Registration No. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-1
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933
------------------------
CRC HOLDINGS CORP.
[TO BE RENAMED CRC-EVANS INTERNATIONAL, INC.]
(Exact name of registrant as specified in its charter)
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DELAWARE 1623 76-0539257
(State or other jurisdiction of (Primary standard industrial (I.R.S. Employer
incorporation or organization) classification code number) Identification No.)
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11601 N. HOUSTON ROSSLYN ROAD
HOUSTON, TEXAS 77086
(281) 999-8920
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
------------------------
M. TIMOTHY CAREY
CHIEF EXECUTIVE OFFICER
11601 N. HOUSTON ROSSLYN ROAD
HOUSTON, TEXAS 77086
(281) 999-8920
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
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COPIES TO:
DAVID S. PETERMAN, P.C. WILLIAM N. FINNEGAN
AKIN, GUMP, STRAUSS, HAUER & FELD, ANDREWS & KURTH L.L.P.
L.L.P. 600 TRAVIS STREET, SUITE 4200
711 LOUISIANA STREET, SUITE 1900 HOUSTON, TEXAS 77002
HOUSTON, TEXAS 77002 (713) 220-4200
(713) 220-5800
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO PUBLIC:
As soon as practicable after the 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, check
the following box. [ ]
If this form is filed to register additional securities for an offering pursuant
to Rule 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 Section 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 under
the Securities Act, check the following box. [ ]
CALCULATION OF REGISTRATION FEE
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PROPOSED MAXIMUM AGGREGATE
TITLE OF EACH CLASS OF OFFERING AMOUNT OF
SECURITIES TO BE REGISTERED PRICE(1) REGISTRATION FEE
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Common Stock, $.01 par value $45,000,000 $12,510
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(1) In accordance with Rule 457(o) under the Securities Act, the number of
shares being registered and the proposed maximum offering price per share
are not included in this table.
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 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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SUBJECT TO COMPLETION, DATED DECEMBER 7, 1998
THE INFORMATION CONTAINED IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED.
THESE SECURITIES MAY NOT BE SOLD UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER
TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE
SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
SHARES
[LOGO] CRC-EVANS INTERNATIONAL, INC.
COMMON STOCK
$ PER SHARE
- --------------------------------------------------------------------------------
This is an initial public offering of common stock of CRC-Evans International,
Inc. CRC-Evans International, Inc. is offering shares of common
stock with this prospectus. This is a firm commitment underwriting.
There is currently no public market for the shares. CRC-Evans expects that the
price to the public in the offering will be between $ and $ per share.
The market price of the shares after the offering may be higher or lower than
the offering price.
CRC-Evans has applied for its common stock to be listed on the
under the symbol " ."
INVESTING IN THE COMMON STOCK INVOLVES CERTAIN RISKS. SEE "RISK FACTORS"
BEGINNING ON PAGE 11.
PER SHARE TOTAL
--------- ------------
Price to the public.................. $ $
Underwriting discount................
Proceeds to CRC-Evans................
CRC-Evans has granted an over-allotment option to the underwriters. Under this
option, the underwriters may elect to purchase a maximum of
additional shares from CRC-Evans within 30 days following the date of this
prospectus to cover over-allotments. The underwriters are offering the shares
subject to various conditions and may reject all or part of any order. The
shares should be ready for delivery on or about against
payment in immediately available funds.
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NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
CIBC OPPENHEIMER
BT ALEX. BROWN
SIMMONS & COMPANY
INTERNATIONAL
The date of this Prospectus is , 1999.
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[THE ARTWORK DEPICTS THE COMPANY'S PRODUCTS AND SERVICES IN USE AND PHOTOGRAPHS
OF VARIOUS TYPES OF PRODUCTS THE COMPANY MANUFACTURES.]
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TABLE OF CONTENTS
PAGE
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Prospectus Summary ...................................................... 5
Risk Factors ............................................................ 11
Forward-Looking Statements .............................................. 16
Use of Proceeds ......................................................... 17
Dividend Policy ......................................................... 17
Capitalization .......................................................... 18
Dilution ................................................................ 19
Unaudited Pro Forma Financial Data ...................................... 20
Selected Consolidated Financial Data .................................... 23
Management's Discussion and Analysis of Financial Condition and
Results of Operations ................................................. 24
Business ................................................................ 31
Management .............................................................. 44
Principal Stockholders .................................................. 49
Certain Related Transactions ............................................ 50
Description of Capital Stock ............................................ 51
Shares Eligible For Future Sale ......................................... 53
Underwriting ............................................................ 54
Legal Matters ........................................................... 55
Experts ................................................................. 55
Index to Financial Statements ........................................... F-1
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As used in this prospectus, the terms "CRC-Evans" or the "Company" mean
CRC-Evans International, Inc. and its subsidiaries including the Predecessor
Business described below (unless the context indicates a different meaning), and
the term "common stock" means the Company's common stock, $0.01 par value.
As used in this prospectus, the terms "Predecessor Business" or
"Predecessors" refer to the business and assets of the consolidated
subsidiaries of CRC-Evans, prior to their acquisition (the "Management
Buyout") by CRC-Evans on June 12, 1997, and their predecessors. In the
Management Buyout, Messrs. D. Dale Wood, M. Timothy Carey and C. Paul Evans, the
Company's Chairman, Chief Executive Officer and President, respectively,
arranged for the Company's purchase of its business and assets from Weatherford
Enterra, Inc. ("Weatherford Enterra"). "Pro forma" information reflects the
effects of the Management Buyout and related financing.
CRC-Evans' principal executive offices are located at 11601 N. Houston
Rosslyn Road, Houston, Texas 77086. Its telephone number is (281) 999-8920.
Unless otherwise stated herein, all information contained in this
prospectus assumes no exercise of the over-allotment option granted to the
underwriters.
Simultaneous with the effectiveness of the registration statement, the
Company will effect a 40 for 1 stock split and an amendment to its certificate
of incorporation as disclosed herein. Except for the financial statements
beginning on page F-1, all common stock numbers and other information in this
prospectus reflect the stock split and the amendment to the Company's
certificate of incorporation.
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[THIS PAGE INTENTIONALLY LEFT BLANK]
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PROSPECTUS SUMMARY
THIS SUMMARY HIGHLIGHTS INFORMATION CONTAINED IN OTHER PARTS OF THIS
PROSPECTUS. IT IS NOT COMPLETE AND MAY NOT CONTAIN ALL OF THE INFORMATION THAT
INVESTORS SHOULD CONSIDER BEFORE INVESTING IN THE COMMON STOCK. INVESTORS SHOULD
READ THE ENTIRE PROSPECTUS CAREFULLY.
THE COMPANY
CRC-Evans is the world's leading provider of specialized equipment and
services used in the construction and rehabilitation of gas and oil transmission
pipelines. CRC-Evans and its Predecessors have been leaders in the specialized
pipeline construction equipment industry since 1933. The Company estimates that
its equipment or services are currently used on a significant majority of the
gas and oil transmission pipeline construction projects throughout the world.
The Company's management team together with two institutional investors,
Natural Gas Partners IV, L.P. ("Natural Gas Partners") and Equus II
Incorporated ("Equus"), acquired the assets of and the business conducted by
the Company from Weatherford Enterra in the Management Buyout in June 1997. The
Company's current senior management team has been involved in managing CRC-Evans
or its Predecessors' major lines of business since 1971. The Company believes
the depth and experience of its management and employees are keys to the
Company's excellent reputation with the world's leading pipeline contractors.
The Company provides equipment and services, primarily to pipeline
contractors, which are essential to the successful completion of a pipeline
construction project. Although the Company's products and services represent
only a relatively small cost component of a pipeline construction project, the
critical nature of the Company's equipment and services has a significant impact
on the pipeline contractor's ability to complete a project within budget and on
time. The Company's pipeline products and services provide a wide range of
solutions to the pipeline construction and rehabilitation industry. The Company
sells and/or rents automatic pipeline welding systems, pipe bending equipment,
line-up clamps, pipe coating plants, coating and cleaning equipment, pipeline
rehabilitation equipment and lay barge pipe handling equipment. The Company also
provides specialized services including joint coating, cement weighting,
induction and resistance heating, and automatic welding systems training and
technical assistance.
The Company has experienced significant growth in revenues, EBITDA (as
defined herein) and net income since the Management Buyout. Management believes
that this growth is attributable to (i) a recent increase in demand for the
Company's specialized products and services in response to increased worldwide
pipeline construction and rehabilitation activity, (ii) the Company's strategic
acquisitions and (iii) the successful implementation of the Company's business
strategy. For the six months ended September 30, 1998, the Company generated
revenues, EBITDA and net income of $56.8 million, $17.7 million and $8.8
million, respectively. These amounts represent increases of approximately 65.3%,
241.5% and 469.2%, respectively, over the pro forma results for the six months
ended September 30, 1997.
INDUSTRY OVERVIEW
The pipeline construction equipment and services industry provides products
and services to support pipeline construction and rehabilitation performed by
pipeline construction contractors. CRC-Evans provides specialized equipment and
services used in the construction of gas and oil pipelines ranging from 6 to 60
inches in diameter and steel water pipelines ranging up to 120 inches in
diameter. These specialized products and services are critical to the pipeline
contractor's ability to complete a project within budget and on time. These
products and services are generally provided by specialized pipeline equipment
manufacturers and service providers such as the Company because: (i) most pieces
of pipeline construction equipment are specific to a small range of diameter
sizes, while the contractor works on a wide range of pipeline diameters and
needs to use multiple equipment sizes for relatively short periods of time; (ii)
contracts are often procured with short lead times, so quick delivery of
equipment and services is required; and (iii) proprietary equipment, specialized
engineering and technical operating capabilities, such as those the
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Company offers, are critical to meeting the speed, efficiency and engineering
requirements of pipeline welding, bending and coating. Accordingly, the Company
has developed its business strategy around designing, manufacturing,
reconditioning and providing a broad inventory of specialized pipeline
construction equipment, for rental or sale, and services on an expedited basis
to pipeline general contractors.
Worldwide pipeline construction activity, based upon miles of pipeline
completed, has grown substantially since 1995, increasing more than 44% from
14,201 miles in 1995 to 20,485 in 1997. Industry sources estimate that 22,232
miles of pipeline were constructed in 1998. This level of activity is
anticipated to continue, as industry sources estimate that approximately 44,100
miles of pipeline are presently planned to be constructed in 1999 and
thereafter. See "Business--Industry Overview--Pipeline Construction
Statistics."
The Company believes a number of factors will drive a continued increase in
the worldwide level of pipeline infrastructure capital expenditures. In addition
to the current trend of increasing pipeline construction activity, the Company
expects a growing share of activity in the pipeline and equipment services
industry will be derived from the rehabilitation of large-diameter pipelines in
the United States, Canada and elsewhere. The pipeline rehabilitation market is
influenced by the necessity to address an aging or corroding pipeline
infrastructure to maintain safe operating conditions and to comply with
increasing governmental regulations concerning safety and environmental
protection. For example, if a large-diameter pipeline has significantly
deteriorated due to corrosion, it is often more economical to rehabilitate the
pipeline than to replace it. See "Business--Industry Overview--Other Important
Trends."
COMPANY STRENGTHS
The Company believes it is well positioned to continue as the leading
provider of specialized equipment and services used in the construction and
rehabilitation of gas and oil transmission pipelines. The Company believes it
possesses a unique combination of specific strengths which provides a solid
foundation for its growth strategy.
o INDUSTRY LEADER. The Company is the world's leading provider of
specialized equipment and services used in the construction and
rehabilitation of pipelines. According to Spears & Associates, Inc.
("Spears"), a market research consulting firm, the Company enjoys a
market share of approximately 66% in the specialized pipeline
equipment rental markets in North America and a market share of
approximately 75% in the worldwide field joint coating markets outside
North America. In addition, management believes the Company enjoys a
market share of approximately 70% in the worldwide onshore pipeline
automatic welding equipment market. The Company believes its portfolio
of specialized pipeline construction and rehabilitation equipment and
services is the most complete in the industry.
o SIGNIFICANT BARRIERS TO ENTRY. The Company believes its large
investment in specialized rental equipment, highly experienced
management, technical expertise and personnel, and worldwide sales
force and sales representative network all serve as a barrier to
entry. Furthermore, the Company believes its proprietary technology,
including patents and pending patents, provides it with a significant
technological advantage over its competitors in many of its product
lines and services. In particular, the Company developed the first
commercially viable automatic pipeline welding system in 1968 and
continues to provide the most commonly used automatic pipeline welding
systems in the world.
o WORLDWIDE PRESENCE. Pipeline construction is worldwide in scope.
While the United States is a large market, the majority of new
pipeline construction projects are located outside the United States.
The Company is organized to manage its diverse geographic customer
base with a strong international direct sales force which is further
complemented by a network of experienced commissioned sales
representatives and distributors in key international markets.
o CUSTOMER RELATIONSHIPS. The Company has developed long-term
relationships with the majority of the world's leading pipeline
construction contractors, pipe coating contractors and state-owned
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oil and gas pipeline companies. The Company has enjoyed repeat
business with the majority of these companies. The Company's Total
Project Support program helps the Company's customers achieve maximum
efficiency and productivity on projects by making available to its
customers the experience and technical expertise of its engineers and
support staff throughout the entire project.
o EXPERIENCED MANAGEMENT WITH SIGNIFICANT OWNERSHIP. The Company's
current senior management team has been involved in managing CRC-Evans
or its Predecessors' major lines of business since 1971. Management
also has significant acquisition and operational experience gained
through numerous years of service as executive officers of public
companies. Messrs. Wood, Carey and Evans have completed over 30
acquisitions for the Company and its Predecessors. Following the
completion of the offering, the Company's management will beneficially
own approximately % of the common stock.
BUSINESS STRATEGY
The Company seeks to maximize shareholder value through its growth strategy
which includes (i) expanding international operations, (ii) adding related
products and services, (iii) making strategic acquisitions and (iv) extending
and leveraging its technological leadership.
o EXPANDING INTERNATIONAL OPERATIONS. Although the Company has
historically served a worldwide customer base, it intends to
strengthen and expand its international operational capability. The
Company seeks to accomplish this goal primarily by acquiring
established operations in several key international regions. These new
operations centers are intended to provide distribution hubs from
which the Company can more readily provide existing and new products
and services to customers' projects. By being in closer proximity to
its customers, the Company expects to strengthen its long-term
customer relationships through increased customer contact as well as
augment its market intelligence through the Company's local personnel.
o ADDING RELATED PRODUCTS AND SERVICES. The Company intends to acquire
or develop related products and services. The Company intends to
provide these new products and services through its broad distribution
system comprised of the Company's sales force, international sales
representatives and operations centers in key geographic regions of
pipeline construction and rehabilitation activity. This strategy is
designed to enhance the performance of acquired companies, increase
the speed of new product acceptance and further diversify the
Company's sources of revenue.
o MAKING STRATEGIC ACQUISITIONS. The Company continually evaluates
opportunities to acquire businesses that offer complementary or
competitive products and services. The Company believes acquisition
candidates are available that should allow it to increase market share
in its existing lines of business, provide product line extensions,
and expand the geographic scope of its operations. The Company has
completed three acquisitions since March 1998 with an aggregate
purchase price of approximately $17.4 million (including all estimated
future earn-out payments). The Company has consolidated a domestic
competitor with pipeline rental assets, expanded its business into
concrete weighting for pipelines and added resistance heat treating
services to complement its pipeline induction heating business.
o EXTENDING AND LEVERAGING TECHNOLOGICAL LEADERSHIP. Continuing its
long history of innovation in the pipeline equipment and services
industry, the Company intends to further extend its technological
leadership and capabilities through in-house research and development,
acquisition and licensing of technology as well as participation in
joint development efforts with providers of related products or
processes which incorporate the Company's products. This strategy has
produced many industry innovations for the Company including the
automatic welding system, pneumatic line-up clamps and mandrels,
hydraulic pipe bending machines and line travel pipeline
rehabilitation systems.
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RECENT DEVELOPMENT
On November 18, 1998, the Company purchased Didcot Heat Treatment Limited
("Didcot") for an aggregate purchase price of $2.4 million (plus an earn-out
of up to $1.0 million). Didcot is a resistance heat treating company with its
primary markets in the United Kingdom and Western Europe. The Company believes
Didcot is an ideal platform for future growth and product line extensions for
its joint coating business.
THE OFFERING
Common stock offered by the shares
Company..............................
Common stock to be outstanding after
the
offering(1)........................ shares
Use of proceeds...................... The Company intends to use the net
proceeds from the offering, estimated to
be approximately $ million after
underwriting discount and other expenses
of the offering, to repay indebtedness
and to provide for working capital and
general corporate purposes, including
strategic acquisitions. See "Use of
Proceeds."
Proposed trading symbol..............
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(1) Excludes 670,160 shares of common stock issuable upon exercise of
outstanding stock options, 24,000 of which are currently exercisable.
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SUMMARY CONSOLIDATED FINANCIAL INFORMATION
The following table sets forth, for the dates and periods indicated,
summary historical and pro forma financial data of the Company. The summary
historical financial data set forth below have been derived from the Company's
historical financial statements. The summary pro forma financial data for the
year ended March 31, 1998 and the six months ended September 30, 1997 give
effect to the Management Buyout, the associated equity financing provided by
Natural Gas Partners and Equus (the "Equity Investment") and borrowings by the
Company under its credit facility (such borrowings, together with the Management
Buyout and the Equity Investment, the "Purchase Transactions"), as if they had
occurred on April 1, 1997. The pro forma financial data do not necessarily
represent what the Company's results of operations would have been if the
transactions described above had occurred on such date and are not intended to
project the Company's results of operations for any period. Such data should be
read in conjunction with the information contained in the Unaudited Pro Forma
Financial Data and the Company's financial statements and notes thereto found
elsewhere in this prospectus.
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HISTORICAL PRO FORMA HISTORICAL
PREDECESSOR BUSINESS PRO FORMA COMPANY(2) COMPANY(2)
-------------------- COMPANY(2) ------------- -------------
YEAR ENDED ----------- SIX MONTHS SIX MONTHS
MARCH 31, YEAR ENDED ENDED ENDED
-------------------- MARCH 31, SEPTEMBER 30, SEPTEMBER 30,
1996 1997 1998 1997 1998
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(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
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STATEMENT OF EARNINGS DATA:
Revenues:
Sales revenue......................... $ 25,325 $ 26,082 $ 29,537 $ 15,589 $ 20,428
Rental and service revenue............ 39,329 43,293 34,919 18,766 36,360
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Total revenues.......................... 64,654 69,375 64,456 34,355 56,788
Total cost of revenues.................. 45,851 46,676 43,762 23,413 31,403
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Gross profit............................ 18,803 22,699 20,694 10,942 25,385
Operating expenses:
Selling, general and administrative... 13,056 13,018 13,130 6,910 9,175
Research and development.............. 856 754 1,104 472 690
Other expenses (income)............... 2,750 367 (74 ) (195) (324)
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Operating income........................ 2,141 8,560 6,534 3,755 15,844
Interest expense (income)............... (246) (689) 2,695 1,164 1,709
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Income before income taxes.............. 2,387 9,249 3,839 2,591 14,135
Income tax expense...................... 889 3,359 1,535 1,041 5,313
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Net income.............................. $ 1,498 $ 5,890 $ 2,304 $ 1,550 $ 8,822
========= ========= =========== ============= =============
NET INCOME PER SHARE:
Basic................................... $ 0.58 $ 0.39 $ 1.56
Diluted................................. 0.56 0.38 1.43
WEIGHTED AVERAGE SHARES OUTSTANDING:
Basic................................... 4,000,000 4,000,000 5,670,479
Diluted................................. 4,120,000 4,120,000 6,171,301
OTHER FINANCIAL DATA:
EBITDA(1)............................... $ 6,978 $ 10,847 $ 9,456 $ 5,193 $ 17,732
Depreciation and amortization........... 4,837 2,287 2,922 1,438 1,888
Capital expenditures (excluding
acquisitions)......................... 473 2,402 1,148 131 1,759
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SEPTEMBER 30, 1998
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HISTORICAL AS ADJUSTED(3)
---------- --------------
(DOLLARS IN THOUSANDS)
BALANCE SHEET DATA:
Working capital......................... $ 34,330
Total assets............................ 84,469
Total long-term debt, excluding current
installments.......................... 36,441
Total liabilities....................... 61,168
Total stockholders' equity.............. 23,301
- ------------
(1) EBITDA represents net income before interest, income taxes, depreciation and
amortization. The Company has included EBITDA data (which is not a measure
of financial performance under generally accepted accounting principles
("GAAP")) because it understands that it is one measure certain investors
use to determine a company's historical ability to service its indebtedness.
Investors should not consider EBITDA to be an alternative to net income, as
an indicator of the Company's operating performance or as an alternative to
cash flow as a measure of liquidity.
(2) Does not give effect to the offering and the application of the net proceeds
therefrom. Giving effect to the use of such proceeds as described in "Use
of Proceeds," interest expense and net income per share would be $ and
$ for the pro forma year ended March 31, 1998, $ and $ for the
pro forma six months ended September 30, 1997 and $ and $ for the
historical six months ended September 30, 1998, respectively.
(3) This gives effect to the sale of shares of common stock in this offering and
the Company's use of the proceeds therefrom. See "Use of Proceeds" and
"Capitalization."
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RISK FACTORS
INVESTORS SHOULD CAREFULLY CONSIDER THE FOLLOWING FACTORS AND OTHER
INFORMATION IN THIS PROSPECTUS BEFORE DECIDING TO INVEST IN THE SHARES.
THE PIPELINE CONSTRUCTION INDUSTRY IS CYCLICAL
Demand for the Company's equipment and services depends primarily on the
level of new pipeline construction by major oil and gas transmission companies
and, to a lesser extent, on the level of rehabilitation work on existing
pipelines. Historically, the pipeline construction industry has been cyclical,
with a number of factors influencing spending decisions in the industry,
including:
o costs of producing and transporting oil and gas;
o conversion to natural gas for residential and power generation usage;
o discoveries of new oil and gas reserves;
o local and international political and economic conditions;
o technological advances;
o the ability of oil and gas transmission companies to generate capital;
and
o current and projected oil and gas prices.
Changes in any of these factors can cause pipeline construction or
rehabilitation activity to rise or fall significantly. The Company cannot
control these factors. Currently, the Company needs major pipeline construction
or rehabilitation projects to maintain and increase its revenues and profits. If
these projects are delayed or cancelled, the revenues and cash flow of the
Company will be adversely impacted. Although the Company seeks to mitigate
revenue and cash flow fluctuations through the execution of its business
strategy, the Company's revenues and cash flow will likely continue to be
subject to substantial cyclical swings. The Company's revenues and profits would
likely be hurt by reduced activity in the pipeline construction industry.
See"-- Many of the Company's Operations are Focused on a Few Projects,"
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and "Business."
THE COMPANY HAS A LIMITED NUMBER OF MAJOR CUSTOMERS
The Company operates primarily by providing equipment and services for the
oil and gas pipeline construction industry. The Company provides equipment and
services to a limited number of customers. Its success depends on keeping these
customers and building relationships with new customers. If the Company loses
one or more of its major customers, its revenues and profits would likely
decrease. Ten customers were responsible for 45% of the Company's total revenues
in the fiscal year ended March 31, 1998 (56% in 1997). In addition, one customer
accounted for approximately 11% of the Company's total revenues in 1998. See
"Business -- Customers and Contracts."
MANY OF THE COMPANY'S OPERATIONS ARE FOCUSED ON A FEW PROJECTS
At any time there are a limited number of major pipeline construction
projects worldwide. As a result, the Company's operations are often focused on a
few projects. Accordingly, the status of these projects is critical to the
Company's business. In addition, because the Company's operations are focused on
only a few projects, the Company is subject to variations in quarter to quarter
financial results. See "-- The Pipeline Construction Industry is Cyclical."
THE COMPANY IS EXPOSED TO RISKS IN DEVELOPING AND OTHER COUNTRIES
The Company conducts business in many countries around the world, including
many developing countries in Asia, Latin America, Africa and the Middle East and
elsewhere in the world, yet often concentrates its operations in only a few
countries. Operating in many of these countries involves risks which are not
normally present in the United States, Canada or Western Europe. These risks
include foreign currency restrictions, substantial exchange rate fluctuations,
government seizure of assets, riots, government
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instability and underdeveloped legal systems. In addition, state-owned gas, oil
and water pipeline companies are often the Company's major customers in these
countries. These companies may choose not to use the Company's equipment or
services for political reasons, or may be unable to do so if the government or
local economy experiences problems. The legal risks in these countries are
great, and can include unfair application of laws and regulations to foreign
businesses, and unanticipated taxes of various kinds.
Recently, certain developing countries, particularly those in Asia and the
Former Soviet Union, have experienced substantial economic turmoil. If this
turmoil continues or spreads to other developing countries, fewer pipelines may
be built in these countries, which could result in lower demand for the
Company's products and services. This would likely reduce the Company's revenues
and income.
The following table shows investors, on the basis of revenues from the
point of sale, some of the countries where the Company's operations have
recently been concentrated:
YEAR ENDED MARCH 31,
----------------------------------
HISTORICAL PRO FORMA
-------------------- ----------
COUNTRY 1996 1997 1998
- ------------------------------------- --------- --------- ----------
U.S.A................................ 18.8% 18.8% 26.6%
Canada............................... 7.4 11.6 9.4
Algeria.............................. 20.3 13.1 2.3
Former Soviet Union.................. 9.6 8.1 9.7
United Kingdom....................... 7.1 6.4 6.9
Other Countries...................... 36.8 42.0 45.1
--------- --------- ----------
Total........................... 100.0% 100.0% 100.0%
========= ========= ==========
The Company tries to reduce the risks of operating in developing countries
in the following ways:
o having local partners in some countries;
o contracting primarily with major international pipeline contracting
companies;
o operating as a subcontractor under the umbrella of the customer who
has the operating presence and facilities in the area;
o requiring customers to prepay or post letters of credit to pay the
cost of equipment rentals or the Company's up-front costs before
starting a project;
o requiring payment in U.S. or Canadian dollars or British pounds;
o maintaining reserves for credit losses; and
o requiring customers to be financially responsible for losses of the
Company's rental equipment.
The Company has local advisors in many of the countries where it operates
to advise it on local laws and customs. Given the unpredictable nature of many
of these risks, it is possible that these risks will cause a loss of business
which could hurt the Company's revenues or income in the short term or the long
term. See "Business."
OPERATING THE COMPANY'S EQUIPMENT IS RISKY
Like most large pieces of construction equipment, the operation of the
Company's equipment involves a certain degree of risk to the operator and those
working in the vicinity. If there is a defect or malfunction in the Company's
equipment, the results can include injury or loss of life and damage to
property. If any of these happened, the Company could lose revenues, face higher
costs or be sued. Litigation arising from such an occurrence could result in the
Company being named as a defendant in lawsuits asserting large claims.
The Company maintains insurance to cover its losses in these situations.
However, the Company's insurance may be insufficient to pay for all or a large
part of these losses. If the Company's insurance did not pay for these losses,
its income would fall. In addition, the Company may not be able to maintain its
insurance if insurance rates or insurance industry policies change. See
"Business -- Insurance."
12
<PAGE>
THE COMPANY'S ACQUISITION STRATEGY IS RISKY
The Company's growth strategy includes acquiring other companies and
product lines. The Company intends to make these acquisitions when they allow
the Company to complement or expand its business. Making acquisitions is risky
for several reasons. After an acquisition, the Company must devote significant
management resources integrating the newly acquired company or assets which
could adversely effect its existing business. The Company also could have lower
income and cash flow in the short term while the newly acquired company or
assets are being integrated into the Company. In addition, if the integration of
the new company or assets does not work, the Company could be adversely affected
over the longer term. Furthermore, if the Company acquires an operating
business, it may incorrectly value the business, or it may be subject to
liabilities that were not discovered in the investigation before the
acquisition.
Because of its acquisition strategy, the Company constantly reviews and has
discussions with other companies that it may wish to acquire. The Company cannot
predict whether it will be able to find good acquisition candidates. Even if it
finds a good acquisition candidate, it may be unable to complete the acquisition
for any number of reasons, including the inability to obtain capital to finance
the acquisition. If the Company makes an acquisition, it may issue new stock or
incur debt to pay for the acquired company. If it issues stock, the issuance
could result in substantial dilution to the Company's then existing
stockholders. In addition, the Company may need to use a large part of its cash
resources or its borrowing capacity for a single acquisition.
GOVERNMENTS REGULATE THE COMPANY SUBSTANTIALLY
The governments of the countries where the Company operates regulate its
business in many ways. These regulations include local currency controls, taxes
imposed on the Company and its employees, trade restrictions, including
embargos, and rules controlling its use of local workers and suppliers. The
demand for the Company's products and services depends primarily on the oil and
gas pipeline construction industry. Therefore, regulations which affect this
industry also affect the Company's business. Regulations which reduce
exploration for, and production and transmission of, oil and gas would hurt the
pipeline construction industry and, therefore, would hurt the Company's business
as well. Any of the countries where the Company does business might impose these
regulations for economic, environmental or other reasons. If these countries
change their regulations or impose new regulations, the Company's revenues and
profits could decrease. The Company cannot predict how regulations might change
and, therefore, cannot predict whether regulatory changes will hurt its
business. See "Business -- Government Regulation -- General."
ENVIRONMENTAL MATTERS
Strict environmental laws regulate the Company's operations and the
Company's equipment is often used in sensitive environmental areas such as
rivers, lakes and wetlands. If the Company's equipment does not perform properly
in these areas, environmental damage could occur, such as from the release of a
hazardous substance. In addition, the pipeline coating materials removed during
pipeline rehabilitation often contain hazardous substances and, therefore, are
subject to environmental regulation. If the Company does not comply with
environmental laws and regulations, it might have to pay large fines and
penalties. Some environmental laws impose joint and several strict liability for
cleanup after the release of a hazardous substance. This means that the Company
might have to pay for cleanup even if it was not at fault or was complying with
all environmental laws. If there is a release of a hazardous substance, the
Company might also be sued for personal injury or property damage if people or
property are exposed to the substance. See "Business -- Government
Regulation -- Environmental."
COMPETITION
The pipeline construction equipment business is very competitive, and the
Company expects it to remain so. The Company competes on the basis of a number
of factors, including price, customer service, satisfying technical
specifications, flexibility in meeting customer needs and the quality and
reliability of its equipment. The Company's competitors include many smaller
pipeline construction equipment companies
13
<PAGE>
worldwide and several business units of larger companies. In addition, certain
major contractors, who are often the Company's customers, have chosen and may
continue to choose to build or purchase their own specialized pipeline
construction equipment and perform on their own certain of the services the
Company provides, which could reduce its revenues or income. See
"Business -- Competition."
DEPENDENCE ON KEY PERSONNEL
The Company's success has been and will continue to be highly dependent on
the efforts and skills of its senior management. The Company maintains a $1.0
million "key man" life insurance policy on its Chief Executive Officer, M.
Timothy Carey, but does not insure any other senior managers. If the Company
loses any of its senior management, its operations could be disrupted. In
addition, the Company's future success depends on its ability to find and retain
new key management personnel, which it may not be able to do successfully. See
"Management."
PURCHASERS OF THE COMMON STOCK WILL EXPERIENCE IMMEDIATE AND SUBSTANTIAL
DILUTION
Purchasers of common stock will experience immediate and substantial
dilution in net tangible book value of $ per share based on an assumed
initial public offering price of $ per share (the midpoint of the range
of initial public offering prices set forth on the cover page of this
prospectus). See "Dilution."
PERCENTAGE OWNERSHIP WILL BE REDUCED IF THE COMPANY ISSUES NEW SHARES
After the offering, the Company will have approximately shares of
common stock which are authorized but not issued. The Company can issue all of
these shares without receiving stockholder approval. The Company might issue
these shares to acquire another company or to raise money for the Company. In
addition, the Company has reserved 1,245,160 shares of common stock for issuance
under its outstanding stock options and under its Incentive Plan (as defined
herein). There are currently outstanding options to purchase 670,160 shares of
common stock. Investors' percentage ownership of the Company would be reduced if
shares are issued in connection with acquisitions, exercise of stock options, or
for other reasons. The Company may also have trouble raising additional capital
because of the possible dilution which could occur by shares being granted under
stock option plans. See "Management -- Stock Option Plans" and "Description
of Capital Stock."
THERE HAS BEEN NO PRIOR MARKET FOR THE COMMON STOCK AND THE MARKET PRICE OF THE
SHARES WILL FLUCTUATE
Prior to the offering, there has been no public market for the common
stock. The initial public offering price of the common stock will be determined
by negotiations between the Company and the underwriters' representatives. See
"Underwriting" for information on the determination of the initial public
offering price.
The price of the common stock after the offering may fluctuate widely,
depending on many factors, including:
o the perceived prospects of the Company and the oil and gas pipeline
construction industry;
o differences between the Company's actual financial and operating results
and those expected by investors and analysts;
o changes in analysts' recommendations or projections;
o general economic or market conditions; and
o broad market fluctuations.
As a result, the common stock may trade at prices significantly below the
initial public offering price.
The Company will apply for quotation of the common stock on
. There is no guarantee that a trading market for the common
stock will develop or, if a market does develop, of the level of trading volume
for the common stock.
14
<PAGE>
SHARE PRICE MAY DECLINE BECAUSE OF SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of the offering, there will be shares of common
stock outstanding (or up to shares if the underwriters' over-allotment
option is fully exercised). All of the shares sold in the offering will be
freely transferable without restriction or further registration under the
Securities Act of 1993, as amended (the "Securities Act"), except for shares
the Company's affiliates purchase.
Of the remaining 6,294,520 shares outstanding, 4,000,000 shares are freely
transferable and 2,294,520 shares cannot be sold unless the sale is registered
under the Securities Act or an exemption from registration is available,
including the exemption provided by Rule 144 under the Securities Act.
Some of the Company's stockholders have signed a Registration Rights
Agreement with the Company which allows them to require the Company to register
for public sale their shares of common stock. The parties to this Agreement have
agreed that they will not sell or otherwise dispose of their common stock for
180 days after the date of this prospectus, unless CIBC Oppenheimer Corp.
consents. See "Description of Capital Stock."
The Company has reserved 1,245,160 shares of common stock for issuance
under its outstanding stock options and under its Incentive Plan. Of these,
670,160 shares of common stock are issuable upon the exercise of outstanding
stock options, 24,000 of which are currently exercisable. The Company will
register the offering and sale of common stock which can be issued under the
Company's stock option plan. See "Management -- Stock Option Plans."
Actual sales or the possibility of sales of substantial amounts of common
stock from any of the above sources, or other sources, may adversely affect the
price of the Company's common stock and impede the Company's ability to raise
capital by issuing more equity securities. See "Shares Eligible for Future
Sale."
THE COMPANY DOES NOT INTEND TO PAY CASH DIVIDENDS
The Company does not intend to pay cash dividends on the common stock in
the foreseeable future because it anticipates that future earnings will be
retained to finance future operations and expansion. In addition, the Company's
Credit Facility prohibits it from paying dividends on its common stock. See
"Dividend Policy" and "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Liquidity and Capital Resources."
THE COMPANY WILL BE CONTROLLED BY ITS SIGNIFICANT STOCKHOLDERS
At the closing, the Company's officers, directors and principal
stockholders will collectively own approximately % of the common stock. As a
result, these stockholders will be able to elect a majority or all of the Board
of Directors, and, in general, determine (without the consent of the Company's
other stockholders) the outcome of any corporate transaction or other matter
submitted to the stockholders for approval, including mergers, consolidations
and the sale of all or substantially all of the Company's assets. These
stockholders will be able to prevent or cause a change in control of the
Company. See "Principal Stockholders" and "Description of Capital Stock."
15
<PAGE>
FORWARD-LOOKING STATEMENTS
Some of the information in this prospectus contains forward-looking
statements within the meaning of the federal securities laws. These statements
include, among others, the following: plans for, and successful closing and
integration of, future acquisitions, the Company's capacity to integrate
successfully acquisitions that have already been completed, the adequacy of
anticipated sources of cash, including the proceeds from this offering, to fund
the Company's future capital requirements and statements with respect to areas
of potential growth for the Company. These statements may be found under
"Prospectus Summary," "Unaudited Pro Forma Financial Data," "Risk
Factors," "Management's Discussion and Analysis of Financial Condition and
Results of Operations," "Selected Consolidated Financial Data" and
"Business" as well as elsewhere herein. Forward-looking statements typically
are identified by use of terms such as "may," "will," "should,"
"expect," "anticipate," "estimate" and similar words, although some
forward-looking statements are expressed differently. Investors should be aware
that the Company's actual results could differ materially from those contained
in the forward-looking statements due to a number of factors, including:
pipeline construction and rehabilitation activity worldwide, sufficiency of
capital resources, ability to integrate acquired businesses successfully,
potential adverse economic and political conditions and unanticipated
difficulties in product and services development. Investors should also consider
carefully the statements under "Risk Factors" and other sections of this
prospectus, which address additional factors that could cause the Company's
actual results to differ from those set forth in the forward-looking statements.
In addition, the protections afforded by Section 27A of the Securities Act and
Section 21E of the Securities Exchange Act of 1934, as amended, are not
applicable to initial public offerings.
16
<PAGE>
USE OF PROCEEDS
CRC-Evans estimates that the net proceeds from the sale of common stock it
is offering will be approximately $ million. If the Underwriters fully
exercise the over-allotment option, the net proceeds to the Company will be
$ million. "Net proceeds" is what the Company expects to receive after
paying the underwriting discount and other expenses of the offering. For
purposes of estimating net proceeds, the Company is assuming the public offering
price will be $ per share.
The Company intends to use (i) $ million of the net proceeds to repay
all indebtedness under the Company's credit facility (the "Credit Facility"),
(ii) approximately $1.9 million to repay its 12% subordinated notes due 2002 and
(iii) the remainder for general corporate purposes, including working capital
and possible acquisitions. Until the Company uses the net proceeds of the
offering, the Company intends to invest the net proceeds of the offering in
short-term, investment grade, interest bearing securities.
As of November 30, 1998, the Company had approximately $35.4 million of
senior debt outstanding as follows: (a) $13.0 million in the form of a revolving
line of credit under the Credit Facility, of which $9.0 million will convert
into a term loan (the "U.S. Conversion Loan") on December 31, 1999 with final
maturity in 2003, all bearing interest at (i) a base rate equal to the higher of
(x) BankBoston's base rate and (y) 0.5% above the federal funds effective rate,
plus 0.25% to 1%, or (ii) the Eurodollar rate, plus 1.75% to 2.50%, (b)
approximately $5.0 million in the form of a revolving line of credit denominated
in British pounds, of which $2.1 million will convert into a term loan (the
"U.K. Conversion Loan") on December 31, 1999 with final maturity in 2003, all
bearing interest at a floating rate equal to LIBOR plus 1%, and (c) $17.4
million in a six-year term loan (the "Acquisition Loan"), bearing interest at
the same rate as the portion discussed in (a) above. The current maturity of the
Credit Facility is June 12, 2003; however, principal payments on the Acquisition
Loan, and the U.S. Conversion Loan and the U.K. Conversion Loan are to be made
on a formula-based amortization schedule beginning September 30, 1997 and March
31, 2000, respectively, with final maturity on June 12, 2003.
Since December 1, 1997, the Company has borrowed $9.0 million and 5/81.3
million under the Credit Facility to finance acquisitions.
DIVIDEND POLICY
The Company has never declared or paid any cash dividends on the common
stock. In addition, the Company's Credit Facility prohibits it from paying
dividends on its common stock. Following the offering, the Company intends to
retain any future earnings to fund growth and does not anticipate paying any
cash dividends in the foreseeable future. Any future determination as to the
Company's dividend policy will be made at the discretion of the Company's Board
of Directors and will depend on a number of factors, including the Company's
future earnings, capital requirements, financial condition and future prospects,
restrictions on dividend payments pursuant to any of the Company's credit or
other agreements and such other factors as the Board of Directors may deem
relevant. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Liquidity and Capital Resources."
17
<PAGE>
CAPITALIZATION
The following table shows:
o The capitalization of CRC-Evans on September 30, 1998.
o The capitalization of CRC-Evans on September 30, 1998, assuming the
completion of the offering at an assumed public offering price of
$ per share and the use of the net proceeds as described
under "Use of Proceeds."
SEPTEMBER 30, 1998
----------------------------
HISTORICAL AS ADJUSTED(1)
---------- --------------
(DOLLARS IN THOUSANDS)
Current installments of long-term
debt................................. $ 2,707 $
========== ==============
Long-term debt, excluding current
installments......................... $ 34,522 $
12% subordinated notes due 2002...... 1,919
---------- --------------
Total long-term debt............ 36,441
---------- --------------
Stockholders' equity:
Common stock, $0.01 par value,
25,000,000 shares authorized,
6,294,520 shares issued and
outstanding, actual;
shares issued and
outstanding, as adjusted(2)........ 14,333
Preferred stock, $0.01 par value,
2,500,000 shares authorized, no
shares issued and outstanding,
actual; no shares issued and
outstanding, as adjusted........... --
Retained earnings.................... 11,164
Less notes receivable from
shareholders....................... (2,083)
Cumulative foreign currency
translation adjustment............. (113)
---------- --------------
Total stockholders' equity...... 23,301
---------- --------------
Total capitalization....... $ 59,742 $
========== ==============
- ------------
(1) Gives effect to the offering and the application of the estimated net
proceeds therefrom, as if they occurred on September 30, 1998. See "Use of
Proceeds."
(2) Excludes 670,160 shares of common stock issuable upon exercise of
outstanding stock options, 24,000 of which are currently exercisable.
18
<PAGE>
DILUTION
The Company's net tangible book value on September 30, 1998 was $21.2
million, or $3.37 per share. "Net tangible book value" is total assets minus
the sum of liabilities and intangible assets. "Net tangible book value per
share" is net tangible book value divided by the total number of shares
outstanding before the offering.
After giving effect to certain adjustments relating to the offering, the
Company's pro forma net tangible book value on September 30, 1998 would have
been $ or $ per share. The adjustments made to determine pro
forma net tangible book value per share are the following:
An increase in total assets and a decrease in total debt to reflect the net
proceeds of the offering as described under "Use of Proceeds" (assuming that
the public offering price will be $ per share).
The addition of the number of shares offered by this prospectus to the
number of shares outstanding. The following table illustrates the pro forma
increase in net tangible book value of $ per share and the dilution (the
difference between the offering price per share and net tangible book value per
share) to new investors:
Assumed public offering price per
share.............................. $
Net tangible book value per share as
of September 30, 1998.............. $ 3.37
Increase in net tangible book value
per share attributable to the
offering...........................
---------
Pro forma net tangible book value per
share, as of September 30, 1998,
after giving effect to the
offering...........................
---------
Dilution per share to new investors
in the offering.................... $
=========
The following table shows the difference between existing stockholders and
new investors with respect to the number of shares purchased from the Company,
the total consideration paid and the average price paid per share. The table
assumes that the public offering price will be $ per share.
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION
--------------------- ------------------------ AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
----------- ------- -------------- ------- -------------
<S> <C> <C> <C> <C> <C>
Existing stockholders................ 6,294,520 % $ 14,382,979 % $2.29
New investors........................ $
----------- ------- -------------- -------
Total........................... 100.0% $ 100.0%
=========== ======= ============== =======
</TABLE>
The foregoing tables exclude the effect of 670,160 shares of common stock
issuable upon exercise of outstanding stock options, 24,000 of which are
currently exercisable, and which were granted to officers, employees and
consultants at a weighted average exercise price of $2.78 per share. To the
extent any of the outstanding options or warrants are exercised, there will be
further dilution to stockholders. See "Management -- Stock Option Plans."
19
<PAGE>
UNAUDITED PRO FORMA FINANCIAL DATA
The unaudited pro forma statements of earnings for the year ended March 31,
1998 and the six months ended September 30, 1997, give effect to the Purchase
Transactions as if they had occurred on April 1, 1997. The unaudited pro forma
statement of earnings for the year ended March 31, 1998 is derived from the
audited historical financial statements of (a) the Predecessor Business for the
period from April 1, 1997 through June 11, 1997 and (b) the Company from June
12, 1997 through March 31, 1998. The unaudited pro forma statement of earnings
for the year ended September 30, 1997 is derived from the (a) audited financial
statements of the Predecessor Business for the period from April 1, 1997 through
June 11, 1997 and (b) unaudited financial statements of the Company for the
period from June 12, 1997 through September 30, 1997.
The pro forma adjustments which give effect to the various events described
above are based upon currently available information and upon certain
assumptions that management believes are reasonable. The Company has accounted
for the assets acquired and liabilities assumed in the Management Buyout at
their allocated estimated fair market values at the date of the Management
Buyout using the purchase method of accounting. See "Risk Factors -- The
Company's Acquisition Strategy is Risky."
The unaudited pro forma financial statements do not purport to be
indicative of the results of operations that would have occurred or that may be
obtained in the future if the transactions described had occurred as presented
in such statements. In addition, future results may vary significantly from the
results reflected in such statements due to general economic conditions, labor
costs, competition, pipeline construction and rehabilitation activity worldwide,
insufficient capital resources, inability to integrate acquired businesses
successfully, adverse economic conditions, unanticipated difficulties in product
development and several other factors, many of which are beyond the Company's
control. See "Risk Factors."
The unaudited pro forma financial statements should be read in conjunction
with the notes thereto, "Management's Discussion and Analysis of Financial
Condition and Results of Operations," and the historical financial statements
of the Company and the Predecessor Business, including the notes thereto,
included elsewhere herein.
20
<PAGE>
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF EARNINGS
YEAR ENDED MARCH 31, 1998
<TABLE>
<CAPTION>
HISTORICAL HISTORICAL
PREDECESSOR BUSINESS COMPANY
4/1/97-6/11/97 6/12/97-3/31/98 ADJUSTMENTS PRO FORMA(D)
-------------------- --------------- ----------- ------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
Revenues:
Sales revenue...................... $ 5,687 $ 23,850 $ 29,537
Rental and service revenue......... 6,928 27,991 34,919
-------------------- --------------- ------------
Total revenues....................... 12,615 51,841 64,456
-------------------- --------------- ------------
Cost of revenues:
Cost of sales revenue.............. 3,712 16,096 $ 3(a) 19,811
Cost of rental and service
revenue......................... 5,451 18,311 189(a) 23,951
-------------------- --------------- ----------- ------------
Total cost of revenues............... 9,163 34,407 192 43,762
-------------------- --------------- ----------- ------------
Gross profit......................... 3,452 17,434 (192) 20,694
Operating expenses:
Selling, general and
administrative.................. 3,016 10,114 -- 13,130
Research and development........... 153 951 -- 1,104
Other expenses (income)............ (153) 79 -- (74)
Operating income..................... 436 6,290 (192) 6,534
Interest expense (income)............ (50) 2,411 334(b) 2,695
-------------------- --------------- ----------- ------------
Income before income taxes........... 486 3,879 (526) 3,839
Income tax expense................... 207 1,536 (208)(c) 1,535
-------------------- --------------- ----------- ------------
Net income........................... $ 279 $ 2,343 $ (318) $ 2,304
==================== =============== =========== ============
NET INCOME PER SHARE:
Basic................................ $ 0.59 $ 0.58
Diluted.............................. 0.57 0.56
WEIGHTED AVERAGE SHARES OUTSTANDING:
Basic................................ 4,000,000 4,000,000
Diluted.............................. 4,120,000 4,120,000
</TABLE>
- ------------
(a) Resulting depreciation from the write up of the fair value of property,
plant and equipment and rental assets.
(b) Reflects net expense adjustment due to funds borrowed in connection with the
Purchase Transactions pursuant to the acquisition term note payable as
follows:
Acquisition term note payable........ $ 20,000,000
Calculated interest rate on
acquisition term note payable for
the period from April 1, 1997 to
June 11, 1997...................... 1.67%
--------------
Interest expense adjustment for the
period from April 1, 1997 to June
11, 1997........................... $ 334,000
==============
(c) Reflects tax effect of all pre-tax pro forma adjustments.
(d) Does not give effect to the offering and the application of the net proceeds
therefrom. Giving effect to the use of such proceeds as described in "Use
of Proceeds," interest expense and net income per share would be $ and
$ , respectively.
21
<PAGE>
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF EARNINGS
SIX MONTHS ENDED SEPTEMBER 30, 1997
<TABLE>
<CAPTION>
HISTORICAL HISTORICAL
PREDECESSOR BUSINESS COMPANY
4/1/97-6/11/97 6/12/97-9/30/97 ADJUSTMENTS PRO FORMA(D)
--------------------- ---------------- ------------ ------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
Revenues:
Sales revenue...................... $ 5,687 $ 9,902 $ 15,589
Rental and service revenue......... 6,928 11,838 18,766
--------------------- ---------------- ------------
Total revenues....................... 12,615 21,740 34,355
--------------------- ---------------- ------------
Cost of revenues:
Cost of sales revenue.............. 3,712 6,470 $ 3(a) 10,185
Cost of rental and service
revenue......................... 5,451 7,588 189(a) 13,228
--------------------- ---------------- ------------ ------------
Total cost of revenues............... 9,163 14,058 192 23,413
--------------------- ---------------- ------------ ------------
Gross profit......................... 3,452 7,682 (192) 10,942
Operating expenses:
Selling, general and
administrative.................. 3,016 3,894 6,910
Research and development........... 153 319 472
Other expenses (income)............ (153) (42) (195)
--------------------- ---------------- ------------ ------------
Operating income..................... 436 3,511 (192) 3,755
Interest expense (income)............ (50) 880 334(b) 1,164
--------------------- ---------------- ------------ ------------
Income before income taxes........... 486 2,631 (526) 2,591
Income tax expense................... 207 1,042 (208)(c) 1,041
--------------------- ---------------- ------------ ------------
Net income........................... $ 279 $ 1,589 $ (318) $ 1,550
===================== ================ ============ ============
NET INCOME PER SHARE:
Basic................................ $ 0.40 $ 0.39
Diluted.............................. 0.39 0.38
WEIGHTED AVERAGE SHARES OUTSTANDING:
Basic................................ 4,000,000 4,000,000
Diluted.............................. 4,120,000 4,120,000
</TABLE>
- ------------
(a) Resulting depreciation from the write up of the fair value of property,
plant and equipment and rental assets.
(b) Reflects net expense adjustment due to funds borrowed in connection with the
Purchase Transactions pursuant to the acquisition term note payable as
follows:
Acquisition term note payable........ $ 20,000,000
Calculated interest rate on
acquisition term note payable for
the period from April 1, 1997 to
June 11, 1997...................... 1.67%
--------------
Interest expense adjustment for the
period from April 1, 1997 to June
11, 1997........................... $ 334,000
==============
(c) Reflects tax effect of all pre-tax pro forma adjustments.
(d) Does not give effect to the offering and the application of the net proceeds
therefrom. Giving effect to the use of such proceeds as described in "Use
of Proceeds," interest expense and net income per share would be $ and
$ , respectively.
22
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
The following table sets forth, for the dates and periods indicated,
selected historical consolidated financial data of the Company and the
Predecessor Businesses. The data for each of the years ended March 31, 1996 and
1997 and the periods from April 1, 1997 to June 11, 1997 and from June 12, 1997
to March 31, 1998 are derived from the audited financial statements of the
Company and the Predecessor Business. The data for each of the years ended March
31, 1994 and 1995 are derived from the unaudited financial statements of the
Predecessor Business. The data for the six months ended September 30, 1998 are
derived from the unaudited condensed consolidated financial statements of the
Company that are included elsewhere in this Prospectus. The following financial
data should be read in connection with such financial statements including the
notes thereto. Results of operations for the interim periods are not necessarily
indicative of results that may be expected for any other interim period or for
the year as a whole.
<TABLE>
<CAPTION>
HISTORICAL HISTORICAL
PREDECESSOR BUSINESS COMPANY
-------------------------------------------------------- ------------
YEAR ENDED MARCH 31,
------------------------------------------ 4/1/97-6/11 6/12/97-3/31
1994 1995 1996 1997 1997 1998
--------- --------- --------- --------- ----------- ------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF EARNINGS DATA:
Revenues:
Sales revenue......................... $ 20,843 $ 30,838 $ 25,325 $ 26,082 $ 5,687 $ 23,850
Rental and service revenue............ 31,029 35,717 39,329 43,293 6,928 27,991
--------- --------- --------- --------- ----------- ------------
Total revenues.......................... 51,872 66,555 64,654 69,375 12,615 51,841
--------- --------- --------- --------- ----------- ------------
Cost of revenues:
Cost of sales revenue................. 15,128 26,398 16,595 18,373 3,712 16,096
Cost of rental and service revenue.... 21,695 24,391 29,256 28,303 5,451 18,311
--------- --------- --------- --------- ----------- ------------
Total cost of revenues.................. 36,823 50,789 45,851 46,676 9,163 34,407
--------- --------- --------- --------- ----------- ------------
Gross profit............................ 15,049 15,766 18,803 22,699 3,452 17,434
Operating expenses:
Selling, general and administrative... 12,656 12,955 13,056 13,018 3,016 10,114
Research and development.............. 731 703 856 754 153 951
Other expenses (income)............... 4 (267) 2,750 367 (153) 79
--------- --------- --------- --------- ----------- ------------
Operating income........................ 1,658 2,375 2,141 8,560 436 6,290
Interest expense (income)............... (642) 213 (246) (689) (50) 2,411
--------- --------- --------- --------- ----------- ------------
Income before income taxes.............. 2,300 2,162 2,387 9,249 486 3,879
Income tax expense...................... 445 799 889 3,359 207 1,536
--------- --------- --------- --------- ----------- ------------
Net income.............................. $ 1,855 $ 1,363 $ 1,498 $ 5,890 $ 279 $ 2,343
========= ========= ========= ========= =========== ============
NET INCOME PER SHARE:
Basic................................... $ 0.59
Diluted................................. 0.57
WEIGHTED AVERAGE SHARES OUTSTANDING:
Basic................................... 4,000,000
Diluted................................. 4,120,000
OTHER FINANCIAL DATA:
EBITDA.................................. $ 6,365 $ 7,207 $ 6,978 $ 10,847 $ 824 $ 8,632
Depreciation and amortization........... 4,707 4,832 4,837 2,287 388 2,342
Capital expenditures (excluding
acquisitions)......................... 473 2,402 65 1,083
BALANCE SHEET DATA:
Working capital......................... $ 24,056
Total assets............................ 56,344
Total long-term debt, excluding current
installments.......................... 30,939
Total liabilities....................... 46,748
Total stockholders' equity.............. 9,596
</TABLE>
SIX MONTHS
ENDED
SEPTEMBER 30,
1998
-------------
STATEMENT OF EARNINGS DATA:
Revenues:
Sales revenue......................... $ 20,428
Rental and service revenue............ 36,360
-------------
Total revenues.......................... 56,788
-------------
Cost of revenues:
Cost of sales revenue................. 13,342
Cost of rental and service revenue.... 18,061
-------------
Total cost of revenues.................. 31,403
-------------
Gross profit............................ 25,385
Operating expenses:
Selling, general and administrative... 9,175
Research and development.............. 690
Other expenses (income)............... (324)
-------------
Operating income........................ 15,844
Interest expense (income)............... 1,709
-------------
Income before income taxes.............. 14,135
Income tax expense...................... 5,313
-------------
Net income.............................. $ 8,822
=============
NET INCOME PER SHARE:
Basic................................... $ 1.56
Diluted................................. 1.43
WEIGHTED AVERAGE SHARES OUTSTANDING:
Basic................................... 5,670,479
Diluted................................. 6,171,301
OTHER FINANCIAL DATA:
EBITDA.................................. $ 17,732
Depreciation and amortization........... 1,888
Capital expenditures (excluding
acquisitions)......................... 1,759
BALANCE SHEET DATA:
Working capital......................... $ 34,330
Total assets............................ 84,469
Total long-term debt, excluding current
installments.......................... 36,441
Total liabilities....................... 61,168
Total stockholders' equity.............. 23,301
23
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
INVESTORS SHOULD READ THIS DISCUSSION TOGETHER WITH THE FINANCIAL
STATEMENTS AND OTHER INFORMATION INCLUDED IN THIS PROSPECTUS.
OVERVIEW
The Company has been under its current ownership since June 12, 1997, when
certain members of management, together with Natural Gas Partners and Equus,
purchased the Company's business and assets from Weatherford Enterra.
The Company provides equipment and services, primarily to pipeline
contractors, which are essential to the successful completion of a pipeline
construction project. Although the Company's products and services represent
only a relatively small cost component of a pipeline construction project, the
critical nature of the Company's equipment and services has a significant impact
on the pipeline contractor's ability to complete a project within budget and on
time. The Company's pipeline products and services provide a wide range of
solutions to the pipeline construction and rehabilitation industry. The Company
sells and/or rents automatic pipeline welding systems, pipe bending equipment,
line-up clamps, pipe coating plants, coating and cleaning equipment, pipeline
rehabilitation equipment and lay barge pipe handling equipment. The Company also
provides specialized services including joint coating, cement weighting,
induction and resistance heating, and automatic welding systems training and
supervision.
The Company's business is seasonal. In the United States, the Company's
highest level of sales and rentals generally occur from April through November
of each year, mainly due to the constraints on pipeline construction during the
winter months. Canadian pipeline construction is also seasonal but consists of a
summer and a winter pipeline construction season. There is no significant
seasonality with respect to the aggregate of other international operations in
the Company's industry. The Company's pipeline equipment is generally rented in
the United States and Canada and, with the exception of automatic welding
equipment, sold internationally.
The Company derives its revenue from contracts or purchase orders with
durations from less than a week to several months and, occasionally, for greater
than one year. The Company obtains contracts for its work primarily by
competitive bidding or through negotiations with long-standing clients. Large
projects can cause variability in the Company's quarterly results. This factor,
as well as external factors, such as weather, client financial condition and
financing requirements, labor, governmental regulations and politics may affect
a project's timing, progress and completion date and the resulting timing of
revenue recognition. The Company recognizes sales revenue when it ships
equipment, rental revenue proratably over the term of the rental agreement and
service revenue when it renders the services. Because of the character of its
business, the Company believes that quarter-to-quarter comparisons of operating
results may not always be meaningful and that its operating results should be
evaluated over a sufficiently long time horizon to gauge the effects of large
projects.
Simultaneous with the effectiveness of the registration statement, the
Company will amend two of its stock option plans to allow for immediate vesting
of the outstanding stock options and fix the exercise price at $2.78 per share.
The in-the-money portion of all of the options has been valued at $
which will be recorded as a one-time, non-cash compensation expense during the
year ended March 31, 1999.
24
<PAGE>
RESULTS OF OPERATIONS
The following table sets forth the relationship (in percentage terms) to
the related line items of certain revenues and expenses together with the change
in such line items from period to period. Pro forma data give effect to the
Purchase Transactions as if they had occurred on April 1, 1997.
<TABLE>
<CAPTION>
PRO FORMA HISTORICAL
HISTORICAL PRO FORMA COMPANY COMPANY
PREDECESSOR BUSINESS COMPANY ------------- -------------
-------------------- ---------- SIX MONTHS SIX MONTHS
YEAR ENDED MARCH 31, YEAR ENDED ENDED ENDED
-------------------- MARCH 31, SEPTEMBER 30, SEPTEMBER 30,
1996 1997 1998 1997 1998
--------- --------- ---------- ------------- -------------
<S> <C> <C> <C> <C> <C>
OPERATING DATA:
Revenues:
Sales revenue...................... 39.2% 37.6% 45.8% 45.4% 36.0%
Rental and service revenue......... 60.8 62.4 54.2 54.6 64.0
Cost of revenues:
Cost of sales revenue.............. 65.5 70.4 67.1 65.3 65.3
Cost of rental and service
revenue.......................... 74.4 65.4 68.6 70.5 49.7
Total cost of revenues............... 70.9 67.3 67.9 68.2 55.3
Gross profit......................... 29.1 32.7 32.1 31.9 44.7
Operating expenses:
Selling, general and
administrative................... 20.2 18.8 20.4 20.1 16.2
Research and development........... 1.3 1.1 1.7 1.4 1.2
Other expenses (income)............ 4.3 0.5 (0.1) (0.6) (0.6)
Operating income..................... 3.3 12.3 10.1 10.9 27.9
Interest expense (income)............ (0.4) (1.0) 4.2 3.4 3.0
Income before income tax............. 3.7 13.3 6.0 7.5 24.9
Income tax expense................... 37.2 36.3 40.0 40.2 37.6
Net income........................... 2.3% 8.5% 3.6% 4.5% 15.5%
</TABLE>
RESULTS OF OPERATIONS FOR THE SIX MONTHS ENDED SEPTEMBER 30, 1998 COMPARED TO
THE PRO FORMA RESULTS OF OPERATIONS FOR THE SIX MONTHS ENDED SEPTEMBER 30, 1997
SALES REVENUE. Sales revenue increased to $20.4 million in the six months
ended September 30, 1998 from $15.6 million in the six months ended September
30, 1997, representing an increase of 31.0%. This increase was caused by the
acquisition of B.L. Key Services, L.L.C. ("Key"), the Company's concrete
weighting division, on April 1, 1998, which increase was partially offset by a
decrease in pipeline products and automatic welding products sales.
RENTAL AND SERVICE REVENUE. Rental and service revenue increased to $36.4
million in the six months ended September 30, 1998 from $18.8 million in the six
months ended September 30, 1997, representing an increase of 93.8%. This
increase was attributable to increased pipeline construction activity in North
and South America, and to a lesser extent, the acquisition of certain pipeline
construction equipment assets.
COST OF SALES REVENUE. Cost of sales revenue increased to $13.3 million in
the six months ended September 30, 1998 from $10.2 million in the six months
ended September 30, 1997, representing an increase of 31.0% due to an increase
in sales volume. The cost of sales as a percentage of sales revenue was the same
at 65.3% for the two periods.
COST OF RENTAL AND SERVICE REVENUE. Cost of rental and service revenue
increased to $18.1 million in the six months ended September 30, 1998 from $13.2
million in the six months ended September 30, 1997, representing an increase of
36.5% because of increased rental and service activities. Costs as a percentage
of rental and service revenue declined 29.5% from 70.5% to 49.7%. This
improvement was due to the Company's participation in longer-term projects
thereby reducing equipment overhaul costs as a percentage of revenue.
GROSS PROFIT. Gross profit increased to $25.4 million in the six months
ended September 30, 1998 from $10.9 million in the six months ended September
30, 1997, representing an increase of 132.0%. Gross
25
<PAGE>
profit as a percentage of total revenues increased 40.1% due to a relatively
greater increase in rental income which typically generates higher margins for
the Company than equipment sales and service revenue.
SELLING, GENERAL AND ADMINISTRATIVE. Selling, general and administrative
expenses increased to $9.2 million in the six months ended September 30, 1998
from $6.9 million in the six months ended September 30, 1997, representing an
increase of 32.8%. Approximately $0.6 million of the increase was due to
additional costs associated with owning and operating Key since April 1998. As a
percentage of total revenues, selling, general and administrative expenses
decreased 19.4% from 20.1% to 16.2% for the respective periods. This improvement
was due to an increase in total revenues.
RESEARCH AND DEVELOPMENT. Research and development expenses increased to
$0.7 million in the six months ended September 30, 1998 from $0.5 million in the
six months ended September 30, 1997 representing an increase of 46.2%.
OPERATING INCOME. Operating income increased to $15.8 million in the six
months ended September 30, 1998 from $3.8 million in the six months ended
September 30, 1997, representing an increase of 321.9% due to increased revenue
and improvements in operating expense margins.
INTEREST EXPENSE. Interest expense increased to $1.7 million in the six
months ended September 30, 1998 from $1.2 million in the six months ended
September 30, 1997, representing an increase of 46.8% as a result of an
increased debt level incurred as a result of the Company's acquisitions during
the six months ended September 30, 1998.
PRO FORMA RESULTS OF OPERATIONS FOR THE YEAR ENDED MARCH 31, 1998 COMPARED TO
RESULTS OF OPERATIONS
FOR THE YEAR ENDED MARCH 31, 1997
SALES REVENUE. Sales revenue increased to $29.5 million in the year ended
March 31, 1998 from $26.1 million in the year ended March 31, 1997, representing
an increase of 13.2%. This increase was a result of an increase in pipeline
construction activity around the world primarily in North and South America and
non-recurring automatic welding sales.
RENTAL AND SERVICE REVENUE. Rental and service revenue decreased to $34.9
million in the year ended March 31, 1998 from $43.3 million in the year ended
March 31, 1997, representing a decrease of 19.3%. This decrease was attributable
to unusually large contracts in Algeria for joint coating products and services
and, to a lesser extent, automatic welding, which contracts were completed in
1997.
COST OF SALES REVENUE. Cost of sales revenue increased to $19.8 million in
the year ended March 31, 1998 from $18.4 million in the year ended March 31,
1997, representing an increase of 7.8% due to increased sales activity. The cost
of equipment sales as a percentage of equipment sales revenue decreased 4.7% due
to a higher proportion of the Company's sales being of higher margin products.
COST OF RENTAL AND SERVICE REVENUE. Cost of rental and service revenue
decreased to $24.0 million in the year ended March 31, 1998 from $28.3 million
in the year ended March 31, 1997, representing a decrease of 15.4% due to lower
rentals and services related to large contracts in Algeria which were completed
in 1997. Costs of rental and service revenue as a percentage of rental and
service revenue increased approximately 4.9% as a result of lower rental and
service revenue, partially offset by a decrease in equivalent expense due to
spreading some relatively fixed costs over a lower revenue base.
GROSS PROFIT. Gross profit decreased to $20.7 million in the year ended
March 31, 1998 from $22.7 million in the year ended March 31, 1997, representing
a decrease of 8.8%. Gross profit as a percentage of total revenues decreased
1.8% which was primarily due to lower rental and services revenue which
typically generates higher margins for the Company than equipment sales and
service revenue.
SELLING, GENERAL AND ADMINISTRATIVE. Selling, general and administrative
expenses increased to $13.1 million in the year ended March 31, 1998 from $13.0
million in the year ended March 31, 1997, representing an increase of less than
1%.
RESEARCH AND DEVELOPMENT. Research and development expenses increased to
$1.1 million in the year ended March 31, 1998 from $0.8 million in the year
ended March 31, 1997.
26
<PAGE>
OPERATING INCOME. Operating income decreased to $6.5 million in the year
ended March 31, 1998 from $8.6 million in the year ended March 31, 1997,
representing a decrease of 23.7% which was primarily due to lower total
revenues.
INTEREST EXPENSE. Interest expense increased to $2.7 million in the year
ended March 31, 1998 from interest income of $0.7 million in the year ended
March 31, 1997. This increase is attributable to the debt incurred to complete
the Management Buyout and for working capital.
RESULTS OF OPERATIONS FOR THE YEAR ENDED MARCH 31, 1997 COMPARED TO THE YEAR
ENDED MARCH 31, 1996
SALES REVENUE. Sales revenue increased to $26.1 million in the year ended
March 31, 1997 from $25.3 million in the year ended March 31, 1996, representing
an increase of 3.0% as a result of slight increases in demand for the Company's
products.
RENTAL AND SERVICE REVENUE. Rental and service revenue increased to $43.3
million in the year ended March 31, 1997 from $39.3 million in the year ended
March 31, 1996, representing an increase of 10.1%. This increase was primarily
due to increased demand for automatic welding rentals and services.
COST OF SALES REVENUE. Cost of sales revenue increased to $18.4 million in
the year ended March 31, 1997 from $16.6 million in the year ended March 31,
1996, representing an increase of 10.7%. The cost of equipment sales as a
percentage of equipment sales revenue increased 7.5% primarily due to a higher
proportion of the Company's sales being of lower margin products.
COST OF RENTAL AND SERVICE REVENUE. Cost of rental and service revenue
decreased to $28.3 million in the year ended March 31, 1997 from $29.3 million
in the year ended March 31, 1996, representing a decrease of 3.3%. The cost of
rental and service revenue as a percentage of rental and service revenue
decreased 12.1% primarily due to the Company's participation in longer-term
projects thereby reducing equipment overhaul costs as a percentage of revenue.
GROSS PROFIT. Gross profit increased to $22.7 million in the year ended
March 31, 1997 from $18.8 million in the year ended March 31, 1996, representing
an increase of 20.7%. Gross profit as a percentage of total revenues increased
12.4% due to a relatively greater increase in rental income which typically
generates higher margins for the Company than equipment sales and service
revenue.
SELLING, GENERAL AND ADMINISTRATIVE. Selling, general and administrative
expenses decreased to $13.0 million in the year ended March 31, 1997 from $13.1
million in the year ended March 31, 1996, representing a decrease of 0.3%
primarily because selling, general and administrative expenses are relatively
fixed.
RESEARCH AND DEVELOPMENT. Research and development expenses decreased to
$0.8 million in the year ended March 31, 1997 from $0.9 million in the year
ended March 31, 1996, representing a decrease of 11.9%.
OPERATING INCOME. Operating income increased to $8.6 million in the year
ended March 31, 1997 from $2.1 million in the year ended March 31, 1996,
representing an increase of 299.8% due to increased revenues and improvement in
operating expense margins.
LIQUIDITY AND CAPITAL RESOURCES
The Company intends to pursue a growth oriented strategy, which is to be
implemented by (i) expanding international operations, (ii) adding related
products and services, (iii) making strategic acquisitions and (iv) extending
and leveraging its technological leadership. The Company is currently evaluating
certain business acquisition and expansion opportunities, but currently has no
binding contracts or capital commitments relating to any potential acquisitions
or developments. See "Risk Factors -- The Company's Acquisition Strategy is
Risky."
Net cash used in operating activities for the period from June 12, 1997 to
March 31, 1998 was $2.3 million. For the six months ended September 30, 1998,
net cash provided by operating activities was $4.2 million. Improvements in cash
flow from operating activities are principally the result of an increase in the
level of pipeline construction which had a positive effect on all of the
Company's operations.
27
<PAGE>
Capital expenditures, excluding acquisitions, were $1.1 million and $1.8
million for the period from June 12, 1997 to March 31, 1998 and the six months
ended September 30, 1998, respectively. Principal payments on long-term debt
were $1.5 million and $1.1 million for the period June 12, 1997 to March 31,
1998 and the six months ended September 30, 1998, respectively. Capital
expenditures for the Company, excluding acquisitions, from September 30, 1998
through March 31, 2000 are expected to be approximately $8.0 million.
On May 20, 1998, the Company issued 995,640 shares of common stock to each
of Natural Gas Partners and Equus and 235,240 shares of common stock to certain
members of management for aggregate proceeds of approximately $5.1 million.
As of November 30, 1998, the principal amount of outstanding indebtedness
under the Credit Facility for the U.S. revolver, U.K. revolver and term loan was
$13.0 million, approximately $5.0 million and $17.4 million, respectively, of
which $9.0 million of the U.S. revolver and $2.1 million of the U.K. revolver
will convert into a term loan on December 31, 1999. The current maturity of the
Credit Facility is June 12, 2003; however, principal payments on the current
term loan and the term loans to be converted are made on a formula-based
amortization schedule beginning September 30, 1997 and March 31, 2000,
respectively, with final maturity on June 12, 2003. All amounts outstanding
under the Credit Facility are secured by substantially all of the Company's
assets. The Company also has (a) $1.9 million in the form of 12% subordinated
notes due 2002 (which the Company expects to repay with the proceeds of the
offering), (b) $0.4 million of other subordinated debt and (c) contingent
liabilities for issued standby letters of credit totaling $2.4 million
outstanding.
After the closing of the offering and the application of the net proceeds
therefrom, the Company expects to have $34.0 million and approximately $5.0
million of availability under the U.S. and U.K. revolvers, respectively.
The Company believes cash on hand and the proceeds from the offering,
together with cash flow anticipated from operations and available borrowings
under the Credit Facility, will be adequate to meet debt service requirements,
fund continuing capital requirements and satisfy working capital and general
corporate needs through the next twelve to eighteen months.
The Company may need to raise additional funds through public or private
debt or equity financing to take advantage of opportunities that may become
available to the Company, including acquisitions and more rapid expansion. The
availability of such capital will depend upon prevailing market conditions and
other factors over which the Company has no control, as well as the Company's
financial condition and results of operations. There can be no assurance that
sufficient funds will be available to finance intended acquisitions or capital
expenditures to sustain the Company's recent rate of growth.
EFFECT OF INFLATION AND CHANGING PRICES; FOREIGN EXCHANGE RISK MANAGEMENT
The Company's operations are affected by increases in prices, whether
caused by inflation, government mandates or other economic factors in the
countries in which it operates. The Company attempts to recover anticipated
increases in the cost of labor, materials and outside services through price
escalation provisions in certain of its major contracts or by considering the
estimated effect of such increases when bidding or pricing its equipment and
services.
The Company's operations in the United States, Canada and the U.K.
typically negotiate contracts in U.S. dollars, Canadian dollars and British
pounds, respectively, but the U.S. and U.K. operations may be required to accept
all or a portion of payment under a contract in a currency other than that of
its home country. To mitigate currency exchange risk, the Company seeks to match
other currency revenue with expenses in that currency. To the extent it is
unable to match revenues and expenses in the same currency, the Company may use
forward contracts, options or other common hedging techniques in limiting
foreign exchange risks. As a result of the Company's foreign exchange risk
management measures, the aggregate foreign exchange losses during the last four
years have been limited to $286,838. There can be no assurance of the success of
this strategy in the future.
28
<PAGE>
THE YEAR 2000
With the new millennium approaching, many institutions around the world are
reviewing and modifying their computer systems to ensure that they are "year
2000" compliant. The issue, in general terms, is that many existing computer
systems and microprocessors with date functions (including those in
non-information technology equipment and systems) use only two digits to
identify a year in the date field with the assumption that the first two digits
of the year are always "19." Consequently, on January 1, 2000, computers that
are not "year 2000" compliant may read the year 1900. Systems that calculate,
compare or sort using the incorrect date may malfunction. The Company uses a
number of computer programs across its entire operation both in application
software (IT applications) and in plant and equipment (embedded technology). In
view of the potential adverse impact of this "year 2000" issue on its
business, operations, and financial condition, the Company has established a
central function to coordinate and report on a continuing basis with regard to
the assessment, remediation planning, and plan implementation processes of the
Company directed to "year 2000." The Company is in the process of surveying
its major vendors and customers and has checked its products' computers
(particularly its automated welding system) for "year 2000" compliance. The
Company believes that the "year 2000" assessment, remediation planning and
plan implementation will be completed by the end of the second quarter of 1999.
In connection with its survey, the Company accelerated its decision to purchase
a new business software system, which purchase is expected to be completed on
December 31, 1998. Such system is projected to be in place by June 30, 1999. As
a backup for the new system, the Company has obtained a patch for the system it
currently uses. Costs to date incurred in connection with the "year 2000"
assessment, remediation, planning and plan implementation are approximately
$100,000 and have been expensed. Aggregate cost to the Company, including
estimated cost of $500,000 associated with the acquisition and installation of
the new business software system, is estimated to be $800,000. The Company is
continuing its assessment of the impact of "year 2000" across its business and
operations, but currently believes that the costs of addressing this issue will
not have a material adverse impact on the Company's financial position. However,
if the Company and third parties upon which it relies are unable to address this
issue in a timely manner, it could result in a material financial risk to the
Company. In an attempt to assure that this does not occur, the Company plans to
devote all resources required to resolve any significant year 2000 issues in a
timely manner.
NEW ACCOUNTING PRONOUNCEMENTS
In June 1997, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards No. 130, Reporting Comprehensive
Income (SFAS 130). SFAS 130 establishes standards for reporting and display of
comprehensive income and its components in a full set of general purpose
financial statements. It does not, however, specify when to recognize or how to
measure items that make up comprehensive income. SFAS 130 was issued to address
the concerns over the practice of reporting elements of comprehensive income
directly in equity. SFAS 130 is effective for annual periods beginning after
December 15, 1997.
In June 1997, the FASB issued Statement of Financial Accounting Standards
No. 131, Disclosures about Segments of an Enterprise and Related Information
(SFAS 131). SFAS 131 supersedes SFAS No. 14, Financial Reporting for Segments of
a Business Enterprise but retains the requirement to report information about
major customers. SFAS 131 replaces the "industry segment" concept of Statement
14 with a "management approach" concept as the basis for identifying
reportable segments. The management approach is based on the way that management
organizes the segments within the enterprise for making operating decisions and
assessing performance. Consequently, the segments are evident from the structure
of the enterprise's internal organization. It focuses on financial information
that an enterprise's decision makers use to make decisions about the
enterprise's operating matters. SFAS 131 is effective for financial statements
for periods beginning after December 15, 1997, and is not anticipated to have a
significant impact on the Company's segment reporting.
In February 1998, the FASB issued Statement of Financial Accounting
Standards No. 132, Employers' Disclosures about Pensions and Other
Postretirement Benefits (SFAS 132), which is required to be implemented for
fiscal years beginning after December 15, 1997. SFAS 132 revises employers'
disclosures
29
<PAGE>
about pension and other postretirement benefit plans. It does not change the
measurement or recognition of those plans.
Statement of Financial Accounting Standards No. 133, Accounting for
Derivatives Instruments and Hedging Activities (SFAS 133), was issued by the
FASB in June 1998. Statement 133 standardizes the accounting for derivatives
instruments, including certain derivative instruments embedded in other
contracts. Under the standard, entities are required to carry all derivative
instruments in the balance sheet at fair value. The accounting for changes in
the fair value of a derivative instrument as a hedge of exposures to changes in
fair values, cash flows, or foreign currencies. If the hedge exposure is a fair
value exposure, the gain or loss on the derivative instrument is recognized in
earnings in the period of change together with the offsetting loss or gain on
the hedged item attributable to the risk being hedged. If the hedged exposure is
a cash flow exposure, the effective portion of the gain or loss on the
derivative instrument is reported initially as a component of other
comprehensive income (outside earnings) and subsequently reclassified into
earnings when the forecasted transaction affects earnings. Any amounts excluded
from the assessment of hedge effectiveness as well as the ineffective portion of
the gain or loss is reported in earnings immediately. The Company must adopt
Statement 133 by September 1, 1999; however, early adoption is permitted.
30
<PAGE>
BUSINESS
THE COMPANY
CRC-Evans is the world's leading provider of specialized equipment and
services used in the construction and rehabilitation of gas and oil transmission
pipelines. CRC-Evans and its Predecessors have been leaders in the specialized
pipeline construction equipment industry since 1933. The Company estimates that
its equipment or services are currently used on a significant majority of the
gas and oil transmission pipeline construction projects throughout the world.
The Company's management team together with two institutional investors,
Natural Gas Partners and Equus, acquired the assets of and the business
conducted by the Company from Weatherford Enterra in the Management Buyout in
June 1997. The Company's current senior management team has been involved in
managing CRC-Evans or its Predecessors' major lines of business since 1971. The
Company believes the depth and experience of its management and employees are
keys to the Company's excellent reputation with the world's leading pipeline
contractors.
The Company provides equipment and services, primarily to pipeline
contractors, which are essential to the successful completion of a pipeline
construction project. Although the Company's products and services represent
only a relatively small cost component of a pipeline construction project, the
critical nature of the Company's equipment and services has a significant impact
on the pipeline contractor's ability to complete a project within budget and on
time. The Company's pipeline products and services provide a wide range of
solutions to the pipeline construction and rehabilitation industry. The Company
sells and/or rents automatic pipeline welding systems, pipe bending equipment,
line-up clamps, pipe coating plants, coating and cleaning equipment, pipeline
rehabilitation equipment and lay barge pipe handling equipment. The Company also
provides specialized services including joint coating, cement weighting,
induction heating, and automatic welding systems training and technical
assistance.
The Company has experienced significant growth in revenues, EBITDA and net
income since the Management Buyout. Management believes that this growth is
attributable to (i) a recent increase in demand for the Company's specialized
products and services in response to increased worldwide pipeline construction
and rehabilitation activity, (ii) the Company's strategic acquisitions and (iii)
the successful implementation of the Company's business strategy. For the six
months ended September 30, 1998, the Company generated revenue, EBITDA and net
income of $56.8 million, $17.7 million and $8.8 million, respectively. These
amounts represent increases of approximately 65.3%, 241.5% and 469.2%,
respectively, over the pro forma six months ended September 30, 1997 results.
INDUSTRY OVERVIEW
The pipeline construction equipment and services industry provides products
and services to support pipeline construction and rehabilitation performed by
pipeline construction contractors. CRC-Evans provides specialized equipment and
services used in the construction of gas and oil pipelines ranging from 6 to 60
inches in diameter and steel water pipelines ranging up to 120 inches in
diameter. These specialized products and services are critical to the pipeline
contractor's ability to complete a project within budget and on time. These
products and services are generally provided by specialized pipeline equipment
manufacturers and service providers such as the Company because: (i) most pieces
of pipeline construction equipment are specific to a small range of diameter
sizes, while the contractor works on a wide range of pipeline diameters and
needs to use multiple equipment sizes for relatively short periods of time; (ii)
contracts are often procured with short lead times, so rapid delivery of
equipment and services is required; and (iii) proprietary equipment, specialized
engineering and technical operating capabilities, such as those the Company
offers, are critical to meeting the speed, efficiency and engineering
requirements of pipeline welding, bending and coating. Accordingly, the Company
has developed its business strategy around designing, manufacturing,
reconditioning and providing a broad inventory of specialized pipeline
construction equipment, for rental or sale, and services on an expedited basis
to pipeline general contractors.
31
<PAGE>
The primary factor influencing demand for the Company's products and
services is the worldwide level of gas, oil and water pipeline construction and
rehabilitation activity. The Company believes several factors influenced by
global economic growth will drive a continued increase in worldwide levels of
pipeline infrastructure capital expenditures.
LONG-TERM INCREASING GLOBAL ENERGY DEMAND. Long-term growth in the
consumption of energy is one of the primary factors which increases the demand
for pipeline construction equipment and services. The demand for natural gas is
particularly relevant for pipeline construction equipment and services, since
pipelines are normally the most efficient method of transporting natural gas.
The following graphs show the increased consumption of gas and oil since
1975. Gas and oil consumption has grown at an average annual rate of 2.8% and
1.3%, respectively, since 1975.
[LINEAR GRAPH PLOTTED FROM DATA IN TABLE BELOW]
WORLD OIL CONSUMPTION
(MILLIONS OF BARRELS PER DAY)
U.S. REST OF WORLD TOTAL WORLD CONSUMPTION
----- ------------- -----------------------
1975 16.7 39.4 56.1
1976 17.8 41.7 59.5
1977 18.8 42.7 61.5
1978 19.2 44.5 63.7
1979 18.9 46.2 65.1
1980 17.4 45.2 62.4
1981 16.4 44.1 60.5
1982 15.5 43.4 58.9
1983 15.4 43.3 58.7
1984 16.0 43.7 59.7
1985 15.9 43.9 59.8
1986 16.5 45.2 61.7
1987 16.9 46.3 63.2
1988 17.5 47.5 65.0
1989 17.5 48.4 65.9
1990 17.2 49.0 66.2
1991 17.0 49.8 66.8
1992 17.2 50.0 67.2
1993 17.5 50.3 67.8
1994 18.0 50.6 68.6
1995 18.0 52.1 70.1
1996 18.5 53.3 71.8
1997E 18.7 55.0 73.7
- --------------------------
[LINEAR GRAPH PLOTTED FROM DATA IN TABLE BELOW]
WORLD NATURAL GAS CONSUMPTION
(BILLIONS OF CUBIC FEET PER DAY)
U.S. REST OF WORLD TOTAL WORLD CONSUMPTION
----- ------------- -----------------------
1975 53.5 62.0 115.5
1976 54.5 67.7 122.2
1977 53.5 71.4 124.9
1978 53.8 76.6 130.4
1979 55.5 83.6 139.1
1980 54.3 85.7 140.0
1981 53.2 87.5 140.7
1982 49.3 91.6 140.9
1983 46.1 97.7 143.8
1984 49.0 105.6 154.6
1985 47.3 112.9 160.2
1986 44.4 117.0 161.4
1987 47.2 122.6 169.8
1988 49.3 129.1 178.4
1989 51.5 135.0 186.5
1990 51.3 138.8 190.1
1991 52.2 141.3 193.5
1992 53.4 140.4 193.8
1993 55.6 140.9 196.5
1994 56.7 140.3 197.0
1995 59.1 143.6 202.7
1996 60.0 152.8 212.8
1997 60.1 152.3 212.4
- -------------------------
Source: Natural gas data from the International Energy Agency. 1975 - 1996 oil
data from International Energy Agency. 1997 estimated oil data provided
by Cambridge Energy Research Associates.
32
<PAGE>
Longer term, there are several key factors which could dictate the
increased consumption of gas. These include: (i) environmental considerations
which provide strong incentives to use "cleaner-burning" natural gas in place
of other carbon or nuclear fuels; (ii) the plentiful supply of natural gas in
North America and worldwide; (iii) increasing electricity deregulation in the
United States (electricity generation is currently the fastest growing market
for natural gas in the United States) and (iv) the development of local
international gas markets.
EXPANDED GAS, OIL AND WATER TRANSPORTATION INFRASTRUCTURE. Areas of energy
supply and demand shift over time. Therefore, the Company believes that new
pipeline and transportation infrastructure and the resulting demand for pipeline
construction equipment and services should increase faster than energy demand
growth.
In addition, the exploration and development of new oil and gas fields has
led to, and is expected to continue to lead to, demand for additional pipeline
infrastructure. Many newly developed oil and gas reserves are in remote regions
of the world, including deep-water offshore areas and regions in South America,
Asia, Siberia and Africa, which are far from where the products will be used. As
these remote fields are developed, the Company believes that demand for
long-haul transmission pipelines to transport gas or oil to refineries, electric
generation facilities, areas of residential and other industrial consumption, or
marine shipping terminals will continue to increase.
Many geographic regions currently lack the infrastructure to transport
natural gas from areas of supply to areas of demand. As a result, these regions
are developing natural gas pipeline grids. For example, in North America there
are specific pipeline construction projects to transport natural gas from Canada
southward and eastward to the large consumption markets in the eastern and
midwestern United States. Regional pipeline grids are also being constructed in
the Mercosur Free Trade Zone of South America (Argentina, Brazil, Paraguay and
Uruguay) and in multiple regions within Asia.
For political and other factors, many pipelines are being routed around
certain countries. For example, stated United States foreign policy proposes
that multiple oil pipelines be constructed from the Caspian Sea thereby reducing
dependence on any one geographic region. As a result, many miles of pipeline may
be constructed that would otherwise not be constructed.
OTHER IMPORTANT TRENDS. The pipeline rehabilitation market is influenced
by the necessity to address an aging pipeline infrastructure in order to
maintain safe operating conditions and to comply with increasing governmental
regulations concerning safety and environmental protection. For example, if a
large-diameter pipeline has significantly deteriorated due to corrosion, it is
often more economical to rehabilitate the pipeline than to replace it. Industry
sources estimate that 19% of all United States pipelines currently in service
were built before 1950, 49% were built between 1950 and 1969 and 32% were built
between 1970 and 1998. The Company believes pipeline operators in the United
States and in other countries such as the countries of the Former Soviet Union
are addressing and will continue to address their aging pipeline infrastructure.
The Company expects that a growing share of activity in the industry will be
derived from larger-diameter pipeline rehabilitation in the United States and
Canada and elsewhere.
There is a continuing trend to design and build gas pipelines to operate at
increasingly higher pressures. High pressure transmission pipelines require the
use of higher strength steels and tougher welds. The use of certain of the
Company's products, including its automatic welding systems, to address these
technical needs has recently increased substantially, and the Company believes
these trends will continue.
The Company expects that a significant shortage of usable water throughout
the world, increased industrialization, higher living standards and the
privatization of the water industry around the world should lead to increased
potable and wastewater infrastructure development and, as a result, water
pipeline construction.
33
<PAGE>
PIPELINE CONSTRUCTION STATISTICS. Pipeline construction has become
increasingly international since 1995 as developing nations expand their
pipeline infrastructure. The following table sets forth the total miles of gas
and oil pipeline construction projects that were completed from 1992 through
1997 and are projected to be completed in 1998. The U.S. market has been
steadily growing since 1995, especially in response to Canadian gas imports.
Worldwide pipeline construction mileage increased from 14,201 miles in 1995 to
20,485 miles in 1997. Industry sources estimate that 22,232 miles of pipeline
were constructed in 1998 and approximately 44,100 miles of pipeline are
presently planned to be constructed in 1999 and thereafter.
WORLD PIPELINE CONSTRUCTION MILEAGE
1992-1998(1)
<TABLE>
<CAPTION>
1992 1993 1994 1995 1996 1997 1998(2)
------------- ------------- ------------- ------------- ------------- ------------- -------------
LOCATION MILES % MILES % MILES % MILES % MILES % MILES % MILES %
- -------------------- ------ ----- ------ ----- ------ ----- ------ ----- ------ ----- ------ ----- ------ -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
United States ...... 6,328 39.2 5,591 36.0 5,426 35.9 4,623 32.6 5,537 31.7 6,598 32.2 7,141 32.1
Other .............. 9,801 60.8 9,559 64.0 9,677 64.1 9,578 67.4 11,935 68.3 13,887 67.8 15,091 67.9
------ ----- ------ ----- ------ ----- ------ ----- ------ ----- ------ ----- ------ -----
World Total ........ 16,129 100% 15,150 100% 15,103 100% 14,201 100% 17,472 100% 20,485 100% 22,232 100%
====== ===== ====== ===== ====== ===== ====== ===== ====== ===== ====== ===== ====== =====
</TABLE>
- ------------
Source: (1) PIPE LINE & GAS INDUSTRY, January 1998.
(2) PIPE LINE & GAS INDUSTRY has estimated the 1998 mileage.
COMPANY STRENGTHS
The Company believes it is well positioned to continue as the leading
provider of specialized equipment and services used in the construction and
rehabilitation of gas and oil transmission pipelines. The Company believes it
possesses a unique combination of specific strengths which provides a solid
foundation for its growth strategy.
o INDUSTRY LEADER. The Company is the world's leading provider of
specialized equipment and services used in the construction and
rehabilitation of pipelines. According to Spears, a market research
consulting firm, the Company enjoys a market share of approximately
66% in the specialized pipeline equipment rental markets in North
America and a market share of approximately 75% in the worldwide field
joint coating markets outside North America. In addition, management
believes the Company enjoys a market share of approximately 70% in the
worldwide onshore pipeline automatic welding equipment market. The
Company believes its portfolio of specialized pipeline construction
and rehabilitation equipment and services is the most complete in the
industry.
o SIGNIFICANT BARRIERS TO ENTRY. The Company believes its large
investment in specialized rental equipment, highly experienced
management, technical expertise and personnel, and worldwide sales
force and sales representative network all serve as a barrier to
entry. Furthermore, the Company believes that its proprietary
technology, including patents and pending patents, provides it with a
significant technological advantage over its competitors in many of
its product lines and services. In particular, the Company developed
the first commercially accepted automatic pipeline welding system in
1968 and continues to provide the most commonly used automatic
pipeline welding systems in the world.
o WORLDWIDE PRESENCE. Pipeline construction is worldwide in scope.
While the United States is a large market, the majority of new
pipeline construction projects are located outside the United States.
The Company is organized to manage its diverse geographic customer
base with a strong international direct sales force which is further
complemented by a network of experienced commissioned sales
representatives and distributors in key international markets.
o CUSTOMER RELATIONSHIPS. The Company has developed long-term
relationships with the majority of the world's leading pipeline
construction contractors, pipe coating contractors and state-owned oil
and gas pipeline companies. The Company has enjoyed repeat business
with the majority of
34
<PAGE>
these companies. The Company's Total Project Support program helps the
Company's customers achieve maximum efficiency and productivity on
projects by making available to its customers the experience and
technical expertise of its engineers and support staff throughout the
entire project.
o EXPERIENCED MANAGEMENT WITH SIGNIFICANT OWNERSHIP. The Company's
current senior management team has been involved in managing CRC-Evans
or its Predecessors' major lines of business since 1971. Management
also has significant acquisition and operational experience gained
through numerous years of service as executive officers of public
companies. Messrs. Wood, Carey and Evans have completed over 30
acquisitions for the Company and its Predecessors. Following the
completion of the offering, the Company's management will beneficially
own approximately % of the common stock.
BUSINESS STRATEGY
The Company seeks to maximize shareholder value through its growth strategy
which includes (i) expanding international operations, (ii) adding related
products and services, (iii) making strategic acquisitions and (iv) extending
and leveraging its technological leadership.
o EXPANDING INTERNATIONAL OPERATIONS. Although the Company has
historically served a worldwide customer base, it intends to
strengthen and expand its international operational capability. The
Company seeks to accomplish this goal primarily by acquiring
established operations in several key international regions. These new
operations centers will provide distribution hubs from which the
Company can more readily provide existing and new products and
services to customers' projects. By being in close proximity to its
customers, the Company expects to strengthen its long-term customer
relationships through increased customer contact as well as augment
its market intelligence through the Company's local personnel.
o ADDING RELATED PRODUCTS AND SERVICES. The Company intends to acquire
or develop related products and services. The Company will provide
these new products and services through its broad distribution system
comprised of the Company's sales force, international sales
representatives and operations centers in key geographic regions of
pipeline construction and rehabilitation activity. This strategy is
designed to enhance the performance of acquired companies, increase
the speed of new product acceptance and further diversify the
Company's sources of revenue.
o MAKING STRATEGIC ACQUISITIONS. The Company continually evaluates
opportunities to acquire businesses that offer complementary or
competitive products and services. The Company believes acquisition
candidates are available that will allow it to increase market share
in its existing lines of business, provide product line extensions,
and expand the geographic scope of its operations. The Company has
completed three acquisitions since March 1998 with an aggregate
purchase price of approximately $17.4 million (including all estimated
future earn-out payments). The Company has consolidated a domestic
competitor with pipeline rental assets, expanded its business into
concrete weighting for pipelines and added resistance heat treating
services to complement its pipeline induction heating business.
o EXTENDING AND LEVERAGING TECHNOLOGICAL LEADERSHIP. Continuing its
long history of innovation in the pipeline equipment and services
industry, the Company intends to further extend its technological
leadership and capabilities through in-house research and development,
acquisition and licensing of technology as well as participation in
joint development efforts with providers of related products or
processes which incorporate the Company's products. This strategy has
produced many industry innovations for the Company including the
automatic welding system, pneumatic line-up clamps and mandrels,
hydraulic pipe bending machines and line travel pipeline
rehabilitation systems.
PRODUCT AND SERVICES OVERVIEW
CRC-Evans is the world's leading provider of specialized equipment and
services used in the construction and rehabilitation of gas and oil transmission
pipelines. The Company's pipeline products and
35
<PAGE>
services provide a wide range of solutions to the pipeline construction and
rehabilitation industry. The Company sells and rents automatic pipeline welding
systems, pipe bending equipment, line-up clamps, pipe coating plants, coating
and cleaning equipment, pipeline rehabilitation equipment and lay barge pipe
handling equipment. The Company also provides specialized services including
joint coating, cement weighting, induction and resistance heating and automatic
welding systems training and supervision.
The Company's products and services are used in various aspects of pipeline
construction. In constructing a pipeline, after the survey, design and
permitting stages, the site is prepared for the pipeline by clearing land and
digging the ditch in which the pipeline will be laid. As the ditch is dug,
sections of pipe are brought to the site and are placed end-to-end beside the
ditch prior to bending and welding. Except for the ends which will be welded
together and coated at the site, these sections are usually coated with a
protective coating either at the pipe mill where the pipe is fabricated or at a
separate coating plant. At this time, equipment is used to bend those sections
to conform to the ditch in which the pipe will be laid. The sections are lined
up using pneumatic line-up clamps, and welded together either manually or by
automatic welding systems. After the sections are welded, the uncoated ends
which have been welded together are coated through a variety of application
methods, including an induction heating and epoxy powder coating process,
spray-applied coatings or shrink sleeves. Because pipe coatings often require
protection from rocks in the soil, prior to being placed in the ditch, a padding
of screened dirt or sand is often placed into the ditch to protect the pipe
coating. At this time, unless the pipeline runs across a river or through a
wetland, the ditch is refilled with dirt. If the pipeline is laid across a river
or through a wetland, the pipeline needs to be weighted to prevent it from
floating out of the ditch or off the bottom of the river. To anchor the
pipeline, it is covered with on-site manufactured concrete bolt-on weights,
set-on weights or a continuous coating of concrete.
As pipelines age and the original coating deteriorates, a decision is made
whether to replace or rehabilitate them. The decision either to replace or
rehabilitate is made based on the amount of corrosion the pipeline has suffered
and the cost and effectiveness of employing cathodic protection to prevent
additional corrosion. The Company provides rehabilitation equipment and services
to perform certain operations in the rehabilitation process. A rehabilitation
project begins with exposing the pipeline sections to be rehabilitated and
stripping the pipe of its former protective coating. This stripping process
requires highly specialized equipment, usually high pressure water blasting,
both to remove the coating and, if required, to contain the removed coating,
which may contain hazardous material such as asbestos. After the pipe is
stripped, it undergoes inspection to ascertain the degree of corrosion, and
based on this inspection, affected areas are cut out and replaced. The surface
is prepared for recoating using steel shot/grit or sand blasting and is then
recoated by a mobile coating plant. After recoating, the pipe sections are
rejoined by welding and lowered into the ditch and buried and, if necessary, the
pipeline is reweighted.
The Company's products and services can be divided into five major areas:
(i) pipeline equipment and services; (ii) automatic welding systems and
services; (iii) pipe joint coating equipment and services; (iv) pipeline
weighting products and services; and (v) rehabilitation equipment and services.
PIPELINE EQUIPMENT AND SERVICES
As a full-line provider of specialized equipment to the pipeline
construction industry, the Company designs, manufactures, sells, rents,
refurbishes and supports an extensive line of equipment used in the construction
and rehabilitation of oil and gas pipelines and water pipelines, including
bending machines, bending mandrels, pipe facing machines, line-up clamps and
coating equipment, as well as specialized equipment such as internal and
external coating plants, double-jointing plants and lay barge pipe handling
equipment. In addition, the Company's service technicians provide installation,
training, field operations, repair services and on-site support to ensure
product reliability. As a complement to its equipment and services, the Company
also operates a division which provides pipeline contractors with basic pipeline
construction supplies such as pipe beveling machines, tensile testers, coating
defect detectors, external line-up clamps, power tools, protective gear and
miscellaneous tools and supplies.
36
<PAGE>
The following is a listing of the Company's major specialized pipeline
construction equipment and its uses:
PRODUCT DESCRIPTION/BENEFIT
- --------------------------------------------------------------------------------
Bending Machines.......................... Bend pipe to follow the contour of
the ditch.
Bending Mandrels.......................... Internally support the pipe during
bending.
Bending Sets.............................. Allow a bending machine to bend pipes
of a specific diameter within the
bending machine's range.
Cleaning/Priming/Taping Machines.......... Feature dual counter-rotating
cleaning heads with wire cup brushes,
scraper knives or a combination of
both to clean the full pipe
circumference and to perform pipe
cleaning, primer application and tape
wrapping simultaneously.
Coating/Wrapping Machines................. Apply enamel-type coating and
reinforcing wrap to pipe.
Cradles................................... Lift pipe string from skids and
provide support for pipe during
cleaning, coating, and lowering into
ditch after welding.
Cutting/Beveling Machines................. Flame cut, bevel pipe, and cut
mechanical testing samples.
Double Jointing Systems................... Using the submerged arc process, the
double jointer welds joints together
prior to pipeline construction,
thereby reducing the need for on-site
welding services.
Internal Pneumatic Line-Up
Clamps.................................. Align pipe joints for external
welding.
Pipe Coating Plants....................... Systems used to transport, clean,
heat, apply coatings, cure coatings
and cool coated pipe; either
permanent facilities or for portable
plants.
Pipe Facing Machines...................... Produces any desired end bevel within
a tolerance of 0.005 inches.
Pipe Lay Barge Equipment.................. Transport and handle pipe on board a
pipe lay barge during offshore pipe
laying operations.
Pipeline Kettles.......................... Heat large quantities of enamel-type
coating materials to a liquid state
for field or plant application.
Road Boring Machines...................... Machines for boring underneath roads
and installing pipe casing.
The Company provides pipeline equipment throughout the world, with activity
levels depending on the level of pipeline construction in given regions.
Historically, the majority of the Company's pipeline equipment-related revenues
has come from sales of equipment in markets outside North America, while it has
typically rented its equipment domestically. Although the Company achieves
higher margins on rental equipment, pipeline contractors also prefer renting
because they do not have to make a capital investment in a wide variety of
pipeline diameter-specific equipment, and the equipment costs can be expensed to
the project.
AUTOMATIC WELDING SYSTEMS AND SERVICES
The Company is the world's largest provider of pipeline automatic welding
systems. The Company designs, manufactures and rents these systems which are
primarily used on large diameter pipeline construction projects. The Company's
automatic welding systems include internal and external automatic welders, pipe
facing machines, all-weather protected welding enclosures, specialized equipment
used in conjunction with automatic welding, and consumables, such as welding
wire. Automatic welding systems are more economically suited for larger
diameter, longer distance pipeline projects and high strength steel pipelines
used for high pressure gas transmission. The Company designed the first
commercially viable pipeline automatic welding system in 1968. The Company's
automatic welding systems have been used to complete, or are in the process of
completing, approximately 25,600 miles of pipe. Although some pipeline
construction companies provide their own automatic welding systems, the Company
believes that it is the largest provider of automatic welding systems and
services used in the onshore market and it also believes
37
<PAGE>
that it is the largest third-party provider of automatic welding systems and
services used in the offshore market.
The Company believes that its automatic welding systems are generally
superior to manual welding because they provide shorter weld times and more
consistent and higher quality welds. In addition to providing automatic welding
equipment, the Company develops and provides welding procedures, advises and
instructs contractors in the use of its equipment and maintains a staff of
welding technicians for assisting customers in project set-up, personnel
training and equipment maintenance.
The Company's automatic welding systems consist of a fine wire,
gas-metal-arc welding process developed specifically for the field welding of
large diameter pipelines. The Company's system is capable of producing
consistently high quality, lower cost welds with higher production rates than
manual welding methods.
PRODUCT DESCRIPTION/BENEFIT
- --------------------------------------------------------------------------------
Combination Internal Welder & Line-up
Clamp................................... Applies the internal weld to the pipe
joints from inside the pipe. Internal
welders have four, six or eight
remotely controlled welding heads,
depending on the pipe diameter.
External Welders.......................... Travel on alignment bands positioned
on the pipe and apply multiple
external weld layers.
Support Equipment......................... This equipment is designed to
users'specifications and includes
items such as welding rectifiers,
welding tractors and all-weather
welding enclosures.
Pipe Facing Machine....................... Used to create new bevels on pipe
ends for either automatic or manual
welding.
The Company has had most of its success in automatic pipeline welding
outside of the United States. Historically, the use of automatic welding onshore
in the United States has not been well accepted. The Company believes, however,
that there is an increasing acceptance of automatic welding by the industry in
the United States. This acceptance is being dictated in part by the changing
nature of pipelines being constructed and the demands of pipeline owners. The
increasing use of higher strength alloy metal pipe that requires high quality
welds with properties that are not available or are difficult to achieve with
manual welding processes is expected to result in greater use of automatic
welding in pipeline projects both in the United States and internationally. In
addition, on larger diameter and longer distance pipeline construction projects,
automatic welding is often a lower cost alternative to manual welding. The
project engineers for the 1,900 mile Alliance Pipeline, which is scheduled to
begin construction in 1999 and is expected to begin piping gas from Canada to
the United States in late 2000, have specified that the pipeline will be welded
with automatic welding systems. The Company has obtained orders to provide
automatic welding systems for major portions of the Alliance Pipeline. The
majority of revenues associated with the Company's automatic welding systems
have been generated by equipment rentals and associated services. Sales revenues
are generated primarily from the sale of welding wire, other consumable items
and spare parts.
38
<PAGE>
PIPE JOINT COATING EQUIPMENT AND SERVICES
The Company is the leading provider of specialty pipe joint coating
services outside North America. The Company provides field-joint coating
services, cleaning and coating services, and rents post-weld heat treating
equipment for pipeline construction applications and resistance and thermal heat
treating equipment and services for power generation, refining, petrochemical,
large fabrication and refractory applications. The Company provides these
products and services to a wide range of onshore and offshore contractors.
SERVICE/PRODUCT DESCRIPTION/BENEFIT
- ------------------------------------- ----------------------------------------
Fusion-Bond Epoxy Powder
Coating -- Onshore................. Specialized equipment for the
application of fusion bonded epoxy
powder both in the field and plant.
Fusion-Bond Epoxy Powder
Coating -- Offshore................ Purpose-built equipment designed to work
within the critical cycle times demanded
by the offshore pipeline construction
contractor.
Heat Treatment Services.............. Induction pre/interpass and post-weld
heat treatment services for pipeline
applications; resistance heat treatment
services for stress relieving
applications and thermal heating for
refractory dry-outs.
Insulation Field-joint Systems....... Allow for the application of coating
both on and offshore, providing similar
physical and insulation properties to
the factory applied coating.
Internal Field-joint Coating
System............................. Application systems operate inside the
pipeline during con- struction, offering
total corrosion protection to the
internal field-joint area.
Specialist Coatings.................. Liquid epoxy, polyurethane and
three-layer coating systems that are
applied both onshore and offshore for
the oil and gas and civil construction
industries. The Company also supplies
joint infill (e.g., foam) systems
primarily for offshore pipelay
activities.
The Company's service personnel and equipment are dispatched primarily from
its offices in Burnley, England to pipeline construction sites worldwide (with
the exception of North America where the Company rents the equipment to
customers). The Company conducts the majority of its fabrication coating
operations at a leased facility in Aberdeen, Scotland. The Company's industrial
heat treating operations are located at Didcot, England, which provides ready
access to its markets in the southern portion of the United Kingdom.
Historically, a significant portion of the Company's revenue for pipe end
coating equipment and services and industrial heat treatment has been generated
in the United Kingdom.
PIPELINE WEIGHTING PRODUCTS AND SERVICES
The Company is the industry leader in the United States in the on-site
manufacture of concrete weights for pipeline construction in wetlands or across
rivers. Pipeline weighting is accomplished through bolt-on weights, set-on
weights or a continuous coating of concrete applied to the exterior of the pipe.
Continuous concrete coating is also used for pipe casing under roads or
railways. The Company provides technical supervision personnel, molds and
materials for the on-site production of weights.
39
<PAGE>
Since acquiring this line of business in April 1998, the Company has begun
to focus on providing concrete weighting services to markets outside of the
United States using its foreign subsidiaries and sales force.
PRODUCT DESCRIPTION/BENEFIT
- ------------------------------------- -----------------------------------------
Set-on Weights....................... Used primarily in wetland areas where
there is no flowing water.
Bolt-on Weights...................... Constructed of two halves which circle
the pipe. Bolt-on weights are used where
there is flowing water and may be
attached before the pipe is put in place.
Continuous Concrete Coating.......... Used in wetlands and river crossings.
Provides protection and negative
buoyancy. Also used for pipeline casing
under roads or railways.
Plastic Pipe Weighting............... Used to weight plastic pipe.
REHABILITATION EQUIPMENT AND SERVICES
The Company believes that the pipeline rehabilitation sector should be a
growing business over the long term as pipelines around the world begin to reach
the end of their useful lives. The Company's pipeline rehabilitation equipment
applies high pressure water (20,000 - 35,000 psi) to remove old and deteriorated
external coatings. Then the pipe surface is prepared for re-coating by using
steel shot/grit or sand blasting. New coatings are then applied using
specialized coating equipment. A key to the Company's success in this area is
its patented pipeline coating removal equipment. Most of the Company's current
rehabilitation rental revenue is derived in the United States and Canada, and
its sales are mainly international.
PRODUCT DESCRIPTION/BENEFITS
- ------------------------------------- -----------------------------------------
High Pressure Waterblast Machine..... Removes deteriorated pipeline coating
either in-plant or on-site.
Shot/Grit Mechanical and Airblast
Cleaning Systems................... Remove rust and prepare pipe surface for
coating.
Plural Component Coating Systems..... Mix and apply plural component corrosion
coatings to the pipeline on-site.
Envirosystem......................... Collects, dewaters, and packages removed
coatings for disposal.
RESEARCH AND DEVELOPMENT
The Company conducts ongoing research and development of new products and
services to maintain its technological position. The Company has approximately
145 patents relating to and covering various features of the many types of
equipment it manufactures for use in pipeline construction and rehabilitation.
Of these patents, 44 are U.S. patents and the remaining 101 are non-U.S. patents
based on corresponding U.S. patents or patent applications. In addition, the
Company has 46 pending applications, of which two are U.S. applications. The
Company's patents have expiration dates ranging through 2015. No single patent
or group of related patents covers products that account for over 10% of the
Company's revenues.
MARKETING AND SALES
The Company sells its products and services through its salesforce of 26
salespeople and approximately 27 independent international sales representatives
and distributors covering 70 countries. The Company's sales offices are located
in Houston, Texas; Tulsa, Oklahoma; Toms River, New Jersey; Hoevelaken,
Netherlands; Edmonton, Alberta; Burnley, England and Didcot, England. The
Company's salespeople and representatives generally have over ten years of
experience selling the Company's products and services and several international
sales representatives have represented the Company for over 30 years. The
Company believes that due to the relatively small community of companies and
people involved in the construction of large diameter pipelines, the two factors
that are most important in marketing its products
40
<PAGE>
and services are its high quality, dependable equipment and services, and the
relationship between its management, sales and technical personnel and its
customers.
The Company believes that its Total Project Support program is important in
marketing its products and services. The program helps the Company's customers
achieve maximum efficiency and productivity on projects by making available to
its customers high-performance equipment, trained operating technicians, on-site
advisors, technical support and training programs throughout the entire project.
Total Project Support helps the Company's customers keep expensive job downtime
to a minimum with an equipment backup fleet, international service teams and a
full spare parts inventory.
CUSTOMERS AND CONTRACTS
Although the Company's customer base is broadly based in the worldwide
pipeline construction industry, the industry is comprised of relatively few
companies around the world. For the fiscal year ended March 31, 1998, the
Company's largest project was responsible for less than 7% of the Company's
revenues, but 45% of the Company's revenues were attributed to its ten largest
customers during such period. One customer, Petroleum Projects and Technical
Consultation Co. (Petrojet), an Egyptian company, accounted for approximately
11% of the Company's total revenues during 1998. At any time the relative
significance of any customer or group of customers depends on the type and
location of pipeline construction projects in progress. As such, the Company's
customer base tends to change from year to year depending on these factors. The
Company's customers include pipeline construction contractors (onshore and
offshore), pipe coating contractors and, in the international market,
state-owned gas and oil pipeline companies. See "Risk Factors -- The Company
has a Limited Number of Major Customers."
The Company attempts to mitigate financial and other risk through the terms
of its contracts with its customers. For instance, in its automatic welding
rental operations, the Company generally requires the payment of all
mobilization and demobilization fees in cash before starting a project. In
addition, the Company attempts to mitigate its expropriation and force majeure
risks by generally requiring the equipment renter to be financially responsible
for the return of all rented equipment regardless of the reason for loss.
EQUIPMENT
The Company's pipeline construction equipment and automatic welding
equipment is manufactured at its Tulsa, Oklahoma facility. The Company
fabricates and assembles its products using certain purchased components in
addition to its own manufactured components, and typically buys most of the
high-volume machine parts used in its products from vendors. The Company's
production level varies with pipeline construction activity and is frequently
project-oriented in nature. The Company is able to satisfy sales demand for
reconditioned equipment by selling equipment out of its rental fleet and
replacing the sold equipment with newly manufactured or repurchased equipment.
This enables the Company to maintain relatively constant production staff levels
using flexible work schedules.
The Company maintains a comprehensive rental equipment fleet and spare
parts inventory to meet the delivery requirements of its customers. The
Company's equipment is manufactured, maintained and refurbished as necessary to
satisfy projected customer demand. The Company has maintenance facilities in
Tulsa, Oklahoma; Edmonton, Alberta; Burnley, England and Didcot, England, and
performs on-site maintenance to minimize downtime. The Company maintains a
facility for welding research and development in Houston, Texas.
COMPETITION
The specialized pipeline equipment sales, rental and services businesses
are highly competitive. Generally, the Company competes directly with smaller
companies and the in-house provision of products and services by general
contractors. Several of the Company's competitors within certain product lines
have greater financial resources than the Company. The Company believes it is
currently the largest specialized pipeline equipment manufacturing sales and
rental company in the world on the basis of revenue, while it is relatively
smaller in the services business. The Company believes that in addition to
long-standing
41
<PAGE>
relationships, competition is based on price, customer service, including the
availability of personnel in remote locations, flexibility in meeting customer
needs and the quality and reliability of its equipment and related services.
FACILITIES
The Company owns a 29-acre equipment yard/manufacturing/maintenance
facility and supply warehouse in Tulsa, Oklahoma and a 9,800 square foot sales
office/warehouse/service facility in Edmonton, Canada. The Company leases all
other facilities used in its operations, including its corporate offices in
Houston, Texas and various office facilities and equipment sites in the United
Kingdom and the Netherlands. The aggregate lease payments made by the Company
for its facilities were $206,000 for the fiscal year ended March 31, 1998. In
November 1998, the Company purchased 19 acres in Houston, Texas which it
currently intends to use for corporate and sales personnel and certain of the
Company's operations.
GOVERNMENT REGULATION
GENERAL. Many aspects of the Company's operations are subject to
government regulations in the countries in which the Company operates, including
those relating to currency conversion and repatriation, taxation of its earnings
and the earnings of its personnel, and its use of local employees and suppliers.
In addition, the Company depends on the demand for its services from the oil and
gas pipeline construction industry and, therefore, is affected by changing
taxes, price controls and laws and regulations relating to that industry
generally. The adoption of laws and regulations by countries in which the
Company operates curtailing oil and gas exploration and development drilling for
economic and other policy reasons could adversely affect the Company's
operations by limiting demand for its services. The Company's operations are
also subject to the risk of changes in foreign and domestic laws and policies,
including trade restrictions and embargos, which may impose restrictions on the
Company that could have a material adverse effect on the Company's operations.
Other types of government regulation which could, if enacted or implemented,
adversely affect the Company's operations include expropriation or
nationalization decrees, confiscatory tax systems, primary or secondary boycotts
directed at specific countries or companies, embargoes, extensive import
restrictions or other trade barriers, mandatory sourcing rules and
unrealistically high labor rate and fuel price regulation. The Company cannot
determine to what extent future operations and earnings of the Company may be
affected by new legislation, new regulations or changes in, or new
interpretations of, existing regulations.
ENVIRONMENTAL. The Company's operations are subject to extensive federal,
state and local environmental laws and regulations. The Company regularly works
in and around sensitive environmental areas such as rivers, lakes and wetlands.
Significant fines and penalties may be imposed for non-compliance with
environmental laws and regulations. Certain environmental laws including, but
not limited to, the Comprehensive Environmental Response, Compensation and
Liability Act, 42 U.S.C. 9601 ET SEQ., and analogous state statutes, provide for
joint and several strict liability for remediation of releases of hazardous
substances, rendering an owner or operator liable for environmental damage
without regard to negligence or fault. In addition, the Company may be subject
to claims alleging personal injury or property damage as a result of exposure to
hazardous substances. Such laws and regulations may expose the Company to
liability arising out of the conduct of operations or conditions caused by
others, or for the acts of the Company which were in compliance with all
applicable laws at the time such acts were performed.
The Company's operations may generate or transport both hazardous and
non-hazardous solid wastes that are subject to the requirements of the Resource
Conservation and Recovery Act, 42 U.S.C. 6901 ET SEQ., and comparable state
statutes and regulations. The operations of the Company may also be subject to
the Clean Water Act, 33 U.S.C. 1251 ET SEQ., and the Clean Air Act, 42 U.S.C.
7401 ET SEQ., and comparable state statutes and regulations. Additional
environmental laws, including but not limited to, the Oil Pollution Act of 1990,
the Endangered Species Act and the Toxic Substances Control Act may also impact
the Company's operations. To the Company's knowledge, its operations are in
substantial compliance, and are expected to continue to comply in all material
respects, with applicable environmental laws, regulations and ordinances. The
Company does not believe that it will be required in the near future to
42
<PAGE>
expend material amounts due to compliance with or liability under such
environmental laws and regulations.
In recent years, environmental requirements have become increasingly
stringent. Future developments, such as stricter environmental laws, regulations
or enforcement policies, could affect the handling, manufacture, use, emission
or disposal of substances by the Company.
INSURANCE
The Company maintains workers' compensation, employers' liability, general
liability, directors' and officers' liability, automobile liability and excess
liability insurance to provide benefits to employees and to protect the Company
against claims by third parties. Such insurance is underwritten by A+ or better
rated insurance companies (AM Best rating as to claims paying ability). The
Company also maintains physical damage insurance covering loss of or damage to
Company property on a worldwide basis, with special insurance covering loss or
damage caused by political or terrorist risks in locations where such coverage
is deemed prudent. The Company maintains risk management and safety programs,
which have resulted in favorable loss ratios and cost savings. The Company
believes its risk management, safety and insurance programs are adequate to meet
its needs.
EMPLOYEES AND LABOR RELATIONS
As of November 1, 1998, the Company had approximately 381 permanent
employees and 178 temporary employees for a total of approximately 559
employees. Of these employees, approximately 356, 20, 176 and 7 are located in
the United States, Canada, the United Kingdom and the Netherlands, respectively.
No permanent employees are represented by labor unions, and the Company believes
that its relations with its employees are satisfactory.
LEGAL PROCEEDINGS
The Company is involved in litigation incidental to the conduct of its
business, none of which management believes is, individually or in the
aggregate, material to the Company's financial condition or results of
operations.
ADDITIONAL INFORMATION
CRC-Evans has filed a registration statement on Form S-1 with the
Securities and Exchange Commission. In addition, upon completion of the
offering, CRC-Evans will be required to file annual, quarterly and current
reports, proxy statements and other information with the Securities and Exchange
Commission. Investors may read and copy the registration statement and any other
documents filed by CRC-Evans at the Securities and Exchange Commission's Public
Reference Room at 450 Fifth Street, N.W., Washington, D.C. 20549. Please call
the Securities and Exchange Commission at 1-800-SEC-0330 for further information
on the Public Reference Room. The Company's Securities and Exchange Commission
filings are also available to the public at the Securities and Exchange
Commission's Internet site at http://www.sec.gov.
This prospectus is part of the registration statement and does not contain
all of the information included in the registration statement. Whenever a
reference is made in this prospectus to any contract or other document of
CRC-Evans, the reference may not be complete and investors should refer to the
exhibits that are a part of the registration statement for a copy of the
contract or document.
43
<PAGE>
MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The name, age and respective position of each executive officer and
director of the Company are as follows:
NAME AGE POSITION
- ----------------------------------- --- ------------------------------
D. Dale Wood....................... 60 Chairman and Chairman of the
Board of Directors
M. Timothy Carey................... 54 Chief Executive Officer and
Director
C. Paul Evans...................... 68 President and Director
Windell D. Norris, Jr.............. 55 Vice President -- Finance and
Administration
Norman R. Francis.................. 68 Chief Financial Officer,
Treasurer and Secretary
Richard L. Covington............... 40 Director
Gary L. Forbes..................... 54 Director
Kenneth A. Hersh................... 35 Director
Nolan Lehmann...................... 54 Director
The following is a brief description of the background and principal
occupation of each executive officer and director:
D. DALE WOOD has been affiliated with the Company and its Predecessors
since 1971. Prior to becoming Chairman and Chairman of the Board of Directors of
CRC-Evans in June 1997, Mr. Wood served as President and Chief Executive Officer
of Enterra Corporation (a predecessor) from March 1991 until October 1995 and
additionally as its Chairman of the Board of Directors from November 1991 until
October 1995. In October 1995, Mr. Wood left Enterra as the result of its merger
into Weatherford Enterra to pursue personal investments, including the formation
of the buy-out groups which acquired Container-Care International, Inc. in
February 1997 and CRC-Evans in June 1997. Mr. Wood devotes approximately 30% of
his working time to the Company. Mr. Wood is a Certified Public Accountant.
M. TIMOTHY CAREY has been affiliated with the pipeline industry and the
Company's Predecessors since 1972, during which time he ran the Predecessors'
automatic welding division and held positions as Executive Vice President and
President. Prior to joining the Company as Chief Executive Officer in June 1997,
Mr. Carey was President of the Oilfield Services and Equipment Group of Enterra
from 1992 through October 1995. From October 1995 through March 1996, Mr. Carey
served as Sr. Vice President of Weatherford Enterra. From March 1996 through
June 1997 he was a private investor and a key participant in structuring the
Management Buyout.
C. PAUL EVANS has been affiliated with the pipeline industry and the
Company's Predecessors for 41 years. Prior to becoming President of CRC-Evans in
June 1997, Mr. Evans served as President of a predecessor to the Company from
October 1995 to June 1997, and as its Chairman of the Board of Directors,
President and Chief Executive Officer from 1992 to October 1995. From 1988 to
1995, Mr. Evans was a member of the Board of Directors of Enterra.
WINDELL D. NORRIS, JR. has been in the energy and pipeline equipment
business for 31 years, including 26 years with CRC-Evans and its Predecessors
during which time he held positions as President -- Pipeline Division, Vice
President -- Corporate Development and Executive Vice President until January
1996. He served as Chief Executive Officer of Wedge Dia-Log, Inc. from September
1996 to December 1996 and as an independent consultant for CRC-Evans and others
from January 1997 until June 1998, at which time he rejoined CRC-Evans as Vice
President -- Finance and Administration.
NORMAN R. FRANCIS has been affiliated with CRC-Evans and its Predecessors
since 1960. He became the Chief Financial Officer, Treasurer and Secretary of
the Company in June 1997. His prior experience with the Company's Predecessors
was as Credit Manager, Controller, Assistant Treasurer, Vice
President -- Finance and Chief Financial Officer. Mr. Francis is a Certified
Public Accountant.
44
<PAGE>
RICHARD L. COVINGTON has served as a director of the Company since June
1997. Since February 1997, Mr. Covington has served as principal and general
counsel to the Natural Gas Partners investment funds. From 1988 to February
1997, Mr. Covington was a senior stockholder and an associate with the law firm
of Thompson & Knight.
GARY L. FORBES has been a director of the Company since June 1997. Since
1991, Mr. Forbes has served as a Vice President of Equus Capital Management, a
registered investment advisor, and as a Vice President of Equus. He serves as a
director of Consolidated Graphics, Inc., a consolidator of commercial printing
companies, Drypers Corporation, a manufacturer of disposable diapers, NCI
Building Systems, Inc., a manufacturer of prefabricated metal buildings, and
Advanced Technical Products, Inc., a manufacturer of high performance composite
parts for the aerospace and defense industries, all of which are public
companies. Mr. Forbes is a certified public accountant.
KENNETH A. HERSH has served as a director of the Company since June 1997.
Since 1989, Mr. Hersh has been a manager of the Natural Gas Partners investment
funds, which were organized to make direct equity investments in the North
American energy industry. He is currently responsible for co-managing Natural
Gas Partners' overall investment portfolio. Mr. Hersh serves as a director of
Pioneer Natural Resources Company, Titan Exploration, Inc., HS Resources, Inc.,
Petroglyph Energy, Inc. and Vista Energy Resources, Inc., all of which are
public companies engaged in the oil and gas business.
NOLAN LEHMANN has been a director of the Company since June 1997. Since
1983, Mr. Lehmann has served as the president and a director of Equus and Equus
Capital Management Corporation. Mr. Lehmann also serves as a director of Allied
Waste Industries, Inc., a solid waste management company, American Residential
Services, Inc., a residential services company, Brazos Sportswear, Inc., a
casual sportswear company, Drypers Corporation, a manufacturer of disposable
diapers, and Paracelsus Healthcare Corporation, a hospital management company,
all of which are public companies. Mr. Lehmann is a certified public accountant.
Directors are elected at each annual meeting of stockholders. Effective
upon consummation of this offering, the Board of Directors will be divided into
two classes of directors, with directors serving staggered two-year terms,
expiring at the annual meeting of stockholders for fiscal years 1999 and 2000,
respectively. At each annual meeting of stockholders, one class of directors
will be elected for a full term of two years to succeed to that class of
directors whose terms are expiring. Messrs. Hersh, Wood, Evans and Forbes will
serve for initial two-year terms and Messrs. Lehman, Carey and Covington will
serve for initial one-year terms.
EXECUTIVE COMPENSATION
The following table sets forth certain compensation information for the
Chief Executive Officer of the Company and four additional most highly
compensated executive officers for the period from June 12, 1997 to March 31,
1998 (the "Named Executive Officers").
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
------------------------------------
AWARDS
-------------------------
ANNUAL COMPENSATION SECURITIES PAYOUTS
------------------------------------ RESTRICTED UNDERLYING -------
OTHER ANNUAL STOCK OPTIONS LTIP ALL OTHER
NAME/PRINCIPAL POSITION SALARY(1) BONUS COMPENSATION AWARDS(S) PLANS/SARS PAYOUTS COMPENSATION
- ------------------------------------- --------- ------- ------------ ---------- ----------- ------- ------------
<S> <C> <C> <C>
D. Dale Wood(1)...................... $ 96,652 -- $7,600 -- -- -- $ 972
M. Timothy Carey(1).................. 163,760 -- 7,600 -- -- -- 3,710
C. Paul Evans(1)..................... 120,414 -- 9,859 -- -- -- 4,094
Windell D. Norris, Jr.(2)............ -- -- -- -- -- -- --
Norman R. Francis(1)(3).............. 103,025 -- 7,600 -- -- -- 2,649
</TABLE>
- ------------
(1) Messrs. Wood, Carey, Evans and Francis receive annual salaries of $120,000,
$200,000, $145,000 and $80,000, respectively.
(2) Mr. Norris joined the Company in June 1998 and receives an annual salary of
$120,000.
(3) Includes salary from January 1997 which was paid after the Management
Buyout.
45
<PAGE>
KEY MANAGEMENT COMPENSATION PLAN
The Company has a Key Management Incentive Compensation Plan effective June
13, 1997 (the "Bonus Plan") by which certain employees may receive a maximum
bonus between 15% to 60% of their salary. The Bonus Plan year is from April 1
through March 31 and was pro rated for the period from June 13, 1997 to March
31, 1998. The Bonus Plan awards incentive bonuses to the Company's executive
officers and certain key employees. The bonuses are calculated by multiplying
the employee's base salary by a factor of 1 to 4, depending on the employee's
level of responsibility, and by the Company's percentage EBITDA return on total
capitalization for the prior fiscal year less 20% (the "percentage factor").
The Board of Directors must ratify any bonus paid to Messrs. Wood, Carey and
Evans pursuant to the Bonus Plan.
If the Company's percentage EBITDA return on total capitalization is less
than 20% for such fiscal year, no bonuses are paid and the difference is carried
forward for up to two years to reduce the percentage factor in those years. If
the percentage EBITDA return on total capitalization exceeds 35%, the percentage
factor is 15% and the excess carries forward for up to two years to increase the
percentage factor in those years. The bonuses are paid 50% upon completion of
the fiscal year-end audit report and 50% at the end of the following fiscal
year, if the employee has not voluntarily left the Company or been terminated
for cause.
DIRECTOR COMPENSATION
Directors who are employees of the Company are not compensated for their
services as directors. Non-employee directors receive an annual fee of $10,000.
Directors are reimbursed, however, for ordinary and necessary expenses incurred
in attending board or committee meetings.
COMMITTEES OF THE BOARD OF DIRECTORS; COMPENSATION COMMITTEE INTERLOCKS
The Company has an Audit Committee and a Compensation Committee. The Audit
Committee reviews and reports to the Board of Directors the scope and results of
audits by the Company's outside auditor. The committee also recommends the firm
of certified public accountants to serve as the Company's independent public
accountants, subject to nomination by the Board of Directors and approval of the
stockholders, authorizes all audit and other professional services rendered by
the auditor and periodically reviews the independence of the auditor. Membership
of the Audit Committee is restricted to those directors who are not active or
retired officers or employees of the Company. Messrs. Covington and Lehmann are
members of the Audit Committee.
The Compensation Committee will be established to oversee the compensation
of the Company's senior management and the Incentive Plan (as defined herein).
The Compensation Committee is currently comprised of Messrs. Hersh and Forbes.
At the closing of the offering, no members of the Compensation Committee will be
a present or former officer or employee of the Company or any subsidiary.
No executive officer or director of the Company serves as an executive
officer, director, or member of a compensation committee of any other entity,
for which an executive officer of such entity is a member of the board of
directors or the Compensation Committee of the Company.
STOCK OPTION PLANS
INITIAL STOCK OPTIONS.
As of June 12, 1997, the Company issued to certain employees options to
purchase up to 138,080 shares of the Company's common stock (the "June 97
Options"). With respect to these options, certain stockholders have agreed to
sell to the Company up to 18,080 shares at the same price as the exercise price
of such options if options to purchase more than 120,000 shares are exercised.
Each June 97 Option vests at the rate of 20% per year over five years, beginning
with the first anniversary of the date of the option agreement and continuing
until the fifth anniversary of the agreement, at which time the options are
fully vested. Each June 97 Option expires on August 31, 2002.
The Company subsequently adopted a stock option plan on May 20, 1998 (as
amended to date, the "Initial Plan"). The Initial Plan authorizes the issuance
of additional options to purchase up to 550,160
46
<PAGE>
shares of common stock (the "Initial Plan Options") to certain employees,
officers, contractors or consultants of the Company. The purposes of the Initial
Plan are to promote the interests of the Company and its stockholders by
attracting, retaining and stimulating the performance of selected individuals in
giving such individuals the opportunity to acquire a proprietary interest in the
Company and increasing personal interest in the Company's continued success and
progress. The Initial Plan Options constitute non-qualified options that are not
"incentive stock options" under Section 422 of the Internal Revenue Code of
1986, as amended.
Currently, all options granted under the Initial Plan vest at a rate of
33 1/3% per year over three years, beginning with the first anniversary of the
governing option agreement and continuing until the third anniversary of the
agreement, at which time the options are fully vested. Simultaneous with the
effectiveness of the registration statement, the Company (i) will amend the June
97 Options and the Initial Plan Options to allow for immediate vesting of the
outstanding stock options and fix the exercise price at $2.78 per share and (ii)
will fix the exercise price of each Initial Option and the June 97 Options at
$2.78. The in-the-money portion of the options has been valued at approximately
$ million which will be recorded as a one-time, non-cash compensation
expense during the year ended March 31, 1999.
The Board of Directors, which currently administers the Initial Plan, has
the authority to set the number of shares of common stock to be covered by each
option granted under the Initial Plan, and to amend, modify, suspend or
terminate the Initial Plan. The Plan will terminate on May 20, 2004. However,
all available options have been issued under the Initial Plan and the Board of
Directors does not intend to authorize the issuance of any additional options
under the Initial Plan in connection with the closing of this offering. All of
the options currently issued and outstanding under the Initial Plan expire on
May 31, 2003, and will continue to be recognized until expiration.
The June 97 Options and the Initial Plan Options (collectively, the
"Initial Options") are not transferable other than by will or the laws of
descent and distribution. Each Initial Option may be exercised within the term
of the option agreement pursuant to which it was granted (so long as the Company
continues to employ the optionee). In addition, within three months after
termination of an optionee's employment, an Initial Option may be exercised as
to vested shares (except in the case of termination for "cause" or an
optionee's voluntary termination, in which cases the Initial Option shall
automatically expire on termination), provided that the Company may redeem the
Initial Option by paying cash to the optionee equal to the excess of the book
value of the option shares over the exercise price of the option. In the event
of an optionee's death or disability, the Initial Options may remain outstanding
and may be exercised by the acquiror of the Initial Options, but only within one
year following the date of death or disability.
To date, no Initial Options have been exercised.
STOCK INCENTIVE PLAN. The Company will adopt a stock incentive plan (the
"Incentive Plan") effective as of the effectiveness of the registration
statement. At such time, 575,000 shares of common stock will be subject to
issuance under the Incentive Plan. The Incentive Plan provides for the grant of
stock options (including incentive stock options as defined in Section 422 of
the Internal Revenue Code of 1986, as amended, and non-qualified stock options),
stock appreciation rights ("SARs") and other stock awards (including
restricted stock awards, dividend rights and stock bonuses) to any officer,
director, or employee of the Company or its subsidiaries, or any consultant or
advisor engaged by the Company or its subsidiaries. The purpose of the Incentive
Plan is to attract, retain and encourage qualified individuals to serve the
Company with a high degree of commitment by providing additional financial
incentives.
The Compensation Committee currently administers the Incentive Plan and
recommends to the Board of Directors for its final approval the recipients who
are to receive grants of options, the terms and conditions of options and the
rules and regulations for administration of the Incentive Plan. The final
approval of the full Board of Directors is required for any options granted
under the Incentive Plan. Stock options may be granted under the Incentive Plan
on such terms, including vesting and payment forms, as the Board of Directors
deems appropriate in its discretion; provided that no option may be exercised
later than ten years after its grant, and the purchase price for the incentive
stock options and non-qualified stock options shall not be less than 100% of the
fair market value of the common stock on the grant date (110% in
47
<PAGE>
the case of an incentive stock option granted to an individual owning more than
10% of the voting stock of the Company or a subsidiary). SARs may be granted by
the Board of Directors on such terms, including payment in forms, as the Board
of Directors deems appropriate, provided that an SAR granted in connection with
a stock option shall become exercisable and lapse according to the same vesting
schedule and lapse rules established for the stock option (which shall not
exceed ten years from the date of grant). Unless terminated by the Board of
Directors, the Incentive Plan has no automatic termination date. Upon the
occurrence of an event constituting a change in control of the Company, all
options and SARs under certain Incentive Plan award agreements will become
immediately exercisable, restrictions on stock granted pursuant to a restricted
stock award will lapse, and other awards will be treated in the manner
determined by the Board of Directors on the grant date. The Board of Directors
has not authorized the granting of any options under the Incentive Plan.
EMPLOYMENT AGREEMENTS
D. DALE WOOD, the Company's Chairman and Chairman of the Board of
Directors, has entered into an employment agreement, effective June 12, 1997,
with a term of five years, which establishes a base salary of $120,000 per year.
Mr. Wood's employment agreement also provides that, in certain circumstances, he
will receive severance payments equal to his then current base salary for up to
two years upon termination of his employment by the Company. Mr. Wood is subject
to a non-competition agreement for up to two years after a voluntary termination
of his employment and for eighteen months after an involuntary termination of
his employment.
M. TIMOTHY CAREY, the Company's Chief Executive Officer, has entered into
an employment agreement, effective June 10, 1997, with a term of five years,
which establishes a base salary of $200,000 per year. Mr. Carey's employment
agreement also provides that, in certain circumstances, he will receive
severance payments equal to his then current base salary for up to two years
upon termination of his employment by the Company. Mr. Carey is subject to a
non-competition agreement for up to two years after a voluntary termination of
his employment and for eighteen months after an involuntary termination of his
employment.
C. PAUL EVANS, the Company's President, has entered into an employment
agreement, effective June 12, 1997, with a term of three years, which
establishes a base salary of $145,000 per year. Mr. Evans' employment agreement
also provides that, in certain circumstances, he will receive severance payments
equal to his then current base salary for up to two years upon termination of
his employment by the Company. Mr. Evans is subject to a non-competition
agreement for up to two years after a voluntary termination of his employment
and for eighteen months after an involuntary termination of his employment.
48
<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information as of November 30, 1998
with respect to the beneficial ownership of the Company's common stock by: (i)
each director of the Company, (ii) each Named Executive Officer, (iii) each
other person known to beneficially own 5% or more of the outstanding shares of
common stock and (iv) all current executive officers (regardless of salary and
bonus level) and directors of the Company as a group. Unless otherwise
indicated, (i) the persons listed in the table below have sole voting and
investment powers with respect to the shares indicated and (ii) each person's
address is 11601 N. Houston Rosslyn Road, Houston, Texas 77086.
<TABLE>
<CAPTION>
PERCENTAGE OF
SHARES
BENEFICIALLY OWNED
---------------------------
SHARES PRIOR TO AFTER THE
BENEFICIALLY OWNED THE OFFERING OFFERING
------------------- ------------- ----------
<S> <C> <C> <C>
D. Dale Wood......................... 186,280 3.0%
M. Timothy Carey..................... 232,880 3.7%
C. Paul Evans........................ 139,680 2.2%
Windell D. Norris, Jr................ 68,000 1.1%
Norman R. Francis.................... 23,280 *
Kenneth A. Hersh(1).................. 2,395,640 38.0%
Richard L. Covington................. -- --
Nolan Lehmann(2)..................... 2,395,640 38.0%
Gary L. Forbes(3).................... 2,395,640 38.0%
Natural Gas Partners IV, L.P......... 2,395,640 38.0%
777 Main Street, Suite 2250
Fort Worth, Texas 76102
Equus II Incorporated................ 2,395,640 38.0%
2929 Allen Parkway, 25th Floor
Houston, Texas 77019
All directors and executive officers
as a group (9 persons)............. 5,441,400 86.4%
</TABLE>
- ------------
* Less than 1%
(1) All shares of common stock that Natural Gas Partners holds. Mr. Hersh, in
his capacity as one of the managing members of the general partner of
Natural Gas Partners, may be deemed to have indirect beneficial ownership of
the shares of common stock owned by Natural Gas Partners. Mr. Hersh
disclaims any such beneficial ownership.
