a Leverage
Ratio of not less than 3.3 to 1.0, as required by Section 9.3(A) of the
Agreement. Except as otherwise specifically provided for in this Amendment,
nothing contained herein shall be construed as a waiver by Lender of any
covenant or provision of the Agreement, the other Agreements, this Amendment, or
of any other contract or instrument between Borrower and Lender, and the failure
of Lender at any time or times hereafter to require strict performance by
Borrower of any provision thereof shall not waive, affect or diminish any right
of Lender to thereafter demand strict compliance therewith. Lender hereby
reserves all rights granted under the Agreement, the other Agreements, this
Amendment and any other contract or instrument between Borrower and Lender.
Except for the Defaults and/or Events of Default specified in the first sentence
of this Section 9, no Default or Event of Default has occurred and is
continuing, unless such Default or Event of Default has been specifically waived
in writing by Lender.
-8-
<PAGE>
l0. EXPENSES. Borrower shall pay all out-of-pocket expenses arising
in connection with the preparation, execution, delivery and administration of
this Amendment, including, but not limited to, all reasonable legal fees and
expenses incurred by Lender.
11. CONTINUED EFFECT. Except to the extent amended hereby, all terms,
provisions and conditions of the Agreement and all of the other Agreements shall
continue in full force and effect and shall remain enforceable and binding in
accordance with their respective terms.
12. FURTHER ASSURANCES. Borrower shall, at Lender's request, promptly
execute or cause to be executed and delivered to Lender any and all documents,
instruments or agreements deemed necessary by Lender to continue perfection of
Lender's Liens, to facilitate collection of the Collateral or otherwise to give
effect to or carry out the terms or intent of this Amendment.
13. COUNTERPARTS. This Amendment may be executed in any number of
counterparts, each of which shall for all purposes be deemed an original and all
of which are identical. All parties need not execute the same counterpart.
14. FINAL AGREEMENT. THIS WRITTEN AMENDMENT AND THE OTHER LOAN
DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE
CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL
AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE
PARTIES.
EXECUTED as of the date first above written.
RED MAN PIPE & SUPPLY CO.
By: /s/ Dee Paige
---------------------------------
Name: DEE PAIGE
-------------------------------
Title: VP-Finance
------------------------------
BARCLAYS BUSINESS CREDIT, INC.
By: /s/ Joy L. Bartholomew
---------------------------------
Name: JOY L. BARTHOLOMEW
-------------------------------
Title: Regional Vice President
------------------------------
The undersigned Guarantor, having guaranteed to Lender the payment of the
obligations, as such term is defined in the
-9-
<PAGE>
Unconditional Limited Guaranty (the "Guaranty") executed by Guarantor on May 3,
1991, hereby acknowledges, confirms, and agrees that (i) the execution and
delivery of this Amendment does not alter, affect, diminish, release or reduce
his liability under the Guaranty, (ii) the Guaranty is in full force and effect
to secure the obligations described therein, and (iii) the obligations secured
by the Guaranty include, without limitation, any Term Loan advanced pursuant to
the terms of this Amendment.
/s/ Lewis B. Ketchum
------------------------------------
LEWIS B. KETCHUM
-10-
<PAGE>
EXHIBIT 10.9
SEVENTH AMENDMENT TO LOAN AND SECURITY AGREEMENT
[May 12, 1994]
This Seventh Amendment to Loan and Security Agreement (the "Amendment") is
made and entered into effective as of May 12, 1994, by and between RED MAN PIPE
& SUPPLY CO., an Oklahoma corporation ("Borrower"), and BARCLAYS BUSINESS
CREDIT, INC., a Connecticut corporation ("Lender").
PRELIMINARY STATEMENTS:
1. Borrower and Lender have entered into that certain Loan and Security
Agreement dated as of May 3, 1991, as heretofore amended (as amended, the
"Agreement").
2. Borrower and Lender desire to amend the Agreement and the other
Agreements as hereinafter set forth.
AGREEMENTS:
NOW, THEREFORE, in consideration of the agreements herein contained,
subject to the terms and conditions set forth herein, Borrower and Lender hereby
agree as follows, and agree that, subject to satisfaction of the provisions of
Section 8 hereof, the amendments specified below shall be effective from and
after the date hereof and shall be incorporated into the Agreement and shall
supersede those provisions in the Agreement referenced as follows:
1. DEFINITIONS.
(a) Terms used herein and defined in the Agreement shall have the
meanings set forth in the Agreement except as otherwise provided herein.
(b) The definition of "Borrowing Base" contained in Section 1.1 of the
Agreement is hereby deleted, and the following shall be substituted
therefor:
"Borrowing Base - as at any date of determination thereof, an
amount equal to the lesser of:
(a) the Commitment as of such date, minus the outstanding
principal amount of the Term Loan as of such date; or
(b) an amount up to:
-1-
<PAGE>
(i) ninety percent (90%) of the net amount (after deduction of
such reserves as Lender deems proper and necessary in its sole
discretion, including a reserve for sales tax payables) of Eligible
Accounts outstanding at such date;
PLUS
(ii) the lesser of (A) $1,500,000 or (B) ninety percent (90%) of
the net amount (after deduction of such reserves as Lender deems
proper and necessary in its sole discretion, including a reserve for
sales tax payables) of Eligible International Accounts outstanding at
such date;
PLUS
(iii) the lesser of (A) $10,000,000 or (B) sixty percent
(60%) of the value (after deduction of such reserves as Lender deems
proper and necessary in its sole discretion) of Eligible Inventory at
such date consisting of tubular goods held for sale in the ordinary
course of Borrower's business, calculated on the basis of the lower of
cost or market;
PLUS
(iv) the lesser of (A) $6,000,000 or (B) forty percent (40%) of
the value (after deduction of such reserves as Lender deems proper and
necessary in its sole discretion) of Eligible Inventory at such date
consisting of consumable supplies held for sale in the ordinary course
of Borrower's business, calculated on the basis of the lower of cost
or market;
MINUS (subtract from the sum of clauses (i), (ii), (iii) and (iv)
above)
(iv) an amount equal to the sum of (A) the face amount of all LC
Guaranties and Letters of Credit issued by Lender or Affiliates of
Lender and outstanding at such date and (B) any amounts which Lender
-2-
<PAGE>
may be obligated to pay in the future for the account of Borrower
pursuant to this Agreement, the other Agreements or otherwise.
For purposes hereof, the net amount of Eligible Accounts or Eligible
International Accounts, as the case may be, at any time shall be the face
amount of such Eligible Accounts or such Eligible International Accounts,
less any and all returns, discounts (which may, at Lender's option, be
calculated on shortest terms), credits, allowances or excise taxes of any
nature at any time issued, owing, claimed by Account Debtors, granted,
outstanding or payable in connection with such Accounts at such time."
(c) The definitions of "Supply Inventory Advance Rate" and "Supply
Inventory Maximum" contained in Section 1.1 of the Agreement are hereby deleted
in their entirety.
2. EXHIBITS. All references in the Agreement (as amended hereby) to
Exhibit "J" shall hereafter be deemed to be references to Exhibit "J" attached
hereto.
3. CONDITIONS. The obligation of Lender to be bound by the provisions of
this Amendment shall be subject to the fulfillment of the following conditions
precedent on or before the date hereof.
(a) Lender shall have received the following, duly executed by each
party thereto, other than Lender:
(i) this Amendment; and
(ii) all other documents Lender may reasonably request with
respect to any matter relevant to this Amendment or the transactions
contemplated hereby.
(b) Borrower and Guarantor shall have performed and complied with all
agreements and conditions contained in the Agreement and the other
Agreements which are required to be performed or complied with by Borrower
or Guarantor before or on the date hereof.
(c) The representations and warranties contained in the Agreement, as
amended hereby, and the other Agreements shall be true and correct in all
material respects as of the date hereof, with the same force and effect as
though made on and as of this date.
-3-
<PAGE>
(d) No material adverse change shall have occurred in the business
operations, financial condition or prospects of Borrower or Guarantor, and
no material adverse litigation shall be pending or, to the knowledge of
Borrower or Guarantor, threatened, against Borrower or Guarantor.
(e) All corporate and legal proceedings and all documents required to
be completed and executed by the provisions of, and all instruments to be
executed in connection with the transactions contemplated by, this
Amendment and any related agreements shall be satisfactory in form and
substance to Lender.
4. NO WAIVER. Except as otherwise specifically provided for in this
Amendment, nothing contained herein shall be construed as a waiver by Lender of
any covenant or provision of the Agreement, the Other Agreements, this
Amendment, or of any other contract or instrument between Borrower and Lender,
and the failure of Lender at any time or times hereafter to require strict
performance by Borrower of any provision thereof shall not waive, affect or
diminish any right of Lender to thereafter demand strict compliance therewith.
Lender hereby reserves all rights granted under the Agreement, the other
Agreements, this Amendment and any other contract or instrument between Borrower
and Lender.
5. REPRESENTATIONS AND WARRANTIES. Borrower hereby represents and
warrants to Lender that (a) the execution, delivery and performance of this
Amendment and any and all other Agreements executed and/or delivered in
connection herewith have been authorized by all requisite corporate action on
the part of Borrower and will not violate the Certificate of Incorporation or
Bylaws of Borrower; (b) the representations and warranties contained in the Loan
Agreement, as amended hereby, and any other Agreement are true and correct on
and as of the date hereof and on and as of the date of execution hereof as
though made on and as of each such date; (c) no Default or Event of Default
under the Loan Agreement, as amended hereby, has occurred and is continuing,
unless such Default or Event of Default has been specifically waived in writing
by Lender; and (d) Borrower is in full compliance with all covenants and
agreements contained in the Loan Agreement and the other Agreements, as amended
hereby.
6. SEVERABILITY. Any provision of this Amendment held by a court of
competent jurisdiction to be invalid or unenforceable shall not impair or
invalidate the remainder of this Amendment and the effect thereof shall be
confined to the provision so held to be invalid or unenforceable.
-4-
<PAGE>
7. EXPENSES. Borrower shall pay all out-of-pocket expenses arising in
connection with the preparation, execution, delivery and administration of this
Amendment, including, but not limited to, all reasonable legal fees and expenses
incurred by Lender.
8. CONTINUED EFFECT. Except to the extent amended hereby, all terms,
provisions and conditions of the Agreement and all of the other Agreements shall
continue in full force and effect and shall remain enforceable and binding in
accordance with their resPective terms.
9. FURTHER ASSURANCES. Borrower shall, at Lender's request, promptly
execute or cause to be executed and delivered to Lender any and all documents,
instruments or agreements deemed necessary by Lender to continue perfection of
Lender's Liens, to facilitate collection of the Collateral or otherwise to give
effect to or carry out the terms or intent of this Amendment.
10. COUNTERPARTS. This Amendment may be executed in any number of
counterparts, each of which shall for all purposes be deemed an original and all
of which are identical. All parties need not execute the same counterpart.
11. FINAL AGREEMENT. THIS WRITTEN AMENDMENT AND THE OTHER LOAN DOCUMENTS
REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY
EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE
PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
12. RELEASE. BORROWER HEREBY ACKNOWLEDGES THAT IT HAS NO DEFENSE,
COUNTERCLAIM, OFFSET, CROSS-COMPLAINT, CLAIM OR DEMAND OF ANY KIND OR NATURE
WHATSOEVER THAT CAN BE ASSERTED TO REDUCE OR ELIMINATE ALL OR ANY PART OF ITS
LIABILITY TO REPAY THE "OBLIGATIONS" OR TO SEEK AFFIRMATIVE RELIEF OR DAMAGES OF
ANY KIND OR NATURE FROM LENDER. BORROWER HEREBY VOLUNTARILY AND KNOWINGLY
RELEASES AND FOREVER DISCHARGES LENDER, ITS PREDECESSORS, AGENTS, EMPLOYEES,
SUCCESSORS AND ASSIGNS, FROM ALL PoSSIBLE CLAIMS, DEMANDS, ACTIONS, CAUSES OF
ACTION, DAMAGES, COSTS, EXPENSES, AND LIABILITIES WHATSOEVER, KNOWN OR UNKNOWN,
ANTICIPATED OR UNANTICIPATED, SUSPECTED OR UNSUSPECTED, FIXED, CONTINGENT, OR
CONDITIONAL, AT LAW OR IN EQUITY, ORIGINATING IN WHOLE OR IN PART ON OR BEFORE
THE DATE THIS AMENDMENT IS EXECUTED, WHICH THE BORROWER MAY NOW OR HEREAFTER
HAVE AGAINST LENDER, ITS PREDECESSORS, AGENTS, EMPLOYEES, SUCCESSORS AND
ASSIGNS, IF ANY, AND IRRESPECTIVE OF WHETHER ANY SUCH CLAIMS ARISE OUT OF
CONTRACT, TORT, VIOLATION OF LAW OR REGULATIONS, OR OTHERWISE, AND ARISING FROM
ANY "LOANS", INCLUDING, WITHOUT LIMITATION, ANY CONTRACTING FOR, CHARGING,
TAKING, RESERVING, COLLECTING OR RECEIVING INTEREST
-5-
<PAGE>
IN EXCESS OF THE HIGHEST LAWFUL RATE APPLICABLE, THE EXERCISE OF ANY RIGHTS AND
REMEDIES UNDER THE LOAN AGREEMENT OR OTHER AGREEMENTS, AND NEGOTIATION FOR AND
EXECUTION OF THIS AMENDMENT.
EXECUTED to be effective as of the date first above written.
RED MAN PIPE & SUPPLY CO.
By: /s/ Dee Paige
------------------------------
Name: Dee Paige
----------------------------
Title: V.P.-Finance
---------------------------
BARCLAYS BUSINESS CREDIT, INC.
By: /s/ Joy L. Bartholomew
------------------------------
Name: Joy L. Bartholomew
----------------------------
Title: Group Vice President
---------------------------
The undersigned Guarantor, having guaranteed to Lender the payment of the
obligations, as such term is defined in the Unconditional Limited Guaranty (the
"Guaranty") executed by Guarantor on May 3, 1991, hereby acknowledges, confirms,
and agrees that (i) the execution and delivery of this Amendment does not alter,
affect, diminish, release or reduce his liability under the Guaranty, and (ii)
the Guaranty is in full force and effect to secure the obligations described
therein.
/s/ Lewis B. Ketchum
---------------------------------
LEWIS B. KETCHUM
-6-
<PAGE>
EXHIBIT 10.10
EIGHTH AMENDMENT TO LOAN AND SECURITY AGREEMENT
October 31, 1994
This Eighth Amendment to Loan and Security Agreement (the "Amendment") is
made and entered into effective as of October 31, 1994, by and between RED MAN
PIPE & SUPPLY CO., an Oklahoma corporation ("Borrower"), and BARCLAYS BUSINESS
CREDIT, INC., a Connecticut corporation ("Lender").
PRELIMINARY STATEMENTS:
1. Borrower and Lender have entered into that certain Loan and Security
Agreement dated as of May 3, 1991, as heretofore amended (as amended from time
to time, the "Agreement").
2. Borrower and Lender desire to amend the Agreement and the other
Agreements as hereinafter set forth.
AGREEMENTS:
NOW, THEREFORE, in consideration of the agreements herein contained,
subject to the terms and conditions set forth herein, Borrower and Lender hereby
agree as follows, and agree that, subject to satisfaction of the provisions of
Section 12 hereof, the amendments specified below shall be effective from and
after the date hereof and shall be incorporated into the Agreement and shall
supersede those provisions in the Agreement referenced as follows:
1. DEFINITIONS.
(a) Terms used herein and defined in the Agreement shall have the
meanings set forth in the Agreement except as otherwise provided herein.
(b) The definitions of "Borrowing Base", "Commitment", and "Revolving
Credit Loans" contained in Section 1.1 of the Agreement are hereby deleted,
and the following shall be substituted therefor:
"Borrowing Base - as at any date of determination thereof, an
amount equal to the lesser of:
(a) the Commitment as of such date, minus the outstanding
principal amount of the Term Loan as of such date; or
(b) an amount up to:
-1-
<PAGE>
(i) ninety percent (90%) of the net amount (after deduction of
such reserves as Lender deems proper and necessary in its sole
discretion, including a reserve for sales tax payables) of Eligible
Accounts outstanding at such date;
PLUS
(ii) the lesser of (A) $2,500,000 or (B) ninety percent (90%) of
the net amount (after deduction of such reserves as Lender deems
proper and necessary in its sole discretion, including a reserve for
sales tax payables) of Eligible International Accounts outstanding at
such date;
PLUS
(iii) the lesser of (A) $11,000,000 or (B) sixty percent
(60%) of the value (after deduction of such reserves as Lender deems
proper and necessary in its sole discretion) of Eligible Inventory at
such date consisting of tubular goods held for sale in the ordinary
course of Borrower's business, calculated on the basis of the lower of
cost or market;
PLUS
(iv) the lesser of (A) $6,500,000 or (B) forty percent (40%) of
the value (after deduction of such reserves as Lender deems proper and
necessary in its sole discretion) of Eligible Inventory at such date
consisting of consumable supplies held for sale in the ordinary course
of Borrower's business, calculated on the basis of the lower of cost
or market:
PLUS
(v) the lesser of (A) $1,500,000 or (B) sixty percent (60%) of
the value (after deduction of such reserves as Lender deems proper and
necessary in its sole discretion of Eligible Inventory at such Date
consisting of line pipe held for sale in the ordinary course of
Borrower's
-2-
<PAGE>
business, calculated on the basis of the lower of cost or
market;
MINUS (subtract from the sum of clauses (i), (ii),
(iii), (iv), and (v) above)
(vi) an amount equal to the sum of (A) the face amount
of all LC Guaranties and Letters of Credit issued by Lender
or Affiliates of Lender and outstanding at such date and (B)
any amounts which Lender may be obligated to pay in the
future for the account of Borrower pursuant to this
Agreement, the Other Agreements or otherwise.
For purposes hereof, the net amount of Eligible Accounts or
Eligible International Accounts, as the case may be, at any time
shall be the face amount of such Eligible Accounts or such
Eligible International Accounts, less any and all returns,
discounts (which may, at Lender's option, be calculated on
shortest terms), credits, allowances or excise taxes of any
nature at any time issued, owing, claimed by Account Debtors,
granted, outstanding or payable in connection with such Accounts
at such time."
"Commitment - $30,000,000."
"Revolving Credit Loans - any and all Base Rate Loans and Eurodollar
Loans made by Lender as provided in Section 2.1(A) of this Agreement."
(e) The following definitions are hereby added to Section 1.1 of the
Agreement:
"Base Rate Loan - a Revolving Credit Loan made by Lender which bears
interest at a rate based upon the Base Rate."
"Borrowing Notice - as defined in Section 2.1.(D) of the Agreement."
"Eurodollar Base Rate - with respect to a Eurodollar Loan for the
relevant Eurodollar Interest Period, a rate per annum equal to the quotient of
the following: (a) the rate at which deposits in U.S. dollars in immediately
available funds are offered by Lender or Barclays Bank PLC to first-class banks
in the London interbank market at approximately 11:00 a.m (London time) two (2)
Business Days prior to the first day
-3-
<PAGE>
of such Eurodollar Interest Period, in the approximate amount of the Eurodollar
Loan and having a maturity approximately equal to the Eurodollar Interest Period
divided by (b) the difference of 1.00 minus the Eurodollar Reserve Requirement.
"Eurodollar Interest Period - with respect to a Eurodollar Loan, a
period of one (1), two (2), three (3) or six (6) months commencing on a Business
Day selected by Borrower pursuant to this Agreement. Such Eurodollar Interest
Period shall end on (but exclude) the day which corresponds numerically to such
date one (1), two (2), three (3) or six (6) months thereafter, provided,
however, that if there is no such numerically corresponding day in such first
(lst), second (2nd), third (3rd) or sixth (6th) succeeding month, such
Eurodollar Interest Period shall end on the last Business Day of such first
(lst), second (2nd), third (3rd) or sixth (6th) succeeding month. If a
Eurodollar Interest Period would otherwise end on a day which is not a Business
Day, such Eurodollar Interest Period shall end on the next succeeding Business
Day, provided, however, that if said next succeeding Business Day falls in a new
month, such Eurodollar Interest Period shall end on the immediately preceding
Business Day."
"Eurodollar Loan - a Revolving Credit Loan which, pursuant to a
Borrowing Notice, bears interest at a rate based upon the Eurodollar Base Rate
for the Eurodollar Interest Period specified in such Borrowing Notice."
"Eurodollar Reserve Requirement - on any day, means that percentage
(expressed as a decimal fraction) which is in effect on such day, as provided by
the Board of Governors of the Federal Reserve System (or any successor
governmental body) applied for determining the maximum reserve requirements
(including without limitation, basic, supplemental, marginal and emergency
reserves) under Regulation D with respect to "eurocurrency liabilities" as
currently defined in Regulation D, or under any similar or successor regulation
with respect to eurocurrency liabilities or eurocurrency funding. Each
determination by Lender of the Eurodollar Reserve Requirement shall, in the
absence of manifest error, be conclusive and binding."
2. MANNER OF BORROWING LOANS. The following Section 2.1(D) is hereby
added to the Agreement, as follows:
"(D) Manner of Borrowing Resolving Credit Loans. Borrowings under
the credit facility established pursuant to Section 2.1(A) hereof shall be
made as follows:
(1) A request for a Revolving Credit Loan shall be made, or
shall be deemed to be made, in the following manner: (a) Borrower may
give
-4-
<PAGE>
Lender notice of its intention to borrow in the form of Exhibit K
hereto (a "Borrowing Notice"), in which notice Borrower shall specify
(i) the aggregate amount of such Revolving Credit Loan, (ii) the
requested date of such Revolving Credit Loan, (iii) the Annual
Revolving Rate selected in accordance with Section 3.1 of this
Agreement, and (iv) where Borrower selects a Eurodollar Loan, the
Eurodollar Interest Period applicable thereto; (b) the becoming due of
any amount required to be paid under this Agreement as interest shall
be deemed irrevocably to be a request for a Base Rate Loan on the due
date in the amount required to pay such interest; and (c) the becoming
due of any other Obligations shall be deemed irrevocably to be a
request for a Base Rate Loan on the due date in the amount then so
due. If Borrower selects a Base Rate Loan, Borrower shall give Lender
the Borrowing Notice prior to 12:00 Noon on the Business Day which is
the requested date of such Base Rate Loan. If Borrower selects a
Eurodollar Loan, Borrower shall give Lender the Borrowing Notice at
least two (2) Business Days prior to the requested date of such
Eurodollar Loan.
(2) Borrower hereby irrevocably authorizes Lender to
disburse the proceeds of each Revolving Credit Loan requested, or
deemed to be requested, pursuant to this Section 2.1(D) as follows:
(a) the proceeds of each Revolving Credit Loan requested under Section
2.1(D)(l)(a) shall be disbursed by Lender in lawful money of the
United States of America in immediately available funds by wire
transfer to such bank account as may be agreed upon by Borrower and
Lender from time to time; and (b) the proceeds of each Loan requested
under Section 2.1(D)(l)(b) or (c) shall be disbursed by Lender by way
of direct payment of the relevant obligation.
3. INTEREST AND CHARGES.
(a) Section 3.1(A) of the Agreement is hereby deleted, and the
following shall be substituted therefor:
"(A) The principal amount of the Term Loan outstanding from day-
to-day shall bear interest, calculated daily at a fluctuating rate per
annum equal to the lesser of (i) 1.5% (or such lesser percentage as
may be provided by subsection (H) hereof) above the Base Rate (the
"Annual Term Rate"), or (ii) the Maximum Legal Rate. The principal
amount of the Revolving Credit Loans
-5-
<PAGE>
outstanding from day-to-day shall bear interest, calculated daily, at
the following rates per annum (individually called, as applicable, an
"Annual Revolving Rate"): (i) each Eurodollar Loan shall bear interest
at a rate per annum equal to the lesser of (a) 3.5% (or such lesser
percentage as may be provided by subsection (H) hereof) above the
Eurodollar Base Rate for the Eurodollar Interest Period applicable
thereto, or (b) the Maximum Legal Rate, and (ii) each Base Rate Loan
shall bear interest at the lesser of (a) a fluctuating rate per annum
equal to 1.0% (or such lesser percentage as may be provided by
subsection (H) hereof) above the Base Rate, or (b) the Maximum Legal
Rate."
(b) Section 3.1(B) of the Agreement is hereby deleted, and the
following shall be substituted therefor:
"Each Base Rate Loan shall be increased or decreased, as the case
may be, by an amount equal to any increase or decrease in the Base
Rate, with such adjustments to be effective as of the opening of
business on the day that any such change in the Base Rate becomes
effective. The Base Rate in effect on the date hereof shall be the
Base Rate effective as of the opening of business on the date hereof,
but if this Agreement is executed on a day that is not a Business Day,
the Base Rate in effect on the date hereof shall be the Base Rate
effective as of the opening of business on the last Business Day
immediately preceding the date hereof. Interest on the Loans shall be
calculated daily, based on the actual days elapsed over a 360 day
year. Further, for the purpose of computing interest, all items of
payment received by Lender shall be applied by Lender (subject to
final payment of all drafts and other items received in form other
than immediately available funds) against the obligations on the first
Business Day after receipt. The determination of when a payment is
received by Lender will be made in accordance with Section 3.5."
