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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 20, 2000
REGISTRATION NUMBER 333-
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
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GRANT PRIDECO, INC.
(Exact name of registrant as specified in its charter)
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DELAWARE 76-0312499
(State of other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
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1450 LAKE ROBBINS DRIVE, SUITE 600
THE WOODLANDS, TEXAS 77380
(281) 297-8500
(Address, including zip code, and telephone number, including area code,
of registrant's principal executive offices)
MR. JOHN C. COBLE
PRESIDENT AND CHIEF EXECUTIVE OFFICER
GRANT PRIDECO, INC.
1450 LAKE ROBBINS DRIVE, SUITE 600
THE WOODLANDS, TEXAS 77380
(281) 297-8500
(Name, address, including zip code, and telephone number including area code, of
agent for service)
Copies to:
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CHARLES L. STRAUSS DAVID P. OELMAN
FULBRIGHT & JAWORSKI L.L.P. ANDREWS & KURTH L.L.P.
1301 MCKINNEY, SUITE 5100 600 TRAVIS, SUITE 4200
HOUSTON, TEXAS 77010-3095 HOUSTON, TEXAS 77002
(713) 651-5151 (713) 220-4200
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: From time
to time after this registration statement becomes effective, subject to market
conditions and other factors.
If the only Securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the Securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than Securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [X]
If this Form is filed to register additional Securities for an offering
pursuant to Rule 462(b) under the Securities Act, please 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. [ ]
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If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
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CALCULATION OF REGISTRATION FEE
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TITLE OF EACH CLASS OF SECURITIES PROPOSED MAXIMUM OFFERING AMOUNT OF
TO BE REGISTERED PRICE PER SHARE(1) REGISTRATION FEE(2)
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Debt Securities $500,000,000.00 $132,000.00
Preferred Stock, par value $.01 per
share
Common Stock, par value $.01 per share
Depositary Shares(3)
Warrants(4)
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(1) The amount of Securities to be registered consists of an indeterminate
number or amount of Debt Securities, Preferred Stock, Common Stock,
Depositary Shares or Warrants as may from time to time be issued at
indeterminate prices. The prospectus herein covers $500,000,000 of
Securities or the equivalent thereof in one or more foreign currencies,
currency units or composite currencies. In addition, this Registration
Statement includes such presently indeterminate amount or number of Debt
Securities, Preferred Stock, Common Stock, Depositary Shares and Warrants as
may be issuable from time to time upon conversion or exchange of the
Securities being registered hereunder. Includes Securities that may be sold
by or for the account of Selling Securityholders.
(2) Estimated solely for purposes of calculating the registration fee pursuant
to Rule 457(o) under the Securities Act of 1933, as amended. No separate
consideration will be received for any Debt Securities, Preferred Stock,
Common Stock, Depositary Shares or Warrants issuable upon conversion of or
in exchange for Debt Securities or Preferred Stock.
(3) Such indeterminate number of Depositary Shares to be evidenced by Depositary
Receipts issued pursuant to a Deposit Agreement. If the Registrant elects to
offer to the public fractional interests in shares of Preferred Stock
registered hereunder, Depositary Receipts will be distributed to persons
purchasing those fractional interests, and shares of Preferred Stock will be
issued to the Depositary under the Deposit Agreement.
(4) Warrants to purchase Debt Securities, Preferred Stock or Common Stock may be
sold separately or with Debt Securities, Preferred Stock or Common Stock.
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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 APRIL 20, 2000
PROSPECTUS
[GRANT PRIDECO LOGO]
$500,000,000
DEBT SECURITIES, PREFERRED STOCK, COMMON STOCK,
DEPOSITARY SHARES AND WARRANTS
This prospectus relates the following securities of Grant Prideco, Inc (the
"Securities"):
- - debt securities, which may be senior or subordinated debt securities;
- - preferred stock, which may be issued in the form of depositary shares;
- - common stock; and
- - warrants.
We will provide the specific terms of the Securities in supplements to this
prospectus. This prospectus may not be used to sell Securities unless it is
accompanied by a prospectus supplement.
Selling Security holders also may offer and sell Securities under this
prospectus.
Our common stock is listed on the New York Stock Exchange under the trading
symbol "GRP". Any common stock sold pursuant to a prospectus supplement will be
listed on that exchange, subject to official notice of issuance.
YOU SHOULD CAREFULLY REVIEW AND CONSIDER THE INFORMATION UNDER THE HEADING
"RISK FACTORS" BEGINNING ON PAGE 2 OF THIS PROSPECTUS AND UNDER THE SAME HEADING
IN THE APPLICABLE PROSPECTUS SUPPLEMENT BEFORE INVESTING IN SECURITIES.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE
MAY NOT SELL THESE SECURITIES 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 PROHIBITED.
, 2000
<PAGE> 4
CONTENTS
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PAGE
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About this Prospectus....................................... 1
About Grant Prideco......................................... 1
Forward-Looking Statements.................................. 2
Risk Factors................................................ 2
We Generally Will Be Responsible For Taxes If Our Spinoff
From Weatherford Is Taxable............................ 2
We May Not Have Access to Sufficient Capital Resources.... 3
Weatherford And Grant Prideco Have A Business
Relationship; Conflicts May Arise...................... 3
Our Business Is Materially Affected By Drilling Activity
And The Rig Count...................................... 4
An Economic Downturn Could Adversely Affect Demand For Our
Products And Services.................................. 4
Disruptions In Foreign Operations Could Adversely Affect
Our Income............................................. 4
Additional Risk Factors................................... 5
Use Of Proceeds............................................. 5
Ratio Of Earnings To Fixed Charges And Earnings To Fixed
Charges And Preferred Stock Dividends..................... 5
Description Of Debt Securities.............................. 6
Specific Terms of Each Series of Debt Securities in a
Prospectus Supplement.................................. 6
Senior and Subordinated Debt Securities................... 7
Subsidiary Guarantees..................................... 7
Certain Covenants......................................... 7
Limitations on Liens................................... 8
Consolidation, Merger or Asset Sale.................... 8
Restriction on Sale-and-Leaseback Transactions......... 9
Additional Covenants................................... 10
Change of Control......................................... 10
Events of Default and Remedies............................ 10
Modification of Indentures................................ 11
Discharging Our Obligations; Defeasance................... 11
Registration of Notes; Minimum Denominations.............. 12
No Personal Liability of Directors, Officers, Employees
and Stockholders....................................... 12
Payment and Transfer...................................... 12
Book Entry, Delivery and Form............................. 12
The Trustee............................................... 13
Resignation or Removal of Trustee...................... 13
Limitations on Trustee if it is a Creditor of the
Company............................................... 14
Annual Trustee Report to Holders of Debt Securities.... 14
Certificates and Opinions to Be Furnished to Trustee... 14
Description Of Common Stock And Preferred Stock............. 14
Common Stock.............................................. 14
Voting Rights.......................................... 14
Dividend Rights........................................ 15
Liquidation Rights and Other Provisions................ 15
Transfer Agent And Registrar........................... 15
Preferred Stock........................................... 15
Specific Terms of Each Series of Preferred Stock in a
Prospectus Supplement................................. 15
Voting Rights.......................................... 16
Dividend Rights........................................ 16
Liquidation Rights..................................... 16
Redemption............................................. 17
Conversion and Exchange................................ 17
Transfer Agent and Registrar........................... 17
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No Preemptive Rights...................................... 17
Business Combinations With Interested Stockholders........ 17
Nomination Of Directors................................... 18
Depositary Shares......................................... 18
General................................................ 18
Dividends and Other Distributions...................... 19
Redemption of Depositary Shares........................ 19
Withdrawal of Preferred Stock.......................... 19
Voting the Preferred Stock............................. 19
Amendment and Termination of Deposit Agreement......... 19
Resignation and Removal of Depositary.................. 20
Charges of Depositary.................................. 20
Miscellaneous.......................................... 20
Description Of Warrants..................................... 21
Specific Terms of Each Series of Warrant in a Prospectus
Supplement............................................. 21
Exercise Of Warrants...................................... 22
Modifications............................................. 22
Merger, Consolidation Or Sale Of Assets................... 23
Enforceability Of Rights By Holders....................... 23
Selling Securityholders..................................... 23
Plan Of Distribution........................................ 24
Distributions By Grant Prideco............................ 24
Distribution By Selling Securityholders................... 25
Legal Matters............................................... 26
Experts..................................................... 26
Where You Can Find More Information......................... 26
Incorporation Of Certain Documents By Reference............. 26
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ABOUT THIS PROSPECTUS
This prospectus is part of a registration statement that we have filed with
the Securities and Exchange Commission using a "shelf" registration process.
Under the shelf process, we may offer any combination of the Securities
described in this prospectus in one or more offerings, and certain third parties
("Selling Securityholders") may sell Securities under this prospectus, with a
total initial offering price of up to $500,000,000 or its equivalent in foreign
currency as we may designate in prospectus supplements.
This prospectus provides you with a general description of the debt
securities, preferred stock, common stock, depositary shares and warrants that
may be offered. Each time we use this prospectus to offer Securities, we will
provide a prospectus supplement that will contain specific information about the
terms of that offering. The prospectus supplement may also add, update or change
information contained in this prospectus.
Any Selling Securityholders will be identified, and the type and amount of
Securities to be offered by them will be specified, in a supplement to this
prospectus. We will not receive proceeds of any sale of Securities by Selling
Securityholders.
We may offer the Securities in amounts, at prices and on terms determined
at the time of offering. We may sell the Securities directly to you, through
agents we select, or through underwriters and dealers we select. If we use
agents, underwriters or dealers to sell the Securities, we will name them and
describe their compensation in a prospectus supplement.
Please carefully read this prospectus and the prospectus supplement
together with the additional information described under the heading "Where You
Can Find More Information".
ABOUT GRANT PRIDECO
We are an international manufacturer and supplier of products used for the
exploration and production of oil and gas. Our business is conducted through two
operating segments:
- drill stem products and
- premium tubulars and engineered connections.
We are the world's leading provider of drill pipe and other drill stem
products. We are also a leading provider in North America for engineered
connections used for casing, production tubing and marine conductors and subsea
structures. Our drilling products are designed and engineered for high
performance and include all components of a drill stem from the rig floor to the
drill bit. We have been the innovators in the field of drill pipe and other
drill stem products for more than 20 years, and we are a leader in connection
technology used in the drilling of wells. Our Atlas Bradford division also has
been providing connection technology to the oil industry for approximately 50
years.
Our company has grown substantially over the years through strategic
acquisitions and internal development. Our operations are conducted throughout
the world through manufacturing facilities located in the United States, Mexico,
Canada, Europe and Asia. We also have 19 sales, service and repair locations
around the world.
Until April 14, 2000, we were a wholly-owned subsidiary of Weatherford
International, Inc. We were spun off from Weatherford on April 14, 2000, through
a distribution by Weatherford to its stockholders of all of our common stock. As
a result of the spinoff, our stock became publicly owned and traded on the New
York Stock Exchange under the symbol "GRP".
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FORWARD-LOOKING STATEMENTS
Statements in this document and the documents incorporated by reference
that relate to matters that are not historical facts are "forward-looking
statements" within the meaning of Section 27A of the Securities Act of 1933 and
Section 21E of the Securities Exchange Act of 1934. When used in this document
and the documents incorporated by reference, words such as "anticipate",
"believe", "could", "estimate", "expect", "intend", "may", "plan", "predict",
"project", "will" and similar expressions are intended to identify
forward-looking statements. You should be aware that these forward looking
statements are only our predictions, and we cannot guarantee any such outcomes.
Future events and actual results may differ materially from the results set
forth in or implied in the forward-looking statements. Factors that might cause
such a difference include:
- fluctuations in worldwide prices and demand for oil and gas;
- fluctuations in levels of oil and gas exploration and development
activities;
- fluctuations in the demand for contract drilling services;
- the existence of competitors, technological changes and developments in
the industry;
- the existence of operating risks inherent in the contract drilling
industry;
- the existence of regulatory uncertainties, the possibility of political
instability in any of the countries in which Grant Prideco does business;
and
year 2000 issues and general economic conditions, in addition to the other
matters discussed under "Risk Factors".
RISK FACTORS
In addition to the other information contained in this prospectus and the
prospectus supplement and the documents incorporated herein by reference,
prospective investors in Securities should carefully consider the following
information.
WE GENERALLY WILL BE RESPONSIBLE FOR TAXES IF OUR SPINOFF FROM WEATHERFORD IS
TAXABLE
In connection with our spinoff from Weatherford, Weatherford received a
favorable ruling from the Internal Revenue Service to the effect that, for
United States federal income tax purposes, the spinoff generally would be
tax-free to Weatherford and its stockholders. It is possible that Weatherford
and its stockholders could be subject to a material amount of taxes as a result
of the spinoff if the representations and undertakings Grant Prideco and
Weatherford made to the IRS in connection with obtaining that tax ruling are
determined to be inaccurate. In addition, the spinoff could be determined to be
taxable if within two years following the spinoff there were to be a change of
control of either Weatherford or Grant Prideco and Weatherford and Grant Prideco
were not able to rebut the presumption that the change in control was
contemplated at the time of the spinoff.
We will be responsible and liable to Weatherford for any and all
corporate-level taxes or liabilities incurred by Weatherford relating to the
spinoff except to the extent the spinoff is determined to be taxable solely as a
result of a change of control of Weatherford following the spinoff. Our
obligation and liability will apply under all other circumstances, regardless of
the reason for the spinoff being determined to be taxable. This liability would
extend to circumstances within the control of Weatherford as well as
circumstances under which it is alleged or determined that there was a breach or
misrepresentation, negligent or otherwise, by Weatherford in connection with the
expected tax ruling. We also will be restricted under an agreement we have with
Weatherford from engaging in certain transactions without the consent of
Weatherford that could affect the taxability of the spinoff unless Weatherford
receives a supplemental tax ruling or an acceptable tax opinion. For a summary
of Weatherford's and Grant Prideco's obligations in connection with obtaining
the tax ruling and potential tax liabilities if the transaction is held
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to be taxable, see "Relationship Between Grant Prideco and Weatherford After the
Spinoff -- Tax Allocation Agreement" in our Form 10 registration statement.
WE MAY NOT HAVE ACCESS TO SUFFICIENT CAPITAL RESOURCES
We cannot assure you that we will generate or have available to us
sufficient funds to fund our planned expenditures and meet our obligations to
pay principal and interest on our debt in the future. Further, we cannot assure
you that we will be able to secure sufficient debt or equity financing to fund
our growth strategy.
Before our spinoff from Weatherford, we relied on Weatherford for financial
support. Weatherford now has no obligation to support us financially. As a
smaller company engaged in a volatile sector of the oil and gas industry, we
expect the cost of capital to us to be greater than that which we paid as a
Weatherford subsidiary. Financing in our industry also is illiquid at this time,
and the long-term debt markets are expensive for companies of our size and
credit.
Our strategy envisions growth through acquisitions. We expect to finance
future acquisitions through a combination of the issuance of additional equity
and debt financing, including Securities. Additional equity issuances will be
dependent on the nature of the opportunity that arises and the anticipated
accretion or dilution from the acquisition to our stockholders. Before the
spinoff, we issued a $100 million note to Weatherford, representing previous
intercompany indebtedness. Under the terms of that note, the proceeds from any
new financing (other than working capital borrowings and equity financings
issued as part of an acquisition) generally must first be applied to the
repayment of that note. This repayment obligation could affect the amount and
terms of any third party debt financing that would be available to us. The
Weatherford note will limit our ability to incur new debt, engage in certain
acquisitions and investments and make distributions to our stockholders.
Also in connection with the spinoff, we established a credit facility to
provide us with up to $50 million for working capital purposes. This facility is
secured by our domestic inventory, equipment and receivables and guaranteed by
our domestic subsidiaries. This facility limits our ability to incur new debt,
engage in certain acquisitions and investments, invest in our foreign
operations, grant liens and make distributions to our stockholders. We cannot
assure you that this facility will be sufficient to satisfy our capital
requirements.
WEATHERFORD AND GRANT PRIDECO HAVE A BUSINESS RELATIONSHIP; CONFLICTS MAY ARISE
The terms of the agreements we entered into with Weatherford before the
spinoff were not negotiated on an arm's-length basis and were proposed by
Weatherford as our sole stockholder. As a result, the terms of those agreements
may not reflect the terms that would have been provided to us from an unrelated
third party. Before the spinoff, Weatherford as our sole stockholder ratified
the terms of these agreements, and we acknowledged that the agreements
constitute our valid obligations.
Persons associated with Weatherford also have a continuing relationship
with Grant Prideco. Five directors of Weatherford, Messrs. Bernard J.
Duroc-Danner, Sheldon B. Lubar, William E. Macaulay, Robert K. Moses, Jr. and
Robert A. Rayne, are also directors of Grant Prideco. These directors represent
a majority of our Board of Directors. In addition, Mr. Duroc-Danner, President,
Chief Executive Officer and Chairman of the Board of Directors of Weatherford,
serves as our Chairman of the Board, and Curtis W. Huff, Executive Vice
President, Chief Financial Officer and General Counsel of Weatherford, serves as
our Vice President and Interim General Counsel.
The persons associated with Weatherford were asked to serve as directors or
officers of Grant Prideco because of their experience and knowledge of us and
our businesses. Although each of them has a fiduciary obligation to both
Weatherford and Grant Prideco, we cannot assure you that no conflicts of
interest will arise with them or Weatherford relating to Weatherford and Grant
Prideco. Weatherford and Grant Prideco each have adopted policies and procedures
to be followed by their respective boards of directors to limit the involvement
of Messrs. Duroc-Danner, Lubar, Macaulay, Moses and Rayne in
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conflict situations, including requiring them to abstain from voting as a
director of either Grant Prideco or Weatherford on certain matters that present
a potential conflict of interest between the two companies. See "Relationship
Between Grant Prideco and Weatherford After the Spinoff" in our Form 10
registration statement.
OUR BUSINESS IS MATERIALLY AFFECTED BY DRILLING ACTIVITY AND THE RIG COUNT
A material decline in either prices or drilling activity would negatively
impact our future results. Our business is materially dependent on the level of
drilling activity worldwide. During 1997 and the first half of 1998, we
benefited from an increase in drilling activity that resulted in strong demand
for our drill pipe and other drill stem products. When drilling activity
declined in the second half of 1998 and 1999, our business fell significantly.
In general, we believe that our drill stem business trails changes in the rig
count by six to nine months. The worldwide monthly rig count for each month in
1999 did not surpass the rig count for the corresponding month of 1998 until
October, and the rig counts since October 1999 have been well below the average
rig count in 1997. This suggests that our drill stem business may not recover
until later this year and will not recover completely unless rig counts continue
to rise.
AN ECONOMIC DOWNTURN COULD ADVERSELY AFFECT DEMAND FOR OUR PRODUCTS AND SERVICES
The economic downturn that began in Asia in 1997 affected the economies in
other regions of the world, including South America and the former Soviet Union,
and contributed to the decline in the price of oil and the level of drilling
activity. Although the economy in the United States has experienced one of its
longest periods of growth in recent history, the continued strength of the
United States economy cannot be assured. If the United States or European
economies were to begin to decline or if the economies of South America or Asia
were to experience further material problems, the demand and price for oil and
gas and our products and services again could adversely affect our revenues and
income.
DISRUPTIONS IN FOREIGN OPERATIONS COULD ADVERSELY AFFECT OUR INCOME
Our operations in certain locations outside the United States, including
Mexico, India, China and Indonesia, are subject to various political and
economic conditions existing in such countries that could disrupt operations.
These risks include (1) currency fluctuations and potential devaluations in most
countries, in particular those in South America and Asia, (2) currency
restrictions in China and India and limitations on repatriation of profits in
various countries in South America and Asia and (3) political instability in
countries such as Indonesia, India, Mexico, Venezuela, the former Soviet Union
and China. Disruptions may occur in our foreign operations and losses may occur
that will not be covered by insurance.
Oil Country Tubular Limited ("OCTL") manufactures drill pipe and other
products for us under a long-term exclusive manufacturing arrangement. Over the
years, we have provided OCTL with a substantial amount of raw materials,
inventory and working capital for the products it manufactures for us. Our
business in India through our relationship with OCTL has been adversely affected
by the downturn of the economies in the eastern hemisphere and is subject to
various political and economic risks as well as financial and operational risks
with respect to OCTL.
As of December 31, 1999, OCTL owed us approximately $25.1 million for prior
advances made by us to it and we had assets in India with a book value of
approximately $1.7 million. In 1999, we substantially curtailed our purchases
from OCTL, and in December of 1999, we decided to terminate our existing
manufacturing relationship with OCTL and seek an alternative arrangement for the
recovery of our prior advances. We are currently discussing with OCTL a
restructuring of our relationship that would allow OCTL to repay our prior
advances in cash, equity in OCTL or product from OCTL.
Our decision to terminate our existing arrangement with OCTL and seek an
alternative structure resulted in our writing off a $7.8 million product deposit
previously paid to OCTL and approximately $1.7 million in property and equipment
currently located at the OCTL facility. The write off was due to the anticipated
inability to utilize the deposit and recover the equipment following the
termination of the
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arrangement. Our remaining exposure in India is approximately $17.3 million
consisting of unpaid receivables and advances made to assist OCTL in its working
capital needs as part of our manufacturing arrangement with it. Based on
financial information of OCTL known to us and our general knowledge of the
business and assets of OCTL, OCTL would appear to have a sufficient asset and
equity value to allow for a restructuring of its remaining $17.3 million in debt
owed to us through a combination of cash, equity of OCTL or product from OCTL.
There is, however, uncertainty as to how much, if any, of the amounts owed to us
by OCTL will ultimately be collected. Accordingly, there can be no assurance
that we will be able to fully realize on the amounts owed to us by OCTL or that
additional charges relating to India will not be required in the near term as
the negotiation and collection process continues.
We have entered into an agreement with Voest-Alpine Stahlrohr Kindberg GmbH
& Co. K.G., an entity with manufacturing operations in Austria of which we
currently own 50.01%, to purchase 45,000 tonnes of tubulars for the twelve
months ending July 2000, and 60,000 tonnes per year for the next three years.
Our future results could be adversely affected if we are unable to use or resell
these tubulars. In addition, we have agreed to be responsible for paying any
"anti-dumping" duties in the United States on the resale of these tubulars,
which could affect our ability to resell the tubulars in the United States.
ADDITIONAL RISK FACTORS
Please see the prospectus supplement and our filings with the Securities
and Exchange Commission incorporated herein for additional risk factors that may
be applicable to a particular class or issuance of Securities or to us in the
future.
USE OF PROCEEDS
Except as we may described in a prospectus supplement, we will use the net
proceeds from any sale of the Securities described in this prospectus for future
business acquisitions and other general corporate purposes, such as working
capital, investment in subsidiaries, the retirement of existing debt (if
economically prudent) and/or the repurchase of shares of common stock or other
Securities. We may also invest the proceeds in certificates of deposit, United
States government Securities or certain other interest bearing Securities until
they are used for acquisitions or general corporate purposes.
The exact amounts to be used and when the net proceeds will be applied to
corporate purposes will depend on a number of factors, including our funding
requirements and the availability of alternative funding sources. We routinely
review acquisition opportunities. We will disclose in a prospectus supplement
any future proposal to use net proceeds from an offering of our Securities to
finance any specific acquisition, if applicable.
We will not receive any proceeds from an sale of shares of Securities by
Selling Shareholders.
RATIO OF EARNINGS TO FIXED CHARGES AND EARNINGS TO FIXED CHARGES
AND PREFERRED STOCK DIVIDENDS
We have computed the ratio of earnings to fixed charges for each of the
following periods on a consolidated basis. You should read the ratio of earnings
to fixed charges in conjunction with our consolidated financial statements
(including the notes thereto) incorporated by reference to our Registration
Statement on Form 10 or most recent Annual Report on Form 10-K as filed with the
SEC.
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YEAR ENDED DECEMBER 31,
--------------------------------
1999 1998 1997 1996 1995
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Ratio of Earnings to Fixed Charges.......................... -- 8.8 8.4 5.5 1.9
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For purposes of computing the ratio of earnings to fixed charges,
"earnings" consist of pretax income from continuing operations plus fixed
charges (excluding capitalized interest). "Fixed charges" represent interest
incurred (whether expensed or capitalized), amortization of debt expense, and
that portion of
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rental expense on operating leases deemed to be the equivalent of interest. For
the year ended December 31, 1999, earnings were insufficient to cover fixed
charges by $44.3 million.
We were a wholly-owned subsidiary of Weatherford during the periods
presented. These ratios are based on earnings and fixed charged attributable to
us during the periods presented, and reflect allocations of certain expenses to
us. Although we believe these allocations are reasonable, they are not
necessarily indicative of the costs we would have incurred had we not been owned
by Weatherford during the periods presented. See Note 1 to our financial
statements, as incorporated herein by reference. In particular, our costs of
capital, and therefore our fixed charges, may have been higher than those
reflected in these ratios had we not been owned by Weatherford during the
periods presented.
No preferred stock was outstanding during any of the periods presented. The
ratio of earnings to combined fixed charges and preferred stock dividends was
therefore the same as the ratio of earnings to fixed charges and is not
displayed.
DESCRIPTION OF DEBT SECURITIES
The Debt Securities will be:
- our direct unsecured general obligations; and
- either Senior Debt Securities or Subordinated Debt Securities.
In this section, the words "we," "us" and the "Company" refer only to Grant
Prideco, the issuer of the Debt Securities, and not our subsidiaries.
Capitalized terms used in but not defined in this "Description of Debt
Securities" have the meanings specified in the applicable Indenture.