(2) All shares of common stock that Equus holds. Mr. Lehmann, in his capacity as
president and director of Equus, may be deemed to have indirect beneficial
ownership of the shares of common stock owned by Equus. Mr. Lehmann
disclaims any such beneficial ownership.
(3) All shares of common stock that Equus holds. Mr. Forbes, in his capacity as
vice president of Equus, may be deemed to have indirect beneficial ownership
of the shares of common stock owned by Equus. Mr. Forbes disclaims any such
beneficial ownership.
49
<PAGE>
CERTAIN RELATED TRANSACTIONS
SUBORDINATED PROMISSORY NOTES. In connection with the Management Buyout on
June 12, 1997, the Company borrowed $1.9 million from Natural Gas Partners and
Equus under subordinated promissory notes due June 30, 2002, each in the
original principal amount of $959,700, and each bearing interest at a rate of
12% per annum. These notes will be repaid with a portion of the proceeds from
the offering.
PROMISSORY NOTES. In connection with the Management Buyout in June 1997,
certain officers, directors and key employees borrowed, in the aggregate, $1.9
million from the Company under promissory notes due June 30, 2002, all of which
bear interest at a rate of 6.75% per annum. The following directors and
executive officers borrowed the following amounts: Mr. Wood, $255,920; Mr.
Carey, $319,900; and Mr. Evans, $191,940.
FEE AGREEMENTS. In connection with the Management Buyout, on June 12,
1997, the Company paid each of Natural Gas Partners and Equus a financing fee of
$70,000 along with reimbursement of out-of-pocket costs. Pursuant to this
agreement, the Company also paid Mr. Covington $77,577 for acting as legal
counsel to the purchasers in the Management Buyout in June 1997.
NORRIS PROMISSORY NOTE. In connection with a purchase of 68,000 shares of
common stock, Mr. Norris borrowed $155,380 from the Company under a promissory
note dated June 15, 1998, due June 30, 2002, and bearing interest at a rate of
6.75% per annum.
INDEMNITY AGREEMENTS. The Company has entered into indemnification
agreements with each of its directors, his affiliates and/or "controlling
person" (within the meaning of applicable securities laws) and certain of its
executive officers. The indemnification agreements provide that the Company
shall indemnify these individuals against certain liabilities (including
settlements) and expenses actually and reasonably incurred by them in connection
with any threatened or pending legal action, proceeding or investigation (other
than actions brought by or in the right of the Company) to which any of them is,
or is threatened to be, made a party by reason of their status as a director,
officer or agent of the Company; PROVIDED that, with respect to a civil,
administrative or investigative (other than criminal) action, such individual
acted in good faith and in a manner he or she reasonably believed to be in, or
not opposed to, the best interests of the Company, and with respect to any
criminal proceedings, he or she had no reasonable cause to believe his or her
conduct was unlawful. With respect to any action brought by or in the right of
the Company, such individuals may be indemnified, to the extent not prohibited
by applicable laws or as determined by a court of competent jurisdiction,
against expenses actually and reasonably incurred by them in connection with
such action if they acted in good faith and in a manner they reasonably believed
to be in, or not opposed to, the best interests of the Company. The agreements
also require indemnification of such individuals for all reasonable expenses
incurred in connection with the successful defense of any action or claim and
provide for partial indemnification in the case of any partially successful
defense.
STOCKHOLDERS AGREEMENT. Certain of the stockholders of the Company
including Equus and Natural Gas Partners and Messrs. Wood, Carey and Evans have
agreed to approve an amended and restated certificate of incorporation and
amended and restated bylaws that will be adopted simultaneous with the
effectiveness of the registration statement.
In addition, certain stockholders including Equus and Natural Gas Partners
and Messrs. Wood, Carey and Evans will enter into a Stockholders Agreement.
Under the Stockholders Agreement, stockholders wishing to sell their shares to
purchasers other than affiliated entities must first provide notice to the other
owners, and must cause the proposed purchaser to offer to the other stockholders
tag-along rights to purchase a proportionate share of the shares being sold. The
tag-along provisions of the Stockholders Agreement terminate on the first to
occur of the following: (i) the first date on which all parties to the
Stockholders Agreement do not own at least 20% of the equity interests in the
Company; (ii) the bankruptcy of the Company, an assignment for the benefit of
creditors and appointment of a receiver, or a voluntary or involuntary
dissolution; (iii) when only one stockholder remains a party to the Stockholders
Agreement; or (iv) the agreement of all parties to the Stockholders Agreement.
The Stockholders Agreement also gives the Company the right to repurchase
shares of stockholders/employees who either are terminated for cause or
voluntarily terminate their employment (other than by retirement), and fixes the
repurchase price at the fair market value of such shares at the time of
repurchase.
50
<PAGE>
DESCRIPTION OF CAPITAL STOCK
The authorized capital stock of the Company consists of 25,000,000 shares
of common stock, of which shares will be outstanding immediately following
the offering and of which no shares will be held as treasury stock, and
2,500,000 shares of preferred stock, par value $.01 per share.
COMMON STOCK
The holders of common stock are entitled to one vote per share on all
matters to be voted on by stockholders of the Company. Subject to any
preferential rights of any outstanding series of preferred stock designated by
the Board of Directors, the holders of common stock are entitled to receive,
ratably, such dividends, if any, as may be declared from time to time by the
Board of Directors out of funds legally available therefor. In the event of a
liquidation, dissolution or winding up of the Company, the holders of common
stock are entitled to receive pro rata all assets of the Company available for
distribution to such holders after distribution in full of the preferential
amount to be distributed to holders of shares of the preferred stock, if any.
The Company's Amended and Restated Certificate of Incorporation (the
"Certificate") grants preemptive rights and denies cumulative voting. The
common stock has no conversion rights or other subscription rights and there are
no redemption or sinking fund provisions applicable to the common stock, other
than those described under "Certain Related Transactions -- Stockholders
Agreements."
PREFERRED STOCK
The preferred stock may be issued from time to time by the Board of
Directors as shares of one or more classes or series. Subject to the provisions
of the Company's Certificate and limitations prescribed by law, the Board of
Directors is expressly authorized to adopt resolutions to issue the shares, to
fix the number of shares and to change the number of shares constituting any
series, and to provide for or change the voting powers, designations,
preferences and relative, participating, optional or other special rights,
qualifications, limitations or restrictions thereof, including dividend rights
(including whether dividends are cumulative), dividend rates, terms of
redemption (including sinking fund provisions), redemption prices, conversion
rights and liquidation preferences of the shares constituting any class or
series of the preferred stock, in each case without any further action or vote
by the stockholders. The Company has no current plans to issue any shares of
preferred stock of any class or series.
One of the effects of undesignated preferred stock may be to enable the
Board of Directors to render more difficult or to discourage an attempt to
obtain control of the Company by means of a tender offer, proxy contest, merger
or otherwise, and thereby to protect the continuity of the Company's management.
The issuance of shares of preferred stock pursuant to the Board of Directors'
authority described above may adversely affect the rights of the holders of
common stock. For example, preferred stock issued by the Company may rank prior
to the common stock as to dividend rights, liquidation preference or both, may
have full or limited voting rights and may be convertible into shares of common
stock. Accordingly, the issuance of shares of preferred stock may discourage
bids for the common stock at a premium or may otherwise adversely affect the
market price of the common stock.
CERTAIN PROVISIONS OF THE ARTICLES OF INCORPORATION AND THE BYLAWS
The Company's Certificate divides the Board of Directors into two classes,
with one class of three directors and one class of four directors, serving
staggered two-year terms. As a result, only one class of directors will be
elected at each annual meeting of stockholders of the Company with the other
class continuing for the remainder of its two-year term. Pursuant to the
Certificate, the Board of Directors is also authorized to issue shares of
"blank check" preferred stock. The Certificate also provides that directors
may only be removed with cause by a majority of the stockholders.
The Company's bylaws (the "Bylaws") permit stockholders to nominate a
person for election as a director before an annual stockholder meeting only if
written notice of such intent is provided to the Company at least 90 days prior
to the meeting. Such notice of intent to nominate a person for election as a
director is required to set forth the same kind of information respecting such
nominee as would be required
51
<PAGE>
under the proxy rules of the Securities and Exchange Commission (the
"Commission"), including the written consent of the nominee to serve as a
director, if elected, and the name and address of the stockholder making the
nomination as well as the number of shares owned by such stockholder. In the
case of other proposed business at an annual stockholder meeting, the notice
must be filed with the secretary of the Company not less than 60 nor more than
120 days prior to the meeting, and must set forth a brief description of each
matter proposed, the name and address of the stockholder proposing the matter,
and the number of shares owned by such stockholder.
The foregoing provisions may tend to deter any potential unfriendly offers
or other efforts to obtain control of the Company that are not approved by the
Board of Directors and thereby deprive the stockholders of opportunities to sell
shares of common stock at prices higher than the prevailing market price. On the
other hand, these provisions may tend to ensure continuity of management and
corporate policies and to induce any person seeking control of the Company or a
business combination with the Company to negotiate on terms acceptable to the
then elected Board of Directors.
DELAWARE ANTITAKEOVER LAW
The Company is subject to Section 203 of the Delaware General Corporation
Law, which prohibits Delaware corporations from engaging in a wide range of
specified transactions with any interested stockholder. "Interested
stockholders" include any person, other than such corporation and any of its
majority-owned subsidiaries, who owns 15% or more of any class or series of
stock entitled to vote generally in the election of directors, unless, among
other exceptions, the transaction is approved by (i) the Board of Directors
prior to the date the interested stockholder obtained such status or (ii) the
holders of two-thirds of the outstanding shares of each class or series of stock
entitled to vote generally in the election of directors, not including those
shares owned by the interested stockholder.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the common stock is Harris Trust and
Savings Bank.
REGISTRATION RIGHTS AGREEMENT
The Company entered into a Registration Rights Agreement dated June 12,
1997 with Natural Gas Partners, Equus and Messrs. Wood, Evans and Carey.
Approximately 5,350,120 shares of common stock have the benefit of "demand"
registration rights which may be exercised by the holders of not less than 20%
of the stock owned by the parties to the agreement and the employees of the
Company on up to three separate occasions that allow the holder to require the
Company, subject to certain limitations, to file a registration statement under
the Securities Act at the Company's expense covering all or part of such
securities. In addition, all of the parties to the agreement and all employee
owners of these securities have the benefit of "piggyback" registration rights
that allow the holders thereof to require the Company to register the underlying
shares of common stock if the Company files a registration statement under the
Securities Act. If such registration statement is with respect to an
underwritten offering, the underwriter may reduce the amount of "piggyback"
shares to be registered in the underwriting in its discretion. The registration
rights agreement includes traditional covenants and indemnification provisions,
including the indemnification of the selling stockholders for violations of the
Securities Act.
52
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
When the offering is completed, CRC-Evans will have a total of
shares of common stock outstanding. The shares offered by this
prospectus will be freely tradable unless "affiliates" of the Company, as
defined in Rule 144 under the Securities Act, purchase them. The remaining
6,294,520 shares are "restricted," which means they were originally sold in
certain types of offerings that were not subject to a registration statement
filed with the Commission. These restricted shares may be resold only through
registration under the Securities Act or under an available exemption from
registration, such as provided through Rule 144. Under Rule 144, all of the
restricted shares may be sold after the 180-day "lock-up" period.
In addition, 670,160 shares are issuable upon exercise of employee options.
If any options are exercised, the shares issued upon exercise will also be
restricted, but may be sold under Rule 144 after the shares have been held for
one year. Sales under Rule 144 may be subject to certain volume limitations and
other conditions.
The holders of 5,441,400 shares of common stock have agreed to a 180-day
"lock-up" with respect to these shares. This generally means that they cannot
sell these shares during the 180 days following the date of this prospectus. See
"Underwriting" for additional details. After the 180-day lock-up period, these
shares subject to lock-up may be sold in accordance with Rule 144.
A total of 1,245,160 shares of common stock have been reserved for issuance
under CRC-Evans' outstanding options and the Incentive Plan, 24,000 of which are
issuable upon exercise of vested options outstanding on November 30, 1998, or
that will become vested within 60 days after such date. The Company will
register on Form S-8 under the Securities Act the offering and sale of common
stock issuable under its Initial Plan.
53
<PAGE>
UNDERWRITING
CRC-Evans entered into an underwriting agreement with the underwriters
named below. CIBC Oppenheimer Corp., BT Alex. Brown Incorporated and Simmons &
Company International are acting as representatives of the underwriters.
The underwriting agreement provides for the purchase of a specific number
of shares of common stock by each of the underwriters. The underwriters'
obligations are several, which means that they are required to purchase a
specified number of shares, but are not responsible for the commitment of any
other underwriter to purchase shares. Subject to the terms and conditions of the
underwriting agreement, each underwriter has severally agreed to purchase the
number of shares of common stock set forth opposite its name below:
NUMBER OF
UNDERWRITER SHARES
- ---------------------------------------- ---------
CIBC Oppenheimer Corp...................
BT Alex. Brown Incorporated.............
Simmons & Company International.........
---------
Total..............................
=========
This is a firm commitment underwriting. This means that the underwriters
have agreed to purchase all of the shares offered by this prospectus (other than
those covered by the over-allotment option described below) if any are
purchased. Under the underwriting agreement, if an underwriter defaults in its
commitment to purchase shares, the commitments of non-defaulting underwriters
may be increased or the underwriting agreement may be terminated, depending on
the circumstances.
The representatives have advised CRC-Evans that the underwriters propose to
offer the shares directly to the public at the public offering price that
appears on the cover page of this prospectus. In addition, the representatives
may offer some of the shares to certain securities dealers at such price less a
concession of $ per share. The underwriters may also allow, and such dealers
may reallow, a concession not in excess of $ per share to certain other
dealers. After the shares are released for sale to the public, the
representatives may change the offering price and other selling terms at various
times.
CRC-Evans has granted the underwriters an over-allotment option. This
option, which is exercisable for up to 30 days after the date of this
prospectus, permits the underwriters to purchase a maximum of
additional shares from CRC-Evans to cover over-allotments. If the underwriters
exercise all or part of this option, they will purchase shares covered by the
option at the initial public offering price that appears on the cover page of
this prospectus, less the underwriting discount. If this option is exercised in
full, the total price to the public will be $ and the total proceeds
to CRC-Evans will be $ . The underwriters have severally agreed that, to
the extent the over-allotment option is exercised, they will each purchase a
number of additional shares proportionate to the underwriter's initial amount
reflected in the foregoing table.
The following table provides information regarding the amount of the
discount to be paid to the underwriters by CRC-Evans:
<TABLE>
<CAPTION>
TOTAL WITHOUT EXERCISE OF TOTAL WITH FULL EXERCISE OF
PER SHARE OVER-ALLOTMENT OPTION OVER-ALLOTMENT OPTION
--------- ------------------------- ---------------------------
<S> <C>
CRC-Evans International, Inc............ $ $ $
</TABLE>
CRC-Evans estimates that its total expenses of the offering, excluding the
underwriting discount, will be approximately $ .
CRC-Evans has agreed to indemnify the underwriters against certain
liabilities, including liabilities under the Securities Act.
CRC-Evans and its officers and directors and certain other CRC-Evans
stockholders, who beneficially own in the aggregate 5,441,400 shares of common
stock, have agreed that for a period of 180 days
54
<PAGE>
following the date of this prospectus, CRC-Evans and such persons will not
offer, sell, pledge or otherwise dispose of shares of common stock and certain
other CRC-Evans securities that they beneficially own, including securities that
are convertible into shares of common stock and securities that are exchangeable
or exercisable for shares of common stock, without the prior written consent of
CIBC Oppenheimer Corp.
The representatives have informed CRC-Evans that they do not expect
discretionary sales by the underwriters to exceed five percent of the shares
offered by this prospectus.
There is no established trading market for the shares. The offering price
for the shares has been determined by CRC-Evans and the representatives, based
on the following factors:
o The Company's historical performance
o Estimates of the earnings prospects of the Company
o Prevailing market conditions
o Market valuation of companies in related businesses
Rules of the Securities and Exchange Commission may limit the ability of
the underwriters to bid for or purchase shares before the distribution of the
shares is completed. However, the underwriters may engage in the following
activities in accordance with the rules:
o Stabilizing transactions -- The representatives may make bids or
purchases for the purpose of pegging, fixing or maintaining the price of
the shares, so long as stabilizing bids do not exceed a specified
maximum.
o Over-allotments and syndicate covering transactions -- The underwriters
may create a short position in the shares by selling more shares than are
set forth on the cover page of this prospectus. If a short position is
created in connection with the offering, the representatives may engage
in syndicate covering transactions by purchasing shares in the open
market. The representatives may also elect to reduce any short position
by exercising all or part of the over-allotment option.
o Penalty bids -- If the representatives purchase shares in the open market
in a stabilizing transaction or syndicate covering transaction, they may
reclaim a selling concession from the underwriters and selling group
members who sold those shares as part of this offering.
Stabilization and syndicate covering transactions may cause the price of
the shares to be higher than it would be in the absence of such transactions.
The imposition of a penalty bid might also have an effect on the price of the
shares if it discourages resales of the shares.
Neither CRC-Evans nor the underwriters makes any representation or
prediction as to the effect that the transactions described above may have on
the price of the shares. These transactions may occur on or
otherwise. If such transactions are commenced, they may be discontinued without
notice at any time.
LEGAL MATTERS
Certain legal matters in connection with the sale of the common stock
offered hereby are being passed upon for the Company by Akin, Gump, Strauss,
Hauer & Feld, L.L.P., and for the Underwriters by Andrews & Kurth L.L.P.
EXPERTS
The consolidated financial statements of the Company as of March 31, 1998
and for the period from June 12, 1997 (date of inception) to March 31, 1998 and
the financial statements of the Predecessor Business as of March 31, 1997 and
for each of the years in the two year period then ended and the period from
April 1, 1997 to June 11, 1997 have been included herein and in the registration
statement in reliance upon the reports of KPMG Peat Marwick LLP, independent
certified public accountants, appearing elsewhere herein, and upon the authority
of said firm as experts in accounting and auditing.
55
<PAGE>
CRC HOLDINGS CORP. AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
PAGE
----
CRC Holdings Corp., and Subsidiaries:
Independent Auditors' Report ...................................... F-2
Consolidated Balance Sheets -- March 31, 1998 and
September 30, 1998 (Unaudited) ................................... F-3
Consolidated Statements of Earnings -- Period from
June 12, 1997 to March 31, 1998, period from
June 12, 1997 to September 30, 1997 (Unaudited)
and six months ended September 30, 1998 (Unaudited) .............. F-4
Consolidated Statements of Stockholders' Equity ................... F-5
Consolidated Statements of Cash Flows -- Period from
June 12, 1997 to March 31, 1998, period from
June 12, 1997 to September 30, 1997 (Unaudited),
and six months ended September 30, 1998 (Unaudited) .............. F-6
Notes to Consolidated Financial Statements ........................ F-7
CRC Holdings Corp. Predecessor Business:
Independent Auditors' Report ...................................... F-16
Statement of Net Assets Acquired -- March 31, 1997 ................ F-17
Statements of Earnings of Net Assets Acquired --
Years ended March 31, 1996 and 1997 and period from
April 1, 1997 to June 11, 1997 ................................... F-18
Statements of Equity in Net Assets Acquired --
Years ended March 31, 1996 and 1997 and period from
April 1, 1997 to June 11, 1997 ................................... F-19
Statements of Cash Flows of Net Assets Acquired -- Years ended
March 31, 1996 and 1997 and period from April 1, 1997 to
June 11, 1997 .................................................... F-20
Notes to Financial Statements ..................................... F-21
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors
CRC Holdings Corp. and Subsidiaries:
We have audited the accompanying consolidated balance sheet of CRC Holdings
Corp. and subsidiaries as of March 31, 1998, and the related consolidated
statement of earnings, stockholders' equity and cash flows for the period from
June 12, 1997 (date of inception) to March 31, 1998. 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 audit.
We conducted our audit 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
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of CRC Holdings
Corp. and subsidiaries as of March 31, 1998, and the results of their operations
and their cash flows for the period from June 12, 1997 (date of inception) to
March 31, 1998, in conformity with generally accepted accounting principles.
KPMG Peat Marwick LLP
Tulsa, Oklahoma
May 19, 1998
F-2
<PAGE>
CRC HOLDINGS CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
MARCH 31, SEPTEMBER 30,
1998 1998
----------- --------------
(UNAUDITED)
ASSETS
Current assets:
Cash............................ $ 1,558,837 $ 4,841,090
Accounts receivable............. 15,968,674 26,896,979
Inventories..................... 18,281,331 21,110,121
Prepaid expenses and other
current assets................ 650,205 1,033,447
Deferred income taxes........... 351,243 1,543,000
Deferred costs.................. 2,971,685 3,296,995
----------- --------------
Total current assets....... 39,781,975 58,721,632
----------- --------------
Rental assets, net of accumulated
depreciation of $3,188,945 and
$1,776,359 at September 30, 1998
and March 31, 1998, respectively... 9,836,440 16,293,371
Net property, plant and equipment.... 4,717,621 5,115,465
Debt issue costs, net of accumulated
amortization of $402,812 and
$231,078, at September 30, 1998 and
March 31, 1998, respectively....... 1,509,360 1,518,563
Goodwill, net of accumulated
amortization of $72,018............ -- 2,088,529
Deferred income taxes................ 273,110 220,000
Other assets......................... 225,475 512,045
----------- --------------
Total assets............... $56,343,981 $ 84,469,605
=========== ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current installments of
long-term debt................ $ 2,387,704 $ 2,707,342
Bank overdraft.................. 782,951 --
Accounts payable -- trade....... 3,765,307 6,664,944
Income taxes payable............ 635,645 3,154,282
Accrued liabilities............. 6,019,850 7,025,855
Deferred revenue................ 2,134,545 4,838,867
----------- --------------
Total current
liabilities............... 15,726,002 24,391,290
Long-term debt, excluding current
installments....................... 29,019,192 34,521,652
12% subordinated notes due 2002...... 1,919,400 1,919,400
Deferred income taxes................ 83,100 335,800
----------- --------------
Total liabilities.......... 46,747,694 61,168,142
----------- --------------
Stockholders' equity:
Preferred stock, $.01 par value,
100,000 shares authorized,
none issued and outstanding... -- --
Common stock, $.01 par value;
900,000 shares authorized;
157,363 and 100,000 shares
issued at September 30, 1998
and March 31, 1998,
respectively.................. 1,000 1,574
Additional paid-in capital...... 9,139,000 14,331,405
Retained earnings............... 2,342,515 11,164,072
Cumulative foreign currency
translation adjustment........ 41,269 (112,862)
----------- --------------
Stockholders' equity before
notes recievable from
shareholders................... 11,523,784 25,384,189
Less notes receivable from
shareholders.................. 1,927,497 2,082,726
----------- --------------
Total stockholders' equity. 9,596,287 23,301,463
Commitments and contingencies
(Notes 11 and 12)...................
----------- --------------
Total liabilities and
equity.................... $56,343,981 $ 84,469,605
=========== ==============
See accompanying notes to consolidated financial statements.
F-3
<PAGE>
CRC HOLDINGS CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
<TABLE>
<CAPTION>
PERIOD FROM PERIOD FROM SIX MONTHS
JUNE 12, 1997 TO JUNE 12, 1997 TO ENDED
MARCH 31, 1998 SEPTEMBER 30, 1997 SEPTEMBER 30, 1998
---------------- ------------------ ------------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C>
Revenues:
Sales revenue................... $ 23,849,375 $ 9,902,110 $ 20,428,029
Rental and service revenue...... 27,991,283 11,837,912 36,360,141
---------------- ------------------ ------------------
Total revenues............. 51,840,658 21,740,022 56,788,170
---------------- ------------------ ------------------
Cost of Revenues:
Cost of sales revenue........... 16,096,239 6,470,230 13,341,826
Cost of rental and service
revenue....................... 18,310,559 7,587,640 18,061,715
---------------- ------------------ ------------------
Total cost of revenues..... 34,406,798 14,057,870 31,403,541
---------------- ------------------ ------------------
Gross profit.......... 17,433,860 7,682,152 25,384,629
Operating expenses:
Selling, general and
administrative................ 10,113,322 3,893,514 9,174,868
Research and development........ 951,180 319,442 689,672
Other expenses (income)......... 79,148 (41,705) (323,538)
---------------- ------------------ ------------------
11,143,650 4,171,251 9,541,002
---------------- ------------------ ------------------
Operating income...... 6,290,210 3,510,901 15,843,627
Interest expense..................... 2,411,405 880,566 1,709,132
---------------- ------------------ ------------------
Income before income
taxes.............. 3,878,805 2,630,335 14,134,495
Income tax expense................... 1,536,290 1,041,804 5,312,938
---------------- ------------------ ------------------
Net income............ $ 2,342,515 $ 1,588,531 $ 8,821,557
================ ================== ==================
Net income per share:
Basic........................... $ 23.43 $ 15.89 $ 62.23
================ ================== ==================
Diluted......................... $ 22.74 $ 15.42 $ 57.18
================ ================== ==================
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE>
CRC HOLDINGS CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
CUMULATIVE
FOREIGN
COMMON STOCK CAPITAL IN CURRENCY TOTAL
-------------------- EXCESS OF TRANSLATION RETAINED STOCKHOLDERS'
SHARES PAR VALUE PAR VALUE ADJUSTMENT EARNINGS EQUITY
--------- --------- -------------- ---------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Balance, June 12, 1997............... -- $ -- $ -- $ -- $ -- $ --
Net income...................... -- -- -- -- 2,342,515 2,342,515
Issuance of stock............... 100,000 1,000 9,139,000 -- -- 9,140,000
Translation adjustments......... -- -- -- 41,269 -- 41,269
--------- --------- -------------- ---------- -------------- -------------
Balance, March 31, 1998.............. 100,000 1,000 9,139,000 41,269 2,342,515 11,523,784
--------- --------- -------------- ---------- -------------- -------------
Net income (unaudited).......... -- -- -- -- 8,821,557 8,821,557
Issuance of stock (unaudited)... 57,363 574 5,192,405 -- -- 5,192,979
Translation adjustments
(unaudited)................... -- -- -- (154,131) -- (154,131)
--------- --------- -------------- ---------- -------------- -------------
Balance, September 30, 1998
(unaudited)........................ 157,363 $ 1,574 $ 14,331,405 $ (112,862) $ 11,164,072 $ 25,384,189
========= ========= ============== ========== ============== =============
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
<PAGE>
CRC HOLDINGS CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
PERIOD FROM PERIOD FROM
JUNE 12, JUNE 12, SIX MONTHS
1997 TO 1997 TO ENDED
MARCH 31, SEPTEMBER 30, SEPTEMBER 30,
1998 1997 1998
------------ ------------- -------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C>
Cash flows from operating activities:
Net income......................... $ 2,342,515 $ 1,588,531 $ 8,821,557
Adjustments to reconcile net income
to net cash provided by
operating activities:
Depreciation and amortization... 2,341,344 857,959 1,888,450
Other........................... 9,717 -- --
Deferred income tax benefit..... (224,000) -- (885,947)
(Increase) decrease in assets:
Accounts receivable........... (599,867) (2,304,446) (10,928,305)
Inventories................... (10,981) 695,605 (2,828,790)
Prepaid expenses and other
assets..................... (658,016) (728,819) (669,812)
Deferred costs................ (2,885,960) (2,382,695) (325,310)
Increase (decrease) in
liabilities:
Accounts payable -- trade..... (6,666,104) (4,547,974) 2,899,637
Accrued liabilities........... 1,301,109 1,279,793 1,006,005
Income taxes payable.......... 635,645 834,586 2,518,637
Deferred income............... 2,134,545 867,665 2,704,322
------------ ------------- -------------
Net cash provided by (used
in) operating
activities.............. (2,280,053) (3,839,795) 4,200,444
------------ ------------- -------------
Cash flows from investing activities:
Capital expenditures............... (1,082,942) (65,544) (1,758,811)
Payment for acquired business...... (34,673,749) (34,673,749) (8,901,209)
------------ ------------- -------------
Net cash used in investing
activities.............. (35,756,691) (34,739,293) (10,660,020)
------------ ------------- -------------
Cash flows from financing activities:
Increase (decrease) in bank
overdraft....................... 782,951 -- (782,951)
Net borrowings (repayments) under
revolving line of credit........ 12,889,959 12,925,356 (2,046,721)
Proceeds from long-term debt....... 20,000,000 20,000,000 9,000,000
Principal payments on long-term
debt............................ (1,510,063) (693,136) (1,131,181)
Debt issuance costs................ (1,740,438) (1,646,937) (180,937)
Loans to stockholders, net......... (8,097) (1,331) 151
Proceeds from issuance of common
stock........................... 9,140,000 9,140,000 5,037,599
------------ ------------- -------------
Net cash provided by
financing activities.... 39,554,312 39,723,952 9,895,960
Effect of exchange rate changes on
cash............................... 41,269 (106,251) (154,131)
------------ ------------- -------------
Net increase in cash................. 1,558,837 1,038,613 3,282,253
Cash at beginning of period.......... -- -- 1,558,837
------------ ------------- -------------
Cash at end of period................ $ 1,558,837 $ 1,038,613 $ 4,841,090
============ ============= =============
Supplementary disclosure of cash flow
information:
Cash paid for interest............. $ 2,411,405 $ 880,566 $ 1,462,676
============ ============= =============
Income taxes....................... $ 1,056,859 $ -- $ 3,679,469
============ ============= =============
Supplemental disclosure of non-cash
financing information --
Notes receivable from stockholders
for common stock................ $ 1,919,400 $ 1,919,400 $ 155,380
============ ============= =============
</TABLE>
See accompanying notes to consolidated financial statements.
F-6
<PAGE>
CRC HOLDINGS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
DESCRIPTION OF BUSINESS
CRC Holdings Corp. and subsidiaries (the Company) designs, manufactures,
sells, and rents specialized equipment to the pipeline construction and
rehabilitation industry. The Company operates on a world wide basis through
wholly owned subsidiaries with principal operations located in Tulsa, Oklahoma;
Houston, Texas; Edmonton, Alberta; Burnley, United Kingdom; and Hoevelaken, the
Netherlands.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the financial statements of
CRC Holdings Corp. and its wholly owned subsidiaries. All significant
intercompany balances and transactions have been eliminated in consolidation.
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid investments with original
maturities of three months or less to be cash equivalents.
INVENTORIES
Inventories are stated at the lower of cost or market. Cost is determined
using the first-in, first-out method for all inventories.
PROPERTY, PLANT AND EQUIPMENT
Property, plant, and equipment are stated at cost. Depreciation is computed
using the straight-line method over the estimated useful lives of the assets.
Betterments and renewals that extend the life of the asset are capitalized;
other repairs and maintenance are expensed.
The estimated useful lives for determining depreciation for the major
classes of assets are:
Buildings and improvements.............. 20 to 40 years
Machinery and equipment................. 7 years
Furniture and fixtures.................. 7 years
Automobiles and trucks.................. 5 years
Computer equipment...................... 5 years
DEBT ISSUANCE COSTS
Debt issuance costs are initially capitalized as intangible assets and are
amortized over the term of the debt to which they relate.
REVENUE RECOGNITION
Equipment sales revenue is recognized when the equipment is shipped.
Equipment rental revenue is deferred and recognized ratably over the term of the
rental agreement. Service revenue is recognized upon customer billing which
occurs at the time the services have been rendered. Cost associated with
refurbishing rental equipment is incurred and deferred at the time the equipment
is readied for use. Such costs are amortized during the rental period.
GOODWILL
Goodwill, which represents the excess of purchase price over fair value of
net assets acquired, is amortized on a straight-line basis over the expected
period to be benefited which is 15 years. The Company assesses the
recoverability of goodwill by determining whether the amortization of the
balance over its remaining life can be recovered through undiscounted future
cash flows of the acquired operation. The
F-7
<PAGE>
CRC HOLDINGS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
amount of goodwill impairment, if any, is measured based on projected discounted
future operating cash flows using a discount rate reflecting the Company's
average cost of funds. The assessment of the recoverability of goodwill will be
impacted if estimated future operating cash flows are not achieved.
INCOME TAXES
Income taxes are accounted for under the asset and liability method.
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
measured using enacted tax rates expected to apply to taxable income in the
years in which those temporary differences are expected to be recovered or
settled. The effect on deferred tax assets and liabilities of a change in tax
rates is recognized in income in the period that includes the enactment date.
FOREIGN CURRENCY TRANSLATION
All significant asset and liability accounts stated in currencies other
than United States dollars are translated into United States dollars at year end
exchange rates. Translation adjustments are accumulated in a separate component
of stockholders' equity. Revenue and expense accounts are converted at
prevailing rates throughout the year.
EMPLOYEE BENEFIT PLAN
The Company has a defined contribution pension plan covering substantially
all of its employees.
STOCK OPTION PLAN
The Company has adopted Statement of Financial Accounting Standards (SFAS)
No. 123, ACCOUNTING FOR STOCK-BASED COMPENSATION, which permits entities to
recognize as expense over the vesting period the fair value of all stock-based
awards on the date of grant. Alternatively, SFAS No. 123 also allows entities to
continue to apply the provisions of Accounting Principles Board (APB) Opinion
No. 25, ACCOUNTING FOR STOCK-BASED COMPENSATION, and provide pro forma net
income and pro forma earnings per share disclosures for employee stock option
grants made in future years as if the fair-value-based method defined in SFAS
No. 123 had been applied. The Company has elected to apply the provisions of APB
Opinion No. 25 and provide the pro forma disclosure provisions of SFAS No. 123.
ENVIRONMENTAL REMEDIATION OBLIGATIONS
The Company accrues for losses associated with environmental remediation
obligations, if any, when such losses are probable and reasonably estimable.
Accruals for estimated losses from environmental remediation obligations
generally are recognized no later than completion of the remedial feasibility
study. Such accruals are adjusted as further information develops or
circumstances change. Costs of future expenditures for environmental remediation
obligations are not discounted to their present value. Recoveries of
environmental remediation costs from other parties, if any, are recorded as
assets when their receipt is deemed probable.
USE OF ESTIMATES
Management has made a number of estimates and assumptions relating to the
reporting of assets and liabilities to prepare these financial statements in
conformity with generally accepted accounting principles. Actual results could
differ from those estimates.
INTERIM PERIOD (UNAUDITED)
The interim unaudited consolidated financial statements, in the opinion of
management, reflect all adjustments (consisting of only normal recurring
adjustments) necessary for a fair presentation of the consolidated financial
position and the results of operations for such periods in conformity with
generally
F-8
<PAGE>
CRC HOLDINGS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
accepted accounting principles. The operating results for any interim period are
not necessarily indicative of operating results that may be expected for a full
year.
(2) FORMATION AND ACQUISITION
The Company was formed to acquire the net assets of CRC-Evans Pipeline
International, Inc. and the issued and outstanding shares of CRC-Evans Canada
Ltd. and Pipeline Induction Heat Ltd., wholly owned subsidiaries of the Company.
The aggregate purchase price after working capital adjustments was $36,640,000.
The transaction was effective June 12, 1997.
Other than the issuance of capital stock and debt on June 12, 1997 the
Company had no operations prior to June 12, 1997. Accordingly, the accompanying
consolidated financial statements represent the results of operations from June
12, 1997 to March 31, 1998.
The purchase price net of cash acquired was allocated to the assets
acquired and liabilities assumed as follows:
Accounts receivable.................. $ 15,368,807
Inventories.......................... 18,270,350
Rental assets........................ 10,721,613
Property, plant and equipment........ 4,869,489
Deferred income taxes................ 317,253
Other assets......................... 303,389
Accounts and notes payable.......... (10,458,411)
Accrued liabilities.................. (4,718,741)
---------------
Net assets acquired............. $ 34,673,749
===============
A portion of the proceeds resulting from the issuance of the capital stock
was loaned by certain shareholders to other shareholders utilizing the Company
as the financing vehicle. Accordingly, the Company has both notes payable to and
receivable from shareholders.
(3) BUSINESS AND CREDIT CONCENTRATIONS
Included in the Company's consolidated balance sheet are the total assets
related to their operations in Canada and the United Kingdom. These assets total
approximately $3 million and $9 million, respectively.
The Company has a concentration of customers in the oil and gas pipeline
construction industry which expose the Company to a concentration of credit risk
within an industry. Receivables are generally not collateralized.
Ten customers were responsible for 45% of the Company's total revenue in
the year ended March 31, 1998. In addition, one customer accounted for
approximately 11% of the Company's total revenues in the period ended March 31,
1998. The Company believes that the allowance for bad debts is adequate.
(4) FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amounts of cash, accounts receivable, bank overdraft, trade
accounts payable, income taxes payable, and accrued liabilities approximate fair
value due to the short maturity of these instruments.
The carrying amounts of notes receivable from shareholders, long-term debt,
and notes payable to shareholders approximate fair value as the interest rates
and terms of the agreements approximate those available to the Company in the
marketplace.
F-9
<PAGE>
CRC HOLDINGS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(5) INVENTORIES
Inventories consist of the following:
MARCH 31, SEPTEMBER 30,
1998 1998
-------------- --------------
(UNAUDITED)
Raw materials........................ $ 8,661,523 $ 8,573,968
Work-in-process...................... 2,244,875 4,604,457
Finished goods....................... 7,374,933 7,931,696
-------------- --------------
$ 18,281,331 $ 21,110,121
============== ==============
(6) PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment, at cost, consist of:
MARCH 31, SEPTEMBER 30,
1998 1998
------------ --------------
(UNAUDITED)
Property, plant and equipment:
Land and improvements................ $ 1,026,228 $1,053,836
Buildings and improvements........... 2,591,995 2,570,546
Machinery and equipment.............. 325,021 463,044
Furniture and fixtures............... 83,165 140,158
Automobiles and trucks............... 379,345 557,958
Leasehold improvements............... 295,940 298,517
Computer equipment................... 344,179 505,294
------------ --------------
5,045,873 5,589,353
Less accumulated depreciation and
amortization....................... (328,252) (473,888)
------------ --------------
Net property, plant and
equipment..................... $ 4,717,621 $5,115,465
============ ==============
F-10
<PAGE>
CRC HOLDINGS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(7) LONG-TERM DEBT
Long-term debt consists of the following:
MARCH 31 SEPTEMBER 30,
1998 1998
----------- -------------
(UNAUDITED)
Note payable to bank, bearing interest
at either (i) a base rate equal to the
lendor's base rate or 0.5% above the
Federal funds effective rate, plus
0.25% to 1%, or (ii) the Eurodollar
rate plus the applicable margin
ranging from 1.75% to 2.50% (9.5% and
8.1875% at March 31, 1998); payable in
escalating quarterly installments;
secured by substantially all assets of
the Company. (a)...................... $18,500,000 $ 17,375,000
Notes payable to bank under $5,000,000
line of credit, bearing interest a
floating rate equal to LIBOR plus 1%
(10.0389% at March 31, 1998); secured
by substantially all assets of the
Company. In July 1998, the Company
added a $2,500,000 acquisition
facility to this note. (a), (b)....... 2,389,959 2,971,675
Note payable to bank under $20,000,000
line of credit, bearing interest at
either (i) a base rate equal to the
higher of the lendor's base rate or
0.5% above the Federal funds effective
rate, plus 0.25% to 1%, or (ii) the
Eurodollar rate plus the applicable
margin ranging from 1.75% to 2.50%
(9.5% and 8.1875% at March 31, 1998);
secured by substantially all assets of
the Company. In July 1998, the line of
credit was increased by $5,000,000 and
the Company added a $17,500,000
acquisition facility. (a), (b)........ 10,500,000 16,500,000
Other installment notes................. 16,937 382,319
----------- -------------
Total notes payable........... 31,406,896 37,228,994
Less current installments............... (2,387,704) (2,707,342)
----------- -------------
Notes payable, excluding
current installments....... $29,019,192 $ 34,521,652
=========== =============
(a) The loan agreement which expires June 12, 2003, contains various covenants,
including, but not limited to, maintenance of minimum net worth and a ratio
of liabilities to net worth, as defined in the agreement.
(b) The Company is required to pay a commitment fee ranging from 0.425% to
0.500% of the unused portion of the revolving line of credit. The commitment
fee varies based upon the ratio of average funded debt to earnings before
interest, taxes, depreciation, and amortization.
Aggregate maturities of long-term debt are as follows:
1999................................. $ 2,387,704
2000................................. 2,879,233
2001................................. 3,375,000
2002................................. 3,875,000
2003................................. 4,750,000
Thereafter........................... 14,139,959
F-11
<PAGE>
CRC HOLDINGS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(8) INCOME TAXES
Income tax expense (benefit) for the period from June 12, 1997 to March 31,
1998 consists of the following:
CURRENT DEFERRED TOTAL
------------ ------------ ------------
Federal.............................. $ 1,133,323 $ (191,265) $ 942,058
State................................ 162,038 (17,735) 144,303
International........................ 464,929 (15,000) 449,929
------------ ------------ ------------
$ 1,760,290 $ (224,000) $ 1,536,290
============ ============ ============
Total income tax expense differs from the amounts computed by applying the
U.S. federal statutory income tax rates of 34% to income before income taxes as
a result of the following:
Computed "expected" income tax
expense............................ $ 1,318,794
Increase (decrease) in income taxes
resulting from:
State income taxes, net of
federal income tax benefit...... 173,678
Foreign income taxes, net of
federal foreign tax credits..... (31,699)
Expenses not deductible for
income tax purposes............. 121,243
Other........................... (45,726)
------------
$ 1,536,290
============
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets (liabilities) at March 31, 1998 are
presented below:
Deferred tax assets (liabilities):
Inventories, principally due to
additional costs capitalized
for tax purposes and the
allowance for obsolete
inventory...................... $ 49,708
Accrued liabilities not
deductible until paid.......... 768,420
Deferred income taxable when
received....................... 610,644
Maintenance costs capitalized
for book purposes.............. (1,077,529)
Property and equipment,
principally due to differences
in depreciation................ 120,260
Debt issue costs, due to
differences in amortization.... (10,840)
Foreign tax credit.............. 80,590
--------------
Net deferred tax assets.... $ 541,253
==============
Management believes that it is more likely than not that the Company will
realize the benefit of the deferred tax assets in future periods.
F-12
<PAGE>
CRC HOLDINGS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(9) EARNINGS PER SHARE
The following information reconciles the number of shares used to compute
basic earnings per share to those used to compute diluted earnings per share:
<TABLE>
<CAPTION>
PERIOD FROM PERIOD FROM SIX MONTHS
JUNE 12, 1998 TO JUNE 12, 1997 TO ENDED
MARCH 31, 1998 SEPTEMBER 30, 1997 SEPTEMBER 30, 1998
---------------------- ---------------------- ----------------------
(UNAUDITED)
<S> <C> <C> <C>
Net Income........................... $ 2,342,515 $ 1,588,531 $ 8,821,557
=========== =========== ===========
Weighted average shares of common
stock outstanding.................. 100,000 100,000 141,762
Basic earnings per share......... $ 23.43 $ 15.89 $ 62.23
=========== =========== ===========
Effect of dilutive
securities -- stock options........ 3,000 3,000 12,521
--------- --------- ---------
103,000 103,000 154,283
========= ========= =========
Diluted earnings per share....... $ 22.74 $ 15.42 $ 57.18
=========== =========== ===========
</TABLE>
(10) STOCK OPTION PLAN
On June 12, 1997, the Company adopted a stock option plan (the 1997 Plan)
and granted options to key employees to purchase up to 3,000 shares of the
Company's stock. The options have an exercise price equal to the stock's initial
price per share times 1.0675 raised to the power of n, where n equals number of
years from the date of grant. These options vest in twenty percent annual
increments and become fully exercisable after five years from the date of grant.
All stock options expire August 31, 2002.
At March 31, 1998, there were no additional shares available for grant
under the Plan. The per share weighted-average fair value of stock options
granted was $91.41 on the date of grant using the Minimum Value method assuming
a risk-free interest rate of 6.75% and an expected life of five years.
The Company applies APB Opinion No. 25 and records compensation expense,
accordingly. Had the Company determined compensation cost based on the fair
value at the grant date for its stock options under SFAS No. 123, the Company's
net income would not have been impacted as the exercise price multiplier is
equal to the assumed risk-free interest rate.
(11) COMMITMENTS AND CONTINGENCIES
In the ordinary course of business, the Company provides warranties on
parts and equipment sold and rented.
In addition to these warranties, the Company has warranted specific systems
and components provided for an oceangoing pipe laying vessel. The Company is
liable for all items, systems, components, and spare parts through October 1998
and for design failure through October 2001. The Company's liability on design
failure is limited to the amount required to correct the design failure,
including replacement, reassembly, and technical support. The Company is not
liable for loss of business or revenue. The vessel is undergoing tests and no
claims have been made to date under the warranty provisions of the contract. The
Company has accrued an estimated amount for its liability under the warranty
provisions. The aggregate amount of warranty claims, if any, cannot be
determined. Payments of claims significantly in excess of amounts accrued, if
any, could have an adverse effect on the Company's consolidated financial
position, results of operations, and liquidity.
F-13
<PAGE>
CRC HOLDINGS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The Company is obligated under various noncancelable operating leases for
certain operating facilities, automobiles, and equipment. The remaining terms of
the leases range from one to sixteen years. Future minimum lease payments as of
March 31, 1998 are:
Year ending March 31:
1999....................... $ 177,000
2000....................... 171,000
2001....................... 160,000
2002....................... 149,000
2003....................... 149,000
Thereafter...................... 1,639,000
Rent expense was approximately $290,385 for the period ended March 31,
1998.
The Company has issued standby letters of credit aggregating $1,686,000 to
guarantee performance to third parties under certain contracts.
The Company is involved in various claims and legal actions arising in the
ordinary course of business. In the opinion of management, the ultimate
disposition of these matters will not have a material adverse effect on the
Company's consolidated financial position, results of operations, or liquidity.
(12) SUBSEQUENT EVENTS -- UNAUDITED
In April 1998, the Company acquired substantially all of the business
assets of B.L. Key Services LLC (B. L. Key), a manufacturer and seller of
concrete pipeline weights. This acquisition was accounted for using the purchase
method of accounting. The purchase price of the assets acquired totaled
approximately $3,029,000 of which $1,029,000 was paid in cash and $2,000,000 was
financed with a note payable to the seller. Goodwill, which represents the
excess of purchase price over fair value of net assets acquired, will be
amortized on a straight-line basis over 15 years. The results of operations for
B.L. Key have been included from the date of acquisition.
The estimated fair value of assets acquired consists of the following:
Inventory............................ $ 119,000
Property and equipment............... 1,193,000
Other................................ 29,000
------------
Fair value of net assets acquired.... 1,341,000
Excess of purchase price paid over
fair value of assets acquired...... 1,688,000
------------
$ 3,029,000
============
On May 29, 1998 the Company acquired substantially all of the pipeline
equipment assets of Hamilton Heavy Equipment, Inc. and Jerry Hamilton dba HHC
International (collectively, Hamilton). This acquisition was accounted for using
the purchase method of accounting. The purchase price of the assets was
$5,748,000 of which $4,773,000 was paid in cash at closing, $400,000 financed
with a note payable to the seller and the balance to be paid upon receipt of
final valuations. The results of operations for Hamilton have been included from
the date of acquisition.
F-14
<PAGE>
CRC HOLDINGS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The estimated fair value of the assets acquired follows:
Rental assets........................ $ 5,495,000
Inventory............................ 200,000
Property and equipment............... 53,000
------------
$ 5,748,000
============
In May 1998, the Company issued 55,663 shares of common stock at $91.40 per
share for total proceeds of $5,087,598. In conjunction with the issuance, the
Company paid a $25,000 fee plus out of pocket expenses to each of the two
majority shareholders.
In June 1998, the Company issued 1,700 shares of common stock at $91.40 per
share in exchange for a note payable of $155,380.
In November 1998, the Company acquired substantially all of the business
assets of Didcot Heat Treatment Limited (Didcot) for an aggregate purchase price
of $3,400,000 using the purchase method of accounting. Didcot performs
resistance heat treating services, with its primary markets in the United
Kingdom and Western Europe.
F-15
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors
CRC Holdings Corp.:
We have audited the statement of net assets acquired of CRC Holdings Corp.
Predecessor Businesses as of March 31, 1997 and the related statements of
earnings of net assets acquired, equity in net assets acquired and cash flows
for the years ended March 31, 1996 and 1997 and for the period from April 1,
1997 to June 11, 1997. These financial statements are the responsibility of the
management of CRC Holdings Corp. Our responsibility is to express an opinion on
these financial statements based on our audit.
We conducted our audit 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
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the net assets acquired of CRC Holdings Corp.
Predecessor Businesses as of March 31, 1997 and the results of operations and
cash flows for the years ended March 31, 1996 and 1997 and for the period from
April 1, 1997 to June 11, 1997, in conformity with generally accepted accounting
principles.
KPMG Peat Marwick LLP
Tulsa, Oklahoma
October 3, 1998
F-16
<PAGE>
CRC HOLDINGS CORP. PREDECESSOR BUSINESSES
STATEMENT OF NET ASSETS ACQUIRED
MARCH 31, 1997
ASSETS
Current assets:
Cash............................... $ 2,761,376
Accounts receivable................ 17,688,716
Inventories........................ 15,187,889
Prepaid expenses and other current
assets............................ 172,039
Deferred income taxes.............. 1,138,423
Deferred costs..................... 2,015,524
--------------
Total current assets.......... 38,963,967
--------------
Rental assets, net of accumulated
depreciation of $22,074,798........... 4,759,171
Net property, plant and equipment....... 3,737,124
Deferred income taxes................... 344,538
Other assets............................ 228,882
--------------
Total assets.................. $ 48,033,682
==============
LIABILITIES AND EQUITY
Current liabilities:
Notes payable...................... $ 29,121
Accounts payable -- trade.......... 4,582,552
Income taxes payable............... 555,703
Accrued liabilities................ 4,252,786
Deferred revenue................... 3,751,617
--------------
Total current liabilities..... 13,171,779
Equity in net assets acquired........... 34,861,903
Commitments and contingencies (note 7)
--------------
Total liabilities and
equity....................... $ 48,033,682
==============
See accompanying notes to financial statements.
F-17
<PAGE>
CRC HOLDINGS CORP. PREDECESSOR BUSINESSES
STATEMENTS OF EARNINGS OF NET ASSETS ACQUIRED
YEARS ENDED MARCH 31, 1996 AND 1997 AND THE PERIOD APRIL 1, 1997 TO JUNE 11,
1997
<TABLE>
<CAPTION>
MARCH 31, MARCH 31, JUNE 11,
1996 1997 1997
-------------- -------------- --------------
<S> <C> <C> <C>
Revenues:
Sales revenue................... $ 25,324,527 $ 26,081,330 $ 5,686,973
Rental and service revenue...... 39,329,096 43,293,159 6,928,325
-------------- -------------- --------------
Total revenues............. 64,653,623 69,374,489 12,615,298
-------------- -------------- --------------
Cost of revenues:
Cost of sales revenue........... 16,594,858 18,372,975 3,712,139
Cost of rental and service
revenue....................... 29,255,453 28,302,656 5,450,835
-------------- -------------- --------------
Total cost of revenues..... 45,850,311 46,675,631 9,162,974
-------------- -------------- --------------
Gross profit............... 18,803,312 22,698,858 3,452,324
-------------- -------------- --------------
Operating expenses:
Selling, general and
administrative................ 13,055,632 13,017,645 3,015,862
Research and development........ 855,900 753,919 152,928
Other expenses (income)......... 2,750,298 367,135 (152,674)
-------------- -------------- --------------
Operating income........... 2,141,482 8,560,159 436,208
Interest income...................... 245,147 688,714 49,676
-------------- -------------- --------------
Income before income
taxes................... 2,386,629 9,248,873 485,884
Income tax expense................... 888,848 3,359,203 207,108
-------------- -------------- --------------
Net income................. $ 1,497,781 $ 5,889,670 $ 278,776
============== ============== ==============
</TABLE>
See accompanying notes to financial statements.
F-18
<PAGE>
CRC HOLDINGS CORP. PREDECESSOR BUSINESSES
STATEMENTS OF EQUITY IN NET ASSETS ACQUIRED
YEARS ENDED MARCH 31, 1996 AND 1997 AND THE PERIOD APRIL 1, 1997 TO JUNE 11,
1997
<TABLE>
<CAPTION>
MARCH 31, MARCH 31, JUNE 11,
1996 1997 1997
----------- ----------- -----------
<S> <C> <C> <C>
Equity in net assets acquired at
beginning of period.................. $34,695,243 $27,841,772 $34,861,903
Net income........................... 1,497,781 5,889,670 278,776
Effect of exchange rate changes...... (178,208) 306,999 297,725
Net capital contributions
(withdrawals)........................ (8,173,044) 823,462 (2,948,148)
----------- ----------- -----------
Equity in net assets at end of
period............................... $27,841,772 $34,861,903 $32,490,256
=========== =========== ===========
</TABLE>
See accompanying notes to financial statements.
F-19
<PAGE>
CRC HOLDINGS CORP. PREDECESSOR BUSINESSES
STATEMENTS OF CASH FLOWS OF NET ASSETS ACQUIRED
YEARS ENDED MARCH 31, 1996 AND 1997 AND THE PERIOD
APRIL 1, 1997 TO JUNE 11, 1997
<TABLE>
<CAPTION>
MARCH 31, MARCH 31, JUNE 11,
1996 1997 1997
-------------- -------------- --------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income......................... $ 1,497,781 $ 5,889,670 $ 278,776
Adjustments to reconcile net income
to net cash provided by
operating activities:
Depreciation and amortization... 4,836,161 2,287,012 387,560
Other........................... 74,311 153,451 (25,740)
Deferred income tax benefit..... (887,614) (417,356) 3,027
(Increase) decrease in assets:
Accounts receivable........... 6,161,830 (2,107,661) 1,789,726
Inventories................... 104,530 (2,928,757) (3,012,645)
Prepaid expenses and other
assets..................... 230,947 (152,757) 187,770
Deferred costs................ 399,606 (903,350) (683,481)
Increase (decrease) in
liabilities:
Accounts payable -- trade..... 538,359 413,025 483,449
Accrued liabilities........... (935,691) (1,551,140) 155,028
Income taxes payable.......... 700,755 (324,381) (326,208)
Deferred income............... (3,715,597) 2,703,531 531,436
-------------- -------------- --------------
Net cash provided by (used
in) operating
activities.............. 9,005,378 3,061,287 (231,302)
-------------- -------------- --------------
Cash flows from investing
activities --
Capital expenditures............... (464,114) (2,366,731) (37,147)
-------------- -------------- --------------
Net cash used in investing
activities.............. (464,114) (2,366,731) (37,147)
-------------- -------------- --------------
Cash flows from financing activities:
Principal payments on debt......... (1,076,467) (8,957) (2,121)
Net increase (decrease) in equity
in net assets acquired.......... (8,173,044) 823,462 (2,948,148)
-------------- -------------- --------------
Net cash provided by (used
in) financing
activities.............. (9,249,511) 814,505 (2,950,269)
-------------- -------------- --------------
Effect of exchange rate changes on
cash............................... (178,208) 306,999 297,725
-------------- -------------- --------------
Net increase in cash................. (886,455) 1,816,060 (2,920,993)
Cash at beginning of period.......... 1,831,771 945,316 2,761,376
-------------- -------------- --------------
Cash at end of period................ $ 945,316 $ 2,761,376 $ (159,617)
============== ============== ==============
</TABLE>
See accompanying notes to financial statements.
F-20
<PAGE>
CRC HOLDINGS CORP. PREDECESSOR BUSINESSES
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1997
(1) BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
Effective June 12, 1997 CRC Holdings Corp. (Holdings) acquired from
Weatherford Enterra, Inc. (Weatherford) the net assets of CRC-Evans Pipeline
International, Inc. and the issued and outstanding shares of CRC-Evans Canada,
Ltd, and Pipeline Induction Heat, Ltd. (collectively the Predecessor
Businesses). Prior to the acquisition the Predecessor Businesses were operated
as a business unit by Weatherford.
The accompanying financial statements have been prepared from records
maintained by Weatherford and may not necessarily be indicators of the
conditions which could have existed if the Predecessor Businesses had been
operated as an independent entity.
DESCRIPTION OF BUSINESS
The Predecessor Businesses design, manufacture, sell, and rent specialized
equipment to the pipeline construction and rehabilitation industry. The
Predecessor Businesses operate on a world wide basis with principal operations
located in Tulsa, Oklahoma; Houston, Texas; Edmonton, Alberta; Burnley, United
Kingdom; and Hoevelaken, the Netherlands.
CASH AND CASH EQUIVALENTS
The Predecessor Businesses consider all highly liquid investments with
original maturities of three months or less to be cash equivalents.
INVENTORIES
Inventories are stated at the lower of cost or market. Cost is determined
using the first-in, first-out method for all inventories.
PROPERTY, PLANT AND EQUIPMENT
Property, plant, and equipment are stated at cost. Depreciation is computed
using the straight-line method over the estimated useful lives of the assets.
Betterments and renewals that extend the life of the asset are capitalized;
other repairs and maintenance are expensed.
The estimated useful lives for determining depreciation for the major
classes of assets are:
Buildings and improvements........... 20 to 40 years
Machinery and equipment.............. 7 years
Furniture and fixtures............... 7 years
Automobiles and trucks............... 5 years
Computer equipment................... 5 years
REVENUE RECOGNITION
Equipment sales revenue is recognized when the equipment is shipped.
Equipment rental revenue is recognized during the period of customer usage.
Rental revenue derived from equipment located outside of the continental United
States is deferred and recognized ratable over the term of the rental agreement.
Service revenue is recognized upon customer billing which occurs at the time the
services have been rendered. Cost associated with refurbishing rental equipment
is incurred and deferred at the time the equipment is readied for use. Such
costs are amortized during the rental period.
F-21
<PAGE>
CRC HOLDINGS CORP. PREDECESSOR BUSINESSES
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
INCOME TAXES
The results of operations of the Predecessor Businesses are included in
Weatherford's consolidated federal and state income tax returns. Income tax
expense or benefit has been determined as if the Predecessor Businesses filed a
separate federal and state tax return.
Income taxes are accounted for under the asset and liability method.
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases and operating loss and tax credit carryforwards. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are expected to be
recovered or settled. The effect on deferred tax assets and liabilities of a
change in tax rates is recognized in income in the period that includes the
enactment date.
FOREIGN CURRENCY TRANSLATION
All significant asset and liability accounts stated in currencies other
than United States dollars are translated into United States dollars at year end
exchange rates. Translation adjustments are accumulated in a separate component
of stockholders' equity. Revenue and expense accounts are converted at
prevailing rates throughout the year.
EMPLOYEE BENEFIT PLAN
The Predecessor Businesses have a defined contribution pension plan
covering substantially all of their employees.
USE OF ESTIMATES
Management has made a number of estimates and assumptions relating to the
reporting of assets and liabilities to prepare these financial statements in
conformity with generally accepted accounting principles. Actual results could
differ from those estimates.
(2) BUSINESS AND CREDIT CONCENTRATIONS
Included in the statement of net assets acquired are the total assets
related to the Predecessor Businesses' operations in Canada and the United
Kingdom. These assets total approximately $5 million and $9 million,
respectively.
The Predecessor Businesses have a concentration of customers in the oil and
gas pipeline construction industry which exposes the Predecessor Businesses to a
concentration of credit risk within an industry, including one customer which
accounts for approximately 10% of total revenues. Receivables are generally not
collateralized. The allowance for bad debts is considered adequate.
(3) FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amounts of cash, accounts receivable, trade accounts payable,
income taxes payable, and accrued liabilities approximate fair value due to the
short maturity of these instruments.
(4) INVENTORIES
Inventories at March 31, 1997 consist of the following:
Raw materials........................... $ 5,375,067
Work-in-process......................... 4,726,083
Finished goods.......................... 5,086,739
--------------
$ 15,187,889
==============
F-22
<PAGE>
CRC HOLDINGS CORP. PREDECESSOR BUSINESSES
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(5) PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment, at cost, consist of:
Property, plant and equipment:
Land and improvements........... $ 751,161
Buildings and improvements...... 2,981,060
Machinery and equipment......... 1,074,652
Furniture and fixtures.......... 337,339
Automobiles and trucks.......... 1,125,029
Leasehold improvements.......... 437,079
Computer equipment.............. 1,086,617
------------
7,792,937
Less accumulated depreciation
and amortization.............. 4,055,813
------------
Net property, plant and equipment.... $ 3,737,124
============
(6) INCOME TAXES
Income tax expense (benefit) consists of the following for the years ended
March 31, 1996 and 1997 and the period from April 1, 1997 to June 11, 1997:
CURRENT DEFERRED TOTAL
------------ ------------ ------------
March 31, 1996:
Federal......................... $ 351,255 $ (556,728) $ (205,473)
State........................... 133,451 (56,409) 77,042
Foreign......................... 1,291,756 (274,477) 1,017,279
------------ ------------ ------------
$ 1,776,462 $ (887,614) $ 888,848
============ ============ ============
March 31, 1997:
Federal......................... $ 2,252,715 $ (430,483) $ 1,822,232
State........................... 414,861 (43,617) 371,244
Foreign......................... 1,108,983 56,744 1,165,727
------------ ------------ ------------
$ 3,776,559 $ (417,356) $ 3,359,203
============ ============ ============
June 11, 1997:
Federal......................... $ 171,979 $ 48,919 220,898
State........................... 38,962 4,957 43,919
Foreign......................... (6,860) (50,849) (57,709)
------------ ------------ ------------
$ 204,081 $ 3,027 $ 207,108
============ ============ ============
F-23
<PAGE>
CRC HOLDINGS CORP. PREDECESSOR BUSINESSES
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Total income tax expense differs from the amounts computed by applying the
U.S. federal statutory income tax rates of 34% to income before income taxes as
a result of the following:
MARCH 31, MARCH 31, JUNE 11,
1996 1997 1997
---------- ------------ ----------
Computed "expected" income tax
expense............................ $ 811,454 $ 3,144,617 $ 165,201
Increase (decrease) in income taxes
resulting from:
State income taxes, net of
federal income tax benefit.... 50,848 245,021 28,987
Expenses not deductible for
income tax purposes........... 91,146 87,961 17,197
Other........................... (64,600) (118,396) (4,277)
---------- ------------ ----------
$ 888,848 $ 3,359,203 $ 207,108
========== ============ ==========
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets (liabilities) at March 31, 1997 are
presented below:
Deferred tax assets (liabilities):
Inventories, principally due to
additional costs capitalized
for tax purposes and the
allowance for obsolete
inventory...................... $ 18,715
Accrued liabilities not
deductible until paid.......... 1,119,708
Property and equipment,
principally due to differences
in depreciation................ 344,538
------------
Net deferred tax assets.... $ 1,482,961
============
Management believes that it is more likely than not that the benefit of the
deferred tax assets will be realized in future periods.
(7) COMMITMENTS AND CONTINGENCIES
In the ordinary course of business, the Predecessor Businesses provide
warranties on parts and equipment sold and rented.
In addition to these warranties, the Predecessor Businesses have warranted
specific systems and components provided for an oceangoing pipe laying vessel.
The Predecessor Businesses are liable for all items, systems, components, and
spare parts through October 1998 and for design failure through October 2001.
The Predecessor Businesses' liability on design failure is limited to the amount
required to correct the design failure, including replacement, reassembly, and
technical support. The Predecessor Businesses are not liable for loss of
business or revenue. The vessel is undergoing tests and no claims have been made
through June 11, 1997, under the warranty provisions of the contract. The
Predecessor Businesses have accrued an estimated amount for its liability under
the warranty provisions. The aggregate amount of warranty claims, if any, cannot
be determined. Payments of claims significantly in excess of amounts accrued, if
any, could have an adverse effect on the Predecessor Businesses' financial
position, results of operations, and liquidity.
F-24
<PAGE>
CRC HOLDINGS CORP. PREDECESSOR BUSINESSES
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
The Predecessor Businesses are obligated under various noncancelable
operating leases for certain operating facilities, automobiles, and equipment.
The remaining terms of the leases range from one to sixteen years. Future
minimum lease payments as of March 31, 1997 are:
YEAR ENDING MARCH 31:
1998............................ $ 182,000
1999............................ 182,000
2000............................ 165,000
2001............................ 158,000
Thereafter...................... 1,910,000
Rent expense was approximately $145,444, $91,862, and $170,948 for the
years ended March 31, 1996 and 1997, and the period from April 1, 1997 to June
11, 1997.
The Predecessor Businesses have issued standby letters of credit
aggregating $1,462,084 to guarantee performance to third parties under certain
contracts.
The Predecessor Businesses are involved in various claims and legal actions
arising in the ordinary course of business. In the opinion of management, the
ultimate disposition of these matters will not have a material adverse effect on
the Predecessor Businesses' financial position, results of operations, or
liquidity.
F-25
<PAGE>
SCHEDULE IIA
CRC HOLDINGS CORP. AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
PERIOD FROM JUNE 12, 1997 TO MARCH 31, 1998
<TABLE>
<CAPTION>
BALANCE CHARGED TO BALANCE
JUNE 12, COST AND DEDUCTIONS/ MARCH 31,
1997 EXPENSE WRITEOFFS 1998
---------- ---------- ----------- ----------
<S> <C> <C> <C> <C>
Accounts receivable -- allowance for
doubtful accounts.................. $ 369,055 $ 13,975 $65,540 $ 317,490
========== ========== =========== ==========
</TABLE>
<PAGE>
SCHEDULE IIB
CRC HOLDINGS CORP. PREDECESSOR BUSINESSES
CONSOLIDATED VALUATION AND QUALIFYING ACCOUNTS
YEARS ENDED MARCH 31, 1996 AND 1997 AND THE PERIOD APRIL 1, 1997 TO JUNE 11,
1997
<TABLE>
<CAPTION>
BALANCE CHARGED TO BALANCE
APRIL 1, COST AND DEDUCTIONS/ MARCH 31,
1995 EXPENSE WRITEOFFS 1996
---------- ---------- ----------- ----------
<S> <C> <C> <C> <C>
Accounts receivable -- allowance for
doubtful accounts.................. $ 309,165 $ 83,570 $56,812 $ 335,923
========== ========== =========== ==========
BALANCE CHARGED TO BALANCE
APRIL 1, COST AND DEDUCTIONS/ MARCH 31,
1996 EXPENSE WRITEOFFS 1997
---------- ---------- ----------- ----------
Accounts receivable -- allowance for
doubtful accounts.................. $ 335,923 $305,081 $22,920 $ 618,084
========== ========== =========== ==========
BALANCE CHARGED TO BALANCE
APRIL 1, COST AND DEDUCTIONS/ JUNE 11,
1997 EXPENSE WRITEOFFS 1997
---------- ---------- ----------- ----------
Accounts receivable -- allowance for
doubtful accounts.................. $ 618,084 $ 1,354 $ 250,383 $ 369,055
========== ========== =========== ==========
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
[LOGO]
CRC-EVANS INTERNATIONAL, INC.
SHARES
COMMON STOCK
----------------------------
PROSPECTUS
----------------------------
, 1999
CIBC OPPENHEIMER
BT ALEX. BROWN
SIMMONS & COMPANY
INTERNATIONAL
- --------------------------------------------------------------------------------
INVESTORS SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS PROSPECTUS. NO
DEALER, SALESPERSON OR OTHER PERSON IS AUTHORIZED TO GIVE INFORMATION THAT IS
NOT CONTAINED IN THIS PROSPECTUS. THIS PROSPECTUS IS NOT AN OFFER TO SELL NOR IS
IT SEEKING AN OFFER TO BUY THESE SECURITIES IN ANY JURISDICTION WHERE THE OFFER
OR SALE IS NOT PERMITTED. THE INFORMATION CONTAINED IN THIS PROSPECTUS IS
CORRECT ONLY AS OF THE DATE OF THIS PROSPECTUS, REGARDLESS OF THE TIME OF THE
DELIVERY OF THIS PROSPECTUS OR ANY SALE OF THESE SECURITIES.
DEALER PROSPECTUS DELIVERY OBLIGATION: UNTIL , 1999 (25
DAYS AFTER THE COMMENCEMENT OF THE OFFERING), ALL DEALERS THAT EFFECT
TRANSACTIONS IN THESE SECURITIES, WHETHER OR NOT PARTICIPATING IN THIS OFFERING,
MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN ADDITION TO THE DEALERS'
OBLIGATION TO DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT
TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The estimated expenses in connection with the issuance and distribution of
the securities being registered, other than underwriting discounts and
commissions, are set forth in the following table. The Company shall pay the
estimated expenses of issuance and distribution in proportion to the respective
number of shares sold by it in the offering. Each amount, except for the
Commission and National Association of Securities Dealers, Inc. ("NASD") fees,
is estimated.
Commission registration fees......... $ 13,000
NASD filing fees..................... $ 5,000
application and listing
fees................................. $ *
Transfer agent's and registrar's fees
and expenses......................... $ *
Printing and engraving expenses...... $ *
Legal fees and expenses.............. $ *
Accounting fees and expenses......... $ *
Blue sky fees and expenses........... $ *
Miscellaneous........................ $ *
---------
Total........................... $ *
=========
- ------------
* To be filed by amendment.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the General Corporation Law of the State of Delaware (the
"DGCL") empowers a Delaware corporation to indemnify any person who was or is
a party, or is threatened to be made a party to 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 such corporation) by
reason of the fact that such person is or was an officer or director of such
corporation, or is or was serving at the request of such corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise. The indemnity may include expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by such person in connection with such action,
suit or proceeding, provided that such person acted in good faith and in a
manner he reasonably believed to be in or not opposed to the best interests of
the corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe such person's conduct was unlawful. A Delaware
corporation may indemnify past or present officers and directors of such
corporation or of another corporation or other enterprise at the former
corporation's request, in an action by or in the right of the corporation to
procure a judgment in its favor under the same conditions, except that no
indemnification is permitted without judicial approval if the officer or
director is adjudged to be liable to the corporation. Where an officer or
director is successful on the merits or otherwise in defense of any action
referred to above, or in defense of any claim, issue or matter therein, the
corporation must indemnify such person against the expenses (including
attorneys' fees) which such person actually and reasonably incurred in
connection therewith. Section 145 further provides that any indemnification
shall be made by the corporation only as authorized in each specific case upon a
determination that indemnification of such person is proper because he has met
the applicable standard of conduct by the (i) stockholders, (ii) board of
directors by a majority vote of a quorum consisting of directors who were not
parties to such action, suit or proceeding, (iii) committee of directors who are
not parties to such action, suit or proceeding designated by majority vote by
such disinterested directors even if less than a quorum, or (iv) independent
legal counsel, if there are no such disinterested directors, or if such
disinterested directors so direct. Section 145 further provides that
indemnification pursuant to its provisions is not exclusive of other rights of
indemnification to which a
II-1
<PAGE>
person may be entitled under any bylaw, agreement, vote of stockholders or
disinterested directors or otherwise.
The Company has entered into indemnification agreements with each of its
directors and certain of its executive officers. The indemnification agreements
provide that the Company shall indemnify each of its directors and his
affiliates and any "controlling person" (within the meaning of applicable
securities laws) and each indemnified officer against certain liabilities
(including settlements) and expenses actually and reasonably incurred by them in
connection with any threatened or pending legal action, proceeding or
investigation (other than actions brought by or in the right of the Company) to
which any of them is, or is threatened to be, made a party by reason of their
status as a director, affiliate, "controlling person," officer or agent of the
Company; PROVIDED that, with respect to a civil, administrative or investigative
(other than criminal) action, such individual acted in good faith and in a
manner he or she reasonably believed to be in, or not opposed to, the best
interests of the Company, and with respect to any criminal proceedings, he or
she had no reasonable cause to believe his or her conduct was unlawful. With
respect to any action brought by or in the right of the Company, such
individuals may be indemnified, to the extent not prohibited by applicable laws
or as determined by a court of competent jurisdiction, against expenses actually
and reasonably incurred by them in connection with such action if they acted in
good faith and in a manner they reasonably believed to be in, or not opposed to,
the best interests of the Company. The agreements also require indemnification
of such individuals for all reasonable expenses incurred in connection with the
successful defense of any action or claim and provide for partial
indemnification in the case of any partially successful defense.
The Company has obtained an insurance policy providing for indemnification
of officers and directors of the Company and certain other persons against
liabilities and expenses incurred by any of them in certain stated proceedings
and under certain stated conditions. The Company has entered into separate
indemnification agreements with each of its directors which may require the
Company, among other things, to indemnify such directors against certain
liabilities that may arise by reason of their status or service as directors to
the maximum extent permitted under Delaware law.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
All of the following issuances reflect figures prior to the Company's
40-for-1 stock split. Since its inception on June 12, 1997, the Company issued
and sold the following unregistered securities:
(1) On June 12, 1997, the Company issued 35,000 shares of common
stock to Natural Gas Partners in connection with the Management
Buyout for $91.40 per share. On June 12, 1997, the Company issued
a subordinated promissory note to Equus, due June 30, 2002, in
the original principal amount of $959,700, and bearing interest
at 12% per annum. On May 20, 1998, the Company issued an
additional 24,891 shares of common stock to Natural Gas Partners
for $91.40 per share. All of these issuances were exempt from
registration under Section 4(2) of the Securities Act.
(2) On June 12, 1997, the Company issued 35,000 shares of common
stock to Equus, in connection with the Management Buyout for
$91.40 per share. On June 12, 1997, the Company issued a
subordinated promissory note to Natural Gas Partners, due June
30, 2002, in the original principal amount of $959,700, and
bearing interest at 12% per annum. On May 20, 1998, the Company
issued an additional 24,891 shares of common stock to Equus for
$91.40 per share. All of these issuances were exempt from
registration under Section 4(2) of the Securities Act.
(3) On June 12, 1997, the Company issued 30,000 shares of common
stock to members of management and certain employees, in
connection with the Management Buyout for $91.40 per share. On
May 20, 1998, the Company issued an additional 5,881 shares of
common stock to members of management and certain employees for
$91.40 per share. Both issuances were exempt from registration
under Section 4(2) of the Securities Act.
II-2
<PAGE>
(4) On June 15, 1998, the Company issued 1,700 shares of common stock
to Windell D. Norris, Jr. for $91.40 per share. This issuance was
exempt from registration under Section 4(2) of the Securities
Act.
ITEM 16 EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits
The following is a list of exhibits filed as part of this Registration
Statement.
EXHIBIT NO. DESCRIPTION
- -------------------------------------------------------------
1.1* -- Form of Underwriting Agreement.
3.1* -- Form of Amended and Restated
Certificate of Incorporation of the
Company.
3.2* -- Form of Amended and Restated Bylaws
of the Company.
4.1* -- Specimen of Stock Certificate.
4.2 -- Registration Rights Agreement, dated
June 12, 1997, among the Company and
Natural Gas Partners, Equus and
Messrs. Wood, Evans and Carey.
5.1* -- Opinion of Akin, Gump, Strauss, Hauer
& Feld, L.L.P.
10.1 -- Form of Indemnity Agreement entered
into by the Company in favor of
members of the Board of Directors and
certain executive officers.
10.2 -- Revolving Credit and Term Loan
Agreement dated June 12, 1997, by and
among CEPI Holdings, Inc., the
Company and a syndicate of banks led
by BankBoston.
10.3 -- Facility Agreement dated June 12,
1997, by and among Pipeline Induction
Heat Limited and a syndicate of banks
led by BankBoston.
10.4 -- First Amendment to Revolving Credit
and Term Loan Agreement, dated July
3, 1998, by and among CRC-Evans
Pipeline International, Inc., CRC
Holdings Corp., BankBoston and
Bankers Trust Company.
10.5 -- Supplemental Agreement dated July 3,
1998, amending Facility Agreement
dated June 12, 1997, among Pipeline
Induction Heat Limited and
BankBoston.
10.6* -- Form of Stockholders Agreement.
10.7 -- Form of Employment Agreement,
executed June 1997, by and among the
Company, the Predecessor Business and
Messrs. Carey, Wood and Evans.
10.8 -- Amended and Restated Asset Purchase
Agreement dated as of January 31,
1997, by and among the Predecessor
Business, Weatherford Enterra, Inc.
and the Company.
10.9 -- Share Transfer Agreement dated June
12, 1997, between Weatherford Enterra
Canada Ltd. and the Company.
10.10 -- Agreement of Purchase and Sale dated
as of April 24, 1998, by and among
CRC-Evans Pipeline International,
Inc., Tulsa Pipeline Equipment &
Supply, Inc., Hamilton Heavy
Equipment, Inc., and Jerry Hamilton,
individually and d/b/a/ HHC
International.
10.11 -- Amendment to Agreement of Purchase
and Sale dated as of April 24, 1998,
by and among CRC-Evans Pipeline
International, Inc., Tulsa Pipeline
Equipment & Supply, Inc., Hamilton
Heavy Equipment, Inc., and Jerry
Hamilton, individually and d/b/a/ HHC
International.
10.12 -- Asset Purchase Agreement dated as of
March 31, 1998, by and among CRC-Key,
Inc. and B.L. Key Services, L.L.C.,
Bobby L. Key, James C. McGill, the
James C. McGill Revocable Living
Trust and James Michael McGill
10.13 -- Form of Option Agreement granting
options to certain employees of the
Company, dated June 12, 1997.
10.14 -- Option Plan, dated May 20, 1998.
10.15 -- Form of Option Agreement issued under the
Option Plan.
10.16 -- Amendment No. 1 to Option Plan, dated
June 15, 1998.
II-3
<PAGE>
EXHIBIT NO. DESCRIPTION
- -------------------------------------------------------------
10.17* -- Reserved.
10.18* -- Form of Stock Incentive Plan.
10.19 -- Form of Promissory Note, dated June
12, 1997, made by Messrs. Wood,
Carey, Evans and Francis, James F.
Reed, Jr., P.M. Bond, B.C. Goff,
Richard L. Jones, Brian S. Laing,
Geurt W. Meijer, Dale Roland, M.P.
Smith, Sidney A. Taylor and Robert A.
Teale, to the order of the Company.
10.20 -- Promissory Note, dated June 15, 1998,
made by Mr. Norris to the order of
the Company.
10.21 -- Key Management Incentive Compensation
Plan, dated as of June 13, 1997.
10.22 -- Fee Agreement, dated June 12, 1997,
between the Company and Natural Gas
Partners.
10.23 -- Fee Agreement, dated June 12, 1997,
between the Company and Equus.
10.24* -- Form of Promissory Note, dated June
12, 1997, made by the Company to the
order of each of Natural Gas Partners
and Equus.
21.1 -- List of Subsidiaries of the Company.
23.1 -- Consent of KPMG Peat Marwick LLP.
23.2* -- Consent of Akin, Gump, Strauss, Hauer
& Feld, L.L.P. (contained in Exhibit
5.1).
24.1 -- Power of Attorney (included on the
signature page hereto).
27.1 -- Financial Data Schedule.
- ------------
* To be filed by amendment.
(b) Financial Data Schedules
None.
ITEM 17. UNDERTAKINGS
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
registrant pursuant to Item 14 herein, 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.
The undersigned registrant hereby undertakes to provide to the underwriter
at the closing specified in the underwriting agreement certificates in such
denominations and registered in such names as required by the underwriter to
permit prompt delivery to each purchaser.
The undersigned registrant hereby undertakes that:
(1) 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 a
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.
(2) 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
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THE
REGISTRANT HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS
BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF HOUSTON,
STATE OF TEXAS, ON DECEMBER 4, 1998.
POWER OF ATTORNEY
The undersigned directors and officers of CRC-Evans hereby constitute and
appoint M. Timothy Carey and Norman R. Francis, each with full power to act and
with full power of substitution and resubstitution, our true and lawful
attorneys-in-fact and agents with full power to execute in our name and behalf
in the capacities indicated below any and all amendments (including
post-effective amendments and amendments thereto) to this Registration Statement
and to file the same, with all exhibits and other documents relating thereto and
any registration statement relating to any offering made pursuant to this
Registration Statement that is to be effective upon filing pursuant to Rule
462(b) under the Securities Act with the Securities and Exchange Commission and
hereby ratify and confirm all that such attorney-in-fact or his substitute shall
lawfully do or cause to be done by virtue hereof.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT THIS REGISTRATION
STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE CAPACITIES INDICATED
ON DECEMBER 4, 1998:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------------------------ ---------------------------------- ----------------
<S> <C> <C>
/s/D. DALE WOOD Chairman and Chairman of the Board December 4, 1998
(D. DALE WOOD) of Directors
/s/M. TIMOTHY CAREY Chief Executive Officer and December 4, 1998
(M. TIMOTHY CAREY) Director (Principal Executive
Officer)
/s/C. PAUL EVANS President and Director December 4, 1998
(C. PAUL EVANS)
/s/NORMAN R. FRANCIS Chief Financial Officer, Treasurer December 4, 1998
(NORMAN R. FRANCIS) and Secretary (Principal
Accounting and Financial Officer)
/s/KENNETH A. HERSH Director December 4, 1998
(KENNETH A. HERSH)
/s/RICHARD L. COVINGTON Director December 4, 1998
(RICHARD L. COVINGTON)
/s/NOLAN LEHMANN Director December 4, 1998
(NOLAN LEHMANN)
/s/GARY L. FORBES Director December 4, 1998
(GARY L. FORBES)
</TABLE>
II-5
EXHIBIT 4.2
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT, dated as of June 12, 1997, by and among CRC
Holdings Corp., a Delaware corporation (together with its successors and
assigns, the "Company"), and each of the parties listed as Owners on the
execution page hereof (collectively, such parties are the "Owners" and each is
an "Owner").
1. BACKGROUND. The Company has been newly formed pursuant to a
proposed transaction in which the Owners will each purchase shares of the
Company's common stock, par value $.01 per share, (the "Proposed Transaction").
The execution and delivery of this Agreement is a condition to consummation of
the Proposed Transaction.
2. REGISTRATION UNDER SECURITIES ACT, ETC.
2.1. REGISTRATION ON REQUEST.
(a) Concurrently with or from time to time after the Initial Registration
Date, upon the written request of one or more of the Owners, requesting that the
Company effect the registration under the Securities Act of all or a portion of
such Owners' Registrable Securities and specifying the intended method of
disposition thereof and whether or not such requested registration is to be an
underwritten offering, the parties hereto agree as follows:
(i) The Company will promptly give written notice of such requested
registration to all other holders of Registrable Securities, if any;
(ii) Promptly after the performance of any obligations imposed under
clause (i) of this Section 2.1(a), and subject to the limitations set
forth in subsection (e) of this Section 2.1, the Company will use its best
efforts to effect the registration under the Securities Act of:
(A) the Registrable Securities that the Company has been so
requested to register by the Owners, and
(B) all other Registrable Securities that the Company has been
requested to register by the holders thereof by written request
given to the Company within thirty (30) days after the giving of
such written notice by the Company (which request shall specify the
intended method of disposition of such Registrable Securities), all
to the extent requisite to permit the disposition (in accordance
with the intended methods thereof as aforesaid) of the Registrable
Securities so to be registered;
<PAGE>
(b) REGISTRATION OF OTHER SECURITIES. Whenever the Company shall effect a
registration pursuant to this Section 2.1 in connection with an underwritten
offering by one or more holders of Registrable Securities, no securities other
than Registrable Securities shall be included among the securities covered by
such registration unless (i) the managing underwriter of such offering shall
have advised each holder of Registrable Securities to be covered by such
registration in writing that the inclusion of such other securities would not
adversely affect such offering or (ii) the holders of all Registrable Securities
to be covered by such registration shall have consented in writing to the
inclusion of such other securities.
(c) REGISTRATION STATEMENT FORM. Registrations under this Section 2.1
shall be on such appropriate registration form of the Commission (i) as shall be
selected by the Company and as shall be reasonably acceptable to the Requisite
Holders, and (ii) as shall permit the disposition of such Registrable Securities
in accordance with the intended method or methods of disposition specified in
their request for such registration. The Company agrees to include in any such
registration statement all information that holders of Registrable Securities
being registered shall reasonably request.
(d) EXPENSES. The Company will pay all Registration Expenses in connection
with any registration requested pursuant to this Section 2.1. Any Selling
Expenses in connection with any registration requested under this Section 2.1
shall be allocated among all Persons on whose behalf securities of the Company
are included in such registration, on the basis of the respective amounts of the
securities then being registered on their behalf.
(e) LIMITATIONS ON REQUESTED REGISTRATIONS. The Company's obligation to
take or continue any action to effect a requested registration under this
Section 2.1 shall be subject to the following:
(i) The Company shall not be required to effect more than three (3)
registrations requested pursuant to this section 2.1; provided that, a
registration requested pursuant to this Section 2.1 shall not be deemed to
have been effected (A) unless a registration statement with respect
thereto has been declared effective for a period of at least ninety (90)
days, (B) if after a registration statement has become effective, such
registration is interfered with by any stop order, injunction or other
order or requirement of the Commission or other governmental agency or
court for any reason, or (C) if the conditions to closing specified in the
purchase agreement or underwriting agreement entered into in connection
with such registration are not satisfied, other than as a result of the
voluntary termination of such offering by the Requisite Holders;
(ii) The Company will not be required to effect a registration
pursuant to this Section 2.1 unless such registration has been requested
by the holders of Registrable Securities that represent at least twenty
percent (20%) of the Registrable Securities then outstanding, and have an
estimated aggregate offering price to the public of at least Three Million
Dollars ($3,000,000); and
2
<PAGE>
(iii) The Company will not be required to effect a registration
pursuant to this Section 2.1 during the ninety (90) day period after a
registration statement shall have been filed and declared effective under
the Securities Act with respect to the public offering of any class of the
Company's equity securities (which shall exclude a registration of
securities with respect to an employee benefit, retirement or similar
plan).
(f) SELECTION OF UNDERWRITERS. If a requested registration pursuant
to this Section 2.1 involves an underwritten offering, the underwriter or
underwriters thereof shall be selected by the Company with the approval of the
Requisite Holders.
(g) PRIORITY IN REQUESTED REGISTRATIONS. If a requested registration
pursuant to this Section 2.1 involves an underwritten offering, and the managing
underwriter shall advise the Company in writing (with a copy to each holder of
Registrable Securities requesting registration) that, in its opinion, the number
of securities requested to be included in such registration exceeds the number
that can be sold in such offering within a price range acceptable to the
Requisite Holders, the Company will include in such registration to the extent
of the number that the Company is so advised can be sold in such offering,
Registrable Securities requested to be included in such registration, pro rata
among the holders thereof requesting such registration on the basis of the
percentage of the Registrable Securities of the Company held by the holders of
Registrable Securities that have requested that such Securities by included. In
connection with any registration as to which the provisions of this clause (g)
apply, no securities other than Registrable Securities shall be covered by such
registration.
2.2. INCIDENTAL REGISTRATION.
(a) RIGHT TO INCLUDE REGISTRABLE SECURITIES. If the Company at any
time proposes to register any of its securities under the Securities Act (other
than (i) in connection with a registration of any employee benefit, retirement
or similar plan, or (ii) with respect to a Rule 145 transaction, or (iii)
pursuant to Section 2.1), whether or not for sale for its own account, it will
each such time give prompt written notice to all holders of Registrable
Securities of its intention to do so and of such holders' rights under this
Section 2.2. Upon the written request of any such holder made within thirty (30)
days after the receipt of any such notice (which request shall specify the
Registrable Securities intended to be disposed of by such holder and the
intended method of disposition thereof), the Company will use its best efforts
to effect the registration under the Securities Act of all Registrable
Securities that the Company has been so requested to register by the holders
thereof, to the extent requisite to permit the disposition (in accordance with
the intended methods thereof as aforesaid) of the Registrable Securities so to
be registered, PROVIDED that if, at any time after giving written notice of its
intention to register any securities and prior to the effective date of the
registration statement filed in connection with such registration, the Company
shall determine for any reason not to register or to delay registration of such
securities, the Company may, at its election, give written notice of such
determination to each holder of Registrable Securities and,
3
<PAGE>
thereupon, (i) in the case of a determination not to register, shall be relieved
of its obligation to register any Registrable Securities in connection with such
registration (but not from its obligation to pay the Registration Expenses in
connection therewith), without prejudice, however, to the rights of any holder
or holders of Registrable Securities entitled to do so to request that such
registration be effected as a registration under Section 2.1, and (ii) in the
case of a determination to delay registering, shall be permitted to delay
registering any Registrable Securities, for the same period as the delay in
registering such other securities. No registration effected under this Section
2.2 shall be deemed to have been effected pursuant to Section 2.1 or shall
relieve the Company of its obligation to effect any registration upon request
under Section 2.1. The Company will pay all Registration Expenses in connection
with each registration of Registrable Securities requested pursuant to this
Section 2.2 and any Selling Expenses shall be allocated among all Persons on
whose behalf securities of the Company are included in such registration, on the
basis of the respective amounts of the securities then being registered on their
behalf.
(b) PRIORITY IN INCIDENTAL REGISTRATIONS. If (i) a registration
pursuant to this Section 2.2 involves an underwritten offering of the securities
so being registered, whether or not for sale for the account of the Company, to
be distributed (on a firm commitment basis) by or through one or more
underwriters of recognized standing under underwriting terms appropriate for
such a transaction, and (ii) the managing underwriter of such underwritten
offering shall inform the Company and the holders of the Registrable Securities
requesting such registration by letter of its belief that the number of
securities requested to be included in such registration exceeds the number that
can be sold in (or during the time of) such offering, then the Company will
include in such registration, to the extent of the number that the Company is so
advised can be sold in (or during the time of) such offering, first, all
securities proposed by the Company to be sold for its own account, second, such
Registrable Securities requested to be included in such registration pro rata on
the basis of the number of such securities so proposed to be sold and so
requested to be included, and third, all other securities of the Company
requested to be included in such registration pro rata on the basis of the
number of such securities so proposed to be sold and so requested to be
included.
2.3. REGISTRATION PROCEDURES. If and whenever the Company is
required to use its best efforts to effect the registration of any Registrable
Securities under the Securities Act as provided in Sections 2.1 and 2.2, the
Company will as expeditiously as possible:
(i) prepare and (as soon thereafter as possible or in any event no
later than sixty (60) days after the end of the period within which
requests for registration may be given to the Company) file with the
Commission the requisite registration statement to effect such
registration and thereafter use its best efforts to cause such
registration statement to become effective, PROVIDED that the Company may
discontinue any registration of its securities that are not Registrable
Securities (and, under the circumstances specified in Section 2.2(a), its
securities that are Registrable Securities) at any time prior to the
effective date of the registration statement relating thereto;
(ii) prepare and file with the Commission such amendments and
supplements to
4
<PAGE>
such registration statement and the prospectus used in connection
therewith as may be necessary to keep such registration statement
effective and to comply with the provisions of the Securities Act with
respect to the disposition of all securities covered by such registration
statement until such time as all of such securities have been disposed of
in accordance with the intended methods of disposition by the seller or
sellers thereof set forth in such registration statement;
(iii) furnish to each seller of Registrable Securities covered by
such registration statement such number of conformed copies of such
registration statement and of each such amendment and supplement thereto
(in each case including all exhibits), such number of copies of the
prospectus contained in such registration statement (including each
preliminary prospectus and any summary prospectus) and any other
prospectus filed under Rule 424 under the Securities Act, in conformity
with the requirements of the Securities Act, and such other documents, as
such seller may reasonably request;
(iv) use its best efforts to register or qualify all Registrable
Securities and other securities covered by such registration statement
under such other securities or blue sky laws of such jurisdictions as each
seller thereof shall reasonably request, to keep such registration or
qualification in effect for so long as such registration statement remains
in effect, and take any other action that may be reasonably necessary or
advisable to enable such seller to consummate the disposition in such
jurisdictions of the securities owned by such seller, except that the
Company shall not for any such purpose be required to qualify generally to
do business as a foreign corporation in any jurisdiction wherein it would
not but for the requirements of this subdivision (iv) be obligated to be
so qualified or to consent to general service of process in any such
jurisdiction;
(v) use its best efforts to cause all Registrable Securities covered
by such registration statement to be registered with or approved by such
other governmental agencies or authorities as may be necessary to enable
the seller or sellers thereof to consummate the disposition of such
Registrable Securities;
(vi) furnish to each seller of Registrable Securities a signed
counterpart, addressed to such seller (and underwriters, if any) of:
(A) an opinion of counsel for the Company, dated the effective
date of such registration statement (and, if such registration
includes an underwritten public offering, dated the date of the
closing under the underwriting agreement), reasonably satisfactory
in form and substance to such seller, and
(B) a "comfort" letter, dated the effective date of such
registration statement (and, if such registration includes an
underwritten public offering, dated the date of the closing under
the underwriting agreement), signed by the independent public
accountants who have certified the Company's financial statements
included in such registration statement,
5
<PAGE>
covering substantially the same matters with respect to such registration
statement (and the prospectus included therein) and, in the case of the
accountants' letter, with respect to events subsequent to the date of such
financial statements, as are customarily covered in opinions of issuer's
counsel and in accountants' letters delivered to the underwriters in
underwritten public offerings of securities and, in the case of the
accountants' letter, such other financial matters, and, in the case of the
legal opinion, such other legal matters, as such seller may reasonably
request;
(vii) notify each seller of Registrable Securities covered by such
registration statement, at any time when a prospectus relating thereto is
required to be delivered under the Securities Act, upon discovery that, or
upon the happening of any event as a result of which, the prospectus
included in such registration statement, as then in effect, includes an
untrue statement of a material fact or omits to state any material fact
required to be stated therein or necessary to make the statements therein
not misleading in the light of the circumstances under which they were
made, and at the request of any such seller promptly prepare and furnish
to such seller a reasonable number of copies of a supplement to or an
amendment of such prospectus as may be necessary so that, as thereafter
delivered to the purchasers of such securities, such prospectus shall not
include an untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements
therein not misleading in the light of the circumstances under which they
were made;
(viii) otherwise use its best efforts to comply with all applicable
rules and regulations of the Commission, and make available to its
security holders, as soon as reasonably practicable, an earnings statement
covering the period of at least twelve months, but not more than eighteen
months, beginning with the first full calendar month after the effective
date of such registration statement, which earnings statement shall
satisfy the provisions of Section 11(a) of the Securities Act, and will
furnish to each such seller at least five (5) business days prior to the
filing thereof a copy of any amendment or supplement to such registration
statement or prospectus and shall not file any thereof to which any such
seller shall have reasonably objected on the grounds that such amendment
or supplement does not comply in all material respects with the
requirements of the Securities Act or of the rules or regulations
thereunder;
(ix) provide and cause to be maintained a transfer agent and
registrar for all Registrable Securities covered by such registration
statement from and after a date not later than the effective date of such
registration statement;
(x) use its best efforts to list all Registrable Securities covered
by such registration statement on any securities exchange on which any of
the Registrable Securities is then listed; and
6
<PAGE>
(xi) enter into such agreements and take such other actions as the
Requisite Holders shall reasonably request in order to expedite or
facilitate the disposition of such Registrable Securities.
The Company may require each seller of Registrable Securities as to which any
registration is being effected to furnish the Company such information regarding
such seller and the distribution of such securities as the Company may from time
to time reasonably request in writing.
Each holder of Registrable Securities agrees by acquisition of such
Registrable Securities that upon receipt of any notice from the Company of the
happening of any event of the kind described in the subdivision (vii) of this
Section 2.3, such holder will forthwith discontinue such holder's disposition of
Registrable Securities pursuant to the registration statement relating to such
Registrable Securities until such holder's receipt of the copies of the
supplemented or amended prospectus contemplated by subdivision (vii) of this
Section 2.3 and, if so directed by the Company, will deliver to the Company (at
the Company's expense) all copies, other than permanent file copies, then in
such holder's possession of the prospectus relating to such Registrable
Securities current at the time of receipt of such notice.
2.4 UNDERWRITTEN OFFERINGS.
(a) REQUESTED UNDERWRITTEN OFFERINGS. If requested by the
underwriters for any underwritten offering by holders of Registrable Securities
pursuant to a registration requested under Section 2.1, the Company will enter
into an underwriting agreement with such underwriters for such offering, such
agreement to be satisfactory in substance and form to each such holder and the
underwriters and to contain such representations and warranties by the Company
and such other terms as are generally prevailing in agreements of this type,
including, without limitation, indemnities to the effect and to the extent
provided in Section 2.7. The holders of Registrable Securities to be distributed
by such underwriters shall be parties to such underwriting agreement and may, at
their option, require that any or all of the representations and warranties by,
and the other agreements on the part of, the Company to and for the benefit of
such underwriters shall also be made to and for the benefit of such holders of
Registrable Securities and that any or all of the conditions precedent to the
obligations of such underwriters under such underwriting agreement be conditions
precedent to the obligations of such holders of Registrable Securities. Any such
holder of Registrable Securities shall not be required to make any
representations or warranties to or agreements with the Company or the
underwriters other than representations, warranties or agreements regarding such
holder, such holder's Registrable Securities and such holder's intended method
of distribution and any other representation required by law.
(b) INCIDENTAL UNDERWRITTEN OFFERINGS. If the Company at any time
proposes to register any of its securities under the Securities Act as
contemplated by Section 2.2 and such securities are to be distributed by or
through one or more underwriters, the Company will, if requested by any holder
of Registrable Securities as provided in Section 2.2 and subject to the
7
<PAGE>
provisions of Section 2.2(b), arrange for such underwriters to include all the
Registrable Securities to be offered and sold by such holder among the
securities to be distributed by such underwriters. The holders of Registrable
Securities to be distributed by such underwriters shall be parties to the
underwriting agreement between the Company and such underwriters and may, at
their option, require that any or all of the representations and warranties by,
and the other agreements on the part of, the Company to and for the benefit of
such underwriters shall also be made to and for the benefit of such holders of
Registrable Securities and that any or all of the conditions precedent to the
obligations of such underwriters under such underwriting agreement be conditions
precedent to the obligations of such holders of Registrable Securities. Any such
holder of Registrable Securities shall not be required to make any
representations or warranties to or agreements with the Company or the
underwriters other than representations, warranties or agreements regarding such
holder, such holder's Registrable Securities and such holder's intended method
of distribution and any other representation required by law.
2.5. PREPARATION; REASONABLE INVESTIGATION. In connection with the
preparation and filing of each registration statement under the Securities Act
pursuant to this Agreement, the Company will give the holders of Registrable
Securities registered under such registration statement, and their counsel and
accountants, the opportunity to participate in the preparation of such
registration statement, each prospectus included therein or filed with the
Commission, and each amendment thereof or supplement thereto, and will give each
of them such access to its books and records and such opportunities to discuss
the business of the Company with its officers and the independent public
accountants who have certified its financial statements as shall be necessary,
in the opinion of such holders' counsel, to conduct a reasonable investigation
within the meaning of the Securities Act.
2.6. ADDITIONAL RIGHTS OF OWNERS. If any registration statement
prepared under this Agreement refers to any Owner by name or otherwise as the
holder of any securities of the Company, then such Owner shall have the right to
require (x) the insertion therein of language, in form and substance
satisfactory to such Owner, to the effect that the holding by such Owner of such
securities does not necessarily make such Owner a "controlling person" of the
Company within the meaning of the Securities Act and is not to be construed as a
recommendation by such Owner of the investment quality of the Company's debt or
equity securities covered thereby and that such holding does not imply that such
Owner will assist in meeting any future financial requirements of the Company,
or (y) in the event that such reference to such Owner by name or otherwise is
not required by the Securities Act or any rules and regulations promulgated
thereunder, the deletion of the reference to such Owner.
2.7. INDEMNIFICATION.
(a) INDEMNIFICATION BY THE COMPANY. In the event of any registration
of any securities of the Company under the Securities Act, the Company will, and
hereby does, indemnify and hold harmless the seller of any Registrable
Securities covered by such registration statement, its directors and officers,
each other Person who participates in the offering or sale of such securities
8
<PAGE>
and each other Person, if any, who controls such seller within the meaning of
the Securities Act against any losses, claims, damages or liabilities, joint or
several, to which such seller or any such director or officer or controlling
person may become subject under the Securities Act or otherwise, insofar as such
losses, claims, damages or liabilities (or actions or proceedings, whether
commenced or threatened, in respect thereof) arise out of or are based upon any
untrue statement or alleged untrue statement of any material fact contained in
any registration statement under which such securities were registered under the
Securities Act, any preliminary prospectus, final prospectus or summary
prospectus contained therein, or any amendment or supplement thereto, or any
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, and
the Company will reimburse such seller and each such director, officer, and
controlling person for any legal or any other expenses reasonably incurred by
them in connection with investigating or defending any such loss, claim,
liability, action or proceeding; PROVIDED that the Company shall not be liable
in any such case to the extent that any such loss, claim, damage, liability (or
action or proceeding in respect thereof) or expense arises out of or is based
upon an untrue statement or alleged untrue statement or omission or alleged
omission made in such registration statement, any such preliminary prospectus,
final prospectus, summary prospectus, amendment or supplement in reliance upon
and in conformity with written information furnished to the Company through an
instrument duly executed by such seller specifically stating that it is for use
in the preparation thereof and, PROVIDED further that the Company shall not be
liable to any Person who participates as an underwriter, in the offering or sale
of Registrable Securities or any other Person, if any, who controls such
underwriter within the meaning of the Securities Act, in any such case to the
extent that any such loss, claim, damage, liability (or action or proceeding in
respect thereof) or expense arises out of such Person's failure to send or give
a copy of the final prospectus, as the same may be then supplemented or amended,
to the Person asserting an untrue statement or alleged untrue statement or
omission or alleged omission at or prior to the written confirmation of the sale
of Registrable Securities to such Person if such statement or omission was
corrected in such final prospectus. Such indemnity shall remain in full force
and effect regardless of any investigation made by or on behalf of such seller
or any such director, officer, underwriter or controlling person and shall
survive the transfer of such securities by such seller.
(b) INDEMNIFICATION BY THE SELLERS. The Company may require, as a
condition to including any Registrable Securities in any registration statement
filed pursuant to Section 2.3, that the Company shall have received an
undertaking satisfactory to it from the prospective seller of such securities,
to indemnify and hold harmless (in the same manner and to the same extent as set
forth in subdivision (a) of this Section 2.7) the Company, each director of the
Company, each officer of the Company and each other Person, if any, who controls
the Company within the meaning of the Securities Act, with respect to any
statement or alleged statement in or omission or alleged omission from such
registration statement, any preliminary prospectus, final prospectus or summary
prospectus contained therein, or any amendment or supplement thereto, if such
statement or alleged statement or omission or alleged omission was made in
reliance upon and in conformity with written information furnished to the
Company through an instrument duly executed by such seller specifically stating
that it is for use in the preparation of such registration statement,
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<PAGE>
preliminary prospectus, final prospectus, summary prospectus, amendment or
supplement. Such indemnity shall remain in full force and effect, regardless of
any investigation made by or on behalf of the Company or any such director,
officer or controlling Person and shall survive the transfer of such securities
by such seller.
(c) NOTICES OF CLAIMS, ETC. Promptly after receipt by an indemnified
party of notice of the commencement of any action or proceeding involving a
claim referred to in the preceding subdivisions of this Section 2.7, such
indemnified party will, if a claim in respect thereof is to be made against an
indemnifying party, give written notice to the latter of the commencement of
such action, PROVIDED that the failure of any indemnified party to give notice
as provided herein shall not relieve the indemnifying party of its obligations
under the preceding subdivisions of this Section 2.7, except to the extent that
the indemnifying party is actually prejudiced by such failure to give notice. In
case any such action is brought against an indemnified party, unless in such
indemnified party's reasonable judgment a conflict of interest between such
indemnified and indemnifying parties may exist in respect of such claim, the
indemnifying party shall be entitled to participate in and to assume the defense
thereof, jointly with any other indemnifying party similarly notified to the
extent that it may wish, with counsel reasonably satisfactory to such
indemnified party, and after notice from the indemnifying party to such
indemnified party of its election so to assume the defense thereof, the
indemnifying party shall not be liable to such indemnified party for any legal
or other expenses subsequently incurred by the latter in connection with the
defense thereof other than reasonable costs of investigation. No indemnifying
party shall, without the consent of the indemnified party, consent to entry of
any judgment or enter into any settlement that does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
indemnified party of a release from all liability in respect to such claim or
litigation.
(d) OTHER INDEMNIFICATION. Indemnification similar to that specified
in the preceding subdivisions of this Section 2.7 (with appropriate
modifications) shall be given by the Company and each seller of Registrable
Securities with respect to any required registration or other qualification of
securities under any Federal or state law or regulation of any governmental
authority other than the Securities Act.
(e) INDEMNIFICATION PAYMENTS. The indemnification required by this
Section 2.7 shall be made by periodic payments of the amount thereof during the
course of the investigation or defense, as and when bills are received or
expense, loss, damage or liability is incurred.
2.8. ADJUSTMENTS AFFECTING REGISTRABLE SECURITIES. The Company will
not effect or permit to occur any combination or subdivision that would
adversely affect the ability of the holders of Registrable Securities to include
such Registrable Securities in any registration of its securities contemplated
by this Section 2 or the marketability of such Registrable Securities under any
such registration.
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<PAGE>
3. DEFINITIONS. As used herein, unless the context otherwise
requires, the following terms have the following respective meanings:
COMMISSION: The Securities and Exchange Commission or any other
Federal agency at the time administering the Securities Act.
EMPLOYEE OWNERS: The employees of the Company or its subsidiaries
who acquire common stock of the Company on the date hereof.
EXCHANGE ACT: The Securities Exchange Act of 1934, or any similar
Federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time.
Reference to a particular section of the Securities Exchange Act of
1934 shall include a reference to the comparable section, if any, of
any such similar Federal statute.
INITIAL REGISTRATION DATE: The first to occur of the following: (i)
the date on which the Company authorizes a registration statement to
be filed with the Commission with respect to an initial public
offering of the Company's securities pursuant to the Securities Act,
or (ii) the effective date upon which the Company is merged into,
consolidated with, or has sold substantially all of its assets to,
another Person who has previously issued securities registered under
the Securities Act.
PERSON: A corporation, an association, a partnership, a business, an
individual, a governmental or political subdivision thereof or a
governmental agency.
REGISTRABLE SECURITIES: Any of the capital stock of the Company
owned by an Owner or an Employee Owner, and any securities issued or
issuable with respect to such stock by way of distribution or in
connection with any reorganization or other recapitalization,
merger, consolidation or otherwise. As to any particular Registrable
Securities, once issued such securities shall cease to be
Registrable Securities when (a) a registration statement with
respect to the sale of such securities shall have become effective
under the Securities Act and such securities shall have been
disposed of in accordance with such registration statement, (b) they
shall have been distributed to the public pursuant to Rule 144 or
Rule 144A (or any successor provision) under the Securities Act, (c)
they shall have been otherwise transferred, new certificates for
them not bearing a legend restricting further transfer shall have
been delivered by the Company and subsequent disposition of them
shall not require registration or qualification of them under the
Securities Act or any similar state law then in force, or (d) they
shall have ceased to be outstanding.
REGISTRATION EXPENSES: All expenses incident to the Company's
performance of or compliance with Section 2.1, including, without
limitation, all registration, filing
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<PAGE>
and National Association of Securities Dealers fees, all fees and
expenses of complying with securities or blue sky laws, all word
processing, duplicating and printing expenses, messenger and
delivery expenses, the fees and disbursements of counsel for the
Company and of its independent public accountants, including the
expenses of any special audits or "cold comfort" letters required by
or incident to such performance and compliance, the fees and
disbursements incurred by the holders of Registrable Securities to
be registered (including the fees and disbursements of not more than
one special counsel to the holders of such Registrable Securities),
premiums and other costs of policies of insurance against
liabilities arising out of the public offering of the Registrable
Securities being registered and any fees and disbursements of
underwriters customarily paid by issuers or sellers of securities,
but excluding Selling Expenses, if any, provided that, in any case
where Registration Expenses are not to be borne by the Company, such
expenses shall not include salaries of Company personnel or general
overhead expenses of the Company, auditing fees, premiums or other
expenses relating to liability insurance required by underwriters of
the Company or other expenses for the preparation of financial
statements or other data normally prepared by the Company in the
ordinary course of its business or that the Company would have
incurred in any event.
REQUISITE HOLDERS: With respect to any registration of Registrable
Securities pursuant to Section 2.1, any holder or holders of more
than 50% of the Registrable Securities to be so registered.
SECURITIES ACT: The Securities Act of 1933, or any similar Federal
statute, and the rules and regulations of the Commission thereunder,
all as of the same shall be in effect at the time. References to a
particular section of the Securities Act of 1933 shall include a
reference to the comparable section, if any, of any such similar
Federal Statute.
SELLING EXPENSES: Underwriting discounts and commissions and stock
transfer taxes relating to securities registered by the Company.
4. RULE 144 AND RULE 144A: If the Company shall have filed a
registration statement pursuant to the requirements of Section 12 of the
Exchange Act or a registration statement pursuant to the requirements of the
Securities Act, the Company will file the reports required to be filed by it
under the Securities Act and the Exchange Act and the rules and regulations
adopted by the Commission thereunder (or, if the Company is not required to file
such reports, will, upon the request of any holder of Registrable Securities,
make publicly available other information) and will take such further action as
any holder of Registrable Securities may reasonably request, all to the extent
required from time to time to enable such holder to sell Registrable Securities
without registration under the Securities Act within the limitation of the
exemptions provided by (a) Rule 144 under the Securities Act, as such Rule may
be amended from
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<PAGE>
time to time or (b) any similar rule or regulation hereafter adopted by the
Commission. Upon the request of any holder of Registrable Securities, the
Company will deliver to such holder a written statement as to whether it has
complied with such requirements. After any sale of Registrable Securities
pursuant to this Section 4, the Company will, to the extent allowed by law,
cause any restrictive legends to be removed and any transfer restrictions to be
rescinded with respect to such Registrable Securities. In order to permit the
holders of Registrable Securities to sell the same, if they so desire, pursuant
to Rule 144A promulgated by the Commission (or any successor to such rule), the
Company will comply with all rules and regulations of the Commission applicable
in connection with use of Rule 144A (or any successor thereto). Prospective
transferees of Registrable Securities that are Qualified Institutional Buyers
(as defined in Rule 144A) that would be purchasing such Registrable Securities
in reliance upon Rule 144A may request from the Company information regarding
the business, operations and assets of the Company. Within five business days of
any such request, the Company shall deliver to any such prospective transferee
copies of annual audited and quarterly unaudited financial statements of the
Company and such other information as may be required to be supplied by the
Company for it to comply with Rule 144A.
5. AMENDMENTS AND WAIVERS. This Agreement may be amended and the
Company may take any action herein prohibited or omit to perform any act herein
required to be performed by it, only if the Company shall have obtained the
written consent to such amendment, action or omission to act, of the holder or
holders of 50% or more of the Registrable Securities. Each holder of any
Registrable Securities at the time or thereafter outstanding shall be bound by
any consent authorized by this Section 6, whether or not such Registrable
Securities shall have been marked to indicate such consent.
6. NOMINEES FOR BENEFICIAL OWNERS. In the event that any Registrable
Securities are held by a nominee for the beneficial owner thereof, the
beneficial owner thereof may, at its election, be treated as the holder of such
Registrable Securities for purposes of any request or other action by any holder
or holders of Registrable Securities pursuant to this Agreement or any
determination of any number or percentage of Registrable Securities held by any
holder or holders of Registrable Securities contemplated by this Agreement. If
the beneficial owner of any Registrable Securities so elects, the Company may
require assurances reasonably satisfactory to it of such owner's beneficial
ownership of such Registrable Securities.
7. NOTICES. All communications provided for hereunder shall be sent
by first-class mail to such party at the address set forth opposite such parties
name on the execution page hereof or at such other address as the Company shall
have furnished to each holder of Registrable Securities at the time outstanding;
provided, however, that any such communication to the Company may also, at the
option of any of the parties hereunder, be either delivered to the Company at
its address set forth above or to any officer of the Company.
8. ASSIGNMENT. This Agreement shall be binding upon and inure to the
benefit of and be enforceable by the parties hereto and their respective
successors and assigns. In addition,
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<PAGE>
and whether or not any express assignment shall have been made, the provisions
of this Agreement that are for the benefit of the parties hereto other than the
Company shall also be for the benefit of and enforceable by any subsequent
holder of any Registrable Securities, subject to the provisions respecting the
minimum numbers or percentages of Registrable Securities required in order to be
entitled to certain rights, or take certain actions, contained herein.
9. TERMINATION. This Agreement shall terminate when no Registrable
Securities remain outstanding.
10. DESCRIPTIVE HEADINGS. The descriptive headings of the several
sections and paragraphs of this Agreement are inserted for reference only and
shall not limit or otherwise affect the meaning hereof.
11. SPECIFIC PERFORMANCE. The parties hereto recognize and agree
that money damages may be insufficient to compensate the holders of any
Registrable Securities for breaches by the Company of the terms hereof and,
consequently, that the equitable remedy of specific performance of the terms
hereof will be available in the event of any such breach.
12. GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED AND ENFORCED IN
ACCORDANCE WITH, AND THE RIGHTS OF THE PARTIES SHALL BE GOVERNED BY, THE LAWS OF
THE STATE OF TEXAS.
13. COUNTERPARTS. This Agreement may be executed simultaneously in
any number of counterparts, each of which shall be deemed an original, but all
such counterparts shall together constitute one and the same instrument.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
and delivered by their respective officers thereunto duly authorized as of the
date first above written.
COMPANY:
CRC HOLDINGS CORP.
By: ___________________________________
Name: _________________________________
Title: ________________________________
OWNERS:
NATURAL GAS PARTNERS IV, L.P.
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<PAGE>
By: G.F.W. Energy IV, L.P., General Partner
By: GFW IV, L.L.C., General Partner
By: ___________________________________
Authorized Member
EQUUS II INCORPORATED
By: ___________________________________
Name: _________________________________
Title: ________________________________
_______________________________________
D. Dale Wood
_______________________________________
C. Paul Evans
_______________________________________
M. Timothy Carey, Jr.
EXHIBIT 10.1
INDEMNITY AGREEMENT
This Indemnity Agreement (this AGREEMENT) dated as of [________] 1998,
is by and between CRC-Evans International, Inc., a Delaware corporation (the
COMPANY), and the person whose name is set forth on the signature page hereof
under the heading "INDEMNITEE," his affiliates and/or "controlling person"
(within the meaning of applicable securities laws) ((COLLECTIVELY REFERRED TO
HEREIN AS THE INDEMNITEE).
R E C I T A L S
A. Indemnitee will serve as an officer and/or director of the Company,
and the Company wishes Indemnitee to serve in such capacity;
B. the Company's Bylaws (the BYLAWS), and its Articles of Incorporation
(the ARTICLES), provide for the indemnification of the directors, officers,
employees and agents of the Company and also provide that the Company can
further indemnify such parties pursuant to an agreement or otherwise;
C. the Delaware General Corporation Law, as amended (the DGCL),
specifically provides that indemnification and advancement of expenses provided
in such statute shall not be exclusive of any other rights under any agreement,
and thereby contemplates that agreements may be entered into between the Company
and its directors, officers, employees and agents with respect to the
indemnification of such persons; and
D. to induce Indemnitee to serve as an officer and/or director of the
Company in the future, the Company has deemed it to be in its best interest to
enter into this Agreement with Indemnitee.
W I T N E S S E T H
NOW, THEREFORE, in consideration of Indemnitee's agreement to serve as
an officer or a member of the Company's Board of Directors (the BOARD) beginning
[_______], the mutual promises contained herein and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto stipulate and agree as follows:
1. DEFINITIONS. For purposes of this Agreement, the following
capitalized terms shall have the meanings ascribed to them in this Section.
ACTION - any threatened, pending or completed action, suit
or proceeding, whether civil, criminal,
administrative, or investigative.
AFFILIATE - any corporation, partnership (general or limited),
limited liability company, joint venture, trust,
or any other organization or enterprise, foreign
or domestic (i) in which the Company owns, either
directly or indirectly, more than 50% of the
outstanding
<PAGE>
voting capital stock or other ownership interest
or (ii) over which the Company, either directly or
indirectly, exercises, or has the ability to
exercise, control or dominion.
AGENT - a duly appointed and authorized officer, director,
employee, agent, representative, or fiduciary.
BOARD - the Board of Directors of the Company as
constituted from time to time.
CHANGE IN CONTROL - shall have occurred if the Company's stockholders
approve (x) a merger or consolidation of the
Company with any other entity (other than a merger
or consolidation which would result in the
Company's voting securities outstanding
immediately prior thereto continuing to represent
(either by remaining outstanding or by being
converted into voting securities of the surviving
entity) at least 51% of the combined voting power
of the voting securities of the Company or such
surviving entity outstanding immediately after
such merger or consolidation), (y) a plan of
complete liquidation of the Company or (z) an
agreement or agreements for the sale or
disposition, in a single transaction or a series
of related transactions, by the Company of all or
substantially all of its property and assets.
Notwithstanding the foregoing, events otherwise
constituting a Change in Control in accordance
with the foregoing shall not constitute a Change
in Control if such events are solicited by the
Company and are approved, recommended or supported
by the Board in actions taken prior to, and with
respect to, such events.
DAMAGES - losses, penalties, fines, judgments, amounts paid
in settlement, or other damages and expenses
(including reasonable legal and investigative
expenses).
DELAWARE COURT - a court in the State of Delaware.
ENTERPRISE - a corporation, general partnership, limited
partnership, limited liability company, joint
venture, trust or any other organization or
enterprise.
2. AGREEMENT TO SERVE. Indemnitee will serve as an officer or a director
of the Company and/or its Affiliates at the will of the Company or under
separate contract, if such exists, and/or will serve as an officer or a director
of such other Affiliate Enterprise as the Company may request, and shall act in
each such capacity so long as he is duly authorized by the Company in accordance
with the Bylaws or Articles or until such time as Indemnitee tenders his
resignation in writing at the office of the Company.
<PAGE>
3. INDEMNIFICATION
(a) GENERAL INDEMNIFICATION.
(i) Subject to the exclusions set forth in SECTION 9, the
Company shall indemnify Indemnitee:
(1) If Indemnitee is a person who was or is a party
or is threatened to be made a party to any Action (other
than an action by or in the right of the Company or any of
its Affiliates), because he is or was acting as an Agent
of the Company or any of its Affiliates, or is or was
serving at the request of the Company as an Agent of
another Enterprise, or because of anything done or not
done by him in any such capacity, against Damages incurred
by him in connection with the investigation, defense or
appeal of such Action if:
(a) in the case of a civil, administrative
or investigative (other than criminal) action, suit
or proceeding, he acted in good faith and in a
manner he reasonably believed to be in, or not
opposed to, the best interests of the Company; or
(b) in the case of a criminal action, suit
or proceeding, he reasonably believed his conduct
was lawful;
(2) If Indemnitee is a person who was or is a party
or is threatened to be made a party to any Action by or in
the right of the Company or any of its Affiliates to
procure a judgment in its favor because he is or was
acting as an Agent of the Company or any of its
Affiliates, or is or was serving at the request of the
Company as an Agent of another Enterprise, or because of
anything done or not done by him in any such capacity,
against all Damages incurred by him in connection with the
investigation, defense, settlement or appeal of such
Action if he acted in good faith and in a manner he
reasonably believed to be in, or not opposed to, the best
interests of the Company; PROVIDED, HOWEVER, that no
indemnification under this subsection 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
Company or any of its Affiliates unless and then only to
the extent that a Delaware Court or the court in which
such Action was brought shall determine upon application
that, despite the adjudication of liability but in view of
all the circumstances of the case, such person is fairly
and reasonably entitled to indemnity for such expenses
which the Delaware Court or such other court shall deem
proper; and
(ii) To the extent Indemnitee has been successful on the
merits or otherwise in defense of any Action referred to in
Section 3(a)(i), or in the defense of any claim, issue or matter
described therein, against all Damages incurred by him in
connection with the investigation, defense or appeal of such
Action.
<PAGE>
(b) ADDITIONAL INDEMNITY. The parties hereto intend that
Indemnitee shall be indemnified pursuant to this Agreement to the
fullest extent authorized and permitted by the provisions of the
Articles, Bylaws, DGCL, or any other applicable law. If the Articles,
Bylaws, DGCL, or any other applicable law is amended or modified after
the date hereof, the parties hereby agree that Indemnitee shall be
entitled any additional indemnification rights resulting from such
amendment or modification, but only to the extent that such amendment or
modification permits the Company to provide broader indemnification
rights than the Articles, Bylaws, DGCL, or applicable law permitted the
Company to provide prior to such amendment or modification.
(c) INDEMNIFICATION OF ESTATE. If Indemnitee is deceased and is
entitled to indemnification under any provision of this Agreement, the
Company shall indemnify Indemnitee's estate and his spouse, heirs,
administrators, and executors against, and the Company shall, and does
hereby agree to, assume any and all Damages incurred by or for
Indemnitee or his estate in connection with the investigation, defense,
settlement or appeal or any such Action. Further, when requested in
writing by the spouse of Indemnitee and/or the heirs, executors or
administrators of Indemnitee's estate, the Company shall provide
appropriate evidence of the Company's agreement set out herein to
indemnify Indemnitee against and to assume such Damages.
(d) PARTIAL INDEMNIFICATION. If Indemnitee is entitled under any
provision of this Agreement to indemnification by the Company for some
or a portion of the Damages incurred by or for him in the investigation,
defense, appeal or settlement of such Action but not, however, for all
of the total amount thereof, the Company shall nevertheless indemnify
Indemnitee against the portion thereof to which Indemnitee is entitled.
4. NOLO CONTENDERE. The termination of any Action which is covered by
this Agreement by judgment, order, settlement or conviction, or upon a plea of
NOLO CONTENDERE or its equivalent shall not, of itself, create a presumption for
the purposes of this Agreement that Indemnitee did not meet any particular
standard of conduct or have any particular belief or that a court has determined
that indemnification is not permitted by applicable law.
5. PAYMENT OF CLAIMS; DETERMINATION OF INDEMNIFICATION RIGHTS
(a) DETERMINATION OF RIGHT TO INDEMNIFICATION. Anything contained
elsewhere herein to the contrary notwithstanding, the determination as
to whether or not Indemnitee has met the standard of conduct required to
qualify and entitle him, partially or fully, to indemnification under
the provisions hereof shall be made by the Board by a majority vote of a
quorum consisting of directors who were not parties to the subject
Action; PROVIDED, HOWEVER, that if such quorum is not obtainable, the
Board, by a majority vote of disinterested directors, shall appoint
independent legal counsel (who may be the outside counsel regularly
employed by the Company), which will issue a written opinion stating
whether Indemnitee has met the appropriate standard of conduct set forth
herein; PROVIDED FURTHER, if all directors are deemed to be interested,
such independent legal counsel shall be appointed by a majority vote of
the entire Board. The fees and expenses of counsel in connection with
making said determination shall be paid by the Company and, if requested
by such counsel, the Company shall give such counsel
<PAGE>
an appropriate written agreement with respect to the payment of its fees
and expenses and such other matters as may be reasonably requested by
counsel.
(b) CLAIMS FOR INDEMNIFICATION. Indemnitee shall make any and all
claims for indemnification or requests for advances covered by this
Agreement in writing. Such written claim or request shall contain
sufficient information to reasonably inform the Company about the nature
and extent of the indemnification or advance sought by Indemnitee.
(c) JUDICIAL REVIEW OF INDEMNIFICATION. Notwithstanding Section
5(a), Indemnitee may, either before or within two years after a
determination regarding indemnification has been made pursuant to the
terms of this Agreement, petition a Delaware Court or any other court of
competent jurisdiction to determine whether Indemnitee is entitled to
indemnification pursuant to the provisions hereof, and such court shall
thereupon have the exclusive authority to make such determination unless
and until such court dismisses or otherwise terminates such Action
without having made such determination. Such court shall, as petitioned,
make an independent determination of whether Indemnitee was entitled to
indemnification pursuant to his Agreement, and, if so, the extent of
such indemnification. If the court shall determine that Indemnitee is
entitled to indemnification hereunder as to any claim, issue, or matter
involved in the Action with respect to which there has been no prior
determination pursuant hereto or with respect to which there has been a
prior determination pursuant hereto that Indemnitee was not entitled, or
was only partially entitled, to indemnification hereunder, the Company
shall pay all Damages incurred by Indemnitee in connection with such
judicial determination , as well as the amount of indemnification
specified by such court (to the extent that such indemnification has not
already been paid).
(d) BURDEN OF PROOF. If under applicable law the entitlement of
Indemnitee to be indemnified under this Agreement depends on whether a
standard of conduct has been met, the burden of proof of establishing
that Indemnitee did not act in accordance with such standard of conduct
shall rest with the Company. Indemnitee shall be presumed to have acted
in accordance with such standard and be entitled to indemnification or
advancement of expenses hereunder, as the case may be, unless, based
upon a preponderance of the evidence, it shall be determined by the
party reviewing Indemnitee's conduct that the Indemnitee did not meet
such standard.
6. CHANGE IN CONTROL. If there has not been a Change in Control after
the date hereof, the determination of the (i) rights of Indemnitee to
indemnification and payment of losses and expenses under this Agreement or under
the provisions of the Articles, Bylaws, and the DGCL, (ii) standard of conduct
and (iii) evaluation of the reasonableness of amounts claimed by Indemnitee
shall be made in accordance with Section 5(a) or in such other manner as may be
required by the DGCL or other applicable law. If there has been a Change in
Control after the date hereof, such determination and evaluation shall be made
by a special, independent counsel (which may be the outside counsel regularly
employed by the Company) who is selected by Indemnitee and approved by the
Company, which approval shall not be unreasonably withheld.
7. LIMITATION OF ACTIONS; RELEASE OF CLAIMS. No Action shall be brought
and no cause of Action shall be asserted by or on behalf of the Company, or any
of its Affiliates,
<PAGE>
against Indemnitee, his spouse, heirs, executors, or administrators after the
expiration of two years from the date Indemnitee ceases (for any reason) to
serve in any one or more of the capacities covered by this Agreement, and any
claim or cause of Action of the Company, or any of its Affiliates, shall be
extinguished and deemed released unless asserted by filing of a legal Action
within such two year period.
8. SUBROGATION. In the event of payment under this Agreement, the
Company shall be subrogated to the extent of such payment to all of the rights
of recovery of Indemnitee, who shall execute all documents, instruments and
papers and take all actions reasonably requested by the Company to implement
such subrogation rights.
9. LIMITATION OF INDEMNIFICATION RIGHTS. The Company shall not be liable
under this Agreement to make any payment in connection with any claim made
against Indemnitee:
(a) for which payment is actually made to Indemnitee under a
valid and collectible insurance policy, except in respect of any excess
beyond the amount of payment under such insurance;
(b) for which Indemnitee has already been indemnified by the
Company or any of its Affiliates or any other Enterprise of which
Indemnitee serves as Agent by request of the Company, otherwise than
pursuant to this Agreement;
(c) for an accounting of profits made from the purchase or sale
by Indemnitee of securities of the Company within the meaning of Section
16(b) of the Securities Exchange Act of 1934, as amended, or similar
provisions of any state statutory law or common law;
(d) brought about or contributed to by the knowingly fraudulent,
deliberate, dishonest or willful misconduct of Indemnitee; or
(e) for which indemnification under this Agreement is determined
by a final adjudication of a court of competent jurisdiction to be
unlawful and violative of public policy.
10. PARTICIPATION BY THE COMPANY. With respect to any such Action as to
which Indemnitee notifies the Company of the commencement thereof:
(a) Company will be entitled to participate therein at its own
expense;
(b) Except as otherwise provided below, to the extent that it may
wish, the Company (jointly with any other indemnifying party similarly
notified) will be entitled to assume the defense thereof, with counsel
satisfactory to Indemnitee. After receipt of notice from the Company to
Indemnitee of the Company's election so to assume the defense thereof,
the Company will not be liable to Indemnitee under this Agreement for
any legal or other expenses subsequently incurred by Indemnitee in
connection with the defense thereof other than reasonable costs of
investigation or as otherwise provided below. Indemnitee shall have the
right to employ his own counsel in such Action but the fees and expenses
of such counsel incurred after notice from the Company of its
<PAGE>
assumption of the defense thereof shall be at the expense of Indemnitee
unless: (i) the employment of counsel by Indemnitee has been authorized
by the Company, (ii) Indemnitee shall have reasonably concluded that
there may be a conflict of interest between the Company and Indemnitee
in the conduct of the defense of such Action, or (iii) the Company shall
not in fact have employed counsel to assume the defense of such Action,
in each of which cases the fees and expenses of counsel employed by
Indemnitee shall be subject to indemnification pursuant to this
Agreement. The Company shall not be entitled to assume the defense of
any Action brought in the name of or on behalf of the Company or as to
which Indemnitee shall have made the conclusion provided for in (ii)
above; and
(c) The Company shall not be liable to indemnify Indemnitee under
this Agreement for any amounts paid in settlement of any Action effected
without its written consent, which consent shall not be unreasonably
withheld. The Company shall not settle any Action in any manner which
would impose any penalty or limitation on Indemnitee without
Indemnitee's written consent, which consent shall not be unreasonably
withheld.
11. ADVANCES
(a) ADVANCES. Upon any threatened or pending Action in which
Indemnitee is a party or is involved and which may give rise to a right
of indemnification under this Agreement, following written request to
the Company by Indemnitee, the Company shall promptly pay to Indemnitee
amounts to cover expenses reasonably incurred (or to be reasonably
incurred) by Indemnitee in such proceeding in advance of its final
disposition upon the receipt by the Company of (i) a written undertaking
executed by or on behalf of Indemnitee to repay the advance if it shall
ultimately be determined that Indemnitee is not entitled to be
indemnified by the Company as provided in this Agreement and (ii)
satisfactory evidence as to the amount of such expenses.
(b) REPAYMENT OF ADVANCES OR OTHER EXPENSES. Indemnitee agrees
that Indemnitee shall reimburse the Company for all expenses paid by the
Company in defending any Action against Indemnitee upon and only to the
extent that it shall be determined pursuant to this Agreement or by
final judgment or other final adjudication under the provisions of the
DGCL or any applicable law that Indemnitee is not entitled to be
indemnified by the Company for such expenses.
12. OTHER RIGHTS AND REMEDIES. Any indemnification or advance payment of
expenses made pursuant to any provision in this Agreement shall be in addition
to any other rights to which Indemnitee may be entitled in any capacity under
any provision of law, the Bylaws and Articles, any governing instrument of any
Affiliate, this or any other agreement, or pursuant to any vote of the governing
body of any Affiliate or of disinterested members of the Board.
13. INSURANCE
(a) NO OBLIGATION TO MAINTAIN INSURANCE. The Company shall not
under any circumstances be obligated to maintain an insurance policy or
insurance policies providing officers' and directors' insurance
(INSURANCE).
<PAGE>
(b) INSURANCE COVERAGE. If the Company maintains Insurance,
Indemnitee shall be covered by such Insurance in accordance with its
terms to the maximum extent of coverage applicable to any director or
officer then serving the Company.
14. DURATION. All agreements and obligations of the Company contained
herein shall continue during the period Indemnitee is an Agent of the Company or
any of its Affiliates or serves as an Agent at the request of the Company for
any other Enterprise and shall continue thereafter so long as Indemnitee shall
be subject to any possible Action because Indemnitee was an Agent of the Company
or any of its Affiliates or serving in any other capacity referred to herein.
15. NOTICE. Promptly after receipt by Indemnitee of notice of the
commencement of any Action, Indemnitee shall, if he anticipates or contemplates
making a claim for expenses or an advance pursuant to this Agreement, notify the
Company of the commencement of such Action; PROVIDED, HOWEVER, that any delay in
so notifying the Company shall not constitute a waiver or release by Indemnitee
of rights hereunder and that any omission by Indemnitee to so notify the Company
shall not relieve the Company from any liability which it may have to Indemnitee
hereunder or otherwise than under this Agreement.
16. INTENT OF PARTIES. The Company expressly confirms and agrees that it
has entered into this Agreement and assumed the obligations imposed on the
Company hereby to induce Indemnitee to serve as an officer and/or director of
the Company and acknowledges that Indemnitee is relying upon this Agreement in
agreeing to serve in such capacity.
17. EFFECTIVENESS OF AGREEMENT. This Agreement is effective for, and
shall apply to, (i) any claim which is asserted or threatened before, on or
after the date of this Agreement but for which no Action has been brought prior
to the date hereof and (ii) any Action which is threatened before, on or after
the date of this Agreement but which is not pending prior to the date hereof.
This Agreement shall not apply to any Action which was brought before the date
of this Agreement. So long as the foregoing is satisfied, this Agreement shall
be effective for, and be applicable to, acts or omissions occurring to, on or
after the date hereof.
18. MISCELLANEOUS
(a) SEVERABILITY. If any provision of this Agreement shall be
held to be unenforceable under any applicable law, then such
unenforceability shall not invalidate the entire Agreement. Such
provision shall be deemed to be modified to the extent necessary to
render it enforceable, and if no such modification shall render it
enforceable, then this Agreement shall be construed as if not containing
the provisions held to be unenforceable, and the rights and obligations
of the parties shall be construed and enforced accordingly.
(b) ENTIRE AGREEMENT. This Agreement, those documents expressly
referred to herein and any other documents of even date herewith embody
the complete agreement and understanding between the parties hereto and
supersede and pre-empt any prior understandings, agreements or
representations between the parties, written, oral or otherwise, which
may have related to the subject matter hereof in any way.
<PAGE>
(c) IDENTICAL COUNTERPARTS. This Agreement may be executed in one
or more counterparts, each of which shall for all purposes be deemed to
be an original and all of which together shall constitute one and the
same instrument.
(d) HEADINGS. The headings used in this Agreement are inserted
for convenience only and shall not be deemed to constitute part of this
Agreement or to affect the construction thereof.
(e) USE OF CERTAIN TERMS. As used in this Agreement, the words
"herein," "hereof," and "hereunder" and other words of similar import
refer to this Agreement as a whole and not to any particular paragraph,
subparagraph, section, subsection, or other subdivision. Whenever the
context may require, any pronoun used in this Agreement shall include
the corresponding masculine, feminine or neuter forms, and the singular
form of nouns, pronouns and verbs shall include the plural and VICE
VERSA.
(f) MODIFICATION; WAIVER; TERMINATION. No supplement,
modification, or amendment, or termination of this Agreement shall be
effective unless executed in writing by both of the parties hereto. No
waiver of any of the provisions of this Agreement shall be deemed or
shall constitute a waiver of any other provisions hereof (whether or not
similar) nor shall such waiver constitute a continuing waiver.
(g) NOTICES. All notices, requests, demands, and other
communications hereunder shall be in writing and shall be deemed to have
been duly given if delivered by hand (return receipt requested) or sent
by overnight delivery service, cable, telegram, or facsimile
transmission to the parties at the following addresses or at such other
addresses as shall be specified by the parties by like notice:
(i) if to Indemnitee, to the address on the signature
page hereof; and
(ii) if to the Company, to:
CRC Holdings Corp.
11601 N. Houston Rosslyn Road
Houston, Texas 77086
Attention: President
Notice so given shall, in the case of notice so given by mail, be
deemed to be given and received on the fourth calendar day after
posting, in the case of notice so given by overnight delivery service,
on the date of actual delivery and, in the case of notice so given by
cable, telegram, facsimile transmission or, as the case may be, personal
delivery.
(h) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY THE LAWS
OF THE STATE OF DELAWARE, EXCLUDING CONFLICT OF LAWS PRINCIPLES.
(i) SURVIVAL; CONTINUATION. The rights of Indemnitee under this
Agreement shall inure to the benefit of Indemnitee, his heirs,
executors, administrators, personal representatives and assigns, and
this Agreement shall be binding upon the Company, its
<PAGE>
successors and assigns. If the Company, in a single transaction or
series of related transactions, sells, leases, exchanges, or otherwise
disposes of all or substantially all of its property and assets, the
Company shall, as a condition precedent to any such transaction, cause
effective provision to be made so that the Persons acquiring such
property and assets shall become bound by and replace the Company under
this Agreement.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed on the date first above written.
CRC-EVANS INTERNATIONAL, INC.
By:__________________________
INDEMNITEE
By:__________________________
Address:
EXHIBIT 10.2
REVOLVING CREDIT
AND
TERM LOAN AGREEMENT
DATED as of June 12, 1997
by and among
CEPI HOLDINGS, INC.,
as Borrower
CRC HOLDINGS CORP.,
and
THE FINANCIAL INSTITUTIONS NOW OR
HEREAFTER PARTIES HERETO,
as Lenders
and
BANKERS TRUST COMPANY,
as Documentation Agent
and
BANKBOSTON, N.A.,
as Agent
<PAGE>
REVOLVING CREDIT
AND
TERM LOAN AGREEMENT
This REVOLVING CREDIT AND TERM LOAN AGREEMENT is made as of June 12, 1997, by
and among (a) CEPI HOLDINGS, INC., a Delaware corporation having its principal
place of business at 11601 N. Houston-Rosslyn Road, Houston, Texas 77086 (the
"BORROWER"), (b) CRC HOLDINGS CORP., a Delaware corporation and the owner of
100% of the equity of the Borrower, having its principal place of business at
11601 N. Houston-Rosslyn Road, Houston, Texas 77086 (the "HOLDING COMPANY"), (c)
the financial institutions which are now, or in accordance with SECTION 20
hereafter from time to time become, parties hereto and are listed on SCHEDULE 1
hereto (individually, each a "LENDER", and collectively, the "LENDERS"), (d)
Bankers Trust Company, a national banking association, as documentation agent,
and (e) BANKBOSTON, N.A., a national banking association ("FNBB"), as agent (the
"AGENT") for itself and the other Lenders.