(c) Section 3.1(H) of the Agreement is hereby deleted, and the
following shall be substituted therefor:
"(H) So long as no Default or Event of Default has occurred, in
the event that Borrower achieves the performance factors described
below as of each of the calculation dates specified below, then the
Applicable Rate shall be reduced as follows:
(i) Performance Factors to be Achieved as of October 31, 1995. So
long as no Default
-6-
<PAGE>
or Event of Default has occurred, and so long as Borrower achieves the
performance factors set out below, upon receipt and review by Lender
of the audited financial statements of Borrower provided pursuant to
Section 9.1(J) demonstrating compliance with the following performance
factors, the Applicable Rate shall be reduced by 0.25%. Such reduction
shall (a) with respect to Base Rate Loans, be made effective November
1, 1995 by (i) crediting the Loan Account by the difference between
the amount of interest paid by Borrower to Lender since such effective
date and the amount of interest which would have been paid by Borrower
to Lender since such effective date had the Applicable Rate been so
reduced, and (ii) recalculating all accrued but unpaid interest, and
all interest to accrue with respect to future transactions, at the
Applicable Rate as so reduced, and (b) with respect to Eurodollar
Loans, be effective only for Eurodollar Loans requested after the date
on which Lender has received and reviewed Borrower's audited financial
statements demonstrating compliance with the performance factors set
out below. The performance factors required to be achieved as of
October 31, 1995 in order to reduce the Applicable Rate are as
follows:
(A) The Average Daily Availability for the six months ending
October 31, 1995 shall equal or exceed thirty percent (30%) of
the Average Daily Loan Balance for such period;
(B) The Adjusted Net Earnings from operations, plus taxes
(to the extent deducted therefrom), for the year ending October
31, 1995 shall be at least $1,800,000; and
(C) Borrower's Leverage Ratio as of October 31, 1995 shall
not exceed 3.8 to 1.0.
Any rate reduction made pursuant to this Section 3.1(H)(i) shall
remain in effect only for so long as no Default or Event of Default
has occurred and is continuing and Borrower maintains the Leverage
Ratio described in (C) above."
-7-
<PAGE>
4. EURODOLLAR LOANS. The following Section 3.7. is hereby added to the
Agreement as follows:
"3.7. Additional Provisions Regarding Eurodollar Loans.
(A) Selection of Eurodollar Loan. Borrower may select a
Eurodollar Base Rate with respect to all or any portion of the
Revolving Credit Loans as provided in this Section 3.7.; provided,
however, that (i) each Eurodollar Loan shall be in a principal amount
of not less than $1,000,000 (and, if greater than $1,000,000, in
integral multiples of $100,000), (ii) if Borrower shall elect to have
all or a portion of the Revolving Credit Loans bear interest at a
Eurodollar Base Rate, the aggregate principal amount of Eurodollar
Loans outstanding shall be no less than $1,000,000, (iii) no more than
four (4) Eurodollar Interest Periods may be in existence at any one
time, and (iv) Borrower may not select a Eurodollar Base Rate for a
Revolving Credit Loan if there exists a Default or Event of Default.
The Borrower shall select Eurodollar Interest Periods with respect to
Eurodollar Loans so that no Eurodollar Interest Period expires after
the end of the original Term, or if extended pursuant to Section 3.3,
any Renewal Term. An outstanding Base Rate Loan may be converted to a
Eurodollar Loan at any time subject to the provisions of this Section
3.7.
(B) Interest on Eurodollar Loans. Each Eurodollar Loan shall
bear interest from and including the first day of the Eurodollar
Interest Period applicable thereto (but not including the last day of
such Eurodollar Interest Period) at the interest rate determined as
applicable to such Eurodollar Loan, but interest on such Eurodollar
Loan shall be payable as provided in Section 3.4. If at the end of an
Eurodollar Interest Period for an outstanding Eurodollar Loan Borrower
has failed to deliver to Lender a new Borrowing Notice with respect to
such Eurodollar Loan or to pay such Eurodollar Loan, then such
Eurodollar Loan shall be converted to a Base Rate Loan on and after
the last day of such Eurodollar Interest Period and shall remain a
Base Rate Loan until paid or until the effective date of a new
Borrowing Notice with respect thereto.
(C) Availability of Eurodollar Loans. If (i) Lender
determines that maintenance of any of its Eurodollar Loans would
violate any applicable law,
-8-
<PAGE>
rule, regulation or directive, whether or not having the force of law,
and (ii) there exists no other branch or office of Lender through
which such Eurodollar Loans could be maintained without any such
violation or other disadvantageous implications to Lender, Lender
shall suspend the availability of Eurodollar Loans and require any
Eurodollar Loans outstanding to be repaid; or if Lender determines
that (i) deposits of a type or maturity appropriate to match fund
Eurodollar Loans are not available or (ii) the Eurodollar Base Rate
does not accurately reflect the cost of making a Eurodollar Loan, then
Lender shall suspend the availability of Eurodollar Loans after the
date of anY such determination.
(D) Funding Indemnification. If any payment of a Eurodollar
Loan occurs on a date which is not the last day of the applicable
Eurodollar Interest Period, whether because of acceleration,
prepayment or otherwise, or a Eurodollar Loan is not made on the date
specified by Borrower because Borrower has not satisfied the
conditions precedent to such Eurodollar Loan contained in this
Agreement or has otherwise breached the terms of this Agreement,
Borrower will indemnify Lender for any loss or cost incurred by it
resulting therefrom, including without limitation any loss or cost in
liquidating or employing deposits acquired to fund or maintain the
Eurodollar Loan.
(E) Lender Statements: Survival of Indemnity. Within sixty
(60) days of the date upon which Lender suspends the availability of
Eurodollar Loans under Section 3.7(C) hereof or learns of any loss or
cost for which Borrower has indemnified Lender under Section 3.7(D)
hereof, Lender shall deliver a written statement as to the amount due
under Section 3.7(C) or (D). Such written statement shall set forth in
reasonable detail the calculations upon which Lender determined such
amount and shall be final, conclusive and binding on Borrower in the
absence of manifest error. Determination of amounts payable under such
Sections in connection with a Eurodollar Loan shall be calculated as
though the Lender funded its Eurodollar Loan through the purchase of a
deposit of the type and maturity corresponding to the deposit used as
a reference in determining the Eurodollar Base Rate applicable to such
Eurodollar Loan whether in fact that is the case or not. Unless
otherwise provided herein, the amount specified in the written
statement shall be payable on demand after receipt by Borrower of the
written statement."
-9-
<PAGE>
5. FINANCIAL COVENANTS.
(a) Section 9.3(A) of the Agreement is hereby deleted, and the
following shall be substituted therefor:
"(A) Maintain a Leverage Ratio not greater than the ratio shown below
for the date corresponding thereto:
Date Amount
October 31, 1994 to October 31, 1995 4.5 to 1.0
November 1, 1995 and Thereafter 4.0 to 1.0"
(b) Section 9.3(E) of the Agreement is hereby deleted, and the
following shall be substituted therefor:
"(E) Achieve Adjusted Net Earnings from operations, plus taxes (to the
extent deducted therefrom), equal to the amounts specified below for
the periods specified below:
Period Amount
Fiscal year ending $1,100,000
October 31, 1994
Fiscal year ending $2,200,000
October 31, 1995 and
each fiscal year
thereafter
6. EXHIBITS. All references in the Agreement (as amended hereby) to
Exhibit "J" shall hereafter be deemed to be references to Exhibit "J" attached
hereto. A new Exhibit "K" is hereby added to the Agreement which shall be in the
form of Exhibit "K" attached hereto.
7. CONDITIONS. The obligation of Lender to be bound by the provisions
of this Amendment shall be subject to the fulfillment of the following
conditions precedent on or before the date hereof:
(a) Lender shall have received the following, duly executed by each
party thereto, other than Lender:
(i) this Amendment; and
(ii) all other documents Lender may reasonably request with
respect to any matter relevant to this Amendment or the transactions
contemplated hereby.
(b) Borrower and Guarantor shall have performed and complied with all
agreements and conditions contained in the Agreement and the other
Agreements which are required to be performed or complied with by Borrower
or Guarantor before or on the date hereof.
-10-
<PAGE>
(c) The representations and warranties contained in the Agreement, as
amended hereby, and the Other Agreements shall be true and correct in all
material respects as of the date hereof, with the same force and effect as
though made on and as of this date.
(d) No material adverse change shall have occurred in the business
operations, financial condition or prospects of Borrower or Guarantor, and
no material adverse litigation shall be pending or, to the knowledge of
Borrower or Guarantor, threatened, against Borrower or Guarantor.
(e) All corporate and legal proceedings and all documents required to
be completed and executed by the provisions of, and all instruments to be
executed in connection with the transactions contemplated by, this
Amendment and any related agreements shall be satisfactory in form and
substance to Lender.
8. LIMITED WAIVER. Upon satisfaction of the conditions precedent
specified in Section 7 hereof, Lender shall waive any Default or Event of
Default which occurred or existed prior to the effective date of this Amendment
arising solely from Borrower's failure:
(a) to maintain a Leverage Ratio of not less than 4.0 to 1.0 for the
months ending November 30, 1993 and December 31, 1993 and April 30, 1994,
as required by Section 9.3(A) of the Agreement; and
(b) to limit Capital Expenditures or payments on account of Capital
Leases to $300,000, as required by Section 9.2(H) of the Aqreement; and
(c) to maintain a positive Net Income plus taxes (to the extent
deducted therefrom) for the month ending September 30, 1994, as required by
Section 9.3(C) of the Agreement; and
(d) to maintain a positive Excess Cash Flow for the months ending
August 31, 1994 and September 30, 1994, as required by Section 9.3(D) of
the Agreement.
Except as otherwise specifically provided for in this Amendment, nothing
contained herein shall be construed as a waiver by Lender of any covenant or
provision of the Agreement, the Other Agreements, this Amendment, or of any
other contract or instrument between Borrower and Lender, and the failure of
Lender at any time or times hereafter to require strict performance by Borrower
of any provision thereof shall not waive, affect or diminish any right of
-11-
<PAGE>
Lender to thereafter demand strict compliance therewith. Lender hereby reserves
all rights granted under the Agreement, the other Agreements, this Amendment and
any other contract or instrument between Borrower and Lender.
9. REPRESENTATIONS AND WARRANTIES. Borrower hereby represents and
warrants to Lender that (a) the execution, delivery and performance of this
Amendment and any and all other Agreements executed and/or delivered in
connection herewith have been authorized by all requisite corporate action on
the part of Borrower and will not violate the Certificate of Incorporation or
Bylaws of Borrower; (b) the representations and warranties contained in the Loan
Agreement, as amended hereby, and any other Agreement are true and correct on
and as of the date hereof and on and as of the date of execution hereof as
though made on and as of each such date; (c) no Default or Event of Default
under the Loan Agreement, as amended hereby, has occurred and is continuing,
unless such Default or Event of Default has been specifically waived in writing
by Lender; and (d) Borrower is in full compliance with all covenants and
agreements contained in the Loan Agreement and the other Agreements, as amended
hereby.
10. SEVERABILITY. Any provision of this Amendment held by a court of
competent jurisdiction to be invalid or unenforceable shall not impair or
invalidate the remainder of this Amendment and the effect thereof shall be
confined to the provision so held to be invalid or unenforceable.
11. EXPENSES. Borrower shall pay all out-of-pocket expenses arising in
connection with the preparation, execution, delivery and administration of this
Amendment, including, but not limited to, all reasonable legal fees and expenses
incurred by Lender.
12. CONTINUED EFFECT. Except to the extent amended hereby, all terms,
provisions and conditions of the Agreement and all of the other Agreements shall
continue in full force and effect and shall remain enforceable and binding in
accordance with their respective terms.
13. FURTHER ASSURANCES. Borrower shall, at Lender's request, promptly
execute or cause to be executed and delivered to Lender any and all documents,
instruments or agreements deemed necessary by Lender to continue perfection of
Lender's Liens, to facilitate collection of the Collateral or otherwise to give
effect to or carry out the terms or intent of this Amendment.
14. COUNTERPARTS. This Amendment may be executed in any number of
counterparts, each of which shall for all purposes be deemed an original and all
of which are identical. All parties need not execute the same counterpart.
-12-
<PAGE>
15. FINAL AGREEMENT. THIS WRITTEN AMENDMENT AND THE OTHER LOAN DOCUMENTS
REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY
EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE
PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
16. RELEASE. BORROWER HEREBY ACKNOWLEDGES THAT IT HAS NO DEFENSE,
COUNTERCLAIM, OFFSET, CROSS-COMPLAINT, CLAIM OR DEMAND OF ANY KIND OR NATURE
WHATSOEVER THAT CAN BE ASSERTED TO REDUCE OR ELIMINATE ALL OR ANY PART OF ITS
LIABILITY TO REPAY THE "OBLIGATIONS" OR TO SEEK AFFIRMATIVE RELIEF OR DAMAGES OF
ANY KIND OR NATURE FROM LENDER. BORROWER HEREBY VOLUNTARILY AND KNOWINGLY
RELEASES AND FOREVER DISCHARGES LENDER, ITS PREDECESSORS, AGENTS, EMPLOYEES,
SUCCESSORS AND ASSIGNS, FROM ALL POSSIBLE CLAIMS, DEMANDS, ACTIONS, CAUSES OF
ACTION, DAMAGES, COSTS, EXPENSES, AND LIABILITIES WHATSOEVER, KNOWN OR UNKNOWN,
ANTICIPATED OR UNANTICIPATED, SUSPECTED OR UNSUSPECTED, FIXED, CONTINGENT, OR
CONDITIONAL, AT LAW OR IN EQUITY, ORIGINATING IN WHOLE OR IN PART ON OR BEFORE
THE DATE THIS AMENDMENT IS EXECUTED, WHICH THE BORROWER MAY NOW OR HEREAFTER
HAVE AGAINST LENDER, ITS PREDECESSORS, AGENTS, EMPLOYEES, SUCCESSORS AND
ASSIGNS, IF ANY, AND IRRESPECTIVE OF WHETHER ANY SUCH CLAIMS ARISE OUT OF
CONTRACT, TORT, VIOLATION OF LAW OR REGULATIONS, OR OTHERWISE, AND ARISING FROM
ANY "LOANS", INCLUDING, WITHOUT LIMITATION, ANY CONTRACTING FOR, CHARGING,
TAKING, RESERVING, COLLECTING OR RECEIVING INTEREST IN EXCESS OF THE HIGHEST
LAWFUL RATE APPLICABLE, THE EXERCISE OF ANY RIGHTS AND REMEDIES UNDER THE LOAN
AGREEMENT OR OTHER AGREEMENTS, AND NEGOTIATION FOR AND EXECUTION OF THIS
AMENDMENT.
EXECUTED to be effective as of the date first above written.
RED MAN PIPE & SUPPLY CO.
By: /S/ DEE PAIGE
------------------------------
Name: DEE PAIGE
----------------------------
Title:VP-FINANCE
---------------------------
BARCLAYS BUSINESS CREDIT, INC.
By: /S/ JOY L. BARTHOLOMEW
------------------------------
Name: JOY L. BARTHOLOMEW
----------------------------
Title: Vice President
---------------------------
-13-
<PAGE>
The undersigned Guarantor, having guaranteed to Lender the payment of the
obligations, as such term is defined in the Unconditional Limited Guaranty (the
"Guaranty") executed by Guarantor on May 3, 1991, hereby acknowledges, confirms,
and agrees that (i) the execution and delivery of this Amendment does not alter,
affect, diminish, release or reduce his liability under the Guaranty, and (ii)
the Guaranty is in full force and effect to secure the obligations described
therein.
/s/ Lewis B. Ketchum
-----------------------------
LEWIS B. KETCHUM
-14-
<PAGE>
EXHIBIT 10.11
NINTH AMENDMENT TO LOAN AND SECURITY AGREEMENT
APRIL 3, 1995
This Ninth Amendment to Loan and Security Agreement (the "Amendment") is
made and entered into effective as of April 3, 1995, by and between RED MAN PIPE
& SUPPLY CO., an Oklahoma corporation ("Borrower"), and SHAWMUT CAPITAL
CORPORATION, a Connecticut corporation, successor-in-interest to Barclays
Business Credit, Inc. ("Lender").
PRELIMINARY STATEMENTS:
1. Borrower and Lender have entered into that certain Loan and Security
Agreement dated as of May 3, 1991, as heretofore amended (as amended from time
to time, the "Agreement").
2. Borrower and Lender desire to amend the Agreement and the other
Agreements as hereinafter set forth.
AGREEMENTS:
NOW, THEREFORE, in consideration of the agreements herein contained,
subject to the terms and conditions set forth herein, Borrower and Lender hereby
agree as follows, and agree that, subject to satisfaction of the provisions of
Section 6 hereof, the amendments specified below shall be effective from and
after the date hereof and shall be incorporated into the Agreement and shall
supersede those provisions in the Agreement referenced as follows:
1. DEFINITIONS.
(a) Terms used herein and defined in the Agreement shall have the
meanings set forth in the Agreement, except as otherwise provided herein.
(b) The definition of "Base Rate" contained in Section 1.1 of the
Agreement is hereby amended as follows:
(i) The words "Barclays Bank PLC" are deleted and substituted
therefor are the words "Shawmut Bank Connecticut, N.A."
(ii) The words "at its offices in New York, New York" are
deleted.
(c) The definitions of "Borrowing Base" and "Commitment" contained in
Section 1.1 of the Agreement are hereby deleted, and the following shall be
substituted therefor:
"Borrowing Base - as at any date of determination thereof, an amount
equal to the lesser of:
<PAGE>
(a) the Commitment as of such date, minus the outstanding
principal amount of the Term Loan as of such date; or
(b) an amount up to:
(i) ninety percent (90%) of the net amount (after deduction
of such reserves as Lender deems proper and necessary, in its sole discretion,
including a reserve for sales tax payables) of Eligible Accounts outstanding at
such date;
PLUS
(ii) the lesser of (A) $3,500,000 or (B) ninety percent
(90%) of the net amount (after deduction of such reserves as Lender deems proper
and necessary, in its sole discretion, including a reserve for sales tax
payables) of Eligible International Accounts outstanding at such date;
PLUS
(iii) the lesser of (A) $15,000,000 or (B) sixty percent
(60%) of the value (after deduction of such reserves as Lender deems proper and
necessary, in its sole discretion) of Eligible Inventory at such date consisting
of tubular goods held for sale in the ordinary course of Borrower's business,
calculated on the basis of the lower of cost or market;
PLUS
(iv) the lesser of (A) $15,000,000 or (B) fifty percent
(50%) of the value (after deduction of such reserves as Lender deems proper and
necessary, in its sole discretion) of Eligible Inventory at such date consisting
of consumable supplies held for sale in the ordinary course of Borrower's
business, calculated on the basis of the lower of cost or market and of Eligible
Inventory at such date consisting of line pipe held for sale in the ordinary
course of Borrower's business, calculated on the basis of the lower of cost or
market;
MINUS (subtract from the sum of clauses (i), (ii), (iii), and
(iv) above)
(v) an amount equal to the sum of (A) the face amount of all
LC Guaranties and Letters of Credit issued by Lender or Affiliates of Lender and
outstanding at such date and (B) any amounts which Lender may be obligated to
pay in the future for the account of Borrower pursuant to this Agreement, the
other Agreements or otherwise.
For purposes hereof, the net amount of Eligible Accounts or Eligible
International Accounts, as the case may be, at any time shall be the face amount
of such Eligible Accounts or such Eligible International Accounts, less any and
all returns, discounts (which may, at Lender's option, be calculated on shortest
terms), credits, allowances or excise taxes of any nature at any
<PAGE>
time issued, owing, claimed by Account Debtors, granted, outstanding or payable
in connection with such Accounts at such time."
"Commitment- $50,000,000."
2. SUBSTITUTION OF SHAWMUT BANK CONNECTICUT, N.A. FOR REFERENCES TO
BARCLAVS BANK PLC. All references to the words "Barclays Bank PLC" contained in
the Loan Agreement are deleted and substituted therefor are the words "Shawmut
Bank Connecticut, N.A.."
3. INTEREST AND CHARGES.
(a) Section 3.1(H) of the Agreement is hereby amended by amending and
restating Subsection (i) thereof to read in its entirety as follows:
"(i) October 31. l995, October 31. 1996, October 31, 1997, and
October 31, 1998 Rate Reduction Calculation Dates. So long as no Default or
Event of Default has occurred, and so long as Borrower achieves the respective
performance factors ('Performance Factors') set out below, upon receipt and
review by Lender of the audited financial statements of Borrower provided
pursuant to Section 9.1(J) demonstrating compliance with (x) the hereinafter
described Level I Performance Factors, the Applicable Rate shall be reduced by
0.25%; (y) the hereinafter described Level II Performance Factors, the
Applicable Rate shall be reduced by an additional 0.25%; and (Z) the hereinafter
described Level III Performance Factors, the Applicable Rate shall be reduced by
an additional 0.25%; provided. however, that in no event shall the Applicable
Rate with respect to the Base Rate Loans (as distinguished from the Eurodollar
Loans) be less than the lesser of (A) 0.75% above the Base Rate or (B) the
Maximum Legal Rate. Such Performance Factors shall be measured on each of
October 31, l995, October 31, 1996, October 31, 1997 and October 31, 1998
(hereinafter, a 'Calculation Date'). Such reduction shall (a) with respect to
Base Rate Loans, be made effective on the November 1 following the relevant
Calculation Date, by (i) crediting the Loan Account by the difference between
the amount of interest paid by Borrower to Lender since such effective date and
the amount of interest which would have been paid by Borrower to Lender since
such effective date had the Applicable Rate been so reduced, and (ii)
recalculating all accrued but unpaid interest, and all interest to accrue with
respect to future transactions, at the Applicable Rate, as so reduced, and (b)
with respect to Eurodollar Loans, be effective only for Eurodollar Loans
requested after the date on which Lender has received and reviewed Borrower's
audited financial statements demonstrating compliance with the respective
Performance Factors set out below. The respective Level I Performance Factors,
Level II Performance Factors and Level III Performance Factors required to be
achieved as of the relevant Calculation Date, in order to attain the relevant
reduction in the Applicable Rate as described above, are as follows:
Level I Performance Factors:
(A) The Average Daily Availability for the six months ending on
the relevant Calculation Date shall equal or exceed twenty percent (20%) of the
Average Daily Loan Balance for such period;
<PAGE>
(B) The Adjusted Net Earnings from operations, plus taxes (to the
extent deducted therefrom), for the year ending on the relevant Calculation
Date shall be at least $1,800,000; and
(C) Borrower's Leverage Ratio as of the relevant Calculation Date
shall not exceed 4.S to l.0.
Level II Performance Factors:
(A) Achievement of Level I Performance Factors.
(B) The Average Daily Availability for the six months ending on
the relevant Calculation Date shall equal or exceed twenty percent (20%) of the
Average Daily Loan Balance for such period;
(C) The Adjusted Net Earnings from operations, plus taxes (to the
extent deducted therefrom), for the year ending on the relevant Calculation Date
shall be at least $3,000,000; and
(D) Borrower's Leverage Ratio as of such Calculation Date shall
not exceed 4.0 to l.0.
Level III Performance Factors:
(A) Achievement of Level II Performance Factors.
(B) The Average Daily Availability for the six months ending on
the relevant Calculation Date shall equal or exceed thirty percent (30%) of the
Average Daily Loan Balance for such period;
(C) The Adjusted Net Earnings from operations, plus taxes (to the
extent deducted therefrom), for the year ending on the relevant Calculation Date
shall be at least $5,000,000; and
(D) Borrower's Leverage Ratio as of such Calculation Date shall
not exceed 3.0 to l.0.
Borrower shall be entitled to the benefits of the respective rate reduction
at the first such Calculation Date it achieves the respective Performance
Factors necessary for such rate reduction and may achieve more than one level of
rate reduction at a specific Calculation Date. For example, if at October 31,
l995, Borrower is able to satisfy all of the Level I Performance Factors, Level
II Performance Factors, and Level III Performance Factors, Borrower shall
thereupon become entitled to the rate reduction provided for in connection with
each such Performance Factors level.
<PAGE>
Any respective rate reduction made pursuant to this Section 3.1(H)(i) shall
remain in effect only for so long as no Default or Event of Default has occurred
and is continuing and Borrower maintains the respective Leverage Ratio required
for such rate reduction described above. If Borrower loses the benefit of a
specific rate reduction it shall have the opportunity to again achieve the
relevant rate reduction by meeting the relevant Performance Factors at the next
Calculation Date."
4. TERM OF AGREEMENT; TERMINATION.
(a) Section 3.3(A) of the Agreement is hereby amended as follows:
(i) The reference to "October 31, 1996" is hereby deleted and
substituted therefor is the date "October 31, 1999."
(ii) The reference to "August 31, 1996" is hereby deleted and
substituted therefor is the date "August 31, 1999."
(b) Section 3.3(C) of the Agreement is hereby amended and restated to
read in its entirety as follows:
"(C) At the effective date of such termination by Borrower,
Borrower shall pay to Lender (in addition to the then outstanding principal,
accrued interest and other charges, fees and expenses owing under this Agreement
and any of the other Agreements), as liquidated damages for the loss of the
bargain and not as a penalty, an amount equal to the applicable percentage set
forth below of the highest of the Average Daily Loan Balances outstanding for
any month during the applicable term set forth below during which such
termination occurs:
APPLICABLE TERM APPLICABLE PERCENTAGE
November 1, 1994
through October 31,
l995 2.0%
Thereafter 1.0%
If termination occurs on the last day of the original Term, or any renewal
term thereafter, Borrower shall not be obligated to pay Lender any liquidated
damages. The termination charge or prepayment premium for amounts outstanding on
the Term Loan shall be computed in accordance with the provisions of the Term
Note."
(c) Section 10.3(F) of the Agreement is hereby amended by deleting
therefrom the date "December 31, 1996" and substituting therefor the date
"October 31, 1999".