SPECIFIC TERMS OF EACH SERIES OF DEBT SECURITIES IN A PROSPECTUS SUPPLEMENT
The following describes general terms and provisions of the Debt Securities
to which any prospectus supplement may relate. Other terms, and the particular
terms of a specific series of Debt Securities (which differ from the terms
described below), will be described in the prospectus supplement relating to
that series. The terms of each series of Debt Securities will be governed by an
indenture or a supplemental indenture (each an "Indenture") that we will enter
into with a trustee. No Indenture will be restated in its entirety in a
prospectus supplement. We will file an Indenture relating to each series of Debt
Securities as an exhibit to the registration statement of which this prospectus
forms a part (or as an exhibit to a Current Report on Form 8-K) before we sell
those Debt Securities. You should read that Indenture, because it, and not this
description, controls the rights of holders of the applicable Debt Securities.
A prospectus supplement and an Indenture relating to any series of Debt
Securities being offered will include specific terms relating to the offering.
These terms will include some or all of the following:
- the form and title of the Debt Securities;
- the total principal amount of the Debt Securities;
- the date or dates on which the principal of the Debt Securities will be
payable;
- the portion of the principal amount which will be payable if the maturity
of the Debt Securities is accelerated;
- the currency or currency unit in which the Debt Securities will be paid;
- any right we may have to defer payments of interest by extending the
dates payments are due and whether interest on those deferred amounts
will be payable as well;
- the interest rate which the Debt Securities will bear and the interest
payment dates for the Debt Securities;
- any optional redemption provisions;
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- any sinking fund or other provisions that would obligate us to repurchase
or otherwise redeem the Debt Securities;
- any rights of the holders of the Debt Securities to convert or exchange
the Debt Securities into or for our common stock, or another of our
Securities, and the terms and conditions of the conversion or the
exchange;
- any changes to or additions to the Events of Default;
- any changes to or additions to the covenants described below or contained
in the Indentures; and
- any other terms of the Debt Securities.
SENIOR AND SUBORDINATED DEBT SECURITIES
The Senior Debt Securities will rank equally in right of payment with all
of our other senior and unsubordinated debt. The Subordinated Debt Securities
will rank junior in right of payment to all of our senior debt. "Senior debt"
includes all notes or other unsecured evidences of indebtedness, including
guarantees given by us, for money borrowed by us, not expressed to be
subordinate or junior in right of payment to any of our other indebtedness.
Each Indenture will allow us to issue Debt Securities up to the principal
amount that we authorize. Moreover, any Indenture relating to subordinated debt
(a "Subordinated Indenture") will not limit the amount of senior debt that we
may incur.
Each Subordinated Indenture will provide that no payment of principal,
interest and any premium on the applicable Subordinated Debt Securities may be
made if:
- we or our property are involved in any voluntary or involuntary
liquidation or bankruptcy;
- we fail to pay the principal, interest, any premium or any other amounts
on any Senior Debt when due; or
- we have a nonpayment default on any Senior Debt that imposes a payment
blockage on the Subordinated Debt Securities for a maximum of 179 days at
any one time.
SUBSIDIARY GUARANTEES
We conduct our operations through our subsidiaries. The Indentures will
require our subsidiaries that guarantee our long-term debt to guarantee, as
"guarantors," any series of Debt Securities on an equal basis. In particular,
the Indentures will require those subsidiaries who are guarantors or borrowers
under our credit agreement to equally guarantee any Debt Securities.
Initially, we expect that all of our domestic subsidiaries will be
guarantors of any series of Debt Securities. Each guarantor is obligated under
its guarantee only up to an amount that will not constitute a fraudulent
conveyance or fraudulent transfer under federal, state or foreign law. We do not
expect that any of our foreign subsidiaries that will be guarantors of any
series of Debt Securities. The debt of these non-guarantor subsidiaries, and any
future debt incurred by any of them, effectively will be senior to any series of
Debt Securities. Holders of Debt Securities will effectively have a junior
position to claims of creditors and preferred stockholders of our subsidiaries
who are not guarantors.
CERTAIN COVENANTS
Under the Indentures, we will agree that, at any time Debt Securities are
outstanding thereunder, we will:
- pay the principal, interest and premium on the Debt Securities when due;
- maintain a place of payment for the Debt Securities;
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- deliver a report to the applicable trustee at the end of each fiscal year
reviewing our obligations under the applicable Indenture; and
- deposit sufficient funds with any payment agent on or before the due date
for any principal, premium or interest payment.
We have also agreed to the following covenants relating to limitations on
liens, requirements with respect to consolidations, mergers and assets sales and
restrictions on sale-and-leaseback transactions.
Limitations on Liens
The Indentures will provide that we will not, nor will we permit any of our
subsidiaries to, create, assume, incur or otherwise cause or suffer to exist or
become effective any lien of any kind securing indebtedness or trade payables on
any of our, or their, property or assets, whether owned or leased or hereafter
acquired, unless all payments due under the Debt Securities and the applicable
Indenture are secured on an equal and ratable basis with the obligation so
secured until such time as the obligations are no longer secured by a lien,
except for Permitted Liens.
By "Permitted Liens", we mean:
- liens on our assets or the assets of any of our guarantor securing
indebtedness under any credit facility that are permitted to be incurred
by the terms of the applicable Indenture;
- liens in favor of us or any guarantor;
- liens on property of a an entity existing at the time such entity is
merged with or into or consolidated with us or any of our subsidiaries;
provided, however, that such liens were in existence prior to the
contemplation of such merger or consolidation and do not extend to any
assets other than those of the merged entity;
- liens on property existing at the time of acquisition thereof by us or
any of our subsidiaries; provided, however, that such liens were in
existence prior to the contemplation of such acquisition;
- liens to secure the performance of statutory obligations, surety or
appeal bonds, performance bonds, workers' compensation, easements or
rights-of-way or other obligations of a like nature incurred in the
ordinary course of business which do not materially interfere with our
ability to perform our obligations under the applicable Indenture and
Debt Securities;
- liens to secure indebtedness covering only the assets acquired with such
indebtedness;
- liens existing on the issue date of the applicable series of Debt
Securities;
- liens for taxes, assessments or governmental charges or claims that are
not yet delinquent or that are being contested in good faith by
appropriate proceedings promptly instituted and diligently concluded;
provided, however, that any reserve or other appropriate provision as
shall be required in conformity with GAAP shall have been made therefor;
and
- liens incurred by us in our ordinary course of business or any our
subsidiaries with respect to obligations that do not exceed a specified
dollar amount at any one time outstanding that do not in the aggregate
materially detract from the value of the property or materially impair
the use thereof in the operation of our business.
Consolidation, Merger or Asset Sale
Each Indenture generally will allow us to consolidate or merge with a
domestic corporation. They also will allow us to sell, lease or transfer all or
substantially all of our property and assets to a domestic corporation. If this
happens, the remaining or acquiring corporation must assume all of our
responsibilities and liabilities under the Indentures including the payment of
all amounts due on any outstanding series of Debt Securities and performance of
the covenants in the Indentures.
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However, we will only consolidate or merge with or into any other
corporation or sell, lease or transfer all or substantially all of our assets
according to the terms and conditions of the Indentures, which include the
following requirements:
- the remaining or acquiring corporation is organized under the laws of the
United States, any state or the District of Columbia;
- the remaining or acquiring corporation assumes our obligations under the
Indentures and any outstanding Debt Securities pursuant to agreements
reasonably satisfactory to the applicable trustee;
- immediately after giving effect to the transaction no Default or Event of
Default exists; and
- the remaining or acquiring corporation:
- will have consolidated net worth (as defined in any supplemental
indenture) immediately after the transaction equal to or greater than
our consolidated net worth immediately prior to the transaction; and
- will, on the date of such transaction after giving pro forma effect
thereto and any related financing transactions as if the same had
occurred at the beginning of the applicable four-quarter period, be
permitted to incur at least $1.00 of additional indebtedness pursuant
to any fixed charge coverage ratio test set forth in any supplemental
indenture.
The remaining or acquiring corporation will be substituted for us in the
Indentures with the same effect as if it had been an original party to the
Indentures. Thereafter, the successor may exercise our rights and powers under
the Indentures, in our name or in its own name. If we sell or transfer all or
substantially all of our assets, we will be released from all our liabilities
and obligations under any Indenture and under the Debt Securities. If we lease
all or substantially all of our assets, we will not be released from our
obligations under the Indentures.
Restriction on Sale-and-Leaseback Transactions
The Indentures will provide that we will not, and will not permit any of
our subsidiaries to, enter into any sale-and-leaseback transactions, unless:
- We or our subsidiaries, as applicable, could have incurred indebtedness
in an amount equal to the Attributable Debt with respect to such
sale-and-leaseback transaction and incurred a lien to secure such
indebtedness pursuant to the covenant described above under the caption
"-- Limitation on Liens";
- the gross cash proceeds of such sale-and-leaseback transaction are at
least equal to the fair market value, as determined in good faith by our
Board of Directors and set forth in an officers' certificate delivered to
the applicable trustee, of the property that is the subject of such sale
and leaseback transaction; and
- the transfer of assets in the sale-and-leaseback transaction is permitted
by, and we apply the proceeds of such transaction in compliance with, the
covenant described above under the caption "-- Consolidation, Merger or
Asset Sale".
"Attributable Debt", when used with respect to any to any
sale-and-leaseback transaction, means, as at the time of determination, the
present value (discounted at the rate set forth or implicit in the terms of the
lease included in such transaction) of the total obligations of the lessee for
rental payments (other than amounts required to be paid on account of property
taxes, maintenance, repairs, insurance, assessments, utilities, operating and
labor costs and other items that do not constitute payments for property rights)
during the remaining term of the lease included in such sale-and-leaseback
transaction (including any period for which such lease has been extended). In
the case of any lease that is terminable by the lessee upon the payment of a
penalty or other termination payment, such amount shall be the lesser of the
amount determined assuming termination upon the first date such lease may be
terminated (in
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which case the amount shall also include the amount of the penalty or
termination payment, but no rent shall be considered as required to be paid
under such lease subsequent to the first date upon which it may be so
terminated) or the amount determined assuming no such termination.
Additional Covenants
Any series of Debt Securities may provide in the applicable Indenture for
additional covenants which may restrict the operations and activities of the
Company, including covenants which restrict our ability to make certain payments
or to incur additional indebtedness.
CHANGE OF CONTROL
Any series of Debt Securities may provide in the Indenture that holders of
that series of Debt Securities may require us to repurchase such Securities at a
specified price upon the occurrence of a change of control of the Company (as
defined in the applicable Indenture).
EVENTS OF DEFAULT AND REMEDIES
"Event of Default" when used in an Indenture, will mean any of the
following:
- our failure to pay the principal of, or any premium on, any Debt Security
when due; or
- our failure to pay interest on any Debt Security for 30 days; or
- our failure to perform any other covenant in the Indenture that continues
for 60 days after being given written notice; or
- our default under any mortgage, indenture or instrument under which there
may be issued or by which there may be secured or evidenced any
indebtedness for money borrowed by us or any of our subsidiaries, which
default (a) is caused by a failure to pay principal of that indebtedness
at final maturity or (b) results in the acceleration of that indebtedness
before its express maturity and, in each case, the principal amount of
all such indebtedness under which there has been a payment default or the
maturity of which has been accelerated, aggregates in excess of a
specified amount, where the default has not been cured or the
acceleration has not been rescinded within five business days after the
default or acceleration; or
- our failure to pay final judgments aggregating in excess of a specified
amount, which remain unpaid or undischarged for a period of 60 days; or
- certain events involving our bankruptcy, insolvency or reorganization; or
- any other Event of Default included in any Indenture.
The trustee may withhold notice to the holders of Debt Securities of any
default (except in the payment of principal or interest) if it considers such
withholding of notice to be in the best interests of the holders.
If an Event of Default for any series of Debt Securities occurs and
continues, the trustee or the holders of a specified percentage in aggregate
principal amount of the Debt Securities of the series may declare the entire
principal of all the Debt Securities of that series to be due and payable
immediately. If this happens, subject to certain conditions, the holders of a
majority of the aggregate principal amount of the Debt Securities of that series
can void the declaration.
Other than its duties in case of a default, a trustee is not obligated to
exercise any of its rights or powers under any Indenture at the request, order
or direction of any holders, unless the holders offer the trustee reasonable
indemnity. If they provide this reasonable indemnification, the holders of a
majority in principal amount of any series of Debt Securities may direct the
time, method and place of conducting any proceeding or any remedy available to
the trustee, or exercising any power conferred upon the trustee, for any series
of Debt Securities.
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MODIFICATION OF INDENTURES
Generally, under each Indenture, we and the trustee will be permitted to
modify our rights and obligations, the guarantors' rights and obligations and
the rights of the holders under that Indenture with the consent of the holders
of a majority in aggregate principal amount of the outstanding Debt Securities
of each series affected by the modification, including consents obtained in
connection with a purchase of, or a tender offer for, a series of Debt
Securities. However, without the consent of each holder affected, no
modification may:
- reduce principal amount of any series of Debt Securities;
- reduce the rate of, or change the time for payment of interest of, any
series of Debt Securities;
- alter the ranking of a series of Debt Securities relative to other
indebtedness of the Company;
- waive a Default or Event of Default in the payment of principal of or
premium, if any, or interest on a series of Debt Securities (except a
rescission of acceleration by the holders of at least a majority in
aggregate principal amount of such series of Debt Securities and a waiver
of the payment default that resulted from such acceleration); or
- make any change in the preceding modification, amendment and waiver
provisions.
Notwithstanding the preceding, without the consent of any holder of the
Debt Securities, we and the applicable trustee may amend or supplement an
Indenture:
- to cure any ambiguity, defect or inconsistency;
- to provide for the assumption of our obligations to holders of Debt
Securities in the case of a merger or consolidation or sale of all or
substantially all of our assets;
- to make any change that would provide any additional rights or benefits
to the holders of Debt Securities or that does not adversely affect the
legal rights under the applicable Indenture of any such holder;
- to provide for a successor trustee;
- to comply with requirements of the Securities and Exchange Commission in
order to effect or maintain the qualification of the Indenture under the
Trust Indenture Act; or
- to add terms and provisions relating to a specific series of Debt
Securities.
DISCHARGING OUR OBLIGATIONS; DEFEASANCE
We may choose to either discharge all of our obligations and the
obligations of the guarantors under any series of Debt Securities in a legal
defeasance, or to release ourselves and the guarantors from the covenant
restrictions with respect to a series of Debt Securities in a covenant
defeasance. We may do so at any time on the 91st day after we irrevocably
deposit with the applicable trustee cash or government Securities in an amount
sufficient to pay the principal, interest, any premium and any other sums to the
stated maturity date or a redemption date for that series of Debt Securities. If
we choose this option, the holders of that series of Debt Securities will not be
entitled to the benefits of the applicable Indenture, except for:
- registration of transfer and exchange of Debt Securities;
- replacement of lost, stolen or mutilated Debt Securities;
- conversion or exchange of Debt Securities;
- sinking fund payments; and
- the receipt of principal and interest on the original stated due dates or
specified redemption dates.
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We may discharge our obligations under an Indenture or release ourselves
from covenant restrictions only if we meet certain requirements. Among other
things, we must deliver to the applicable trustee an opinion of counsel that the
discharge will not result in the holders of that series of Debt Securities
having to recognize taxable income or loss or subject them to different tax
treatment. In the case of legal defeasance, this opinion must be based on a
letter ruling from the Internal Revenue Service or a change in federal tax law.
In addition, no Default or Event of Default may have occurred and be continuing
at the time of such deposit, and the discharge may not result in the breach or
violation of any material agreement to which we are a party.
REGISTRATION OF NOTES; MINIMUM DENOMINATIONS
We may issue Debt Securities of a series in registered, bearer, coupon or
global form. Debt Securities will be issued in registered form in amounts of
$1,000 each or multiples of $1,000.
NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND STOCKHOLDERS
No director, officer, employee, incorporator or stockholder of the Company
or any guarantor, as such, shall have any liability for any of our obligations
or obligations of the guarantors under the Debt Securities, the Indentures or
the subsidiary guarantees, or for any claim based on, in respect of, or by
reason of, such obligations or their creation. Each holder of Debt Securities by
accepting such Debt Securities will waive and release all such liability. The
waiver and release will be part of the consideration for issuance of the Debt
Securities. The waiver may not be effective to waive liabilities under the
federal Securities laws.
PAYMENT AND TRANSFER
We will pay principal and any premium and interest on Debt Securities at
the corporate trust office of the applicable trustee or at any other office or
agency maintained by us for such purpose. We may choose to make any interest
payments on a Debt Security:
- by check mailed to the address of the holder of the Debt Security as it
appears in the register for that series of Debt Securities; or
- by wire transfer to an account maintained by the holder as specified in
the register.
We will make interest payments to the person in whose name the Debt
Security is registered at the closing of business on the days specified in the
applicable Indenture.
Fully registered Debt Securities may be transferred or exchanged at the
corporate trust office of the applicable trustee or at any other office or
agency maintained by us for such purposes, without the payment of any service
charge except for any tax or governmental charge.
BOOK ENTRY, DELIVERY AND FORM
The Debt Securities of a series may be issued in whole or in part in the
form of one or more global certificates that will be deposited with a depositary
identified in a prospectus supplement.
Unless otherwise stated in any prospectus supplement, The Depository Trust
Company, New York, New York ("DTC") will act as depositary. Book-entry notes of
a series will be issued in the form of a global note that will be deposited with
DTC. This means that we will not issue certificates to each holder. One global
note will be issued to DTC who will keep a computerized record of its
participants (for example, your broker) whose clients have purchased the notes.
The participant will then keep a record of its clients who purchased the notes.
Unless it is exchanged in whole or in part for a certificate note, a global note
may not be transferred; except that DTC, its nominees and their successors may
transfer a global note as a whole to one another.
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Beneficial interests in global notes will be shown on, and transfers of
global notes will be made only through, records maintained by DTC and its
participants.
DTC has provided us the following information: DTC is a limited-purpose
trust company organized under the New York Banking Law, a "banking organization"
within the meaning of the New York Banking Law, a member of the United States
Federal Reserve System, a "clearing corporation" within the meaning of the New
York Uniform Commercial Code and a "clearing agency" registered under the
provisions of Section 17A of the Securities Exchange Act of 1934. DTC holds
Securities that its participants ("Direct Participants") deposit with DTC. DTC
also records the settlement among Direct Participants of Securities
transactions, such as transfers and pledges, in deposited Securities through
computerized records for Direct Participant's accounts. This eliminates the need
to exchange certificates. Direct Participants include Securities brokers and
dealers, banks, trust companies, clearing corporations and certain other
organizations.
DTC's book-entry system is also used by other organizations such as trust
companies that work through a Direct Participant. The rules that apply to DTC
and its participants are on file with the SEC.
DTC is owned by a number of its Direct Participants and by the New York
Stock Exchange, Inc., The American Stock Exchange, Inc. and the National
Association of Securities Dealers, Inc.
We will wire principal and interest payments to DTC's nominee. We and the
trustee will treat DTC's nominee as the owner of the global notes for all
purposes. Accordingly, we, the trustee and any paying agent will have no direct
responsibility or liability to pay amounts due on the global notes to owners of
beneficial interests in the global notes.
It is DTC's current practice, upon receipt of any payment of principal or
interest, to credit Direct Participants' accounts on the payment date according
to their respective holdings of beneficial interests in the global notes as
shown on DTC's records. In addition, it is DTC's current practice to assign any
consenting or voting rights to Direct Participants whose accounts are credited
with notes on a record date, by using an omnibus proxy. Payments by participants
to owners of beneficial interests in the global notes, and voting by
participants, will be governed by the customary practices between the
participants and owners of beneficial interests, as is the case with notes held
for the account of customers registered in "street name." However, payments will
be the responsibility of the participants and not of DTC, the trustee or us.
Notes represented by a global note will be exchangeable for certificate
notes with the same terms in authorized denominations only if:
- DTC notifies us that it is unwilling or unable to continue as depositary
or if DTC ceases to be a clearing agency registered under applicable law
and a successor depositary is not appointed by us within 90 days; or
- we determine not to require all of the notes of a series to be
represented by a global note and notify the trustee of our decision.
THE TRUSTEE
Resignation or Removal of Trustee
Under provisions of the Indentures and the Trust Indenture Act of 1939, as
amended, governing trustee conflicts of interest, any uncured Event of Default
with respect to any series of Debt Securities will force the trustee to resign
as trustee under either the Subordinated Indenture or the Senior Indenture. Any
resignation will require the appointment of a successor trustee under the
applicable Indenture in accordance with the terms and conditions of that
Indenture. The trustee may resign or be removed by us with respect to one or
more series of Debt Securities and a successor trustee may be appointed to act
with respect to any such series. The holders of a majority in aggregate
principal amount of the Debt Securities of any series may remove the trustee
with respect to the Debt Securities of such series.
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Limitations on Trustee if it is a Creditor of the Company
Each Indenture will contain limitations on the right of the trustee
thereunder, in the event that it becomes a creditor of the Company, to obtain
payment of claims in certain cases, or to realize on certain property received
in respect of any such claim as security or otherwise.
Annual Trustee Report to Holders of Debt Securities
The trustee will be required to submit an annual report to the holders of a
series of Debt Securities regarding, among other things, the trustee's
eligibility to serve as such, the priority of the trustee's claims regarding
certain advances made by it, and any action taken by the trustee materially
affecting the Debt Securities.
Certificates and Opinions to Be Furnished to Trustee
Each Indenture will provide that, in addition to other certificates or
opinions that may be specifically required by other provisions of an Indenture,
every application by us for action by the trustee shall be accompanied by a
certificate of certain of our officers and an opinion of counsel (who may be our
counsel) stating that, in the opinion of the signers, all conditions precedent
to such action have been complied with by us.
DESCRIPTION OF COMMON STOCK AND PREFERRED STOCK
Our authorized capital stock consists of 300 million shares of our common
stock and 10 million shares of preferred stock, par value $.01 per share, of
which, approximately 109.0 million shares of our common stock are issued and
outstanding. No shares of our preferred stock are issued or outstanding (unless
indicated otherwise in a prospectus supplement). All of the shares of our common
stock issued and outstanding have been validly issued and are fully paid and
nonassessable.
COMMON STOCK
Voting Rights
Holders of our common stock will be entitled to one vote for each share on
all matters voted on by stockholders. Our common stock will possess all voting
power of Grant Prideco, except as otherwise required by law or provided in any
resolution adopted by our board designating any series of our preferred stock.
The shares of our common stock will not have cumulative voting rights.
Although the holders of our common stock are generally entitled to vote for
the approval of amendments to our certificate of incorporation, the voting
rights of the holders of our common stock are limited with respect to certain
amendments to our certificate of incorporation that affect only the holders of
our preferred stock. Specifically, subject to the rights of any outstanding
shares of any series of our preferred stock, our certificate of incorporation
may be amended from time to time in any manner that would solely modify or
change the relative powers, preferences and rights and the qualifications or
restrictions of any issued shares of any series of our preferred stock then
outstanding with the only required vote or consent for approval of such
amendment being the affirmative vote or consent of the holders of a majority of
the outstanding shares of the series of our preferred stock so affected,
provided that the powers, preferences and rights and the qualifications and
limitations or restrictions of such series after giving effect to such amendment
are no greater than the powers, preferences and rights and qualifications and
limitations or restrictions permitted to be fixed and determined by the board of
directors with respect to the establishment of any new series of shares of our
preferred stock pursuant to the authority vested in the board of directors as to
such matters.
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Dividend Rights
Subject to any preferential or other rights of any outstanding series of
our preferred stock that our board may designate, and subject to contractual
restrictions contained in our debt agreements, holders of our common stock will
be entitled to such dividends as may be declared from time to time by our board
from funds legally available therefor.
Liquidation Rights and Other Provisions
Subject to the prior rights of creditors and the holders of any of our
preferred stock that may be outstanding from time to time, the holders of our
common stock are entitled in any liquidation, dissolution or winding up to share
pro rata in the distribution of all remaining assets.
Our common stock is not liable for any calls or assessments and is not
convertible into any other Securities. Our certificate of incorporation will
provide that the private property of the stockholders shall not be subject to
the payment of corporate debts. There are no redemption or sinking fund
provisions applicable to our common stock.
Transfer Agent And Registrar
The registrar and transfer agent of our common stock is American Stock
Transfer & Trust Company.
PREFERRED STOCK
Under our Certificate of Incorporation, the Board of Directors of Grant
Prideco is authorized, without further stockholder action, to issue from time to
time up to 10,000,000 shares of Preferred Stock and to fix and determine voting
powers, designations, preferences and relative, participating, optional or other
special rights and qualifications, limitations or restrictions of any series of
Preferred Stock, including, without limitation, any voting rights, any dividends
payable and any right of the shares of that series to convert into or be
exchanged for other Securities of Grant Prideco (provided, however, that any
Securities issuable upon conversion or exchange of Preferred Stock will be
subject to registration under the Securities Act or an applicable exemption
therefrom). The Board of Directors of Grant Prideco, without stockholder
approval, could authorize the issuance of Preferred Stock with voting,
conversion and other rights that could adversely affect the voting power (if
any) and other rights of other series of the Preferred Stock or of the Common
Stock. As of the date of this prospectus we have no Preferred Stock outstanding.