1. DEFINITIONS AND RULES OF INTERPRETATION.
1.1. DEFINITIONS. The following terms shall have the meanings set forth in
this SECTION 1.1 or elsewhere in the provisions of this Credit Agreement
referred to below:
ACCOUNTS RECEIVABLE. All rights of the Borrower and its Subsidiaries to
payment for goods sold, leased or otherwise marketed in the ordinary course of
business and all rights of the Borrower and its Subsidiaries to payment for
services rendered in the ordinary course of business and all sums of money or
other proceeds due thereon pursuant to transactions with account debtors, except
for that portion in excess of $100,000 of the sum of money or other proceeds due
thereon that relates to sales, use or property taxes in conjunction with such
transactions, recorded on books of account in accordance with Generally Accepted
Accounting Principles.
ACQUISITION. The acquisition by the Borrower and its Subsidiaries of
substantially all of the assets or of all of the issued and outstanding shares
of capital stock (as the case may be) of each of the Target Companies pursuant
to the Purchase Agreement and the other documents entered into in connection
therewith.
AFFILIATE. Any Person that would be considered to be an affiliate of the
Borrower under Rule 144(a) of the Rules and Regulations of the Securities and
Exchange Commission, as in effect on the date hereof, if the Borrower were
issuing securities.
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AGENCY ACCOUNT AGREEMENT. Any Agency Account Agreement in the form of
EXHIBIT A-1 or A-2 hereto (or a form otherwise approved by the Agent in its sole
discretion), entered into by the Borrower, the Agent and a depository
institution satisfactory to the Agent.
AGENT. As defined in the preamble hereto.
AGENT'S HEAD OFFICE. The Agent's head office located at 100 Federal
Street, Boston, Massachusetts 02110, or at such other location as the Agent may
designate from time to time.
AGENT'S SPECIAL COUNSEL. Bingham, Dana & Gould LLP or such other
counsel as may be approved by the Agent.
AGGREGATE FACILITIES COMMITMENT. With respect to each Lender, the amount
equal to the sum of (a) such Lender's Commitments hereunder and, with respect to
FNBB, the UK Commitment, PLUS (b) such Lender's Commitment Percentage of the
Term Loan hereunder.
APPLICABLE MARGIN. With respect to a Base Rate Loan, the Base Rate
Applicable Margin, and with respect to a Eurodollar Rate Loan, the Eurodollar
Applicable Margin.
ASSIGNMENT AND ACCEPTANCE. As set forth in SECTION 20.1 hereof.
BALANCE SHEET DATE. December 31, 1996.
BASE RATE. The higher of (a) the annual rate of interest announced from
time to time by FNBB at its head office in Boston, Massachusetts, as its "base
rate" and (b) one-half of one percent (1/2%) above the Federal Funds Effective
Rate. For the purposes of this definition, "FEDERAL FUNDS EFFECTIVE RATE" shall
mean for any day, the rate per annum equal to the weighted average of the rates
on overnight federal funds transactions with members of the Federal Reserve
System arranged by federal funds brokers, as published for such day (or, if such
day is not a Business Day, for the next preceding Business Day) by the Federal
Reserve Bank of New York, or, if such rate is not so published for any day that
is a Business Day, the average of the quotations for such day on such
transactions received by the Agent from three funds brokers of recognized
standing selected by the Agent.
BASE RATE APPLICABLE MARGIN. At all times from the Closing Date through
the first Performance Adjustment Date, one percent (1%), and thereafter the
percentage as determined pursuant to SECTION 6.11 hereof.
BASE RATE LOANS. The Revolving Credit Loans and all or any portion of
the Term Loan bearing interest calculated by reference to the Base Rate.
<PAGE>
-3-
BORROWER. As defined in the preamble hereto.
BORROWING BASE. At the relevant time of reference thereto, the amount then
in effect as determined by the Agent pursuant to SECTION 2.9 by reference to the
most recent Borrowing Base Report delivered to the Lenders and the Agent
pursuant to SECTION 9.4(E) hereof, which is equal to the sum of:
(a) 80% of Eligible Accounts Receivable for which invoices have
been issued and are payable; PLUS
(b) 50% of the net book value (determined on a first-in first-out
basis at lower of cost or market) of Eligible Inventory (other than
inventory which is located outside the United States of America, England,
Wales or the Dominion of Canada); PLUS
(c) the sum of (i) 50% of the net book value (determined on a
first-in first-out basis at lower of cost or market) of up to $1,000,000
of Eligible Inventory located outside the United States of America,
England, Wales or the Dominion of Canada, and (ii) 35% of the net book
value (determined on a first-in first-out basis at lower of cost or
market) of up to $2,000,000 of Eligible Inventory located outside the
United States of America, England, Wales or the Dominion of Canada in
excess of the $1,000,000 set forth in CLAUSE (I) above; MINUS
(d) the greater of (i) the Dollar Equivalent of the aggregate
principal amount of loans outstanding PLUS letter of credit exposure under
the UK Facility, and (ii) the Dollar Equivalent of UK Monthly Maximum
Amount, as set forth in the UK Monthly Maximum Amount Certificate.
BORROWING BASE REPORT. A Borrowing Base Report signed by the chief
financial officer of the Borrower and in substantially the form of EXHIBIT B
hereto.
BUSINESS DAY. Any day on which banking institutions in Boston,
Massachusetts and Houston, Texas are open for the transaction of banking
business and, in the case of Eurodollar Rate Loans, also a day which is a
Eurodollar Business Day.
CANADIAN ACCOUNTS. As set forth in SECTION 9.14(B) hereof.
CANADIAN DOLLARS. Canadian Dollars in lawful currency of Canada.
CANADIAN SECURITY DOCUMENTS. Collectively, the Collateral Mortgage and the
General Security Agreement, each dated as of the date hereof, executed by the
Canadian Subsidiary in favor of the Agent or its trustee, for the benefit of the
Agent
<PAGE>
-4-
and the Lenders, each in form and substance satisfactory to the Lenders and the
Agent.
CANADIAN SUBSIDIARY. CRC-Evans Canada, Ltd., a corporation organized
under the laws of the Province of Alberta, Canada and a direct, wholly-owned
subsidiary of the Borrower.
CANADIAN WORKING CAPITAL FACILITY. Loan facility by Royal Bank of Canada
in favor of the Canadian Subsidiary in the principal amount of $300,000 CDN, in
the form delivered to the Agent as of the date hereof.
CAPITAL ASSETS. Fixed assets, both tangible (such as land, buildings,
fixtures, machinery and equipment) and intangible (such as patents, copyrights,
trademarks, franchises and good will); PROVIDED that Capital Assets shall not
include any item customarily charged directly to expense or depreciated over a
useful life of twelve (12) months or less in accordance with Generally Accepted
Accounting Principles.
CAPITAL EXPENDITURES. Amounts paid or indebtedness incurred by the
Borrower or any of its Subsidiaries in connection with the purchase or lease by
the Borrower or any of its Subsidiaries of Capital Assets that would be required
to be capitalized and shown on the balance sheet of such Person in accordance
with Generally Accepted Accounting Principles.
CAPITALIZED LEASES. Leases under which the Borrower or any of its
Subsidiaries is the lessee or obligor, the discounted future rental payment
obligations under which are required to be capitalized on the balance sheet of
such Person in accordance with Generally Accepted Accounting Principles.
CERCLA. As set forth in SECTION 8.18 hereof.
CLOSING DATE. The first date on which the conditions set forth in SECTION
12 hereof have been satisfied and any Revolving Credit Loans and the Term Loan
are to be made or any Letter of Credit is to be issued hereunder.
CODE. The Internal Revenue Code of 1986, as amended.
COLLATERAL. All of the property, rights and interests of the Holding
Company and each of its Subsidiaries, whether tangible or intangible, real or
personal, that are or are intended to be subject to the security interests and
mortgages created by the Security Documents and the UK Security Documents.
COMMITMENT. With respect to each Lender, the amount set forth on SCHEDULE
1 hereto as the amount of such Lender's commitment to make Revolving Credit
Loans to, and to participate in the issuance, extension and renewal of Letters
of
<PAGE>
-5-
Credit for the account of, the Borrower, as the same may be reduced from time to
time; or if such Commitment is terminated pursuant to the provisions hereof,
zero.
COMMITMENT FEE. As set forth in SECTION 2.2 hereof.
COMMITMENT LETTER. As set forth in SECTION 6.1 hereof.
COMMITMENT PERCENTAGE. With respect to each Lender, the percentage set
forth on SCHEDULE 1 hereto as such Lender's percentage of the aggregate Term
Loan and Total Commitment.
CONSOLIDATED OR CONSOLIDATING. With reference to any term defined herein,
shall mean that term as applied to the accounts of the Holding Company and its
Subsidiaries, consolidated in accordance with Generally Accepted Accounting
Principles.
CONSOLIDATED DEBT SERVICE. With respect to any fiscal period, an amount
equal to the sum of all payments on Indebtedness of the Holding Company and its
Subsidiaries determined on a consolidated basis that become due and payable or
that are to become due and payable during such fiscal year pursuant to any
agreement or instrument to which the Holding Company or any of its Subsidiaries
is a party relating to the borrowing of money or the obtaining of credit or in
respect of Capitalized Leases LESS, any amounts received by the Borrower during
such fiscal period pursuant to any Interest Rate Protection Agreements. Demand
obligations shall be deemed to be due and payable during any fiscal year during
which such obligations are outstanding.
CONSOLIDATED EBIT. Consolidated Net Income for any period, before payment
or provision for any income taxes or interest expense for such period,
determined in accordance with Generally Accepted Accounting Principles.
CONSOLIDATED EBITDA. For any period, Consolidated EBIT, calculated before
deduction of depreciation, amortization and all other non-cash charges for such
period, determined in accordance with Generally Accepted Accounting Principles.
CONSOLIDATED EXCESS CASH FLOW. With respect to the Holding Company and its
Subsidiaries for any particular fiscal period, an amount equal to (a)
Consolidated Operating Cash Flow for such period LESS (b) Consolidated Debt
Service PLUS (c) extraordinary nonrecurring items of income other than
extraordinary items of income resulting from the sale of assets, the proceeds of
which are used to prepay the Loans pursuant to SECTION 4.3.3(B) hereof.
CONSOLIDATED FUNDED DEBT. All liabilities of the Holding Company and its
Subsidiaries determined on a consolidated basis in accordance with Generally
Accepted Accounting Principles, relating to the borrowing of money or in respect
of
<PAGE>
-6-
Capitalized Leases, LESS any amounts received by the Borrower during the period
of review pursuant to any Interest Rate Protection Agreements.
CONSOLIDATED NET INCOME (OR DEFICIT). The consolidated net income (or
deficit) of the Holding Company and its Subsidiaries, after deduction of all
expenses, taxes, and other proper charges, determined in accordance with
Generally Accepted Accounting Principles, and after eliminating therefrom all
extraordinary nonrecurring items of income.
CONSOLIDATED OPERATING CASH FLOW. For any period, an amount equal to (a)
Consolidated EBITDA, LESS (b) the sum of (i) cash payments for all taxes paid or
payable by the Holding Company and its Subsidiaries during such period, PLUS
(ii) Capital Expenditures made during such period to the extent permitted by
SECTION 11.2 hereof.
CONSOLIDATED TANGIBLE NET WORTH. The excess of Consolidated Total
Assets over Consolidated Total Liabilities, and LESS the sum of:
(a) the total book value of all assets of the Holding Company and
its Subsidiaries properly classified as intangible assets under Generally
Accepted Accounting Principles, including such items as good will, the
purchase price of acquired assets in excess of the fair market value
thereof, trademarks, trade names, service marks, brand names, copyrights,
patents and licenses, and rights with respect to the foregoing; PLUS
(b) all amounts representing any write-up in the book value of any
assets of the Holding Company and its Subsidiaries resulting from a
revaluation thereof subsequent to the date on which the Acquisition is
consummated, excluding adjustments to translate foreign assets and
liabilities for changes in foreign exchange rates made in accordance with
Financial Accounting Standards Board Statement No. 52; PLUS
(c) to the extent otherwise includable in the computation of
Consolidated Tangible Net Worth, any subscriptions receivable.
CONSOLIDATED TOTAL ASSETS. All assets of the Holding Company and its
Subsidiaries determined on a consolidated basis in accordance with Generally
Accepted Accounting Principles.
CONSOLIDATED TOTAL INTEREST EXPENSE. For any period, the aggregate amount
of interest required to be paid or accrued by the Holding Company and its
Subsidiaries during such period on all Indebtedness of the Holding Company and
its Subsidiaries outstanding during all or any part of such period determined on
a consolidated basis, whether such interest was or is required to be reflected
as an item of expense or capitalized, including payments consisting of interest
in respect of Capitalized Leases
<PAGE>
-7-
and including commitment fees, agency fees, facility fees, balance deficiency
fees and similar fees or expenses in connection with the borrowing of money, but
excluding the amortization of costs incurred in connection with the closing of
the financing contemplated by this Agreement.
CONSOLIDATED TOTAL LIABILITIES. All liabilities of the Holding Company and
its Subsidiaries determined on a consolidated basis in accordance with Generally
Accepted Accounting Principles and all Indebtedness of the Holding Company and
its Subsidiaries, to the extent not so classified.
CONVERSION REQUEST. A notice given by the Borrower to the Agent of the
Borrower's election to convert or continue a Loan in accordance with SECTION
2.7 hereof.
COPYRIGHT MORTGAGES. The several Memorandum of Grant of Security Interest
in Copyrights, dated or to be dated on or prior to the Closing Date, made by
each of the Borrower and its Subsidiaries in favor of the Agent and in form and
substance satisfactory to the Lenders and the Agent.
CREDIT AGREEMENT. This Revolving Credit and Term Loan Agreement,
including the Schedules and Exhibits hereto.
DEFAULT. As set forth in SECTION 14.1 hereof.
DISTRIBUTION. With respect to a particular Person, the declaration or
payment of any dividend (whether in cash or otherwise) on or in respect of any
shares of any class of capital stock of such Person, other than dividends
payable solely in shares of common stock of such Person; the purchase,
redemption, or other retirement of any shares of any class of capital stock of
such Person, directly or indirectly through a Subsidiary of such Person or
otherwise; the return of capital by such Person to its shareholders as such; or
any other distribution on or in respect of any shares of any class of capital
stock of such Person.
DOLLARS OR $. Dollars in lawful currency of the United States of America.
DOLLAR EQUIVALENT. At any time of determination, (a) with respect to
Dollars or an amount denominated in Dollars, such amount, and (b) with respect
to any other currency, the amount of Dollars obtained by converting such
currency into Dollars at the spot rate for the purchase of Dollars with respect
to such currency as quoted by the Agent at approximately 11:00 a.m. (Boston,
Massachusetts time) on the date of such determination.
DOMESTIC LENDING OFFICE. Initially, the office of each Lender designated
as such in SCHEDULE 1 hereto; thereafter, such other office of such Lender, if
any, located within the United States that will be making or maintaining Base
Rate Loans.
<PAGE>
-8-
DRAWDOWN DATE. The date on which any Revolving Credit Loan or the Term
Loan is made or is to be made, and the date on which any Revolving Credit Loan
is converted or continued in accordance with SECTION 2.7 hereof or all or any
portion of the Term Loan is converted or continued in accordance with SECTION
4.5 hereof.
DUTCH GUILDERS. The lawful currency of the Netherlands.
ELIGIBLE ACCOUNTS RECEIVABLE. The aggregate of the unpaid portions of
Accounts Receivable (net of any credits, rebates, offsets, holdbacks or other
adjustments payable by the Holding Company, the Borrower or any of its
Subsidiaries to third parties that are adjustments to such Accounts Receivable)
(a) that the Borrower reasonably and in good faith determines to be collectible;
(b) that are with account debtors that (i) are not the Borrower, Subsidiaries of
the Borrower or Persons within the Investors' Control Group, (ii) purchased the
goods or services giving rise to the relevant Accounts Receivable in an arm's
length transaction, in the ordinary course of business of the Borrower and its
Subsidiaries, and (iii) are not insolvent or involved in any case or proceeding,
whether voluntary or involuntary, under any bankruptcy, reorganization,
arrangement, insolvency, adjustment of debt, dissolution, liquidation or similar
law of any jurisdiction; (c) that the Agent believes will not fail to be paid
because of the account debtor's financial inability to pay or because the
account debtor has disputed liability, asserted any right of set-off or has made
a claim with respect to any other Account Receivable due from such account
debtor, other than as a minimal adjustment in the ordinary course of business
and in accordance with regular commercial practice; (d) that are not subject to
any pledge, restriction, security interest or other lien or encumbrance other
than those created by the Loan Documents; (e) in which the Agent has a valid and
perfected first priority security interest; (f) that are not more than ninety
(90) days, with respect to account debtors located in the United States and
Canada, one hundred twenty (120) days, with respect to all other account
debtors, past due according to their original terms of sale; (g) that are not
outstanding for more than one hundred fifty (150) days, with respect to account
debtors located in the United States and Canada, and one hundred eighty (180)
days, with respect to all other account debtors, past the earlier to occur of
(i) the date of the respective invoices therefor and (ii) the date of shipment
thereof in the case of goods or the end of the calendar month following the
provision thereof in the case of services; PROVIDED, HOWEVER, that up to
$1,000,000 may be outstanding for more than one hundred and eighty (180) days
from the original invoice or shipment date thereof so long as such Accounts
Receivable otherwise constitute Eligible Accounts Receivable hereunder; (h) that
are not due from any single account debtor if more than twenty-five percent
(25%) of the aggregate amount of all Accounts Receivable owing from such account
debtor would otherwise not be Eligible Accounts Receivable; (i) that are payable
in Dollars, Canadian Dollars, Pound Sterling or Dutch Guilders; and (j) that are
not secured by a standby Letter of Credit with an expiration date three (3)
months or later from the issuance date thereof and in
<PAGE>
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a face amount exceeding $500,000, unless the conditions of SECTION 9.16 have
been satisfied in full.
ELIGIBLE ASSIGNEE. Any of (a) a commercial Lender or finance company
organized under the laws of the United States, or any State thereof or the
District of Columbia, and having total assets in excess of $1,000,000,000; (b) a
savings and loan association or savings Lender organized under the laws of the
United States, or any State thereof or the District of Columbia, and having a
net worth of at least $100,000,000, calculated in accordance with generally
accepted accounting principles; (c) a commercial bank organized under the laws
of any other country which is a member of the Organization for Economic
Cooperation and Development (the "OECD"), or a political subdivision of any such
country, and having total assets in excess of $1,000,000,000, PROVIDED that such
bank is acting through a branch or agency located in the country in which it is
organized or another country which is also a member of the OECD; (d) the central
bank of any country which is a member of the OECD; (e) any institutional
investor having a rating of not less than A or its equivalent by Standard &
Poor's Corporation; (f) investment companies (as defined in the Investment
Company Act of 1940, as amended) or other investment or mutual funds, in each
case having total assets in excess of $100,000,000; and (g) if, but only if, any
Event of Default has occurred and is continuing, any other bank, insurance
company, commercial finance company or other financial institution or other
Person approved by the Agent, such approval not to be unreasonably withheld.
ELIGIBLE INVENTORY. With respect to the Borrower and its Subsidiaries, all
inventory owned by the Borrower and its Subsidiaries; PROVIDED that Eligible
Inventory shall not include any inventory (a) held on consignment, or not
otherwise owned by the Borrower or such Subsidiary, or of a type no longer sold
by the Borrower or such Subsidiary, (b) which is damaged or subject to any legal
encumbrance other than Permitted Liens, (c) which is held by the Borrower or a
Subsidiary of the Borrower on property leased by the Borrower or such Subsidiary
if the aggregate book value of all Inventory located on such property is greater
than $1,000,000, unless the Agent has received a waiver from the lessor of such
leased property and, if any, sublessor thereof in form and substance
satisfactory to the Agent, (d) as to which, as applicable, (i) appropriate
Uniform Commercial Code financing statements showing the Borrower or such
Subsidiary as debtor and the Agent as secured party have not been filed in the
proper filing office or offices in order to perfect the Agent's security
interest therein, (ii) appropriate steps have not been taken by UK Holdings, the
UK Subsidiary and/or the direct Subsidiaries of the UK Subsidiary (including,
without limitation, the execution and delivery by each such Person of a
debenture in favor of the Agent and the registration thereof with the Company's
Registration Office pursuant to Section 395 of the Company's Act of 1955) to
create a valid charge in favor of the Agent over all such Person's inventory, or
(iii) appropriate financing statements showing the Canadian Subsidiary as debtor
have not been filed in the proper filing office or offices under the Personal
Property
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Security Act in order to perfect the Agent's security interest therein, or (e)
which in the aggregate exceeds $3,000,000 and is located outside of the United
States of America, England, Wales or the Dominion of Canada.
EMPLOYEE BENEFIT PLAN. Any employee benefit plan within the meaning of
SECTION 3(3) of ERISA maintained or contributed to by the Borrower or any ERISA
Affiliate, other than a Multiemployer Plan.
ENVIRONMENTAL LAWS. As set forth in SECTION 8.18(A) hereof.
ERISA. The Employee Retirement Income Security Act of 1974.
ERISA AFFILIATE. Any Person which is treated as a single employer with the
Borrower under SECTION 414 of the Code.
ERISA REPORTABLE EVENT. A reportable event with respect to a Guaranteed
Pension Plan within the meaning of SECTION 4043 of ERISA and the regulations
promulgated thereunder as to which the requirement of notice has not been
waived.
EURODOLLAR APPLICABLE MARGIN. At all times from the Closing Date through
the first Performance Adjustment Date, two and one-half percent (2.50%), and
thereafter the margin rate as determined pursuant to SECTION 6.11 hereof.
EURODOLLAR BUSINESS DAY. Any day on which commercial banks are open for
international business (including dealings in Dollar deposits) in London or such
other eurodollar interbank market as may be selected by the Agent in its sole
discretion acting in good faith.
EURODOLLAR LENDING OFFICE. Initially, the office of each Lender designated
as such in SCHEDULE 1 hereto; thereafter, such other office of such Lender, if
any, that shall be making or maintaining Eurodollar Rate Loans.
EURODOLLAR RATE. For any Interest Period with respect to a Eurodollar Rate
Loan, the rate of interest equal to (a) the arithmetic average of the rates per
annum (rounded upwards to the nearest 1/16 of one percent) at which the Agent's
Eurodollar Lending Office is offered Dollar deposits two (2) Eurodollar Business
Days prior to the beginning of such Interest Period in the interbank Eurodollar
market where the Eurodollar and foreign currency and exchange operations of such
Eurodollar Lending Office are customarily conducted, for delivery on the first
day of such Interest Period for the number of days comprised therein and in an
amount comparable to the amount of the Eurodollar Rate Loans to which such
Interest Period applies, DIVIDED BY (b) a number equal to 1.00 MINUS the
Eurocurrency Reserve Rate, if applicable.
EURODOLLAR RATE LOANS. Revolving Credit Loans and all or any portion
of the Term Loan bearing interest calculated by reference to the Eurodollar
Rate.
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EUROCURRENCY RESERVE RATE. For any day with respect to a Eurodollar Rate
Loan, the maximum rate (expressed as a decimal) at which any lender subject
thereto would be required to maintain reserves under Regulation D of the Board
of Governors of the Federal Reserve System (or any successor or similar
regulations relating to such reserve requirements) against "EUROCURRENCY
LIABILITIES" (as that term is used in Regulation D), if such liabilities were
outstanding. The Eurocurrency Reserve Rate shall be adjusted automatically on
and as of the effective date of any change in the Eurocurrency Reserve Rate.
EVENT OF DEFAULT. As set forth in SECTION 14.1 hereof.
FACILITY AGREEMENT. The Facility Agreement, dated as of the date hereof,
among the UK Subsidiary, the Agent and the other parties thereto, concerning the
UK Facility.
FNBB. As set forth in the preamble hereto.
FNBB CONCENTRATION ACCOUNT. As set forth in SECTION 9.14 hereof.
FNBB OPERATING ACCOUNTS. As set forth in SECTION 2.6(B) hereof.
FUNDED DEBT RATIO. At any time of determination, the ratio of (a) the
average amount of Consolidated Funded Debt during the four quarter period ended
on such date to (b) Consolidated EBITDA for the four fiscal quarters then ended.
GENERALLY ACCEPTED ACCOUNTING PRINCIPLES. (a) When used in SECTION 11
hereof, whether directly or indirectly through reference to a capitalized term
used therein, means (i) principles that are consistent with the principles
promulgated or adopted by the Financial Accounting Standards Board and its
predecessors, in effect for the fiscal year ended on the Balance Sheet Date, and
(ii) to the extent consistent with such principles, the accounting practice of
the Borrower reflected in its financial statements for the year ended on the
Balance Sheet Date, and (b) when used in general, other than as provided above,
means principles that are (i) consistent with the principles promulgated or
adopted by the Financial Accounting Standards Board and its predecessors, as in
effect from time to time, and (ii) consistently applied with past financial
statements of the Borrower adopting the same principles; PROVIDED that in each
case referred to in this definition of "GENERALLY ACCEPTED ACCOUNTING
PRINCIPLES" a certified public accountant would, insofar as the use of such
accounting principles is pertinent, be in a position to deliver an unqualified
opinion (other than a qualification regarding changes in Generally Accepted
Accounting Principles) as to financial statements in which such principles have
been properly applied.
GUARANTEED PENSION PLAN. Any employee pension benefit plan within the
meaning of SECTION 3(2) of ERISA maintained or contributed to by the Borrower or
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any ERISA Affiliate the benefits of which are guaranteed on termination in full
or in part by the PBGC pursuant to Title IV of ERISA, other than a Multiemployer
Plan.
GUARANTORS. Collectively, the North American Subsidiaries and the
Holding Company.
GUARANTIES. The several Guaranties, each dated or to be dated on or prior
to the Closing Date, made by each of the Guarantors in favor of the Lenders and
the Agent pursuant to which each Guarantor unconditionally guaranties to the
Lenders and the Agent the payment and performance in full of the Obligations, in
form and substance satisfactory to the Lenders and the Agent.
HAZARDOUS SUBSTANCES. As set forth in SECTION 8.18(B) hereof.
HIGHEST LAWFUL RATE. The maximum non-usurious rate of interest
permitted by applicable law.
HOLDING COMPANY. As defined in the preamble hereto.
HOLLAND ACCOUNT. As set forth in SECTION 9.14(C) hereof.
HOLLAND SUBSIDIARY. CRC-Evans B.V., a corporation to be organized under
the laws of the Netherlands and a direct, wholly-owned Subsidiary of the
Borrower, for the purpose of conducting the business in the Netherlands formerly
conducted by CRC-Evans Holland B.V.
INDEBTEDNESS. All obligations, contingent and otherwise, that in
accordance with generally accepted accounting principles should be classified
upon the obligor's balance sheet as liabilities, or to which reference should be
made by footnotes thereto, including in any event and whether or not so
classified: (a) all debt and similar monetary obligations, whether direct or
indirect; (b) all liabilities secured by any mortgage, pledge, security
interest, lien, charge or other encumbrance existing on property owned or
acquired subject thereto, whether or not the liability secured thereby shall
have been assumed; and (c) all guarantees, endorsements and other contingent
obligations whether direct or indirect in respect of indebtedness of others,
including any obligation to supply funds to or in any manner to invest in,
directly or indirectly, the debtor, to purchase indebtedness, or to assure the
owner of indebtedness against loss, through an agreement to purchase goods,
supplies, or services for the purpose of enabling the debtor to make payment of
the indebtedness held by such owner or otherwise, and the obligations to
reimburse the issuer in respect of any letters of credit.
INTEREST PAYMENT DATE. (a) As to any Base Rate Loan, the last day of the
Interest Period which includes the Drawdown Date thereof; and (b) as to any
Eurodollar Rate Loan in respect of which the Interest Period is (i) three (3)
months or less, the last day of such Interest Period and (ii) more than three
(3) months, the date that is three (3) months
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from the first day of such Interest Period and, in addition, the last day of
such Interest Period.
INTEREST PERIOD. With respect to each Revolving Credit Loan or all or any
relevant portion of the Term Loan, (a) initially, the period commencing on the
Drawdown Date of such Loan and ending on the last day of the period selected by
the Borrower in the Loan Request as follows: (i) for any Base Rate Loan, the
last day of the relevant fiscal quarter, and (ii) for any Eurodollar Rate Loan,
1, 2, 3 or 6 month periods; and (b) thereafter, each period commencing on the
last day of the next preceding Interest Period applicable to such Loan (or
portion thereof), as the case may be, and ending on the last day of one of the
periods set forth above, as selected by the Borrower in a Conversion Request;
PROVIDED that all of the foregoing provisions relating to Interest Periods are
subject to the following:
(a) if any Interest Period with respect to a Eurodollar Rate Loan would
otherwise end on a day that is not a Eurodollar Business Day, that Interest
Period shall be extended to the next succeeding Eurodollar Business Day unless
the result of such extension would be to carry such Interest Period into another
calendar month, in which event such Interest Period shall end on the immediately
preceding Eurodollar Business Day;
(b) if any Interest Period with respect to a Base Rate Loan would end on a
day that is not a Business Day, that Interest Period shall end on the next
succeeding Business Day;
(c) if the Borrower shall fail to give notice as provided in SECTION 2.7
hereof, the Borrower shall be deemed to have requested a conversion of the
affected Eurodollar Rate Loan to a Base Rate Loan and the continuance of all
Base Rate Loans as Base Rate Loans on the last day of the then current Interest
Period with respect thereto;
(d) any Interest Period relating to any Eurodollar Rate Loan that begins
on the last Eurodollar Business Day of a calendar month (or on a day for which
there is no numerically corresponding day in the calendar month at the end of
such Interest Period) shall end on the last Eurodollar Business Day of a
calendar month; and
(e) any Interest Period relating to any Eurodollar Rate Loan that would
otherwise extend beyond the Maturity Date shall end on the Maturity Date.
INTEREST RATE PROTECTION AGREEMENTS. As set forth in SECTION 9.15
hereof.
INVESTMENTS. All expenditures made and all liabilities incurred
(contingently or otherwise) for the acquisition of stock or Indebtedness of, or
for loans, advances, capital contributions or transfers of property to, or in
respect of any guaranties (or
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other commitments as described under Indebtedness), or obligations of, any
Person. In determining the aggregate amount of Investments outstanding at any
particular time: (a) the amount of any Investment represented by a guaranty
shall be taken at not less than the principal amount of the obligations
guaranteed and still outstanding; (b) there shall be included as an Investment
all interest accrued with respect to Indebtedness constituting an Investment
unless and until such interest is paid; (c) there shall be deducted in respect
of each such Investment any amount received as a return of capital (but only by
repurchase, redemption, retirement, repayment, liquidating dividend or
liquidating distribution); (d) there shall not be deducted in respect of any
Investment any amounts received as earnings on such Investment, whether as
dividends, interest or otherwise, except that accrued interest included as
provided in the foregoing clause (b) may be deducted when paid; and (e) there
shall not be deducted from the aggregate amount of Investments any decrease in
the value thereof.
INVESTORS. The Primary Investors and the Management Investors.
INVESTORS' CONTROL GROUP. All Persons (a) which, directly or indirectly,
individually or collectively, controls or is controlled by or under common
control with any of the Investors or (b) who are relatives, directors, officers
or general partners of any Investor or of any Person described in CLAUSE (A)
above, other than the Borrower and its Subsidiaries. For purposes of this
definition, "control" of a Person shall include the power, whether direct or
indirect, (x) to vote fifty percent (50%) or more of the capital stock,
partnership interest, voting trust certificates or other instruments commonly
known as "securities" (as the case may be) having ordinary voting power for the
election of directors or other managers of such Person or (y) to direct or cause
the direction of the management and policies of such Person whether by contract
or otherwise.
LENDERS. As defined in the preamble hereto.
LETTER OF CREDIT. As set forth in SECTION 5.1.1 hereof.
LETTER OF CREDIT APPLICATION. As set forth in SECTION 5.1.1 hereof.
LETTER OF CREDIT FEE. As set forth in SECTION 5.6 hereof.
LETTER OF CREDIT PARTICIPATION. As set forth in SECTION 5.1.4 hereof.
LOAN DOCUMENTS. The UK Loan Documents and the US Loan Documents.
LOAN REQUEST. As set forth in SECTION 2.6(A) hereof.
LOANS. The Revolving Credit Loans and the Term Loan.
LOCK BOX ACCOUNTS. As set forth in SECTION 9.14(A) hereof.
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MAJORITY LENDERS. As of any date, the Lenders holding at least Sixty-Six
and Two-Thirds percent (66 2/3%) of an amount equal to the sum of the aggregate
outstanding principal amounts of the Notes hereunder and the Dollar Equivalent
of the aggregate unpaid principal amount outstanding under the UK Facility on
such date; and if no such principal is outstanding, the Lenders whose Aggregate
Facilities Commitments constitute at least Sixty-Six and Two-Thirds percent (66
2/3%) of the Aggregate Facilities Commitments for all of the Lenders,
collectively.
MANAGEMENT INVESTORS. The persons named on SCHEDULE 2 hereto.
MANAGEMENT NOTES. The several promissory notes, in the original
aggregate principal amount of $1,919,400, executed by the Management
Investors in favor of the Holding Company.
MATURITY DATE. June 12, 2003.
MAXIMUM DRAWING AMOUNT. The Dollar Equivalent of maximum aggregate amount
that the beneficiaries may at any time draw under outstanding Letters of Credit,
as such aggregate amount may be reduced from time to time pursuant to the terms
of the Letters of Credit.
MORTGAGED PROPERTIES. The Real Estate located in Tulsa, Oklahoma and
Edmonton, Alberta, Canada.
MORTGAGES. The several mortgages, dated or to be dated on or prior to the
Closing Date, executed by the Borrower and the North American Subsidiaries in
favor of the Agent with respect to the fee interests of the Borrower and such
Subsidiaries in the Mortgaged Properties, in form and substance satisfactory to
the Lenders and the Agent.
MULTIEMPLOYER PLAN. Any multiemployer plan within the meaning of
SECTION 3(37) of ERISA maintained or contributed to by the Borrower or any
ERISA Affiliate.
NORTH AMERICAN SUBSIDIARIES. All of the Subsidiaries of the Borrower,
both direct and indirect, other than the UK Subsidiary and its direct
Subsidiaries and the Holland Subsidiary.
NOTES. The Term Notes and the Revolving Credit Notes.
OBLIGATIONS. All indebtedness, obligations and liabilities of any of the
Borrower and its Subsidiaries to any of the Lenders and the Agent, individually
or collectively, existing on the date of this Credit Agreement or arising
thereafter, direct or indirect, joint or several, absolute or contingent,
matured or unmatured, liquidated or unliquidated, secured or unsecured, arising
by contract, operation of law or
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otherwise, arising or incurred under this Credit Agreement or any of the other
Loan Documents or in respect of any of the Loans made or Reimbursement
Obligations incurred or any of the Notes, Letters of Credit Application, Letters
of Credit or other instruments at any time evidencing any thereof or under any
Interest Rate Protection Agreement issued by the Agent.
OPERATING ACCOUNTS. As set forth in SECTION 9.14(A) hereof.
OUTSTANDING. With respect to the Loans, the aggregate unpaid principal
thereof as of any date of determination.
PATENT ASSIGNMENTS. The several Patent Collateral Assignment and Security
Agreements, dated or to be dated on or prior to the Closing Date, made by each
of the Borrower and its Subsidiaries in favor of the Agent and in form and
substance satisfactory to the Lenders and the Agent.
PBGC. The Pension Benefit Guaranty Corporation created by SECTION 4002
of ERISA and any successor entity or entities having similar responsibilities.
PERFECTION CERTIFICATES. The Perfection Certificates as defined in the
Security Agreements.
PERFORMANCE ADJUSTMENT DATE. As set forth in SECTION 6.11 hereof.
PERMITTED LIENS. Liens, security interests and other encumbrances
permitted by SECTION 10.2 hereof.
PERSON. Any individual, corporation, partnership, trust, unincorporated
association, business, or other legal entity, and any government or any
governmental agency or political subdivision thereof.
PLEDGE AGREEMENTS. Collectively, the Stock Pledge Agreement executed by
the Borrower, the Stock and Note Pledge Agreement executed by the Holding
Company, and the Charge Over Shares in UK Holdings executed by the Borrower,
each dated or to be dated on or prior to the Closing Date and each in form and
substance satisfactory to the Lenders and the Agent.
POUND STERLING. The lawful currency of the United Kingdom.
PRIMARY INVESTORS. Natural Gas Partners IV, L.P. and Equus II
Incorporated.
PRO FORMA CLOSING DATE BALANCE SHEET. The pro forma consolidated and
consolidating balance sheet of the Holding Company and its Subsidiaries as of
April 30, 1997, as adjusted for the transactions to occur in connection with the
Acquisition and as contemplated by this Credit Agreement, and giving effect to
such transactions as though all such transactions had occurred on the Closing
Date.
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PURCHASE AGREEMENT. The Asset Purchase Agreement, dated December 23, 1996,
as amended and restated as of January 31, 1997, in the form delivered to the
Agent as of the date hereof.
REAL ESTATE. All real property at any time owned or leased (as lessee
or sublessee) by the Holding Company or any of its Subsidiaries.
RECORD. The grid attached to a Note, or the continuation of such grid, or
any other similar record, including computer records, maintained by any Lender
with respect to any Loan referred to in such Note.
REIMBURSEMENT OBLIGATION. The Borrower's obligation to reimburse the
Agent and the Lenders for amounts drawn under any Letter of Credit as
provided in SECTION 5.2 hereof.
RENTAL EQUIPMENT AND/OR RENTAL INVENTORY. Equipment owned by the Borrower
and leased pursuant to rental agreements or contracts and carried on the
consolidated books and records of the Borrower as rental inventory.
REVOLVING CREDIT LOANS. Revolving credit loans made or to be made by
the Lenders to the Borrower pursuant to SECTION 2 hereof.
REVOLVING CREDIT NOTE RECORD. A Record with respect to a Revolving
Credit Note.
REVOLVING CREDIT NOTES. As set forth in SECTION 2.4 hereof.
SECURITY AGREEMENTS. The several Security Agreements, each dated or to be
dated on or prior to the Closing Date, between the Agent and each of the
Borrower, the North American Subsidiaries and the Holding Company, each in form
and substance satisfactory to the Lenders and the Agent.
SECURITY DOCUMENTS. Collectively, the Guaranties, the Security Agreements,
the Mortgages, the Patent Assignments, the Trademark Assignments, the Copyright
Mortgages, the Pledge Agreements, the Canadian Security Documents, the Agency
Account Agreements, and any other guaranties, security agreements or other
security documents executed and delivered to the Agent in accordance with
SECTION 7 hereof.
SETTLEMENT. The making of, or receiving of payments, in immediately
available funds, by the Lenders, to the extent necessary to cause each Lender's
actual share of the outstanding amount of Revolving Credit Loans (after giving
effect to any Loan Request) to be equal to each Lender's Commitment Percentage
of the outstanding amount of such Revolving Credit Loans (after giving effect to
any Loan Request), in any case where, prior to such event or action, the actual
share is not so equal.
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SETTLEMENT AMOUNT. As set forth in SECTION 2.8.2 hereof.
SETTLEMENT DATE. (a) The Drawdown Date relating to any Loan Request or the
date on which any Revolving Credit Loans are repaid pursuant to SECTION 3.3(A),
(b) Friday of each week, or if Friday is not a Business Day, the Business Day
immediately following such Friday, (c) the Business Day immediately following
the Agent becoming aware of the existence of an Event of Default, (d) any
Business Day on which the amount of Revolving Credit Loans outstanding from the
Agent PLUS the Agent's Commitment Percentage of the sum of the Maximum Drawing
Amount and any Unpaid Reimbursement Obligations is equal to or greater than the
Agent's Commitment Percentage of the Total Commitment, (e) the Business Day
immediately following any Business Day on which the amount of Loans outstanding
increases or decreases by more than $5,000,000 as compared to the previous
Settlement Date, (f) any day on which any conversion of a Base Rate Loan to a
Eurodollar Rate Loan occurs, or (g) any Business Day on which (i) the amount of
outstanding Revolving Credit Loans decreases and (ii) the amount of the Agent's
Loans outstanding equals zero dollars ($0).
SUBORDINATED DEBT. The unsecured Indebtedness of the Holding Company
owing to the Primary Investors, evidenced by the Subordinated Notes.
SUBORDINATED NOTES. The several unsecured promissory notes, in the
original aggregate principal amount of $1,919,400, paying interest at a per
annum rate not to exceed twelve percent (12%), executed by the Holding Company
in favor of the Primary Investors, which are expressly subordinated by their
terms and made junior to the payment and performance in full of the Obligations.
SUBSIDIARY. Any corporation, association, trust, or other business entity
of which the designated parent shall at any time own directly or indirectly
through a Subsidiary or Subsidiaries at least a majority (by number of votes) of
the outstanding Voting Stock.
SURVEY. In relation to each Mortgaged Property, an instrument survey of
such Mortgaged Property, dated as of a date subsequent to 1996, which shall show
the location of all buildings, structures, easements and utility lines on such
Mortgaged Property, shall be sufficient to remove the survey exception from the
Title Policy, shall show that all buildings and structures are within the lot
lines of such Mortgaged Property, shall not show any encroachments by others,
shall show the zoning district or districts in which such Mortgaged Property is
located and if such Mortgaged Property is located in a flood hazard district as
established by the Federal Emergency Management Agency or any successor agency
or in any flood plain, flood hazard or wetland protection district established
under federal, state or local law.
SURVEYOR CERTIFICATE. In relation to each Mortgaged Property for which a
Survey has been conducted, a certificate executed by the surveyor who prepared
such
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Survey, dated as of a recent date, containing such information relating to such
Mortgaged Property as the Agent or the Title Insurance Company may require, in
form and substance satisfactory to the Agent.
TARGET COMPANIES. CRC-Evans Pipeline International, Inc., a Delaware
corporation, and the "Affiliated Companies" (as defined in the Purchase
Agreement).
TERM LOAN. The term loan made or to be made by the Lenders to the Borrower
on the Closing Date in the aggregate principal amount of $20,000,000 pursuant to
SECTION 4.1 hereof.
TERM NOTE RECORD. A Record with respect to a Term Note.
TERM NOTES. As set forth in SECTION 4.2 hereof.
TITLE INSURANCE COMPANY. Lawyer's Title Insurance Corporation.
TITLE POLICY. In relation to the Real Estate located in Tulsa, Oklahoma,
an ALTA standard form title insurance policy issued by the Title Insurance
Company (with such reinsurance or co-insurance as the Agent may require, any
such reinsurance to be with direct access endorsements) in such amount as may be
determined by the Agent insuring the priority of the Mortgage on such Mortgaged
Property and that the Borrower or one of its Subsidiaries holds marketable fee
simple title to such Mortgaged Property, subject only to the encumbrances
permitted by such Mortgage and which shall not contain exceptions for mechanics
liens, persons in occupancy or matters which would be shown by a survey (except
as may be permitted by such Mortgage), shall not insure over any matter except
to the extent that any such affirmative insurance is acceptable to the Agent in
its sole discretion, and shall contain such endorsements and affirmative
insurance as the Agent in its discretion may require, including but not limited
to (a) comprehensive endorsement, (b) variable rate of interest endorsement, (c)
revolving credit endorsement, (d) tie-in endorsement, and (e) doing business
endorsement.
TOTAL COMMITMENT. The sum of the Commitments of all of the Lenders,
collectively (at no time to exceed $20,000,000).
TRADEMARK ASSIGNMENTS. The several Trademark Collateral Security and
Pledge Agreements, dated or to be dated on or prior to the Closing Date, made by
each of the Borrower and its Subsidiaries in favor of the Agent, each in form
and substance satisfactory to the Lenders and the Agent.
TYPE. As to any Loan (or portion thereof), its nature as a Base Rate
Loan or a Eurodollar Rate Loan.
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UK COMMITMENT. The "Maximum Commitment Amount" under the UK Facility, not
to exceed (pound)3,050,000.
UK FACILITY. The Pound Sterling Revolving Credit Facility, pursuant to the
Facility Agreement, not to exceed the UK Commitment.
UK HOLDINGS. PIH Holdings Limited (Registered Number 3335609), a limited
liability company incorporated in England and Wales, and a direct wholly-owned
Subsidiary of the Borrower and the owner of 100% of the equity of the UK
Subsidiary.
UK LOAN DOCUMENTS. The definitive loan documents memorializing the UK
Facility, including without limitation, the Facility Agreement and the UK
Security Documents.
UK MONTHLY MAXIMUM AMOUNT. The maximum amount available to be borrowed
under the UK Facility during any calendar month, as set forth in the UK Monthly
Maximum Amount Certificate.
UK MONTHLY MAXIMUM AMOUNT CERTIFICATE. The certificate delivered to the
Agent by the Borrower and the UK Subsidiary pursuant to SECTION 9.4(I) hereof
setting forth the UK Monthly Maximum Amount.
UK SECURITY DOCUMENTS. Collectively, the documents listed on Part 2 of
the Third Schedule to the Facility Agreement.
UK SUBSIDIARY. Pipeline Induction Heat Limited (Registered Number
01478556), a limited liability company incorporated in England and Wales, and a
direct wholly-owned Subsidiary of UK Holdings.
UNIFORM CUSTOMS. With respect to any Letter of Credit, the Uniform Customs
and Practice for Documentary Credits (1993 Revision), International Chamber of
Commerce Publication No. 500 or any successor version thereto adopted by the
Agent in the ordinary course of its business as a letter of credit issuer and in
effect at the time of issuance of such Letter of Credit.
UNPAID REIMBURSEMENT OBLIGATION. Any Reimbursement Obligation for which
the Borrower does not reimburse the Agent and the Lenders on the date specified
in, and in accordance with, SECTION 5.2 hereto.
US LOAN DOCUMENTS. This Credit Agreement, the Notes, the Letter of Credit
Applications, the Letters of Credit, the Security Documents, and any other
documents, agreements or instruments contemplated hereby or thereby or executed
in connection herewith or therewith, including, without limitation, any letter
agreement relating to fees payable to the Agent or the Lenders in connection
herewith.
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VOTING STOCK. Stock or similar interests, of any class or classes (however
designated), the holders of which are at the time entitled, as such holders, to
vote for the election of a majority of the directors (or persons performing
similar functions) of the corporation, association, trust or other business
entity involved, whether or not the right so to vote exists by reason of the
happening of a contingency.
1.2. RULES OF INTERPRETATION.
(a) A reference to any document or agreement shall include such
document or agreement as amended, modified or supplemented from time to
time in accordance with its terms and the terms of this Credit Agreement.
(b) The singular includes the plural and the plural includes the
singular.
(c) A reference to any law includes any amendment or
modification to such law.
(d) A reference to any Person includes its permitted successors
and permitted assigns.
(e) Accounting terms not otherwise defined herein have the meanings
assigned to them by generally accepted accounting principles applied on a
consistent basis by the accounting entity to which they refer.
(f) The words "include", "includes" and "including" are not
limiting.
(g) All terms not specifically defined herein or by generally
accepted accounting principles, which terms are defined in the Uniform
Commercial Code as in effect in The Commonwealth of Massachusetts, have
the meanings assigned to them therein, with the term "instrument" being
that defined under Article 9 of the Uniform Commercial Code.
(h) Reference to a particular "Section" refers to that Section of
this Credit Agreement unless otherwise indicated.
(i) The words "herein", "hereof", "hereunder" and words of like
import shall refer to this Credit Agreement as a whole and not to any
particular Section or subdivision of this Credit Agreement.
2. THE REVOLVING CREDIT FACILITY.
2.1. COMMITMENT TO LEND. Subject to the terms and conditions set forth in
this Credit Agreement, each of the Lenders severally agrees to lend to the
Borrower and the Borrower may borrow, repay, and reborrow from time to time from
the Closing Date until the Maturity Date, upon notice by the Borrower to the
Agent
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given in accordance with SECTION 2.6 hereof, such sums as are requested by the
Borrower up to a maximum aggregate amount outstanding (after giving effect to
all amounts requested) at any one time equal to such Lender's Commitment MINUS
such Lender's Commitment Percentage of the sum of the Maximum Drawing Amount and
all Unpaid Reimbursement Obligations; PROVIDED that the sum of the outstanding
amount of the Revolving Credit Loans (after giving effect to all amounts
requested) PLUS the Maximum Drawing Amount and all Unpaid Reimbursement
Obligations shall not at any time exceed the lesser of the Total Commitment and
the Borrowing Base, and PROVIDED FURTHER, that the Borrower shall not have the
right to request any Revolving Credit Loans hereunder unless the principal
amounts then outstanding under the UK Facility (including the maximum amount
available to be drawn under letters of credit and other collateral instruments
issued under such facility) are equal to or greater than (pound)2,000,000. The
Revolving Credit Loans shall be made PRO RATA in accordance with each Lender's
Commitment Percentage. Each request for a Revolving Credit Loan hereunder shall
constitute a representation and warranty by the Borrower that the conditions set
forth in SECTIONS 12 and 13 hereof, in the case of the initial Revolving Credit
Loans to be made on the Closing Date, and SECTION 13, in the case of all other
Revolving Credit Loans, have been satisfied on the date of such request.
2.2. COMMITMENT FEE. The Borrower agrees to pay to the Agent for the
accounts of the Lenders pro rata in accordance with each Lender's share of the
aggregate amount of Loans and Letters of Credit outstanding, a commitment fee
(the "COMMITMENT FEE") calculated at the rate of one-half of one percent (0.50%)
from the Closing Date through the first Performance Adjustment Date, and
thereafter the percentage determined pursuant to SECTION 6.11 hereof, on the
average daily amount, during each calendar quarter or portion thereof from the
Closing Date to the Maturity Date, by which (a) the Total Commitment MINUS (b)
the sum of the Maximum Drawing Amount and all Unpaid Reimbursement Obligations,
exceeds the outstanding amount of Revolving Credit Loans during such calendar
quarter. The commitment fee shall be payable quarterly in arrears on the first
day of each calendar quarter for the immediately preceding calendar quarter
commencing on the first such date following the date hereof, with a final
payment on the Maturity Date or any earlier date on which the Commitments shall
terminate.
2.3. REDUCTION OF REVOLVER COMMITMENT. The Borrower shall have the right,
at any time and from time to time upon five (5) Business Days written notice to
the Agent thereof, to reduce by $1,000,000 (or integral multiples thereof), or
to terminate entirely, the Total Commitment, whereupon the Commitments of the
Lenders shall be reduced PRO RATA in accordance with their respective Commitment
Percentages of the amount specified in such notice, or as the case may be,
terminated. Promptly after receiving any notice of the Borrower delivered
pursuant to this SECTION 2.3, the Agent will notify the Lenders of the substance
thereof. Upon the effective date of any such reduction or termination, the
Borrower shall pay to the
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Agent for the respective accounts of the Lenders the full amount of any
commitment fee then accrued on the amount of the reduction. No reduction or
termination of the Total Commitment may be reinstated.
2.4. THE REVOLVING CREDIT NOTES. The Revolving Credit Loans shall be
evidenced by separate promissory notes of the Borrower in substantially the form
of EXHIBIT C hereto (each a "REVOLVING CREDIT NOTE"), dated as of the Closing
Date and completed with appropriate insertions. One Revolving Credit Note shall
be payable to the order of each Lender in a principal amount equal to such
Lender's Commitment on the Closing Date or, if less, the outstanding amount of
all Revolving Credit Loans made by such Lender, PLUS interest accrued thereon,
as set forth below. The Borrower irrevocably authorizes each Lender to make or
cause to be made, at or about the time of the Drawdown Date of any Revolving
Credit Loan or at the time of receipt of any payment of principal on such
Lender's Revolving Credit Note, an appropriate notation on such Lender's
Revolving Credit Note Record reflecting the making of such Revolving Credit Loan
or (as the case may be) the receipt of such payment. The outstanding amount of
the Revolving Credit Loans set forth on such Lender's Revolving Credit Note
Record shall be PRIMA FACIE evidence of the principal amount thereof owing and
unpaid to such Lender, but the failure to record, or any error in so recording,
any such amount on such Lender's Revolving Credit Note Record shall not limit or
otherwise affect the obligations of the Borrower hereunder or under any
Revolving Credit Note to make payments of principal of or interest on any
Revolving Credit Note when due.
2.5. INTEREST ON REVOLVING CREDIT LOANS. Except as otherwise provided
in SECTION 6.12 hereof,
(a) Each Base Rate Loan shall bear interest for the period
commencing with the Drawdown Date thereof and ending on the last day of
the Interest Period with respect thereto at a rate equal to the Base Rate
PLUS the Base Rate Applicable Margin.
(b) Each Eurodollar Rate Loan shall bear interest for the period
commencing with the Drawdown Date thereof and ending on the last day of
the Interest Period with respect thereto at a rate equal to the Eurodollar
Rate PLUS the Eurodollar Applicable Margin.
The Borrower promises to pay interest on each Revolving Credit Loan in arrears
on each Interest Payment Date with respect thereto.
2.6. REQUESTS FOR REVOLVING CREDIT LOANS.
(a) The Borrower shall give to the Agent written notice in the form
of EXHIBIT D hereto (or telephonic notice confirmed in a writing in the
form of EXHIBIT D) of each Revolving Credit Loan requested hereunder
(each, a "LOAN
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REQUEST") no less than (a) one (1) Business Day prior to the proposed
Drawdown Date of any Base Rate Loan and (b) three (3) Eurodollar Business
Days prior to the proposed Drawdown Date of any Eurodollar Rate Loan. Each
such notice shall specify (i) the principal amount of the Revolving Credit
Loan requested, (ii) the proposed Drawdown Date of such Revolving Credit
Loan, (iii) the Interest Period for such Revolving Credit Loan and (iv)
the Type of such Revolving Credit Loan. Promptly upon receipt of any such
notice (but in any event on the same Business Day), the Agent shall notify
each of the Lenders thereof. Each Loan Request shall be irrevocable and
binding on the Borrower and shall obligate the Borrower to accept the
Revolving Credit Loan requested from the Lenders on the proposed Drawdown
Date. Each Loan Request shall be in a minimum aggregate amount of $500,000
or an integral multiple thereof.
(b) Notwithstanding the notice and minimum amount requirements set
forth in SECTION 2.6(A) above, but otherwise in accordance with the terms
and conditions of this Credit Agreement, the Agent may, in its sole
discretion and without conferring with the other Lenders, make Revolving
Credit Loans to the Borrower (i) by entry of credits to the Borrower's
operating account(s) (No(s). 522 84 061 (the "FNBB OPERATING ACCOUNTS")
with the Agent to cover checks or other charges which the Borrower has
drawn or made against such account(s) or (ii) in an amount as otherwise
requested by the Borrower. The Borrower hereby requests and authorizes the
Agent to make from time to time such Revolving Credit Loans by means of
appropriate entries of such credits sufficient to cover checks and other
charges then presented. The Borrower acknowledges and agrees that the
making of such Loans shall, in each case, be subject in all respects to
the provisions of this Credit Agreement as if they were Loans covered by a
Loan Request, including, without limitation, the limitations set forth in
SECTION 2.1 above and the requirements that the applicable provisions of
SECTION 12 (in the case of Loans made on the Closing Date) and SECTION 13
be satisfied. All actions taken by the Agent pursuant to the provisions of
this SECTION 2.6(B) shall be conclusive and binding on the Borrower absent
the Agent's gross negligence or willful misconduct. Loans made pursuant to
this SECTION 2.6(B) shall be Base Rate Loans until converted in accordance
with the provisions of the Credit Agreement and, prior to a Settlement,
interest thereon shall be for the account of the Agent.
2.7. CONVERSION OPTIONS.
2.7.1. CONVERSION TO DIFFERENT TYPE OF REVOLVING CREDIT Loan. The
Borrower may elect from time to time to convert any outstanding Revolving
Credit Loan to a Revolving Credit Loan of another Type, PROVIDED that (a)
with respect to any such conversion of a Eurodollar Rate Loan to a Base
Rate Loan, (i) such conversion shall only be made on the last day of the
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Interest Period with respect thereto and (ii) the Borrower shall give the
Agent at least one (1) Business Day prior written notice of such election;
and (b) with respect to any such conversion of a Base Rate Loan to a
Eurodollar Rate Loan, the Borrower shall give the Agent at least three (3)
Eurodollar Business Days prior written notice of such election and (c) no
Loan may be converted into a Eurodollar Rate Loan when any Default or
Event of Default has occurred and is continuing. On the date on which such
conversion is being made each Lender shall take such action as is
necessary to transfer its Commitment Percentage of such Revolving Credit
Loans to its Domestic Lending Office or its Eurodollar Lending Office, as
the case may be. All or any part of outstanding Revolving Credit Loans of
any Type may be converted into a Revolving Credit Loan of another Type as
provided herein; PROVIDED that any partial conversion shall be in an
aggregate principal amount of $500,000 or an integral multiple thereof.
Each Conversion Request relating to the conversion of a Base Rate Loan to
a Eurodollar Rate Loan shall be irrevocable by the Borrower.
2.7.2. CONTINUATION OF TYPE OF REVOLVING CREDIT LOAN. Any Revolving
Credit Loan of any Type may be continued as a Revolving Credit Loan of the
same Type upon the expiration of an Interest Period with respect thereto
by compliance by the Borrower with the notice provisions contained in
SECTION 2.7.1 above; PROVIDED that no Eurodollar Rate Loan may be
continued as such when any Default or Event of Default has occurred and is
continuing, but shall be automatically converted to a Base Rate Loan on
the last day of the first Interest Period relating thereto ending during
the continuance of such Default or Event of Default of which officers of
the Agent active in the Borrower's account have actual knowledge. In the
event that the Borrower fails to provide any such notice with respect to
the continuation of any Eurodollar Rate Loan as such, then such Eurodollar
Rate Loan shall be automatically converted to a Base Rate Loan on the last
day of the first Interest Period relating thereto. The Agent shall notify
the Lenders promptly when any such automatic conversion contemplated by
this SECTION 2.7 is scheduled to occur.
2.7.3. EURODOLLAR RATE LOANS. Any conversion to or from Eurodollar
Rate Loans shall be in such amounts and shall be made pursuant to such
elections so that, after giving effect thereto, the aggregate principal
amount of all Eurodollar Rate Loans having the same Interest Period shall
not be less than $1,000,000 or an integral multiple thereof. The Borrower
may not have more than four (4) Interest Periods relating to Eurodollar
Rate Loans at any time outstanding.
2.8. FUNDS FOR REVOLVING CREDIT LOAN.
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2.8.1. FUNDING PROCEDURES. Not later than 2:00 p.m.. (Boston,
Massachusetts time) on the proposed Drawdown Date of any Revolving Credit
Loans, each of the Lenders will make available to the Agent, at its Head
Office, in immediately available funds, the amount of such Lender's
Commitment Percentage of the amount of the requested Revolving Credit
Loans. Upon receipt from each Lender of such amount, and upon receipt of
the documents required by SECTIONS 12 and 13 hereof and the satisfaction
of the other conditions set forth therein, to the extent applicable, the
Agent will make available to the Borrower the aggregate amount of such
Revolving Credit Loans made available to the Agent by the Lenders. The
failure or refusal of any Lender to make available to the Agent at the
aforesaid time and place on any Drawdown Date the amount of its Commitment
Percentage of the requested Revolving Credit Loans shall not relieve any
other Lender from its several obligation hereunder to make available to
the Agent the amount of such other Lender's Commitment Percentage of any
requested Revolving Credit Loans.
2.8.2. SETTLEMENTS. On each Settlement Date, the Agent shall, not
later than 11:00 a.m. (Boston, Massachusetts time), give telephonic or
facsimile notice (a) to the Lenders and the Borrower of the respective
outstanding amount of Loans made by the Agent on behalf of the Lenders
from the immediately preceding Settlement Date through the close of
business on the prior day and the amount of any Eurodollar Rate Loans to
be made on such date pursuant to a Loan Request, and (b) to the Lenders of
the amount (a "SETTLEMENT AMOUNT") that each Lender shall pay to effect a
Settlement of any Loan. A statement of the Agent submitted to the Lenders
and the Borrower or to the Lenders (as the case may be), with respect to
any amounts owing under this SECTION 2.8.2 shall be PRIMA FACIE evidence
of the amount due and owing. Each Lender shall, not later than 3:00 p.m.
(Boston, Massachusetts time) on such Settlement Date, effect a wire
transfer of immediately available funds to the Agent in the amount of the
Settlement Amount. All funds advanced by any Lender pursuant to this
SECTION 2.8.2 shall for all purposes be treated as a Loan made by such
Lender to the Borrower and all funds received by any Lender pursuant to
this SECTION 2.8.2 shall for all purposes be treated as repayment of
amounts owed with respect to Loans made by such Lender. In the event that
any bankruptcy, reorganization, liquidation, receivership or similar cases
or proceedings in which the Borrower is a debtor prevent a Lender from
making any Loan to effect a Settlement as contemplated hereby, such Lender
will make such disposition and arrangements with the other Lenders with
respect to such Loans, either by way of purchase of participations,
distribution, PRO TANTO assignment of claims, subrogation or otherwise as
shall result in each Lender's share of the outstanding Revolving Credit
Loans being equal, as nearly as may be, to such Lender's Commitment
Percentage of the outstanding amount of the Revolving Credit Loans. The
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failure or refusal of any Lender to make available to the Agent at the
aforesaid time and place on any Settlement Date the amount of its
Settlement Amount (a) shall not relieve any other Lender from its several
obligations hereunder to make available to the Agent the amount of such
other Lender's Settlement Amount and (b) shall not impose upon such other
Lender any liability with respect to such failure or refusal or otherwise
increase the commitment of such other Lender.
2.8.3. ADVANCES BY AGENT. The Agent may, unless notified to the
contrary by any Lender prior to a Drawdown Date or Settlement Date (as the
case may be), assume that such Lender has made or will make available to
the Agent on such date the amount of such Lender's Commitment Percentage
of the Revolving Credit Loans to be made on such Drawdown Date or
Settlement Amount (as the case may be), and the Agent may (but it shall
not be required to), in reliance upon such assumption, make available to
the Borrower a corresponding amount. If any Lender makes available to the
Agent its Commitment Percentage of the Revolving Credit Loans on a date
after such Drawdown Date, or its Settlement Amount on a date after such
Settlement Date, such Lender shall pay to the Agent on demand an amount
equal to the product of (a) the average computed for the period referred
to in clause (c) below, of the weighted average interest rate paid by the
Agent for federal funds acquired by the Agent during each day included in
such period, times (b) the amount of such Lender's (i) Commitment
Percentage of such Revolving Credit Loans or (ii) Settlement Amount (as
the case may be), times (c) a fraction, the numerator of which is the
number of days that elapse from and including such Drawdown Date or
Settlement Date (as the case may be) to the date on which the amount of
such Lender's (i) Commitment Percentage of such Revolving Credit Loans or
(ii) Settlement Amount (as the case may be) shall become immediately
available to the Agent, and the denominator of which is 360. A statement
of the Agent submitted to such Lender with respect to any amounts owing
under this paragraph shall be PRIMA FACIE evidence of the amount due and
owing to the Agent by such Lender. If such amount is not made available to
the Agent by such Lender within three (3) Business Days following such
Drawdown Date or Settlement Date (as the case may be), the Agent shall be
entitled to recover such amount from the Borrower on demand, with interest
thereon at the rate per annum applicable to the Revolving Credit Loans (x)
made on such Drawdown Date or (y) as of such Settlement Date (as the case
may be), but in no event shall the Borrower be responsible for payment of
any amounts, costs, or other expenses under SECTION 6.10 hereof incurred
by or allocable to the Lender who failed to make available to the Agent
any amounts required under this SECTION 2.8.
2.9. CHANGE IN BORROWING BASE. The Borrowing Base shall be determined
monthly (or at such other interval as may be specified pursuant to SECTION
9.4(E)
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hereof) by the Agent by reference to the Borrowing Base Report. Notwithstanding
any provision of this Agreement to the contrary, if at any time the Borrowing
Base is reduced due to the exercise by the Agent of its discretion pursuant to
CLAUSE (C) of the definition of "Eligible Accounts Receivable or CLAUSE (E) of
the definition of "Eligible Inventory" (collectively, the "DISCRETIONARY
CLAUSES"), and, as a result thereof, the sum of any outstanding Revolving Credit
Loans, the Maximum Drawing Amount and all Unpaid Reimbursement Obligations
exceeds the Borrowing Base, the Borrower shall not be required to repay the
Loans for a period of thirty (30) days to the extent, and only to the extent, of
the amount by which the Borrowing Base is so reduced by the Agent pursuant to
the Discretionary Clauses.
3. REPAYMENT OF THE REVOLVING CREDIT LOANS.
3.1. MATURITY. The Borrower promises to pay on the Maturity Date, and
there shall become absolutely due and payable on the Maturity Date, all of the
Revolving Credit Loans outstanding on such date, together with any and all
accrued and unpaid interest thereon.
3.2. MANDATORY REPAYMENTS OF REVOLVING CREDIT LOANS. If at any time the
sum of the outstanding amount of the Revolving Credit Loans, the Maximum Drawing
Amount and all Unpaid Reimbursement Obligations exceeds the lesser of (a) the
Total Commitment and (b) the Borrowing Base, then, subject to SECTION 2.9 above,
the Borrower shall immediately pay the amount of such excess to the Agent for
the respective accounts of the Lenders for application: first, to any Unpaid
Reimbursement Obligations; second, to the Revolving Credit Loans; and third, to
provide to the Agent cash collateral for Reimbursement Obligations as
contemplated by SECTIONS 5.2(B) and (C) hereof. Each payment of any Unpaid
Reimbursement Obligations or prepayment of Revolving Credit Loans shall be
allocated among the Lenders, in proportion, as nearly as practicable, to each
Reimbursement Obligation or (as the case may be) the respective unpaid principal
amount of each Lender's Revolving Credit Note, with adjustments to the extent
practicable to equalize any prior payments or repayments not exactly in
proportion.
3.3. OPTIONAL REPAYMENTS OF REVOLVING CREDIT LOANS.
(a) The Borrower shall have the right, at its election, to repay the
outstanding amount of the Revolving Credit Loans, as a whole or in part,
at any time without penalty or premium; PROVIDED that any full or partial
prepayment of the outstanding amount of any Eurodollar Rate Loans pursuant
to this SECTION 3.3 may be made only on the last day of the Interest
Period relating thereto. The Borrower shall give the Agent, no later than
10:00 a.m. (Boston, Massachusetts time), at least two (2) Business Days
prior written notice of any proposed prepayment pursuant to this SECTION
3.3 of Base Rate Loans and three (3) Eurodollar Business Days notice of
any proposed prepayment pursuant to this SECTION 3.3 of Eurodollar Rate
Loans, in each
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case specifying the proposed date of prepayment and the principal amount
to be prepaid. Each such partial prepayment of the Revolving Credit Loans
shall be in an integral multiple of $500,000, shall be accompanied by the
payment of accrued interest on the principal prepaid to the date of
prepayment and shall be applied, in the absence of instruction by the
Borrower, first to the principal of Base Rate Loans and then to the
principal of Eurodollar Rate Loans. Each partial prepayment shall be
allocated among the Lenders, in proportion, as nearly as practicable, to
the respective unpaid principal amount of each Lender's Revolving Credit
Note, with adjustments to the extent practicable to equalize any prior
repayments not exactly in proportion.
(b) Notwithstanding the notice and minimum amount requirements set
forth in SECTION 3.3(A) above, subject to Settlement, the Agent may in its
sole discretion allow the Borrower to repay Revolving Credit Loans made by
the Agent on a daily basis.
4. THE TERM LOAN.
4.1. COMMITMENT TO LEND. Subject to the terms and conditions set forth in
this Credit Agreement, each Lender agrees to lend to the Borrower on the Closing
Date the amount of its Commitment Percentage of the Term Loan, which such amount
shall not exceed in aggregate for all the Lenders collectively, $20,000,000.
4.2. THE TERM NOTES. The Term Loan shall be evidenced by separate
promissory notes of the Borrower in substantially the form of EXHIBIT E hereto
(each a "TERM NOTE"), dated the Closing Date and completed with appropriate
insertions. One Term Note shall be payable to the order of each Lender in a
principal amount equal to such Lender's Commitment Percentage of the Term Loan
on the Closing Date and representing the obligation of the Borrower to pay to
such Lender such principal amount or, if less, the outstanding amount of such
Lender's Commitment Percentage of the Term Loan, PLUS interest accrued thereon,
as set forth below. The Borrower irrevocably authorizes each Lender to make or
cause to be made a notation on such Lender's Term Note Record reflecting the
original principal amount of such Lender's Commitment Percentage of the Term
Loan and, at or about the time of such Lender's receipt of any principal payment
on such Lender's Term Note, an appropriate notation on such Lender's Term Note
Record reflecting such payment. The aggregate unpaid amount set forth on such
Lender's Term Note Record shall be PRIMA FACIE evidence of the principal amount
thereof owing and unpaid to such Lender, but the failure to record, or any error
in so recording, any such amount on such Lender's Term Note Record shall not
affect the obligations of the Borrower hereunder or under any Term Note to make
payments of principal of and interest on any Term Note when due.
4.3. MANDATORY PAYMENTS.
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4.3.1. SCHEDULE OF INSTALLMENT PAYMENTS OF PRINCIPAL OF TERM LOAN.
The Borrower promises to pay to the Agent for the account of the Lenders
the principal amount of the Term Loan in twenty-three (23) consecutive
installments, due and payable in arrears on the last day of each calendar
quarter of each calendar year as set forth in the table below, commencing
on September 30, 1997, with a final payment on the Maturity Date in an
amount equal to the unpaid balance of the Term Loan.
-------------------------------------------------------------------
YEAR QUARTERLY AMOUNT ANNUAL AMOUNT
-------------------------------------------------------------------
One $ 500,000 $ 2,000,000
-------------------------------------------------------------------
Two $ 625,000 $ 2,500,000
-------------------------------------------------------------------
Three $ 750,000 $ 3,000,000
-------------------------------------------------------------------
Four $ 875,000 $ 3,500,000
-------------------------------------------------------------------
Five $1,000,000 $ 4,000,000
-------------------------------------------------------------------
Six $1,250,000 $ 5,000,000
-------------------------------------------------------------------
TOTAL $20,000,000
-------------------------------------------------------------------
4.3.2. PAYMENTS FROM EXCESS CASH FLOW. Within thirty (30) days after
the Agent's receipt of the audited financial statements delivered pursuant
to SECTION 9.4(A) hereof, the Borrower shall prepay the Term Loan in an
aggregate principal amount equal to (a) if the Funded Debt Ratio as at the
last day of the most recently ended fiscal year is less than 3.00:1.00,
fifty percent (50%) of Consolidated Excess Cash Flow for such fiscal year;
and (b) if the Funded Debt Ratio equals or exceeds 3.00:1.00, seventy-five
percent (75%) of Consolidated Excess Cash Flow for such fiscal year, LESS,
in each case, the amount of any prepayments of the Term Loan made during
such fiscal year by the Borrower pursuant to SECTION 4.4 below.
4.3.3. PAYMENTS FROM NET PROCEEDS. The Borrower shall prepay the
Term Loan as follows:
(a) no later than five (5) days following the issuance of equity
securities or debt by the Borrower or any of the North American
Subsidiaries (to the extent permitted by this Credit Agreement), other
than sales of equity securities to directors, officers or employees of the
Borrower or any of its North American Subsidiaries to the extent the
aggregate proceeds thereof in any fiscal year do not exceed $200,000, the
Borrower shall prepay the Term Loan by an amount equal to 100% of the cash
proceeds received by the Borrower from the issuance of such equity
securities or debt; and
(b) no later than five (5) days after any sale or other disposition
of all or any material assets of the Borrower or of any of the North
American Subsidiaries (to the extent permitted by SECTION 10.5.2 hereof),
other than (i)
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sales in the ordinary course of business and consistent with the past
practices of the Target Companies, of (A) inventory and (B) Rental
Equipment and/or Rental Inventory and (ii) sales or dispositions of assets
which do not exceed $250,000 in any fiscal year of the Borrower, the
Borrower shall prepay the Term Loan by an amount equal to 100% of the cash
proceeds from such sale or disposition.
4.3.4. UK FACILITY. The Borrower shall prepay the Term Loan in full
if at any time the aggregate principal amount outstanding under the UK
Facility (including the maximum amount available to be drawn under letters
of credit and other collateral instruments issued under such facility) is
less than (pound)2,000,000.
4.3.5. ALLOCATION OF MANDATORY PREPAYMENTS. Each mandatory
prepayment required under this SECTION 4.3 shall be applied to reduce the
principal amounts of the Term Loan outstanding on the date of such
prepayment and shall be allocated among the Lenders in proportion, as
nearly as practicable, to the respective aggregate outstanding amounts of
each Lender's Term Note with adjustments to the extent practicable to
equalize any prior prepayments not exactly in proportion. Any prepayment
of principal of the Term Loan shall include all interest accrued to the
date of such prepayment and all principal amounts prepaid shall be applied
against the scheduled installments of principal due on the Term Loan in
the inverse order of maturity.
4.4. OPTIONAL PREPAYMENT OF TERM LOAN. The Borrower shall have the right
at any time to prepay the Term Loan on or before the Maturity Date, as a whole
or in part, upon not less than five (5) Business Days prior written notice to
the Agent; PROVIDED that (a) each partial prepayment shall be in the principal
amount of $500,000, or an integral multiple thereof, (b) no portion of the Term
Loan bearing interest at the Eurodollar Rate may be prepaid pursuant to this
SECTION 4.4 other than on the last day of the Interest Period relating thereto,
and (c) each partial prepayment shall be allocated among the Lenders, in
proportion, as nearly as practicable, to the respective outstanding amount of
each Lender's Term Note, with adjustments, to the extent practicable, to
equalize any prior prepayments not exactly in proportion. Any prepayment of
principal of the Term Loan shall be applied against the scheduled installments
of principal due on the Term Loan in the inverse order of maturity. No amount
repaid with respect to the Term Loan may be reborrowed.
4.5. CONVERSION OPTIONS. After the Term Loan has been made, the provisions
of SECTION 2.7 hereof shall apply MUTATIS MUTANDIS with respect to all or any
portion of the Term Loan so that the Borrower may have the same interest rate
options with respect to all or any portion of the Term Loan as it would be
entitled to with respect to the Revolving Credit Loans.
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4.6. INTEREST ON TERM LOAN.
4.6.1. INTEREST RATES. Except as otherwise provided in SECTION 6.12
hereof, the Term Loan shall bear interest during each Interest Period
relating to all or any portion of the Term Loan at the following rates:
(a) To the extent that all or any portion of the Term Loan
bears interest during such Interest Period at the Base Rate, the
Term Loan or such portion shall bear interest during such Interest
Period at a rate equal to the Base Rate PLUS the Base Rate
Applicable Margin.
(b) To the extent that all or any portion of the Term Loan
bears interest during such Interest Period at the Eurodollar Rate,
the Term Loan or such portion shall bear interest during such
Interest Period at a rate equal to the Eurodollar Rate PLUS the
Eurodollar Applicable Margin.
The Borrower promises to pay interest on the Term Loan or any portion
thereof outstanding during each Interest Period in arrears on each
Interest Payment Date applicable to such Interest Period.
4.6.2. NOTIFICATION BY BORROWER. The Borrower shall notify the
Agent, such notice to be irrevocable, at least four (4) Eurodollar
Business Days prior to the Drawdown Date of the Term Loan if all or any
portion of the Term Loan is to bear interest at the Eurodollar Rate.
4.6.3. AMOUNTS, ETC. Any portion of the Term Loan bearing interest
at the Eurodollar Rate relating to any Interest Period shall be in the
amount of $1,000,000 or an integral multiple thereof. No Interest Period
relating to the Term Loan or any portion thereof bearing interest at the
Eurodollar Rate shall extend beyond the date on which a regularly
scheduled installment payment of the principal of the Term Loan is to be
made unless a portion of the Term Loan at least equal to such installment
payment has an Interest Period ending on such date or is then bearing
interest at the Base Rate.
5. LETTERS OF CREDIT.
5.1. LETTER OF CREDIT COMMITMENTS.
5.1.1. COMMITMENT TO ISSUE LETTERS OF CREDIT. Subject to the terms
and conditions hereof and the execution and delivery by the Borrower of a
letter of credit application on the Agent's customary form (a "LETTER OF
CREDIT APPLICATION"), the Agent on behalf of the Lenders and in reliance
upon the
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agreement of the Lenders set forth in SECTION 5.1.4 below and upon the
representations and warranties of the Borrower contained herein, agrees to
issue, extend and renew for the account of the Borrower one or more
standby or documentary letters of credit (individually, each a "LETTER OF
CREDIT"), in such form as may be requested from time to time by the
Borrower and agreed to by the Agent; PROVIDED, HOWEVER, that, after giving
effect to such request, (a) the sum of the aggregate Maximum Drawing
Amount and all Unpaid Reimbursement Obligations shall not exceed
$9,000,000 at any one time, (b) the sum of (i) the Maximum Drawing Amount
on all Letters of Credit, (ii) all Unpaid Reimbursement Obligations, and
(iii) the amount of all Revolving Credit Loans outstanding shall not
exceed the lesser of (A) the Total Commitment and (B) the Borrowing Base
and (c) the principal amounts outstanding under the UK Facility (including
the maximum amount available to be drawn under letters of credit and other
collateral instruments issued under such facility) shall equal or exceed
(pound)2,000,000.
5.1.2. LETTER OF CREDIT APPLICATIONS. Each Letter of Credit
Application shall be completed to the satisfaction of the Agent. In the
event that any provision of any Letter of Credit Application shall be
inconsistent with any provision of this Credit Agreement, then the
provisions of this Credit Agreement shall, to the extent of any such
inconsistency, govern.
5.1.3. TERMS OF LETTERS OF CREDIT. Each Letter of Credit issued,
extended or renewed hereunder shall, among other things, (a) provide for
the payment of sight drafts for honor thereunder when presented in
accordance with the terms thereof and when accompanied by the documents
described therein, and (b) have an expiration date no later than the date
which is fourteen (14) days (or, if the Letter of Credit is confirmed by a
confirmer or otherwise provides for one or more nominated persons,
forty-five (45) days) prior to the Maturity Date. Each Letter of Credit so
issued, extended or renewed shall be subject to the Uniform Customs.
5.1.4. REIMBURSEMENT OBLIGATIONS OF LENDERS. Each Lender severally
agrees that it shall be absolutely liable, without regard to the
occurrence of any Default or Event of Default or any other condition
precedent whatsoever, to the extent of such Lender's Commitment Percentage
of all Letters of Credit issued, extended or renewed and all Unpaid
Reimbursement Obligations, to reimburse the Agent on demand for the amount
of each draft paid by the Agent under each Letter of Credit to the extent
that such amount is not reimbursed by the Borrower pursuant to SECTION 5.2
below (such agreement for a Lender being called herein the "LETTER OF
CREDIT PARTICIPATION" of such Lender).
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5.1.5. PARTICIPATIONS OF LENDERS. Each such payment made by a Lender
shall be treated as the purchase by such Lender of a participating
interest in the Borrower's Reimbursement Obligation under SECTION 5.2
below in an amount equal to such payment. Each Lender shall share in
accordance with its participating interest in any interest which accrues
pursuant to SECTION 5.2.
5.2. REIMBURSEMENT OBLIGATION OF THE BORROWER. In order to induce the
Agent to issue, extend and renew each Letter of Credit and the Lenders to
participate therein, the Borrower hereby agrees to reimburse or pay to the
Agent, for the account of the Agent or (as the case may be) the Lenders, with
respect to each Letter of Credit issued, extended or renewed by the Agent
hereunder,
(a) except as otherwise expressly provided in SECTIONS 5.2(B) and
(C) below, on each date that any draft presented under such Letter of
Credit is honored by the Agent, or the Agent otherwise makes a payment
with respect thereto, (i) the amount paid by the Agent under or with
respect to such Letter of Credit, and (ii) the amount of any taxes, fees,
charges or other costs and expenses whatsoever incurred by the Agent or
any Lender in connection with any payment made by the Agent or any Lender
under, or with respect to, such Letter of Credit,
(b) upon the reduction (but not termination) of the Total Commitment
to an amount less than the Maximum Drawing Amount, an amount equal to such
difference, which amount shall be held by the Agent for the benefit of the
Lenders and the Agent as cash collateral for all Reimbursement
Obligations, and
(c) upon the termination of the Total Commitment, or the
acceleration of the Reimbursement Obligations with respect to all Letters
of Credit in accordance with SECTION 14 hereof, an amount equal to the
then Maximum Drawing Amount on all Letters of Credit, which amount shall
be held by the Agent for the benefit of the Lenders and the Agent as cash
collateral for all Reimbursement Obligations.
Each such payment shall be made to the Agent at the Agent's Head Office in
immediately available funds. Interest on any and all amounts remaining unpaid by
the Borrower under this SECTION 5.2, at any time from the date such amounts
become due and payable (whether as stated in this SECTION 5.2, by acceleration
or otherwise) until payment in full (whether before or after judgment), shall be
payable to the Agent on demand at the rate specified in SECTION 6.12.1 hereof
for overdue principal on the Revolving Credit Loans.
5.3. LETTER OF CREDIT PAYMENTS. If any draft shall be presented or other
demand for payment shall be made under any Letter of Credit, the Agent shall
notify
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the Borrower of the date and amount of the draft presented or of the demand for
payment made and of the date and time when it expects to pay such draft or honor
such demand for payment. If the Borrower fails to reimburse the Agent as
provided in SECTION 5.2 above on or before the date that such draft is paid or
other payment is made by the Agent, the Agent may at any time thereafter notify
the Lenders of the amount of any such Unpaid Reimbursement Obligation. No later
than 3:00 p.m. (Boston, Massachusetts time) on the Business Day next following
the receipt of such notice, each Lender shall make available to the Agent, at
its Head Office, in immediately available funds, such Lender's Commitment
Percentage of such Unpaid Reimbursement Obligation, together with an amount
equal to the product of (a) the average, computed for the period referred to in
clause (c) below, of the weighted average interest rate paid by the Agent for
federal funds acquired by the Agent during each day included in such period,
times (b) the amount equal to such Lender's Commitment Percentage of such Unpaid
Reimbursement Obligation, times (c) a fraction, the numerator of which is the
number of days that elapse from and including the date the Agent paid the draft
presented for honor or otherwise made payment to the date on which such Lender's
Commitment Percentage of such Unpaid Reimbursement obligation shall become
immediately available to the Agent, and the denominator of which is 360. The
responsibility of the Agent to the Borrower and the Lenders shall be only to
determine that the documents (including each draft) delivered under each Letter
of Credit in connection with such presentment shall be in conformity in all
material respects with such Letter of Credit.
5.4. OBLIGATIONS ABSOLUTE. The Borrower's obligations under this SECTION 5
shall be absolute and unconditional under any and all circumstances and
irrespective of the occurrence of any Default or Event of Default or any
condition precedent whatsoever or any setoff, counterclaim or defense to payment
which the Borrower may have or have had against the Agent, any Lender or any
beneficiary of a Letter of Credit. The Borrower further agrees with the Agent
and the Lenders that the Agent and the Lenders shall not be responsible for, and
the Borrower's Reimbursement Obligations under SECTION 5.2 above shall not be
affected by, among other things, the validity or genuineness of documents or of
any endorsements thereon, even if such documents should in fact prove to be in
any or all respects invalid, fraudulent or forged, or any dispute between or
among the Borrower, the beneficiary of any Letter of Credit or any financing
institution or other party to which any Letter of Credit may be transferred or
any claims or defenses whatsoever of the Borrower against the beneficiary of any
Letter of Credit or any such transferee. The Agent and the Lenders shall not be
liable for any error, omission, interruption or delay in transmission, dispatch
or delivery of any message or advice, however transmitted, in connection with
any Letter of Credit. The Borrower agrees that any action taken or omitted by
the Agent or any Lender under or in connection with each Letter of Credit and
the related drafts and documents, if done in good faith, shall be binding upon
the Borrower and shall not result in any liability on the part of the Agent or
any Lender.
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5.5 RELIANCE BY ISSUER. To the extent not inconsistent with SECTION 5.4
above, the Agent shall be entitled to rely, and shall be fully protected in
relying upon, (a) any Letter of Credit, draft, writing, resolution, notice,
consent, certificate, affidavit, letter, cablegram, telegram, telecopy, telex or
teletype message, statement, order or other document believed by it to be
genuine and correct and to have been signed, sent or made by the proper Person
or Persons, and (b) any advice and statements of legal counsel, independent
accountants and other experts selected by the Agent with due care. The Agent
shall be fully justified in failing or refusing to take any action under this
Agreement unless it shall first have received such advice or concurrence of the
Majority Lenders as it reasonably deems appropriate or it shall first be
indemnified to its reasonable satisfaction by the Lenders against any and all
liability and expense which may be incurred by it by reason of taking or
continuing to take any such action. The Agent shall in all cases be fully
protected in acting, or in refraining from acting, under this Agreement in
accordance with a request of the Majority Lenders, and such request and any
action taken or failure to act pursuant thereto shall be binding upon the
Lenders and all future holders of the Revolving Credit Notes or of a Letter of
Credit Participation.
5.6. LETTER OF CREDIT FEE. The Borrower shall, on the date of issuance or
of any extension or renewal of any Letter of Credit and at such other time or
times as such charges are customarily made by the Agent, pay a fee (in each
case, a "LETTER OF CREDIT FEE") to the Agent in an amount equal to the sum of
(a) the product of, (i) in respect of each standby Letter of Credit, the
Eurodollar Applicable Margin TIMES the average daily aggregate amount available
to be drawn under such Letter of Credit during such period, and (ii) in respect
of each documentary Letter of Credit, the Eurodollar Applicable Margin TIMES the
face amount of such documentary Letter of Credit, times a fraction, the
numerator of which is the number of days between the issuance date of the
documentary Letter of Credit, inclusive, and the expiration date thereof,
inclusive, and the denominator is 365, PLUS (b) the Agent's customary issuance,
amendment, negotiation, document examination and other administrative processing
fees; with a portion of each such Letter of Credit Fee equal to one-eighth
percent (0.125%) per annum of the face amount of each applicable Letter of
Credit (and such issuance, amendment, negotiation, document examination and
other administrative processing fees) to be for the Agent's own account, and
with the remainder of each such Letter of Credit Fee (but not such issuance,
amendment, negotiation, document examination or other administrative processing
fees) to be for the accounts of the Lenders in accordance with their respective
Commitment Percentages.
6. CERTAIN GENERAL PROVISIONS.
6.1. CLOSING FEE. The Borrower agrees to pay to the Agent on the Closing
Date, a closing fee in the amount set forth in that certain Letter Agreement,
dated as of the date hereof, between the Agent and the Borrower (the "FEE
LETTER").
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6.2. AGENT'S FEE. The Borrower shall pay to the Agent annually in advance,
for the Agent's own account, the Agent's Fee as required by the Fee Letter.
6.3. FUNDS FOR PAYMENTS.
6.3.1. PAYMENTS TO AGENT. All payments of principal, interest,
Reimbursement Obligations, commitment fees, Letter of Credit Fees and any
other amounts due hereunder or under any of the other U.S. Loan Documents
shall be made to the Agent, for the respective accounts of the Lenders and
the Agent (as the case may be), at the Agent's Head Office or at such
other location in the Boston, Massachusetts area that the Agent may from
time to time designate, in each case in immediately available funds.
6.3.2. NO OFFSET, ETC. All payments by the Borrower hereunder and
under any of the other Loan Documents shall be made without setoff or
counterclaim and free and clear of and without deduction for any taxes,
levies, imposts, duties, charges, fees, deductions, withholdings,
compulsory loans, restrictions or conditions of any nature now or
hereafter imposed or levied by any jurisdiction or any political
subdivision thereof or taxing or other authority therein unless the
Borrower is compelled by law to make such deduction or withholding. If any
such obligation is imposed upon the Borrower with respect to any amount
payable by it hereunder or under any of the other U.S. Loan Documents, the
Borrower will pay to the Agent, for the account of the Lenders or (as the
case may be) the Agent, on the date on which such amount is due and
payable hereunder or under such other U.S. Loan Document, such additional
amount in Dollars as shall be necessary to enable the Lenders or the Agent
to receive the same net amount which the Lenders or the Agent would have
received on such due date had no such obligation been imposed upon the
Borrower. The Borrower will deliver promptly to the Agent certificates or
other valid vouchers for all taxes or other charges deducted from or paid
with respect to payments made by the Borrower hereunder or under such
other Loan Document.
6.4. COMPUTATIONS. All computations of interest on the Loans and of
commitment fees, Letter of Credit Fees or other fees shall, unless otherwise
expressly provided herein, be based on a 360-day year and paid for the actual
number of days elapsed. Except as otherwise provided in the definition of the
term "Interest Period" with respect to Eurodollar Rate Loans, whenever a payment
hereunder or under any of the other Loan Documents becomes due on a day that is
not a Business Day, the due date for such payment shall be extended to the next
succeeding Business Day, and interest shall accrue during such extension. The
outstanding amount of the Loans as reflected on the Revolving Credit Note
Records and the Term Note Records from time to time shall be considered correct
and binding on the Borrower unless within five (5) Business Days after receipt
of any notice by the Agent or any of the
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Lenders of such outstanding amount, the Agent or such Lender shall notify the
Borrower to the contrary.
6.5. INABILITY TO DETERMINE EURODOLLAR RATE. In the event, prior to the
commencement of any Interest Period relating to any Eurodollar Rate Loan, the
Agent shall determine that adequate and reasonable methods do not exist for
ascertaining the Eurodollar Rate that would otherwise determine the rate of
interest to be applicable to a Eurodollar Rate Loan during such Interest Period,
the Agent shall forthwith give notice of such determination (which shall be
conclusive and binding on the Borrower and the Lenders) to the Borrower and the
Lenders. In such event (a) any Loan Request or Conversion Request with respect
to Eurodollar Rate Loans shall be automatically withdrawn and, shall be deemed a
request for Base Rate Loans, (b) each Eurodollar Rate Loan will automatically,
on the last day of the then current Interest Period relating thereto, become a
Base Rate Loan, and (c) the obligations of the Lenders to make Eurodollar Rate
Loans shall be suspended until the Agent determines that the circumstances
giving rise to such suspension no longer exist, whereupon the Agent shall so
notify the Borrower and the Lenders.
6.6. ILLEGALITY. Notwithstanding any other provisions herein, if any
change in present or future law, regulation, treaty or directive or in the
interpretation or application thereof shall make it unlawful for any Lender to
make or maintain Eurodollar Rate Loans, such Lender shall forthwith give notice
of such circumstances to the Borrower and the other Lenders and thereupon (a)
the commitment of such Lender to make Eurodollar Rate Loans or convert Base Rate
Loans to Eurodollar Rate Loans shall forthwith be suspended and (b) such
Lender's Revolving Credit Loans then outstanding as Eurodollar Rate Loans, if
any, shall be converted automatically to Base Rate Loans on the last day of each
Interest Period applicable to such Eurodollar Rate Loans or within such earlier
period as may be required by law. The Borrower hereby agrees promptly to pay the
Agent for the account of such Lender, upon demand by such Lender, any additional
amounts necessary to compensate such Lender for any costs incurred by such
Lender in making any conversion in accordance with this SECTION 6.6, including
any interest or fees payable by such Lender to lenders of funds obtained by it
in order to make or maintain its Eurodollar Rate Loans hereunder.
6.7. ADDITIONAL COSTS, ETC. If any change in present or any future
applicable law, which expression, as used herein, includes statutes, rules and
regulations thereunder and interpretations thereof by any competent court or by
any governmental or other regulatory body or official charged with the
administration or the interpretation thereof and requests, directives,
instructions and notices at any time or from time to time hereafter made upon or
otherwise issued to any Lender or to the Agent by any central bank or other
fiscal, monetary or other authority (whether or not having the force of law),
shall:
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(a) subject any Lender or the Agent to any tax, levy, impost, duty,
charge, fee, deduction or withholding of any nature with respect to this
Credit Agreement, the other U.S. Loan Documents, any Letters of Credit,
such Lender's Commitment or the Loans (other than taxes based upon or
measured by the income or profits of such Lender or the Agent), or
(b) materially change the basis of taxation (except for changes in
taxes on income or profits) of payments to any Lender of the principal of
or the interest on any Loans or any other amounts payable to any Lender or
the Agent under this Credit Agreement or any of the other U.S Loan
Documents, or
(c) impose or increase or render applicable (other than to the
extent specifically provided for elsewhere in this Credit Agreement) any
special deposit, reserve, assessment, liquidity, capital adequacy or other
similar requirements (whether or not having the force of law) against
assets held by, or deposits in or for the account of, or loans by, or
letters of credit issued by, or commitments of an office of any Lender, or
(d) impose on any Lender or the Agent any other conditions or
requirements with respect to this Credit Agreement, the other U.S. Loan
Documents, any Letters of Credit, the Loans, such Lender's Commitment, or
any class of loans, letters of credit or commitments of which any of the
Loans or such Lender's Commitment forms a part, and the result of any of
the foregoing is;
(i) to increase the cost to any Lender of making, funding,
issuing, renewing, extending or maintaining any of the Loans or such
Lender's Commitment or any Letter of Credit, or
(ii) to reduce the amount of principal, interest,
Reimbursement Obligation or other amount payable to such Lender or
to the Agent hereunder on account of such Lender's Commitment, any
Letter of Credit or any of the Loans, or
(iii) to require such Lender or the Agent to make any payment
or to forego any interest or Reimbursement Obligation or other sum
payable hereunder, the amount of which payment or foregone interest
or Reimbursement Obligation or other sum is calculated by reference
to the gross amount of any sum receivable or deemed received by such
Lender or the Agent from the Borrower hereunder,
then, and in each such case, the Borrower will, upon demand made by such Lender
or (as the case may be) the Agent, at any time and from time to time and as
often as the occasion therefor may arise, pay to such Lender or the Agent such
additional amounts
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as will be sufficient to compensate such Lender or the Agent for such additional
cost, reduction, payment or foregone interest or Reimbursement Obligation or
other sum.
6.8. CAPITAL ADEQUACY. If after the date hereof any Lender or the Agent
determines that (a) the adoption of or change in any law, governmental rule,
regulation, policy, guideline or directive (whether or not having the force of
law) regarding capital requirements for lenders or lender holding companies or
any change in the interpretation or application thereof by a court or
governmental authority with appropriate jurisdiction, or (b) compliance by such
Lender or the Agent or any corporation controlling such Lender or the Agent with
any change in law, governmental rule, regulation, policy, guideline or directive
(whether or not having the force of law) of any such entity regarding capital
adequacy, has the effect of reducing the return on such Lender's or the Agent's
commitment with respect to any Loans to a level below that which such Lender or
the Agent could have achieved but for such adoption, change or compliance
(taking into consideration such Lender's or the Agent's then existing policies
with respect to capital adequacy and assuming full utilization of such entity's
capital) by any amount deemed by such Lender or (as the case may be) the Agent
to be material, then such Lender or the Agent may notify the Borrower of such
fact. To the extent that the amount of such reduction in the return on capital
is not reflected in the Base Rate, the Borrower agrees to pay such Lender or (as
the case may be) the Agent for the amount of such reduction in the return on
capital as and when such reduction is determined upon presentation by such
Lender or (as the case may be) the Agent of a certificate in accordance with
SECTION 6.9 hereof. Each Lender shall allocate such cost increases among its
customers in good faith and on an equitable basis.
6.9. CERTIFICATE. A certificate setting forth any additional amounts
payable pursuant to SECTIONS 6.7 or 6.8 above and a brief explanation of such
amounts which are due, submitted by any Lender or the Agent to the Borrower,
shall be conclusive, absent manifest error, that such amounts are due and owing.
6.10. INDEMNITY. The Borrower agrees to indemnify each Lender and to hold
each Lender harmless from and against any loss, cost or expense (including loss
of anticipated profits) that such Lender may sustain or incur as a consequence
of (a) default by the Borrower in payment of the principal amount of or any
interest on any Eurodollar Rate Loans as and when due and payable, including any
such loss or expense arising from interest or fees payable by such Lender to
lenders of funds obtained by it in order to maintain its Eurodollar Rate Loans,
(b) default by the Borrower in making a borrowing or conversion after the
Borrower has given (or is deemed to have given) a Loan Request or a Conversion
Request relating thereto in accordance with SECTIONS 2.6, 2.7 or 4.5 hereof or
(c) the making of any payment of a Eurodollar Rate Loan or the making of any
conversion of any such Loan to a Base Rate Loan on a day that is not the last
day of the applicable Interest Period with
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respect thereto, including interest or fees payable by such Lender to lenders of
funds obtained by it in order to maintain any such Loans.
6.11. APPLICABLE MARGIN. Based upon, and three (3) Business Days following
receipt by the Agent (the date of the effectiveness of any Performance
Adjustment, a "PERFORMANCE ADJUSTMENT DATE") of, (a) beginning with the
Borrower's financial statements as hereafter described for the fiscal quarter of
the Borrower ending December 31, 1997, (i) with respect to the first three
fiscal quarters of each fiscal year, the Borrower's quarterly unaudited
consolidated and consolidating financial statements pursuant to SECTION 9.4(B)
hereof and (ii) with respect to the last fiscal quarter of each fiscal year, the
Borrowers' annual audited consolidated and consolidating financial statements
pursuant to SECTION 9.4(A) hereof, and (b) a certificate of the chief financial
officer of the Borrower setting forth calculations of the financial information
set forth below (the Borrower also hereby agreeing to provide to the Agent,
simultaneously with the delivery of such certificate, telephonic notice of any
Performance Adjustments based upon such calculations), the Base Rate Applicable
Margin, the Eurodollar Applicable Margin and the Commitment Fee shall be subject
to adjustment in accordance with the provisions of this paragraph (each such
adjustment, a "PERFORMANCE ADJUSTMENT"). The Eurodollar Applicable Margin, the
Base Rate Applicable Margin and the Commitment Fee with respect to any period
following any Performance Adjustment Date until the next succeeding Performance
Adjustment Date shall be as set forth in the table below on the line furthest
down in such table with respect to which the Funded Debt Ratio for the fiscal
quarter most recently ended prior to such possible Performance Adjustment Date
shall be less than the ratio set forth on such line in such table:
-----------------------------------------------------------------------
BASE RATE
FUNDED DEBT EURODOLLAR APPLICABLE COMMITMENT
RATIO APPLICABLE MARGIN MARGIN FEE
-----------------------------------------------------------------------
equal to or greater
than 3.00:1.00 2.50% 1.00% 0.50%
-----------------------------------------------------------------------
equal to or greater
than 2.50:1.00
but less than
3.00:1.00 2.25% 0.75% 0.375%
-----------------------------------------------------------------------
equal to or greater
than 2.00:1.00
but less than
2.50:1.00 2.00% 0.50% 0.375%
-----------------------------------------------------------------------
less than
2.00:1.00 1.75% 0.25% 0.25%
-----------------------------------------------------------------------
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6.12. INTEREST AFTER DEFAULT.
6.12.1. OVERDUE AMOUNTS. Overdue principal and (to the extent
permitted by applicable law) interest on the Loans and all other overdue
amounts payable hereunder or under any of the other Loan Documents shall
bear interest compounded monthly and payable on demand at a rate per annum
equal to (a) with respect to the Term Loan, two percent (2%) above the
then applicable interest rate as set forth in SECTION 4.6 above, (b) with
respect to any Revolving Credit Loans, two percent (2%) above the then
applicable interest rate as set forth in SECTION 2.5 above and (c) with
respect to any other amounts due and payable hereunder or under any of the
other Loan Documents, two percent (2%) above the then applicable interest
rate set forth herein or therein for such amounts (and if no interest rate
is so set forth, then the applicable Base Rate), until such amount shall
be paid in full (after as well as before judgment).
6.12.2. AMOUNTS NOT OVERDUE. During the continuance of a Default or
an Event of Default the principal of the Loans not overdue shall, until
such Default or Event of Default has been cured or remedied or such
Default or Event of Default has been waived by the Majority Lenders
pursuant to SECTION 28 hereof, bear interest at a rate per annum equal to
(a) with respect to the Term Loan, two percent (2%) above the then
applicable interest rate as set forth in SECTION 4.6, and (b) with respect
to any Revolving Credit Loans, two percent (2%) above the then applicable
interest rate as set forth in SECTION 2.5.
6.13. USURY PROVISION. It is not the intention of any parties to this
Credit Agreement to make an agreement in violation of the laws of any applicable
jurisdiction relating to usury. Regardless of any provision of this Credit
Agreement or of any other Loan Document, neither the Agent nor any Lender shall
ever be entitled to receive, collect or apply, as interest, charges, fees,
penalties or additional amounts (collectively, referred to herein as "INTEREST")
on any of the Loans or any other Obligation, any amount in excess of the Highest
Lawful Rate. If under the laws of any applicable jurisdiction there is no legal
limitation on the rate of Interest that may be charged with respect to an
obligation owing to any Lender or the Agent (including, without limitation, the
outstanding principal amount of the Loans, unpaid Interest with respect to any
Loan or any other Obligations due and payable under any Loan Document), there
shall be no maximum amount applicable to such obligation, notwithstanding any
reference thereto herein or in any other Loan Document. The existence of a
Highest Lawful Rate for Obligations owing to any one Lender or the
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Agent shall not cause such Highest Lawful Rate to apply to the Obligations owing
to any other Lender or the Agent, the Highest Lawful Rate being independently
determined with respect to each Lender or the Agent. If at any time the rate at
which Interest is payable to any Lender or the Agent on any Loan or any other
Obligation exceeds the Highest Lawful Rate, such Loan or other Obligation shall
bear Interest at the Highest Lawful Rate only but shall continue to bear
Interest at the Highest Lawful Rate until such time as the total amount of
Interest accrued on such Loan or other Obligation equals (but does not exceed)
the total amount of Interest which would have accrued thereon had there been no
Highest Lawful Rate applicable thereto. If at the maturity or final payment of
such Loan or other Obligation (whether at stated maturity, by acceleration or
prepayment or otherwise) the total amount of Interest which has then accrued or
been paid thereon as provided above (the "COLLECTED INTEREST") is less than the
total amount of Interest which would have accrued thereon had there been no
Highest Lawful Rate applicable thereto (the "UNRESTRICTED INTEREST"), then the
Borrower shall, in addition to the Collected Interest, pay to each Lender or (as
the case may be) the Agent an amount equal to (a) the lesser of the Unrestricted
Interest owed or accrued for the benefit of such Lender or (as the case may be)
the Agent and the total amount of Interest which would have accrued thereon for
the benefit of each Lender and the Agent had such Loan or other Obligation at
all times borne Interest at the Highest Lawful Rate, MINUS (b) the Collected
Interest paid for the account of each Lender and the Agent. This SECTION 6.13
shall control every provision of every agreement pertaining to the transactions
contemplated by or contained in this Credit Agreement or any of the other Loan
Documents and shall equally apply to any guaranty or other obligation of any
Subsidiary of the Borrower or of any other Person under the Loan Documents as if
such obligations were "Obligations" as defined herein.
7. COLLATERAL SECURITY AND GUARANTIES.
7.1. SECURITY OF BORROWER. The Obligations shall be secured at all times
by (a) a pledge of and perfected first priority lien on all of the issued and
outstanding shares of the capital stock of the Borrower pursuant to the Pledge
Agreement to which the Holding Company is party, and (b) a perfected first
priority security interest (subject only to Permitted Liens entitled to priority
under applicable law) in substantially all of the assets of the Borrower,
whether now owned or hereafter acquired, pursuant to the terms of the Security
Documents to which the Borrower is party.
7.2. GUARANTIES AND SECURITY OF THE NORTH AMERICAN SUBSIDIARIES. The
Obligations shall also be unconditionally guaranteed pursuant to the terms of
the Guaranties. The obligations of the North American Subsidiaries under the
Guaranties to which they are party shall be in turn secured at all times by (a)
a pledge of and perfected first priority lien on all of the issued and
outstanding shares of the capital stock of each North American Subsidiary,
pursuant to the appropriate Pledge
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Agreement to which the Borrower is party, and (b) a perfected first priority
security interest in substantially all of the assets of each North American
Subsidiary, whether now owned or hereafter acquired, pursuant to the terms of
the Security Documents to which such Subsidiary is a party. The obligations of
the Holding Company under the Guaranty to which it is a party shall be in turn
secured at all times by a perfected first priority security interest in
substantially all of the assets of the Holding Company, whether now owned or
hereafter acquired (other than those assets explicitly excluded by the terms
thereof), pursuant to the terms of the Security Agreement and the Pledge
Agreement to which the Holding Company is a party. The Obligations shall be
further secured at all times by a first legal charge over sixty-five percent
(65%) of the issued shares of UK Holdings, pursuant to the Pledge Agreement to
which the Borrower is party.
8. REPRESENTATIONS AND WARRANTIES.
The Borrower and the Holding Company represent and warrant to the Lenders
and the Agent as follows:
8.1. CORPORATE AUTHORITY.
8.1.1. INCORPORATION; GOOD STANDING. Each of the Holding Company and
its Subsidiaries (a) is a corporation duly organized, validly existing and
in good standing under the laws of its state of incorporation, (b) has all
requisite corporate power to own its property and conduct its business as
now conducted and as presently contemplated, and (c) is in good standing
as a foreign corporation and is duly authorized to do business in each
jurisdiction where such qualification is necessary except where a failure
to be so qualified would not have a materially adverse effect on the
business, operations, assets or financial condition of such Person.
8.1.2. AUTHORIZATION. The execution, delivery and performance of
this Credit Agreement and the other Loan Documents to which the Holding
Company or any of its Subsidiaries is or is to become a party and the
transactions contemplated hereby and thereby (a) are within the corporate
authority of such Person, (b) have been duly authorized by all necessary
corporate proceedings, (c) do not conflict with or result in any breach or
contravention of any provision of law, statute, rule or regulation to
which such Person is subject or by which such Person or any of its assets
or properties is bound, or any judgment, order, writ, injunction, license
or permit applicable to such Person and (d) do not conflict with any
provision of the corporate charter or bylaws of, or any agreement or other
instrument binding upon, such Person.
8.1.3. ENFORCEABILITY. The execution and delivery of this Credit
Agreement and the other Loan Documents to which the Holding Company or
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any of its Subsidiaries is or is to become a party will result in valid
and legally binding obligations of such Person enforceable against it in
accordance with the respective terms and provisions hereof and thereof,
except as enforceability is limited by Bankruptcy, insolvency,
reorganization, moratorium or other laws relating to or affecting
generally the enforcement of creditors' rights and except to the extent
that availability of the remedy of specific performance or injunctive
relief is subject to the discretion of the court before which any
proceeding therefor may be brought.
8.2. GOVERNMENTAL APPROVALS. The execution, delivery and performance by
each of the Holding Company and its Subsidiaries of this Credit Agreement and
the other Loan Documents to which such Persons are or are to become parties and
the transactions contemplated hereby and thereby do not require the approval or
consent of, or filing with, any governmental agency or authority other than
those already obtained.
8.3. TITLE TO PROPERTIES; LEASES. Except as indicated on SCHEDULE 8.3
hereto, the Holding Company and its Subsidiaries own (a) all of the assets
reflected in the consolidated balance sheet of the Target Companies as at the
Balance Sheet Date or acquired since that date (except property and assets sold
or otherwise disposed of in the ordinary course of business since that date),
and (b) all of the assets reflected in the Pro Forma Closing Date Balance Sheet
as at the Closing Date, subject to no rights of others, including any mortgages,
leases, conditional sales agreements, title retention agreements, liens or other
encumbrances except Permitted Liens.
8.4. FINANCIAL STATEMENTS AND PROJECTIONS.
8.4.1. FINANCIAL STATEMENTS. There has been furnished to each of the
Lenders the following financial statements (the "FINANCIAL STATEMENTS"):
(a) the consolidated balance sheet of the Target Companies as at the
Balance Sheet Date, and the related consolidated statements of income and
cash flow of the Target Companies for the fiscal year then ended, and (b)
the unaudited consolidated balance sheet of the Target Companies as of
March 31, 1997, and the related unaudited consolidated statements of
income and cash flow of the Target Companies for the three (3) month
period then ended, each certified by an authorized officer of the Borrower
(based upon the representatives and warranties made by Weatherford
Enterra, Inc. and CRC-Evans Pipeline International, Inc., each a Delaware
corporation, in the Purchase Agreement, and based upon all other
information received by the Holding Company, any of its Subsidiaries or
any of the Investors in connection with the Acquisition). Each of the
Financial Statements has been prepared in accordance with generally
accepted accounting principles; each of the balance sheets fairly presents
the financial condition of the Target Companies as at the close of
business on the date thereof; and each of the
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statements of income and cash flow fairly presents the results of
operations for the periods covered thereby. There are no contingent
liabilities of the Target Companies as of such date involving material
amounts which are not covered by insurance or other indemnity
arrangements, known to the officers of the Borrower or any of its
Subsidiaries, which were assumed by the Borrower or any of its
Subsidiaries in connection with the Acquisition and which are not
disclosed in such balance sheets and the notes related thereto.
8.4.2. PRO FORMA FINANCIAL STATEMENTS. There has been furnished to
each of the Lenders (a) the Pro Forma Closing Date Balance Sheet of the
Holding Company and its Subsidiaries and (b) for the period then ended, a
pro forma statement of income and statement of cash flow of the Holding
Company and its Subsidiaries, each certified as true and correct by the
Borrower (collectively, the "MANAGEMENT STATEMENTS"). The Management
Statements fairly present the Holding Company's and its Subsidiaries'
financial condition as of such date after giving effect to the Acquisition
and to all of the transactions contemplated herein as though they had
occurred on the Closing Date. There are no contingent liabilities of the
Holding Company or of any of its Subsidiaries as of such date involving
material amounts, known to the officers of the Holding Company or any of
its Subsidiaries, which were not disclosed in said pro forma balance
sheets and the related notes thereto.
8.4.3. PROJECTIONS. The projections of the annual operating budgets
of the Holding Company and its Subsidiaries on a consolidated basis,
balance sheets and cash flow statements for the 1997 to 2003 fiscal years,
copies of which have been delivered to each Lender, disclose all material
assumptions made with respect to general economic, financial and market
conditions used in formulating such projections. To the best knowledge of
the Holding Company and its Subsidiaries, no facts exist that
(individually or in the aggregate) would result in any material change in
any of such projections. The projections are based upon reasonable
estimates and assumptions, have been prepared on the basis of the
assumptions stated therein and reflect the reasonable estimates of the
Holding Company and each of its Subsidiaries of the results of operations
and other information projected therein.
8.5. NO MATERIAL CHANGES, ETC. Since the Balance Sheet Date there has
occurred no materially adverse change in the financial condition, operations or
business of the Target Companies or of the Holding Company and its Subsidiaries
as shown on or reflected in the consolidated and consolidating balance sheets of
the Target Companies as at the Balance Sheet Date, or the consolidated and
consolidating statements of income and cash flow for the fiscal year then ended,
other than changes in the ordinary course of business that have not had any
materially adverse effect either individually or in the aggregate on the
business, operations or financial condition of the Holding Company or any of its
Subsidiaries. Since the
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Balance Sheet Date, as applicable, neither the Target Companies, the Holding
Company nor the Borrower has made any Distributions.
8.6. FRANCHISES, PATENTS, COPYRIGHTS, ETC. Upon consummation of the
Acquisition, each of the Holding Company and its Subsidiaries will possess all
franchises, patents, copyrights, trademarks, trade names, licenses and permits,
and rights in respect of the foregoing, adequate for the conduct of the business
substantially as now conducted by them without known conflict with any rights of
others.
8.7. LITIGATION. Except as set forth in SCHEDULE 8.7 hereto, there are no
actions, suits, proceedings or investigations of any kind pending or threatened
against the Holding Company or any of its Subsidiaries before any court,
tribunal or administrative agency or board that, if adversely determined, might,
either in any case or in the aggregate, materially adversely affect the
properties, assets, operations, financial condition or business of such Person
or materially impair the right of the Holding Company and its Subsidiaries,
considered as a whole, to carry on business substantially as now conducted by
them, or result in any substantial liability not adequately covered by
insurance, or for which adequate reserves are not maintained on the consolidated
balance sheet of the Borrower and its Subsidiaries, or which question the
validity of this Credit Agreement or any of the other Loan Documents, or any
action taken or to be taken pursuant hereto or thereto.
8.8. NO MATERIALLY ADVERSE CONTRACTS, ETC. None of the Holding Company or
any of its Subsidiaries is subject to any charter, corporate or other legal
restriction, or any judgment, decree, order, rule or regulation that has or is
expected in the future to have a materially adverse effect on the business,
operations, assets or financial condition of such Person. None of the Holding
Company or any of its Subsidiaries is a party to any contract or agreement that
has or is expected, in the best judgment of the officers of the Borrower and its
Subsidiaries, to have any materially adverse effect on the business of such
Person.
8.9. COMPLIANCE WITH OTHER INSTRUMENTS, LAWS, ETC. None of the Holding
Company or any of its Subsidiaries is in violation of (a) any provision of the
charter documents or bylaws of such Person, (b) any agreement or instrument to
which such Person may be subject or by which such Person or any of its
properties or assets may be bound, or (c) any decree, order, judgment, statute,
license, rule or regulation, in any of the foregoing cases in a manner that
could result in the imposition of substantial penalties or materially and
adversely affect the financial condition, operations, properties, assets or
business of such Person.
8.10. TAX STATUS. Each of the Holding Company and its Subsidiaries (a) has
made or filed all federal and state income and all other tax returns, reports
and declarations required by any jurisdiction to which such Person is subject,
(b) has paid all taxes and other governmental assessments and charges shown or
determined to be
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due on such returns, reports and declarations, except those being contested in
good faith and by appropriate proceedings and (c) has set aside on its books
provisions reasonably adequate for the payment of all taxes for periods
subsequent to the periods to which such returns, reports or declarations apply.
There are no unpaid taxes in any material amount claimed by the taxing authority
of any jurisdiction to be due by the Holding Company or its Subsidiaries, and
the officers of the Holding Company and its Subsidiaries know of no basis for
any such claim.
8.11. NO EVENT OF DEFAULT. No Default or Event of Default has occurred and
is continuing.
8.12. HOLDING COMPANY AND INVESTMENT COMPANY ACTS. Neither the Borrower
nor any of its Subsidiaries is a "holding company", or a "Subsidiary company" of
a "holding company", or an "affiliate" of a "holding company", as such terms are
defined in the Public Utility Holding Company Act of 1935; nor is it an
"investment company", or an "affiliated company" or a "principal underwriter" of
an "investment company", as such terms are defined in the Investment Company Act
of 1940.
8.13. ABSENCE OF FINANCING STATEMENTS, ETC. Except with respect to
Permitted Liens, there is no financing statement, security agreement, chattel
mortgage, real estate mortgage, debenture or other document filed or recorded
with any filing records, registry or other public office, that purports to
cover, affect or give notice of any present or possible future lien on, security
interest in or charge over, any assets or property of the Holding Company or any
of its Subsidiaries or any rights relating thereto.
8.14. PERFECTION OF SECURITY INTEREST. All filings, assignments, pledges
and deposits of documents or instruments have been made and all other actions
have been taken that are necessary or advisable, under applicable law, to
establish and perfect the Agent's security interest in the Collateral. The
Collateral and the Agent's rights with respect to the Collateral are not subject
to any setoff, claims, withholdings or other defenses. The Holding Company and
its Subsidiaries are the owners of all of the Collateral free from any lien,
security interest, encumbrance and any other claim or demand, except for
Permitted Liens.
8.15. CERTAIN TRANSACTIONS. Except as disclosed on SCHEDULE 8.15 and
except for arm's length transactions pursuant to which the Holding Company or
any of its Subsidiaries makes payments in the ordinary course of business upon
terms no less favorable than such Person could obtain from third parties, none
of the officers, directors, or employees of Holding Company or any of its
Subsidiaries is presently a party to any transaction with any of the Holding
Company or any of its Subsidiaries, including any contract, agreement or other
arrangement providing for the furnishing of services to or by (other than for
services as employees, officers and directors), providing for rental of real or
personal property to or from, or otherwise requiring
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payments to or from, any such officer, director or employee, or, to the best
knowledge of the Holding Company and its Subsidiaries, any corporation,
partnership, trust or other entity in which any such officer, director, or
employee has a substantial interest or is an officer, employee, director,
trustee or partner.
8.16. EMPLOYEE BENEFIT PLANS.
8.16.1. IN GENERAL. Each Employee Benefit Plan has been maintained
and operated in compliance in all material respects with the provisions of
ERISA and, to the extent applicable, the Code, including but not limited
to the provisions thereunder respecting prohibited transactions. The
Borrower has heretofore delivered to the Agent the most recently completed
annual report, Form 5500, with all required attachments, and actuarial
statement required to be submitted under SECTION 103(D) of ERISA, with
respect to each Guaranteed Pension Plan.
8.16.2. TERMINABILITY OF WELFARE PLANS. Under each Employee Benefit
Plan which is an employee welfare benefit plan within the meaning of
SECTIONS 3(1) or 3(2)(B) of ERISA, no benefits are due unless the event
giving rise to the benefit entitlement occurs prior to plan termination
(except as required by Title I, Part 6 of ERISA) . The Borrower or an
ERISA Affiliate, as appropriate, may terminate each such Plan at any time
(or at any time subsequent to the expiration of any applicable bargaining
agreement) in the discretion of the Borrower or such ERISA Affiliate
without liability to any Person.
8.16.3. GUARANTEED PENSION PLANS. Each contribution required to be
made to a Guaranteed Pension Plan, whether required to be made to avoid
the incurrence of an accumulated funding deficiency, the notice or lien
provisions of SECTION 302(F) of ERISA, or otherwise, has been timely made.
No waiver of an accumulated funding deficiency or extension of
amortization periods has been received with respect to any Guaranteed
Pension Plan. No liability to the PBGC (other than required insurance
premiums, all of which have been paid) has been incurred by the Borrower
or any ERISA Affiliate with respect to any Guaranteed Pension Plan and
there has not been any ERISA Reportable Event, or any other event or
condition which presents a material risk of termination of any Guaranteed
Pension Plan by the PBGC. Based on the latest valuation of each Guaranteed
Pension Plan (which in each case occurred within twelve months of the date
of this representation), and on the actuarial methods and assumptions
employed for that valuation, the aggregate benefit liabilities of all such
Guaranteed Pension Plans within the meaning of SECTION 4001 of ERISA did
not exceed the aggregate value of the assets of all such Guaranteed
Pension Plans, disregarding for this purpose the benefit liabilities
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and assets of any Guaranteed Pension Plan with assets in excess of benefit
liabilities, by more than $500,000.
8.16.4. MULTIEMPLOYER PLANS. Neither the Borrower nor any ERISA
Affiliate has incurred any material liability (including secondary
liability) to any Multiemployer Plan as a result of a complete or partial
withdrawal from such Multiemployer Plan under SECTION 4201 of ERISA or as
a result of a sale of assets described in SECTION 4204 of ERISA. Neither
the Borrower nor any ERISA Affiliate has been notified that any
Multiemployer Plan is in reorganization or insolvent under and within the
meaning of SECTIONS 4241 or 4245 of ERISA or that any Multiemployer Plan
intends to terminate or has been terminated under SECTION 4041A of ERISA.
8.17. REGULATIONS U AND X. The proceeds of the Loans shall be used for the
purposes permitted in SECTION 9.13 hereof. No portion of any Loan is to be used,
and no portion of any Letter of Credit is to be obtained, for the purpose of
purchasing or carrying any "margin security" or "margin stock" as such terms are
used in Regulations U and X of the Board of Governors of the Federal Reserve
System, 12 C.F.R. Parts 221 and 224.
8.18. ENVIRONMENTAL COMPLIANCE. The Borrower and the Holding Company have
taken all necessary steps to investigate the past and present condition and
usage of the Real Estate and the operations conducted thereon and, based upon
such diligent investigation, has determined that:
(a) none of the Holding Company, its Subsidiaries, or any operator
of the Real Estate or any operations thereon is in violation, or alleged
violation, of any judgment, decree, order, law, license, rule or
regulation pertaining to environmental matters, including without
limitation, those arising under the Resource Conservation and Recovery Act
("RCRA"), the Comprehensive Environmental Response, Compensation and
Liability Act of 1980 as amended ("CERCLA"), the Superfund Amendments and
Reauthorization Act of 1986 ("SARA"), the Federal Clean Water Act, the
Federal Clean Air Act, the Toxic Substances Control Act, or any state or
local statute, regulation, ordinance, order or decree relating to health,
safety or the environment (hereinafter, collectively, "ENVIRONMENTAL
LAWS"), which violation would have a material adverse effect on the
environment or the business, operations, properties, assets or financial
condition of the Borrower, any of its Subsidiaries or the Holding Company;
(b) none of the Holding Company or any of its Subsidiaries has
received notice from any third party including, without limitation, any
federal, state or local governmental authority, (i) that any one of them
has been identified by the United States Environmental Protection Agency
("EPA") as a potentially responsible party under CERCLA with respect to a
site listed on
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the National Priorities List, 40 C.F.R. Part 300 Appendix B; (ii) that any
hazardous waste, as defined by 42 U.S.C. Section 6903(5), any hazardous
substances as defined by 42 U.S.C. Section 9601(14), any pollutant or
contaminant as defined by 42 U.S.C. Section 9601(33) and any toxic
substances, oil or hazardous materials or other chemicals or substances
regulated by any Environmental Laws (collectively, "HAZARDOUS SUBSTANCES")
which any one of them has generated, transported or disposed of has been
found at any site at which a federal, state or local agency or other third
party has conducted or has ordered that the Holding Company or any of its
Subsidiaries conduct a remedial investigation, removal or other response
action pursuant to any Environmental Law; or (iii) that it is or shall be
a named party to any claim, action, cause of action, complaint, or legal
or administrative proceeding (in each case, contingent or otherwise)
arising out of any third party's incurrence of costs, expenses, losses or
damages of any kind whatsoever in connection with the release of Hazardous
Substances;
(c) except as set forth on SCHEDULE 8.18(C) hereto: (i) no portion
of the Real Estate has been used for the handling, processing, storage or
disposal of Hazardous Substances except in accordance with applicable
Environmental Laws and no underground tank or other underground storage
receptacle for Hazardous Substances is located on any portion of the Real
Estate; (ii) in the course of any activities conducted by the Holding
Company, its Subsidiaries or any operators of its properties, no Hazardous
Substances have been generated or are being used on the Real Estate except
in accordance with applicable Environmental Laws; (iii) there have been no
releases (i.e. any past or present releasing, spilling, leaking, pumping,
pouring, emitting, emptying, discharging, injecting, escaping, disposing
or dumping) or threatened releases of Hazardous Substances on, upon, into
or from the properties of the Holding Company or any of its Subsidiaries,
which releases would have a material adverse effect on the value of any of
the Real Estate or adjacent properties or the environment; (iv) to the
best knowledge of the Holding Company and each of its Subsidiaries, there
have been no releases on, upon, from or into any real property in the
vicinity of any of the Real Estate which, through soil or groundwater
contamination, may have come to be located on, and which would have a
material adverse effect on the value of, the Real Estate; and (v) in
addition, any Hazardous Substances that have been generated on any of the
Real Estate have been transported offsite only by carriers having an
identification number issued by the EPA, treated or disposed of only by
treatment or disposal facilities maintaining valid permits as required
under applicable Environmental Laws, which transporters and facilities
have been and are, to the best knowledge of the Holding Company and each
of its Subsidiaries, operating in compliance with such permits and
applicable Environmental Laws; and
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(d) Except with respect to the conditions specifically referred to
in the environmental assessment reports listed on SCHEDULE 8.18(D) hereto,
copies of each of which have been delivered to the Lenders and the Agent
prior to the date hereof, none of the Holding Company or its Subsidiaries,
or any Mortgaged Property or any of the other Real Estate is subject to
any applicable environmental law requiring the performance of Hazardous
Substances site assessments, or the removal or remediation of Hazardous
Substances, or the giving of notice to any governmental agency or the
recording or delivery to other Persons of an environmental disclosure
document or statement by virtue of the transactions set forth herein and
contemplated hereby, or as a condition to the recording of any Mortgage or
to the effectiveness of any other transactions contemplated hereby.
8.19. SUBSIDIARIES, ETC. The Canadian Subsidiary, the Holland Subsidiary,
UK Holdings and the UK Subsidiary are the only Subsidiaries (both direct and
indirect) of the Borrower. Except as set forth on SCHEDULE 8.19 hereto, the
Borrower owns all of the issued and outstanding capital stock of each such
Subsidiary. Except as set forth on SCHEDULE 8.19, neither the Borrower nor any
Subsidiary of the Borrower is engaged in any joint venture or partnership with
any other Person.
8.20. HOLDING COMPANY; UK HOLDINGS. The Holding Company and UK Holdings
own all of the issued and outstanding capital stock of the Borrower and the UK
Subsidiary, respectively, and neither has any business purpose, or engages in
any business activity, other than to hold the capital stock of the Borrower and
the UK Subsidiary, respectively. Neither the Holding Company nor UK Holdings
leases or owns any real property or employs any employees, agents (other than
registered agents in their respective states of incorporation) or
representatives.
8.21. BANK ACCOUNTS. SCHEDULE 8.21 hereto sets forth a list of the account
numbers and location of all bank accounts of the Borrower and its Subsidiaries.
8.22. DISCLOSURE. No representation or warranty made by the Borrower or
any other Person in this Credit Agreement, the other Loan Documents, or in any
other agreement, instrument, document, certificate, statement or letter
furnished to the Agent or any of the Lenders by or on behalf of the Borrower or
such other Persons in connection with any of the transactions contemplated by
any of the Loan Documents or in connection with the Acquisition, contains any
untrue statement or omits to state a fact necessary in order to make the
statements contained therein not misleading in light of the circumstances in
which they are made. Except as disclosed in writing to each of the Lenders and
the Agent, there is no fact known to the Holding Company or to any of its
Subsidiaries which could reasonably be expected to adversely affect, or which
would reasonably be expected to adversely affect in the future, the financial
condition, assets, properties, business or operations of the Holding Company or
any of its Subsidiaries.
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8.23. CAPITAL STRUCTURE. As of the Closing Date, after giving effect to
the Acquisition, the Investors shall have invested in the Holding Company not
less than $9,140,000 in exchange for that number of shares of capital stock of
the Holding Company of equal value, and the Holding Company shall have made a
downstream equity contribution of equal value to the Borrower.
9. AFFIRMATIVE COVENANTS OF THE BORROWER AND THE HOLDING COMPANY.
Each of the Holding Company and the Borrower covenants and agrees that,
until all of the Obligations have been irrevocably paid and satisfied in full,
and so long as any Lender has any obligation to make any Loans hereunder or any
Advances under the Facility Agreement, the Agent has any obligation to issue,
extend or renew any Letters of Credit hereunder, or the UK Subsidiary has any
right to utilize the facilities available to it under the Facility Agreement:
9.1. PUNCTUAL PAYMENT. The Borrower will duly and punctually pay or cause
to be paid the principal and interest on the Loans, all Reimbursement
Obligations, the Letter of Credit Fees, the Commitment Fees, the Agent's fee and
all other amounts provided for in this Credit Agreement and the other Loan
Documents to which the Borrower, any of its Subsidiaries or the Holding Company
is a party, all in accordance with the terms of this Credit Agreement and such
other Loan Documents.
9.2. MAINTENANCE OF OFFICE. Each of the Borrower and the Holding Company
will maintain its chief executive office in Houston, Texas, or at such other
place in the United States of America as such Person shall designate upon
written notice to the Agent, where notices, presentations and demands to or upon
such Person in respect of the Loan Documents to which such Person is a party may
be given or made.
9.3. RECORDS AND ACCOUNTS. The Borrower and the Holding Company will each
(a) keep, and cause each of its Subsidiaries to keep, true and accurate records
and books of account in which full, true and correct entries will be made in
accordance with Generally Accepted Accounting Principles and (b) maintain
adequate accounts and reserves for all taxes (including income taxes),
depreciation, depletion, obsolescence and amortization of its properties and the
properties of its Subsidiaries, contingencies, and other reserves.
9.4. FINANCIAL STATEMENTS, CERTIFICATES AND INFORMATION. The Borrower
will deliver to each of the Lenders:
(a) as soon as practicable, but in any event not later than ninety
(90) days after the end of each fiscal year of the Borrower, the
consolidated balance sheet of the Holding Company and its Subsidiaries and
the consolidating balance sheet of the Holding Company and its
Subsidiaries,
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each as at the end of such year, and the related consolidated statement of
income and consolidated statement of cash flow and consolidating statement
of income and consolidating statement of cash flow for such year, each
setting forth in comparative form the figures for the previous fiscal year
and all such consolidated and consolidating statements to be in reasonable
detail, prepared in accordance with Generally Accepted Accounting
Principles, and, with respect to all such consolidated statements,
certified without qualification by the Borrower's certified public
accountant or by other independent certified public accountants
satisfactory to the Agent, together with a written statement from such
accountants to the effect that they have read a copy of this Credit
Agreement, and that, in making the examination necessary to said
certification, they have obtained no knowledge of any Default or Event of
Default, or, if such accountants shall have obtained knowledge of any then
existing Default or Event of Default they shall disclose in such statement
any such Default or Event of Default; PROVIDED that such accountants shall
not be liable to the Lenders for failure to obtain knowledge of any
Default or Event of Default;
(b) as soon as practicable, but in any event not later than
forty-five (45) days after the end of each of the fiscal quarters of the
Borrower, copies of the unaudited consolidated balance sheet of the
Holding Company and its Subsidiaries and the unaudited consolidating
balance sheet of the Holding Company and its Subsidiaries, each as at the
end of such quarter, and the related consolidated statement of income and
consolidated statement of cash flow and consolidating statement of income
and consolidating statement of cash flow for the portion of the Borrower's
fiscal year then elapsed, all in reasonable detail and prepared in
accordance with Generally Accepted Accounting Principles, together with a
certification by the principal financial or accounting officer of the
Borrower that the information contained in such financial statements
fairly presents the financial position of the Holding Company and its
Subsidiaries on the date thereof (subject to year-end adjustments);
(c) as soon as practicable, but in any event within thirty (30) days
after the end of each month in each fiscal year of the Borrower, unaudited
monthly consolidated financial statements of the Holding Company and its
Subsidiaries for such month and unaudited monthly consolidating financial
statements of the Holding Company and its Subsidiaries for such month,
each prepared in accordance with Generally Accepted Accounting Principles,
together with a certification by the principal financial or accounting
officer of the Borrower that the information contained in such financial
statements fairly presents the financial condition of the Holding Company
and its Subsidiaries on the date thereof (subject to year-end
adjustments);
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(d) simultaneously with the delivery of the financial statements
referred to in SUBSECTIONS (A) and (B) above, a statement certified, on
behalf of the Borrower, by the principal financial or accounting officer
of the Borrower in substantially the form of EXHIBIT F hereto, setting
forth in reasonable detail computations evidencing compliance by the
Holding Company and each of its Subsidiaries with the covenants contained
in SECTION 11 hereof and (if applicable) reconciliations to reflect
changes in Generally Accepted Accounting Principles since the Balance
Sheet Date;
(e) within twenty (20) days after the end of each calendar month or
at such earlier time as the Agent may reasonably request, a Borrowing Base
Report setting forth the Borrowing Base as at the end of such calendar
month or other date so requested by the Agent;
(f) within twenty (20) days after the end of each calendar
month, an Accounts Receivable aging report;
(g) as soon as practicable, but in any event not later than sixty
(60) days after reasonably requested by the Agent, a current summary
report setting forth in detail all information concerning the Rental
Equipment and/or Rental Inventory, including without limitation (i) a list
of all locations of such equipment, (ii) a list of all lease arrangements
concerning such equipment and (iii) detailed descriptions of each such
lease, which summary shall be in form and substance satisfactory to the
Agent;
(h) within thirty (30) days after the end of each fiscal year,
projections of the Holding Company and its Subsidiaries;
(i) within five (5) Business Days prior to the end of each calendar
month, the UK Monthly Maximum Amount Certificate setting forth the UK
Monthly Maximum Amount for the next calendar month, in the form of EXHIBIT
G hereto;
(j) simultaneously with the delivery of the Borrowing Base Report
referred to in SUBSECTION (E) above, a statement certified, on behalf of
the Borrower, by the principal financial or accounting officer of the
Borrower summarizing certain information concerning the inventory of the
Borrower and its Subsidiaries constituting Eligible Inventory which is not
located in the United States of America, England, Wales or the Dominion of
Canada, including a list of the approximate book value of the inventory at
each location and the project or customer for which such inventory is
being used;
(k) simultaneously with the delivery of the financial statements
referred to in SUBSECTION (B) above, a report listing the orders and
contractual back-log of each of the Holding Company and its Subsidiaries,
which reports
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shall be in form and substance substantially similar to those customarily
prepared by the Borrower, a copy of the most recent report of which has
been delivered to the Agent by the Borrower prior to the date hereof; and
(l) from time to time such other financial data and information
(including accountants, management letters) as the Agent or any Lender may
reasonably request.
9.5. NOTICES.
9.5.1. DEFAULTS. The Borrower will promptly notify the Agent and
each of the Lenders in writing of the occurrence of any Default or Event
of Default. If any Person shall give any notice or take any other action
in respect of a claimed default (whether or not constituting a Default or
an Event of Default) under this Credit Agreement or any other note,
evidence of indebtedness, indenture or other obligation to which or with
respect to which the Holding Company or any of its Subsidiaries is a party
or obligor, whether as principal, guarantor, surety or otherwise, the
Borrower shall forthwith give written notice thereof to the Agent and each
of the Lenders, describing the notice or action and the nature of the
claimed default.
9.5.2. ENVIRONMENTAL EVENTS. The Borrower will promptly give notice
to the Agent and each of the Lenders (a) of any violation of any
Environmental Law that the Holding Company or any of its Subsidiaries
reports in writing or is reportable by such Person in writing (or for
which any written report supplemental to any oral report is made) to any
federal, state or local environmental agency, and (b) upon becoming aware
thereof, of any inquiry, proceeding, investigation, or other action,
including a notice from any agency of potential environmental liability,
of any federal, state or local environmental agency or board, that has the
potential to materially affect the business, assets, properties,
liabilities, financial conditions or operations of the Holding Company or
any of its Subsidiaries, or the Agent's mortgages or security interests
pursuant to the Security Documents.
9.5.3. NOTIFICATION OF CLAIM AGAINST COLLATERAL. The Borrower will,
immediately upon becoming aware thereof, notify the Agent and each of the
Lenders in writing of any setoff, claims (including, with respect to the
Real Estate, environmental claims), withholdings or other defenses to
which any of the Collateral, or the Agent's rights with respect to the
Collateral, are subject.
9.5.4. NOTICE OF LITIGATION AND JUDGMENTS. The Borrower and the
Holding Company will, and will cause each of their Subsidiaries to, give
notice to the Agent and each of the Lenders in writing within fifteen (15)
days of becoming aware of any litigation or proceedings threatened in
writing or any pending litigation and proceedings affecting the Borrower,
the Holding
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Company, any of their Subsidiaries or to which any such Person is or
becomes a party involving an uninsured claim against such Person that
could reasonably be expected to have a materially adverse effect on such
Person, or on any of its assets or properties and stating the nature and
status of such litigation or proceedings. The Borrower and the Holding
Company will, and will cause each of their Subsidiaries to, give notice to
the Agent and each of the Lenders, in writing, in form and detail
satisfactory to the Agent, within ten (10) days of any judgment not
covered by insurance, final or otherwise, against the Borrower, the
Holding Company or any of their Subsidiaries in an amount in excess of
$500,000.
9.6. CORPORATE EXISTENCE; MAINTENANCE OF PROPERTIES. Each of the Borrower
and the Holding Company will do or cause to be done all things necessary to
preserve and keep in full force and effect its corporate existence, rights and
franchises and those of their Subsidiaries and will not cause or permit any of
their Subsidiaries (other than UK Holdings and the UK Subsidiary) to, convert to
a limited liability company. Each of the Borrower and the Holding Company will
(a) cause all of their properties and those of their Subsidiaries used or useful
in the conduct of such Person's business to be maintained and kept in good
condition, repair and working order (normal wear and tear excepted) and supplied
with all necessary equipment, (b) cause to be made all necessary repairs,
renewals, replacements, betterments and improvements thereof, all as in the
judgment of the Borrower may be necessary so that the business carried on in
connection therewith may be properly and advantageously conducted at all times,
and (c) continue and will cause each of its Subsidiaries to continue, to engage
primarily in the businesses now conducted by them and in related businesses;
PROVIDED that nothing in this SECTION 9.6 shall prevent the Borrower from
discontinuing the operation and maintenance of any of its properties or any of
those of its Subsidiaries if such discontinuance is, in the best judgment of the
Borrower, (x) desirable in the conduct of its or their business and (y) will not
in the aggregate materially adversely affect the business of the Holding Company
and its Subsidiaries on a consolidated basis.