<PAGE>
5. DISTRIBUTIONS.
(a) Section 9.2(F) of the Agreement is amended and restated to read in
its entirety as follows:
"(F) (i) Make Distributions during any fiscal year in excess of
the aggregate amount of $250,000 (other than compensation of officers and
directors permitted pursuant to Section 9.2(M) hereof, and other than payments
on Indebtedness owing by Borrower to a shareholder of Borrower provided such
Indebtedness is expressly subordinated to the obligations upon terms and
conditions satisfactory to Lender, in its sole discretion, and such payments are
permitted pursuant to the relevant intercreditor or subordination agreement
entered into by such shareholder and Lender)or (ii) make any Distributions
(other than compensation of officers and directors permitted pursuant to Section
9.2(M) hereof) if at such date there exists an Event of Default hereunder."
6. EXHIBITS. All references in the Agreement to Exhibit "J" shall
hereafter be deemed to be references to Exhibit "J" attached hereto.
7. CONDITIONS. The obligation of Lender to be bound by the provisions of
this Amendment shall be subject to the fulfillment of the following conditions
precedent on or before the date hereof:
(a) Lender shall have received all of the following, each in form and
substance satisfactory to Lender, in its sole discretion, and each duly executed
by each party thereto, other than Lender:
(i) this Amendment;
(ii) Intercreditor Agreement, duly executed by Vinson Supply
Company ("Vinson"), in favor of Lender, relating to indebtedness payable by
Borrower to Vinson in connection with the acquisition by Borrower of certain
assets of Vinson pursuant to the provisions of that certain Purchase Agreement,
dated March 2, l995, executed by Vinson as "seller" and Borrower as "buyer" (the
"Purchase Agreement") (such acquisition being referred to herein as the
"Acquisition"), and a copy of the note executed by Borrower to Vinson covered by
the Subordination Agreement;
(iii) Collateral Assignment of Asset Purchase Agreement, duly
executed by Borrower, in favor of Lender, and duly accepted by Vinson, covering
the Purchase Agreement;
(iv) A copy of such documentation executed in connection with the
Vinson Acquisition as shall be requested by Lender;
<PAGE>
(v) Landlord's Consents, duly executed by Vinson, in favor of
Lender, covering each of the sites being leased by Vinson to Borrower in
connection with the Vinson Acquisition;
(vi) Written instructions from Borrower directing the application
of the indicated portion of the Loans made on the date of the closing of the
Vinson Acquisition to Vinson and/or to any persons or entities holding perfected
liens in the assets being transferred by Vinson to Borrower, along with
appropriate wiring instructions;
(vii) Modifications to such existing real estate lien documents
as shall be required by Lender, duly executed by Borrower;
(viii) A letter from Vinson's counsel stating that Lender may
rely on such counsel's opinion to Borrower issued in connection with the
Acquisition;
(ix) The written opinion of counsel to Borrower, regarding
Borrower, the consummation of the Acquisition, and the execution of this
Agreement and the other Agreements executed in connection with this Agreement,
and the transactions contemplated hereby; and
(x) All other documents Lender may request with respect to any
matter relevant to this Amendment or the transactions contemplated hereby,
including, without limitation, the Vinson Acquisition.
(b) Lender shall have received an indemnification letter, duly
executed by Vinson, indemnifying Lender against any losses and expenses Lender
might incur as a result of non-compliance by Vinson and/or Borrower with such
bulk transfer laws of Article Six of the Oklahoma Uniform Commercial Code and
the Utah Uniform Commercial Code
(c) Lender shall have received evidence satisfactory to it, in its
sole discretion, that Lender has a perfected, first priority Lien in the assets
transferred to Borrower in connection with the Vinson Acquisition.
(d) No Event of Default shall have occurred and be continuing and no
Default shall exist, unless such Event of Default or Default has been
specifically waived in writing by Lender.
(e) Borrower and Guarantor shall have performed and complied with all
agreements and conditions contained in the Agreement and the other Agreements
which are required to be performed or complied with by Borrower or Guarantor
before or on the date hereof.
(f) The representations and warranties contained in the Agreement, as
amended hereby, and the other Agreements shall be true and correct in all
material respects as of the date hereof, with the same force and effect as
though made on and as of this date.
<PAGE>
(g) No material adverse change shall have occurred in the business
operations, financial condition or prospects of Borrower or Guarantor, and no
material adverse litigation shall be pending or, to the knowledge of Borrower or
Guarantor, threatened, against Borrower or Guarantor.
(h) Lender shall have received, in immediately available funds, a non-
refundable closing fee in the amount of $50,000, which closing fee shall be due
and payable, and be deemed fully earned, upon the execution of this Amendment.
(i) on the date of funding to Borrower of the Loans relevant to the
consummation of the Acquisition, Borrower shall have provided Lender with a duly
completed Borrowing Base Certificate, which Borrowing Base Certificate shall be
satisfactory to Lender, in its sole discretion.
(j) The Class C Preferred Stock issued to Vinson Supply in connection
with the Vinson Acquisition shall have characteristics, rights and preferences
satisfactory to Lender, in its sole discretion.
(k) All corporate and legal proceedings and all documents required to
be completed and executed by the provisions of, and all instruments to be
executed in connection with the transactions contemplated by, this Amendment and
any related agreements shall be satisfactory in form and substance to Lender.
8. CONSENT TO AND WAIVER REGARDING VINSON ACQUISITION. Borrower has (i)
requested permission from the Lender to consummate the Vinson Acquisition and
accordingly purchase the assets of Vinson listed in the Purchase Agreement, and
(ii) requested that Lender waive the covenants embodied respectively in Section
9.2(A), Section 9.2(E), and Section 9.2(O) of the Agreement to the extent such
covenants would be deemed violated due to the consummation of the Vinson
Acquisition. Subject to the satisfaction of the conditions precedent specified
in Section 7 of this Amendment and to the other terms, conditions, and
provisions of this Amendment, Lender hereby consents to the consummation by
Borrower of the Vinson Acquisition and waives the covenants embodied
respectively in Sections 9.2(A), 9.2(E), and 9.2(Q) of the Agreement to the
extent such covenants would be deemed violated due to the consummation of the
Vinson Acquisition; provided, however, the consent and waiver described in this
Section 8 of this Amendment is strictly limited to the Vinson Acquisition and to
the Sections of the Agreement described above as they relate to the Vinson
Acquisition. Except as otherwise specifically provided for in this Amendment,
nothing contained herein shall be construed as a waiver by Lender of any
covenant or provision of the Agreement, the other Agreements, this Amendment, or
of any other contract or instrument between Borrower and Lender, and the failure
of Lender at any time or times hereafter to require strict performance by
Borrower of any provision thereof shall not waive, affect or diminish any right
of Lender to thereafter demand strict compliance therewith. Lender hereby
reserves all rights granted under the Agreement, the other Agreements, this
Amendment and any other contract or instrument between Borrower and Lender.
<PAGE>
9. REPRESENTATIONS AND WARRANTIES. Borrower hereby represents and
warrants to Lender that (a) the execution, delivery and performance of this
Amendment and any and all other Agreements executed and/or delivered in
connection herewith have been authorized by all requisite corporate action on
the part of Borrower and will not violate the Certificate of Incorporation or
Bylaws of Borrower; (b) the representations and wananties contained in the Loan
Agreement, as amended hereby, and any other Agreement are true and correct on
and as of the date hereof and on and as of the date of execution hereof as
though made on arld as of each such date; (c) no Default or Event of Default
under the Loan Agreement, as amended hereby, has occulTed and is continuing,
unless such Default or Event of Default has been specifically waived in writing
by Lender; and (d) Borrower is in full compliance with all covenants and
agreements contained in the Loan Agreement and the other Agreements, as amended
hereby.
10. SEVERABILITY. Any provision of this Amendment held by a court of
competent jurisdiction to be invalid or unenforceable shall not impair or
invalidate the remainder of this Amendment and the effect thereof shall be
confined to the provision so held to be invalid or unenforceable.
11. EXPENSES. Borrower shall pay all out-of-pocket expenses arising in
connection with the preparation, execution, delivery and administration of this
Amendment, including, but not limited to, all reasonable legal fees and expenses
incurred by Lender.
12. CONTINUED EFFECT. Except to the extent amended hereby, all terms,
provisions and conditions of the Agreement and all of the other Agreements shall
continue in full force and effect and shall remain enforceable and binding in
accordance with their respective terms.
13. FURTHER ASSURANCES. Borrower shall, at Lender's request, promptly
execute or cause to be executed and delivered to Lender any and all documents,
instruments or agreements deemed necessary by Lender to continue perfection of
Lender's Liens, to facilitate collection of the Collateral or otherwise to give
effect to or carry out the terms or intent of this Amendment.
14. COUNTERPARTS. This Amendment may be executed in any number of
counterparts, each of which shall for all purposes be deemed an original and all
of which are identical. All parties need not execute the same counterpart..
15. FINAL AGREEMENT. THIS WRITTEN AMENDMENT AND THE OTHER LOAN DOCUMENTS
REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY
EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE
PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
16. RELEASE. BORROWER HEREBY ACKNOWLEDGES THAT IT HAS NO DEFENSE,
COUNTERCLAIM, OFFSET, CROSS-COMPLAINT, CLAIM OR DEMAND OF ANY KIND OR NATURE
WHATSOEVER THAT CAN BE ASSERTED TO REDUCE OR
<PAGE>
ELIMINATE ALL OR ANY PART OF ITS LIABILITY TO REPAY THE "OBLIGATIONS" OR TO SEEK
AFFIRMATIVE RELIEF OR DAMAGES OF ANY KIND OR NATURE FROM LENDER. BORROWER HEREBY
VOLUNTARILY AND KNOWINGLY RELEASES AND FOREVER DISCHARGES LENDER, ITS
PREDECESSORS, AGENTS, EMPLOYEES, SUCCESSORS AND ASSIGNS, FROM ALL POSSIBLE
CLAIMS, DEMANDS, ACTIONS, CAUSES OF ACTION, DAMAGES, COSTS, EXPENSES, AND
LIABILITIES WHATSOEVER, KNOWN OR UNKNOWN, ANTICIPATED OR UNANTICIPATED,
SUSPECTED OR UNSUSPECTED, FIXED, CONTINGENT, OR CONDITIONAL, AT LAW OR IN
EQUITY, ORIGINATING IN WHOLE OR IN PART ON OR BEFORE THE DATE THIS AMENDMENT IS
EXECUTED, WHICH THE BORROWER MAY NOW OR HEREAFTER HAVE AGAINST LENDER, ITS
PREDECESSORS, AGENTS, EMPLOYEES, SUCCESSORS AND ASSIGNS, IF ANY, AND
IRRESPECTIVE oF WHETHER ANY SUCH CLAIMS ARISE OUT OF CONTRACT, TORT, VIOLATION
OF LAW OR REGULATIONS, OR OTHERWISE, AND ARISING FROM ANY "LOANS", INCLUDING,
WITHOUT LIMITATION, ANY CONTRACTING FOR, CHARGING, TAKING, RESERVING, COLLECTING
OR RECEIVING INTEREST IN EXCESS OF THE HIGHEST LAWFUL RATE APPLICABLE, THE
EXERCISE OF ANY RIGHTS AND REMEDIES UNDER THE LOAN AGREEMENT OR OTHER
AGREEMENTS, AND NEGOTIATION FOR AND EXECUTION OF THIS AMENDMENT.
EXECUTED to be effective as of the date first above written.
RED MAN PIPE & SUPPLY CO.
By: /s/ Lewis B. Ketchum
------------------------------
Name: Lewis B. Ketchum
----------------------------
Title: President
---------------------------
SHAWMUT CAPITAL CORPORATION
By: /s/ Joy L. Bartholomew
------------------------------
Name: Joy L. Bartholomew
----------------------------
Title: Vice President
---------------------------
The undersigned Guarantor, having guaranteed to Lender the payment of the
obligations, as such term is deflned in the Unconditional Limited Guaranty (the
"Guaranty") executed by Guarantor on May 3, 1991, hereby acknowledges, confirms,
and agrees that (i) the execution and delivery of this Amendment does not alter,
affect, diminish, release or reduce his liability under the Guaranty, and (ii)
the Guaranty is in full force and effect to secure the obligations described
therein.
/s/ Lewis B. Ketchum
---------------------------------
LEWIS B. KETCHUM
<PAGE>
EXHIBIT 10.12
TENTH AMENDMENT TO LOAN AND SECURITY AGREEMENT
March 7th, 1996
This Tenth Amendment to Loan and Security Agreement (the "Amendment") is
made and entered into on this 7th day of March, l996, to be effective as of
the respective date herein indicated, by and between RED MAN PIPE & SUPPLY CO.,
an Oklahoma corporation ("Borrower"), and FLEET CAPITAL CORPORATION, a
Connecticut corporation, formerly known as Shawmut Capital Corporation,
successor-in-interest to Barclays Business Credit, Inc. ("Lender").
PRELIMINARY STATEMENTS:
l. Borrower and Lender have entered into that certain Loan and Security
Agreement dated as of May 3, l991, as heretofore amended (as amended from time
to time, the "Agreement").
2. Borrower and Lender desire to amend the Agreement and the other
Agreements as hereinafter set forth.
AGREEMENTS:
NOW, THEREFORE, in consideration of the agreements herein contained,
subject to the terms and conditions set forth herein, Borrower and Lender hereby
agree as follows, and agree that, subject to satisfaction of the provisions of
Section 9 hereof, the amendments specified below shall be effective from and
after the date hereof and shall be incorporated into the Agreement and shall
supersede those provisions in the Agreement referenced as follows:
1. DEFINITIONS.
(a) Terms used herein and defined in the Agreement shall have the
meanings set forth in the Agreement, except as otherwise provided herein.
(b) Effective as of December 8, 1995, the definition of "Base Rate"
contained in Section l.l of the Agreement is amended by deleting the words
"Shawmut Bank Connecticut, N.A." and substituting therefor the words "Fleet
National Bank of Connecticut".
(c) Effective as of the date of execution of this Amendment, the
definitions of "Borrowing Base" and "Commitment" contained in Section 1.1 of the
Agreement are hereby deleted, and the following shall be substituted therefor:
"Borrowing Base - as at any date of determination thereof, an amount
equal to the lesser of:
1
<PAGE>
(a) the Commitment as of such date, minus the outstanding principal
amount of the Term Loan as of such date; or
(b) an amount up to:
(i) ninety percent (90%) of the net amount (after deduction of
such reserves as Lender deems proper and necessary, in its sole
discretion, including a reserve for sales tax payables) of Eligible
Accounts outstanding at such date;
PLUS
(ii) the lesser of (A) $5,000,000 or (B) ninety percent (90%) of
the net amount (after deduction of such reserves as Lender deems
proper and necessary, in its sole discretion, including a reserve for
sales tax payables) of Eligible International Accounts outstanding at
such date;
PLUS
(iii) the lesser of (A) $15,000,000 or (B) sixty percent (60%)
of the value (after deduction of such reserves as Lender deems proper
and necessary, in its sole discretion) of Eligible Inventory at such
date consisting of oil country tubular goods held for sale in the
ordinary course of Borrower's business, calculated on the basis of the
lower of cost or market:
PLUS
(iv) the lesser of (A) $25,000,000 or (B) fifty percent (50%) of
the value (after deduction of such reserves as Lender deems proper and
necessary, in its sole discretion) of Eligible Inventory at such date
consisting of consumable supplies held for sale in the ordinary course
of Borrower's business, calculated on the basis of the lower of cost
or market and of Eligible Inventory at such date consisting of line
pipe held for sale in the ordinary course of Borrower's business,
calculated on the basis of the lower of cost or market;
MINUS (subtract from the sum of clauses (i),
(ii), (iii), and (iv) above)
(v) an amount equal to the sum of (A) the face amount of all LC
Guaranties and Letters of Credit issued by Lender or Affiliates of
Lender and outstanding at such date and (B) any arnounts which Lender
may be obligated to pay in the future for the account of Borrower
pursuant to this Agreement, the other Agreements or otherwise.
2
<PAGE>
For purposes hereof, the net amount of Eligible Accounts or Eligible
International Accounts, as the case may be, at any time shall be the face amount
of such Eligible Accounts or such Eligible International Accounts, less any and
all returns, discounts (which may, at Lender's option, be calculated on shortest
terms), credits, allowances or excise taxes of any nature at any time issued,
owing, claimed by Account Debtors, granted, outstanding or payable in connection
with such Accounts at such time."
"Commitment - $65,000,000; provided, however, that on the 120th day after
the date of execution of the Tenth Amendment, the term 'Commitment' shall mean
$50,000,000, unless by such date, another Person has either become a participant
or co-lender for at least $15,000,000 of the Commitment, upon terms and
conditions, and pursuant to documentation, satisfactory to Lender, in its sole
discretion."
"Tenth Amendment - that certain Tenth Amendment to Loan and Security
Agreement, executed by Borrower and Lender."
(d) Effective as of the date of execution of this Amendment, the
definitions of "Guarantor" and "Guarantv" contained in Section 1.1 of the
Agreement are hereby deleted and each reference in the Agreement to the words
"Guarantor" and "Guaranty" are hereby also deleted.
2. SUBSTITUTION OF FLEET NATIONAL BANK OF CONNECTICUT FOR REFERENCES TO
SHAWMUT BANK CONNECTICUT, N.A. Effective as of December 8, 1995, all references
to the words "Shawmut Bank Connecticut, N.A." contained in the Agreement are
deleted and substituted therefor are the words "Fleet National Bank of
Connecticut."
3. INTEREST AND CHARGES.
(a) Effective as of the date of execution of this Amendment, the
second sentence of Section 3.l (A) of the Agreement is amended and restated to
read as follows:
"The principal amount of the Revolving Credit Loans outstanding
from day-to-day shall bear interest, calculated daily, at the following
rates per annum (individually called, as applicable, an 'Annual Revolving
Rate'): (i) each Eurodollar Loan shall bear interest at a rate per annum
equal to the lesser of (a) 2.75% (or such lesser percentage as may be
provided by subsection (H) hereof) above the Eurodollar Base Rate for the
Eurodollar Interest Period applicable thereto, or (b) the Maximum Legal
Rate, and (ii) each Base Rate Loan shall bear interest at the lesser of (a)
a fluctuating rate per annum equal to 0.5% above the Base Rate, or (b) the
Maximum Legal Rate."
(b) Effective as of the date of execution of this Amendment, Section
3.1(H) of the Agreement is hereby amended by amending and restating Subsection
(i) thereof to read in its entirety as follows:
3
<PAGE>
"(i) Rate Reduction Calculation Dates. So long as no Default or
Event of Default has occurred, and so long as Borrower achieves the
performance factors ('Performance Factors') set out below, upon receipt and
review by Lender of the audited financial statements of Borrower provided
pursuant to Section 9.1(J) demonstrating compliance with the hereinafter
described Performance Factors, the Annual Revolving Rate applicable to
Eurodollar Loans shall be reduced to the rate per annum equal to the lesser
of (a) 2.50% above the Eurodollar Base Rate for the Eurodollar Interest
Period applicable thereto or (b) the Maximum Legal Rate. Such Performance
Factors shall be measured on each of October 31, 1996, October 31, 1997 and
October 31, 1998 (hereinafter, a 'Calculation Date'). Such reduction shall
be effective only for Eurodollar Loans requested after the date on which
Lender has received and reviewed Borrower's audited financial statements
demonstrating compliance with the Performance Factors set out below. The
Performance Factors required to be achieved as of the relevant Calculation
Date, in order to attain the above-described rate reduction, are as
follows:
Performance Factors:
(A) The Average Daily Availability for the six months ending on
the relevant Calculation Date shall equal or exceed thirty percent
(30%) of the Average Daily Loan Balance for such period;
(B) The Adjusted Net Earnings from operations, plus taxes (to the
extent deducted therefrom), for the year ending on the relevant
Calculation Date shall be at least $5,000,000; and
(C) Borrower's Leverage Ratio as of such Calculation Date shall
not exceed 3.0 to l.0.
Borrower shall be entitled to the benefits of the above-described rate
reduction at the first such Calculation Date it achieves the Performance Factors
necessary for the rate reduction. The rate reduction made pursuant to this
Section 3.1(H)(i) shall remain in effect only for so long as no Default or Event
of Default has occurred and is continuing and Borrower maintains the Leverage
Ratio required for the rate reduction described above. If Borrower loses the
benefit of the rate reduction, it shall have the opportunity to again achieve
the rate reduction by meeting the Performance Factors at the next Calculation
Date."
(c) Effective as of the date of execution of this Amendment, Section
3.2(B) of the Agreement is amended and restated to read as follows:
"(B) Agency Fee. Borrower agrees to pay Lender an annual agency
fee on the dates and in the amount specified in, and otherwise in
accordance with, the agency fee letter agreement issued by Borrower in
favor of Lender."
4. CAPITAL EXPENDITURES. Effective as of the date of execution of this
Amendment, Section 9.2(H) of the Agreement is amended and restated to read in
its entirety as follows:
4
<PAGE>
"(H) Make Capital Expenditures or payments on account of Capital
Lesses which exceed in the aggregate (i) for the period from November 1, 1995
through October 31, 1996, $750,000, or (ii) $300,000 for any fiscal year
thereafter occurring."
5. LEVERAGE RATIO. Effective as of the date of execution of this
Amendment, Section 9.3(A) of the Agreement is amended and restated to read in
its entirety as follows:
"(A) Maintain a Leverage Ratio not greater than the ratio shown below
for the date corresponding thereto:
Date Amount
November 1, 1995 through April 30, 1996 5.5 to l.0
May 1, 1996 through October 31, 1996 5.0 to 1.0
November 1, 1996 through October 31, 1997 4.5 to 1.0
November 1, 1997 through October 31, 1998 4.0 to 1.0
November 1, 1998 and Thereafter 3.5 to l.0
6. NOTICE TO BORROWER. Effective as of the date of execution of this
Amendment, Section 12.10(B) of the Agreement is hereby amended so that the
address for notice to Borrower shall be as follows:
with a copy to:
Noss, Monnet & Edmiston
Red Man Pipe & Supply Co. Suite 300 Grantson Building
8023 East 63rd Place 111 West Fifth Street
Suite 800 Tulsa, OK 74103
Tulsa, Oklahoma 74133 ATTENTION: David L. Noss
Attention: President
7. EXHIBITS. Effective as of the date of execution of this Amendment,
references in the Agreement to Exhibit "J" shall hereafter be deemed to be
references to Exhibit "J" attached hereto.
8. RELEASE OF UNCONDITIONAL LIMITED GUARANTY OF LEWIS B. KETCHUM.
Effective as of the date of execution of this Amendment, Lender hereby releases
and declares null and void that certain Unconditional Limited Guaranty, dated as
of May 3, 1991, executed by Lewis B. Ketchum, for the benefit of Lender,
relating to indebtedness of Borrower to Lender.
9. CONDITIONS. The obligation of Lender to be bound by the provisions of
this Amendment shall be subject to the fulfillment of the following conditions
precedent on or before the date hereof:
(a) Lender shall have received all of the following, each in form and
substance satisfactory to Lender, in its sole discretion, and each duly executed
by each party thereto, other than Lender:
5
<PAGE>
(i) This Amendment;
(ii) An agency fee letter agreement, duly executed by Borrower, in
favor of Lender; and
(iii) All other documents Lender may request with respect to any
matter relevant to this Amendment or the transactions contemplated hereby.
(b) No Event of Default shall have occurred and be continuing and no
Default shall exist, unless such Event of Default or Default has been
specifically waived in writing by Lender.
(c) Borrower shall have performed and complied with all agreements and
conditions contained in the Agreement and the other Agreements which are
required to be performed or complied with by Borrower before or on the date
hereof.
(d) The representations and warranties contained in the Agreement, as
amended hereby, and the other Agreements shall be true and correct in all
material respects as of the date hereof, with the same force and effect as
though made on and as of this date.
(e) No material adverse change shall have occurred in the business
operations, financial condition or prospects of Borrower, and no material
adverse litigation shall be pending or, to the knowled~e of Borrower,
threatened, against Borrower.
(f) All corporate and legal proceedings and all documents required to
be completed and executed by the provisions of, and all instruments to be
executed in connection with the transactions contemplated by, this Amendment and
any related agreements shall be satisfactory in form and substance to Lender.
l0. NO WAIVER. Except as otherwise specifically provided for in this
Amendment, nothing contained herein shall be construed as a waiver by Lender of
any covenant or provision of the Agreement, the other Agreements, this
Amendment, or of any other contract or instrument between Borrower and Lender,
and the failure of Lender at any time or times hereafter to require strict
performance by Borrower of any provision thereof shall not waive, affect or
diminish any right of Lender to thereafter demand strict compliance therewith.
Lender hereby reserves all rights granted under the Agreement, the other
Agreements, this Amendment and any other contract or instrument between Borrower
and Lender.
11. REPRESENTATIONS AND WARRANTIES. Borrower hereby represents and
warrants to Lender that (a) the execution, delivery and performance of this
Amendment and any and all Other Agreements executed and/or delivered in
connection herewith have been authorized by all requisite corporate action on
the part of Borrower and will not violate the Certificate of Incorporation or
Bylaws of Borrower; (b) the representations and warranties contained in the Loan
Agreement, as amended hereby, and any Other Agreement are true and correct on
and as of
6
<PAGE>
the date hereof and on and as of the date of execution hereof as though made on
and as of each such date; (c) no Default or Event of Default under the Loan
Agreement, as amended hereby, has occurred and is continuing, unless such
Default or Event of Default has been specifically waived in writing by Lender;
and (d) Borrower is in full compliance with all covenants and agreements
contained in the Loan Agreement and the Other Agreements, as amended hereby.
12. SEVERABILITY. Any provision of this Amendment held by a court of
competent jurisdiction to be invalid or unenforceable shall not impair or
invalidate the remainder of this Amendment and the effect thereof shall be
confined to the provision so held to be invalid or unenforceable.
13. EXPENSES. Borrower shall pay all out-of-pocket expenses arising in
connection with the preparation, execution, delivery and administration of this
Amendment, including, but not limited to, all reasonable legal fees and expenses
incurred by Lender.