Specific Terms of Each Series of Preferred Stock in a Prospectus Supplement
The following describes general terms and provisions of the Preferred Stock
to which any prospectus supplement may relate. Other terms, and the particular
terms of a specific series of Preferred Stock (which differ from the terms
described below), will be described in the prospectus supplement relating to
that series. The terms of each series of Preferred Stock will be governed by our
Certificate of Incorporation (as amended from time to time) and the certificate
of designations relating to that series of Preferred Stock (the "Certificate of
Designations"). The Certificate of Incorporation and any Certificates of
Designations are not restated in their entirety below and will not be restated
in their entirety in a prospectus supplement. We will file a Certificate of
Designations as an exhibit to the registration statement of which this
prospectus forms a part (or as an exhibit to a Current Report on Form 8-K)
before we issue that series of the Preferred Stock. You should read our
Certificate of Incorporation and any applicable Certificate of Designations,
because they, and not this description, control the rights of holders of
Preferred Stock.
The Preferred Stock will have the dividend, liquidation, redemption and
voting rights set forth below, unless otherwise provided in the prospectus
supplement relating to a particular series of Preferred Stock.
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The applicable prospectus supplement will describe:
- the designation and the number of shares offered;
- the amount of liquidation preference per share;
- the price at which that Preferred Stock will be issued;
- the dividend rate (or method of calculation), if any, the dates on which
dividends will be payable, whether dividends will be cumulative or
noncumulative and, if cumulative, the dates from which dividends will
begin to cumulate;
- any redemption or sinking fund provisions;
- the terms of any rights to convert or exchange the Preferred Stock into
other Securities of Grant Prideco;
- whether we have elected to offer Depositary Shares (as defined below);
and
- any additional voting, dividend, liquidation, redemption, sinking fund
and other rights, preferences, privileges, limitations and restrictions.
Voting Rights
The holders of Preferred Stock of a series offered hereby will not have any
voting rights, except as indicated in the applicable prospectus supplement or as
required by applicable law.
Dividend Rights
Unless otherwise set forth in the applicable prospectus supplement, holders
of shares of each series of the Preferred Stock will be entitled to receive,
when, as and if declared by the Board of Directors of Grant Prideco out of funds
legally available therefor, cash dividends at such rates and on such dates as
are set forth in the prospectus supplement relating to such series of Preferred
Stock. Different series of Preferred Stock may be entitled to dividends at
different rates or based upon different methods of determination. The dividend
rate may be fixed or variable or both. Each dividend will be payable to the
holders of record as they appear on the stock books of Grant Prideco, on the
record dates fixed by the Board of Directors of Grant Prideco or a duly
authorized committee thereof. Dividends on any series of the Preferred Stock may
be cumulative or noncumulative, as provided in the related prospectus
supplement.
Liquidation Rights
In the event of any voluntary or involuntary liquidation, dissolution or
winding up of Grant Prideco, the holders of shares of each series of Preferred
Stock will be entitled to receive liquidating distributions in the amount set
forth in the prospectus supplement relating to that series of Preferred Stock,
out of assets of Grant Prideco available for distribution to stockholders,
before any distribution of assets is made to holders of Common Stock or any
other class of stock ranking junior to that series of Preferred Stock upon
liquidation.
Because we are a holding company, our rights and the rights of holders of
our Securities, including the holders of Preferred Stock, to participate in the
distribution of assets of any of our subsidiaries on the subsidiary's
liquidation or recapitalization will be subject to the prior claims of the
subsidiary's creditors and preferred stockholders, except to the extent that we
may itself be a creditor with recognized claims against the subsidiary or a
holder of preferred stock of the subsidiary. The Preferred Stock will rank prior
to the Common Stock with respect to dividend rights and rights upon winding up
and dissolution of Grant Prideco.
The Preferred Stock will be issued in one or more series. The holders of
Preferred Stock will have no preemptive rights. Preferred Stock will be fully
paid and nonassessable when issued upon full payment of the purchase price
therefor. Unless otherwise specified in the prospectus supplement relating to a
particular
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series of Preferred Stock, each series of Preferred Stock offered hereby will
rank on a parity as to dividends and liquidation rights in all respects with
each other series of Preferred Stock. The prospectus supplement will contain, if
applicable, a description of material United States federal income tax
consequences relating to the purchase and ownership of shares of the series of
Preferred Stock offered by the prospectus supplement.
Redemption
One or more series of the Preferred Stock may be redeemable, in whole or in
part, at the option of Grant Prideco, and may be subject to mandatory redemption
pursuant to a sinking fund or otherwise, in each case upon terms, at the times
and at the redemption prices set forth in the applicable prospectus supplement.
Conversion and Exchange
The terms, if any, on which shares of any series of Preferred Stock will be
convertible into or exchangeable for other Securities of Grant Prideco will be
set forth in the applicable prospectus supplement (however, any Securities
issuable upon conversion or exchange of Preferred Stock will be subject to
registration under the Securities Act or an applicable exemption therefrom). The
conversion or exchange terms may include provisions for conversion or exchange,
either mandatory, at the option of the holder, or at our option, in which case
the number of other Securities of Grant Prideco to be received by the holders of
that series of Preferred Stock would be calculated as of a time and in the
manner stated in the prospectus supplement.
Transfer Agent and Registrar
The transfer agent, registrar and dividend disbursement agent for the
Preferred Stock will be designated in the applicable prospectus supplement. The
registrar for shares of Preferred Stock will send to stockholders notices of any
meetings at which holders of the applicable series of Preferred Stock will have
the right to elect directors of Grant Prideco or to vote on any other matter.
NO PREEMPTIVE RIGHTS
No holder of any stock of Grant Prideco of any class authorized at the
distribution date will have any preemptive right to subscribe to any Securities
of Grant Prideco of any kind or class.
BUSINESS COMBINATIONS WITH INTERESTED STOCKHOLDERS
As a Delaware corporation, we are subject to Section 203 of the Delaware
General Corporation Law. In general, Section 203 prevents an "interested
stockholder" (defined generally as a person owning 15% or more of a
corporation's outstanding voting stock) from engaging in a "business
combination" (as defined) with a Delaware corporation for three years following
the time such person became an interested stockholder unless:
- before such person became an interested stockholder, the board of
directors of the corporation approved the transaction in which the
interested stockholder became an interested stockholder or approved the
business combination;
- upon consummation of the transaction that resulted in the stockholder
becoming an interested stockholder, the interested stockholder owns at
least 85% of the voting stock of the corporation outstanding at the time
the transaction commenced (excluding stock held by directors who are also
officers of the corporation and by employee stock plans that do not
provide employees with the rights to determine confidentially whether
shares held subject to the plan will be tendered in a tender or exchange
offer); or
- following the transaction in which such person became an interested
stockholder, the business combination is approved by the board of
directors of the corporation and authorized at a meeting of
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stockholders by the affirmative vote of the holders of two-thirds of the
outstanding voting stock of the corporation not owned by the interested
stockholder.
Under Section 203, the restrictions described above also do not apply to
certain business combinations proposed by an interested stockholder following
the announcement or notification of one of certain extraordinary transactions
involving the corporation and a person who had not been an interested
stockholder during the previous three years or who became an interested
stockholder with the approval of a majority of the corporation's directors, if
such extraordinary transaction is approved or not opposed by a majority of the
directors who were directors prior to any person becoming an interested
stockholder during the previous three years or were recommended for election or
elected to succeed such directors by a majority of such directors.
NOMINATION OF DIRECTORS
Our bylaws establish an advance notice procedure with regard to the
nomination, other than by or at the direction of the board or a committee
thereof, of candidates for election as directors.
This nomination procedure requires that a stockholder give advance written
notice, in proper form, of a planned nomination for the board to the Secretary
of Grant Prideco. The requirements as to the form and timing of that notice,
which are specified in our bylaws, are not inconsistent with the requirements of
the Securities Exchange Act of 1934 for a stockholder proposal. If a person is
not nominated in accordance with this nomination procedure, that person will not
be eligible for election as a director.
Although our bylaws do not give the board any power to approve or
disapprove stockholder nominations for the election of directors, our bylaws may
have the effect of precluding a nomination for the election of directors at a
particular meeting if the proper procedures are not followed and may discourage
a third party from soliciting proxies to elect its own slate of directors or
otherwise attempting to obtain control of Grant Prideco, even if that
solicitation or attempt might be beneficial to us and our stockholders.
DEPOSITARY SHARES
General
We may offer receipts for fractional interests ("Depositary Shares") in
Preferred Stock, rather than full shares of Preferred Stock. If we do so,
receipts ("Depositary Receipts") for Depositary Shares, each of which will
represent a fraction (which will be set forth in the prospectus supplement
relating to the applicable series of Preferred Stock) of a share of a particular
series of Preferred Stock, will be issued as described below.
The shares of any series of Preferred Stock represented by Depositary
Shares will be deposited under a Deposit Agreement between Grant Prideco and a
Depositary to be named by Grant Prideco in the applicable prospectus supplement.
Subject to the terms of the Deposit Agreement, each owner of a Depositary Share
will be entitled, in proportion to the applicable fraction of a share of
Preferred Stock represented by that Depositary Share, to all of the rights and
preferences of the Preferred Stock represented thereby (including dividend,
voting, redemption, subscription and liquidation rights). The following summary
of certain provisions of the Deposit Agreement does not purport to be complete
and is subject to, and is qualified in its entirety by reference to, all of the
provisions of the Deposit Agreement, including the definitions therein of
certain terms. Copies of the forms of Deposit Agreement and Depositary Receipt
are incorporated by reference as exhibits to the Registration Statement of which
this prospectus is a part, and the following summary is qualified in its
entirety by reference to those exhibits.
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Dividends and Other Distributions
The Depositary will distribute all cash dividends or other cash
distributions received in respect of the applicable series of Preferred Stock to
the record holders of Depositary Shares relating to that series in proportion to
the amount of those Depositary Shares owned by the holders.
In the event of a distribution other than in cash, then the Depositary will
distribute property received by it to the record holders of Depositary Shares in
an equitable manner, unless Grant Prideco, after consulting with the Depositary,
determines that it is not feasible to make the distribution, in which case the
Depositary may sell the distributed property and distribute the net proceeds
from the sale to the holders.
Redemption of Depositary Shares
If a series of Preferred Stock represented by Depositary Shares is subject
to redemption, the Depositary Shares will be redeemed from the proceeds received
by the Depositary resulting from any redemption of any shares of that series of
Preferred Stock held by the Depositary. The redemption price per Depositary
Share will equal the applicable fraction of the redemption price per share
payable with respect to that series of Preferred Stock. Whenever Grant Prideco
redeems shares of Preferred Stock held by the Depositary, the Depositary will
redeem, as of the same redemption date, the number of Depositary Shares
representing shares of Preferred Stock so redeemed. If fewer than all of the
Depositary Shares are to be redeemed, then the Depositary Shares to be redeemed
will be selected by lot, pro rata or by another equitable method.
Withdrawal of Preferred Stock
Any holder of Depositary Shares may receive, upon surrender of the
corresponding Depositary Receipts to the Depositary, the number of whole shares
of the related series of Preferred Stock and any money or other property
represented by the surrendered Depositary Receipts. Holders of Depositary Shares
that surrender their Depositary Receipts will be entitled to receive whole
shares of Preferred Stock on the basis set forth in the related prospectus
supplement for the applicable series of Preferred Stock, but holders of whole
shares of that series of Preferred Stock will not be entitled to subsequently
deposit those shares of Preferred Stock under the Deposit Agreement or to
receive Depositary Receipts therefor. If the Depositary Shares surrendered by a
holder in connection with a withdrawal exceed the number of Depositary Shares
that represent the number of whole shares of Preferred Stock to be withdrawn,
then the Depositary will deliver to that holder at the same time a new
Depositary Receipt evidencing the excess number of Depositary Shares.
Voting the Preferred Stock
Upon receipt of a notice of any meeting at which the holders of a series of
Preferred Stock are entitled to vote, the Depositary will mail the information
contained in the notice to the record holders of the Depositary Shares relating
to that series of Preferred Stock. Each record holder of the Depositary Shares
on the record date (which will be the same date as the record date for the
Preferred Stock) will be entitled to instruct the Depositary to exercise the
voting rights pertaining to the shares of Preferred Stock represented by that
holder's Depositary Shares. The Depositary will endeavor, insofar as
practicable, to vote the amount of the Preferred Stock represented by those
Depositary Shares in accordance with the holder's instructions, and Grant
Prideco will take all reasonable action that the Depositary may deem necessary
in order to enable the Depositary to do so. The Depositary will abstain from
voting shares of the Preferred Stock to the extent that it does not receive
specific instructions from the holder of Depositary Shares representing those
shares of Preferred Stock.
Amendment and Termination of Deposit Agreement
The form of Depositary Receipt evidencing the Depositary Shares and any
provision of the Deposit Agreement may at any time be amended by agreement
between Grant Prideco and the Depositary.
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However, any amendment that imposes any fees, taxes or other charges payable by
holders of Depositary Receipts (other than taxes and other governmental charges,
fees and other expenses payable by such holders as stated under "-- Depositary
Shares -- Charges of Depositary"), or that otherwise prejudices any substantial
existing right of holders of Depositary Receipts, will not affect outstanding
Depositary Receipts until 90 days after notice of the amendment has been mailed
to the record holders of outstanding Depositary Receipts. Every holder of
Depositary Receipts at the time the amendment becomes effective will be deemed
to consent and agree to the amendment and to be bound by the Deposit Agreement,
as so amended. No amendment may impair the right of any owner of Depositary
Shares to receive shares of the Preferred Stock and any money or other property
represented thereby, subject to the conditions specified in the Deposit
Agreement, upon surrender of the Depositary Receipts evidencing such Depositary
Shares, except in order to comply with mandatory provisions of applicable law.
Whenever so directed by Grant Prideco, the Depositary will terminate the
Deposit Agreement by mailing notice of termination to the record holders of all
Depositary Receipts then outstanding at least 30 days before the termination
date stated in the notice. The Depositary also may terminate the Deposit
Agreement if 45 days have expired after the Depositary delivered to Grant
Prideco a written notice of its election to resign and a successor depositary
has not been appointed and accepted its appointment. If any Depositary Receipts
remain outstanding after the date of termination, the Depositary will
discontinue the transfer of Depositary Receipts, will suspend the distribution
of dividends to the holders of Depositary Receipts, and will not give any
further notices (other than notice of termination) or perform any further acts
under the Deposit Agreement, except that the Depositary will continue (1) to
collect dividends and any other distributions on the Preferred Stock and (2) to
deliver the Preferred Stock, together with the corresponding dividends and
distributions and the net proceeds of any sales of rights, preferences,
privileges or other property, without liability for interest thereon, in
exchange for Depositary Receipts surrendered. At any time after two years from
the date of termination, the Depositary may sell the Preferred Stock then held
by it at public or private sales, at such place or places and upon such terms as
it deems proper, and may hold the net proceeds of any sale, together with any
money and other property then held by it, without liability for interest
thereon, for the pro rata benefit of the holders of Depositary Receipts which
have not been surrendered.
Resignation and Removal of Depositary
The Depositary may resign at any time by delivering notice of its election
to do so to Grant Prideco, and Grant Prideco may at any time remove the
Depositary. Any resignation or removal will take effect upon the appointment of
a successor Depositary and its acceptance of such appointment. The successor
Depositary must be appointed within 45 days after delivery of the notice of
resignation or removal and must be a bank or trust company, or an affiliate of a
bank or trust company, having its principal office in the United States and
having a combined capital and surplus of at least $50,000,000.
Charges of Depositary
Grant Prideco will pay charges of the Depositary in connection with the
initial deposit of the Preferred Stock and issuance of Depositary Receipts, all
withdrawals of shares of Preferred Stock by owners of Depositary Shares, any
redemption of the deposited Preferred Stock and the distribution of information
to holders of the Depositary Receipts. Holders of Depositary Receipts will pay
other transfer and other taxes and governmental charges and any other charges
that are expressly provided in the Deposit Agreement to be at their expense.
Miscellaneous
The Depositary will forward to the holders of Depositary Receipts all
reports and communications from Grant Prideco that are delivered to the
Depositary and that Grant Prideco is required or otherwise determines to furnish
to the holders of the corresponding series of Preferred Stock.
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Neither the Depositary nor Grant Prideco will be liable if it is prevented
or delayed by law or any circumstance beyond its control in performing its
obligations under the Deposit Agreement. The obligations of the Depositary under
the Deposit Agreement are limited to performing its duties thereunder without
negligence or bad faith. The obligations of Grant Prideco under the Deposit
Agreement are limited to performing its duties thereunder in good faith. Neither
Grant Prideco nor the Depositary will be required to prosecute or defend any
legal proceeding regarding any Depositary Shares or Preferred Stock unless
satisfactory indemnity is furnished. Grant Prideco and the Depositary may rely
upon the advice of counsel or accountants, or upon information provided by
persons presenting Preferred Stock.
DESCRIPTION OF WARRANTS
We may issue Warrants to purchase Debt Securities, Common Stock or
Preferred Stock (which may be represented by Depositary Shares). We may issue
Warrants independently or together with any other Securities and may attach them
to or separate them from other Securities. We will issue any Warrants under
separate Warrant Agreements to be entered into between us and a warrant agent
specified in the applicable prospectus supplement.
SPECIFIC TERMS OF EACH SERIES OF WARRANT IN A PROSPECTUS SUPPLEMENT
The following describes general terms and provisions of the Warrants to
which any prospectus supplement may relate. Other terms, and the particular
terms of a specific series of Warrants (which differ from the terms described
below), will be described in the prospectus supplement relating to that series.
The terms of each series of Warrants will be governed by a Warrant Agreement
(each a "Warrant Agreement") that we will enter into with a warrant agent. No
Warrant Agreement is restated in its entirety below, and the Warrant Agreement
relating to any specific series of Warrants will not be restated in its entirety
in a prospectus supplement. We will file a Warrant Agreement relating to each
series of Warrants as an exhibit to the registration statement of which this
prospectus forms a part (or as an exhibit to a Current Report on Form 8-K)
before we sell those Warrants. You should read that Warrant Agreement, because
it, and not this description, controls the rights of holders of the applicable
Warrants.
The Warrants will be denominated in U.S. dollars or in such foreign
currency, currency unit or composite currency as indicated in the applicable
prospectus supplement.
The applicable prospectus supplement will describe the terms of any series
of Warrants in respect of which this prospectus is being delivered, including,
where applicable, the following:
- the title of the Warrants;
- the aggregate number of the Warrants;
- the price or prices for which the Warrants will be issued;
- the currency, currency unit or composite currency in which the price for
the Warrants will be payable;
- the designation, number and terms of the Debt Securities, Common Stock or
Preferred Stock purchasable upon exercise of the Warrants, and procedures
pursuant to which such numbers may be adjusted;
- the designation and terms of the Debt Securities, Common Stock or
Preferred Stock, if any, with which the Warrants are issued and the
number of Warrants issued with each such Security;
- the date, if any, on and after which the Warrants and the related
underlying Security will be separately transferable;
- the exercise price or prices at which the Debt Securities, Common Stock
or Preferred Stock purchasable upon exercise of the Warrants may be
purchased, or provisions for determining the exercise price or prices,
procedures pursuant to which the exercise price or prices may be
adjusted,
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and (if not U.S. dollars) the foreign currency, currency unit or
composite currency in which the exercise price or prices are denominated;
- the date on which the right to exercise the Warrants will commence and
the date on which that right will expire;
- whether the Warrants will be issued in bearer form;
- the minimum or maximum amount of Warrants that may be exercised at any
one time;
- information with respect to book-entry procedures, if any;
- a discussion of certain United States federal income tax considerations;
and
- any other terms of the Warrants, including terms, procedures and
limitations relating to the
- transferability, exchange and exercise of the Warrants.
Until they exercise their Warrants, holders of Warrants will not have any
of the rights of holders of the Securities purchasable upon exercise, and will
not be entitled to
- receive payments of principal of (or premium, if any) or interest, if
any, on any Debt Securities purchasable upon exercise,
- receive dividend payments, if any, with respect to any underlying
Securities or
- exercise the voting rights of any Common Stock or Preferred Stock
purchasable upon exercise.
EXERCISE OF WARRANTS
Unless otherwise indicated in the applicable prospectus supplement relating
thereto, the Warrants will be issued in registered form. Each Warrant will
entitle its holder to purchase for cash the principal amount or number of
Securities of Grant Prideco at the exercise price set forth in, or determinable
from, the applicable prospectus supplement relating to the Warrants offered
thereby. Warrants may be exercised as described in the applicable prospectus
supplement at any time up to the close of business on the expiration date set
forth in the prospectus supplement. After the close of business on the
expiration date (or any later expiration date, if we extend the expiration
date), unexercised Warrants will become void.
Upon receipt of payment and of the certificate evidencing a Warrant,
properly completed and duly executed, at the corporate trust office of the
warrant agent or any other office indicated in the applicable prospectus
supplement, we will, as soon as practicable, forward the Securities purchasable
upon such exercise. If less than all of the Warrants represented by a
surrendered Warrant certificate are exercised, a new Warrant certificate will be
issued for the remaining Warrants.
MODIFICATIONS
We and the warrant agent may amend the Warrant Agreements and the terms of
the Warrants, without the consent of the holders of Warrants,
- to cure any ambiguity, defect or inconsistency;
- to provide for the assumption of our obligations to holders of Warrants
in the case of a merger or consolidation or sale of all or substantially
all of our assets;
- to make any change that we deem necessary or desirable and that will not
materially and adversely affect the interests of holders of outstanding
Warrants; or
- to provide for a successor warrant agent.
We and the warrant agent also may modify or amend certain other terms of
the Warrant Agreements and the Warrants with the consent of the holders of a
majority in number of the then-outstanding
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unexercised Warrants affected. However, no such modification or amendment may be
made without the consent of the affected holders if the amendment would
- shorten the period of time during which the Warrants may be exercised;
- otherwise materially and adversely affect the exercise rights of the
holders of the Warrants; or
- reduce the number of outstanding Warrants.
MERGER, CONSOLIDATION OR SALE OF ASSETS
If at any time there occurs a merger of, consolidation of, or sale of
substantially all of the assets of, Grant Prideco, as a result of which
Securities underlying Warrants are converted into the right to receive stock,
Securities or other property, then each outstanding Warrant will thereafter only
be exercisable for the kind and amount of stock, Securities or other property
receivable upon the consummation of that transaction by a holder of the number
of Securities underlying the Warrant.
ENFORCEABILITY OF RIGHTS BY HOLDERS
The warrant agent will act solely as our agent in connection with the
issuance and exercise of any Warrants. The warrant agent will have no duty or
responsibility in case of any default by Grant Prideco in the performance of its
obligations under the Warrant Agreements or the Warrant certificates. Each
holder of Warrants may, without the consent of the warrant agent, enforce by
appropriate legal action, on its own behalf, its right to exercise its Warrants.
SELLING SECURITYHOLDERS
In addition to covering the offering of Securities by us, this prospectus
covers the offering for resale of Securities by Selling Securityholders. The
applicable prospectus supplement will set forth, with respect to each Selling
Stockholder,
- the name of the Selling Stockholder,
- the nature of any position, office or other materials relationship which
the Selling Stockholder will have had within the prior three years with
Grant Prideco or any of its predecessors or affiliates,
- the type and amount of Securities owned by the Selling Stockholder prior
to the offering,
- the type and amount of Securities to be offered for the Selling
Stockholder's account and
- the amount and (if one percent or more) the percentage of Securities to
be owned by the Selling Stockholder after completion of the offering.
The Selling Securityholders may include or consist of, from time to time,
such underwriters and/or other persons with whom we may enter into standby
arrangements from time to time as described under "Plan of Distribution".
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PLAN OF DISTRIBUTION
DISTRIBUTIONS BY GRANT PRIDECO
We may sell Securities to one or more underwriters for public offering and
sale by them. We also may sell Securities directly to investors or to other
purchasers or through dealers or agents. We will name any underwriter, dealer or
agent involved in the offer and sale of the Securities in the applicable
prospectus supplement.
In addition, we may from time to time, redeem, repurchase or tender for
some or all of our outstanding indebtedness. In that case, we may enter into an
agreement with one or more underwriters or other persons pursuant to which that
underwriter or person would agree to act as a "standby purchaser" and purchase
from us a number of shares of our common stock or other securities of Grant
Prideco as would be required to fund some or all of the applicable redemption,
repurchase or tender offer price. Alternatively, a standby purchaser may agree
to purchase directly any redeemed, repurchased or tendered indebtedness and
receive, as compensation, Securities issued by Grant Prideco. The agreement
might also provide that the standby purchaser would resell the Securities
received from Grant Prideco. In such case, the standby purchaser may be deemed
to be an underwriter and may be required to resell such Securities pursuant to a
prospectus supplement to this prospectus. The applicable terms of any such
agreement or arrangement, including terms relating to compensation and the
identity of any such standby purchaser, would be disclosed in a prospectus
supplement.
We may distribute Securities from time to time in one or more transactions
at a fixed price or prices, which may be changed, or at market prices prevailing
at the time of sale, at prices related to those prevailing market prices or at
negotiated prices. We may sell common stock under this prospectus from time to
time in one or more transactions on the New York Stock Exchange or in negotiated
transactions or a combination of these methods.
In connection with distributions of Securities, we may enter into hedging
transactions with broker-dealers through which those broker-dealers may sell
Securities registered hereunder in the course of hedging, through short sales,
the positions they assume with us.
In connection with the sale of Securities, we may compensate underwriters,
dealers or agents or purchasers of Securities may compensate their agents, in
the form of discounts, concessions or commissions. Underwriters may sell
Securities to or through dealers, and the dealers may receive compensation in
the form of discounts, concessions or commissions from the underwriters and/or
commissions from the purchasers for whom they may act as agents. Underwriters,
dealers and agents that participate in a distribution of Securities may be
deemed to be underwriters, and any discounts or commissions received by them
from us (along with any profit on the resale of Securities by them) may be
deemed to be underwriting discounts and commissions under the Securities Act.