9.7. INSURANCE. Each of the Borrower and the Holding Company will, and
will cause each of their Subsidiaries to, maintain with financially sound and
reputable insurers insurance with respect to its properties and business against
such casualties and contingencies as shall be in accordance with the general
practices of businesses engaged in similar activities in similar geographic
areas and in amounts, containing such terms, in such forms and for such periods
as may be reasonable and prudent and in accordance with the terms of the
Security Agreements; PROVIDED that (a) in no event will the deductible amount in
respect of any covered loss exceed an amount which is usual and customary for
similar businesses engaged in similar activities, (b) insurance with respect to
inventory will at all times be maintained in an amount at least equal to its
cost, (c) all insurance shall be in such form, for such periods and written by
such companies as may be satisfactory to the Agent, (d) all policies of
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insurance shall provide for thirty (30) days' minimum cancellation notice to the
Agent, (e) in the event of any failure by the Holding Company or any of its
Subsidiaries to provide and maintain insurance as required herein or in the
Security Documents to which such Person is a party, the Agent may, after notice
to the Borrower to such effect, provide such insurance and charge the amount
thereof to the Borrower and the Borrower hereby promises to pay to the Agent on
demand the amount of any disbursements made by the Agent for such purpose, and
(f) the Borrower shall furnish to the Agent certificates or other evidence
satisfactory to the Agent of compliance with the foregoing provisions. The
Borrower will, and will cause each of its Subsidiaries to, maintain insurance on
the Mortgaged Properties in accordance with the terms of the Mortgages.
9.8. TAXES. Each of the Borrower and the Holding Company will, and will
cause each of their Subsidiaries to, duly pay and discharge, or cause to be paid
and discharged, before the same shall become overdue, all taxes, assessments and
other governmental charges imposed upon it and its real properties, sales and
activities, or any part thereof, or upon the income or profits therefrom, as
well as all claims for labor, materials, or supplies that if unpaid might by law
become a lien or charge upon any of its property; PROVIDED that any such tax,
assessment, charge, levy or claim need not be paid if the validity or amount
thereof shall currently be contested in good faith by appropriate proceedings
and if the Borrower, such Subsidiary or the Holding Company (as the case may be)
shall have set aside on its books adequate reserves with respect thereto; and
PROVIDED FURTHER that the Holding Company and each of its Subsidiaries will pay
all such taxes, assessments, charges, levies or claims forthwith upon the
commencement of proceedings to foreclose any lien that may have attached as
security therefor.
9.9. INSPECTION OF PROPERTIES AND BOOKS, ETC.
9.9.1. GENERAL. Each of the Borrower and the Holding Company shall
permit the Lenders, through the Agent or any of the Lenders' other
designated representatives, to visit and inspect any of the properties of
the Holding Company or its Subsidiaries, to examine the books of account
of each such Person (and to make copies thereof and extracts therefrom),
and to discuss the affairs, finances and accounts of each such Person
with, and to be advised as to the same by, its and their officers, all at
such reasonable times and intervals as the Agent or any Lender may
reasonably request.
9.9.2. COLLATERAL REPORTS. No more frequently than once each
calendar year, or more frequently as determined by the Agent if an Event
of Default shall have occurred and be continuing, upon the request of the
Agent, the Borrower will obtain and deliver to the Agent a report of an
independent collateral auditor satisfactory to the Agent (which may be
affiliated with one of the Lenders) with respect to the Accounts
Receivable and inventory
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components included in the Borrowing Base, which report shall indicate
whether or not the information set forth in the Borrowing Base Report most
recently delivered is accurate and complete in all material respects based
upon a review by such auditors of the Accounts Receivable (including
verification with respect to the amount, aging, identity and credit of the
respective account debtors and the billing practices of the Borrower or
its applicable Subsidiary) and inventory (including verification as to the
value, location and respective types). All such collateral value reports
shall be conducted and made at the expense of the Borrower; PROVIDED that
the costs incurred by the Borrower with respect to each such report
conducted other than during the continuation of a Default or an Event of
Default shall not exceed $5,000.
9.9.3. APPRAISALS. If an Event of Default shall have occurred and be
continuing, upon the request of the Agent, the Borrower will obtain and
deliver to the Agent appraisal reports in form and substance and from
appraisers satisfactory to the Agent, stating (a) the then current fair
market, orderly liquidation and forced liquidation values of all or any
portion of the equipment, assets or real estate owned by the Borrower and
its Subsidiaries and (b) the then current business value of each of the
Borrower and its Subsidiaries. All such appraisals shall be conducted and
made at the expense of the Borrower.
9.9.4. ENVIRONMENTAL ASSESSMENTS. Whether or not an Event of Default
shall have occurred, the Agent may, from time to time (but not more
frequently than once in any 36-month period if a Default has not
occurred), in its reasonable discretion for the purpose of assessing and
ensuring the value of any Mortgaged Property, obtain one or more
environmental assessments or audits of such Mortgaged Property prepared by
a hydrogeologist, an independent engineer or other qualified consultant or
expert approved by the Agent to evaluate or confirm (a) whether any
Hazardous Materials are present in the soil or water at such Mortgaged
Property and (b) whether the use and operation of such Mortgaged Property
complies with all Environmental Laws. Environmental assessments may
include without limitation detailed visual inspections of such Mortgaged
Property including any and all storage areas, storage tanks, drains, dry
wells and leaching areas, and the taking of soil samples, surface water
samples and ground water samples, as well as such other investigations or
analyses as the Agent deems appropriate. All such environmental
assessments shall be conducted and made at the expense of the Borrower.
9.9.5. COMMUNICATIONS WITH ACCOUNTANTS. Each of the Borrower and the
Holding Company authorizes the Agent and, if accompanied by the Agent, the
Lenders to communicate directly with the independent certified public
accountants of the Borrower and the Holding Company and authorizes
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such accountants to disclose to the Agent and the Lenders any and all
financial statements and other supporting financial documents and
schedules including copies of any management letter with respect to the
business, financial condition and other affairs of the Borrower, any of
its Subsidiaries or the Holding Company. At the request of the Agent, the
Borrower and/or the Holding Company (as appropriate) shall deliver a
letter addressed to such accountants instructing them to comply with the
provisions of this SECTION 9.9.5.
9.10. COMPLIANCE WITH LAWS, CONTRACTS, LICENSES, AND PERMITS. Each of the
Borrower and the Holding Company will, and will cause each of their Subsidiaries
to, comply with (a) the applicable laws and regulations wherever such Person's
business is conducted, including all Environmental Laws, (b) the provisions of
such Person's charter documents and by-laws, (c) all agreements and instruments
by which such Person or any of its properties or assets may be bound or subject
and (d) all applicable decrees, orders, and judgments. If any authorization,
consent, approval, permit or license from any officer, agency or instrumentality
of any government shall become necessary or required in order that the Holding
Company or any of its Subsidiaries may fulfill any of its obligations hereunder
or under any of the other Loan Documents to which such Person is a party, the
Borrower and the Holding Company will, or (as the case may be) the Holding
Company will cause such Subsidiary to, immediately take or cause to be taken all
reasonable steps within the power of such Person to obtain such authorization,
consent, approval, permit or license and to furnish the Agent and the Lenders
with evidence thereof.
9.11. EMPLOYEE BENEFIT PLANS.
The Borrower will (a) upon request of the Agent, furnish to the Agent a
copy of the most recent actuarial statement required to be submitted under
SECTION 103(D) of ERISA and Annual Report, Form 5500, with all required
attachments, in respect of each Guaranteed Pension Plan, and (b) promptly upon
receipt or dispatch, furnish to the Agent any notice, report or demand sent or
received in respect of a Guaranteed Pension Plan under SECTIONS 302, 4041, 4042,
4043, 4063, 4065, 4066 and 4068 of ERISA, or in respect of a Multiemployer Plan,
under SECTIONS 4041A, 4202, 4219, 4242, or 4245 of ERISA.
9.12. USE OF PROCEEDS. The Borrower will use the proceeds of the Loans
solely to finance the Acquisition and to support ongoing working capital
requirements and other general corporate purposes of the Borrower, including,
without limitation, the funding of Capital Expenditures. The Borrower will
obtain Letters of Credit solely for working capital and other general corporate
purposes, including supporting the Canadian Working Capital Facility.
9.13. ADDITIONAL MORTGAGED PROPERTY. If, after the Closing Date, the
Borrower or any of North American Subsidiaries acquires real estate for a
purchase
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price in excess of $100,000, the Borrower shall, or shall cause such Subsidiary
to, forthwith deliver to the Agent a fully executed mortgage or deed of trust
over such real estate, in form and substance satisfactory to the Agent, together
with title insurance policies, surveys, evidences of insurance with the Agent
named as loss payee and additional insured, legal opinions and other documents
and certificates with respect to such real estate as was required for Real
Estate of the Borrower or such Subsidiary as of the Closing Date. The Borrower
further agrees that, following the taking of such actions with respect to such
real estate, the Agent shall have for the benefit of the Lenders and the Agent a
valid and enforceable first priority mortgage or deed of trust over such real
estate, free and clear of all defects and encumbrances except for Permitted
Liens.
9.14. BANK ACCOUNTS.
(a) On or prior to the Closing Date, the Borrower will, and will
cause each of its Subsidiaries (other than the Canadian Subsidiary and the
Holland Subsidiary) to, (i) (A) establish depository accounts (the "FNBB
CONCENTRATION ACCOUNTS") under the control of the Agent for the benefit of
the Lenders and the Agent, in the name of the Borrower or such Subsidiary,
as appropriate, (PROVIDED that, with respect to UK Holdings and its
Subsidiaries, such accounts shall be under the control of the Agent's
London, England branch and shall be in the name of the UK Subsidiary), (B)
cause all depository institutions at which the Borrower or any of its
Subsidiaries maintains depository accounts (collectively, the "LOCK BOX
ACCOUNTS") other than (x) Payroll Account No. 522-84074 under the control
of the Agent's Boston, Massachusetts office (the "PAYROLL ACCOUNT"), (y)
the disbursement account under the control of the Agent's Portland, Maine
office (the "DISBURSEMENT Account") and (z) the depository accounts
referred to in CLAUSE (II) below to enter into an Agency Account Agreement
in the form of EXHIBIT A-1 hereto, pursuant to which such depository
institutions shall transfer daily all funds of the Borrower and its
Subsidiaries therein, (x) with respect to funds of the Borrower and the
North American Subsidiaries (other than the Canadian Subsidiary), to the
FNBB Concentration Accounts under the control of the Agent's Boston,
Massachusetts office, and (y) with respect to funds of UK Holdings and its
Subsidiaries, to the FNBB Concentration Accounts under the control of the
Agent's London, England branch, or such other locations in the United
Kingdom as the Agent shall designate, (C) deposit, on a daily basis, any
cash or cash equivalents or any other proceeds of Collateral received by
the Borrower or any of its Subsidiaries either directly into the
applicable FNBB Concentration Account or into the Lock Box Accounts and
(D) transfer, on a daily basis, all funds in the Lock Box Accounts to the
FNBB Concentration Accounts, and (ii) with respect to those depository
accounts listed in SCHEDULE 9.14(A) hereto (collectively, the "OPERATING
ACCOUNTS"), (A) cause all depository institutions at which the Borrower or
any of its
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Subsidiaries maintains such accounts to enter into an Agency Account
Agreement in the form of EXHIBIT A-2 hereto, pursuant to which such
depository institutions shall, upon the written request thereof of the
Agent (each a "TRANSFER REQUEST"), transfer daily all funds of the
Borrower and its Subsidiaries in the Operating Accounts to the applicable
FNBB Concentration Account, and (B) not maintain in the Operating Accounts
more than the amounts set forth opposite each such Operating Account on
SCHEDULE 9.14(A). The Agent shall have the right to deliver a Transfer
Request at any time upon the occurence of a Default or an Event of
Default.
(b) The Canadian Subsidiary (i) shall only maintain the depository
accounts listed on SCHEDULE 9.14(B) hereto (collectively, the "CANADIAN
ACCOUNTS"), (ii) shall cause each depository institution at which the
Canadian Subsidiary maintains such Canadian Accounts to enter into an
Agency Account Agreement substantially in the form of EXHIBIT A-2 hereto,
and (iii) shall not allow more than $300,000 on average during any sixty
(60) day period be maintained in the Canadian Accounts, collectively.
(c) The Holland Subsidiary (i) shall only maintain the depository
accounts listed on SCHEDULE 9.14(C) hereto (collectively, the "HOLLAND
ACCOUNTS"), (ii) shall cause the depository institution at which the
Holland Subsidiary maintains the Holland Accounts to enter into an Agency
Account Agreement substantially in the form of EXHIBIT A-2 hereto, and
(iii) shall not allow more than $100,000 at any one time be maintained in
the Holland Accounts, collectively.
(d) On or prior to the Closing Date, the Borrower will, and will
cause each of its Subsidiaries to, obtain Agency Account Agreements
(whereby such depository institution shall, among other things, waive any
right to set-off, other than for service charges and returns incurred in
connection therewith) from each depository institution at which the
Borrower or any of its Subsidiaries maintains depository accounts. The
Borrower and its Subsidiaries shall not maintain any bank accounts other
than the Lock Box Accounts, the Operating Accounts, the FNBB Concentration
Accounts, the Canadian Accounts, the FNBB Operating Accounts, the Holland
Accounts, the Payroll Account and the Disbursement Account.
(e) The Borrower hereby agrees that all amounts belonging to the
Borrower or any of its Subsidiaries and received by the Agent in any of
the FNBB Concentration Accounts will be the sole and exclusive property of
the Agent, for the accounts of the Lenders and the Agents, to be applied
in accordance with SECTION 14.4 hereof after the occurrence and during the
continuance of a Default or an Event of Default
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9.15. INTEREST RATE PROTECTION. Within ninety (90) days following the
Closing Date, the Borrower shall have obtained such interest rate cap, collar or
swap arrangements ("INTEREST RATE PROTECTION AGREEMENTS") as shall be necessary
to effectively cap or fix the interest cost to the Borrower on not less than
forty percent (40%) of the Term Loan, on terms satisfactory to the Agent.
9.16. STANDBY LETTERS OF CREDIT. The Borrower will, and will cause each of
its Subsidiaries to, as soon as practicable, but in any event no later than ten
(10) days after the receipt thereof, (a) deliver to the Agent each standby
Letter of Credit securing Accounts Receivable with an expiration date three (3)
months or later from the issuance date thereof and in a face amount exceeding
$500,000, to be held by the Agent as additional security for the Obligations, or
(b) to the extent such Letter of Credit is assignable by its terms, assign the
same to the Agent as additional security for the Obligations.
9.17. HOLDING COMPANY; UK HOLDINGS. Neither the Holding Company nor UK
Holdings shall, at any time, engage in any business activity other than to hold
beneficially all of the issued and outstanding shares of capital stock of the
Borrower and the UK Subsidiary, respectively. Neither the Holding Company nor UK
Holdings shall, at any time, lease or own any real property or employ any
employees, agents (other than a registered agent in its state of incorporation)
or representatives for any reason whatsoever.
9.18. FURTHER ASSURANCES. The Borrower and the Holding Company will, and
will cause each of their Subsidiaries to, cooperate with the Lenders and the
Agent and execute such further instruments and documents as the Lenders or the
Agent shall reasonably request to carry out to their satisfaction the
transactions contemplated by this Credit Agreement and the other Loan Documents.
10. CERTAIN NEGATIVE COVENANTS OF THE BORROWER AND THE HOLDING COMPANY.
Each of the Holding Company and the Borrower covenants and agrees that,
until all of the Obligations have been irrevocably paid and satisfied in full,
and so long as any Lender has any obligation to make any Loans hereunder or any
Advances under the Facility Agreement, the Agent has any obligation to issue,
extend or renew any Letters of Credit hereunder, or the UK Subsidiary has any
right to utilize the facilities available to it under Facility Agreement:
10.1. RESTRICTIONS ON INDEBTEDNESS. The Borrower and the Holding Company
will not, and will not permit any of their Subsidiaries to, create, incur,
assume, guarantee or be or remain liable, contingently or otherwise, with
respect to any Indebtedness; PROVIDED, HOWEVER, that the Borrower and its
Subsidiaries (and with respect only to SUBSECTIONS (a), (c), (d), (f), (j), (l),
and (o) below, the Holding
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Company) may create, incur, assume, guarantee or be or remain liable with
respect to:
(a) Indebtedness to the Lenders and the Agent arising under any
of the Loan Documents;
(b) current liabilities of the Borrower or such Subsidiary incurred
in the ordinary course of business, not through (i) the borrowing of
money, or (ii) the obtaining of credit except for credit on an open
account basis customarily extended and in fact extended in connection with
normal purchases of goods and services;
(c) Indebtedness in respect of taxes, assessments, governmental
charges or levies and claims for labor, materials and supplies to the
extent that payment therefor shall not at the time be required to be made
in accordance with the provisions of SECTION 9.8 above;
(d) Indebtedness in respect of judgments or awards that have been in
force for less than the applicable period for taking an appeal so long as
execution is not levied thereunder or in respect of which the Borrower,
such Subsidiary or the Holding Company (as the case may be) shall at the
time in good faith be prosecuting an appeal or proceedings for review and
in respect of which a stay of execution shall have been obtained pending
such appeal or review;
(e) endorsements for collection, deposit or negotiation and
warranties of products or services, in each case incurred in the
ordinary course of business;
(f) Subordinated Debt;
(g) obligations under Capitalized Leases not exceeding
$1,000,000 in aggregate amount at any time outstanding;
(h) Indebtedness incurred in connection with the acquisition after
the date hereof of any real or personal property by the Borrower or such
Subsidiary; PROVIDED that the aggregate principal amount of such
Indebtedness of the Borrower and its Subsidiaries shall not exceed the
aggregate amount of $1,000,000 at any one time;
(i) Indebtedness incurred in connection with Interest Rate
Protection Agreements entered into by the Borrower pursuant to SECTION
9.16 hereof;
(j) Indebtedness existing on the Closing Date and listed and
described on SCHEDULE 10.1 hereto;
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(k) Other Indebtedness to which the Agent shall have given its prior
written consent; PROVIDED that such Indebtedness does not exceed in the
aggregate $1,000,000 at any one time;
(l) Indebtedness of the Borrower to any of its Subsidiaries or the
Holding Company; guarantees, endorsements or other contingent obligations
of the Borrower in respect of Indebtedness of any Subsidiary of the
Borrower permitted hereunder; or any Indebtedness of any Subsidiary of the
Borrower or of the Holding Company to the Borrower; PROVIDED, that such
Indebtedness is subordinated in all respects to Indebtedness of the
Borrower, such Subsidiary or the Holding Company (as the case may be) to
the Lenders and the Agent arising under the Loan Documents;
(m) Indebtedness under (i) the UK Facility and (ii) the Canadian
Working Capital Facility;
(n) Indebtedness in respect of surety or other bonds issued in the
ordinary course of business secured by liens permitted in SECTION 10.2(D)
below; and
(o) Indebtedness of the Borrower, any of its Subsidiaries or the
Holding Company incurred by such Person as a result of insurance premium
financing entered into in connection with the purchase by such Person of
policies of insurance required hereunder or under the Security Agreements.
10.2. RESTRICTIONS ON LIENS. The Borrower and the Holding Company will
not, and will not permit any of their Subsidiaries to, (a) create or incur or
suffer to be created or incurred or to exist any lien, encumbrance, mortgage,
pledge, charge, restriction or other security interest of any kind upon any of
its property or assets of any character whether now owned or hereafter acquired,
or upon the income or profits therefrom; (b) transfer any of such property or
assets or the income or profits therefrom for the purpose of subjecting the same
to the payment of Indebtedness or performance of any other obligation in
priority to payment of its general creditors; (c) acquire, or agree or have an
option to acquire, any property or assets upon conditional sale or other title
retention or purchase money security agreement, device or arrangement; (d)
suffer to exist for a period of more than sixty (60) days after the same shall
have been incurred any Indebtedness or claim or demand against it that if unpaid
might by law or upon Bankruptcy or insolvency, or otherwise, be given any
priority whatsoever over its general creditors; or (e) sell, assign, pledge or
otherwise transfer any accounts, contract rights, general intangibles, chattel
paper or instruments, with recourse; PROVIDED, HOWEVER, that the Borrower and
its Subsidiaries (and with respect only to liens to secure taxes and SUBSECTION
(L) below, the Holding Company) may create or incur or suffer to be created or
incurred or to exist:
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(a) liens in favor of the Borrower on all or part of the assets of
any Subsidiary of the Borrower securing Indebtedness owing by such
Subsidiary of the Borrower to the Borrower; PROVIDED that such liens are
subordinated in all respects to all liens in favor of the Agent;
(b) liens to secure taxes, assessments and other government charges
in respect of obligations not overdue or liens on properties other than
Mortgaged Properties to secure claims for labor, material or supplies in
respect of obligations not overdue;
(c) deposits or pledges made in connection with, or to secure
payment of, workmen's compensation, unemployment insurance, old age
pensions or other social security obligations;
(d) deposits or pledges made to secure the performance of bids,
tenders, trade contracts (other than for borrowed money), leases,
statutory and regulatory obligations, surety and appeal bonds, performance
and return-of-money bonds and other obligations of a like nature incurred
in the ordinary course of business;
(e) liens on properties other than Mortgaged Properties in respect
of judgments or awards, the Indebtedness with respect to which is
permitted by SECTION 10.1(D) above;
(f) liens of carriers, warehousemen, mechanics and materialmen, and
other like liens on properties other than Mortgaged Properties, in
existence less than one hundred and twenty (120) days from the date of
creation thereof in respect of obligations not overdue;
(g) encumbrances on Real Estate other than the Mortgaged Properties
consisting of easements, rights of way, zoning restrictions, restrictions
on the use of real property and defects and irregularities in the title
thereto, landlord's or lessor's liens under leases to which the Borrower
or any Subsidiary of the Borrower is a party, and other minor liens or
encumbrances none of which in the opinion of the Borrower interferes
materially with the use of the property affected in the ordinary conduct
of the business of the Borrower and its Subsidiaries, which defects do not
individually or in the aggregate have a materially adverse effect on the
business of the Borrower individually or of the Borrower and its
Subsidiaries on a consolidated basis;
(h) liens existing on the Closing Date and listed on SCHEDULE
10.2 hereto;
(i) purchase money security interests in or purchase money mortgages
on real or personal property other than the Mortgaged Properties acquired
<PAGE>
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after the date hereof to secure purchase money Indebtedness of the type
and amount permitted by SECTION 10.1(H) above, incurred in connection with
the acquisition of such property, which security interests or mortgages
cover only the real or personal property so acquired;
(j) liens and encumbrances on the Mortgaged Properties as and to
the extent permitted by the Mortgages applicable thereto;
(k) rights of lessors with respect to property leased by the
Borrower or its Subsidiaries;
(l) rights of lessees to use Rental Equipment and/or Rental
Inventory leased by such Persons from the Borrower, PROVIDED that no such
Person shall have a lien or security interest of any kind on or in any
such equipment other than the right (if any) to purchase from the Borrower
the Rental Equipment and/or Rental Inventory pursuant to the terms of the
underlying rental agreement or contract; and
(m) liens in favor of the Agent for the benefit of the Lenders
and the Agent under the Loan Documents.
10.3. RESTRICTIONS ON INVESTMENTS. The Borrower and the Holding Company
will not, and will not permit any of their Subsidiaries to, make or permit to
exist or to remain outstanding any Investment; PROVIDED, HOWEVER that the
Borrower and its Subsidiaries (and with respect only to SUBSECTIONS (D), (E) and
(F) below, the Holding Company), may make or permit to exist or remain
outstanding Investments in:
(a) marketable direct or guaranteed obligations of the United States
of America that mature within one (1) year from the date of purchase by
the Borrower;
(b) demand deposits, certificates of deposit, bankers acceptances
and time deposits of United States banks having total assets in excess of
$1,000,000,000 which have entered into Agency Account Agreements;
(c) securities commonly known as "commercial paper" issued by a
corporation organized and existing under the laws of the United States of
America or any state thereof that at the time of purchase have been rated
and the ratings for which are not less than "P 1" if rated by Moody's
Investors Services, Inc., and not less than "A 1" if rated by Standard and
Poor's Corporation;
(d) Investments existing on the Closing Date hereof and listed
on SCHEDULE 10.3 hereto;
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(e) Investments with respect to Indebtedness permitted by Section
10.1(L) so long as such entities remain Subsidiaries of the Borrower, or,
with respect to the Holding Company, such entity remains the sole
beneficial holder of all of the issued and outstanding capital stock of
the Borrower;
(f) Investments consisting of the Guaranties;
(g) Investments consisting of promissory notes received as
proceeds of asset dispositions permitted by SECTION 10.5.2 below;
(h) Investments consisting of (i) Accounts Receivable, (ii) prepaid
expenses in the ordinary course and (iii) workers' compensation,
performance and other similar deposits permitted by SECTION 10.2(C)
hereof;
(i) Investments consisting of loans and advances to employees for
moving, entertainment, travel and other similar expenses in the ordinary
course of business not to exceed $100,000 in the aggregate at any time
outstanding; and
(j) Investments in an aggregate amount not to exceed $100,000 in the
Holland Subsidiary; PROVIDED that (i) the Borrower, at the time of such
Investments, owns 100% of the equity of the Holland Subsidiary, (ii) such
Investments are made directly to the Holland Accounts, and (iii) the
amount of such Investments, together with all other funds and credits in
the Holland Accounts, shall not exceed $100,000, collectively, at any
time;
PROVIDED, HOWEVER, that, with the exception of demand deposits referred to in
SECTION 10.3(B), such Investments will be considered Investments permitted by
this SECTION 10.3 only if all actions have been taken to the satisfaction of the
Agent to provide to the Agent, for the benefit of the Lenders and the Agent, a
first priority perfected security interest in all of such Investments free of
all encumbrances other than Permitted Liens.
10.4. DISTRIBUTIONS. The Borrower and the Holding Company will not make
any Distributions; PROVIDED, HOWEVER, that so long as no Default or Event of
Default has occured, the Borrower may make Distributions to the Holding Company
in an amount not to exceed the interest payments then due and payable by the
Holding Company to the Primary Investors under the Subordinated Notes.
10.5. MERGER, CONSOLIDATION AND DISPOSITION OF ASSETS.
10.5.1. MERGERS AND ACQUISITIONS. The Borrower and the Holding
Company will not, and will not permit any of their Subsidiaries to, become
a party to any merger or consolidation, or agree to or effect any asset
acquisition or stock acquisition (other than the acquisition of assets in
the
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ordinary course of business consistent with past practices), except (i)
the merger or consolidation of one or more of the Subsidiaries of the
Borrower with and into the Borrower, or the merger or consolidation of two
or more Subsidiaries of the Borrower or (ii) any acquisition of stock or
assets by the Borrower of any other Person which has been approved by the
Agent and which is for a purchase price of less than $2,500,000 at any
time when the ratio of Consolidated Operating Cash Flow to Consolidated
Debt Service for the four most recently ended fiscal quarters is greater
than 3.00:1 (on both a historical and pro forma basis after giving effect
to such acquisition).
10.5.2. DISPOSITION OF ASSETS. The Borrower and the Holding Company
will not, and will not permit any of their Subsidiaries to, become a party
to or agree to or effect any disposition of assets, other than (a) the
disposition by the Borrower or any of its Subsidiaries of Rental Equipment
and/or Rental Inventory in the ordinary course of business consistent with
the past practices of the Target Companies, (b) the sale or other
disposition by the Borrower or any of its Subsidiaries of obsolete or worn
out property in the ordinary course of business, (c) the sale by the
Borrower or any of its Subsidiaries of inventory in the ordinary course of
business, or (d) any other sales or dispositions by the Borrower or any of
its Subsidiaries of assets whose aggregate fair market value does not
exceed $250,000 in any fiscal year, the consideration in cash received for
any of the above which equals an amount not less than the fair market
value of such assets; PROVIDED that the Borrower will give the Agent five
(5) Business Days prior written notice of any disposition of any assets
which will yield proceeds of more than $1,000,000 setting forth the
details of such transaction.
10.6. SALE AND LEASEBACK. The Borrower and the Holding Company will not,
and will not permit any of their Subsidiaries to, enter into any arrangement,
directly or indirectly, whereby the Borrower or any Subsidiary of the Borrower
shall sell or transfer any property owned by it in order then or thereafter to
lease such property or lease other property that the Borrower or any Subsidiary
of the Borrower intends to use for substantially the same purpose as the
property being sold or transferred.
10.7. COMPLIANCE WITH ENVIRONMENTAL LAWS. The Borrower and the Holding
Company will not, and will not permit any of their Subsidiaries to, (a) conduct
any activity at any Real Estate or use any Real Estate in any manner so as to
cause a release (i.e. releasing, spilling, leaking, pumping, pouring, emitting,
emptying, discharging, injecting, escaping, leaching, disposing or dumping) or
threatened release of Hazardous Substances on, upon or into the Real Estate, or
(b) otherwise conduct any activity at any Real Estate or use any Real Estate in
any manner that would violate any Environmental Law or bring such Real Estate in
violation of any Environmental Law.
<PAGE>
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10.8. SUBORDINATED DEBT. The Borrower and the Holding Company will not,
and will not permit any of their Subsidiaries to, amend, supplement or otherwise
modify the terms of any of the Subordinated Debt or prepay, pay, redeem or
repurchase any of the Subordinated Debt; PROVIDED that regularly scheduled
interest payments on Subordinated Debt may be paid in accordance with the terms
of the Subordination Note so long as no Default or Event of Default has occurred
and is continuing.
10.9. EMPLOYEE BENEFIT PLANS. Neither the Borrower, the Holding
Company nor any ERISA Affiliate will:
(a) engage in any "prohibited transaction" within the meaning of
SECTION 406 of ERISA or SECTION 4975 of the Code which could result in a
material liability for the Borrower or any of its Subsidiaries; or
(b) permit any Guaranteed Pension Plan to incur an "accumulated
funding deficiency", as such term is defined in SECTION 302 of ERISA,
whether or not such deficiency is or may be waived; or
(c) fail to contribute to any Guaranteed Pension Plan to an extent
which, or terminate any Guaranteed Pension Plan in a manner which, could
result in the imposition of a lien or encumbrance on the assets of the
Borrower or any of its Subsidiaries pursuant to SECTIONS 302(F) or 4068 of
ERISA; or
(d) permit or take any action which would result in the aggregate
benefit liabilities (with the meaning of SECTION 4001 of ERISA) of all
Guaranteed Pension Plans exceeding the value of the aggregate assets of
such Plans, disregarding for this purpose the benefit liabilities and
assets of any such Plan with assets in excess of benefit liabilities, by
more than $500,000.
10.10. BANK ACCOUNTS. The Borrower and the Holding Company will not, and
will not permit any of their Subsidiaries to, (a) establish any bank accounts
other than those existing on the date hereof and listed on SCHEDULE 8.21 hereof
(other than depository institutions acceptable to the Agent which have executed
and delivered to the Agent Agency Account Agreements) without the Agent's prior
written consent, (b) violate directly or indirectly any bank agency or lock box
agreement in favor of the Agent for the benefit of the Lenders and the Agent
with respect to such account, or (c) deposit into any of the payroll accounts
listed on SCHEDULE 8.21 any amounts in excess of amounts necessary to pay
current payroll obligations from such accounts.
10.11. TRANSACTIONS WITH AFFILIATES. Except as otherwise expressly
permitted by the terms hereof, the Borrower and the Holding Company will not,
and will not permit any of their Subsidiaries to, (a) engage in any transaction
with any Affiliate on terms more favorable to such Affiliate than would have
been obtainable on an arms' length basis, considered from the perspective of the
Borrower, the Holding Company or such Subsidiary, as applicable, or (b) pay, or
enter into any agreement requiring the Borrower, the Holding Company or such
Subsidiary, as applicable, to pay salary or bonus or other compensation payments
to any officer or management employee of the Borrower, the
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Holding Company or any Subsidiary of the Borrower or any holder of any title of
office, in an amount in excess of reasonable compensation paid for similar
services by similar businesses similarly situated.
11. FINANCIAL COVENANTS OF THE BORROWER AND THE HOLDING COMPANY.
Each of the Holding Company and the Borrower covenants and agrees that,
until all of the Obligations have been irrevocably paid and satisfied in full,
and so long as any Lender has any obligation to make any Loans hereunder or any
Advances under the Facility Agreement, the Agent has any obligation to issue,
extend or renew any Letters of Credit hereunder, or the UK Subsidiary has any
right to utilize the facilities available to it under the Facility Agreement:
11.1. FUNDED DEBT RATIO. The Borrower and the Holding Company will not
permit the Funded Debt Ratio as of the last day of any fiscal quarter ending on
any date set forth in the table below to exceed the ratio set forth opposite
such date:
------------------------------------------------
FISCAL QUARTER
ENDING DATE RATIO
------------------------------------------------
6/30/97 4.00:1
------------------------------------------------
9/30/97 4.00:1
------------------------------------------------
12/31/97 3.50:1
------------------------------------------------
3/31/98 3.50:1
------------------------------------------------
6/30/98 3.50:1
------------------------------------------------
9/30/98 3.25:1
------------------------------------------------
12/31/98 3.00:1
------------------------------------------------
3/31/99 3.00:1
------------------------------------------------
6/30/99 3.00:1
------------------------------------------------
9/30/99 2.75:1
------------------------------------------------
12/31/99 2.50:1
------------------------------------------------
3/31/00 2.50:1
------------------------------------------------
6/30/00 2.50:1
------------------------------------------------
9/30/00 2.50:1
------------------------------------------------
12/31/00 and thereafter 2:00:1
------------------------------------------------
11.2. CAPITAL EXPENDITURES. The Borrower and the Holding Company will not
make, or permit any of their Subsidiaries to make, Capital Expenditures that
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exceed in aggregate $2,000,000, for all such Persons collectively, for any
fiscal year; PROVIDED that, (a) if during any such fiscal year, the amount of
Capital Expenditures permitted for that fiscal year is not so utilized, a
portion of such unutilized amount not to exceed $500,000 may be utilized in the
immediately succeeding fiscal year, but not in any subsequent fiscal year, and
(b) the Borrower may utilize in the immediately succeeding fiscal year, in part
or in full, irrespective of the $2,000,000 ceiling set forth above, the amount
by which Consolidated Excess Cash Flow for the prior fiscal year exceeded the
amount required to be paid by the Borrower to the Agent pursuant to SECTION
4.3.2 hereof. Notwithstanding the foregoing, the Borrower and the Holding
Company shall not make, or permit any of their Subsidiaries to make, Capital
Expenditures that exceed in aggregate $4,000,000, for all such Persons
collectively, in any fiscal year.
11.3. CONSOLIDATED TANGIBLE NET WORTH. The Borrower and the Holding
Company will not permit Consolidated Tangible Net Worth at any time to be less
than the sum of (a) $9,000,000, plus (b) on a cumulative basis, 75% of positive
Consolidated Net Income for each fiscal year beginning with the fiscal year
ended March 31, 1998, plus (c) 100% of the proceeds of any sale by any of the
Holding Company or any of its Subsidiaries of (i) equity securities issued by
such Person, or (ii) warrants or subscription rights for equity securities
issued by such Person.
11.4. INTEREST COVERAGE RATIO. The Borrower and the Holding Company will
not permit, for any period of four consecutive fiscal quarters ending on any
date set forth in the table below, the ratio of (a) Consolidated EBITDA for such
period to (b) Consolidated Total Interest Expense for such period, to be less
than the ratio set forth opposite such date:
------------------------------------------------
DATE RATIO
------------------------------------------------
6/30/97 2.00:1
------------------------------------------------
9/30/97 2.00:1
------------------------------------------------
12/31/97 2.75:1
------------------------------------------------
3/31/98 2.75:1
------------------------------------------------
6/30/98 3.00:1
------------------------------------------------
9/30/98 3.00:1
------------------------------------------------
12/31/98 3.75:1
------------------------------------------------
3/31/99 3.75:1
------------------------------------------------
6/30/99 4.00:1
------------------------------------------------
9/30/99 4.00:1
------------------------------------------------
12/31/99 and thereafter 4.50:1
------------------------------------------------
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11.5. CONSOLIDATED OPERATING CASH FLOW TO CONSOLIDATED DEBT SERVICE RATIO.
The Borrower and the Holding Company will not permit, for any period of four
consecutive fiscal quarters ending on any date set forth in the table below, the
ratio of (a) Consolidated Operating Cash Flow for such period to (b)
Consolidated Debt Service for such period, to be less than the ratio set forth
opposite such date:
------------------------------------------------
DATE RATIO
------------------------------------------------
6/30/97 1.20:1
------------------------------------------------
9/30/97 1.20:1
------------------------------------------------
12/31/97 1.30:1
------------------------------------------------
3/31/98 1.30:1
------------------------------------------------
6/30/98 1.30:1
------------------------------------------------
9/30/98 1.30:1
------------------------------------------------
12/31/98 1.40:1
------------------------------------------------
3/31/99 1.40:1
------------------------------------------------
6/30/99 1.40:1
------------------------------------------------
9/30/99 1.40:1
------------------------------------------------
12/31/99 1.50:1
------------------------------------------------
3/31/00 and thereafter 1.50:1
------------------------------------------------
12. CLOSING CONDITIONS.
The obligations of the Lenders to make the initial Revolving Credit Loans
and the Term Loan and of the Agent to issue any initial Letters of Credit shall
be subject to the satisfaction of the following conditions precedent on or prior
to the Closing Date;
12.1. LOAN DOCUMENTS. Each of the Loan Documents shall have been duly
executed and delivered by the respective parties thereto, shall be in full force
and effect and shall be in form and substance satisfactory to each of the
Lenders. Each Lender shall have received a fully executed copy of each such
document.
12.2. CERTIFIED COPIES OF CHARTER DOCUMENTS. Each of the Lenders shall
have received from the Holding Company and each of its Subsidiaries a copy,
certified by a duly authorized officer of such Person to be true and complete on
the Closing Date, of each of (a) such Person's charter or other incorporation
documents as in effect on such date of certification, and (b) such Person's
by-laws as in effect on such date.
12.3. CORPORATE ACTION. All corporate action necessary for the valid
execution, delivery and performance by the Holding Company and each of its
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Subsidiaries of this Credit Agreement and the other Loan Documents to which such
Person is or is to become a party shall have been duly and effectively taken,
and evidence thereof satisfactory to the Lenders shall have been provided to
each of the Lenders.
12.4. INCUMBENCY CERTIFICATE. Each of the Lenders shall have received from
the Holding Company and each of its Subsidiaries an incumbency certificate,
dated as of the Closing Date, signed by a duly authorized officer of such
Person, and giving the name and bearing a specimen signature of each individual
who shall be authorized: (a) to sign, in the name and on behalf of such Person,
each of the Loan Documents to which such Person is or is to become a party; (b)
in the case of the Borrower, to make Loan Requests and Conversion Requests and
to apply for Letters of Credit; and (c) to give notices and to take other action
on its behalf under the Loan Documents.
12.5. FINANCIAL CONDITION. The Agent shall be satisfied that there has
been no adverse change in the financial condition, assets or business operations
of the Holding Company and its Subsidiaries since the Balance Sheet Date and the
Borrower shall have delivered to the Agent the Pro Forma Closing Date Balance
Sheet of the Holding Company and its Subsidiaries. All such balance sheets shall
be in form and substance satisfactory to the Agent.
12.6. CERTIFICATES OF GOOD STANDING. The Agent shall have received a
certificate signed by the Secretary of State (or other appropriate governmental
official, as the case may be) of the jurisdiction of organization or
incorporation (as applicable), of the Holding Company and each of its
Subsidiaries, dated a date reasonably near (but prior to) the Closing Date,
stating that such Person is duly organized, validly existing and in good
standing under the laws of such jurisdiction.
12.7. VALIDITY OF LIENS. The Security Documents and the UK Security
Documents, collectively, shall be effective to create in favor of the Agent a
legal, valid and enforceable first (except for Permitted Liens entitled to
priority under applicable law) security interest in and lien upon the
Collateral. All filings, recordings, deliveries of instruments and other actions
necessary or desirable in the opinion of the Agent to protect and preserve such
security interests shall have been duly effected. The Agent shall have received
evidence thereof in form and substance satisfactory to the Agent.
12.8. PERFECTION CERTIFICATES AND UCC SEARCH RESULTS. The Agent shall have
received from each of the Holding Company and its Subsidiaries a completed and
fully executed Perfection Certificate and the results of lien searches
(including without limitation UCC, judgment and tax lien search results) with
respect to the Collateral, indicating no liens other than Permitted Liens and
otherwise in form and substance satisfactory to the Agent.
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12.9. SURVEY AND TAXES. The Agent shall have received (a) an updated
Survey of each Mortgaged Property together with a Surveyor Certificate relating
thereto, and (b) evidence of payment of real estate taxes and municipal charges
on all Real Estate not delinquent on or before the Closing Date.
12.10. ENVIRONMENTAL ASSESSMENT REPORTS. The Agent shall have received
satisfactory environmental assessment reports from independent third party
environmental engineers in form and substance satisfactory to the Agent,
covering the Real Property located in each of Tulsa, Oklahoma and Edmonton,
Canada.
12.11. APPRAISALS. The Agent shall have received an appraisal report in
form and substance and from appraisers satisfactory to the Agent, covering the
Real Property located in Tulsa, Oklahoma.
12.12. TITLE INSURANCE. The Agent shall have received a Title Policy
covering the Real Estate located in Tulsa, Oklahoma (or commitments to issue
such policies, with all conditions to issuance of the Title Policy deleted by an
authorized agent of the Title Insurance Company), together with proof of payment
of all fees and premiums for such policies, from the Title Insurance Company, in
the amount of $4,875,000 and insuring the interest of the Agent as mortgagee
under the Mortgages.
12.13. LANDLORD CONSENTS. The Borrower and its Subsidiaries shall have
delivered to the Agent all consents required for the Agent to receive, as part
of the Security Documents, a collateral assignment of each material leasehold of
personal property of each of the Borrower, its Subsidiaries and the Holding
Company, together in each case with such estoppel certificates as the Agent may
request.
12.14. CERTIFICATES OF INSURANCE. The Agent shall have received (a) a
certificate of insurance from an independent insurance broker dated as of the
Closing Date, identifying insurers, types of insurance, insurance limits, and
policy terms, and otherwise describing the insurance obtained in accordance with
the provisions of the Security Agreements, and (b) certified copies of all
policies evidencing such insurance (or certificates therefor signed by the
insurer or an agent authorized to bind the insurer)
12.15. BANK ACCOUNTS; AND OPERATING AGENCY ACCOUNT AGREEMENTS. The
Borrower and each of its Subsidiaries shall have established the FNBB
Concentration Accounts, the Lock Box Accounts, the Operating Accounts, the
Canadian Accounts and the Holland Account, and the Agent shall have received an
Agency Account Agreement, in form and substance satisfactory to the Agent, from
each bank at which the Borrower or any of its Subsidiaries maintains depository
accounts.
12.16. BORROWING BASE REPORT. The Agent shall have received from the
Borrower the initial Borrowing Base Report dated as of the Closing Date and
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calculated based upon information relating to the Borrower's assets as of April
30, 1997.
12.17. ACCOUNTS RECEIVABLE AGING REPORT. The Agent shall have received
from the Borrower the most recent Accounts Receivable aging report of the
Borrower and its Subsidiaries, dated as of a date which shall be no more than
twenty (20) days prior to the Closing Date, and the Borrower shall have notified
the Agent in writing on the Closing Date of any material deviation from the
Accounts Receivable values reflected in such Accounts Receivable aging report
and shall have provided the Agent with such supplementary documentation as the
Agent may reasonably request.
12.18. SOLVENCY CERTIFICATE. The Agent shall have received an officer's
certificate of the Borrower dated as of the Closing Date as to the solvency of
the Holding Company and its Subsidiaries following the consummation of the
Acquisition and the transactions contemplated herein and the other Loan
Documents, in form and substance satisfactory to the Agent. The Solvency
Certificate shall further set forth in detail and certify that, at the Closing,
after giving effect to the transactions contemplated hereby, (a) the ratio of
Consolidated Funded Debt for the three (3) month period ending on the Closing
Date to Consolidated EBITDA for the trailing twelve (12) month period ending on
the Closing Date, determined on a pro forma basis, shall not exceed 4.00:1.00,
and (b) the amount of unused Borrowing Base availability under the Total
Commitment and the UK Facility, collectively, shall not be less than $3,000,000.
12.19. OPINION OF COUNSEL. The Agent shall have received a favorable legal
opinion addressed to the Agent (and on which the Lenders may rely), dated as of
the Closing Date, in form and substance satisfactory to the Lenders and the
Agent, from:
(a) Thompson & Knight, counsel to the Borrower, the North
American Subsidiaries and the Holding Company;
(b) Bryan & Company, special Canadian counsel to the Borrower
and the North American Subsidiaries; and
(c) Conner & Winters, special real estate counsel to the Borrower
with respect to the Real Estate located in Tulsa, Oklahoma.
12.20. PAYMENT OF FEES. The Borrower shall have paid to the Lenders and
(as appropriate) the Agent, all fees, costs, expenses and amounts owing and
payable to such Persons on the Closing Date under this Credit Agreement or any
of the other Loan Documents.
12.21. THIRD PARTY CONSENTS. All necessary governmental and third party
consents to and notice of the transactions contemplated hereby, by the other
Loan Documents and by each and every agreement entered into in connection with
the
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Acquisition, shall have been obtained and given, and evidence thereof
satisfactory to the Agent shall have been provided to the Agent.
12.22. ACQUISITION. The Acquisition shall have been completed pursuant to
the terms and provisions of the Purchase Agreement, and the Agent shall have
received executed copies (certified to the Agent's satisfaction to be true and
correct) of each and every definitive agreement, document, certificate,
instrument and other writing entered into by the Investors, the Target Companies
or the Borrower or any of its Subsidiaries in connection with the Acquisition.
12.23. CAPITALIZATION. The Agent shall have received evidence,
satisfactory in form and substance the Agent, that prior to or in connection
with the consummation of the Acquisition, (a) the Investors purchased from the
Holding Company capital stock of the Holding Company equal in value to
$9,140,000, and (b) the Holding Company made an equity contribution to the
Borrower in an amount equal to $9,140,000.
13. CONDITIONS TO ALL BORROWINGS.
The obligations of the Lenders to make any Loan, and of the Agent to
issue, extend or renew any Letter of Credit, in each case whether on or after
the Closing Date, shall also be subject to the satisfaction of the following
conditions precedent:
13.1. REPRESENTATIONS TRUE; NO EVENT OF DEFAULT. Each of the
representations and warranties of each of the Holding Company and its
Subsidiaries contained in this Credit Agreement, the other Loan Documents or in
any document or instrument delivered pursuant to or in connection herewith or
therewith, shall be true as of the date as of which they were made and shall
also be true at and as of the time of the making of such Loan or the issuance,
extension or renewal of such Letter of Credit, with the same effect as if made
at and as of that time (except to the extent of changes resulting from
transactions contemplated or permitted by this Credit Agreement and the other
Loan Documents and changes occurring in the ordinary course of business that
singly or in the aggregate are not materially adverse, and to the extent that
such representations and warranties relate expressly to an earlier date) and no
Default or Event of Default shall have occurred and be continuing. The Agent
shall have received a certificate of the Borrower signed by an authorized
officer of the Borrower to such effect.
13.2. NO LEGAL IMPEDIMENT. No change shall have occurred in any law or
regulations thereunder or interpretations thereof that in the reasonable opinion
of any Lender would make it illegal for such Lender to make such Loan or to
participate in the issuance, extension or renewal of such Letter of Credit or in
the reasonable opinion of the Agent would make it illegal for the Agent to
issue, extend or renew such Letter of Credit.
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13.3. GOVERNMENTAL REGULATION. Each Lender shall have received such
statements in substance and form reasonably satisfactory to such Lender as such
Lender shall require for the purpose of compliance with any applicable
regulations of the Comptroller of the Currency or the Board of Governors of the
Federal Reserve System.
13.4. PROCEEDINGS AND DOCUMENTS. All proceedings in connection with the
transactions contemplated by this Credit Agreement, the other Loan Documents and
all other documents incident hereto and thereto shall be satisfactory in
substance and in form to the Lenders and to the Agent and to the Agent's Special
Counsel, and the Lenders, the Agent and such counsel shall have received all
information and such counterpart originals or certified or other copies of such
documents as the Agent may reasonably request.
13.5. BORROWING BASE REPORT. The Agent shall have received the most recent
Borrowing Base Report required to be delivered to the Agent in accordance with
SECTION 9.4(E) hereof and, if requested by the Agent, a Borrowing Base Report
dated within five (5) days of the Drawdown Date of such Loan or of the date of
issuance, extension or renewal of such Letter of Credit.
14. EVENTS OF DEFAULT; ACCELERATION; ETC.
14.1. EVENTS OF DEFAULT AND ACCELERATION. If any of the following events
("EVENTS OF DEFAULT" or, if the giving of notice or the lapse of time or both is
required, then, prior to such notice or lapse of time, "DEFAULTS") shall occur:
(a) the Borrower shall fail to pay any principal of the Loans or any
Reimbursement Obligation when the same shall become due and payable,
whether at the stated date of maturity or any accelerated date of maturity
or at any other date fixed for payment;
(b) the Holding Company or any of its Subsidiaries shall fail to pay
any interest on the Loans, the commitment fee, the Agent's fee, or other
sums due hereunder or under any of the other Loan Documents, when the same
shall become due and payable, whether at the stated date of maturity or
any accelerated date of maturity or at any other date fixed for payment;
(c) the Borrower or the Holding Company (as the case may be) shall
fail to comply with any of its covenants contained in (i) Sections 9.9,
9.11, 9.13, 9.15 and 9.18 hereof within thirty (30) days after the date on
which the same shall have become due or required to be performed, or (ii)
the remaining subsections of SECTION 9 or Sections 10 or 11 hereof or any
of the covenants contained in the Mortgages;
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(d) the Holding Company or any of its Subsidiaries shall fail to
perform any term, covenant or agreement contained herein or in any of the
other Loan Documents to which such Person is a party (other than those
specified elsewhere in this SECTION 14.1) for thirty (30) days after
written notice of such failure has been given to the Borrower by the
Agent;
(e) any representation or warranty of the Holding Company or any of
its Subsidiaries in this Credit Agreement or any of the other Loan
Documents or in any other document or instrument delivered pursuant to or
in connection herewith or therewith shall prove to have been false in any
material respect upon the date when made or deemed to have been made or
repeated;
(f) the Holding Company or any of its Subsidiaries shall fail to pay
at maturity, or within any applicable period of grace, any obligation in
excess of $500,000 (either individually or in the aggregate) for borrowed
money or credit received or in respect of any Capitalized Leases, or fail
to observe or perform any material term, covenant or agreement contained
in any agreement by which it is bound, evidencing or securing such
obligation for borrowed money or credit received or in respect of any such
Capitalized Leases for such period of time as would permit (assuming the
giving of appropriate notice if required) the holder or holders thereof or
of any obligations issued thereunder to accelerate the maturity thereof;
(g) the Holding Company or any of its Subsidiaries shall make an
assignment for the benefit of creditors, or admit in writing its inability
to pay or generally fail to pay its debts as they mature or become due, or
shall petition or apply for the appointment of a trustee or other
custodian, liquidator or receiver of the Holding Company, or any
Subsidiary of the Holding Company or of any substantial part of the assets
of the Holding Company, or any Subsidiary of the Holding Company or shall
commence any case or other proceeding relating to the Holding Company, the
Borrower or any Subsidiary of the Borrower under any Bankruptcy,
reorganization, arrangement, insolvency, readjustment of debt, dissolution
or liquidation or similar law of any jurisdiction, now or hereafter in
effect, or shall take any action to authorize or in furtherance of any of
the foregoing, or if any such petition or application shall be filed or
any such case or other proceeding shall be commenced against the Holding
Company, or any Subsidiary of the Holding Company and the Holding Company,
or any Subsidiary of the Holding Company shall indicate its approval
thereof, consent thereto or acquiescence therein or such petition or
application shall not have been dismissed within forty-five (45) days
following the filing thereof;
(h) a decree or order is entered appointing any such trustee,
custodian, liquidator or receiver or adjudicating the Holding Company or
any Subsidiary
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of the Holding Company bankrupt or insolvent, or approving a petition in
any such case or other proceeding, or a decree or order for relief is
entered in respect of the Holding Company, or any Subsidiary of the
Holding Company in an involuntary case under federal Bankruptcy laws as
now or hereafter constituted;
(i) there shall remain in force, undischarged, unsatisfied and
unstayed, for more than thirty (30) days, whether or not consecutive, any
final judgment against the Holding Company or any of its Subsidiaries
that, with other outstanding final judgments, undischarged, against the
Holding Company or any of its Subsidiaries, exceeds in the aggregate
$500,000;
(j) there shall exist any default under the terms of any promissory
note evidencing Subordinated Debt; the holders of all or any part of the
Subordinated Debt shall accelerate the maturity of all or any part of the
Subordinated Debt; the Subordinated Debt shall be prepaid, redeemed or
repurchased in whole or in part; or any interest is paid on the
Subordinated Debt while any Default or Event of Default is continuing
hereunder;
(k) if any of the Loan Documents shall be cancelled, terminated,
revoked or rescinded or the Agent's security interests, mortgages or liens
in a substantial portion of the Collateral shall cease to be perfected, or
shall cease to have the priority contemplated by the Security Documents
and the UK Security Documents, in each case otherwise than in accordance
with the terms thereof or with the express prior written agreement,
consent or approval of the Agent and the Lenders, or any action at law,
suit or in equity or other legal proceeding to cancel, revoke or rescind
any of the Loan Documents shall be commenced by or on behalf of the
Holding Company, any of its Subsidiaries or any of their respective
stockholders, or any court or any other governmental or regulatory
authority or agency of competent jurisdiction shall make a determination
that, or issue a judgment, order, decree or ruling to the effect that, any
one or more of the Loan Documents is illegal, invalid or unenforceable in
accordance with the terms thereof;
(l) with respect to any Guaranteed Pension Plan, an ERISA Reportable
Event shall have occurred and the Majority Lenders shall have determined
in their reasonable discretion that such event reasonably could be
expected to result in liability of the Holding Company or any of its
Subsidiaries to the PBGC or such Guaranteed Pension Plan in an aggregate
amount exceeding $500,000 and such event in the circumstances occurring
reasonably could constitute grounds for the termination of such Guaranteed
Pension Plan by the PBGC or for the appointment by the appropriate United
States District Court of a trustee to administer such Guaranteed Pension
Plan; or a trustee shall have been appointed by the United States District
Court to administer such
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Plan; or the PBGC shall have instituted proceedings to terminate such
Guaranteed Pension Plan;
(m) the Holding Company or any of its Subsidiaries shall be
enjoined, restrained or in any way prevented by the order of any court or
any administrative or regulatory agency from conducting any material part
of its business and such order shall continue in effect for more than
forty-five (45) days;
(n) there shall occur any material damage to, or loss, theft or
destruction of, any Collateral, whether or not insured, or any strike,
lockout, labor dispute, embargo, condemnation, act of God or public enemy,
or other casualty, which in any such case causes, for more than thirty
(30) consecutive days, the cessation or substantial curtailment of revenue
producing activities at any facility of the Holding Company or any of its
Subsidiaries if such event or circumstance is not covered by business
interruption insurance and would have a material adverse effect on the
business, operations or financial condition of such Person;
(o) there shall occur the loss, suspension or revocation of, or
failure to renew, any license or permit now held or hereafter acquired by
the Holding Company or any of its Subsidiaries if such loss, suspension,
revocation or failure to renew would have a material adverse effect on the
business, operations or financial condition of such Person; or
(p) the Primary Investors and Persons who are part of the Primary
Investors' Investor's Control Group, collectively as a group, shall at any
time, (i) cease to own, hold and control common stock of the Holding
Company having the unrestricted right to elect a majority of the Board of
Directors of the Holding Company, or (ii) legally or beneficially own less
than fifty percent (50%) of the shares of the voting common stock of the
Holding Company, as adjusted pursuant to any stock split, stock dividend
or recapitalization or reclassification of the capital of the Holding
Company; or the Holding Company shall at any time, legally or beneficially
own less than 100% of the shares of the capital stock of the Borrower, as
adjusted pursuant to any stock split, stock dividend or recapitalization
or reclassification of the capital stock of the Borrower; or the Borrower
shall at any time, legally or beneficially own less than 100% of the
shares of the capital stock of each of its Subsidiaries in existence as of
the date hereof, as adjusted pursuant to any stock split, stock dividend
or recapitalization or reclassification of the capital of such Subsidiary;
(q) the Holding Company or UK Holdings shall, at any time, engage in
any business activity whatsoever, other than to hold beneficially all of
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the issued and outstanding capital stock of the Borrower or the UK
Subsidiary, respectively; or
(r) there shall occur an Event of Default under (and as defined
in) the Facility Agreement;
then, and for so long as the same may be continuing, the Agent may, and upon the
request of the Majority Lenders shall, by notice in writing to the Borrower
declare all amounts owing with respect to this Credit Agreement, the Notes and
the other U.S. Loan Documents and all Reimbursement Obligations to be, and they
shall thereupon forthwith become, immediately due and payable without
presentment, demand, protest or other notice of any kind, all of which are
hereby expressly waived by the Borrower; PROVIDED that in the event of any Event
of Default specified in SECTIONS 14.1(G), 14.1(H) or 14.1(J) above, all such
amounts shall become immediately due and payable automatically and without any
requirement of notice to the Borrower from the Agent or any Lender.
14.2. TERMINATION OF COMMITMENTS. If any one or more of the Events of
Default specified in SECTIONS 14.1(G), 14.1(H) or 14.1(J) above shall occur, any
unused portion of the credit hereunder shall forthwith terminate and each of the
Lenders shall be relieved of all further obligations to make Loans to the
Borrower and the Agent shall be relieved of all further obligations to issue,
extend or renew Letters of Credit. If any other Event of Default shall have
occurred and be continuing, or if on any Drawdown Date or other date for
issuing, extending or renewing any Letter of Credit the conditions precedent to
the making of the Loans to be made on such Drawdown Date or (as the case may be)
to issuing, extending or renewing such Letter of Credit on such other date are
not satisfied, the Agent may and, upon the request of the Majority Lenders
shall, by written notice to the Borrower, terminate the unused portion of the
credit hereunder, and upon such notice being given such unused portion of the
credit hereunder shall terminate immediately and each of the Lenders shall be
relieved of all further obligations to make Loans and the Agent shall be
relieved of all further obligations to issue, extend or renew Letters of Credit.
No termination of the credit hereunder shall relieve the Holding Company or any
of its Subsidiaries of any of the Obligations.
14.3. REMEDIES. In case any one or more Events of Default shall have
occurred and be continuing, and whether or not the Lenders shall have
accelerated the maturity of the Loans pursuant to SECTION 14.1 hereof, each
Lender, if owed any amount with respect to the Loans or the Reimbursement
Obligations, may, with the consent of the Majority Lenders but not otherwise,
proceed to protect and enforce its rights by suit in equity, action at law or
other appropriate proceeding, whether for the specific performance of any
covenant or agreement contained in this Credit Agreement and the other Loan
Documents or any instrument pursuant to which the Obligations to such Lender are
evidenced, including (as permitted by applicable law)
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the obtaining of the EX PARTE appointment of a receiver, and, if such amount
shall have become due, by declaration or otherwise, proceed to enforce the
payment thereof or any other legal or equitable right of such Lender. No remedy
herein conferred upon any Lender or the Agent or the holder of any Note or
purchaser of any Letter of Credit Participation is intended to be exclusive of
any other remedy, and each and every remedy shall be cumulative and shall be in
addition to every other remedy given hereunder or now or hereafter existing at
law or in equity or by statute or any other provision of law.
14.4. DISTRIBUTION OF COLLATERAL PROCEEDS. In the event that following the
occurrence or during the continuance of any Default or Event of Default, the
Agent or any Lender, as the case may be, receives any monies in connection with
the enforcement of any the Security Documents or the UK Facility, or otherwise
with respect to the realization upon any of the Collateral or any of the
collateral under the UK Facility, such monies shall be distributed for
application as follows:
(a) First, to the payment of, or (as the case may be) the
reimbursement of, the Agent for or in respect of all reasonable costs,
expenses, disbursements and losses which shall have been incurred or
sustained by the Agent in connection with the collection of such monies by
the Agent, for the exercise, protection or enforcement by the Agent of all
or any of the rights, remedies, powers and privileges of the Agent under
this Credit Agreement or any of the other Loan Documents or in respect of
the Collateral or the collateral under the UK Facility or in support of
any provision of adequate indemnity to the Agent against any taxes or
liens which by law shall have, or may have, priority over the rights of
the Agent to such monies;
(b) Second, to all other Obligations in such order or preference as
the Majority Lenders may determine; PROVIDED, HOWEVER, that distributions
(i) in respect of the Agent's fee payable hereunder shall be made PARI
PASSU with the other Obligations, and (ii) in respect of any other type of
Obligations owing to the Lenders, such as interest, principal, fees and
expenses, shall be made among the Lenders PRO RATA in accordance with each
Lender's relative interest in such type of Obligation (taking into account
for purposes of this subsection (b)(ii), on a Dollar Equivalent basis,
each Lender's Aggregate Facilities Commitment); and PROVIDED, FURTHER,
that the Agent may in its discretion make proper allowance to take into
account any Obligations not then due and payable;
(c) Third, upon payment and satisfaction in full or other provisions
for payment in full satisfactory to the Lenders and the Agent of all of
the Obligations, to the payment of any obligations required to be paid
pursuant to Section 9-504(1)(C) of the Uniform Commercial Code of The
Commonwealth of Massachusetts; and
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(d) Fourth, the excess, if any, shall be returned to the Borrower or
to such other Persons as are entitled thereto.
In the event that any Lender receives monies pursuant to SECTION 14.4(B)(II)
above which exceed, in aggregate, such Lender's PRO RATA share of the Dollar
Equivalent of the sum of all of the Lenders' Aggregate Facilities Commitments,
such Lender will make such disposition and arrangements with the other Lenders
with respect to the amount of such excess, either by way of purchase of
participations, distribution, PRO TANTO assignment of claims, subrogation or
otherwise, as shall result in each Lender receiving its PRO RATA share of such
monies based upon the sum of the Dollar Equivalent of all of the Lenders'
Aggregate Facilities Commitments.
15. SETOFF.
Regardless of the adequacy of any Collateral, during the continuance of
any Event of Default, any deposits or other sums credited by or due from any of
the Lenders to the Holding Company or any of its Subsidiaries and any securities
or other property of the Holding Company or any of its Subsidiaries in the
possession of such Lender may be applied to or set off by such Lender against
the payment of Obligations and any and all other liabilities, direct, or
indirect, absolute or contingent, due or to become due, now existing or
hereafter arising, of the Holding Company or any of its Subsidiaries to such
Lender. Each of the Lenders agrees with each other Lender that (a) if an amount
to be set-off is to be applied to Indebtedness of the Borrower to such Lender,
other than Indebtedness evidenced by the Notes held by such Lender or
constituting Reimbursement Obligations owed to such Lender, such amount shall be
applied ratably to such other Indebtedness and to the Indebtedness evidenced by
all such Notes held by such Lender or constituting Reimbursement Obligations
owed to such Lender, and (b) if such Lender shall receive from the Holding
Company or any of its Subsidiaries, whether by voluntary payment, exercise of
the right of set-off, counterclaim, cross action, enforcement of the claim
evidenced by the Notes held by, or constituting Reimbursement Obligations owed
to, such Lender by proceedings against the Holding Company or any of its
Subsidiaries at law or in equity or by proof thereof in bankruptcy,
reorganization, liquidation, receivership or similar proceedings, or otherwise,
and shall retain and apply to the payment of the Note or Notes held by, or
Reimbursement Obligations owed to, such Lender, any amount in excess of its
ratable portion of the payments received by all of the Lenders with respect to
the Notes held by, and Reimbursement Obligations owed to, all of the Lenders,
such Lender will make such disposition and arrangements with the other Lenders
with respect to such excess, either by way of distribution, PRO TANTO assignment
of claims, subrogation or otherwise as shall result in each Lender receiving in
respect of the Notes held by it or Reimbursement Obligations owed it, its
proportionate payment as contemplated by this Credit Agreement; PROVIDED that if
all or any part of such excess payment is thereafter
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recovered from such Lender, such disposition and arrangements shall be rescinded
and the amount restored to the extent of such recovery, but without interest.
16. THE AGENT.
16.1. AUTHORIZATION.
(a) The Agent is authorized to take such action on behalf of each of
the Lenders and to exercise all such powers as are hereunder and under any
of the other Loan Documents and any related documents delegated to the
Agent, together with such powers as are reasonably incident thereto;
PROVIDED that no duties or responsibilities not expressly assumed herein
or therein shall be implied to have been assumed by the Agent.
(b) The relationship between the Agent and each of the Lenders is
that of an independent contractor. The use of the term "AGENT" is for
convenience only and is used to describe, as a form of convention, the
independent contractual relationship between the Agent and each of the
Lenders. Nothing contained in this Credit Agreement nor the other Loan
Documents shall be construed to create an agency, trust or other fiduciary
relationship between the Agent and any of the Lenders, other than (and
only to the extent of) the trust relationship created under the laws of
England as a result of the Facility Agreement and the UK Security
Documents.
(c) As an independent contractor empowered by the Lenders to
exercise certain rights and perform certain duties and responsibilities
hereunder and under the other Loan Documents, the Agent is nevertheless a
"representative" of the Lenders, as that term is defined in Article 1 of
the Uniform Commercial Code, for purposes of actions for the benefit of
the Lenders and the Agent with respect to all collateral security and
guaranties contemplated by the Loan Documents. Such actions include the
designation of the Agent as "secured party", "mortgagee" or the like on
all financing statements and other documents and instruments, whether
recorded or otherwise, relating to the attachment, perfection, priority or
enforcement of any security interests, mortgages or deeds of trust in
collateral security intended to secure the payment or performance of any
of the Obligations, all for the benefit of the Lenders and the Agent.
16.2. EMPLOYEES AND AGENTS. The Agent may exercise its powers and execute
its duties by or through employees or agents and shall be entitled to take, and
to rely on, advice of counsel concerning all matters pertaining to its rights
and duties under this Credit Agreement and the other Loan Documents. The Agent
may utilize the services of such Persons as the Agent in its sole discretion may
reasonably determine, and all reasonable fees and expenses of any such Persons
shall be paid by the Borrower.
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16.3. NO LIABILITY. Neither the Agent nor any of its shareholders,
directors, officers or employees nor any other Person assisting them in their
duties nor any agent or employee thereof, shall be liable for any waiver,
consent or approval given or any action taken, or omitted to be taken, in good
faith by it or them hereunder or under any of the other Loan Documents, or in
connection herewith or therewith, or be responsible for the consequences of any
oversight or error of judgment whatsoever, except that the Agent or such other
Person, as the case may be, may be liable for losses due to its willful
misconduct or gross negligence.
16.4. NO REPRESENTATIONS. The Agent shall not be responsible (a) for the
execution or validity or enforceability of this Credit Agreement, the Notes, the
Letters of Credit, any of the other Loan Documents or any instrument at any time
constituting, or intended to constitute, collateral security for the Notes, (b)
for the value of any such collateral security, (c) for the validity,
enforceability or collectibility of any such amounts owing with respect to the
Notes, (d) for any recitals or statements, warranties or representations made
herein or in any of the other Loan Documents or in any certificate or instrument
hereafter furnished to it or to any of the other Lenders by or on behalf of the
Borrower, any of its Subsidiaries or the Holding Company, (e) to ascertain or
inquire as to the performance or observance of any of the terms, conditions,
covenants or agreements herein, in any of the other Loan Documents or in any
instrument at any time constituting, or intended to constitute, collateral
security for the Notes, (f) to inspect any of the properties, books or records
of the Borrower, or any of its Subsidiaries or the Holding Company, or (g) to
ascertain whether any notice, consent, waiver or request delivered to it by the
Borrower, any of its Subsidiaries or any holder of any of the Notes shall have
been duly authorized or is true, accurate and complete. The Agent has not made
nor does it now make any representations or warranties, express or implied, nor
does it assume any liability to the Lenders, with respect to the credit
worthiness or financial conditions of the Borrower, any of its Subsidiaries or
the Holding Company. Each Lender acknowledges that it has, independently and
without reliance upon the Agent or any other Lender, and based upon such
information and documents as it has deemed appropriate, made its own credit
analysis and decision to enter into this Credit Agreement and the other Loan
Documents.
16.5. PAYMENTS.
16.5.1. PAYMENTS TO AGENT. A payment by the Borrower to the Agent
hereunder or under any of the other Loan Documents for the account of any
Lender shall constitute a payment to such Lender. The Agent agrees
promptly to distribute to each Lender such Lender's PRO RATA share of
payments received by the Agent for the account of the Lenders except as
otherwise expressly provided herein or in any of the other Loan Documents.
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16.5.2. DISTRIBUTION BY AGENT. If in the opinion of the Agent the
distribution of any amount received by it in such capacity hereunder,
under the Notes or under any of the other Loan Documents might involve it
in liability, it may refrain from making distribution until its right to
make distribution shall have been adjudicated by a court of competent
jurisdiction. If a court of competent jurisdiction shall adjudge that any
amount received and distributed by the Agent is to be repaid, each Person
to whom any such distribution shall have been made shall either repay to
the Agent its proportionate share of the amount so adjudged to be repaid
or shall pay over the same in such manner and to such Persons as shall be
determined by such court.
16.5.3. DELINQUENT LENDERS. Notwithstanding anything to the contrary
contained in this Credit Agreement or any of the other Loan Documents, any
Lender that fails (a) to make available to the Agent its PRO RATA share of
any Loan or to purchase any Letter of Credit Participation or (b) to
comply with the provisions of SECTION 15 hereof with respect to making
dispositions and arrangements with the other Lenders, where such Lender's
share of any payment received, whether by setoff or otherwise, is in
excess of its PRO RATA share of such payments due and payable to all of
the Lenders, shall in each case, when and to the full extent required by
the provisions of this Credit Agreement, be deemed delinquent (a
"DELINQUENT LENDER") and shall be deemed a Delinquent Lender until such
time as such delinquency is satisfied. A Delinquent Lender shall be deemed
to have assigned any and all payments due to it from the Borrower, any of
its Subsidiaries or the Holding Company, whether on account of outstanding
Loans, Unpaid Reimbursement Obligations, interest, fees or otherwise, to
the remaining nondelinquent Lenders for application to, and reduction of,
their respective PRO RATA shares of all outstanding Loans and Unpaid
Reimbursement Obligations. The Delinquent Lender hereby authorizes the
Agent to distribute such payments to the nondelinquent Lenders in
proportion to their respective PRO RATA shares of all outstanding Loans
and Unpaid Reimbursement Obligations. A Delinquent Lender shall be deemed
to have satisfied in full a delinquency when and if, as a result of
application of the assigned payments to all outstanding Loans and Unpaid
Reimbursement Obligations of the nondelinquent Lenders, the Lenders'
respective PRO RATA shares of all outstanding Loans and Unpaid
Reimbursement Obligations have returned to those in effect immediately
prior to such delinquency and without giving effect to the nonpayment
causing such delinquency.
16.6. HOLDERS OF NOTES. The Agent may deem and treat the payee of any Note
or the purchaser of any Letter of Credit Participation as the absolute owner or
purchaser thereof for all purposes hereof until it shall have been furnished in
writing
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with a different name by such payee or by a subsequent holder, assignee or
transferee.
16.7. INDEMNITY. The Lenders ratably agree hereby to indemnify and hold
harmless the Agent from and against any and all claims, actions and suits
(whether groundless or otherwise), losses, damages, costs, expenses (including
any expenses for which the Agent has not been reimbursed by the Borrower as
required by SECTION 17 below), and liabilities of every nature and character
arising out of or related to this Credit Agreement, the Notes, or any of the
other Loan Documents or the transactions contemplated or evidenced hereby or
thereby, or the Agent's actions taken hereunder or thereunder, except to the
extent that any of the same shall be directly caused by the Agent's willful
misconduct or gross negligence.
16.8. AGENT AS LENDER. In its individual capacity, FNBB shall have the
same obligations and the same rights, powers and privileges in respect to its
Commitment and the Loans made by it, and as the holder of any of the Notes and
as the purchaser of any Letter of Credit Participations, as it would have were
it not also the Agent.
16.9. RESIGNATION. The Agent may resign at any time by giving sixty (60)
days prior written notice thereof to the Lenders and the Borrower. Upon any such
resignation, the Majority Lenders shall have the right to appoint a successor
Agent. Unless a Default or Event of Default shall have occurred and be
continuing, such successor Agent shall be reasonably acceptable to the Borrower.
If no successor Agent shall have been so appointed by the Majority Lenders and
shall have accepted such appointment within thirty (30) days after the retiring
Agent's giving of notice of resignation, then the retiring Agent may, on behalf
of the Lenders, appoint a successor Agent, which shall be a financial
institution having a rating of not less than A or its equivalent by Standard &
Poor's Corporation. Upon the acceptance of any appointment as Agent hereunder by
a successor Agent, such successor Agent shall thereupon succeed to and become
vested with all the rights, powers, privileges and duties of the retiring Agent,
and the retiring Agent shall be discharged from its duties and obligations
hereunder. After any retiring Agent's resignation, the provisions of this Credit
Agreement and the other Loan Documents shall continue in effect for its benefit
in respect of any actions taken or omitted to be taken by it while it was acting
as Agent.
16.10. NOTIFICATION OF DEFAULTS AND EVENTS OF DEFAULT. Each Lender hereby
agrees that, upon learning of the existence of a Default or an Event of Default,
it shall promptly notify the Agent thereof.
16.11. DUTIES IN THE CASE OF ENFORCEMENT. In case one or more Events of
Default have occurred and shall be continuing, and whether or not acceleration
of the Obligations shall have occurred, the Agent shall, if (a) so requested by
the Majority Lenders and (b) the Lenders have provided to the Agent such
additional indemnities and assurances against expenses and liabilities as the
Agent may reasonably request,
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proceed to enforce the provisions of the Security Documents authorizing the sale
or other disposition of all or any part of the Collateral and exercise all or
any such other legal and equitable and other rights or remedies as it may have
in respect of such Collateral. The Majority Lenders may direct the Agent in
writing as to the method and the extent of any such sale or other disposition,
the Lenders hereby agreeing to indemnify and hold the Agent harmless from all
liabilities incurred in respect of all actions taken or omitted in accordance
with such directions; PROVIDED that the Agent need not comply with any such
direction to the extent that the Agent reasonably believes the Agent's
compliance with such direction to be unlawful or commercially unreasonable in
any applicable jurisdiction.
17. EXPENSES.
The Borrower and the Holding Company, jointly and severally, agree to pay
(a) the reasonable costs of producing and reproducing this Credit Agreement, the
other Loan Documents and the other agreements and instruments mentioned herein,
(b) any taxes (including any interest and penalties in respect thereto) payable
by the Agent or any of the Lenders (other than taxes based upon the Agent's or
any Lender's net income) on or with respect to the transactions contemplated by
this Credit Agreement or by any of the other Loan Documents (the Borrower and
the Holding Company hereby, jointly and severally, agreeing to indemnify the
Agent and each Lender with respect thereto), (c) the reasonable fees, expenses
and disbursements of the Agent's Special Counsel or any local counsel to the
Agent incurred in connection with the preparation, administration or
interpretation of the Loan Documents and the other instruments mentioned herein,
each closing hereunder, and amendments, modifications, approvals, consents or
waivers hereto or hereunder, (d) the reasonable fees, expenses and disbursements
of the Agent incurred by the Agent in connection with the preparation,
administration or interpretation of the Loan Documents and the other instruments
mentioned herein, including all title insurance premiums and surveyor,
engineering and appraisal charges, but excluding the costs of Spears &
Associates, (e) any fees, costs, expenses and bank charges, including bank
charges for returned checks, incurred by the Agent in establishing, maintaining
or handling agency accounts, lock box accounts and other accounts for the
collection of any of the Collateral, (f) all reasonable out-of-pocket expenses
(including without limitation reasonable attorneys' fees and costs, which
attorneys may be employees of any Lender or the Agent), and reasonable
consulting, accounting, appraisal, investment banking and similar professional
fees and charges) incurred by any Lender or the Agent in connection with (i) the
enforcement of or preservation of rights under any of the Loan Documents against
the Borrower, any of its Subsidiaries or the Holding Company or the
administration thereof after the occurrence of a Default or Event of Default and
(ii) any litigation, proceeding or dispute whether arising hereunder or
otherwise, in any way related to any Lender's or the Agent's relationship with
the Borrower, any of its Subsidiaries or the Holding Company and (g) all
reasonable fees, expenses and disbursements of any Lender or the Agent incurred
in connection
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with lien searches, financing statement filings (or the equivalent thereof in
each applicable jurisdiction) or mortgage recordings. Nothwithstanding anything
in this Section 17 to the contrary, the Agent shall pay the mortgage tax
resulting from the recordation of the Mortgage on the Real Estate located in
Tulsa, Oklahoma. The covenants of this SECTION 17 shall survive payment or
satisfaction of all other Obligations.
18. INDEMNIFICATION.
THE BORROWER AND THE HOLDING COMPANY, JOINTLY AND SEVERALLY, AGREE TO
INDEMNIFY AND HOLD HARMLESS THE AGENT, THE LENDERS AND THEIR RESPECTIVE
OFFICERS, EMPLOYEES, DIRECTORS, AGENTS, TRUSTEES AND AFFILIATES (EACH AN
"INDEMNIFIED PARTY") FROM AND AGAINST ANY AND ALL CLAIMS, ACTIONS AND SUITS
WHETHER GROUNDLESS OR OTHERWISE, AND FROM AND AGAINST ANY AND ALL LIABILITIES,
LOSSES, DAMAGES AND EXPENSES OF EVERY NATURE AND CHARACTER ARISING OUT OF THIS
CREDIT AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS OR THE TRANSACTIONS
CONTEMPLATED HEREBY OR THEREBY, INCLUDING, WITHOUT LIMITATION, (A) ANY ACTUAL OR
PROPOSED USE BY THE BORROWER, ANY OF ITS SUBSIDIARIES OR THE HOLDING COMPANY OF
THE PROCEEDS OF ANY OF THE LOANS OR LETTERS OF CREDIT, (B) THE REVERSAL OR
WITHDRAWAL OF ANY PROVISIONAL CREDITS GRANTED BY THE AGENT UPON THE TRANSFER OF
FUNDS FROM BANK AGENCY OR LOCK BOX ACCOUNTS OR IN CONNECTION WITH THE
PROVISIONAL HONORING OF CHECKS OR OTHER ITEMS, (C) ANY ACTUAL OR ALLEGED
INFRINGEMENT OF ANY PATENT, COPYRIGHT, TRADEMARK, SERVICE MARK OR SIMILAR RIGHT
OF THE BORROWER, ANY OF ITS SUBSIDIARIES OR THE HOLDING COMPANY COMPRISED IN THE
COLLATERAL (D) THE BORROWER, ANY OF ITS SUBSIDIARIES OR THE HOLDING COMPANY
ENTERING INTO OR PERFORMING THIS CREDIT AGREEMENT OR ANY OF THE OTHER LOAN
DOCUMENTS OR (E) WITH RESPECT TO THE BORROWER, ITS SUBSIDIARIES AND THE HOLDING
COMPANY AND THEIR RESPECTIVE PROPERTIES AND ASSETS, (I) THE VIOLATION OF ANY
ENVIRONMENTAL LAW, (II) THE PRESENCE, DISPOSAL, ESCAPE, SEEPAGE, LEAKAGE,
SPILLAGE, DISCHARGE, EMISSION, RELEASE OR THREATENED RELEASE OF ANY HAZARDOUS
SUBSTANCES, OR (III) ANY ACTION, SUIT, PROCEEDING OR INVESTIGATION BROUGHT OR
THREATENED WITH RESPECT TO ANY HAZARDOUS SUBSTANCES (INCLUDING, BUT NOT LIMITED
TO, CLAIMS WITH RESPECT TO WRONGFUL DEATH, PERSONAL INJURY OR DAMAGE TO
PROPERTY); PROVIDED, THAT SUCH CLAIMS, ACTIONS, SUITS, LIABILITIES,
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LOSSES, DAMAGES AND EXPENSES HAVE NOT BEEN FOUND IN A FINAL, NON-APPEALABLE
JUDGMENT BY A COURT OF COMPETENT JURISDICTION TO HAVE RESULTED FROM AN
INDEMNIFIED PARTY'S GROSS NEGLIGENCE OR WILLFUL MISCONDUCT. Such indemnification
shall include, in each case, without limitation, the reasonable fees and
disbursements of counsel and the allocated costs of counsel incurred in
connection with any such investigation, litigation or other proceeding. In
litigation, or the preparation therefor, the Lenders and the Agent shall be
entitled to select their own counsel and, in addition to the foregoing
indemnity, the Borrower agrees to pay promptly the reasonable fees and expenses
of such counsel. If, and to the extent that, the obligations of the Borrower
under this SECTION 18 are unenforceable for any reason, the Borrower hereby
agrees to make the maximum contribution to the payment in satisfaction of such
obligations which is permissible under applicable law. The covenants contained
in this SECTION 18 shall survive payment or satisfaction in full of all other
Obligations.
19. SURVIVAL OF COVENANTS, ETC.
All covenants, agreements, representations and warranties made herein, in
the Notes, in any of the other Loan Documents or in any documents or other
papers delivered by or on behalf of the Borrower, any of its Subsidiaries or the
Holding Company pursuant hereto or thereto shall be deemed to have been relied
upon by the Lenders and the Agent, notwithstanding any investigation heretofore
or hereafter made by any of them, and shall survive the making by the Lenders of
any of the Loans and the issuance, extension or renewal of any Letters of
Credit, as herein contemplated, and shall continue in full force and effect so
long as any Letter of Credit or any amount due under this Credit Agreement or
the Notes or any of the other Loan Documents remains outstanding or any Lender
has any obligation to make any Loans or the Agent has any obligation to issue,
extend or renew any Letter of Credit, and for such further time as may be
otherwise expressly specified in this Credit Agreement. All statements contained
in any certificate or other paper delivered to any Lender or the Agent at any
time by or on behalf of the Borrower, any of its Subsidiaries or the Holding
Company pursuant hereto or to the other Loan Documents or in connection with the
transactions contemplated hereby or thereby shall constitute representations and
warranties by such Person hereunder.
20. ASSIGNMENT AND PARTICIPATION.
20.1. CONDITIONS TO ASSIGNMENT BY LENDERS. Except as provided herein, each
Lender may assign to one or more Eligible Assignees all or a portion of its
interests, rights and obligations under this Credit Agreement (including all or
a portion of its Commitment Percentage and Commitment and the same portion of
the Loans at the time owing to it, the Notes held by it and its participating
interest in the risk relating to any Letters of Credit); PROVIDED that (a) each
of the Agent and, unless
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a Default or Event of Default shall have occurred and be continuing, the
Borrower shall have given its prior written consent to such assignment, which
consent will not be unreasonably withheld, (b) each such assignment shall be of
a constant, and not a varying, percentage of all the assigning Lender's rights
and obligations under this Credit Agreement and shall be PRO RATA between the
Commitment and the Term Loan, (c) each assignment shall be in an amount not less
than $5,000,000 (or if less, such Lender's entire Commitment) and in multiples
of $1,000,000 thereafter, and (d) the parties to such assignment shall execute
and deliver to the Agent, for recording in the Register (as hereinafter
defined), an Assignment and Acceptance, substantially in the form of EXHIBIT H
hereto (an "ASSIGNMENT AND ACCEPTANCE"), together with any Notes subject to such
assignment. Upon such execution, delivery, acceptance and recording, from and
after the effective date specified in each Assignment and Acceptance, which
effective date shall be at least five (5) Business Days after the execution
thereof, (i) the assignee thereunder shall be a party hereto and, to the extent
provided in such Assignment and Acceptance, have the rights and obligations of a
Lender hereunder, and (ii) the assigning Lender shall, to the extent provided in
such Assignment and Acceptance and upon payment to the Agent of the registration
fee referred to in SECTION 20.3 below, be released from its obligations under
this Credit Agreement.
20.2. CERTAIN REPRESENTATIONS AND WARRANTIES; LIMITATIONS; COVENANTS. By
executing and delivering an Assignment and Acceptance, the parties to the
assignment thereunder confirm to and agree with each other and the other parties
hereto as follows:
(a) other than the representation and warranty that it is the legal
and beneficial owner of the interest being assigned thereby free and clear
of any adverse claim, the assigning Lender makes no representation or
warranty, express or implied, and assumes no responsibility with respect
to any statements, warranties or representations made in or in connection
with this Credit Agreement or the execution, legality, validity,
enforceability, genuineness, sufficiency or value of this Credit
Agreement, the other Loan Documents or any other instrument or document
furnished pursuant hereto or the attachment, perfection or priority of any
security interest or mortgage,
(b) the assigning Lender makes no representation or warranty and
assumes no responsibility with respect to the financial condition of the
Borrower, its Subsidiaries, the Holding Company or any other Person
primarily or secondarily liable in respect of any of the Obligations, or
the performance or observance by the Borrower, its Subsidiaries, the
Holding Company or any other Person primarily or secondarily liable in
respect of any of the Obligations or any of their respective obligations
under this Credit Agreement or any of the other Loan Documents or any
other instrument or document furnished pursuant hereto or thereto;
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(c) such assignee confirms that it has received a copy of this
Credit Agreement, together with copies of the most recent financial
statements referred to in SECTIONS 8.4 and 9.4 hereof and such other
documents and information as it has deemed appropriate to make its own
credit analysis and decision to enter into such Assignment and Acceptance;
(d) such assignee will, independently and without reliance upon the
assigning Lender, the Agent or any other Lender and based on such
documents and information as it shall deem appropriate at the time,
continue to make its own credit decisions in taking or not taking action
under this Credit Agreement;
(e) such assignee represents and warrants that it is an Eligible
Assignee;
(f) such assignee appoints and authorizes the Agent to take such
action as agent on its behalf and to exercise such powers under this
Credit Agreement and the other Loan Documents as are delegated to the
Agent by the terms hereof or thereof, together with such powers as are
reasonably incidental thereto;
(g) such assignee agrees that it will perform in accordance with
their terms all of the obligations that by the terms of this Credit
Agreement and each of the other U.S. Loan Documents are required to be
performed by it as a Lender;
(h) such assignee represents and warrants that it is legally
authorized to enter into such Assignment and Acceptance; and
(i) such assignee acknowledges that it has made arrangements with
the assigning Lender satisfactory to such assignee with respect to its PRO
RATA share of Letter of Credit Fees in respect of outstanding Letters of
Credit.
20.3. REGISTER. The Agent shall maintain a copy of each Assignment and
Acceptance delivered to it and a register or similar list (the "Register") for
the recordation of the names and addresses of the Lenders and the Commitment
Percentage of, and principal amount of the Revolving Credit Loans owing to and
Letter of Credit Participations purchased by, the Lenders from time to time. The
entries in the Register shall be conclusive, in the absence of manifest error,
and the Borrower, the Agent and the Lenders may treat each Person whose name is
recorded in the Register as a Lender hereunder for all purposes of this Credit
Agreement. The Register shall be available for inspection by the Borrower and
the Lenders at any reasonable time and from time to time upon reasonable prior
notice. Upon each such recordation, the assigning Lender agrees to pay to the
Agent a registration fee in the sum of $3,500.
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20.4. NEW NOTES. Upon its receipt of an Assignment and Acceptance executed
by the parties to such assignment, together with each Note subject to such
assignment, the Agent shall (a) record the information contained therein in the
Register, and (b) give prompt notice thereof to the Borrower and the Lenders
(other than the assigning Lender). Within five (5) Business Days after receipt
of such notice, the Borrower, at its own expense, shall execute and deliver to
the Agent, in exchange for each surrendered Note, a new Note to the order of
such Eligible Assignee in an amount equal to the amount assumed by such Eligible
Assignee pursuant to such Assignment and Acceptance and, if the assigning Lender
has retained some portion of its obligations hereunder, a new Note to the order
of the assigning Lender in an amount equal to the amount retained by it
hereunder. Such new Notes shall provide that they are replacements for the
surrendered Notes, shall be in an aggregate principal amount equal to the
aggregate principal amount of the surrendered Notes, shall be dated the
effective date of such Assignment and Acceptance and shall otherwise be
substantially in the form of the assigned Notes. Within five (5) days of
issuance of any new Notes pursuant to this SECTION 20.4, the Borrower shall
deliver an opinion of counsel, addressed to the Lenders and the Agent, relating
to the due authorization, execution and delivery of such new Notes and the
legality, validity and binding effect thereof, in form and substance
satisfactory to the Lenders. The surrendered Notes shall be cancelled and
returned to the Borrower.
20.5. PARTICIPATIONS. Each Lender may sell participations to one or more
Lenders or other entities in all or a portion of such Lender's rights and
obligations under this Credit Agreement and the other Loan Documents; PROVIDED
that (a) each such participation shall be in an amount of not less than
$5,000,000, (b) any such sale or participation shall not affect the rights and
duties of the selling Lender hereunder to the Borrower and (c) the only rights
granted to the participant pursuant to such participation arrangements with
respect to waivers, amendments or modifications of the Loan Documents, shall be
the right to approve waivers, amendments or modifications that would (i) reduce
the principal of or the interest rate on any Loans, (ii) extend the term or
increase the amount of the Commitment of such Lender as it relates to such
participant, (iii) reduce the amount of any commitment fees or Letter of Credit
Fees to which such participant is entitled, (iv) extend any regularly scheduled
payment date for principal or interest or (v) permit the sale or disposition of
all or substantially all of the Borrower's and its Subsidiaries' assets and
properties.
20.6. DISCLOSURE. The Borrower agrees that in addition to disclosures made
in accordance with standard and customary banking practices any Lender may
disclose information obtained by such Lender pursuant to this Credit Agreement
or any of the other Loan Documents to assignees or participants and potential
assignees or participants hereunder; PROVIDED that, prior to such disclosure,
such assignees or participants or potential assignees or participants shall
agree (a) to treat in confidence such information unless such information
otherwise becomes public knowledge, (b)
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not to disclose such information to a third party, except as required by law or
legal process and (c) not to make use of such information for purposes of
transactions unrelated to the contemplated assignment or participation.
20.7. ASSIGNEE OR PARTICIPANT AFFILIATED WITH THE BORROWER. If any
assignee Lender is an Affiliate of the Borrower, of any of the Borrower's
Subsidiaries or the Holding Company, then such assignee Lender shall have no
right to vote as a Lender hereunder or under any of the other Loan Documents for
purposes of granting consents or waivers or for purposes of agreeing to
amendments or other modifications to any of the Loan Documents or for purposes
of making requests to the Agent pursuant to SECTION 14.1 or 14.2, and the
determination of the Majority Lenders shall for all purposes of this Credit
Agreement and the other Loan Documents be made without regard to such assignee
Lender's interest in any of the Loans. If any Lender sells a participating
interest in any of the Loans or Reimbursement Obligations to a participant, and
such participant is the Borrower or an Affiliate of the Borrower, of any of the
Borrower's Subsidiaries or the Holding Company, then such transferor Lender
shall promptly notify the Agent of the sale of such participation. A transferor
Lender shall have no right to vote as a Lender hereunder or under any of the
other Loan Documents for purposes of granting consents or waivers or for
purposes of agreeing to amendments or modifications to any of the Loan Documents
or for purposes of making requests to the Agent pursuant to SECTION 14.1 or 14.2
to the extent that such participation is beneficially owned by the Borrower, any
of its Subsidiaries, the Holding Company or any Affiliate of any of the
foregoing, and the determination of the Majority Lenders shall for all purposes
of this Agreement and the other Loan Documents be made without regard to the
interest of such transferor Lender in the Loans to the extent of such
participation.
20.8. MISCELLANEOUS ASSIGNMENT PROVISIONS. Any assigning Lender shall
retain its rights to be indemnified pursuant to SECTION 17 hereof with respect
to any claims or actions arising prior to the date of such assignment. If any
assignee Lender is not incorporated under the laws of the United States of
America or any state thereof, it shall, prior to the date on which any interest
or fees are payable hereunder or under any of the other Loan Documents for its
account, deliver to the Borrower and the Agent certification as to its exemption
from deduction or withholding of any United States federal income taxes.
Anything contained in this SECTION 20 to the contrary notwithstanding, any
Lender may at any time pledge all or any portion of its interest and rights
under this Credit Agreement (including all or any portion of its Notes) to any
of the twelve Federal Reserve Banks organized under SECTION 4 of the Federal
Reserve Act, 12 U.S.C. Section 341. No such pledge or the enforcement thereof
shall release the pledgor Lender from its obligations hereunder or under any of
the other Loan Documents.
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20.9. ASSIGNMENT BY BORROWER. Neither the Borrower nor the Holding Company
shall assign or transfer any of their respective rights or obligations under any
of the Loan Documents without the prior written consent of each of the Lenders.
21. NOTICES, ETC.
Except as otherwise expressly provided in this Credit Agreement, all
notices and other communications made or required to be given pursuant to this
Credit Agreement or the Notes or any Letter of Credit Applications shall be in
writing and shall be delivered in hand, mailed by United States registered or
certified first class mail, postage prepaid, sent by overnight courier, or sent
by telegraph, telecopy, facsimile or telex and confirmed by delivery via courier
or postal service, addressed as follows:
(a) if to the Borrower, at 11601 N. Houston-Rosslyn Road,
Houston, Texas 77086, Attention: Chief Executive Officer, or at such
other address for notice as the Borrower shall last have furnished in
writing to the Person giving the notice;
(b) if to the Holding Company, at 11601 N. Houston-Rosslyn Road,
Houston, Texas 77086, Attention: Chief Executive Officer, or at such
other address for notice as the Holding Company shall last have
furnished in writing to the Person giving the notice;
(c) if to the Agent, at 100 Federal Street, Boston,
Massachusetts 02110, USA, Attention: Gregory R. D. Clark, Managing
Director, or such other address for notice as the Agent shall last have
furnished in writing to the Person giving the notice; and
(d) if to any Lender, at such Lender's address set forth on SCHEDULE
1 hereto, or such other address for notice as such Lender shall have last
furnished in writing to the Person giving the notice.
Any such notice or demand shall be deemed to have been duly given or made
and to have become effective (i) if delivered by hand, overnight courier or
facsimile to a responsible officer of the party to which it is directed, at the
time of the receipt thereof by such officer or the sending of such facsimile and
(ii) if sent by registered or certified first-class mail, postage prepaid, on
the third Business Day following the mailing thereof.
22. GOVERNING LAW.
THIS CREDIT AGREEMENT AND, EXCEPT AS OTHERWISE SPECIFICALLY PROVIDED
THEREIN, EACH OF THE OTHER LOAN DOCUMENTS, ARE CONTRACTS UNDER THE LAWS OF THE
COMMONWEALTH OF MASSACHUSETTS AND SHALL FOR ALL
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PURPOSES BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE
COMMONWEALTH OF MASSACHUSETTS (EXCLUDING THE LAWS APPLICABLE TO CONFLICTS OR
CHOICE OF LAW). EACH OF THE BORROWER AND THE HOLDING COMPANY AGREES THAT ANY
SUIT FOR THE ENFORCEMENT OF THIS CREDIT AGREEMENT OR ANY OF THE OTHER LOAN
DOCUMENTS MAY BE BROUGHT IN THE COURTS OF THE COMMONWEALTH OF MASSACHUSETTS OR
ANY FEDERAL COURT SITTING THEREIN AND CONSENTS TO THE NONEXCLUSIVE JURISDICTION
OF SUCH COURT AND SERVICE OF PROCESS IN ANY SUCH SUIT BEING MADE UPON THE
BORROWER BY MAIL AT THE ADDRESS SPECIFIED IN SECTION 22. EACH OF THE BORROWER
AND THE HOLDING COMPANY HEREBY WAIVES ANY OBJECTION THAT IT MAY NOW OR HEREAFTER
HAVE TO THE VENUE OF ANY SUCH SUIT OR ANY SUCH COURT OR THAT SUCH SUIT IS
BROUGHT IN AN INCONVENIENT COURT.
23. HEADINGS.
The captions in this Credit Agreement are for convenience of reference
only and shall not define or limit the provisions hereof.
24. COUNTERPARTS.
This Credit Agreement and any amendment hereof may be executed in several
counterparts and by each party on a separate counterpart, each of which when
executed and delivered shall be an original, and all of which together shall
constitute one instrument. In proving this Credit Agreement it shall not be
necessary to produce or account for more than one such counterpart signed by the
party against whom enforcement is sought.
25. ENTIRE AGREEMENT, ETC.
The Loan Documents and any other documents executed in connection herewith
or therewith express the entire understanding of the parties with respect to the
transactions contemplated hereby. Neither this Credit Agreement nor any term
hereof may be changed, waived, discharged or terminated, except as provided in
SECTION 27 below.
26. WAIVER OF JURY TRIAL.
EACH OF THE BORROWER AND THE HOLDING COMPANY HEREBY WAIVES ITS RIGHT TO A
JURY TRIAL WITH RESPECT TO ANY ACTION OR CLAIM ARISING OUT OF ANY DISPUTE IN
CONNECTION WITH THIS CREDIT AGREEMENT, THE NOTES OR ANY OF THE OTHER LOAN
DOCUMENTS, ANY RIGHTS OR OBLIGATIONS
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HEREUNDER OR THEREUNDER OR THE PERFORMANCE OF WHICH RIGHTS AND OBLIGATIONS.
EXCEPT AS PROHIBITED BY LAW, EACH OF THE BORROWER AND THE HOLDING COMPANY HEREBY
WAIVES ANY RIGHT IT MAY HAVE TO CLAIM OR RECOVER, IN ANY LITIGATION REFERRED TO
IN THE PRECEDING SENTENCE, ANY SPECIAL, EXEMPLARY, PUNITIVE OR CONSEQUENTIAL
DAMAGES OR ANY DAMAGES OTHER THAN, OR IN ADDITION TO, ACTUAL DAMAGES. EACH OF
THE BORROWER AND THE HOLDING COMPANY (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT
OR ATTORNEY OF ANY LENDER OR THE AGENT HAS REPRESENTED, EXPRESSLY OR OTHERWISE,
THAT SUCH LENDER OR THE AGENT WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO
ENFORCE THE FOREGOING WAIVERS AND (B) ACKNOWLEDGES THAT THE AGENT AND THE
LENDERS HAVE BEEN INDUCED TO ENTER INTO THIS CREDIT AGREEMENT, THE OTHER LOAN
DOCUMENTS TO WHICH IT IS A PARTY AND THE SUBORDINATION DOCUMENTS TO WHICH IT IS
A PARTY BY, AMONG OTHER THINGS, THE WAIVERS AND CERTIFICATIONS CONTAINED HEREIN.
27. CONSENTS, AMENDMENTS, WAIVERS, ETC.
Any consent or approval required or permitted by this Credit Agreement to
be given by all of the Lenders may be given with the written consent of the
Majority Lenders; and (a) any term of this Credit Agreement, the other Loan
Documents or any other instrument related hereto or thereto or mentioned herein
or therein may be amended, and (b) the performance or observance by the
Borrower, any of its Subsidiaries or the Holding Company of any terms of this
Credit Agreement, the other Loan Documents or such other instruments entered
into in connection herewith or therewith and the continuance of any Default or
Event of Default, may be waived (either generally or in a particular instance
and either retroactively or prospectively) with, but only with, the written
consent of the Borrower and the Majority Lenders. Notwithstanding the foregoing,
(a) the rate of interest and interest payment dates on the Notes (other than
interest accruing pursuant to SECTION 6.12.2 hereof following the effective date
of any waiver by the Majority Lenders of the Default or Event of Default
relating thereto), (b) the maturity of the Notes and the scheduled installment
payments of the Term Loan as required by SECTION 4.3.1 hereof, (c) the amount of
the Commitments of the Lenders, (d) the amount of commitment fees or Letter of
Credit fees hereunder, (e) transfers or other dispositions of a majority of the
assets and equipment of the Borrower, its Subsidiaries and the Holding Company
constituting Collateral or the release of all or substantially all Collateral,
and (f) extensions of the Maturity Date, may not be waived or changed without
the written consent of the Borrower and each Lender affected thereby; and the
definition of Majority Lenders and the provisions of this SECTION 27 may not be
amended without the written consent of all of the Lenders; and the amount of the
Agent's fee or any Letter of Credit fees
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payable to the Agent's account and SECTION 16 hereof may not be amended without
the written consent of the Agent. No waiver shall extend to or affect any
obligation not expressly waived or impair any right consequent thereon. No
course of dealing or delay or omission on the part of the Agent or any Lender in
exercising any right shall operate as a waiver thereof or otherwise be
prejudicial thereto. No notice to or demand upon the Borrower shall entitle the
Borrower to other or further notice or demand in similar or other circumstances.
28. SEVERABILITY.
The provisions of this Credit Agreement are severable and if any one
clause or provision hereof shall be held invalid or unenforceable in whole or in
part in any jurisdiction, then such invalidity or unenforceability shall affect
only such clause or provision, or part thereof, in such jurisdiction, and shall
not in any manner affect such clause or provision in any other jurisdiction, or
any other clause or provision of this Credit Agreement in any jurisdiction.
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IN WITNESS WHEREOF, the undersigned have duly executed this Credit
Agreement as a sealed instrument as of the date first set forth above.
CEPI HOLDINGS, INC.
By:_______________________________
Name:
Title:
CRC HOLDINGS CORP.
By:_______________________________
Name:
Title:
BANKBOSTON, N.A., individually and as
Agent
By:_______________________________
Name:
Title:
BANKERS TRUST COMPANY, individually and
as Documentation Agent
By:_______________________________
Name:
Title:
NATIONSBANK OF TEXAS, N.A.
By:_______________________________
Name:
Title:
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UNION BANK OF CALIFORNIA, N.A.
By:_______________________________
Name:
Title:
EXHIBIT 10.3
FACILITY AGREEMENT
Dated __________________ 1997
By and Among
Pipeline Induction Heat Limited,
The Banks named herein,
The First National Bank of Boston, London Branch, as Issuing Bank,
The First National Bank of Boston, London Branch, as Overdraft Bank
- and -
The First National Bank of Boston, London Branch, as Agent
<PAGE>
- ii -
TABLE OF CONTENTS
Clause Page
1. INTERPRETATION
1.1 Terms Defined 1
1.2 Rules of Interpretation 9
2A. THE ADVANCES
2A.1 Obligation of the Banks to Make 10
Advances
2A.2 Voluntary Reduction or Termination 11
by the Borrower of the Maximum
Commitment Amount
2A.3 Termination of Commitment 11
2A.4 Commitment Fee 11
2A.5 Making the Advances 12
2A.6 Exceeding the Maximum Commitment Amount 13
2B. COLLATERAL INSTRUMENTS
2B.1 Issuance of Collateral Instruments 14
2B.2 Request for Collateral Instruments 14
2B.3 Fees 14
2B.4 Reimbursement Obligations of the Borrower 15
2B.5 Obligations Absolute 15
2B.6 Indemnities from the Borrower 16
2B.7 Letters of Credit 17
2B.8 Cash Collateral 17
3. INTEREST PAYABLE ON THE ADVANCES
3.1 Rate of Interest 17
3.2 Time for Payment 17
3.3 Default Interest 18
4. CERTAIN LENDING PROVISIONS
4.1 Determination of Interest Rate 19
4.2 Alternative Interest Rate 19
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4.3 Repayments and Prepayments of 19
the Advances, etc.
4.4 Indemnities from the Banks 20
4.5 Payments and Computations 21
4.6 Payments to be Free of 23
Deductions
4.7 Additional Costs, Changes in 25
Circumstances, etc.
4.8 Illegality 25
4.9 Indemnification 27
5. CONDITIONS PRECEDENT; SECURITY
5.1 Documentary Conditions Precedent 28
5.2 Further Conditions Precedent 28
5.3 Security; Parent Guarantee 28
6. REPRESENTATIONS AND WARRANTIES
6.1 Due Incorporation 29
6.2 Capacity 29
6.3 Authority and Enforceability 29
6.4 Compliance with Other Instruments 29
6.5 No Unmatured Events of Default 29
or Events of Default
6.6 Collateral 30
6.7 Disclosure 30
6.8 Bank Accounts 30
6.9 Representations and Warranties in the 30
Parent Loan Agreement
7. CERTAIN AFFIRMATIVE COVENANTS
7.1 Notice of Default, etc.
30
7.2 Expenses 31
7.3 Financial Records 32
7.4 Use of Proceeds 32
7.5 Delivery of Monthly Maximum Amount 32
Certificate
7.6 Further Assurances 32
7.7 Affirmative Covenants in the 32
Parent Loan Agreement
8. CERTAIN NEGATIVE COVENANTS
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8.1 Distributions 33
8.2 Bank Accounts 33
8.3 Negative Covenants in the 33
Parent Loan Agreement
9. EVENTS OF DEFAULT; ACCELERATION
9.1 Events of Default 33
9.2 Distribution of Collateral Proceeds 35
10. SET-OFF 36
11. AGENCY
11.1 Authorisation 37
11.2 Notification 41
11.3 No Obligation 42
11.4 Indemnity 42
11.5 No Liability 42
11.6 The Agent as a Bank 43
11.7 Resignation 43
11.8 No Representations 44
11.9 Compliance with Law 44
11.10 Investment by Agent 44
11.11 Divisions of Agent Treated as Separate 45
11.12 No Knowledge 45
12. MISCELLANEOUS
12.1 Consents, Amendments, Waivers, etc. 45
12.2 Assignment and Novation 46
12.3 Notices 50
12.4 Governing Law; Place of Jurisdiction 51
12.5 Severability 51
12.6 Counterparts 51
12.7 Entire Agreement 51
<PAGE>
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LIST OF EXHIBITS AND SCHEDULES
THE FIRST SCHEDULE Calculation of Additional Cost
THE SECOND SCHEDULE Banks; Addresses; Commitment
Percentages
THE THIRD SCHEDULE Documentary Conditions Precedent
To First Advance
THE FOURTH SCHEDULE Bank Accounts
EXHIBIT A Form of Drawdown Request
EXHIBIT B Form of Novation Agreement
EXHIBIT C Form of Utilisation Request
<PAGE>
THIS FACILITY AGREEMENT is made the ___ day of _________ 1997
BY AND AMONG
(1) PIPELINE INDUCTION HEAT LIMITED, a limited liability company incorporated
in England and Wales (registered number 1478556) and having its registered
office at The Pipeline Centre, Unit 12, Farrington Road, Rossendale Road
Industrial Estate, Burnley, BB11 5SW (the "BORROWER");
(2) THE FIRST NATIONAL BANK OF BOSTON (to be registered in England from and
after 20 June 1997 under the name BankBoston, N.A.), a national banking
association organised under the laws of the United States of America under
the name BankBoston, N.A. acting through its London Branch at 39 Victoria
Street, London SW1H 0ED ("BANKBOSTON"), in its capacity as agent and
trustee for the Banks (in such capacity, the "AGENT");
(3) THE BANKS named in THE SECOND SCHEDULE hereto, each in its individual
capacity;
(4) BANKBOSTON, in its capacity as the Overdraft Bank (the "OVERDRAFT BANK");
and
(5) BANKBOSTON, in its capacity as the Issuing Bank (the "Issuing Bank").
NOW IT IS HEREBY AGREED:
Clause 1. INTERPRETATION.
1.1 TERMS DEFINED. In this Agreement, the following terms shall have the
respective meanings set forth below:
"ACQUISITION DOCUMENTS" shall mean the Agreement for the sale and purchase
of the entire issued share capital of the Borrower dated on or about 12 June
1997 by and between Holdings and Weatherford Eurasia Limited and any other
documents executed and/or delivered in connection therewith.
<PAGE>
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"ADDITIONAL COST" shall mean in relation to any period, a percentage
calculated for such period at an annual rate determined by the application of
the formula set out in THE FIRST SCHEDULE hereto.
"ADVANCES" shall mean, collectively, any utilisation of the Overdraft and
any LIBOR Advance made or to be made to the Borrower pursuant to Clause 2A
hereof.
"AFFILIATE" shall mean any Person directly or indirectly controlling,
controlled by or under direct or indirect common control with any member of the
Affiliate Group (or other specified Person).
"AFFILIATE GROUP" shall mean, collectively, the Borrower, the Parent, and
each of their respective direct and indirect Subsidiaries.
"APPLICABLE MARGIN" shall mean the Eurodollar Applicable Margin under and
as defined in the Parent Loan Agreement, as such margin is adjusted from time to
time pursuant to Section 6.11 of the Parent Loan Agreement.
"BANKS" shall mean at any time The First National Bank of Boston, London
Branch, and the other financial institutions named in THE SECOND SCHEDULE, and
any New Bank, and their respective successors in title and assigns, and "BANK"
shall mean individually each of the Banks.
"BORROWING DATE" shall mean in relation to any Advance, the day on which
that Advance is made or to be made to the Borrower.
"BUSINESS DAY" shall mean a day (other than a Saturday or a Sunday) on
which banks are open for business in London, England.
"COLLATERAL INSTRUMENT" shall mean any Letter of Credit, Performance Bond
or Guarantee issued, extended or renewed by the Issuing Bank for the account of
the Borrower pursuant to Clause 2B hereof.
"COLLATERAL INSTRUMENT RATE" shall mean the percentage per annum equal to
the Applicable Margin in effect for the time being.
"COMMITMENT" shall mean with respect to each Bank, the amount equal to the
product of (A) such Bank's Commitment Percentage and (B) the Maximum Commitment
Amount, as the amount of such Bank's commitment to make available to the
Borrower or to indemnify the Overdraft Bank, as the case may be, with respect to
the Advances and to indemnify the Issuing Bank with respect to Collateral
Instruments on the terms and subject to the
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conditions contained in this Agreement, as the same is reduced from time to time
in accordance with the terms hereof.
"COMMITMENT AMOUNT" shall mean at any time an amount equal to the lesser
of (a) the Maximum Commitment Amount at such time and (b) the Monthly Maximum
Amount at such time.
"COMMITMENT EXPIRY DATE" shall mean that term as defined in Clause 2A.3
hereof.
"COMMITMENT FEE" shall mean that term as defined in Clause 2A.4 hereof.
"COMMITMENT FEE PERCENTAGE" shall mean the percentage per annum used in
determining the Commitment Fee under and as defined in the Parent Loan
Agreement, as such percentage is adjusted from time to time pursuant to Section
6.11 of the Parent Loan Agreement.
"COMMITMENT PERCENTAGE" shall mean with respect to each Bank, the
percentage set forth on THE SECOND SCHEDULE hereto opposite such Bank's name
(or, as the case may be, specified in the Novation Agreement pursuant to which
such Bank became a party hereto as the proportion of the aggregate Commitments
transferred to such Bank).
"DISCHARGED OBLIGATIONS" shall mean that term as defined in Clause 12.2
hereof.
"DISCHARGED RIGHTS" shall mean that term as defined in Clause 12.2 hereof.
"DISTRIBUTION" shall mean (A) the declaration or payment of any dividend
on or in respect of any Shares of any class of any Person, other than dividends
payable solely in Shares of such Person, or (B) the purchase, redemption or
other retirement of any Shares of any class of any Person, directly or
indirectly through a Subsidiary or otherwise, or (C) the return of capital by
any Person to its shareholders as such, or (D) any other distribution on or in
respect of any Shares of any class of any Person.
"DRAWDOWN REQUEST" shall mean a request by the Borrower for a LIBOR
Advance in the form set out in EXHIBIT A hereto.
"ELIGIBLE TRANSFEREE" shall mean (a) any Qualifying Bank that is a
commercial bank or finance company organised under the laws of the United
States, or any State thereof or the District of Columbia, and having total
assets in excess of $1,000,000,000; (b) any Qualifying Bank that is a savings
and loan association or savings bank organised under the laws of the United
<PAGE>
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States, or any State thereof or the District of Columbia, and having a net worth
of at least $100,000,000; (c) any Qualifying Bank that is a commercial bank
organised under the laws of any other country which is a member of the
Organization for Economic Cooperation and Development (the "OECD"), or a
political subdivision of any such country, and having total assets in excess of
$1,000,000,000; provided that such bank is acting through a branch or agency
located in the country in which it is organised or another country which is also
a member of the OECD; (d) any Qualifying Bank that is the central bank of any
country which is a member of the OECD; and (e) if, but only if, any Event of
Default has occurred and is continuing, any other bank, insurance company,
commercial finance company or other financial institution or other Person
approved by the Agent, such approval not to be unreasonably withheld.
"EVENT OF DEFAULT" shall mean any of the events described in Clauses
9.1(A) through (L) (inclusive) hereof.
"EXISTING BANK" shall mean that term as defined in Clause 12.2.
"EXISTING PARTIES" shall mean that term as defined in Clause 12.2.
"GUARANTEE" shall mean a guarantee, indemnity or other assurance, in a
form and on terms acceptable to the Issuing Bank, issued, extended or renewed by
the Issuing Bank for the account of the Borrower pursuant to Clause 2B hereof.
"HOLDINGS" shall mean PIH Holdings Limited, a limited liability company
incorporated in England and Wales (registered number 3335609), having its
registered office at 1 South Quay, Victoria Quays, Sheffield, S2 5SY, and the
holder of 100% of the Borrower's issued share capital.
"HOLDINGS GUARANTEE" shall mean that term as defined in Clause 5.3 hereof.
"INDEBTEDNESS" shall mean, as to any Person, without duplication, (A) all
obligations of such Person for borrowed money, (B) all obligations of such
Person evidenced by bonds, debentures, notes or other similar instruments, (C)
all obligations of such Person to pay the deferred purchase price of property or
services, (D) all obligations of such Person for reimbursement (whether
contingent or liquidated) of amounts drawn under letters of credit, performance
bonds or guarantees issued for the account of such Person, (E) all obligations
of such Person as lessee under finance leases, hire purchase or conditional sale
agreements or other agreements entered into primarily as a method of raising
finance, (F) all obligations secured by any mortgage, charge, lien, security
interest or other encumbrance, to which any property or asset owned or held by
such Person is subject, whether or not the
<PAGE>
-5-
obligation secured thereby shall have been assumed, and (G) all Indebtedness of
others guaranteed by such Person.
"INTEREST PAYMENT DATE" shall mean any date on which a payment of interest
is due on any of the Advances pursuant to the terms hereof.
"INTEREST PERIOD" shall mean with respect to the LIBOR Advances (i)
initially, as specified by the Borrower in its Drawdown Request, the period
commencing on the Borrowing Date of such Advance and expiring 1, 2, 3 or 6
months thereafter, and (ii) thereafter as specified by the Borrower in a written
notice furnished to the Agent no later than 11:00 a.m. (London time) one (1)
Business Day prior to the Rate-fixing Day with respect to such Advance, any
successive periods of 1, 2, 3 or 6 months (or such shorter period as will result
in the Interest Period not extending beyond the Commitment Expiry Date)
commencing on the same day on which the immediately preceding Interest Period
with respect to such Advance shall have expired. The number of days in each
Interest Period and the particular day on which each Interest Period ends and
the next begins shall be fixed by the Agent in accordance with generally
accepted practice and notified to the Borrower on the Rate-fixing Day therefor.
If any Interest Period would otherwise end on a day which is not a Business Day,
such Interest Period shall end and the next Interest Period shall commence on
the next succeeding day which is a Business Day. Any Interest Period which
begins on the last Business Day of a calendar month (or on a day for which there
is no numerically corresponding day in the calendar month at the end of such
Interest Period) shall end on the last Business Day of a calendar month.
"LETTER OF CREDIT" shall mean a letter of credit, in a form and on terms
acceptable to the Issuing Bank, issued, extended or renewed by the Issuing Bank
for the account of the Borrower pursuant to Clause 2B hereof.
"LIBOR" shall mean, at the time any determination thereof is to be made
for any Interest Period, the rate at which the Agent, in accordance with its
normal practice, is able to obtain like deposits in Sterling in the London
Interbank offered market for a period comparable in length to such Interest
Period.
"LIBOR ADVANCE" shall mean any Advance made hereunder, the interest rate
on which is calculated by reference to LIBOR.
"LOAN DOCUMENTS" shall mean, collectively, this Agreement, all Collateral
Instruments issued, extended or renewed hereunder, the Security Documents and
any other documents or instruments delivered or to be delivered by Holdings, the
Borrower or any of its Subsidiaries pursuant to or in connection with this
Agreement.
<PAGE>
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"MAJORITY BANKS" shall mean, at any time, a Bank or Banks whose aggregate
Commitment Percentages are at least equal to sixty-six and two-thirds percent
(66 2/3%).
"MAXIMUM COLLATERAL INSTRUMENT DRAWINGS" shall mean, at any time, the
Sterling Equivalent of the maximum aggregate amount that may be demanded from
the Issuing Bank (assuming all conditions to any such demand have been met)
under all outstanding Collateral Instruments at such time.
"MAXIMUM COMMITMENT AMOUNT" shall mean an amount equal to
(pound)3,050,000, as such amount may be reduced from time to time in accordance
with the terms hereof.
"MONTHLY MAXIMUM AMOUNT" shall mean that term as defined in Clause 7.5
hereof.
"NEW BANK" shall mean that term as defined in Clause 12.2 hereof.
"NOVATION AGREEMENT" shall mean that term as defined in Clause 12.2
hereof.
"NOVATION DATE" shall mean that term as defined in Clause 12.2 hereof.
"OBLIGATIONS" shall mean all Indebtedness, obligations and liabilities to
the Agent, the Banks, the Issuing Bank or the Overdraft Bank existing on the
date of this Agreement or arising thereafter, direct or indirect, joint or
several, absolute or contingent, matured or unmatured, liquidated or
unliquidated, secured or unsecured, arising by contract, operation of law or
otherwise of the Borrower and its Subsidiaries arising or incurred under this
Agreement or the other Loan Documents or in respect of the Advances or the
Collateral Instruments hereunder or pursuant to any instruments at any time
evidencing any of the foregoing.
"OPTIONAL CURRENCY" shall mean, with respect to any Collateral Instrument,
such currency other than Sterling readily available to the Issuing Bank (as
determined by the Issuing Bank in its sole discretion) in which such Collateral
Instrument shall be denominated.
"OUTSTANDING AMOUNT" shall mean, at any time, (A) in relation to a LIBOR
Advance, the principal amount of such LIBOR Advance outstanding at such time and
(B) in relation to the Overdraft, the amount of the debit balance on the
Borrower's current account with the Overdraft Bank at such time.
<PAGE>
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"OVERDRAFT" shall mean that term as defined in Clause 2A.5(F)
hereof.
"PARENT" shall mean CEPI Holdings, Inc., a Delaware corporation to be
named CRC-Evans Pipeline International, Inc. on or about the date hereof, which
corporation is the owner of 100% of the issued share capital of Holdings.
"PARENT GUARANTEE" shall mean that term as defined in Clause 5.3 hereof.
"PARENT LOAN AGREEMENT" shall mean the Revolving Credit and Term Loan
Agreement dated as of June 12, 1997 by and among the Parent, CRC Holdings Corp.,
the financial institutions party thereto from time to time, BankBoston, N.A. as
agent for such financial institutions and Bankers Trust Company as documentation
agent, as the same may be amended, modified, supplemented or restated and in
effect from time to time.
"PARTICIPANT" shall mean that term as defined in Clause 12.2
hereof.
"PERFORMANCE BOND" shall mean a surety or performance bond, in a form and
on terms acceptable to the Issuing Bank, issued, extended or renewed by the
Issuing Bank for the account of the Borrower pursuant to the provisions of
Clause 2B hereof.
"PERSON" shall mean any natural person, corporation, limited liability
company, partnership, limited liability partnership, firm, association,
government, governmental agency or any other juridical entity, whether acting in
an individual, fiduciary or other capacity.
"QUALIFYING BANK" shall mean a bank for the purposes of section 349 of the
Income and Corporations Taxes Act 1988 (or any statutory re-enactment or
modification thereof) which is within the charge to United Kingdom corporation
tax as respects any interest payable or paid to it under this Agreement.
"RATE-FIXING DAY" shall mean in relation to any LIBOR Advance, the
Business Day on which the Interest Period relating to such LIBOR Advance begins.
"REGISTER" shall mean that term as defined in Clause 12.2.
"REIMBURSEMENT OBLIGATION" shall mean the obligation of the Borrower to
reimburse the Issuing Bank on account of any drawing under any Collateral
Instrument as provided in Clause 2B.5 hereof.
<PAGE>
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"SECURITY DOCUMENTS" shall mean all documents executed or to be executed
for the purpose of giving to the Agent, the Banks, the Issuing Bank and/or the
Overdraft Bank security or any other form of support in connection with any of
the Obligations, including, without limitation, the Parent Guarantee, the
Holdings Guarantee, the Security Documents (as defined in the Parent Loan
Agreement) and those security documents listed in THE THIRD SCHEDULE hereto.
"SHARES" shall mean any type of shares or other units of equity capital of
any kind, whether or not such units are certificated.
"STERLING" and "(POUND)" shall mean the lawful currency for the time being
of the United Kingdom.
"STERLING BASE RATE" shall mean the rate of interest announced from time
to time by the London Branch of the Agent as its base lending rate for Sterling,
as in effect at the relevant time of reference thereto.
"STERLING EQUIVALENT" shall mean, on any particular date, with respect to
any amount denominated in Sterling, such amount of Sterling, and with respect to
any amount denominated in a currency other than Sterling (the "SECOND
CURRENCY"), the amount of Sterling which could be purchased by the Agent (in
accordance with its usual practice) with that amount of the Second Currency at
the spot rate of exchange in the London Foreign Exchange Market at or about
11:00 a.m. (London time) on such date for the purchase of Sterling with the
Second Currency.
"SUBSIDIARY" shall mean (A) when used to determine the relationship
between a company incorporated in England and another Person, that term as
defined by Clause 736 of the Companies Act 1985 (as amended by Clause 144 of the
Companies Act 1989), and (B) when used to determine the relationship between a
company not incorporated in England to another Person, that other Person of
which such company shall own directly or indirectly through a Subsidiary or
Subsidiaries at least a majority (by number of votes) of the Shares or similar
interests, of any class or classes (however designated), the holders of which
are entitled, as such holders, to vote for the election of a majority of the
directors (or persons performing similar functions) of such other Person,
whether or not the right so to vote exists by reason of the happening of a
contingency.
"TAXES" shall mean taxes, levies, imposts, duties or other charges of
whatsoever nature imposed by any government or any political subdivision or
taxing authority thereof on the Agent, any Bank, the Issuing Bank or the
Overdraft Bank, as the case may be, other than any such charges on or measured
by the overall net income, net worth or shareholders' capital of such Person.
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"TOTAL OUTSTANDINGS" shall mean at any time the aggregate Outstanding
Amount of all Advances at such time.
"TOTAL OUTSTANDING REIMBURSEMENT OBLIGATIONS" shall mean, at any time, the
Sterling Equivalent of the aggregate outstanding amount of all Reimbursement
Obligations for which the Borrower has not, at that time, reimbursed the Issuing
Bank in accordance with Clause 2B.5.
"UNIFORM CUSTOMS AND PRACTICE" shall mean the Uniform Customs and
Practice for Documentary Credits (1993 Revision), International Chamber
of Commerce Publication No. 500, and any subsequent revisions thereof
approved by the International Chamber of Commerce.
"UNMATURED EVENT OF DEFAULT" shall mean an event, act or occurrence which
with the giving of notice or the lapse of time, or with both thereof, would
become an Event of Default.
"UTILISATION DATE" shall mean, in relation to any Collateral Instrument,
the date on which that Collateral Instrument is to be made available to the
beneficiary or beneficiaries thereof.
"UTILISATION REQUEST" shall mean a request by the Borrower for the
issuance, extension or renewal of a Collateral Instrument in the form set out in
EXHIBIT C hereto.
1.2 RULES OF INTERPRETATION.
(A) A reference to any document or agreement shall include such document
or agreement as in force for the time being and as amended, varied, substituted,
supplemented, restated or novated in accordance with the terms thereof or, as
the case may be, with the agreement of the relevant parties and (where such
consent is, by the terms of this Agreement or the relevant document, required to
be obtained as a condition to such amendment being permitted) the prior written
consent of the Agent.
(B) The singular includes the plural and the plural includes the singular.
(C) A reference to any law includes any amendment or modification to such
law.
(D) A reference to any Person includes its permitted successors and
permitted assigns.
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(E) Accounting terms not otherwise defined herein have the meanings
assigned to them by generally accepted accounting principles in the United
Kingdom, applied on a consistent basis by the accounting entity to which they
refer.
(F) The words "include", "includes" and "including" are not limiting.
(G) Reference to "this Agreement" and the "Agreement" refers to this
Facility Agreement and reference to a particular Clause or subclause refers to
that section or subclause of this Agreement unless otherwise indicated.
(H) The words "herein", "hereof", "hereunder" and words of like import
shall refer to this Agreement as a whole and not to any particular section or
subdivision of this Agreement.
(I) Clause headings are inserted for convenience only and have no legal
effect.
(J) References to clauses, schedules and exhibits are to be construed as
references to the clauses of, schedules to and exhibits to this Agreement, and
references to this Agreement include its schedules and exhibits.
1.3 PURPOSE. This Agreement sets out the terms and conditions upon and
subject to which the Banks, the Overdraft Bank and the Issuing Bank will make
available to the Borrower credit facilities of up to the Maximum Commitment
Amount to be used solely (a) to repay an intercompany loan from Holdings to the
Borrower in the amount of (pound)___________ the proceeds of which were used to
repay a loan from Weatherford UK Limited to the Borrower and (b) to support
ongoing working capital requirements and other general corporate purposes of the
Borrower.
Clause 2A. THE ADVANCES.
2A.1 OBLIGATION OF THE BANKS TO MAKE ADVANCES.
(A) From the date hereof until the Commitment Expiry Date, each of the
Banks severally agrees, upon the terms and conditions contained in this
Agreement, to make its Commitment Percentage of LIBOR Advances in Sterling to
the Borrower, and the Overdraft Bank agrees, upon the terms and conditions
contained in this Agreement, to permit the Borrower to utilise the Overdraft, in
each case up to a maximum amount at any one time equal to the Commitment Amount
at such time LESS the sum of (I) the Total Outstandings at such time, (II) the
Maximum Collateral Instrument
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Drawings at such time and (III) the Total Outstanding Reimbursement Obligations
at such time; PROVIDED that at no time shall the sum of the Total Outstandings
(after giving effect to all amounts requested or utilised) PLUS the Maximum
Collateral Instrument Drawings PLUS the Total Outstanding Reimbursement
Obligations exceed the Commitment Amount at such time, and PROVIDED FURTHER that
the Overdraft shall be made available subject to provisions of Clause 2A.5(f).
(B) The Banks agree to indemnify the Agent and the Overdraft Bank in the
manner hereinafter appearing.
(C) The obligations of each Bank hereunder are several. The failure by a
Bank to perform its obligations hereunder shall not affect the obligations of
the Borrower or any other Bank towards any other party hereto nor shall any such
other party be liable for the failure by such Bank to perform its obligations
hereunder.
2A.2 VOLUNTARY REDUCTION OR TERMINATION BY THE BORROWER OF THE MAXIMUM
COMMITMENT AMOUNT. At any time after all loans or advances under the Parent Loan
Agreement shall have been repaid in full in cash and all commitments thereunder
shall have been irrevocably terminated, the Borrower may at its option at any
time prior to the Commitment Expiry Date reduce, in whole or in part, the
Maximum Commitment Amount in a minimum principal amount of (pound)250,000 or any
multiple thereof by giving at least thirty (30) Business Days' prior written
notice thereof to the Agent and, if necessary, making a payment to the Agent for
the account of the Banks and/or the Overdraft Bank, as the case may be, against
the Total Outstandings and providing cash collateral to the Agent for the
account of the Issuing Bank in respect of Reimbursement Obligations, in such
aggregate amount as will reduce the sum of the Total Outstandings, the Maximum
Collateral Instrument Drawings and the Total Outstanding Reimbursement
Obligations to an amount not in excess of the Commitment Amount for the time
being following such reduction, or, if the Maximum Commitment Amount is being
reduced to zero, repay all outstanding Obligations hereunder and provide to the
Agent for the account of the Issuing Bank cash collateral in an amount equal to
the Maximum Collateral Instrument Drawings.
2A.3 TERMINATION OF COMMITMENT. The Commitments will terminate in full on
the first to occur of (A) 12 June 2003 and (B) such earlier date on which the
Commitments may terminate as provided in this Agreement (the "Commitment Expiry
Date"). Following the Commitment Expiry Date, no additional Advances or
Collateral Instruments may be requested by the Borrower and the Total
Outstandings and any Total Outstanding Reimbursement Obligations as at the
Commitment Expiry Date shall be repaid in accordance with the provisions of
Clause 4.3 hereof and cash
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collateral shall be provided to the Agent for the account of the Issuing Bank in
an amount equal to the Maximum Collateral Instrument Drawings.
2A.4 COMMITMENT FEE. The Borrower agrees to pay to the Agent for the
account of the Banks in accordance with their respective Commitment Percentages
a commitment fee (the "COMMITMENT FEE") equal to the Commitment Fee Percentage
of the average daily difference by which the Maximum Commitment Amount exceeds
the sum of the Total Outstandings (other than the Outstanding Amount of the
Overdraft) and the Maximum Collateral Instrument Drawings during the preceding
calendar quarter or portion thereof. The Commitment Fee shall accrue beginning
on the date hereof and shall be payable quarterly in arrear on the first
Business Day of each calendar quarter hereafter, with a final payment on the
Commitment Expiry Date.
2A.5 MAKING THE ADVANCES.
(A) Subject to the terms and conditions of this Agreement, the Borrower
may request a LIBOR Advance hereunder from time to time on any Business Day
between the date hereof and the Commitment Expiry Date, upon notice given to the
Agent in accordance with subclause (b) below. Each such LIBOR Advance shall be
in the minimum principal amount of (pound)250,000 or a larger integral multiple
thereof.
(B) Unless otherwise agreed by the Agent, whenever the Borrower desires
and is entitled hereunder to request a LIBOR Advance, the Borrower shall furnish
to the Agent a Drawdown Request not later than 11:00 a.m. (London time) one (1)
Business Day prior to the Rate-fixing Day with respect to such LIBOR Advance.
One (1) Business Day immediately preceding the Rate-fixing Day for any
succeeding Interest Period for any outstanding LIBOR Advance, the Borrower shall
notify the Agent in writing of the Borrower's determination of the duration of
such succeeding Interest Period with respect to such Advance. In the absence of
such notice, the Borrower shall be deemed to have elected a succeeding Interest
Period of one (1) month (or such shorter period as will result in the Interest
Period not extending beyond the Commitment Expiry Date). Each Drawdown Request
furnished hereunder shall be irrevocable.
(C) The Agent shall, after receipt by it of a Drawdown Request or a notice
of duration for a succeeding Interest Period, promptly notify each Bank of its
receipt of such Drawdown Request or notice of duration, as the case may be.
(d) If, prior to 11:00 a.m. (London time) on the proposed Borrowing Date
of a LIBOR Advance, all the applicable conditions hereunder, including without
limitation the conditions of Clauses 2A and 5 hereof, are satisfied,
<PAGE>
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the Agent, subject to subclause (e) below, will make such Advance available to
the Borrower, in each case by crediting the Borrower's specified account on the
specified Borrowing Date.
(E) The Agent may, unless notified to the contrary by any Bank prior to a
Borrowing Date, assume that each Bank has made available to the Agent on such
Borrowing Date the amount of such Bank's Commitment Percentage of the LIBOR
Advance to be made on such Borrowing Date, and the Agent may (but it shall not
be required to), in reliance upon such assumption, make available to the
Borrower a corresponding amount. If any Bank makes available to the Agent such
amount on a date after such Borrowing Date, such Bank shall pay to the Agent on
demand an amount equal to the sum of any and all losses, costs and expenses of
the Agent in respect of such Bank's failure to make the required amounts
available to the Agent on such Borrowing Date. A statement of the Agent
submitted to such Bank with respect to any amounts owing under this paragraph
shall be prima facie evidence of the amount due and owing to the Agent by such
Bank. If the amount of such Bank's Commitment Percentage of such Advances is not
made available to the Agent by such Bank within three (3) Business Days
following such Borrowing Date, the Agent shall be entitled to recover such
amount from the Borrower on demand, with interest thereon.
(f) Subject to the terms and conditions of this Agreement, including,
without limitation, the conditions of Clauses 2A and 5 hereof, the Borrower may
from time to time between the date hereof and the Commitment Expiry Date utilise
an overdraft on its Sterling-denominated current account with the Overdraft Bank
(the "OVERDRAFT") by causing cheques or other items denominated in Sterling to
be presented for payment against such current account in amounts greater than
the then available balance in such current account, PROVIDED THAT at no time
shall the sum of the Outstanding Amount of the Overdraft, the Outstanding Amount
of all LIBOR Advances, the Total Outstanding Reimbursement Obligations and the
Maximum Collateral Instrument Drawings at such time exceed the Commitment Amount
at such time. Each such presentation shall be deemed to be a request by the
Borrower for a utilisation of the Overdraft in an amount equal to the excess of
such cheque or other item over such available balance, and shall be irrevocable.
After the occurrence of an Event of Default, the Overdraft Bank may terminate
the Overdraft facility in its entirety with immediate effect at its sole
discretion by written notice to the Borrower.
2A.6 EXCEEDING THE COMMITMENT AMOUNT. If at any time for any reason
(including without limitation currency fluctuation or a reduction in the Monthly
Maximum Amount) the sum of the Total Outstandings, the Total Outstanding
Reimbursement Obligations and the Maximum Collateral Instrument Drawings shall
exceed the Commitment Amount, the Borrower
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hereby absolutely and unconditionally promises to repay on demand by the Agent
the amount of such excess: FIRSTLY to the Agent for the account of the Issuing
Bank, for application to any outstanding Reimbursement Obligations, SECONDLY to
the Agent for the account of the Overdraft Bank, for application against the
Overdraft, THIRDLY to the Agent for the account of the Banks for application
against the LIBOR Advances, subject, in any event, to Clause 4.9, and FOURTHLY
to the Agent for the account of the Issuing Bank to be held as cash collateral
for the Maximum Collateral Instrument Drawings.
Clause 2B. COLLATERAL INSTRUMENTS.
2B.1 ISSUANCE OF COLLATERAL INSTRUMENTS. At the request of the Borrower,
the Issuing Bank may, from time to time from the date hereof until the
Commitment Expiry Date, upon the terms, subject to the conditions and in
reliance upon the representations and warranties contained in this Agreement,
issue, extend or renew one or more Collateral Instruments denominated in
Sterling or in any Optional Currency, PROVIDED THAT, at such time and after
giving effect to such request the sum of (A) the Total Outstandings, (B) the
Maximum Collateral Instrument Drawings and (C) the Total Outstanding
Reimbursement Obligations shall not exceed the Commitment Amount then in effect.
2B.2 REQUEST FOR COLLATERAL INSTRUMENTS. Unless otherwise agreed by the
Issuing Bank, when the Borrower desires the Issuing Bank to issue, extend or
renew a Collateral Instrument for the account of the Borrower, the Borrower
shall furnish to the Agent a Utilisation Request relating thereto (together with
a counter-indemnity relating thereto on the Issuing Bank's customary form) not
later than 11:00 a.m., London time, one (1) Business Day prior to the
Utilisation Date of such Collateral Instrument, identifying (A) the Utilisation
Date (which must be a Business Day), (B) the name of the beneficiary, (C) the
expiry date of such Collateral Instrument (such expiry date only to extend
beyond the Commitment Expiry Date with consent of the Issuing Bank acting in its
sole discretion and subject to the Borrower's agreement to provide cash
collateral therefore in the terms of Clause 2B.4), (D) the proposed currency of
denomination and face amount of such Collateral Instrument, (E) special
conditions, if any, attaching to the negotiation of such Collateral Instrument,
and (F) the instruments, documents and other evidence necessary to be presented
to the Issuing Bank for negotiation of the Collateral Instrument. The Agent
shall, after receipt by it of a Utilisation Request, promptly notify the Issuing
Bank of its receipt of such Utilisation Request and the details thereof.
2B.3 FEES. The Borrower shall, on the date of issuance or any extension or
renewal of any Collateral Instrument and at such other time or times as such
charges are customarily made by the Issuing Bank, pay to the Agent a fee in an
amount equal to the Collateral Instrument Rate in effect
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on such date multiplied by the maximum amount that may be demanded from the
Issuing Bank (assuming all conditions to any such demand have been met) under
such Collateral Instrument. A portion of each such fee equal to one-eighth of
one percent (0.125%) of such maximum amount shall be solely for the account of
the Issuing Bank and the remainder of each such fee shall be for the account of
the Banks in accordance with their Commitment Percentages. In addition, the
Borrower shall pay to the Agent for the account of the Issuing Bank in all cases
on the date of issuance or any extension or renewal of any Collateral
Instrument, all reasonable customary costs, where applicable, associated with
the application, issuance, documentation, and amendment together with all
applicable fees, charges, administrative and out-of-pocket expenses.
2B.4 REIMBURSEMENT OBLIGATIONS OF THE BORROWER. In order to induce the
Issuing Bank to issue, extend and renew each Collateral Instrument, the Borrower
hereby absolutely and unconditionally promises and agrees to reimburse or pay to
the Issuing Bank, with respect to each Collateral Instrument, issued, extended
or renewed by the Issuing Bank hereunder:
(A) on each date that any Collateral Instrument is honoured by the
Issuing Bank or the Issuing Bank otherwise makes a payment with respect
thereto, (I) the amount paid by the Issuing Bank under or with respect to
such Collateral Instrument, (II) the amounts necessary to comply with
Clause 2B.3 hereof (to the extent not previously paid), and (III) the
amount of any taxes, fees, charges or other costs and expenses whatsoever
reasonably incurred by the Issuing Bank in connection with any payment
made by the Issuing Bank under or with respect to such Collateral
Instrument, PROVIDED THAT, if the Borrower fails to make such payments the
Issuing Bank may (but is not obligated to do so), and is hereby appointed
attorney of the Borrower for that purpose, draw down such amounts as are
necessary to discharge the unsatisfied Reimbursement Obligations which are
due and payable as a result of such non-payment, the proceeds of such
drawing being applied by the Agent to the payment of such unsatisfied
Reimbursement Obligations and constituting, for the purposes of Clause
2A.5, a utilisation of the Overdraft; and
(B) upon the Commitment Expiry Date (if for any reason any
Collateral Instrument remains outstanding), an amount equal to the Maximum
Collateral Instrument Drawings, which amount will be held by the Agent for
the account of the Issuing Bank as cash collateral for any and all
Reimbursement Obligations arising thereafter.