14. CONTINUED EFFECT. Except to the extent amended hereby, all terms,
provisions and conditions of the Agreement and all of the other Agreements shall
continue in full force and effect and shall remain enforceable and binding in
accordance with their respective terms.
15. FURTHER ASSURANCES. Borrower shall, at Lender's request, promptly
execute or cause to be executed and delivered to Lender any and all documents,
instruments or agreements deemed necessary by Lender to continue perfection of
Lender's Liens, to facilitate collection of the Collateral or otherwise to give
effect to or carry out the tenns or intent of this Amendment.
L6. COUNTERPARTS. This Amendment may be executed in any num~er of
counterparts, each of which shall for all purposes be deemed an original and all
of which are identical. All parties need not execute the sarne counterpart.
17. FINAL AGREEMENT. THIS WRITTEN AMENDMENT AND THE OTHER LOAN DOCUMENTS
REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY
EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE
PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
18. RELEASE. BORROWER HEREBY ACKNOWLEDGES THAT IT HAS NO DEFENSE,
COUNTERCLAIM, OFFSET, CROSS-COMPLAINT, CLAIM OR DEMAND OF ANY KIND OR NATURE
WHATSOEVER THAT CAN BE ASSERTED TO REDUCE OR ELIMINATE ALL OR ANY PART OF ITS
LIABILITY TO REPAY THE "OBLIGATIONS" OR TO SEEK AFFIRMATIVE RELIEF OR DAMAGES OF
ANY KIND OR NATURE FROM LENDER. BORROWER HEREBY VOLUNTARILY AND KNOWINGLY
RELEASES AND FOREVER DISCHARGES LENDER, ITS PREDECESSORS, AGENTS, EMPLOYEES,
SUCCESSORS AND ASSIGNS, FROM ALL POSSIBLE CLAIMS, DEMANDS, ACTIONS, CAUSES OF
ACTION, DAMAGES, COSTS, EXPENSES, AND LIABILITIES WHATSOEVER, KNOWN OR UNKNOWN,
ANTICIPATED OR UNANTICIPATED,
7
<PAGE>
SUSPECTED OR UNSUSPECTED, FIXED, CONTINGENT, OR CONDITIONAL, AT LAW OR IN
EQUITY, ORIGINATING IN WHOLE OR IN PART ON OR BEFORE THE DATE THIS AMENDMENT IS
EXECUTED, WHICH THE BORROWER MAY NOW OR HEREAFTER HAVE AGAINST LENDER, ITS
PREDECESSORS, AGENTS, EMPLOYEES, SUCCESSORS AND ASSIGNS, IF ANY, AND
IRRESPECTIVE OF WHETHER ANY SUCH CLAIMS ARISE OUT OF CONTRACT, TORT, VIOLATION
OF LAW OR REGULATIONS, OR OTHERWISE, AND ARISING FROM ANY "LOANS", INCLUDING,
WITHOUT LIMITATION, ANY CONTRACTING FOR, CHARGING, TAKING, RESERVING, COLLECTING
OR RECEIVING INTEREST IN EXCESS OF THE HIGHEST LAWFUL RATE APPLICABLE, THE
EXERCISE OF ANY RIGHTS AND REMEDIES UNDER THE LOAN AGREEMENT OR OTHER
AGREEMENTS, AND NEGOTIATION FOR AND EXECUTION OF THIS AMENDMENT.
EXECUTED to be effective as of the date first above written.
RED MAN PIPE & SUPPLY CO.
By: /s/ Dee Paige
------------------------------
Name: Dee Paige
----------------------------
Title: CFO
---------------------------
FLEET CAPITAL CORPORATION, formerly known as
Shawmut Capital Corporation
By: /s/ Joy L. Bartholomew
------------------------------
Name: Joy L. Bartholomew
----------------------------
Title: Vice President
---------------------------
8
<PAGE>
EXHIBIT 10.13
ELEVENTH AMENDMENT TO LOAN AND SECURITY AGREEMENT
JUNE 14, 1996
This Eleventh Amendment to Loan and Security Agreement (the "Amendment") is
made and entered into on this 14th day of June, 1996, to be effective as of the
respective date herein indicated, by and between RED MAN PIPE & SUPPLY CO., an
oklahoma corporation ("Borrower"), and FLEET CAPITAL CORPORATION, a Rhode Island
corporation, successor-in-interest by merger to Fleet Capital Corporation, a
Connecticut corporation, formerly known as Shawmut Capital Corporation,
successor-in-interest to Barclays Business Credit, Inc. ("Lender").
PRELIMINARY STATEMENTS:
1. Borrower and Lender have entered into that certain Loan and Security
Agreement dated as of May 3, 1991, as heretofore amended (as amended from time
to time, the "Agreement").
2. Borrower and Lender desire to amend the Agreement and the other
Agreements as hereinafter set forth.
AGREEMENTS:
NOW, THEREFORE, in consideration of the agreements herein contained,
subject to the terms and conditions set forth herein, Borrower and Lender hereby
agree as follows, and agree that, subject to satisfaction of the provisions of
Section 6 hereof, the amendments specified below shall be effective from and
after the respective date herein indicated and shall be incorporated into the
Agreement and shall supersede those provisions in the Agreement referenced as
follows:
1. DEFINITIONS.
(a) Terms used herein and defined in the Agreement shall have the
meanings set forth in the Agreement, except as otherwise provided herein.
(b) Effective as of May 1, 1996, the definition of "Base Rate"
contained in Section 1.1 of the Agreement is amended by deleting the words
"Fleet National Bank of Connecticut," and substituting therefor the words "Fleet
National Bank".
(c) Effective as of the date of execution of this Amendment, the
definition of "Borrowing Base" contained in Section 1.1 of the Agreement is
amended and restated to read in its entirety as follows:
1
<PAGE>
"Borrowing Base - as at any date of determination thereof, an amount
equal to the lesser of:
(a) the Revolving Credit Loan Commitment as of such date; or
(b) an amount up to:
(i) ninety percent (90%) of the net amount (after deduction of
such reserves as Lender deems proper and necessary, in its sole
discretion, including a reserve for sales tax payables) of
Eligible Accounts outstanding at such date;
PLUS
(ii) the lesser of (A) $5,000,000 or (B) ninety percent (90%) of
the net amount (after deduction of such reserves as Lender deems
proper and necessary, in its sole discretion, including a reserve
for sales tax payables) of Eligible International Accounts
outstanding at such date;
PLUS
(iii) the lesser of (A) $15,000,000 or (B) sixty percent (60%)
of the value of (after deduction of such reserves as Lender deems
proper and necessary, in its sole discretion) of Eligible
Inventory at such date consisting of oil country tubular goods
held for sale in the ordinary course of Borrower's business,
calculated on the basis of the lower of cost or market;
PLUS
(iv) the lesser of (A) $25,000,000 or (B) fifty percent (50%) of
the value (after deduction of such reserves as Lender deems
proper and necessary, in its sole discretion) of Eligible
Inventory at such date consisting of consumable supplies held for
sale in the ordinary course of Borrower's business, calculated on
the basis of the lower of cost or market and of Eligible
Inventory at such date consisting of line pipe held for sale in
the ordinary course of Borrower's business, calculated on the
basis of the lower of cost or market;
MINUS (subtract from the sum of clauses
(i), (ii), (iii), and (iv) above)
2
<PAGE>
(v) an amount equal to the sum of (A) the face amount of all
LC Guaranties and Letters of Credit issued by Lender or
Affiliates of Lender and outstanding at such date and (B)
any amounts which Lender may be obligated to pay in the
future for the account of Borrower pursuant to this
Agreement, the other Agreements or otherwise.
For purposes hereof, the net amount of Eligible Accounts or Eligible
International Accounts, as the case may be, at any time shall be the face amount
of such Eligible Accounts or such Eligible International Accounts, less any and
all returns, discounts (which may, at Lender's option, be calculated on shortest
terms), credits, allowances or excise taxes of any nature at any time issued,
owing, claimed by Account Debtors, granted, outstanding or payable in connection
with such Accounts at such time."
(d) Effective as of the date of execution of this Amendment, the
definitions of "Eurodollar Base Rate," "Eurodollar Loans," "Real Propertv" and
"Term Note" contained in Section 1.1 of the Agreement are hereby deleted, and
the following shall be substituted therefor:
"Eurodollar Base Rate" - with respect to a Eurodollar Loan, a rate per
annum (rounded upwards, if necessary, to the next higher 1/8 of 1%) equal to the
quotient of the following: (a) the rate (rounded to the nearest 1/8 of 1% or, if
there is no nearest 1/8 of 1%, the next higher 1/8 of 1%) at which deposits in
U.S. dollars, in immediately available funds, approximately equal in principal
amount to the then outstanding principal balance of all Revolving Credit Loans
are offered to Bank for a one month period in the London interbank foreign
currency deposits market at approximately 11 :00 a.m. (London time) on any day
within the term of this Agreement, or if such day is not a Business Day, on the
previous next preceding Business Day, divided bv (b) the difference of l.00
minus the Eurodollar Reserve Requirement. Each determination by Lender of any
Eurodollar Base Rate shall, in the absence of manifest error, be conclusive, and
at Borrower's request, Lender shall demonstrate the basis for such
determination. The foregoing notwithstanding, in the event deposits of U.S.
dollars in amounts approximately equal to the outstanding principal balance of
all Revolving Credit Loans for a one month period are not offered to Bank in the
London interbank foreign currency deposits markets, then the numerator of the
'Eurodollar Base Rate' shall be the thirty (30) day London interbank offered
rate as published from time to time by the Wall Street Journal, or if not
published in the Wall Street Journal, as published in the Financial Times of
London.
"Eurodollar Loan" - a Revolving Credit Loan which bears interest at a rate
based upon the Eurodollar Base Rate."
"Real Property - those certain parcels of real property to be purchased by
Borrower from Sammons Realty Corporation in connection with the advance under
the Term Loan, and more particularly described on Exhibit 'L' attached hereto."
3
<PAGE>
"Term Note - the term note to be executed by Borrower on or about the Term
Loan Closing Date in favor of Lender to evidence the Term Loan, which shall be
in substantially the same form of Exhibit 'K' attached to the Eleventh
Amendment."
(e) Effective as of the date of execution of this Arnendment, the
definition of "Commitment" contained in Section 1.1 of the Agreement is deleted
and hereafter all references in the Amendment and the other Agreements to
"Commitment" shall be deemed references to the "Revolving Credit Loan
Commitment."
(f) Effective as of the date of execution of this Amendment, Section
1.1 of the Agreement is hereby amended to include the following definition:
"Eleventh Amendment - that certain Eleventh Amendment to Loan and Security
Agreement, executed by Borrower and Lender."
"Revolving Credit Loan Commitment - $65,000,000.00."
(g) Effective as the date of execution of this Amendment, Section 1.1
of the Agreement is amended by deleting therefrom the definition "Eurodollar
Interest Period."
2. SUBSTITUTION OF FLEET NATIONAL BANK FOR REFERENCES TO FLEET NATIONAL
BANK OF CONNECTICUT. Effective as of May 1, 1996, all references to the words
"Fleet National Bank of Connecticut" contained in the Agreement are deleted and
substituted therefor are the words "Fleet National Bank."
3. THE LOANS. Effective as of the date of execution of this Amendment:
(a) Section 2.1 (B) of the Agreement is hereby amended and restated to
read in its entirety as follows:
"(B) Subject to the terms and conditions of this Agreement, Lender
agrees to make a term loan to Borrower in the aggregate principal amount of
$1,550,000, which shall bear interest and be repayable in accordance with the
terms of the Term Note and shall be secured by the Collateral. The Term Loan may
be advanced in one advance, and the proceeds of such advance shall be used by
Borrower solely for the purpose of purchasing the Real Property. The advance
shall be for an amount not to exceed the purchase price of such Real Property."
(b) Section 2.1 (D) of the Agreement is hereby deleted in its
entirety.
4. INTEREST AND CHARGES. Effective as of the date of the execution of
this Amendment:
(a) Section 3.1(A) of the Agreement is amended and restated to read as
follows:
4
<PAGE>
"The principal amount of the Term Loan outstanding from day-to-day shall
bear interest, calculated daily at a fluctuating rate per annum, equal to the
lesser of (i) l.0% above the Base Rate (the 'Annual Term Rate') or (ii) the
Maximum Legal Rate. The principal amount of the Revolving Credit Loans
outstanding from day-to-day shall bear interest, calculated daily, at the
following rates per annum (individually called, as applicable an 'Annual
Revolving Rate'): (i) each Eurodollar Loan shall bear interest at a rate per
annum equal to the lesser of (a) 2.75% (or such lesser percentage as may be
provided by subsection (H) hereof) above the Eurodollar Base Rate or (b) the
Maximum Legal Rate, and (ii) each Base Rate Loan shall bear interest at the
lesser of (a) a fluctuating rate per annum equal to 0.5% above the Base Rate, or
(b) the Maximum Legal Rate. Borrower shall deliver to Lender a notice electing
to have the Revolving Credit Loans made hereunder accrue at the Eurodollar Base
Rate or the Base Rate (plus, in each case, the percentages set forth above), and
Borrower may subsequently change the manner in which interest accrues on the
Revolving Credit Loans (from Eurodollar Base Rate to Base Rate or from Base Rate
to Eurodollar Base Rate) by written notice to Lender, each such change being
effective three (3) Business Days after receipt of such notice by Lender. All
outstanding Revolving Credit Loans shall accrue interest in the same manner.
Borrower may not elect to have a portion of the Revolving Credit Loans accrue
interest based upon the Eurodollar Base Rate, and a portion accrue interest
based upon the Base Rate (plus, in each case, the percentages set forth above).
Until Lender receives the first such notice hereunder, all Revolving Credit
Loans shall be Base Rate Loans. Notwithstanding anything herein to the contrary,
unless otherwise agreed by Lender, the becoming due of any obligations (other
than requested Revolving Credit Loans) shall be deemed irrevocably to be a
request by Borrower for a Base Rate Loan on the due date on the amount then so
due."
(b) Section 3.1(B) of the Agreement is amended and restated to read as
follows:
"The interest rate on each Base Rate Loan shall be increased or decreased,
as the case may be, by an amount equal to any increase or decrease in the Base
Rate, with such adjustments to be effective as of the opening of business on the
day that any such change in the Base Rate becomes effective. The Base Rate in
effect on the date hereof shall be the Base Rate effective as of the opening of
business on the date hereof, but if this Agreement is executed on the day that
is not a Business Day, the Base Rate in effect on the date hereof shall be the
Base Rate effective as of the opening of business on the last Business Day
immediately preceding the date hereof. The interest rate on each Eurodollar Loan
shall be increased or decreased, as the case may be, by an amount equal to any
increase or decrease in the Eurodollar Base Rate, with such adjustments to be
effective as of the opening of business on the day that any such change in the
Eurodollar Base Rate becomes effective. The Eurodollar Base Rate in effect on
the date hereof shall be the Eurodollar Base Rate effective as of the opening of
business on the date hereof, but if this Agreement is executed on a day that is
not a Business Day, the Eurodollar Base Rate in effect on the date hereof shall
be the Eurodollar Base Rate effective as of the opening of business on the last
Business Day immediately preceding the date hereof.
5
<PAGE>
Interest on the Loans shall be calculated daily, based on the actual days
elapsed over a 360 day year. Further, for the purpose of computing interest, all
items of payment received by Lender shall be applied by Lender (subject to final
payment of all drafts and other items received in form other than immediately
available funds) against the obligations on the first Business Day after
receipt. The determination of when a payment is received by Lender will be made
in accordance with Section 3.5."
(c) Section 3.1(H) of the Agreement is amended by deleting from
Subsection thereof the phrase "for the Eurodollar Interest Period applicable
thereto".
(d) Section 3.7(A) and Section 3.7(B) of the Agreement are hereby
deleted in their entirety.
(e) Section 3.7(D) of the Agreement is amended by deleting therefrom
the phrase "any payment of a Eurodollar Loan occurs on a date which is not the
last day of the applicable Eurodollar Interest Period, whether because of
acceleration, prepayment or otherwise, or".
5. CONDITIONS TO ADVANCES UNDER TERM LOAN. Effective as of the date of
execution of this Amendment, Section l0.3 of the Agreement is hereby amended by
deleting the present subsection (F) of such Section l0.3, and substituting
therefor the following subsections (F), (G) and (H):
"(F) Lender shall have received a current, fair market appraisal of
the Real Property, prepared by an appraiser satisfactory to Lender, in its
sole discretion, in an amount and in form and substance satisfactory to
Lender, in its sole discretion;
(G) Lender shall have received a current, complete Phase I
environmental site assessment regarding the Real Property, performed by a
qualified environmental engineer or specialist acceptable to Lender, in its
sole discretion, such environmental site assessment to be in form and
substance satisfactory to Lender, in its sole discretion, together with
such other satisfactory environmental studies, reports, and reviews as
shall be required by Lender, in its sole discretion; and
(H) The Term Loan Closing Date must occur before August 31, 1996."
6. CONDITIONS. The obligation of Lender to be bound by the provisions of
this Amendment shall be subject to the fulfillment of the following conditions
precedent on or before the date hereof:
(a) Lender shall have received all of the following, each in form and
substance satisfactory to Lender, in its sole discretion, and each duly executed
by each party thereto, other than Lender:
(i) This Amendment;
6
<PAGE>
(ii) Sale and Participation Agreement, dated on or about the date
hereof, executed by the CIT Group/Business Credit, Inc. ("CIT Group")
(the "Participation Agreement"); and
(iii) All other documents Lender may request with respect to any
matter relevant to this Amendment or the transactions contemplated
hereby.
(b) Lender shall have received from CIT Group the payment required to
be made by CIT Group to Lender pursuant to the provisions of the Participation
Agreement in connection with the purchase by CIT Group of a participation in the
Loans.
(c) No Event of Default shall have occurred and be continuing and no
Default shall exist, unless such Event of Default or Default has been
specifically waived in writing by Lender.
(d) Borrower shall have performed and complied with all agreements and
conditions contained in the Agreement and the other Agreements which are
required to be performed or complied with by Borrower before or on the date
hereof.
(e) The representations and warranties contained in the Agreement, as
amended hereby, and the other Agreements shall be true and correct in all
material respects as of the date hereof, with the same force and effect as
though made on and as of this date.
(f) No material adverse change shall have occurred in the business
operations, financial condition or prospects of Borrower, and no material
adverse litigation shall be pending or, to the knowledge of Borrower,
threatened, against Borrower.
(g) All corporate and legal proceedings and all documents required to
be completed and executed by the provisions of, and all instruments to be
executed in connection with the transactions contemplated by, this Amendment and
any related agreements shall be satisfactory in form and substance to Lender.
7. NO WAIVER. Except as otherwise specifically provided for in this
Amendment, nothing contained herein shall be construed as a waiver by Lender of
any covenant or provision of the Agreement, the other Agreements, this
Amendment, or of any other contract or instrument between Borrower and Lender,
and the failure of Lender at any time or times hereafter to require strict
performance by Borrower of any provision thereof shall not waive, affect or
diminish any right of Lender to thereafter demand strict compliance therewith.
Lender hereby reserves all rights granted under the Agreement, the other
Agreements, this Amendment and any other contract or instrument between Borrower
and Lender.
8. REPRESENTATIONS AND WARRANTIES. Borrower hereby represents and
warrants to Lender that (a) the execution, delivery and performance of this
Amendment and any and all Other Agreements executed and/or delivered in
connection herewith have been authorized by all
7
<PAGE>
requisite corporate action on the part of Borrower and will not violate the
Certificate of Incorporation or Bylaws of Borrower; (b) the representations and
warranties contained in the Loan Agreement, as amended hereby, and any other
Agreement are true and correct on and as of the date hereof and on and as of the
date of execution hereof as though made on and as of each such date; (c) no
Default or Event of Default under the Loan Agreement, as amended hereby, has
occurred and is continuing, unless such Default or Event of Default has been
specifically waived in writing by Lender; and (d) Borrower is in full compliance
with all covenants and agreements contained in the Loan Agreement and the other
Agreements, as amended hereby.
9. SEVERABILITY. Any provision of this Amendment held by a court of
competent jurisdiction to be invalid or unenforceable shall not impair or
invalidate the remainder of this Amendment and the effect thereof shall be
confined to the provision so held to be invalid or unenforceable.
10. EXPENSES. Borrower shall pay all out-of-pocket expenses of Lender and
CIT Group arising in connection with the preparation, execution, and delivery of
this Amendment and the Participation Agreement, including, but not limited to,
all reasonable legal fees and expenses incurred by Lender and CIT Group;
provided, however, that Borrower's liability to Lender for such out-of-pocket
expenses of Lender shall be limited to $5,000.00 and that Borrower's liability
to CIT for such out-of-pocket expenses of CIT shall be limited to $5,000.00.
11. CONTINUED EFFECT. Except to the extent amended hereby, all terms,
provisions and conditions of the Agreement and all of the other Agreements shall
continue in full force and effect and shall remain enforceable and binding in
accordance with their respective terms.
12. FURTHER ASSURANCES. Borrower shall, at Lender's request, promptly
execute or cause to be executed and delivered to Lender any and all documents,
instruments or agreements deemed necessary by Lender to continue perfection of
Lender's Liens, to facilitate collection of the Collateral or otherwise to give
effect to or carry out the terms or intent of this Amendment.
13. COUNTERPARTS. This Amendment may be executed in any number of
counterparts, each of which shall for all purposes be deemed an original and all
of which are identical. All parties need not execute the same counterpart.
14. FINAL AGREEMENT. THIS WRITTEN AMENDMENT AND THE OTHER LOAN DOCUMENTS
REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY
EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE
PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
15. RELEASE. BORROWER HEREBY ACKNOWLEDGES THAT IT HAS NO DEFENSE,
COUNTERCLAIM, OFFSET, CROSS-COMPLAINT, CLAIM OR DEMAND OF ANY KIND OR NATURE
WHATSOEVER THAT CAN BE ASSERTED TO REDUCE OR ELIMINATE ALL OR ANY PART OF ITS
LIABILITY TO REPAY THE "OBLIGATIONS"
8
<PAGE>
OR TO SEEK AFFIRMATIVE RELIEF OR DAMAGES OF ANY KIND OR NATURE FROM LENDER.
BORROWER HEREBY VOLUNTARILY AND KNOWINGLY RELEASES AND FOREVER DISCHARGES
LENDER, ITS PREDECESSORS, AGENTS, EMPLOYEES, SUCCESSORS AND ASSIGNS, FROM ALL
POSSIBLE CLAIMS, DEMANDS, ACTIONS, CAUSES OF ACTION, DAMAGES, COSTS, EXPENSES,
AND LIABILITIES WHATSOEVER, KNOWN OR UNKNOWN, ANTICIPATED OR UNANTICIPATED,
SUSPECTED OR UNSUSPECTED, FIXED, CONTINGENT, OR CONDITIONAL, AT LAW OR IN
EQUITY, ORIGINATING IN WHOLE OR IN PART ON OR BEFORE THE DATE THIS AMENDMENT IS
EXECUTED, WHICH THE BORROWER MAY NOW OR HEREAFTER HAVE AGAINST LENDER, ITS
PREDECESSORS, AGENTS, EMPLOYEES, SUCCESSORS AND ASSIGNS, IF ANY, AND
IRRESPECTIVE OF WHETHER ANY SUCH CLAIMS ARISE OUT OF CONTRACT, TORT, VIOLATION
OF LAW OR REGULATIONS, OR OTHERWISE, AND ARISING FROM ANY "LOANS", INCLUDING,
WITHOUT LIMITATION, ANY CONTRACTING FOR, CHARGING, TAKING, RESERVING, COLLECTING
OR RECEIVING INTEREST IN EXCESS OF THE HIGHEST LAWFUL RATE APPLICABLE, THE
EXERCISE OF ANY RIGHTS AND REMEDIES UNDER THE LOAN AGREEMENT OR OTHER
AGREEMENTS, AND NEGOTIATION FOR AND EXECUTION OF THIS AMENDMENT.
EXECUTED to be effective as of the date first above written.
RED MAN PIPE & SUPPLY CO.
By: /s/ Dee Paige
------------------------------
Name: Dee Paige
------------------------------
Title: CFO
------------------------------
FLEET CAPITAL CORPORATION, a Rhode Island
corporation, successor-in-interest by merger
to Fleet Capital Corporation, a Connecticut
corporation
By: /s/ Joy L. Bartholomew
------------------------------
Name: Joy L. Bartholomew
------------------------------
Title: Vice President
------------------------------
9
<PAGE>
EXHIBIT 10.14
TWELFTH AMENDMENT TO LOAN AND SECURITY AGREEMENT
JUNE 4, 1997
This Twelfth Amendment to Loan and Security Agreement (the "Amendment") is
made and entered into on this 4th day of June, 1997, to be effective as of the
respective date herein indicated, by and between RED MAN PIPE & SUPPLY co., an
oklahoma corporation ("Borrower"), and FLEET CAPITAL CORPORATION, a Rhode Island
corporation, successor-in-interest by merger to Fleet Capital Corporation, a
Connecticut corporation, formerly known as Shawmut Capital Corporation,
successor-in-interest to Barclays Business Credit, Inc. ("Lender").
PRELIMINARY STATEMENTS:
1. Borrower and Lender have entered into that certain Loan and Security
Agreement dated as of May 3, 1991, as heretofore amended (as amended from time
to time, the "Agreement").
2. Borrower and Lender desire to amend the Agreement and the other
Agreements as hereinafter set forth.
AGREEMENTS:
NOW, THEREFORE, in consideration of the agreements herein contained,
subject to the terms and conditions set forth herein, Borrower and Lender hereby
agree as follows, and agree that, subject to satisfaction of the provisions of
Section 8 hereof, the amendments specified below shall be effective from and
after the respective date herein indicated and shall be incorporated into the
Agreement and shall supersede those provisions in the Agreement referenced as
follows:
1. DEFINITIONS.
(a) Terms used herein and defined in the Agreement shall have the meanings
set forth in the Agreement except as otherwise provided herein.