Any such underwriter, dealer or agent will be identified, and any such
compensation we pay, will be described in the applicable prospectus supplement.
Unless otherwise indicated in the applicable prospectus supplement, any agent
will be acting on a best efforts basis and any dealer will purchase Securities
as a principal, and may then resell those Securities at varying prices to be
determined by the dealer.
We may enter into agreements to provide indemnification and contribution to
underwriters, dealers and agents who participate in a distribution of Securities
against certain civil liabilities, including liabilities under the Securities
Act, and to reimburse those underwriters, dealers and agents for certain
expenses.
If we so indicated in the applicable prospectus supplement, we will
authorize agents and underwriters or dealers to solicit offers by certain
purchasers to purchase offered Securities from us, at the public offering price
set forth in the prospectus supplement, pursuant to delayed delivery contracts
providing for payment and delivery on a specified date in the future. These
contracts will be subject only to those conditions set forth in the prospectus
supplement, and the prospectus supplement will set forth the commission payable
for solicitation of the offers.
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Certain underwriters, dealers or agents and their associates may engage in
transactions with and perform services for us in the ordinary course of
business.
The Securities may or may not be listed on a national Securities exchange
or a foreign Securities exchange (other than the common stock, which is listed
on the New York Stock Exchange). Any common stock sold pursuant to a prospectus
supplement will be listed on the New York Stock Exchange, subject to official
notice of issuance. Any underwriters to whom we sell Securities for public
offering and sale may make a market in those Securities, but the underwriters
will not be obligated to do so and may discontinue any market making activities
at any time without notice. We cannot assure you that there will be an active
trading market for any Securities.
DISTRIBUTION BY SELLING SECURITYHOLDERS
Selling Securityholders may distribute Securities from time to time in one
or more transactions (which may involve block transactions) on the New York
Stock Exchange, in the over-the-counter market, in transactions otherwise than
on the New York Stock Exchange or in the over-the-counter market or in a
combination of any of these transactions. Selling Securityholders may sell
Securities at market prices prevailing at the time of sale, at prices related to
the prevailing market prices, at negotiated prices or at fixed prices. The
Selling Securityholders may from time to time offer their Securities through
underwriters, brokers, dealers or agents, who may receive compensation in the
form of underwriting discounts, commissions or concessions from the Selling
Securityholders and/or the purchasers of the Securities for whom they act as
agent. From time to time the Selling Securityholders may engage in short sales,
short sales against the box, puts and calls and other transactions in securities
of Grant Prideco, or derivatives thereof, and may sell and deliver their shares
in connection therewith. In addition, the Selling Securityholders may from time
to time sell their Securities in transactions permitted by Rule 144 under the
Securities Act.
As of the date of this prospectus, we have engaged no underwriter, broker,
dealer or agent in connection with any distribution of Securities pursuant to
this prospectus by the Selling Securityholders. To the extent required, the type
and amount of Securities to be sold, the purchase price, the name of any
applicable agent, broker, dealer or underwriter and any applicable commissions
with respect to a particular offer will be set forth in the applicable
prospectus supplement. The aggregate net proceeds to the Selling Securityholders
from the sale of their Securities offered hereby will be the sale price of those
shares, less any commissions, if any, and other expenses of issuance and
distribution not borne by us.
The Selling Securityholders and any brokers, dealers, agents or
underwriters that participate with the Selling Securityholders in a distribution
of Securities may be deemed to be "underwriters" within the meaning of the
Securities Act, in which event any discounts, concessions and commissions
received by such brokers, dealers, agents or underwriters and any profit on the
resale of the shares purchased by them may be deemed to be underwriting
discounts and commissions under the Securities Act.
The applicable prospectus supplement will set forth the extent to which we
will have agreed to bear fees and expenses of the Selling Securityholders in
connection with the registration of the Securities being offered hereby by them.
We may, if so indicated in the applicable prospectus supplement, agree to
indemnify Selling Securityholders against certain civil liabilities, including
liabilities under the Securities Act.
25
<PAGE> 31
LEGAL MATTERS
Unless otherwise specified in a prospectus supplement relating to
particular Securities, certain legal matters with respect to the validity of the
Securities will be passed upon for the Company by Fulbright & Jaworski L.L.P.,
Houston, Texas, and for the underwriters, dealers or agents, if any, of a
particular issue of Securities, by Andrews Kurth L.L.P., Houston, Texas.
EXPERTS
The financial statements incorporated by reference in this prospectus and
elsewhere in the registration statement have been audited by Arthur Andersen
LLP, independent public accountants, as indicated in their reports with respect
thereto, and are included herein in reliance upon the authority of said firm as
experts in accounting and auditing in giving said reports.
Our board will select before the end of fiscal 2000 an independent
accounting firm to audit our financial statements for the year ending December
31, 2000. Arthur Andersen LLP has served as independent public accountants of
Grant Prideco through the periods covered by the financial statements included
in our Form 10 registration statement.
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and current reports, proxy statements and other
information with the Securities and Exchange Commission. You may read and copy
and document we file at the Securities and Exchange Commission's public
reference rooms in Washington, D.C., New York, New York and Chicago, Illinois.
Please call the Securities and Exchange Commission at (800) SEC-0330 for further
information on the public reference rooms. Our Securities and Exchange
Commission filings are also available to the public at the Securities and
Exchange Commission's wed site at http://www.sec.gov. In addition, documents
filed by Grant Prideco can be inspected at the offices of the New York Stock
Exchange, Inc., New York, New York.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Securities and Exchange Commission allows us to "incorporate by
reference" into this prospectus the information we file with it, which means
that we can disclose important information to you by referring you to those
documents. The information incorporated by reference is considered to be part of
this prospectus, and later information that we file with the SEC will
automatically update and supersede this information. We incorporate by reference
our Registration Statement on Form 10 (File No. 001-15423) and any future
filings we make with the SEC under section 13(a), 13(c), 14 or 15(d) of the
Securities Exchange Act of 1934 until our offering is completed.
We will provide without charge to each person, including any beneficial
owner, to whom this prospectus is delivered, upon written or oral request, a
copy of any document incorporated by reference in this prospectus, other than
exhibits to any such document not specifically described above. Requests for
such documents should be directed to Philip A. Choyce, Corporate Secretary,
Grant Prideco Inc., 1450 Lake Robbins Drive, Suite 600, The Woodlands, Texas
77380; telephone number: (281) 297-8500.
26
<PAGE> 32
PART II INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the estimated expenses in connection with
the distribution of the Securities covered by this Registration Statement. All
of the expenses will be borne by the Company except as otherwise indicated.
<TABLE>
<S> <C>
Registration fee under the Securities Act.............. $132,000
Printing and engraving expenses*....................... 50,000
Legal fees and expenses*............................... 75,000
Accounting fees and expenses*.......................... 75,000
Fees and expenses of trustee and counsel*.............. 15,000
Miscellaneous*......................................... 3,000
--------
Total*......................................... $350,000
</TABLE>
- ---------------
* Estimated solely for the purpose of this Item. Actual expenses may be more
or less, depending on the nature of the offering and the type of security.
ITEM 15. INDEMNIFICATION OF OFFICERS AND DIRECTORS.
Delaware law and our certificate of incorporation and bylaws include
provisions designed to limit the liability of our officers and directors and, in
certain circumstances, to indemnify our officers and directors against certain
liabilities. These provisions are designed to encourage qualified individuals to
serve as our officers and directors.
Exculpation Of Monetary Liability
Under Delaware law, a corporation may include provisions in its certificate
of incorporation that relieve its directors of monetary liability for breaches
of their fiduciary duty to the corporation, except under certain circumstances,
including
- a breach of the director's duty of loyalty,
- acts or omissions of the director not in good faith or which involve
intentional misconduct or a knowing violation of law,
- the approval of an improper payment of a dividend or an improper purchase
by the corporation of the corporation's stock or
- any transaction from which the director derived an improper personal
benefit.
Our certificate of incorporation will provide that our directors are not
liable to us or our stockholders for monetary damages for breach of their
fiduciary duty, subject to the restrictions above. These limitations of
liability may not affect claims arising under the federal securities laws.
Indemnification
Under Section 145 of the Delaware General Corporation Law and our bylaws,
we are obligated to indemnify our present and former directors and officers and
may indemnify other employees and individuals against expenses (including
attorneys' fees), judgments, fines and amounts paid in settlement in connection
with specified actions, suits or proceedings, whether civil, criminal,
administrative or investigative (other than an action by or in the right of the
corporation, a "derivative action"), if the person to whom indemnity is granted
acted in good faith and in a manner he or she reasonably believed to be in or
not opposed to our best interests, and with respect to any criminal action or
proceeding, had no reasonable cause to believe his or her conduct was unlawful.
A similar standard of care is applicable in the case of derivative actions,
except that indemnification extends only to expenses (including attorneys' fees)
II-1
<PAGE> 33
incurred in connection with defense or settlement of such an action, and the
Delaware General Corporation Law requires court approval before there can be any
indemnification where the person seeking indemnification has been found liable
to Grant Prideco.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors and officers and controlling persons pursuant to
the foregoing provisions, we have been advised that, in the opinion of the SEC,
such indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable.
ITEM 16. EXHIBITS.
<TABLE>
<C> <S>
2.1 -- Distribution Agreement, dated as of March 22, 2000,
between Weatherford and Grant
3.1 -- Restated Certificate of Incorporation of Grant
3.2 (a) -- Restated Bylaws of Grant
4.1 -- Subordinated Promissory Note to Weatherford, dated April
14, 2000
4.2 (b) -- Subordination Agreement, dated April 14, 2000, among
Grant, Weatherford and Transamerica Business Credit
Corporation, as agent
4.3 -- Loan and Security Agreement, dated April 14, 2000, among
Grant and certain of its subsidiaries, the Lenders
identified therein and Transamerica Business Credit
Corporation, as agent
4.4 -- Guaranty, dated April 14, 2000, by Grant's subsidiaries
in favor of Transamerica Business Credit Corporation, as
agent
4.5 -- Pledge Agreement, dated April 14, 2000, by Grant's
subsidiaries in favor of Transamerica Business Credit
Corporation, as agent
12.1 -- Statement of Computation of Ratios
21.1 (a) -- List of Subsidiaries of Grant
23.1 -- Consent of Arthur Andersen LLP
</TABLE>
- ---------------
(a) Incorporated by reference to Grant's Registration Statement on Form 10
(file No. 00115423).
(b) To be filed by amendment.
We will file, as an exhibit to a Current Report on Form 8-K, (a) any
underwriting agreement relating to Securities offered hereby, (b) the
instruments setting forth the terms of any debt securities, preferred stock,
depositary shares or warrants and (c) any required opinion of counsel as to the
validity of any Securities and as to certain tax matters relative to Securities.
ITEM 17. UNDERTAKINGS.
The registrant hereby undertakes:
- To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
- to include any prospectus required by section 10(a)(3) of the Act of
1933;
- to reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement; and
- to include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or
any material change to such information in the registration statement;
provided, however, that the undertakings set forth in the previous two
clauses do not apply if the information required to be included in a
post-effective amendment by those clauses is contained in periodic
reports filed with or furnished to the Securities and Exchange
Commission by the Company pursuant to section 13 or section 15(d) of
the
II-2
<PAGE> 34
Securities Exchange Act of 1934 that are incorporated by reference in
the registration statement.
- That, for the purpose of determining any liability under the Securities
Act of 1933, each such post-effective amendment 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.
- To remove from registration by means of a post-effective amendment any of
the Securities being registered which remain unsold at the termination of
the offering.
- That, for purposes of determining any liability under the Securities Act
of 1933, each filing of the Company's annual report pursuant to section
13(a) or section 15(d) of the Securities Exchange Act of 1934 (and, where
applicable, each filing of an employee benefit plan's annual report
pursuant to Section 15(d) of the Securities Exchange Act of 1934) that is
incorporated by reference in the registration statement 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.
- That, for purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as
part of a registration statement in reliance upon Rule 430A and contained
in a form of prospectus filed by the registrants pursuant to Rule
424(b)(1) or (4) or 497(h) under the Securities Act of 1933 shall be
deemed to be part of this registration statement as of the time it was
declared effective.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the 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 Act and will be governed by the final adjudication of
such issue.
II-3
<PAGE> 35
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, Grant Prideco,
Inc. certifies that it has reasonable grounds to believe that it meets all of
the requirements for filing on Form S-3 and has duly caused this Registration
Statement or amendment to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of The Woodlands, State of Texas, on April 20,
2000.
GRANT PRIDECO, INC.
By: /s/ JOHN C. COBLE
----------------------------------
John C. Coble
President and Chief Executive
Officer
Know all men by these presents, that each individual whose signature
appears below constitutes and appoints Bernard J. Duroc-Danner and John C. Coble
and each of them, his true and lawful attorney-in-fact and agent, with full
power of substitution and resubstitution, for him and in his name, place and
stead, in any and all capacities, to sign any and all amendments (including
post-effective amendments) to this Registration Statement, and to file the same
and all exhibits thereto, and all documents in connection therewith, with the
Securities and Exchange Commission, granting said attorney-in-fact and agent,
and each of them, full power and authority to do and perform each and every act
and thing requisite and necessary to be done in and about the premises, as fully
to all intents and purposes as he might or could do in person, hereby ratifying
and confirming all that said attorney-in-fact and agent or either of them, or
their or his substitute or substitutes, may lawfully do or cause to be done by
virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities on April 20, 2000.
<TABLE>
<C> <S>
/s/ JOHN C. COBLE Chief Executive Officer, President and
- --------------------------------------------- Director (principal executive officer)
John C. Coble
/s/ FRANCES R. POWELL Chief Financial Officer, Vice President and
- --------------------------------------------- Treasurer (principal financial and accounting
Frances R. Powell officer)
/s/ BERNARD J. DUROC-DANNER Chairman of the Board, Director
- ---------------------------------------------
Bernard J. Duroc-Danner
/s/ ELIOT M. FRIED Director
- ---------------------------------------------
Eliot M. Fried
/s/ SHELDON B. LUBAR Director
- ---------------------------------------------
Sheldon B. Lubar
/s/ WILLIAM E. MACAULAY Director
- ---------------------------------------------
William E. Macaulay
/s/ ROBERT K. MOSES Director
- ---------------------------------------------
Robert K. Moses, Jr.
Director
- ---------------------------------------------
Robert A. Rayne
</TABLE>
II-4
<PAGE> 36
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
2.1 -- Distribution Agreement, dated as of March 22, 2000,
between Weatherford and Grant
3.1 -- Restated Certificate of Incorporation of Grant
3.2 (a) -- Restated Bylaws of Grant
4.1 -- Subordinated Promissory Note to Weatherford, dated April
14, 2000
4.2 (b) -- Subordination Agreement, dated April 14, 2000, among
Grant, Weatherford and Transamerica Business Credit
Corporation, as agent
4.3 -- Loan and Security Agreement, dated April 14, 2000, among
Grant and certain of its subsidiaries, the Lenders
identified therein and Transamerica Business Credit
Corporation, as agent
4.4 -- Guaranty, dated April 14, 2000, by Grant's subsidiaries
in favor of Transamerica Business Credit Corporation, as
agent
4.5 -- Pledge Agreement, dated April 14, 2000, by Grant's
subsidiaries in favor of Transamerica Business Credit
Corporation, as agent
12.1 -- Statement of Computation of Ratios
21.1 (a) -- List of Subsidiaries of Grant
23.1 -- Consent of Arthur Andersen LLP
</TABLE>
- ---------------
(a) Incorporated by reference to Grant's Registration Statement on Form 10
(file No. 00115423).
(b) To be filed by amendment.
<PAGE> 1
EXHIBIT 2.1
DISTRIBUTION AGREEMENT
BY AND BETWEEN
WEATHERFORD INTERNATIONAL, INC.
AND
GRANT PRIDECO, INC.
MARCH 22, 2000
<PAGE> 2
<TABLE>
<CAPTION>
TABLE OF CONTENTS
Page
----
<S> <C>
ARTICLE 1.........................................................................................................1
CERTAIN DEFINITIONS......................................................................................1
1.1 "Additional Shares"...................................................................1
1.2 "Affiliate"...........................................................................1
1.3 "Agreement"...........................................................................2
1.4 "Assets"..............................................................................2
1.5 "Amended Bylaws"......................................................................2
1.6 "Business Day"........................................................................2
1.7 "CERCLA"..............................................................................2
1.8 "Circumstance"........................................................................2
1.9 "Code"................................................................................2
1.10 "Consent Required Contract"...........................................................2
1.11 "Contributed Indebtedness"............................................................2
1.12 "Contribution"........................................................................2
1.13 "Distribution"........................................................................2
1.14 "Distribution Date"...................................................................2
1.15 "Environmental Conditions"............................................................2
1.16 "Environmental Law" or "Environmental Laws"...........................................2
1.17 "Environmental Liabilities"...........................................................3
1.18 "Excluded Assets".....................................................................3
1.19 "Grant"...............................................................................3
1.20 "Grant Common Stock"..................................................................3
1.21 "Grant Company".......................................................................3
1.22 "Grant Employee"......................................................................3
1.23 "Grant Employee Benefit Plans"........................................................3
1.24 "Grant Entity"........................................................................3
1.25 "Grant 401(k) Plan"...................................................................4
1.26 "Grant Liabilities"...................................................................4
1.27 "Grant Option"........................................................................5
1.28 "Grant Taxes".........................................................................5
1.29 "Liability"...........................................................................5
1.30 "1998 Director Options and Warrants"..................................................5
1.31 "1998 Weatherford Employee Option Plan"...............................................5
1.32 "Note"................................................................................5
1.33 "NYSE"................................................................................5
1.34 "Old Weatherford Director Plans"......................................................5
1.35 "Old Weatherford Employee Option Plans"...............................................5
1.36 "Person"..............................................................................6
1.37 "Preferred Supplier Agreement"........................................................6
1.38 "Properties"..........................................................................6
1.39 "Record Date".........................................................................6
1.40 "Restated Certificate of Incorporation"...............................................6
1.41 "SEC".................................................................................6
1.42 "Service of Process"..................................................................6
1.43 "Stock Split".........................................................................6
1.44 "Tax Allocation Agreement"............................................................6
1.45 "Taxes"...............................................................................6
</TABLE>
i
<PAGE> 3
<TABLE>
<CAPTION>
<S> <C> <C> <C>
1.46 "Transfer Agent"......................................................................6
1.47 "Transfers"...........................................................................6
1.48 "Transition Services Agreement".......................................................6
1.49 "Trust"...............................................................................6
1.50 "Waste Materials".....................................................................6
1.51 "Weatherford".........................................................................7
1.52 "Weatherford Common Stock"............................................................7
1.53 "Weatherford Company".................................................................7
1.54 "Weatherford Employee"................................................................7
1.55 "Weatherford 401(k) Plan".............................................................7
1.56 "Weatherford Indemnified Parties".....................................................7
1.57 "Weatherford Option"..................................................................7
ARTICLE 2.........................................................................................................7
CONTRIBUTION.............................................................................................7
2.1 Contribution..........................................................................7
2.2 Grant Liabilities.....................................................................8
2.3 Consideration.........................................................................8
2.4 Limitation of Assignments.............................................................8
2.5 Delivery of Records...................................................................8
2.6 Guarantees and Financial Assurances...................................................9
2.7 Grant Acknowledgments.................................................................9
ARTICLE 3.........................................................................................................9
RECAPITALIZATION OF GRANT; MECHANICS OF DISTRIBUTION.....................................................9
3.1 Grant Capitalization..................................................................9
3.2 Recapitalization of Grant.............................................................9
3.3 Mechanics of Distribution.............................................................9
3.4 Timing of Distribution................................................................9
ARTICLE 4.........................................................................................................9
EMPLOYEE BENEFIT PLANS...................................................................................9
4.1 Employee Benefits are Grant Liabilities...............................................9
4.2 401(k) Plans..........................................................................9
4.3 Employee Health, Life and Disability Insurance Plans.................................10
4.4 Credited Employment..................................................................10
4.5 No Termination of Employment for Benefit Entitlement Purposes........................10
ARTICLE 5........................................................................................................10
STOCK PLANS.............................................................................................10
ARTICLE 6........................................................................................................14
INDEMNIFICATION.........................................................................................14
6.1 Indemnification Matters..............................................................14
6.2 Notice of Circumstance...............................................................16
6.3 Payment..............................................................................16
6.4 Insurance............................................................................16
6.5 Scope of Indemnification.............................................................17
</TABLE>
ii
<PAGE> 4
<TABLE>
<CAPTION>
Page
----
<S> <C> <C> <C>
6.6 Indemnity for Certain Environmental Liabilities......................................17
ARTICLE 7........................................................................................................17
CONDITIONS TO OBLIGATIONS OF WEATHERFORD................................................................17
ARTICLE 8........................................................................................................18
MISCELLANEOUS...........................................................................................18
8.1 Grant Covenants......................................................................18
8.2 Governing Law........................................................................18
8.3 Arbitration..........................................................................18
8.4 Notices..............................................................................19
8.5 Expenses.............................................................................20
8.6 Entire Agreement.....................................................................20
8.7 Waiver...............................................................................20
8.8 Binding Effect; Assignment; No Third Party Benefit...................................20
8.9 Counterparts.........................................................................20
8.10 References...........................................................................20
8.11 Terminology..........................................................................21
8.12 Severability.........................................................................21
8.13 Further Assurances...................................................................21
</TABLE>
LIST OF ANNEXES
Annex A - Amended Bylaws of Grant
Annex B - Excluded Assets
Annex C - Note
Annex D - Preferred Supplier Agreement
Annex E - Restated Certificate of Incorporation of Grant
Annex F - Tax Allocation Agreement
Annex G - Transfers
Annex H - Transition Services Agreement
Annex I - Grant Employee Stock Plan
Annex J - Grant Director Plan
Annex K - Employee Benefits Agreement
iii
<PAGE> 5
DISTRIBUTION AGREEMENT
THIS DISTRIBUTION AGREEMENT (this "Agreement") is dated March 22, 2000,
by and among WEATHERFORD INTERNATIONAL, INC., a Delaware corporation
("Weatherford"), and GRANT PRIDECO, INC. ("Grant"), a Delaware corporation.
W I T N E S S E T H:
WHEREAS, Grant is a wholly owned subsidiary of Weatherford;
WHEREAS, pursuant to this Agreement Weatherford and Grant will cause
the Transfers to be made or occur, Grant will execute the Note, Weatherford
will contribute the Contributed Indebtedness to Grant and Grant will effect the
Stock Split and issue the Additional Shares to Weatherford (the transactions
described in this paragraph are referred to collectively herein as the
"Contribution");
WHEREAS, after the Contribution, Weatherford will distribute to its
stockholders all of the outstanding stock of Grant as further described in
Article 3 hereof; and
WHEREAS, for federal income tax purposes, it is intended that the
Contribution and Distribution will qualify as transactions pursuant to Sections
368(a)(1)(D) and 355 and related sections of the Code;
NOW, THEREFORE, in consideration of the premises and the mutual terms,
covenants and conditions herein contained, and intending to be legally bound
hereby, the parties hereto hereby agree as follows:
ARTICLE 1
CERTAIN DEFINITIONS
As used in this Agreement, the following terms have the following
respective meanings:
1.1 "Additional Shares" shall mean that number of shares of Grant
Common Stock as shall be equal to the number of shares of Weatherford Common
Stock outstanding on the Record Date, less the number of shares of Grant Common
Stock owned by Weatherford on the Record Date, which Additional Shares will be
issued to Weatherford as a result of the Stock Split.
1.2 "Affiliate" shall mean, with respect to Weatherford or Grant
Prideco, any Person, that directly or indirectly, is in control of, is
controlled by, controls or is under common control of Weatherford or Grant
Prideco, as the case may be. For purposes of this definition, control shall
include the ownership of 50% or more of the legal or beneficial interest in any
Person or the power to direct or cause the direction of the management and
policies of such Person, whether through the ownership of voting securities, by
contract or otherwise. A Person who is an Affiliate shall only be considered an
Affiliate for so long as that Person meets the definition of an Affiliate. An
officer, director, general partner, managing member or trustee of a Person or
Affiliate of such Person shall not be considered to be an Affiliate unless such
Person is under the direct or indirect control or common control of Weatherford
or Grant Prideco, as the case may be. For purposes of clarity, neither
Weatherford nor Grant Prideco shall be considered to be an Affiliate of the
other, nor shall National Oilwell, Grey Wolf Inc. or any other company in which
a director or officer of Weatherford is also a director, officer or shareholder
be considered an Affiliate of Weatherford unless Weatherford itself controls
such company.
1.3 "Agreement" shall have the meaning specified in the preamble.
<PAGE> 6
1.4 "Assets" shall mean, collectively, all the property, assets and
rights, tangible and intangible, owned or operated by the Grant Companies on,
before or after the Distribution Date, excluding the Excluded Assets.
1.5 "Amended Bylaws" shall mean the Amended Bylaws of Grant, in
substantially the form of Annex A hereto.
1.6 "Business Day" shall mean a day on which national banks are
generally open for the transaction of business in Houston, Texas.
1.7 "CERCLA" shall mean the Comprehensive Environmental Response,
Compensation, and Liability Act, 42 U.S.C. Section 9601 et seq.
1.8 "Circumstance" shall have the meaning specified in Section 6.2
hereof.
1.9 "Code" shall mean the Internal Revenue Code of 1986, as amended.
1.10 "Consent Required Contract" shall have the meaning specified in
Section 2.4 hereof.