2B.5 OBLIGATIONS ABSOLUTE. The Borrower's obligations under this Clause 2B
shall be absolute and unconditional under any and all circumstances and
irrespective of the occurrence of any Event of Default or
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Unmatured Event of Default or any condition precedent whatsoever or any setoff,
counterclaim or defence to payment which the Borrower may have or has had
against the Agent, the Banks, the Issuing Bank or the Overdraft Bank or any
beneficiary of a Collateral Instrument. The Borrower further agrees with the
Agent and the Issuing Bank that the Issuing Bank shall not be responsible for,
and the Borrower's Reimbursement Obligations shall not be affected by, among
other things, the validity or genuineness of any documents or of any
endorsements thereon, notwithstanding that such documents should in fact prove
to be in any or all respects invalid, fraudulent or forged, or any dispute
between or among the Borrower, the beneficiary of any Collateral Instrument or
any financing institution or other party to which any Collateral Instrument may
be transferred and notwithstanding any claims or defences whatsoever that the
Borrower may have against the beneficiary of any Collateral Instrument or any
such transferee. The Issuing Bank shall not be liable for any error, omission,
interruption or delay in transmission, dispatch or delivery of any message or
advice, however transmitted, in connection with any Collateral Instrument. The
Borrower agrees that any action taken or omitted to be taken by the Issuing Bank
under or in connection with each Collateral Instrument and the related
instruments and documents, if done in good faith, shall be binding upon the
Borrower and shall not result in any liability on the part of the Issuing Bank
to the Borrower.
2B.6 INDEMNITIES FROM THE BORROWER. In consideration of the Issuing Bank's
issuing, extending or renewing any Collateral Instrument at the request of the
Borrower the Borrower hereby:
(A) irrevocably and unconditionally agrees to indemnify and hold the
Issuing Bank harmless against all actions, proceedings, liabilities,
claims, damages, costs and expenses in relation to or arising out of any
Collateral Instrument and to pay to the Issuing Bank on demand all
payments, losses, costs and expenses properly suffered or incurred by it
in consequence thereof or arising therefrom and the Issuing Bank shall be
entitled to rely upon, and shall be fully protected in relying upon, any
Collateral Instrument, draft, writing, resolution, notice, consent,
certificate, affidavit, letter, cablegram, telegram, telecopy, or teletype
message, statement, order or other document believed by it to be genuine
and correct;
(B) irrevocably authorises the Issuing Bank to make any payment and
comply with any demands which may be claimed from or made upon it under
any Collateral Instrument without any reference to or further authority
from the Borrower and agrees that any payment which the Issuing Bank shall
make in accordance with any of the Collateral Instruments shall be binding
upon the Borrower and shall be accepted by the Borrower as conclusive
evidence that the Issuing Bank
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was liable to make such payment or comply with such demand and further
agrees that it shall not be incumbent upon the Issuing Bank to enquire
whether any such payment was in fact due, properly made or as to the
authority or identity of the person claiming or making the same; and
(C) irrevocably agrees that the Borrower's obligations hereunder
shall remain in full force and effect and shall not be discharged until
each Collateral Instrument shall have been negotiated or returned to the
Issuing Bank by the beneficiary thereof as cancelled.
2B.7 LETTERS OF CREDIT. Each Letter of Credit issued by the Issuing Bank
hereunder will be subject to, and the performance by the Issuing Bank and the
beneficiary thereunder will be governed by, the Uniform Customs and Practice,
except to the extent it is otherwise expressly agreed. In the event the Letter
of Credit is subject to laws other than the Uniform Customs and Practice, any
action, inaction, or omission on the part of the Issuing Bank or its agents in
connection with such Letter of Credit, and in good faith reliance on such laws,
will be deemed to be in compliance with such Letter of Credit and this Agreement
and the Borrower hereby indemnifies the Issuing Bank or its agents against and
holds them harmless from any and all loss, liability, damages or expense
incurred thereby.
2B.8 CASH COLLATERAL. All amounts provided to the Agent for the account of
the Issuing Bank as cash collateral for outstanding Collateral Instruments shall
be provided in the currencies in which the respective Collateral Instruments are
denominated, or in Sterling if so agreed by the Issuing Bank at the time such
cash collateral is to be provided.
Clause 3. INTEREST PAYABLE ON THE ADVANCES.
3.1 RATE OF INTEREST.
(A) With respect to any LIBOR Advance, the rate of interest which
shall be payable by the Borrower on the unpaid principal amount of such
Advance outstanding and not yet overdue shall be the annual percentage
rate of interest determined by the Agent to be the sum of (I) the LIBOR
applicable to such Advance, PLUS (II) the Applicable Margin, PLUS (III)
the Additional Cost.
(b) With respect to the Overdraft, the rate of interest which shall
be payable by the Borrower on the day to day debit balance in the
Borrower's current account maintained with the Overdraft Bank shall be the
annual percentage rate of interest determined by the Agent to be the sum
of (I) the Sterling Base Rate, PLUS (II) the Applicable Margin, PLUS (iii)
0.25%. The rate of interest on the Overdraft shall vary from
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time to time as the Sterling Base Rate varies, any change in the rate of
interest to become effective on the date of the change in the Sterling
Base Rate.
3.2 TIME FOR PAYMENT. The Borrower hereby absolutely and unconditionally
promises to pay interest:
(A) on the unpaid principal amount of each LIBOR Advance to the
Agent for the account of the Banks in arrear on (I) the last day of each
Interest Period, provided that if the duration of any such Interest Period
is longer than three (3) months the Borrower shall pay the accrued
interest on the last Business Day of each successive three (3) month
period within such Interest Period and on the last day of such Interest
Period and (II) the date such LIBOR Advance is repaid in full; and
(B) with respect to the Overdraft (I) monthly in arrear on the last
day of each calendar month commencing on the first such date following the
date hereof and (II) the date on which the Overdraft is repaid in full and
terminated irrevocably.
3.3 DEFAULT INTEREST.
(a) If the Borrower fails to pay any amount payable by it under this
Agreement when due it shall, upon demand by the Agent from time to time,
pay interest on the overdue amount from the due date up to the date of
actual payment, both before and after judgment, at a rate (the "DEFAULT
RATE") determined by the Agent to be 2.00% per annum above the higher of:
(i) the interest rate payable on the overdue amount
under Clause 3.1 immediately prior to the due date therefore;
and
(ii) the interest rate which would have been payable if the
overdue amount had, during the period of non-payment, constituted a
LIBOR Advance having relative thereto successive Interest Periods of
any duration up to three months as the Agent may determine from time
to time (each a "DESIGNATED INTEREST PERIOD").
(B) The default rate shall be determined on each Business Day or the
first day of the relevant Designated Interest Period, as appropriate.
(C) Default interest shall be compounded at the end of each
Designated Interest Period, if calculated in accordance with Clause
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3.3(A)(II) above, or on the last day of each calendar month, if calculated
in accordance with Clause 3.3(A)(I) above.
(D) If an event occurs which is an Event of Default other than a
payment default as described in Clause 3.3(A) hereof, (the date upon which
such event is notified by the Agent to the Borrower as being an Event of
Default being hereinafter referred to as the "RELEVANT DATE") then,
without prejudice to any other rights and remedies of the Agent, the
Banks, the Issuing Bank and the Overdraft Bank in respect of the
occurrence of that event, from and after the Relevant Date and until such
Event of Default and any other continuing Events of Default shall have
been waived in accordance with the provisions of this Agreement, the
Applicable Margin shall increase by 2.00% per annum. If following any such
increase in the Applicable Margin such Event of Default and any other
continuing Event of Default shall have been waived in accordance with the
provisions of this Agreement, such increase in the Applicable Margin shall
cease to have effect forthwith but without prejudice to any further or
future operation of the provisions of this subclause.
Clause 4. CERTAIN LENDING PROVISIONS.
4.1 DETERMINATION OF INTEREST RATE. Each determination of any interest
rate by the Agent pursuant to the terms hereof with respect to each Advance
shall be conclusive in the absence of manifest error.
4.2 ALTERNATIVE INTEREST RATE. Except as otherwise provided in this
Agreement, if the Agent shall determine that adequate and reasonable methods do
not exist for ascertaining LIBOR on any Rate-fixing Day, the Agent will so
notify the Borrower and the Banks as soon as practicable on such day, which
notice shall be conclusive and binding, and then (A) the Interest Period for the
applicable LIBOR Advance shall be one month (the "ALTERNATIVE INTEREST PERIOD")
and (B) the Agent shall calculate interest on the principal amount of such LIBOR
Advance by substituting for LIBOR the rate per annum determined by the Agent in
consultation with the Banks to be that which fairly expresses as a percentage
per annum the cost to the Banks of funding such principal amount, from whatever
source the Agent may select in good faith, during such Alternative Interest
Period, as certified by the Agent to the Borrower and the Banks.
4.3 REPAYMENTS AND PREPAYMENTS OF THE ADVANCES, ETC.
(A) The Borrower hereby absolutely and unconditionally promises to
pay to the Agent for the account of the Agent, the Banks, the Issuing Bank
and the Overdraft Bank, as the case may be, on the Commitment Expiry Date
(i) the Total Outstandings, the Total
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Outstanding Reimbursement Obligations and all other Obligations and (ii)
an amount equal to the Maximum Collateral Instrument drawings to be held
as cash collateral for any and all Reimbursement Obligations arising
thereafter.
(B) The Borrower may, pursuant to this subclause (B), by providing
one (1) Business Day's prior written notice to the Agent, elect to repay
the principal of any LIBOR Advance outstanding in full or in part without
premium or penalty, PROVIDED THAT (I) any such repayment may be made only
on the last day of the Interest Period relating to such LIBOR Advance, and
(II) the amount of any partial repayment of the unpaid principal of any
Advance pursuant to this subclause (B) shall be in a principal amount of
not less than (pound)250,000.
(C) The Borrower irrevocably agrees to permit the Overdraft Bank on
any Business Day to reduce all or a portion of the Overdraft in an amount
equal to the amount of any cleared funds credited on such Business Day to
the Borrower's current account with the Overdraft Bank. For the avoidance
of doubt, repayment pursuant to this subclause (C) shall not prohibit the
Borrower's continued utilisation of the Overdraft subject to the terms and
conditions of this Agreement.
(D) The obligation of the Borrower to repay all amounts borrowed by
it hereunder, all interest thereon and all other amounts payable by it in
respect thereof shall be evidenced by this Agreement, it being the
intention of the parties hereto that the Borrower's obligation with
respect to any amounts owed by the Borrower hereunder is evidenced only as
stated herein and in the other Loan Documents and not by separate
promissory notes or other instruments.
4.4 INDEMNITIES FROM THE BANKS.
(A) Each Bank irrevocably and unconditionally undertakes to pay to
the Agent for the account of the Issuing Bank on demand made by the
Issuing Bank through the Agent:
(I) its Commitment Percentage of each amount which is
expressed to be payable by the Borrower to the Agent under Clauses
2A and 2B hereof and its Commitment Percentage of any amount
otherwise demanded of or expressed to be payable by the Borrower for
the account of the Issuing Bank by way of provision of cash cover
for any Collateral Instrument and which in either case the Borrower
fails to pay; and
(II) such additional amount as shall be necessary to reimburse
the Issuing Bank for its cost of funding the amount
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payable by such Bank as mentioned in (I) above during the period beginning
on the date the amount was due from the Borrower and ending on the date
such Bank makes payment of the same,
and agrees that neither the Issuing Bank nor the Agent shall be obliged to
make any demand on or take any proceedings against the Borrower or any
other Person before making demand on such Bank hereunder.
(B) Each Bank irrevocably and unconditionally undertakes to pay to
the Agent for the account of the Overdraft Bank on demand made by the
Overdraft Bank through the Agent:
(I) its Commitment Percentage of the debit balance from time to
time in the Borrower's current account maintained with the Overdraft
Bank which the Borrower fails to pay together with interest which
has accrued with respect thereto; and
(II) such additional amount as shall be necessary to reimburse
the Overdraft Bank for its cost of funding the amount payable by
such Bank as mentioned in (I) above during the period beginning on
the date the amount was due from the Borrower and ending on the date
such Bank makes payment of the same,
and agrees that neither the Overdraft Bank nor the Agent shall be obliged
to make any demand on or take any proceedings against the Borrower or any
other person before making demand on such Bank hereunder.
(C) Each Bank irrevocably and unconditionally undertakes to pay to
the Agent for the account of the Overdraft Bank on demand made by the
Overdraft Bank through the Agent at any time after an Event of Default has
occurred and is continuing and has not been waived, its Commitment
Percentage of the debit balance from time to time in the Borrower's
current account maintained with the Overdraft Bank, and any such payment
shall be in satisfaction PRO TANTO of the undertakings of such Bank
contained in Clause 4.4(B) above.
(D) If a Bank (a "DEFAULTING BANK") fails to make payment on the due
date therefor of any amount due from it for the account of any Person
pursuant to Clauses 4.4(A), 4.4(B) and 4.4(C) hereof (a "RELEVANT AMOUNT")
then until such Person has received payment of that amount in full (and
without prejudice to any other rights or remedies of the Agent in respect
of such failure) such Person shall be entitled to receive any interest or
commission (as the case may be) which such Defaulting Bank would otherwise
have been entitled to receive in respect of the
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Advance or the Collateral Instrument in respect of which the relevant
amount is payable.
(E) The Borrower irrevocably and unconditionally undertakes to
reimburse to each Bank any amount paid by such Bank pursuant to Clauses
4.4(A), 4.4(B) and 4.4(C) hereof and such amount shall be immediately due
from the Borrower to such Bank on the day such amount is paid by such Bank
to the Agent and to indemnify and hold such Bank harmless against all
actions, proceedings, liabilities, claims, demands, reasonable costs and
expenses of whatsoever nature and howsoever occurring which such Bank may
properly incur, suffer or sustain by reason of its payment of such amount.
4.5 PAYMENTS AND COMPUTATIONS.
(A) Sterling is the currency of account and payment for each and
every sum at any time due from the Borrower hereunder; PROVIDED THAT:
(I) each payment in respect of costs and expenses shall
be made in the currency in which the same were incurred; and
(II) any amount expressed to be payable in a currency other
than Sterling (including without limitation Collateral Instruments
issued in an Optional Currency) shall be paid in that other
currency.
(B) Interest and fees payable by the Borrower shall be paid
to the Agent as follows:
(I) as to interest due with respect to the Overdraft, such
interest shall be for the account of the Overdraft Bank, PROVIDED
THAT to the extent that a Bank has paid to the Overdraft Bank any
amount in respect of the Overdraft pursuant to Clause 4.4 hereof,
interest to the extent as aforesaid on such amount shall thereafter
accrue for the account of such Bank;
(II) as to fees due with respect to Collateral Instruments
issued hereunder, such fees shall be for the account of the Issuing
Bank and the Banks, as the case may be, pursuant to the provisions
of Clause 2B.3 hereof; and
(III) as to all interest (other than that specifically
provided for in subclause (I) above), such interest shall be for the
account of the Banks in the proportions of their respective
Commitment
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Percentages from time to time in the Advance in respect of which such
interest is being paid.
(C) If any sum due from the Borrower under this Agreement or any
order or judgment given or made in relation hereto has to be converted
from the currency (the "FIRST CURRENCY") in which the same is payable
hereunder or under such order or judgment into another currency (the
"SECOND CURRENCY") for the purpose of (I) making or filing a claim or
proof against the Borrower, (II) obtaining an order or judgment in any
court or other tribunal or (III) enforcing any order or judgment given or
made in relation hereto, the Borrower shall indemnify and hold harmless
each of the Persons to whom such sum is due from and against any loss
suffered as a result of any discrepancy between (A) the rate of exchange
used for such purpose to convert the sum in question from the first
currency into the second currency and (B) the rate or rates of exchange at
which such Person may in the ordinary course of business purchase the
first currency with the second currency upon receipt of a sum paid to it
in satisfaction, in whole or in part, of any such order, judgment, claim
or proof.
(D) On each date on which this Agreement requires an amount to be
paid by the Borrower or any of the Banks hereunder, the Borrower or, as
the case may be, such Bank shall make the same available to the Agent to
such account of the Agent as the Agent shall have notified the Borrower or
such Bank, as the case may be. Each such payment which is made for the
account of a Person other than the Agent shall be made in time to enable
the Agent to make available such other Person's portion thereof for value
the same day and in any event no later than 12:00 noon (London time).
(E) Where a sum is to be paid hereunder to the Agent for account of
another Person, the Agent shall not be obliged to make the same available
to that other Person until it has been able to establish to its
satisfaction that it has actually received such sum, but if it does so and
it proves to be the case that it has not actually received the sum it paid
out, then the Person to whom such sum was so made available shall on
request refund the same to the Agent together with an amount sufficient to
reimburse the Agent for any amount it may have been required to pay out by
way of interest on moneys borrowed to fund the sum in question during the
period beginning on the due date for payment thereof and ending on the
date on which it receives the same.
(F) If any sum would, but for the provisions of this subclause (f),
become due and payable hereunder on a day which is not a Business Day,
then such sum shall become due and payable on the Business Day
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next succeeding the day on which such sum would otherwise have become due
and payable hereunder.
(G) All computations of interest payable hereunder shall be made by
the Agent on the basis of the actual number of days elapsed and on a
365-day year.
4.6 PAYMENTS TO BE FREE OF DEDUCTIONS.
(A) All payments by the Borrower under this Agreement shall be made
without set-off or counterclaim and free and clear of and without
deduction for any Taxes, charges, fees, deductions, withholdings,
compulsory loans, restrictions or conditions of any nature now or
hereafter imposed or levied by any country or any political subdivision
thereof or taxing or other authority therein unless the Borrower is
compelled by law to make such deduction or withholding. If any such
obligation is imposed upon the Borrower with respect to any amount payable
by it hereunder, the Borrower will pay to the Agent for the account of the
Agent, the Banks, the Issuing Bank or the Overdraft Bank, as the case may
be, on the date on which the said amount becomes due and payable
hereunder, such additional amount as shall be necessary to enable the
Agent, the Banks, the Issuing Bank or the Overdraft Bank to receive the
same net amount which they would have received on such due date had no
such obligation been imposed upon the Borrower.
(B) In the event that any of the Agent, the Banks, the Issuing Bank
or the Overdraft Bank actually receives from any such taxing or other
authority any credit, repayment, relief or rebate in respect of any such
deduction or withholding for which the Borrower has paid any of them an
additional amount pursuant to Clause 4.6(A) above, the Agent, such Bank,
the Issuing Bank or the Overdraft Bank, as the case may be, will promptly
after the date of such credit, repayment, relief or rebate pay to the
Borrower the amount of such credit, repayment, relief or rebate, less the
aggregate amount of any costs or expenses which the Agent, such Bank, the
Issuing Bank or the Overdraft Bank, as the case may be, shall have
sustained or incurred in connection with or as a result of the obtaining
of such credit, repayment, relief or rebate, but not including the normal
expenses incurred by the Agent, such Bank, the Issuing Bank or the
Overdraft Bank, as the case may be, in filing those tax forms it would
otherwise have been required to file without regard to such credit,
repayment, relief or rebate and provided that if any of the Agent, the
Banks, the Issuing Bank or the Overdraft Bank, as the case may be, has
made a payment to the Borrower pursuant to this Clause 4.6(B) on the basis
of any credit, repayment, relief or rebate which is subsequently
disallowed, then the Borrower shall repay,
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immediately upon demand, the amount of such payment. Nothing herein
contained shall interfere with the right of any of the Agent, the Banks,
the Issuing Bank or the Overdraft Bank, as the case may be, to arrange its
tax affairs in whatever manner it thinks fit and, in particular, none of
them shall be under any obligation to claim relief from tax on its
corporate profits or from any similar tax liability, or to claim such
relief in priority to any other claims of relief, credits or deductions
available to it or to disclose details of its tax affairs.
(C) Each of the Agent, the Banks, the Issuing Bank and the Overdraft
Bank hereby represents and warrants to the Borrower that it is on the date
hereof a Qualifying Bank and agrees to advise the Borrower promptly if at
any time it ceases to be a Qualifying Bank.
(D) If otherwise than as a result of the introduction of, amendment
to, or any change in the interpretation, administration or application of,
any law or regulation or any practice or concession of the United Kingdom
Inland Revenue occurring after the date of this Agreement, any of the
Agent, the Banks, the Issuing Bank or the Overdraft Bank is not or ceases
to be a Qualifying Bank, the Borrower shall not be liable to pay to such
Person under this Clause 4.6 any amount in respect of taxes levied or
imposed by any taxing authority of or in the United Kingdom in excess of
the amount the Borrower would have been obliged to pay if such Person had
been, or had not ceased to be, a Qualifying Bank.
4.7 ADDITIONAL COSTS, CHANGES IN CIRCUMSTANCES, ETC.
(a) Anything herein to the contrary notwithstanding, if any law
which becomes effective or is implemented on or after the date hereof
(which expression, as used in this Agreement, includes statutes and rules
and regulations thereunder and interpretations thereof by any competent
court or by any governmental or other regulatory body or official charged
with the administration or the interpretation thereof and requests,
directives, instructions and notices at any time or from time to time
heretofore or hereafter made upon or otherwise issued to any Bank, whether
in its capacity as a Bank or as the Agent, the Overdraft Bank or the
Issuing Bank hereunder, by any central bank or other fiscal, monetary or
other authority, whether or not having the force of law) shall (I) subject
such Bank to any Tax, charge, fee, deduction or withholding of any nature
with respect to this Agreement, the amount of its Commitment, or the
payment to such Bank of any amounts due to it hereunder, or (II)
materially change the basis of taxation of payments to such Bank (as
determined by such Bank) of principal or interest or any other amount
payable to such Bank hereunder, or (III) impose or increase or render
applicable any special or
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supplemental deposit or reserve or similar requirements or assessment
against assets held by, or deposits in or for the account of, or any
eligible liabilities of, or advances by such Bank in respect of the
transaction or transactions contemplated herein, or (IV) impose on such
Bank any other condition or requirement with respect to this Agreement or
its Commitment, and the result of any of the foregoing is (A) to increase
the cost to such Bank of making, funding or maintaining all or any part of
the Advances or issuing, extending or renewing any Collateral Instrument,
or (B) to reduce the amount of principal, interest or other amount payable
to such Bank hereunder, or (C) to require such Bank to make any payment or
to forego any interest or other sum payable hereunder, the amount of which
payment or foregone interest or other sum is calculated by reference to
the gross amount of any sum receivable or deemed received by such Bank
from the Borrower hereunder, then, and in each such case not otherwise
provided for in Clause 4.6 or any other Clause hereunder, the Borrower
will pay to such Bank, within 30 days of the date of an invoice
(accompanied by calculations of such additional amounts in reasonable
detail) issued by such Bank to the Agent and the Borrower with respect
thereto, such additional amounts as will be sufficient to compensate such
Bank for such additional cost, reduction, payment or foregone interest or
other sum. Such calculations as to amounts owed by the Borrower referred
to in the preceding sentence shall be conclusive and binding upon the
Borrower, absent manifest error.
(B) If any law which becomes effective or is implemented on or after
the date hereof or any governmental rule, regulation, policy, guideline or
directive (whether or not having the force of law) or the interpretation
thereof by a court or governmental authority with appropriate jurisdiction
imposes or increases the amount of capital required or expected to be
maintained by any Bank, whether in its capacity as a Bank or as the Agent,
the Overdraft Bank or the Issuing Bank hereunder, or any corporation
controlling any Bank and any Bank determines that the amount of capital
required is increased by or based upon the existence of the credit
facilities established hereunder or any Advance made pursuant hereto then
such Bank shall notify the Agent and the Borrower of such fact showing the
calculation thereof in reasonable detail. To the extent that the costs of
such increased capital requirements are not reflected in the calculation
of LIBOR or the Sterling Base Rate, as the case may be, or in commissions
or fees payable by the Borrower hereunder (and are not otherwise adjusted
by the provisions of Clause 4.6 or any other Clause hereof), the Borrower
and such Bank shall thereafter attempt to negotiate in good faith an
adjustment within 30 days of the day on which the Borrower receives such
notice. If no such adjustment is agreed pursuant thereto within such time,
then commencing on the date of such notice (but not earlier
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than the effective date of any such change), the amounts payable by the
Borrower hereunder shall increase by an amount which will, in the
reasonable determination of such Bank in consultation with the Agent,
provide adequate compensation. Each Bank shall allocate such cost
increases among its customers in good faith and on an equitable basis.
4.8 ILLEGALITY. If, at any time, it is or becomes unlawful for a Bank to
maintain its Commitment hereunder or in its capacity as a Bank or as the Agent,
the Overdraft Bank or the Issuing Bank hereunder to make or perform any other
obligation hereunder in relation to any Advance made or to be made or any
Collateral Instrument issued, extended or renewed then such Bank shall, promptly
after becoming aware of the same, deliver to the Borrower through the Agent a
certificate to that effect and:
(A) such Bank shall not thereafter be obliged to maintain its
Commitment hereunder or to participate in any Advance or to issue or
participate in, as the case may be, any Collateral Instruments;
(B) if the Agent on behalf of such Bank so requires, the Borrower
shall within 30 days of demand by the Agent (or such earlier date as may
be required by applicable law affecting such Bank) repay or provide cash
collateral, as the case may be, to the Agent for the account of such Bank
an amount equal to such Bank's Commitment Percentage in any outstanding
Advances and any outstanding Collateral Instruments together with accrued
interest thereon and all other amounts owing to such Bank hereunder,
whereupon such Bank's Commitment Percentage shall be reduced to zero and
the Maximum Commitment Amount shall be reduced by the amount of such
Bank's terminated Commitment; and
(C) such Bank shall use reasonable efforts (consistent with
applicable law and regulatory restrictions) in consultation with the
Borrower to mitigate the consequences to the Borrower of such illegality,
including the transfer of its rights and obligations hereunder to an
Eligible Transferee in accordance with Clause 12.2 hereof, provided that
no such Bank shall have any obligation to take any steps that in its
opinion would or could have an adverse effect on such Bank.
4.9 INDEMNIFICATION. In the event that the Borrower shall at any time (A)
repay or prepay any principal of any LIBOR Advance on a date other than the last
day of the Interest Period with respect thereto, whether such repayment or
prepayment is pursuant to Clauses 2A or 4 hereof, as a result of acceleration or
otherwise, or (B) for any reason fail to borrow any LIBOR Advance as requested,
the Borrower shall, within five (5) days of demand by the Agent accompanied by
calculations in reasonable detail pay to the Agent for the account of the Banks
or the Agent, as the case may be, any amounts
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required to compensate the Banks or the Agent for any and all losses, costs and
expenses of the Banks or the Agent in respect of the Borrower's payment,
prepayment or failure to borrow, on the date of such payment or failure to
borrow, including, but not limited to, compensation relating to liquidation or
re-employment of deposits or other funds acquired by the Banks or the Agent to
fund or maintain such Advance. Such compensation may include, without
limitation, an amount equal to the excess, if any, of (I) the amount of interest
which would have accrued on the amount so paid or prepaid or not borrowed for
the period from the date of such payment or prepayment or failure to borrow to
the last day of the then current Interest Period for such Advance (or, in the
case of a failure to borrow, the Interest Period for such Advance which would
have commenced on the date of such failure to borrow) at the applicable rate of
interest for such Advance provided for herein, over (II) the amount of interest
(as reasonably determined by the Agent, or the Banks, as the case may be) which
would have been paid on deposits of comparable amounts having terms comparable
to such period placed with it by leading banks in the relevant market. Any
calculations made by the Agent pursuant to the terms of this Clause 4.9
regarding amounts owed by the Borrower shall be conclusive and binding on the
Borrower and the Banks absent manifest error.
Clause 5. CONDITIONS PRECEDENT; SECURITY.
5.1 DOCUMENTARY CONDITIONS PRECEDENT. The obligations of the Agent, the
Banks, the Issuing Bank and the Overdraft Bank to make the first Advance to the
Borrower or to issue the first Collateral Instrument, as the case may be, under
this Agreement are subject to the condition precedent that the Agent has
notified the Borrower, the Banks, the Issuing Bank and the Overdraft Bank that
it has received all of the documents set out in THE THIRD SCHEDULE hereto in
form and substance satisfactory to it.
5.2 FURTHER CONDITIONS PRECEDENT. The obligations of the Agent, each Bank,
the Issuing Bank and the Overdraft Bank, as the case may be, in respect of the
making of each Advance, and the commencement of each succeeding Interest Period
with respect to any outstanding Advance or the issuance, extension or renewal of
any Collateral Instrument under this Agreement are subject to the further
conditions precedent that:
(A) the representations and warranties in Clause 6 hereof and all
other representations in writing made by or on behalf of the Borrower or
any of its Subsidiaries to the Agent, the Banks, the Issuing Bank and/or
the Overdraft Bank in connection with this Agreement or any of the Loan
Documents shall be true as of the date on which they were made and shall
also be true at and as of such time of the making of the Advance or the
issuance, extension or renewal of the Collateral
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Instrument, as the case may be, with the same effect as if made at and as
of such time; and
(B) no event shall have occurred and be continuing, and no condition
shall exist, which constitutes an Event of Default or an Unmatured Event
of Default, or which following the making of the Advance or the issuance,
extension or renewal of the Collateral Instruments, as the case may be,
would constitute an Event of Default or an Unmatured Event of Default.
5.3 SECURITY; PARENT GUARANTEE. The Obligations shall be secured by the
Security Documents, and shall be unconditionally and irrevocably guaranteed in
full by the Parent pursuant to a guarantee of even date herewith in form and
substance satisfactory to the Banks and the Agent (the "PARENT GUARANTEE") and
by Holdings pursuant to a guarantee of even date herewith in form and substance
satisfactory to the Banks and the Agent (the "HOLDINGS GUARANTEE").
Clause 6. REPRESENTATIONS AND WARRANTIES.
The Borrower represents and warrants to the Agent, the Banks, the Issuing
Bank and the Overdraft Bank (each such representation and warranty being deemed
repeated upon the making of each Advance, upon the issuance, extension or
renewal of any Collateral Instrument and upon the commencement of each
succeeding Interest Period with respect to any outstanding LIBOR Advance) that:
6.1 DUE INCORPORATION. The Borrower is a limited liability company duly
incorporated and registered under the laws of England. Each of the Borrower's
Subsidiaries is a corporation duly organised, validly existing and in good
standing under the laws of the jurisdiction of its incorporation.
6.2 CAPACITY. Each of the Borrower and its Subsidiaries has full power and
authority to execute and deliver and to perform and observe the provisions of
each of the Loan Documents to which it is a party and to carry out the
transactions contemplated thereby.
6.3 AUTHORITY AND ENFORCEABILITY. The execution, delivery and performance
by each of the Borrower and its Subsidiaries of each of the Loan Documents to
which it is a party have been duly authorised by all necessary corporate action,
and do not and will not require any registration with, consent or approval of,
notice to, or any action by, any Person, except for satisfaction of the
requirements of Section 395 of the Companies Act 1985, Section 2 of the Land
Charges Act 1972 and Section 26 of the Land Registration Act 1925, where
applicable, in relation to the Security Documents. Each of the Loan Documents to
which the Borrower or any of its
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Subsidiaries is a party constitutes the legal, valid and binding obligations of
the Borrower or such Subsidiary, as the case may be, enforceable against it in
accordance with its terms.
6.4 COMPLIANCE WITH OTHER INSTRUMENTS. The execution and delivery of each
of the Loan Documents to which the Borrower or any of its Subsidiaries is a
party and compliance with their terms will not (A) result in a breach of (I) any
of the terms or conditions of, or result in the imposition of any lien, charge
or encumbrance upon any properties of the Borrower or any of its Subsidiaries
pursuant to, or constitute a default (with due notice or lapse of time or both)
or result in an occurrence of an event for which any holder or holders of
Indebtedness may declare the same due and payable under, any indenture,
agreement, order, judgment or instrument under which the Borrower or any of its
Subsidiaries is a party or by which the Borrower or any of its Subsidiaries or
its or their property may be bound or affected, or (II) the Memorandum and
Articles of Association or other constitutive documents of the Borrower or any
of its Subsidiaries or any shareholder's resolution of the Borrower or any of
its Subsidiaries, or (B) violate any existing provision of law applicable to the
Borrower or any of its Subsidiaries.
6.5 NO UNMATURED EVENTS OF DEFAULT OR EVENTS OF DEFAULT. No Unmatured
Event of Default or Event of Default has occurred and is continuing.
6.6 COLLATERAL. All of the Obligations will at all times from and after
the execution and delivery of each of the Security Documents be entitled to all
of the benefits of and be secured by each of such Security Documents in
accordance with the terms thereof.
6.7 DISCLOSURE. None of the representations or warranties made by the
Borrower or any of its Subsidiaries in any of the Loan Documents as of the date
of such representations and warranties, and none of the statements contained in
each exhibit or report furnished by or on behalf of the Borrower or any of its
Subsidiaries to the Agent or any of the Banks in connection with any of the Loan
Documents, contains any untrue statement of a material fact or omits any
material fact required to be stated therein or necessary to make the statements
made therein, in the light of the circumstances under which they are made, not
misleading. There is no fact known to the Borrower which materially adversely
affects, or which would be reasonably likely in the future to materially
adversely affect, the financial position, business, operations, or affairs of
the Borrower and its Subsidiaries taken as a whole.
6.8 BANK ACCOUNTS. All accounts maintained by the Borrower or any of its
Subsidiaries with any bank or similar institution are described in THE FOURTH
SCHEDULE, which such schedule shows the account holder, the address
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at which such account is maintained, the account number, the type of account and
the currency in which such account is maintained.
6.9 REPRESENTATIONS AND WARRANTIES IN THE PARENT LOAN AGREEMENT. The
Borrower is familiar with all representations and warranties made by the Parent
with respect to itself and its Subsidiaries in the Parent Loan Agreement, and
all such representations and warranties are true and correct insofar as they
apply to the Borrower as a Subsidiary of the Parent. All such representations
and warranties are hereby incorporated by reference and are hereby deemed to
made by the Borrower from time to time as if set forth herein in full.
Clause 7. CERTAIN AFFIRMATIVE COVENANTS.
The Borrower covenants and agrees that, until the later of (A) the
Commitment Expiry Date, or (B) the date upon which all of the Obligations shall
have been paid in full and the Commitments have been terminated, the Borrower
will (and to the extent applicable to any Subsidiary, will ensure like
compliance by each such Subsidiary):
7.1 NOTICE OF DEFAULT, ETC. Promptly give notice in writing to the Agent of
(A) the occurrence of any Event of Default or any continuing Unmatured Event of
Default under this Agreement, (B) any technical, legal or administrative event
(including without limitation, actual or threatened litigation) which has
occurred or it is aware will occur and which is reasonably likely to materially
prejudice the financial or economic situation of the Borrower or any of its
Subsidiaries, (C) the occurrence of any event in relation to it which is
reasonably likely to materially adversely affect the rights of the Agent or any
of the Banks under, or the ability of any member of the Affiliate Group to
perform its respective obligations under, the Loan Documents to which it is a
party, (d) any set off, withholding or other claim or dispute of which it is
aware affecting any of the collateral in any material respect, (E) any
litigation or proceedings threatened in writing or any pending litigation of
which it is aware or proceedings affecting, or involving as a party or potential
party thereto the Borrower or any of its Subsidiaries and that could reasonably
be expected to have a materially adverse effect on the Borrower or any of its
Subsidiaries and (F) any judgment not covered by insurance, final or otherwise,
against the Borrower or any of its Subsidiaries in an amount in excess of
(pound)15,000, which is not discharged within 10 days.
7.2 EXPENSES. Promptly pay (without duplication of any other
expenses to be paid by the Borrower hereunder):
(A) all reasonable out-of-pocket expenses of the Agent (including,
but not limited to, reasonable fees and disbursements of the Agent's
counsel as well as those fees and disbursements arising in connection
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with appraisals and environmental site assessments) together with any
applicable VAT, incident to the preparation, execution and delivery of the
Loan Documents, any amendments or waivers to any of the Loan Documents,
the protection of the rights of the Agent and the Banks under the Loan
Documents and the enforcement of the Obligations, whether by judicial
proceedings or otherwise;
(B) in addition to and without limitation of the foregoing, all
reasonable costs incurred by or on behalf of the Agent in connection with
the monitoring or examination of the assets of the Borrower or its
Subsidiaries, including all such costs incurred by the Agent's employees
or professional advisers engaged in such monitoring or examination; and
(C) all stamp, registration and other taxes and fees (including VAT)
to which this Agreement and/or any other Loan Document or any judgment
given in connection herewith or therewith is or at any time may be subject
and shall, from time to time on demand of the Agent, indemnify the Agent,
against any liabilities, costs, claims and expenses resulting from any
failure to pay or any delay in paying any such tax.
If the Borrower fails to perform any of its obligations under this Clause 7.2
each Bank shall, in accordance with its respective Commitment Percentage,
indemnify the Agent against any loss incurred by it as a result of such failure
and the Borrower shall forthwith reimburse each Bank for any payment made by it
pursuant hereto. The obligations of the Borrower under this Clause 7.2 shall
survive the repayment of the Advances.
7.3 FINANCIAL RECORDS. Keep, and cause each of the Subsidiaries at all
times to keep, books of record and accounts in which proper entries will be made
of its financial transactions in accordance with generally accepted accounting
principles in the United Kingdom, applied on a consistent basis.
7.4 USE OF PROCEEDS. Use the Advances made available hereunder and the
Collateral Instruments issued, extended or renewed hereunder solely for the
purposes specified in Clause 1.3. None of the Advances or the Collateral
Instruments shall be used in any way which infringes Section 151 of the
Companies Act 1985 or any law of any other relevant jurisdiction which restricts
the incurring of indebtedness and/or the creation of security by the Borrower or
its Subsidiaries in connection with the acquisition, directly or indirectly, of
ownership or control of the Borrower or its Subsidiaries. Without affecting the
obligations of the Borrower in any way, no Bank shall be bound to monitor or
verify the application of any Advance.
7.5 DELIVERY OF MONTHLY MAXIMUM AMOUNT CERTIFICATE. Deliver to the Agent
and each of the Banks within five (5) Business Days prior to the end of
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each calendar month a certificate in the form of EXHIBIT G to the Parent Loan
Agreement, duly signed on behalf of the Borrower and the Parent and setting
forth the maximum amount of the credit facilities available hereunder during the
next calendar month (the "MONTHLY MAXIMUM AMOUNT") in accordance with Section
9.4(i) of the Parent Loan Agreement.
7.6 FURTHER ASSURANCES. At any time or from time to time execute and
deliver and cause each of the Subsidiaries to execute and deliver such further
instruments and take such further action as may reasonably be requested by the
Agent, further and more perfectly to effect the purposes of the Loan Documents,
including without limitation, such further Security Documents and documents
evidencing good and marketable title with respect to the properties and assets
of the Borrower and its Subsidiaries now owned or acquired after the date
hereof.
7.7 AFFIRMATIVE COVENANTS IN THE PARENT LOAN AGREEMENT. Comply with all
affirmative covenants made by the Parent in the Parent Loan Agreement with
respect to itself and its Subsidiaries insofar as they apply to the Borrower as
a Subsidiary of the Parent. The Borrower is familiar with all such affirmative
covenants, which are hereby incorporated by reference and are hereby deemed to
be made by the Borrower as if set forth herein in full.
Clause 8. CERTAIN NEGATIVE COVENANTS.
The Borrower covenants and agrees that, until the later of (A) the
Commitment Expiry Date, or (B) the date upon which all of the Obligations shall
have been paid in full and the Commitments have been terminated, the Borrower
will not (and to the extent applicable to any Subsidiary, will ensure that each
such Subsidiary will not):
8.1 DISTRIBUTIONS. Make, or permit any of the Subsidiaries to
make, without the approval of all the Banks, any Distribution, except
Distributions by any Subsidiary to the Borrower.
8.2 BANK ACCOUNTs. Open or establish any bank accounts other than those
listed on THE FOURTH SCHEDULE without the prior written consent of the Agent.
8.3 NEGATIVE COVENANTS IN THE PARENT LOAN AGREEMENT. Fail to comply with
all negative covenants made by the Parent in the Parent Loan Agreement with
respect to itself and its Subsidiaries insofar as they apply to the Borrower as
a Subsidiary of the Parent. The Borrower is familiar with all such negative
covenants, which are hereby incorporated by reference and are hereby deemed to
be made by the Borrower as if set forth herein in full.
Clause 9. EVENTS OF DEFAULT; ACCELERATION.
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9.1 EVENTS OF DEFAULT. If any of the following events shall occur:
(A) the Borrower shall fail to pay when due any amount of principal
of, or interest on, any Advance, when the same becomes due (whether at
maturity, by reason of acceleration or otherwise); or
(B) the Borrower shall fail to pay any amount (other than those
specified in (a) above) payable hereunder or under any of the other Loan
Documents; or
(C) the Borrower or any of its Subsidiaries shall fail to
comply with any of its covenants contained in Clauses 7 and 8; or
(D) any member of the Affiliate Group shall fail to comply with any
term, covenant or agreement contained in this Agreement (other than those
specified in (A), (B) or (C) above) or in any of the other Loan Documents
to which it is a party and such failure continues for fifteen (15) days
after written notice of such failure has been given to such Person by the
Agent; or
(E) any representation or warranty made by any member of the
Affiliate Group herein, in any of the Loan Documents, or in any writing
delivered or furnished pursuant to this Agreement, or otherwise in
connection with the transactions contemplated hereby or any report,
certificate, or financial statement furnished in connection with this
Agreement, shall prove to have been false or incorrect in any material
respect when made, repeated, or deemed made; or
(F) any Event of Default under and as defined in the Parent
Loan Agreement shall have occurred and be continuing;
(G) any member of the Affiliate Group shall be unable to pay its
debts as they fall due or is deemed to be unable to pay its debts as they
fall due within the meaning of Section 123 of the Insolvency Act 1986 (as
that section may be amended by order under Section 416 of the Insolvency
Act 1986) or admits its inability to pay its debts as they fall due, or
suspends making payments on all or any class of its debts or announces an
intention to do so, or a moratorium is declared in respect of any of its
indebtedness, or it begins negotiations with one or more of its creditors
with a view to avoiding, or in the expectation of, insolvency; or
(H) any petition is presented or meeting is convened with a view to
a general composition, assignment or arrangement with all or any class of
creditors of any member of the Affiliate Group, or a meeting of
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any member of the Affiliate Group is convened for the purpose of
considering any resolution for its winding-up or for its administration or
any such resolution is passed, or any Person presents a petition for the
winding-up or for the administration of any member of the Affiliate Group,
or an order for the winding-up or administration of any member of the
Affiliate Group is made, or any other legal process is commenced with a
view to the rehabilitation, administration, liquidation, bankruptcy,
winding-up or dissolution of any member of the Affiliate Group or to any
other insolvency proceedings involving any member of the Affiliate Group
and, in the case of a petition or legal process (other than a petition for
the administration of any member of the Affiliate Group) instituted by a
Person who is not a member of the Affiliate Group (as the case may be),
such petition or legal process has not been dismissed within thirty (30)
consecutive calendar days; or
(I) any liquidator, receiver, administrative receiver,
administrator, trustee or the like is appointed in respect of any member
of the Affiliate Group or of the whole or a substantial part of its
assets, or one or more directors of any member of the Affiliate Group
requests the appointment of any such Persons, or any attachment,
sequestration, distress or execution affects all or substantially all of
the assets of any member of the Affiliate Group and is not discharged or
stayed within ten (10) consecutive calendar days; or
(J) any event or series of events occurs after the date hereof which
would be reasonably likely to materially adversely effect the ability of
any member of the Affiliate Group to pay or perform its obligations under
this Agreement or any of the other Loan Documents to which it is a party;
(K) the Parent shall at any time beneficially own less than 100% of
the issued share capital of Holdings or Holdings shall at any time
beneficially own less than 100% of the issued share capital of the
Borrower; or
(L) the Parent shall default in the payment or performance of any of
its obligations under the Parent Guarantee, or Holdings shall default in
the payment or performance of any of its obligations under the Holdings
Guarantee;
THEN, or at any time thereafter while such event shall be continuing:
(1) where the Borrower or any of its Subsidiaries is in default under the
provisions of Clauses 9.1(G), (H) or (I) the Commitments shall automatically
terminate, and the entire unpaid principal amount of all of the Advances, all
interest accrued and unpaid thereon, all unsatisfied
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Reimbursement Obligations and all fees and other amounts payable hereunder shall
automatically become and be forthwith due and payable, without presentment,
demand, protest or notice of any kind, all of which are hereby expressly waived
by the Borrower and the Borrower shall be immediately obligated to provide cash
collateral to the Agent in an amount equal to the Maximum Collateral Instrument
Drawings; and
(2) in any case referred to in this Clause 9.1 other than in Clauses
9.1(G), (H) or (I) the Agent may, and upon the request of the Majority Banks
shall, by written notice to the Borrower, terminate all or part of the
Commitments and/or declare all or part of the unpaid principal amount of all of
the Advances, all interest accrued and unpaid thereon, all unsatisfied
Reimbursement Obligations and all fees and other Obligations to be forthwith due
and payable, whereupon the same shall become immediately due and payable,
without presentment, demand, protest or further notice of any kind, all of which
are hereby expressly waived by the Borrower, and the Borrower shall on demand
provide cash collateral to the Agent in an amount equal to the Maximum
Collateral Instrument Drawings.
No remedy herein conferred upon the Agent, the Banks, the Issuing Bank or
the Overdraft Bank is intended to be exclusive of any other remedy and each and
every remedy shall be cumulative and shall be in addition to every other remedy
given hereunder or now or hereafter existing at law or in equity or by statute
or any other provision of law.
9.2 DISTRIBUTION OF COLLATERAL PROCEEDS. In the event that, following the
occurrence or during the continuance of any Unmatured Event of Default or Event
of Default, the Agent, any Bank, the Issuing Bank or the Overdraft Bank, as the
case may be, receives any monies in connection with the enforcement of any of
the Security Documents, or otherwise with respect to the realisation upon any of
the collateral, such monies shall be distributed for application as follows:
(A) first, to the payment of, or (as the case may be) the
reimbursement of, the Agent, the Banks, the Issuing Bank and the Overdraft
Bank for or in respect of all reasonable costs, expenses, disbursements
and losses (excluding overhead or general payroll or administrative
expenses) which they shall have incurred or sustained in connection with
the collection of such monies, or the exercise, protection or enforcement
of all or any of their rights, remedies, powers and privileges under this
Agreement or any of the other Loan Documents or in respect of the
collateral, and to support the provision of adequate indemnity to the
Agent, the Banks, the Issuing Bank and the Overdraft Bank against all
taxes or liens which by law shall have, or may have, priority over their
rights to such monies;
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(B) second, to the satisfaction of all other Obligations in
the following order:
(I) to pay all commitment and other fees owing and
outstanding; then
(II) to pay accrued and outstanding interest pro rata
in accordance with Clause 4.5(b) hereof; then
(III) to pay the principal amount of all Advances and
unsatisfied Reimbursement Obligations pro rata amongst the Banks,
the Issuing Bank and the Overdraft Bank; then
(IV) at the Agent's discretion, to be held as cash collateral
for any Obligations not then due and payable (including without
limitation Obligations with respect to outstanding Collateral
Instruments); and
(C) third, the excess, if any, shall be returned to the Borrower or
to such other Persons as are entitled thereto.
Clause 10. SET-OFF.
Regardless of the adequacy of any collateral for the Obligations, during
the continuance of any Event of Default, any deposits or other sums credited by
or due from any of the Banks (including for purposes of this Clause 10, the
Agent, the Issuing Bank and the Overdraft Bank) to the Borrower or any of its
Subsidiaries and any securities or other property of the Borrower or any of its
Subsidiaries in the possession of such Bank may be applied to or set off against
the payment of the Obligations and any and all other liabilities, direct, or
indirect, absolute or contingent, due or to become due, now existing or
hereafter arising, of the Borrower or such Subsidiary, as the case may be, to
such Bank. Each of the Banks agrees with each other Bank that (A) if an amount
to be set off is to be applied to Indebtedness of the Borrower or such
Subsidiary as the case may be, to such Bank, other than in respect of the
Obligations, such amount shall be applied rateably to such other Indebtedness
and to such Bank's PRO RATA portion of the Obligations, and (B) if such Bank
shall receive from the Borrower or any of its Subsidiaries, whether by voluntary
payment, exercise of the right of setoff, counterclaim, cross action,
enforcement of the claim with respect to the Obligations by proceedings against
the Borrower or any of its Subsidiaries at law or in equity or by proof thereof
in bankruptcy, reorganisation, liquidation, receivership or similar proceedings,
or otherwise, and shall retain and apply to the payment of the Obligations any
amount in excess of its rateable portion of the payments received by all of the
Banks with respect to the Obligations, such Bank will make such disposition and
arrangements with the other
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Banks, with respect to such excess, either by way of distribution, PRO TANTO
assignment of claims, subrogation or otherwise as shall result in each Bank
receiving in respect of the Obligations, its proportionate payment as
contemplated by this Agreement.
Clause 11. AGENCY.
11.1 AUTHORISATION.
(A) Each of the Banks, the Issuing Bank and the Overdraft Bank
hereby appoints the Agent to act as its agent in connection herewith.
(B) Each of the Banks, the Issuing Bank and the Overdraft Bank
hereby appoints the Agent as, and agrees that the Agent shall act as,
trustee of the security constituted by the Security Documents and the
Agent hereby declares, irrevocably for itself and its successors in trust,
that it shall hold such security and such rights and benefits in trust for
the benefit of such Persons; SUBJECT ALWAYS to the terms and conditions
set forth herein and in the Loan Documents and for the benefit of the said
Persons and for the enforcement of the payment of all Obligations, and for
the performance of and compliance with the covenants and conditions of
this Agreement and each of the other Loan Documents.
(C) Subject to the terms hereof, each of the Banks, the Issuing Bank
and the Overdraft Bank irrevocably and expressly authorises the Agent to
take such action and to exercise such rights, powers and discretions as
are conferred upon it by the terms of this Agreement and the Loan
Documents and any documents referred to therein, together with all such
rights, powers and discretions as are reasonably incidental thereto.
Nothing herein or therein shall impose on the Agent any duties or
obligations other than those for which express provision is made herein or
therein. Without limiting the foregoing, the Agent may:
(I) perform any of its functions, powers or duties by or
through agents or employees;
(II) whenever it thinks necessary or desirable, delegate to
any Person or group of Persons all or any duties, trusts, powers,
authorities and discretions vested in the Agent under this Agreement
or the Loan Documents or any other document related hereto or
thereto and any such delegation may be made by power of attorney or
in such other manner as the Agent may think fit and may be made upon
such terms and conditions (including the power to sub-delegate) and
subject to such regulations as the Agent thinks fit, the Agent shall
not be responsible for any loss
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incurred by reason of any misconduct or default on the part of any
such delegate or sub-delegate or be bound to supervise the
proceedings or acts of any such Person;
(III) hold or place this Agreement and the Loan Documents and
any other document relating hereto and thereto with any banker, bank
or any other Person whose business includes the safe custody of
documents or with a lawyer or firm of lawyers in any part of the
world, and the Agent shall not be responsible for any loss incurred
in connection with any such deposit and may pay all sums required to
be paid on account or in respect of any such deposit;
(IV) assume that:
(A) any representation made by the Borrower or any
other Person in connection herewith or in
connection with any of the Loan Documents is true;
(B) no event which is or may become an Event of
Default has occurred; and
(C) the Borrower is not in breach of or in default
under its obligations hereunder
unless it has actual knowledge or actual notice to the contrary;
(V) assume that the office of each Person is that identified
with its signature below until it has received from such Person a
notice designating some other office of such Person to replace such
office and act upon any such notice until the same is superseded by
a further such notice;
(VI) engage and pay for the advice or services of any lawyers,
accountants, surveyors or other experts whose advice or services may
to it seem necessary, expedient or desirable and rely upon any
advice so obtained;
(VII) rely as to any matters of fact which might reasonably be
expected to be within the knowledge of the Borrower or any other
Person upon a certificate signed by or on behalf of the Borrower or
such other Person;
(VIII) rely upon any communication or document believed by it
to be genuine and to have been sent or signed by the Person by whom
it purports to have been sent or signed;
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(IX) refrain from exercising any right, power or discretion
vested in it hereunder unless and until instructed by the Majority
Banks as to whether or not such right, power or discretion is to be
exercised and, if it is to be exercised, as to the manner in which
it should be exercised; and
(X) refrain from acting in accordance with any instructions of
the Majority Banks to begin any legal action or proceeding arising
out of or in connection with this Agreement or any Loan Document
until it shall have received such security as it may require
(whether by way of payment in advance or otherwise) for all costs,
claims, expenses (including legal fees) and liabilities which it
will or may expend or incur in complying with such instructions.
(D) Each of the Banks, the Issuing Bank and the Overdraft Bank
hereby appoints the Agent with the power to act, subject to the express
conditions hereinafter set forth, as its true and lawful attorney, with
full power and authority to act for and on behalf of it as attorney:
(I) to execute and deliver, whether as a deed or under hand,
any and all agreements and other documents relating to the
establishment, maintenance and exercise of rights deriving from the
Security Documents;
(II) to execute and deliver any and all amendments and
supplements to the matters described in subclause (I) above;
(III) to take all such further action and do all such things of
whatsoever nature and description as in the entire discretion of
such attorney are appropriate, necessary or convenient to carry out
the objects referred to in this subclause (D); and
(IV) to appoint a substitute to carry out all or any of the
objects referred to in this subclause (D) and to revoke any such
appointment.
Each of the Banks hereby ratifies and confirms all that the Agent as
attorney shall do or cause to be done by virtue of this subclause (D).
Notwithstanding anything contained herein to the contrary, nothing
in this subclause (D) shall be deemed or construed to constitute a
transfer of the rights arising under the Security Documents to the Agent
as attorney.
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(E) All rights of action and rights to assert claims upon or under
this Clause 11 and the Security Documents may be enforced by the Agent and
any such suit or proceeding instituted by the Agent shall be brought in
its name in its capacity as agent and trustee under this Clause 11 and/or
in the name of the relevant Banks and any recovery of judgment shall be
held by it in such capacity.
(F) (I) If there shall exist and be continuing an Event of Default
or an Unmatured Event of Default, the Majority Banks shall have the
right, by an instrument in writing executed and delivered to the
Agent under this Clause 11, to direct the Agent to exercise, or to
refrain from exercising, any right, power, discretion or remedy,
available to or conferred upon any of the Banks in respect of the
Security Documents, and in connection therewith, to direct the time,
method and place of conducting any proceeding for the exercise of
any such right, power discretion or remedy available to any of the
Banks, or of exercising any right, power, discretion or remedy
conferred on the Agent under this Clause 11, or for the appointment
of a receiver, or for the taking of any other action authorised by
this Clause 11. Subject to the limitations set forth in subclause
(G) of this Clause 11.1 and subject to Clause 11.1(c)(x), upon
receipt of such directions, the Agent shall take such actions as are
specified therein.
(II) Nothing in this subclause (F) of Clause 11.1 shall impair
the right of the Agent in its discretion to take or omit to take any
action which is deemed proper by the Agent and which is not
inconsistent with any direction of the Majority Banks; PROVIDED,
HOWEVER, that the Agent shall not be under any obligation, as a
result of this subclause (f) of Clause 11.1, to take any action
which is discretionary with the Agent under the provisions of the
Security Documents or this Clause 11 unless so directed by the
Majority Banks.
(G) Notwithstanding any other provision contained in this Agreement,
none of the rights of any Bank, the Issuing Bank or the Overdraft Bank,
which are absolute and unconditional, to receive payment of the
Obligations owing to it on or after the due date thereof as expressed in
this Agreement or in any of the documents constituting the Security
Documents, to institute suit for the enforcement of such payment on or
after such due date, or to assert its position and views as a secured
creditor in, and to otherwise exercise any right (other than the right to
enforce the Security Documents which shall in all circumstances be
exercisable only by the Agent at the direction of the Majority Banks) it
may have in connection with, a case or proceeding under any bankruptcy or
insolvency law in which any member of the
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Affiliate Group is a debtor, or the obligation of any member of the
Affiliate Group which is also absolute and unconditional, to pay the
Obligations owing by such Person to any Bank, the Issuing Bank or the
Overdraft Bank at the time and place expressed in the documents
constituting Security Documents relating thereto, shall be impaired or
affected without the consent of such Bank, the Issuing Bank or the
Overdraft Bank, as the case may be.
(H) If there shall exist and be continuing an Event of Default or an
Unmatured Event of Default, the Agent shall have the right and power to
institute and maintain such suits and proceedings as it may deem
appropriate to protect and enforce the rights vested in it under this
Clause 11, and the Agent may either after entry or without entry proceed
by suit or suits at law or in equity to enforce such rights and to
foreclose upon the property charged by the Security Documents and to sell
or assign, as the case may be, all or, from time to time, any part of such
property under the judgment or decree of any court of competent
jurisdiction in connection with the Security Documents.
11.2 NOTIFICATION. The Agent shall:
(A) promptly inform each Bank, the Issuing Bank and the Overdraft
Bank of the contents of any notice or document received by it from the
Borrower hereunder;
(B) promptly notify each Bank, the Issuing Bank and the Overdraft
Bank of the occurrence of any Event of Default or any default by the
Borrower in the due performance of or compliance with this Agreement of
which the personnel of the Agent having the conduct of such matters have
actual knowledge or actual notice;
(C) except as otherwise provided herein, act hereunder in accordance
with any instructions given to it by the Majority Banks, which
instructions shall be binding on all the Banks; and
(D) if so instructed by the Majority Banks, refrain from exercising
any right, power or discretion vested in it hereunder.
11.3 NO OBLIGATION. Notwithstanding anything set forth to the contrary
herein, the Agent shall not:
(A) be bound to enquire as to:
(I) whether or not any representation made by the
Borrower or any other Person in connection herewith or with
any of the Loan Documents is true;
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(II) the occurrence or otherwise of any event which is
or may become an Event of Default or an Unmatured Event of
Default;
(iii) the performance by the Borrower or any other
Person of its obligations hereunder or under any of the Loan
Documents; or
(IV) any breach of or default by the Borrower or any
other Person of its obligations hereunder or under any of the
Loan Documents;
(B) be bound to account to any Bank, the Issuing Bank or the
Overdraft Bank for any sum or the profit element of any sum received
by it for its own account;
(C) be bound to disclose to any other Person any information
relating to the Borrower or any other Person if such disclosure would or
might in its opinion constitute a breach of any law or regulation or
otherwise be actionable at the suit of any Person; or
(D) be under any obligations other than those for which express
provision is made herein.
11.4 INDEMNITY. Each Bank shall, from time to time on demand by the Agent,
indemnify the Agent, the Issuing Bank and the Overdraft Bank PRO RATA in
accordance with its respective Commitment Percentage against any and all costs,
claims, expenses (including legal fees) together with any applicable VAT and
liabilities which the Agent, the Issuing Bank or the Overdraft Bank may incur in
acting in its capacity.
11.5 NO LIABILITY.
(A) The Agent does not accept any responsibility for the accuracy
and/or completeness of any information supplied by the Borrower or any
other Person in connection herewith or in connection with the Loan
Documents or for the legality, validity, effectiveness, adequacy or
enforceability of this Agreement or the Loan Documents and the Agent shall
not be under any liability as a result of taking or omitting to take any
action in relation to this Agreement or any of the Loan Documents.
(B) The Agent in its capacity as trustee or otherwise:
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(I) shall not be liable for any failure, omission or defect in
perfecting the security constituted by any Security Document or any
security created thereby; and
(II) may accept without enquiry such title as the Borrower or
any of its Subsidiaries may have to the property over which security
is intended to be created by any of the Security Documents.
(C) Each of the Banks agrees that it will not assert or seek to
assert against any director, officer or employee of the Agent, the Issuing
Bank or the Overdraft Bank any claim it might have against the Agent, the
Issuing Bank or the Overdraft Bank in respect of the matters referred to
in this Clause 11.5.
11.6 THE AGENT AS A BANK. The Agent may accept deposits from, lend money
to and generally engage in any kind of banking or other business with any member
of the Affiliate Group and shall not be liable to account to the Banks, the
Issuing Bank or the Overdraft Bank for any profit made by it thereby or in
connection therewith.
11.7 RESIGNATION.
(A) Each of the Agent, the Issuing Bank and the Overdraft Bank may
resign its appointment as such (and in the case of the Agent, as trustee)
hereunder at any time without assigning any reason therefor by giving not
less than seven days' prior written notice to that effect to each of the
other parties hereto; PROVIDED THAT no such resignation shall be effective
until a successor is appointed in accordance with the provisions of this
Clause 11.
(B) If a Person gives notice of its resignation pursuant to
subclause (A) hereof then any reputable and experienced bank or other
financial institution that is qualified to act as Agent, the Issuing Bank
or Overdraft Bank, as the case may be, under this Agreement, may (with the
prior written consent of the Borrower, such consent not to be unreasonably
withheld) be appointed as a successor to such Person by the Majority Banks
during the period of such notice but, if no such successor is so
appointed, such Person may appoint such a successor itself.
(C) If a successor to a Person is appointed under the provisions of
subclause (b) hereof then (i) the retiring Person shall be discharged from
any further obligation hereunder but shall remain entitled to the benefit
of the provisions of this Clause 11 and (ii) its successor and each of the
other parties hereto shall have the same rights and obligations
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amongst themselves as they would have had if such successor had been a
party hereto. The parties hereto shall do such acts and things and execute
such documents as may be necessary to give effect to the appointment of
such successor.
11.8 NO REPRESENTATIONS. It is understood and agreed by each Bank, the
Issuing Bank and the Overdraft Bank that it has itself been, and will continue
to be, solely responsible for making its own independent appraisal of and
investigations into the financial condition, creditworthiness, affairs, status
and nature of the Borrower and the other members of the Affiliate Group and,
accordingly, each Bank, the Issuing Bank and the Overdraft Bank warrants to the
Agent that it has not relied and will not hereafter rely on the Agent:
(A) to check or enquire on its behalf into the adequacy, accuracy or
completeness of any information provided by the Borrower and the other
members of the Affiliate Group in connection with this Agreement or the
Loan Documents or the transactions contemplated hereby or thereby (whether
or not such information has been or is hereafter circulated to such Person
by the Agent); or
(B) to assess or keep under review on its behalf the financial
condition, creditworthiness, affairs, status or nature of the Borrower or
any other member of the Affiliate Group.
11.9 COMPLIANCE WITH LAW. The Agent may refrain from doing anything which
might, in its opinion, constitute a breach of any law or regulation or be
otherwise actionable at the suit of any person, and may do anything which, in
its opinion, is necessary or desirable to comply with any law or regulation of
any jurisdiction.
11.10 INVESTMENT BY AGENT. Save as otherwise provided in the Security
Documents, all monies which under the trusts herein or therein contained or
received by the Agent in its capacity as trustee or otherwise may be invested in
the name of or under the control of the Agent in an investment for the time
being authorised by English law for the investment by trustees of trust money or
in any other investments which may be selected by the Agent with the consent of
the Majority Banks.
11.11 DIVISIONS OF AGENT TREATED AS SEPARATE.
(A) In acting as Agent, the London Branch of BankBoston, N.A.
shall be treated as a separate entity from any other of the
divisions or branches of BankBoston, N.A. or its affiliates.
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(B) In the event that any of BankBoston, N.A.'s divisions, branches
or similar units or affiliates should act for any of the Borrower, its
Subsidiaries or the Parent or its Subsidiaries in any capacity, whether as
bankers or otherwise in relation to any matter, any information given by
such division, units or affiliates shall be treated as confidential and
BankBoston, N.A. shall not be obliged to disclose such information to any
Bank or any other Person.
11.12 NO KNOWLEDGE. The Agent shall be deemed not to have any actual
knowledge or actual notice of the contents of any information obtained by it or
supplied to it by or on behalf of the Borrower, any of its Subsidiaries or the
Parent, other than the contents of information obtained by or supplied to the
Agent in its capacity as Agent under the Loan Documents.
Clause 12. MISCELLANEOUS.
12.1 CONSENTS, AMENDMENTS, WAIVERS, ETC. Any consent or approval required
or permitted by this Agreement to be given by the Banks may be given, and any
term of this Agreement, the other Loan Documents or any other instrument related
hereto or mentioned herein may be amended (either generally or in a particular
instance and either retroactively or prospectively) with, but only with, the
written consent of the Borrower and the written consent of the Majority Banks.
The performance or observance by the Borrower or any member of the Affiliate
Group of any terms of this Agreement, the other Loan Documents or any other such
other instrument or the continuance of any Unmatured Event of Default or Event
of Default may be waived (either generally or in a particular instance and
either retroactively or prospectively), with but only with, the written consent
of the Majority Banks. Notwithstanding the foregoing, the rate of interest on
and the term of the Obligations, the time for the payment or repayment of the
principal of any Advances, any interest thereon and any fees or other amounts
payable hereunder, the release of a substantial portion of the security intended
to be created by the Security Documents, the Commitment Percentages, the
respective Commitments of the Banks and the Maximum Commitment Amount hereunder
may not be changed without the written consent of the Borrower and the written
consent of each Bank affected thereby; the definition of Majority Banks and this
Clause 12.1 may not be amended without the written consent of all of the Banks;
Clause 2B and Clause 4.4(a) may not be amended without the written consent of
the Issuing Bank; Clause 2A.5(F) and Clause 4.4(B) and (C) may not be amended
without the written consent of the Overdraft Bank; and Clause 11 may not be
amended without the written consent of the Agent. No waiver shall extend to or
affect any obligation not expressly waived or impair any right consequent
thereon. No course of dealing or delay or omission on the part of the Agent, any
Bank, the Issuing Bank or the Overdraft Bank in exercising any right shall
operate as a waiver thereof or otherwise be prejudicial thereto. No
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notice to or demand upon the Borrower shall entitle the Borrower to other or
further notice or demand in similar or other circumstances.
12.2 ASSIGNMENT AND NOVATION.
(A) This Agreement shall be binding upon and enure to the benefit of
each party hereto and its successors and permitted assigns.
(B) The Borrower shall not be entitled to assign or transfer all or
any of its rights, benefits and obligations hereunder and under the other
Loan Documents.
(C) Any Bank (an "Existing Bank") may at any time with the prior
written consent of the Agent on behalf of itself, the Issuing Bank and the
Overdraft Bank assign all or any part of its rights and benefits hereunder
and under the other Loan Documents to an Eligible Transferee (a
"PARTICIPANT"), PROVIDED THAT:
(I) the Existing Bank shall retain all of its obligations
hereunder and under the other Loan Documents unless such obligations
are transferred pursuant to and in accordance with subclauses (E),
(F) and (G) below;
(II) simultaneously with such assignment, the Existing Bank
shall assign to the Participant a pro rata participation in such
Bank's rights and benefits under the Parent Loan Agreement, in
accordance with the relevant terms and conditions of the Parent Loan
Agreement; and
(III) unless the Participant is an Affiliate of the Existing
Bank, the Existing Bank shall give prompt notice of such assignment
and the amount thereof to the Borrower, the Agent, the other Banks,
the Issuing Bank and the Overdraft Bank.
(D) If an Existing Bank assigns all or any of its rights and
benefits hereunder and under the other Loan Documents in accordance with
subclause (C), then, unless and until the Participant has agreed with the
Agent, the Banks, the Issuing Bank and the Overdraft Bank that it shall be
under the same obligations towards each of them as it would have been
under if it had been a party hereto as a Bank, then the Agent, the other
Banks, the Issuing Bank and the Overdraft Bank shall not be obliged to
recognise such Participant as having the rights against each of them which
it would have had if it had been such a party hereto.
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(E) Any Existing Bank may at any time novate all or any part of its
Commitment hereunder and under the other Loan Documents together with all
of such Bank's rights, benefits and obligations hereunder and under the
other Loan Documents (including its obligation to indemnify the Issuing
Bank with respect to drawings under Collateral Instruments and its
obligation to indemnify the Overdraft Bank with respect to the Overdraft)
in connection with such Commitment or part thereof to any Eligible
Transferee (a "NEW BANK"), PROVIDED THAT:
(I) except in the case of a novation to an Affiliate of the
Existing Bank or to another Bank party to this Agreement, no such
novation may be made without the prior written consent of the
Borrower, such consent not be unreasonably withheld;
(II) no such novation may be made without the prior written
consent of the Agent on behalf of itself and the other Banks, the
Issuing Bank and the Overdraft Bank (and for the avoidance of doubt
each of the Banks (other than the Existing Bank and the New Bank),
the Issuing Bank and the Overdraft Bank irrevocably authorises the
Agent to execute any Novation Agreement on its behalf), such
consents not to be unreasonably withheld;
(III) each such novation shall be of a constant, and not a
varying, percentage of all the Existing Bank's rights and
obligations hereunder and under the other Loan Documents; and
(IV) the Existing Bank shall pay to the Agent on the Novation
Date a registration fee as set forth in subclause (H).
(F) If an Existing Bank wishes to novate all or any part of its
Commitment hereunder and under the other Loan Documents and its associated
rights, benefits and obligations as contemplated in subclause (E), then
such novation shall be by effected the delivery to the Agent of a duly
completed and duly executed certificate substantially in the form attached
hereto as EXHIBIT B (a "NOVATION AGREEMENT"). On the date (the "NOVATION
DATE") which is the later of the date specified in such Novation Agreement
(the "NOVATION Date") and the fifth Business Day following the date of the
delivery thereof to the Agent, or on such earlier date as the Agent may
agree, to the extent of the rights and obligations specified in the
Novation Agreement:
(I) the Existing Lender, on the one hand, and the Borrower,
the other Banks, the Agent, the Issuing Bank and the Overdraft Bank
(collectively, the "EXISTING PARTIES"), on the other
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hand, shall be released from their obligations to each other (the
"DISCHARGED OBLIGATIONS") under this Agreement and the other Loan
Documents, but without prejudice to any claims that may have arisen
prior to the Novation Date;
(ii) the New Lender and the Existing Parties shall assume
obligations towards each other that differ from the Discharged
Obligations only insofar as they are owed to or assumed by the New
Lender instead of the Existing Lender;
(iii) the rights of the Existing Lender against the Existing
Parties and vice versa (the "Discharged Rights") under this
Agreement and the Loan Documents shall be cancelled but without
prejudice to any claims that may have arisen prior to the Novation
Date; and
(iv) the New Lender and the Existing Parties shall acquire
rights against each other that differ from the Discharged Rights
only insofar as they are exercisable by or against the New Lender
instead of the Existing Lender.
(g) By executing and delivering a Novation Agreement, each of the
Existing Bank and the New Bank party thereto confirms to, and agrees with,
each other and the Existing Parties as follows:
(i) other than the representation and warranty that it is the
legal and beneficial owner of the interest being novated thereby
free and clear of any adverse claim, the Existing Bank makes no
representation or warranty, express or implied, and assumes no
responsibility with respect to any statements, warranties or
representations made in or in connection with this Agreement or the
other Loan Documents or the execution, legality, validity,
enforceability, genuineness, sufficiency or value of this Agreement,
the other Loan Documents or any other instrument or document
furnished pursuant hereto or the attachment, perfection or priority
of any charge, security interest or mortgage;
(II) the Existing Bank makes no representation or warranty and
assumes no responsibility with respect to the financial condition of
the Borrower and its Subsidiaries or any other Person primarily or
secondarily liable in respect of any of the Obligations, or the
performance or observance by the Borrower and its Subsidiaries or
any other Person primarily or secondarily liable in respect of any
of the Obligations of any of their obligations under this Agreement
or any of the other Loan
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Documents or any other instrument or document furnished pursuant
hereto or thereto;
(III) the New Bank confirms that it has received such
documents and information as it has deemed appropriate to make its
own credit analysis and decision to enter into such Novation
Agreement;
(IV) the New Bank agrees that it will, independently and
without reliance upon the Existing Bank, the Agent, the Issuing
Bank, the Overdraft Bank or any other Bank and based on such
documents and information as it shall deem appropriate at the time,
continue to make its own credit decisions in taking or not taking
action under this Agreement and the other Loan Documents;
(V) the New Bank represents and warrants that it is an
Eligible Transferee;
(VI) the New Bank appoints and authorises the Agent to take
such action as agent on its behalf and to exercise such powers under
this Agreement and the other Loan Documents as are delegated to the
Agent by the terms hereof or thereof, together with such powers as
are reasonably incidental thereto;
(VII) the New Bank agrees that it will perform in accordance
with their terms all of the obligations that by the terms of this
Agreement and the other Loan Documents are required to be performed
by it as a Bank; and
(VIII) the New Bank represents and warrants that it is legally
authorised to enter into such Novation Agreement.
(H) The Agent shall maintain a copy of each Novation Agreement
delivered to it in a register or similar list (the "REGISTER") for the
recordation of the names and addresses of the Banks and the Commitment
Percentage of and principal amount of the Advances owing to each of the
Banks from time to time. The entries in the Register shall be conclusive,
in the absence of manifest error. Upon each such recordation, the Existing
Lender shall pay to the Agent a registration fee in the amount of
(pound)1,000.
(I) Any Bank may, in connection with an actual or potential
assignment or novation pursuant to this Clause 12.2 disclose to any actual
or potential Participant or New Bank or to any Person who may otherwise
enter into contractual relations with such Bank in relation to
<PAGE>
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this Agreement such information about the Borrower and its Subsidiaries
furnished to such Bank by or on behalf of the Borrower.
12.3 NOTICES.
(A) Any notice, demand or communication made or given hereunder by
one Person to another pursuant to this Agreement shall be in writing and
shall be made or delivered to that other Person at the address listed in
subclause (B) below (or, in the case of a New Bank, as indicated in the
Novation Agreement to which it is a party as the New Bank) and shall be
deemed to have been made or delivered when despatched (in the case of any
communication made by facsimile transmission), when left at that address
(in the case of any letter sent by hand or courier service), or one
Business Day after being deposited in the post, first class postage
prepaid, in an envelope addressed to it at that address (in the case of
any letter sent by post).
(B) Notices to any party shall be sent to it at the following
addresses, or any other address of which all the other parties are
notified in writing.
If to the Borrower at: Pipeline Induction Heat Limited
The Pipeline Centre, Unit 12
Farrington Road
Rossendale Road Industrial Estate
Burnley, BB11 5SW
Attention: Michael Smith
Telephone no.: 01282 415 323
Telecopy no.: 01282 415 326
If to the Agent, the Issuing
Bank or the Overdraft Bank at: The First National Bank
of Boston, London Branch
39 Victoria Street
London SW1H OED
Attention: Michael Rowe
Telephone no.: 0171 932 9253
Telecopy No. 0171 932 9364
If to any of the Banks, to the address for such Bank set forth on
THE SECOND SCHEDULE hereto, or as otherwise set forth in a notice from
such Bank to each other party hereto.
(C) Any communication to be made or delivered to the Borrower by the
Banks, the Issuing Bank or the Overdraft Bank, or by the Borrower to any
of them shall be made or delivered to the Agent, which
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shall promptly advise the Borrower, the Banks or the Overdraft Bank, as
the case may be, thereof.
12.4 GOVERNING LAW; PLACE OF JURISDICTION.
(A) This Agreement shall be governed by, and shall be construed in
accordance with, the laws of England.
(B) For the benefit of the Agent, each of the Banks, the Issuing
Bank and the Overdraft Bank, the Borrower irrevocably agrees that:
(I) the courts of England are to have jurisdiction to settle
any disputes which may arise in connection with the legal
relationships established by this Agreement or otherwise arising in
connection with this Agreement, and the Borrower irrevocably submits
to the jurisdiction of such courts; and
(II) this provision shall not limit the rights of the Agent,
the Banks, the Issuing Bank or the Overdraft Bank to take
proceedings in any other court of competent jurisdiction.
12.5 SEVERABILITY. The provisions of this Agreement are severable and if
any one clause or provision hereof shall be held invalid or unenforceable in
whole or in part in any jurisdiction, then such invalidity or unenforceability
shall affect only such clause or provision or part thereof, in such
jurisdiction, and shall not in any manner affect such clause or provision in any
other jurisdiction, or any other clause or provision of this Agreement in any
jurisdiction.
12.6 COUNTERPARTS. This Agreement and any amendment hereof may be executed
in several counterparts and by each party on a separate counterpart, each of
which when executed and delivered shall be an original, and all of which
together shall constitute one Agreement.
12.7 ENTIRE AGREEMENT. This Agreement together with all Amendments,
Exhibits and Schedules hereto, expresses the entire understanding of the
parties, with respect to the transactions contemplated hereby. Neither this
Agreement nor any term hereof may be changed, waived, discharged, or terminated,
orally or in writing, except as provided in Clause 12.1 hereof.
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IN WITNESS WHEREOF this Agreement has been duly executed and delivered by or on
behalf of the parties on the day and year first written above.
SIGNED by )
for and on behalf of PIPELINE )
INDUCTION HEAT LIMITED )
in the presence of: ) ______________________
)
Witness Signature:
Name:
Address:
Occupation:
SIGNED by )
for and on behalf of )
THE FIRST NATIONAL, ) ____________________
BANK OF BOSTON, )
LONDON BRANCH, as a )
Bank, Agent, Issuing Bank )
and Overdraft Bank, )
in the presence of: )
Witness Signature:
Name:
Address:
Occupation
EXHIBIT 10.4
FIRST AMENDMENT
TO
REVOLVING CREDIT AND TERM LOAN AGREEMENT
First Amendment dated as of July 3, 1998 (the "Amendment") to Revolving
Credit and Term Loan Agreement (the "Amendment"), by and among CRC-EVANS
PIPELINE INTERNATIONAL, INC. (formerly known as CEPI Holdings, Inc.), a Delaware
Corporation (the "Borrower"), (b) CRC HOLDINGS CORP., a Delaware Corporation and
the owner of 100% equity of the Borrower (the "Holding Company") (c) the
financial institutions listed on SCHEDULE 1 to the Credit Agreement (as
hereinafter defined) (the "Lenders"), (d) BANKBOSTON, N.A. (formerly known as
The First National Bank of Boston) as agent for itself and the other Lenders
(the "Agent") and (e) BANKERS TRUST COMPANY, as documentation agent for itself
and the other Lenders (the "Documentation Agent"), amending certain provisions
of the Revolving Credit and Term Loan Agreement date([ as of June 12, 1997 (as
amended and in effect from time to time, the "Credit Agreement") by and among
the Borrower, the Holding Company, the Lenders, the Agent and the Documentation
Agent. Terms not otherwise defined herein which are defined in the Credit
Agreement shall have the same respective meanings herein as therein.
WHEREAS, the Borrower and he Lenders have agreed to modify certain terms
and conditions of the Credit Agreement s specifically set forth in this
Amendment;
NOW, THEREFORE, in consideration of the premises and the mutual agreements
contained herein and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto hereby agree as
follows:
SECTION 1. AMENDMENT TO SECTION 1 OF THE CREDIT AGREEMENT. SECTION 1.1. of
the Credit Agreement is hereby amended as follows:
(a) The definition of "Aggregate Facilities Commitment" is hereby
amended in its entirety to read as follows:
"AGGREGATE FACILITIES COMMITMENT. With respect to each Lender, the
amount equal to the sum of (a) such Lender's Commitments hereunder
and, with respect to FNBB, the UK Commitment, plus (b) such Lender's
Commitment Percentage of the Term Loan hereunder, PLUS (c) such
Lender's Acquisition Commitment Percentage of the Acquisition Loan
outstanding."
(b) The definition of "Borrowing Base" is hereby amended by
replacing the reference to the dollar amount "$1.000,000" appearing in part
(c)(i) and (ii) with a reference the dollar amount "$2,000,000" and by replacing
the reference to the dollar amount "2,000,000" appearing in part (c)(ii) with a
reference to the dollar amount "$3,000,000".
(c) The definition of "B, se Rate Loans" is hereby amended in its
entirety to read as follows:
<PAGE>
BASE RATE LOANS. The Revolving Credit Loans and all or any
portion of the Term Loan or Acquisition Loan bearing interest
calculated by reference to the Base Rate."
(d) The definition of " Capital Expenditures" is hereby amended by
inserting at the end thereof the following new sentence:
"Notwithstanding the foregoing, "Capital Expenditures" shall
not include (a) the acquisition of assets in connection with a
Permitted Acquisition and (b) up to $750,000 per annum of the cost
of producing rental equipment necessary to replace rental equipment
sold in the ordinary course of the Borrower's business."
(e) The definition of "Commitment Fee" is hereby amended in its
entirety to read as follows:
"COMMITMENT FEE. The commitment fees due pursuant to
Sections 2-2 and 4A. 13."
(f) The definition of "Commitment Percentage" is hereby amended in
its entirety to read as follows:
"COMMITMENT PERCENTAGE. With respect to each Lender, the
percentage set forth on SCHEDULE 1 hereto under the heading
Revolving Credit Facility."
(g) The definition of "Drawdown Date" is hereby amended in its
entirety to read as follows:
"DRAWDOWN DATE. The date on which any Revolving Credit Loan,
Acquisition Loan or the Term Loan is made or is to be made, and the
date on which any Revolving Credit Loan is converted or continued in
accordance with SECTION 2.7 hereof, all or any portion of the
Acquisition Loan is converted or continued in accordance with
SECTION 4.A.6 hereof or all or any portion of the Term Loan is
converted or continued in accordance with SECTION 4.5 hereof."
(h) The definition of "Eurodollar Rate Loans" is hereby amended in
its entirety to read as follows:
"EURODOLLAR RATE LOANS. Revolving Credit Loans and all or
any portion of the Term Loan or Acquisition Loans bearing
interest calculated by reference :o the Eurodollar Rate."
(i) The definition of Guaranties" is hereby amended by inserting
immediately after the words "Closing Date" contained in the second line thereof
the phrase "(or in the case of Persons who become Subsidiaries after the Closing
Date, at such time as such Person becomes i Subsidiary of the Holding Company or
the Borrower)".
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<PAGE>
(j) The definition of "Interest Period" is hereby amended by
inserting immediately after the words "relevant portion of the Term Loan"
contained in the second line thereof the phrase "or Acquisition Loans".
(k) The definition of "Loans" is hereby amended in its entirety to
read as follows:
"LOANS. The Revolving Credit Loans, the Acquisition Loans
and the Term Loan."
(1) The definition of Mortgaged Properties" is hereby amended in its
entirety to read as follows:
"MORTGAGED PROPERTIES. The Real Estate located in Tulsa,
Oklahoma and Edmonton, Alberta, Canada, any Real Estate which the
Borrower or any North American Subsidiary is required to grant to
the Agent a Mortgage pursuant to SECTION 9.13, and any Real Estate
acquired in connection with a Permitted Acquisition as to which the
Agent requests that the Borrower or the North American Subsidiaries
grant to the Agent a Mortgage.
(m) The definition of 'Mortgages" is hereby amended by inserting
immediately after the words "Closing Date" contained in the second line thereof
the phrase "(or in the case of Real Estate acquired after the Closing Date,
prior to the acquisition of such Real Estate)".
(n) The definition of "Notes" is hereby amended in its entirety to
read as follows:
"NOTES. The Term Notes, the Acquisition Notes and the
Revolving Credit Notes."
(o) The definition of "Security Agreements" is hereby amended in its
entirety to read as follows:
"SECURITY AGREEMENTS. The several Security Agreements, each
executed and delivered pursuant to the Credit Agreement, between the
Agent and each of the Borrower, the North American Subsidiaries and
the Holding Company, each in form and substance satisfactory to the
Lenders and the Agent.'
(p) The definition of "UK Commitment" is hereby amended in its
entirety to read as follows:
"UK COMMITMENT. The "Maximum Commitment Amount" under the
UK Facility, not to exceed (pound)4,500,000."
(q) SECTION 1.1 of the C it Agreement is further amended by
inserting the following definitions in the appropriate alphabetical order:
3
<PAGE>
ACQUISITION COMMITMENT. With respect to each Lender, the
amount set forth on Schedule 1 hereto as the amount of such Lender's
commitment to make Acquisition Loans to the Borrower during the
Disbursement Period, as the same may be reduced from time to time;
or, after the Disbursement Period or if such commitment is
terminated pursuant to the provision hereof, zero.
ACQUISITION COMMITMENT PERCENTAGE. With respect to each
Lender, the percentage,. set forth on Schedule .1 hereto under
the heading Acquisition Loan."
ACQUISITION FACILITY CLOSING DATE. The date of the First
Amendment to the Credit Agreement.
ACQUISITION LOANS. Loans made or to be made by the Lenders
to the Borrower pursuant to the acquisition facility described in
SECTION 4A.
ACQUISITION NOTES. See Section 4A.3.
ACQUISITION LOAN REQUEST. See Section 4A.1.2.
ACQUISITION TARGET. A Person or business, the business
operations of which are substantially concentrated in the same or
similar lines of business as that of the Borrower or any Subsidiary
of the Borrower or of the Holding Company.
CRC KEY, INC. CRC-Key, Inc., an Oklahoma corporation and
wholly owned subsidiary of the Holding Company.
DISBURSEMENT PERIOD. The period from the Acquisition Facility
Closing Date through and including the Final Acquisition Drawdown
Date or such earlier date on which the Acquisition Commitment shall
have been terminated pursuant hereto.
FINAL ACQUISITION DRAWDOWN DATE. December 31, 1999.
PERMITTED ACQUISITION (a) An acquisition by the Borrower or,
in the case of an Acquisition Target organized outside of the United
States, a Subsidiary of the Borrower (i) of Capital Assets or (ii)
of the shares, or assets of any Acquisition Target, PROVIDED that in
each case each of the following conditions are met:
(A) if such Permitted Acquisition is structured as a
stock acquisition, the Acquisition Target will be immediately
merged with and into the Borrower; and
(B) upon completion of the Permitted Acquisition, unless
waived by the Agent, the Borrower shall have provided the
Agent with all
4
<PAGE>
such additional security Documents, pledge agreements or other
documents or instruments (where appropriate, in substantially
the form previously delivered to the Agent) necessary or
appropriate to grant to the Agent, for the benefit of the
Lenders, a perfected first priority pledge and security
interest in substantially all of the acquired assets located
in the United States, Canada or England; and
(C) Not, withstanding anything contained in (A) or (B)
above, the Borrower may make share or asset acquisitions
having an aggregate cash purchase price not exceeding
$5,000,000 (and make investments in Subsidiaries of such
amounts) for Permitted Acquisitions of Acquisition Targets
organized outside of the United States or the Dominion of
Canada to which the Agent is not granted a perfected first
priority pledge and security interest in substantially all of
the acquired assets and the Acquisition Target is not merged
with and into the Borrower; PROVIDED, HOWEVER, the Agent is
granted, for the benefit of the Lenders, a lien on and pledge
of all of the shares of capital stock of the acquired company;
and
(D) the Agent and the Lenders shall have received at
least ten (10) Business Days' prior to the Permitted
Acquisition Closing Date (i) written notice of the proposed
acquisition describing the relevant Permitted Acquisition to
be consummated, including but not limited to the anticipated
date of the closing of such acquisition and the expected
amount of Acquisition Loans to be borrowed in connection with
such Permitted Acquisition, (ii) copies c f all documents,
agreements and instruments to be entered into by the Borrower
in connection with such Permitted Acquisition and evidence, of
compliance with all requirements of the Loan Documents and
(iii) PRO FORMA financial statements and calculations, in form
and substance satisfactory to the Agent, evidencing that
immediately prior to and following such acquisition the
Borrower will be in compliance on a Pro forma Basis with the
financial covenants set forth in SECTION 1.1 for the period of
twelve (12) months following the Permitted Acquisition Closing
Date; and
(E) no Default or Event of Default shall have occurred
and be continuing at the time a of completion of the proposed
acquisition, and no Default or Event of Default would result
therefrom; and
(F) any Indebtedness assumed or incurred in connection
with such Permitted acquisition must be on terms and
conditions acceptable to the Agent; and
(G) Purchase rice for each Permitted Acquisition shall
not exceed $5,000,000; PROVIDED, HOWEVER, the Borrower may
make one (1) Permitted Acquisition with a Purchase Price in
excess of $5,000,000 but not exceeding $10,000,000; and
5
<PAGE>
(H) the Borrower shall have delivered to the Agent and
the Lenders a copy of all financial statements received from
the Acquisition Target for the periods prior to the Permitted
Acquisition Closing Date,
(b) Up to $61;00,000 in the aggregate of amounts paid or
Indebtedness incurred b) the Borrowers in connection with the
purchase or construction of Capital Assets.
PERMITTED ACQUISITION CLOSING DATE. The closing date of
any acquisition by the Borrower which is a Permitted Acquisition.
PRO FORMA BASIS. Following a Permitted Acquisition, the
Consolidated Funded Debt (or, in the case of Consolidated Total
Interest Expense, all Indebtedness) and EBITDA for the fiscal
quarter in which such Permitted Acquisition occurred and each of the
three fiscal quarters immediately following such Permitted
Acquisition being calculated with reference to the audited
historical financial results of the business or portion thereof so
acquired (to the extent available) and the Borrower for the
applicable Test Period after giving effect on a PRO FORMA basis to
such Permitted Acquisition and assuming that such Permitted
Acquisition had been consummated at the beginning of such Test
Period in the manner described in (a), (b) and (c) below:
(a) all Indebtedness (whether under this Credit
Agreement or otherwise) and any other balance sheet
adjustments incurred or made in connection with the Permitted
Acquisition shall be deemed to have been incurred or made on
the first day of the Test Period, and all Indebtedness of the
Person acquired )r to be acquired in such Permitted
Acquisition which was or will have been repaid in connection
with the consummation of the Permitted Acquisition shall be
deemed to have been repaid concurrently with the incurrence of
the Indebtedness incurred in connection with the Permitted
Acquisition;
(b) all Indebtedness assumed to have been incurred
pursuant to the preceding clause (a) shall be deemed to have
borne interest at the sum of (i) the Eurodollar Rate for
Eurodollar Rate Loan having an Interest Period of one m:)nth
in effect on the first day of the Test Period PLUS (ii) the
Applicable Margin for Revolving Credit Loans then in effect
(after giving effect to the Permitted Acquisition on a PRO
FORMA Basis); and
(c) other reasonable cost savings, expenses and other
income statement or operating statement adjustments which are
attributable to the change in ownership and/or management
resulting from such Permitted Acquisition as may be approved
by the Agent in writing (which approval shall not be
unreasonably withheld) shall be deemed to have been realized
on the first day of the Test Period.
6
<PAGE>
PURCHASE PRICE. The sum of (a) cash paid, (b) Indebtedness
assumed or incurred (other than Indebtedness under the Credit
Agreement) and (c) the started issue price of any securities or the
principal amount of any notes issued by the Borrower or the
Guarantors in connection with any Permitted Acquisition.
RESTRICTED CAPITAL EXPENDITURE. Amounts paid or indebtedness
incurred by the Borrower or any of its Subsidiaries in connection
with the purchase or lease I y the Borrower or any of its
Subsidiaries of Capital Assets that would be required to be
capitalized and shown on the balance sheet of such Person in
accordance with Generally Accepted Accounting Principles.
TEST PERIOD. The period of all fiscal quarters (and any
portion of a fiscal quarter) being tested in any covenant
calculation period prior to the date of such Permitted, Acquisition
as set forth in the definition of Pro forma Basis.
TOTAL ACQUISITION COMMITMENT. The sum of the Acquisition
Commitments of the Lenders, as in effect from time to time (at no
time to exceed $17,500,000.
UK PERMITTED ACQUISITION. As defined in the UK Facility.
SECTION 2. AMENDMENT TO SECTION 2.1 OF THE CREDIT AGREEMENT.
Section 2.1 is hereby amended by inserting the following phrase at
the end of the first sentence "plus, the amount borrowed under the UK Facility
to fund any Permitted Acquisition."
SECTION 3. AMENDMENT TO SECTIONS 4.3.2., 4.3.3., 4.3.4 AND 4.3.5. OF THE
CREDIT AGREEMENT. SECTIONS 4.3.2, 4.3.3, 4.3.4 and 4.3.5 of the Credit Agreement
are hereby amended in their entirety to read as follows:
"4.3.2 PAYMENTS FROM EXCESS CASH FLOW. Commencing on June 30, 1999
and thereafter, within thirty (30) days after the Agent's receipt of the
audited financial statements delivered pursuant to SECTION 9.4(a) hereof,
the Borrower shall prepay the Term Loan and Acquisition Loan in an
aggregate principal amount equal to (a) if the Funded Debt Ration as at
the last day of the most recently ended fiscal year is less than
2.50:1.00, twenty five percent (25%) of Consolidated Excess Cash Flow for
such fiscal year; (b) if the Funded Debt Ratio as at the la! t day of the
most recently ended fiscal year is greater than or equal to 2.5:1:00 but
less than 3.00:1.00, fifty percent (50%) of Consolidated Excess Cash Flow
for such fiscal year; and (c) if the Funded Debt Ratio equals or exceeds
3.00:1.00, seventy-five percent (75%) of Consolidated Excess Cash Flow for
such fiscal year, less, in each case, the amount of any prepayments of he
Term Loan made during such fiscal year by the Borrower pursuant to SECTION
4.4 below."
7
<PAGE>
"4.3.3 PAYMENTS FROM NET PROCEEDS. The Borrower shall prepay the
Term Loan and the Acquisition Loans as follows:
(a) no later than five (5) days following the issuance of
equity securities or debt by the Borrower or any of the North
American Subsidiaries (to the extent permitted by this Credit
Agreement), other than sales of equity securities to directors,
officers or employees of the Borrower or any of its North American
Subsidiaries t ) the extent the aggregate proceeds thereof in any
fiscal year do not exceed $200,000, the Borrower shall prepay the
Term Loan and the Acquisition Loans by an amount equal to 100% of
the cash proceeds received by the Borrower from the issuance of such
equity securities or debt; and
(b) no later than five (5) days after any sale or other
disposition of all or any material assets of the Borrower or of any
of the North American Subsidiaries (to the extent permitted by
SECTION 10.5.2 hereof), other than (i) sales in the ordinary course
of business and consistent with the -past practices of the Holding
Company and it; Subsidiaries, of (A) inventory and (B) Rental
Equipment and/or Rental Inventory and (ii) sales or dispositions of
other assets which do not exceed $200,000 in any fiscal year of the
Borrower, the Borrower shall prepay the Term Loan and the
Acquisition Loans by an amount equal to 100% of the cash proceeds
from such sale or disposition.
4.3.4 UK FACILITY. The Borrower shall prepay the Term Loan and
Acquisition Loans in full, and the Acquisition Commitments shall terminate
if at any time the aggregate principal amount outstanding under the UK
Facility (including the maximum amount available to be drawn under letters
of credit and other collateral instruments issued under such facility) is
less than (pound)2,000,000 PLUS fifty percent (50%) of the amount borrowed
under the UK Facility to fund any UK Permitted Acquisition.
4.3.5 ALLOCATION OF MANDATORY PREPAYMENTS. Each mandatory prepayment
required under this SECTION 4.3 shall be (i) FIRST, applied to reduce the
principal amounts of the Term Loan outstanding on the date of such
prepayment and SECOND, after payment in full of the Term Loan to reduce
the principal amounts of the Acquisition Loans, and (ii) allocated among
the Lenders in proportion, as nearly as practicable, to the respective
aggregate outstanding amounts of each Lender's Term Note or, as
applicable, Acquisition Note, with adjustments to the extent practicable
to equalize any prior prepayments not exactly in proportion. Any
prepayment of principal of the Term Loan or, as applicable, Acquisition
Loan, shall include all interest accrued to the date of such prepayment
and all principal amounts prepaid shall be applied against the scheduled
installments of principal due on the Term Loan or, as applicable,
Acquisition Loan, in the inverse order of maturity.
SECTION 4. ADDITION OF SECTION 4A. The following Section 4A is hereby
addeD to the Credit Agreement:
4A THE ACQUISITION LOAN
8
<PAGE>
4A.1 COMMITMENT TO LEND.
4A.1.1 COMMITMENT. Subject to the terms and conditions set forth in
this Credit Agreement (including, but not limited to those requirements
set forth in SECTION 4A.1.2) during the Disbursement Period each of the
Lenders severally agrees to lend to the Borrower and the Borrower may
borrow from time to time, upon notice by the Borrower to the Agent given
in accordance with SECTION 4A.1.2 hereof, such sums as are requested by
the Borrower up to a maximum aggregate amount outstanding (after giving
effect to all amounts requested) at any one time equal to such Lender's
Acquisition Commitment; PROVIDED that the sum of the outstanding amount of
the Acquisition Loans (after giving effect to all amounts requested) shall
not at any time exceed the Total Acquisition Commitment. The Acquisition
Loans shall be made PRO RATA in accordance with each -ender's Acquisition
Commitment Percentage. Each request for a Acquisition Loan hereunder shall
constitute a representation and warranty by the Borrower that the
Acquisition Loans are used solely to purchase assets which constitute a
Permitted Acquisition at the conditions set forth in SECTIONS 1.3 hereof,
have been satisfied on the date of such request The commitments of the
Lenders to make any Acquisition Loans shall terminate on the Final
Acquisition Drawdown Date.
4A.1.2 CONDITIONS TO ACQUISITION LOANS. Advances of principal of the
Acquisition Loans may be requested by the Borrower during the Disbursement
Period on the following terms and conditions. The Borrower shall provide
the Agent with evidence, in form and substance satisfactory to the Agent,
that the proceeds from such Acquisition Loan will be used only in
connection with a Permitted Acquisition or the refinancing of Revolving
Credit Loans or other Indebtedness (including the Seller Note) used to
make a Permitted Acquisition. The Borrower shall give to the Agent written
notice in the form of EXHIBIT I hereto of each Acquisition Loan requested
hereunder (an "Acquisition Loan Request") no later than 2:00 p.m. (Boston
time) (a) one (1) Business Day prior to the proposed Drawdown Date of any
Acquisition Loan which is a Base Rate Loan and (b) three (3) Eurodollar
Business Days prior to the proposed Drawdown Date of any Acquisition Loan
which is a Eurodollar Rate Loan. Each such notice shall specify (i) the
principal amount of the Acquisition Loan requested, (ii) the proposed
Drawdown Date of such Acquisition Loan; (iii) the Interest Period of such
Acquisition Loan, and (iv) the Type of such Acquisition L:)an. Promptly
upon receipt of any such notice, the Agent shall notify each of the
Lenders thereof. Each Acquisition Loan Request shall be irrevocable aid
binding on the Borrower and shall obligate the Borrower to accept the
Acquisition Loan requested from the Lenders on the proposed Drawdown Date.
Each Acquisition Loan Request shall be in a minimum amount of $500,000 )r
a whole multiple $100,000 in excess thereof The Purchase Price for such
Permitted Acquisition plus all transaction costs related thereto shall not
be less than the amount of the Acquisition Loan so requested. Subject to
the foregoing, and subject to satisfaction of the conditions set forth in
SECTION 13, so long as no Default or Event of Default shall have occurred
and is continuing, and all of the applicable conditions set forth in this
Credit Agreement, have been met, each Lender shall lend to the Borrower
such Lender's Acquisition Loan
9
<PAGE>
Commitment Percentage of the Acquisition Loan so requested in immediately
available funds not later than the close of business on such Drawdown
Date.
4A.1.3 COMMITMENT FEE. The Borrower agrees to pay to the Agent for
the accounts of the Lenders PRO RATA in accordance with each Lender's
share of the aggregate amount of Acquisition Loans outstanding, a
commitment fee calculated at the rate determined pursuant to SECTION 6.11
hereof for the Commitment Fee, on the average daily amount, during each
calendar quarter or portion thereof during the Disbursement Period, by
which the Total Acquisition Commitment, exceeds the outstanding amount of
Acquisition Loans during such calendar quarter. The commitment fee for the
unborrowed portion of the Acquisition Commitments shall be payable
quarterly in arrears on the first day of each calendar quarter for the
immediately preceding calendar quarter commencing on the first such date
following the date hereof, with a final payment on the Final Acquisition
Drawdown Date or any earlier date on which the Acquisition Commitments
shall terminate.
4A.2 REDUCTION OF TOTAL COMMITMENT. The Borrower shall have the right at
any time and from time to time upon five (5) Business Days prior written
notice to the Agent to reduce by $500,000 or a whole multiple $100,000 in
excess thereof the unborrowed portion of the Total Acquisition Commitment
or terminate entirely the Total Acquisition Commitment, whereupon the
Acquisition Commitments of the Lenders shall be reduced PRO RATA in
accordance with their respective Acquisition Commitment Percentages of the
amount specified in such notice or, as the case may be, terminated.
Promptly after receiving any notice of the Borrower delivered pursuant to
this SECTION 4A.2, the Agent will notify the Lenders of the substance
thereof. Upon the effective date of any such reduction or termination, the
Borrower shall pay to the Agent for the respective accounts of the Lenders
the full amount of any commitment fee then accrued on the amount of the
reduction. No reduction or termination of the Acquisition Commitments may
be reinstated. In addition, on he Final Acquisition Drawdown Date, the
Acquisition Commitments shall permanently be reduced to zero.
4A.3 THE ACQUISITION NOTES. The Acquisition Loan shall be evidenced by
separate promissory notes of the Borrower in substantially the form of
EXHIBIT J hereto (each an "Acquisition Note"), dated the Acquisition
Facility Closing Date and completed with appropriate insertions. One
Acquisition Note shall be payable to the order of each Lender in a
principal amount equal to such Lender's Acquisition Commitment of the
Acquisition Loan and representing the obligation of the Borrower to pay to
such Lender such principal amount or, if less, the outstanding amount of
such Lender's Acquisition Commitment Percentage of the Acquisition Loan,
plus interest accrued thereon, as set forth below. The Borrower
irrevocably authorizes each Lender to make or cause to be made a notation
on such Lender's Acquisition Note Record reflecting the original principal
amount o ' such Lender's Acquisition Commitment Percentage of the
Acquisition Loan and, at or about the time of such Lender's receipt of any
principal payment on such Lender's Acquisition Note, an appropriate
notation on such Lender's Acquisition Note Record reflecting such payment.
The aggregate unpaid amount set forth on such Lender's Acquisition Note
Record shall be PRIMA FACIE evidence of the principal amount thereof owing
and unpaid to such Lender, but the failure to record, or any error in so
recording, any such amount on such Lender's Acquisition Note Record shall
not affect the obligations of the Borrower hereunder or under any
Acquisition Note to make payments of principal of and interest on any
Acquisition Note when due.
10
<PAGE>
4A.4 OPTIONAL PREPAYMENT OF ACQUISITION LOAN. The Borrower shall have the
right at any time after the Disbursement Period to prepay the Acquisition
Note on or before the Maturity Date, as a whole, or in part, upon not less
than three (3) Business Days prior written notice to the Agent, without
premium or penalty, PROVIDED that (a) each partial prepayment shall be in
the principal amount of $500,000 or a whole multiple $100,000 in excess
thereof, (b) no portion of the Acquisition Loan bearing interest at the
Eurodollar Rate may be prepaid pursuant to this SECTION 4.A4 except on the
last day of the Interest Period relating thereto, and (c) each partial
prepayment shall be allocated among the Lenders, in proportion, as nearly
as practicable, to the respective outstanding amount of each Lender's
Acquisition Note, with adjustments to the extent practicable to equalize
any prior prepayments not exactly in proportion. Any prepayment of
principal of the Acquisition Loan shall include all interest accrued to
the date of prepayment and shall be applied against the scheduled
installments of principal due on such Acquisition Loan on a PRO RATA rate
basis. No amount repaid with respect to the Acquisition Loan may be
reborrowed.
4.A.5 SCHEDULE OF INSTALLMENT PAYMENTS OF PRINCIPAL OF ACQUISITION LOAN.
The Borrower promise; to pay to the Agent for the account of the Lenders
the principal amount of the Acquisition Loan in sixteen (16) consecutive
installments, due and payable in arrears on the last day of each calendar
quarter of each calendar year as set forth in the table below, commencing
on the Final Acquisition Drawdown Date, with a final payment on the
Maturity Date in an amount equal to the unpaid balance of the Acquisition
Loan.
<TABLE>
<CAPTION>
- ------------------------ --------------------------------------------------- -------------------------------------------------------
PAYMENTS QUARTERLY AMOUNT ANNUAL AMOUNT
- ------------------------ --------------------------------------------------- -------------------------------------------------------
<S> <C> <C>
1 through 2 5% of the principal amount of the Acquisition 10% of the principal amount of the Acquisition Loan
Loan outstanding on the Final Acquisition outstanding on the Final Acquisition Drawdown Date
Drawdown Date
- ------------------------ --------------------------------------------------- -------------------------------------------------------
3 through 6 5% of the principal amount of the Acquisition 20% of the principal amount of the Acquisition Loan
Loan outstanding on the Final Acquisition outstanding on the Final Acquisition Drawdown Date
Drawdown Date
- ------------------------ --------------------------------------------------- -------------------------------------------------------
7 through 10 7.5% of the principal amount of the Acquisition 30% of the principal amount of the Acquisition Loan
Loan outstanding on the Final Acquisition outstanding on the Final Acquisition Drawdown Date
Drawdown Date
- ------------------------ --------------------------------------------------- -------------------------------------------------------
11 through 14 10% of the principal amount Acquisition Loan 40% of the principal amount of the Acquisition Loan
outstanding on the Final Acquisition Drawdown Date outstanding on the Final Acquisition Drawdown Date
- ------------------------ --------------------------------------------------- -------------------------------------------------------
The principal amount of the Acquisition Loan
TOTAL outstanding on the Final Acquisition Drawdown Date
- ------------------------ --------------------------------------------------- -------------------------------------------------------
</TABLE>
11
<PAGE>
4A.6 INTEREST ON ACQUISITION LOAN.
4A6.1 INTEREST RATES. Except as otherwise provided in SECTION 6.12, the
Acquisition Loan shall bear interest during each Interest Period relating to all
or any portion of the Acquisition Loan at the following rates:
(a) to the, extent that all or any portion of the Acquisition Loan
bears interest during such Interest Period at the Base Rate, the
Acquisition L)an or such portion shall bear interest during such Interest
Period at the rate per annum equal to the Base Rate PLUS the Applicable
Margin.
(b) To the extent that all or any portion of the Acquisition Loan
bears interest during such Interest Period at the Eurodollar Rate, the
Acquisition Loan or such portion shall bear interest during such Interest
Period at the rate per annum equal to the Eurodollar Rate PLUS the
Eurodollar Applicable Margin.
The Borrower promises to pay interest on the Acquisition Loan or any
portion thereof outstanding during each Interest Period in arrears on each
Interest Payment Date applicable to such Interest Period.
4A.6.2 NOTIFICATION BY BORROWER. After any Acquisition Loan has been made,
the provisions of SECTION 2.7 shall apply MUTATIS MUTANDIS with respect to all
or any portion of the Acquisition Loan so that the Borrower may have the same
interest rate options with respect to all or any portion of the Acquisition Loan
as it would be entitled to with respect to the Revolving Credit Loans, subject
to the same limitations as applied to Revolving Credit Loans.
4A.6.3. AMOUNTS, ETC. Any portion of the Acquisition Loan bearing interest
at the Eurodollar Rate relating to any Interest Period shall be in the amount of
$500,000 or a while multiple $100,000 in excess thereof. No Interest Period
relating to the i Acquisition Loan or any portion thereof bearing interest at
the Eurodollar Rate shall extend beyond the date on which a regularly scheduled
installment payment of the principal of the Acquisition Loan is to be made
unless a portion of the Acquisition Loan at least equal to such installment
payment has , In Interest Period ending on such date or is then bearing interest
at the Base Rate.
4A.7 FUNDS FOR ACQUISITION LOANS.
4A7.1. FUNDING PROCEDURES. Not later than 2:00 p.m. (Boston time) on the
proposed Drawdown Date of any Acquisition Loan, each of the Lenders will make
available to the Agent, at the Agent's Head Office, in immediately available
funds, such Lender'; Acquisition Commitment Percentage of the amount of the
requested Acquisition Loan. Upon receipt from each Lender of such amount, and
upon receipt of the documents required by SECTIONS 4A.1.2 and 13 and the
satisfaction 0: the other conditions set forth therein, to the extent
applicable, the Agent
12
<PAGE>
will make available to the Borrower the aggregate amount of such Acquisition
Loans made available to the Agent by the Lenders. The failure or refusal of any
Lender to make available to the Agent at the aforesaid time and price on any
Drawdown Date its Acquisition Commitment Percentage of the requested Acquisition
Loan shall not relieve any other Lender from its several obligation hereunder to
make available to the Agent such other Lender's Acquisition Commitment
Percentage of any requested Acquisition Loan.
4A.8 ACQUISITION LOANS BY AGENT
The Agent may, unless notified to the contrary by any Lender prior to a Drawdown
Date, assume that such Lender has made available to the Agent on such Drawdown
Date such Lender's Acquisition Commitment Percentage of the Acquisition Loan to
be made on such Drawdown Date, and the Agent may (but it shall not be required
to), in reliance upon such assumption, make available to the Borrower a
corresponding amount. If any Lender makes available to the Agent such amount on
a date after such Drawdown Date, such Lender shall pay to the Agent on demand an
amount equal to the product of (a) the average computed for the period referred
to in clause (c) below, of the weighted average interest rate paid by the Agent
for federal funds acquired by the Agent during each day included in such period,
TIMES (b) the amount of such Lender's Acquisition Commitment Percentage of such
Acquisition Loan, TIMES (c) a fraction, the numerator of which is the number of
days that elapse from and including such Drawdown Date (or, if the Drawdown Date
occurs prior to twenty-four hours after such Lender has received notice a loan
request, twenty-four hours after receipt of such notice of a loan request) to
the date on which the amount of such Lender's Acquisition Commitment Percentage
of such Acquisition Loan shall become immediately available to the Agent, and
the denominator of which is 360. A statement of the Agent submitted to such
Lender with respect to any amounts owing under this paragraph shall be PRIMA
FACIE evidence of the amount due and owing to the Agent by such Lender. If the
amount of such Lender's Acquisition Commitment Percentage of such Acquisition
Loan is not made available to the Agent by such Lender within three (3) Business
Days following such Drawdown Date, the Agent shall be entitled to recover such
amount from the Borrower on demand, with interest thereon at the rate per annum
applicable to the Acquisition Loan made on such Drawdown Date. In no event shall
the Borrower be responsible for payments of any amounts, costs, or other
expenses under SECTION 6.10 hereof incurred by or allocable to the Lender who
failed to make available to the Agent any amounts required under this SECTION
4.A8.
SECTION 5. AMENDMENT TO SECTION 7 OF THE AGREEMENT.
SECTION 7.2 is hereby amended by inserting the following sentence
immediately prior to the last sentence "the obligations of CRC-Key, Inc.
under the Guaranty to which it is a party shall be in turn secured at all
times by a perfected first priority security interest in substantially all
of the assets of CRC-Key, Inc., whether now owned or hereafter acquired,
pursuant to the terms of the Security Agreement to which it is a party to,
and the Pledge Agreement to which the Holding Company is a party."
SECTION 6. AMENDMENT TO SECTION 8 OF THE CREDIT AGREEMENT.
13
<PAGE>
SECTION 8.19 is hereby amended by inserting after the phrase "The
Canadian Subsidiary, the Holland Subsidiary" in the first line thereof the
following new words," CRC-Key, Inc."
SECTION 7. AMENDMENT TO SECTION 9 OF THE CREDIT AGREEMENT.
SECTION 9.12 is hereby amended by inserting immediately after the
word "Acquisition" in the second line thereof I words "and Permitted
Acquisitions."
SECTION 8. AMENDMENT TO SECTION 10 OF THE CREDIT AGREEMENT.
(a) SECTION 10.1 is here y amended by adding thereto subparagraph
(p) as follows:
"(p) Indebtedness assumed or incurred in connection with a
Permitted Acquisition."
(b) SECTION 10.5.1 is hereby amended by adding the following (iii)
prior to the end thereof:
"(iii) prior to the Final Acquisition Drawdown Date, any
Permitted Acquisition or UK Permitted Acquisition."
SECTION 9. AMENDMENT TO SECTION 11 OF THE CREDIT AGREEMENT.
(a) SECTION 11.1 is hereby amended by replacing the table appearing
therein with the following table:
FISCAL QUARTER
ENDING DATE RATIO
------------------------------------------------
3/31/98 3.50:1
------------------------------------------------
6/30/98 3.75:1
------------------------------------------------
9/30/98 3.75:1
------------------------------------------------
12/31/98 3.00:1
------------------------------------------------
3/31/99 3.00:1
------------------------------------------------
6/30/99 3.00:1
------------------------------------------------
9/30/99 2.75:1
------------------------------------------------
12/31/99 2.50:1
------------------------------------------------
3/31/00 2.50:1
------------------------------------------------
6/30/00 2.50:1
------------------------------------------------
9/30/00 2.50:1
------------------------------------------------
12/31/00 and thereafter 2.00:1
------------------------------------------------
(b) SECTION 11.2 is here y amended in its entirety to read as follows:
14
<PAGE>
"11.2 RESTRICTED CAPITAL EXPENDITURES. The Borrower and the Holding
Company will not make, or permit any of their Subsidiaries to make, Restricted
Capital Expenditures OTHER THAN: (a) Restricted Capital Expenditures that do not
exceed in aggregate $6,800,000, for all such Persons collectively, for fiscal
year 1999 and do not exceed $3,000,000 thereafter, PROVIDED that, if during any
such fiscal year, the amount of Restricted Capital Expenditures permitted for
that fiscal year is not so utilized, a portion of such unutilized amount not to
exceed $500,000 may be utilized in the immediately succeeding fiscal year, but
not in any subsequent fiscal year, (b) in fiscal, year 1999, Restricted Capital
Expenditures in an amount not to exceed in aggregate $1,000,000 to (i) acquire
property in the metropolitan Houston, Texas area, (ii) construct an office
building on such property, and (iii) expand the Borrower's existing facility in
Tulsa, Oklahoma, (c) in fiscal year 2000, Restrictive Capital Expenditures in an
amount not to exceed in aggregate $1,500,000 in connection with the relocation
of the existing Houston, Texas facility to another facility in the same
geographic area and the development of such other facility, (d) Permitted
Acquisitions and (e) UK Permitted Acquisitions."
(c) SECTION 11.3 is hereby amended by amended in its entirety to
read as follows:
"11.3 CONSOLIDATED TANGIBLE NET WORTH. The Borrower and the Holding
Company will not permit Consolidated Tangible Net Worth at any time to be
less than the sum of (a) $7,257,000, plus (b) on a cumulative basis, 75%
of positive Consolidated Net Income for each fiscal year beginning with
the fiscal year ended March 31, 1999, plus (c) 100% of the proceeds of any
sale by any of the Holding Company or any of its Subsidiaries after the
Closing Date of (i) equity securities issued by such Person, or (ii)
warrants or subscription rights for equity securities issued by such
Person.
(d) SECTION 11.4 is hereby amended by replacing the table appearing
therein with the following table:
-------------------------------------------------
Date Ratio
-------------------------------------------------
3/31/98 2.75:1
-------------------------------------------------
6/30/98 2.50:1
-------------------------------------------------
9/30/98 3.00:1
-------------------------------------------------
12/31/98 3.75:1
-------------------------------------------------
3/31/99 3.75:1
-------------------------------------------------
6/30/99 4.00:1
-------------------------------------------------
9/30/99 4.00:1
-------------------------------------------------
12/31/99 and thereafter 4.50:1
-------------------------------------------------
(e) SECTION 11.5 is hereby amended by replacing the table appearing
therein with the following table:
15
<PAGE>
-------------------------------------------------
Date Ratio
-------------------------------------------------
3/3 1/98 1.05:1
-------------------------------------------------
6/30/98 1.00:1
-------------------------------------------------
9/30/98 1.20:1
-------------------------------------------------
12/31/98 1.40:1
-------------------------------------------------
3/31/99 1.40:1
-------------------------------------------------
6/30/99 1.40:1
-------------------------------------------------
9/30/99 1.40:1
-------------------------------------------------
12/31/99 1.50:1
-------------------------------------------------
3/3 1 /00 and thereafter 1.50:1
-------------------------------------------------
SECTION 10. AMENDMENT TO THE CREDIT AGREEMENT. The Credit Agreement is
hereby amended by adding EXHIBITS I and J hereto as EXHIBITS I and J thereto.
SCHEDULE 1 of the Credit Agreement is hereby amended in its entirety and
replaced with SCHEDULE 1 hereto.
SECTION 11. CONDITIONS TO EFFECTIVENESS. This Amendment shall not become
effective until the Agent receives the following:
(a) a counterpart of this Amendment, executed by the Borrower,
the Guarantors and each of the Lenders; and
(b) an amendment fee of $56,250 paid by the Borrower for the PRO
RATA account of each Lender based on such Lender's percentage of the Total
Acquisition Commitment and the increase of such Lender's Total Commitment as
effected by this Amendment; and
(c) an arrangement fee for the account of BancBoston Securities Inc.
in the amount set forth in the term sheet relating to this Amendment; and
(d) Acquisition Notes, duly executed and delivered by the Borrower
for each Lender; and
(e) the first amendment to the UK Facility, executed by the parties
to the UK Facility; and
(f) Amended and Restated Revolving Credit Notes, duly executed and
delivered by the Borrower for each Lender; and
(g) a copy, certified by a duly authorized officer of the Borrower
and the Holding Company to be true and complete on the date hereof, of each of
(i) such Person's charter or other incorporation documents as in effect on such
date of certification, (ii) such Person's by-laws as in effect on such date and
(iii) proof of at corporate action necessary for the valid execution, delivery
and performance by the Holding Company and each of its Subsidiaries of this
Amendment, the Acquisition Notes and the other documents entered into in
connection herewith to which such Person is or is to become a party; and
16
<PAGE>
(h) an opinion of counsel for the Borrower and the Guarantors in
form and substance satisfactory to the Agent.
SECTION 12. DELIVERY OF ANNUAL FINANCIAL STATEMENTS. Notwithstanding the
provisions of ss.9.4(a) and (d), the Agent and the Lenders hereby agree that so
long as the Borrower delivers the financial statement its and compliance
certificate required thereby for the Borrower's 1997 fiscal year to the Agent
and the Lenders within 10 days of the effective date of this Amendment, no
D,,-fault or Event of Default will occur as a result of the Borrower's failure
to deliver the 199 7 annual statements and compliance certificate by the date
originally required by such ss.9.4 (a) and (d).
SECTION 13. REPRESENTATIONS AND WARRANTIES. The Borrower and the
Guarantors hereby repeat, on and as of the date hereof, each of the
representations and warranties made by it in SECTION 8 of the Credit Agreement,
and such representations and warranties remain true as of the date hereof
(except to the extent of changes resulting from transactions contemplated or
permitted by the Credit Agreement and the other Loan Documents and changes
occurring in the ordinary course of business that singly or in the aggregate are
not materially adverse, and to the extent that such representations and
warranties relate expressly to an earlier date), PROVIDED, that all references
therein to the Credit Agreement shall refer to such Credit Agreement as amended
hereby. In addition, the Borrower and the Guarantors hereby represent an d
warrant that (a) the execution and delivery by the Borrower and the Guarantors
of this Amendment and the performance by the Borrower and the Guarantors of a of
their agreements and obligations under the Credit Agreement as amended hereby
are within the corporate authority of each the Borrower and the Guarantors and
have been duly authorized by all necessary corporate action on the part of the
Borrower an I the Guarantors and (b) on May 20, 1998 the Holding Company
received additional cash equity contributions of $5,087,598.
SECTION 14. RATIFICATION, ETC. as expressly amended hereby, the Credit
Agreement and all documents, instruments and agreements related thereto,
including, but not limited to the Security Documents, are hereby ratified and
confirmed in all respects and shall continue in full force and effect. The
Credit Agreement and this Amendment shall be read and construed as a single
agreement. All references in the Credit Agreement or any related agreement or
instrument t the Credit Agreement shall hereafter refer to the Credit Agreement
as amended hereby.
SECTION 15. WAIVER. Nothing contained herein shall constitute a waiver of,
impair or otherwise affect any Obligations, any other obligation of the Borrower
or any rights of the Agent or the Lenders consequent thereon.
SECTION 16. COUNTERPARTS. This Amendment may be executed in one or more
counterparts, each of which shall be deemed an original but which together shall
constitute one and the same instrument.
SECTION 17. GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS
(WITHOUT REFERENCE TO CONFLICT OF LAWS).
17
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Amendment as a
document under seal as of the date first above written.
CRC-EVANS PIPELINE
INTERNATIONAL, INC.
By: ___________________________
Title:__________________________
CRC HOLDINGS CORP.
By: ___________________________
Title:__________________________
BANKBOSTON, N.A., as Agent
By: ___________________________
Title:__________________________
BANKERS TRUST COMPANY, as
Documentation Agent
By: ___________________________
Title:__________________________
NATIONSBANK OF TEXAS, N.A.
By: ___________________________
Title:__________________________
18
<PAGE>
UNION BANK OF CALIFORNIA, N.A.
By: ___________________________
Title:__________________________
19
<PAGE>
RATIFICATION OF GUARANTY
Each of the undersigned Guarantors hereby acknowledges and consents to the
foregoing Amendment as of July 3, 1998, and agrees that each of the Guarantees
from each of the undersigned Guarantors remain in full force and effect, and
each of the Guarantors confirms and ratifies all of it legations thereunder.
CRC-KEY, INC.
By:____________________________
Title:___________________________
CRC-EVANS CANADA, LTD.
By:____________________________
Title:___________________________
20
EXHIBIT 10.5
THIS SUPPLEMENTAL AGREEMENT (this "Agreement") is made on _____________ 1998
AMONG:
(1) PIPELINE INDUCTION HEAT LIMITED, a private company limited by shares
incorporated in England and Wales (registered number 1478556) and having
its registered office at The Pipeline Centre, Unit 12, Farrington Road,
Rossendale Road Industrial Estate, Burnley, BB11 5SW;
(2) BANKBOSTON, N.A., LONDON BRANCH, in its individual capacity (together with
its successors in title and assign, the "BANKS");
(3) BANKBOSTON, N.A., LONDON BRANCH, in its capacity as the Overdraft Bank
(the "OVERDRAFT BANK");
(4) BANKBOSTON, N.A., LONDON BRANCH, in its capacity as the Issuing Bank (the
"ISSUING BANK"); and
(5) BANKBOSTON, N.A., LONDON BRANCH, in its capacity as agent and trustee for
the Banks, the Overdraft Bank and the Issuing Bank (the "AGENT").
RECITALS
(A) This Agreement amends a facility agreement dated 12 June 1997 made among
the parties to this Agreement (such facility agreement as amended,
supplemented, modified or restated and in effect for the time being
referred to in this Agreement as the "FACILITIES AGREEMENT").
(B) The parties to the Facilities Agreement have agreed that it shall be
amended upon the terms and subject to the conditions set forth below.
IT IS HEREBY AGREED as follows:
1. EXPRESSIONS
Expressions used in this Agreement without definition that are defined in
or defined by reference in the Facilities Agreement shall have the same
meanings when used in this Agreement.
2. AMENDMENTS TO FACILITIES AGREEMENT
With effect from the Effective Date (as defined in Clause 5 hereof):
1
<PAGE>
2.1 The Facilities Agreement shall continue in full force and effect save as
amended by this Agreement, and all references in the Loan Documents to the
term "Facilities Agreement" shall be in all respects read and construed as
being references to the Facilities Agreement as amended by this Agreement.
2.2 The definition of "Security Documents" is hereby amended by adding at the
end thereof the phrase "and further including any and all security
documents executed and delivered in connection with each UK Permitted
Acquisition". 2.3 The definition of "Maximum Commitment" contained in
Clause 1.1 of the Facilities Agreement is hereby amended by replacing the
reference to "(pound)8,050,000, with a reference to (pound)4,500,000". 2.4
Clause 1.1 of the Facilities Agreement is further amended by inserting the
following definitions in the appropriate alphabetical order:
"PURCHASE PRICE" shall mean the sum of all cash paid, all
Indebtedness assumed or incurred (other than Indebtedness under
this Agreement), and the stated issue price of any shares or the
principal amount of any debt issued by the Borrower in connection
with any UK Permitted Acquisition.
"UK PERMITTED ACQUISITION" shall mean an acquisition by the
Borrower of substantially all of the assets of or of the shares
in a Person in the same or similar lines of business as that of
the Borrower; PROVIDED, that in each case each of the following
conditions is met:
(i) upon completion of the UK Permitted Acquisition, unless
waived by the Agent, the Borrower shall have provided,
and shall have caused the target to provide, to the
Agent all such additional guarantees, debentures,
security documents, pledge agreements and other
documents or instruments (where appropriate, in
substantially the form previously delivered to the
Agent) necessary or appropriate to grant to the Agent,
for the benefit of the Banks, a first fixed and floating
charge over substantially all of the assets of the
Person acquired or of the assets acquired, as
applicable; and
(ii) the Agent and the Banks shall have received (i) written
notice of the proposed acquisition at least ten (10)
Business Days' prior to the proposed completion date for
the acquisition, describing the relevant acquisition to
be completed, including without limitation the
anticipated completion date and the anticipated amount
of the Advances to be borrowed in connection with the
proposed acquisition, (ii) copies of all documents,
agreements and instruments to be entered into by the
Borrower in connection with such acquisition and
evidence of compliance with all requirements of the Loan
Documents and (iii) PRO FORMA financial statements and
2
<PAGE>
calculations, in form and substance satisfactory to the
Agent, evidencing that immediately prior to and
following such acquisition the Parent will be in
compliance on a Pro Forma Basis (as defined in the
Parent Loan Agreement) with the financial covenants set
forth in Section 11 of the Parent Loan Agreement for the
period of 12 months following completion of such
acquisition;
(iii) no Event of Default or Unmatured Event of Default shall
have occurred and be continuing at the time of
completion of the proposed acquisition, and no Event of
Default or Unmatured Event of Default would result
therefrom;
(iv) the company or business to be acquired must have
substantially all of its operations located in the UK;
(v) any Indebtedness assumed or incurred in connection with
such acquisition must be on terms and conditions
acceptable to the Agent;
(vi) the aggregate Purchase Price for all UK Permitted
Acquisitions shall not exceed (pound)1,450,000; and
(vii) the Borrower shall have delivered to the Agent and the
Banks a copy of all financial statements received from
the company to be acquired for the periods prior to the
proposed closing date for such acquisitions.
2.5 Clause 1.3 of the Facilities Agreement is hereby amended by deleting it in
its entirety and replacing it with the following:
"1.3 PURPOSE. This Agreement sets out the terms and conditions upon
and subject to which the Banks, the Overdraft Bank and the Issuing
Bank will make available to the Borrower credit facilities of up to
the Maximum Commitment Amount to be used solely for the purposes set
out in Clause 7.4."
2.6 Clause 7.4 of the Facilities Agreement is hereby amended by deleting it in
its entirety and replacing it with the following:
"7.4 USE OF PROCEEDS. Use the Advances made available hereunder and
the Collateral Instruments issued, extended or renewed hereunder
solely for the following purposes:
(i) The Advances may be used to repay an intercompany loan from
Holdings to the Borrower in the amount of $2,491,280, the
proceeds of which were used to repay a loan from Weatherford
U.K. Ltd. to the Borrower,
3
<PAGE>
(ii) The Advances and the Collateral Instruments may be used to
support ongoing working capital requirements and other general
corporate purposes of the Borrower, and
(iii) The Advances in an aggregate amount up to (pound)1,450,000 may
be used to pay the Purchase Price for UK Permitted
Acquisitions;
PROVIDED, HOWEVER, that not more than (pound)8,050,000 of the
Maximum Commitment Amount shall be used for the purposes described
in clauses (i) and (ii) herein.
None of the Advances or the Collateral Instruments shall be used in
any way which infringes Section 151 of Companies Act 1985 or any law
of any other relevant jurisdiction which restricts the incurring of
indebtedness and/or the creation of security by the Borrower or its
Subsidiaries in connection with the acquisition, directly or
indirectly, of ownership or control of the Borrower or its
Subsidiaries. Without affecting the obligations of the Borrower in
any way, no Bank shall be bound to monitor or verify the application
of any Advance."
3. REPRESENTATIONS AND WARRANTIES.
The Borrower represents and warrants to the Agent, the Banks, the
Overdraft Bank and the Issuing Bank that the representations and
warranties contained in Clause 6 of the Facilities Agreement and the other
representations and warranties made by or on behalf of each member of the
Affiliate Group in connection with the Facilities Agreement or any of the
Loan Documents were true when made and continue to be true on the date
hereof with the same effect as if made on the date hereof.
4. CONDITIONS PRECEDENT
Unless otherwise agreed by the Agent, the effectiveness of this Agreement
shall be subject to the satisfaction of the following conditions
precedent:
4.1 Agent shall have received a counterpart of this Agreement duly
executed and delivered by each of the parties hereto, including
Holdings and the Parent which shall have executed and delivered the
guarantee confirmation act forth on the signature pages hereto.
4.2 The Agent shall have received an amendment fee in the amount of
(pound)3625 for the ratable accounts of the Banks in accordance with
their respective Commitment Percentages.
4.3 The Agent shall have received the First Amendment to the Parent Loan
Agreement, executed by all parties thereto.
4.4 The Agent shall have received a duly certified copy of the
Certificate of Incorporation, and the Certificate of Incorporation
on change of name and the Memorandum and Articles of Association of
the Borrower.
4
<PAGE>
4.5 The Agent shall have received resolutions of the directors of the
Borrower approving the terms of and the transactions contemplated by
this Agreement and setting out the reasons why the transaction is
for the commercial benefit of the Borrower, and authorizing a
specified person or persons to execute this Agreement.
4.6 The Agent shall have received a specimen of the signature of each
person authorized by the resolution referred to above an which the
Agent, the Banks, the Issuing Bank and the Overdraft Bank shall be
entitled to rely conclusively.
4.7 The Agent and each of the Banks shall have received an opinion of
counsel for the Borrower in form and substance satisfactory to the
Agent.
5. EFFECTIVENESS
The amendments set forth in this Agreement shall take effect on the date
(the "Effective Date") of satisfaction of each of the conditions precedent
set forth in Clause 4 hereof.
6. COSTS AND EXPENSES.
The provisions of Clause 7.2 of the Facilities Agreement shall apply
MUTATIS MUTANDIS to this Agreement as though set out herein in full.
7. CLAUSE 12.1 OF THE FACILITIES AGREEMENT
It is hereby acknowledged that this Agreement constitutes an amendment of
certain provisions of the Facilities Agreement in accordance with the
provisions of Clause 12.1 of the Facilities Agreement.
8. COUNTERPARTS
This Agreement may be executed in any number of copies which, taken
together, shall constitute a single agreement whether or not each party
has executed every copy.
9. LAW AND JURISDICTION
This Agreement shall be governed by and construed in accordance with the
laws of England and Wales and for the benefit of the Agent, each of the
Banks, the Issuing Bank and the Overdraft Bank, the Borrower hereby
irrevocably submits to the jurisdiction of the English courts in
connection with any disputes which may arise in connection with the legal
relationships established by this Agreement.
5
<PAGE>
AS WITNESS the hands of the authorized signatories of the parties hereto the day
and year first above written.
SIGNED by )
for and on behalf of PIPELINE ) _____________________
INDUCTION HEAT LIMITED ) Director
)
SIGNED by )
for and on behalf of )
BANKBOSTON, N.A., ) _____________________
LONDON BRANCH, as a ) Authorised Signatory
Bank, Agent, Overdraft )
Bank and Issuing Bank )
6
<PAGE>
Confirmation of Holdings Guarantee
PIH Holdings Limited, a company incorporated in England, as guarantor
under the Holdings Guarantee (as defined in the Facilities Agreement referred to
above) hereby confirms to the Banks, the Agent, the Issuing Bank and the
Overdraft Bank that the Holdings Guarantee remains in full force and effect and
continues to constitute, among other things, an absolute and unconditional
guarantee of all of the Guaranteed Obligations as therein defined which includes
the obligations of the Borrower under the Facilities Agreement as amended by
this Agreement.
SIGNED by )
for and on behalf of ) ____________________
PIH HOLDINGS LIMITED: ) Director
Confirmation of CRC-Evans Pipeline International, Inc. Guaranty
CRC-Evans Pipeline International Inc., a Delaware Corporation, as
guarantor under the Parent Guarantee (as defined in the Facilities Agreement
referred to above) hereby confirms to the Banks, the Agent, the Issuing Bank and
the Overdraft Bank that the Parent Guarantee remains in full force and effect
and continues to constitute, among other things, an absolute and unconditional
guarantee of all obligations described therein which includes the obligations of
the Borrower under the Facilities Agreement as amended by this Agreement.
SIGNED by )
for and on behalf of )
CRC-EVANS PIPELINE ) ____________________
INTERNATIONAL, INC.: ) Title:
7
EXHIBIT 10.7
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT (this "Agreement") is dated as of June ___, 1997
and made by and among CRC Holdings, Corp., a Delaware corporation (the "Holding
Company"), CEPI Holdings, Inc., a Delaware corporation (the "Company"), and D.
Dale Wood ("Employee").
WHEREAS, the Holding Company and the Company have been recently created
and organized in connection with a proposed transaction (the "Proposed
Transaction") in which Employee, Natural Gas Partners IV, L.P., a Delaware
limited partnership ("NGP"), and Equus II Incorporated, a Delaware corporation
("Equus"), will each purchase shares of the Holding Company's common stock, par
value $.01 per share ("Common Stock") with the proceeds of such investments to
be used to make an investment in the Company, which the Company will use,
together with other available funds, to acquire substantially all of the assets
and the business of CRC-Evans Pipeline International, Inc. and affiliated
companies (the "Acquired Companies");
WHEREAS, Employee has had a previous association with the Acquired
Companies (either as an employee, officer or consultant), and the Holding
Company and the Company desire to, promptly after the consummation of the
Proposed Transaction, employ Employee, who desires to be employed by the Holding
Company and the Company, upon the terms and conditions hereinafter set forth;
and
WHEREAS, it is a condition to the (consummation of the Proposed
Transaction that Employee enter into this Agreement;
NOW, THEREFORE, in consideration of, and as a material inducement to, the
consummation of the Proposed Transaction, the Holding Company, the Company and
Employee intending to be legally bound, hereby agree as follows:
1. EMPLOYMENT; POSITION. Employee shall be employed by the Holding Company
and the Company, as Chairman of the Board (the "Position").
2. TERM. The term of this Agreement shall be for a period of __ years (the
"Term"), unless earlier terminated in accordance with the terms of this
Agreement.
3. DUTIES. Employee shall have such duties, functions, responsibilities,
and authority customarily pertaining to the Position, subject however, to the
bylaws and the directives of the Board of Directors of the Holding Company and
the Company; provided, that in no event shall Employee be required to relocate
outside of the Houston metropolitan area. During the Term, Employee shall devote
the time, skill, and attention necessary to fulfill his duties hereunder to the
business and affairs of the Holding Company and the Company, and in furtherance
of the business and affairs of the Holding Company, the Company and their
respective subsidiaries, if any, (collectively the "RELATED PARTIES").
<PAGE>
4. COMPENSATION AND RELATED MATTERS.
(a) BASE SALARY. During the Term, Employee shall be paid a base
salary at the rate of $120,000 per annum. This base salary may be reviewed
periodically and increases in such base salary may be granted at the sole
discretion of the Board of Directors of the Holding Company or the Company.
(b) BENEFITS. Employee shall be eligible to participate in such
insurance, medical and other employee benefit plans of the Holding Company or
the Company that may be in effect, from time to time, to the extent such plans
are generally available to other executive officers of the Holding Company or
the Company.
(c) PROFESSIONAL ORGANIZATION DUES. During the Term, the Holding
Company or the Company shall pay the initiation fees and periodic dues for
membership in any professional organizations in which Employee is currently a
member, or which are otherwise approved by the Board of Directors of the Holding
Company or the Company, and the Holding Company or the Company shall pay all
charges and expenses, including reasonable travel expenses, incurred by Employee
in connection with membership in such organizations.
(d) VACATIONS. Employee shall be entitled to take such vacations as
he may desire, with pay, provided that such vacations do not interfere with the
performance of his duties and services hereunder.
(e) EXPENSES. Employee will be reimbursed for reasonable expenses
incurred in the performance of his duties and services hereunder and in
furtherance of the business of the Related Parties upon presentation by Employee
of an itemized account, accompanied by appropriate receipts satisfactory to the
Holding Company or the Company, as the case may be, in substantiation of such
expenses.