(b) Effective as of the date of execution of this Amendment, the definition
of "Borrowing Base" contained in Section 1.1 of the Agreement is amended as
follows:
(i) The reference in clause (ii) of paragraph (b) to the
dollar amount "$5,000,000" is hereby deleted and substituted therefor
is the dollar amount "$10,000,000".
(ii) The reference in clause (iii) of paragraph (b) to the
dollar amount "$15,000,000" is hereby deleted and substituted therefor
is the dollar amount "$20,000,000".
1
<PAGE>
(c) Effective as of the date of execution of this Amendment, the
definition of "Eligible International Accounts" contained in Section 1.1 of the
Agreement is amended and restated to read in its entirety as follows:
"Eligible International Accounts - an Account arising in the ordinary
course of Borrower's business from the sale of goods or rendition of
services to an Account Debtor outside the United States which Lender, in
its good faith credit judgment, deems to be an Eligible International
Account. Without limiting the generality of the foregoing, (i) no Account
which arises from a sale to an Account Debtor outside of the United States
shall be an Eligible International Account unless each of the following is
true and correct of such Account: (a) other than for clause (ix) of such
definition, such Account otherwise constitutes an Eligible Account, and (b)
such Account arises from a sale to an Account Debtor acceptable to Lender,
in its sole discretion, and (ii) to the extent the aggregate amount of
Accounts which arise from a sale or sales to Account Debtor(s) in Nigeria
are in excess of $5,000,000, such Accounts shall in no event constitute
'Eligible International Accounts' to the extent of such excess."
(d) Effective as of the date of execution of this Amendment, the
definition of "Revolving Credit Commitment" contained in Section 1.1 of the
Agreement is amended and restated to read in its entirety as follows:
"Revolving Credit Commitment - $75,000,000.00".
2. INTEREST AND CHARGES. Effective as of the date of the execution of
this Amendment:
(a) Section 3.l (A) of the Agreement is amended as follows:
(i) The reference to the percentage "2.75%" is hereby
deleted and substituted therefor is the percentage "2.25%".
(ii) The reference to the percentage "0.5%" is hereby
deleted and substituted therefor is the percentage "0.25%".
3. TERM OF AGREEMENT.
(a) Effective as of the date of execution of this Amendment, Section
3.3(A) of the Agreement is amended as follows:
(i) The reference to the date "October 31, 1999" is hereby
deleted and substituted therefor is the date "October 31, 2000".
(ii) The reference to the date "August 31, 1999" is hereby
deleted and substituted therefor is the date "August 31, 2000".
2
<PAGE>
4. CAPITAL EXPENDITURES. Effective as of the date of execution of this
Amendment, Section 9.2(H) of the Agreement is amended and restated to read in
its entirety as follows:
"(H) Make Capital Expenditures or payments on account of Capital
Leases which exceed in the aggregate (i) for the period from November 1, 1996,
through October 31, 1997, $1,650,000, or (ii) $750,000 for any fiscal year
thereafter occurring."
5. OPERATING LEASES. Effective as of the date of execution of this
Amendment, Section 9.2(J) of the Agreement is amended by deleting therefrom the
dollar amount "$2000,000" and substituting therefor the dollar amount
"$750,000."
6. FINANCIAL COVENANTS. Effective as of the date of execution of this
Amendment:
(a) Section 9.3(C) of the Agreement is hereby deleted, and the
following shall be substituted therefor:
"(C) Achieve Net Income plus taxes (to the extent deducted
therefrom), calculated as of the last day of each month, beginning June 30,
1997, for the six-month period ending on such day, of at least $3,000,000.
(b) Section 9.3(D) of the Agreement is hereby deleted, and the
following shall be substituted therefor:
"(D) Maintain Excess Cash Flow, calculated as of the last day of
each month, beginning June 30, 1997, for the six-month period ending on
such day, of at least $ l,000,000."
(c) Section 9.3(E) of the Agreement is hereby deleted, and the
following shall be substituted therefor:
"(E) Achieve Adjusted Net Earnings from operations, plus taxes
(to the extent deducted therefrom), for each fiscal year of Borrower,
beginning with the fiscal year ending October 31, 1997, of at least
$6,000,000."
7. CLOSING FEE. Borrower agrees to pay to Lender on the date of execution
of this Amendment, a closing fee equal to $50,000, which fee shall be deemed
fully earned and nonrefundable as of the date of execution of this Amendment.
8. CONDITIONS. The obligation of Lender to be bound by the provisions of
this Amendment shall be subject to the fulfillment of the following conditions
precedent on or before the date hereof:
3
<PAGE>
(a) Lender shall have received all of the following, each in form and
substance satisfactory to Lender, in its sole discretion, and each duly executed
by each party thereto, other than Lender:
(i) This Amendment;
(ii) Amendment to Sale and Participation Agreement, dated on
or about the date hereof, executed by The CIT Group/Business
Credit, Inc. ("CIT Group") (the "Amendment to Participation
Agreement");
(iii) Modifications to such existing real estate lien
documents as shall be required by Lender, duly executed by
Borrower; and
(iv) All other documents Lender may request with respect to
any matter relevant to this Amendment or the transactions
contemplated hereby.
(b) Lender shall have received from CIT Group the payment required to
be made by CIT Group to Lender, if any, pursuant to the provisions of the
Participation Agreement, as amended by the Amendment to Participation Agreement,
in connection with the increase of the CIT Group participation in the Loans.
(c) No Event of Default shall have occurred and be continuing and no
Default shall exist, unless such Event of Default or Default has been
specifically waived in writing by Lender.
(d) Borrower shall have performed and complied with all agreements and
conditions contained in the Agreement and the other Agreements which are
required to be performed or complied with by Borrower before or on the date
hereof.
(e) The representations and warranties contained in the Agreement, as
amended hereby, and the other Agreements shall be true and correct in all
material respects as of the date hereof, with the same force and effect as
though made on and as of this date.
(f) No material adverse change shall have occurred in the business
operations, financial condition or prospects of Borrower, and no material
adverse litigation shall be pending or, to the knowledge of Borrower,
threatened, against Borrower.
(g) All corporate and legal proceedings and all documents required to
be completed and executed by the provisions of, and all instruments to be
executed in connection with the transactions contemplated by, this Amendment and
any related agreements shall be satisfactory in form and substance to Lender.
(h) Borrower shall have paid to Lender, in immediately available
funds, the closing fee set forth in Section 7 hereof, which closing fee is non-
refundable and shall be deemed fully earned as of the date of execution of this
Amendment.
4
<PAGE>
9. NO WAIVER. Except as otherwise specifically provided for in this
Amendment, nothing contained herein shall be construed as a waiver by Lender of
any covenant or provision of the Agreement, the other Agreements, this
Amendment, or of any other contract or instrument between Borrower and Lender,
and the failure of Lender at any time or times hereafter to require strict
performance by Borrower of any provision thereof shall not waive, affect or
diminish any right of Lender to thereafter demand strict compliance therewith.
Lender hereby reserves all rights granted under the Agreement, the other
Agreements, this Amendment and any other contract or instrument between Borrower
and Lender.
10. REPRESENTATIONS AND WARRANTIES. Borrower hereby represents and
warrants to Lender that (a) the execution, delivery and performance of this
Amendment and any and all other Agreements executed and/or delivered in
connection herewith have been authorized by all requisite corporate action on
the part of Borrower and will not violate the Certificate of Incorporation or
Bylaws of Borrower; (b) the representations and warranties contained in the Loan
Agreement, as amended hereby, and any other Agreement are true and correct on
and as of the date hereof and on and as of the date of execution hereof as
though made on and as of each such date; (c) no Default or Event of Default
under the Loan Agreement, as amended hereby, has occurred and is continuing,
unless such Default or Event of Default has been specifically waived in writing
by Lender; and (d) Borrower is in full compliance with all covenants and
agreements contained in the Loan Agreement and the other Agreements, as amended
hereby.
11. SEVERABILITY. Any provision of this Amendment held by a court of
competent jurisdiction to be invalid or unenforceable shall not impair or
invalidate the remainder of this Amendment and the effect thereof shall be
confined to the provision so held to be invalid or unenforceable.
12. EXPENSES. Borrower shall pay all out-of-pocket expenses of Lender and
CIT Group arising in connection with the preparation, execution, and delivery of
this Amendment and the Participation Agreement, including, but not limited to,
all reasonable legal fees and expenses incurred by Lender and CIT Group.
13. CONTINUED EFFECT. Except to the extent amended hereby, all terms,
provisions and conditions of the Agreement and all of the other Agreements shall
continue in full force and effect and shall remain enforceable and binding in
accordance with their respective terms.
14. FURTHER ASSURANCEs. Borrower shall, at Lender's request, promptly
execute or cause to be executed and delivered to Lender any and all documents,
instruments or agreements deemed necessary by Lender to continue perfection of
Lender's Liens, to facilitate collection of the Collateral or otherwise to give
effect to or carry out the terms or intent of this Amendment.
15. COUNTERPARTS. This Amendment may be executed in any number of
counterparts, each of which shall for all purposes be deemed an original and all
of which are identical. All parties need not execute the same counterpart.
5
<PAGE>
16. FINAL AGREEMENT. THIS WRITTEN AMENDMENT AND THE OTHER LOAN DOCUMENTS
REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY
EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE
PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
17. RELEASE. BORROWER HEREBY ACKNOWLEDGES THAT IT HAS NO DEFENSE,
COUNTERCLAIM, OFFSET, CROSS-COMPLAINT, CLAIM OR DEMAND OF ANY KIND OR NATURE
WHATSOEVER THAT CAN BE ASSERTED TO REDUCE OR ELIMINATE ALL OR ANY PART OF ITS
LIABILITY TO REPAY THE "OBLIGATIONS" OR TO SEEK AFFIRMATIVE RELIEF OR DAMAGES OF
ANY KIND OR NATURE FROM LENDER. BORROWER HEREBY VOLUNTARILY AND KNOWINGLY
RELEASES AND FOREVER DISCHARGES LENDER, ITS PREDECESSORS, AGENTS, EMPLOYEES,
SUCCESSORS AND ASSIGNS, FROM ALL POSSIBLE CLAIMS, DEMANDS, ACTIONS, CAUSES OF
ACTION, DAMAGES, COSTS, EXPENSES, AND LIABILITIES WHATSOEVER, KNOWN OR UNKNOWN,
ANTICIPATED OR UNANTICIPATED, SUSPECTED OR UNSUSPECTED, FIXED, CONTINGENT, OR
CONDITIONAL, AT LAW OR IN EQUITY, ORIGINATING IN WHOLE OR IN PART ON OR BEFORE
THE DATE THIS AMENDMENT IS EXECUTED, WHICH THE BORROWER MAY NOW OR HEREAFTER
HAVE AGAINST LENDER, ITS PREDECESSORS, AGENTS, EMPLOYEES, SUCCESSORS AND
ASSIGNS, IF ANY, AND IRRESPECTIVE OF WHETHER ANY SUCH CLAIMS ARISE OUT OF
CONTRACT, TORT, VIOLATION OF LAW OR REGULATIONS, OR OTHERWISE, AND ARISING FROM
ANY "LOANS", INCLUDING, WITHOUT LIMITATION, ANY CONTRACTING FOR, CHARGING,
TAKING, RESERVING. COLLECTING OR RECEIVING INTEREST IN EXCESS OF THE HIGHEST
LAWFUL RATE APPLICABLE, THE EXERCISE OF ANY RIGHTS AND REMEDIES UNDER THE LOAN
AGREEMENT OR OTHER AGREEMENTS, AND NEGOTIATION FOR AND EXECUTION OF THIS
AMENDMENT.
EXECUTED to be effective as of the date first above written.
RED MAN PIPE & SUPPLY CO., an Oklahoma
corporation
By: /s/ Dee Paige
------------------------------
Name: DEE PAIGE
------------------------------
Title: CFO
------------------------------
6
<PAGE>
FLEET CAPITAL CORPORATION, a Rhode
Island corporation
By: /s/ Joy L. Bartholomew
------------------------------
Name: JOY L. BARTHOLOMEW
------------------------------
Title: VICE PRESIDENT
------------------------------
7
<PAGE>
EXHIBIT 10.15
THIRTEENTH AMENDMENT
TO LOAN AND SECURITY AGREEMENT
This Thirteenth Amendment to Loan and Security Agreement (the "Amendment")
is made and entered into on this 29th day of August, 1997, to be effective as of
the respective date herein indicated, by and between RED MAN PIPE & SUPPLY CO.,
an oklahoma corporation ("Borrower"), and FLEET CAPITAL CORPORATION, a Rhode
Island corporation, successor-in-interest by merger to Fleet Capital
Corporation, a Connecticut corporation, formerly known as Shawmut Capital
Corporation, successor-in-interest to Barclays Business Credit, Inc. ("Lender").
PRELIMINARY STATEMENTS:
1. Borrower and Lender have entered into that certain Loan and Security
Agreement dated as of May 3, 1991, as heretofore amended (as amended from time
to time, the "Agreement").
2. Borrower and Lender desire to amend the Agreement and the other
Agreements as hereinafter set forth.
AGREEMENTS:
NOW, THEREFORE, in consideration of the agreements herein contained,
subject to the terms and conditions set forth herein, Borrower and Lender hereby
agree as follows, and agree that, subject to satisfaction of the provisions of
Section 3 hereof, the amendments specified below shall be effective from and
after the respective date herein indicated and shall be incorporated into the
Agreement and shall supersede those provisions in the Agreement referenced as
follows:
1. DEFINITIONS.
(a) Terms used herein and defined in the Agreement shall have the
meanings set forth in the Agreement, except as otherwise provided herein.
(b) Effective as of the date of execution of this Amendment, the
definition of "Revolving Credit Loan Commitment" contained in Section 1.1 of the
Agreement is amended and restated to read in its entirety as follows:
"Revolving Credit Loan Commitment - $100,000,000.00".
2. NOTICE TO LENDER. Effective as of the date of execution of this
Amendment, Section 12.10(A) of the Agreement is hereby amended so that the
address for notice to Lender shall be as follows:
1
<PAGE>
"(A) If to Lender: Fleet Capital Corporation
2711 North Haskell, Suite 2100
Dallas, Texas 75204
Attention: Loan Administration Manager
With a copy to: Patton Boggs, L.L.P.
2626 Cole Avenue, Suite 300
Dallas, Texas 75204
Attention: Larry A. Makel, Esq."
3. CONDITIONS. The obligation of Lender to be bound by the provisions of
this Amendment shall be subject to the fulfillment of the following conditions
precedent on or before the date hereof:
(a) Lender shall have received all of the following, each in form and
substance satisfactory to Lender, in its sole discretion, and each duly executed
by each party thereto, other than Lender:
(i) This Amendment;
(ii) Second Amendment to Sale and Participation Agreement, dated
on or about the date hereof, executed by The CIT Group/Business
Credit, Inc. ("CIT Group") (the "Second Amendment to Participation
Agreement");
(iii) Modifications to such existing real estate lien documents
as shall be required by Lender, duly executed by Borrower; and
(iv) All other documents Lender may request with respect to any
matter relevant to this Amendment or the transactions contemplated
hereby.
(b) No Event of Default shall have occurred and be continuing and no
Default shall exist, unless such Event of Default or Default has been
specifically waived in writing by Lender.
(c) Borrower shall have performed and complied with all agreements and
conditions contained in the Agreement and the other Agreements which are
required to be performed or complied with by Borrower before or on the date
hereof.
(d) The representations and warranties contained in the Agreement, as
amended hereby, and the other Agreements shall be true and correct in all
material respects as of the date hereof, with the same force and effect as
though made on and as of this date.
(e) No material adverse change shall have occurred in the business
operations, financial condition or prospects of Borrower, and no material
adverse litigation shall be pending or, to the knowledge of Borrower,
threatened, against Borrower.
2
<PAGE>
(f) All corporate and legal proceedings and all documents required to
be completed and executed by the provisions of, and all instruments to be
executed in connection with the transactions contemplated by, this Amendment and
any related agreements shall be satisfactory in form and substance to Lender.
4. NO WAIVER. Except as otherwise specifically provided for in this
Amendment, nothing contained herein shall be construed as a waiver by Lender of
any covenant or provision of the Agreement, the other Agreements, this
Amendment, or of any other contract or instrument between Borrower and Lender,
and the failure of Lender at any time or times hereafter to require strict
performance by Borrower of any provision thereof shall not waive, affect or
diminish any right of Lender to thereafter demand strict compliance therewith.
Lender hereby reserves all rights granted under the Agreement, the other
Agreements, this Amendment and any other contract or instrument between Borrower
and Lender.
5. REPRESENTATIONS AND WARRANTIES. Borrower hereby represents and
warrants to Lender that (a) the execution, delivery and performance of this
Amendment and any and all other Agreements executed and/or delivered in
connection herewith have been authorized by all requisite corporate action on
the part of Borrower and will not violate the Certificate of Incorporation or
Bylaws of Borrower; (b) the representations and warranties contained in the Loan
Agreement, as amended hereby, and any other Agreement are true and correct on
and as of the date hereof and on and as of the date of execution hereof as
though made on and as of each such date; (c) no Default or Event of Default
under the Loan Agreement, as amended hereby, has occurred and is continuing,
unless such Default or Event of Default has been specifically waived in writing
by Lender; and (d) Borrower is in full compliance with all covenants and
agreements contained in the Loan Agreement and the other Agreements, as amended
hereby.
6. SEVERABILITY. Any provision of this Amendment held by a court of
competent jurisdiction to be invalid or unenforceable shall not impair or
invalidate the remainder of this Amendment and the effect thereof shall be
confined to the provision so held to be invalid or unenforceable.
7. EXPENSES. Borrower shall pay all out-of-pocket expenses of Lender and
CIT Group arising in connection with the preparation, execution, and delivery of
this Amendment and the Participation Agreement, including, but not limited to,
all reasonable legal fees and expenses incurred by Lender and CIT Group.
8. CONTINUED EFFECT. Except to the extent amended hereby, all terms,
provisions and conditions of the Agreement and all of the other Agreements shall
continue in full force and effect and shall remain enforceable and binding in
accordance with their respective terms.
9. FURTHER ASSURANCES. Borrower shall, at Lender's request, promptly
execute or cause to be executed and delivered to Lender any and all documents,
instruments or agreements deemed necessary by Lender to continue perfection of
Lender's Liens, to facilitate collection of the Collateral or otherwise to give
effect to or carry out the terms or intent of this Amendment.
3
<PAGE>
10. COUNTERPARTS. This Amendment may be executed in any number of
counterparts, each of which shall for all purposes be deemed an original and all
of which are identical. All parties need not execute the same counterpart.
11. FINAL AGREEMENT. THIS WRITTEN AMENDMENT AND THE OTHER LOAN DOCUMENTS
REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY
EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE
PARTIES. THERE ARE No UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
12. RELEASE. BORROWER HEREBY ACKNOWLEDGES THAT IT HAS NO DEFENSE,
COUNTERCLAIM, OFFSET, CROSS-COMPLAINT, CLAIM OR DEMAND OF ANY KIND OR NATURE
WHATSOEVER THAT CAN BE ASSERTED TO REDUCE OR ELIMINATE ALL OR ANY PART OF ITS
LIABILITY TO REPAY THE "OBLIGATIONS" OR TO SEEK AFFIRMATIVE RELIEF OR DAMAGES OF
ANY KIND OR NATURE FROM LENDER. BORROWER HEREBY VOLUNTARILY AND KNOWINGLY
RELEASES AND FOREVER DISCHARGES LENDER, ITS PREDECESSORS, AGENTS, EMPLOYEES,
SUCCESSORS AND ASSIGNS, FROM ALL POSSIBLE CLAIMS, DEMANDS, ACTIONS, CAUSES OF
ACTION, DAMAGES, COSTS, EXPENSES, AND LIABILITIES WHATSOEVER, KNOWN OR UNKNOWN,
ANTICIPATED OR UNANTICIPATED, SUSPECTED OR UNSUSPECTED, FIXED, CONTINGENT, OR
CONDITIONAL, AT LAW OR IN EQUITY, ORIGINATING IN WHOLE OR IN PART ON OR BEFORE
THE DATE THIS AMENDMENT IS EXECUTED, WHICH THE BORROWER MAY NOW OR HEREAFTER
HAVE AGAINST LENDER, ITS PREDECESSORS, AGENTS, EMPLOYEES, SUCCESSORS AND
ASSIGNS, IF ANY, AND IRRESPECTIVE OF WHETHER ANY SUCH CLAIMS ARISE OUT OF
CONTRACT, TORT, VIOLATION OF LAW OR REGULATIONS, OR OTHERWISE, AND ARISING FROM
ANY "LOANS", INCLUDING, WITHOUT LIMITATION, ANY CONTRACTING FOR, CHARGING,
TAKING, RESERVING, COLLECTING OR RECEIVING INTEREST IN EXCESS OF THE HIGHEST
LAWFUL RATE APPLICABLE, THE EXERCISE OF ANY RIGHTS AND REMEDIES UNDER THE LOAN
AGREEMENT OR OTHER AGREEMENTS, AND NEGOTIATION FOR AND EXECUTION OF THIS
AMENDMENT.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
4
EXECUTED to be effective as of the date first above written.
RED MAN PIPE & SUPPLY CO., an oklahoma
corporation
By: /s/ Dee Paige
------------------------------
Name: MR. DEE PAIGE
------------------------------
Title: CFO
------------------------------
FLEET CAPITAL CORPORATION, a Rhode
Island corporation
By: /s/ Joy L. Bartholomew
------------------------------
Name: JOY L. BARTHOLOMEW
------------------------------
Title: VICE PRESIDENT
------------------------------
5
<PAGE>
EXHIBIT 10.16
FOURTEENTH AMENDMENT
TO LOAN AND SECURITY AGREEMENT
This Fourteenth Amendment to Loan and Security Agreement (the "Amendment")
is made and entered into on this 26th of September, 1997, to be effective as of
the respective date herein indicated, by and between RED MAN PIPE & SUPPLY CO.,
an oklahoma corporation ("Borrower"), and FLEET CAPITAL CORPORATION, a Rhode
Island corporation, successor-in-interest by merger to Fleet Capital
Corporation, a Connecticut corporation, formerly known as Shawmut Capital
Corporation, successor-in-interest to Barclays Business Credit, Inc. ("Lender").
PRELIMINARY STATEMENTS:
1. Borrower and Lender have entered into that certain Loan and Security
Agreement dated as of May 3, 1991, as heretofore amended (as amended from time
to time, the "Agreement").
2. Borrower and Lender desire to amend the Agreement and the other
Agreements as hereinafter set forth.
AGREEMENTS:
NOW, THEREFORE, in consideration of the agreements herein contained,
subject to the terms and conditions set forth herein Borrower and Lender hereby
agree as follows, and agree that, subject to satisfaction of the provisions of
Section 7 hereof, the amendments specified below shall be effective from and
after the respective date herein indicated and shall be incorporated into the
Agreement and shall supersede those provisions in the Agreement referenced as
follows:
1. DEFINITIONS
(a) Terms used herein and defined in the Agreement shall have the
meanings set forth in the Agreement, except as otherwise provided herein.
(b) Effective as of September 1, 1997, the following new definitions
are hereby added to Section 1.1 of the Agreement to be inserted in their proper
alphabetical order and to read in their entirety as follows:
"Eurodollar Adjustment Date - the first Business Day of the calendar month
during which Lender receives the Compliance Certificate required by Section
91(M) hereof, beginning with the Compliance Certificate with the effective
date of July 31, 1997 (provided, however, that if the Compliance
Certificate with an effective date of July 31. 1997, is received by Lender
prior to September 1, 1997, the first Eurodollar Adjustment Date shall be
September l, 1997.
1
<PAGE>
Eurodollar Margin - for all Eurodollar Loans outstanding during the period
beginning on a Eurodollar Adjustment Date and ending on the day preceding the
subsequent Eurodollar Adjustment Date, the applicable percent per annum set
forth in the pricing table below respectively for Revolving Credit Loans and for
the Term Loan opposite the EBITDA calculated for the trailing twelve (12)
calendar month period ending on the effective date of the applicable Compliance
Certificate.
PRICING TABLE
<TABLE>
<CAPTION>
EURODOLLAR
MARGIN FOR EURODOLLAR
REVOLVING MARGIN FOR
CREDIT LOANS TERM LOAN
<S> <C> <C> <C> <C> <C>
(i) greater than $20,000,000 (i) 1.00% (i) 1.25%
(ii) Equal to or greater than (ii) 1.25% (ii) 1.50%
$18,000,000, but not
greater than $20,000,000
(iii) Equal to or greater than (iii) 1.50% (iii) 1.75%
$16,000,000, but not
greater than $18,000,000
(iv) Equal to or greater than (iv) 1.75% (iv) 2.00%
$14,000,000, but not
greater than $16,000,000
(v) Equal to or greater than (v) 2.00% (v) 2.25%
$12,000,000, but not
greater than $14,000,000
(vi) Equal to or greater than (vi) 2.25% (vi) 2.50%
$10,000,000, but not
greater than $12,000,000
(vii) Less than $10,000,000 (vii) 2 .50% (vii) 2.75%
</TABLE>
2
<PAGE>
If Borrower shall fail to deliver a Compliance Certificate by the date
required pursuant to Section 9.1(M) of this Agreement, then effective as of the
date such Compliance Certificate becomes delinquent, the applicable Eurodollar
Margin shall be conclusively presumed to equal the highest applicable Eurodollar
Margin specified in the pricing table set forth above, such automatic adjustment
to remain in effect until the first Business Day of the calendar month during
which such delinquent Compliance Certificate is delivered. From and after the
first Business Day of the calendar month during which such delinquent Compliance
Certificate is delivered and until the next Eurodollar Adjustment Date, the
Eurodollar Margin shall be determined by reference to such delinquent Compliance
Certificate and the pricing table set forth above.