1.11 "Contributed Indebtedness" shall mean all intercompany
indebtedness owed by a Grant Company to a Weatherford Company in excess of the
sum of (i) the amount of the Note owed by Grant to Weatherford immediately
prior to the Contribution, (ii) the Drill Stem Credits (as defined in the
Preferred Supplier Agreement), (iii) indebtedness owed by Grant to Weatherford
pursuant to the Tax Allocation Agreement and (iv) indebtedness owed by Grant in
connection with any employee benefit plans, arrangements or policies for the
benefit of employees and former employees (and their beneficiaries) of any
Grant Company.
1.12 "Contribution" shall have the meaning specified in the second
"WHEREAS" clause hereof.
1.13 "Distribution" shall mean the distribution by Weatherford to its
stockholders (other than the Trust) of all of the outstanding shares of Grant.
1.14 "Distribution Date" shall mean the time and date as of which the
Distribution is effective.
1.15 "Environmental Conditions" shall mean (i) any pollution,
contamination, degradation, damage or injury caused by, related to, arising
from or in connection with the generation, handling, use, treatment, storage,
transportation, disposal, discharge, release or emission of any Waste Materials
and (ii) any course of conduct or operating practice with respect to matters
governed by or regulated under Environmental Laws.
1.16 "Environmental Law" or "Environmental Laws" shall mean all laws,
rules, regulations, statutes, ordinances, decrees or orders of any governmental
entity now or at any time in the future in effect relating to (i) the
prevention or control of any potential pollutant or protection of the air,
water or land, (ii) solid, gaseous or liquid waste generation, handling,
treatment, storage, disposal, discharge, release or transportation and (iii)
exposure to hazardous, toxic or other substances alleged to be harmful. The
term "Environmental Law" or "Environmental Laws" includes, without limitation,
(1) the terms and conditions of any license, permit, approval or other
authorization by any governmental entity and (2) judicial, administrative or
other regulatory decrees, judgments and orders of any governmental entity. The
term "Environmental Law" or "Environmental Laws" includes, but is not limited
to, the following statutes and the regulations promulgated thereunder: the Clean
Air Act, 42 U.S.C. Section 7401 et seq., the Resource Conservation Recovery Act,
42 U.S.C. Section 6901 et seq., the Superfund Amendments and Reauthorization
Act, 42 U.S.C. Section 11011 et seq., the Toxic Substances Control Act, 15
U.S.C. Section 2601 et seq., the Federal Water Pollution Control Act (Clean
Water Act),
2
<PAGE> 7
33 U.S.C. Section 1251, et seq., the Safe Drinking Water Act, 42 U.S.C. Section
300f et seq., CERCLA and any state, county or local laws or regulations similar
thereto.
1.17 "Environmental Liabilities" shall mean any and all liabilities,
responsibilities, claims, suits, losses, costs (including remediation, removal,
response, abatement, clean-up, investigative or monitoring costs and any other
related costs and expenses), other causes of action recognized now or at any
later time, damages, settlements, expenses, charges, assessments, liens,
penalties, fines, pre-judgment and post-judgment interest, attorney fees and
other legal fees imposed or incurred (i) pursuant to any agreement, order,
notice, requirement, responsibility or directive (including directives embodied
in Environmental Laws), injunction, judgment or similar documents (including
settlements) arising out of or in connection with any Environmental Laws, (ii)
pursuant to any claim by a governmental entity or other person or entity
pursuant to common law or statute for personal injury, property damage, damage
to natural resources, remediation, payment or reimbursement of response costs
or similar costs or expenses or (iii) as a result of Environmental Conditions.
1.18 "Excluded Assets" shall mean the assets listed on Annex B hereto.
1.19 "Grant" for purposes of the assumption and indemnification
provisions of this Agreement, shall include Grant Prideco, Inc. and any and all
predecessors or successors thereto, whether by merger, purchase or other
acquisition of substantially all of the assets or otherwise, and any and all
predecessors or successors to such entities.
1.20 "Grant Common Stock" shall mean shares of common stock, $.01 par
value per share, of Grant.
1.21 "Grant Company" shall mean any corporation, joint venture,
partnership, limited liability company, association, investment or other
entity, including Grant, and any predecessor of the foregoing, in which Grant
or any company in which the business of a Grant Entity is or was conducted (or
any predecessor to the business or assets of Grant) now or at any time in the
past owned, or as a result of Transfers will own, directly or indirectly, an
ownership interest (whether or not such ownership interest constitutes control
of the entity and whether or not such interest represents a passive or active
investment); provided, however, Weatherford International, Inc., Weatherford
Canada Ltd. and EVI de Venezuela, S.A. shall not be considered Grant Companies
to the extent the business conducted by them does not relate to the drill pipe,
tubular or related businesses that are being transferred to a subsidiary of
Grant.
1.22 "Grant Employee" shall mean an individual whose principal
occupation on the Distribution Date is as an employee of any Grant Company.
1.23 "Grant Employee Benefit Plans" shall have the meaning specified
in Section 4.3 hereof.
1.24 "Grant Entity" shall mean any entity or division of an entity in
which the drill pipe, tubular or related or associated business of
Weatherford's Grant Prideco division is now conducted or previously was
conducted, including when those businesses were conducted as a division of
Energy Ventures, Inc. or EVI, Inc.; provided, however, a Grant Entity shall not
include any Weatherford Company other than to the extent such Weatherford
Company's business is related to or associated with the drill pipe or other
business historically conducted by the Grant Prideco division.
1.25 "Grant 401(k) Plan" shall have the meaning specified in Section
4.2 hereof.
1.26 "Grant Liabilities" shall mean any and all Liabilities and
Environmental Liabilities (other than Liabilities or Environmental Liabilities
resulting from, arising out of or relating to the Excluded Assets) to which
Weatherford or any of its Affiliates may now or at any time in the future
become subject (whether
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<PAGE> 8
directly or indirectly, including by reason of any Grant Company owning,
controlling or operating any business or assets), resulting from, arising out
of or relating to (i) any Grant Company, (ii) any Grant Taxes (except as
provided otherwise in the Tax Allocation Agreement), (iii) any obligation,
matter, fact, circumstance or action or omission by any Person in any way
relating to or arising from the business, operations or assets of any Grant
Company on, before or after the Distribution Date, (iv) any product or service
manufactured, sold or otherwise provided by any Grant Company on, before or
after the Distribution Date, (v) except as provided herein, the Contribution,
the Distribution or any of the other transactions contemplated hereby or (vi)
the Assets. The term "Grant Liabilities" shall also include, without
limitation, the following (other than Liabilities or Environmental Liabilities
resulting from, arising out of or relating to the Excluded Assets):
(a) Any and all Liabilities and Environmental Liabilities
resulting from, arising out of or relating to (i) the current, former
or future assets, activities, operations, facilities, actions or
omissions of any Grant Company or any of their respective officers,
directors or employees (to the extent such officer, director or
employee is acting in his or her capacity as an officer, director or
employee of a Grant Company), independent contractors or agents (in
their capacity as such), (ii) any product liability claim, recall,
replacement, returns or customer allowances of or relating to any
Grant Company or (iii) any contract or permit of any Grant Company,
regardless of whether the contract or permit is assigned, conveyed or
leased hereunder or under any other agreement contemplated hereby;
(b) Any and all accounts and notes payable of any Grant
Company;
(c) Any and all Liabilities relating to the Grant 401(k) Plan
and the Grant Employee Benefit Plans;
(d) Any and all Liabilities and Environmental Liabilities to,
on behalf of, or which arise from or relate to active or inactive
employees (retired or otherwise) of any Grant Company for claims
occurring on, before or after the Distribution Date, including,
without limitation, (i) liability for any salaries, wages, tax
equalization payments, vacation pay, sick leave, personal leave,
severance pay, wrongful dismissal or discrimination claims; (ii)
liability for or under any employee benefit plan, policy or
arrangement, including, without limitation, retirement, pension,
medical, dental, profit sharing, unemployment, supplemental
unemployment or disability plan policy or arrangement; (iii) liability
for any payroll taxes, social security or similar taxes or
withholding; (iv) liability arising from claims or litigation and (v)
liability arising from any injury, death, loss, disability,
occupational disease or claims under any workers' compensation laws;
(e) Any and all Liabilities and Environmental Liabilities
resulting from, arising out of, relating to or occurring on the
Properties, the operations on any of the Properties or with regard to
any of the Assets, and any off-site Environmental Liabilities related
to any of the foregoing or to any Grant Company, including, without
limitation, those under any indemnification agreement or obligation of
any Grant Company, Weatherford or any Affiliate of Weatherford and any
documents related thereto;
(f) Any and all Liabilities of any Grant Company with respect
to any projects or transactions performed or engaged in by it on,
before or after the Distribution Date;
(g) Any and all litigation and claims against any Grant
Company existing as of the Distribution Date;
(h) Except as provided otherwise in the Tax Allocation
Agreement, any and all Liabilities for Grant Taxes; and
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<PAGE> 9
(i) Any and all legal, accounting, consulting and expert fees
and expenses incurred in investigating, preparing, defending, settling
or discharging any claim or action arising under, out of or in
connection with any of the Grant Liabilities or Assets.
1.27 "Grant Option" shall mean an option to purchase Grant Common
Stock.
1.28 "Grant Taxes" shall mean any and all Taxes (i) to which any Grant
Company may be obligated pursuant to the Tax Allocation Agreement or (ii)
relating to or arising from the Contribution or the Distribution (including,
without limitation, any transfer taxes or value added taxes).
1.29 "Liability" shall mean any and all claims, demands, liabilities,
responsibilities, disputes, causes of action, losses, damages, assessments,
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)) and
obligations of every nature whatsoever, liquidated or unliquidated, known or
unknown, matured or unmatured, or fixed or contingent.
1.30 "1998 Director Options and Warrants" shall mean the nonqualified
stock options and warrants granted by Weatherford to non-employee directors on
or after August 31, 1998.
1.31 "1998 Weatherford Employee Option Plan" shall mean the
Weatherford International, Inc. 1998 Employee Stock Option Plan.
1.32 "Note" shall mean the promissory note to be executed by Grant in
favor of Weatherford, in substantially the form of Annex C hereto.
1.33 "NYSE" shall mean The New York Stock Exchange, Inc.
1.34 "Old Weatherford Director Plans" shall mean the Energy Ventures,
Inc. 1991 Non-Employee Director Stock Option Plan and the Energy Ventures, Inc.
Amended and Restated Non-Employee Director Stock Option Plan.
1.35 "Old Weatherford Employee Option Plans" shall mean the
Weatherford International Incorporated 1987 Stock Option Plan, the Weatherford
Enterra, Inc. 1991 Stock Option Plan, the Energy Ventures, Inc. Employees'
Stock Option Plan, the Energy Ventures, Inc. 1992 Employee Stock Option Plan,
the Taro Industries Limited Stock Option Plan and the D. Dale Wood Stock Option
Agreement.
1.36 "Person" shall mean an individual, partnership, corporation,
business trust, limited liability company, limited liability partnership, joint
stock company, trust, unincorporated association, joint venture, governmental
authority or other entity of whatever nature.
1.37 "Preferred Supplier Agreement" shall mean the agreement to be
entered into between Weatherford and Grant, in substantially the form of Annex
D hereto.
1.38 "Properties" shall mean the properties currently or previously
owned or operated by any Grant Company or Grant Entity, but excluding the
Excluded Assets.
1.39 "Record Date" shall have the meaning specified in Section 3.3
hereof.
1.40 "Restated Certificate of Incorporation" shall mean the Restated
Certificate of Incorporation of Grant, in substantially the form of Annex E
hereto.
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<PAGE> 10
1.41 "SEC" shall mean the United States Securities and Exchange
Commission.
1.42 "Service of Process" shall have the meaning specified in Section
6.1 hereof.
1.43 "Stock Split" shall mean the split pursuant to the Restated
Certificate of Incorporation of the outstanding shares of Grant Common Stock
into an aggregate number of shares equal to the number of shares of Weatherford
Common Stock on the Record Date, resulting in the issuance of the Additional
Shares.
1.44 "Tax Allocation Agreement" shall mean the agreement to be entered
into between Weatherford and Grant, substantially in the form of Annex F
hereto.
1.45 "Taxes" shall mean all federal, state, local, foreign and other
taxes, 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, value added,
withholding, payroll, employment, excise, estimated, severance, stamp,
occupation, premium, property, windfall profits or other taxes 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.
1.46 "Transfer Agent" shall mean American Stock Transfer & Trust
Company.
1.47 "Transfers" shall mean the transactions described on Annex G
hereto.
1.48 "Transition Services Agreement" shall mean the agreement to be
entered into between Weatherford and Grant, in substantially the form of Annex
H hereto.
1.49 "Trust" shall mean the Energy Ventures, Inc. Executive Deferred
Compensation Stock Ownership Trust.
1.50 "Waste Materials" shall mean any (i) toxic or hazardous materials
or substances; (ii) solid wastes, including asbestos, polychlorinated
biphenyls, mercury, buried contaminants, chemicals, flammable or explosive
materials; (iii) radioactive materials; (iv) petroleum wastes and spills or
releases of petroleum products; and (v) any other chemical, pollutant,
contaminant, substance or waste that is regulated by any governmental entity
under any Environmental Law.
1.51 "Weatherford" shall mean Weatherford International, Inc., a
Delaware corporation.
1.52 "Weatherford Common Stock" shall mean shares of common stock,
$1.00 par value per share, of Weatherford.
1.53 "Weatherford Company" shall mean any corporation, joint venture,
partnership, limited liability company, association, investment or other entity
(other than Grant, a Grant Company or any entity transferred to Grant or a
Grant Company as a result of the Transfers), including Weatherford, and any
predecessor of the foregoing, in which Weatherford or any Weatherford Company
(or any predecessor to the business or assets of Weatherford or any Weatherford
Company) now or at any time in the past owned, directly or indirectly, an
ownership interest (whether or not such ownership interest constitutes control
of the entity and whether or not such interest represents a passive or active
investment).
1.54 "Weatherford Employee" shall mean an individual whose principal
occupation on the Distribution Date is as an employee of any Weatherford
Company.
1.55 "Weatherford 401(k) Plan" shall mean the Weatherford
International, Inc. 401(k) Plan.
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<PAGE> 11
1.56 "Weatherford Indemnified Parties" shall have the meaning set
forth in Section 6.1(a) hereof.
1.57 "Weatherford Option" shall mean an option or warrant, as
applicable, to purchase Weatherford Common Stock.
ARTICLE 2
CONTRIBUTION
2.1 Contribution.
(a) Effective before the Distribution Date: (i) Weatherford
and Grant shall cause the Transfers to be made or occur, or shall have
entered into agreements to effect the Transfers; (ii) Grant will
transfer, or cause to be transferred, the Excluded Assets to the
Weatherford Company or Weatherford Companies designated by
Weatherford; (iii) Grant will execute and deliver the Note; (iv)
Weatherford will contribute the Contributed Indebtedness to Grant; (v)
Grant will effect the Stock Split and issue the Additional Shares to
Weatherford; and (vi) Grant will issue the Drill Stem Credits (as
defined in the Preferred Supplier Agreement) to Weatherford.
(b) THE TRANSFERS SHALL BE MADE WITHOUT ANY REPRESENTATION OR
WARRANTY, EXPRESS OR IMPLIED, WITH RESPECT TO THE ASSETS (CURRENT,
FIXED, PERSONAL, REAL, TANGIBLE OR INTANGIBLE), INCLUDING, BUT NOT
LIMITED TO, CONDITION OR WORKMANSHIP THEREOF, OR THE ABSENCE OF ANY
DEFECTS THEREIN, WHETHER LATENT OR PATENT, CAPACITY, SUITABILITY,
UTILITY, SALABILITY, AVAILABILITY, COLLECTIBILITY, OPERATIONS,
CONDITIONS, MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE, IT
BEING THE EXPRESS AGREEMENT OF WEATHERFORD AND GRANT THAT, EXCEPT AS
EXPRESSLY SET FORTH IN THIS AGREEMENT, GRANT WILL OBTAIN THE ASSETS IN
THEIR PRESENT CONDITION AND STATE OF REPAIR, ON AN "AS IS AND WHERE
IS, WITH ALL FAULTS" BASIS.
2.2 Grant Liabilities. Effective as of the Distribution Date, Grant
hereby unconditionally assumes and undertakes to pay, satisfy and discharge the
Grant Liabilities. IT IS THE INTENT OF THE PARTIES THAT THE GRANT LIABILITIES
AND ENVIRONMENTAL LIABILITIES SHALL BE WITHOUT REGARD TO THE CAUSE THEREOF OR
THE NEGLIGENCE OF ANY PERSON, WHETHER SUCH NEGLIGENCE BE SOLE, JOINT OR
CONCURRENT, ACTIVE OR PASSIVE, AND WHETHER SUCH GRANT LIABILITY OR
ENVIRONMENTAL LIABILITY IS BASED ON STRICT LIABILITY, ABSOLUTE LIABILITY OR
ARISING AS AN OBLIGATION OF CONTRIBUTION. GRANT HEREBY WAIVES AND RELEASES FOR
ITSELF AND ON BEHALF OF GRANT'S AFFILIATES ANY CLAIMS, DEFENSES OR CLAIMS FOR
CONTRIBUTION, INCLUDING CLAIMS FOR CONTRIBUTION OR REIMBURSEMENT PROVIDED UNDER
ENVIRONMENTAL LAWS, THAT IT HAS OR MAY HAVE AGAINST WEATHERFORD OR ANY OF ITS
AFFILIATES WITH RESPECT TO THE GRANT LIABILITIES AND ENVIRONMENTAL LIABILITIES.
AFTER THE DISTRIBUTION, NEITHER WEATHERFORD NOR ANY OF ITS AFFILIATES SHALL IN
ANY WAY BE LIABLE OR RESPONSIBLE FOR ANY GRANT LIABILITIES, EXCEPT TO THE
EXTENT SUCH LIABILITY RELATES TO THE OWNERSHIP OR OPERATION OF AN EXCLUDED
ASSET AFTER THE DISTRIBUTION DATE.
2.3 Consideration. The aggregate consideration for the Transfers shall
consist of (a) the contribution by Weatherford to Grant of the Contributed
Indebtedness and (b) all other agreements, arrangements and understandings
contemplated by this Agreement.
2.4 Limitation of Assignments. Notwithstanding any other provision
hereof, this Agreement shall not constitute nor require an assignment to any
Grant Company or, in the case of Excluded Assets, any Weatherford Company of
any contract, permit, license or other right if an attempted assignment of the
same
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<PAGE> 12
without the consent of any party would constitute a breach thereof or a
violation of any law or any judgment, decree, order, writ, injunction, rule or
regulation of any governmental entity unless and until such consent shall have
been obtained. In the case of any such contract, permit, license or other right
that cannot be effectively transferred to a Grant Company or, in the case of
Excluded Assets, a Weatherford Company without such consent (a "Consent
Required Contract"), each transferor agrees that it will use its best efforts
to obtain all consents of third parties and governmental entities as are
necessary for the assignment of any Consent Required Contract. To the extent
that any Consent Required Contract cannot be transferred by law or without the
consent of any governmental entity or third party, such Consent Required
Contract shall be held by the transferor in trust for its transferee and shall
be performed by such transferee in the name of the transferor and all benefits
and obligations derived thereunder shall be for the account of such transferee;
provided, however, that where entitlement of a transferee to such Consent
Required Contract is not recognized by any third party or governmental entity,
its transferor shall, at the request of such transferee, enforce in a
reasonable manner, at the cost of and for the account of such transferee, any
and all rights of such transferor against such third party or governmental
entity.
2.5 Delivery of Records. Grant shall be entitled to all books,
records, papers and instruments of Weatherford of whatever nature that relate
to the Assets, including, without limitation, all financial and accounting
records, on the Distribution Date, and all books and records relating to
employees, the purchase of materials, supplies and services, research and
development, engineering drawings, designs, schematics, blueprints, instruction
manuals, flowsheets, models, maintenance schedules and similar technical
records, and dealings with customers, vendors and suppliers relating to the
Assets, and including computerized books and records and other computerized
storage media and the software (including documentation and object and source
codes) used in connection therewith; provided that Weatherford shall be
entitled to retain all originals of its corporate, financial, accounting,
legal, tax and auditing records, and Weatherford shall be entitled to retain
copies at its expense of any such other books and records that are necessary
for its tax, accounting or legal purposes.
2.6 Guarantees and Financial Assurances. Grant agrees to use
reasonable efforts to obtain the release of any guarantees or other financial
assurances provided by Weatherford or any of its Affiliates on behalf of any
Grant Company.
2.7 Grant Acknowledgments. Grant acknowledges that this Agreement is a
valid, binding and enforceable contract that has been approved by its sole
stockholder. Grant further acknowledges that this Agreement and the
transactions contemplated hereby are in the best interests of Grant.
ARTICLE 3
RECAPITALIZATION OF GRANT; MECHANICS OF DISTRIBUTION
3.1 Grant Capitalization. The current equity capitalization of Grant
consists of 1,000 issued and outstanding shares of Grant Common Stock, all of
which is outstanding and owned beneficially and of record by Weatherford.
3.2 Recapitalization of Grant. Effective before the Distribution Date,
Grant shall have filed the Restated Certificate of Incorporation effecting the
Stock Split, and the Board of Directors of Grant shall have adopted the Amended
Bylaws.
3.3 Mechanics of Distribution. The Distribution shall be effected by
the distribution to each holder of record of Weatherford Common Stock (other
than the Trust), as of the record date designated for the Distribution by or
pursuant to the authorization of the Board of Directors of Weatherford (the
"Record Date"), of one share of Grant Common Stock for each share of
Weatherford Common Stock held by such holder. No
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<PAGE> 13
fraction of a share of Grant Common Stock shall be issued, but in lieu thereof
each holder of shares of Weatherford Common Stock who otherwise would be
entitled to a fraction of a share of Grant Common Stock shall receive a whole
share of Grant Common Stock for such fraction of a share. All shares of
Weatherford Common Stock held by a record holder other than nominee holders
shall be aggregated for purposes of computing the number of shares of Grant
Common Stock to be issued pursuant to this Section 3.3.
3.4 Timing of Distribution. The Board of Directors of the Weatherford
shall formally declare the Distribution and shall authorize Weatherford to pay
it upon the satisfaction or waiver of the conditions set forth in Article 7, by
delivery of certificates for Grant Common Stock to the Transfer Agent for
delivery to the holders entitled thereto. The Distribution shall be deemed to
be effective upon notification by Weatherford to the Transfer Agent that the
Distribution has been declared and that the Transfer Agent is authorized to
proceed with the distribution of Grant Common Stock.
ARTICLE 4
EMPLOYEE BENEFIT PLANS
4.1 Employee Benefits are Grant Liabilities. All obligations of Grant
Companies with respect to employee benefit plans, arrangements or policies for
the benefit of employees and former employees (and their beneficiaries) of
Grant Companies in place at the time of the Distribution shall be treated and
deemed to be as Grant Liabilities under this Agreement.
4.2 401(k) Plans. Before the Distribution Date, Grant shall establish
a defined contribution plan (the "Grant 401(k) Plan") that shall be qualified
under Section 401(a) of the Internal Revenue Code of 1986, as amended, and
effective as of the Distribution Date. On or before the Distribution Date, and
in accordance with the terms of the Weatherford 401(k) Plan, Weatherford shall
cause the account balance attributable to each individual who will cease to be
an employee of Weatherford and its Affiliates following the Distribution Date
to be transferred to the Grant 401(k) Plan to the extent that such transfer is
permitted by law. Each individual who continues to be an employee of any Grant
Company on the Distribution Date shall, for eligibility and vesting purposes
under the Grant 401(k) Plan, be credited with the same service with which he or
she is credited for such purposes under the Weatherford 401(k) Plan immediately
prior to the Distribution Date.
4.3 Employee Health, Life and Disability Insurance Plans. On or before
the Distribution Date, Grant shall establish such employee health, life and
disability insurance plans and other employee welfare or fringe benefit
arrangements (collectively, the "Grant Employee Benefit Plans") that are
comparable in the aggregate to the health, life and disability insurance plans
and other employee welfare or fringe benefit arrangements that had been
maintained by Weatherford for its employees and the employees of its
subsidiaries prior to the Distribution Date (collectively, the "Weatherford
Employee Benefit Plans"). Service by any employee with Weatherford or its
subsidiaries prior to the Distribution Date shall be counted for purposes of
determining any period of eligibility to participate in, or to vest in benefits
(including vacation rights) provided under the Grant Employee Benefit Plans,
and any amounts previously expended by any such employees of Weatherford or its
subsidiaries prior to the Distribution Date for purposes of satisfying such
plan year's deductible, co-payment limitations, maximum out-of-pocket
provisions and applicable annual and/or life-time maximum benefit limitations
shall be credited for purposes of satisfying such plan year's deductible,
co-payment limitations under the Grant Employee Benefit Plans and any coverage
waiting period for pre-existing conditions for such employees shall be waived
under the Grant Employee Benefit Plans.
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<PAGE> 14
4.4 Credited Employment.
(a) During the five-year period following the Distribution,
if any employee of Weatherford or any of its Affiliates shall become an
employee of Grant or any of its Affiliates, Grant shall, and shall cause its
Affiliates to, credit such employee, for purposes of eligibility and vesting
under the Grant Employee Benefit Plans (including Grant's vacation policy) and
the Grant 401(k) Plan, with the period of time such employee was employed by
Weatherford or any of its Affiliates.