5. TERMINATION OF EMPLOYMENT.
(a) Employee's employment hereunder:
(i) shall automatically terminate upon the occurrence of any
of the following: (A) the mental or physical incapacity or inability
of Employee to perform his duties for a consecutive period of one
hundred twenty (120) days or a non-consecutive period of one hundred
eighty (180) days during any twelve month period; (B) the death of
Employee; or (C) the voluntary resignation or retirement of
Employee; and
(ii) may be terminated by the Holding Company or the Company,
at any time, for "CAUSE", which shall mean by reason of any of the
following: (A) Employee's conviction of, or plea of nolo contendere
to, any felony or to any crime or offense causing substantial harm
to any of the Related Parties or involving acts of theft, fraud,
embezzlement, moral turpitude or similar conduct; (B) malfeasance in
the conduct of Employee's duties, including, but not limited to, (1)
willful and intentional misuse or diversion of funds of any of the
Relate Parties, (2) embezzlement, or (3)
<PAGE>
fraudulent or willful and material misrepresentations or
concealments on any written reports submitted to the Related
Parties; (C) Employee's material breach of the provisions of this
Agreement or material failure to follow or comply with the
reasonable and lawful written directives of the Board of Directors
of the Holding Company or the Company, PROVIDED, HOWEVER, that
Employee shall have been informed, in writing, of such material
breach or failure and given a period of sixty (60) days to remedy
same.
(b) Upon any termination of Employee's employment pursuant to this
Section 5, all obligations (of the Holding Company and the Company under this
Agreement shall terminate; PROVIDED, HOWEVER, that if Employee's employment
hereunder is involuntarily terminated without "cause", as defined above, or if
Employee's employment is terminated (whether voluntarily or involuntarily)
following any "Change in Control" (as defined below), then the Company shall
continue to pay to Employee his then-current monthly salary and to provide his
then-current benefits ("SEVERANCE Payments") during the lesser of (i) the 24
month period following the date of termination of Employee's employment, or (ii)
the remainder of the Term (the "SEVERANCE PERIOD"); provided that, the Company's
obligation to make Severance Payments shall automatically terminate upon any
breach by Employee of the provisions in Sections 8, 9 and 10.
For purposes hereof, a "Change in Control" is any change in the ownership
of the capital stock of the Holding Company (whether resulting from a merger,
consolidation, sale of capital stock or otherwise) which causes, by reason other
than the completion of a public offering of the Common Stock pursuant to an
effective registration statement filed with the Securities and Exchange
Commission, the owners of the capital stock of the Holding Company as of the
date of this Agreement to no longer have the right to elect a majority of
members of the Board of Directors of the Holding Company.
6. BUSINESS OPPORTUNITIES AND INTELLECTUAL PROPERTY.
(a) Employee hereby assigns and agrees to assign to the Related
Parties, their successors, assigns, or designees, all of the Employee's right,
title, and interest in and to all Business Opportunities and Intellectual
Property (both as defined below) and further acknowledges and agrees that all
Business Opportunities and Intellectual Property constitute the exclusive
property of the Related Parties. Employee has and shall continue to promptly
disclose to the Company all Business Opportunities and Intellectual Property.
(b) For purposes hereof "Business Opportunities" shall mean all
business ideas, prospects, proposals or other opportunities pertaining to: (i)
any business in which the Acquired Companies were regularly engaged or the
Related Parties are to be regularly engaged (referred to herein as the "Current
Business") and (ii) any other aspect of the oil and gas service business, that
were developed by Employee during that period that Employee provided services to
the Acquired Companies or that are developed by Employee during the period that
Employee provides services to any of the Related Parties (whether as an
employee, officer or consultant) (such periods are referred to herein as the
"Opportunity Term") or originated by any third party and brought to the
attention of Employee during the Opportunity Term, together with
2
<PAGE>
information relating thereto. It is acknowledged that the "Current Business"
includes, without limitation, the following: (A) the design, manufacture, sales
and rental of right-of-way pipeline construction and rehabilitation equipment
and services provided in connection therewith, (B) the design, manufacture, sale
and commissioning of pipe handling, cleaning and coating equipment, (C) the
design, manufacture, sale and rental of automatic (mechanized) pipeline welding
systems and ancillary sales and services provided in connection therewith, and
(D) pipeline field joint coating services and related equipment rentals and
sales, the manufacture and sale of pipeline induction heating systems, and
pipeline coating rehabilitation services.
(c) For purposes hereof "Intellectual Property" shall mean all
ideas, inventions, discoveries, processes, designs, methods, substances,
articles, computer programs, and improvements (including, without limitation,
enhancements to, or further interpretation or processing of, information that
was in the possession of Employee prior to the date of this Agreement), whether
or not patentable or copyrightable, that do not fall within the definition of
Business Opportunities, that Employee discovered, conceived, invented, created,
or developed, alone or with others during the course of his service as an
officer, employee or consultant for the Acquired Companies or that Employee
discovers, conceives, invents, creates, or develops, alone or with others,
during the Term, if such discovery, conception, invention, creation, or
development (A) occurred or occurs in the course of Employee's performance of
services (whether as a director, officer, employee or consultant) for the
Acquired Companies or for the Related Parties, or (B) occurred or occurs with
the use of any of the Acquired Companies' or the Related Parties' time,
materials, or facilities, or (C) relates or pertains in any way to the Related
Parties' purposes, activities, or affairs.
7. NON-COMPETE OBLIGATIONS DURING TERM. Employee agrees that during the
Term:
(i) Employee will not, other than through the Related Parties,
engage or participate in any manner, whether directly or indirectly
through any family member or as an employee, employer, consultant,
agent, principal, partner, more than three percent (3%) shareholder,
officer, director, licensor, lender, lessor or in any other
individual or representative capacity, in any business, or activity
that is the same as or similar to the Current Business or to any
other business or activity in which the Related Parties become
engaged during the Term; and
(ii) all investments made by Employee (whether in his own name
or in the name of any family members or made by Employee's
controlled affiliates) that relate to the businesses conducted by
the Related Parties shall be made solely through the Related
Parties; and Employee will not (directly or indirectly through any
family members), and will not permit any of his controlled
affiliates to invest or otherwise participate alongside the Related
Parties in any Business Opportunities, or invest or otherwise
participate in any business or activity relating to a Business
Opportunity;
provided that, if the Company expands its business activities after the date
hereof, then this Section 7 shall not apply to any personal investments owned by
Employee, his family members and his controlled affiliates in business
activities outside of the Current Business if (i) the
3
<PAGE>
Related Parties were not engaged in such business or activity at the time of
such investment, (ii) Employee does not expend any significant time in
connection with the monitoring, maintaining or administering such investment in
conflict with Employee's duties under Section 3 of this Agreement, and (iii) to
the extent that such business or activity relates to the oil and gas service
business (A) Employee fully informs the Company of the terms of such investment
and provides all available information requested by the CompanY, (B) the
opportunity to make such investment is first offered to, and subsequently
declined by, the Company, and (C) Employee, his family members and his
controlled affiliates agree not to increase their respective ownership interests
in investment after the Company becomes engaged in such business activity and
grant to the Company a right of first refusal upon any disposition of such
investment.
8. CONFIDENTIALITY OBLIGATIONS.
(a) Employee hereby acknowledges that all trade secrets and
confidential or proprietary information of the Acquired Companies and the
Related Parties (collectively referred to herein as ("Confidential Information")
constitute valuable, special and unique assets of the Related Parties' business,
and that access to and knowledge of such Confidential Information is essential
to the performance of Employee's duties. Employee agrees that during the Term
and during the two (2) year period following the date of termination of
Employee's employment or engagement, as applicable (the "Termination Date"),
Employee will hold the Confidential Information in strict confidence and will
not publish, disseminate or otherwise disclose, directly or indirectly, to any
person other than the Related Parties and their respective officers, directors
and employees, any Confidential Information or use any Confidential Information
for Employee's own personal benefit or for the benefit of anyone other than the
Related Parties.
(b) For purposes of this Section 8, it is agreed that Confidential
Information includes, without limitation, any information heretofore or
hereafter acquired, developed or used by any of the Acquired Companies or the
Related Parties relating to Business Opportunities or Intellectual Property or
other geological, geophysical, economic, financial or management aspects of the
business, operations, properties or prospects of the Acquired Companies or the
Related Parties whether oral or in written form in a Related Parties' Business
Records (as defined in Section 10 below), but shall exclude any information that
(A) has become part of common knowledge or understanding in the oil and gas
pipeline construction industry or otherwise in the public domain (other than
from disclosure by Employee in violation of this Agreement), or (B) was
rightfully in the possession of Employee, as shown by Employee's records, prior
to the date of this Agreement; provided, however, that Employee shall provide to
the Company copies of all information described in clause (B); further provided,
however, that this Section 8 shall not be applicable to the extent Employee is
required to testify in a judicial or regulatory proceeding pursuant to the order
of judge or administrative law judge after Employee requests that such
Confidential Information be preserved. Holding Company and Company agree to
provide Confidential Information to Employee regarding the Acquired Companies
and the Related Parties in exchange for Employee's agreement to keep such
Confidential Information, and any Confidential Information to which Employee has
already become privy, in strict confidence as provided in this Agreement.
4
<PAGE>
9. OBLIGATIONS AFTER TERMINATION DATE.
(a) The purpose of the provisions of Section 7 and this Section 9
are to protect the Acquired Companies and the Related Parties from unfair loss
of goodwill and business advantage and to shield Employee from pressure to use
or disclose Confidential Information or to trade on the goodwill belonging to
the Acquired companies or the Related Parties. Accordingly, during the
"Post-Termination Non-Compete Term" s defined below), Employee will not engage
or participate in any manner, whether directly or indirectly through any family
member or as an employee, employer, consultant, agent, principal, partner,
shareholder, officer, director, licensor, lender, lessor or in any other
individual or representative capacity, in any business or activity that is the
same as or similar to the Current Business or to any other business or activity
in which the Related Parties are engaged as of he Termination Date or during the
six (6) month period following such Termination Date in any geographic area (i)
in which the offices and properties of the Related Parties are located, (ii) in
which the customers of the Related Parties are located (which includes the
geographic areas in which customers are engaged in construction projects which
involve the use of products or services like those provided by the Related
Parties) if the Related Parties are, or if within the preceding two years the
Related Parties or the Acquired Companies have been actively engaged in the
design, manufacture, sales or rental of equipment, or the provision of services
to such customers, and (iii) in which prospective customers are located, if the
Related Parties are in the process of preparing bids or other preliminary work
required as a pre-requisite to the design, manufacture, sales or rental of
equipment, or the provision of services to such prospective customers.
(b) For purposes hereof, the "Post Termination Non-Compete Term" is:
(i) with respect to any Employee (A) who voluntarily
resigns or otherwise terminates his position as an officer or
employee of the Related Parties, or (B) whose employment or
engagement by the Related Parties is terminated for "cause", the 18
month period following the Termination Date; or
(ii) with respect to any Employee whose services as an
officer, employee or consultant are terminated by a Related Party
other than for cause, the period during which Employee is entitled
to receive Severance Payments absent a breach of Section 8, 9 or 10.
(c) Employee acknowledges that if the Company is obligated to make
payments during the Severance Period to Employee under this Agreement, then such
payments are intended to, and will, constitute adequate consideration for
Employee's agreements set forth in this Section 9.
(d) Employee will not during Post Termination Non-Compete Term,
solicit, entice, persuade or induce, directly or indirectly, any individual (or
person who within the preceding ninety (90) days was an employee) of any of the
Related Parties or any other person who is under contract with or rendering
services to any of the Related Parties, to (i) terminate his or her employment
by, or contractual relationship with, such person, (ii) refrain
5
<PAGE>
from extending or renewing the same (upon the same or new terms), (iii) refrain
from rendering services to or for such person, (iv) become employed by or to
enter into contractual relations with any Persons other than such person, or (v)
enter into a relationship with a competitor of any of the Related Parties.
10. BUSINESS RECORDS.
(a) Employee agrees to promptly deliver to the Company, upon
termination of his employment by the Related Parties, or at any other time when
the Company so requests, all documents relating to the business of the Related
Parties, including, without limitation: contract files, notes, records drawings,
manuals, correspondence, financial and accounting information, customer lists,
statistical data and compilations, patents, copyrights, trademarks, trade names,
inventions, formulae, methods, processes, agreements, contracts, manuals or any
other documents relating to the business of the Related Parties, (collectively,
the "Related Parties' Business Records"), and all copies thereof and therefrom.
(b) Employee confirms that all of the Related Parties' Business
Records (and all copies thereof and therefrom) that are required to be delivered
to the Company pursuant to this Section 10 constitute the exclusive property of
the Related Parties.
(c) The obligation of confidentiality set forth in Section 8 shall
continue notwithstanding Employee's delivery of any such documents to the
Company.
(d) Notwithstanding the foregoing provisions of this Section 10 or
any other provision of this Agreement, Employee shall be entitled to retain any
written materials that, as shown by Employee's records, were in Employee's
possession on or prior to the date hereof, subject to the Company's right to
receive a copy of all such materials.
(e) The provisions of this Section 10 shall continue in effect
notwithstanding termination of Employee's employment for any reason.
11. MISCELLANEOUS.
(a) The invalidity or non-enforceability of any provision of this
Agreement in any respect shall not affect the validity or enforceability of this
Agreement in any other respect or of any other provision of this Agreement. In
the event that any provision of this Agreement shall be held invalid or
unenforceable by a court of competent jurisdiction by reason of the geographic
or business scope or the duration thereof, such invalidity or unenforceability
shall attach only to the scope or duration of such provision and shall not
affect or render invalid or unenforceable any other provision of this Agreement,
and, to the fullest extent permitted by law, this Agreement shall be construed
as if the geographic or business scope or the duration of such provision had
been more narrowly drafted so as not to be invalid or unenforceable.
(b) Employee acknowledges that the remedy at law of any of the
Related Parties for any breach of the provisions of this Agreement is and will
be insufficient and
6
<PAGE>
inadequate and that the Related Parties shall be entitled to equitable relief,
including by way of temporary and permanent injunction, in addition to any
remedies they may have at law.
(c) The representations and covenants contained in this Agreement on
the part of Employee will be construed as ancillary to and independent of any
other agreement between the Holding Company or the Company and Employee, and the
existence of any claim or cause of action of Employed against the Company or any
of the other Related Parties or any officer, director, or shareholder of the
Company or any of the other Related Parties, whether predicated on Employee's
employment or otherwise, shall not constitute a defense to the enforcement by
the Holding Company or the Company of the covenants of Employee contained in
this Agreement. In addition, the provisions of this Agreement shall continue to
be binding upon Employee in accordance with their terms, Notwithstanding the
termination of Employee's employment for any reason.
(d) The parties to this Agreement agree that the limitations
contained in Sections 7 and 9 with respect to time, geographical area, and scope
of activity are reasonable. However, if any court shall Determine that the time
or scope of activity of any restriction contained in Section 7 or 9 is
unenforceable, it is the intention of the parties that such restrictive covenant
set forth herein shall not thereby be terminated but shall be deemed amended to
the extent required to render it valid and enforceable.
(e) Any notices or other communications required or permitted to be
sent hereunder shall be in writing and shall be duly given if personally
delivered or sent postage pre-paid by certified or registered mail, return
receipt requested, at the addresses set forth on the signature page hereof.
Either party may change his or its address for the sending of notice to such
party by written notice to the other party sent in accordance with the
provisions hereof.
(f) This Agreement contains the entire understanding of the parties
with respect to the employment of Employee and supersedes all prior arrangements
or understandings with respect thereto and all oral or written employment
agreements or arrangements between any of the Related Parties and Employee.
(g) This Agreement may not be altered or amended except by a
writing, duly executed by the party against whom such alteration or amendment is
sought to be enforced.
(h) The parties agree that this Agreement shall be governed by and
construed in accordance with the laws of the State of Texas, and that the courts
of the County of Harris in the State of Texas shall be the exclusive courts of
jurisdiction and venue for any litigation, special proceeding, dispute or other
proceeding as between the parties that may be brought or arise out of, in
connection with, or by reason of this Agreement.
(i) This Agreement may be executed in counterparts, each of which
shall be an original and all of which together shall constitute one and the same
instrument.
7
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has executed this Agreement
in multiple counterparts as of the day and year first above written.
CRC HOLDINGS CORP.
By:_______________________________________
Name:______________________________
Title:_____________________________
CEPI HOLDINGS, INC.
By:_______________________________________
Name:______________________________
Title:_____________________________
EMPLOYEE
__________________________________________
D. Dale Wood
8
EXHIBIT 10.8
AMENDED AND RESTATED
ASSET PURCHASE AGREEMENT
By and Among
Weatherford Enterra, Inc.,
CRC-Evans Pipeline International, Inc.
and
CEPI Holdings, Inc.
January 31, 1997
<PAGE>
TABLE OF CONTENTS
PAGE
ARTICLE 1 PURCHASE AND SALE OF ASSETS.......................................1
1.1 TRANSFERRED ASSETS....................................................1
1.2 EXCLUDED ASSETS.......................................................3
1.3 CLOSING...............................................................3
1.4 PURCHASE PRICE FOR THE ASSETS.........................................3
1.5 PURCHASE PRICE ADJUSTMENT.............................................4
1.6 LIABILITIES NOT ASSUMED BY THE BUYER..................................5
1.7 PRORATIONS OF EXPENSES AND CERTAIN PROPERLY TAXES.....................6
1.8 TRANSFER TAXES, RECORDING FEES........................................6
1.9 ALLOCATION OF PURCHASE PRICE..........................................7
ARTICLE 2 REPRESENTATIONS AND WARRANTIES OF THE SELLER AND WEATHERFORD......7
2.1 CORPORATE MATTERS.....................................................7
2.2 VALIDITY OF AGREEMENT AND CONFLICT WITH OTHER INSTRUMENTS.............8
2.3 APPROVALS, LICENSES AND AUTHORIZATIONS................................9
2.4 TITLE TO AND CONDITION OF PROPERTIES..................................9
2.5 CONTRACTS AND COMMITMENTS............................................10
2.6 NO LITIGATION........................................................11
2.7 FINANCIAL STATEMENTS.................................................12
2.8 BOOKS AND RECORDS....................................................12
2.9 NO ADVERSE CHANGES OR EVENTS.........................................12
2.10 CUSTOMERS AND SUPPLIES...............................................13
2.11 INSURANCE............................................................13
2.12 FINANCIAL REQUIREMENTS...............................................13
2.13 ENVIRONMENTAL MATTERS................................................13
2.14 CONDITION OF ASSETS..................................................14
2.15 WARRANTIES AND PRODUCT LIABILITY.....................................14
2.16 EMPLOYEE MATTERS.....................................................14
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF THE BUYER......................15
3.1 CORPORATE MATTERS....................................................15
3.2 APPROVALS AND AUTHORIZATIONS.........................................16
3.3 FINDER'S FEES........................................................16
3.4 HART-SCOTT-RODINO MATTERS............................................16
ARTICLE 4 ADDITIONAL AGREEMENTS............................................17
4.1 DELIVERY OF CORPORATE DOCUMENTS, RECORD RETENTION, FINANCIAL STATEMENTS17
4.2 FURTHER ASSURANCES...................................................18
4.3 EMPLOYEE MATTERS.....................................................18
4.4 USE OF CORPORATE NAMES...............................................19
4.5 NONCOMPETITION.......................................................20
4.6 NO SOLICITATION OF EMPLOYEES.........................................21
4.7 INSURANCE............................................................22
4.8 NOTIFICATION OF CERTAIN MATTERS......................................22
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<PAGE>
4.9 ACCESS TO RECORDS AFTER CLOSING......................................22
4.10 POST-CLOSING COLLECTION..............................................22
4.11 TERMINATION OF ACQUISITION PROPOSALS.................................23
4.12 REASONABLE BEST EFFORTS..............................................23
4.13 FINANCING............................................................23
4.14 WARRANTY OBLIGATIONS; ALLSEAS CONTRACT...............................24
4.15 LETTERS OF CREDIT; BANK GUARANTEES; PARENT GUARANTEES................28
ARTICLE 5 BUYER'S CONDITIONS...............................................29
5.1 REPRESENTATIONS, WARRANTIES AND COVENANTS............................29
5.2 GOOD STANDING........................................................29
5.3 INSTRUMENTS OF TRANSFER..............................................29
5.4 NO LITIGATION........................................................30
5.5 LICENSES, CONSENTS AND APPROVALS.....................................30
5.6 CONSENTS OF THIRD PERSONS............................................30
5.7 RESOLUTIONS..........................................................30
5.8 SHARE TRANSFER AGREEMENTS............................................30
5.9 OPINION OF COUNSEL...................................................30
5.10 NO MATERIAL ADVERSE CHANGE...........................................30
5.11 ASSUMED LITIGATION...................................................30
ARTICLE 6 SELLER'S CONDITIONS..............................................31
6.1 REPRESENTATIONS, WARRANTIES AND COVENANTS............................31
6.2 RECEIPT OF THE TRANSFERRED ASSETS....................................31
6.3 LICENSES, CONSENTS AND APPROVALS.....................................31
6.4 NO LITIGATION........................................................31
6.5 RESOLUTIONS..........................................................31
6.6 SHARE TRANSFER AGREEMENTS............................................31
6.7 OPINION OF COUNSEL...................................................32
6.8 ASSUMED LITIGATION...................................................32
6.9 BACK-UP LETTERS OF CREDIT AND PARENT COMPANY GUARANTEES..............32
ARTICLE 7 INDEMNIFICATION..................................................32
7.1 INDEMNIFICATION BY THE SELLER AND WEATHERFORD........................32
7.2 INDEMNIFICATION BY THE BUYER.........................................33
7.3 PROCEDURE............................................................33
7.4 LIMITATION...........................................................34
7.5 ASSUMPTION OF RETAINED LIABILITIES...................................34
7.6 PAYMENT..............................................................34
7.7 FAILURE TO PAY INDEMNIFICATION.......................................34
7.8 ADJUSTMENT OF LIABILITY..............................................35
7.9 RELEASE..............................................................35
7.10 EXPRESS NEGLIGENCE...................................................35
7.11 ADDITIONAL ENVIRONMENTAL INDEMNITY...................................35
7.12 SPECIAL ENVIRONMENTAL REMEDIATION....................................37
ARTICLE 8 NATURE OF STATEMENTS AND SURVIVAL OF COVENANTS, REPRESENTATIONS,
WARRANTIES AND AGREEMENTS........................................37
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ARTICLE 9 TERMINATION......................................................38
9.1 EVENTS OF TERMINATION................................................38
9.2 LIABILITY UPON TERMINATION...........................................38
9.3 NOTICE OF TERMINATION................................................38
ARTICLE 10 DEFINITIONS OF CERTAIN TERMS....................................38
ARTICLE 11 MISCELLANEOUS...................................................47
11.1 CONDUCT OF THE BUSINESS............................................47
11.2 GOVERNMENTAL FILINGS...............................................49
11.3 ACCESS TO INFORMATION; CONFIDENTIALITY.............................49
11.4 PUBLIC ANNOUNCEMENTS...............................................49
11.5 OTHER ACTION.......................................................50
11.6 EXPENSES...........................................................50
11.7 NOTICES............................................................50
11.8 BULK TRANSFER LAWS.................................................51
11.9 SUCCESSORS.........................................................52
11.10 JOINT AND SEVERAL LIABILITY........................................52
11.11 INJUNCTIVE RELIEF..................................................52
11.12 ENTIRE AGREEMENT...................................................52
11.13 GOVERNING LAW......................................................52
11.14 WAIVER.............................................................52
11.15 SEVERABILITY.......................................................52
11.16 NO THIRD PARTY BENEFICIARIES.......................................52
11.17 COUNTERPARTS.......................................................53
11.18 HEADINGS...........................................................53
11.19 NEGOTIATED TRANSACTION.............................................53
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AMENDED AND RESTATED ASSET PURCHASE AGREEMENT
THIS AMENDED AND RESTATED ASSET PURCHASE AGREEMENT (this "Agreement") is
made and entered into effective the 31st day of January, 1997, by and among
Weatherford Enterra, Inc., a Delaware corporation ("Weatherford"), CRC-Evans
Pipeline International, Inc., a Delaware corporation (the "Seller"), and CEPI
Holdings, Inc., a Delaware corporation (the "Buyer").
W I T N E S S E T H :
WHEREAS, the Seller desires to transfer to the Buyer the Business (as
hereinafter defined) and the properties, assets and liabilities related to the
Business, and the Buyer desires to acquire such Business, properties and assets
and assume such liabilities, all upon the terms and subject to the conditions
set forth herein; and
WHEREAS, the parties hereto desire to set forth certain representations,
warranties and agreements, all as more fully set forth below;
NOW, THEREFORE, in consideration of the premises and the respective
covenants and agreements contained herein, the parties hereto agree as follows:
ARTICLE 1
PURCHASE AND SALE OF ASSETS
1.1 TRANSFERRED ASSETS.
(a) Subject to the terms and conditions of this Agreement and in
consideration of the obligations of the Buyer as provided herein, and except as
otherwise provided in SECTION 1.2 hereof, at the Closing, the Seller shall sell,
assign, transfer, grant, bargain, deliver and convey, and Weatherford shall
cause to be sold, assigned, transferred, granted, bargained, delivered and
conveyed, to the Buyer, free and clear of all Liens (other than Permitted
Liens), the Seller's and the Affiliated Companies' entire right, title and
interest in, to and under the Business, as a going concern, and all assets owned
or used by the Seller or any of the Affiliated Companies in connection with or
arising out of the Business of every type and description, tangible and
intangible, wherever located and whether or not reflected on the books and
records of the Seller (all of such assets, properties, rights and business being
hereinafter sometimes collectively referred to as the "Transferred Assets"),
including, but not limited to,
(i) the Equipment, including the Equipment set forth in
SECTION 1.1(A)(I) of the Disclosure Schedule;
(ii) all Inventories, including the Inventories set forth in
SECTION 1.1(A)(II) of the Disclosure Schedule;
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(iii) all accounts and notes receivable relating to the
Business (the "Accounts Receivable"), including the
Accounts Receivable set forth in SECTION 1.1(A)(III) of
the Disclosure Schedule;
(iv) all Real Property, including the Real Property set forth
in SECTION 1.1(A)(IV) of the Disclosure Schedule;
(v) the Leasehold Interests, including the Leasehold
Interests set forth in SECTION 1.1(A)(V) of the
Disclosure Schedule;
(vi) all Proprietary Information, including the Proprietary
Information set forth in SECTION 1.1(A)(VI) of the
Disclosure Schedule;
(vii) subject to SECTION 1.1(B) hereof, the benefit of all
unfilled or outstanding purchase orders, sales
contracts, other commitments and contracts to which the
Seller is entitled on the Closing Date and that relate
to the Business (the "Entitlements");
(viii) all prepaid expenses and deposits made by the Seller
relating to the Business; and
(ix) any goodwill associated with the Business.
(b) The Seller shall use its best efforts to obtain such consents of
third parties as are necessary for the assignment of the Transferred Assets. To
the extent that any of the Transferred Assets are not assignable by the terms
thereof or for which consents to the assignment thereof cannot be obtained as
provided herein, the Transferred Assets shall be held by the Seller in trust for
the Buyer and shall be performed by the Buyer in the name of the Seller and all
benefits and obligations derived thereunder shall be for the account of the
Buyer; provided, however, that where entitlement of the Buyer to any of the
Transferred Assets that are not assignable by the terms thereof or for which
consents to the assignment thereof cannot be obtained as provided herein is not
recognized by any third party, the Seller shall, at the request of the Buyer,
enforce in a reasonable manner, at the cost of the Seller and for the account of
the Buyer, any and all rights of the Seller against such third party.
(c) The Seller shall also notify each Person that may have
possession of the Transferred Assets at the Closing Date, whether by consignment
or otherwise, of the transfer of such Transferred Assets to the Buyer.
(d) All representations, warranties, covenants and agreements of the
Seller in this Agreement shall be deemed to include representations and
warranties made by Weatherford on behalf of the Affiliated Companies and
covenants and agreements of Weatherford to cause each of the Affiliated
Companies to abide by the covenants and agreements of the Seller hereunder.
1.2 EXCLUDED ASSETS. Anything in SECTION 1.1(A) to the contrary
notwithstanding, there shall be excluded from the assets, properties, rights and
business to be transferred to the Buyer hereunder those assets of the Seller
listed or described in SECTION 1.2 of the Disclosure Schedule (collectively, the
"Excluded Assets").
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1.3 CLOSING. Subject to the conditions set forth in this Agreement, the
Closing shall take place at the offices of Fulbright & Jaworski L.L.P., located
at 1301 McKinney, Houston, Texas, at such time, date and place as the parties
hereto shall mutually agree upon in writing (the "Closing Date"). Failure to
consummate the transactions contemplated hereby on such date shall not result in
a termination of this Agreement or relieve any party hereto of any obligation
hereunder. Title to, ownership of, control over and risk of loss of the
Transferred Assets shall pass to the Buyer at the Closing.
1.4 PURCHASE PRICE FOR THE ASSETS.
(a) In consideration of the transfer to the Buyer of the Transferred
Assets, the Buyer shall (i) pay to the Seller an amount in cash equal to the
Cash Purchase Price plus or minus, as appropriate, the net amount provided in
SECTION 1.7 (the "Net Cash Purchase Price") and (ii) assume (A) the payment
obligations of the Seller with respect to all Trade Payables, Accrued
Liabilities and Notes Payable as of the Closing Date, (B) the obligations of the
Seller and the Affiliated Companies under the express written terms of the
Entitlements to the extent and only to the extent such obligations are not
Pre-Closing Obligations (other than as provided for under clauses (C) and (D)),
(C) the liabilities and obligations of the Seller or the Affiliated Companies
under the Allseas Contract, whether incurred prior to the Closing Date or
following the Closing Date, (D) the liabilities and obligations of the Seller or
the Affiliated Companies as a result of claims made with respect to warranties
given or made by the Seller or the Affiliated Companies on or prior to the
Closing Date that relate to products shipped by the Seller or the Affiliated
Companies in the conduct of the Business on or prior to the Closing and services
rendered by the Seller or the Affiliated Companies with regard to commissioning
of such products (and, in the case of Pipeline Induction Heat Limited CRC-Evans
Automatic Welding, Inc. or the automatic welding division of the Seller, that
relate to any services rendered in the conduct of the Business), and (E) the
liabilities and obligations of the Seller and the Affiliated Companies with
respect to the litigation described in SECTION 1.4 of the Disclosure Schedule
(the "Assumed Litigation") (collectively, the "Assumed Liabilities").
Notwithstanding the foregoing, the Buyer shall not assume any liabilities and
obligations for the Warranty Obligations and the Allseas Obligations that in the
aggregate are in excess of the Ceiling Amount, and such liabilities and
obligations that in the aggregate are in excess of the Ceiling Amount shall not
be deemed to be Assumed Liabilities. The Net Cash Purchase Price and the Assumed
Liabilities are herein collectively referred to as the "Purchase Price". A
portion of the Cash Purchase Price in the amount of $2,491,280 shall be deemed
to have been paid in cash upon the payment at the Closing of the outstanding
debt owed by Pipeline Induction Heat Limited to Weatherford U.K. Ltd. in a like
amount (the "PIH Debt").
(b) At the Closing, the Buyer shall pay to the Seller by wire
transfer of same day funds $32,750,150 and shall cause the PIH Debt to be paid
in full in accordance with the share purchase agreement between Weatherford
Eurasia Ltd. and PIH Holding's Limited referred to in SECTION 5.8 hereof (the
"Closing Payment").
1.5 PURCHASE PRICE ADJUSTMENT.
(a) Within 60 calendar days after the Closing Date, the Buyer shall
prepare and deliver to the Seller a statement reflecting the Net Cash Purchase
Price and the calculation thereof (the "Final Statement"). The Buyer shall
provide the Seller with access to copies of all work papers and other relevant
documents to verify the entries contained in the Final Statement. The Seller
shall
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have a period of 15 calendar days after delivery to it of the Final Statement to
review it and make any objections the Seller may have in writing to the Buyer.
If written objections to the Final Statement are delivered to the Buyer within
such 15 day period, then the Buyer and the Seller shall attempt to resolve the
matter or matters in dispute. If no written objections are made within the time
period provided above, the Buyer shall pay to the Seller in same day funds the
aggregate amount, if any, by which the Net Cash Purchase Price exceeds the
Closing Payment and the Seller shall pay to the Buyer in same day funds the
aggregate amount, if any, by which the Closing Payment exceeds the Net Cash
Purchase Price, in each case within five calendar days after the end of such 15
day period.
(b) If disputes with respect to the Final Statement cannot be
resolved by the Buyer and the Seller within 15 calendar days after the delivery
of the objections to the Final Statement, then the specific matters in dispute
shall be submitted to Arthur Andersen LLP or such other independent accounting
firm as may be approved by the Buyer and the Seller, which firm shall render its
opinion as to such matters within 30 days after the specific matters in dispute
are submitted to such firm. Based on such opinion, such independent accounting
firm will then send to the Buyer and the Seller its determination on the
specific matters in dispute, which determination shall be final and binding on
the parties hereto. Within five calendar days after delivery of such opinion to
the Buyer and the Seller, the Buyer shall pay to the Seller the aggregate
amount, if any, by which the Net Cash Purchase Price exceeds the Closing Payment
and the Seller shall pay to the Buyer the aggregate amount, if any, by which the
Closing Payment exceeds the Net Cash Purchase Price. The fees and other costs
charged by such independent accounting firm shall be borne by the Buyer and the
Seller equally.
1.6 LIABILITIES NOT ASSUMED BY THE BUYER. Except for the Assumed
Liabilities, the Seller shall pay and discharge in due course all of its
liabilities, debts and obligations relating to the Transferred Assets or the
Business, whether known or unknown, now existing or hereafter arising,
contingent or liquidated, including, without limitation, any Tax liabilities of
the Seller or the Affiliated Companies pertaining to the Transferred Assets or
the Business for periods prior to the Closing Date, any Debt Obligations and the
liabilities and obligations set forth in clauses (a) through (g) below
(collectively, the "Retained Liabilities"), and, subject to SECTION 7.5 hereof,
the Buyer shall not assume, or in any way be liable or responsible for, any of
such Retained Liabilities. Without limiting the generality of the foregoing, the
Retained Liabilities shall include the following:
(a) any liability or obligation of the Seller and the Affiliated
Companies arising out of or in connection with the negotiation and preparation
of this Agreement and the consummation and performance of the transactions
contemplated hereby, whether or not such transactions are consummated;
(b) any liability or obligation for any and all Taxes of, or
pertaining or attributable to, (i) the Seller and the Affiliated Companies for
any period that ends on or before the Closing Date, or (ii) the Business and/or
the Transferred Assets for any period or portion thereof that ends on or before
the Closing Date;
(c) any liability (other than with respect to the Assumed
Liabilities) to which any of the parties may become subject as a result of the
fact that the transactions contemplated by this Agreement are being effected
without compliance with the bulk sales provisions of the Uniform Commercial Code
as in effect in any state or any similar statute as enacted in any jurisdiction;
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(d) any liability or obligation of the Seller and the Affiliated
Companies relating to the Excluded Assets described in SECTION 1.2;
(e) any liability or obligation of the Seller and the Affiliated
Companies relating to the transportation, storage or disposal of Hazardous
Materials generated by the Seller and the Affiliated Companies, or used, in
connection with the Transferred Assets or the properties, operations or
activities of the Business prior to the Closing Date;
(f) any liability or obligation of the Seller and the Affiliated
Companies resulting from or relating to the employment relationship between the
Seller and the Affiliated Companies and the Excluded Employees; and
(g) all other liabilities and obligations arising prior to the
Closing and related to the conduct or operation of the Transferred Assets or the
Business on or prior to the Closing Date, including, but not limited to, the
Pre-Closing Obligations (other than with respect to the Assumed Liabilities).
Notwithstanding the foregoing, all Warranty Obligations and Allseas Obligations
that in the aggregate do not exceed the Ceiling Amount and all liabilities and
obligations of the Seller and the Affiliated Companies with respect to the
Assumed Litigation shall not be deemed to be Retained Liabilities. Liabilities
and obligations for the Warranty Obligations and the Allseas Obligations that in
the aggregate are in excess of the Ceiling Amount shall be deemed to be Retained
Liabilities.
1.7 PRORATIONS OF EXPENSES AND CERTAIN PROPERLY TAXES.
(a) The Seller warrants that the Transferred Assets are not, and on
the Closing Date will not be, subject to or liable for any special assessments
or similar types of impositions. Any general property Tax assessed against or
pertaining to the Transferred Assets for the taxable period that includes the
Closing Date shall be prorated between the Buyer and the Seller as of the
Closing Date. In the event the amount of any such general property Tax cannot be
ascertained as of the Closing Date, proration shall be made on the basis of the
preceding year, the Buyer shall receive a credit against the Cash Purchase Price
on the Closing Date for the Seller's pro rata portion of such general property
Taxes, and to the extent that such proration may be inaccurate the Seller and
the Buyer agree to make such payment to the other after the tax statements have
been received as is necessary to allocate such general property Tax properly
between the Seller and the Buyer as of the Closing Date.
(b) Except as otherwise provided in this Agreement, the Seller and
the Buyer agree that amounts payable with respect to utility charges and other
items of expense attributable to the conduct of the Business shall be prorated
as of the Closing Date to the extent the charges and expenses cannot be
identified as to the party that received the benefits to which such charges and
expenses relate. To the extent such amounts are estimated on the Closing Date
and such prorations are inaccurate, the Seller and the Buyer agree to make such
payment to the other after such amounts are correctly computed as is necessary
to allocate such charges properly between the Seller and the Buyer as of the
Closing Date.
1.8 TRANSFER TAXES, RECORDING FEES.
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(a) Notwithstanding any provision of law imposing the burden of
Transfer Taxes (as hereinafter defined) on the Seller or the Buyer, as the case
may be, any sales, use and other transfer Taxes imposed in connection with the
consummation of the transactions contemplated by this Agreement (collectively,
"Transfer Taxes") shall be borne equally by the Buyer and the Seller. The Seller
and the Buyer agree to cooperate in good faith with each other, and to use their
commercially reasonable efforts, to minimize Transfer Taxes. Without limiting
the generality of the preceding sentence, (i) the appropriate party hereto shall
promptly and properly complete, execute and deliver to the other party resale,
exemption and/or similar certificates or other documentation necessary or
appropriate under any applicable law to claim and/or evidence that all or any
portion of the sale or transfer of the Transferred Assets under this Agreement
is exempt from or otherwise not subject to Transfer Taxes imposed under such
applicable law and (ii) each of the parties hereto shall consult and cooperate
in good faith with each other on a timely basis in order to effectively handle
and contest any audit, examination, investigation or administrative, court or
other proceeding relating to Transfer Taxes.
(b) The Buyer shall pay any and all recording, filing or other fees
relating to the conveyance or transfer of the Transferred Assets from the Seller
to the Buyer.
(c) The Buyer shall deliver to the Seller on the Closing Date a
certificate certifying that the Inventories are being purchased for resale to
the extent stated therein.
(d) If a party hereto shall fail to pay on a timely basis any amount
for which such party is responsible under this SECTION 1.8, the other party may
pay such amount to the appropriate Governmental Entity or Governmental Entities
or other appropriate third party or parties, and the party responsible for
payment of such amount shall promptly reimburse the other party for such amount
so paid.
(e) The respective rights and obligations of the parties hereto
under this Section 1.8 shall survive the Closing without limitation.
1.9 ALLOCATION OF PURCHASE PRICE. The Purchase Price shall be allocated
among the Transferred Assets by the Buyer and the Seller within 60 days
following the Closing Date subject to the following:
(a) such allocation of the Purchase Price will be reflected in Form
8594 that will be filed by the Buyer and the Seller in accordance with Section
1060 of the Code, with such adjustments as may be necessary pursuant to Section
1.5; and
(b) The Buyer and the Seller agree to treat and report in filings
under the Code (and, if necessary, to cause each of their respective Affiliates
to so treat and report) the transactions contemplates by this Agreement in a
manner consistent with one another.
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ARTICLE 2
REPRESENTATIONS AND WARRANTIES
OF THE SELLER AND WEATHERFORD
Except as otherwise set forth in the Disclosure Schedule, the Seller and
Weatherford represent and warrant to the Buyer as follows:
2.1 CORPORATE MATTERS.
(a) The Seller and Weatherford are corporations duly incorporated,
validly existing and in good standing under the laws of their respective states
of incorporation. The Seller has all requisite power and authority under all
applicable laws, ordinances and orders of public authorities to own, operate and
lease its properties and assets and to carry on, its business in the manner
currently conducted, except where the failure to be so qualified would not have
a Material Adverse Effect. Each of the Seller and Weatherford has all requisite
corporate power and authority to enter into this Agreement and to perform its
obligations under this Agreement.
(b) True, correct and complete copies of the Certificate of
Incorporation and the Bylaws of the Seller have been provided by the Seller to
the Buyer, and such Certificate of Incorporation and Bylaws are in full force
and effect.
(c) Set forth in SECTION 2.1(C) of the Disclosure Schedule is a list
of assumed names under which the Seller operates the Business.
2.2 VALIDITY OF AGREEMENT AND CONFLICT WITH OTHER INSTRUMENTS.
(a) This Agreement, and all transactions contemplated hereby, have
been duly authorized and approved by all necessary corporate action on the part
of the Seller and Weatherford. No further corporate action is necessary on the
part of the Seller or Weatherford to execute and deliver this Agreement or to
consummate the transactions contemplated hereby. This Agreement has been duly
executed and delivered by the Seller and Weatherford and is a legal, valid and
binding obligation of the Seller and Weatherford enforceable against the Seller
and Weatherford in accordance with its terms, except as enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
similar laws from time to time in effect that affect creditors' rights generally
and by legal and equitable limitations on the availability of specific remedies.
(b) The execution, delivery and performance of this Agreement and
the other agreements and documents to be delivered by the Seller and Weatherford
to the Buyer, the consummation of the transactions contemplated hereby or
thereby, and the compliance with the provisions hereof or thereof, by the Seller
and Weatherford will not, with or without the passage of time or the giving of
notice or both:
(i) conflict with, constitute a breach, violation or
termination of any provision of, or give rise to any
right of termination, cancellation or acceleration, or
loss of any right or benefit or both, under, any of the
Contracts and Other Agreements relating to the Business,
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(ii) conflict with or violate the Certificate of
Incorporation or Bylaws of the Seller or Weatherford,
(iii) result in acceleration or increase of any amounts due
with respect to the Trade Payables, Accrued Liabilities
or Notes Payable,
(iv) result in the creation or imposition of any Lien on any
of the Transferred Assets, or
(v) violate any law, statute, ordinance, regulation,
judgment, writ, injunction, rule, decree, order or any
other restriction of any kind or character applicable to
the Seller or Weatherford or any of their respective
properties or assets,
other than conflicts, breaches, violations, terminations or conflicts that would
not materially and adversely affect the ability of the Seller or Weatherford to
consummate the transactions provided for in this Agreement.
2.3 APPROVALS, LICENSES AND AUTHORIZATIONS.
(a) No order, license, consent, waiver, authorization or approval
of, or exemption by, or the giving of notice to, or the registration with, or
the taking of any other action in respect of, any Person not a party to this
Agreement, including any Governmental Entity, and no filing, recording,
publication or registration in any public office or any other place is now, or
under existing law in the future will be, necessary on behalf of the Seller or
Weatherford to authorize its execution, delivery and performance of this
Agreement or any other agreement contemplated hereby to be executed and
delivered by the Seller or Weatherford and the consummation of the transactions
contemplated hereby or thereby (including, but not limited to, assignment of the
Transferred Assets), or to effect the legality, validity, binding effect or
enforceability thereof.
(b) All material licenses, permits, concessions, warrants,
franchises and other governmental authorizations and approvals of all
Governmental Entities required or necessary for the Seller to carry on its
business in the places and in the manner currently conducted have been duly
obtained and are in full force and effect. No material violations are in
existence or have been recorded with respect to such licenses, permits or other
authorizations and no proceeding is pending or, to the best knowledge of the
Seller, threatened with respect to the revocation or limitation of any of such
licenses, permits or other authorizations. The Seller has complied with all
laws, rules, regulations and orders applicable to the Business, and all rules,
regulations and orders respecting the provision of services by the Seller,
except for violations that would not have a Material Adverse Effect. No
proceedings are pending or, to the knowledge of the Seller, threatened with
respect to any violation of any Applicable Law relating to the Transferred
Assets or the Business, except for violations that would not have a Material
Adverse Effect.
2.4 TITLE TO AND CONDITION OF PROPERTIES.
(a) The Seller owns, and has good and indefeasible title to, each
parcel of Real Property, free and clear of any Liens, other than Permitted Liens
and Liens and imperfections of title that would not have a Material Adverse
Effect. No parcel of Real Property is subject to any
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decree of any Governmental Entity nor is being condemned, expropriated or
otherwise taken by any public authority with or without payment of compensation
therefor, nor, to the knowledge of the Seller, has any such condemnation,
expropriation or taking been proposed.
(b) The Seller is the lessee or has succeeded to the rights of the
lessee under all of the Leasehold Interests and owns the Leasehold Interests
free and clear of all Liens, except for Permitted Liens. The Seller either owns
the improvements and fixtures located on each Leasehold Interest or validly
occupies and uses such improvements and fixtures in accordance with the terms of
the Leasehold Interest, in each case free and clear of Liens, except for
Permitted Liens. A true and complete copy or written description of the lease
governing each Leasehold Interest, as amended to date and including any letter
agreements relating thereto, has been furnished by the Seller to the Buyer.
(c) All Equipment (excluding Equipment that did not have a cost
basis of $25,000 or more at their respective dates of acquisition by the Seller)
is set forth in SECTION 1.1(A)(I) of the Disclosure Schedule. The Seller has
good and marketable title to all Equipment free and clear of all Liens.
(d) All Inventories at September 30, 1996 are set forth in SECTION
1.1(A)(II) of the Disclosure Schedule. The Seller has good and marketable title
to all Inventories free and clear of all Liens.
(e) The Accounts Receivable are owned by the Seller free and clear
of all Liens.
(f) The Seller owns or possesses licenses or other rights to use all
rights to all Proprietary Rights necessary for the conduct of the Business as
currently conducted. On the Closing Date, the Seller and Weatherford will
transfer or cause to be transferred all Proprietary Rights necessary for the
conduct of the Business as currently conducted. Set forth in SECTION 2.4(F) of
the Disclosure Schedule is a complete and accurate list of all patents,
trademarks and licenses the Seller owns or possesses or otherwise has rights to
use and all patents, trademarks and licenses pertaining to the Business that the
Seller owns or possesses or otherwise has rights to use. No licenses,
sublicenses, covenants or agreements have been granted or entered into by the
Seller in respect of the items listed in SECTION 2.4(F) of the Disclosure
Schedule except as noted thereon. The Seller has not received any notice of
infringement, misappropriation or conflict from any other Person with respect to
such Proprietary Rights and, to the Seller's knowledge, the conduct of the
Business has not infringed, misappropriated or otherwise conflicted with any
Proprietary Rights of any such Person. All of the Proprietary Rights that are
owned by the Seller are owned free and clear of all Liens and all such
Proprietary Rights will be transferred to the Buyer free and clear of all Liens.
All Proprietary Rights that are licensed by the Seller from third parties are
licensed pursuant to valid and existing license agreements and such interests
are not subject to any Liens other than those under the applicable license
agreements. The consummation of the transactions contemplated by this Agreement
will not result in the loss of any Proprietary Rights and will not conflict
with, constitute a breach, violation or termination of, any agreement or
understanding, whether written or otherwise, relating to any Proprietary Rights
necessary for the conduct of the Business as currently conducted.
2.5 CONTRACTS AND COMMITMENTS.
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(a) None of the Transferred Assets is subject to, and, except for
the Retained Liabilities, the Seller is not a party to or bound by:
(i) any agreement, contract or commitment requiring the
expenditure or series of related expenditures of funds
or the acquisition or disposition of assets, in either
case involving amounts or values in excess of $50,000
(other than purchase orders in the ordinary course of
business for goods necessary for the Seller to complete
then existing contracts or purchase orders);
(ii) any loan or advance to, or investment in, any Person or
any agreement, contract, Commitment or understanding
relating to the making of any such loan, advance or
investment;
(iii) any Debt Obligations;
(iv) any partnership, joint venture or profit sharing
agreement or any management service, employment, bonus,
incentive, consulting or other similar type contract or
agreement;
(v) any broker, sales, distributorship, dealer,
manufacturer's representative, agency or similar
agreement relating to the products sold or services
provided by the Seller;
(vi) any maintenance, service or repair agreement requiring
the annual expenditure of funds in excess of $10,000; or
(vii) any license, royalty or similar agreement.
(b) The Seller is not in breach of any provision of, or in default
(nor does the Seller have knowledge of any event or circumstance that with
notice, or lapse of time or both, would constitute an event of default) under
the terms of any of the Contracts and Other Agreements that constitute a part of
the Transferred Assets, except for breaches or defaults that would not have a
Material Adverse Effect. All of the Contracts and Other Agreements that
constitute a part of the Transferred Assets are in full force and effect. The
Seller is not aware of any pending or threatened disputes with respect to any of
the Contracts and Other Agreements.
(c) Except as set forth in the Disclosure Schedule, the
enforceability of the Contracts and Other Agreements that constitute a part of
the Transferred Assets will not be affected in any manner by the execution and
delivery of this Agreement or the consummation of the transactions contemplated
hereby.
2.6 NO LITIGATION. There is no action, suit, claim, investigation or
legal, administrative, arbitration or other proceeding, or governmental
investigation or examination, or any change in any zoning or building ordinance
pending or, to the Seller's knowledge, threatened against or affecting the
Seller, the Business or any of the Transferred Assets, at law or in equity,
before or by any Governmental Entity.
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2.7 FINANCIAL STATEMENTS. The Seller has delivered to the Buyer accurate
and complete copies of (i) the balance sheet of the Business as of December 31,
1996, 1995 and 1994, and the related statements of income and cash flows for
each of the years then ended, and the notes and schedules thereto (the "Annual
Financial Statements"), and (ii) the balance sheet of the Business as of January
31, 1997, and the related statements of income and cash flows ` for the
one-month period then ended (the "Stub-Period Financial Statements")
(collectively, the "Financial Statements"). The Financial Statements (i) have
been prepared from the books and records of the Seller in conformity with United
States generally accepted accounting principles applied on a basis consistent
with preceding years throughout the periods involved, except, in the case of the
Stub-Period Financial Statements, for the exclusion of notes thereto and subject
to normal year-end adjustments and accruals that would not have a Material
Adverse Effect and any other adjustments and accruals described therein, and
(ii) accurately, completely and fairly present the financial position of the
Business as of the respective dates thereof and its results of operations and
cash flows for the periods then ended.
2.8 BOOKS AND RECORDS. To the knowledge of the Seller, all the books and
records of the Seller relating to the Transferred Assets or the Business,
including all personnel files, employee data and other materials relating to
employees of the Business, are substantially complete and correct, have been
maintained in accordance with good business practice and all Applicable Laws,
and, in the case of the books of account, have been prepared and maintained in
accordance with generally accepted accounting principles consistently applied.
Such books and records accurately and fairly reflect, in reasonable detail, all
material transactions (when taken together as a whole), revenues, expenses,
assets and liabilities of the Seller with respect to the Business.
2.9 NO ADVERSE CHANGES OR EVENTS. Since January 31, 1997, the Business has
been consistently operated only in the ordinary course, and there has not been:
(a) any adverse charge in the financial condition, assets,
liabilities (contingent or otherwise), results of operations or business of the
Seller except for such changes that in the aggregate have not had a Material
Adverse Effect;
(b) any damage, destruction or loss, whether or not covered by
insurance, materially adversely affecting the Transferred Assets or the
Business;
(c) any increase in the compensation or rate of compensation or
commissions or bonuses payable or to become payable by the Seller to any
employee of the Seller that is not consistent with past practice, any payment or
accrual of, or commitment with respect to, any bonus plan or severance
arrangement that is not consistent with past practice or any change or
modification to any severance arrangement;
(d) any sale, assignment, transfer or other disposition or lapse of
any Proprietary Rights;
(e) any sale, transfer or other disposition of any properties or
assets, real, personal or mixed, tangible or intangible, material to the
Business (other than sales of Inventory in the ordinary course of business);
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(f) any change in the Seller's method of accounting for financial,
Tax or other purposes; or
(g) any transactions giving rise to special or nonrecurring income
reflected in the Financial Statements or any write-up or revaluation that
increased the book value of any assets reflected in the Financial Statements.
2.10 CUSTOMERS AND SUPPLIES. Set forth in SECTION 2.10 of the Disclosure
Schedule is a list of (i) the names of, and the dollar volume and percentage of
products or services purchased by the Seller from, each of its largest suppliers
of products and services with respect to the Business (in terms of purchases)
during each of the fiscal years ended December 31, 1993, 1194 and 1995, and (ii)
the dollar volume and percentage of sales to each of the Seller's 15 largest
customers of products and services with respect to the Business (in terms of
sales) during each of such periods. The Seller is not past due (in accordance
with the stated invoice terms) with respect to any amounts owed to any of the
suppliers listed in SECTION 2.10 of the Disclosure Schedule.
2.11 INSURANCE. The Seller maintains in full force and effect policies of
insurance with respect to the Transferred Assets and the Business against
casualties and contingencies of such types and in such amounts as are customary
for corporations of similar size engaged in similar lines of business. All
premiums due and payable with respect to such policies have been timely paid. No
notice of cancellation of any such policy has been received by the Seller.
During the past three years, no application by the Seller for insurance with
respect to any of the Transferred Assets or operations of the Business has been
denied for any reason.
2.12 FINANCIAL REQUIREMENTS. Set forth in SECTION 2.12 of the Disclosure
Schedule is a list and summary description of all bonds, deposits, financial
assurance requirements and insurance coverage submitted to Governmental Entities
for the continued ownership and operation of the Transferred Assets and the
operation of the Business.
2.13 ENVIRONMENTAL MATTERS. The sole representations of the Seller and
Weatherford with respect to environmental matters are set forth in this SECTION
2.13. To the extent representations in other sections of this Agreement also
could apply to environmental matters, including, but not limited to, matters
related to, arising under or concerning Environmental Laws, such representations
shall be construed to exclude all environmental matters and to apply to matters
other than environmental matters. Except as would not have a Material Adverse
Effect:
(a) Neither the Seller nor, to the knowledge of the Seller, any
prior owner or operator of the Business or the Transferred Assets, nor, to the
knowledge of the Seller, any carrier transporting Hazardous Materials for the
Seller, has caused or allowed the generation, use, transportation, treatment,
storage or disposal of Hazardous Materials at any site or facility owned, leased
or operated by the Seller or used in the Business or, to the knowledge of the
Seller, at any offsite facilities, in each case except in accordance with all
applicable Environmental Laws.
(b) The Seller does not own or lease any real property, improvements
or related assets that form a part of the Transferred Assets or the Business and
that have been subject to the release of any Hazardous Materials.
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(c) The Seller has secured all Environmental Permits necessary to
the conduct of the Business and the Seller is in compliance with such permits.
(d) The Seller has not received written notice of any proceedings,
claims or lawsuits related to or arising under any Environmental Law and related
to the Business or the Transferred Assets.
(e) The Seller is not current operating or required to be operating
the Business under any compliance order, schedule, decree or agreement, any
consent decree, order or agreement, or corrective action decree, order or
agreement issued or entered into under any Environmental Law.
(f) The Business is being operated in substantial compliance with
applicable limitations, restrictions and requirements established under
Environmental Laws.
(g) All written environmental studies, reports and analyses relating
to the Transferred Assets that are in the possession of the Seller or
Weatherford have been made available to the Buyer or, if not in the possession
of the Seller or Weatherford but are known to the Seller or Weatherford, have
been identified to the Buyer.
2.14 CONDITION OF ASSETS. Except as expressly provided herein, the
Inventory, property and Equipment included in the Transferred Assets are being
sold, transferred and conveyed on an "AS IS, WHERE IS" condition, and the Seller
makes NO REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, AS TO THEIR
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR AS TO THEIR CONDITION.
2.15 WARRANTIES AND PRODUCT LIABILITY. Except for (i) warranties implied
by law and (ii) warranties disclosed in SECTION 2.15 of the Disclosure Schedule,
the Seller has not given or made any warranties in connection with the sale or
rental of goods or services on or prior to the Closing Date, including, without
limitation, warranties covering the customer's consequential damages. The Seller
is not aware of any state of facts or the occurrence of any event forming the
basis of any present claim against the Seller with respect to warranties
relating to products manufactured, sold or distributed by the Seller or services
performed by or on behalf of the Seller on or prior to the Closing Date except
any claim that would not individually or in the aggregate exceed $300,000.
2.16 EMPLOYEE MATTERS.
(a) There are no collective bargaining or other labor union
agreements to which the Seller is a party or by which it is bound. To the
knowledge of the Seller, the Seller has not encountered any labor union
organizing activity or had any actual or threatened employee strikes, world
stoppages, slowdowns or walkouts.
(b) The Seller does not contribute to or have an obligation to
contribute to, and has not at any time within six years prior to the Closing
Date contributed to or had an obligation to contribute to, a multi-employer plan
within the meaning of SECTION 3(37) of ERISA.
(c) With respect to any employee benefit plan, within the meaning of
SECTION 3(3) of ERISA, which is sponsored, maintained or contributed to, or has
been sponsored, maintained or contributed to within six years prior to the
Closing Date, by the Seller or any
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corporation, trade, business or entity under common control with the Seller,
within the meaning of Section 414(b), (c) or (m) of the Code or Section 4001 of
ERISA ("Commonly Controlled Entity"), (i) no withdrawal liability, within the
meaning of Section 4201 of ERISA, has been incurred, which withdrawal liability
has not been satisfied, (ii) no liability to the Pension Benefit Guaranty
Corporation has been incurred by the Seller or any Commonly Controlled Entity,
which liability has not been satisfied, (iii) no accumulated funding deficiency,
whether waived or not waived, within the meaning of Section 302 of ERISA. or
Section 412 of the Code has been incurred and (iv) all contributions, including
installments, to such plan required by Section 302 of ERISA and Section 412 of
the Code have been timely made.
2.17 FINDER'S FEES. Except for fees payable to Merrill Lynch & Co. and
Simmons & Company International that are payable by the Seller, neither the
Seller nor any Affiliate of the Seller has employed or retained any investment
banker, broker, agent, finder or other party, or incurred any obligation for
brokerage fees, finder's fees or commissions, with respect to the sale by the
Seller of any of the Transferred Assets or with respect to the transactions
contemplated by this Agreement, or otherwise dealt with anyone purporting to act
in the capacity of a finder or broker with respect thereto whereby any party
hereto may be obligated to pay such a fee or commission. The Seller and
Weatherford agree to indemnify and hold the Buyer and its Affiliates harmless
from and against any and all claims liabilities or obligations with respect to
all fees, commissions or expenses asserted by any Person on the basis of any
act, statement, agreement or commitment alleged to have been made by the Seller,
Weatherford or any Affiliate of Weatherford with respect to any such fee,
commission or expense.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE BUYER
The Buyer represents and warrants to the Seller as follows:
3.1 CORPORATE MATTERS. The Buyer is a corporation duly incorporated,
validly existing and in good standing under the laws of the State of Delaware.
The Buyer has all requisite corporate power and authority to enter into this
Agreement and to perform its obligations under this Agreement. This Agreement,
and all transactions contemplated hereby, have been duly authorized and approved
by all necessary corporate action on the part of the Buyer. No further corporate
action is necessary on the part of the Buyer to execute and deliver this
Agreement or to consummate the transactions contemplated hereby. This Agreement
has been duly executed and delivered by the Buyer and is a legal, valid and
binding obligation of the Buyer, enforceable against it in accordance with its
terms, except as enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws from time to time in
effect that effect creditors' rights generally and by legal and equitable
limitations on the availability of specific remedies. The execution, delivery
and performance of this Agreement and the consummation of the transactions
contemplated hereby, and the compliance with the provisions hereof, by the Buyer
will not violate any provision of, or constitute a default under, any contract
or other agreement to which the Buyer is a party or by which it is bound, or
conflict with its Certificate of Incorporation or Bylaws, other than violations,
defaults or conflicts that would not materially and adversely affect the ability
of the Buyer to consummate the transactions provided for in this Agreement.
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3.2 APPROVALS AND AUTHORIZATIONS. No order, license, consent, waiver,
authorization or approval of, or exemption by, or the giving of notice to, or
the registration with, or the taking of any other action in respect of, any
Person not a party to this Agreement, including any Governmental Entity, and no
filing, recording, publication or registration in any public office or any other
place is now, or under existing law in the future will be, necessary on behalf
of the Buyer to authorize its execution, delivery and performance of this
Agreement or any other agreement contemplated hereby to be executed and
delivered by the Buyer and the consummation of the transactions contemplated
hereby or thereby (including, but not limited to, assignment of the Transferred
Assets), or to effect the legality, validity, binding effect or enforceability
thereof.
3.3 FINDER'S FEES. Neither the Buyer nor any Affiliate of the Buyer has
employed or retained any investment banker, broker, agent, finder or other
party, or incurred any obligation for brokerage fees, finder's fees or
commissions, with respect to the transactions contemplated by this Agreement, or
otherwise dealt with anyone purporting to act in the capacity of a finder or
broker with respect thereto whereby any party hereto may be obligated to pay
such a fee or a commission. The Buyer agrees to indemnify and hold the Seller
and its Affiliates harmless from and against any and all claims, liabilities or
obligations with respect to all fees, commissions or expenses asserted by any
Person on the basis of any act, statement, agreement or commitment alleged to
have been made by the Buyer or any Affiliate of the Buyer with respect to any
such fee, commission or expense.
3.4 HART-SCOTT-RODINO MATTERS.
(a) The Buyer was incorporated on December 20, 1996, and CRC
Holdings Corp., a Delaware corporation (the "Holding Company"), was incorporated
on April 30, 1997. Neither the Buyer nor the Holding Company has any operating
history or financial statements.
(b) The Holding Company owns 100% of the voting capital stock of the
Buyer.
(c) No Person owns, or will own, directly or indirectly, prior to
the Closing Date, 50% or more of the voting capital stock of the Holding
Company.
(d) As of the Closing Date, the Holding Company's and the Buyer's
consolidated assets will consist solely of cash and notes receivable in an
aggregate amount that will not exceed by $10 million or more the sum of the
Purchase Price and the incidental expenses incurred by the Buyer in connection
with the transactions contemplated herein.
ARTICLE 4
ADDITIONAL AGREEMENTS
4.1 DELIVERY OF CORPORATE DOCUMENTS, RECORD RETENTION, FINANCIAL
STATEMENTS.
(a) The Seller shall deliver to the Buyer all Documents and Other
Papers relating to the Transferred Assets, the Assumed Liabilities and the
current and proposed operations of the Business, including, without limitation,
all files relating to the Accounts Receivable and the Trade Payables, computer
disks reflecting any books or records, documents or other papers, or other
information or data relating to the operation of the Business or the Transferred
Assets stored on any electronic media, including computers. The Seller, however,
shall be entitled to retain the historical
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books and records relating to the Business to the extent such books and records
are not necessary for the ongoing operations of the Business by the Buyer.
(b) In the event and for so long as any party is contesting or
defending against any action, suit, proceeding, hearing, investigation, charge,
complaint, claim or demand asserted by a third party (including any Governmental
Entity) in connection with (i) any transaction contemplated by this Agreement or
(ii) any fact, situation, circumstance, status, condition, activity, practice,
plan, occurrence, event, incident, action, failure to act or transaction on or
prior to the Closing Date involving the Business or the Transferred Assets , the
other party will to the extent reasonably practicable cooperate with the
contesting or defending party and its counsel in the contest or defense, and
provide such testimony and access to its books and records as shall be necessary
in connection with the contest or defense, all at the sole cost and expense of
the contesting or defending party (except to the extent the contesting or
defending party is entitled to indemnification therefor under ARTICLE 7 hereof);
provided, however, that nothing herein requires any party to retain any books
and records other than in the ordinary course of business; provided further, any
party hereto, before destroying any historical books and records that relate in
whole or in part to the Business or the Transferred Assets, shall give such
other party reasonable notice of its intention to destroy such books and records
and an opportunity to make copies thereof at the sole expense of the party
destroying such copies. In addition, the Buyer agrees to provide Weatherford
with reasonable access to any books and records included in the Transferred
Assets as may be necessary for the preparation of any Tax returns or financial
statements. Notwithstanding the foregoing, information as to which the
contesting or defending party may reasonably assert would waive a privilege need
not be disclosed.
(c) If the Buyer is required under applicable United States federal
securities laws to include historical accounting information for periods prior
to the Closing relating to the Business in any of the Buyer's filings with the
Securities and Exchange Commission, then the Seller shall cooperate with and
provide the Buyer reasonable access, during regular business hours and upon
reasonable advance notice, to the Seller's accounting records relating to the
Business prior to the Closing and shall cause its outside auditors to cooperate,
at the Buyer's expense, with the Buyer in the preparation of such historical
financial statements relating to the Business prior to the Closing as may be
required under such securities laws to be included in such filings.
4.2 FURTHER ASSURANCES. The Seller shall execute, acknowledge and deliver
or cause to be executed, acknowledged and delivered to the Buyer such bills of
sale, assignments (including, but not limited to, assignments of leases) and
other instruments of transfer, assignment and conveyance, in form and substance
satisfactory to counsel for the Buyer, as shall be necessary to vest in the
Buyer all the right, title and interest in and to the Transferred Assets free
and clear of all Liens (including the release of all Liens of record) and shall
use its best efforts to cause to be taken such other action as the Buyer
reasonably may require to more effectively implement and carry into effect the
transactions contemplated by this Agreement.
4.3 EMPLOYEE MATTERS.
(a) The Buyer agrees to offer employment to all of the employees
(other than the Excluded Employees) of the Seller or Affiliates of the Seller
who are engaged in the Business on terms substantially similar to those under
which such employees are currently engaged, provided that the Buyer need only
offer the Seller's employees those benefits that are provided by the Buyer to
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similarly situated employees. The Buyer shall not offer employment to the
employees listed in a letter from the Buyer to the Seller to be delivered to the
Seller on or prior to the seventh day preceding the Closing Date (the "Excluded
Employees") and shall not be responsible for any severance benefits or other
liabilities in respect of the Excluded Employees; provided, however, that the
number of Excluded Employees shall not exceed six. Any employees of the Seller
or Affiliates of the Seller who are engaged in the Business that the Buyer or
one of its Affiliates in fact employs immediately after the Closing Date shall
hereinafter be referred to as the "Transferred Employees". Any such employees
(other than Non-Offered Employees) who are not employed by the Buyer or one of
its Affiliates immediately after the Closing Date shall hereinafter be referred
to as the "Terminated Employees". In determining eligibility for and entitlement
to vacation and other normal benefits (excluding stock-based plans and incentive
programs) based on length of service by Transferred Employees under the Buyer's
normal policies, service with the Seller or an Affiliate of the Seller shall be
considered by the Buyer and its Affiliates as service with the Buyer and its
Affiliates. The Buyer agrees to reimburse the Seller or Weatherford for the
severance payments due any Non-Offered Employees that are made in accordance
with the Seller's existing severance policy (as described in SECTION 4.3(B) of
the Disclosure Schedule, including, as applicable, the Weatherford Enterra
Special Severance Payment Plan) and for any medical or other obligations of
Weatherford or its Affiliates under the Consolidated Omnibus Budget
Reconciliation Act (COBRA) and other obligations of Weatherford or its
Affiliates arising from the terminated employment of the Non-Offered Employees.
The Buyer further agrees to indemnify the Seller, Weatherford and their
Affiliate from and against any claims or Damages arising from or relating to the
Non-Offered Employees not being offered employment by the Buyer and its
Affiliates, with such claims and Damages being considered Assumed Liabilities.
The term "Non-Offered Employee", as used in this SECTION 4.3(A), means any
employee (other than an Excluded Employee) of the Seller or an Affiliate of the
Seller who is engaged in the Business to whom the Buyer does not offer
employment on terms substantially similar to those under which such employee is
currently engaged.
SECTION 4.3(A) of the Disclosure Schedule sets forth a complete list
of the names, social security numbers and dates of employment of each employee
of the Business as of September 30, 1996 (other than the Excluded Employees),
together with a description of the position of each such employee and the total
amounts of salary, bonuses and other compensation paid or payable by the Seller
to each such employee for the fiscal year ending December 3l, 1996 and the
fiscal year ended December 31, 1995.
(b) The Seller shall be responsible for the severance obligations,
if any, with respect to any Terminated Employees, the terms of which severance
obligations are as described in SECTION 4.3(B) of the Disclosure Schedule. The
Buyer agrees that if the employment of any of the Transferred Employees with the
Buyer or its Affiliates is terminated by the Buyer within six months following
the Closing Date other than for cause, the Buyer will provide to such terminated
Transferred Employee the severance that such Transferred Employee would have
received had the Transferred Employee been entitled to receive severance from
the Seller in accordance with the severance policy (including, as applicable,
the Weatherford Enterra Special Severance Payment Plan) of the Seller previously
provided to the Buyer, without giving effect to any provisions that eliminate
the severance payment obligations as a result of a purchaser of the Business
offering the Transferred Employee employment.
(c) In determining eligibility for and the amount of severance
benefits the Transferred Employees may become entitled to upon termination of
employment with the Buyer or
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one of its Affiliates after the Closing Date under the Buyer's normal severance
policies, service with the Seller or an Affiliate of the Seller shall be
considered as service with the Buyer and its Affiliates.
(d) The parties hereto do not intend to create any third-party
beneficiary rights respecting any employee of the Seller or an Affiliate of the
Seller as a result of the provisions hereof and specifically hereby negate any
such intention.
(e) The Buyer agrees to provide to all Transferred Employees the
opportunity to participate in group health and other benefit plans maintained by
it or its Affiliates for similarly situated employees. The Buyer agrees to use
its best efforts to obtain a waiver of any pre-existing condition limitation for
all Transferred Employees under the group health plan maintained by it or its
Affiliates; provided, however, that if the Buyer is unable to obtain such waiver
at a commercially reasonable cost, the Buyer and the Seller agree to split
equally the costs incurred by either the Buyer or the Seller with regard to
claims for pre-existing conditions.
(f) The Buyer shall be fully responsible for all liabilities related
to the termination by the Buyer of the employment of any of the Transferred
Employees within 90 days after the Closing Date or such other period that would
expose the Seller to liabilities under the WARN Act as a result of the premature
termination by the Buyer of the employment of any of the Transferred Employees.
4.4 USE OF CORPORATE NAMES. All uses of the corporate names set forth in
SECTION 1.1(AL(VI) of the Disclosure `Schedule, or any derivations thereof, are
being transferred to the Buyer hereunder as part of the Transferred Assets. The
Seller agrees that it will change its corporate name promptly following Closing
and not take any action that could reasonably be expected to adversely affect
the Buyer's right to the use of such names or cause confusion with respect to
the Buyer's use of such names. All goodwill with respect to the use of the names
will inure to the benefit of the Buyer, and the Seller will not have any rights
to sue or recover against any Person with respect to the use of such names.
4.5 NONCOMPETITION.
(a) The Seller acknowledges that in consideration of the payment of
the Purchase Price, the Buyer is acquiring the goodwill of the Business,
including complete ownership and control of the Transferred Assets. Therefore,
the Seller and Weatherford agree that for a period commencing upon the Closing
Date and ending upon the third anniversary thereof, the Seller, Weatherford and
their Affiliates will not, directly or indirectly, either as an employer,
consultant, agent, principal, partner, stockholder or in any other
representative capacity, engage or participate in any business similar to the
Business as the Business is conducted as of the Closing Date (a "Similar
Business") in any geographic area in which the Buyer is then conducting the
Business. For purposes of this SECTION 4.5(A), the Buyer shall be considered to
be conducting Business in (i) any geographic area in which the offices and
properties of the Business are located, (ii) any geographic area in which the
Business' customers are located if the Buyer is, or if within the preceding two
years the Buyer or the Seller was, actively engaged in the design, manufacture,
sales or rental of the Business' equipment, or the provision of services by the
Business, to such customers, and (iii) any geographic area in which prospective
customers are located if the Buyer or the Seller is in the process of preparing
bids or other preliminary work required as a prerequisite to the design,
manufacture, sales or rental of the Business' equipment, or the provision of
services by the Business, to such
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prospective customers. To induce the Buyer to enter into this Agreement, the
Seller and Weatherford represent to the Buyer that the enforcement of the
restriction contained in this SECTION 4.5(A) would not be unduly burdensome to
the Seller, Weatherford and their Affiliates and acknowledge that such
restriction will not preclude the Seller, Weatherford and their Affiliates from
competing in other geographical areas not prohibited by this SECTION 4.5(A). The
Seller and Weatherford agree that a breach or violation of the covenant not to
compete shall entitle the Buyer, as a matter of right, to an injunction issued
by any court of competent jurisdiction, restraining any further or continued
breach or violation of this covenant. Such right to an injunction, shall be
cumulative and in addition to, and not in lieu of, any other remedies to which
the Buyer may show itself justly entitled. Further, during any period in which
the Seller or Weatherford is in breach of this covenant not to compete, the time
period of this covenant shall be extended for an amount of time that the Seller
or Weatherford is in breach hereof.
The foregoing provisions of this SECTION 4.5(A) shall not prevent
Weatherford or any of its Affiliates, during the three year period following the
Closing Date, from making any acquisition (whether by way of assets, stock or
otherwise) of, or retaining any interest in, or making any investment in, in
either case, whether directly or indirectly (an "Acquisition"), any business,
entity or affiliated group of entities that on a consolidated basis during the
four most recent fiscal quarters derived 20% or less of its gross revenues from
a Similar Business so long as the portion of such business or entity that is
engaged in such Similar Business is sold within 270 days after the date of the
Acquisition. Weatherford shall provide written notice to the Buyer within five
Business Days of an Acquisition of a Similar Business. The Buyer shall have 30
days from the receipt of such notice to make an offer in writing (the "Offer")
to Weatherford to purchase the Similar Business. The Offer shall set forth in
detail the terms and conditions of the Buyer's proposal to purchase the Similar
Business. If the Buyer does not make an Offer, or if Weatherford and the Buyer
have not, within 15 days following Weatherford's receipt of the Offer, executed
a written agreement pursuant to which Weatherford will sell the Similar Business
to the Buyer, Weatherford may sell the Similar Business to a party other than
the Buyer for a price that equals or exceeds the amount of the purchase price
contained in the Offer, provided that the other material terms and conditions of
such sale, taken as a whole, are no less favorable to Weatherford than those set
forth, in the Offer. The foregoing provisions also shall not prohibit any Person
that may in the future acquire 50% or more of the outstanding capital stock of
Weatherford (or an successor thereto) from engaging in a Similar Business as
long as such acquiring Person was engaged in the Similar Business prior to such
acquisition.
(b) Each of the Seller and Weatherford agrees that it shall not, for
a period commencing upon the Closing Date and ending upon the third anniversary
thereof, either directly or indirectly, (i) unless required by law, make known
to any Person the names and addresses of any of the customers of the Business or
contacts o the Seller within the industries of the Business or any other
information pertaining to such customers or contacts or (ii) call on, solicit or
take away, or attempt to call on, solicit or take away, any of the customers of
the Business, whether for the Seller or for any other Person; provided, however,
that the limitations contained in this SECTION 4.5(B) with respect to customers
of the Business or contacts of the Seller shall apply only with respect to the
Business as the Business is conducted as of the Closing Date and shall not apply
to customers of the Seller or Weatherford or contacts of the Seller or
Weatherford as to any other matters or business.
(c) The representations and covenants contained in this SECTION 4.5
on the part of the Seller and Weatherford will be construed as ancillary to and
independent of any other
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provision of this Agreement, and the existence of any claim or cause of action
of the Seller or Weatherford against the Buyer or any officer, director or
shareholder of the Buyer, whether predicated on this Agreement or otherwise,
shall not constitute a defense to the enforcement by the Buyer of the covenants
of the Seller contained in this SECTION 4.5.
(d) The parties to this Agreement agree that the limitations
contained in this SECTION 4.5 with respect to time, geographical area and scope
of activity are reasonable. However, if any court shall determine that the time,
geographical area or scope of activity of any restriction contained in this
SECTION 4.5 is unenforceable, it is the intention of the parties that such
restrictive covenant set forth herein shall not thereby be terminated but shall
be deemed amended to the extent required to render it valid and enforceable.
(e) The covenants the Seller contained in this SECTION 4.5 may be
assigned by the Buyer to any Person to whom the Transferred Assets are
transferred substantially as an entirety, it being the intention of the parties
hereto that such covenants shall inure to the benefit of any successor to the
Transferred Assets, with the same force and effect as if such covenants had been
made directly to such successor or successors.
4.6 NO SOLICITATION OF EMPLOYEES. The Seller and Weatherford agree that,
for a period of two years after the Closing Date, neither the Seller,
Weatherford nor any of their Affiliates will, directly or indirectly, solicit to
employ (as an employee, consultant, independent contractor or otherwise) any
Transferred Employee.
4.7 INSURANCE. All occurrences prior to the Closing that are insured under
insurance policies obtained and maintained by the Seller or Weatherford covering
the Business, property and employees of the Seller shall continue to be so
insured, and the Buyer shall be entitled to the benefits thereof to the limited
extent necessary to hold the Buyer harmless from such occurrences, and any
remaining benefits thereof shall be paid to the benefit of the Seller. At the
Buyer's request, the Seller shall make copies of such policies available to the
Buyer for inspection and shall assist the Buyer in determining whether any claim
or loss is covered by such policies of insurance.
4.8 NOTIFICATION OF CERTAIN MATTERS. The Seller shall give prompt notice
to the Buyer of (i) the occurrence or nonoccurrence of any event the occurrence
or nonoccurrence of which would be likely to cause any representation or
warranty contained in ARTICLE 2 to be untrue or inaccurate in any material
respect at or prior to the Closing, (ii) any material failure of the Seller to
comply with or satisfy any covenant, condition or agreement to be complied with
or satisfied by the Seller hereunder and (iii) any notice or other communication
from any Person alleging that the consent or approval of such Person is or may
be required in connection with the transactions contemplated by this Agreement
(other than those consents and approvals indicated as required in SECTION 2.3 of
the Disclosure Schedule). The Buyer shall give prompt notice to the Seller of
(i) the occurrence or nonoccurrence of any event the occurrence or nonoccurrence
of which would be likely to cause any representation or warranty contained in
ARTICLE 3 to be untrue or inaccurate in any material respect at or prior to the
Closing, (ii) any material failure of the Buyer to comply with or satisfy any
covenant, condition or agreement to be complied with or satisfied by the Buyer
hereunder and (iii) any notice or other communication from any Person alleging
that the consent or approval of such Person is or may be required in connection
with the transactions contemplated by this Agreement. The delivery of any notice
pursuant to this SECTION 4.8 shall not be deemed to (i) modify the
representations or warranties hereunder of the party delivering such notice,
(ii) modify the conditions set forth in this
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Agreement or (iii) limit or otherwise affect the remedies available hereunder to
the party receiving such notice; provided,, however, that if the Closing shall
occur, then all matters disclosed pursuant to this SECTION 4.8 at or prior to
the Closing shall be waived and no party shall be entitled to make a claim
thereon pursuant to the terms of this Agreement.
4.9 ACCESS TO RECORDS AFTER CLOSING. From and after the Closing Date, each
party hereto and its representatives shall have reasonable access to inspect and
copy all books and records relating to the Transferred Assets or the Business
that the other parties hereto or their respective Affiliates may retain after
the Closing Date. Such access shall be afforded by the party maintaining such
records upon receipt of reasonable advance notice and during normal business
hours. Nothing contained in this SECTION 4.9 shall require the Buyer or the
Seller to retain any books or records longer than such books or records would
otherwise have been retained in the ordinary course of business but for the
transactions contemplated by this Agreement; provided, however, that if the
party maintaining such records shall desire to dispose of any of such books and
records, such party shall, prior to such disposition, give the other party
hereto a reasonable opportunity, at such other party's expense, to segregate and
remove such books and records as such other party may select.
4.10 POST-CLOSING COLLECTION. Payment and Administration Procedures.
Subsequent to the Closing, the Seller agrees to deliver to the Buyer, within
three Business Days of the Seller's receipt of same, any and all monies paid to
or received by the Seller in respect of amounts due the Buyer, including, but
not limited to, payment of receivables, refunds, rebates, release of performance
or similar bonds or letters of credit and any inquiries, correspondence or
documents received by the Seller related to such amounts. Subsequent to the
Closing, the Buyer agrees to deliver to the Seller, within three Business Days
of the Buyer's receipt of same, any and all monies paid to or received by the
Buyer in respect of amounts due to the Seller.
4.11 TERMINATION OF ACQUISITION PROPOSALS. Weatherford and the Seller and
their advisors and representatives shall immediately cease any existing
activities, discussions or negotiations with any Persons conducted heretofore
with respect to any Acquisition Proposal. If the Seller or its Affiliates shall
hereafter receive any Acquisition Proposal, the Seller shall inform such Person
of this Agreement and its inability to consider such proposal and shall promptly
communicate the terms of such proposal to the Buyer. The term "Acquisition
Proposal", as used in this SECTION 4.11, means any offer or proposal for, or any
indication of interest in, the acquisition of the Transferred Assets or the
Business or any portion thereof, other than the transactions contemplated or
expressly permitted by this Agreement. Notwithstanding anything contained in
this Agreement to the contrary, the provisions of this SECTION 4.11 shall
terminate on February 14, 1997 if the Buyer shall not have obtained the Credit
Commitment on or before February 13, 1997 or shall terminate on April 3, 1997 if
the Closing shall not have occurred on or before April 2, 1997.
4.12 REASONABLE BEST EFFORTS. Each party hereto agrees that it will not
voluntarily undertake any course of action inconsistent with the provisions or
intent of this Agreement and will use its reasonable best efforts to take, or
cause to be taken, all action and to do, or cause to be done, all things
reasonably necessary, proper or advisable under Applicable Laws to consummate
the transactions contemplated by this Agreement, including, without limitation,
(i) cooperation in determining whether any consents, approvals, orders,
authorizations, waivers, declarations, filings or registrations of or with any
Governmental Entity or third party are required in connection with the
consummation of the transactions contemplated hereby; (ii) reasonable best
efforts to obtain any such consents, approvals, orders, authorizations and
waivers and to effect any such declarations,
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filings and registrations; (iii) reasonable best efforts to cause to be lifted
or rescinded any injunction or restraining order or other order adversely
affecting the ability of the parties to consummate the transactions contemplated
hereby; (iv) reasonable best efforts to defend, and cooperation in defending,
all lawsuits or other legal proceedings challenging this Agreement or the
consummation of the transactions contemplated hereby; and (v) the execution of
any additional instruments necessary to consummate the transactions contemplated
hereby. The Seller shall cooperate with and assist the Buyer and its authorized
representatives to provide an efficient and orderly transfer of the control and
management of the Transferred Assets and the Business to the Buyer and to avoid
any undue interruption in the ongoing operations of the Transferred Assets and
the Business following the Closing.
4.13 FINANCING. The Buyer shall use its reasonable best efforts to obtain
the financing required to effect the transactions contemplated by this Agreement
and to pay all related fees and expenses (the "Financing"). In the event that
any material portion of the Financing becomes unavailable, regardless of the
reason therefor, the Buyer shall, upon learning thereof, promptly so advise the
Seller, and the Buyer shall use its reasonable best efforts to obtain
alternative financing from other sources on and subject to substantially the
same terms and conditions as the portion of the Financing that has become
unavailable.
4.14 WARRANTY OBLIGATIONS; ALLSEAS CONTRACT.
(a) From and after the Closing, the Buyer or its Affiliates shall
satisfy the Warranty Obligations and the Allseas Obligations on behalf of the
Seller and its Affiliated Companies. The Buyer shall assume, and the Seller and
the Affiliated Companies shall have no liability for, the liabilities and
obligations of the Seller and the Affiliated Companies for the Warranty
Obligations and the Allseas Obligations; PROVIDED, HOWEVER, that the Buyer's
liability for the Warranty Obligations and the Allseas Obligations in the
aggregate shall not exceed the Ceiling Amount, and the Seller and Weatherford
shall be responsible for the payment of Warranty Obligations and Allseas
Obligations that in the aggregate are in excess of the Ceiling Amount.
(b) Within 45 calendar days following each fiscal quarter of the
Buyer, the Buyer shall prepare and deliver to the Seller a statement (a
"Quarterly Report") reflecting in sufficient detail the amount of the Warranty
Obligations and the Allseas Obligations (i) incurred during such quarter and
(ii) incurred during the period beginning on the day following the Closing Date
and ending the last day of such quarter. Each Quarterly Report delivered before
the Threshold Amount has been exceeded also shall include a list of each Demand
relating to the Allseas Contract received during such quarter and during the
period beginning on the day following the Closing Date and ending on the last
day of such quarter. Each Quarterly Report delivered after the Threshold Amount
has been exceeded also shall include a list of each Demand (whether relating to
the Allseas Contract or to a Warranty Obligation) and the Buyer's reasonable
estimate of costs that it will incur in connection with each such Demand
("Estimated Demand Costs") received during such quarter and during the period
beginning on the day following the Closing Date and ending on the last day of
such quarter. On a quarterly basis, during normal business hours and upon
reasonable notice, the Buyer shall provide the Seller with access to copies of
all work papers and other relevant documents to verify the entries contained in
each Quarterly Report and shall make available to the Seller and its
representatives appropriate management, operational and accounting personnel of
the Buyer to respond to questions regarding such Quarterly Report.
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For each Quarterly Report delivered after the Threshold Amount has
been exceeded, the Seller shall have a period of ten Business Days after
delivery to it of such Quarterly Report to review it and deliver to the Buyer in
writing any objections the Seller may have with respect to such Quarterly
Report. If written objections to such Quarterly Report are delivered to the
Buyer within such ten-day period, the Buyer and the Seller agree to negotiate in
good faith in an effort to resolve the matter or matters in dispute with:
respect to such Quarterly Report. If such dispute cannot be resolved by good
faith negotiation, such dispute shall be referred to mediation before the
parties resort to arbitration, and a mutually acceptable mediator shall be
chosen by the Buyer and the Seller. The costs of any such mediation shall be
borne equally by the Buyer and the Seller.
If such dispute cannot be resolved by good faith negotiations
between the parties or by mediation within ten Business Days following the
delivery of objections to such Quarterly Report, and if the difference between
the Buyer's and the Seller's reasonable estimate of the amounts set forth in the
Quarterly Report (including the estimate of costs the Buyer and its Affiliates
will incur in connection with one or more Demands) would affect whether the
Notice Amount, the Opinion Amount, the Consent Amount or the Ceiling Amount has
been exceeded, depending upon which estimate is used, the specific matters in
dispute may, at the option of the Buyer or the Seller, be referred to and
determined by binding arbitration, as the sole and exclusive remedy of the Buyer
and the Seller as to such dispute. Such arbitration shall be conducted in
accordance with the Commercial Arbitration Rules of the American Arbitration
Association, as in effect on the date hereof (the "Rules"), which are deemed to
be incorporated herein by reference, except that in the event of any conflict
between the Rules and the arbitration provisions set forth below, the provisions
set forth below shall govern and control. The arbitral tribunal (the "Tribunal")
shall use the substantive laws of Texas in construing and interpreting this
Agreement. The Tribunal shall be composed of three arbitrators with appropriate
experience in (i) the pipeline construction industry (or, in the absence
thereof, the petroleum industry) and (ii) risk management, with each party
appointing one arbitrator, and the two arbitrators so appointed appointing the
third arbitrator who shall act as the presiding arbitrator of the Tribunal (the
"Chairman of the Tribunal"). Should any arbitrator fail to be appointed as
aforesaid, then either the Seller or the Buyer may in writing request the judge
of the United States District Court for the Southern District of Texas who is
most senior in term of service to appoint a qualified arbitrator. Should a
vacancy in the Tribunal arise because any arbitrator dies, resigns, refuses to
act or becomes incapable of performing his function, the vacancy shall be filled
by the method by which such arbitrator was originally appointed. The arbitration
shall be in Houston, Texas, and the proceedings shall be conducted and concluded
as soon as reasonably practicable, based upon the schedule established by the
Tribunal, but in any event the decision of the Tribunal shall be rendered within
30 days following the selection of the Chairman of the Tribunal. In fulfilling
any of their arbitration duties, the arbitrators may consider such other matters
and may consult with and engage disinterested third parties, including, without
limitation, engineers, attorneys and consultants, as in the opinion of the
arbitrators are necessary or helpful to make a proper evaluation. Any decision
of the Tribunal shall be made by the majority of the arbitrators comprising the
Tribunal, shall be in writing and shall include a statement of the basis and
reasons for such decision. The decision of the Tribunal pursuant hereto shall be
final and binding on the parties. Each party shall bear the expense of the
arbitrator specified to be selected by it, and the fees of the Chairman of the
Tribunal and other expenses incurred by the Tribunal shall be borne equally by
the Buyer and the Seller. The Buyer and the Seller shall each bear its own
expenses, including expenses of its counsel; PROVIDED, HOWEVER, that if either
party submits to the Tribunal the issue of whether the other party has breached
its obligation to negotiate in good faith regarding a dispute with respect to a
Quarterly Report, and if the Tribunal determines that such a
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breach has occurred, the breaching party shall pay the expenses of the
non-breaching party, including legal fees and the expense of the arbitrator
selected by the non-breaching party, as well as the non-breaching party's share
of the fees of the Chairman of the Tribunal and other expenses incurred by the
Tribunal. It is the desire of the Buyer and the Seller that any dispute be
resolved quickly and at the lowest possible cost, and the Tribunal shall act in
a manner consistent with these intentions. No party subject to these arbitration
procedures will commence or prosecute any suit or action against another party
subject to these arbitration procedures relating to the disputed issues, other
than as may be necessary to compel arbitration under these arbitration
procedures or to enforce the decision of the Tribunal.
(c) The Buyer shall notify the Seller in writing within ten Business
Days following the date on which the Notice Amount (as established in the most
recent Quarterly Report or by good faith negotiations, mediation or binding
arbitration under SECTION 4.14(B) hereof) has been exceeded and thereafter shall
notify the Seller in writing within ten Business Days of each incremental
$500,000 aggregate amount of Warranty Obligations, Allseas Obligations and
Demands.
(d) The Buyer shall notify the Seller in writing within ten Business
Days following the date on which the Opinion Amount (as established in the most
recent Quarterly Report or by good faith negotiations, mediation or binding
arbitration under SECTION 4.14(B) hereof) has been exceeded and shall set forth
in such notice the Buyer's proposed procedures for addressing outstanding
Warranty Obligations, Allseas Obligations and Demands. The Buyer shall seek the
opinion of the Seller with respect to such proposed procedures, shall give the
Seller's opinion due consideration and shall respond to such opinion prior to
taking any action with respect to implementing such proposed procedures. The
Buyer shall follow the procedures set forth in this SECTION 4.14(D) with respect
to each incremental $500,000 aggregate amount of Warranty Obligations, Allseas
Obligations and Demands.
(e) The Buyer shall notify the Seller in writing within ten Business
Days following the date on which the Consent Amount (as established in the most
recent Quarterly Report or by good faith negotiations, mediation or binding
arbitration under SECTION 4.14(B) hereof) has been exceeded and thereafter shall
notify the Seller in writing within ten Business Days of each incremental
$500,000 aggregate amount of Warranty Obligations, Allseas Obligations and
Demands. After the Consent Amount has been exceeded, the Buyer shall not proceed
to take any action with respect to the implementation of procedures for
addressing outstanding Warranty Obligations, Allseas Obligations or Demands
without the prior written consent of the Seller, which consent shall not be
unreasonably withheld. Notwithstanding the foregoing, while good faith
negotiations, mediation or arbitration proceedings are pending pursuant to
SECTION 4.14(B) hereof, and if the Resolution of such negotiations, mediation or
arbitration proceedings could affect the determination of whether the Consent
Amount has been exceeded, the Buyer shall not take any action with respect to
the implementation of procedures for addressing outstanding Warranty
Obligations, Allseas Obligations or Demands without the prior written consent of
the Seller, which consent shall not be unreasonably withheld.
(f) If the Threshold Amount has not been exceeded, the Buyer shall
promptly give the Seller written notice of (i) all actual legal proceedings
against the Buyer or any of its Affiliates regarding (A) performance or payment
that, if performed or paid, would result in a Warranty Obligation in excess of
$100,000, or (B) the Allseas Contract (regardless of the dollar amount at issue)
and (ii) all threatened legal proceedings against the Buyer or any of its
Affiliates
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regarding the Allseas Contract (regardless of the dollar amount at issue). If
the Threshold Amount has been exceeded, the Buyer shall promptly give the Seller
written notice of all actual or threatened legal proceedings against the Buyer
or any of its Affiliates regarding (i) performance or payment that, if performed
or paid, would result in a Warranty Obligation in excess of $100,000, or (ii)
the Allseas Contract (regardless of the dollar amount at issue). The Buyer and
its representatives and legal counsel shall control such proceedings but shall
cooperate with the Seller and its representatives and legal counsel in the
investigation and defense of such legal proceedings and shall allow the Seller
and its representatives and legal counsel to participate, at their own expense,
in, but not control, such legal proceedings. The Buyer and its representatives
and legal counsel shall keep the Seller and its representatives and legal
counsel apprised of the status of such legal proceedings and the Buyer's
strategy and tactics with respect thereto, and shall provide to the Seller and
its representatives and legal counsel access to the books and records and other
documents of the Buyer relating to such legal proceedings and the Buyer's
management, operational and accounting personnel and legal counsel in connection
with the investigation and defense of such legal proceedings. If the Opinion
Amount (as established in the most recent Quarterly Report or by good faith
negotiations, mediation or binding arbitration under SECTION 4.14(B) hereof) has
been exceeded, (i) the selection of legal counsel to represent the Buyer in such
legal proceedings and the terms of engagement of such legal counsel are subject
to the prior written consent of the Seller, which consent shall not be
unreasonably withheld, and (ii) the Buyer may not settle any such legal
proceedings for an amount in excess of $500,000 without the prior written
consent of the Seller, which consent shall not be unreasonably withheld.
Notwithstanding the foregoing, while good faith negotiations, mediation or
arbitration proceedings are pending pursuant to SECTION 4.14(B) hereof, and if
the resolution of such negotiations, mediation or arbitration proceedings could
affect the determination of whether the Opinion Amount has been exceeded, the
Buyer shall not take any action described in clause (i) or clause (ii) of the
preceding sentence without the prior written consent of the Seller, which
consent shall not be unreasonably withheld.
If the amount of Warranty Obligations and Allseas Obligations in
the. aggregate do not exceed the Ceiling Amount, but when added to the Estimated
Demand Costs (as established in the most recent Quarterly Report or by good
faith negotiations, mediation or arbitration proceedings pursuant to SECTION
4.14(B) hereof) would exceed the Ceiling Amount, the Seller and its
representatives and legal counsel shall control such legal proceedings subject
to the following: (i) the selection of legal counsel to represent the Seller in
such legal proceedings and the terms of engagement of such legal counsel are
subject to the prior written consent of the Buyer, which consent shall not be
unreasonably withheld, (ii) the Seller may not settle any such legal proceedings
for an amount in excess of $500,000 without the prior written consent of the
Buyer, which consent shall not be unreasonably withheld, and (iii) the Buyer and
its representatives and legal counsel shall be entitled to participate, at their
own expense, in, but not control, such legal proceedings in the same manner that
the Seller and its representatives and legal counsel are entitled to participate
in legal proceedings controlled by the Buyer as described in the third sentence
of the preceding paragraph of this SECTION 4.14(F). Notwithstanding the
foregoing, while good faith negotiations, mediation or arbitration proceedings
are pending pursuant to Section 4.14(b) hereof, and if the resolution of such
negotiations, mediation or arbitration proceedings could affect the
determination of whether the Seller is entitled to control legal proceedings in
accordance with the immediately preceding sentence, then neither the Buyer nor
the Seller shall take any action described in clause (i) or clause (ii) of such
preceding sentence without the prior written consent of the other, which consent
shall not be unreasonably withheld. At such time as the Ceiling Amount is
exceeded,
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without giving effect to any Estimated Demand Costs, the Seller's obligations in
clauses (i) and (ii) of the first sentence of this paragraph shall terminate.
(g) To the extent that; any amounts of Warranty Obligations or
Allseas Obligations in excess of the Ceiling Amount are covered by insurance
maintained by the Buyer or its Affiliates, the Seller's liability for such
amounts shall be secondary to such insurance. The parties acknowledge that this
SECTION 4.14(A) does not obligate the Buyer or its Affiliates to obtain
insurance that would cover any Warranty Obligations or Allseas Obligations.
4.15 LETTERS OF CREDIT; BANK GUARANTEES; PARENT GUARANTEES.
(a) Letters of Credit. The Buyer or its Affiliates shall, as of the
Closing Date, cause to be issued in favor of the Seller, as beneficiary, one or
more letters of credit (the "Back-up LC") in a face amount equal to the
aggregate face amount of the letters of credit set forth in EXHIBIT 4.15(a)
hereto (collectively, the "Outstanding LCs"). The Back-up LC shall be in form
and substance reasonably satisfactory to the Seller, shall be issued by
BankBoston, N.A. or another financial institution reasonably satisfactory to the
Seller, and shall provide that (i) upon a drawing under any Outstanding LC by
the beneficiary thereof, the Seller may draw under the Back-up LC in an amount
equal to the amount drawn under the Outstanding LC by presentation of a sight
draft accompanied by an officer's certificate as to the amount so drawn on such
Outstanding LC, (ii) upon notice of non-renewal thereof prior to the termination
of all Outstanding LCs, it may be drawn on by the Seller for the full then
undrawn amount thereof and (iii) upon the expiration, termination or return to
the Seller of any Outstanding LC marked "canceled", the face amount of the
Back-up LC shall be reduced by the face amount of such expired, terminated or
returned Outstanding LC. Any amount drawn pursuant to clause (ii) above shall be
held by the Seller as cash collateral to secure the Seller's reimbursement for
all amounts theretofore supported by any Back-up LC. The Buyer covenants and
agrees to pay to the Seller on demand all actual costs, fees and charges
incurred from time to time by the Seller and its Affiliates in connection with
maintaining, renewing or extending any Outstanding LC, or in connection with any
drawing thereunder. Subject to the agreement of the beneficiaries of the
Outstanding LCs, the Buyer and its Affiliates shall use their reasonable best
efforts to cause each Outstanding LC to be substituted or otherwise replaced and
returned to the Seller and to cause the Seller to be released from its
obligations regarding the Outstanding LCs, and the Seller shall use its
reasonable best efforts to assist the Buyer and its Affiliates in causing such
Outstanding LCs to be substituted or otherwise replaced. The Seller covenants
and agrees to use its reasonable best efforts to promptly forward to the Buyer
any request received by the Seller from a beneficiary of an Outstanding LC
requesting an extension or renewal of such Outstanding LC. Following receipt by
the Buyer of any such forwarded request for a renewal or extension, the Buyer
shall have the right to request the Seller to use its reasonable best efforts to
cause the issuer of the Outstanding LC to which the request relates to extend or
renew (but not increase the face amount of such Outstanding LC, and upon any
such request by the Buyer, the Seller shall promptly use its reasonable best
efforts to cause such issuer to so extend or renew such Outstanding LC for a
period of up to one year from the then current expiration date; provided, any
such request by the Buyer to the Seller shall be made not less than one Business
Day after the Buyer's receipt of such forward d notice of requested renewal or
extension.
(B) BANK GUARANTEES. The Buyer or its Affiliates shall, as of the
Closing Date, cause to be issued in favor of Lloyds Bank, as beneficiary, a
letter of credit or bank guarantee with respect to the bank guarantees set forth
in EXHIBIT 4.15(b) hereto sufficient to cause Lloyds Bank to
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cancel, release or otherwise terminate that certain Letter of Credit No. S037134
issued by Wells Fargo Bank (Texas), National Association (f/k/a First Interstate
Bank of Texas, N.A.) in the face amount of 1,053,000 pounds sterling in favor of
Lloyds Bank, as beneficiary.
(C) PARENT GUARANTEES. The Buyer or its Affiliates shall, as of the
Closing Date, cause to be issued in favor of the Seller, as beneficiary,
guarantees ("Back-up Guarantees") of the parent guarantees set forth in EXHIBIT
4.15(c) hereto (collectively, the "Parent Guarantees"). The Back-up Guarantees
shall be in form and substance reasonably satisfactory to the Seller and shall
contain the same terms and provisions as are contained in, and shall be the same
form as, the Parent Guarantees. Subject to the agreement of the beneficiaries of
the Parent Guarantees, the Buyer and Governmental Entity shall have been
commenced or threatened by any Person other than the Buyer or any of its
Affiliates seeking to prevent the sale of the Transferred its Affiliates shall
use their best efforts to cause each Parent Guarantee to be canceled and the
Seller to be released from its obligations thereunder.
ARTICLE 5
BUYER'S CONDITIONS
The obligation of the Buyer to purchase the Transferred Assets and to
assume the Assumed Liabilities as contemplated hereby is, at the option of the
Buyer, subject to the satisfaction on or before the Closing Date of the
conditions set forth below, any of which may be waived by the Buyer in writing;
provided, however, the Buyer's election to proceed with the Closing shall not be
deemed a waiver of any breach of any representation, warranty or covenant
herein, whether or not known to the Buyer or existing on the Closing Date, and
such action shall not prejudice the Buyer's right to recover damages for any
such breach.
5.1 REPRESENTATIONS, WARRANTIES AND COVENANTS. The representations and
warranties of the Seller and Weatherford contained in this Agreement shall be
true, correct and complete in all respects (in and as of the Closing Date with
the same force and effect as though such representations and warranties had been
made or given on and as of such date, except (i) to the extent that any such
representation or warranty is made or given as of a specified date, in which
case such representation or warranty shall have been true and correct as oil
such specified date, and (ii) for such matters due to changes in facts from the
date hereof required or permitted by this Agreement that, in the aggregate,
would not have all Material Adverse Effect. Each and all of the agreements and
covenants of the Seller and Weatherford to be performed or complied with by such
Persons on or before the Closing Date pursuant to this Agreement shall have been
performed or complied with in all material respects. The Seller and Weatherford
shall have delivered to the Buyer a certificate signed by duly authorized
officers dated the Closing Date regarding the matters set forth in this SECTION
5.L.
5.2 GOOD STANDING. The Seller shall have delivered to the Buyer a
certificate issued by the Secretary of State of the State of Delaware evidencing
the good standing of the Seller, as of a date not more than five calendar days
prior to the Closing Date.
5.3 INSTRUMENTS OF TRANSFER. The Seller shall have executed, acknowledged
and delivered to the Buyer such deeds, bills of sale, assignments (including but
not limited to
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assignments of the leases), certificates of title and other instruments of
transfer, assignment and conveyances, in form and substance mutually agreeable,
as shall be necessary to vest in the Buyer all the right, title and interest in
and to the Transferred Assets free and clear of all Liens, except for Permitted
Liens.
5.4 NO LITIGATION. No preliminary or permanent injunction or other order
of any Governmental Entity shall be in effect nor shall there be in effect any
statute, rule, regulation or executive order promulgated or enacted by any
Governmental Entity that, in any such case, prevents the consummation of the
transactions contemplated by this Agreement. No suit, action, claim, proceeding
or investigation before any Governmental Entity shall have been commenced or
threatened by any Person other than the Buyer or any of its Affiliates seeking
to prevent the sale of the Transferred Assets or the Business or asserting that
the sale of all or a portion of the Transferred Assets or the business would be
unlawful.
5.5 LICENSES, CONSENTS AND APPROVALS. The Seller and Weatherford shall
have delivered to the Buyer a copy of each of the licenses, consents, approvals
and other authorizations from Governmental Entities necessary or appropriate for
the Seller and Weatherford to consummate the transactions contemplated by this
Agreement.
5.6 CONSENTS OF THIRD PERSONS. A copy of all consents from third Persons
that are listed in Section 2.3(a) of the Disclosure Schedule have been delivered
to the Buyer.
5.7 RESOLUTIONS. The Buyer shall have received certified copies of
resolutions of the Boards of Directors of the Seller and Weatherford approving
this Agreement and the transactions contemplated hereby.
5.8 SHARE TRANSFER AGREEMENTS. Weatherford Enterra Canada Ltd. and the
Buyer shall have executed and delivered a share transfer agreement in form and
substance mutually satisfactory to the Buyer and the Seller and Weatherford
Eurasia Ltd. and PIH Holdings Limited, a wholly owned subsidiary of the Buyer,
shall have executed and delivered a share transfer agreement in form and
substance mutually satisfactory to the Buyer and the Seller.
5.9 OPINION OF COUNSEL. The Buyer shall have received opinions of H.
Suzanne Thomas, Senior Vice President, Secretary and General Counsel of
Weatherford, and Macleod Dixon, outside Canadian legal counsel to the Seller, in
each case dated the Closing Date, covering the matters set forth in EXHIBIT
5.9(a) and EXHIBIT 5.9(b) hereto, respectively. Each of such opinions shall be
reasonably acceptable to the Buyer.
5.10 NO MATERIAL ADVERSE CHANGE. Since the date of this Agreement, there
shall not have occurred any Material Adverse Effect.
5.11 ASSUMED LITIGATION. The Buyer shall have delivered to the Seller
documents in form and substance mutually satisfactory to the Buyer and the
Seller regarding the Assumed Litigation, pursuant to which the Buyer shall
assume the control of the Assumed Litigation and all liabilities and obligations
of the Seller and the Affiliated Companies related thereto.
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ARTICLE 6
SELLER'S CONDITIONS
The obligation of the Seller to transfer the Transferred Assets as
contemplated hereby is, at the option of the Seller, subject to the satisfaction
on or before the Closing Date of the conditions set forth below, any of which
may be waived by the Seller in writing; provided, however, the Seller's election
to proceed with the closing of the transactions contemplated hereby shall not be
deemed a waiver of any breach of any representation, warranty or covenant
herein, whether or not known to the Seller or existing on the Closing Date, and
such action shall not prejudice the Seller's right to recover damages for any
breach.
6.1 REPRESENTATIONS, WARRANTIES AND COVENANTS. The representations and
warranties of the Buyer contained in this Agreement shall be true, correct and
complete in all respects on and as of the Closing Date with the same force and
effect as though such representations and warranties had been made or given on
and as of such date. Each and all of the agreements and covenants of the Buyer
to be performed or complied with by it on or before the Closing Date pursuant to
this Agreement shall have been performed or complied with in all material
respects. The Buyer shall have delivered to the Seller a certificate signed by
one of its duly authorized officers, dated the Closing Date, regarding the
matters set forth in this SECTION 6.1.
6.2 RECEIPT OF THE TRANSFERRED ASSETS. The Buyer shall have paid the
Closing Payment and the Buyer shall have duly executed and delivered to the
Seller an instrument acknowledging receipt of the Transferred Assets and
assumption of the Assumed Liabilities in form and substance mutually agreeable.
6.3 LICENSES, CONSENTS AND APPROVALS. The Buyer shall have delivered to
the Seller a copy of each of the licenses, consents, approvals and other
authorizations from Governmental Entities necessary or appropriate for the Buyer
to consummate the transactions contemplated by this Agreement.
6.4 NO LITIGATION. No preliminary or permanent injunction or other order
of any Governmental Entity shall be in effect nor shall there be in effect any
statute, rule, regulation or executive order promulgated or enacted by any
Governmental Entity that, in any such case, prevents the consummation of the
transactions contemplated by this Agreement. No suit, action, claim, proceeding
or investigation before any Governmental Entity shall have been commenced or
threatened by any Person other than the Seller or any of its Affiliates seeking
to prevent the sale of the Transferred Assets or the Business or asserting that
the sale of all or a portion of the Transferred Assets or the Business would be
unlawful.
6.5 RESOLUTIONS. The Seller shall have received certified copies of
resolutions of the Board of Directors of the Buyer approving this Agreement and
the transactions contemplated hereby.
6.6 SHARE TRANSFER AGREEMENTS. Weatherford Enterra Canada Ltd. and the
Buyer shall have executed and delivered a share transfer agreement in form and
substance mutually satisfactory to the Buyer and the Seller and Weatherford
Eurasia Ltd. and PIH Holdings Limited, a wholly
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owned subsidiary of the Buyer, shall have executed and delivered a share
transfer agreement in form and substance mutually satisfactory to the Buyer and
the Seller.
6.7 OPINION OF COUNSEL. The Seller shall have received opinions of Richard
L. Covington, legal counsel to the Buyer, and Bryan & Company, outside Canadian
legal counsel to the Buyer, in each case dated the Closing Date, covering the
matters set forth in EXHIBIT 6.7(a) and EXHIBIT 6.7(b) hereto, respectively.
Each of such opinions shall be reasonably acceptable to the Seller.
6.8 ASSUMED LITIGATION. The Buyer shall have delivered to the Seller
documents in form and substance mutually satisfactory to the Buyer and the
Seller regarding the Assumed Litigation, pursuant to which the Buyer shall
assume the control of the Assumed Litigation and all liabilities and obligations
of the Seller and the Affiliated Companies related thereto.
6.9 BACK-UP LETTERS OF CREDIT AND PARENT COMPANY GUARANTEES. The Buyer
shall have delivered to the Seller the Back-up LC and the Back-up Parent Company
Guarantees required by SECTION 4.15 hereof.
ARTICLE 7
INDEMNIFICATION
7.1 INDEMNIFICATION BY THE SELLER AND WEATHERFORD. Except as otherwise
limited by this ARTICLE 7 and ARTICLE 8 hereof, the Seller and Weatherford agree
to indemnify, defend and hold the Buyer and each of its officers, directors,
employees, agents, stockholders and controlling Persons and their respective
successors and assigns harmless from and against and in respect of Damages
actually suffered, incurred or realized by such party (collectively, "Buyer
Losses"), arising out of or resulting from or relating to:
(a) any misrepresentation, breach of warranty or breach of any
covenant or agreement made or undertaken by Weatherford or the Seller in this
Agreement or any misrepresentation in or omission from any other agreement,
certificate, exhibit or writing delivered to the Buyer pursuant to this
Agreement;
(b) any Retained Liability; or
(c) any Third Party Claim for personal injury or property damage
arising out of or resulting from releases or disposals of Hazardous Materials
that occurred on the Rosslyn Property prior to the Closing Date.
Notwithstanding the foregoing, neither the Seller nor Weatherford shall be
liable under clause (a) of this Section 7. 1 in respect to a misrepresentation
or breach of warranty or under clause (c) of this SECTION 7.1 in respect to a
Third Party Claim for personal injury or property damage, unless and until the
aggregate amount of any Buyer Losses for which the Buyer is entitled to
indemnification pursuant to such clause from all such Persons exceeds $750,000
and then only for those Buyer Losses that in the aggregate exceed $750,000;
provided, however, (i) liability under clause (b) of this SECTION 7.1 shall not
be so limited and (ii) liability under clause (a) and clause (c) of this SECTION
7.1 shall not exceed $10,000,000 except for Retained Liabilities, which shall
not be limited.
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7.2 INDEMNIFICATION BY THE BUYER. Except as otherwise limited by this
ARTICLE 7 and ARTICLE 8 hereof, the Buyer agrees to indemnify, defend and hold
the Seller, Weatherford and each of its officers, directors, employees, agents,
stockholders and controlling Persons and its successors and assigns harmless
from and against and in respect of Damages actually suffered, incurred or
realized by such party (collectively, "Seller Losses"), arising out of or
resulting from:
(a) any misrepresentation, breach of warranty or breach of any
covenant or agreement made or undertaken by the Buyer in this Agreement or any
misrepresentation in or omission from any other agreement, certificate, exhibit
or writing delivered to the Seller or Weatherford pursuant to this Agreement; or
(b) any Assumed Liability.
7.3 PROCEDURE. All claims for indemnification under this ARTICLE 7 shall
be asserted and resolved as follows:
(a) An Indemnitee shall promptly give the Indemnitor notice of any
matter that an Indemnitee has determined has given or could give rise to a right
of indemnification under this Agreement, stating the amount of the Losses, if
known, and method of computation thereof, all with reasonable particularity, and
stating with particularity the nature of such matter. Failure to provide such
notice shall not affect the right of the Indemnitee to indemnification except to
the extent such failure shall have resulted in liability to the Indemnitor that
could have been actually avoided had such notice been provided within such
required time period.
(b) The obligations and liabilities of an Indemnitor under this
ARTICLE 7 with respect to Losses arising from claims of any third party that are
subject to the indemnification provided for in this ARTICLE 7 ("Third Party
Claims") shall be governed by and contingent upon the following additional terms
and conditions: if an Indemnitee shall receive notice of any Third Party Claim,
the Indemnitee shall give the Indemnitor prompt notice of such Third Party Claim
and the Indemnitor may, at its option, assume and control the defense of such
Third Party Claim at the Indemnitor's expense and through counsel of the
Indemnitor's choice reasonably acceptable to Indemnitee. In the event the
Indemnitor assumes the defense against any such Third Party Claim as provided
above, the Indemnitee shall have the right to participate at its own expense in
the defense of such asserted liability, shall cooperate with the Indemnitor in
such defense and will attempt to make available on a reasonable basis to the
Indemnitor all witnesses, pertinent records, materials and information in its
possession or under its control relating thereto as is reasonably required by
the Indemnitor. In the event the Indemnitor does not elect to conduct the
defense against any such Third Party Claim, the Indemnitor shall pay all
reasonable costs and expenses of such defense as incurred and shall cooperate
with the Indemnitee (and be entitled to participate) in such defense and attempt
to make available to it on a reasonable basis all such witnesses, records,
materials and information in its posse on or under its control relating thereto
as is reasonably required by the Indemnitee. Except for the settlement of a
Third Party Claim that involves the payment of money only and for which the
Indemnitee is totally indemnified by the Indemnitor, no Third Party Claim may be
settled without the written consent of the Indemnitee.
(c) With respect to any Buyer Loss for which the Seller and
Weatherford are required to indemnify and defend the Buyer pursuant to the terms
of this Agreement and that
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requires any removal, remedial, response, clean-up or other corrective action or
any site investigation, groundwater monitoring or post-closure care ("Remedial
Action") to address conditions that cause, contribute to or are associated with
such Buyer Loss, the Seller or Weatherford may elect to implement and complete
such Remedial Action, which Remedial Action shall not be required to achieve
cleanup standards that are more stringent than those required under
Environmental Laws existing as of the Closing Date. The Seller or Weatherford
shall endeavor to plan, design, implement and perform such Remedial Action
without undue delay and in a manner consistent with the operation and
requirements of the Business. The Seller or Weatherford shall provide the Buyer
with copies of all reports, plans and correspondence submitted to any
Governmental Entity with respect to such Remedial Action. The Seller or
Weatherford shall reimburse the Buyer for any actual costs and expenses incurred
by the Buyer as a result of the negligence of the Seller or Weatherford in
implementing and completing such Remedial Action and such obligation shall
continue without limitation by SECTION 7.4.
7.4 LIMITATION. No claim for indemnification under this ARTICLE 7 may be
asserted subsequent to the Survival Period; provided, however, that any claim
for indemnification under this ARTICLE 7 made during the Survival Period shall
be valid and the indemnification obligations owed by an Indemnitor with respect
to a claim under this ARTICLE 7 shall continue to survive notwithstanding that
such claim may not be resolved within the Survival Period. Notwithstanding the
foregoing, any claim for indemnification under this ARTICLE 7 with respect to
the Warranty Obligations and the Allseas Obligations may be asserted without
regard to the limitation set forth in this SECTION 7.4.
7.5 ASSUMPTION OF RETAINED LIABILITIES. Effective following the expiration
of the Survival Period, the Buyer shall be deemed to have assumed, and hereby
does assume, effective as of such date, any and all obligations and liabilities
of the Seller or the Affiliated Companies that may alone, directly or
indirectly, or result from or are caused by the Retained Liabilities; Provided
however, that (i) the Seller, the Affiliated Companies and Weatherford (A) shall
not be entitled to indemnification from the Buyer under this ARTICLE 7 with
respect to the Retained Liabilities and (B) shall continue to be responsible for
any claim by the Buyer for indemnification arising from a Retained Liability, if
such claim is made in accordance with SECTION 7.4. and (ii) the Buyer shall not
assume and shall not be deemed to have assumed any obligations and liabilities
of the Seller or the Affiliated Companies with respect to the Warranty
Obligations and the Allseas Obligations that in the aggregate are in excess of
the Ceiling Amount.
7.6 PAYMENT. Payment of any amounts due pursuant to this ARTICLE 7 shall
be made within ten Business Days after notice is sent by the Indemnitee.
7.7 FAILURE TO PAY INDEMNIFICATION. If and to the extent the Indemnitee
shall make written demand upon the Indemnitor for indemnification pursuant to
this ARTICLE 7 and the Indemnitor shall refuse or fail to pay in full within ten
Business Days of such written demand the amounts demanded pursuant hereto and in
accordance herewith, then the Indemnitee may utilize any legal or equitable
remedy to collect from the Indemnitor the amount of its Losses. Nothing
contained herein is intended to limit or constrain the Indemnitee's rights
against the Indemnitor for indemnity, the remedies herein being cumulative and
in addition to all other rights and remedies of the Indemnitee.
7.8 ADJUSTMENT OF LIABILITY. The amount which an Indemnitee shall be
entitled to receive from an Indemnitor with respect to any indemnifiable Losses
under this ARTICLE 7 shall be
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net of any insurance recovery by the Indemnitee on account of such Losses from
an unaffiliated party.
7.9 RELEASE. In consideration for the agreement of the Seller and
Weatherford to indemnify and defend the Buyer in the manner provided in this
Agreement, the Buyer hereby releases, acquits and forever discharges the Seller
and Weatherford from any claim, demand for cause of action the Buyer may have
against the Seller and/or Weatherford (including, but not limited to, any right
of contribution or reimbursement provided under any Environmental Law), but only
to the extent all such indemnification obligations of the Seller and Weatherford
are performed in full in accordance with the terms of this Agreement.
7.10 EXPRESS NEGLIGENCE. THE FOREGOING INDEMNITIES SET FORTH IN THIS
ARTICLE 7 ARE INTENDED TO BE ENFORCEABLE AGAINST THE PARTIES IN ACCORDANCE WITH
THE EXPRESS TERMS AND SCOPE THEREOF NOTWITHSTANDING TEXAS' EXPRESS NEGLIGENCE
RULE OR ANY SIMILAR DIRECTIVE THAT WOULD PROHIBIT OR OTHERWISE LIMIT INDEMNITIES
BECAUSE OF THE SIMPLE OR GROSS NEGLIGENCE (WHETHER SOLE, CONCURRENT, ACTIVE OR
PASSIVE) OR OTHER FAULT OR STRICT LIABILITY OF ANY OF THE INDEMNFIED PARTIES.
7.11 ADDITIONAL ENVIRONMENTAL INDEMNITY.
(a) In addition to the indemnification by the Seller and Weatherford
provided in SECTION 7.1 hereof, the Seller and Weatherford agree to indemnify,
defend and hold the Buyer and each of its officers, directors, employees,
agents, stockholders and controlling Persons and their respective successors and
assigns harmless from and against Buyer Losses resulting from a Third Party
Claim that requires, or seeks to require, the Buyer to implement and complete,
or to pay the cost of, any Remedial Action at, in, on or under the Rosslyn
Property, provided such Remedial Action is required to address conditions at,
in, on or under the Rosslyn Property that result from releases or disposals of
Hazardous Materials that occurred prior to the Closing Date. The Seller and
Weatherford also agree to indemnify, defend and hold the Buyer and each of its
officers, directors, employees, agents, stockholders and controlling Persons and
their respective successors and assigns harmless from and against Buyer Losses
resulting from a Third Party Claim that requires, or seeks to require, the Buyer
to implement and complete, or to pay the cost of, any Remedial Action at, in, on
or under property adjacent to the Rosslyn Property, provided such Remedial
Action is required to address conditions on such adjacent property that result
from releases or disposals of Hazardous Materials that originated on the Rosslyn
Property prior to the Closing Date and migrated from the Rosslyn Property onto
the adjacent property. The indemnification provided in this SECTION 7.11 shall
not be subject to the $750,000 threshold amount or the $10,000,000 limit
provided in SECTION 7.1 nor to the provisions of SECTION 7.4 and SECTION 7.5. In
addition, the amounts, if any, paid by the Seller and/or Weatherford pursuant to
this SECTION 7.11 shall not be included in the calculation of the aggregate
amount of Buyer Losses for purposes of determining if such losses exceed the
$750,000 threshold provided for in SECTION 7.1. Except as set forth in this
SECTION 7. 11(A), the indemnification provided in this SECTION 7.11 shall be
subject to the procedures and requirements contained in this ARTICLE 7. For
purposes of this SECTION 7 11, the "Rosslyn Property shall refer to the property
identified as 11601 North Houston - Rosslyn Road, Houston, Texas, and more
particularly described in the Lease Agreement dated July 15, 1990, originally
executed by and between Dreco, Inc. and the Seller, which lease was Extended by
Lease Extension and Modification Agreement
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dated February 15, 1995, by and between MIP Rosslyn Road LP, as
successor-in-interest to Dreco, Inc., and the Seller.
(b) The indemnification provided in this SECTION7.LL specifically
covers, but is not limited to, the soil and groundwater contamination (the
"Contamination") discovered by the Buyer on the Rosslyn Property during its
preclosing environmental assessment of the Rosslyn Property. The Seller does not
believe that the Contamination was caused by the business operations that the
Seller conducted on the Rosslyn Property, and, consequently, believes that any
Remedial Action required with respect to the Contamination would be the
responsibility of the landlord or others, and not the responsibility of either
the Buyer or the Seller. In addition, the Seller and the Buyer recognize that it
is in the interest of both parties to avoid any claim that the business
operations of the Buyer after the Closing contributed to the Contamination. The
Buyer and the Seller have reviewed the business operations that the Buyer
intends to conduct on the Rosslyn Property, including the materials and
processes used in such operations, and have concluded that the Buyer's proposed
operations could not contribute to the Contamination. To protect the interests
of both the Buyer and the Seller, the Buyer agrees that it will not make any
material changes in the business operations conducted on the Rosslyn Property or
in the materials and processes used in such operations without the consent of
the Seller and Weatherford, which consent will not be withheld unreasonably, if
such change would increase the volume of any waste generated at the Rosslyn
Property, result in the creation of a new waste or change the manner in which
any waste generated on the Rosslyn Property is disposed of, treated or stored.
In addition, if the Buyer makes any such material changes to its business
operations, it also will implemnent any practices that the Buyer, the Seller and
Weatherford determine are necessary to ensure that the changed operations will
not contribute to the Contamination. The Seller and Weatherford shall have the
right, during normal business hours and upon reasonable notice, but not more
frequently than monthly, to inspect the Buyer's operations at the Rosslyn
Property to ensure that such operations conform to the description of such
operations provided by the Buyer to the Seller and Weatherford. If the Buyer
elects to extend the lease of the Rosslyn Property beyond its current expiration
date of July 14, 2000, the indemnity provided in this SECTION 7.11 shall
terminate with respect to any claim for indemnification under this SECTION 7.11
that is not made prior to July 14, 2000.
(c) The Seller and Weatherford have agreed to provide this
additional environmental indemnification to the Buyer solely as an inducement to
the Buyer to close this transaction and such agreement does not constitute, and
will not be construed as, an admission by either the Seller or Weatherford that
they, or either of them, are responsible for, or have any liability, with
respect to, the Contamination, other than to indemnify the Buyer in the manner
provided in this SECTION 7.11.
7.12 SPECIAL ENVIRONMENTAL REMEDIATION. In addition to the indemnification
provided in SECTION 7.1 and SECTION 7.11. the Seller and Weatherford agree to
implement and complete as promptly as reasonably practicable after the Closing:
(a) the removal of the underground storage tank located at the property
identified as 10700 East Independence, Tulsa, Oklahoma (the "Tulsa Property")
and any Remedial Action required by the Oklahoma Department of Environmental
Quality or other applicable Governmental Entity in response to releases, if any,
from such underground storage tank, (b) the removal of the underground storage
tank located at the property identified as 2005 80th Avenue, Edmonton, Alberta,
Canada (the "Edmonton Property") and, if there have been releases from such
underground storage tank, the Remedial Action, if any, required by the
applicable Governmental Entity in response to such releases, and (e) the removal
of soils at
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the Rosslyn Property, the Tulsa Property and the Edmonton Property that the
Seller and Weatherford determine, based on the existence of surface soil
staining, are required to be removed by applicable Environmental Laws or by
general operating standards maintained by the Seller and Weatherford. The Buyer
agrees to provide the Seller and Weatherford and their representatives and
contractors with access to the Rosslyn Property, the Tulsa Property and the
Edmonton Property for purposes of completing the above described actions and
will cooperate, to the extent necessary, with the Seller and Weatherford in the
filing of any claim or claims for reimbursement under the Oklahoma Underground
Storage Tank Trust Fund or other applicable government program. The Seller and
Weatherford intend to comply with applicable Environmental Laws, including
applicable reporting requirements, in the course of completing the above
described actions and will provide the Buyer a copy of reports or documents
evidencing the completion of the above described actions. Neither the Seller nor
Weatherford shall have any obligation to replace the underground storage tank at
the Tulsa Property or at the Edmonton Property.
ARTICLE 8
NATURE OF STATEMENTS AND SURVIVAL OF COVENANTS,
REPRESENTATIONS, WARRANTIES AND AGREEMENTS
The several representations and warranties of the parties to this
Agreement shall survive the Closing Date and shall remain in full force and
effect for a period of three years following the Closing Date, for the
representations and warranties set forth in SECTION 1.6(E), SECTION 2.13 and
SECTION 7.1(C), and (b) two years following the Closing Date, for all other
representations and warranties (the period during which the representations and
warranties shall survive being referred to herein with respect to such
representations and warranties as the "Survival Period"), and shall be effective
with respect to any inaccuracy therein or breach thereof (and a claim for
indemnification under ARTICLE 7 hereof may be made thereon) if a written notice
asserting the claim shall have been duly given in accordance with ARTICLE 7
hereof within the Survival Period with respect to such matter. All covenants and
agreements contained herein shall survive without limitation. Any claim for
indemnification made during the Survival Period shall be valid and the
representations and warranties relating thereto shall remain in effect for
purposes of such indemnification notwithstanding that such claim may not be
resolved within the Survival Period.
ARTICLE 9
TERMINATION
9.1 EVENTS OF TERMINATION. The obligation to close the transactions
contemplated by this Agreement may be terminated by:
(a) mutual agreement of the Buyer and the Seller;
(b) the Buyer, if a material default shall be made by the Seller in
the observance or in the due and timely performance by the Seller of any
agreements and covenants of the Seller herein contained, or if there shall have
been a breach by the Seller of any of the warranties and
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representations of the Seller herein contained, and such default or breach has
not been cured or has not been waived within 20 days of written notice thereof;
(c) the Seller, if a material default shall be made by the Buyer in
the observance or in the due and timely performance by the Buyer of any
agreements and covenants of the Buyer herein contained, or if there shall have
been a breach by the Buyer of any of the warranties and representations of the
Buyer herein contained, and such default or breach has not been cured or has not
been waived within 20 days of written notice thereof; or
(d) the Buyer or the Seller, provided the terminating party has not
materially breached any of its agreements, covenants, representations or
warranties, if the Closing shall not have occurred on or before June 30, 1997.
9.2 LIABILITY UPON TERMINATION. If the obligation to close the
transactions contemplated by this Agreement is terminated pursuant to any
provision of this Article 9 then this Agreement shall forthwith become void and
there shall not be any liability or obligation with respect to the terminated
provisions of this Agreement on the part of the Seller, Weatherford or the Buyer
except and to the extent such termination is pursuant to SECTION 9.1(B) or
SECTION 9.1(C); provided, however, that the termination of this Agreement shall
not relieve any party of its obligations and liabilities under this ARTICLE 9.
9.3 NOTICE OF TERMINATION. The parties hereto may exercise their
respective rights of termination under this ARTICLE 9 only by delivering written
notice to that effect to the other party or parties, provided, however, that
such notice must be received on or before the Closing Date.
ARTICLE 10
DEFINITIONS OF CERTAIN TERMS
In addition to terms defined elsewhere in this Agreement, the following
terms shall have the meanings assigned to them herein, unless the context
otherwise indicates, both for purposes of this Agreement and the Disclosure
Schedule:
10.1 "ACCOUNTS RECEIVABLE" shall have the meaning given such term in
SECTION 1.1(A)(III) hereof
10.2 "ACCRUED LIABILITIES" shall mean the accrued liabilities of the
Seller and the Affiliated Companies to the extent accrued and reflected on the
financial statements of the Seller and the Affiliated Companies, excluding
intercompany liabilities, Taxes and accrued Taxes.
10.3 "ACQUISITION PROPOSAL" shall have the meaning given such term in
SECTION 4.11 hereof.
10.4 "AFFILIATE" shall mean, with respect to any Person, an individual or
entity that, directly or indirectly, controls, is controlled by or is under
common control with such Person.
10.5 "AFFILIATED COMPANIES" shall mean Pipeline Induction Heat Limited,
CRC-Evans Canada Ltd., CRC-Evans Automatic Welding, Inc., CRC-Evans Holland
B.V., CRC-Evans Limited,
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CRC-Evans Pipeline International (UK) Limited, CRC-Evans Rehabilitation Systems,
Inc. and CRC-Evans Services Limited.
10.6 "AGREEMENT" shall mean this Amended and Restated Asset Purchase
Agreement among the Seller, Weatherford and the Buyer, as amended from time to
time by such parties.
10.7 "ALLSEAS CONTRACT" shall mean the Purchase Order Contract dated June
9, 1993, as amended by Novation Agreement dated April 3, 1995, and Agreement
dated December 27, 1995, by and between the Seller and Societe D'Exploitation du
Solitaire S.A., as successor-in-interest to Pacific Ocean Shipping Corporation.
10.8 "ALLSEAS OBLIGATIONS" shall mean all costs actually incurred by the
Buyer and its Affiliates in connection with the completion of the Allseas
Contract, including, without limitation, court costs and attorney fees incurred
in connection with litigation related to the Allseas Contract, costs incurred in
connection with providing equipment and products and performing services
required by the Allseas Contract, costs incurred to satisfy warranty claims made
pursuant to the Allseas Contract, amounts drawn under any letter of credit
posted by the Buyer or its Affiliates to secure performance of the Allseas
Contract and amounts paid by the Buyer or its parent company in respect of any
guarantee provided by such parent company to secure performance of the Allseas
Contract; PROVIDED, HOWEVER, that "Allseas Obligations" shall not include any
costs incurred by the Buyer and its Affiliates as a result of (a) the gross
negligence or willful misconduct of the Buyer or any of its affiliates, agents
or representatives, (b) personal injury or property damage resulting in
connection with completion of the Allseas Contract by the Buyer or its
Affiliates, agents or representatives following the Closing, (c) the extension
of the term of the Allseas Contract or the warranties given by the Seller
thereunder by the Buyer or any of its Affiliates, without the prior written
approval of the Seller, which approved shall not be unreasonably withheld, or
(d) the agreement by the Buyer or any of its Affiliates to modify the terms of
the Allseas Contract to increase the obligations of the Buyer or any of its
Affiliates thereunder, including, without limitation, the scope of the
warranties given by the Seller thereunder, or the costs related thereto beyond
that which existed as of the Closing Date, without the prior written approval of
the Seller, which approval shall not be unreasonably withheld.
10.9 "APPLICABLE LAW" means any statute, law, rule or regulation or any
judgment, order, writ, injunction or decree of any Governmental Entity to which
a specified Person or property is subject.
10.10 "ASSUMED LIABILITIES" shall have the meaning given such term in
SECTION 1.4(A) hereof.
10.11 "BUSINESS" shall mean the businesses and operations of the Seller
and the Affiliated Companies relating to (i) the design, manufacture, sales and
rental of right-of-way pipeline construction and rehabilitation equipment and
services provided in connection therewith, (ii) the design, manufacture, sale
and commissioning of pipe handling, cleaning and coating equipment, (iii) the
design, manufacture, sale and rental of automatic (mechanized) pipeline welding
systems and ancillary sales and services provided in connection therewith and
(iv) pipeline field joint coating services and related equipment rentals and
sales, the manufacture and sale of pipeline induction heating systems, and
pipeline coating: rehabilitation services.
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10.12 "BUSINESS DAY" shall mean any day other than a Saturday, Sunday or
other day on which commercial banks in Houston, Texas are authorized by law to
close.
10.13 "BUYER" shall have the meaning specified in the preamble.
10.14 "BUYER LOSSES" shall have the meaning given such term in SECTION 7.1
hereof.
10.15 "CASH PURCHASE PRICE" shall mean $35,241,430 plus (a) the sum of (i)
the amount, if any, by which the sum of the book value of the net Notes and
Accounts Receivable, the Inventories and the Seller's prepaids (including
Prepaid Expenses and Prepaid Deferred Costs) on the Closing Date exceeds
$29,772,430, and (ii) the amount, if any, by which $11,782,000 exceeds the book
value of the sum of (x) the Current Notes Payable and Accounts Payable
(excluding intercompany payables and Income Taxes Payable), (y) the amount of
Deferred Income reflected on the Final Statement and (z) the Accrued Liabilities
(excluding intercompany liabilities) reflected on the Final Statement, and minus
(b) the sum of (i) the amount, if any, by which $29,772,430 exceeds the book
value of the net Notes and Accounts Receivable, the Inventories and the Seller's
prepaids (including Prepaid Expenses and Prepaid Deferred Costs) on the Closing
Date and (ii) the amount, if any, by which the book value of the sum of (x) the
Current Notes Payable and Accounts Payable (excluding intercompany payables and
Income Taxes Payable), (y) the amount of Deferred Income reflected on the Final
Statement and (z) the Accrued Liabilities (excluding intercompany liabilities)
reflected on the Final Statement exceeds [$11,082,000]. For purposes of this
definition, (a) the book value of the Notes and Accounts Receivable,
Inventories, the Seller's prepaids (including Prepaid Expenses and Prepaid
Deferred Costs), Current Notes Payable and Accounts Payable (excluding
intercompany payables and Income Taxes Payable), Deferred Income and Accrued
Liabilities (excluding intercompany liabilities) shall be determined under
generally accepted accounting principles as consistently applied by the Seller,
(b) "Accounts Receivable" shall not include any receivables owed by Great Plains
Pipeline to the Seller and (c) Accrued Liabilities reflected on the Final
Statement shall not reflect any reduction in reserves related to the Warranty
Obligations and the Allseas Obligations. Capitalized term is used in this
SECTION 10.13 shall refer to such items reflected on the balance sheet of the
Seller.
10.16 "CEILING AMOUNT" shall mean an aggregate of $12,000,000 of Warranty
Obligations and Allseas Obligations in excess of the Threshold Amount.
10.17 "CERCLA" shall mean the Comprehensive Environmental Response,
Compensation and Liability Act, 42 U.S.C. ss. 9601 et seq.
10.18 "CREDIT COMMITMENT" shall have the meaning given such term in
SECTION 5.11 hereof.
10.19 "CLOSING" shall mean the closing of the transactions contemplated by
this Agreement.
10.20 "CLOSING DATE" shall have the meaning given such term in SECTION 1.3
hereof
10.21 "CLOSING PAYMENT" shall have the meaning given such term in SECTION
1.4(B) hereof.
10.22 "CODE" shall mean the Internal Revenue Code of 1986, as amended from
time to time, or similar provisions of legislation replacing such law from time
to time.
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10.23 "COMMONLY CONTROLLED ENTITY" shall have the meaning given such term
in SECTION 2.16(C) hereof.
10.24 "CONSENT AMOUNT" shall mean an aggregate of $9,000,000 of Warranty
Obligations, Allseas Obligations and Estimated Demand Costs (as adjusted
pursuant to any good faith negotiations, mediation or arbitration proceedings
pursuant to SECTION 4.14(B) hereof) in excess of the Threshold Amount.
10.25 "CONTRACTS AND OTHER, AGREEMENTS" shall mean all contracts,
agreements, understandings, indentures, notes, bonds, loans, instruments,
leases, mortgages, franchises, licenses, commitments or binding arrangements,
whether express or implied, oral or written, to which the Seller is a party or
bound or to which its properties or assets are subject.
10.26 "DAMAGES" shall mean any and all liabilities, losses, damages,
demands, assessments, claims, costs and expenses (including interest, awards,
judgments, penalties, settlements, fines, costs of remediation, diminutions in
value, costs and expenses incurred in connection with investigating and
defending any claims or causes of action (including, without limitation,
attorneys' fees and expenses and all fees and expenses of consultants and other
professionals)).
10.27 "DEBT OBLIGATIONS" shall mean any contract, agreement, indenture,
note, mortgage, deed of trust, security agreement or other instrument relating
to the borrowing of money or the pledge of collateral therefor or any guarantee
or other contingent liability in respect of any indebtedness or obligation of
any Person (other than the endorsement of negotiable instruments for deposit or
collection in the ordinary course of business).
10.28 "DEMAND" shall mean a written notice received by the Buyer or its
Affiliates demanding performance or payment that, if performed or paid, would
result in a Warranty Obligation or an Allseas Obligation.
10.29 "DISCLOSURE SCHEDULE" shall mean the amended disclosure schedule
delivered to the Buyer.
10.30 "DOCUMENTS AND OTHER PAPERS" shall mean and include any document,
agreement, instrument, certificate, writing, notice, consent, affidavit, letter,
telegram, telex, statement, file, computer disk, microfiche or other document in
electronic format, schedule, exhibit or any other paper or record whatsoever.
10.31 "ENTITLEMENTS" shall `have the meaning given such term in SECTION
1.1(A)(VII) hereof.