Fourteenth Amendment - That certain Fourteenth Amendment to Loan and
Security Agreement executed by Borrower and Lender."
(c) Effective as of September 1, 1997, the definition of "Base Rate
Loan" is amended and restated to read in its entirety as follows:
"Base Rate Loan -- a Revolving Credit Loan or Term Loan which bears
interest at a rate per annum based on the Base Rate."
(d) Effective as of September 1, 1997, the definition of "Borrowing
Base" contained in Section 1.1 of the Agreement is amended and restated to read
in its entirety as follows:
"Borrowing Base - as at any date of determination thereof, an amount
equal to the lesser of:
(a) the Revolving Credit Loan Commitment as of such date, minus the
outstanding principal amount of the Term Loan as of such date; or
(b) an amount up to:
(i) ninety percent (90%) of the net amount (after deduction of such
reserves as Lender deems proper and necessary, in its sole discretion,
including a reserve for sales tax payables) of Eligible Accounts
outstanding at such date;
PLUS
(ii) the lesser of (A) $l5,000,000 or (B) or ninety percent (90%) of
the value of the net amount (after deduction of such reserves as
Lender deems proper and necessary. in its sole discretion, including a
reserve for sales tax payables) of Eligible International Accounts
outstanding at such date;
PLUS
3
<PAGE>
(iii) the lesser of (A) $35,000,000 or (B) sixty percent (60%) of the
value of (after deduction of such reserves as Lender deems proper and
necessary, in its sole discretion) of Eligible Inventory at such date
consisting of oil country tubular goods held for sale in the ordinary
course of Borrower's business, calculated on the basis of the lower of
cost or market;
PLUS
(iv) the lesser of (A) $35,000,000 or (B) fifty percent (50%) of the
value (after deduction of such reserves as Lender deems proper and
necessary, in its sole discretion) of Eligible Inventory at such date
consisting of consumable supplies held for sale in the ordinary course
of Borrower's business, calculated on the basis of the lower of cost
or market and of Eligible Inventory at such date consisting of line
pipe held for sale in the ordinary course of Borrower's business,
calculated on the basis of the lower of cost or market;
MINUS (subtract from the SUM of clauses (i), (ii),
(iii), and (iv) above)
(v) an amount equal to the sum of (A) the face amount of all LC
Guaranties and Letters of Credit issued by Lender or Affiliates of
Lender and outstanding at such date and (B) any amounts which Lender
may be obligated to pay in the future for the account of Borrower
pursuant to this Agreement, the other Agreements or otherwise.
For purposes hereof, the net amount of Eligible Accounts or Eligible
International Accounts, as the case may be, at any time shall be the face amount
of such Eligible Accounts or such Eligible International Accounts, less any and
all returns, discounts (which may, at Lender's option, be calculated on shortest
terms), credits, allowances or excise taxes of any nature at any time issued,
owing, claimed by Account Debtors, granted, outstanding or payable in connection
with such Accounts at such time."
(e) Effective as of September 1, 1997, the definition of "Eligible
International Accounts" contained in Section 1.1 of the Agreement is amended by
deleting therefrom the reference to the dollar amount "$5,000,000" and
substituting therefor the dollar amount "$10,000,000".
(f) Effective as of September 1, 1997, the definition of "Eurodollar
Loan" is amended and restated to read in its entirety as follows:
"Eurodollar Loan -- a Revolving Credit Loan or Term Loan which bears
interest at a rate per annum based upon the Eurodollar Base Rate."
4
<PAGE>
(g) Effective as of September 1, 1997, the definition of "Term Note"
contained in Section 1.1 of the Agreement is amended and restated to read in its
entirety as follows:
"Term Note - the term note to be executed by Borrower on or about the date
of execution of the Fourteenth Amendment in favor of Lender to evidence the
Term Loan, which shall be in substantially the form of Exhibit 'K' attached
to the Fourteenth Amendment."
2. THE TERM LOAN. Effective as of the date of execution of this
Amendment, Section 2.1 (B) of the Agreement is hereby amended and restated to
read in its entirety as follows:
"(B) Borrower agrees, represents and warrants that it has requested that
Lender convert $10,000,000 of the principal amount of Revolving Credit
Loans made to Borrower by Lender which are outstanding on the date of
execution of the Fourteenth Amendment, to a term loan (such $10,000,000
term loan made to Borrower on the date of execution of the Fourteenth
Amendment being referred to in this Agreement as the 'Term Loan'). Subject
to the terms and conditions of this Agreement (including, without
limitation, execution and delivery by Borrower of the Term Note), Lender
agrees to make the Term Loan to Borrower on the date of execution of the
Fourteenth Amendment. The Term Loan shall be repayable in accordance with
the terms of the Term Note. and shall be secured by the Collateral."
3. INTEREST AND CHARGES. Effective as of September 1, 1997:
(a) Section 3.1(A) of the Agreement is amended and restated to read in
its entirety as follows:
"The principal amount of the Term Loan outstanding from day-to-day
shall bear interest, calculated daily, at the following rates per
annum (individually called, as applicable, an 'Annual Term Rate'): (i)
each Term Loan which is a Eurodollar Loan shall bear interest at a
rate per annum equal to the lesser of (a) the applicable Eurodollar
Margin applicable to the Term Loan, plus the Eurodollar Base Rate, or
(b) the Maximum Legal Rate, and (ii) each Term Loan which is a Base
Rate Loan shall bear interest at a rate per annum equal to the lesser
of (a) a fluctuating rate per annum equal to 0.50% above the Base
Rate, or (b) the Maximum Legal Rate. The principal amount of the
Revolving Credit Loans outstanding from day-to-day shall bear
interest, calculated daily, at the following rates per annum
(individually called, as applicable an 'Annual Revolving Rate'): (i)
each Revolving Credit Loan which is a Eurodollar Loan shall bear
interest at a rate per annum equal to the lesser of (a) the applicable
Eurodollar Margin applicable to Revolving Credit Loans, plus the
Eurodollar Base Rate or (b) the Maximum Legal Rate, and (ii) each
5
<PAGE>
Revolving Credit Loan which is a Base Rate Loan shall bear interest at
a rate per annum equal to the lesser of (a) a fluctuating rate per
annum equal to 0.25% above the Base Rate, or (b) the Maximum Legal
Rate. Borrower shall deliver to Lender a notice electing to have the
Revolving Credit Loans and/or the Term Loan, as the case may be, made
hereunder accrue at the Eurodollar Base Rate or the Base Rate (plus,
in each case, the percentages set forth above), and Borrower may
subsequently change the manner in which interest accrues on the
Revolving Credit Loans and/or the Term Loan, as the case may be (from
Eurodollar Base Rate to Base Rate or from Base Rate to Eurodollar Base
Rate) by written notice to Lender, each such change being effective
three (3) Business Days after receipt of such notice by Lender. All
outstanding Revolving Credit Loans shall accrue interest in the same
manner. The entire outstanding principal amount of the Term Loan shall
accrue interest in the same manner. Borrower may not elect to have a
portion of the Revolving Credit Loans accrue interest based upon the
Eurodollar Base Rate, and a portion accrue interest based upon the
Base Rate (plus, in each case, the percentages set forth above).
Borrower may not elect to have a portion of the outstanding principal
amount of the Term Loan accrue interest based upon the Eurodollar Base
Rate, and a portion accrue interest based upon the Base Rate (plus, in
each case, the percentages set forth above). Notwithstanding anything
herein to the contrary, unless otherwise agreed by Lender, the
becoming due of any obligations (other than requested Revolving Credit
Loans) shall be deemed irrevocably to be a request by Borrower for a
Base Rate Loan on the due date on the amount then so due."
(b) Section 3.1 (H) of the Agreement is hereby deleted in its
entirety.
4. UNUSED FACILITY FEE. Effective as of September 1, 1997, Section 3.2(C)
of the Agreement is amended by deleting therefrom the phrase "one-half percent
(0.50%)" and substituting therefor the phrase "three-eighths of one percent
(0.375%)".
5. CAPITALIZATION OF BORROWER. Effective as of September 1, 1997, Section
8.1 of the Agreement is amended and restated to read in its entirety as follows:
"(P) The issued and outstanding stock of Borrower consists of (i) an
aggregate of 157,692 shares of Class A Common Stock, which is voting stock,
(ii) 34,344 shares of Class B Common Stock, which is nonvoting stock. and
(iii) 2,000 shares of Class C Preferred Stock. Borrower has delivered to
Lender true and correct copies of all agreements pursuant to which the
holders of Class C Preferred Stock are entitled to receive distributions,
including a true and correct copy of the Financial Agreement."
6. CAPITAL EXPENDITURES. Effective as of September l, 1997, Section
9.2(H) of the Agreement is amended and restated to read in its entirety as
follows:
6
<PAGE>
"(H) Make Capital Expenditures or payments on account of Capital Leases
which exceed in the aggregate $2,500,000 for any fiscal year, beginning
with the fiscal year ending October 31, 1997."
7. LEVERAGE RATIO. Effective as of September 1, 1997, Section 9.3(A) of
the Agreement is amended and restated to read in its entirety as follows:
"(A) Maintain a Leverage Ratio not greater than the ratio shown below for
the date corresponding thereto:
Date Amount
November 1, 1996 through October 31, 1997 5.0 to 1.0
November 1, 1997 through October 31, 1998 4.75 to 1.0
November 1, 1998 and thereafter 4.50 to 1.0"
8. EXHIBITS. Effective as of the date of execution of this Amendment, (i)
references in the Agreement to Exhibit "H" shall hereafter be deemed to be
references to Exhibit "H" attached hereto, and (ii) references in the Agreement
to Exhibit "J" shall hereafter be deemed to be references to Exhibit "J"
attached hereto, and (iii) references in the Agreement to Exhibit "K" shall
hereafter be deemed to be references to Exhibit "K" attached hereto.
9. CONDITIONS. The obligation of Lender to be bound by the provisions of
this Amendment shall be subject to the fulfillment of the following conditions
precedent on or before the date hereof:
(a) Lender shall have received all of the following, each in form and
substance satisfactory to Lender, in its sole discretion, and each duly executed
by each party thereto, other than Lender:
(i) This Amendment;
(ii) The Term Note;
(iii) Third Amendment to Sale and Participation Agreement, dated
on or about the date hereof, executed by The CIT Group/Business
Credit, Inc. ("CIT Group") (the "Third Amendment to Participation
Agreement");
(iv) Modifications to such existing real estate lien documents as
shall be required by Lender, duly executed by Borrower;
(v) An amendment to the existing agency fee letter agreement,
duly executed by Borrower; and
7
<PAGE>
(vi) A11 other documents Lender may request with respect to any
matter relevant to this Amendment or the transactions contemplated
hereby.
(b) No Event of Default shall have occurred and be continuing and no
Default shall exist, unless such Event of Default or Default has been
specifically waived in writing by Lender
(c) Borrower shall have performed and complied with all agreements and
conditions contained in the Agreement and the other Agreements which are
required to be performed or complied with by Borrower before or on the date
hereof.
(d) The representations and warranties contained in the Agreement, as
amended hereby, and the other Agreements shall be true and correct in all
material respects as of the date hereof, with the same force and effect as
though made on and as of this date.
(e) No material adverse change shall have occurred in the business
operations, financial condition or prospects of Borrower, and no material
adverse litigation shall be pending or, to the knowledge of Borrower,
threatened, against Borrower.
(f) All corporate and legal proceedings and all documents required to
be completed and executed by the provisions of, and all instruments to be
executed in connection with the transactions contemplated by, this Amendment and
any related agreements shall be satisfactory in form and substance to Lender.
10. No Waiver. Except as otherwise specifically provided for in this
Amendment, nothing contained herein shall be construed as a waiver by Lender of
any covenant or provision of the Agreement, the other Agreements, this
Amendment, or of any other contract or instrument between Borrower and Lender,
and the failure of Lender at any time or times hereafter to require strict
performance by Borrower of any provision thereof shall not waive, affect or
diminish any right of Lender to thereafter demand strict compliance therewith.
Lender hereby reserves all rights granted under the Agreement, the other
Agreements, this Amendment and any other contract or instrument between Borrower
and Lender.
11. Representations and Warranties. Borrower hereby represents and
warrants to Lender that (a) the execution, delivery and performance of this
Amendment and any and all other Agreements executed and/or delivered in
connection herewith have been authorized by all requisite corporate action on
the part of Borrower and will not violate the Certificate of Incorporation or
Bylaws of Borrower; (b) the representations and warranties contained in the Loan
Agreement, as amended hereby, and any other Agreement are true and correct on
and as of the date hereof and on and as of the date of execution hereof as
though made on and as of each such date; (c) no Default or Event of Default
under the Loan Agreement, as amended hereby, has occurred and is continuing,
unless such Default or Event of Default has been specifically waived in writing
by Lender; and (d) Borrower is in full compliance with all covenants and
agreements contained in the Loan Agreement and the Other Agreements, as amended
hereby.
8
<PAGE>
12. SEVERABILITY. Any provision of this Amendment held by a court of
competent jurisdiction to be invalid or unenforceable shall not impair or
invalidate the remainder of this Amendment and the effect thereof shall be
conf1ned to the provision so held to be invalid or unenforceable.
13. EXPENSES. Borrower shall pay all out-of-pocket expenses of Lender and
CIT Group arising in connection with the preparation, execution and delivery of
this Amendment and the Participation Agreement, including but not limited to,
all reasonable legal fees and expenses incurred by Lender and CIT Group.
14. CONTINUED EFFECT. Except to the extent amended hereby, all terms,
provisions and conditions of the Agreement and all of the other Agreements shall
continue in full force and effect and shall remain enforceable and binding in
accordance with their respective terms.
15. FURTHER ASSURANCES. Borrower shall, at Lender's request, promptly
execute or cause to be executed and delivered to Lender any and all documents,
instruments or agreements deemed necessary by Lender to continue perfection of
Lender s Liens, to facilitate collection of the Collateral or otherwise to give
effect to or carry out the terms or intent of this Amendment.
16. COUNTERPARTS. This Amendment may be executed in any number of
counterparts, each of which shall for all purposes be deemed an original and all
of which are identical. All parties need not execute the same counterpart.
17. FINAL AGREEMENT. THIS WRITTEN AMENDMENT AND THE OTHER LOAN DOCUMENTS
REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY
EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE
PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
18. RELEASE. BORROWER HEREBY ACKNOWLEDGES THAT IT HAS NO DEFENSE,
COUNTERCLAIM, OFFSET, CROSS-COMPLAINT, CLAIM OR DEMAND OF ANY KIND OR NATURE
WHATSOEVER THAT CAN BE ASSERTED TO REDUCE OR ELIMINATE ALL OR ANY PART OF ITS
LIABILITY TO REPAY THE "OBLIGATIONS" OR TO SEEK AFFIRMATIVE RELIEF OR DAMAGES OF
ANY KIND OR NATURE FROM LENDER. BORROWER HEREBY VOLUNTARILY AND KNOWINGLY
RELEASES AND FOREVER DISCHARGES LENDER, ITS PREDECESSORS, AGENTS, EMPLOYEES,
SUCCESSORS AND ASSIGNS, FROM ALL POSSIBLE CLAIMS, DEMANDS, ACTIONS, CAUSES OF
ACTION, DAMAGES, COSTS, EXPENSES, AND LIABILITIES WHATSOEVER, KNOWN OR UNKNOWN,
ANTICIPATED OR UNANTICIPATED, SUSPECTED OR UNSUSPECTED, FIXED, CONTINGENT, OR
CONDITIONAL, AT LAW OR IN EQUITY, ORIGINATING IN WHOLE OR IN PART ON OR BEFORE
THE DATE THIS AMENDMENT IS EXECUTED, WHICH THE BORROWER MAY NOW OR HEREAFTER
HAVE AGAINST LENDER, ITS PREDECESSORS, AGENTS, EMPLOYEES,
9
<PAGE>
SUCCESSORS AND ASSIGNS, IF ANY, AND IRRESPECTIVE OF WHETHER ANY SUCH CLAIMS
ARISE OUT OF CONTRACT, TORT, VIOLATION OF LAW OR REGULATIONS, OR OTHERWISE, AND
ARISING FROM ANY "LOANS", INCLUDING WITHOUT LIMITATION, ANY CONTRACTING FOR,
CHARGING, TAKING, RESERVING, COLLECTING OR RECEIVING INTEREST IN EXCESS OF THE
HIGHEST LAWFUL RATE APPLICABLE, THE EXERCISE OF ANY RIGHTS AND REMEDIES UNDER
THE LOAN AGREEMENT OR OTHER AGREEMENTS, AND NEGOTIATION FOR AND EXECUTION OF
THIS AMENDMENT.
EXECUTED to be effective as of the date first above written.
RED MAN PIPE & SUPPLY CO., an Oklahoma corporation
By: /s/ Dee Paige
------------------------------------
Name: DEE PAIGE
------------------------------------
Title: CFO
------------------------------------
FLEET CAPITAL CORPORATION, a Rhode Island
corporation
By: /s/ Joy L. Bartholomew
------------------------------------
Name: JOY L. BARTHOLOMEW
------------------------------------
Title: VICE PRESIDENT
------------------------------------
10
<PAGE>
EXHIBIT 10.17
PRIDECO
STANDARD LEASING AGREEMENT
FINANCE LEASE
Lease No._________
Lessor. The Lessor is Prideco, a Ford Dealer and an Oklahoma corporation with
offices at P.O. Box 35632, Tulsa OK.
Lessee. The Lessee is Red Man Pipe & Supply Co. whose address is
Tulsa, OK. 74133
Lessor leases to Lessee, and Lessee leases from Lessor, the following
vehicles and equipment upon the following terms and conditions:
1. VEHICLES, EQUIPMENT, ORIGINAL VALUE, TERM, GVW and USE. Each vehicle
included in this lease (hereinafter called "Vehicle"), the extra equipment
thereon, and the original value, lease term, GVW and use thereof shall be as set
forth in the annexed Schedule A. Additional equipment, may be installed after
delivery at Lessee's expense, with Lessor's approval, and may be removed and
retained by Lessee upon expiration (but not termination) of the lease term at
Lessee's expense, provided Lessee restores the Vehicle to its original condition
prior to installation of such additional equipment.
a. Commencement of Term. The lease term for each Vehicle shall commence on
the date of delivery of the Vehicle to the Lessee as shown on a delivery receipt
therefor signed by the Lessee (or agent) and given to the Lessor at the time of
delivery.
2. MONTHLY RENTAL. The Lessee shall pay the Lessor the Monthly Rental
specified for each Vehicle in Schedule A, payable in advance on the commencement
of the term and the first day of each month thereafter. If the term commences
on other than the first day, or ends on other than the last day, of a month, the
Monthly Rental for the month shall be apportioned on a daily basis. The Monthly
Rentals for all vehicles shall be paid in a single payment.
3. OPERATING EXPENSES. Lessee shall pay for all washing, parking,
garage, highway, road service and towing charges or tolls, and all fines,
incurred in connection with each Vehicle. Lessee shall also pay for all
gasoline, oil and anti-freeze required for proper operation or protection of
each Vehicle.
4. REGISTRATION and INSPECTION. Lessee shall accomplish and pay for the
titling, registration and licensing of each Vehicle in the Lessor's name (unless
otherwise agreed if permitted by law), and all inspections thereof required by
any governmental authority, except to the extent the same are to be accomplished
and paid for by Lessor as specified in Schedule A. Lessee shall permit Lessor
and its designees to inspect each Vehicle at reasonable times and intervals.
5. TAXES. Lessee shall pay all occupational taxes and governmental
charges imposed in connection with the use to which any Vehicle is put. Lessee
shall also pay all sales, use, excise, personal property and other taxes and
governmental charges payable during the lease term with respect to each Vehicle
or its ownership, possession, rental, transportation or delivery, except net
income or gross receipts taxes measured by rentals payable hereunder.
6. MAINTENANCE and REPAIRS. Lessee shall maintain each Vehicle in good
working order and condition, properly serviced and greased, and shall make all
necessary repairs and replacements. Title to all replacements shall vest in
Lessor. All such servicing, repairs and replacements shall be done, in order of
preference, at Lessor's shop or shop of nearest authorized dealer in such make
of vehicle, unless any interested insurance company shall direct otherwise.
a. Payment. All repairs made necessary by accident or collision and not
covered by insurance and all other servicing, repairs and replacements shall be
paid for by Lessee.
<PAGE>
7. RISKS and INDEMNITY. Lessee shall indemnify and hold harmless the
Lessor and Lessor's agents and employees from and against (i) any damage, loss,
theft or destruction of any Vehicle and its contents during the lease term, and
(ii) any loss, damage, injury, claim, demand, cost and expense (including legal
expense) arising out of or connected with the use, operation or condition
(including all defects whether or not discoverable by either party) of any
Vehicle during the lease term, except any portion of any such loss, etc., that
is within the coverage of any insurance to be provided by Lessor as specified in
Schedule A.
Each party shall promptly notify the other of any such loss, etc., of
which he has knowledge. Lessee shall be entitled to participate in the defense
of any such claim or demand.
8. INSURANCE. During the lease term, each Vehicle shall be covered with
the following insurance:
(i) Comprehensive fire and theft insurance for cars, and fire, theft
and combined additional insurance for trucks with not more than
$50 deductible for cars and light trucks and $100 deductible for
medium and heavier trucks.
(ii) Collision and upset insurance with not more than $100 deductible
for cars and light trucks and $250 deductible for medium and
heavier trucks; and
(iii) Automobile liability insurance with limits of not less than
$100,000 for any one person for injury or death, $300,000 for any
one accident for personal injury or death, and $25,000 for
property damage for cars and $50,000 for property damage for
trucks.
a. Procurement and Payment. All such insurance shall be procured and paid
for by Lessee except to the extent the same is to be procured and paid for by
Lessor as specified in Schedule A.
b. Other Insurance. Lessee shall provide and pay for any other insurance or
bond that may be required by any governmental authority as a condition to or in
connection with Lessee's use of any Vehicle.
c. Persons Protected, Insurers. ALl insurance referred to above shall
protect, as their interests may appear, the Lessor, the Lessee, any other
person having an interest in the Vehicle if he so desires, and any person
responsible for the use or operation of the Vehicle. All such insurance shall be
provided through insurance companies approved by Lessor. Any insurance referred
to in (i) and (ii) above to be provided by Lessor may be provided by self-
insurance. Lessee shall furnish Lessor satisfactory evidence of insurance to be
provided by Lessee.
d. Proceeds. Any insurance proceeds received by either party for any loss or
casualty that has been made good by the other shall to that extent be paid to
the other, unless such other is then in default with respect to any of his
obligations hereunder and fails to cure such default.
9. PERFORMANCE of OTHER'S OBLIGATION: REIMBURSEMENT. If either party
shall fail or refuse, for any reason, to perform any provision of paragraph
3,4,5,6 or 8 hereof, the other party may, at his option, perform the same and
shall be reimbursed his costs therefor upon demand.
10. USAGE. Each Vehicle shall be used and operated only (i) for the use
and within the GVW specified therefor in Schedule A, and (ii) in a careful
manner and in compliance with all governmental requirements, including those
pertaining to the age and licensing of drivers and disclosure of Lessor's
interest in the Vehicle. No Vehicle shall be used or operated (i) in a manner
subjecting it to depreciation above the normal depreciation associated with the
use specified therefor in Schedule A, (ii) for an illegal purpose or by a person
under the influence of alcohol or narcotics, (iii) for the transportation of
goods or persons for hire, (iv) in any manner or for any purpose that would
cause any insurance specified in paragraph 8 to be suspended, cancelled,
inapplicable, or increased in cost, or (v) outside the continental United States
or Canada. Lessee shall not place any sign or marking on any Vehicle without
Lessor's prior written consent and shall bear the cost of removing the same at
the end of this lease and of repairing any damage caused by such removal.
11. TERMINATION.
a. By Lessor. The Lessor may terminate this lease at any time with respect
to any or all of the Vehicles by written notice to the Lessee upon the
occurrence of any of the following events of default: (i) failure by the Lessee
to provide any insurance to be provided by Lessee, or refusal by any mutually
approved carrier to issue any insurance required hereunder, or cancellation or
suspension by the carrier of any insurance required hereunder, (ii) failure by
the Lessee to pay any Monthly Rental or other sum then payable to Lessor
hereunder and such failure continues for more than 10 days after Lessor has
issued a demand notice for payment thereof, (iii) failure by the Lessee to
perform any other provision of this lease to be performed by Lessee, (iv) the
filing of any petition by or against the Lessee under any bankruptcy
reorganization or receivership law, or Lessee's making an assignment for the
benefit of creditors, or Lessee suffers the appointment of any trustee or
receiver of Lessee's business or assets or any part thereof, or Lessee makes or
suffers any voluntary or involuntary assignment of Lessee's interest in any
Vehicle, or Lessee suffers any lien, attachment or levy to become attached to
any Vehicle, unless such petition, assignment, appointment, lien, attachment or
levy be withdrawn or nullified in 20 days.
<PAGE>
b. By Lessee. Upon at least 30 days prior written notice to Lessor, the Lessee
may terminate this lease with respect to any Vehicle at any time upon return
thereof and payment of damages as specified in paragraphs 12 and 13 hereof or
upon such other terms and conditions as may then be mutually agreed to in
writing by Lessor and Lessee.