(b) During the five-year period following the Distribution,
if any employee of Grant or any of its Affiliates shall become an employee of
Weatherford or any of its Affiliates, Weatherford shall, and shall cause its
Affiliates to, credit such employee, for purposes of eligibility and vesting
under Weatherford Employee Benefit Plans (including Weatherford's vacation
policy), with the period of time such employee was employed by Grant or any of
its Affiliates.
4.5 No Termination of Employment for Benefit Entitlement Purposes. For
purposes of determining a person's entitlement to benefits under any of the
Weatherford Employee Benefit Plans, the Distribution shall not constitute a
termination of employment for persons who will continue to be employees of
Grant or any of its Affiliates or Weatherford or any of its Affiliates after
the Distribution.
ARTICLE 5
STOCK PLANS
On or before the Distribution Date, Grant will adopt the Grant
Prideco, Inc. 2000 Employee Stock Option and Restricted Stock Plan, in
substantially the form of Annex I hereto (the "Grant Employee Stock Plan"), and
the Grant Prideco, Inc. 2000 Non-Employee Director Stock Option Plan, in
substantially the form of Annex J attached hereto (the "Grant Director Plan").
In consideration of Weatherford's contribution of the Contributed Indebtedness
to Grant, on or before the Distribution Date, Grant will enter into the
Employee Benefits Agreement in substantially the form of Annex K hereto. On or
before the Distribution Date, Weatherford and Grant will take such actions as
are necessary to cause the following treatment of outstanding Weatherford
Options to be effected as of the Distribution Date.
(a) Treatment of Old Weatherford Options and Old Director Options.
(i) Grant will issue Grant Options under the Grant Employee
Stock Plan to each holder of an outstanding Weatherford Option that
has been granted under an Old Weatherford Employee Option Plan ("Old
Weatherford Options").
(ii) Grant will issue Grant Options to each holder of an
outstanding Weatherford Option that has been granted under an Old
Weatherford Director Plan ("Old Director Options").
(iii) Grant Options issued pursuant to the preceding two
clauses will be exercisable for Grant Common Stock on the basis of one
share of Grant Common Stock for each share of Weatherford Common Stock
subject to the terms of the applicable outstanding Old Weatherford
Option or Old Director Option.
(iv) Each Grant Option will have the same vesting schedule
and other terms (including the exercise date and expiration date) as
the vesting schedules and other terms of the related Old Weatherford
Option or Old Director Option, as applicable; provided that employment
with either Grant or Weatherford will satisfy any condition to
continuing employment where discontinued employment would cause the
options to terminate.
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<PAGE> 15
(v) The per-share exercise price of each adjusted Old
Weatherford Option or Old Director Option and the related Grant Option
will be a function of (A) the per share exercise price of the Old
Weatherford Option or Old Director Option immediately before the
Distribution, (B) the market value per share of Weatherford Common
Stock immediately before giving effect to the Distribution and (C) the
market value per share of Grant Common Stock after giving effect to
the Distribution, all as provided in the following formula:
<TABLE>
<S> <C>
The adjusted exercise price per share for an Old
Weatherford Option or an Old Director Option will equal: E (W-G)/W
The exercise price per share for the related Grant Option will equal: E (G/W)
Where E = The original exercise price of the applicable Weatherford Option;
G = The market value per share of Grant Common Stock (a) initially based on
the average of the high and low trading prices on the NYSE on the first full
trading date after "when-distributed" trading begins, and (b) following 30
consecutive trading days after "when-distributed" trading begins, for
options remaining outstanding on such date, the average of the last sales
price per share of Grant Common Stock on the NYSE for each of the 30
consecutive trading days beginning on the date "when-distributed" trading
begins; and
W = The market value per share of Weatherford Common Stock as of the close of
market on the last trading day before "when-issued" trading begins as
reported by the NYSE.
</TABLE>
(vi) As a condition of exercise of a Grant Option issued to a
current or former Weatherford employee, Grant shall require the
optionee to pay at the time of exercise the exercise price and the
amount necessary to cover Weatherford's obligation to withhold all
federal, state, local and other taxes. Grant will then transfer Grant
Common Stock to the optionee in accordance with the terms of the Grant
Option. Grant also shall immediately notify Weatherford of the
exercise and remit to Weatherford the sum necessary to cover
Weatherford's obligation to withhold all federal, state, local and
other taxes with respect to such exercise. To the extent that
compensation income recognized by a holder of a Grant Option is
attributable to services rendered to Weatherford or any of its
subsidiaries (other than Grant or any of its subsidiaries),
Weatherford (or its subsidiary) and not Grant shall be entitled to a
compensation expense deduction for federal income tax purposes, and
Grant (or any of its subsidiaries) shall not attempt to claim a
deduction for such expense.
(b) Substitution of 1998 Weatherford Options.
(i) Each Weatherford Option granted under the 1998
Weatherford Employee Option Plan (collectively, "1998 Weatherford
Options") held by a Grant Employee will be substituted with Grant
Options. The number of shares of Grant Common Stock subject to such
Grant Options and the exercise price of such Grant Options will be
determined as provided in the following formula:
<TABLE>
<S> <C>
The exercise price for the Grant Option will equal: E (G/W)
The number of shares of Grant Common Stock subject to the
Grant Option will equal NE/Pg
</TABLE>
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<PAGE> 16
<TABLE>
<S> <C> <C>
Where E = The original exercise price of the 1998 Weatherford Option;
N = The original number of shares of Weatherford Common Stock subject to
the 1998 Weatherford Option;
G = The market value per share of Grant Common Stock (a) initially based on
the average of the high and low trading prices on the NYSE on the first full
trading date after "when-distributed" trading begins, and (b) following 30
consecutive trading days after "when-distributed" trading begins, for
options remaining outstanding on such date, the average of the last sales
price per share of Grant Common Stock on the NYSE for each of the 30
consecutive trading days beginning on the date "when-distributed" trading
begins;
W = The market value per share of Weatherford
Common Stock as of the close of market on
the last trading day before
"when-distributed" trading begins as
reported by the NYSE; and
Pg = The exercise price of the Grant Option
determined in accordance with the first
formula of this subsection (i).
</TABLE>
(ii) Each 1998 Weatherford Option held by a Weatherford
Employee and each of the 1998 Director Options and Warrants will be
adjusted. The number of shares of Weatherford Common Stock for which
those adjusted options will be exercisable and the adjusted exercise
price of those options will be determined as provided in the following
formula:
<TABLE>
<S> <C>
The adjusted exercise price for the Weatherford Option will equal E (W-G)/W
The number of shares of Weatherford Common Stock subject to the
adjusted option will equal NE/Pw
Where E = The original exercise price of the 1998 Weatherford Option;
N = The original number of shares of Weatherford Common Stock subject to
the 1998 Weatherford Option;
G = The market value per share of Grant Common Stock (a) initially based on
the average of the high and low trading prices on the NYSE on the first full
trading date after "when-distributed" trading begins, and (b) following 30
consecutive trading days after "when-distributed" trading begins, for
options remaining outstanding on such date, the average of the last sales
price per share of Grant Common Stock on the NYSE for each of the 30
consecutive trading days beginning on the date "when-distributed" trading
begins;
W = The market value per share of Weatherford
Common Stock as of the close of market on
the last trading day before
"when-distributed" trading begins as
reported by the NYSE; and
Pw = The adjusted exercise price of the 1998
Weatherford Option determined in accordance
with the first formula in this subsection
(ii).
</TABLE>
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<PAGE> 17
(iii) The adjusted Weatherford Options will be administered
under the Weatherford Stock Option Plan or Weatherford Director Plan
under which they were issued. The substitute Grant Options will be
issued and administered under the Grant Employee Stock Plan.
(c) Treatment of Outstanding Restricted Stock. Holders of restricted
Weatherford Common Stock granted under the Weatherford Enterra, Inc. Restricted
Stock Incentive Plan, the Weatherford Enterra, Inc. 1997 Non-Employee Directors
Restricted Stock Plan or under an individual agreement in the case of the
restricted stock award granted to Curtis W. Huff, will receive one share of
restricted Grant Common Stock for each share of restricted Weatherford Common
Stock they hold. The restricted Grant Common Stock will be subject to the same
restrictions as the applicable restricted Weatherford Common Stock without any
reference to employment with Grant.
ARTICLE 6
INDEMNIFICATION
6.1 Indemnification Matters.
(a) Grant hereby agrees to indemnify, defend and hold Weatherford and
its Affiliates and each of their respective officers, directors, employees,
agents and assigns (collectively, the "Weatherford Indemnified Parties")
harmless from and against any and all Liabilities or Environmental Liabilities
(including, without limitation, reasonable fees and expenses of attorneys,
accountants, consultants and experts) that the Weatherford Indemnified Parties
incur, suffer or realize, are subject to a claim for or are subject to, that
are based upon, arising out of, relating to or otherwise in respect of:
(i) any breach of any covenant or agreement of any Grant
Company contained in this Agreement or any other agreement
contemplated hereby, including the Tax Allocation Agreement;
(ii) the acts or omissions of any Grant Company or any
Affiliate of any Grant Company (other than Weatherford and its
Affiliates that are not Grant Companies after the Distribution) or the
conduct of any business by them or any predecessor thereto before, on
or after the Distribution Date;
(iii) the Grant Liabilities;
(iv) the Assets;
(v) the conveyance, assignment, sale, lease or making
available of the Assets;
(vi) any Grant Tax (except as provided otherwise in the Tax
Allocation Agreement);
(vii) any and all amounts for which Weatherford may be liable
on account of any claims, administrative charges, self-insured
retentions, deductibles, retrospective premiums or fronting provisions
in insurance policies, including as the result of any uninsured
period, insolvent insurance carriers or exhausted policies, arising
from claims by any Grant Company or any Affiliate of any Grant
Company, or the employees of any of the foregoing, or claims by
insurance carriers of any Grant Company for indemnity arising from or
out of claims by or against any Grant Company for acts or omissions of
any Grant Company, or related to any
13
<PAGE> 18
current or past business of any Grant Company or any product or
service provided by any Grant Company;
(viii) any COBRA Liability with respect to any employees of
Weatherford who become employees of any Grant Company after the
Distribution;
(ix) any settlements or judgments in any litigation commenced
by one or more insurance carriers against Weatherford on account of
claims by any Grant Company or employees of any Grant Company;
(x) any and all Liabilities incurred by Weatherford pursuant
to its obligations hereunder in seeking to obtain or obtaining any
consent or approval to assign, transfer or lease any interest in any
asset or instrument, contract, lease, permit or benefit to any Grant
Company arising thereunder or resulting therefrom;
(xi) any Liability relating to the failure to comply with any
bulk sales or transfer laws in connection herewith or with any of the
other agreements contemplated hereby;
(xii) the on-site or off-site handling, storage, treatment or
disposal of any Waste Materials generated by any Grant Company;
(xiii) any and all Environmental Conditions, known or
unknown, existing on, at or underlying any of the Properties or
related to the operations on any of the Properties or with regard to
any of the Assets;
(xiv) any acts or omissions of any Grant Company relating to
the ownership or operation of the business of any Grant Company or the
Properties;
(xv) any and all Liabilities incurred by Weatherford or any
of its Affiliates relating to any guarantee or other financial
assurance provided by Weatherford or any of its Affiliates on behalf
of any Grant Company;
(xvi) any Liability relating to any claim or demand by any
stockholder of Weatherford, any stockholder of Grant following the
Distribution or any other Person with respect to the Transfers (or any
of them), the Contribution, the Distribution or the transactions
relating thereto;
(xvii) any Liability relating to the Grant 401(k) Plan, any
Grant Employee Benefit Plan and the other employee benefit or welfare
plans of any Grant Company; and
(xviii) any Liability relating to any Excluded Asset with
respect to any period prior to the Distribution Date.
(b) Absolute Indemnity. NONE OF THE WEATHERFORD INDEMNIFIED
PARTIES WILL BE OBLIGATED TO INSTITUTE ANY LEGAL PROCEEDINGS IN
CONNECTION WITH THE COLLECTION OR PURSUIT OF ANY INSURANCE IN ORDER TO
EXERCISE AN INDEMNIFICATION REMEDY UNDER THIS ARTICLE 6. UNLESS
OTHERWISE SPECIFICALLY EXPRESSED, THIS INDEMNITY OBLIGATION SHALL
APPLY WITHOUT REGARD TO WHETHER THE LIABILITY OR ENVIRONMENTAL
LIABILITY WAS CAUSED BY THE ORDINARY OR GROSS NEGLIGENCE OF ANY OF THE
WEATHERFORD INDEMNIFIED PARTIES (WHETHER
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<PAGE> 19
SUCH NEGLIGENCE BE SOLE, JOINT OR CONCURRENT OR ACTIVE OR PASSIVE), OR
WHETHER THE LIABILITY OR ENVIRONMENTAL LIABILITY IS BASED ON STRICT
LIABILITY, ABSOLUTE LIABILITY OR ARISES AS AN OBLIGATION OF
CONTRIBUTION OR INDEMNITY. GRANT ACKNOWLEDGES THAT IT IS AWARE OF
VARIOUS THEORIES KNOWN AS THE "EXPRESS NEGLIGENCE" DOCTRINE AND OTHER
SIMILAR DOCTRINES AND THEORIES THAT MAY LIMIT INDEMNIFICATION AND
AGREES AND STIPULATES THAT THE PROVISIONS OF THIS AGREEMENT REFLECT
THE EXPRESS INTENT OF THE PARTIES THAT THE INDEMNIFICATION TO BE
PROVIDED BY GRANT APPLY NOTWITHSTANDING THE FACT THAT THE LIABILITY OR
ENVIRONMENTAL LIABILITY (I) MAY NOT CURRENTLY BE KNOWN BY IT OR
MANIFEST ITSELF IN ANY REGARD, (II) MAY ARISE UNDER A STATUTE OR
THEORY THAT MAY NOT CURRENTLY EXIST OR BE KNOWN TO GRANT, (III) MAY
ARISE AS A RESULT OF ANY ACT OR OMISSION BY ANY OF THE WEATHERFORD
INDEMNIFIED PARTIES (WHETHER SUCH CONDUCT BE SOLE, JOINT OR CONCURRENT
OR ACTIVE OR PASSIVE) OR (IV) MAY CONSTITUTE A VIOLATION OF ANY
APPLICABLE CIVIL OR CRIMINAL LAW OR REGULATION.
6.2 Notice of Circumstance. After receipt by Weatherford of notice, or
Weatherford's actual discovery, of any action, proceeding, claim, demand or
potential claim that could give rise to a right to indemnification pursuant to
any provision of this Agreement (any of which is individually referred to as a
"Circumstance"), Weatherford shall give Grant written notice describing the
Circumstance in reasonable detail; provided, however, that no delay by
Weatherford in notifying Grant shall relieve Grant from any Liability or
Environmental Liability hereunder. If Grant notifies Weatherford within 15 days
after such notice that Grant is assuming the defense thereof, except as
otherwise provided in the Tax Allocation Agreement, (i) Grant will defend the
Weatherford Indemnified Parties against the Circumstance with counsel of its
choice, provided such counsel is reasonably satisfactory to Weatherford, (ii)
the Weatherford Indemnified Parties may retain separate co-counsel at its or
their sole cost and expense (except that Grant will be responsible for the fees
and expenses for the separate co-counsel to the extent Weatherford concludes
reasonably that the counsel Grant has selected has a conflict of interest),
(iii) the Weatherford Indemnified Parties will not consent to the entry of any
judgment or enter into any settlement with respect to the Circumstance without
the written consent of Grant and (iv) Grant will not consent to the entry of
any judgment with respect to the Circumstance, or enter into any settlement
that (x) requires any payments by or continuing obligations of an Weatherford
Indemnified Party, (y) requires an Weatherford Indemnified Party to admit any
facts or liability that could reasonably be expected to adversely affect an
Weatherford Indemnified Party in any other matter or (z) does not include a
provision whereby the plaintiff or claimant in the matter releases the
Weatherford Indemnified Parties from all Liability with respect thereto,
without the written consent of Weatherford. In the event Grant does not notify
Weatherford within 15 days after Weatherford has given notice of the
Circumstance that Grant is assuming the defense thereof, the Weatherford
Indemnified Parties may defend against, or enter into any settlement with
respect to, the Circumstance in any manner the Weatherford Indemnified Parties
reasonably may deem appropriate, at Grant's sole cost.
6.3 Payment. Payment of any amounts due pursuant to this Article 6
shall be made in United States dollars in immediately available funds, by wire
transfer to a bank account or accounts to be designated by the Weatherford
Indemnified Party, within ten Business Days after notice is sent by the
Weatherford Indemnified Party. If and to the extent the Weatherford Indemnified
Party shall make written demand upon Grant for indemnification pursuant to this
Article 6 and Grant 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 Weatherford Indemnified Party may utilize any
legal or equitable remedy to collect from Grant the amount demanded.
15
<PAGE> 20
6.4 Insurance. Grant shall not be obligated to indemnify the
Weatherford Indemnified Parties for amounts that shall have been covered and
paid by insurance of the Weatherford Indemnified Parties; provided, however,
insurance shall not include deductibles or self-insured retentions.
6.5 Scope of Indemnification. INDEMNIFICATION UNDER THIS ARTICLE 6
SHALL BE IN ADDITION TO ANY REMEDIES WEATHERFORD OR ANY WEATHERFORD INDEMNIFIED
PARTY MAY HAVE AT LAW OR EQUITY. THERE SHALL BE NO TIME LIMIT AS TO GRANT'S
INDEMNIFICATION OBLIGATIONS HEREUNDER.
6.6 Indemnity for Certain Environmental Liabilities. It is the
intention of the parties that the indemnity provided herein with respect to
Environmental Liabilities under CERCLA and corresponding provisions of state
law is an agreement expressly not barred by 42 U.S.C. Section 9607(e)(i) or
corresponding provisions of any state law.
ARTICLE 7
CONDITIONS TO OBLIGATIONS OF WEATHERFORD
The obligations of the Weatherford to consummate the Distribution
hereunder shall be subject to the fulfillment of each of the following
conditions:
(a) The Board of Directors of Weatherford shall be satisfied that,
after giving effect to the Contribution, (i) Weatherford will not be insolvent
and will not have unreasonably small capital with which to engage in its
businesses and (ii) the Weatherford surplus will be sufficient to permit,
without violation of Delaware law, the Distribution.
(b) The Transfers shall have been made or occurred.
(c) Weatherford and Grant shall have executed the Preferred
Supplier Agreement.
(d) Weatherford and Grant shall have executed the Tax Allocation
Agreement.
(e) Weatherford and Grant shall have executed the Transition
Services Agreement.
(f) Grant shall have filed the Restated Certificate of
Incorporation, effecting the recapitalization described in Section 3.2.
(g) The Board of Directors of Grant shall have adopted the Amended
Bylaws.
(h) The Grant Common Stock shall have been approved for listing by
the NYSE, and the NYSE shall not have (i) withdrawn its certification filed with
the SEC that the Grant Common Stock has been approved for listing, (ii)
suspended trading in either the Grant Common Stock or the Weatherford Common
Stock or (iii) filed with the SEC a Form 25 to strike either the Grant Common
Stock or the Weatherford Common Stock from listing and registration thereof.
(i) Grant's Registration Statement on Form 10 shall have become
effective pursuant to Section 12 of the Securities Exchange Act of 1934, as
amended, and the SEC shall not have commenced any action to prohibit or restrict
the Distribution in any way.
(j) Weatherford shall have received a ruling from the United
States Internal Revenue Service to the effect that, for United States federal
income tax purposes, no gain or loss will be recognized by, and no
16
<PAGE> 21
amount will be included in the income of, the Weatherford stockholders upon
their receipt of shares of Grant Common Stock in the Distribution and that no
gain or loss will be recognized by Weatherford as a result of the Distribution.
(k) Grant shall have executed the Note and delivered the Note to
Weatherford.
(l) The Board of Directors of Weatherford shall not have
determined, in its sole discretion, to abandon, defer or modify the Transfers,
the Contribution and the Distribution or the terms thereof.
ARTICLE 8
MISCELLANEOUS
8.1 Grant Covenants. To assure the performance of the obligations of
Grant under this Agreement, Grant hereby covenants and agrees that it will not,
and will cause the Grant Companies not to, merge, convert into another entity,
engage in a share exchange for a majority of its shares, liquidate or transfer,
assign or otherwise convey or allocate, directly or indirectly, in one or more
transactions, whether or not related, a majority of Grant's assets (determined
in good faith by a board resolution prior to the transaction on a fair value
and consolidated basis) to any Person unless the acquiring Person (i) expressly
assumes the obligations of Grant hereunder, (ii) executes and delivers to
Weatherford an agreement, in form and substance satisfactory to Weatherford,
agreeing to be bound by each and every provision of this Agreement as if it
were Grant and (iii) has a net worth on a pro forma basis after giving effect
to the acquisition or business combination equal to or greater than that of
Grant (on a consolidated basis) and Grant complies with the provisions of the
Tax Allocation Agreement. Any such assumption of liability by the acquiring
Person shall not release Grant from its obligations under this Agreement.
8.2 Governing Law. All questions arising out of this Agreement and the
rights and obligations created herein, or its validity, existence,
interpretation, performance or breach, shall be governed by and construed in
accordance with the internals laws of the State of Texas, without regard to or
the application of the rules of conflicts of laws set forth in such laws.
8.3 Arbitration.
(a) In the event there shall exist any dispute or controversy with
respect to this Agreement or any matter relating hereto or the transactions
contemplated hereby, the parties hereto agree to seek to resolve such dispute or
controversy by mutual agreement. If the parties hereto are unable to resolve
such dispute or controversy by agreement within 90 days following notice by any
party hereto of the nature of such dispute or controversy setting forth in
reasonable detail the circumstances and basis of such dispute or controversy,
the parties agree that such dispute or controversy be resolved by binding
arbitration pursuant to the provisions of this Section 8.3 and in accordance
with the then current Commercial Arbitration Rules of the American Arbitration
Association. If a party elects to submit such matter to arbitration, such party
shall provide notice to the other party of its election to do so, which notice
shall name one arbitrator. Within 10 Business Days after the receipt of such
notice, the other party shall provide written notice to the electing party
naming a second arbitrator. The two arbitrators so appointed shall name a third
arbitrator, or failing to do so, a third arbitrator shall be appointed pursuant
to the Commercial Arbitration Rules of the American Arbitration Association.
(b) All arbitration proceedings shall be held in Houston, Texas.
(c) Each arbitrator selected to act hereunder shall be qualified by
education and experience to pass on the particular question in dispute and shall
be independent and not affiliated with any
17
<PAGE> 22
of the parties hereto or an Affiliate thereof. A person associated or affiliated
with the legal counsel for either of the parties or their Affiliates will not be
considered independent.
(d) The arbitrators shall resolve all disputes in controversy in
accordance with the Texas substantive law. All statutes of limitations that
would otherwise be applicable shall apply to any arbitration proceeding. The
arbitrators shall not be authorized to order any equitable remedies and shall
only be empowered to make monetary awards and determinations with respect to
compliance by a party and its Affiliates with the terms hereof.
(e) The arbitrators appointed pursuant to this Section 8.3 shall
promptly hear and determine (after due notice and hearing and giving the parties
reasonable opportunity to be heard) the questions submitted, and shall endeavor
to render their decision within 60 days after appointment of the third
arbitrator or as soon as practical thereafter. If within such period a decision
is not rendered by the board or a majority thereof, new arbitrators may be named
and shall act hereunder at the election of either party in like manner as if
none had previously been named.
(f) The decision of the arbitrators, or a majority thereof, made in
writing, shall absent manifest error be final and binding upon the parties
hereto as to the questions submitted, and each party shall abide by such
decision.
(g) The cost of the arbitration shall be borne by the parties
thereto as unanimously determined by the arbitrators.
(h) Notwithstanding the agreement by the parties to arbitration,
either party may seek from a court of competent jurisdiction injunctive and
other equitable relief in aid of arbitration. Each party hereto on its own
behalf and on behalf of its Affiliates irrevocably agrees that any such relief
shall first be sought in Federal or State court in Harris County, Texas.
8.4 Notices. All notices and other communications to be given or made
hereunder shall be in writing and shall be (a) personally delivered with signed
receipt obtained acknowledging delivery; (b) transmitted by postage prepaid
registered mail, return receipt requested (air mail if international); or (c)
transmitted by facsimile; to a party at the address set out below (or at such
other address as it may have provided notification for the purposes hereof to
the other party hereto in accordance with this Section).
If to Grant: Grant Prideco, Inc.
1450 Lake Robbins Drive, Suite 600
The Woodlands, Texas 77380
Fax number: (281) 297-8569
Attention: President
If to Weatherford: Weatherford International, Inc.
515 Post Oak Boulevard, Suite 600
Houston, Texas 77027
Fax number: (713) 693-4484
Attention: General Counsel
18
<PAGE> 23
With a copy to:
Fulbright & Jaworski L.L.P.
1301 McKinney, Suite 5100
Houston, Texas 77010-3095
Fax number: (713) 651-5246
Attention: Charles L. Strauss
8.5 Expenses. Except as otherwise set forth herein or in any agreement
executed in connection herewith, all costs and expenses related to the
Distribution and the transactions contemplated hereby shall be borne by
Weatherford.
8.6 Entire Agreement. This Agreement, including the Schedules, Annexes
and other writings referred to herein or delivered pursuant hereto, constitutes
the entire agreement between Weatherford and Grant with respect to the subject
matter hereof and supersedes all other agreements, representations, warranties,
statements, promises and understandings, whether oral or written, with respect
to the subject matter hereof. This Agreement may not be amended, altered or
modified except by a writing signed by duly authorized officers of Weatherford
and Grant.