10.32 "ENVIRONMENTAL LAWS" shall mean all federal, state, or municipal
laws, rules, regulations, statutes, ordinances or orders of any Governmental
Entity relating to (a) the control of any potential pollutant or protection of
the air, water or land, (b) solid, gaseous or liquid waste gene ration,
handling, treatment, storage, disposal or transportation and (c) exposure to
hazardous, toxic or other substances alleged to be harmful. "Environmental Laws"
shall include, but not be limited to, the Clean Air Act, 42 U.S.C. SECTION 7401
et seq., the Resource Conservation Recovery Act, 42 U.S.Q. SECTION 6901 et seq.,
the Superfund Amendments and Reauthorization Act, 42 U.S. C. SECTION 9601 et
seq., the Toxic Substances Control Act, 15 U,S.C. SECTION 2601 et seq., the
Water Pollution Control Act, 33 U.S.C. SECTION 1251 et seq., the Safe Drinking
Water Act, 42 U.S. C. SECTION 300f et seq. and CERCLA. The term "Environmental
Laws" shall also include all state, local and municipal laws, rules,
regulations,
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statutes, ordinances and orders dealing with the same subject matter or
promulgated by any governmental or quasi-governmental agency thereunder or to
carry out the purposes of any federal, state, local and municipal law.
"Environmental Laws" does not include the Occupational Safety and Health Act or
any other federal, state or local law, statute, ordinance, regulation or order
governing worker safety or workplace conditions.
10.33 "ENVIRONMENTAL PERMIT" shall mean any permit, license, approval,
registration, identification number or other authorization with respect to the
Transferred Assets or the Business under any applicable Environmental Law.
10.34 "EQUIPMENT" shall mean all machinery, transportation equipment,
tools, equipment, furnishings and fixtures owned, leased or subject to a
contract of purchase and sale, or lease commitment, that are used in the
Business as operated by the Seller.
10.35 "ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended from time to time
10.36 "ESTIMATED DEMAND COSTS" shall have the meaning given such term in
SECTION 4.14(B) hereof
10.37 "EXCLUDED ASSETS" shall have the meaning given such term in SECTION
L.2 hereof
10.38 "EXCLUDED EMPLOYEES" shall have the meaning given such term in
SECTION 4.3 hereof
10.39 "FINAL STATEMENT" shall have the meaning given such term in SECTION
1.5(A) hereof
10.40 "FINANCIAL STATEMENTS" shall have the meaning given such term in
SECTION 2.7 hereof
10.41 "GOVERNMENTAL ENTITY" shall mean any arbitrator, court,
administrative or regulatory agency, commission, department, board or bureau or
body or other government (domestic or foreign) or authority or instrumentality
or any entity or Person exercising executive, legislative, judicial, regulatory
or administrative functions of or pertaining to government (domestic or
foreign).
10.42 "HSR ACT" shall mean the Hart-Scott-Rodino Antitrust Improvements
Act of 1976.
10.43 "HAZARDOUS MATERIALS" shall mean any (a) petroleum or petroleum
products, (b) hazardous substances as defined by ss. 101(14) of CERCLA and (c)
any other chemical, substance or waste that is regulated by any Governmental
Entity under any Environmental Law.
10.44 "INDEMNITEE" shall mean the Person or Persons indemnified or
entitled, or claiming to be entitled to be indemnified, pursuant to the
provisions of SECTION 7.1 or SECTION 7.2 hereof. as the case may be.
10.45 "INDEMNITOR" shall mean the Person or Persons having the obligation
to indemnify pursuant to the provisions, of SECTION 7.1 or SECTION 7.2 hereof,
as the case may be.
10.46 "INVENTORIES" shall mean all inventories of furnished goods, tooling
inventory, work in progress and raw materials relating to the Business, wherever
situated.
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10.47 "LEASEHOLD INTERESTS" shall mean the interests of the Seller and the
Affiliated Companies as lessee in the real property listed in SECTION 1.1(A)(V)
of the Disclosure Schedule.
10.48 "LIEN" shall mean any lien, pledge, claim, charge, security interest
or other encumbrance, option, defect or other rights of any third Person of any
nature, whatsoever.
10.49 "LOSSES" shall mean Seller Losses or Buyer Losses, as the case may
be.
10.50 "MATERIAL ADVERSE EFFECT" shall mean a loss to the Business in
excess of $2,000,000, or a material adverse effect on the assets, business,
operations or financial or physical condition of the Transferred Assets or the
Business or on the ability of the Seller to perform its obligations under this
Agreement, or that would constitute a criminal violation of law involving a
felony.
10.51 "NET CASH PURCHASE PRICE" shall have the meaning given such term in
SECTION 1.4(A) hereof.
10.52 "NOTES PAYABLE" shall mean the obligations of the Seller under the
notes described in SECTION 2.5(A)(IV) of the Disclosure Schedule.
10.53 "NOTICE AMOUNT" shall mean an aggregate of $2,500,000 of Warranty
Obligations, Allseas Obligations and Estimated Demand Costs (as adjusted
pursuant to any good faith negotiations, mediation or arbitration proceedings
pursuant to SECTION 4.14(B) hereof) in excess of the Threshold Amount.
10.54 "OPINION AMOUNT" shall mean an aggregate of $6,000,000 of Warranty
Obligation, Allseas Obligations and Estimated Demand Costs (as adjusted pursuant
to any good faith negotiations, mediation or arbitration proceedings pursuant to
SECTION 4.14(B) hereof) in excess of the Threshold Amount.
10.55 "PERMITTED LIENS"shall mean (a) Liens created by the Buyer, (b)
Liens for taxes, assessments and governmental charges not yet due and payable;
(ii) statutory liens arising in the ordinary course of business, relating to
obligations as to which there is no default on the part of the Seller or the
Affiliated Companies; and (c) any other Liens that in the aggregate do not
exceed $50,000; provided, however, that at the Closing "Permitted Liens" on Real
Property shall not include any Lien for taxes, assessments or governmental
charges filed of record against the Real Property, or statutory liens filed of
record against the Real Property, unless any such Liens are being diligently
contested in good faith by appropriate proceedings.
10.56 "PERSON" shall mean a corporation, an association, a partnership, an
organization, a business, an individual or a Governmental Entity.
10.57 "PRE-CLOSING OBLIGATIONS" shall mean, other than with respect to the
Assumed Liabilities, all liabilities and obligations of the Seller and the
Affiliated Companies relating to (i) acts, events or omissions by any Person or
circumstances existing at or prior to the Closing Date, (ii) goods or services
provided to or for the benefit of the Seller or any of its Affiliates prior to
the Closing Date, (iii) goods or services provided, produced, distributed or
sold by or on behalf of the Seller or any of its Affiliates or licensees prior
to the Closing Date, (iv) any pending or threatened litigation or claims made or
threatened (A) on or prior to the Closing Date or (B) after the Closing Date if
based upon acts, events or omissions by any Person or circumstances existing at
or prior to
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the Closing Date, (v) any Retained Liabilities, (vi) the conduct of the
Business, the ownership or operation of the Transferred Assets or any benefit
realized by the Seller or any of its Affiliates prior to the Closing Date, (vii)
contracts, agreements and other commitments that were required to be scheduled
in SECTION 2.5(A) of the Disclosure Schedule but were not scheduled and (viii)
Debt Obligations.
10.58 "PROPRIETARY INFORMATION" shall mean collectively (a) Proprietary
Rights and (b) any and all other information and material proprietary to the
Seller or the Affiliated Companies, owned, possessed or used by the Seller or
the Affiliated Companies, whether or not such information is embodied in writing
or other physical form, and which is not generally known to the public, that (i)
relates to financial information regarding the Seller, the Affiliated Companies
or the Business, including, without limitation, (A) business plans and (B)
sales, financing, pricing and marketing procedures or methods of the Seller or
the Affiliated Companies or (ii) relates to specific business matters concerning
the Seller or the Affiliated Companies, including, without limitation, the
identity of or other information regarding sales personnel or customers of the
Seller or the Affiliated Companies.
10.59 "PROPRIETARY RIGHTS" means all patents, inventions, shop rights,
know how, trade secrets, designs, plans, manuals, computer software,
specifications, confidentiality agreements, confidently information and other
proprietary technology and similar information; all registers and unregistered
trademarks, service marks, logos, trade and corporate names (including the names
"CRC-Evans Pipeline International", "Pipeline Induction Heat", "CRC-Evans
Canada" and "CRC-Evans Automatic Welding" and all derivations thereof) and all
other trademark rights; all registered and unregistered copyrights; and all
registrations for, and applications for registration of, any of the foregoing
that are used in the conduct of the Business.
10.60 "PURCHASE PRICE" shall have the meaning given such term in SECTION
1.4(A) hereof.
10.61 "QUARTERLY REPORT" shall have the meaning given such term in SECTION
4.14(B) hereof
10.62 "REAL PROPERTY" shall mean the owned real property of the Seller and
the Affiliated Companies.
10.63 "REMEDIAL ACTION" shall have the meaning given such term in SECTION
713(C).
10.64 "RETAINED LIABILITIES" shall have the meaning given such term in
SECTION L.6 hereof.
10.65 "SELLER" shall have the meaning specified in the preamble.
10.66 "SELLER LOSSES" shall have the meaning given such term in SECTION
7.2 hereof.
10.67 "SURVIVAL PERIOD" she have the meaning given such term in ARTICLE 8
hereof
10.68 "TAXES" shall mean all federal, state, local, foreign and other
taxes, charges, fees, duties, levies, imposts, customs or other assessments,
including, without limitation, all net income, gross income, gross receipts,
sales, use, ad valorem, transfer, franchise, profits, profit share, license,
lease, service, service use, value added, withholding, payroll, employment,
excise, estimated, severance, stamp, occupation, premium, property, windfall
profits, or other taxes, fees, assessments, customs, duties, levies, imposts, or
charges of any kind whatsoever, together with any interest,
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penalties, additions to tax, fines or other additional amounts imposed thereon
or related thereto, and the term "Tax" means any one of the foregoing Taxes.
10.69 "TERMINATED EMPLOYEES" shall have the meaning given such term in
SECTION 4.3(A) hereof
10.70 "THIRD PARTY CLAIMS" shall have the meaning given such term in
SECTION 7.3(B) hereof
10.71 "THRESHOLD AMOUNT"shall mean an aggregate of $2,800,000 of Warranty
Obligations and Allseas Obligations.
10.72 "TRADE PAYABLES" shall mean those obligations of the Seller and the
Affiliated Companies relating to the Provision of goods and services to the
Seller and the Affiliated Companies for the conduct of the Business in the
ordinary course of business of the Seller and the Affiliated Companies that
relate to the Transferred Assets and that are classified as trade payables or
accounts payable in the Financial Statements in accordance with generally
accepted accounting principles as consistently applied by the Seller.
10.73 "TRANSFERRED ASSETS" shall have the meaning given such term in
SECTION 1.1(A) hereof
10.74 "TRANSFERRED EMPLOYEES" shall have the meaning given such term in
SECTION 4.3(A) hereof
10.75 "WARN ACT" shall mean the Worker Adjustment and Retraining
Notification Act, 29 U.S.C. ss.ss. 2101-2109.
10.76 "WARRANTY OBLIGATIONS" shall mean costs (including court costs and
attorney fees in connection with litigation) actually incurred by the Buyer and
its Affiliates as a result of claims made with respect to warranties given or
made by the Seller or the Affiliated Companies on or prior to the Closing Date
that relate to products shipped by the Seller or the Affiliated Companies in the
conduct of the Business on or prior to the Closing and services rendered by the
Seller or the Affiliated Companies with regard to commissioning of such products
(and, in the case of Pipeline Induction Heat Limited, CRC-Evans Canada Ltd.,
CRC-Evans Automatic Welding, Inc. and the automatic welding division of the
Seller, that relate to any services rendered in the conduct of the Business) in
the conduct of the Business on or prior to the Closing; provided, however, that
"Warranty Obligations" shall not include any costs incurred that result from (a)
the failure of the Buyer or any of its Affiliates after the Closing to properly
store, maintain and transport the Inventories, (b) the gross negligence or
willful misconduct of the Buyer or any of its Affiliates, agents or
representatives, (c) personal injury, property damage, lost profits or
consequential damages resulting from satisfaction of Warranty Obligations by the
Buyer or its Affiliates, agents or representatives following the Closing, (d)
the extension of the term of any warranties by the Buyer or any of its
Affiliates, without the prior written approval of the Seller, which approval
shall not be unreasonably withheld, or (e) the agreement by the Buyer or any of
its Affiliates to increase the scope of any warranty or the costs related
thereto beyond that which existed as of the Closing Date, without the prior
written approval of the Seller, which approval shall not be unreasonably
withheld.
10.77 "WEATHERFORD" shall have the meaning specified in the preamble.
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ARTICLE 11
MISCELLANEOUS
11.1 CONDUCT OF THE BUSINESS. The Seller covenants and agrees with the
Buyer that from and after the date hereof until the Closing, except as expressly
authorized by this Agreement or as expressly consented to in writing by the
Buyer, the Seller shall, and Weatherford shall cause the Seller to:
(a) operate the Business and the Transferred Assets only in the
usual, regular and ordinary manner with a view to maintaining the goodwill that
the Seller now enjoys and, to the extent consistent with such operation, will
use all reasonable efforts to preserve intact its present business organization,
keep available the services of its employees and preserve its relationship with
its customers, suppliers, jobbers, distributors and other Persons having
business relations with it;
(b) use all reasonable efforts to maintain the Transferred Assets in
a state of repair, order and condition consistent with its usual practice in
connection with the Business;
(c) maintain its books of account and records relating to the
Business in the usual, regular and ordinary manner, in accordance with the
Seller's usual accounting practices applied on a consistent basis;
(d) comply in all material respects with all statutes, laws, orders
and regulations applicable to it and to the conduct of the Business;
(e) not sell, assign, transfer, lease or otherwise dispose of any
Equipment or any of the other Transferred Assets except for dispositions of
Inventories for value in the ordinary course of time Business consistent with
past practice;
(f) preserve and maintain all rights that it now enjoys in and to
the Proprietary Rights and not sell, assign, transfer, lease or otherwise
dispose of any Proprietary Rights other than to the Buyer pursuant to the terms
of this Agreement;
(g) other than Permitted Liens, not mortgage, pledge or otherwise
create a security interest in any of the Transferred Assets or permit there to
be created or exist any Liens thereon that would not be released upon the
transfer of the Transferred Assets to the Buyer pursuant to this Agreement;
(h) not enter into any contract, commitment or lease in relation to
the Business (i) that includes terms that are inconsistent in any material
respect with the Seller's prevailing pricing practices, (ii) pursuant to which
the Seller is to receive in excess of $200,000 or is required to expend in
excess of $50,000, (iii) that is out of the ordinary course of the Business or
(iv) that is with an Affiliate of the Seller or that would bind the Buyer under
a contract or other obligation with the Seller or any of its Affiliates;
(i) not permit any insurance policy naming it as a beneficiary or a
loss payee relating to the Business or the Transferred Assets to be canceled or
terminated or any of the coverage thereunder to lapse unless simultaneously with
such termination or cancellation replacement policies providing substantially
the same coverage are in full force and effect;
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(j) promptly notify the Buyer in writing if the Seller or
Weatherford becomes aware of any change that shall have occurred in the
Transferred Assets or the Business that would reasonably be expected to have a
Material Adverse Effect whether or not occurring in the ordinary course of the
Business consistent with past practice;
(k) not create, incur, guarantee or assume any indebtedness for
borrowed money in respect of the Business, other than draws not in excess of
$30,000 in the aggregate outstanding at any time pursuant to existing overdraft
agreements relating to the operations of Pipeline Induction Heat Limited;
(l) not enter into, adopt or (except as may be required by law)
amend or terminate any agreement, plan or other arrangement for the benefit or
welfare of any employee of the Business; not increase in any manner the
compensation or fringe benefits of any employee of the Business other than merit
increases planned for January 1997 in an aggregate amount not to exceed
$375,000; not pay to any employee of the Business any benefit not required by
any employee benefit agreement, trust, plan, fund or other arrangement as in
effect on the date hereof;
(m) not make any capital expenditure relating to the Business that,
individually, is in excess of $50,000, or that, in the aggregate with all other
capital expenditures made after the date of this Agreement, is in excess of
$250,000;
(n) not amend, modify, or change any existing lease, contract or
agreement relating to the Business, other than in the ordinary course of the
Business consistent with past practice;
(o) not waive, release, grant or transfer any rights relating to the
Business, other than in the ordinary course of the Business consistent with past
practice;
(p) not accelerate collection of any notes or accounts receivable
generated by the Business, other than in the ordinary course of the Business
consistent with past practice;
(q) not delay payment of any account payable or other liability of
the Seller relating to the Business beyond its due date or the date when such
liability would have been paid in the ordinary course of the Business consistent
with past practice;
(r) not allow the levels of raw materials, work-in-process, finished
goods, supplies and other materials included in the inventory of the Business to
vary in any material respect from the levels customarily maintained by the
Seller in the ordinary course of the Business consistent with past practice;
(s) not change any of the accounting principles or practices used by
it relating to the Business, except for any change required by reason of a
concurrent change in generally accepted accounting principles and notice of
which is given in writing by the Seller to the Buyer;
(t) not take any action that would or might make any of the
representations or warranties of the Seller contained in this Agreement untrue
or inaccurate as of any time from the date of this Agreement to the Closing or
would or might result in any of the conditions set forth in this Agreement
not-being satisfied; or
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(u) not authorize or propose, or agree in writing or otherwise to
take, any of the actions described in this SECTION 11.1.
11.2 GOVERNMENTAL FILINGS. As promptly as practicable after the execution
of this Agreement, the Buyer and Weatherford shall, in cooperation with the
other, file any reports or notifications that may be required to be filed by it
under applicable law, including filings under the HSR Act: with the Federal
Trade Commission and the Antitrust Division of the Department Justice, and shall
furnish to the other all such information in its possession as may be necessary
for the completion of the reports or notifications to be filed by the other.
11.3 ACCESS TO INFORMATION; CONFIDENTIALITY. Prior to the Closing, the
Buyer may make such investigation of the business and properties of the Seller
as the Buyer may desire and, upon reasonable notice, the Seller shall give to
the Buyer and its counsel, accountants and other representatives reasonable
access, during normal business hours throughout the period prior to the Closing,
to the property, books, commitments, agreements, records, files and personnel of
the Seller, and the Seller shall furnish to the Buyer during that period all
copies of documents and information concerning the Seller (all of such documents
and information being referred to herein as "Confidential Information") as the
Buyer may reasonably request, subject to Applicable Law; provided, however, that
no investigation pursuant to this SECTION 11.3 shall affect any representation
or warranty of the Seller contained in this Agreement or in any agreement,
instrument or document delivered pursuant hereto or in connection herewith. The
Seller acknowledges and agrees that irreparable damage would occur in the event
any Confidential Information regarding the Transferred Assets or the Business
were disclosed to or utilized on behalf of any Person that is in competition in
any material respect with the Business. Accordingly, the Seller covenants and
agrees that after the Closing it will not, directly or indirectly, without the
prior written consent of the Buyer, use or disclose any Confidential
Information, except as required by law or to authorized representatives of the
Buyer. For purposes of this SECTION 11.3, it is agreed that the confidentiality
obligations of the parties shall not extend to any information that (i) was or
becomes generally available to the public other than as a result of disclosure
by a party hereto or (ii) was or becomes available to a party hereto on a
nonconfidential basis from a source not a party hereto, provided that such
source is not known by by a party hereto to be bound by a confidentiality
agreement with respect to such Confidential Information.
11.4 PUBLIC ANNOUNCEMENTS. Subject to applicable securities law or stock
exchange requirements, none of the Buyer, the Seller or Weatherford shall,
without the prior approval of the other parties, issue, or permit any of their
respective partners, directors, officers, employees, agents or Affiliates to
issue, any press release or other public announcement with respect to this
Agreement or the transactions contemplated hereby.
11.5 OTHER ACTION. Each of the parties shall use its reasonable efforts to
cause the fulfillment at the earliest practicable date but, in any event, prior
to the Closing Date of all of the conditions to their respective obligations to
consummate the transactions under this Agreement.
11.6 EXPENSES. Except as otherwise set forth herein, and whether or not
the transactions contemplated by this Agreement shall be consummated, each party
agrees to pay, without right of reimbursement from any other party, the costs
incurred by such party incident to the preparation and execution of this
Agreement and performance of its obligations hereunder, including without
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limitation the fees and disbursements of legal counsel, accountants and
consultants employed by such party in connection with the transactions
contemplated by this Agreement.
11.7 NOTICES. All notices, requests, consents, directions and other
instruments and communications required or permitted to be given under this
Agreement shall be in writing and shall be deemed to have been duly given if
delivered in Person, by courier, by overnight delivery service with proof of
delivery or by prepaid registered or certified United States first-class mail,
return receipt requested, addressed to the respective party at the address set
forth below, or if sent by facsimile or other similar form of communication
(with receipt confirmed) to the respective party at the facsimile number set
forth below:
If to the Seller or Weatherford to:
Weatherford Enterra, Inc.
1360 Post Oak Boulevard, Suite 1000
Houston, Texas 77056
Attention: H. Suzanne Thomas
Facsimile: (713) 622-0913
Confirm: (713) 439-9400
Copies to:
Fulbright & Jaworski L.L.P.
1301 McKinney, Suite 5100
Houston, Texas 77010
Attention: Charles L. Strauss
Facsimile: (713) 651-5246
Confirm: (713) 651-5151
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If to the Buyer, to:
CEPI Holdings, Inc.
777 Main Street
Suite 2700
Ft. Worth, Texas 76102
Attention: Kenneth A. Hersh
Facsimile: (817) 820-6650
Confirm: (817) 338-9235
Copies to:
Wood Enterprises
5600 Northwest Central
Suite 155
Houston, Texas 77092
Attention: D. Dale Wood
Facsimile: (713) 460-1128
Confirm: (713) 460-1322
EQUUS Capital Management Corporation
2929 Allen Parkway
25th Floor
Houston, Texas 77019
Attention:..Gary L. Forbes
Facsimile:..(713) 529-9545
Confirm:....(713) 529-0900
Natural Gas Partners, L.P.
777 Main Street
Suite 2700
Ft. Worth, Texas 76102
Attention:..Richard L. Covington
Facsimile:..(817) 820-6650
or to such other address or facsimile number and to the attention of such other
Person(s) as either party may designate by written notice. Any notice mailed
shall be deemed to have been given and received on the third Business Day
following the day of mailing.
11.8 BULK TRANSFER LAWS. The Seller agrees with the Buyer that the
provisions of any statute of any state or jurisdiction regulating bulk sales or
transfers do not apply to this Agreement.
11.9 SUCCESSORS. This Agreement shall inure to the benefit of and be
binding upon the Buyer, Weatherford and the Seller and their respective
successors and permitted assigns. Neither
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this Agreement nor any of the rights, interest or obligations hereunder shall be
assigned by any of the parties hereto without the prior written consent of the
other parties hereto; except that the Buyer may assign to any Affiliate
controlled by the Buyer, any of the Buyer's rights, interests or obligations
hereunder, upon prior written notice to the Seller.
11.10 JOINT AND SEVERAL LIABILITY. Each of the Seller and Weatherford
agrees that they are jointly and severally liable for all representations,
warranties, covenants, agreements and indemnities of the Seller and Weatherford
contained in this Agreement.
11.11 INJUNCTIVE RELIEF. The parties hereto acknowledge and agree that
irreparable damage would occur in the event any of the provisions of this
Agreement were willfully breached. It is accordingly agreed that the parties
shall be entitled to an injunction or injunctions to prevent willful breaches of
the provisions of this Agreement, and, in the event of a willful breach, shall
be entitled to enforce specifically the provisions of this Agreement, in any
court of the United States or any state thereof having jurisdiction, in addition
to any other remedy to which the parties may be entitled under this Agreement or
at law or in equity.
11.12 ENTIRE AGREEMENT. This Agreement and the exhibits hereto, the
Disclosure Schedule and the letter dated October 2, 1996 from Natural Gas
Partners, L.P., an Affiliate of the Buyer, to Weatherford relating to
confidential information, which letter shall terminate upon the Closing,
constitute the entire agreement and understanding between the parties relating
to the subject matter hereof and thereof and supersedes all prior
representations, endorsements, premises, agreements, memoranda communications,
negotiations, discussions, understandings and arrangements, whether oral,
written or inferred, between the parties relating to the subject matter hereof.
This Agreement may not be modified, amended, rescinded, canceled, altered or
supplemented, in whole or in part, except upon the execution and delivery of a
written instrument executed by a duly authorized representative of each of the
parties hereto.
11.13 GOVERNING LAW. This Agreement shall be governed by and construed and
enforced in accordance with the laws of the State of Texas without giving effect
to choice of law principles.
11.14 WAIVER. The waiver of any breach of any term or condition of this
Agreement shall not be deemed to constitute the waiver of any other breach of
the same or any other term or condition.
11.15 SEVERABILITY. Any provision hereof that is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.
11.16 NO THIRD PARTY BENEFICIARIES. Any agreement contained, expressed or
implied in this Agreement shall be only for the benefit of the parties hereto
and their respective legal representatives, successors and assigns, and such
agreements shall not inure to the benefit of the obligees of any indebtedness of
any party hereto, it being the intention of the parties hereto that no Person
shall be deemed a third party beneficiary of this Agreement, except to the
extent a third party is expressly given rights herein.
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11.17 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
11.18 HEADINGS. The headings of the Articles and Sections of this
Agreement have been inserted for convenience of reference only and shall in no
way restrict or otherwise modify any of the terms or provisions hereof or affect
in any way the meaning or interpretation of this Agreement.
11.19 NEGOTIATED TRANSACTION. The provisions of this Agreement were
negotiated by the parties hereto, and this Agreement shall be deemed to have
been drafted by all of the parties hereto.
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IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement
effective as of the date first above written.
WEATHERFORD ENTERRA, INC.
By:___________________________________
H. Suzanne Thomas
Senior Vice President, Secretary
and General Counsel
CRC-EVANS PIPELINE INTERNATIONAL, INC.
By:___________________________________
Philip D. Gardner
President
BUYER:
CEPI HOLDINGS, INC.
By:___________________________________
D. Dale Wood
Chairman of the Board
EXHIBIT 10.9
SHARE TRANSFER AGREEMENT
made the 12th day of June, 1997
BETWEEN
WEATHERFORD ENTERRA CANADA LTD.
and
CEPI HOLDINGS, INC.
RE: SHARES OF CRC-EVANS CANADA LTD.
<PAGE>
TABLE OF CONTENTS
PAGE
ARTICLE 1 INTERPRETATION.......................................................1
1.1 Definitions.............................................................1
1.2 Disclosure Schedule:....................................................5
1.3 Construction............................................................5
1.4 Canadian GAAP...........................................................6
1.5 Entire Agreement........................................................6
ARTICLE 2 SALE AND TRANSFER....................................................6
2.1 Sale and Transfer.......................................................6
2.2 Purchase Price..........................................................6
2.3 Allocation..............................................................6
2.4 Closing Deliveries of Seller............................................7
2.5 Closing Deliveries of Buyer.............................................7
2.6 Investment Canada.......................................................8
ARTICLE 3 REPRESENTAT IONS AND WARRANTIES......................................8
3.1 Sellers Representations and Warranties..................................8
3.2 Limitation of Seller's Representations.................................17
3.3 Buyer's Representations................................................17
3.4 Survival of Representations and Warranties.............................19
3.5 Application of Indemnities.............................................19
ARTICLE 4 GENERAL.............................................................19
4.1 Public Announcements...................................................19
4.2 Communications.........................................................19
4.3 Transaction Expenses...................................................20
4.4 Assignment.............................................................20
4.5 Inurement..............................................................20
4.6 Governing Law..........................................................20
4.7 Further Assurances.....................................................21
4.8 Waiver.................................................................21
4.9 Counterpart Execution..................................................21
4.10 Tax Returns and Financial Statements...................................21
4.11 Transfer Taxes.........................................................21
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SHARE TRANSFER AGREEMENT
-THIS AGREEMENT made the 12th day of June, 1997,
BETWEEN:
WEATHERFORD ENTERRA CANADA LTD., a body corporate having an office
in the Town of Nisku, in the Province of Alberta, (the "SELLER")
OF THE FIRST PART
- and -
CEPI HOLDINGS, INC., a body corporate having an office in the City
of Fort Worth, in the State of Texas, (the "BUYER")
OF THE SECOND PART
WHEREAS:
A. Weatherford Enterra, Inc. ("Weatherford"), CRC-Evans Pipeline
International, Inc. ("CRC") and Buyer are parties to that certain Amended
and Restated Asset Purchase Agreement dated effective the 31st day of
January, 1997 (the "Definitive Acquisition Agreement").
B. SECTION 5.8 of the Definitive Acquisition Agreement provides for the
execution and delivery of this Agreement pursuant to which the Seller
sells and the Buyer buys the Company Shares (as hereinafter defined) on
the terms and conditions hereinafter set forth.
NOW THEREFORE THIS AGREEMENT WITNESSETH THAT, in consideration of
the premises and of the respective covenants and agreements of the parties
hereto hereinafter set forth, the parties hereto hereby covenant and agree with
one another as follows:
ARTICLE 1
INTERPRETATION
1.1 DEFINITIONS
In this Agreement, including the premises and the schedules hereto:
"ACCRUED LIABILITIES" has the meaning ascribed thereto in ARTICLE 10 of
the Definitive Acquisition Agreement.
"AFFILIATE" shall mean, with respect to any Person, an individual or
entity that, directly or indirectly, controls, is controlled by or is
under common control with such Person.
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"AGREEMENT" shall mean this Share Transfer Agreement among the Seller, and
the Buyer, as amended from time to time by such parties.
"APPLICABLE LAW" means any statute, law, rule or regulation or any
judgment, order, writ, injunction or decree of any Governmental Entity to
which a specified Person or property is subject.
"BUSINESS" shall mean the businesses and operations of the Company
relating to (i) the design, manufacture, sales and rental of right-of-way
pipeline construction and rehabilitation equipment and services provided
in connection therewith, (ii) the design, manufacture, sale and
commissioning of pipe handling, cleaning and coating equipment, (iii) the
design, manufacture, sale and rental of automatic (mechanized) pipeline
welding systems and ancillary sales and services provided in connection
therewith and (iv) pipeline field joint coating services and related
equipment rentals and sales, the manufacture and sale of pipeline
induction heating systems, and pipeline coating rehabilitation services.
"BUSINESS DAY" means any day of the week except Saturday, Sunday or any
statutory holiday in Calgary, Alberta.
"BUYER" shall have the meaning specified in the preamble.
"CLOSING" shall mean the closing of the transactions contemplated by this
Agreement and the Definitive Acquisition Agreement on the Closing Date.
"CLOSING DATE" shall have the meaning given such term in SECTION 1.3 of
the Definitive Acquisition Agreement.
"COMPANY" means CRC-Evans Canada Ltd., a corporation amalgamated under the
laws of the Province of Alberta.
"COMPANY SHARES" means all of the issued and outstanding shares in the
capital stock of the Company, consisting of 2450 Class A common shares,
7350 Class B common shares, 3086 Class C common shares and 9527 Class D
common shares.
"CONTRACTS AND OTHER AGREEMENTS" shall mean all contracts, agreements,
understandings, indentures, notes, bonds, loans, instruments, leases,
mortgages, franchises, licenses, commitments or binding arrangements,
whether express or implied, oral or written, to which the Company is a
party or bound or to which its properties or assets are subject.
"DAMAGES" shall mean any and all liabilities, losses, damages, demands,
assessments, claims, costs and expenses (including interest, awards,
judgments, penalties, settlements, fines, costs of remediation,
diminutions in value, costs and expenses incurred in connection with
investigating and defending any claims or causes of action (including,
without limitation, attorneys' fees and expenses and all fees and expenses
of consultants and other professionals)).
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"DEBT OBLIGATIONS" shall mean an contract, agreement, indenture, note,
mortgage, deed of trust, security agreement or other instrument relating
to the borrowing of money or the pledge of collateral therefor or any
guarantee or other contingent liability in respect of any indebtedness or
obligation of any Person (other than the endorsement of negotiable
instruments for deposit or collection in the ordinary course of business).
"DISCLOSURE SCHEDULE" shall mean the amended disclosure schedule delivered
to the Buyer pursuant to the Definitive Acquisition Agreement.
"DOCUMENTS AND OTHER PAPERS" shall mean and include any document,
agreement, instrument, certificate, writing, notice, consent, affidavit,
letter, telegram, telex, statement, file, computer disk, microfiche or
other document in electronic format, schedule, exhibit or any other paper
or record whatsoever.
"ENVIRONMENTAL LAWS" shall mean all federal, provincial or municipal laws,
rules, regulations, statutes, ordinances or orders of any Governmental
Entity relating to (a) the control of any potential pollutant or
protection of the air, water or land, (b) solid, gaseous or liquid waste
generation, handling, treatment, storage, disposal or transportation and
(c) exposure to hazardous, toxic or other substances alleged to be
harmful. "Environmental Laws" shall include, but not be limited to THE
ENVIRONMENTAL PROTECTION AND ENHANCEMENT ACT (Alberta) and THE CANADIAN
ENVIRONMENTAL PROTECTION ACT (Canada) and all Regulations thereunder. The
term "Environmental Laws" shall also include all federal, provincial,
local and municipal laws, rules, regulations, statutes, ordinances and
orders dealing with the same subject matter or promulgated by any
governmental or quasi-governmental agency thereunder or to carry out the
purposes of any federal, provincial, local and municipal law.
"Environmental Laws" does not include any Occupational Safety and Health
legislation or any other federal, provincial or local law, statute,
ordinance, regulation or order governing worker safety or workplace
conditions.
"ENVIRONMENTAL PERMIT" shall mean any permit, license, approval,
registration, identification number or other authorization with respect to
the Principal Assets or the Business under any applicable Environmental
Law.
"EQUIPMENT" shall mean all machinery, transportation equipment, tools,
equipment, furnishings and fixtures owned, leased or subject to a contract
of purchase and sale, or lease commitment, that are used in the Business
as operated by the Company.
"EXCLUDED ASSETS" shall have the meaning given such term in SECTION 1.2 of
the Definitive Acquisition Agreement.
"FINANCIAL STATEMENTS" shall mean the unaudited December 31, 1994,
December 31, 1995 and December 31, 1996 financial statements of the
Company and the unaudited balance sheet of the Company as at January 31,
1997, delivered to the Buyer pursuant to SECTION 2.7 of the Definitive
Acquisition Agreement.
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"GOVERNMENTAL ENTITY" shall mean any arbitrator, court, administrative or
regulatory agency, commission, department, board or bureau or body or
other government (domestic or foreign) or authority or instrumentality or
any entity or Person exercising executive, legislative, judicial,
regulatory or administrative functions of or pertaining to government
(domestic or foreign).
"HAZARDOUS MATERIALS" shall mean any (a) petroleum or petroleum products,
(b) hazardous substances, hazardous waste, hazardous materials or toxic
substances or words of similar import used under any applicable
Environmental Law and (c) any other chemical, substance or waste that is
regulated by any Governmental Entity under any Environmental Law.
"INVENTORIES" shall mean all inventories of finished goods, tooling
inventory, work in progress and raw materials relating to the Business,
wherever situated.
"LEASEHOLD INTERESTS" shall mean the interests of the Company as lessee in
the real property listed in SECTION 1.1(A)(V) of the Disclosure Schedule.
"LIEN" shall mean any lien, pledge, claim, charge, security interest or
other encumbrance, option, defect or other rights of any third Person of
any nature whatsoever other than Permitted Liens.
"MATERIAL ADVERSE EFFECT" shall mean a loss to the Business in excess of
$2,000,000, or a material adverse effect on the assets, business,
operations or financial or physical condition of the Principal Assets or
the Business or on the ability of the Seller to perform its obligations
under this Agreement, or that would constitute a criminal violation of law
involving a felony.
"NOTES PAYABLE" has the meaning ascribed thereto in ARTICLE 10 of the
Definitive Acquisition Agreement.
"PERMITTED LIENS" shall mean (a) Liens created by the Buyer, (b) Liens for
taxes, assessments and governmental charges not yet due and payable; (ii)
statutory liens arising in the ordinary course of business, relating to
obligations as to which there is no default on the part of the Seller or
the Company; and (c) any other Liens that in the aggregate do not exceed
$50,000; provided, however, that at the Closing "Permitted Liens" on Real
Property shall not include any Lien for taxes, assessments or governmental
charges registered against title to the Real Property, or statutory liens
filed of record against the Real Property, unless any such Liens are being
diligently contested in good faith by appropriate proceedings.
"PERSON" shall mean a corporation. an association, a partnership, an
organization, a business, an individual or a Governmental Entity.
"PRINCIPAL ASSETS" means all assets of the Company used in conjunction
with the Business, including without limitation the Equipment and the
Inventories but excluding Excluded Assets.
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"PROPRIETARY INFORMATION" shall mean collectively (a) Proprietary Rights
and (b) any and all other information and material proprietary to the
Company, owned, possessed or used by the Company, whether or not such
information is embodied in writing or other physical form, and which is
not generally known to the public, that (i) relates to financial
information regarding the Company or the Business, including, without
limitation, (A) business plans and (B) sales, financing, pricing and
marketing procedures or methods of the Company or (ii) relates to specific
business matters concerning the Company, including, without limitation,
the identity of or other information regarding sales personnel or
customers of the Company.
"PROPRIETARY RIGHTS" means all patents, inventions, shop rights, know how,
trade secrets, designs, plans, manuals, computer software, specifications,
confidentiality agreements, confidential information and other proprietary
technology and similar information; all registered and unregistered
trademarks, service marks, logos, trade and corporate names (including the
name "CRC-Evans Canada" and all derivations thereof) and all other
trademark rights; all registered and unregistered copyrights; and all
registrations for, and applications for registration of, any of the
foregoing, that are used in the conduct of the Business.
"PURCHASE PRICE" has the meaning ascribed thereto in SECTION 1.4(A) of the
Definitive Acquisition Agreement.
"REAL PROPERTY" shall mean the owned real property of the Company.
"SELLER" shall have the meaning specified in the preamble.
"TAXES" shall mean all federal, provincial, local, foreign and other
taxes, charges, fees, duties, levies, imposts, customs or other
assessments, including, without limitation, all net income, gross income,
gross receipts, sales, use, ad valorem, transfer, franchise, profits,
profit share, license, lease, service, service use, value added,
withholding, payroll, employment, excise, estimated, severance, stamp,
occupation, premium, property, windfall profits, or other taxes, fees,
assessments, customs, duties, levies, imposts, or charges of any kind
whatsoever, together with any interest, penalties, additions to tax, fines
or other additional amounts imposed thereon or related thereto, and the
term "TAX" means any one of the foregoing Taxes.
"TRADE PAYABLES" shall mean those obligations of the Company relating to
the provision of goods and services in the ordinary course of business and
that are classified as trade payables or accounts payable in the Financial
Statements in accordance with United States generally accepted accounting
principles as consistently applied by the Company.
1.2 DISCLOSURE SCHEDULE:
The Amended Disclosure Schedule referenced in and delivered pursuant
to the Definitive Acquisition Agreement is incorporated into this Agreement by
reference and forms a part of this Agreement as if attached to this Agreement,
whether so attached or not.
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1.3 CONSTRUCTION
In this Agreement, unless otherwise expressly stated:
(a) references to a "party" or "parties" are references to a party or
parties to this Agreement, and references to "herein", "hereby",
"hereunder", "hereof" and similar expressions are references to this
Agreement and not to any particular section, subsection or schedule;
(b) references to an "Article", "Section", "subsection", "clause" or
"Schedule" are references to an Article, Section, subsection, clause
or Schedule of or to this Agreement;
(c) references to dollar amount are references to U.S. dollar amounts;
(d) words importing the singular shall include the plural and vice
versa, words importing gender shall include the masculine, feminine
and neuter genders, and references to a "person" or "persons" shall
include individuals, corporations, partnerships, associations,
bodies politic and other entities, all as may be applicable in the
context;
(e) the use of headings is for convenience of reference only and shall
not affect the construction or interpretation hereof, and
(f) time is of the essence.
1.4 CANADIAN GAAP
Except as otherwise expressly provided herein, all determinations
and assessments reliant on the application of accounting Principles shall be
made on a basis consistent with Canadian generally accepted accounting
principles.
1.5 ENTIRE AGREEMENT
This Agreement together with the applicable provisions of the
Definitive Acquisition Agreement expresses and constitutes the entire agreement
between the parties hereto with respect to the purchase and sale of the Company
Shares, and supersedes any previous agreements or understandings with respect
thereto. This Agreement may be amended only by written instrument executed by
the Seller and the Buyer.
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ARTICLE 2
SALE AND TRANSFER
2.1 SALE AND TRANSFER
At the Closing and effective as of the Closing Date the Seller shall
sell, transfer and convey the Company Shares to the Buyer, and the Buyer shall
purchase and accept the Company Shares from the Seller, to have and to hold the
same, together with all benefit and advantage to be derived therefrom,
absolutely.
2.2 PURCHASE PRICE
The price to be paid by the Buyer for the Company Shares (the "SHARE
PURCHASE PRICE") shall be the portion of the Purchase Price allocated therefor,
as determined in accordance with SECTION 1.9 of the Definitive Acquisition
Agreement. The Seller acknowledges that the Buyer's payment of the Purchase
Price to CRC pursuant to and in accordance with the Definitive Acquisition
Agreement shall satisfy the obligation of the Buyer to make payment of the Share
Purchase Price hereunder.
2.3 ALLOCATION
The Share Purchase Price shall be allocated among the classes of the
Company Shares in the manner and in such amounts as may be determined in
accordance with SECTION 1.9 of the Definitive Acquisition Agreement.
2.4 CLOSING DELIVERIES OF SELLER
At Closing the Seller shall together with execution and delivery of
this Agreement deliver or cause to be delivered to the Buyer or such other
recipient designated by the Buyer or pursuant to Definitive Acquisition
Agreement the following:
(a) a certified copy of resolutions of the Board of Directors of the
Seller authorizing the execution, delivery and performance by the
Seller of its obligations under this Agreement;
(b) a certified copy of resolutions of the Board of Directors of the
Company authorizing the transfer of the Company shares to the Buyer;
(c) such other documents and instruments as may be required of the
Seller pursuant to the Definitive Acquisition Agreement;
(i) a certificate of an officer or director of the Company
attaching and certifying the by-laws of the Company in effect
on the Closing Date;
(ii) written resignations of Philip D. Gardner and David Guichon
Jr. as directors of the Company;
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(iii) certificates for the Company Shares, accompanied by duly
executed share transfers that transfer the Company Shares to
the Buyer;
(iv) the minute books and corporate seal of the Company;
(v) the legal opinion of Macleod Dixon, Canadian solicitors for
the Seller and the Company, addressing, to the extent
applicable to the transactions contemplated by this Agreement,
the matters set forth in Exhibit 5.9(b) to the Definitive
Acquisition Agreement, such opinion to be satisfactory to the
Buyer, acting reasonably.
2.5 CLOSING DELIVERIES OF BUYER
At Closing the Buyer shall together with execution and delivery of
this Agreement deliver or cause to be delivered to the Seller or such other
recipient designated by the Seller or pursuant to the Definitive Acquisition
Agreement the following:
(a) a certified copy of a resolution the Board of Directors of the Buyer
authorizing the execution, delivery and performance by the Buyer of
its obligations under this Agreement;
(b) such other documents and instruments as may be required of the Buyer
pursuant to the Definitive Acquisition Agreement;
(c) any other documents or instruments that may be reasonably requested
by the Seller in connection with the transactions contemplated by
this Agreement, including the legal opinion of Bryan & Company,
Canadian solicitors for the Buyer, addressing, to the extent
applicable to the transaction contemplated by this Agreement, the
matters set forth in EXHIBIT 6.6(B) to the Definitive Acquisition
Agreement, such opinion to be satisfactory to the Seller, acting
reasonably.
2.6 INVESTMENT CANADA
The Buyer shall, at or after Closing and in accordance with
applicable laws and procedures, file the notification required pursuant to
SECTION 11 of the INVESTMENT CANADA ACT and provide the Seller with a copy of
the filing.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES
3.1 SELLERS REPRESENTATIONS AND WARRANTIES
Except as otherwise set forth in the Disclosure Schedule, the Seller
represents and warrants to the Buyer as follows:
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(a) CORPORATE MATTERS.
(i) The Seller and the Company are corporations duly amalgamated,
validly subsisting and in good standing under the laws of their
respective jurisdictions of amalgamation. The Company has all
requisite power and authority under all applicable laws, ordinances
and orders of public authorities to own, operate and lease its
properties and assets and to carry on its business in the manner
currently conducted, except where the failure to be so qualified
would not have a Material Adverse Effect. The Seller has all
requisite corporate power and authority to enter into this Agreement
and to perform its obligations under this Agreement.
(ii) True, correct and complete copies of the Certificate of Amalgamation
and the Bylaws of the Company have been provided by the Seller to
the Buyer, and such Certificate of Amalgamation and Bylaws are in
full force and effect.
(iii) Set forth in SECTION 2.1(C) of the Disclosure Schedule is a list of
assumed names under which the Company operates the Business.
(b) VALIDITY OF AGREEMENT AND CONFLICT WITH OTHER INSTRUMENTS.
(i) This Agreement, and all transactions contemplated hereby, have been
duly authorized and approved by all necessary corporate action on
the part of the Seller and the Company. No further corporate action
is necessary on the part of the Seller or the Company to execute and
deliver this Agreement or to consummate the transactions
contemplated hereby. This Agreement has been duly executed and
delivered by the Seller and is a legal, valid and binding obligation
of the Seller enforceable against the Seller in accordance with its
terms, except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws
from time to time in effect that affect creditors' rights generally
and by legal and equitable limitations on the availability of
specific remedies.
(ii) The execution, delivery and performance of this Agreement and the
other agreements and documents to be delivered by the Seller to the
Buyer, the consummation of the transactions contemplated hereby or
thereby, and the compliance with the provisions hereof or thereof,
by the Seller will not, with or without the passage of time or the
giving of notice or both:
(A) conflict with, constitute a breach, violation or termination
of any provision of, or give rise to any right of termination,
cancellation or acceleration, or loss of any right or benefit
or both, under, any of the Contracts and Other Agreements
relating to the Business,
(B) conflict with or violate the Certificate of Amalgamation or
Bylaws of the Seller or the Company,
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(C) result in an acceleration or increase of any amounts due with
respect to the Trade Payables, Accrued Liabilities or Notes
Payable,
(D) result in the creation or imposition of any Lien on any of the
Company Shares or the Principal Assets, or
(E) violate any law, statute, ordinance, regulation, judgment,
writ, injunction, rule, decree, order or any other restriction
of any kind or character applicable to the Seller or the
Company or any of their respective properties or assets, other
than conflicts, breaches, violations, terminations or
conflicts that would not materially and adversely affect the
ability of the Seller or the Company to consummate the
transactions provided for in this Agreement.
(c) APPROVALS, LICENSES AND AUTHORIZATIONS.
(i) No order, license, comment, waiver, authorization or approval of, or
exemption by, or the giving of notice to, or the registration with,
or the taking of any other action in respect of, any Person not a
party to this Agreement, including any Governmental Entity, and no
filing, recording, publication or registration in any public office
or any other place is now, or under existing law in the future will
be, necessary on behalf of the Seller to authorize its execution,
delivery and performance of this Agreement or any other agreement
contemplated hereby to be executed and delivered by the Seller and
the consummation of the transactions contemplated hereby or thereby
or to effect the legality, validity, binding effect or
enforceability thereof.
(ii) All material licenses, permits, concessions, warrants, franchises
and other governmental authorizations and approvals of all
Governmental Entities required or necessary for the Company to carry
on its business in the places and in the manner currently conducted
have been duly obtained and are in full force and effect. No
material violations are in existence or have been recorded with
respect to such licenses, permits or other authorizations and no
proceeding is pending or, to the best knowledge of the Seller,
threatened with respect to the revocation or limitation of any of
such licenses, permits or other authorizations. The Company has
complied with all laws, rules, regulations and orders applicable to
the Business, and all rules, regulations and orders respecting the
provision of services by the Company, except for violations that
would not have a Material Adverse Effect. No proceedings are pending
or, to the knowledge of the Seller, threatened with respect to any
violation of any Applicable Law relating to the Company or the
Business, except for violations that would not have a Material
Adverse Effect.
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(d) TITLE TO AND CONDITION OF PROPERTIES.
(i) The Company is registered as owner of an estate in fee simple in and
to each parcel of Real Property, free and clear of any Liens, other
than Permitted Liens and Liens and imperfections of title that would
not have a Material Adverse Effect. No parcel of Real Property is
subject to any decree of any Governmental Entity nor is being
condemned, expropriated or otherwise taken by any public authority
with or without payment of compensation therefor, nor, to the
knowledge of the Seller, has any such condemnation, expropriation or
taking been proposed.
(ii) The Company is the lessee or has succeeded to the rights of the
lessee under all of the Leasehold Interests and owns the Leasehold
Interests free and clear of all Liens, except for Permitted Liens.
The Company either owns the improvements and fixtures located on
each Leasehold Interest or validly occupies and uses such
improvements and fixtures in accordance with the terms of the
Leasehold Interest, in each case free and clear of Liens, except for
Permitted Liens. A true and complete copy or written description of
the lease governing each Leasehold Interest, as amended to date and
including any letter agreements relating thereto, has been furnished
by the Seller or CRC or Weatherford to the Buyer.
(iii) All Equipment (excluding Equipment that did not have a cost basis of
$25,000 or more at their respective dates of acquisition by the
Company) is set forth in SECTION 1.1(A)(I) of the Disclosure
Schedule. The Company has good and marketable title to all Equipment
free and clear of all Liens. \
(iv) All Inventories at September 30, 1996 are set forth in SECTION
1.1(A)(II) of the Disclosure Schedule. The Company has good and
marketable title to all Inventories free and clear of all Liens.
(v) The Accounts Receivable are owned by the Company free and clear of
all Liens.
(vi) The Company owns or possesses licenses or other rights to use all
rights to all Proprietary Rights necessary for the conduct of the
Business as currently conducted. Set forth in SECTION 2.4(F) of the
Disclosure Schedule is a complete and accurate list of all patents,
trademarks and licenses the Company owns or possesses or otherwise
has rights to use and all patents, trademarks and licenses
pertaining to the Business that the Company owns or possesses or
otherwise has rights to use. No licenses, sublicenses, covenants or
agreements have been granted or entered into by the Company in
respect of the items listed in SECTION 2.4(F) of the Disclosure
Schedule except as noted thereon. The Company has not received any
notice of infringement, misappropriation or conflict from any other
Person with respect to such Proprietary Rights and, to the Seller's
knowledge, the conduct of the Business has not infringed,
misappropriated or otherwise conflicted with any
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Proprietary Rights of any such Person. All of the Proprietary Rights
that are owned by the Company are owned free and clear of all Liens.
All Proprietary Rights that are licensed by the Company from third
parties are licensed pursuant to valid and existing license
agreements and such interests are not subject to any Liens other
than those under the applicable license agreements. The consummation
of the transactions contemplated by this Agreement will not result
in the loss of any Proprietary Rights and will not conflict with,
constitute a breach, violation or termination of, any agreement or
understanding, whether written or otherwise, relating to any
Proprietary Rights necessary for the conduct of the Business as
currently conducted.
(e) CONTRACTS AND COMMITMENTS.
(i) None of the Principal Assets is subject to and the Company is not a
party to or bound by:
(A) any agreement, contract or commitment requiring the
expenditure or series of related expenditures of funds or the
acquisition or disposition or assets, in either case involving
amounts or values in excess of $50,000 (other than purchase
orders in the ordinary course of business for goods necessary
for the Company to complete then existing contracts or
purchase orders);
(B) any loan or advance to, or investment in, any Person or any
agreement, contract, commitment or understanding relating to
the making of any such loan, advance or investment;
(C) any Debt Obligations;
(D) any partnership, joint venture or profit sharing agreement or
any management service, employment, bonus, incentive,
consulting or other similar type contract or agreement;
(E) any broker, sales, distributorship, dealer, manufacturer's
representative, agency or similar agreement relating to the
products sold or services provided by the Company;
(F) any maintenance, service or repair agreement requiring the
annual expenditure of funds in excess of $10,000; or
(G) any license, royalty or similar agreement.
(ii) The Company is not in breach of any provision of, or in default (nor
does the Seller have knowledge of any event or circumstance that
with notice, or lapse of time or both, would constitute an event of
default) under the terms of any of the Contracts and other
Agreements, except for breaches or defaults that would not have a
Material Adverse Effect. All of the Contracts and Other Agreements
that constitute a part of the Business are in full force
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and effect. The Seller is not aware of any pending or threatened
disputes with respect to any of the Contracts and Other Agreements.
(iii) The enforceability of the Contracts and Other Agreements that
constitute a part of the Business will not be affected in any manner
by the execution and delivery of this Agreement or the consummation
of the transactions contemplated hereby.
(f) NO LITIGATION.
There is no action, suit, claim, investigation or legal, administrative,
arbitration or other proceeding, or governmental investigation or
examination, or any change in any zoning or building ordinance pending or,
to the Seller's knowledge, threatened against or affecting the Company,
the Business or any of the Company Shares, at law or in equity, before or
by any Governmental Entity.
(g) FINANCIAL STATEMENTS.
(i) the Seller or the Company has delivered or caused to be delivered to
the Buyer accurate and complete copies of the Financial Statements;
(ii) the Financial Statements:
(A) have been prepared from the books and records of the Company
in conformity with United States generally accepted accounting
principles applied on a basis consistent with preceding years
throughout the periods involved, subject to normal year-end
adjustments and accruals that would not have a Material
Adverse Effect and any other adjustments and accruals
described therein, and
(B) accurately, completely and fairly present the financial
position of the Business as of the respective dates thereof
and its results of operations and cash flows for the periods
then ended.
(h) BOOKS AND RECORDS.
To the knowledge of the Seller, all the books and records of the
Company relating to the Principal Assets or the Business, including
all personnel files, employee data and other materials relating to
employees of the Business, are substantially complete and correct,
have been maintained in accordance with good business practice and
all Applicable Laws, and, in the case of the books of account, have
been prepared and maintained in accordance with generally accepted
accounting principles consistently applied. Such books and records
accurately and fairly reflect, in reasonable detail, all material
transactions (when taken together as a whole), revenues, expenses,
assets and liabilities of the Company with respect to the Business.
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(i) NO ADVERSE CHANGES OR EVENTS.
Since January 31, 1997, Business has been consistently operated only
in the ordinary course, and there not been:
(i) any adverse change in the financial condition, assets,
liabilities (contingent or otherwise), results of operations
or business of the Company except for such changes that in the
aggregate have not had a Material Adverse Effect;
(ii) any damage, destruction or loss, whether or not covered by
insurance, materially adversely affecting the Principal Assets
or the Business;
(iii) any increase in the compensation or rate of compensation or
commissions or bonuses payable or to become payable by the
Company to any employee of the Company that is not consistent
with past practice, any payment or accrual of, or commitment
with respect to, any bonus plan or severance arrangement that
is not consistent with past practice or any change or
modification to any severance arrangement;
(iv) any sale, assignment, transfer or other disposition or lapse
of any Proprietary Rights;
(v) any sale, transfer or other disposition of any properties or
assets, real, personal or mixed, tangible or intangible,
material to the Business (other than sales of Inventory in the
ordinary course of business);
(vi) any change in the Company's method of accounting for
financial, Tax or other purposes; or
(vii) any transactions giving rise to special or nonrecurring income
reflected in the Financial Statement; or any write-up or
revaluation that increased the book value of any assets
reflected in the Financial Statements.
(j) CUSTOMERS AND SUPPLIERS.
Set forth in SECTION 2.10 of the Disclosure Schedule is a list of
(i) the names of, and the dollar volume and percentage of products or
services purchased by the Company from, each of its largest
suppliers of products and services with respect to the Business (in
terms of purchases) during each of the fiscal years ended December
31, 1993, 1994 and 1995, and
(ii) the dollar volume and percentage of sales to each of the Company's
15 largest customers of products and services with respect to the
Business (in terms of sales) during each of such periods. The
Company is not past due (in accordance with the stated invoice
terms) with respect to any amounts owed to any of the suppliers
listed in SECTION 2.10 of the Disclosure Schedule.
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(k) INSURANCE.
The Company maintains in full force and effect policies of insurance with
respect to the Principal Assets and the Business against casualties and
contingencies of such types and in such amounts as are customary for
corporations of similar size engaged in similar lines of business. All
premiums due and payable with respect to such policies have been timely
paid. No notice of cancellation of any such policy has been received by
the Company. During the past three years, no application by the Company
for insurance with respect to any Principal Assets or operations of the
Business has been denied for any reason.
(l) FINANCIAL REQUIREMENTS.
Set forth in SECTION 2.12 of the Disclosure Schedule is a list and summary
description of all bonds, deposits, financial assurance requirements and
insurance coverage submitted to Governmental Entities for the continued
ownership and operation of the Principal Assets or the Business.
(m) ENVIRONMENTAL MATTERS.
The sole representations of the Seller with respect to environmental
matters are set forth in this SECTION 3.1(M). To the extent
representations in other sections of this Agreement or the Definitive
Acquisition Agreement also could apply to environmental matters,
including, but not limited to, matters related to, arising under or
concerning Environmental Laws, such representations shall be construed to
exclude all environmental matters and to apply to matters other than
environmental matters. Except as would not have a Material Adverse Effect:
(i) Neither the Company nor, to the knowledge of the Seller, any prior
owner or operator of the Business, nor, to the knowledge of the
Seller, any carrier transporting Hazardous Materials for the
Company, has caused or allowed the generation, use, transportation,
treatment, storage or disposal of Hazardous Materials at any site or
facility owned, leased or operated by the Company or used in the
Business or, to the knowledge of the Seller, at any offsite
facilities, in each case except in accordance with all applicable
Environmental Laws.
(ii) The Company does not own or lease any real property, improvements or
related assets that form a part of the Principal Assets or the
Business and that have been subject to the release of any Hazardous
Materials.
(iii) The Company has secured all Environmental Permits necessary to the
conduct of the Business and the Company is in compliance with such
permits.
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(iv) The Company has not received written notice of any proceedings,
claims or lawsuits related to or arising under any Environmental Law
and related to the Business or the Principal Assets.
(v) The Company is not currently operating or required to be operating
the Business under any compliance order, schedule, decree or
agreement, any consent decree, order or agreement. or corrective
action decree, order or agreement issued or entered into under any
Environmental Law.
(vi) The Business is being operated in substantial compliance with
applicable limitations, restrictions and requirements established
under Environmental Laws.
(vii) All written environmental studies, reports and analyses relating to
the Business that are in the possession of the Seller or the Company
have been made available to the Buyer or, if not in the possession
of the Seller or the Company but are known to the Seller or the
Company, have been identified to the Buyer.
(n) CONDITION OF ASSETS.
Except as expressly provided herein, the Principal Assets are in an "AS
IS, WHERE IS" condition, and the Seller makes NO REPRESENTATION OR
WARRANTY, EXPRESS OR IMPLIED, AS TO THEIR MERCHANTABILITY OR FITNESS FOR A
PARTICULAR PURPOSE OR AS TO THEIR CONDITION.
(o) WARRANTIES AND PRODUCT LIABILITY.
Except for (i) warranties implied by law and (ii) warranties disclosed in
SECTION 2.15 of the Disclosure Schedule, the Company has not given or made
any warranties in connection with the sale or rental of goods or services
on or prior to the Closing Date, including, without limitation, warranties
covering the customer's consequential damages. The Seller is not aware of
any state of facts or the occurrence of any event forming the basis of any
present claim against the Company with respect to warranties relating to
products manufactured, sold or distributed by the Company or services
performed by or on behalf of the Company on or prior to the Closing Date
except any claim that would not individually or in the aggregate exceed
$300,000.
(p) EMPLOYEE MATTERS.
There are no collective bargaining or other labor union agreements to
which the Company is a party or by which it is bound. To the knowledge of
the Seller, the Company has not encountered any labor union organizing
activity or had any actual or threatened employee strikes, work stoppages,
slowdowns or walkouts.
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(q) FINDER'S FEES.
Except for fees payable to Merrill Lynch & Co. and Simmons & Company
International that are payable by CRC or Weatherford, neither the Seller
nor any Affiliate of the Seller has employed or retained any investment
banker, broker, agent, finder or other party, or incurred any obligation
for brokerage fees, finder's fees or commissions, with respect to the sale
by the Seller of any of the Company Shares or with respect to the
transactions contemplated by this Agreement, or otherwise dealt with
anyone purporting to act in the capacity of a finder or broker with
respect thereto whereby any party hereto may be obligated to pay such a
fee or commission. The Seller agrees to indemnify and hold the Buyer and
its Affiliates harmless from and against any and all claims, liabilities
or obligations with respect to all fees, commissions or expenses asserted
by any Person on the basis of any act, statement, agreement or commitment
alleged to have been made by the Seller, with respect to any such fee,
commission o expense.
(r) RESIDENCY.
The Seller is not a non-resident of Canada for the purposes of Section 116
of the INCOME TAX ACT (Canada);
(s) MINUTE BOOKS.
The Company minute book contains complete, accurate and up-to-date
versions of:
(i) the articles of amalgamation and all by-laws, unanimous shareholder
agreements and other constating or governing corporate documents of
the Company,
(ii) minutes of all meetings of the directors and shareholders of the
Company held since the date of its formation by amalgamation, and
copies of all written resolutions of the directors and shareholders
of the Company passed in lieu of the holding of meetings,
(iii) registers of shareholders, transfers, directors and officers, and
(iv) all other documents and information summaries of any material nature
relating to the corporate activities and status of the Company.
(t) THE COMPANY SHARES.
(i) The authorized Capital of the Company consists of 5,000 Class "A"
Common Shares, 5,000 Class "B" Common Shares, 5,000 Class "C" Common
Shares, and 15,000 Class "D" Common Shares, of which only the
Company Shares are presently issued and outstanding, and there are
no agreements, options, rights or privileges (including, without
limitation, convertible securities, warrants or other rights of any
nature) for the purchase, subscription, allotment or issuance of any
of the unissued shares in
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the capital of-the Company, or of any other Company securities of
any nature or kind;
(ii) the Company Shares have been duly authorized and issued, and are
fully paid and non-assessable;
(iii) the Seller is the registered and beneficial owner of the Company
Shares, and has good and marketable title thereto, and the Company
Shares are now, and will be conveyed to the Buyer, free and clear of
all liens, encumbrances, security interests and other third party
claims and interests of any nature whatsoever;
(iv) except for any approval stipulated by any statute or regulation,
there are no approvals or other restrictions of any nature
applicable to the sale and transfer of the Company Shares to the
Buyer pursuant hereto, and the Seller has the absolute right to
effect such sale and transfer.
(u) TAX MATTERS.
(i) The Company has duly filed all federal, provincial, local, and
foreign Tax Returns which have come due for filing and which are
required to be filed by or with respect to it with Revenue Canada or
other applicable taxing authorities, and no extensions with respect
to such Tax Returns have been requested or granted;
(ii) the Company has paid, or adequately reserved against in the
Financial Statements, all Taxes which have come due, or are claimed
by any Taxing authority to be due, from or with respect to it,
except Taxes that are being contested in good faith by appropriate
legal proceedings and for which adequate reserves have been set
aside;
(iii) the Company has received no notice that an issue is being raised or
adjustment is being proposed by Revenue Canada or any other Taxing
authority in connection with any of the Company's tax returns;
(iv) the Company has made all deposits which have come due with respect
to Taxes;
(v) no waiver or extension of any statute of limitations as to any
federal, provincial, local, or foreign tax matter has been given by
or requested from the Company.
3.2 LIMITATION OF SELLER'S REPRESENTATIONS
The Seller makes no representation or warranty whatsoever except as
and to the extent expressly set forth in SECTION 3.1; provided that all
representations, warranties and covenants of the Seller in this Agreement are in
addition to those in the Definitive Acquisition Agreement which pertain to the
Company and the Business. The Buyer acknowledges that it is aware of the
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matters set forth in the Disclosure Schedule, and that each of the covenants,
representations and warranties of the Seller set forth in SECTION 3.1 is
expressly subject to all matters set forth in the Disclosure Schedule.
3.3 BUYER'S REPRESENTATIONS
The Buyer represents and warrants to the Seller as follows:
(a) CORPORATE MATTERS.
The Buyer is a corporation duly incorporated, validly existing and
in good standing under the laws of the State of Delaware. The Buyer
has all requisite corporate power and authority to enter into this
Agreement and to perform its obligations under this Agreement. This
Agreement, and all transactions contemplated hereby, have been duly
authorized and approved by all necessary corporate action on the
part of the Buyer. No further corporate action is necessary on the
part of the Buyer to execute and deliver this Agreement or to
consummate the transactions contemplated hereby. This Agreement has
been duly executed and delivered by the Buyer and is a legal, valid
and binding obligation of the Buyer, enforceable against it in
accordance with its terms, except as enforceability may be limited
by applicable bankruptcy, insolvency, reorganization, moratorium or
similar laws from time to time in effect that affect creditors'
rights generally and by legal and equitable limitations on the
availability of specific remedies. The execution, delivery and
performance of this Agreement and the consummation of the
transactions contemplated hereby, and the compliance with the
provisions hereof, by the Buyer will not violate any provision of,
or constitute a default under, any contract or other agreement to
which the Buyer is a party or by which it is bound, or conflict with
its Certificate of Incorporation or Bylaws, other than violations,
defaults or conflicts that would not materially and adversely affect
the ability of the Buyer to consummate the transactions provided for
in this Agreement.
(b) APPROVALS AND AUTHORIZATIONS.
No order, license, consent, waiver, authorization or approval of, or
exemption by, or the giving of notice to, or the registration with,
or the taking of any other action in respect of, any Person not a
party to this Agreement, including any Governmental Entity, and no
filing, recording, publication or registration in any public office
or any other place is now, or under existing law in the future will
be, necessary on behalf of the Buyer to authorize its execution,
delivery and performance of this Agreement or any other agreement
contemplated hereby to be executed and delivered by the Buyer and
the consummation of the transactions contemplated hereby or thereby
(including, but not limited to, purchase of the Company Shares), or
to effect the legality, validity, binding effect or enforceability
thereof
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(c) FINDER'S FEES.
Neither the Buyer nor any Affiliate of the Buyer has employed or
retained any investment banker, broker, agent, finder or other
party, or incurred any obligation for brokerage fees, finder's fees
or commissions, with respect to the transactions contemplated by
this Agreement, or otherwise dealt with anyone purporting to act in
the capacity of a finder or broker with respect thereto whereby any
party hereto may be obligated to pay such a fee or a commission. The
Buyer agrees to indemnify and hold the Seller and its Affiliates
harmless from and against any and all claims, liabilities or
obligations with respect to all fees, commissions or expenses
asserted by any Person on the basis of any act, statement, agreement
or commitment alleged to have been made by the Buyer or any
Affiliate of the Buyer with respect to any such fee, commission or
expense.
(d) WTO INVESTOR.
The Buyer is a "WTO investor" as that term is defined in the
INVESTMENT CANADA ACT, R.S.C. 1985, as amended.
3.4 SURVIVAL OF REPRESENTATIONS AND WARRANTIES
The several representations and warranties of the parties to this
Agreement shall survive the Closing Date and shall remain in full force and
effect for a period of two years following the Closing Date (the period during
which the representations and warranties shall survive being referred to herein
with respect to such representations and warranties as the "Survival Period"),
and shall be effective with respect to any inaccuracy therein or breach thereof
(and a claim for indemnification under ARTICLE 7 of the Definitive Acquisition
Agreement may be made thereon) if a written notice asserting the claim shall
have been duly given in accordance with ARTICLE 7 of the Definitive Acquisition
Agreement within the Survival Period with respect to such matter. All covenants
and agreements contained herein shall survive without limitation. Any claim for
indemnification made during the Survival Period shall be valid and the
representations and warranties relating thereto shall remain in effect for
purposes of such indemnification notwithstanding that such claim may not be
resolved within the Survival Period.
3.5 APPLICATION OF INDEMNITIES
The parties acknowledge that the provisions in ARTICLE 7 of the
Definitive Acquisition Agreement are intended to apply to any misrepresentation,
breach of warranty or breach of any covenant or agreement of a party hereunder,
or to any obligation or liability which constitutes an Assumed Liability or a
Retained Liability (as those terms are defined in the Definitive Acquisition
Agreement), notwithstanding the sale and conveyance of the Company Shares.
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ARTICLE 4
GENERAL
4.1 PUBLIC ANNOUNCEMENTS
Each of the parties and their Affiliates shall be entitled to make
all such announcements and disclosures in respect of this Agreement as they may
consider appropriate for purposes of satisfying obligations at law, or to any
governmental or regulatory authority or stock exchange, provided that the party
proposing to make the announcement and disclosure first provides the other party
with reasonable advance notice of the contents and timing of any such
announcement or disclosure, and provides such other party with a reasonable
opportunity to comment thereon.
4.2 COMMUNICATIONS
All notices and other communications given in connection with this
Agreement shall be in writing, and the respective addresses of the parties for
the service of any such notices or other communications shall be as follows:
Seller: Weatherford Enterra Canada Ltd.
c/o Weatherford Enterra, Inc.
1360 Post Oak Boulevard
Suite 1000
Houston, Texas 77056
Attention: H. Suzanne Thomas
Fax No.: (713) 622-0913
With a copy to: Macleod Dixon
Barristers & Solicitors
3700. 400 - Third Avenue S.W.
Calgary, Alberta T2P 4H2
Attention: David Guichon Jr.
Fax No: (403) 264-5973
Buyer: CEPI Holdings, Inc.
777 Main Street
Suite 2700
Fort Worth, Texas 76102
Attention: Kenneth A. Hersh
Fax No.: (817) 820-6650
All notices and communications given in connection with this Agreement shall be
sufficiently given if addressed as aforesaid and either delivered by hand or by
reputable courier service with proof of delivery to the intended recipient's
address for service as set forth above, or sent by direct facsimile
telecommunication (with receipt confirmed) to such party at its fax number as
set forth above. Any notice so given shall be deemed to have been given and
received on the first Business Day on which it is presented during normal
business hours at the address for service of the
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addressee thereof, or, in the case of a direct facsimile telecommunication, on
the day on which it is transmitted if transmitted prior to or during normal
business hours on a Business Day, or on the first Business Day following the day
on which it is transmitted if transmitted otherwise. A party may change its
address for service by giving written notice thereof to the other party and
their counsel.
4.3 TRANSACTION EXPENSES
The parties shall each be responsible for their own legal,
accounting, evaluation and other transaction fees and expenses incurred in
connection with the purchase and sale contemplated hereby.
4.4 ASSIGNMENT
Neither party shall be entitled to assign any rights or obligations
under or in respect of this Agreement without the prior written consent of the
other party, which consent shall not be unreasonably withheld.
4.5 INUREMENT
This Agreement shall inure to the benefit of and be binding upon the
parties and their respective successors and permitted assigns.
4.6 GOVERNING LAW
This Agreement shall be governed by and construed in accordance with
the laws of the Province of Alberta, and each of the parties submits to the
jurisdiction of the courts of the Province of Alberta for the interpretation and
enforcement hereof.
4.7 FURTHER ASSURANCES
Each of the parties shall from time to time and at all times
hereafter, without further consideration, do and perform all such further acts
and things, and execute and deliver all such further agreements, assurances,
notices, releases and other documents and instruments, as may reasonably be
required to more fully assure the transfer of the Company Shares to the Buyer in
accordance with the provisions of this Agreement, and otherwise to assure the
carrying out of the intent and purpose of this Agreement.
4.8 WAIVER
No waiver by either party shall be effective unless in writing, and
a waiver shall affect only the matter, and the occurrence thereof, specifically
identified in the writing granting such waiver and shall not extend to any other
matter or occurrence.
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4.9 COUNTERPART EXECUTION
This Agreement may be executed in separate counterparts, and the
executed counterparts shall together constitute one instrument and have the same
force and effect as if both of the parties had executed the same instrument.
4.10 TAX RETURNS AND FINANCIAL STATEMENTS
The Seller agrees to prepare or cause to be prepared, at the
Seller's expense, and within 180 days of the Closing Date, audited financial
statements of the Company and federal and provincial corporate income tax
returns and goods and services tax returns for the Company, in each case for the
fiscal periods ending December 31, 1996 and on the Closing Date. The said
financial statements and tax returns shall be prepared on a basis consistent
with past practice by the accountants of the Company prior to Closing or such
other accountants selected by the Seller, provided that the said financial
statements and tax returns shall be subject to review and approval of the Buyer
before finalization, acting reasonably. The Buyer shall provide or cause to be
provided to the Seller and the Seller's agents and professional advisors full
and unrestricted access to the relevant records of the Company, and all other
reasonable assistance and cooperation requested by the Seller, in order to
facilitate and assist the Seller in the preparation of the said financial
statements and tax returns.
4.11 TRANSFER TAXES
(a) Notwithstanding any provision of law imposing the burden of Transfer
Taxes (as hereinafter defined) on the Seller or the Buyer, as the
case may be, any sales, use and other transfer Taxes imposed in
connection with the consummation of the transactions contemplated by
this Agreement (collectively, "Transfer Taxes") shall be borne
equally by the Buyer and the Seller. The Seller and the Buyer agree
to cooperate in good faith with each other, and to use their
commercially reasonable efforts, to minimize Transfer Taxes. Without
limiting the generality of the preceding sentence, (i) the
appropriate party hereto shall promptly and properly complete,
execute and deliver to the other party resale, exemption and/or
similar certificates or other documentation necessary or appropriate
under any applicable law to claim and/or evidence that all or any
portion of the sale or transfer of the Company Shares under this
Agreement is exempt from or otherwise not subject to Transfer Taxes
imposed under such applicable law and (ii) each of the parties
hereto shall consult and cooperate in good faith with each other on
a timely basis in order to effectively handle and contest any audit,
examination, investigation or administrative, court or other
proceeding relating to Transfer Taxes.
(b) The Buyer shall pay any and all recording, filing or other fees
relating to the conveyance or transfer of the Company Shares from
the Seller to the Buyer. The Seller shall pay, cause to be paid or
adjust in favor of the Buyer all income taxes and goods and services
taxes payable by the Company for all fiscal periods prior to the
Closing, including applicable interest or penalties due thereon.
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(c) If a party hereto shall fail to pay on a timely basis any amount for
which such party is responsible under this SECTION 4.11, the other
party may pay such amount to the appropriate Governmental Entity or
Governmental Entities or other appropriate third party or parties,
and the party responsible for payment of such amount shall promptly
reimburse the other party for such amount so paid.
(d) The respective rights and obligations of the parties hereto under
this SECTION 4.11 shall survive the Closing without limitation.
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IN WITNESS WHEREOF the parties have executed and delivered this
Agreement as of the date first above written.
WEATHERFORD ENTERRA CANADA LTD.
Per:____________________________
Per:____________________________
Per:____________________________
Per:____________________________
25
EXHIBIT 10.10
AGREEMENT OF PURCHASE AND SALE
THIS AGREEMENT OF PURCHASE AND SALE (the "Agreement") is made and entered
into this 24 day of April, 1998 and is by and between CRC-EVANS PIPELINE
INTERNATIONAL, INC., a Delaware corporation (the "Purchaser") and TULSA PIPELINE
EQUIPMENT & SUPPLY, INC., an Oklahoma corporation ("Tulsa Pipeline Equipment &
Supply"), HAMILTON HEAVY EQUIPMENT, INC., a Texas corporation ("Hamilton Heavy
Equipment"), and JERRY HAMILTON, individually and doing business as HHC
INTERNATIONAL ("Hamilton"), (collectively, Tulsa Pipeline Equipment & Supply,
Hamilton Heavy Equipment, and Hamilton are sometimes hereinafter referred to as
the "Seller").
WHEREAS, the Seller is engaged primarily in the pipeline equipment
business (the "Business"); and
WHEREAS, the Purchaser desires to purchase and/or otherwise assume from
the Seller, and the Seller desires to sell and/or otherwise transfer to the
Purchaser, the Business and certain assets utilized in the conduct of the
Business and certain of the liabilities of the Business on and subject to the
terms and conditions contained in this Agreement;
NOW, THEREFORE, in consideration of the premises and of other good and
valuable consideration, and intending to be legally bound hereby, the Purchaser
and the Seller hereby agree as follows:
1. PURCHASE AND SALE. On and subject to the terms and conditions of this
Agreement, (a) at the Closing, the Purchaser will purchase from the Seller, and
the Seller will sell, convey, transfer, assign and deliver to the Purchaser, or
cause to be sold, conveyed, transferred, assigned and delivered to the
Purchaser, all of the Acquired Assets, free and clear of any encumbrances other
than the Permitted Encumbrances; (b) at the Closing, the Purchaser will assume
and become directly and solely responsible for the payment, performance or
discharge, as the case may be, of all of the Assumed Liabilities; (c) at the
Closing, the Purchaser will pay to the Seller the Purchase Price with such
payment to be made as herein provided; and (d) at the Closing, the Purchaser
shall execute and deliver the Consulting Agreement described in ANNEX 1 attached
hereto between Hamilton and the Purchaser.
2. ACQUIRED ASSETS. For purposes hereof, "Acquired Assets" means all of
the properties, rights, interests and other assets, owned or otherwise held by
the Seller as described in SCHEDULE 2 attached hereto.
3. ASSUMED LIABILITIES. For purposes hereof, "Assumed Liabilities" means
the obligations and liabilities of the Seller as described in SCHEDULE 3
attached hereto. Notwithstanding
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anything herein contained to the contrary, the only liabilities which the
Purchaser will assume are those described in SCHEDULE 3 attached hereto.
4. PURCHASE PRICE. The "Purchase Price" means, as of the Closing Date, the
sum of $5,747,689.00, subject to adjustments as hereinafter provided. At the
Closing, the Purchaser shall pay the Purchase Price as follows:
(a) Ninety percent of the Purchase Price after adjustments for
inventory valuation as described in Paragraph 5(a), less $400,000.00, by means
of a wire transfer of immediately available funds to an account designated by
the Seller.
(b) The sum of $400,000.00, be evidenced by the Purchaser's
promissory note in the form described in ANNEX 2 attached hereto (the
"Promissory Note"). (c) The remaining portion of the Purchase Price, after
determination of the adjustments to the Purchase Price described hereinafter in
Paragraph 5(b), shall be paid by the Purchaser no later than 45 days after the
Closing by means of a wire transfer of immediately available funds to an account
designated by the Seller.
5. ADJUSTMENTS TO THE PURCHASE PRICE.
(a) Within two days before the Closing, the parties will conduct an
inventory of the parts which comprise part of the Acquired Assets. An adjustment
will be made to the Purchase Price based on the difference in the inventory
value of such parts from the value shown in SCHEDULE 2.
(b) At the Closing, the Purchaser will take possession of the
Acquired Assets located in Broken Arrow, Oklahoma. However, with respect to the
Acquired Assets located in Harris County, Texas and Nisku, Alberta, Canada, the
final inventory value will be determined when such portion of the Acquired
Assets located in Harris County, Texas and Nisku, Alberta, Canada are loaded for
delivery to the Purchaser. Adjustments will be made to the Purchase Price based
on any changes to the Acquired Assets shown in SCHEDULE 2 as revised to show
inventory as being on-hand at the Closing. The basis for valuation of any
shortages or agreed additions shall be the value shown in SCHEDULE 2, or in the
case of agreed additions, 40 percent of the April 1, 1997 price list of the
Purchaser. In the case of newly manufactured equipment added after March 1,
1998, the value shall be the manufacturing cost. Any adjustments to the parts
inventory shall be made at book value. The Purchase Price shall be further
adjusted upon the failure of the Seller to deliver to the Purchaser within 45
days following the Closing any of the Acquired Assets which were not complete
and assembled to the Purchaser's reasonable satisfaction as of the Closing Date,
except as otherwise noted. If following all of the adjustments to the :Purchase
Price as herein provided, the adjustments total more than 10 percent of the
Purchase Price, the Seller shall immediately refund to the Purchaser the amount
in excess of such 10 percent by means of wire transfer of immediately available
funds to an account designated by the Purchaser.
6. COVENANT NOT TO COMPETE. It is recognized by the Seller that the
business of the Seller and the Purchaser and the affiliates of the Purchaser
that provide similar products and services is and will continue to be
international in scope and that geographical limitations on the
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below described covenant not to compete and the non-solicitation covenant are
therefore not appropriate.
Consequently, a period of five years from the Closing Date, on a world-wide
basis, no party constituting the Seller shall:
(a) Canvas, solicit, or accept any business for any other person,
partnership, firm, corporation or other legal entity from any present or past
customer of the Seller or the Purchaser, in connection with any activity the
same as that engaged in by the Seller and the Purchaser on the date of this
Agreement.
(b) Give any other person, partnership, firm, corporation or other
legal entity the right to canvas, solicit or accept any business for any other
business, from any present or past customer of the Seller or the Purchaser, in
connection with any activity the same as that engaged in by the Seller and the
Purchaser on the date of this Agreement.
(c) Directly or indirectly request or advise any past, present or
future customer of the Purchaser to withdraw, curtail or cancel its business for
any other business, from any present or past customer of the Seller or the
Purchaser, in connection with any activity the same as that engaged in by the
Seller and the Purchaser on the date of this Agreement.
(d) Directly or indirectly disclose to any other person,
partnership, firm, corporation or other legal entity the names of past, present
or future customers of the Seller or the Purchaser, in connection with any
activity the same as that engaged in by the Seller and the Purchaser on the date
of this Agreement.
(e) Directly or indirectly induce, or attempt to influence any
employee of the Purchaser to terminate his employment.
(f) Without the written consent of the Purchaser, directly or
indirectly employ or attempt to employ any person, who, on the date of this
Agreement or at any time during the two years before the date of this Agreement,
is or was an employee of the Seller or the Purchaser, whether full or part-time.
(g) Directly or indirectly own, manage, operate, join or participate
in, or be connected as an officer, director, shareholder, employee, partner or
otherwise with any business under any name similar to Tulsa Pipeline Equipment &
Supply, Inc. or the Purchaser's name.
(h) Directly or indirectly compete with, or become interested in any
competitor of the Seller in any activity the same as that engaged in by the
Seller or the Purchaser on the date of this Agreement.
As used herein, the business of the Purchaser shall include, but not be
limited to the design, manufacturing, sale, rental of and providing of services
pertaining to specialized equipment for the construction, rehabilitation,
corrosion and weight coating, and automatic welding of pipelines.
The Seller acknowledges that the remedy at law for any breach by it of the
foregoing covenant not to compete will be inadequate, and that the Purchaser
shall be entitled, in addition to
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any other legal remedy available to it, to an injunction after the posting of a
bond in the amount of $100.00, the issuance of which the Seller hereby consents,
restraining the Seller from any breach or threatened breach thereof. This
covenant on the part of the Seller shall be construed as an agreement
independent of any other provision of this Agreement and the existence of any
claim or cause of action by the Seller against the Purchaser, whether predicated
on this Agreement or otherwise, shall not constitute a defense to the
enforcement by the Purchaser of this covenant.
Provided, however, notwithstanding anything herein contained to contrary,
Hamilton may buy, sell or rent Caterpillar tractors and other items of general
construction equipment, and may participate as a passive 50 percent owner of
Rocky Mountain Pipe Equipment, Inc. of Edmonton, Alberta, Canada ("Rocky
Mountain"). Hamilton shall not participate in the management of Rocky Mountain
or provide additional capital to Rocky Mountain or provide equipment for the use
or sale by Rocky Mountain. Any permitted activities pertaining to Rocky Mountain
shall be for business in Canada only. Moreover, Hamilton agrees to assist the
Company in its efforts to acquire the capital stock of Rocky Mountain.
7. CONFIDENTIALITY. The Seller shall act in good faith to maintain on a
confidential basis Confidential Information about the Purchaser obtained by the
Seller hereunder, but in no event shall the Seller be faulted in connection
therewith except for intentional or gross misconduct on the part of the Seller.
The Seller's confidentiality obligations of non-disclosure shall not apply to
the extent such information (a) was or becomes in the public domain through
disclosures by the Purchaser or others, (b) was in the Seller's possession
before the Purchaser's disclosure thereof to the Seller, (c) if legally acquired
by the Seller from a third party in the absence of a secrecy commitment, or (d)
to the extent that disclosure to governmental agencies is required by law, or
disclosure is required by a court order with proper jurisdiction, in which case
the Seller will use reasonable efforts to maintain confidentiality of
non-publicly known information involved therein.
As used herein, the term "Confidential Information" includes, without
limitation, information and knowledge pertaining to products, inventions,
innovations, designs, ideas, plans, trade secrets, proprietary information,
manufacturing, packaging, advertising, distribution and sales methods and
systems, sales and profit figures, customer and client lists, and relationships
between the Purchaser and its affiliates and dealers, distributors, customers,
clients, suppliers and others who have had or will have had business dealings
with the Purchaser and its affiliates.
8. THE SELLER'S REPRESENTATIONS AND WARRANTIES. The Seller hereby
represents and warrants to the Purchaser as follows:
(a) ORGANIZATION AND EXISTENCE. Tulsa Pipeline Equipment & Supply
is a corporation duly organized, validly existing, and in good
standing under the laws of the State of Oklahoma, and is
qualified to do business in the State of Texas. Likewise,
Hamilton Heavy Equipment is a corporation duly organized,
validly existing, and in good standing under the laws of the
State of Texas.
(b) POWER AND AUTHORITY. The Seller has full corporate power and
authority to execute, deliver, and perform this Agreement and
all other agreements, certificates or documents to be
delivered in connection herewith, including,
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without limitation, the other agreements, certificates and
documents contemplated hereby (collectively the "Other
Agreements"). The Seller has full corporate power and
authority to own, lease and operate its assets, including, but
not limited to, the Acquired Assets, and to conduct its
businesses, including, but not limited to, the Business, as
same are currently being conducted.
(c) AUTHORIZATION. The execution, delivery and performance of this
Agreement and all of the Other Agreements by the Seller have
been duly authorized by all requisite shareholder and
corporate action.
(d) BINDING EFFECT. Upon execution and delivery by the Seller,
this Agreement and the Other Agreements will be and constitute
the valid, binding and legal obligations of the Seller,
enforceable against the Seller in accordance with the terms
hereof and thereof, except as the enforceability hereof or
thereof may be subject to the effect of (i) any applicable
bankruptcy, insolvency, reorganization, moratorium or similar
laws relating to or affecting creditors' rights generally, and
(ii) general principles of equity (regardless of whether such
enforceability is considered a proceeding in equity or at
law).
(e) OWNERSHIP OF THE ACQUIRED ASSETS. The Seller is the record
owner of the Acquired Assets and is duly authorized and
empowered to and shall execute and deliver to the Purchaser at
the Closing bills of sale and such other forms of conveyance
which will convey good, absolute and indefeasible title to the
Acquired Assets being so sold to the Purchaser hereunder, free
and clear of all liens, encumbrances, charges, escrows,
equities, and other restrictions, except as may be otherwise
permitted hereunder.
(f) CONDITION OF THE ACQUIRED ASSETS. As of the Closing Date, the
Acquired Assets will be complete and assembled, except as
otherwise noted, to the Purchaser's reasonable satisfaction,
with no known significant defects, and suitable for their
intended use, reasonable wear and tear excepted. The Purchaser
acknowledges that, except as otherwise set forth in this
Agreement, the Seller has made no representations or
warranties of any kind, express or implied, with respect to
the physical condition, performance, merchantability or
fitness for a particular purpose of any of the Acquired
Assets, it being understood and agreed to by the Purchaser
that the same are being purchased "as is, where is."
Notwithstanding anything herein contained to the contrary, if
as of the Closing any of the Acquired Assets are not complete
or assembled, to the Purchaser's reasonable satisfaction, the
Seller shall have 45 days or other agreed period in which to
complete or assemble any of such Acquired Assets, with no
known significant defects, and suitable for their intended
use, reasonable wear and tear excepted. To the extent that the
Seller fails to so complete and assemble to the Purchaser's
reasonable satisfaction any of such Acquired Assets, except as
otherwise noted, the Purchase Price shall be further adjusted
by the value of any such Acquired Assets which the Seller has
failed to so complete and assemble
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pursuant to the terms hereof. Any parts which are included
with the Acquired Assets which are new shall be valued at book
value. Any such parts included within the Acquired Assets
which are not new must be usable by Purchaser and shall be
valued as agreed upon by the parties.
(g) NO DEFAULT. Neither the execution and delivery of this
Agreement or the Other Agreements nor full performance by the
Seller of its obligations hereunder or thereunder will violate
or breach, or otherwise constitute or give rise to a default
under, the terms or provisions of the Articles of
Incorporation or Bylaws of Tulsa Pipeline Equipment & Supply
and Hamilton Heavy Equipment or, subject to obtaining any and
all necessary consents, of any contract, commitment or other
obligation included in the Acquired Assets or necessary for
the operation of the Business following the Closing or any
other material contract, commitment, or other obligation to
which the Seller is a party, or create or result in the
creation of any encumbrance on any of the Acquired Assets.
(h) NO CONSENTS. No consent, approval or authorization of, or
registration, declaration or filing with any third party,
including, but not limited to, any governmental departments
agency, commission or other instrumentality, will, except such
consents, if any, delivered or obtained on or prior to the
Closing, be obtained or made by the Seller prior to the
Closing to authorize the execution, delivery and performance
by the Seller of this Agreement.
(i) CORPORATE RECORDS. True and correct copies of the Articles of
Incorporation and Bylaws of Tulsa Pipeline Equipment & Supply
and Hamilton Heavy Equipment, and all amendments thereto, have
been delivered to the Purchaser for review, copies of which
are set forth on SCHEDULE 7(I) hereto.
(j) LITIGATION. Except as otherwise disclosed on SCHEDULE 7(J)
hereto, there presently exists no litigation, proceedings,
actions, claims or investigations pending in law or in equity,
nor, to the Seller's knowledge, are there any of the foregoing
which are threatened in writing, which would, in the
aggregate, have a material adverse effect on the Acquired
Assets or the Business.
(k) ACCESS TO RECORDS. The Seller shall cause the Seller to afford
the Purchaser access, during normal business, to all of its
business operations, properties, books, files, and records
related to the pipeline equipment business being acquired
hereunder, and will cooperate in the Purchaser's examination
thereof. No such examination, however, shall constitute a
waiver or relinquishment by the Purchaser of its right to rely
upon the Seller's covenants, representations, and warranties
made herein or pursuant hereto. Until the Closing hereunder or
the termination of this Agreement, whichever shall occur
first, and after the termination of this Agreement in the
event this Agreement does not close, the Purchaser will hold
in confidence all information so obtained by the Purchaser as
a result of such examination.
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(l) CONTRACT RIGHTS. Each of he Contract Rights included within
the Acquired Assets was entered into in the ordinary course of
business.
(m) PAYMENT OF TAXES: TAX LIENS. All tax returns and all documents
whether federal, state or local, required to be filed by the
Seller with respect to the Seller and the Business have been
or will be filed on or before the date on which such tax
returns or other documents are required to be filed. The
Acquired Assets are not and will not be encumbered by any
liens arising out of or relating to unpaid taxes for which the
Seller is responsible hereunder.
(n) ASSISTANCE AFTER THE CLOSING. After the Closing, the Seller
shall assist the Purchaser in the loading of all of the
Acquired Assets for shipment to a location determined by the
Purchaser.
(o) RELIANCE. The foregoing representations and warranties are
made by the Seller with the knowledge and expectation that the
Purchaser is placing complete reliance thereon.
(p) NO UNTRUE STATEMENTS. No representation or warranty by the
Seller in this Agreement or in any writing furnished or to be
furnished pursuant hereto, contains or will contain any untrue
statement of a material fact, or omits, or will omit to state
any material fact required to make the statements herein or
therein contained not misleading.
9. THE PURCHASER'S REPRESENTATIONS AND WARRANTIES. The Purchaser hereby
represents and warrants to the Seller as follows:
(a) ORGANIZATION AND EXISTENCE. The Purchaser is a corporation
duly organized, validly existing, and in good standing under
the laws of the State of Delaware and is duly qualified to do
business as a foreign corporation in all other states where
the nature of the Purchaser's business requires such
qualification, including the State of Texas.
(b) POWER AND AUTHORITY. The Purchaser has full corporate power
and authority to execute, deliver and perform this Agreement
and the Other Agreements.
(c) AUTHORIZATION. The execution, delivery and performance of this
Agreement and the Other Agreements any the Purchaser have been
duly authorized by all requisite corporate action.
(d) BINDING EFFECT. Upon execution and delivery by the Purchaser,
this Agreement and the Other Agreements will be and constitute
the valid, binding and legal obligations of the Purchaser
enforceable against the Purchaser in accordance with the terms
hereof and thereof, except as the enforceability hereof and
thereof may be subject to the effect of (i) any applicable
bankruptcy, in solvency, reorganization, moratorium or similar
laws relating to or affecting creditors' rights generally, and
(ii) general
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principles of equity regardless of whether such enforceability
is considered in a proceeding in equity or at law.
(e) NO DEFAULT. Neither the execution and delivery of this
Agreement or the Other Agreements nor full performance by the
Purchaser of its obligations hereunder or thereunder will
violate or breach, or otherwise constitute or give rise to a
default under, the terms or provisions of the Purchaser's
Certificate of Incorporation or Bylaws or of any material
contract, commitment, or other obligation to which the
Purchaser is a party.
(f) RELIANCE. The foregoing representations and warranties are
made by the Purchaser with the knowledge and expectation that
the Seller is placing complete reliance thereon.
(g) NO UNTRUE STATEMENTS. No representation or warranty by the
Purchaser in this Agreement or in any writing furnished or to
be furnished pursuant hereto, contains or will contain any
untrue statement of a material fact, or omits, or will omit to
state any material fact required to make the statements herein
or therein contained not misleading.
10. CONDITIONS PRECEDENT TO PERFORMANCE BY THE PURCHASER. The obligations
of the Purchaser to consummate the transactions contemplated by this Agreement
and to pay the Purchase Price, are subject to the satisfaction, at or before the
Closing Date, of all the following conditions, any one or more of which may be
waived in writing by the Purchaser:
(a) OPINION OF COUNSEL. The Seller shall have delivered at the
Closing to the Purchaser an opinion of the Seller's counsel
dated as of the Closing Date in form and substance reasonably
satisfactory to the Purchaser to the effect that: (i) Tulsa
Pipeline Equipment & Supply and Hamilton Heavy Equipment are
validly organized and existing corporations in good standing
under the laws of the states in which they were incorporated,
with full corporate power to carry on the business in which
they are engaged, and are duly qualified to do business in the
State of Texas; (ii) the performance of this Agreement and the
consummation of the transactions contemplated herein will not
result in any breach or violation of any terms or provisions
of or cause a default under the Articles of Incorporation as
amended, or Bylaws, as amended, of Tulsa Pipeline Equipment &
Supply and Hamilton Heavy Equipment, or to said counsel's
knowledge and belief any order, rule, or regulation of any
court, governmental agency or body having jurisdiction over
the Seller; (iii) no provision of the Articles of corporation,
as amended, Bylaws, as amended, minutes or share certificates
of Tulsa Pipeline Equipment & Supply and Hamilton Heavy
Equipment prevents the Purchaser from purchasing the Acquired
Assets to be sold as contemplated by this Agreement or
performing its obligations under this Agreement; (iv) to said
counsel's knowledge and belief, the Seller has the power and
right to execute and deliver and perform its obligations under
this Agreement, and any other agreement or undertaking called
for hereunder; (v) this Agreement and the Other
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Agreements constitute the binding obligation of the Seller,
enforceable against the Seller in accordance with their
respective terms, subject to any applicable bankruptcy,
insolvency, reorganization, moratorium or other similar laws
affecting the rights of creditors generally and that the
remedy of specific performance or of other equitable relief is
subject to the discretion of the court before which any
proceeding therefor is brought; and (vi) said counsel has no
knowledge of any litigation, proceeding, or governmental
investigation or labor dispute pending or threatened against
or relating to the Seller, its properties or businesses,
except as set forth herein or in said opinion.
(b) CERTIFICATES OF GOOD STANDING. The Seller shall have delivered
to the Purchaser certificates or telegrams issued by
appropriate governmental authorities evidencing the good
standing of Tulsa Pipeline Equipment & Supply and Hamilton
Heavy Equipment as of a date not more than 10 days prior to
the Closing Date, in the States of Oklahoma and Texas,
respectively, and that Tulsa Pipeline Equipment & Supply is
qualified to do business in the State of Texas as a foreign
corporation.
(c) CHANGE OF NAME. Before the Closing, Tulsa Pipeline Equipment &
Supply shall change its name to a name reasonably approved in
advance by the Purchaser. At the Closing, the Seller shall
deliver to the Purchaser evidence of such change in the name
of Tulsa Pipeline Equipment & Supply.
(d) RESOLUTIONS. The Purchaser's counsel shall have received
certified resolutions of a stockholder's meeting of the Seller
pursuant to which this Agreement and the transactions
contemplated hereby were duly and validly approved, adopted
and ratified by the stockholders of the Seller all in form and
content reasonably Satisfactory to such counsel, authorizing
(i) the execution, delivery and performance of this Agreement,
(ii) such other documents and instrument as shall be necessary
to consummate the transactions contemplated hereby and
thereby, and (iii) all actions to be taken by the Seller
hereunder.
(e) ACCESS TO RECORDS. With respect to the Business only, the
Seller shall afford the Purchaser access, during normal
business hours, to all of the Seller's business operations,
properties, books, files, and records, and will cooperate in
the Purchaser's examination thereof. No such examination,
however, shall constitute a waiver or relinquishment by the
Purchaser of its right to rely upon the covenants,
representations, and warranties made herein or pursuant hereto
by the Seller. Until the Closing hereunder or the termination
of this Agreement, whichever shall occur first, and after the
termination of this Agreement in the event this Agreement does
not close, the Purchaser will hold in confidence all
information so obtained by the Purchaser as a result of such
examination.
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(f) COMPLIANCE. The Seller shall cause its officers and employees
to comply with all applicable provisions of this Agreement.
(g) INSURANCE. From the date hereof, until the Closing, the Seller
shall keep all of the Acquired Assets insured in accordance
with the present practice, and maintain, preserve and keep the
Acquired Assets in reasonably good condition and state of
repair, reasonable wear excepted.
11. CONDITIONS PRECEDENT TO THE PERFORMANCE OF THE SELLER. The obligations
of the Seller to consummate the transactions contemplated by this Agreement are
subject to the satisfaction, at or before the Closing Date, of all of the
following conditions:
(a) OPINION OF COUNSEL. The Purchaser shall have delivered at the
Closing to the Seller an opinion of the Purchaser's counsel
dated as of the Closing Date in form and substance reasonably
satisfactory to the Seller to the effect that: (i) the
Purchaser is a validly organized and existing corporation in
good standing under the laws of the State of Delaware, with
full corporate power to carry on the business in which it is
engaged, and is duly qualified to do business in the State of
Texas; (ii) the performance of this Agreement and the
consummation of the transactions contemplated herein will not
result in any breach or violation of any terms or provisions
of or cause a default under the Certificate of Incorporation,
as amended, or Bylaws, as amended, of the Purchaser, or to
said counsel's knowledge and belief any order, rule, or
regulation of any court, governmental agency or body having
jurisdiction over the Purchaser; no provision of the
Certificate of Incorporation, as amended, Bylaws, as amended,
minutes or share, certificate of the Purchaser prevents the
Purchaser from purchasing the Acquired Assets to be sold as
contemplated by this Agreement or performing its obligations
under this Agreement; (iv) to said counsel's knowledge and
belief, the Purchaser has the power and right to execute and
deliver and perform its obligations under this Agreement, and
any other agreement or undertaking called for hereunder; (v)
this Agreement and the Other Agreements constitute the binding
obligation of the Purchaser, enforceable against the Purchaser
in accordance with their respective terms, subject to any
applicable Bankruptcy, insolvency, reorganization, moratorium
or other similar laws affecting the rights of creditors
generally and that the remedy of specific performance or of
other equitable relief is subject to the discretion of the
court before which any proceeding therefor is brought; and
(vi) said counsel has no knowledge of any litigation,
proceeding, or governmental investigation or labor dispute
pending or threatened against or relating to the Purchaser,
its properties or businesses, except as set forth herein or in
said opinion.
(b) CERTIFICATES OF GOOD STANDING. The Purchaser shall have
delivered to the Seller certificates or telegrams issued by
appropriate governmental authorities evidencing the good
standing of the Purchaser as of a date not more than 10 days
prior to the Closing Date, in the State of Delaware and
foreign qualification in the State of Texas.
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(c) RESOLUTIONS. The Seller shall have received certified
resolutions of the Board of Directors of the Purchaser, in
form reasonably satisfactory to counsel for the Seller,
authorizing execution, delivery and performance of this
Agreement by the Purchaser and all actions to be taken by the
Purchaser hereunder.
12. SATISFACTION OF LIENS AND ENCUMBRANCES. On or before the Closing Date,
the Seller shall take all such action as shall be legally required in order to
deliver to the Purchaser good and marketable title to all of the Acquired
Assets, free and clear of all liens, pledges, claims, security interests,
mortgages, encumbrances and restrictions of all types and nature whatsoever
(collectively the "Liens"), except only for such (i) permitted liens which have
been approved in advance by the Purchaser, and (ii) the terms and conditions of
the Contract Rights and the Other Contracts (collectively the "Permitted
Liens"). Such action shall include, without limitation, the payment in full of
all indebtedness for money borrowed by the Seller which is secured by the Liens
on the Acquired Assets (which payment may be made, in whole or in part, by
application and payment of all or a portion of the Purchase Price to the holders
of such indebtedness of the Seller), and, in connection therewith, to deliver to
the Purchaser and its counsel appropriate UCC form-3 or termination statements,
satisfactions of mortgages, and other documents which the Purchaser and its
counsel shall reasonably require to evidence the termination of all of the Liens
other than the Permitted Liens.
13. ACCESS TO FORMER BUSINESS RECORDS. For a period of seven years
following the Closing, the Purchaser will retain all business records
constituting part of the Acquired Assets and the Assumed Liabilities. During
such period, the Purchaser will afford authorized representatives of the Seller
free and full access to all of such records at reasonable times and during
normal business hours at the principal business office of the Purchaser, or at
such other location or locations at which such business records may be stored or
maintained from time to time, and will permit such representatives to make
abstracts from, or copies of, any of such records, or to obtain temporary
possession of any thereof as may be reasonably required by the Seller at the
Seller's sole cost and expense. During such period, the Purchaser will, at the
Seller's expense, cooperate with the Seller in furnishing information, evidence,
testimony, and other reasonable assistance in connection with any action,
proceeding, or investigation relating to the Seller's conduct of the Business
prior to the Closing. The Purchaser shall not be liable for destruction of any
such records which destruction is not the result of negligence or willful act.
14. EMPLOYMENT. Effective as of the Closing Date, the Seller may terminate
the employment of some or all of its employees (the " Employees"). Some or all
of the Employees may be offered employment by the Purchaser effective on the
Closing Date on such terms and conditions as may be determined by the Purchaser.
The Seller shall be solely responsible for and shall pay all benefits which may
be due to any of the Employees as a result of any such termination of employment
by the Seller.
15. PROPERTY TAXES. All property taxes with respect to the Acquired Assets
for the current taxation period shall be prorated among the parties hereto as of
the date of the Closing. The aggregate amount to be prorated shall be the actual
amount of taxes to be due for the year to which the proration applies or in the
absence thereof the good faith estimate of the parties as to the expected tax
bill for such year. At the Closing, the Purchase Price shall be credited with
any such
11
<PAGE>
property taxes which are paid by the Purchaser relating to any period before the
Closing. If the Seller has prepaid any such property taxes before the Closing,
the Purchaser shall reimburse the Seller for any such property taxes so prepaid
which relate to a period after the Closing.
16. ACTIONS OF THE SELLER FOLLOWING THE CLOSING. Following the Closing,
the Seller shall refer to the Purchaser all communications intended for Tulsa
Pipeline Equipment & Supply.
17. SURVIVAL OF WARRANTIES. All representations and warranties made by the
parties in this Agreement or in any agreement, document, statement or
certificate furnished hereunder or in connection with the negotiation, execution
and performance of this Agreement shall survive the Closing and any instrument
delivered as described herein for a period of 15 months after the Closing; all
covenants shall survive so long as applicable. Notwithstanding any investigation
or audit conducted before or after the Closing Date or the decision of any party
to complete the Closing, each party shall be entitled to rely upon the
representations, covenants, warranties and agreements set forth herein and
therein.
18. NO BROKERS. Each of the parties represents and warrants to the other
parties that all negotiations relative to this Agreement have been carried on by
such party directly and without the intervention of any person, firm,
corporation or entity who or which may be entitled to any brokerage or finder's
fee or other commission in respect of the execution of this Agreement or the
consummation of the transactions contemplated hereby, and each party shall
indemnify and hold harmless all of the other parties hereto against any and all
claims, losses, liabilities or expenses which may be asserted against any such
other party as a result of the dealings, arrangements or agreements of such
party or any of its affiliates with any such person, firm, corporation or
entity.
19. INDEMNIFICATION BY THE SELLER. The Seller agrees to indemnify and hold
harmless the Purchaser against any and all liability, damage, loss or expense
(including reasonable counsel fees), resulting from, arising out of, or
connected with:
(a) Any breach of the representations and warranties made by the
Seller in this Agreement or the Other Agreements, for the
period of survival of the breached representation and warranty
set forth in Paragraph 17 of this Agreement.
(b) The nonfulfillment of any agreement or covenant made by the
Seller in this Agreement or in the Other Agreements.
Notwithstanding the provisions of this Paragraph 19 of this Agreement, the
Purchaser agrees that it shall not seek indemnification under this Paragraph 19
until such time as the aggregate amount of the indemnifiable liability, damage,
loss or expense incurred by the Purchaser exceeds $25,000.00. In addition, the
aggregate liability of the Seller with respect to the aggregate amount of all
claims asserted under this Paragraph 19 shall in no event exceed the Purchase
Price.
20. INDEMNIFICATION BY THE PURCHASER. The Purchaser agrees to indemnify
and hold harmless the Seller against any and all liability damage, loss or
expense (including reasonable counsel fees), resulting from, arising out of, or
connected with:
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<PAGE>
(a) Any breach of the representations and warranties made by the
Purchaser in this Agreement or in the Other Agreements for the
period of survival of the breached representation and warranty
set forth in Paragraph 17 of this Agreement.
(b) The nonfulfillment of any agreement or covenant made by the
Purchaser in this Agreement or in the Other Agreements,
including the Assumption of Liabilities Agreement.
21. DESTRUCTION OF THE ACQUIRED ASSETS. If, on or before the Closing, any
substantial portion of the Acquired Assets shall suffer a loss due to fire,
flood, tornado, hurricane, earthquake, riot, accident or other calamity, whether
or not insured, to such an extent that in the opinion of the Purchaser there
will be a delay in repairing or replacing any of the Acquired Assets so lost,
then the Purchaser may, at its sole option, declare that this Agreement is null
and void, and thereafter, no party shall have any liability to any other party
hereunder or in connection with any other instrument executed in relation to the
transactions contemplated herein.
22. CLOSING. The Closing Date of the sale and purchase contemplated
hereunder shall be on the 29 day of May, 1998, subject to acceleration or
postponement from time to time as the Seller and the Purchaser mutually agree.
The Closing shall be held at the offices of the Purchaser located at 11601 North
Houston-Rosslyn Road, Houston Texas 77086, at 10:00 a.m., Houston, Texas time,
on the Closing Date unless another hour or place is mutually agreed upon by the
Seller and the Purchaser.
23. DELIVERIES AT THE CLOSING BY THE SELLER.
(a) The bills of sale and any other required form of conveyance
covering the Acquired Assets to be sold hereunder as more
fully described in ANNEX 3 attached hereto, free and clear of
all liens, encumbrances, charges, escrows, equities, and other
restrictions, except as may be otherwise permitted hereunder.
(b) The Consulting Agreement executed by Hamilton as described in
ANNEX 1 attached hereto.
(c) The opinion of counsel in he form described in Paragraph 10(a)
hereof.
(d) The certificates of good standing as described in Paragraph
10(b) hereof.
(e) Evidence of the change of he name of Tulsa Pipeline Equipment
& Supply as described in Paragraph 10(c) hereof.
(f) The certified copies of various corporate resolutions as
described in Paragraph 10(d) hereof.
(g) Any other document which may be necessary to carry out the
intent of this Agreement.
13
<PAGE>
24. DELIVERIES AT THE CLOSING BY THE PURCHASER.
(a) By wire transfer, the sum of ninety percent of the Purchase
Price, as adjusted for inventory on hand at Closing, less
$400,000.00.
(b) The Promissory Note in the amount of $400,000.00 as described
in ANNEX 2 attached hereto.
(c) The opinion of counsel in the form described in Paragraph
11(a) hereof.
(d) The certificates of good standing as described in Paragraph
11(b) hereof.
(e) The certified copies of the various corporate resolutions as
described in Paragraph 11(c) hereof.
(f) The Consulting Agreement as described in ANNEX 1 attached
hereto.
(g) The Assumption of Liabilities Agreement as described in ANNEX
4 attached hereto.
(h) Any other document which may be necessary to carry out the
intent of this Agreement, including SCHEDULE 2 revised to show
inventory on hand at Closing.
25. DELIVERIES FOLLOWING THE CLOSING BY THE SELLER. Within 45 days
following the Closing, the Seller shall deliver to the Purchaser any of the
Acquired Assets which were not complete and assembled to the Purchaser's
reasonable satisfaction as of the Closing. To the extent that the Seller fails
to deliver any of the Acquired Assets as described in this paragraph, the
Purchase Price shall be adjusted by the value of any such of the Acquired Assets
not so delivered.
26. DELIVERIES FOLLOWING THE CLOSING BY THE PURCHASER. Within 45 days
following the Closing, the Purchaser shall deliver the remainder of the Purchase
Price by means of a wire transfer of immediately available funds to an account
designated by the Seller, after making all adjustments to the Purchase Price as
called for herein.
27. PUBLIC ANNOUNCEMENTS. Except as otherwise required by law, no public
announcements shall be made by any party regarding the transactions contemplated
hereby without the prior approval of the other parties, which approval shall not
be unreasonably withheld.
28. ATTORNEY'S FEES. In the event that it should become necessary for any
party entitled hereunder to bring suit against the other party to this Agreement
for enforcement of the covenants herein contained, the parties hereby covenant
and agree that the party who is found to be in violation of said covenants shall
also be liable for all reasonable attorney's fees and costs of court incurred by
the other party.
29. BENEFIT. All the terms and provisions of this Agreement shall be
binding upon and inure to the benefit of and be enforceable by the parties
hereto, and their respective heirs, executors, administrators, personal
representatives, successors and permitted assigns.
14
<PAGE>
30. NOTICES. All notices, requests and other communications hereunder
shall be in writing and shall be deemed to have been duly given at the time of
receipt if delivered by hand or communicated by electronic transmission, or, if
mailed, three days after deposit in the United States mail, registered or
certified, return receipt requested, with postage prepaid and addressed to the
party to receive same, if to the Purchaser, addressed to Mr. M. Timothy Carey at
11601 North Houston-Rosslyn Road, Houston, Texas 77086, telephone (281)
999-8920, and fax (281) 999-8724; and if to the Seller, addressed to Mr. Jerry
Hamilton at 1807 Rankin Road, Houston, Texas 77073, telephone (281) 821-6007,
and fax (281) 821-5501; provided, however, that if either party shall have
designated a different address by notice to the other given as provided above,
then any subsequent notice shall be addressed to such party at the last address
so designated.
31. ASSIGNMENT. This Agreement shall be binding upon and inure to the
benefit of the successors of each of the parties hereto. The Purchaser may
assign this Agreement to any other entity as it may choose, without the prior
consent of the Seller.
32. NO THIRD PARTIES. This Agreement is not intended to, and shall not,
create any rights in or confer any benefit whatsoever upon any person other than
the parties hereto. The assumption of any liability or obligation by the
Purchaser pursuant to this Agreement and the exclusion of any liability or
obligation hereunder shall have effect and shall create enforceable rights only
as between the parties to this Agreement, and is not intended to and shall not
be enforceable by, create any rights of whatever nature in, or confer any
benefit whatsoever upon any person other than the parties to this Agreement.
33. CONSTRUCTION. Words of any gender used in this Agreement shall be held
and construed to include any other gender, and words in the singular number
shall be held to include the plural, and vice versa, unless the context requires
otherwise.
34. WAIVER. No course of dealing on the part of any party hereto or its
agents, or any failure or delay by any such party with respect to exercising any
right, power or privilege of such party under this Agreement or any instrument
referred to herein shall operate as a waiver thereof, and any single or partial
exercise of any such right, power or privilege shall not preclude any later
exercise thereof or any exercise of any other right, power or privilege
hereunder or thereunder.
35. CUMULATIVE RIGHTS. The rights and remedies of any party under this
Agreement and the instruments executed or to be executed in connection herewith,
or any of them, shall be cumulative and the exercise or partial exercise of any
such right or remedy shall not preclude the exercise of any other right or
remedy.
36. INVALIDITY. In the event any one or more of the provisions contained
in this Agreement or in any instrument referred to herein or executed in
connection herewith shall, for any reason, be held to be invalid, illegal or
unenforceable in any respect, such invalidity, illegality, or unenforceability
shall not affect the other provisions of this Agreement or any such other
instrument.
37. TIME OF THE ESSENCE. Time is of the essence of this Agreement.
15
<PAGE>
38. MULTIPLE COUNTERPARTS. This Agreement may be exercised in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
39. LAW GOVERNING. This Agreement hall be construed and governed by the
laws of the State of Texas, and all obligations hereunder shall be deemed
performable in Harris County, Texas.
40. PERFECTION OF TITLE. The parties hereto shall do all other acts and
things that may be reasonably necessary or proper, fully or more fully, to
evidence, complete or perfect this Agreement, and to carry out the intent of
this Agreement.
41. ENTIRE AGREEMENT. This instrument contains the entire understanding of
the parties and may not be changed orally, but only by an instrument in writing
signed by the party against whom enforcement of any waiver, change,
modification, extension, or discharge is sought.
IN WITNESS WHEREOF, the Purchaser and the Seller have each caused this
Agreement to be executed by their respective duly authorized officers, as of the
date first above written.
CRC-EVANS PIPELINE
INTERNATIONAL, INC.
By:__________________________________
M. Timothy Carey, Chief Executive
Officer
TULSA PIPELINE EQUIPMENT &
SUPPLY, INC.
By:__________________________________
Jerry Hamilton, President
HAMILTON HEAVY EQUIPMENT, INC.
By:__________________________________
Jerry Hamilton, President
______________________________________
JERRY HAMILTON, individually and doing
business as HHC INTERNATIONAL
16
EXHIBIT 10.11
AMENDMENT TO AGREEMENT OF PURCHASE AND SALE
THIS AMENDMENT TO AGREEMENT OF PURCHASE AND SALE (the "Agreement") is made
and entered into this 29th day of May, 1998 and is by and between CRC-EVANS
PIPELINE INTERNATIONAL, INC,, a Delaware corporation (the "Purchaser") and
HAMILTON HEAVY EQUIPMENT, INC., a Texas corporation ("Hamilton Heavy Equipment")
and JERRY HAMILTON, individually and doing business as HHC INTERNATIONAL
("Hamilton"), (collectively, Hamilton Heavy Equipment, and Hamilton are
sometimes hereinafter referred to as the "Seller").
WHEREAS, on April 24, 1998, the parties hereto executed that certain
Agreement of Purchase and Sale with respect to the Business and certain Acquired
Assets of the Seller (the Purchase Agreement"), all as more fully described in
the Purchase Agreement, to which reference is hereby made and expressly
incorporated herein for all purposes; and
WHEREAS, one of the parties included within the Seller as referred to in
the Purchase Agreement was Tulsa Pipeline Equipment & Supply, Inc., an Oklahoma
corporation ("Tulsa Pipeline Equipment & Supply"); and
WHEREAS, Tulsa Pipeline Equipment & Supply was merged into Hamilton Heavy
Equipment on May 28, 1998, and as a result all references in the Purchase
Agreement to Tulsa Pipeline Equipment & Supply as a part of the Seller should be
deleted; and
WHEREAS, all terms which are capitalized in the Purchase Agreement shall
have the same meaning herein as ascribed to such terms in the Purchase
Agreement; and
WHEREAS, the parties hereto desire to amend the Purchase Agreement as
hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and of other good and
valuable consideration, and intending to be legally bound hereby, the Purchaser
and the Seller hereby agree as follows:
1. LEASE OF THE BROKEN ARROW, OKLAHOMA FACILITY. At the Closing, the
Seller shall execute and deliver a lease with the Purchaser whereby the
Purchaser shall have the right to lease the Broken Arrow, Oklahoma facility from
the Seller beginning June 1, 1998 for a term extending through May 31, 1999 with
an option to renew for two successive one-year terms. A form of the lease is
attached hereto as Annex 1.
2. LEASE OF THE HOUSTON, TEXAS FACILITY. At the Closing, the Seller shall
execute and deliver a letter agreement with the Purchaser whereby the Purchaser
shall have the right to lease a portion of the Houston, Texas facility and
offices from the Seller beginning June 1, 1998 and extending on a month-to-month
basis. In addition to the right to utilize the leased space, the
1
<PAGE>
Seller shall provide to the Purchaser certain services required by the Purchaser
for the operation of a sales office and limited rental equipment storage and
maintenance. A copy of the letter agreement is attached hereto as ANNEX 2.
3. ASSIGNMENT OF TRADEMARKS AND SERVICE MARKS. At Closing, the Seller
shall execute and deliver an Assignment of Trademarks and Service Marks
transferring, assigning and conveying all right, title and interest in and to
the trademarks and service marks with respect to Tulsa Pipeline Equipment &
Supply, including, but not limited to the name of Tulsa Pipeline Equipment &
Supply (the "Marks") to the Purchaser. To the extent necessary to carry out the
intent and purpose of the Purchase Agreement, the Marks shall be included within
the definition of Acquired Assets. A copy of the Assignment of Trademarks and
Service Marks is attached hereto as ANNEX 3.
4. EMPLOYEES. The employees of the Seller which the Purchaser desires to
hire shall remain on the payroll of the Seller through May 31, 1998. However,
such employees shall be available to assist the Purchaser from and after the
Closing through May 31, 1998.
5. PARTS INVENTORY. With respect to the parts inventory and the
calculation of the adjustments to the Purchase Price as described in Paragraph 5
of the Purchase Agreement, the Broken Arrow, Oklahoma facility will be
inventoried on May 29, 1998, and the Purchaser will take possession of such
inventory on June 1, 1998. Any usage of such inventory after June 1, 1998 by the
Seller will be charged to the Seller at cost. The Houston, Texas facility will
be inventoried immediately before the 45-day settlement date for calculation of
the final adjustment to the Purchase Price. Any usage of such inventory by the
Purchaser between the Closing and 45-day settlement date will be charged to the
Purchaser at cost.
6. SALES AND RENTAL ORDERS. Except as identified in ANNEX 4, the Seller
agrees to timely deliver and assign to the Purchaser any and all sales and
rental orders received by the Seller which pertain to the Business. All sales
and rental orders received by the Seller, and which are accepted by the
Purchaser, shall be completed and billed by the Purchaser.
7. RATIFICATION. Except as amended hereby, the parties do hereby ratify
and republish the Purchase Agreement.
8. ATTORNEY'S FEES. In the event that it should become necessary for any
party entitled hereunder to bring suit against the other party to this Agreement
for enforcement of the covenants herein contained, the parties hereby covenant
and agree that the party who is found to be in violation of said covenants shall
also be liable for all reasonable attorney's fees and costs of court incurred by
the other party.
9. BENEFIT. All the terms and provisions of this Agreement shall be
binding upon and inure to the benefit of and be enforceable by the parties
hereto, and their respective heirs, executors, administrators, personal
representatives, successors and permitted assigns.
10. NOTICES. All notices, requests and other communications hereunder
shall be in writing and shall be deemed to have been duly given at the time of
receipt if delivered by hand or communicated by electronic transmission, or, if
mailed, three days after deposit in the United States mail, registered or
certified, return receipt requested, with postage prepaid and addressed to the
party to receive same, if to the Purchaser, addressed to Mr. M. Timothy Carey at
11601 North Houston-Rosslyn Road, Houston, Texas 77086, telephone (281)
999-8920, and fax (281) 999-8724; and if to the Seller, addressed to Mr. Jerry
Hamilton at 1807 Rankin Road, Houston, Texas 77073, telephone (281) 821-6007,
and fax (281) 821-5501; provided, however, that if either party shall have
designated a different address by notice to the other given as provided above,
then any subsequent notice shall be addressed to such party at the last address
so designated.
2
<PAGE>
11. NO THIRD PARTIES. This Agreement is not intended to, and shall not,
create any rights in or confer any benefit whatsoever upon any person other than
the parties hereto. The assumption of any liability or obligation by the
Purchaser pursuant to this Agreement and the exclusion of any liability or
obligation hereunder shall have effect and shall create enforceable rights-only
as between the parties to this Agreement, and is not intended to and shall not
be enforceable by, create any rights of whatever nature in, or confer any
benefit whatsoever upon any person other than the parties to this Agreement.
12. CONSTRUCTION. Words of any gender used in this Agreement shall be held
and construed to include any other gender, and words in the singular number
shall be held to include the plural, and vice versa, unless the context requires
otherwise.
13. WAIVER. No course of dealing on the part of any party hereto or its
agents, or any failure or delay by any such party with respect to exercising any
right, power or privilege of such party under this Agreement or any instrument
referred to herein shall operate as a waiver thereof, and any single or partial
exercise of any such right, power or privilege shall not preclude any later
exercise thereof or any exercise of any other right, power or privilege
hereunder or thereunder.
14. CUMULATIVE RIGHTS. The rights and remedies of any party under this
Agreement and the instruments executed or to be executed in connection herewith,
or any of them, shall be cumulative and the exercise or partial exercise of any
such right or remedy shall not preclude the exercise of any other right or
remedy.
15. INVALIDITY. In the event any one or more of the provisions contained
in this Agreement or in any instrument referred to herein or executed in
connection herewith shall, for any reason, be held to be invalid, illegal or
unenforceable in any respect, such invalidity, illegality, or unenforceability
shall not affect the other 'provisions of this Agreement or any such other
instrument.
16. TIME OF THE ESSENCE. Time is of the essence of this Agreement.
17. MULTIPLE COUNTERPARTS. This Agreement may be exercised in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
18. LAW GOVERNING. This Agreement shall be construed and governed by the
laws of the State of Texas, and all obligations hereunder shall be deemed
performable in Harris County, Texas.
3
<PAGE>
19. PERFECTION OF TITLE. The parties hereto shall do all other acts and
things that may be reasonably necessary or proper, fully or more fully, to
evidence, complete or perfect this Agreement, and to carry out the intent of
this Agreement.
20. ENTIRE AGREEMENT. This instrument contains the entire understanding of
the parties and may not be changed orally, but only by an instrument in writing
signed by the party against whom enforcement of any waiver, change,
modification, extension, or discharge is sought.
IN WITNESS WHEREOF, the Purchaser and the Seller have each caused this
Agreement to be executed by their respective duly authorized officers, as of the
date first above written.
CRC-EVANS PIPELINE
INTERNATIONAL, INC.
By _________________________________
M. Timothy Carey, Chief Executive
Officer
HAMILTON HEAVY EQUIPMENT INC.
By _________________________________
Jerry Hamilton, President
____________________________________
JERRY HAMILTON, individually and
doing business as HHC INTERNATIONAL
4
EXHIBIT 10.12
ASSET PURCHASE AGREEMENT
(B. L. KEY SERVICES, L.L.C.)
THIS AGREEMENT is made and entered into by and among CRC-KEY, INC, an
Oklahoma corporation, ("Buyer"), and B. L. KEY SERVICES, L.L.C. ("Seller"),
BOBBY L. KEY ("Key"), JAMES C. McGILL ("James McGill"), the JAMES C. McGILL
REVOCABLE LIVING TRUST DATED JUNE 28, 1996, amended and restated October 22,
1996 (the "Trust"), JAMES MICHAEL McGILL ("Michael McGill") (Key, James McGill
and Michael McGill being referred to as "Member" or "Members").
RECITALS
1. Seller owns and operates a business that designs, manufactures and
sells concrete weights that are used in the pipeline business, among others (the
"Business"). Seller is an Oklahoma Limited Liability Company, which, under
Oklahoma law, has "Members" and "Managers" instead of "Shareholders" and
"Directors" or "Limited Partners" and "General Partners." Under Oklahoma
corporate law Key, the Trust and Michael McGill are the only members of Seller
and Key and James McGill are the only Managers of the Seller, although the
Seller has other employees who hold managerial positions but are not "Managers"
of the L.L.C. under Oklahoma law.
2. Seller desires to sell to Buyer, and Buyer desires to buy from Seller,
substantially all of Seller's assets upon the terms and conditions contained in
this Agreement.
NOW, THEREFORE, in consideration for the mutual terms and provisions
contained in this Agreement, and other good and valuable consideration, the
receipt and adequacy of which are acknowledged, the Parties agree as follows:
ARTICLE 1
PURCHASE AND SALE OF ASSETS
1.1 PURCHASE OF ASSETS. On the basis of the representations and warranties
of the Parties contained herein, subject to the terms and conditions set forth
in this Agreement, and for the consideration hereafter provided, Seller agrees
to sell, transfer and deliver to Buyer, and Buyer agrees to purchase from
Seller, on the Closing Date (as hereafter defined) all of the following assets
(except as specifically excluded in Section 1.2):
(a) The real property and improvements described in and according to
the terms of the Contract for the Purchase of Real Estate attached
as SCHEDULE 1.L(A) (the "Real Estate Contract"); provided that such
real property shall be leased as provided in the lease attached to
such Real Estate Contract;
<PAGE>
(b) All of Seller's supplies, equipment, inventory, fixed assets and
other tangible personal property as of October 31, 1997 as described
on SCHEDULE 1.L(B). Such schedule shall be updated from October 31,
1997 through the Closing Date (all of Seller's supplies, equipment,
inventory, fixed assets and other tangible personal property being
purchased by Buyer is hereinafter referred to as the "Personal
Property") Seller's cost of all such Personal Property and the
accumulated depreciation for each item through October 31, 1997, is
shown on SCHEDULE 1.L(B);
(c) All rights accruing under the leases of and licenses to use
real, tangible or intangible personal, or other property in which
Seller has an interest listed on SCHEDULE 1.L(C) from and after the
Closing Date, which Schedule includes: (i) all leases or licenses of
property that would be "Personal Property" if Seller owned that
property and (ii) all real property leases, leases or licenses of
computer systems, software, systems and documentation, visual and
electronic security equipment, facsimile and duplicating equipment,
and leases of all other equipment, automobiles, trucks, rolling
stock, and communications equipment, collectively referred to as the
"Personal Property Leases";
(d) All of the following related to the Business: (i) supplier
lists, (ii) customer lists, (iii) address or phone lists, (iv)
marketing prospects and brochures, (v) product descriptions,
drawings, plans and specifications; (vi) computer files, (vii)
warranties, maintenance and other records relating to the Purchased
Assets, and (viii) copies of Seller's tax returns and financial
records, Seller's organizational document and operating agreement
and Seller's personnel files;
(e) All intangible personal property of Seller (collectively,
"Intangible Property") described on SCHEDULE 1.1(E) and the
following:
(i) Contracts as listed in SCHEDULE 1.L(E)(I);
(ii) All deposits, prepaid items and refunds including utility
deposits;
(iii) To the extent transferable, all licenses, certificates,
franchises, accreditations, permits, and other indicia of
authority relating to business operations of the Business;
(iv) All trade names and business names including, without
limitation, the names "B. L. Key Services" (or any part or
derivation thereof), service marks, trade dress, trademarks,
logos, and all derivations and variations of any thereof, and
all proprietary materials listed on SCHEDULE 1.1(E)(IV)
(collectively called the "Business Identity");
(v) All telephone, facsimile, e-mail numbers, Internet
web-page identifiers and communication numbers and post office
box rights listed on Schedule I - 1 (e) (v),
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<PAGE>
(vi) All technical information, blueprints, plans,
specifications, processes, engineering drawings or notes,
patents, rights to inventions, copyrights, rights to
proprietary processes, ideas, developments, and all other
intellectual property (collectively called "Intellectual
Property"), including such intellectual property described on
Schedule 1.1(e)(vi);
(vii) The rights of Seller under all manufacturers',
contractors', bankers' or others' warranties and guaranties
which relate to the Purchased Assets;
(viii) All of Seller's goodwill in the Business.
(f) To the extent that policy limits are not exhausted by Seller
before December 31, 1999, or thereafter with respect to claims
asserted against Seller, all rights under all insurance policies
insuring against any liability for any past or future activity or
liability of the Seller or the Business for periods before the
Closing Date;
(g) To the extent that Buyer pays an amount to resolve, settle or
pay for a claim, rights of subrogation, contribution, claims against
agents, or claims against others, in which the Seller has an
interest or that are related to the Business, including without
limitation all rights which, under law or equity, accrue before or
after the Closing Date but relate to an occurrence that happened
before the Closing Date;
(h) All "work in process" in which Seller has an interest as shown
on SCHEDULE 1.1(H) as such schedule shall be updated through the
Closing Date; and
(i) The intent of the foregoing is that the Buyer will purchase
substantially all of the assets and rights that are used in the
Business and have been paid for by Seller other than Excluded
Assets. If a schedule omits such an asset or right of Seller, other
than an asset described in Section 1.2(a)-(e), Buyer will have the
right and option to purchase such item or right from Seller for
Seller's cost less depreciation or if greater, the assumption of any
purchase money indebtedness thereon. Buyer's purchase option will
survive the Closing for a period of twelve (12) months.
1.2 EXCLUDED ASSETS. The following assets (the "Excluded Assets") shall
not be included in the definition of "Purchased Assets" (hereinafter defined)
and shall not be included in the sale:
(a) All of Seller's cash on hand, in banks, or elsewhere;
(b) Any property (including, any Personal Property) of Seller that
is expended, disposed of or sold in the ordinary course of business
prior to the Closing Date;
(c) The Seller's accounts receivable;
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(d) Seller's notes receivable;
(e) The other assets described on SCHEDULE 1.2; and
(f) All rights, claims, interests and property of Seller not
described in Section 1.1 above.
all of which (a-f) are called the "Excluded Assets." The Assets described in
Section 1.1, less the Excluded Assets, will be called the " Purchased Assets."
1.3 ASSUMPTION OF OBLIGATIONS AND LIABILITIES.
(a) IN GENERAL. Subject to the terms and conditions set forth in
this Agreement, Buyer agrees to assume, perform and pay when due the
obligations and liabilities of Seller with respect to the Personal
Property, the Personal Property Leases, the Contracts, all
obligations related to the work in progress being assigned to Buyer
hereunder, and the remaining Purchased Assets, but only to the
extent they arise or are to be performed after the Closing Date (the
"Assumed Obligations"). Buyer also agrees to assume and pay any
specific liabilities described in SCHEDULE 1.3(A)("Assumed
Liabilities").
(b) EXCLUDED LIABILITIES. Seller shall pay all liabilities and
obligations not expressly assumed by Buyer on the Closing Date and
Seller shall indemnify Buyer against any and all such liabilities
pursuant to and in accordance with Section 4.4 hereof. Buyer does
not assume any liabilities or obligations of Seller, or related in
any way to the Purchased Assets or actions of Seller, which are not
specifically assumed by Buyer under this Agreement including,
without limitation, liabilities arising prior to the Closing Date in
connection with the operation of the Business and the activities of
Seller.
1.4 PURCHASE PRICE.
(a) IN GENERAL. Subject to the terms and conditions of this
Agreement and the adjustments and credits provided in SECTION 1.5,
the purchase price ("Purchase Price") to be paid by Buyer to Seller
for the Purchased Assets shall be as follows:
(i) The sum of One Million Thirty Thousand Dollars
($1,030,000.00), less closing adjustments described in SECTION
1.5 of this Agreement, payable on the Closing Date by a
cashier's check drawn on a bank located in the United States
or, at the Seller's option, a wire transfer of funds initiated
and transferred on the Closing Date; plus
(ii) A note in the form attached hereto as SCHEDULE
1.4(A)(II); plus
(iii) If, but only to the extent that, any "Earnout Payments"
described in SUBSECTION 1.4(B) are payable, such Earnout
Payments; plus or minus
(iv) Any "Purchase Price Adjustment" described in SUBSECTION
1.4(C).
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(b) EARNOUT PAYMENTS. The "Earnout Payments" shall be calculated as
described on SCHEDULE 1.4(B), subject to the following rules:
(i) CUMULATIVE BASIS. The maximum Earnout Payments will be
calculated on a cumulative basis, beginning on April 1, 1998,
and ending March 31, 2003. Interim calculations and payments
will be made as described in this Subsection, but all
calculations and payments will be based on the entire period
described above.
(ii) EARNOUT PAYMENT. For each of the Buyer's Fiscal Years
ending on or before March 31, 2003, the Buyer will calculate
and pay an Earnout Payment; provided that, in no event will
the Seller receive aggregate Earnout Payments that exceed the
cumulative sum of Five Million Five Hundred Thousand Dollars
($5,500,000.00). If the Earnout Ratio described on SCHEDULE
1.4(B) exceeds 0.2 for one or more fiscal years, and then
drops below 0.2 for a future fiscal year, then Seller will not
be required to repay Earnout Payments previously made by the
Buyer. In addition, if for two successive fiscal years the
Earnout Ratio is less than 0.1, then in Buyer's discretion it
may cancel and terminate all remaining Earnout Payments. In
addition, if Buyer in any fiscal year suffers an operating
loss (not including any extraordinary items) in excess of
$500,000, then Buyer in its discretion may cancel and
terminate any Earnout Payment for that fiscal year and for all
future fiscal years.
(iii) FINANCIAL ACCOUNTING METHODS. The Earnout Payments
calculation will be applied on a non-consolidated basis, even
while the Buyer is a member of a business group that should be
consolidated for tax or regular accounting basis. While the
Business is owned by the Buyer and it does not own assets
other the those purchased hereunder, or employed or generated
as a part of the Business, the Buyer's entire assets,
liabilities, earnings and other accounting elements will be
used to calculate the Earnout Payments, Average Net Assets and
EBITDA as such terms are defined on SCHEDULE 1.4(B). If,
however, the Buyer owns other businesses, the Buyer shall
operate the Business as a separate division and only the
accounts of that division will be used to calculate the
Earnout Payments, Average Net Assets and EBITDA. The increased
basis or cost of the Purchased Assets, based on the Buyer's
purchase price (including any previous Earnout Payment), will
be included in the carrying cost of the Total Assets as such
term is defined on SCHEDULE 1.4(B). To calculate Total Assets
for purposes of the Earnout Payments, no asset will be
depreciated, depleted, amortized or written off by more than
the amount permitted as an expense for the Earnout Payments,
Average Net Assets and EBITDA, even if GAAP or tax rules
permit or require such depreciation, amortization or
write-off; thus, Total Assets for the Earnout Payment may
exceed the Total Assets stated on the Buyer's regular books of
account or on its tax statements.
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(iv) PAYMENT. Any Earnout Payment will be payable, by Buyer's
wire transfer, on or before the earlier of (A) August 31 that
follows immediately after the end of each "Applicable Year,"
or (B) 10 business days after Buyer receives its final
certified audit for the previous fiscal year. The "Applicable
Years" relate to the fiscal years ending on March 31, 1999,
through March 31, 2003, inclusive. With the payment for any
Earnout Payment, the Buyer shall include a calculation of the
Earnout Payment computed and shown in accordance with SCHEDULE
1.4(B), and copies of Buyer's monthly financial statements for
that fiscal year and fiscal year financial statements.
(v) SELLER'S RIGHTS TO REVIEW AND OBJECT. Seller shall have
the right to review the Buyer's financial statements during
the period that Earnout Payments are calculated on a monthly
basis. Seller also has the right to review the Buyer's regular
books of account for such fiscal year during Buyer's regular
business hours, by giving Buyer at least ten business days'
notice within 120 days after Buyer delivers the information
described in Subsection 1.4(b)(iv). The Seller may object to
the calculation of the Earnout Payment by delivering a
specific and detailed statement of the reasons for the
objection and the errors in the calculation of the Earnout
Payment by giving at least ten business days' notice; provided
that if the Seller does not deliver its Statement within 180
days after the Buyer delivers to Seller the calculation of the
Earnout Payment, Average Net Assets and EBITDA for that fiscal
year, the Seller shall be deemed to have accepted the Buyer's
calculation of the Earnout Payment, Average Net Assets and
EBITDA and for future fiscal years all previous fiscal years'
calculations shall not be subject to review or objection.
(vi) DISPUTE RESOLUTION. In the event of a timely objection to
Buyer's calculation of the Average Net Assets, EBITDA and the
Earnout Payment, the Parties shall endeavor to resolve the
objection during a period of at least 60 days after Seller
delivers such timely objection. If the Parties are unable to
resolve such timely objection, they shall appoint David O.
Hogan at Hogan & Slovacek, Tulsa, Oklahoma, to review the
Buyer's calculation, and the determination of such accounting
firm of the correct amounts shall be binding on both Parties.
The fees of such accounting firm shall be shared equally by
the Parties.
THIS SUBSECTION IS THE EXCLUSIVE REMEDY WITH RESPECT TO
DISPUTES REGARDING THE BUYER'S CALCULATION OF THE AVERAGE NET
ASSETS, EBITDA, AND EARNOUT PAYMENTS.
(vii) KEY MAN INSURANCE. Notwithstanding the foregoing
description of the Earnout Payments, this Subsection describes
the exclusive rights to Earnout Payments with respect to the
interest of any of the Members who dies before March 31, 2003.