12. RETURN OF VEHICLE. Upon the expiration or earlier termination by
either party of the term of this lease with respect to any Vehicle:
a. Return. Unless the Lessee purchases the Vehicle, pursuant to paragraph 13a,
the Lessee shall return the same to the Lessor, in as good condition as when
first received, ordinary wear and tear excepted, at (i) the place where the
Lessee first received the Vehicle, (ii) to Lessor's principal place of
business if different from (i) above, or (iii) to such location as may be
designated by Lessor.
b. Repossession. If Lessee neither purchases nor returns the Vehicle, the Lessor
may repossess the same at any time wherever the same may be located, and may
enter upon any premises of Lessee for the purpose, and shall hold the same
when so repossessed free and clear of this lease and any rights of Lessee
therein.
c. Lost Vehicle. If the Vehicle is lost, stolen or destroyed or is declared a
total constructive loss (subject to Lessor's agreement as to such condition),
Lessee shall promptly notify Lessor thereof and hold any wreckage for
disposal by Lessor, and the Vehicle shall be deemed surrendered to Lessor as
of Lessor's receipt of such notice. Lessor shall promptly cause any wreckage
to be sold. Any wreckage not held by Lessee for disposal by Lessor shall be
deemed sold at a price of zero dollars.
d. Sums Due. Upon any purchase, return or repossession, Lessee shall promptly
pay Lessor all Monthly Rentals and other sums payable hereunder with respect
to the Vehicle up to the time of such purchase, return or repossession.
e. Resale. As provided in paragraph 13a, Lessor shall sell the Vehicle and, if
Net Proceeds are less than Depreciated Value, Lessee shall pay the difference
to Lessor; if Net Proceeds exceed Depreciated Value, Lessor shall pay to
Lessee the portion of such excess proceeds as agreed upon.
13. DAMAGES UPON EARLY TERMINATION. Upon the termination of this lease
by either party as to any Vehicle prior to the expiration of its lease term, the
Lessee shall promptly pay Lessor all damages suffered by the Lessor by reason of
such termination (or by reason of any breach of this lease by Lessee). Such
damages shall include damages determined as follows:
a. Purchase or Resale. The Lessee shall promptly purchase and pay for the
Vehicle, if Lessor so requests, at its Depreciated Value (i.e., its Original
Value as specified in Schedule A, less a sum equal to its Monthly
Depreciation specified in Schedule A, multiplied by the number of Monthly
Rentals that have been paid). Lessee shall also take over any insurance on
the Vehicle paid for by Lessor and pay Lessor for the unearned cost thereof
on a daily apportionment basis. If the Lessor doe not request Lessee to
purchase the Vehicle or if the Vehicle is not so purchased, Lessor shall sell
the Vehicle (or wreckage under paragraph 12d) within 30 days after its
surrender or repossession (or such other period a the parties may agree
upon). The sale may be public or private and with or without notice to
Lessee, shall be at wholesale, and shall be only for cash payable in full
upon delivery of the Vehicle and its title papers to the purchaser. If the
Net Proceeds of the sale are less than the Depreciated Value of the Vehicle
such deficiency shall constitute part of Lessor's damages; if such Net
Proceeds exceed Depreciated Value, the excess shall constitute an offset to
Lessor's other damages.
(i) "Net Proceeds" shall mean the amount received on the sale, less all
direct expenses of Lessor in preparing and holding the Vehicle for
sale and selling it and less all sums due Lessor under paragraph 12d
if not otherwise paid, and less all debts incurred by Lessee which,
if not paid, might constitute a lien on the Vehicle or a liability
of Lessor.
b. Lost Income. Lessee shall pay Lessor as liquidated damages for loss of income
a sum equal to the Monthly Rental less the amount of the Monthly Depreciation
for each month of the original term of the lease remaining after the
termination.
c. Expenses. Lessee shall reimburse Lessor all costs and expenses (including
reasonable attorney's fees) incurred by Lessor in enforcing Lessor's rights
hereunder.
d. Remedies Not Exclusive. Repossession and resale of any Vehicle shall not
affect Lessor's rights to recover any damages from Lessee, and Lessor's
rights and remedies in the event of any breach, termination or expiration of
this lease with respect to any Vehicle (including damages herein specified)
shall not be deemed exclusive but shall be cumulative and in addition to all
other rights and remedies in Lessor's favor existing by law.
14. ADDITIONAL VEHICLES; EXTENDED TERM. Additional Vehicles may be
included in this lease by addenda to Schedule A mutually executed by Lessor and
Lessee from time to time.
Either Lessor or Lessee may, at least thirty (30) days, but not more
than ninety (90) days, prior to the expiration of this lease as to any Vehicle,
offer in writing to the other to continue this lease as to such Vehicle
indefinitely on a month-to-month basis. If the other accepts such offer in
writing this lease shall be so continued with respect to such Vehicle.
<PAGE>
15. FORCE MAJEURE and NO CONSEQUENTIAL DAMAGES. Lessor shall not be
liable for any failure or delay in delivering any Vehicle, or in performing any
provision hereof, due to fire or other casualty, labor difficulty, governmental
restriction or any cause beyond Lessor's control. In no event shall Lessor be
liable for any loss of profits, other consequential damages or inconvenience due
to any theft, damage, loss, defect or failure of any Vehicle or the time
consumed in recovering, repairing, servicing or replacing the same, and there
shall be no abatement or apportionment of rental during such time.
16. LEASE ONLY. This agreement is one of leasing only and Lessee shall
not have or acquire any right, title or interest in any Vehicle except the right
to use the same as provided in this agreement.
17. PROCEDURE on ACCIDENTS. Lessee shall furnish to Lessor and to the
automobile liability insurer of any Vehicle, within 24 hours, a report of any
accident involving the Vehicle on the form furnished by such insurer. If any
claim is made or action commenced for death, personal injury or property damage,
condition, use or operation of any Vehicle, Lessee shall promptly notify Lessor
thereof and furnish Lessor a copy of every demand, notice, summons, process and
pleading received in connection therewith and cooperate with Lessor and the
insurer in defending the same.
18. ENTIRE AGREEMENT, LAW of AGREEMENT, ASSIGNMENT and SUBORDINATION.
This lease constitutes the entire agreement between the parties and may not be
changed except by an instrument in writing signed by the party to be charged.
This lease may not be assigned, or any Vehicle subleased, by Lessee
without Lessor's prior written consent.
Lessor may assign this lease and any or all rentals or other sums
payable by Lessee hereunder; upon notice of such an assignment. Lessee shall pay
such sums to the assignee without offset, counterclaim or defense of any kind.
Lessor may also execute any type of security instrument with respect to any
Vehicle and Lessee's rights shall be subordinate to the rights of the holder of
such instrument. No assignment, or execution of a security instrument, by Lessor
shall relieve Lessor from any liability hereunder.
The parties intend this agreement to be executed in, and interpreted,
construed and enforced in accordance with the laws of, the state of Lessor's
place of business first above stated.
19. COUNTERPARTS and RECORDING. Lessor and Lessee shall execute this
lease in as many counterparts (each constituting an original but together
constituting only one agreement) as may be reasonably necessary for recording or
filing in any governmental office. Lessee shall pay the fees and Lessor's
out-of-pocket expenses for any such recording or filing required by law and
shall pay any stamp or documentary taxes assessed upon this lease.
IN WITNESS WHEREOF, the parties have duly executed this lease
this __________________ day of ____________________, 1989.
PRIDECO RED MAN PIPE & SUPPLY CO.
- ---------------------------------- ---------------------------------
Lessor Lessee
By By
-------------------------------- ----------------------------------
Its GENERAL PARTNER Its PRESIDENT
----------------------------- ------------------------------
<PAGE>
SCHEDULE "A" ATTACHMENT
PRIDECO LEASE AGREEMENT
LESSOR: PRIDECO
8023 E. 63RD PL., SUITE 800
TULSA, OK 74133 LEASE NO. WB-640
LEASEE: RED MAN PIPE & SUPPLY CO.
P.O. BOX 35632
TULSA, OK 74153-0632
VEHICLE & LEASE DATA
--------------------
VEHICLE NO. 2FALP74W2VX219640
YEAR 1997
MODEL FORD CROWN VIC LX
ENGINE 4.6L OHC SEFI V8 ENGINE
TIRES P215/70RX15 BSW
USAGE BUSINESS & PROFESSIONAL
EXTRA EQUIPMENT A/C, AM/FM ELECT STEREO/CLOCK/CASSETTE, POWER DOORS,
CRUISE, ETC.
ORIGINAL VALUE LEASE TERM MONTHS MONTHLY/WEEKLY RENTAL
- -------------- ----------------- ---------------------
$20,240,000 36 MONTHS 12 @ $668.00
L.E.V. 12 @ $623.00
- ------
$2,384,000 12 @ $578.00
RED MAN PIPE & SUPPLY CO.: LEASEE PRICECO: LESSOR
BY: /S/ [SIGNATURE APPEARS HERE] BY: /S/ BETTY J. KETCHUM
------------------------------- ----------------------------
PRESIDENT GENERAL PARTNER
DATED THIS 13TH DAY OF AUGUST, 1997
<PAGE>
<TABLE>
<CAPTION>
1
RED MAN PIPE & SUPPLY CO.
LIST OF VEHICLES BY LESSOR/OWNER
DATE: OCTOBER 31, 1997
CURRENT NO. OF YEAR YEAR YEAR
LEASE LEASE MONTHS ENDING ENDING ENDING
LESSOR LEASE# DESCRIPTION V IN # LOCATION AMOUNT CHANGES REMAINING 10/31/98 10/31/99 10/31/00 TOTAL L.E.V.
- ------ ------ ----------- - ---- -------- ------ ------- --------- -------- -------- -------- ----- ------
<S> <C> <C> <C><C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PD L-151 '81 FORKLIFT # 2520 ARDMORE 0 M-T-M M-T-M L-151
PD L-196 '81 TOYOTA FKLFT # 2696 TULSA RMM 0 M-T-M M-T-M L-196
PD L-209 '84 TOYOTA FKLFT # 1543 CRANE 0 M-T-M M-T-M L-209
PD L-212 '84 TOYOTA FKLFT # 1676 FORT SMITH 0 M-T-M M-T-M L-212
PD L-387 '94 FORD F-150 # 7424 WILBURTON 50 M-T-M M-T-M L-387
PD L-388 '94 FORD F-150 # 7422 LINDSAY 50 M-T-M M-T-M L-388
PD L-390 '94 FORD F-150 # 7423 ULYSSES 50 M-T-M M-T-M L-390
PD L-394 '94 FORD F-250 # 0681 LAUREL 368 M-T-M M-T-M 333 L-394
PD L-412 '93 LEXUS LS-400 # 8359 TULSA 800 AUGUST M-T-M 13,570 L-412
PD L-413 '95 FORD F-150 # 9141 FLOMATON 368 M-T-M M-T-M 1,633 L-413
PD L-444 '95 GMC YUKON # 4864 TULSA 756 JULY 8 6,048 6,048 7,036 L-444
PD L-446 '95 FORD F-250 # 2793 CAMERON 501 AUGUST 9 4,509 4,509 2,036 L-446
PD L-461 '97 FORD F-150 # 6315 ELK CITY 453 MAY 18 5,238 2,520 7,758 1,696 L-461
PD L-462 '97 FORD F-150 # 6317 FORT SMITH 453 JULY 20 5,304 3,360 8,664 1,696 L-462
PD L-463 '97 FORD F-150 # 6316 ODESSA 453 AUGUST 21 5,337 3,780 9,117 1,696 L-463
PD L-464 '96 FORD F-250 # 6024 WILBURTON 545 JUNE 19 6,345 3,542 9,887 2,062 L-464
PD L-465 '96 FORD F-250 # 0642 ULYSSES 550 MAY 18 6,360 3,060 9,420 2,076 L-465
PD L-466 '96 FORD F-350 # 2660 SNYDER 561 MAY 18 6,486 3,120 9,606 2,144 L-466
PD L-467 '96 FORD EXPLORER # 6166 VERNAL 657 JULY 20 7,704 4,896 12,600 6,891 L-467
PD L-469 '97 FORD TAURUS # 9198 ODESSA 491 OCTOBER 23 5,856 5,005 10,861 1,861 L-469
PD L-498 '97 FORD TAURUS # 6083 JOURDANTON 566 FEBRUARY 27 6,441 5,982 1,467 13,890 2,008 L-498
PD L-499 '97 FORD F-150 # 1844 ZAPATA 508 FEBRUARY 27 5,781 5,370 1,317 12,468 1,776 L-499
PD L-500 '97 FORD F-150 # 3930 LAREDO 521 FEBRUARY 27 5,937 5,508 1,350 12,795 1,852 L-500
PD L-501 '97 FORD F-150 # 2421 JOURDANTON 508 FEBRUARY 27 5,790 5,373 1,317 12,480 1,806 L-501
PD L-548 '97 GMC 1-TON # 5466 HARVEY 545 NOVEMBER 36 6,540 6,108 5,676 18,324 1,924 L-548
PD L-549 '97 GMC 1-TON # 6048 HARVEY 545 NOVEMBER 36 6,540 6,108 5,676 18,324 1,924 L-549
PD L-552 '97 FORD F-250 # 0344 FREEPORT 588 NOVEMBER 36 7,056 6,588 6,120 19,764 2,102 L-552
PD L-553 '98 FORD F-150 SC # 5120 MORGAN CITY 569 OCTOBER 35 6,790 6,334 5,423 18,547 2,036 L-553
PD L-554 '98 PONTIAC GR.PRIX # 8156 HARVEY 554 OCTOBER 35 6,611 6,168 5,291 18,070 1,981 L-554
PD L-555 '98 FORD F-150 SC # 2980 TULSA 635 NOVEMBER 36 7,620 7,116 6,600 21,336 2,267 L-555
PD LF-234 '90 FORD F-350 # 8124 HOUMA 50 M-T-M M-T-M F-234
PD LM-343 '93 GMC SUBURBAN # 4114 TULSA 510 JUNE M-T-M 7,958 LM-343
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
2
RED MAN PIPE & SUPPLY CO.
LIST OF VEHICLES BY LESSOR/OWNER
DATE: OCTOBER 31, 1997
CURRENT NO. OF YEAR YEAR YEAR
LEASE LEASE MONTHS ENDING ENDING ENDING
LESSOR LEASE# DESCRIPTION V IN # LOCATION AMOUNT CHANGES REMAINING 10/31/98 10/31/99 10/31/00 TOTAL L.E.V.
- ------ ------ ----------- - ---- -------- ------ ------- --------- -------- -------- -------- ----- ------
<S> <C> <C> <C><C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PD LM-344 '93 LEXUS COUPE # 6852 TULSA 829 JANUARY M-T-M 4,099 LM-344
PD LW-242 '90 FORD F-150 # 1364 TULSA 50 M-T-M M-T-M LW-242
PD LW-257 '90 FORD F-150 # 5496 HOUMA 50 M-T-M M-T-M LW-257
PD LW-278 '92 FD CR VIC LX # 6309 GULF COAST 50 M-T-M M-T-M LW-278
PD LW-282 '91 FORD F-350 # 8736 CARTHAGE 50 M-T-M M-T-M LW-282
PD LW-288 '92 FD CR VIC LX # 5704 TULSA RMM 50 M-T-M M-T-M LW-288
PD LW-310 '92 FORD CR VIC # 7575 OKC/SALES 50 M-T-M M-T-M LW-310
PD LW-314 '92 FORD F-250HD # 6067 ARTESIA 50 M-T-M M-T-M LW-314
PD LW-315 '92 FORD F-250 # 8585 MOBILE 50 M-T-M M-T-M LW-315
PD LW-320 '93 FORD F-250HD # 8791 WILBURTON 50 M-T-M M-T-M LW-320
PD LW-321 '93 FD F250HD 4X4 # 2037 ROOSEVELT 50 M-T-M M-T-M LW-321
PD LW-327 '93 FORD F-250 # 5701 HOUMA 50 M-T-M M-T-M LW-327
PD LW-328 '93 FD CR VIC LX # 6949 TULSA 50 M-T-M M-T-M LW-328
PD LW-330 '93 FORD F-150 # 0767 TULSA RMM 50 M-T-M M-T-M LW-330
PD LW-332 '93 FORD F-150 # 8789 SNYDER 50 M-T-M M-T-M LW-332
PD LW-333 '93 FORD F-150 # 6225 SNYDER 50 M-T-M M-T-M LW-333
PD LW-336 '93 FORD TAURUS # 3109 TULSA 50 M-T-M M-T-M LW-336
PD LW-337 '93 FORD F-150 # 3366 FARMINGTON 50 M-T-M M-T-M LW-337
PD LW-339 '93 FORD F-150 # 0687 CRANE 50 M-T-M M-T-M LW-339
PD LW-342 '93 FORD F-150 # 0163 LAREDO 50 M-T-M M-T-M LW-342
PD LW-345 '93 FORD TAURUS # 9190 DENVER 50 M-T-M M-T-M LW-345
PD LW-348 '93 FORD F-150 # 7294 SNYDER 50 M-T-M M-T-M LW-348
PD LW-352 '93 FORD TAURUS # 3341 MIDLAND 50 M-T-M M-T-M LW-352
PD LW-355 '94 FD F250 4X4 # 0107 VERNAL 50 M-T-M M-T-M LW-355
PD LW-356 '94 FORD F-250 # 2742 FT. SMITH 50 M-T-M M-T-M LW-356
PD LW-357 '94 FORD F-150 # 1774 ANDREWS 50 M-T-M M-T-M LW-357
PD LW-358 '94 FORD F-150 # 1773 CARTHAGE 50 M-T-M M-T-M LW-358
PD LW-364 '94 FORD F-150 # 1772 HOUMA 50 M-T-M M-T-M LW-364
PD LW-367 '94 FORD F-350 # 5342 CRANE 50 M-T-M M-T-M LW-367
PD LW-368 '94 FORD F-150 # 2743 WHITE OAK 50 M-T-M M-T-M LW-368
PD LW-369 '94 FORD F-150 # 2747 FLOMATON 50 M-T-M M-T-M LW-369
PD LW-370 '94 FD CR VIC LX # 5970 HOUSTON 50 M-T-M M-T-M LW-370
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
3
RED MAN PIPE & SUPPLY CO.
LIST OF VEHICLES BY LESSOR/OWNER
DATE: OCTOBER 31, 1997
CURRENT NO. OF YEAR YEAR YEAR
LEASE LEASE MONTHS ENDING ENDING ENDING
LESSOR LEASE# DESCRIPTION V IN # LOCATION AMOUNT CHANGES REMAINING 10/31/98 10/31/99 10/31/00 TOTAL L.E.V.
- ------ ------ ----------- - ---- -------- ------ ------- --------- -------- -------- -------- ----- ------
<S> <C> <C> <C><C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PD LW-371 '94 FORD F-150 # 3252 HARVEY 50 M-T-M M-T-M LW-371
PD LW-372 '94 FORD F-150 # 3250 FLOMATON 50 M-T-M M-T-M LW-372
PD LW-373 '94 FORD F-150 # 2748 LINDSAY 50 M-T-M M-T-M LW-373
PD LW-375 '94 FORD F-150 # 3253 SNYDER 50 M-T-M M-T-M LW-375
PD LW-377 '94 FORD F-250 # 3460 WOODWARD 50 M-T-M M-T-M LW-377
PD LW-378 '94 FORD F-250HD # 3461 ELK CITY 50 M-T-M M-T-M LW-378
PD LW-381 '94 FORD F-150 # 2746 LINDSAY 50 M-T-M M-T-M LW-381
PD LW-382 '94 FORD F-150 # 3401 TULSA WEST 50 M-T-M M-T-M LW-382
PD LW-384 '94 FORD F-150 # 3398 CONROE 50 M-T-M M-T-M LW-384
PD LW-385 '94 FORD F-150 # 3399 ODESSA 50 M-T-M M-T-M LW-385
PD LW-386 '94 FORD F-150 # 3397 WOODWARD 50 M-T-M M-T-M LW-386
PD LW-389 '94 FORD F-150 # 7421 LAUREL 50 M-T-M M-T-M LW-389
PD LW-391 '94 FORD F-150 # 0956 PERRYTON 357 AUGUST M-T-M 580 LW-391
PD LW-392 '94 FORD F-150 # 0957 BORGER 357 AUGUST M-T-M 580 LW-392
PD LW-393 '94 FORD F-250 # 0682 SUNDOWN 368 JULY M-T-M 333 LW-393
PD LW-395 '94 FORD F-250 # 0961 LOVINGTON 426 AUGUST M-T-M 719 LW-395
PD LW-396 '94 FORD F-250 # 0963 WILBURTON 426 AUGUST M-T-M 719 LW-396
PD LW-397 '94 FORD F-250 # 0962 ARDMORE 426 AUGUST M-T-M 719 LW-397
PD LW-398 '94 FORD F-350 # 3202 CAMERON 366 JULY M-T-M 332 LW-398
PD LW-399 '94 FORD TAURUS # 1656 ELKHART 369 AUGUST M-T-M 607 LW-399
PD LW-401 '94 FORD F-150 # 0510 CRANE 363 SEPTEMBER M-T-M 934 LW-401
PD LW-404 '94 FORD F-150 # 0959 GOLDSMITH 357 SEPTEMBER M-T-M 905 LW-404
PD LW-405 '94 FORD F-150 # 0960 ANDREWS 357 AUGUST M-T-M 580 LW-405
PD LW-406 '94 FORD F-150 # 9465 ANDREWS 302 JULY M-T-M 270 LW-406
PD LW-407 '94 FORD F-150 # 9421 CRANE 284 JULY M-T-M 253 LW-407
PD LW-408 '95 FORD F-350 # 1199 RMM 433 OCTOBER M-T-M 1,508 LW-408
PD LW-409 '95 FORD CR VIC # 4968 TULSA 544 OCTOBER M-T-M 1,950 LW-409
PD LW-410 '95 FORD CR VIC # 4969 TULSA/HOUSTON 544 OCTOBER M-T-M 1,950 LW-410
PD LW-411 '95 FORD TAURUS # 5928 HOUSTON 433 OCTOBER M-T-M 1,512 LW-411
PD WB-403 '94 FORD F-150 # 0955 ARTESIA 392 DECEMBER 1 392 392 1,603 WB-403
PD WB-414 '95 FORD TAURUS # 1927 HOUSTON/GP 472 DECEMBER 1 472 472 1,918 WB-414
PD WB-416 '95 FORD F-250 # 6246 WHITE OAK 439 FEBRUARY 3 1,317 1,317 1,778 WB-416
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
4
RED MAN PIPE & SUPPLY CO.
LIST OF VEHICLES BY LESSOR/OWNER
DATE: OCTOBER 31, 1997
CURRENT NO. OF YEAR YEAR YEAR
LEASE LEASE MONTHS ENDING ENDING ENDING
LESSOR LEASE# DESCRIPTION V IN # LOCATION AMOUNT CHANGES REMAINING 10/31/98 10/31/99 10/31/00 TOTAL L.E.V.
- ------ ------ ----------- - ---- -------- ------ ------- --------- -------- -------- -------- ----- ------
<S> <C> <C> <C><C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PD WB-417 '95 FORD F-250 # 6218 HOUMA 465 FEBRUARY 3 1,395 1,395 1,910 WB-417
PD WB-419 '95 FORD F-150 # 9150 MOBILE 396 FEBRUARY 3 1,188 1,188 1,619 WB-419
PD WB-420 '95 FORD F-150 # 9151 ODESSA 396 FEBRUARY 3 1,188 1,188 1,619 WB-420
PD WB-421 '95 FORD F-350 # 6247 MARSHALL 473 FEBRUARY 2 946 946 1,918 WB-421
PD WB-422 '95 FORD F-150 # 7316 BORGER 396 FEBRUARY 2 792 792 1,918 WB-422
PD WB-423 '95 FORD F-250 # 4432 CARTHAGE 465 MARCH 3 1,395 1,395 1,897 WB-423
PD WB-424 '95 FORD F-250 # 4431 FARMINGTON 465 MARCH 3 1,395 1,395 1,897 WB-424
PD WB-425 '95 FORD F-250 # 9149 ULYSSES 464 MARCH 3 1,392 1,392 1,890 WB-425
PD WB-426 '95 FORD F-150 # 3131 ARTESIA 401 MARCH 3 1,203 1,203 1,590 WB-426
PD WB-427 '95 FORD F-150 # 3132 RATLIFF CITY 398 FEBRUARY 3 1,194 1,194 1,590 WB-427
PD WB-428 '95 FORD F-150 # 3716 RATLIFF CITY 398 FEBRUARY 3 1,194 1,194 1,590 WB-428
PD WB-429 '95 FORD TAURUS # 2139 MIDLAND/SALES 411 MARCH 3 1,233 1,233 1,658 WB-429
PD WB-430 '95 FORD F-150 # 9148 MARSHALL 396 FEBRUARY 3 1,188 1,188 1,619 WB-430
PD WB-431 '95 FORD F-150 # 4264 ANDREWS 388 MARCH 4 1,552 1,552 1,557 WB-431
PD WB-432 '95 FORD F-150 # 4265 MORGAN CITY 388 MARCH 4 1,552 1,552 1,557 WB-432
PD WB-433 '95 FORD F-150 # 4263 SNYDER 388 APRIL 4 1,552 1,552 1,557 WB-433
PD WB-435 '95 FORD F-150 # 0546 FARMINGTON 430 MAY 5 2,150 2,150 1,748 WB-435
PD WB-436 '95 FORD F-250HD # 9174 RATLIFF CITY 478 MAY 5 2,390 2,390 1,950 WB-436
PD WB-437 '95 FORD F-250 # 9175 BORGER 470 MAY 5 2,350 2,350 1,922 WB-437
PD WB-438 '95 FORD F-150 # 0548 PERRYTON 390 APRIL 5 1,950 1,950 1,570 WB-438
PD WB-439 '95 FORD F-150 # 0549 SUNDOWN 390 JUNE 6 2,340 2,340 1,570 WB-439
PD WB-440 '95 FORD F-150 # 0547 ODESSA 389 OCTOBER 10 3,890 3,890 1,570 WB-440
PD WB-442 '95 FORD F-150 # 1071 ELKHART 439 AUGUST 9 3,951 3,951 1,770 WB-442
PD WB-443 '95 FORD F-250 # 5740 CRANE 471 AUGUST 9 4,239 4,239 1,900 WB-443
PD WB-447 '96 FORD F-150 # 4942 ARDMORE 402 NOVEMBER 12 4,824 4,824 1,607 WB-447
PD WB-448 '96 FORD TAURUS # 1242 TULSA 452 NOVEMBER 12 5,424 5,424 1,835 WB-448
PD WB-449 '96 FORD F-150 # 1420 BORGER 440 DECEMBER 13 4,906 40 5,312 1,650 WB-449
PD WB-450 '96 FORD F-150 # 1417 ARTESIA 433 DECEMBER 13 4,844 40 5,245 1,607 WB-450
PD WB-451 '96 FORD F-150 # 1418 WHITE OAK 433 DECEMBER 13 4,844 40 5,245 1,607 WB-451
PD WB-452 '96 FORD F-150 # 1419 ARDMORE 431 MARCH 16 4,916 1,59 6,512 1,607 WB-452
PD WB-453 '96 FORD F-250 # 5174 ROOSEVELT 592 MARCH 16 6,760 2,19 8,956 2,263 WB-453
PD WB-454 '96 FORD F-350 # 2106 CAMERON 540 FEBRUARY 15 6,111 1,49 7,608 2,042 WB-454
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
5
RED MAN PIPE & SUPPLY CO.