8.7 Waiver. No consent or waiver, express or implied, by a party
hereto to or of any breach or default by the other party hereto in the
performance by such other party of its obligations hereunder will be deemed or
construed to be a consent or waiver to or of any other breach or default in the
performance by such other party of the same or any other obligations of such
other party hereunder. Failure on the part of a party to complain of any act or
failure to act of the other party or to declare the other party in default,
irrespective of how long such failure continues, will not constitute a waiver
by such party of its rights hereunder. The giving of consent by a party in any
one instance will not limit or waive the necessity to obtain such party's
consent in any future instance.
8.8 Binding Effect; Assignment; No Third Party Benefit.
(a) This Agreement will be binding upon and inure to the
benefit of and be enforceable by the parties hereto and their respective
successors and permitted assigns. Neither party to this Agreement may assign
its rights under this Agreement without the prior written consent of the other
party; provided, however, Weatherford may assign any of its rights and
obligations under this Agreement to any Weatherford Affiliate, of which
Weatherford beneficially owns or controls at least 50% of the equity or other
interests of such Affiliate, without the consent of Grant.
(b) Nothing in this Agreement, express or implied, is
intended to or shall confer upon any person other than Grant, Weatherford and
the Weatherford Indemnified Parties any rights, benefits or remedies of any
nature whatsoever under or by reason of this Agreement.
8.9 Counterparts. This Agreement may be executed simultaneously in two
or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same agreement.
8.10 References. All references in this Agreement to Articles,
Sections and other subdivisions refer to the Articles, Sections and other
subdivisions of this Agreement unless expressly provided otherwise. The words
"this Agreement", "herein", "hereof", "hereby", "hereunder" and words of
similar import refer to this Agreement as a whole and not to any particular
subdivision unless expressly so limited.
8.11 Terminology. All personal pronouns used in this Agreement,
whether used in the masculine, feminine or neuter gender, will include all
other genders; and the singular will include the plural and vice
19
<PAGE> 24
versa. The headings of the Articles and Sections of this Agreement are included
for convenience only and will not be deemed to constitute part of this Agreement
or to affect the construction hereof or thereof.
8.12 Severability. Any provision of this Agreement that is determined
by arbitration as provided herein or a court of competent jurisdiction to be
invalid, illegal or unenforceable shall be ineffective to the extent of such
invalidity, illegality or unenforceability, without affecting in any way the
remaining provisions hereof in such jurisdiction or rendering that or any other
provision of this Agreement invalid, illegal or unenforceable, so long as the
material purposes of this Agreement can be determined and effectuated. Should
any provision of this Agreement be so declared invalid, illegal or
unenforceable, the parties shall agree on a valid provision to substitute for
it.
8.13 Further Assurances. Each party hereto agrees to do all acts and
things and to make, execute and deliver such written instruments, as will from
time to time be reasonably required to carry out the terms and provisions of
this Agreement.
[signatures of the following page]
20
<PAGE> 25
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first set forth in the introduction to this Agreement.
WEATHERFORD INTERNATIONAL, INC.
By: /s/ CURTIS W. HUFF
----------------------------------------
Curtis W. Huff
Executive Vice President, Chief Financial
Officer, General Counsel and Secretary
GRANT PRIDECO, INC.
By: /s/ JOHN C. COBLE
----------------------------------------
John C. Coble
President
21
<PAGE> 1
EXHIBIT 3.1
GRANT PRIDECO, INC.
RESTATED CERTIFICATE OF INCORPORATION
The original Certificate of Incorporation of Grant Prideco, Inc. (the
"Corporation") was filed on June 22, 1990. On March 22, 2000, the Board of
Directors and the sole stockholder of the Corporation adopted resolutions
authorizing the further amendment and the restatement and integration of the
provisions of the most recent amended Certificate of Incorporation of the
Corporation and authorizing the filing of this Restated Certificate of
Incorporation, in accordance with Sections 242 and 245 of the General
Corporation Law of the State of Delaware. This Restated Certificate of
Incorporation amends and supersedes the most recent amended Certificate of
Incorporation of the Corporation, as presently in effect, in its entirety as
follows:
ARTICLE 1
The name of the Corporation is Grant Prideco, Inc.
ARTICLE 2
The address of the Corporation's registered office in the State of
Delaware is 1013 Centre Road, Wilmington, County of New Castle, Delaware 19805.
The name of its registered agent at that address is The Corporation Service
Company.
ARTICLE 3
The purpose of the Corporation is to engage in any lawful act or
activity for which corporations may be organized under the General Corporation
Law of the State of Delaware.
ARTICLE 4
The total number of shares of stock of all classes which the
Corporation has authority to issue is 310,000,000 shares, of which 300,000,000
shares shall be common stock, with a par value of $.01 per share ("Common
Stock"), and 10,000,000 shares shall be preferred stock, with a par value of
$.01 per share ("Preferred Stock"). Effective upon the filing of this Restated
Certificate of Incorporation (the "Effective Time"), each share of Common Stock
issued and outstanding immediately prior to the Effective Time shall
automatically be changed and converted, without any action on the part of the
holder thereof, into 109,000 shares of Common Stock.
The designations and the powers, preferences and rights, and the
qualifications, limitations or restrictions of the shares of each class of stock
are as follows:
<PAGE> 2
PREFERRED STOCK
Preferred Stock may be issued from time to time by the Board of
Directors as shares of one or more series. Subject to the provisions hereof and
the limitations prescribed by law, the Board of Directors is hereby vested with
the authority and is expressly authorized, prior to issuance, by adopting
resolutions providing for the issuance of, or providing for a change in the
number of, shares of any particular series and, if and to the extent from time
to time required by law, by filing a certificate pursuant to the General
Corporation Law of the State of Delaware, to establish or change the number of
shares to be included in each such series and to fix the designation and powers,
preferences and rights and the qualifications and limitations or restrictions
thereof relating to the shares of each such series, all to the maximum extent
permitted by the General Corporation Law of the State of Delaware as in effect
on the date hereof or as hereafter amended. The vested authority of the Board of
Directors with respect to each series shall include, but not be limited to, the
determination of the following:
(a) the distinctive serial designation of such series and the
number of shares constituting such series;
(b) The annual dividend rate, if any, on shares of such series
and the preferences, if any, over any other series (or of any other
series over such series) with respect to dividends, and whether
dividends shall be cumulative and, if so, from which date or dates;
(c) whether the shares of such series shall be redeemable and,
if so, the terms and conditions of such redemption, including the date
or dates upon and after which such shares shall be redeemable, and the
amount per share payable in case of redemption, which amount may vary
under different conditions and at different redemption dates;
(d) the obligation, if any, of the Corporation to purchase or
redeem shares of such series pursuant to a sinking fund or purchase
fund and, if so, the terms of such obligation;
(e) whether shares of such series shall be convertible into,
or exchangeable for, shares of stock of any other class or classes, any
stock of any series of the same class or any other class or classes or
any evidences of indebtedness and, if so, the terms and conditions of
such conversion or exchange, including the price or prices or the rate
or rates of conversion or exchange and the terms of adjustment, if any;
(f) whether the shares of such series shall have voting rights
in addition to the voting rights provided by law, and, if so, the terms
of such voting rights,
2
<PAGE> 3
including, without limitation, whether such shares shall have the right
to vote with the Common Stock on issues on an equal, greater or lesser
basis;
(g) the rights of the shares of such series in the event of a
voluntary or involuntary liquidation, dissolution, winding up or
distribution of assets of the Corporation;
(h) whether the shares of such series shall be entitled to the
benefit of conditions and restrictions upon (1) the creation of
indebtedness of the Corporation or any subsidiary, (2) the issuance of
any additional stock (including additional shares of such series or of
any other series) or (3) the payment of dividends or the making of
other distributions on the purchase, redemption or other acquisition by
the Corporation or any subsidiary of any outstanding stock of the
Corporation; and
(i) any other relative, rights, powers, preferences,
qualifications, limitations or restrictions thereof, including, but not
limited to, any that may be determined in connection with the adoption
of any stockholder rights plan after the date hereof, relating to any
such series.
The number of authorized shares of Preferred Stock may be increased or
decreased by the affirmative vote of the holders of a majority of the stock of
the Corporation entitled to vote generally in the election of directors without
the separate vote of holders of Preferred Stock as a class.
COMMON STOCK
Subject to the rights of any outstanding series of Preferred Stock, and
except as may be expressly provided by law,
(a) dividends may be declared and paid or set apart for
payment upon Common Stock to the exclusion of the Preferred Stock out
of any assets or funds of the Corporation legally available for the
payment of dividends and may be payable in cash, stock or otherwise;
(b) the holders of Common Stock shall have the exclusive right
to vote for the election of directors (other than in the case of newly
created directorships and vacancies, which may be filled by the
remaining directors or as otherwise provided for by the General
Corporation Law of the State of Delaware) and on all other matters
requiring stockholder action, each share being entitled to one vote;
and
(c) upon the voluntary or involuntary liquidation, dissolution
or winding up of the Corporation, the net assets of the Corporation
shall be distributed pro rata to the holders of Common Stock.
3
<PAGE> 4
ARTICLE 5
All power of the Corporation shall be vested in and exercised by or
under the direction of the Board of Directors except as otherwise provided
herein or required by law.
(a) The Board of Directors of the Corporation may from time to time
designate one or more committees, each committee to consist of one or more of
the directors of the Corporation. Any such committee, to the extent provided in
the resolution of the board of directors, or in the Bylaws of the Corporation,
shall have and may exercise all the powers and authority of the board of
directors in the management of the business and affairs of the Corporation, and
may authorize the seal of the Corporation to be affixed to all papers which may
require it; but no such committee shall have the power or authority in reference
to the following matter: (1) approving or adopting, or recommending to the
stockholders, any action or matter expressly required by the General Corporation
Law of the State of Delaware to be submitted to stockholders for approval or (2)
adopting, amending or repealing any bylaw of the Corporation.
(b) Advance notice of nominations for the election of Directors, other
than nominations by the Board of Directors or a committee thereof, shall be
given in the manner provided in the Bylaws of the Corporation. Election of
Directors need not be by written ballot unless the Bylaws of the Corporation
provide otherwise.
(c) The power to adopt amend or repeal bylaws of the Corporation is
conferred upon the Board of Directors of the Corporation; provided that the fact
that such power has been so conferred upon the Board of Directors shall not
divest the stockholders of the Corporation of the power, nor limit their power
to adopt, amend or repeal bylaws of the Corporation. In addition to any
requirements of law and any other provision of this Restated Certificate of
Incorporation or any resolution or resolutions of the Board of Directors adopted
pursuant to Article 4 of this Restated Certificate of Incorporation (and
notwithstanding the fact that a lesser percentage may be specified by law, this
Restated Certificate of Incorporation or any such resolution or resolutions),
the affirmative vote of the holders of 80% or more of the combined voting power
of the then outstanding shares of stock of all classes and series of stock the
holders of which are entitled to vote generally in the election of directors,
voting together as a single class, shall be required for the stockholders of the
Corporation to adopt, amend, alter or repeal any bylaws of the Corporation.
ARTICLE 6
Whenever a compromise or arrangement is proposed between this
Corporation and its creditors or any class of them and/or between this
Corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware may, on the application in a summary
way of this Corporation or of any creditor or stockholder thereof or on the
application of any receiver or receivers appointed for this Corporation under
the provisions of Section 291 of Title 8 of the Delaware Code or on the
application of trustees in dissolution or of any receiver or receivers
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appointed for this Corporation under the provisions of Section 279 of Title 8 of
the Delaware Code order a meeting of the creditors or class of creditors, and/or
of the stockholders or class of stockholders of this Corporation, as the case
may be, to be summoned in such manner as the said court directs. If a majority
in number representing three-fourths in value of the creditors or class of
creditors, and/or of the stockholders or class of stockholders of this
Corporation, as the case may be, agree to any compromise or arrangement and to
any reorganization of this Corporation as consequence of such compromise or
arrangement, the said compromise or arrangement and the said reorganization
shall, if sanctioned by the court to which the said application has been made,
be binding on all the creditors or class of creditors, and/or on all the
stockholders or class of stockholders, of this Corporation, as the case may be,
and also on this Corporation.
ARTICLE 7
(a) No director of the Corporation shall be liable to the Corporation
or any of its stockholders for monetary damages for breach of fiduciary duty as
a director; provided that this Article shall not eliminate or limit the
liability of a director of the Corporation: (1) for any breach of the director's
duty of loyalty to the Corporation or its stockholders, (2) for acts or
omissions not in good faith or that involve intentional misconduct or a knowing
violation of law, (3i) under Section 174 of the General Corporation Law of the
State of Delaware, or (4) for any transaction from which the director derived an
improper personal benefit.
(b) If the General Corporation Law of the State of Delaware hereafter
is amended to authorize the further elimination or limitation of the liability
of directors of the Corporation to the Corporation or its stockholders, then the
liability of a director of the Corporation to the Corporation or its
stockholders shall be limited to the fullest extent permitted by the General
Corporation Law of the State of Delaware, as so amended, and such limitation of
liability shall be in addition to, and not in lieu of, the limitation on the
liability of a director of the Corporation provided this Article.
(c) Any repeal or modification of this Article shall be prospective
only and shall not adversely affect any right or protection of a director of the
Corporation existing at the time of such repeal or modification.
(d) Notwithstanding anything contained in this Restated Certificate of
Incorporation to the contrary, the affirmative vote of the holders of at least
66 2/3% of the voting power of all shares of the Corporation entitled to vote
generally in the election of directors, voting together as a single class, shall
be required to alter, amend, adopt any provision inconsistent with, or repeal,
this Article or any provision hereof.
ARTICLE 8
The Corporation reserves the right to amend, alter, change or repeal
any provision contained in this Restated Certificate of Incorporation, in the
manner now or hereafter prescribed by statute and
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this Restated Certificate of Incorporation, and all rights conferred upon
stockholders herein are granted subject to this reservation.
IN WITNESS WHEREOF, the Corporation has caused this Restated
Certificate of Incorporation to be signed by its President and attested to by
its Secretary this 13th day of April, 2000.
GRANT PRIDECO, INC.
By: /s/ JOHN C. COBLE
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John C. Coble, President
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<PAGE> 1
Exhibit 4.1
THIS SUBORDINATED PROMISSORY NOTE IS SUBORDINATED TO THE OBLIGATIONS
OF THE MAKER UNDER THE GUARANTY OF EVEN DATE HEREWITH BY THE MAKER IN FAVOR OF
TRANSAMERICA BUSINESS CREDIT CORPORATION, AS AGENT ("AGENT"), IN THE MANNER AND
TO THE EXTENT SET FORTH IN THE SUBORDINATION AGREEMENT AMONG PAYEE, AGENT,
MAKER AND CERTAIN SUBSIDIARIES OF MAKER.
SUBORDINATED PROMISSORY NOTE
$100,000,000 Houston, Texas April 14, 2000
1. FOR VALUE RECEIVED, the undersigned, GRANT PRIDECO, INC., a
Delaware corporation ("Maker"), hereby promises to pay to the order of
WEATHERFORD INTERNATIONAL, INC., a Delaware corporation (the "Payee"), in
Houston, Harris County, Texas, at 515 Post Oak Blvd., Suite 600, on or before
March 31, 2002 (the "Maturity Date"), in lawful money of the United States of
America, the principal amount of ONE HUNDRED MILLION DOLLARS, together with
interest on the unpaid balance of said principal amount from time to time
remaining outstanding, from the date hereof until maturity (howsoever such
maturity shall occur), in like money, at said office, at a rate per annum equal
to the lesser of (a) the Note Rate and (b) the Maximum Rate.
2. All past due principal of and interest on this Note shall bear
interest from the due date thereof (whether by acceleration or otherwise) until
paid at a per annum rate equal to the lesser of (a) the Note Rate plus 2% and
(b) the Maximum Rate.
3. Accrued unpaid interest on the outstanding principal balance
hereof shall be due and payable by Maker to Payee on the last Business Day of
each March, June, September and December, commencing June 30, 2000. The
outstanding principal balance of this Note shall be due and payable on the
Maturity Date; provided that all unpaid accrued interest on this Note, and the
outstanding unpaid principal balance hereof, shall be immediately due and
payable in full upon the maturity of the principal of this Note, whether by
acceleration or otherwise. All principal and interest payments under this Note
shall be subject to the provisions of the Subordination Agreement.
4. Maker shall have the right and privilege of prepaying this
Note, in whole or in part, at any time or from time to time without premium or
penalty or notice to the holder hereof. Maker shall notify Payee upon the
execution by Maker of any agreement relating to a proposed Financing. At the
closing of any Financing, Maker shall remit to Payee, by wire transfer of
immediately available funds on the same Business Day (or the next Business Day
if not reasonably practicable) as the closing of such Financing, an amount (to
be applied as a prepayment with respect hereto) equal to the lesser of (a) the
sum of the outstanding unpaid principal balance hereof and all accrued unpaid
interest thereon, and (b) the net cash proceeds from the Financing. All amounts
repaid or prepaid (including payments resulting from a Financing) shall be
applied first to earned, accrued and unpaid interest hereon and the balance, if
any, shall be applied to the outstanding principal.
5. The terms set forth below shall have the meanings assigned to
such terms as used in this Note:
"Applicable Law" shall mean the law in effect from time to
time and applicable to the transactions between Payee and Maker
pursuant to this Note that
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<PAGE> 2
lawfully permits the charging and collection of the highest permissible
lawful non-usurious rate of interest on such transactions, including
laws of the State of Texas, and to the extent controlling and providing
for a higher lawful rate of interest, laws of the United States of
America. It is intended that Chapter 1D, Subtitle 1, Title 79, Revised
Civil Statutes of Texas, 1925, as amended, shall be included in the
laws of the State of Texas in determining Applicable Law; and for the
purpose of applying said Chapter 1D, the interest ceiling applicable to
such transactions under said Chapter 1D shall be the indicated (weekly)
rate ceiling from time to time in effect.
"Business Day" shall mean any day on which banks are open for
general banking business in the State of Texas, other than on Saturday,
Sunday, a legal holiday or any other day on which banks in the State of
Texas are required or authorized by law or executive order to close.
"Credit Facility" shall mean one or more credit facilities
providing for aggregate borrowings and other financial accommodations,
including without limitation letter of credit facilities and related
reimbursement obligations, of up to $100,000,000 that now is or are, or
hereafter may be, entered into by Maker or any of its direct or
indirect subsidiaries and the lenders party thereto, including any
related notes, guarantees, collateral documents, reimbursement
agreements and other instruments and agreements executed in connection
therewith, which credit facility may be guaranteed by Maker or secured
by all or part of the assets of Maker and its direct or indirect
assets, in each case as may be amended, modified, supplemented,
renewed, extended, refunded, replaced, restated or refinanced from time
or time in whole or in part in one or more credit agreements, loan
agreements, instruments or similar agreements so long as the aggregate
permitted borrowings do not exceed $100,000,000.
"Financing" shall mean any transaction or series of related
transactions (whether by means of the issuance and sale of debt or
equity securities or a sale of assets or equity interests in another
entity) pursuant to which Maker receives cash proceeds, net of
underwriting fees and discounts and transaction expenses, of not less
than $5,000,000; provided that none of the following transactions shall
be deemed to be a "Financing": (a) any sale of assets in the ordinary
course of Maker's business, (b) any borrowings or advances under the
Credit Facility, (c) any issuances of securities pursuant to employee
benefit plans or options granted thereunder, or (d) any borrowings not
requiring the prior written consent of Payee pursuant to Section 6(l)
of this Note.
"Indebtedness for Borrowed Money" shall mean any indebtedness
of Maker or its subsidiaries for borrowed money; provided, however, the
following shall not be considered Indebtedness for Borrowed Money:
(a) indebtedness under this Note;
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<PAGE> 3
(b) indebtedness and other obligations from time to time
outstanding under, or guaranty obligations of Maker
or its Subsidiaries with respect to, the Credit
Facility;
(c) intercompany indebtedness from time to time
outstanding between or among any of Maker and/or its
subsidiaries;
(d) any indebtedness outstanding on the date of issuance
of this Note;
(e) indebtedness, the net proceeds of which are used
solely to renew, extend, refinance, refund or
repurchase Indebtedness for Borrowed Money otherwise
permitted under this definition; provided, however,
such indebtedness shall not have terms and conditions
materially adverse to the creditworthiness of Maker
and its subsidiaries taken as a whole;
(f) daylight overdraft facilities having customary terms
for such facilities; provided that such indebtedness
is extinguished or repaid within two Business Days
of incurrence;
(g) credit facilities, established in connection with
customary cash management procedures, for up to
$1,000,000, to permit use of wire transfer facilities
and to cover checks and other payments made to the
order of Maker or its subsidiaries for which
immediate bank account credit is given but for which
customary clearing times may exceed two Business
Days;
(h) credit facilities of up to $3,000,000 established to
facilitate cash management functions on customary
terms, in connection with automated clearing house
(ACH) transactions for payroll for Maker or its
subsidiaries;
(i) accounts and other trade payables incurred in the
ordinary course of business and any standby letters
of credit, bid, performance or surety bonds or other
reimbursement obligations issued for the account of,
or entered into by, Maker or any of its subsidiaries
in the ordinary course of business; and
(j) capitalized lease obligations incurred in the
ordinary course of business or purchase money
indebtedness incurred in the ordinary course of
business (so long as such capitalized lease
obligations and purchase money indebtedness do not
exceed $7,500,000 at any one time in the aggregate).
"Material Subsidiary" shall mean a direct or indirect majority
owned subsidiary of Maker with total assets exceeding $5,000,000.
"Maximum Rate" shall mean the maximum lawful non-usurious rate
of interest, if any, that under Applicable Law Payee is permitted to
charge Maker on the loan evidenced by this Note from time to time. If,
however, during any period interest accruing on this Note is not
limited to any maximum lawful non-usurious rate of interest under
Applicable Law, then during each such period the "Maximum Rate" shall
be equal to a per annum rate of 4% plus the Note Rate.
"Note Rate" shall mean a per annum rate of interest (computed
on the basis of the actual number of days elapsed (including the first
but excluding the last day) over a year of 365 or 366 days, as the case
may be) equal to 10%.
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<PAGE> 4
"Subordination Agreement" shall mean a subordination agreement
between Maker, certain subsidiaries of Maker (as may be required under
the circumstances of the Credit Facility), Payee and the lenders under
the Credit Facility (or such lenders agent, as the case may be)
providing for the subordination of Payee's rights and obligations under
this Note to the rights of such lenders under the Credit Facility,
which subordination agreement shall contain terms and conditions that
are normal and customary in agreements of this type and acceptable to
Payee in its reasonable discretion.
6. If any one of the following events shall occur and be
continuing (an "Event of Default"):
(a) Maker shall fail to pay timely when due, the
principal of, or accrued unpaid interest on, this Note or any other of
the obligations hereunder within three Business Days following the due
date;
(b) Maker or any Material Subsidiary shall (i) dissolve
or terminate its existence, (ii) merge with or into any other entity
(other than a wholly-owned subsidiary (excluding director qualifying
shares or other immaterial ownership required by applicable law) of
Maker) after the date hereof, (iii) discontinue its usual business or
(iv) sell all or substantially all of its business or assets;
(c) Maker or any Material Subsidiary shall (i) apply for
or consent to the appointment of a receiver, trustee, custodian or
liquidator of it or of all or a substantial part of its property, (ii)
generally fail to pay its debts as they come due in the ordinary course
of business or (iii) commence, or file an answer admitting the material
allegations of or consenting to, or default in a petition filed against
it in, any case, proceeding or other action under any existing or
future law of any jurisdiction, domestic or foreign, relating to
bankruptcy, insolvency, reorganization or relief of debtors, or seeking
to have an order for relief entered with respect to it under the
federal Bankruptcy Code 11 USC Section 101 et. seq., or seeking
reorganization, arrangement, adjustment, winding-up, liquidation,
dissolution, composition or the similar relief with respect to it or
its debt;
(d) Any person or group becomes the beneficial owner (as
such terms are defined in the rules promulgated under the Securities
Exchange Act of 1934) of 40% or more of the voting power of Maker's
capital stock or shall otherwise have the right to cast 40% or more of
the votes cast in any election of Maker's directors (excluding votes
cast by or at the direction of directors of the Company by means of
proxies solicited in accordance with the Securities Exchange Act of
1934);
(e) A receiver, conservator, liquidator, custodian or
trustee of Maker or any Material Subsidiary or any of its property is
appointed by the order or decree of any court or agency or supervisory
authority having jurisdiction; or Maker obtains an order for relief
under the federal Bankruptcy Code 11 USC Section 101 et. seq.; or any
of the property of Maker is sequestered by court order; or a petition
is filed or a proceeding is commenced against Maker or any Material
Subsidiary under any
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<PAGE> 5
bankruptcy, reorganization, arrangement, insolvency, readjustment of
debt, dissolution or liquidation law of any jurisdiction, whether now
or hereafter in effect;
(f)(1) Any event or condition occurs that results in the
occurrence of any event, circumstance or condition that, after any
applicable cure or notice period or lapse of time, or both, would
constitute a default under the Credit Facility that continues
unremedied for any applicable cure period, whether or not a party
thereto exercises any of its rights and remedies with respect to such
default;
(g) The levy or execution of any attachment, execution or
other process against any material property or interest in property of
Maker or any Material Subsidiary that is not timely and completely
stayed by appropriate proceedings and/or bonding requirements;
(h) Any court shall find or rule, or Maker or any
Material Subsidiary shall assert or claim, that this Note does not or
will not constitute the legal, valid, binding and enforceable
obligations of the party or parties hereto;
(i) The rendering of any judgment or judgments against
Maker or any Material Subsidiary for the payment of money in excess of
$5,000,000, in the aggregate, that remains unsatisfied and in effect
for any period of 60 consecutive days without a stay of execution;
(j) Maker or any Material Subsidiary shall have
concealed, removed, or permitted to be concealed or removed, any part
of its property, with intent to hinder, delay or defraud its creditors
or any of them, or made or suffered a transfer of any of its property
that may be fraudulent under any bankruptcy, fraudulent conveyance or
similar law; or shall have made any transfer of its property to or for
the benefit of a creditor at a time when other creditors similarly
situated have not been paid; or shall have suffered or permitted, while
insolvent, any creditor to obtain a lien upon any of its property
through legal proceedings or distraint or other process that is not
vacated within 15 days from the date thereof;
(k) Maker shall declare, set aside or pay any dividend or
distribution of any kind (in cash, property, securities or otherwise)
(but excluding dividends or distributions of common stock);
(l) Maker and its subsidiaries shall have outstanding, at
any one time, without the prior written consent of Payee, Indebtedness
for Borrowed Money exceeding in the aggregate $100,000,000; or
(m) Maker shall breach any material provision of the
Subordination Agreement;
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<PAGE> 6
then Payee, at its option, subject to the Subordination Agreement, may declare
the unpaid principal portion of this Note to be forthwith due and payable,
whereupon the said portion of this Note and all accrued, earned and unpaid
interest shall become immediately due and payable by Maker without demand,
presentment for payment, notice of non-payment, protest, notice of protest,
notice of intent to accelerate maturity, notice of acceleration of maturity or
any other notice of any kind to Maker, or any other person liable hereon or with
respect hereto, all of which are hereby expressly waived by Maker and each other
person liable hereon or with respect hereto, anything contained herein or in any
other documents or instruments to the contrary notwithstanding; and upon the
happening of any Event of Default referred to in paragraphs (b), (c), (d) or
(e), the unpaid principal portion of this Note and all other interest on this
Note then accrued, earned and unpaid shall become automatically due and payable
by Maker without demand, presentment for payment, notice of nonpayment, protest,
notice of protest, notice of intent to accelerate maturity, notice of
acceleration of maturity or any other notice of any kind to Maker or any other
person liable hereon or with respect hereto, all of which are expressly waived
by Maker and each other Person liable hereon or with respect hereto, anything
contained herein or in any document or instrument to the contrary
notwithstanding. Further, upon any default or event of default, subject to the
Subordination Agreement, Payee shall have all other rights and remedies as set
forth herein and as otherwise provided at law or in equity, all such rights and
remedies being cumulative, including, but without limitation, the right, without
prior notice to Maker or any other person liable with respect hereto, to set-off
and apply any indebtedness at any time owing by Payee to, or for the credit or
account of, Maker against any indebtedness owed to Payee by Maker, irrespective
of whether or not Payee shall have made demand under this Note or any other
instrument securing this Note, and although this Note may not then be matured;
provided, that any exercise of said set-off by Payee shall be subsequently
followed by notice from Payee to Maker of such right exercised, but the failure
to give such notice shall in no manner affect the right of Payee in respect to
set-offs and corresponding applications of funds.