The Seller or Key and James McGill currently have life
insurance policies insuring the lives of each other as
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described on SCHEDULE 1.4(B)(VII), with death benefits
totaling $1,500,000 on the life of Key and $1,000,000 on the
life of James McGill. Such policies will be split such that
one third ($500,000) of the policy insuring the life of Key
will be assigned to Buyer at Closing with the remainder
($1,000,000) assigned to Key at Closing and one-quarter
($250,000) of the policy insuring the life of James McGill
will be assigned to Buyer at Closing with the remainder
($750,000) assigned to James McGill at Closing. Key and McGill
will consent to such assignment. In addition, Michael McGill
will cooperate with the obtaining of $500,000 in life
insurance on his life. One policy for $200,000 will be owned
by the Buyer; the other policy for $300,000 will be owned by
Michael McGill. The Members will keep all such life insurance
policies in full force and effect for the full policy limits
stated above with premiums paid on a timely basis throughout
the period of the Earnout Payments. If any of the Members
should die before March 31, 2003, then the respective death
beneficiaries of such policies shall receive the benefits
thereof. Further, Buyer shall have the obligation to pay a pro
rata portion of any Earnout Payment with respect o such
deceased Member's "interest" (or the Trust's "interest" with
respect to James McGill) in the Seller with respect to the
year in which such death occurred. Such Earnout Payment will
be a pro rata share ("Pro Rata Share") of such deceased
Member's "interest" (or the Trust's "interest" with respect to
James McGill) in the total Earnout Payment which is paid for
such fiscal year based upon the number of days that such
Member lived during the fiscal year in which death occurred.
Upon payment of the Pro Rata Share, such deceased Member's
"interest" (or the Trust's "interest" with respect to James
McGill) in the Earnout Payments shall not thereafter be
payable to anyone. Each Member's "interest" (or the Trust's
"interest" with respect to James McGill) in the Seller, and
the portion of the Earnout Payments that will cease to be
payable with respect to a Member's death, is as follows:
Key - 49% "interest" in the Seller and of the Earnout
Payments;
James C. McGill Revocable Living Trust dated June 28,
1996, as amended and restated October 22, 1996 - 46 %
"interest" in the Seller and of the Earnout Payments
with respect to James C. McGill's death; and
Michael McGill - 5% "interest" in the Seller and of the
Earnout Payments.
For example, if James McGill dies on August 1, 2000, the
Company will be liable to the Seller for 33.42 percent of
amounts otherwise accruing with respect to the Trust's
interest in Seller as Earnout Payments for the fiscal year
ending March 31, 2001. After such payments are made, no person
shall have any right or interest in the portion of the Earnout
Payment previously payable with respect to the Trust's
interest therein.
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The Seller or the applicable Member's estate and his
beneficiaries will bear all income, estate and other taxes and
withholdings on the payments described in this Subsection
(vii).
If any Member fails to maintain in full force and effect any
of the life insurance policies provided for above for the full
policy limits stated above for the term described above, then
no death benefits will be paid to the beneficiaries of the
policies held by the Members and Buyer will not be liable for
such death benefits.
(viii) If, prior to the final Earnout Payment being made
hereunder, a Member becomes qualified to receive long term
disability payments in accordance with the long term
disability plan of Buyer or if a Member ceases employment with
Buyer, then the payment or nonpayment of that Member's (or the
Trust's) "interest" in future Earnout Payments will be
determined in accordance with such Member's Employment
Agreement (or James C. McGill's Consulting Agreement with
respect to the Trust) with Buyer as attached hereto as
SCHEDULE 1.7(A)(XV).
A Member's or the Trust's interest in Earnout Payments is used
for the purpose of reducing a portion of the Earnout Payments
if a Member dies. The Seller will receive all Earnout Payments
as provided in this Agreement.
(C) PURCHASE PRICE ADJUSTMENT. Within 90 days after the Closing
Date, the Buyer will determine the Business' Personal Property and
work in process as of the Closing Date. Based on such "Closing Date
Personal Property Statement" and the October 31, 1997 Personal
Property Statement attached hereto as SCHEDULE 1.4(C) and the work
in process on March 31, 1998, the Buyer will calculate the Purchase
Price Adjustment as follows:
(i) CLOSING DATE PERSONAL PROPERTY STATEMENT. The Closing Date
Personal Property Statement will be prepared on the same basis
as the October 31, 1997 Personal Property Statement. The
Closing Date Personal Property Statement will not reflect an
increase in the basis or carrying cost of the assets shown on
the Closing Date Personal Property Statement. The cost, net of
depreciation, of the Personal Property shown on the October
31, 1997 Personal Property Statement shall be subtracted from
the cost, net of depreciation, of the Personal Property shown
on the Closing Date Personal Property Statement. Any positive
difference shall be paid by Buyer to Seller and any negative
difference shall be paid by Seller to Buyer. Any personal
property acquired or disposed of after October 31, 1997 and
before the Closing Date shall have depreciation accounted for
in accordance with generally accepted accounting practices,
consistently applied.
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(ii) WORK IN PROCESS. Work in process on March 31, 1998 shall
be treated in the following manner:
(A) With respect to the work in process described on
Schedule 1.4(c)(ii)(A), all revenues and costs accrued
prior to the Closing Date shall belong to and be
received or paid by Seller and all revenues and costs
accrued on or after the Closing Date shall belong to and
be received or paid by Buyer.
(B) With respect to the work in process described on
Schedule 1.4(c)(ii)(B), the gross profit derived
therefrom shall be calculated as described on SCHEDULE
1.4(C)(II)(B) and shall be either retained by the Buyer
or paid to the Seller as described in SCHEDULE
1.4(C)(II)(B).
(iii) CALCULATION AND PAYMENT. Within 90 days after the
Closing Date, the Buyer will deliver the Closing Date Personal
Property Statement, and a detailed calculation of the gross
profit derived from the work in process described on SCHEDULE
1.4(C)(II)(B) (all of which are called the "Calculations").
Within 10 days after the delivery of such information, Buyer
shall pay to Seller any net positive amount, and, within ten
days after the close of Seller's right to review and object
period set forth below, Seller shall pay to Buyer any net
negative amount, shown by the Calculations.
(iv) SELLER'S RIGHTS TO REVIEW AND OBJECT. Seller will have
the right to review the Buyer's regular books of account for a
fiscal year during Buyer's regular business hours, by giving
Buyer at least ten business days' notice within 45 days after
Buyer delivers the Calculations. The Seller also may object to
the calculation of the Closing-Date Personal Property
Statement, the price to be paid for the other assets, or the
gross profit derived from the work in process described on
SCHEDULE 1.4(C)(II)(B) by delivering a specific and detailed
"Statement" of the reasons for the objection and the errors in
such Calculations by giving at least ten business days'
notice; provided that if the Seller does not deliver its
Statement within 60 days after the Buyer delivers such
Calculations, the Seller shall be deemed to have accepted the
Calculations, and the Purchase Price Adjustment shall not be
subject to review or objection.
(v) DISPUTE RESOLUTION. In the event of a timely objection to
Calculations, the Parties shall endeavor to resolve the
objection during a period of at least 60 days after Buyer
delivers such timely objection. If the Parties are unable to
resolve such timely objection, they shall appoint David O.
Hogan at Hogan & Slovacek, Tulsa, Oklahoma to review the
Calculations, and the determination of such accounting firm of
the correct amounts will be binding on both Parties. The fees
of such accounting firm will be shared equally by the Parties.
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THIS SUBSECTION STATES THE EXCLUSIVE REMEDY FOR DISPUTES RELATING TO THE
CALCULATIONS.
1.5 PRORATIONS.
(a) TAXES. Buyer shall pay all special assessments against the Purchased
Assets. All state, city, county and tax district ad valorem and personal
property taxes and general assessments, if any, which are directly
attributable to the Purchased Assets, shall be prorated between the
Parties as of the Closing Date. Buyer shall pay only the pro rata share of
any personal property taxes arising with respect to the period after the
Closing Date regardless of when the taxes are assessed. If such taxes have
not been assessed as of the Closing Date, such taxes will be based on the
previous year's taxes.
(b) UTILITIES. The proration of utilities is described in the Real Estate
Contract. For periods before the Closing Date, Seller shall pay all
utilities relating to the Business except as prorated in the Real Estate
Contract. For periods after the Closing Date, Buyer shall pay all of the
utilities.
(c) SALES TAXES. Buyer shall pay to Seller or to the taxing authority all
sales taxes that are payable with respect to the purchase of the Purchased
Assets.
(d) NO DOUBLE PRORATIONS. This Agreement and the Real Estate Contract both
have proration clauses. There shall be no duplicate proration of any cost,
expense or amount. If there is a conflict between the prorations described
in this Agreement and the prorations described in the Real Estate
Contract, the Real Estate Contract shall control.
1.6 CLOSING DATE. The consummation of the transactions contemplated by
this Agreement (the "Closing") shall take place at Suite 1000, 100 West Fifth
Street, Tulsa, Oklahoma, on or before March 31, 1998, at a time mutually agreed
by the Parties or such other date, time and place as the Parties shall mutually
agree (the "Closing Date"), provided that all conditions and other matters
required to be completed as of the Closing Date have been or shall be completed
on the date. In the event the Closing shall not have occurred prior to June 1,
1998, this Agreement shall terminate, and, except as set forth in Sections 4.6,
4.7 and 8.3, neither party shall have any further liability to any other party
hereunder other than for a breach of this Agreement occurring before that date
such as the failure to consummate this Agreement after all conditions and
requirements have been satisfied.
1.7 INSTRUMENTS OF CONVEYANCE AND TRANSFER.
(a) SELLER. At the Closing, Seller shall execute and deliver or
cause to be executed and delivered to Buyer the following:
(i) A bill of sale, assignment and assumption agreement
substantially in the form attached as SCHEDULE 1.7(A)(I) which
shall be effective to vest in Buyer good and marketable title
to the Purchased Assets free and clear of all liens, charges
and encumbrances, and restrictions of any kind
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whatsoever, except only the Assumed Obligations and Assumed
Liabilities;
(ii) UCC-2 Termination Statements with respect to all of
Seller's Financing Statements including those identified in
SCHEDULE 2. L(F) but not including those described on SCHEDULE
1.7(A)(II);
(iii) A copy of Seller's Articles of Organization and
Operating Agreement certified by a Manager of Seller;
(iv) A certified copy of a resolution, signed by all of the
Seller's Members and Managers, approving this Agreement and
all transactions contemplated in this Agreement;
(v) An opinion of counsel that this Agreement is the
fully-authorized, valid and binding agreement of the Seller
that is enforceable according to its terms, except as the
enforceability thereof may be limited by any applicable
bankruptcy, insolvency, reorganization, moratorium or other
similar laws affecting the enforcement of creditor's rights
generally and to general principles of equity regardless of
whether such enforceability is considered in a proceeding in
equity or at law;
(vi) Original policies of insurance on the lives of Key and
James McGill and related consents to such assignments;
(vii) Copies of the notice letters to lessors, lessees,
employees and contractors who are Parties to the leases,
licenses contracts and accounts payable to be assumed by Buyer
regarding the assignment thereof, which shall be in a form
that is acceptable to Seller and Buyer;
(viii) Assignments and consents to the assumption of such of
Seller's purchase or sales orders or contracts as require such
consents; a general form for such assignments and consents is
attached as SCHEDULE 1.7(A)(VIII);
(ix) Certificates of title to all personal property required
to have such titles, signed and acknowledged to transfer such
titles to the Buyer and having all liens thereon released
except for Assumed Obligations and Assumed Liabilities;
(x) All documents required to close the Real Estate Contract
or the lease in lieu of the Real Estate Contract; and
(xi) All tangible personal property, and all documents
evidencing intangible personal property, that are part of the
Purchased Assets.
(xii) Estoppel Certificates from each of the Seller's full
time employees (about 10 people), in the form attached as
SCHEDULE 1.7(A)(XII);
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(xiii) COBRA notices to all of Buyer's employees to whom COBRA
notices are required to be sent;
(xiv) Copies of all Form 5500s that the Seller has been
required to file;
(xv) Final Employment Agreements and a Consulting Agreement
with Buyer and Key, Michael McGill and James McGill in the
form attached as SCHEDULE 1.7(A)(XV); and
(xvi) All other instruments of title, certificates, consents,
endorsements, assignments, assumptions and other documents or
instruments, in a form satisfactory to Buyer and its counsel,
as may be reasonably requested by Buyer in order to transfer
the Purchased Assets to Buyer and to carry out the
transactions contemplated by this Agreement.
(b) BUYER. At the Closing Buyer shall execute and deliver or cause
to be executed and delivered to Seller the following:
(i) The payment of the initial amount of the Purchase Price as
provided in Subsection 1.4(a)(i) and (ii) of this Agreement;
and
(ii) Certificates, consents and other documents as may be
required to carry out the terms of this Agreement.
(iii) Assumption of Assumed Obligations and Assumed
Liabilities Agreement in the form as shown on SCHEDULE
1.7(A)(I).
(iv) Guaranty attached hereto as SCHEDULE 1.7(B)(IV).
ARTICLE 2
SELLER'S REPRESENTATIONS AND WARRANTIES
2.1 REPRESENTATIONS AND WARRANTIES. Seller represents and warrants to
Buyer, which representations and warranties shall be true and correct on the
date hereof and through and including the Closing Date, as follows:
(a) ORGANIZATION: GOOD STANDING. The Seller is an Oklahoma
Limited Liability Company, duly organized, validly existing
and in good standing under the laws of the State of Oklahoma.
(b) AUTHORITY. Seller has all requisite power and authority to
enter into this Agreement and to consummate the transactions
contemplated hereby. This Agreement has been fully-authorized
by the Seller's Members and Managers.
(c) BINDING EFFECT. All action on the part of the Seller
necessary for the authorization, execution, delivery and
performance of this Agreement and the consummation of the
transactions contemplated hereby has been or will be taken
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prior to the Closing Date, and Seller has received all
consents necessary to carry out this Agreement and each of the
transactions contemplated herein. The individual signing this
Agreement on behalf of the Seller is duly authorized to bind
Seller to the terms of this Agreement. This Agreement is and
shall constitute the legal, valid and binding obligation of
Seller, enforceable in accordance with its terms except as the
enforceability thereof may be limited by any applicable
bankruptcy, insolvency, reorganization, moratorium or other
similar laws affecting the enforcement of creditor's rights
generally and to general principles of equity regardless of
whether such enforceability is considered in a proceeding in
equity or at law.
(d) TITLE TO AND CONDITION OF PERSONAL PROPERTY AND CONTRACTS.
Except as set forth on SCHEDULE 2.1(D), with respect to the
Personal Property and Contracts:
(i) Except for the Personal Property that is the subject
of a Personal Property Lease, Seller is the sole and
exclusive legal and equitable owner of all right, title
and interest in and has good, insurable and marketable
title to all of the Personal Property. Except as shown
on SCHEDULE 2.1(D), none of the Purchased Assets is
subject to: (A) any security interest, mortgage, pledge,
lien, restriction or encumbrance of any kind or
character, direct or indirect, whether accrued,
absolute, contingent or otherwise, or (B) any claims in
which any person or entity other than Buyer will have
acquired or will have a basis to assert any right, title
or interest in, or right to possession, use, enjoyment
or proceeds of any of the Personal Property. The liens
described on SCHEDULE 2.L(D) will be extinguished at the
Closing.
(ii) SCHEDULE 1.1(C), SCHEDULE 1.1(E)(I), and SCHEDULE
1.1(E)(IV) set forth accurate and complete lists of all
Personal Property Leases, Contracts and Business
Identity used in, or necessary or intended for the
operation of, the Business. Seller has provided, or will
provide within ten (10) days from the date hereof, Buyer
with complete and correct copies of all Contracts and
Personal Property Leases and Business Identity. Except
as set forth in such Schedules: (A) the Contracts and
Personal Property Leases are freely assignable by Seller
to Buyer, have not been modified, amended or assigned
and are in full force and effect; (B) there are no
defaults by Seller, or any other party to the Contracts
and Personal Property Leases; (C) Seller has not
perfected its rights to use its Business Identity by a
state or federal filing, but has a right to use its
Business Identity through use and has not received any
adverse claims to any of the Business Identity; (D)
Seller has not received any notice of any default,
offset, counterclaim or defense under the Contracts or
Personal Property Leases, or with respect to the
Business Identity; (E) no condition or event has
occurred which with the passage of time or the giving of
notice or both would constitute a material default or
breach by Seller of the terms of the Contracts or
Personal Property Leases; and (F) there does not now,
and at Closing shall not exist any security interest,
lien, encumbrance, right of
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set-off, prepayment, deposit or claim on any interest of
Seller in the Contracts or Personal Property Leases, or
with respect to the Business Identity except for the
Assumed Obligations and Assumed Liabilities.
(iii) The Personal Property, including, without
limitation, any Personal Property leased by Seller, is
merchantable, is in good operating condition and repair
(ordinary wear and tear excepted).
(iv) The supplies and inventories to be purchased by
Buyer are of good quality, not obsolete, and are of a
quantity useable and saleable in the ordinary course of
business. Seller has not made any additions or
reductions to the supplies prior to the Closing Date,
except in the ordinary course of business.
(v) To the best knowledge of Seller, Seller is the sole
owner of all of the Intellectual Property, free from the
claims or rights of any other person. None of the
Intellectual Property is subject to any actual or
claimed assignment, lien, encumbrance, license or
royalty, except as described on SCHEDULE 1.1(E)(VI).
(vi) Except as shown on SCHEDULE 2.L(D)(VI) the
Purchased Assets are located at the Business address in
Tulsa or near Catoosa, Oklahoma or under the custody and
control of an on-site supervisor.
(e) ABSENCE OF ADVERSE FACTS OR CIRCUMSTANCES. Except as
stated on SCHEDULE 2.1(E), to the best of Seller's knowledge,
no facts or circumstances exist which are expected to
materially and adversely affect the present condition of the
Purchased Assets.
(f) COMPLIANCE WITH LAW. Except as stated on SCHEDULE 2.L(F),
to the best of Seller's knowledge, the Business and the
Purchased Assets are not in violation of any applicable
statutes, regulations, ordinances or other laws which could in
any manner materially adversely affect Buyer's ownership of
the Purchase Assets or the operation of the Business. Seller
does not know of any governmental investigation of Seller
pending in connection with the operation of the Business.
(g) PURCHASED ASSETS. Except as stated on SCHEDULE 2.1(G), the
Purchased Assets constitute all of the property presently used
in or required for the operation of the Business (excluding
the Excluded Assets described in Subsection 1.2(a)-(e)).
(h) NO VIOLATION. Entering into this Agreement and
consummating the transactions contemplated hereby will not
constitute or result in a breach or default (or an event
which, with notice or lapse of time or both, would constitute
a default) under, or result in the termination of or
accelerate the performance required, or cause the acceleration
of the maturity of any debt or obligation pursuant to, or
result in the creation or imposition of any security interest,
lien or other encumbrance upon the Purchased Assets, under any
provision of any
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chapter, bylaw, mortgage, lease or agreement, or any order,
judgment or decree to which any of the Purchased Assets is
subject or by which Seller is bound. Neither the execution or
delivery of this Agreement nor the consummation of the
transactions contemplated herein violate any order, writ,
injunction, judgment or decree of any federal, state or local
court, department, agency or instrumentality to which the
Seller is a party or by which the Seller is bound.
(i) LITIGATION; LIABILITY. Except as set forth in SCHEDULE
2.1(I) attached hereto, there is no action, assertion of
breach, investigation or proceeding pending or, to the best
knowledge of Seller, threatened against or involving the
Purchased Assets or the Seller, and to the best knowledge of
Seller after due inquiry, there are no facts based on which
material assertions of breach may be hereafter made against
the Purchased Assets or the Seller.
(j) INSURANCE. A description of all insurance policies
presently in effect with respect to the Purchased Assets,
including the policies and respective coverage amounts, is set
forth in SCHEDULE 2.L(I). Seller has maintained and shall
continue to maintain (i) insurance on all of their assets and
business of a type customarily insured, covering property
damage and loss of income by fire and other casualties, and
(ii) adequate insurance protection against all liabilities,
claims and risks against which it is customary to insure.
Seller shall deliver copies of all such insurance policies to
Buyer at Closing.
(k) REAL ESTATE. All warranties and representations made in
the Real Estate Contract are and will be true, complete and
accurate as of the dates described in the Real Estate
Contract, and are incorporated by reference into this
Agreement as if they were completely restated in this
subsection.
2.2 NO UNTRUE OR INACCURATE REPRESENTATION OR WARRANTY. No representation
or warranty by Seller contains or will contain any untrue statement of material
fact, or omits or will omit to state a material fact necessary to make the
statements therein not materially misleading.
2.3 SCHEDULES. Each Schedule to this Agreement discloses all of the
information that the text of this Agreement requires to be disclosed with
respect to the subject matter of that Schedule.
2.4 SURVIVAL. The representations and warranties of Seller contained in
this Agreement shall be deemed to have been made as of the date of this
Agreement and as of the Closing Date, and shall, as of each such date, then be
true, accurate and complete in all material respects. The representations and
warranties of Seller contained in this Agreement shall terminate December 31,
1999, except that the termination thereof does not affect the right of
indemnification under Section 4.4.
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ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF BUYER
3.1 REPRESENTATIONS AND WARRANTIES. Buyer represents and warrants to
Seller, which representations and warranties shall be true correct on the date
hereof and through and including the Closing Date, as follows:
(A) ORGANIZATION; GOOD STANDING. Buyer is a corporation duly organized,
validly existing and in good standing under the laws of the State of
Oklahoma.
(B) CORPORATE AUTHORITY. Buyer has all requisite corporate power and
authority to enter into this Agreement and consummate the transactions
contemplated hereby.
(C) BINDING EFFECT. All corporate action on the part of Buyer, its
officers and directors necessary for the authorization, execution,
delivery and performance of this Agreement and the consummation of the
transactions contemplated hereby has been or shall be taken prior to the
Closing Date. This Agreement shall constitute the legal, valid and binding
obligation of Buyer, enforceable in accordance with its terms.
(D) NO VIOLATION. Consummation of the transactions contemplated hereby
will not constitute or result in a breach or default under any provision
of any charter, bylaw, mortgage, lease or agreement, or any order,
judgment or decree to which any property of Buyer is subject or by which
Buyer is bound.
3.2 SURVIVAL. The representations and warranties of Buyer contained in
this Agreement shall be deemed to have been made as of the date of this
Agreement and also as of the Closing Date and shall, as of both such dates, be
true, accurate and complete in all respects. The representations and warranties
of Buyer contained in this Agreement shall terminate December 31, 1999, except
that the termination thereof does not affect the right of indemnification under
Section 5.1.
ARTICLE 4
COVENANTS OF SELLER
4.1 ACCESS AND INFORMATION. From the date of this Agreement until Closing,
Seller shall give to Buyer or Buyer's representatives access during normal
business hours to the business, books, accounts and records and all other
relevant documents and shall make available copies of all documents and
information with respect to the business and properties of Seller as
representatives of Buyer may from time to time request, all in a manner as not
unduly to disrupt Seller's normal business activities. Access may include
consultations with Seller and (after advance notice and only at times reasonably
permitted by Seller) the personnel of Seller. From the date of this Agreement
until Closing, Seller shall (after advance notice and only at times reasonably
permitted by Seller) make the Personal Property available for inspection by
Buyer and its representatives during normal business hours. Prior to the Closing
Date, Seller shall
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notify Buyer of (a) any material adverse change in the financial position,
earnings or business of Seller, (b) any governmental, customer, supplier,
current or former employee, or others' complaints, investigations or hearings to
which Seller is a party, and (c) any pending or threatened court actions to
which the Seller is a party.
4.2 CONDUCT OF BUSINESS. Before the Closing Date, except as otherwise
approved by Buyer, Seller shall conduct its business only in the ordinary course
thereof consistent with past practice and in a manner that the representations
and warranties contained in Article 2 shall be true and correct at and as of the
Closing Date (except for changes contemplated, permitted or required by this
Agreement). Seller will, consistent with conducting its business in accordance
with reasonable business judgment, use its best efforts to maintain and preserve
its business organization, employee relationships, customer and supplier base,
and rights under the Personal Property Leases and Contracts intact.
4.3 NEGATIVE COVENANTS. During the period from the date of this Agreement
to the Closing Date, Seller shall not, without Buyer's prior written consent:
(a) Transfer, sell or otherwise dispose of any assets material to the
operation of the Business other than in the ordinary and usual course of
business as heretofore conducted, except for the items as are no longer
useful, or obsolete, worn out or incapable of any further use, and as will
be replaced in accordance with Seller's usual practices with other items
of substantially the same value and utility as the items transferred,
sold, exchanged or otherwise disposed of;
(b) Create, participate in or agree to the creation of any liens,
encumbrances or hypothecation of any of the assets of Seller, except any
liens for current taxes;
(c) Except for contracts for the sale of goods or services on standard
terms, conditions and profit margins, enter into any leases, contracts or
agreements of any kind or character with respect to the Business or its
operation, or incur any liabilities in connection therewith, save and
except (i) those which will terminate or expire prior to the Closing Date,
and (ii) those to which Seller is presently committed or which arise in
the ordinary course of business as heretofore conducted and involve a
liability or obligation not exceeding an aggregate amount of $20,000.00;
(d) Engage in any transaction concerning the Business except in the
ordinary course of business;
(e) Except as required for the performance by Seller of the terms of this
Agreement, amend or terminate prior to its expiration date, any contract
or agreement to which the Seller is a party, including those Contracts and
Personal Property Leases that Buyer has agreed to assume;
(f) Authorize or undertake any capital projects with respect to the
Business, except equipment purchases, repairs and replacements occurring
in the ordinary course of business as heretofore conducted and not
exceeding $30,000.00 for any single item or an aggregate of $100,000.00
for all items;
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(g) Increase any salaries or other compensation payable or to become
payable to Seller' employees, or incur any obligation not currently part
of Seller's compensation arrangement for payment of bonuses or similar
payments; or
(h) Except as part of the sale of trucks or other equipment for which
replacements are being obtained, offer for sale, solicit offers to buy, or
enter into any agreement with any person (other than Buyer) with respect
to the sale or other disposition of, all or any material portion of the
Purchased Assets or any ownership interest of Seller, hold discussions
with any party (other than Buyer looking toward an offer or solicitation,
or furnish or cause to be furnished any information with respect to the
Seller or the Purchased Assets to any person that the Seller knows or has
reason to believe is in the process of considering any acquisition.
4.4 INDEMNIFICATION BY SELLER.
(a) EXCEPT FOR ASSUMED OBLIGATIONS AND ASSUMED LIABILITIES ASSUMED BY
BUYER UNDER THIS AGREEMENT, SELLER AGREES TO PROTECT, INDEMNIFY, DEFEND
AND HOLD BUYER, ITS OFFICERS, DIRECTORS, LEGAL REPRESENTATIVES, SUCCESSORS
AND ASSIGNS, AND EACH OF THEM, FREE AND HARMLESS FROM AND AGAINST ANY AND
ALL DEBTS, LIABILITIES, OBLIGATIONS, DAMAGES, COSTS OR EXPENSES
(INCLUDING, BUT NOT LIMITED TO ATTORNEY'S FEES AND COURT COSTS), LIENS OR
ENCUMBRANCES ACCRUING OR BASED UPON OR ARISING OUT OF:
(i) ANY BREACH OR VIOLATION OF ANY REPRESENTATION OR WARRANTY BY
SELLER SET FORTH IN ARTICLE 2 HEREOF,
(ii) THE BREACH BY SELLER OR A MEMBER OF ANY OTHER TERM OR PROVISION
OF THIS AGREEMENT; AND
(iii) THE INDEMNIFICATION PROVISIONS OF SUBSECTION 1.3(B) AND
SECTION 4.9. PROVIDED, HOWEVER, SELLER'S OBLIGATION IN THE
AGGREGATE:
(iv) TO PROTECT, INDEMNIFY, DEFEND AND HOLD BUYER HARMLESS AS STATED
ABOVE; AND
(v) TO BUYER WITH RESPECT TO ANY BREACH OR VIOLATION DESCRIBED IN
SECTION 4.4(A)(I), (II) AND (III) SHALL BE LIMITED:
(vi) WITH RESPECT TO ALL CLAIMS FILED, NOTICES OF CLAIMS DELIVERED
TO BUYER AND CLAIMS BY BUYER DELIVERED TO SELLER ON OR PRIOR TO
DECEMBER 31, 1999, (AND DAMAGES ARISING THEREFROM INCLUDING, BUT NOT
LIMITED TO, SPECIAL CONSEQUENTIAL, ORDINARY OR PUNITIVE) TO THE
AMOUNT ACTUALLY PAID BY BUYER FOR THE PURCHASE OF THE PURCHASED
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ASSETS, PLUS EARNOUT PAYMENTS PAID ON OR BEFORE DECEMBER 31, 1999,
AND INCLUDING ANY PAYMENTS UNDER SUBSECTION 1.4(C) FOR THE
ASSET-BASED PRICE ADJUSTMENT; AND
(vii) WITH RESPECT TO ALL CLAIMS FILED, NOTICES OF CLAIMS DELIVERED
TO BUYER AND CLAIMS BY BUYER DELIVERED TO SELLER AFTER DECEMBER 31,
1999, (AND DAMAGES ARISING THEREFROM INCLUDING, BUT NOT LIMITED TO,
SPECIAL CONSEQUENTIAL, ORDINARY OR PUNITIVE) TO THE AMOUNT OF ANY
EARNOUT PAYMENT WHICH IS PAID AFTER DECEMBER 31, 1999.
PROVIDED, HOWEVER, SUCH LIMITATIONS SHALL NOT APPLY TO CLAIMS BY BUYER
ALLEGING A BREACH OF SUBSECTIONS 4.5, 4.6 OR 4.7 HEREOF.
(b) IN ORDER FOR BUYER (THE "INDEMNIFIED PARTY"), TO BE ENTITLED TO ANY
INDEMNIFICATION PROVIDED FOR UNDER THIS AGREEMENT IN RESPECT OF, ARISING
OUT OF OR INVOLVING A CLAIM MADE BY ANY PERSON AGAINST THE INDEMNIFIED
PARTY (A "THIRD PARTY CLAIM"), SUCH INDEMNIFIED PARTY MUST NOTIFY THE
INDEMNIFYING PARTY IN WRITING OF THE THIRD PARTY CLAIM WITHIN A REASONABLE
TIME AFTER RECEIPT BY SUCH INDEMNIFIED PARTY OF WRITTEN NOTICE OF THE
THIRD PARTY CLAIM UNLESS THE INDEMNIFYING PARTY SHALL HAVE PREVIOUSLY
OBTAINED ACTUAL KNOWLEDGE THEREOF. THEREAFTER, THE INDEMNIFIED PARTY SHALL
DELIVER TO THE INDEMNIFYING PARTY, WITHIN A REASONABLE TIME AFTER THE
INDEMNIFIED PARTY'S RECEIPT THEREOF, COPIES OF ALL NOTICES AND DOCUMENTS
(INCLUDING COURT PAPERS) RECEIVED BY THE INDEMNIFIED PARTY RELATING TO THE
THIRD PARTY CLAIM.
(c) IF A THIRD PARTY CLAIM IS MADE AGAINST AN INDEMNIFIED PARTY, THE
INDEMNIFYING PARTY WILL BE ENTITLED TO PARTICIPATE IN THE DEFENSE THEREOF
AND, IF IT SO CHOOSES, TO ASSUME THE DEFENSE THEREOF WITH COUNSEL SELECTED
BY THE INDEMNIFYING PARTY; PROVIDED SUCH COUNSEL IS NOT REASONABLY
OBJECTED TO BY THE INDEMNIFIED PARTY; AND PROVIDED FURTHER THAT THE
INDEMNIFYING PARTY FIRST ADMITS IN WRITING ITS LIABILITY TO THE
INDEMNIFIED PARTY WITH RESPECT TO SUCH CLAIM AND HAS THE ABILITY TO PAY
FOR THE DEFENSE AND LIABILITY ON SUCH CLAIM. SHOULD THE INDEMNIFYING PARTY
SO ELECT TO ASSUME THE DEFENSE OF A THIRD PARTY CLAIM, THE INDEMNIFYING
PARTY WILL NOT BE LIABLE TO THE INDEMNIFIED PARTY FOR ANY LEGAL EXPENSES
SUBSEQUENTLY INCURRED BY THE INDEMNIFIED PARTY IN CONNECTION WITH THE
DEFENSE THEREOF. IF THE INDEMNIFYING PARTY ELECTS TO ASSUME THE DEFENSE OF
A THIRD PARTY CLAIM, THE INDEMNIFIED PARTY WILL (i) COOPERATE (AT
INDEMNIFYING PARTY'S EXPENSE FOR THE INDEMNIFIED PARTY'S OUT OF POCKET
COSTS) IN ALL REASONABLE RESPECTS WITH THE INDEMNIFYING PARTY IN
CONNECTION WITH SUCH DEFENSE, (ii) NOT ADMIT ANY LIABILITY WITH RESPECT
TO, OR SETTLE, COMPROMISE OR DISCHARGE, ANY THIRD PARTY CLAIM WITHOUT THE
INDEMNIFYING PARTY'S PRIOR WRITTEN CONSENT (WHICH CONSENT SHALL NOT BE
UNREASONABLY WITHHELD), AND (iii) AGREE TO ANY SETTLEMENT, COMPROMISE OR
DISCHARGE OF A THIRTY PARTY CLAIM WHICH THE INDEMNIFYING PARTY MAY
RECOMMEND AND WHICH BY ITS TERMS OBLIGATES THE INDEMNIFYING PARTY TO PAY
THE FULL AMOUNT OF THE LIABILITY IN CONNECTION WITH SUCH THIRD PARTY CLAIM
WHICH RELEASES THE INDEMNIFIED PARTY COMPLETELY IN CONNECTION WITH SUCH
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THIRD PARTY CLAIM WITHOUT ANY INJUNCTION OR ORDER AGAINST THE INDEMNIFIED
PARTY, AND WHICH DOES NOT ADVERSELY AFFECT THE BUSINESS CARRIED ON BY THE
INDEMNIFIED PARTY. IN THE EVENT THE INDEMNIFYING PARTY SHALL ASSUME THE
DEFENSE OF ANY THIRD PARTY CLAIM, THE INDEMNIFIED PARTY SHALL BE ENTITLED
TO PARTICIPATE IN (BUT NOT CONTROL) SUCH DEFENSE WITH ITS OWN COUNSEL AT
ITS OWN EXPENSE. IF THE INDEMNIFYING PARTY DOES NOT ASSUME THE DEFENSE OF
ANY SUCH THIRD PARTY CLAIM, THE INDEMNIFIED PARTY MAY DEFEND THE SAME IN
SUCH MANNER AS IT MAY DEEM APPROPRIATE, INCLUDING BUT NOT LIMITED TO
SETTLING SUCH CLAIM OR LITIGATION AFTER GIVING NOTICE TO THE INDEMNIFYING
PARTY OF SUCH TERMS AND THE INDEMNIFYING PARTY WILL PROMPTLY REIMBURSE THE
INDEMNIFIED PARTY FOR THE COSTS OF DEFENSE AND DAMAGES UPON WRITTEN
REQUEST SUBJECT TO THE LIMITATIONS DESCRIBED ABOVE AND PROVIDED, FURTHER,
THAT IF THE INDEMNIFYING PARTY MAKES SUCH REIMBURSEMENT, THEN THE COSTS OF
DEFENSE AND DAMAGES PAID BY BUYER SHALL NOT BE TAKEN INTO ACCOUNT IN
DETERMINING ANY EARNOUT PAYMENTS. IF THE COSTS OF DEFENSE AND DAMAGES ARE
PAID BY BUYER AND NOT REIMBURSED BY SELLER, THEN SUCH AMOUNTS SHALL BE
TAKEN INTO ACCOUNT IN DETERMINING ANY EARNOUT PAYMENTS AND TO THAT EXTENT
SELLER SHALL NOT HAVE TO REIMBURSE BUYER HEREUNDER. IN ADDITION, IF BUYER
RECOVERS ANY DAMAGES OR MONETARY RELIEF FROM OTHER PARTIES, INCLUDING,
WITHOUT LIMITATION, OTHER RESPONSIBLE PARTIES, INSURANCE PROCEEDS AND
OTHERS, THEN ALL SUCH DAMAGES AND MONETARY RELIEF SHALL BE TAKING INTO
ACCOUNT IN DETERMINING ANY EARNOUT PAYMENT.
4.5 USE OF NAME. SELLER MAY CONTINUE TO USE ITS CURRENT NAME UNTIL
DECEMBER 31, 1999, AND MAY USE ITS NAME DURING SUCH PERIOD BUT SOLELY FOR THE
PURPOSES OF WINDING UP ITS BUSINESS OPERATIONS AND AFFAIRS, DISSOLVING ITSELF,
DEFENDING ITSELF FROM CLAIMS AND EFFECTUATING THE TERMS OF THIS AGREEMENT.
SELLER WILL EXECUTE ALL CONSENTS REQUESTED BY BUYER IN ORDER FOR BUYER TO USE
SELLER'S NAME. EXCEPT TO THE EXTENT DESCRIBED IN THE PRECEDING SENTENCES OF THIS
SECTION, AS OF THE CLOSING DATE ALL MEMBERS SHALL CEASE USING ANY OF THE
BUSINESS IDENTITY IN ANY MANNER WHATSOEVER, DIRECTLY OR INDIRECTLY, WITHOUT THE
PRIOR WRITTEN APPROVAL OF BUYER. SELLER SHALL EXECUTE AN ASSIGNMENT OF TRADE
NAME AND OF ALL OF THE BUSINESS IDENTITY SUBSTANTIALLY IN THE FORM ATTACHED AS
SCHEDULE 4.5. BY DECEMBER 31, 1999, SELLER SHALL FILE AMENDED ARTICLES OF
ORGANIZATION TO CHANGE ITS NAME TO A NAME THAT DOES NOT HAVE ANY OF THE
FOLLOWING WORDS: "B. L."; "KEY"; OR "SERVICES."
4.6 CONFIDENTIALITY. SELLER AND THE MEMBERS ACKNOWLEDGE THAT BUYER WOULD
BE IRREPARABLY DAMAGED IF CONFIDENTIAL INFORMATION CONCERNING BUYER OR THE
BUYER'S BUSINESSES (AS DEFINED IN SCHEDULE 4.6) WERE DISCLOSED TO OR UTILIZED BY
ANY PERSON TO THE DETRIMENT OF BUYER. THEREFORE, THE SELLER AND THE MEMBERS
SHALL NOT, AT ANY TIME, DIRECTLY OR INDIRECTLY, WITHOUT THE PRIOR WRITTEN
CONSENT OF BUYER, MAKE USE OF OR DIVULGE TO ANY PERSON, GOVERNMENTAL OFFICIAL OR
OFFICE, OR PUBLIC OR PRIVATE ENTITY, ANY OF: (i) BUYER'S INTELLECTUAL PROPERTY
DEFINED IN SCHEDULE 4.6); (ii) PURCHASED ASSETS; (iii) NON-PUBLIC OR PROPRIETARY
INFORMATION CONCERNING SELLER, BUYER, ANY AFFILIATE (DEFINED IN SCHEDULE 4.6) OR
THE BUYER'S BUSINESSES; (iv) ANY FINANCIAL, MARKETING, EMPLOYEE OR TRANSACTIONAL
INFORMATION RELATING TO AFFAIRS OR MATTERS OF SELLER OR THE BUYER'S BUSINESSES
THAT COULD BE USED TO THE DETRIMENT OF BUYER OR AN AFFILIATE; OR (v)
DESCRIPTIONS OF THIS AGREEMENT OR ANY OF ITS SCHEDULES OR TRANSACTIONS
CONTEMPLATED HEREIN, EXCEPT TO THE EXTENT REQUIRED BY LAW,
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GOVERNMENT FILINGS OR JUDICIAL, ADMINISTRATIVE OR ARBITRATION PROCEEDINGS OR AS
MAY BE REQUIRED FOR SELLER'S ACCOUNTING OR INCOME TAX PURPOSES OF SELLER, OR IN
ORDER TO PRESERVE OR ENFORCE SELLER'S RIGHTS UNDER THIS OR ANY OTHER AGREEMENT
BETWEEN THE PARTIES. ALL AFFILIATES ARE THIRD PARTY BENEFICIARIES OF THIS
SECTION 4.6.
4.7 COVENANT NOT TO COMPETE; PROPRIETARY INFORMATION; NONSOLICITATION.
(a) EXCEPT AS OTHERWISE PROVIDED IN THIS SECTION 4.7, FOR A PERIOD
ENDING 24 MONTHS FOLLOWING THE PAYMENT OF THE FINAL EARNOUT PAYMENT
BUT IN NO EVENT LATER THAN MARCH 31, 2005 (THE "NONCOMPETE PERIOD"),
SELLER AND MEMBERS SHALL NOT, WITHOUT THE PRIOR WRITTEN CONSENT OF
BUYER, DIRECTLY OR INDIRECTLY, ENGAGE IN ANY OF THE BUYER'S
BUSINESSES, OR IN ANY ACTIVITY THAT IS SIMILAR TO THE BUYER'S
BUSINESSES, AND SHALL NOT PERMIT, ASSIST, INVEST WITH (EXCEPT WITH
RESPECT TO NO MORE THAN 5% OF THE VOTING STOCK OF ANY COMPANY WHOSE
STOCK IS PUBLICLY TRADED) OR ENCOURAGE ANY OTHER PERSON TO TAKE ANY
ACTION THAT WOULD BE PROHIBITED IF TAKEN DIRECTLY BY THE SELLER OR A
MEMBER, WITHIN ANY OF THE STATES OF THE UNITED STATES LOCATED IN
NORTH AMERICA (INCLUDING, WITHOUT LIMITATION, ALASKA), HAWAII,
CANADA, SAUDI ARABIA, ANY NATION LOCATED IN ASIA, AFRICA OR SOUTH
AMERICA, OR ANY OTHER LOCATION WORLDWIDE (IN WHICH THE SELLER
ACKNOWLEDGES THAT IT HAS, OR HAS THE POTENTIAL OF, DOING BUSINESS)
(THE "NONCOMPETE AREA").
(b) PROPRIETARY INFORMATION. FOR PURPOSES OF THIS AGREEMENT,
PROPRIETARY INFORMATION INCLUDES, WITHOUT LIMITATION, ALL
INFORMATION THAT IS SECRET OR THAT IS IMPORTANT TO, DEVELOPED BY, OR
USED OR USEFUL IN BUYER'S BUSINESSES, AND ALL INFORMATION,
CONTRACTS, BUSINESS IDENTITY, AND INTELLECTUAL PROPERTY OF THE
SELLER OR ANY AFFILIATE. FOR EXAMPLE BUT WITHOUT LIMITATION,
PROPRIETARY INFORMATION INCLUDES ALL OF THE FOLLOWING:
(i) TRADE SECRETS, PROCESSES, FORMULAS, DATA, ALGORITHMS,
COMPUTER PROGRAMS, KNOW-HOW, INVENTIONS, STRATEGIC PLANS,
CUSTOMER LISTS, THE STATUS OF NEGOTIATIONS WITH ANY OTHER
PERSON OR ENTITY, AND MARKETING INFORMATION AND PLANS, THAT
ARE, HAVE BEEN, OR IN THE FUTURE ARE OWNED, USED, OR USEFUL IN
ANY OF THE BUYER'S BUSINESSES;
(ii) CLAIMS OR LITIGATION BY OR AGAINST THE BUYER, ANY
AFFILIATE OR ANY OFFICER, DIRECTOR, EMPLOYEE MEMBER, OR
MANAGER O BUYER OR ANY AFFILIATE;
(iii) THE BUYER'S OR ANY AFFILIATE'S FINANCIAL CONDITION OR
THE STATUS OF ANY OF THEIR BORROWINGS OR LOAN AGREEMENTS; AND
(iv) ALL INFORMATION ABOUT THE ABILITIES, QUALIFICATIONS,
CHARACTERISTICS, PERFORMANCE, MENTAL OR PHYSICAL HEALTH,
DISABILITY, INFECTION (INCLUDING WITHOUT LIMITATION HIV
INFECTION), CONTENTS OF PERSONNEL FILES, EXISTENCE OR REASONS
FOR ANY DISCIPLINARY ACTION, OR
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ACTUAL OR ALLEGED INAPPROPRIATE ACTIONS, OF ANY CURRENT,
FUTURE, OR PAST EMPLOYEE OF ANY OF THE BUYER'S BUSINESSES.
(c) PROTECTION OF PROPRIETY INFORMATION. SELLER AND MEMBERS SHALL
USE THEIR BEST EFFORTS TO PROTECT THE PROPRIETARY INFORMATION.
SELLER AND MEMBERS SHALL NOT, DIRECTLY OR INDIRECTLY USE ANY
PROPRIETARY INFORMATION FOR ANY OF THEIR BENEFIT OR FOR THE BENEFIT
OF ANY PERSON OR ENTITY OTHER THAN BUYER, WITHOUT BUYER'S WRITTEN
CONSENT. SELLER AND MEMBERS SHALL NOT DISCLOSE ANY PROPRIETARY
INFORMATION TO ANY PERSON OR ENTITY OTHER THAN BUYER OR AN
AFFILIATE, WITHOUT BUYER'S PRIOR WRITTEN CONSENT, EXCEPT TO THE
EXTENT REQUIRED BY LAW, GOVERNMENT FILINGS OR JUDICIAL,
ADMINISTRATIVE OR ARBITRATION PROCEEDINGS OR AS MAY BE REQUIRED FOR
SELLER'S ACCOUNTING OR INCOME TAX PURPOSES OF SELLER, OR IN ORDER TO
PRESERVE OR ENFORCE SELLER'S RIGHTS UNDER THIS OR ANY OTHER
AGREEMENT BETWEEN THE PARTIES.
(d) SOLICITATION. DURING THE NONCOMPETE PERIOD, SELLER AND THE
MEMBERS SHALL NOT, EITHER DIRECTLY, INDIRECTLY, INDIVIDUALLY, OR
JOINTLY:
(i) EMPLOYMENT. SOLICIT, OR ATTEMPT TO INDUCE OR INFLUENCE,
ANY PERSON CURRENTLY EMPLOYED BY SELLER OR EMPLOYED IN THE
FUTURE BY BUYER OR AN AFFILIATE, TO LEAVE BUYER'S OR AN
AFFILIATE'S EMPLOYMENT OR TO HIRE ANY SUCH PERSON; OR
(ii) CUSTOMERS. SOLICIT ANY ACTUAL OR POTENTIAL CUSTOMER OF
ANY OF BUYER'S BUSINESSES FOR SALE OF PRODUCTS OR SERVICES
SIMILAR TO THOSE OF SUCH BUSINESSES, AT ANY PLACE IN THE
NONCOMPETE AREA.
(e) REMEDY. THE REMEDY AT LAW FOR ANY BREACH OF THIS SECTION 4.7 IS
AND SHALL BE INADEQUATE, AND IN THE EVENT OF A BREACH OR THREATENED
BREACH BY SELLER OR ANY MEMBER, BUYER OR AN AFFILIATE SHALL BE
ENTITLED TO AN INJUNCTION RESTRAINING SELLER OR ANY MEMBER FROM ANY
BREACH OR THREATENED BREACH HEREOF. NOTHING HEREIN SHALL BE
CONSTRUED AS PROHIBITING BUYER OR AN AFFILIATE FROM PURSUING ANY
OTHER REMEDIES AVAILABLE FOR SUCH BREACH OR THREATENED BREACH,
INCLUDING THE RECOVERY OF DAMAGES.
(f) THE PROVISIONS OF THIS SECTION 4.7 SHALL BE DEEMED TO CONSIST OF
A SERIES OF SEPARATE COVENANTS. SELLER AND MEMBERS EXPRESSLY AGREE
THAT THE CHARACTER, DURATION AND GEOGRAPHICAL SCOPE OF SUCH
PROVISIONS ARE REASONABLE. HOWEVER, SHOULD A DETERMINATION
NONETHELESS BE MADE BY A COURT OF COMPETENT JURISDICTION OR OTHER
TRIBUNAL AT A LATER DATE THAT THE CHARACTER, DURATION OR
GEOGRAPHICAL SCOPE OF SUCH PROVISIONS IS UNREASONABLE, THEN IT IS
THE INTENTION AND THE AGREEMENT OF THE PARTIES THAT SUCH PROVISIONS
SHALL BE CONSTRUED BY THE COURT IN SUCH A MANNER AS TO IMPOSE ONLY
THOSE RESTRICTIONS ON THE CONDUCT OF SELLER WHICH ARE REASONABLE IN
LIGHT OF THE CIRCUMSTANCES AS THEY THEN EXIST AND AS ARE NECESSARY
TO ASSURE BUYER AND ANY AFFILIATE OF THE INTENDED BENEFIT TO THIS
AGREEMENT, THEN THOSE COVENANTS WHICH, IF ELIMINATED, WOULD PERMIT
THE REMAINING SEPARATE COVENANTS TO BE
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ENFORCED IN SUCH PROCEEDING SHALL, FOR THE PURPOSE OF SUCH
PROCEEDING, BE DEEMED ELIMINATED FROM THIS AGREEMENT.
(g) IF ANY OF THE PROVISIONS OF THIS SECTION 4.7 SHALL OTHERWISE
CONTRAVENE OR BE INVALID UNDER THE LAWS OF ANY STATE OR OTHER
JURISDICTION WHERE IT IS APPLICABLE BUT FOR SUCH CONTRAVENTION OR
INVALIDITY, SUCH CONTRAVENTION OR INVALIDITY SHALL NOT INVALIDATE
ALL OF THE PROVISIONS OF THIS AGREEMENT, BUT RATHER THIS AGREEMENT
SHALL BE CONSTRUED, INSOFAR AS THE LAWS OF THE STATE OR JURISDICTION
ARE CONCERNED, AS NOT CONTAINING THE PROVISION OR PROVISIONS
CONTRAVENING OR INVALID UNDER THE LAWS OF THAT STATE OR
JURISDICTION, AND THE RIOTS AND OBLIGATIONS CREATED HEREBY SHALL BE
CONSTRUED AND ENFORCED ACCORDINGLY.
(h) THE PROVISIONS OF THIS SECTION 4.7 SHALL SURVIVE THE CLOSING
DATE. ALL AFFILIATES ARE THIRD PARTY BENEFICIARIES OF THIS SECTION
4.7.
4.8 SELLER'S CONFIDENTIAL INFORMATION.
(a) FOR PURPOSES OF THIS AGREEMENT, SELLER'S CONFIDENTIAL
INFORMATION INCLUDES, WITHOUT LIMITATION, ALL INFORMATION ABOUT THE
SELLER THAT IS SECRET, THAT RELATES TO THIS AGREEMENT BUT IS NOT
PURCHASED BY BUYER HEREUNDER. FOR EXAMPLE BUT WITHOUT LIMITATION,
SELLER'S CONFIDENTIAL INFORMATION INCLUDES ALL OF THE FOLLOWING:
(i) ALL PERSONAL INFORMATION CONCERNING THE MEMBERS;
(ii) CLAIMS OR LITIGATION BY OR AGAINST THE SELLER OR ANY
MEMBER, MANAGER, DIRECT OR INDIRECT CORPORATE SUBSIDIARY OR
PARENT, OR AFFILIATES; AND
(iii) THE SELLER'S OR MEMBER'S FINANCIAL CONDITION OR THE
STATUS OF SELLER'S OR ANY MEMBER'S BORROWINGS OR LOAN
AGREEMENTS.
(b) BUYER AND ITS OFFICERS, DIRECTORS, EMPLOYEES AND AGENTS SHALL
USE THEIR BEST EFFORTS TO PROTECT THE SELLER'S CONFIDENTIAL
INFORMATION. BUYER AND ITS OFFICERS, DIRECTORS, EMPLOYEES AND AGENTS
SHALL NOT, DIRECTLY OR INDIRECTLY, USE ANY OF SELLER'S CONFIDENTIAL
INFORMATION FOR ANY OF THEIR BENEFIT OR FOR THE BENEFIT OF ANY
PERSON OR ENTITY OTHER THAN SELLER OR THE APPLICABLE MEMBER, WITHOUT
SELLER'S OR THE APPLICABLE MEMBER'S WRITTEN CONSENT. BUYER AND ITS
OFFICERS, DIRECTORS, EMPLOYEES AND AGENTS SHALL NOT DISCLOSE ANY OF
SELLER'S CONFIDENTIAL INFORMATION TO ANY PERSON OR ENTITY OTHER THAN
SELLER OR THE APPLICABLE MEMBER, WITHOUT SELLER'S OR THE APPLICABLE
MEMBER'S PRIOR WRITTEN CONSENT, EXCEPT TO THE EXTENT REQUIRED BY
LAW, GOVERNMENT FILINGS OR JUDICIAL, ADMINISTRATIVE OR ARBITRATION
PROCEEDINGS OR AS MAY BE REQUIRED FOR SELLER'S ACCOUNTING OR INCOME
TAX PURPOSES OF SELLER, OR IN ORDER TO PRESERVE OR ENFORCE SELLER'S
RIGHTS UNDER THIS OR ANY OTHER AGREEMENT BETWEEN THE PARTIES.
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(c) THE REMEDY AT LAW FOR ANY BREACH OF THIS SECTION 4.8 IS AND
SHALL BE INADEQUATE, AND IN THE EVENT OF A BREACH OR THREATENED
BREACH BY BUYER, SELLER SHALL BE ENTITLED TO AN INJUNCTION
RESTRAINING BUYER FROM ANY BREACH OR THREATENED BREACH HEREOF.
NOTHING HEREIN SHALL BE CONSTRUED AS PROHIBITING SELLER FROM
PURSUING ANY OTHER REMEDIES AVAILABLE FOR SUCH BREACH OR THREATENED
BREACH, INCLUDING THE RECOVERY OF DAMAGES.
(d) IF ANY OF THE PROVISIONS OF THIS SECTION 4.8 SHALL OTHERWISE
CONTRAVENE OR BE INVALID UNDER THE LAWS OF ANY STATE OR OTHER
JURISDICTION WHERE IT IS APPLICABLE BUT FOR SUCH CONTRAVENTION OR
INVALIDITY, SUCH CONTRAVENTION OR INVALIDITY SHALL NOT INVALIDATE
ALL OF THE PROVISIONS OF THIS AGREEMENT, BUT RATHER THIS AGREEMENT
SHALL BE CONSTRUED, INSOFAR AS THE LAWS OF THE STATE OR JURISDICTION
ARE CONCERNED, AS NOT CONTAINING THE PROVISION OR PROVISIONS
CONTRAVENING OR INVALID UNDER THE LAWS OF THAT STATE OR
JURISDICTION, AND THE RIGHTS AND OBLIGATIONS CREATED HEREBY SHALL BE
CONSTRUED AND ENFORCED ACCORDINGLY.
(e) THE PROVISIONS OF THIS SECTION 4.8 SHALL SURVIVE THE CLOSING
DATE.
4.9 EMPLOYEE MATTERS. PURSUANT TO AND IN ACCORDANCE WITH SECTION 4.4
HEREOF SELLER SHALL INDEMNIFY, DEFEND AND HOLD BUYER HARMLESS AGAINST ANY AND
ALL EXPENSE, DAMAGE OR LIABILITY, INCLUDING REASONABLE ATTORNEYS FEES AND COURT
COSTS, THAT BUYER MAY SUFFER AS A RESULT OF ANY CLAIMS, SUITS, INVESTIGATIONS,
OR CHARGES ASSERTED BY OR ON BEHALF OF SELLER'S EMPLOYEES OR INDEPENDENT
CONTRACTORS, DUE TO ANY ACTUAL OR ALLEGED LIABILITIES OR OBLIGATIONS OF SELLER,
OR INJURIES OR DAMAGES DUE TO ACTS OR OMISSIONS OF SELLER TO SUCH EMPLOYEES OR
INDEPENDENT CONTRACTORS OR WHILE SELLER IS EMPLOYEES' EMPLOYER, OCCURRING OR
ARISING PRIOR TO THE CLOSING DATE, INCLUDING, WITHOUT LIMITATION, ANY MATTERS
ARISING UNDER LAWS GOVERNING WAGES AND HOURS, WAGE PAYMENT AND COLLECTION,
EMPLOYMENT DISCRIMINATION, OCCUPATIONAL SAFETY AND HEALTH, WORKER'S
COMPENSATION, SHORT- AND LONG-TERM DISABILITY, OCCUPATIONAL DISEASES,
UNEMPLOYMENT INSURANCE, THE PAYMENT AND WITHHOLDING OF EMPLOYMENT TAXES,
WRONGFUL TERMINATION, HARASSMENT, EMPLOYEE BENEFITS, AND ANY ALLEGED VIOLATION
OF THE COMMON LAW.
4.10 CONTINUING, COOPERATION. After the Closing, Seller shall continue to
use its best efforts to assure that Buyer has the benefit of all Personal
Property Leases, Contracts, Business Identity, accounts receivable and
Intellectual Property. Seller appoints Buyer as Seller's attorney-in-fact to sue
for, collect, compromise and collect all accounts receivable, warranties and
contract rights included within the definitions of Purchased Assets, for and in
the name of the Seller and for the Buyer's benefit. Seller shall execute,
deliver and file all affidavits, bills of sale, assignments and other documents
that Buyer deems helpful to confirm Buyer's ownership of or interest in any item
of Purchased Assets.
ARTICLE 5
COVENANTS OF BUYER
5.1 INDEMNIFICATION BY BUYER.
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(a) BUYER AGREES TO PROTECT, INDEMNIFY, DEFEND AND HOLD SELLER,
LEGAL REPRESENTATIVES, SUCCESSORS AND ASSIGNS, AND EACH OF THEM,
FREE AND HARMLESS FROM AND AGAINST ANY AND ALL DEBTS, LIABILITIES,
OBLIGATIONS, DAMAGES, COSTS OR EXPENSES (INCLUDING, BUT NOT LIMITED
TO ATTORNEYS' FEES), LIENS OR ENCUMBRANCES ACCRUING OR BASED UPON OR
ARISING OUT OF (I) ANY BREACH OR VIOLATION BY BUYER OF ANY
REPRESENTATION OR WARRANTY SET FORTH IN ARTICLE 3, (II) THE BREACH
BY BUYER OF ANY OTHER TERM OR PROVISION OF THIS AGREEMENT, (III) ANY
BREACH BY BUYER OF BUYER'S OBLIGATIONS UNDER ANY LEASES, AGREEMENTS,
LIABILITIES AND OBLIGATIONS ASSUMED BY BUYER PURSUANT TO THIS
AGREEMENT, OR (IV) ANY FACTS OR EVENTS OCCURRING AFTER THE CLOSING
DATE AND CONNECTED WITH (A) THE PURCHASED ASSETS, OR (B) ANY
EMPLOYEE OF SELLER HIRED BY BUYER (EXCEPT AS EXPRESSLY PROVIDED
HEREIN TO THE CONTRARY); PROVIDED THAT THIS INDEMNITY SHALL NOT
APPLY TO ANY LIABILITY ARISING FROM A BREACH OR OTHER ACT OR
OMISSION BY SELLER OCCURRING BEFORE THE CLOSING DATE AND CREATING
ANY LIABILITY OUTSIDE OF THE ORDINARY AND BASIC OBLIGATION TO
PERFORM OR MAKE ANY PAYMENTS BECOMING DUE AFTER SAID DATE IN
ACCORDANCE WITH THE ASSUMED OBLIGATIONS OR ASSUMED LIABILITIES
PURSUANT TO THIS AGREEMENT.
(b) IN ORDER FOR SELLER (THE "INDEMNIFIED PARTY") TO BE ENTITLED TO
ANY INDEMNIFICATION PROVIDED FOR UNDER THIS AGREEMENT IN RESPECT OF,
ARISING OUT OF OR INVOLVING A CLAIM MADE BY ANY PERSON AGAINST THE
INDEMNIFIED PARTY (A "THIRD PARTY CLAIM"), SUCH INDEMNIFIED PARTY
MUST NOTIFY THE INDEMNIFYING PARTY IN WRITING OF THE THIRD PARTY
CLAIM WITHIN A REASONABLE TIME AFTER RECEIPT BY SUCH INDEMNIFIED
PARTY OF WRITTEN NOTICE OF THE THIRD PARTY CLAIM UNLESS THE
INDEMNIFYING PARTY SHALL HAVE PREVIOUSLY OBTAINED ACTUAL KNOWLEDGE
THEREOF. THEREAFTER, THE INDEMNIFIED PARTY SHALL DELIVER TO THE
INDEMNIFYING PARTY, WITHIN REASONABLE TIME AFTER THE INDEMNIFIED
PARTY'S RECEIPT THEREOF, COPIES OF ALL NOTICES AND DOCUMENTS
(INCLUDING COURT PAPERS) RECEIVED BY THE INDEMNIFIED PARTY RELATING
TO THE THIRD PARTY CLAIM.
(c) IF A THIRD PARTY CLAIM IS MADE AGAINST AN INDEMNIFIED PARTY, THE
INDEMNIFYING PARTY WILL BE ENTITLED TO PARTICIPATE IN THE DEFENSE
THEREOF AND, IF IT SO CHOOSES, TO ASSUME THE DEFENSE THEREOF WITH
COUNSEL SELECTED BY THE INDEMNIFYING PARTY; PROVIDED SUCH COUNSEL IS
NOT REASONABLY OBJECTED TO BY THE INDEMNIFIED PARTY; AND PROVIDED
FURTHER THAT THE INDEMNIFYING PARTY FIRST ADMITS IN WRITING ITS
LIABILITY TO THE INDEMNIFIED PARTY WITH RESPECT TO SUCH CLAIM AND
STATES THAT IT HAS THE ABILITY TO PAY FOR THE DEFENSE AND LIABILITY
ON SUCH CLAIM. SHOULD THE INDEMNIFYING PARTY SO ELECT TO ASSUME THE
DEFENSE OF A THIRD PARTY CLAIM, THE INDEMNIFYING PARTY WILL NOT BE
LIABLE TO THE INDEMNIFIED PARTY FOR ANY LEGAL EXPENSES SUBSEQUENTLY
INCURRED BY THE INDEMNIFIED PARTY IN CONNECTION WITH THE DEFENSE
THEREOF. IF THE INDEMNIFYING PARTY ELECTS TO ASSUME THE DEFENSE OF A
THIRD PARTY CLAIM, THE INDEMNIFIED PARTY WILL (i) COOPERATE (AT
INDEMNIFYING PARTY'S EXPENSE FOR THE INDEMNIFIED PARTY'S OUT OF
POCKET COSTS) IN ALL REASONABLE RESPECTS WITH THE INDEMNIFYING PARTY
IN CONNECTION WITH SUCH DEFENSE, (ii) NOT ADMIT ANY LIABILITY WITH
RESPECT TO OR SETTLE, COMPROMISE OR DISCHARGE, ANY THIRD PARTY CLAIM
WITHOUT THE INDEMNIFYING PARTY'S PRIOR WRITTEN CONSENT (WHICH
CONSENT
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SHALL NOT BE UNREASONABLY WITHHELD), AND (iii) AGREE TO ANY
SETTLEMENT, COMPROMISE OR DISCHARGE OF A THIRTY PARTY CLAIM WHICH
THE INDEMNIFYING PARTY MAY RECOMMEND AND WHICH BY ITS TERMS
OBLIGATES THE INDEMNIFYING PARTY TO PAY THE FULL AMOUNT OF THE
LIABILITY IN CONNECTION WITH SUCH THIRD PARTY CLAIM WHICH RELEASES
THE INDEMNIFIED PARTY COMPLETELY IN CONNECTION WITH SUCH THIRD PARTY
CLAIM WITHOUT ANY INJUNCTION OR ORDER AGAINST THE INDEMNIFIED PARTY,
AND WHICH DOES NOT ADVERSELY AFFECT THE BUSINESS CARRIED ON BY THE
INDEMNIFIED PARTY. IN THE EVENT THE INDEMNIFYING PARTY SHALL ASSUME
THE DEFENSE OF ANY THIRD PARTY CLAIM, THE INDEMNIFIED PARTY SHALL BE
ENTITLED TO PARTICIPATE IN (BUT NOT CONTROL) SUCH DEFENSE WITH ITS
OWN COUNSEL AT ITS OWN EXPENSE. IF THE INDEMNIFYING PARTY DOES NOT
ASSUME THE DEFENSE OF ANY SUCH THIRD PARTY CLAIM, THE INDEMNIFIED
PARTY MAY DEFEND THE SAME IN SUCH MANNER AS IT MAY DEEM APPROPRIATE,
INCLUDING BUT NOT LIMITED TO SETTLING SUCH CLAIM OR LITIGATION AFTER
GIVING NOTICE TO THE INDEMNIFYING PARTY OF SUCH TERMS AND THE
INDEMNIFYING PARTY WILL PROMPTLY REIMBURSE THE INDEMNIFIED PARTY FOR
THE COSTS OF DEFENSE AND DAMAGES UPON WRITTEN REQUEST.
5.2 EMPLOYMENT MATTERS.
(a) Buyer shall offer employment to Seller's employees identified in
SCHEDULE 5.2(A) as of the Closing Date, on terms and conditions
established by Buyer in accordance with its hiring policies. Such
employees will be Buyer's employees at will in accordance with
Buyer's employment policies.
(b) Buyer shall employ Key and Michael McGill, and shall enter into
a consulting agreement with James McGill, on the terms described on
SCHEDULE 1.7(A)(XV).
ARTICLE 6
CONDITIONS PRECEDENT TO PARTIES' OBLIGATIONS
The Parties' respective obligations to consummate this transaction shall
be subject to fulfillment on or before the Closing Date of each of the following
conditions, unless waived in writing by the party for whose benefit such
condition exists.
6.1 REPRESENTATIONS AND WARRANTIES TRUE. All representations and
warranties of the Parties set forth in this Agreement shall be true and correct
on the date set forth above the signature line and as of the Closing Date as
though made at and as of those dates.
6.2 PERFORMANCE OF COVENANTS. The Parties shall have performed all
covenants required by this Agreement to be performed On or before the Closing
Date.
6.3 ASSIGNMENTS AND CONSENTS. Seller shall have obtained all necessary
assignments, approvals, authorizations and consents necessary (i) for the
assignment to Buyer of all of the Personal Property Leases, Contracts, Business
Identity, Intellectual Property and other Purchased Assets on the same terms and
conditions as presently apply to Seller without any transfer
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premium or penalty whatsoever to be paid by Buyer or its assignee, and (ii) in
connection with the valid execution, delivery and performances of this
Agreement.
6.4 ACTION OR PROCEEDINGS. No action or proceeding before a court or any
other governmental agency or body shall have been instituted or threatened to
restrain or prohibit the transactions contemplated hereby, and no order, decree
or judgment of any court, agency, commission or governmental authority shall be
outstanding which seeks to or would render it unlawful to consummate the
transactions described herein.
6.5 DUG DILIGENCE. Buyer shall have completed to its satisfaction a due
diligence review of Seller including, without limitation, the receipt of
documents, certificates, interviews with Members, review of the Purchased Asset,
and a review of the differences between Seller's accounting system and Generally
Accepted Accounting Standards. If the results of such due diligence review
reveal facts that are materially different than those represented herein or in
Seller's Confidential Memorandum Regarding, B. L. Key Services, L.L.C., attached
hereto as SCHEDULE 6.5, Buyer may terminate this Agreement without liability and
all related Agreements without liability to Seller. The provisions of Section
4.6, 4.7 and 8.3 shall apply upon the happening of any such termination and
shall survive such termination for the period stated.
6.6 COVENANTS. Buyer shall have performed all of Buyer's covenants
described in Article IV.
6.7 REAL ESTATE CONTRACT. Buyer and Seller shall have executed and
delivered the lease attached as SCHEDULE 1.1(A).
6.8 OTHER DELIVERIES. The Parties shall have delivered other documents and
instruments contemplated by this Agreement or the agreements entered into in
connection herewith, and other documents and instruments as either party or its
counsel may reasonably request, including all of the Closing documents described
in Section 1.7.
6.9 THE OKLAHOMA TAX COMMISSION AND CITY OF TULSA. The Oklahoma Tax
Commission and City of Tulsa shall have issued all state and local tax
clearances which are either required by law or otherwise available and requested
by Buyer.
6.10 TERMINATION. No termination of this Agreement under Article 7 or 8
will have occurred.
ARTICLE 7
DESTRUCTION OF ASSETS
7.1 DESTRUCTION. If, as of the Closing Date, the Purchased Assets have
suffered loss or damage, whether or not caused by Seller and whether or not
caused by an Act of God, to the extent which materially affects the value of the
Purchased Assets, Buyer shall have the right to:
(a) Terminate this Agreement by giving written notice to Seller within
twenty (20) calendar days after the date Buyer acquires actual knowledge
of loss or damage;
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(b) Close the purchase of the Purchased Assets hereunder, in which
event Buyer shall be entitled to all insurance proceeds payable by
reason of loss or damage to the Purchased Assets; or
(c) Complete the purchase of the Purchased Assets subject to
reduction of the Purchase Price in an amount to be agreed by the
Parties in which case Buyer shall not be entitled to any insurance
proceeds payable by reason of such loss or damage.
ARTICLE 8
TERMINATION
8.1 TERMINATION. This Agreement may be terminated by the mutual written
consent of the Parties, by one (1) party if any condition set forth in Article 6
has not been satisfied or waived by the party for whose benefit such condition
exists, on or before the Closing Date, or by the Buyer as described in Article
7.
8.2 COSTS. In the event of a termination of this Agreement pursuant to
Section 8.1, each party shall pay the costs and expenses incurred by it in
connection with this Agreement, and no party shall be liable to any other party
for any costs, expenses, damage or loss of anticipated profits hereunder.
8.3 OTHER. If this Agreement is terminated without a purchase of assets
being completed, then for a period of 2 years from the date hereof neither Buyer
nor any of its officers or directors shall (1) disclose to any party or use to
the detriment of Seller any Proprietary Information or Seller's Confidential
Information; (2) without the prior consent of Seller, directly or indirectly,
engage in the Business, or in any activity that is similar to the Business, and
shall not permit, assist, invest with (except with respect to no more than 5% of
the voting stock of any company whose stock is publicly traded) or encourage any
other person to take any action that would be prohibited if taken directly by
the Buyer or one of its affiliates, within the Noncompete Area as defined in
Section 4.7(a) above; and (3) solicit, or attempt to induce or influence, any
person currently employed by Seller as listed on SCHEDULE 5.2(A), or employed in
the future by Seller to replace a person listed on SCHEDULE 5.2(A), to leave
Seller's employment or to hire any such person; or solicit any actual or
potential Business customer for the sale of products or services similar to
those of Business, at any place in the Noncompete Area. The provisions of
Section 4.7(e), (f), (g) and (h) shall be applied with respect to the foregoing
except that in all cases the rights and protections accruing to Buyer thereunder
shall accrue to Seller instead and shall be applicable to this Section 8.3.
ARTICLE 9
MISCELLANEOUS PROVISIONS
9.1 ASSIGNMENT. Except as stated in this Section, none of the Buyer,
Seller or Members or the Trust may assign any right, interest or obligation of
this Agreement to any third party.
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9.2 WAIVER. Any failure on the part of any party hereto to comply with any
of its obligations, agreements or conditions hereunder may be waived in writing
by the party or Parties to whom compliance is owed. One waiver or failure to
insist on strict compliance does not, however, imply that similar waivers or
failures to insist on compliance will or must be granted.
9.3 BROKERS. Each party represents to the other Parties that no broker or
finder has acted for it in connection with this Agreement and agrees to
indemnify and hold harmless other Parties alleged to have been employed by it.
9.4 GOVERNING LAW. Except as specifically stated in this Agreement, this
Agreement shall be governed by and construed in accordance with the laws of the
State of Oklahoma. The Covenant not to compete, however, Section 4.7 will be
governed by the laws of the jurisdictions described in such Section.
9.5 AMENDMENTS. This Agreement may not be amended or terminated other than
by written instrument signed by the party against whom enforcement of amendment
or termination is sought. Only the Chief Executive Officer of the Buyer has the
authority to amend this Agreement for the Buyer.
9.6 SCHEDULES. All schedules referred to in this Agreement shall be
attached to this Agreement and are incorporated by reference herein.
9.7 NOTICES. Any and all notices or other communications required or
permitted by this Agreement or by law to be given to any Party shall be in
writing and shall be deemed delivered when personally delivered to the Party to
whom they are directed, three days after being deposited by certified mail in
the United States mail, postage prepaid, or by facsimile transmission with a
confirmation of transmission, addressed as follows:
If to Buyer: Attention M. Timothy Carey, CEO
CRC-Key, Inc.
11601 No. Houston Rosslyn Rd.
Houston, TX 77086
Fax (281) 405-2741
With a copy to:
David B McKinney
Boesche, McDermott & Eskridge
100 West Fifth Suite 800
Tulsa, OK 74103
Fax (918) 592-5809
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If to Seller: Attention James C. McGill, Member and Manager
B. L. KEY SERVICES, L.L.C.
5401 So. Harvard, Ste. 1
Tulsa, OK 74135
Fax (918) 749-9976
If to Key: Bobby L. Key
Gable Gotwals Mock Schwabe Kihle Gaberino
100 W. Fifth Street, Suite 1000
Tulsa, OK 74103-4219
ATTN: C. Burnett Dunn
Fax (918) 588-7873
If to James McGill: James C. McGill
Gable Gotwals Mock Schwabe Kihle Gaberino
100 W. Fifth Street, Suite 1000
Tulsa, OK 74103-4219
ATTN: C. Burnett Dunn
Fax (918) 588-7873
If to the James C. McGill James C. McGill, Trustee
Revocable Living Trust
dated June 28, 1996, as Gable Gotwals Mock Schwabe Kihle Gaberino
amended and restated 100 W. Fifth Street, Suite 1000
October 22, 1996 Tulsa, OK 74103-4219
ATTN: C. Burnett Dunn
Fax (918) 588-7873
If to Michael McGill: Michael McGill
Gable Gotwals Mock Schwabe Kihle Gaberino
100 W. Fifth Street, Suite 1000
Tulsa, OK 74103-4219
ATTN: C. Burnett Dunn
Fax (918) 588-7873
or at another address as one party may designate by notice hereunder to the
other Parties.
9.8 ATTORNEY'S FEES. Should any legal proceeding be commenced among the
Parties to this Agreement concerning the Business, this Agreement, the Real
Estate Contract or the rights and duties of the Parties in relation thereto, the
party prevailing in the proceeding shall be entitled, in addition to the other
relief as may be granted, to a reasonable sum as and for the party's attorneys'
fees and court costs actually incurred and paid.
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9.9 RESTRICTIONS ON SELLER'S DISTRIBUTIONS. Seller, Members and the Trust
agree that Seller shall not dissolve between the Closing Date and December 31,
1999. Seller and Members agree that Seller shall maintain liquid assets in
excess of $2,000,000 (less any amounts paid to resolve any claims against the
Seller by any third party or Buyer), for the period from the Closing Date to
December 31, 1999. Liquid assets shall include the note described in SCHEDULE
1.4(A)(II).
9.10 BINDING AGREEMENT. This Agreement shall be binding on and shall inure
to the benefit of the Parties and their respective heirs, executors,
administrators, successors and permitted assigns. The Members and the Trust are
bound by this Agreement only with respect to the Sections of this Agreement
where the Members and the Trust have specific rights or obligations set forth
with respect to the Members. Where the rights and obligations relate to the
Seller, only the Seller and not the Members and the Trust shall have such rights
or obligations under this Agreement; provided that the Members and the Trust
retain whatever rights or obligations, if any, they may have under Limited
Liability Company statutes, or other statutes or rules of law. The Buyer's
parent and affiliated corporations do not have any rights or obligations under
this Agreement; provided that the Corporation's parent corporation retains
whatever rights or obligations, if any, it may have under corporation statutes,
or other statutes or rules of law.
9.11 LITIGATION ARISING FROM THE OPERATION OF THE BUSINESS. It is
recognized that in the future litigation may arise relating to Seller's or
Buyer's operations and the Purchased Assets, which may relate directly or
indirectly to the period prior to the Closing, the period subsequent to the
Closing, or both. Therefore, to the extent reasonable under the circumstances,
each Party shall assist and provide information, records and documents to the
other Party with respect to any litigation or potential litigation in which the
other party is or may be involved.
9.12 FISCAL YEAR. It is assumed by the parties that Buyer will be able to
elect a fiscal year ending March 31 and Buyer will so elect. If such assumption
is incorrect or cannot be accomplished, then the fiscal year shall be the
calendar year and all references to fiscal years ending on or prior to March 31,
2003 or 2005 shall be deemed to refer to the calendar years ending on or prior
to December 31, 2003 or 2005.
9.13 CLOSING COSTS. Except as specifically described in this Agreement,
each party shall bear and pay its own costs, expenses, consulting fees, attorney
fees and other costs relating to the negotiation or closing of this Agreement.
Buyer will not assume or pay Seller's accounts payable or accrued liabilities
relating to such negotiation or closing costs of Seller.
9.14 HEADINGS. The section and other headings contained in this Agreement
and in the exhibits and schedules to this Agreement are included for the purpose
of convenient reference only and shall not restrict, amplify, modify or
otherwise affect in any way the meaning or interpretation of this Agreement or
the exhibits and schedules.
9.15 FAIR MEANING. This Agreement shall be construed according to its fair
meaning and as if prepared by all Parties.
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9.16 GENDER AND NUMBER. All references to the neuter gender shall include
the feminine or masculine gender and vice versa, where applicable, and all
references to the singular shall include the plural and vice versa, where
applicable.
9.17 NO THIRD PARTY BENEFICIARY. The provisions of this Agreement are not
intended by the Parties, nor shall they be deemed, to confer any benefit on any
person that is not a party to this Agreement, except death beneficiaries to the
extent provided for in Section 1.4(b)(vii) and Affiliates to the extent provided
in Sections 4.6 or 4.7.
9.18 CONSENT TO JURISDICTION. Each of the Parties submits to the personal
jurisdiction of the federal or state district courts located in Tulsa, Oklahoma,
with respect to any claim brought to enforce, sue for the breach of, interpret,
rescind, or interpret this Agreement.
9.19 ENTIRE AGREEMENT. THIS IS THE ENTIRE AGREEMENT OF THE PARTIES. ALL
LETTERS OF INTENT, DISCUSSIONS, AND NEGOTIATIONS ARE MERGED INTO THIS DOCUMENT
AND WILL NOT SURVIVE UNLESS THEY ARE DESCRIBED IN THIS DOCUMENT. THERE ARE NO
CONDITIONS PRECEDENT OR SUBSEQUENT.
IN WITNESS WHEREOF, this Agreement has been entered into on the 31 day of
March, 1998.
BUYER: CRC-Key, Inc., an Oklahoma corporation
By:___________________________________
Chief Executive Officer
SELLER: B. L. KEY SERVICES, L.L.C., Seller
By:___________________________________
Bobby L. Key, Member and Manager
And___________________________________
Michael McGill, Member
And___________________________________
James C. McGill as Trustee, Member
And___________________________________
James C. McGill, Manager
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And___________________________________
Bobby L. Key
JAMES MCGILL: ______________________________________
James C. McGill
JAMES C. MCGILL REVOCABLE
LIVING TRUST DATED JUNE 28, 1996, AS
AMENDED AND RESTATED OCTOBER 22, 1996: ______________________________________
James C. McGill, Trustee
MICHAEL MCGILL: ______________________________________
James M. McGill
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ACKNOWLEDGMENTS
STATE OF OKLAHOMA )
) ss.
COUNTY OF TULSA )
This foregoing instrument was acknowledged before me on this 31st day
of March, 1998, by JAMES C. McGILL, individually and as Trustee of the James
C. McGill Revocable Living Trust dated June 2 , 1996, as amended and restated
October 22, 1996, and as Manager of B. L. Key Services, L.L.C. (the Seller),
BOBBY L. KEY individually and as Member/Manager of Seller, and JAMES M.
McGILL, individually and also as Member of the Seller.
______________________________________
Notary Public
My Commission Expires:
_________________________________
STATE OF OKLAHOMA )
) ss.
COUNTY OF TULSA )
This foregoing instrument was acknowledged before me on this 31st day of
March, 1998, by M. TIMOTHY CAREY, as Chief Executive Officer of CRC-Key, Inc.,
on behalf of the Buyer.
______________________________________
Notary Public
My Commission Expires:
_________________________________
34
EXHIBIT 10.13
OPTION AGREEMENT
This Option Agreement ("Agreement"), made and entered into as of June 12,
1997, is by and between CRC Holdings Corp., a Delaware corporation (the
"Company") and _________________________ (the "Optionee").
WITNESSETH:
WHEREAS, the Optionee is an employee of the Company or one or more of its
subsidiaries (collectively, the Company and its subsidiaries are the "Related
Parties") and the Board of Directors of the Company has determined that the
Company should recognize the potential contributions that the Optionee may make
to the success of the Related Parties by granting him an option to purchase
shares of Common Stock in the Company upon the terms set forth herein;
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants and agreements hereinafter set forth, the Company and Optionee hereby
agree as follows:
1. CERTAIN DEFINITIONS. The following terms shall have the following
meanings:
"EXPIRATION DATE" means 6:00 P.M., Houston, Texas time, on August
31, 2002.
"1933 ACT" means the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder.
"STATE LAW" means applicable state securities laws and the rules and
regulations promulgated thereunder.
"VOTING AGREEMENT" the Voting and Shareholders Agreement dated as of
June 12, 1997 among the Company and certain holders of its shares, as such
agreement may be amended from time to time.
2. GRANT OF OPTION. Subject to the terms and conditions hereinafter set
forth, the Company hereby irrevocably grants to the Optionee the right and
option (the "Option") to purchase shares ("Option Shares") of Common Stock,
subject to adjustment in accordance with the provisions of Section 7 of this
Agreement.
3. OPTION PRICE. The price to be paid by Optionee to the Company for each
Option Share purchased pursuant to the exercise of this Option ("Option Price")
shall $[111.00] per share; provided, however, that the Option Price shall be
subject to adjustment in accordance with the provisions of Section 7 of this
Agreement.
4. VESTING OF RIGHT TO EXERCISE OPTION; FORFEITURE OR REPURCHASE UPON
TERMINATION OF EMPLOYMENT.
<PAGE>
(a) Except as otherwise provided in this Agreement, the right to exercise
this Option shall vest as to twenty percent (20%) of the total Option Shares
which may be purchased hereunder on each anniversary of the date of issuance of
this Option, beginning with the first anniversary and continuing until the fifth
anniversary, at which time this Option shall be fully vested. From and after
each date of vesting, Optionee may exercise this Option, subject to the terms
and conditions set forth herein, to purchase all or any portion of the Option
Shares for which Optionee's rights have vested.
(b) To the extent Optionee does not purchase all or any part of the Option
Shares at the times this Option becomes exercisable, the Optionee has the right
cumulatively thereafter to purchase any Option Shares not so purchased and such
right shall continue until this Option terminates or expires.
(c) If Optionee's employment is terminated by one of the Related Parties
for "cause" (as defined below) or if Optionee shall voluntarily terminate his
employment by the Related Parties or its subsidiaries (through resignation or
otherwise), the Option shall automatically terminate as of the date of such
termination and any rights to purchase Option Shares which may have vested prior
to such termination shall be forfeited. For purposes hereof, a termination for
"cause" will include any of the following: (A) Optionee's conviction of, or plea
of nolo contendere to, any felony or to any crime or offense causing substantial
harm to the Related Parties or their affiliates or involving acts of theft,
fraud, embezzlement, moral turpitude or similar conduct; (B) Optionee's repeated
intoxication by alcohol or drugs during the performance of his duties for the
Related Parties in a manner that materially and adversely affects Optionee's
performance of such duties; (C) malfeasance in the conduct of Optionee's duties
for the Related Parties, including, but not limited to, (1) willful and
intentional misuse or diversion of funds of the Related Parties or their
affiliates, (2) embezzlement, or (3) fraudulent or willful and material
misrepresentations or concealments on any written reports submitted to the
Related Parties or their affiliates; (D) Optionee's material violation of any
provision of the Voting Agreement among Optionee, the Company and others; (E)
Optionee's material failure to perform the duties of Optionee's employment or
material failure to follow or comply with the reasonable and lawful written
directives of the Board of Directors of the Related Parties, in either case
after Optionee shall have been informed, in writing, of such material failure
and given a period of not more than 60 days to remedy same.
(d) If Optionee's employment by the Related Parties is terminated by a
Related Party for reasons other than "cause", the portion of this Option which
has vested may be exercised, but only within three months after such termination
(if otherwise prior to the date of expiration of this Option), and not
thereafter, to purchase the number of Option Shares, if any, that could be
purchased upon exercise of this Option at the date of termination of Optionee's
employment (the "Vested Option Shares"); provided that, in lieu of permitting
the exercise of this Option, the Company may, at the sole discretion, redeem
this Option, by paying cash to Optionee in an amount equal to the greater of:
(i) the amount, if any, by which the "Book Value" (as defined below) of the
Vested Option Shares exceeds the Option Price for such shares, or (ii) $100.
For purposes of this subsection (d), the "Book Value" of the Vested
Options Shares is equal to (A) the Company's total stockholders equity, as set
forth in the Company's consolidated balance
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sheet for its most recently concluded fiscal quarter, divided by, the number of
shares of Common Stock outstanding, as set forth in the Company's consolidated
balance sheet for its most recently concluded fiscal quarter, times (B) the
number of Vested Option Shares.
For purposes of this subsection (d), if this Option shall not have fully
vested as of the date of termination of Optionee's employment, then a ratable
portion of the number of Option Shares which would have become purchasable upon
the next vesting date shall be deemed to have vested as of the date of such
termination (determined by multiplying the number of Option Shares that vest on
the next vesting date by a fraction with a numerator equal to the number of full
months which have then elapsed since the last vesting date and a denominator of
12, and rounding to the closest whole number).
(e) In the event of Optionee's death or disability, this Option shall
remain outstanding and may be exercised by the person who acquires this Option
by will or the laws of descent and distribution, or by Optionee, as the case may
be, but only (i) within the one year period following the date of death or
disability (if otherwise prior to the date of expiration of this Option), and
not thereafter, and (ii) to purchase the number of Option Shares that were
subject to purchase upon exercise of this Option at the time of such death or
disability.
5. RESTRICTIONS ON EXERCISE. The right to exercise the Option shall be
subject to the following restrictions:
(a) VESTING. Optionee shall have no right to exercise this Option to
purchase any Option Shares for which Optionee's rights have not yet vested in
accordance with Section 4.
(b) NO FRACTIONAL OPTION SHARES. The Option may be exercised only with
respect to full Option Shares.
(c) COMPLIANCE WITH LAW. The Option may not be exercised in whole or in
part, and no Option Shares shall be issued nor certificates representing such
Option Shares delivered pursuant to any exercise of the Option, if any requisite
approval or consent of any governmental authority of any kind having
jurisdiction over the exercise of options or the issuance and sale of Option
Shares shall not have been obtained or if such exercise or issuance would
violate any applicable law.
(d) EXERCISE BY OPTIONEE. The Option shall only be exercisable by the
Optionee and by any transferee who has received such Option pursuant to Section
4(e).
(e) VOTING AGREEMENT. Optionee shall have no right to exercise this Option
to purchase any Option Shares until Optionee and Optionee's spouse (if Optionee
has a spouse) shall have executed and delivered to the Company a counterpart of
the Voting Agreement. Any Option Shares purchased upon exercise of this Option
shall be subject to the terms of the Voting Agreement.
6. EXERCISE OF OPTION.
(a) Subject to the other terms and provisions of this Agreement, the
Option shall be
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exercisable by written notice timely given to the Company by the Optionee, which
notice (i) shall state the number of Option Shares that the Optionee then
desires to purchase, and (ii) shall be accompanied by payment in full of the
Option Price for each of such Option Shares, which such payment shall be made in
cash or certified check.
(b) The Company shall be entitled to require the Optionee to deliver to
the Company such documents as the Company in its discretion shall deem necessary
to confirm that (i) such exercise and the Company's issuance and sale of such
Option Shares are in compliance with the requirements of any applicable laws
(including, but not limited to, the Securities Act of 1933 and applicable state
law) and (ii) the Optionee shall be bound by and comply with all of the terms
and provisions of the Voting Agreement.
(c) Unless the Company and Optionee shall make mutually acceptable
alternative arrangements, at the time of exercise of the Option, Optionee shall
pay to the Company, in cash, any federal, state and local taxes required by law
to be paid or withheld in connection with such exercise.
7. RECAPITALIZATION OR REORGANIZATION; ADJUSTMENTS.
(a) The existence of this Option shall not affect in any way the right or
power of the Company to make or authorize any adjustment, recapitalization,
reorganization or other change in the Company's capital structure or its
business, any merger or consolidation of the Company, any issuance of additional
Company securities with priority over the Common Stock or otherwise affecting
the Common Stock or the rights thereof, the dissolution or liquidation of the
Company's common stock or any sale, lease, exchange or other disposition of all
or any part of its assets or business or any other corporate act or proceeding.
(b) If (i) the Company merges, consolidates or reconstitutes with or into
any other entity (in a situation in which the Company is not the surviving
entity), (ii) the Company sells, leases or exchanges or agrees to sell, lease or
exchange all or substantially all of its assets to any other person or entity,
or (iii) the Company is to be dissolved and liquidated (each such event is
referred to herein as a "Fundamental Change"), the Company shall declare any
portion of the Option which has not then vested to be vested, so that the
Optionee shall have an opportunity to exercise the Option prior to the
consummation of the Fundamental Change.
(c) If the Company subdivides its outstanding common stock into greater
shares of common stock, the Option Price in effect immediately prior to such
subdivision shall be proportionately reduced, and the number of Option Shares
then subject to the Option shall be proportionately increased. Conversely, if
the outstanding shares of common stock of the Company are combined into a
smaller number of shares, the Option Price in effect immediately prior to such
combination shall be proportionately increased, and the number of Option Shares
then subject to the Option shall be proportionately reduced.
8. TERMINATION OF OPTION. The Option shall terminate upon the first to
occur of the (i) the Expiration Date, (ii) the date on which Optionee purchases,
or in writing surrenders his right to purchase, all Option Shares or other
securities then subject to the Option, or (iii) the date of termination pursuant
to Section 4 hereof.
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9. RESTRICTION ON TRANSFER OF OPTION. The Option may not be sold,
assigned, hypothecated or transferred, except by will or by the laws of descent
and distribution. Any attempted transfer of the Option in violation of this
provision shall be void and of no effect whatsoever.
10. CERTAIN RIGHTS INCIDENT TO DIVORCE. If an interest in the Option is
required by law to be transferred to a spouse of Optionee pursuant to an order
of a court in a divorce proceeding (notwithstanding the provisions of Section 9
hereof), Optionee shall nevertheless retain all rights with respect to the
exercise of the Option and any interest of such spouse shall be subject to such
rights of Optionee. In addition, if it is determined that Optionee will be
required to pay any taxes attributable to the interest of the spouse in the
Option, any tax liability of Optionee which is attributable to such spouse's
interest shall be taken into account, and shall reduce such spouse's interest in
this Option.
11. RIGHTS AS A SHAREHOLDER. Optionee shall have no rights as a
shareholder of the Company with respect to any Option Shares covered by the
Option until the exercise of the Option.
12. ADDITIONAL DOCUMENTS. The Company and the Optionee will, upon request
of the other party, promptly execute and deliver all additional documents, and
take all such further action, reasonably deemed by such party to be necessary,
appropriate or desirable to complete and evidence the sale, assignment and
transfer of the Option Shares pursuant to this Agreement.
13. REPRESENTATIONS, WARRANTIES AND COVENANTS OF OPTIONEE.
(a) The Optionee acknowledges that neither the Option nor the Option
Shares covered thereby have been registered under the 1933 Act or State Law on
the grounds that the issuance of the Option is, and the sale of any Option
Shares pursuant to the exercise of the Option will be, exempt from registration
under one or more provisions of each of such acts. The Optionee further
understands that in determining the availability and applicability of such
exemptions and in executing and delivering this Agreement and issuing and
delivering any Option Shares upon exercise of the Option, the Company has relied
and will rely upon the representations, warranties and covenants made by the
Optionee herein and in any other documents which he may hereafter deliver to the
Company. Accordingly, the Optionee represents and warrants to and covenants and
agrees with the Company as follows:
(i) the Optionee is acquiring and will hold the Option, and will
acquire and hold all securities which he acquires upon exercise of the
Option, for his own account for investment and not with a view to any sale
or distribution of all or any part thereof; and
(ii) the Optionee will hold all securities acquired by him upon
exercise of the Option, as well as any and all other securities issued in
respect thereof, subject to all applicable provisions of the Voting and
Shareholders Agreement of the Company, the 1933 Act and State Law, and
will not at any time make any sale, transfer, pledge or other disposition
or encumbrance of any of such securities in violation of the Voting and
Shareholders Agreement of the Company or in the absence of an effective
registration statement for such securities under the 1933 Act and State
Law or an applicable exemption from the registration requirements
therefrom.
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(b) The Optionee agrees (i) that the certificates representing the Option
Shares or other securities purchased under this Option may bear such legend or
legends as the Company deems appropriate in order to assure compliance with
applicable securities laws, (ii) that the Company may refuse to register the
transfer of the Option Shares or other securities purchased under this Option on
the transfer records of the Company if such proposed transfer would in the
opinion of counsel satisfactory to the Company constitute a violation of any
applicable securities laws, (iii) that the Company may give related instructions
to its transfer agent, if any, to stop registration of the transfer of the
Option Shares or other securities purchased under this Option, and (iv) that the
Option Shares or other securities acquired upon exercise of this Option shall be
subject, in all respects, to the Voting and Shareholders Agreement of the
Company.
(c) Optionee acknowledges that the value of the Option over its life will
be speculative and uncertain, that there is no market for the Option or the
Option Shares or other securities that may be acquired upon exercise of the
Option and it is unlikely that any market will develop, and consequently, the
Optionee may ultimately realize no value from the Option.
14. NOTICES. All notices required or permitted to be given hereunder shall
be in writing and shall be deemed to have been given on the earlier of the date
of receipt by the party to whom the notice is given or five (5) days after being
mailed by certified or registered United States mail, postage prepaid, addressed
to the appropriate party at the address shown beside such party's signature
below or at such other address as such party shall have theretofore designated
by written notice given to the other party.
15. ENTIRETY AND MODIFICATION. This Agreement contains the entire
agreement between the parties hereto with respect to the subject matter hereof
and supersedes any and all prior agreements, whether written or oral, between
such parties relating to such subject matter. No modification, alteration,
amendment or supplement to this Agreement shall be valid or effective unless the
same is in writing and signed by the party against whom it is sought to be
enforced.
16. SEVERABILITY. If any provision of this Agreement is held to be
unenforceable, this Agreement shall be considered divisible, and such provision
shall be deemed inoperative to the extent it is unenforceable, and in all other
respects this Agreement shall remain in full force and effect; provided,
however, that if any such provision may be made enforceable by limitation
thereof, then such provision shall be deemed to be so limited and shall be
enforceable to the maximum extent permitted by applicable law.
17. GENDER. Words used in this Agreement which refer to Optionee and
denote the male gender shall also be deemed to include the female gender or the
neuter gender when appropriate.
18. HEADINGS. The headings of the various sections and subsections of this
Agreement have been inserted for convenient reference only and shall not be
construed to enlarge, diminish or otherwise change the express provisions
hereof.
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19. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE (REGARDLESS OF THE LAWS THAT
MIGHT OTHERWISE GOVERN UNDER APPLICABLE DELAWARE PRINCIPLES OF CONFLICTS OF
LAW).
20. COUNTERPARTS. This Agreement may be signed in counterparts, each of
which shall be deemed an original and all of which shall constitute one and the
same agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first set forth above.
CRC HOLDINGS CORP.
By: _______________________________
OPTIONEE
Number of Option
Shares:
____________________________________
EXHIBIT 10.14
CRC HOLDINGS CORP.
OPTION PLAN
RECITALS
A. Effective as of May 20, 1998 (the "Effective Date"), the Board of
Directors of CRC Holdings Corp., a Delaware corporation (the "Company"), hereby
adopts this Option Plan (the "Plan") for certain officers and employees of the
Company (collectively, "Employees" and individually, a "Employee").
B. It is the purpose of this Plan to promote the interests of the Company
and its shareholders by attracting, retaining and stimulating the performance of
selected Employees and giving such Employees the opportunity to acquire a
proprietary interest in the Company and an increased personal interest in its
continued success and progress, by granting to such persons options to acquire
additional shares of common stock of the Company, subject to the terms and
conditions described below.
ARTICLE I
GENERAL
1.1 DEFINITIONS. Terms used in this Plan and not otherwise defined shall
have the respective meanings assigned to such terms in the Bylaws of the Company
(the "Bylaws") and the following terms shall have the following meanings:
"BOARD" means the Board of Directors of the Company.
"CODE" means the Internal Revenue Code of 1986, as amended.
"COMMON STOCK" shall mean the common stock, $.01 par value per
share, of the Company.
"EMPLOYEE" means an individual whose wages are subject to the
withholding of federal income tax under Section 3401 of the Code or an
independent contractor or consultant retained to provide services to the
Company or its affiliates on a frequent and recurring basis.
"EXPIRATION DATE" means 6:00 P.M. Houston, Texas time, on May 31,
2003.
"HOLDER" means any Employee to whom an Option has been granted under
this Plan.
"OPTION" any option granted to a Employee hereunder, which shall be
in the form of Exhibit A hereto.
<PAGE>
"OPTIONS" collectively all Options granted to Employees hereunder.
ARTICLE II
ADMINISTRATION
The Plan shall be administered by the Board of Directors of the Company
(the "Board"). The Board shall have full authority, discretion or power to
select the Employees who will receive Options and, subject to the aggregate
limitations set forth herein, to set the number of shares of Common Stock to be
covered by each Option granted to a Employee and the decisions of the Board
relating to such matters shall be final and binding upon the Company and the
Employees. The Board shall have no authority, discretion or power to set the
exercise price or the period within which the Options so granted may be
exercised, or to alter any other terms or conditions specified herein.
Subject to the foregoing limitations, the Board shall have authority and
power to adopt such rules and regulations and to take such action as they shall
consider necessary or advisable for the administration of the Plan, and to
construe, interpret and administer the Plan. The Board shall incur no liability
by reason of any action or determination made in good faith with respect to the
Plan or any option agreement entered into pursuant to the Plan.
ARTICLE III
GRANT OF OPTIONS
3.1 OPTION AGREEMENTS. Each Option granted under the Plan to a Employee
shall be evidenced by a written option agreement, which agreement shall be
entered into by the Company and the Employee to whom the Option is granted. The
agreements for each Option shall be in substantially the form set forth in
Exhibit A hereto, respectively, with appropriate insertions of the name of the
optionee and the number of shares for which such option may be exercised.
3.2 MAXIMUM NUMBER OF SHARES SUBJECT TO OPTIONS. The total number of
shares which may be acquired upon exercise of all Options granted pursuant to
the Plan (the "Option Shares") shall be 15,454.
3.3 INITIAL GRANT OF OPTIONS. Options shall be initially granted as of the
Effective Date to each of the parties listed on attachment I hereto to purchase
the number of shares set forth opposite their respective names.
3.4 SUBSEQUENT GRANT OF OPTIONS. After the initial grant of options
pursuant to Section 3.3, the Board may at any time grant any of 4,158 remaining
Options authorized under this Plan to any person then serving as a Employee of
the Company on the date of such grant, subject to the limitations described in
Section 3.2.
ARTICLE IV
GENERAL PROVISIONS
<PAGE>
4.1 TERMINATION OF PLAN. The Plan shall terminate whenever the Board
adopts a resolution to that effect. If not sooner terminated under the preceding
sentence, the Plan shall wholly cease and expire at the close of business on the
sixth anniversary of the Effective Date. After termination of the Plan, no
Options shall be granted under this Plan, but the Corporation shall continue to
recognize Options previously granted to the extent such Options shall not have
expired.
4.2 AMENDMENT OF PLAN. The Board may from time to time amend, modify,
suspend or terminate the Plan. Nevertheless, no such amendment, modification,
suspension or termination shall impair any Options theretofore granted under the
Plan or deprive any Holder of any shares of Common Stock which he might have
acquired through or as a result of the Plan.
4.3 TREATMENT OF PROCEEDS. Proceeds from the sale of Common Stock pursuant
to Options granted under the Plan shall constitute general funds of the Company.
4.4 EFFECTIVENESS. This Plan shall become effective as of the Effective
Date.
4.5 PARAGRAPH HEADINGS. The paragraph headings included herein are only
for convenience, and they shall have no effect on the interpretation of the
Plan.
EXHIBIT 10.15
OPTION AGREEMENT
This Option Agreement ("Agreement"), made and entered into as of
_______________ is by and between CRC Holdings Corp., a Delaware corporation
(the "Company"), and __________________________(the "Optionee").
WITNESSETH:
WHEREAS, an Option Plan ("Plan") was adopted effective as of May 20, 1998
("Plan Date") for certain Employees of the Company or one or more of its
subsidiaries (collectively, the Company and its subsidiaries are the "Related
Parties");
WHEREAS, the Optionee is an Employee of the Related Parties eligible to
participate in the Plan and the Board of Directors of the Company, as
administrator of the Plan, has determined that the Company should recognize the
potential contributions that the Optionee may make to the success of the Company
by granting him an option to purchase shares of Common Stock in the Company
pursuant to the Plan and upon the terms set forth herein;
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants and agreements hereinafter set forth, the Company and Optionee hereby
agree as follows:
1. CERTAIN DEFINITIONS. Capitalized terms which are used but not otherwise
defined herein shall have the meanings set forth for such terms in the Plan. The
following terms shall have the following meanings:
"EXPIRATION DATE" means 6:00 P.M., Houston, Texas time, on May 31,
2003.
"1933 ACT" means the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder.
"STATE LAW" means applicable state securities laws and the rules and
regulations promulgated thereunder.
"VOTING AGREEMENT" the Voting and Shareholders Agreement dated as of
June 12, 1997 among the Company and certain holders of its shares, as such
agreement may be amended from time to time.
2. GRANT OF OPTION. Subject to the terms and conditions hereinafter set
forth, the Company hereby irrevocably grants to the Optionee the right and
option (the "Option") to purchase shares ("Option Shares") of Common Stock,
subject to adjustment in accordance with the provisions of Section 7 of this
Agreement.
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3. OPTION PRICE. The price to be paid by Optionee to the Company for each
Option Share purchased pursuant to the exercise of this Option ("Option Price")
shall be $[111.00] per share; provided, however, that the Option Price shall be
subject to adjustment in accordance with the provisions of Section 7 of this
Agreement.
4. VESTING OF RIGHT TO EXERCISE OPTION; FORFEITURE OR REPURCHASE UPON
TERMINATION OF EMPLOYMENT.
(a) Except as otherwise provided in this Agreement, the right to exercise
this Option shall vest as to thirty three and one-third percent (331/3%) of the
total Option Shares which may be purchased hereunder on each anniversary of the
date of issuance of this Option, beginning with the first anniversary and
continuing until the third anniversary, at which time this Option shall fully
vested. From and after each date of vesting, Optionee may exercise this Option,
subject to the terms and conditions set forth herein, to purchase all or any
portion of the Option Shares for which Optionee's rights have vested.
(b) To the extent Optionee does not purchase all or any part of the Option
Shares at the times this Option becomes exercisable, the Optionee has the right
cumulatively thereafter to purchase any Option Shares not so purchased and such
right shall continue until this Option terminates or expires.
(c) If Optionee's employment is terminated by one of the Related Parties
for "cause" (as defined below) or if Optionee shall voluntarily terminate his
employment by the Related Parties or its subsidiaries (through resignation or
otherwise), other than by retirement if Optionee is over age 70, the Option
shall automatically terminate as of the date of such termination and any rights
to purchase Option Shares which may have vested prior to such termination shall
be forfeited. For purposes hereof, a termination for "cause" will include any of
the following: (A) Optionee's conviction of, or plea of nolo contendere to, any
felony or to any crime or offense causing substantial harm to the Related
Parties or their affiliates or involving acts of theft, fraud, embezzlement,
moral turpitude or similar conduct; (B) Optionee's repeated intoxication by
alcohol or drugs during the performance of his duties for the Related Parties in
a manner that materially and adversely affects Optionee's performance of such
duties; (C) malfeasance in the conduct of Optionee's duties for the Related
Parties, including, but not limited to, (1) willful and intentional misuse or
diversion of funds of the Related Parties or their affiliates, (2) embezzlement,
or (3) fraudulent or willful and material misrepresentations or concealments on
any written reports submitted to the Related Parties or their affiliates; (D)
Optionee's material violation of any provision of the Voting Agreement among
Optionee, the Company and others; (E) Optionee's material failure to perform the
duties of Optionee's employment or material failure to follow or comply with the
reasonable and lawful written directives of the Board of Directors of the
Related Parties, in either case after Optionee shall have been informed, in
writing, of such material failure and given a period of not more than 60 days to
remedy same. If Optionee is over age 70 and elects to retire, then Optionee
shall continue to have the right to purchase any Option Shares which have vested
prior to such termination and the Company may, at its option, declare all Option
Shares to be fully vested as of the date of termination of Optionee's
employment.
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(d) If Optionee's employment by the Related Parties is terminated by a
Related Party for reasons other than "cause", the portion of this Option which
has vested may be exercised, but only within three months after such termination
(if otherwise prior to the date of expiration of this Option), and not
thereafter, to purchase the number of Option Shares, if any, that could be
purchased upon exercise of this Option at the date of termination of Optionee's
employment (the "Vested Option Shares"); provided that, in lieu of permitting
the exercise of this Option, the Company may, at its sole discretion, redeem
this Option, by paying cash to Optionee in an amount equal to the greater of:
(i) the amount, if any, by which the "Book Value" (as defined below) of the
Vested Option Shares exceeds the Option Price for such shares, or (ii) $100.
For purposes of this subsection (d), the "Book Value" of the Vested
Options Shares is equal to (A) the Company's total stockholders equity, as set
forth in the Company's consolidated balance sheet for its most recently
concluded fiscal quarter, divided by, the number of shares of Common Stock
outstanding, as set forth in the Company's consolidated balance sheet for its
most recently concluded fiscal quarter, times (B) the number of Vested Option
Shares.
For purposes of this subsection (d), if this Option shall not have fully
vested as of the date of termination of Optionee's employment, then a ratable
portion of the number of Option Shares which would have become purchasable upon
the next vesting date shall be deemed to have vested as of the date of such
termination (determined by multiplying the number of Option Shares that vest on
the next vesting date by a fraction with a numerator equal to the number of full
months which have then elapsed since the last vesting date and a denominator of
12, and rounding to the closest whole number).
(e) In the event of Optionee's death or disability, this Option shall
remain outstanding and may be exercised by the person who acquires this Option
by will or the laws of descent and distribution, or by Optionee, as the case may
be, but only (i) within the one year period following the date of death or
disability (if otherwise prior to the date of expiration of this Option), and
not thereafter, and (ii) to purchase the number of Option Shares that were
subject to purchase upon exercise of this Option at the time of such death or
disability, unless Optionee was over the age of 70 at the time of such death or
disability in which case this Option may be exercised to purchase all of Option
Shares subject hereto without regard to the vesting requirements set forth in
subsection (a) of this Section.
5. RESTRICTIONS ON EXERCISE. The right to exercise the Option shall be
subject to the following restrictions:
(a) VESTING. Optionee shall have no right to exercise this Option to
purchase any Option Shares for which Optionee's rights have not yet vested in
accordance with Section 4.
(b) NO FRACTIONAL OPTION SHARES. The Option may be exercised only with
respect to full Option Shares.
(c) COMPLIANCE WITH LAW. The Option may not be exercised in whole or in
part, and no
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Option Shares shall be issued nor certificates representing such Option Shares
delivered pursuant to any exercise of the Option, if any requisite approval or
consent of any governmental authority of any kind having jurisdiction over the
exercise of options or the issuance and sale of Option Shares shall not have
been obtained or if such exercise or issuance would violate any applicable law.
(d) EXERCISE BY OPTIONEE. The Option shall only be exercisable by the
Optionee and by any transferee who has received such Option pursuant to Section
4(e).
(e) VOTING AGREEMENT. Optionee shall have no right to exercise this Option
to purchase any Option Shares until Optionee and Optionee's spouse (if Optionee
has a spouse) shall have executed and delivered to the Company a counterpart of
the Voting Agreement. Any Option Shares purchased upon exercise of this Option
shall be subject to the terms of the Voting Agreement.
6. EXERCISE OF OPTION.
(a) Subject to the other terms and provisions of this Agreement, the
Option shall be exercisable by written notice timely given to the Company by the
Optionee, which notice (i) shall state the number of Option Shares that the
Optionee then desires to purchase, and (ii) shall be accompanied by payment in
full of the Option Price for each of such Option Shares, which such payment
shall be made in cash or certified check.
(b) The Company shall be entitled to require the Optionee to deliver to
the Company such documents as the Company in its discretion shall deem necessary
to confirm that (i) such exercise and the Company's issuance and sale of such
Option Shares are in compliance with the requirements of any applicable laws
(including, but not limited to, the Securities Act of 1933 and applicable state
law) and (ii) the Optionee shall be bound by and comply with all of the terms
and provisions of the Voting Agreement.
(c) Unless the Company and Optionee shall make mutually acceptable
alternative arrangements, at the time of exercise of the Option, Optionee shall
pay to the Company, in cash, any federal, state and local taxes required by law
to be paid or withheld in connection with such exercise.
7. RECAPITALIZATION OR REORGANIZATION; ADJUSTMENTS.
(a) The existence of this Option shall not affect in any way the right or
power of the Company to make or authorize any adjustment, recapitalization,
reorganization or other change in the Company's capital structure or its
business, any merger or consolidation of the Company, any issuance of additional
Company securities with priority over the Common Stock or otherwise affecting
the Common Stock or the rights thereof, the dissolution or liquidation of the
Company's common stock or any sale, lease, exchange or other disposition of all
or any part of its assets or business or any other corporate act or proceeding.
(b) If (i) the Company merges, consolidates or reconstitutes with or into
any other entity
4
<PAGE>
(in a situation in which the Company is not the surviving entity), (ii) the
Company sells, leases or exchanges or agrees to sell, lease or exchange all or
substantially all of its assets to any other person or entity, or (iii) the
Company is to be dissolved and liquidated (each such event is referred to herein
as a "Fundamental Change"), the Company shall declare any portion of the Option
which has not then vested to be vested, so that the Optionee shall have an
opportunity to exercise the Option prior to the consummation of the Fundamental
Change.
(c) If the Company subdivides its outstanding common stock into greater
shares of common stock, the Option Price in effect immediately prior to such
subdivision shall be proportionately reduced, and the number of Option Shares
then subject to the Option shall be proportionately increased. Conversely, if
the outstanding shares of common stock of the Company are combined into a
smaller number of shares, the Option Price in effect immediately prior to such
combination shall be proportionately increased, and the number of Option Shares
then subject to the Option shall be proportionately reduced.
8. TERMINATION OF OPTION. The Option shall terminate upon the first to
occur of the (i) the Expiration Date, (ii) the date on which Optionee purchases,
or in writing surrenders his right to purchase, all Option Shares or other
securities then subject to the Option, or (iii) the date of termination pursuant
to Section 4 hereof.
9. RESTRICTION ON TRANSFER OF OPTION. The Option may not be sold,
assigned, hypothecated or transferred, except by will or by the laws of descent
and distribution. Any attempted transfer of the Option in violation of this
provision shall be void and of no effect whatsoever.
10. CERTAIN RIGHTS INCIDENT TO DIVORCE. If an interest in the Option is
required by law to be transferred to a spouse of Optionee pursuant to an order
of a court in a divorce proceeding (notwithstanding the provisions of Section 9
hereof), Optionee shall nevertheless retain all rights with respect to the
exercise of the Option and any interest of such spouse shall be subject to such
rights of Optionee. In addition, if it is determined that Optionee will be
required to pay any taxes attributable to the interest of the spouse in the
Option, any tax liability of Optionee which is attributable to such spouse's
interest shall be taken into account, and shall reduce such spouse's interest in
this Option.
11. RIGHTS AS A SHAREHOLDER. Optionee shall have no rights as a
shareholder of the Company with respect to any Option Shares covered by the
Option until the exercise of the Option.
12. ADDITIONAL DOCUMENTS. The Company and the Optionee will, upon request
of the other party, promptly execute and deliver all additional documents, and
take all such further action, reasonably deemed by such party to be necessary,
appropriate or desirable to complete and evidence the sale, assignment and
transfer of the Option Shares pursuant to this Agreement.
5
<PAGE>
13. REPRESENTATIONS, WARRANTIES AND COVENANTS OF OPTIONEE.
(a) The Optionee acknowledges that neither the Option nor the Option
Shares covered thereby have been registered under the 1933 Act or State Law on
the grounds that the issuance of the Option is, and the sale of any Option
Shares pursuant to the exercise of the Option will be, exempt from registration
under one or more provisions of each of such acts. The Optionee further
understands that in determining the availability and applicability of such
exemptions and in executing and delivering this Agreement and issuing and
delivering any Option Shares upon exercise of the Option, the Company has relied
and will rely upon the representations, warranties and covenants made by the
Optionee herein and in any other documents which he may hereafter deliver to the
Company. Accordingly, the Optionee represents and warrants to and covenants and
agrees with the Company as follows:
(i) the Optionee is acquiring and will hold the Option, and will
acquire and hold all securities which he acquires upon exercise of the
Option, for his own account for investment and not with a view to any sale
or distribution of all or any part thereof; and
(ii) the Optionee will hold all securities acquired by him upon
exercise of the Option, as well as any and all other securities issued in
respect thereof, subject to all applicable provisions of the Voting and
Shareholders Agreement of the Company, the 1933 Act and State Law, and
will not at any time make any sale, transfer, pledge or other disposition
or encumbrance of any of such securities in violation of the Voting and
Shareholders Agreement of the Company or in the absence of an effective
registration statement for such securities under the 1933 Act and State
Law or an applicable exemption from the registration requirements
therefrom.
(b) The Optionee agrees (i) that the certificates representing the Option
Shares or other securities purchased under this Option may bear such legend or
legends as the Company deems appropriate in order to assure compliance with
applicable securities laws, (ii) that the Company may refuse to register the
transfer of the Option Shares or other securities purchased under this Option on
the transfer records of the Company if such proposed transfer would in the
opinion of counsel satisfactory to the Company constitute a violation of any
applicable securities laws, (iii) that the Company may give related instructions
to its transfer agent, if any, to stop registration of the transfer of the
Option Shares or other securities purchased under this Option, and (iv) that the
Option Shares or other securities acquired upon exercise of this Option shall be
subject, in all respects, to the Voting and Shareholders Agreement of the
Company.
(c) Optionee acknowledges that the value of the Option over its life will
be speculative and uncertain, that there is no market for the Option or the
Option Shares or other securities that may be acquired upon exercise of the
Option and it is unlikely that any market will develop, and consequently, the
Optionee may ultimately realize no value from the Option.
14. NOTICES. All notices required or permitted to be given hereunder shall
be in writing and shall be deemed to have been given on the earlier of the date
of receipt by the party to whom
6
<PAGE>
the notice is given or five (5) days after being mailed by certified or
registered United States mail, postage prepaid, addressed to the appropriate
party at the address shown beside such party's signature below or at such other
address as such party shall have theretofore designated by written notice given
to the other party.
15. ENTIRETY AND MODIFICATION. This Agreement contains the entire
agreement between the parties hereto with respect to the subject matter hereof
and supersedes any and all prior agreements, whether written or oral, between
such parties relating to such subject matter. No modification, alteration,
amendment or supplement to this Agreement shall be valid or effective unless the
same is in writing and signed by the party against whom it is sought to be
enforced.
16. SEVERABILITY. If any provision of this Agreement is held to be
unenforceable, this Agreement shall be considered divisible, and such provision
shall be deemed inoperative to the extent it is unenforceable, and in all other
respects this Agreement shall remain in full force and effect; provided,
however, that if any such provision may be made enforceable by limitation
thereof, then such provision shall be deemed to be so limited and shall be
enforceable to the maximum extent permitted by applicable law.
17. GENDER. Words used in this Agreement which refer to Optionee and
denote the male gender shall also be deemed to include the female gender or the
neuter gender when appropriate.
18. HEADINGS. The headings of the various sections and subsections of this
Agreement have been inserted for convenient reference only and shall not be
construed to enlarge, diminish or otherwise change the express provisions
hereof.
19. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE (REGARDLESS OF THE LAWS THAT
MIGHT OTHERWISE GOVERN UNDER APPLICABLE DELAWARE PRINCIPLES OF CONFLICTS OF
LAW).
20. COUNTERPARTS. This Agreement may be signed in counterparts, each of
which shall be deemed an original and all of which shall constitute one and the
same agreement.
7
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first set forth above.
CRC HOLDINGS CORP.
By:____________________________________
M. Timothy Carey, Chief Executive
Officer
OPTIONEE
Number of Option
Shares:
_______________________________________
8
EXHIBIT 10.16
CRC HOLDINGS CORP.
AMENDMENT NO. 1 TO OPTION PLAN
This Amendment No. 1 dated as of June 15, 1998 (this "Amendment") amends
that certain Option Plan dated May 20, 1998 (the "Plan") of CRC Holdings Corp.,
a Delaware corporation (the "Company").
RECITALS
The Board of Directors has determined that it is in the best interests of
the Corporation and its shareholders to amend the Plan to decrease the number of
Option Shares which may be acquired thereunder by 1,700 shares.
THEREFORE, Section 3.2 of the Plan is amended by deleting the reference to
"15,454" therein and replacing it with "13,754" .
Except as amended hereby the provisions of the Plan shall remain in full
force and effect and all references to the Plan shall refer to the Plan as
amended hereby.
Certificate of Corporate Secretary
The foregoing is a true and correct copy of Amendment No. 1 to Option Plan
as authorized and approved by the Board or Directors of the Company.
____________________________________
Secretary
EXHIBIT 10.19
PROMISSORY NOTE
$_____________ June 1, 1997
FOR VALUE RECEIVED, ____________________ (herein called "MAKER") hereby
promises to pay to the order of CRC Holdings Corp., a Delaware corporation
("PAYEE"), the principal sum of _____________________ Dollars ($ ) with interest
thereon at the rate of Six and 75/100 percent (6.75%) per annum. Both principal
and interest are payable as hereinafter provided in lawful money of the United
States of America at the address of Payee set forth below or at such other place
as from time to time may be designated by the holder of this Note.
The principal of this Note shall be due and payable on June 30, 2002.
Interest on this Note shall be payable in quarterly installments, each of which
shall be due on the last day of each March, June, September and December of each
year, beginning June 30, 1997 and continuing regularly thereafter until
maturity.
Upon the occurrence of an Event of Default under the Security Agreement
(defined below), Payee shall have the option of declaring the principal of this
Note, and all accrued and unpaid interest thereon, to be immediately due and
payable (an "ACCELERATION").
This Note is secured by and entitled to the benefits of that certain
Security Agreement of even date herewith (the "SECURITY AGREEMENT") between
Maker and Payee, as the secured party. Maker shall have the right to prepay,
without penalty, at any time and from time to time prior to maturity, all or any
part of the unpaid principal balance of this Note and/or all or any part of the
unpaid interest accrued to the date of such prepayment, provided that any such
principal thus paid is accompanied by accrued interest on such principal.
It is the intent of the Payee and Maker in the execution of this Note and
all other instruments now or hereafter securing this Note to contract in strict
compliance with applicable usury law. In furtherance thereof, the Payee and
Maker stipulate and agree that none of the terms and provisions contained in
this Note, or in any other instrument executed in connection herewith, shall
ever be construed to create a contract to pay for the use, forbearance or
detention of money, interest at a rate in excess of the maximum interest rate
permitted to be charged by applicable law. Neither Maker nor any guarantors,
endorsers or other parties now or hereafter becoming liable for payment of this
Note shall ever be required to pay interest on this Note at a rate in excess of
the maximum interest that that may be lawfully charged under applicable law, and
the provisions of this paragraph shall control over all other provisions of this
Note and any other instruments now or hereafter executed in connection herewith
that may be in apparent conflict herewith. The holder of this Note expressly
disavows any intention to charge or collect excessive unearned interest or
finance charges in the event the maturity of this Note is accelerated. If the
maturity of this Note shall be accelerated for any reason or if the principal of
this Note is paid prior to the end of the term of this Note, and as a result
thereof the interest received for the actual period of existence of the loan
evinced by this Note exceeds the
<PAGE>
applicable maximum lawful rate, the holder of this Note shall, at its option,
either refund to Maker the amount of such excess or credit the amount of such
excess against the principal balance of this Note then outstanding and thereby
shall render inapplicable any and all penalties of any kind provided by
applicable law as a result of such excess interest. In the event that the said
payee or any other holder of this Note shall collect monies that are deemed to
constitute interest that would increase the effective interest rate on this Note
to a rate in excess of that permitted to be charged by applicable law, all such
sums deemed to constitute interest in excess of the lawful rate shall, upon such
determination, at the option of the holder of this Note, be either immediately
returned to Maker or credited against the principal balance of this Note then
outstanding, in which event any and all penalties of any kind under applicable
law as a result of such excess interest shall be inapplicable. By execution of
this Note, Maker acknowledges that it believes the loan evinced by this Note to
be non-usurious and agrees that if, at any time, Maker should have reason to
believe that such loan is in fact usurious, it will give the holder of this Note
notice of such condition and Maker agrees that said holder shall have ninety
(90) days in which to make appropriate refund or other adjustment in order to
correct such condition if in fact such exists. The term "APPLICABLE LAW" as used
in this Note shall mean the laws of the State of Texas or the laws of the United
States, whichever laws are applicable and allow the greater rate of interest, as
such laws now exist or may be changed or amended or come into effect in the
future.
Should the indebtedness represented by this Note or any part thereof be
collected at law or in equity or through any bankruptcy, receivership, probate
or other court proceedings or if this Note is placed in the hands of attorneys
for collection after default, Maker and all endorsers, guarantors and sureties
of this Note jointly and severally agree to pay to the holder of this Note in
addition to the principal and interest due and payable hereon reasonable
attorneys' and collection fees.
Maker and all endorsers, guarantors and sureties of this Note and all
other persons liable or to become liable on this Note severally waive
presentment for payment, demand, notice of demand and of dishonor and nonpayment
of this Note, notice of intention to accelerate the maturity of this Note,
notice of acceleration of this Note, protest and notice of protest, diligence in
collecting, and the bringing of suit against any other party, and agree to all
renewals, extensions, modifications, partial payments, releases or substitutions
of security, in whole or in part, with or without notice, before or after
maturity.
This Note and the rights and duties of the parties hereunder shall be
governed for all purposes by the law of the State of Texas and the law of the
United States applicable to transactions within such State.
<PAGE>
IN WITNESS WHEREOF, Maker has duly executed and delivered this Note as of
the date first above written.
_________________________________________
Address of Payee Address of Maker
____________________ ____________________
____________________ ____________________
____________________ ____________________
3
EXHIBIT 10.20
PROMISSORY NOTE
$155,380 June 15,1998
FOR VALUE RECEIVED, Windell D. Norris, Jr. (herein called "MAKER") hereby
promises to pay to the order of CRC Holdings Corp., a Delaware corporation
("PAYEE"), the principal sum of One Hundred Fifty Five Thousand Three Hundred
Eighty Dollars ($155,380) with interest thereon at the rate of Six and 75/100
percent (6.75%) per annum. Both principal and interest are payable as
hereinafter provided in lawful money of the United States of America at the
address of Payee set forth below or at such other place as from time to time may
be designated by the holder of this Note.
The principal of this Note shall be due and payable as follows: $46,614.00
shall be due on September 30, 1998 and the balance of $108,766.00 shall be due
on June 30, 2002. Interest on this Note shall be payable in quarterly
installments, each of which shall be due on the last day of each March, June,
September and December of each year, beginning September 30, 1998 and continuing
regularly thereafter until maturity.
Upon the occurrence of an Event of Default under the Security Agreement
(defined below), Payee shall have the option of declaring the principal of this
Note, and all accrued and unpaid interest thereon, to be immediately due and
payable (an "ACCELERATION").
This Note is secured by and entitled to the benefits of that certain
Security Agreement of even date herewith (the "SECURITY AGREEMENT") between
Maker and Payee, as the secured party. Maker shall have the right to prepay,
without penalty, at any time and from time to time prior to maturity, all or any
part of the unpaid principal balance of this Note and/or all or any part of the
unpaid interest accrued to the date of such prepayment, provided that any such
principal thus paid is accompanied by accrued interest on such principal.
It is the intent of the Payee and Maker in the execution of this Note and
all other instruments now or hereafter securing this Note to contract in strict
compliance with applicable usury law. In furtherance thereof, the Payee and
Maker stipulate and agree that none of the terms and provisions contained in
this Note, or it any other instrument executed in connection herewith, shall
ever be construed to create a contract to pay for the use, forbearance or
detention of money, interest at a rate in excess of the Maximum interest rate
permitted to be charged by applicable law. Neither Maker nor any guarantors,
endorsers or other parties now or hereafter becoming liable for payment of this
Note shall ever be required to pay interest on this Note at a rate in excess of
the maximum interest that may be lawfully charged under applicable law, and the
provisions of this paragraph shall control over all other provisions of this
Note and any other instruments now or hereafter executed in connection herewith
that may be in apparent conflict herewith. The holder of this Note expressly
disavows any intention to charge or collect excessive unearned interest or
finance charges in the event the maturity of this Note is accelerated. If the
maturity of this Note shall be accelerated for any reason or if the principal of
this Note is paid prior to the end of the term of this Note, and as a result
thereof the interest
<PAGE>
received for the actual period of existence of the loan evinced by this Note
exceeds the applicable maximum lawful rate, the holder of this Note shall, at
its option, either refund to Maker the amount of such excess or credit the
amount of such excess against the principal balance of this Note then
outstanding and thereby shall render inapplicable any and all penalties of any
kind provided by applicable law as a result of such excess interest. In the
event that the said payee or any other holder of this Note shall collect monies
that are deemed to constitute interest that would increase the effective
interest rate on this Note to a rate in excess of that permitted to be charged
by applicable law, all such sums deemed to constitute interest in excess of the
lawful rate shall, upon such determination, at the option of the holder of this
Note, be either immediately returned to Maker or credited against the principal
balance of this Note then outstanding, in which event any and all penalties of
any kind under applicable law as a result of such excess interest shall be
inapplicable. By execution of this Note, Maker acknowledges that it believes the
loan evinced by this Note to be non-usurious and agrees that if, at any time,
Maker should have reason to believe that such loan is in fact usurious, it will
give the holder of this Note notice of such condition and Maker agrees that said
holder shall have ninety (90) days in which to make appropriate refund or other
adjustment in order to correct such condition if in fact such exists. The term
"APPLICABLE LAW" as used in this Note shall mean the laws of the State of Texas
or the laws of the United States, whichever laws are applicable and allow the
greater rate of interest, as such laws now exist or may be changed or amended or
come into effect in the future.
Should the indebtedness represented by this Note or any part thereof be
collected at law or in equity or through any bankruptcy, receivership, probate
or other court proceedings or if this Note is placed in the hands of attorneys
for collection after default, Maker and all endorsers, guarantors and sureties
of this Note jointly and severally agree to pay to the holder of this Note in
addition to the principal and interest due and payable hereon reasonable
attorneys' and collection fees.
Maker and all endorsers, guarantors and sureties of this Note and all
other persons liable or to become liable on this Note severally waive
presentment for payment, demand, notice of demand and of dishonor and nonpayment
of this Note, notice of intention to accelerate the maturity of this Note,
notice of acceleration of this Note, protest and notice of protest, diligence in
collecting, and the bringing of suit against any other party, and agree to all
renewals, extensions, modifications, partial payments, releases or substitutions
of security, in whole or in part, with or without notice, before or after
maturity.
This Note and the rights and duties of the parties hereunder shall be
governed for all purposes by the law of the State of Texas and the law of the
United States applicable to transactions within such State.
2
<PAGE>
IN WITNESS WHEREOF, Maker had duly executed and delivered this Note as of
the date first above written.
____________________________________
Windell D. Norris, Jr.
Address of Maker
_________________________
_________________________
Address of Payee
11601 N. Houston-Rosslyn Road
Houston, Texas 77086
EXHIBIT 10.21
CONFIDENTIAL
Interoffice Memo
TO: Dick Jones
Gus Meijer
Mike Smith
Sid Taylor
Laurence Wenger
Bob Williams
FROM: Tim Carey
DATE: February 3, 1998
SUBJECT: Key Management Incentive Compensation Plan
==============================================================================
The Board of Directors of CRC Holdings Corp. has approved a Key Management
Incentive Compensation Plan effective June 13, 1997 (date of purchase). The
first year will be prorated from date of purchase through March 31, 1998. After
this initial short period, the plan year will be from April 1 through March
31st.
The essential fundamentals of this incentive compensation plan provides cash
incentive awards based on:
1) Superior operating performance
2) Effective balance sheet management, and
3) Building stockholder value
The general framework of the Plan gives consideration to participants and their
related responsibility factor, which control the relationship of bonus to
salary, as well as to other factors determining bonus threshold, accrual rates
and ceiling; bonus vesting or carry over terms and payment timing.
The general outline of the Plan is as follows:
1) GENERAL BONUS FORMULATION - A bonus plan participant's annual award
will, in general, be determined by multiplying the individual's
responsibility
<PAGE>
Key Management Incentive Compensation Plan
Page 2
February 3, 1998
- ------------------------------------------------------------------------------
factor by his annual base salary and the company's percentage return
on total capitalization in excess of a threshold level.
2) RETURN ON TOTAL CAPITALIZATION - The Plan sets a 20% annualized
EBITDA return on total capitalization (total equity plus funded
debt) as the threshold to be achieved before incentive bonuses would
begin to accrue. This would equate to an annualized EBITDA (before
bonus accrual) of $8 million based on estimated average
capitalization of $40 million. The bonus ceiling will be 35%
annualized EBITDA return on total capitalization, reflecting an
EBITDA of approximately $14 million at our current capitalization.
EBITDA levels representing a return on total capitalization of less
than 20% or greater than 35% will be carried forward for up to two
fiscal years as either a decrease or addition to EBITDA generated
for that year.
3) PARTICIPANTS AND RESPONSIBILITY FACTORS - Responsibility factors
range from 4.0 down to 1.0. The responsibility factor controls the
level of bonus as a percentage of base salary.
-------------------------------------------------------------
RESPONSIBILITY MAXIMUM BONUS AS A
POSITION FACTOR % OF SALARY
-------------------------------------------------------------
CEO 4.0 60.0%
-------------------------------------------------------------
Chairman, President 3.5 52.5
-------------------------------------------------------------
CFO, Senior
Operating Officers 3.0 45.0
-------------------------------------------------------------
Key Major
Department Heads 2.5 37.5
-------------------------------------------------------------
Other Department
Heads, Key Staff 1.0 - 2.0 15.0 - 30.0
-------------------------------------------------------------
A 1.0 responsibility factor creates a maximum bonus of 15.0% of base
salary.
4) DISCRETIONARY POOL - In addition to the formula - based awards
defined above, an annual discretionary bonus pool of up to $100,000
can be drawn upon to reward select employees for significant
contributions or special performances during the year. The
discretionary awards could be recommended whether or not the company
attains its threshold return on total capitalization.
<PAGE>
Key Management Incentive Compensation Plan
Page 3
February 3, 1998
- ------------------------------------------------------------------------------
5) VESTING SCHEDULE - 50% of each employee's annual incentive bonus
will be payable upon completion of the fiscal year-end audit report.
The remaining 50% will be paid at the end of the following fiscal
year, providing the employee has not voluntarily left the company's
employ or been terminated for cause. For the fiscal year ending
March 31, 1998, we would expect the initial bonus installment, if
payable, to be paid in June 1998 and the final installment to follow
on March 31, 1999. Forfeitures, if any, would reduce the company's
expense in the following year.
Based on our updated 1998 Profit Plan, we expect an annualized EBITDA of $11.4
million and an EBITDA return on total capitalization of approximately 28.5%
($11.4 million EBITDA / $40 million total average capitalization). The excess
return over the threshold level is therefore 8.5%.
If you have questions please give me a call, however, we will be discussing this
plan at the management meeting in March.
cc: Paul Evans
Norman Francis
Tom Stephens
EXHIBIT 10.22
FEE AGREEMENT
This Fee Agreement is made as of June 12, 1997, by and among CEPI Holdings,
Inc., a Delaware corporation (the "COMPANY"), and Natural Gas Partners IV, L.P.,
a Delaware corporation ("NGP").
WITNESSETH
WHEREAS, the Company has been recently organized to acquire substantially
all the assets of CRC-Evans Pipeline International Inc., a Delaware corporation
and certain affiliated companies, pursuant to that certain Asset Purchase
Agreement dated December 23, 1996, as amended;
WHEREAS, NGP has assisted in the organization and funding of the Company;
and
WHEREAS, the parties desire to set forth their agreement as to the
compensation to be paid to NGP in consideration of such assistance;
NOW, THEREFORE, for good and valuable consideration, the parties hereto
agree that the compensation due and owing to NGP shall be an amount equal to (i)
$70,000, plus (ii) reimbursement for all reasonable out-of-pocket expenses
incurred by its officers, employees and agents (including legal fees incurred by
NGP) in connection with the organization of the Company and the transactions
related thereto.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized officers effective as of the day first above
written.
CEPI HOLDINGS, INC.
By: ___________________________
Name: _________________________
Title _________________________
NATURAL GAS PARTNERS IV, L.P.
By: G.F.W. Energy IV, L.P., General Partner
By: GFW IV, L.L.C., General Partner
By: __________________________
Name: ________________________
Title: _______________________
EXHIBIT 10.23
FEE AGREEMENT
This Fee Agreement is made as of June 12, 1997, by and among CEPI Holdings,
Inc., a Delaware corporation (the "COMPANY"), and Equus II Incorporated, a
Delaware corporation ("EQUUS").
WITNESSETH
WHEREAS, the Company has been recently organized to acquire substantially
all the assets of CRC-Evans Pipeline International Inc., a Delaware corporation
and certain affiliated companies, pursuant to that certain Asset Purchase
Agreement dated December 23, 1996, as amended;
WHEREAS, Equus has assisted in the organization and funding of the
Company; and
WHEREAS, the parties desire to set forth their agreement as to the
compensation to be paid to Equus in consideration of such assistance;
NOW, THEREFORE, for good and valuable consideration, the parties hereto
agree that the compensation due and owing to Equus shall be an amount equal to
(i) $70,000, plus (ii) reimbursement for all reasonable out-of-pocket expenses
incurred by its officers, employees and agents (including legal fees incurred by
Equus) in connection with the organization of the Company and the transactions
related thereto.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized officers effective as of the day first above
written.
CEPI HOLDINGS, INC.
By: ___________________________
Name: _________________________
Title _________________________
EQUUS II INCORPORATED
By: ___________________________
Name: _________________________
Title: ________________________
EXHIBIT 21.1
LIST OF SUBSIDIARIES OF THE COMPANY
CRC-Evans International, Inc.
CRC-Evans Pipeline International, Inc.
CRC-Evans B.V.
CRC-Evans Candada Ltd.
PIH Holdings Ltd.
Pipeline Induction Heat Limited
Didcot Heat Treatment Limited
CRC-Key, Inc.
EXHIBIT 23.1
The Board of Directors
CRC Holdings Corp.:
The audits referred to in our reports dated May 19, 1998 and October 3, 1998,
included the related financial statement schedule for the period from June 12,
1997 to March 31, 1998, and the related financial statement schedule for the
years ended March 31, 1996 and 1997 and for the period from April 1, 1997 to
June 11, 1997 included in the registration statement. These financial statement
schedules are the responsibility of the Company's management. Our responsibility
is to express an opinion on the financial statement schedules based on our
audit. In our opinion, such financial statement schedules, when considered in
relation to the basic consolidated financial statements taken as a whole,
presents fairly in all material respects the information set forth therein.
We consent to the use of our reports included herein and to the reference to our
firm under the heading "Experts" in the prospectus.
Tulsa, Oklahoma /s/ KPMG PEAT MARWICK LLP
December 4, 1998 -------------------------
KPMG PEAT MARWICK LLP
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE FINANCIAL DATA SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM CONSOLIDATED BALANCE SHEET AND CONSOLIDATED STATEMENT OF EARNINGS AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-1999
<PERIOD-END> SEP-30-1998
<CASH> 4,841
<SECURITIES> 0
<RECEIVABLES> 26,897
<ALLOWANCES> 0
<INVENTORY> 21,110
<CURRENT-ASSETS> 58,722
<PP&E> 25,072
<DEPRECIATION> 3,662
<TOTAL-ASSETS> 84,470
<CURRENT-LIABILITIES> 24,391
<BONDS> 36,441
0
0
<COMMON> 2
<OTHER-SE> 23,299
<TOTAL-LIABILITY-AND-EQUITY> 84,470
<SALES> 20,428
<TOTAL-REVENUES> 56,788
<CGS> 13,342
<TOTAL-COSTS> 31,403
<OTHER-EXPENSES> 9,541
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,709
<INCOME-PRETAX> 14,135
<INCOME-TAX> 5,313
<INCOME-CONTINUING> 8,822
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 8,822
<EPS-PRIMARY> 62.23
<EPS-DILUTED> 57.18
</TABLE>