LIST OF VEHICLES BY LESSOR/OWNER
DATE: OCTOBER 31, 1997
CURRENT NO. OF YEAR YEAR YEAR
LEASE LEASE MONTHS ENDING ENDING ENDING
LESSOR LEASE# DESCRIPTION V IN # LOCATION AMOUNT CHANGES REMAINING 10/31/98 10/31/99 10/31/00 TOTAL L.E.V.
- ------ ------ ----------- - ---- -------- ------ ------- --------- -------- -------- -------- ----- ------
<S> <C> <C> <C><C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PD WB-455 '97 FORD F-150SC # 2804 RMM 681 MARCH 16 7,772 2,524 10,296 2,614 WB-455
PD WB-456 '97 FORD F-150 # 0861 WHITE OAK 488 APRIL 17 5,394 2,110 7,504 1,720 WB-456
PD WB-457 '97 FORD F-150 # 0862 MARSHALL 488 APRIL 17 5,394 2,110 7,504 1,720 WB-457
PD WB-458 '97 FORD F-150 # 0863 MORGAN CITY 488 APRIL 17 5,394 2,110 7,504 1,720 WB-458
PD WB-459 '97 FORD F-150 # 0864 SUNDOWN 488 APRIL 17 5,394 2,110 7,504 1,720 WB-459
PD WB-460 '97 FORD F-150 # 0865 CRANE 488 APRIL 17 5,394 2,110 7,504 1,720 WB-460
PD WB-468 '96 FORD F-350 # 2008 ODESSA 568 JULY 20 6,648 4,208 10,856 2,172 WB-468
PD WB-470 '97 FORD F-150 # 9957 CARTHAGE 450 NOVEMBER 24 5,400 5,016 10,416 1,697 WB-470
PD WB-471 '97 FORD F-150 # 9954 LOVINGTON 450 NOVEMBER 24 5,400 5,016 10,416 1,697 WB-471
PD WB-472 '97 FORD F-150 # 9955 ODESSA 450 NOVEMBER 24 5,400 5,016 10,416 1,697 WB-472
PD WB-473 '97 FORD F-150 # 9962 RATLIFF CITY 444 NOVEMBER 24 5,328 4,944 10,272 1,672 WB-473
PD WB-474 '97 FORD TAURUS # 1307 DALLAS/SALES 494 OCTOBER 23 5,892 5,038 10,930 1,884 WB-474
PD WB-475 '97 FORD F-250 # 6643 ELKHART 553 NOVEMBER 24 6,636 6,144 12,780 2,086 WB-475
PD WB-476 '97 FORD F-250 # 8189 ROOSEVELT 656 DECEMBER 25 7,377 6,848 567 14,792 2,327 WB-476
PD WB-477 '97 FORD F-250 # 6644 RATLIFF CITY 553 NOVEMBER 24 6,636 6,144 12,780 2,086 WB-477
PD WB-478 '97 FORD F-150 # 9956 CARTHAGE 450 NOVEMBER 24 5,400 5,016 10,416 1,697 WB-478
PD WB-479 '97 FORD F-150 # 9958 ARTESIA 450 NOVEMBER 24 5,400 5,016 10,416 1,697 WB-479
PD WB-480 '97 FORD F-150 # 9961 ULYSSES 444 NOVEMBER 24 5,328 4,944 10,272 1,672 WB-480
PD WB-481 '97 FORD F-150 # 9959 MARSHALL 444 NOVEMBER 24 5,328 4,944 10,272 1,672 WB-481
PD WB-482 '97 FORD F-150 # 9960 LOVINGTON 476 FEBRUARY 27 5,424 5,040 1,236 11,700 1,672 WB-482
PD WB-483 '97 FORD TAURUS # 6165 SALT LAKE CITY 502 OCTOBER 23 5,987 5,115 11,102 1,914 WB-483
PD WB-484 '96 FORD F-478 # 0866 SALT LAKE CITY 659 NOVEMBER 24 7,908 7,332 15,240 2,503 WB-484
PD WB-485 '96 FORD F-478 # 5560 BEAUMONT 751 NOVEMBER 24 9,012 8,340 17,352 2,872 WB-485
PD WB-486 '97 FORD F-250 # 6949 BEAUMONT 569 NOVEMBER 24 6,828 6,324 13,152 2,145 WB-486
PD WB-487 '97 FORD F-250 # 5092 LINDSAY 567 JANUARY 26 6,414 5,956 980 13,350 2,005 WB-487
PD WB-488 '97 FORD F-150 # 4033 BORGER 477 FEBRUARY 27 5,436 5,052 1,239 11,727 1,676 WB-488
PD WB-489 '97 FORD F-150 # 4034 LINDSAY 477 FEBRUARY 27 5,436 5,052 1,239 11,727 1,676 WB-489
PD WB-490 '97 FORD F-150 # 4035 SNYDER 477 FEBRUARY 27 5,436 5,052 1,239 11,727 1,676 WB-490
PD WB-491 '97 FORD F-150 # 4036 SNYDER 477 FEBRUARY 27 5,436 5,052 1,239 11,727 1,676 WB-491
PD WB-492 '97 FORD F-150 # 4037 RATLIFF CITY 477 FEBRUARY 27 5,436 5,052 1,239 11,727 1,676 WB-492
PD WB-493 '97 FORD F-150 # 4389 MARSHALL 499 FEBRUARY 27 5,682 5,274 1,293 12,249 1,759 WB-493
PD WB-494 '97 FORD F-150 # 4388 ELK CITY 508 MARCH 28 5,816 5,404 1,756 12,976 1,802 WB-494
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
6
RED MAN PIPE & SUPPLY CO.
LIST OF VEHICLES BY LESSOR/OWNER
DATE: OCTOBER 31, 1997
CURRENT NO. OF YEAR YEAR YEAR
LEASE LEASE MONTHS ENDING ENDING ENDING
LESSOR LEASE# DESCRIPTION V IN # LOCATION AMOUNT CHANGES REMAINING 10/31/98 10/31/99 10/31/00 TOTAL L.E.V.
- ------ ------ ----------- - ---- -------- ------ ------- --------- -------- -------- -------- ----- ------
<S> <C> <C> <C><C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PD WB-495 '97 FORD F-250 # 3148 ODESSA 574 MARCH 28 6,592 6,140 1,996 14,728 2,061 WB-495
PD WB-496 '97 FORD TAURUS # 5643 HOUSTON/SALES 523 FEBRUARY 27 5,961 5,541 1,359 12,861 1,842 WB-496
PD WB-497 '97 FORD CR.VIC # 9295 TULSA/LA 639 JANUARY 26 7,238 6,712 1,104 15,054 2,259 WB-497
PD WB-502 '97 FORD F-250 # 4604 GONZALES 626 FEBRUARY 27 7,125 6,618 1,623 15,366 2,219 WB-502
PD WB-503 '97 FORD F-250 # 7672 LAREDO 605 FEBRUARY 27 6,891 6,399 1,569 14,859 2,135 WB-503
PD WB-504 '97 FORD F-250 # 7555 JOURDANTON 606 FEBRUARY 27 6,903 6,411 1,572 14,886 2,134 WB-504
PD WB-505 '97 FORD F-250 # 6961 JOURDANTON 622 FEBRUARY 27 7,086 6,573 1,611 15,270 2,220 WB-505
PD WB-506 '96 FORD F-477 # 8218 JOURDANTON 824 FEBRUARY 27 9,384 8,703 2,133 20,220 2,935 WB-506
PD WB-507 '97 FORD F-150 # 9385 LAUREL 476 JUNE 31 5,557 5,180 2,891 13,628 1,694 WB-507
PD WB-508 '97 FORD F-150 # 9386 PERRYTON 476 JUNE 31 5,557 5,180 2,891 13,628 1,694 WB-508
PD WB-509 '97 FORD F-150 V8 # 3816 FORT SMITH 492 JUNE 31 5,739 5,348 2,989 14,076 1,742 WB-509
PD WB-510 '97 FORD F-150 V8 # 3815 MARSHALL 492 JUNE 31 5,739 5,348 2,989 14,076 1,742 WB-510
PD WB-511 '97 FORD TAURUS # 3746 GULF COAST/HOUMA 534 MARCH 28 6,128 5,716 1,860 13,704 1,919 WB-511
PD WB-512 '97 FORD F-250 4X4 # 4371 VERNAL 661 JUNE 31 7,712 7,184 4,011 18,907 2,379 WB-512
PD WB-513 '97 FORD CAB/CHAS # 4373 ULYSSES 584 JUNE 31 6,813 6,345 3,542 16,700 2,076 WB-513
PD WB-514 '97 FORD CAB/CHAS # 4372 FARMINGTON 584 JUNE 31 6,813 6,345 3,542 16,700 2,076 WB-514
PD WB-515 '97 FORD CR VIC # 9969 DALLAS/SALES 647 MAY 30 7,506 6,990 3,366 17,862 2,313 WB-515
PD WB-516 '97 FORD TAURUS # 1919 HARVEY 541 MAY 30 6,276 5,844 2,814 14,934 1,924 WB-516
PD WB-517 '97 PONT GR.PRIX # 0818 HOUSTON/TULSA 545 MAY 30 6,324 5,892 2,838 15,054 1,920 WB-517
PD WB-518 '97 GMC CAB/CHAS # 5348 HARVEY 562 SEPTEMBER 34 6,670 6,224 4,870 17,764 1,694 WB-518
PD WB-519 '97 FORD F150 # 3076 LOVINGTON 476 SEPTEMBER 34 5,650 5,276 4,130 15,056 1,694 WB-519
PD WB-520 '97 FORD F150 # 3081 ANDREWS 476 SEPTEMBER 34 5,650 5,276 4,130 15,056 1,694 WB-520
PD WB-521 '97 FORD F150 # 3083 ELKHART 476 SEPTEMBER 34 5,650 5,276 4,130 15,056 1,694 WB-521
PD WB-522 '97 FORD F150 # 3079 FORT SMITH 476 SEPTEMBER 34 5,650 5,276 4,130 15,056 1,694 WB-522
PD WB-523 '97 FORD F150 # 3082 LOVINGTON 476 SEPTEMBER 34 5,650 5,276 4,130 15,056 1,694 WB-523
PD WB-524 '97 FORD F-350 DIESEL# 1244 ODESSA 688 OCTOBER 35 8,210 7,658 6,556 22,424 2,479 WB-524
PD WB-525 '97 FORD F150 # 3085 ODESSA 476 SEPTEMBER 34 5,650 5,276 4,130 15,056 1,694 WB-525
PD WB-526 '97 FORD F150 # 3080 WHITE OAK 476 SEPTEMBER 34 5,650 5,276 4,130 15,056 1,694 WB-526
PD WB-527 '97 FORD F150 # 3086 WOODWARD 476 SEPTEMBER 34 5,650 5,276 4,130 15,056 1,694 WB-527
PD WB-528 '97 FORD CAB/CHAS # 6129 PERRYTON 578 SEPTEMBER 34 6,858 6,392 5,010 18,260 2,042 WB-528
PD WB-529 '97 FORD F150 # 3076 LOVINGTON 476 SEPTEMBER 34 5,650 5,276 4,130 15,056 1,694 WB-529
PD WB-530 '97 FORD F150 # 3077 ELKHART 476 SEPTEMBER 34 5,650 5,276 4,130 15,056 1,694 WB-530
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
7
RED MAN PIPE & SUPPLY CO.
LIST OF VEHICLES BY LESSOR/OWNER
DATE: OCTOBER 31, 1997
CURRENT NO. OF YEAR YEAR YEAR
LEASE LEASE MONTHS ENDING ENDING ENDING
LESSOR LEASE# DESCRIPTION V IN # LOCATION AMOUNT CHANGES REMAINING 10/31/98 10/31/99 10/31/00 TOTAL L.E.V.
- ------ ------ ----------- - ---- -------- ------ ------- --------- -------- -------- -------- ----- ------
<S> <C> <C> <C><C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PD WB-531 '97 FORD F150 # 3084 LAUREL 476 SEPTEMBER 34 5,650 5,276 4,130 15,056 1,694 WB-531
PD WB-532 '97 FORD CAB/CHAS # 6130 CONROE 578 SEPTEMBER 34 6,858 6,392 5,010 18,260 2,042 WB-532
PD WB-533 '97 FORD CAB/CHAS # 6054 HOUSTON/GP 602 SEPTEMBER 34 7,144 6,664 5,220 19,028 2,134 WB-533
PD WB-534 '97 FORD F150 SC # 2448 TULSA/HOLLAND 575 SEPTEMBER 34 6,824 6,368 4,990 18,182 2,059 WB-534
PD WB-535 '97 FORD F-250 # 2225 MARSHALL 578 SEPTEMBER 34 6,858 6,392 5,010 18,260 2,047 WB-535
PD WB-536 '97 FORD F-350 # 2226 MARSHALL 576 OCTOBER 35 6,874 6,418 5,500 18,792 2,059 WB-536
PD WB-537 '98 FORD F-150 # 4702 LINDSAY 486 OCTOBER 35 5,800 5,416 4,642 15,858 1,700 WB-537
PD WB-538 '97 FORD F-250 # 4871 LINDSAY 576 OCTOBER 35 6,874 6,418 5,500 18,792 2,042 WB-538
PD WB-539 '98 PONTIAC GR.PRIX # 0776 HOUSTON/GP 554 OCTOBER 35 6,611 6,168 5,291 18,070 1,979 WB-539
PD WB-540 '97 FORD CROWN VIC # 9640 TULSA/GALENA PK 668 SEPTEMBER 34 7,926 7,388 5,790 21,104 2,384 WB-540
PD WB-541 '97 FORD F-350 # 5764 FREEPORT 580 OCTOBER 35 6,922 6,465 5,533 18,920 2,078 WB-541
PD WB-542 '98 PONTIAC GR.PRIX # 1503 HARVEY 554 SEPTEMBER 34 6,574 6,132 4,810 17,516 1,978 WB-542
PD WB-543 '97 FORD F-250 # 5766 CAMERON 583 OCTOBER 35 6,957 6,489 5,555 19,001 2,042 WB-543
PD WB-544 '97 FORD F-350 # 5765 MORGAN CITY 579 OCTOBER 35 6,909 6,442 5,522 18,873 2,042 WB-544
PD WB-545 '97 FORD F-250 # 5767 HOUMA 583 OCTOBER 35 6,957 6,489 5,555 19,001 2,042 WB-545
PD WB-546 '98 FORD F-150 # 1058 SNYDER 486 OCTOBER 35 5,800 5,416 4,642 15,858 2,042 WB-546
PD WB-547 '98 FORD F-150 # 0247 SUNDOWN 484 OCTOBER 35 5,776 5,392 4,620 15,788 2,042 WB-547
PD WB-550 '97 FORD F-250 # 6747 LAREDO 632 SEPTEMBER 34 7,500 6,996 5,480 19,976 2,244 WB-550
PD WB-551 '97 FORD F150 # 9369 GONZALES 521 SEPTEMBER 34 6,184 5,774 4,520 16,478 1,839 WB-551
TT TTR-2799 '89 CHEV C30 # 7453 LOVINGTON 5 M-T-M TTR-2799
WH KY-716 '84 CHEV C30 # 6417 CONROE 3 M-T-M KY-716
TL TL-1354 '93 BUICK REGAL # 6557 BEAUMONT 0 M-T-M TL-1354
TL TL-1404 '93 FORD TAURUS # 1893 TULSA 0 M-T-M TL-1404
TL TL-1407 '93 BUICK REGAL # 0749 HARVEY 0 M-T-M TL-1407
TL TL-1806 '93 BUICK REGAL # 3390 HOUSTON/GP 518 M-T-M TL-1806
TL TL-1889 '94 DGE INTREPID # 4558 BORGER 549 M-T-M TL-1889
TL TL-1903 '94 DGE INTREPID # 6030 BORGER 552 M-T-M TL-1903
TL TL-1948 '94 BUICK LEDABRE # 5342 SLC 649 M-T-M TL-1948
TL TL-1950 '94 FRD CR VIC LX # 2328 TULSA WEST 585 M-T-M TL-1950
TL TL-2188 '95 DGE INTREPID # 9789 TULSA WEST 538 8 4,308 4,308 3,078 TL-2188
TL TL-2197 '95 CHEV EXT CAB # 9659 FARMINGTON 570 11 6,273 6,273 5,039 TL-2197
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
8
RED MAN PIPE & SUPPLY CO.
LIST OF VEHICLES BY LESSOR/OWNER
DATE: OCTOBER 31, 1997
CURRENT NO. OF YEAR YEAR YEAR
LEASE LEASE MONTHS ENDING ENDING ENDING
LESSOR LEASE# DESCRIPTION V IN # LOCATION AMOUNT CHANGES REMAINING 10/31/98 10/31/99 10/31/00 TOTAL L.E.V.
- ------ ------ ----------- - ---- -------- ------ ------- --------- -------- -------- -------- ----- ------
<S> <C> <C> <C><C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
TL TL-2205 '95 CHEV EXT CAB # 6010 FREEPORT 512 10 5,115 5,115 3,847 TL-2205
TL TL-2207 '95 DGE INTREPID # 4351 HOUSTON/GP 492 9 4,430 4,430 3,261 TL-2207
TL TL-2255 '95 DGE INTREPID # 6591 SLC 504 10 5,044 5,044 3,996 TL-2255
-------- -------- -------- --------- --------
$761,638 $561,846 $254,020 $1,577,504 $332,287
======== ======== ======== ========= ========
GE GE-9402 '94 FORD TAURUS # 9325 HOUSTON/GP
GE GE-9406 '94 FORD TAURUS # 7405 HOUSTON/GP
GE GE-9407 '94 FORD CR VIC # 2287 BEAUMONT
</TABLE>
<PAGE>
Exhibit 10.18
AGREEMENT
---------
THIS AGREEMENT ("Agreement") is made and entered into as of the 30th day of
October, 1997, by and between Consolidated Investment Services, Inc.
("Consolidated") and Red Man Pipe & Supply Co. ("Red Man").
RECITALS
--------
On the 12th day of July, 1988, Otter, Inc., an Oklahoma corporation
("Otter"), and Red Man entered into a Financial Agreement, which agreement was
on October 24, 1990, amended by an agreement between those parties (the "Amended
Financial Agreement"); and Vinson Supply Company, a Delaware corporation
("Vinson") and Red Man entered into a Purchase Agreement as of the 2nd day of
March, 1995.
Consolidated is successor in interest to the rights and obligations of
Otter and Vinson under both the Amended Financial Agreement and the Purchase
Agreement.
Consolidated is the holder of the following securities of Red Man:
23,276 shares Class A Common Stock
34,344 shares Class B Common Stock
2,000 shares Class C Preferred Stock
Red Man anticipates a public offering (the "Offering") of approximately
thirty percent (30%) of its Common Stock computed after completion of the
Offering, and assuming exercise of the underwriter's over allotment option. The
public offering will consist only of Class A Common Stock.
1
<PAGE>
IT IS THEREFORE AGREED AS FOLLOWS:
1. Prior to the Offering, the 34,344 shares of Class B Common Stock held
by Consolidated will be exchanged for 34,344 shares of Class A Common Stock.
2. That 82,000 shares of Class A Common Stock which were originally issued
to Lewis B. Ketchum and are now held by or for the Ketchum family, will be
exchanged for 82,000 shares of Class B Common Stock.
3. The Articles of Incorporation of Red Man will be amended to:
A. Accommodate the exchange of Class B Common Stock for Class A Common
Stock and the exchange of eighty-two thousand (82,000) shares of Class
A Common Stock beneficially owned by the Ketchum Family for Class B
Common Stock;
B. Increase authorized capital to allow a stock split in order that
present stockholders will own approximately seventy percent (70%) of
the then outstanding capital stock of Red Man after the Offering;
C. Increase authorized capital to raise authorized capital for not less
than the Offering;
D. Assign ten (10) votes for each share of Class B Common Stock and one
(1) vote for each share of Class A Common Stock.
2
<PAGE>
4. The Amended Financial Agreement and the Purchase Agreement shall be of
no further force and effect, except as follows:
A. All leases of real and personal property between the parties hereto
and their predecessors in interest shall remain in full force and
effect.
B. The characteristics, rights and preferences of Class C Preferred Stock
as stated on the Certificate representing those shares shall remain in
full force and effect.
5. Prior to the initial stock offering, the Board of Directors of Red Man
is authorized to establish and approve an incentive plan for not greater than
five percent (5%) of the authorized Class A Common Stock to be used for
incentive or non-qualified stock options or other stock incentive programs for
employees.
6. That at the time of, or prior to the Offering, Red Man will redeem and
retire the Preferred Stock owned by Consolidated at the face amount thereof,
with accrued dividends to the date of redemption.
7. That the Board of Directors of Red Man shall promptly take all action
required to cause the Red Man Common Stock owned by Consolidated to be
registered under the Securities Act of 1933 and/or the Oklahoma Securities Act
upon request by Consolidated,
3
<PAGE>
which request shall not be made until after the expiration of two (2) years from
the date of the Offering. Further and notwithstanding the foregoing, at any time
after the Offering, if the Board of Directors of Red Man causes or permits any
additional shares of Red Man stock to be registered under the Securities Act of
1933 and/or the Oklahoma Securities Act, Consolidated shall have the right to
have its Red Man Common Stock registered simultaneously therewith.
8. That should an Offering of Red Man Class A Common Stock not occur on or
before March 31, 1998, this Agreement will terminate and immediately thereafter
the parties shall be required to take such action as is necessary to effect the
restoration to the positions of the parties which existed on October 28, 1997.
AGREED TO effective the 30th day of October, 1997.
"CONSOLIDATED"
By /s/ Michael M. Masterson, President
------------------------------------
"RED MAN"
By /s/ Lewis Craig Ketchum, President
-------------------------------------
4
<PAGE>
EXHIBIT 11.1
RED MAN PIPE & SUPPLY CO.
EARNINGS PER SHARE STATEMENT
<TABLE>
<CAPTION>
Year Ended October 31,
----------------------
(in thousands)
1995 1996 1997
---- ---- ----
<S> <C> <C> <C>
PRIMARY EARNINGS PER SHARE
Net income $1,758 $3,353 $7,068
Preferred dividends (125) (250) (250)
------ ------ ------
Net income available for common shares 1,633 3,103 6,818
------ ------ ------
Weighted average number of common
equivalent shares outstanding - primary,
including dilutive common stock equivalents 192 192 192
Primary Earnings Per Share $ 8.50 $16.16 $35.50
====== ====== ======
FULLY DILUTED EARNINGS PER SHARE
Net Income $1,758 $3,353 $7,068
Preferred dividends (125) (250) (250)
------ ------ ------
Net income available for common shares 1,633 3,103 6,818
------ ------ ------
Weighted average number of common and
equivalent shares outstanding - fully
diluted including dilutive common
stock equivalents 192 192 192
Fully Diluted Per Share $ 8.50 $16.16 $35.50
====== ====== ======
</TABLE>
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in this Registration Statement on Form S-1 (File
No. ) of our report dated November 26, 1997 except as to Note 12, for
which the date is December 17, 1997, on our audits of the consolidated
financial statements and financial statement schedule of Red Man Pipe and
Supply Co. and Subsidiaries. We also consent to the reference to our firm
under the caption "EXPERTS."
Coopers & Lybrand L.L.P.
Tulsa, Oklahoma
December 17, 1997
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-START> NOV-01-1996
<PERIOD-END> OCT-31-1997
<CASH> 1,511
<SECURITIES> 0
<RECEIVABLES> 56,612
<ALLOWANCES> 750
<INVENTORY> 99,825
<CURRENT-ASSETS> 157,198
<PP&E> 7,660
<DEPRECIATION> 3,503
<TOTAL-ASSETS> 161,813
<CURRENT-LIABILITIES> 52,029
<BONDS> 0
5,000
0
<COMMON> 192
<OTHER-SE> 23,022
<TOTAL-LIABILITY-AND-EQUITY> 161,813
<SALES> 454,438
<TOTAL-REVENUES> 454,438
<CGS> 403,774
<TOTAL-COSTS> 438,047
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 5,606
<INCOME-PRETAX> 11,418
<INCOME-TAX> 4,350
<INCOME-CONTINUING> 7,068
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 7,068
<EPS-PRIMARY> 35.5
<EPS-DILUTED> 35.5
</TABLE>