7. Upon the execution by Maker of any agreement related to a
proposed Financing, Maker shall promptly provide written notice thereof to
Payee's Chief Financial Officer.
8. Maker shall, upon demand by Payee, promptly pay to Payee any
and all costs and expenses, including legal expenses, collections costs and
attorneys' fees (whether or not legal proceedings are instituted including,
without limitation, legal expenses and reasonable attorneys' fees in connection
with any bankruptcy proceedings), incurred or paid by Payee in protecting or
enforcing Payee's rights hereunder. Without limiting the generality of the
foregoing, if this Note is collected by suit or through the Bankruptcy Court, or
any judicial proceeding, or if this Note is not paid at maturity, however such
maturity may be brought about, and it is placed in the hands of an attorney for
collection (whether or not legal proceedings are instituted), then Maker agrees
to pay, in addition to all other amounts owing hereunder, the collection costs
and reasonable attorneys' fees of the holder hereof. The obligations of Maker
hereunder shall be subject to the provisions of the Subordination Agreement.
9. The records of Payee shall constitute rebuttably presumptive
evidence of the principal and earned, accrued and unpaid interest remaining
outstanding on this Note.
10. It is the intent of Payee and Maker in the execution and
performance of this Note to remain in strict compliance with Applicable Law from
time to time in effect. In furtherance thereof,
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<PAGE> 7
Payee and Maker stipulate and agree that none of the terms and provisions
contained in this Note shall ever be construed to create a contract to pay for
the use, forbearance or detention of money with interest at a rate or in an
amount in excess of the Maximum Rate or amount of interest permitted to be
charged under Applicable Law. For purposes of this Note "interest" shall include
the aggregate of all charges that constitute interest under Applicable Law that
are contracted for, charged, reserved, received or paid under this Note. Maker
shall never be required to pay unearned interest and shall never be required to
pay interest at a rate or in an amount in excess of the Maximum Rate or amount
of 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 of any other instrument pertaining to or securing this Note, that may
be in actual or apparent conflict herewith. If this Note is prepaid, or if the
maturity of this Note is accelerated for any reason, or if under any other
contingency the effective rate or amount of interest that would otherwise be
payable under this Note would exceed the Maximum Rate or amount of interest
Payee or any other holder of this Note is allowed by Applicable Law to charge,
contract for, take, reserve or receive, or in the event Payee or any holder of
this Note shall charge, contract for, take, reserve or receive monies that are
deemed to constitute interest that would, in the absence of this provision,
increase the effective rate or amount of interest payable under this Note to a
rate or amount in excess of that permitted to be charged, contracted for, taken,
reserved or received under Applicable Law then in effect, then the principal
amount of this Note or the amount of interest that would otherwise be payable
under this Note or both shall be reduced to the amount allowed under Applicable
Law as now or hereinafter construed by the courts having jurisdiction, and all
such moneys so charged, contracted for, taken, reserved or received that are
deemed to constitute interest in excess of the Maximum Rate or amount of
interest permitted by Applicable Law shall immediately be returned to or
credited to the account of Maker upon such determination. Payee and Maker
further stipulate and agree that, without limitation of the foregoing, all
calculations of the rate or amount of interest contracted for, charged, taken,
reserved or received under this Note that are made for the purpose of
determining whether such rate or amount exceeds the Maximum Rate or amount,
shall be made to the extent not prohibited by Applicable Law, by amortizing,
prorating, allocating and spreading during the period of the full stated term of
this Note, all interest at any time contracted for, charged, taken, reserved or
received from Maker or otherwise by Payee or any other holder of this Note.
11. Maker and all sureties, endorsers and guarantors, if any
(which shall not include any obligor under the Credit Facility that is not a
party to the Subordination Agreement), of this Note waive demand, presentment
for payment, notice of non-payment, protest, notice of protest, notice of intent
to accelerate maturity, notice of acceleration of maturity and all other notice,
filing of suit and diligence in collecting this Note or enforcing any security
herefor, and agree to any substitution, exchange or release of any such
security, the release of any party primarily or secondarily liable hereon and
further agree that it will not be necessary for any holder hereof, in order to
enforce payment of this Note, to first institute suit or exhaust its remedies
against any security herefor, and consent to any one or more extensions or
postponements of time of payment of this Note on any terms or any other
indulgences with respect hereto, without notice thereof to any of them.
12. This Note shall be governed by and construed in accordance
with the internal laws of the State of Texas and applicable federal laws of the
United States of America. This Note has been delivered and accepted and is
payable at Houston, Harris County, Texas. There are no unwritten or oral
agreements between Maker and Payee. Payee has no commitment to make any
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<PAGE> 8
additional loans or extend financial accommodations to Maker beyond the
indebtedness evidenced hereby.
EXECUTED AND EFFECTIVE as of the day and year first above written.
MAKER:
GRANT PRIDECO, INC.
By: /s/ John C. Coble
--------------------------------
John C. Coble
President
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<PAGE> 1
LOAN AND SECURITY AGREEMENT
THIS LOAN AND SECURITY AGREEMENT is entered into as of April
14, 2000, among each of the entities identified as a Borrower on Schedule 1
(each a "Borrower," and collectively the "Borrowers"), each of the financial
institutions identified as a Lender on Schedule 2 (together with each of their
respective direct and indirect successors and assigns, each, a "Lender," and
collectively, the "Lenders"), and TRANSAMERICA BUSINESS CREDIT CORPORATION, a
Delaware corporation having its principal office at 9399 West Higgins Road,
Suite 600, Rosemont, Illinois 60018 and having an office at 555 Theodore Fremd
Avenue, Rye, New York 10580 (the "Agent").
W I T N E S S E T H :
WHEREAS, the Borrowers wish to obtain a revolving credit and
letter of credit facility to refinance existing short-term indebtedness, to
finance acquisitions by GPI (as defined below) and the Borrowers, and for
general working capital purposes; and
WHEREAS, upon the terms and subject to the conditions set
forth herein, the Lenders are willing to make loans and other extensions of
credit to the Borrowers.
NOW, THEREFORE, the Borrowers, the Lenders and the Agent
hereby agree as follows:
ARTICLE I.
DEFINITIONS
SECTION 1.1. General Definitions. As used herein, the
following terms shall have the meanings herein specified (to be equally
applicable to both the singular and plural forms of the terms defined):
"Acquisition" means the acquisition of a majority of the stock
or partnership or other equity interests of a Person or of all or substantially
all of the assets of a Person or any division, business or line of business of a
Person.
"Adjusted Earnings" means, for any period, with respect to GPI
and its Subsidiaries on a consolidated basis (i) net income (as that term is
determined in accordance with GAAP) for such period, plus (ii) the amount of
depreciation and
<PAGE> 2
amortization of fixed and intangible assets deducted in determining such net
income for such period, plus (iii) all interest and fees for the use of money or
the availability of money, including commitment, facility and like fees and
charges upon Indebtedness (including Indebtedness to the Lenders) paid or
payable during such period, plus (iv) all tax liabilities paid or accrued during
such period, less (v) the amount of all gains (or plus the amount of all losses)
realized during such period upon the sale or other disposition of property or
assets that are sold or otherwise disposed of outside the ordinary course of
business that are included in the calculation of net income for such period,
plus (vi) any losses (or less any gains) relating to the write-off or
restructuring of the Borrowers' and their Subsidiaries' Investments in, and
manufacturing arrangement with, OCTL during such period, plus (vii) any
non-recurring unusual or extraordinary losses (as classified in accordance with
GAAP) (or less any such gains) included in the calculation of net income for
such period, plus (viii) any non-cash compensation expense included in the
calculation of net income for such period, plus (ix) all cash dividends and
other distributions received from Voest-Alpine during such period on account of
its Capital Stock.
"Administrative Borrower" means Grant Prideco, LP or any other
Borrower agreed to in writing by the Borrowers and the Agent from time to time,
acting in its capacity as agent for the Borrowers under Section 11.11.
"Advance" means a Base Rate Advance, a Prime Rate Advance or a
LIBOR Rate Advance.
"Affiliate" means, as to any Person, any other Person who
directly or indirectly controls, is under common control with, is controlled by
or is a director or officer of such Person. As used in this definition,
"control" (including its correlative meanings, "controlled by" and "under common
control with") means possession, directly or indirectly, of the power to direct
or cause the direction of management or policies (whether through ownership of
voting securities or partnership or other ownership interests, by contract or
otherwise), provided that, in any event, any Person who owns directly or
indirectly twenty percent (20%) or more of the securities having ordinary voting
power for the election of the members of the board of directors or other
governing body of a corporation or twenty percent (20%) or more of the
partnership or other ownership interests of any other Person (other than as a
limited partner of such other Person) will be deemed to control such
corporation, partnership or other Person. Notwithstanding the foregoing, (i)
Weatherford International, Inc. and its Subsidiaries shall not be deemed to be
Affiliates of the Borrowers or their Subsidiaries and (ii) any corporation,
partnership or other entity (excluding the Borrowers, the Guarantors and their
Subsidiaries) upon which members of GPI's Board of Directors serve as officers
or directors shall not be deemed to be an Affiliate of the Borrowers or their
Subsidiaries solely as a result thereof.
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<PAGE> 3
"Agent's Cdn. Payment Account" means the account of the
Agent's Affiliate, Transamerica Commercial Finance Corporation, Canada at Bank
of Montreal in Toronto, Ontario, Canada, account number 1365-850 or such other
account of the Agent or one of its Affiliates in Canada as the Agent may from
time to time designate to the Administrative Borrower and the Lenders.
"Agent's U.S. Payment Account" means the account of the Agent
at Bank One, N.A. in Chicago, Illinois, account number 52-97184 or such other
account of the Agent or one of its Affiliates in the United States as the Agent
may from time to time designate in writing to the Administrative Borrower and
the Lenders.
"Agents" means the Agent and the Cdn. Agent.
"Agreement" means this Loan and Security Agreement, as
amended, supplemented or otherwise modified from time to time.
"Assignment and Acceptance" means an assignment and acceptance
entered into by a Lender and its assignee, and accepted by the Agent and in
substantially the form of Exhibit D.
"Auditors" means a nationally recognized firm of independent
public accountants selected by the Administrative Borrower and reasonably
satisfactory to the Agent.
"Availability Reserve" means, with respect to the Borrowers,
the sum of (i) three months' rental or storage payments on all leased premises
and warehouse locations (where Collateral is stored from time to time) of the
Borrowers for which the Borrowers have not delivered to the Agent a Collateral
Access Agreement, provided that such sum shall be adjusted from time to time
hereafter upon (A) delivery to the Agent of any such Collateral Access
Agreement, (B) the addition of a lease or warehouse location or the removal of
all Collateral therefrom or (C) any change in rental payments or storage charges
for any such location, and (ii) an amount equal to any and all past-due rent and
storage charges with respect to all lease or warehouse locations at which
Collateral may be located, provided that the Borrowers shall promptly advise the
Agent of all such amounts and, upon request by the Agent, provide a report to
the Agent with respect thereto.
"Average Life" means, as of the date of determination, with
reference to any Indebtedness, the quotient obtained by dividing (i) the sum of
the products of the number of years from the date of determination to the dates
of each successive scheduled principal payment of such Indebtedness multiplied
by the amount of such principal payment by (ii) the sum of all such principal
payments.
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<PAGE> 4
"Bankruptcy Code" means (i) Title 11 of the United States Code
entitled "Bankruptcy," or (ii) the Bankruptcy and Insolvency Act of Canada, as
either may be amended from time to time, or any successor statute.
"Base Rate" means the higher of (i) the prime, base or
equivalent rate of interest publicly announced from time to time by Citibank,
N.A. (which may not be the lowest rate of interest charged by Citibank, N.A.)
and (ii) the published annualized rate for 90-day dealer commercial paper that
appears in the "Money Rates" section of The Wall Street Journal.
"Base Rate Advance" means an Advance that bears interest as
provided in Section 4.1(a).
"Blocked Account" has the meaning specified in Section 2.6(a).
"Blocked Account Agreement" means an agreement entered into by
the Cdn. Borrower, the Cdn. Agent and the Blocked Account Bank in substantially
the form of Exhibit J, as amended, supplemented or otherwise modified from time
to time.
"Blocked Account Bank" means The Bank of Nova Scotia or any
successor or other bank acceptable to the Agent to act as such.
"Borrowing" means any single Borrowing of Loans from the
Lenders under Section 2.1(a) or (b).
"Borrowing Base Certificate" has the meaning specified in
Section 7.1(k)(v).
"Borrowing Date" means the date on which a Borrowing is
obtained.
"Business Day" means any day other than a Saturday, a Sunday
or any other day on which commercial banks in New York, New York or Chicago,
Illinois are required or permitted by law to close. When used in connection with
any (i) LIBOR Rate Advance, a Business Day shall also exclude any day on which
commercial banks are not open for dealings in Dollar deposits in the London
interbank market or (ii) Prime Rate Advance, a Business Day shall also exclude
any day on which Canadian chartered banks in Toronto, Ontario, and Edmonton,
Alberta, Canada are required or permitted by law to close.
"Business Plan" means a business plan of GPI and its
Subsidiaries, consisting of consolidated and consolidating by
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<PAGE> 5
operating division (and, with respect to each business plan delivered to the
Agent after the Closing Date, consolidating by legal entity) projected balance
sheets, related cash flow statements and related profit and loss statements, and
availability forecasts, together with appropriate supporting details and a
statement of the underlying assumptions, which covers a one-year period and
which presents amounts on a monthly basis.
"Capital Expenditures" means expenditures (but excluding
acquisitions of businesses (whether through the acquisition of all or
substantially all of the assets or all or substantially all of the Capital
Stock) of third parties) for any fixed assets or improvements, replacements,
substitutions or additions thereto which have a useful life of more than one
year, (but excluding purchases of up to US$1,000,000 in any calendar year of
computer hardware with a useful life of less than two years) and shall include
all commitments and payments in respect of Capitalized Lease Obligations and
leasehold improvements.
"Capitalized Lease Obligations" means any rental obligation
which, under GAAP, is or will be required to be capitalized on the books of the
lessee, taken at the amount thereof accounted for as indebtedness (net of
interest expense) in accordance with GAAP.
"Capital Stock" means, with respect to any Person, any and all
shares, interests, rights to purchase, warrants, options, participations or
other equivalents (however designated) of such Person's equity, including all
common stock and preferred stock, any limited or general partnership interest
and any limited liability company membership interest.
"Cash Equivalents" means (i) securities issued, guaranteed or
insured by the United States or, with respect to Investments by the Cdn.
Borrower, Canada or any of its agencies with maturities of not more than one
year from the date acquired; (ii) certificates of deposit with maturities of not
more than one year from the date acquired, issued by (A) the Agent or its
Affiliates; (B) any U.S. federal or state chartered commercial bank of
recognized standing which has capital and unimpaired surplus in excess of
US$500,000,000; (C) any bank or its holding company that has a short-term
commercial paper rating of at least A-1 or the equivalent by Standard & Poor's
Ratings Services or at least P-1 or the equivalent by Moody's Investors Service,
Inc.; or (D) with respect to Investments by a Foreign Subsidiary or a Cdn.
Subsidiary, a bank or trust company organized under the laws of any jurisdiction
other than the United States or any state thereof whose commercial paper is
rated at least A-1 or the equivalent by Standard & Poor's Rating Group or at
least P-1 or the equivalent by Moody's Investors Service, Inc.; (iii) repurchase
agreements and reverse repurchase agreements
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<PAGE> 6
with terms of not more than seven days from the date acquired, for securities of
the type described in clause (i) above and entered into only with commercial
banks having the qualifications described in clause (ii) above or such other
financial institutions with a short-term commercial paper rating of at least A-1
or the equivalent by Standard & Poor's Ratings Services or at least P-1 or the
equivalent by Moody's Investors Service, Inc.; (iv) commercial paper, other than
commercial paper issued by a Borrower or any of its Affiliates, issued by any
Person incorporated under the laws of the United States or any state thereof and
rated at least A-1 or the equivalent thereof by Standard & Poor's Ratings
Services or at least P-1 or the equivalent thereof by Moody's Investors Service,
Inc., in each case with maturities of not more than one year from the date
acquired; (v) investments in money market funds registered under the Investment
Company Act of 1940, which have net assets of at least US$500,000,000 and at
least eighty-five percent (85%) of whose assets consist of securities and other
obligations of the type described in clauses (i) through (iv) above; (vi)
Investments by Foreign Subsidiaries or Cdn. Subsidiaries in short-term
investments, in connection with the cash management programs of GPI and its
Subsidiaries; (vii) deposit accounts (A) in a bank or trust company organized
under the laws of the United States or any state thereof having capital surplus
and undivided profits aggregating at least US$500,000,000 and whose commercial
paper (or that of the holding company with which such bank or trust company is
affiliated) is rated A-1 or better by Standard & Poor's Rating Group or P-1 or
better by Moody's Investors Service, Inc., (B) with respect to a Foreign
Subsidiary or Cdn. Subsidiary, in a bank organized under laws other than those
of the United States or any state thereof, in currencies other than U.S.
Dollars, which bank provides working capital, operating accounts or similar
services to such Foreign Subsidiary or Cdn. Subsidiary at such Bank, and (C) in
a bank organized under the laws of the United States or any state thereof not
included in the descriptions in clauses (A) or (B) above, so long as the
aggregate amount on deposit in all such banks by the Borrowers and their
Subsidiaries does not exceed US$2,500,000 in the aggregate; (viii) Investments
in eurodollars not in excess of US$10,000,000 in the aggregate at any one time
outstanding, issued by any bank or trust company having capital surplus and
undivided profits aggregating at least US$500,000,000 and whose long term
certificates of deposit are, at the time of acquisition thereof by any Borrower
or its Subsidiary, rated A-1 or better by Standard & Poor's Ratings Group or P-1
or better by Moody's Invest or Service, Inc.; (ix) other instruments, commercial
paper or investments acceptable to the Agent in its sole discretion; and (x)
Canadian bankers acceptances.
"Cdn. Agent" means Transamerica Commercial Finance
Corporation, Canada, a Canadian corporation.
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"Cdn. Borrower" means Grant Prideco Canada Ltd., an Alberta
corporation.
"Cdn. Borrower's Account" means, collectively, the accounts
maintained by the Cdn. Borrower at The Bank of Nova Scotia in Edmonton, Alberta,
Canada, account number 90019 00326 11 for Cdn. Dollar deposits and account
number 90019 86403 19 for U.S. Dollar deposits, or such other account which the
Cdn. Borrower may designate to the Agent from time to time.
"Cdn. Borrowing Base" has the meaning specified in Section
2.1(b).
"Cdn. Dollars" and "Cdn.$" means lawful currency of Canada.
"Cdn. Lenders" means Lenders specified as such in Schedule 2
to this Agreement, together with each other Person which from time to time
becomes a party to this Agreement and a Lender to the Cdn. Borrower under this
Agreement.
"Cdn. Letter of Credit" means a Letter of Credit issued for
the account of the Cdn. Borrower.
"Cdn. Loans" has the meaning specified in Section 2.1(b).
"Cdn. Note" has the meaning specified in Section 2.1(e).
"Cdn. Subsidiary" means the Cdn. Borrower and each other
Subsidiary of GPI formed under the laws of Canada or any province thereof.
"CDOR" means, for any day the rate that appears on the Reuters
Screen CDOR page as of at 10:00 A.M. (Toronto time) on such day (or, if such day
is not a Business Day, as of 10:00 A.M. (Toronto time) on the next preceding
Business Day).
"Closing Date" means the date of execution and delivery of
this Agreement.
"Code" has the meaning specified in Section 1.3.
"Collateral" means all Receivables, Inventory and Equipment of
the Borrowers and all other collateral specified in this Agreement, the Security
Agreement and the other Security Documents.
"Collateral Access Agreements" means landlord waivers,
mortgagee waivers, bailee letters or similar acknowledgments of any lessor,
warehouseman or processor in possession of any Collateral or on whose property
any Collateral is located, substantially in the form of Exhibit L-1 or Exhibit
L-2.
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<PAGE> 8
"Collateralization" and "Collateralize" each means, with
respect to any Letter of Credit, the deposit by the Borrowers in a cash
collateral account established and controlled by or on behalf of the Agent of an
amount equal to 105% of the undrawn amount of such Letter of Credit.
"Collections" means all cash, funds, checks, notes,
instruments, any other form of remittance tendered by account debtors in respect
of payment of Receivables of the Borrowers and any other payments received by
the Loan Parties with respect to any Collateral.
"Commitment" means, with respect to any Lender, its commitment
to make U.S. Loans or Cdn. Loans, as the case may be, and to participate in U.S.
Letters of Credit or Cdn. Letters of Credit, as the case may be, up to the
amount set forth opposite its name on Schedule 2 as such Schedule 2 may be
amended, supplemented or otherwise modified from time to time.
"Compliance Certificate" has the meaning specified in Section
7.1(k)(iii).
"Contingent Obligation" means any direct, indirect, contingent
or non-contingent guaranty or obligation for the Indebtedness of another Person,
except endorsements in the ordinary course of business.
"Continuation" has the meaning specified in Section 2.2(b).
"Contribution Agreement" means the contribution, subrogation
and indemnity agreement among the Guarantors, substantially in the form of
Exhibit G, as amended, supplemented or otherwise modified from time to time.
"Convert," "Conversion" and "Converted" each refers to
conversion of Advances of one Type into Advances of another Type pursuant to
Section 2.2(c).
"Default" means any of the events specified in Section 9.1,
whether or not any of the requirements for the giving of notice, the lapse of
time, or both, or any other condition, has been satisfied.
"Defaulting Lender" has the meaning specified in Section
2.9(a).
"Designated Affiliate" means (i) GPI, (ii) each Guarantor and
(iii) each other Subsidiary of GPI that has or had
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<PAGE> 9
a net worth as determined in accordance with GAAP of more than US$1,000,000 or
annual revenues in excess of US$5,000,000 in each case in or for the fiscal year
of determination (including on an annualized basis for the current year in the
case of revenues) or in or for any of the immediately three preceding fiscal
years.
"Disqualified Stock" means any Capital Stock of Subsidiaries
that, by its terms (or by the terms of any security into which it is convertible
or for which it is exercisable, redeemable or exchangeable), or upon the
happening of any event or with the passage of time, matures, or is mandatorily
redeemable, pursuant to a sinking fund obligation or otherwise, or is redeemable
at the option of the holder thereof, in whole or in part, in each case on, or
prior to, the Expiration Date, or is convertible into or is exchangeable for
debt securities of GPI or any of its Subsidiaries.
"Effective Date" means the date on which all of the conditions
specified in Section 5.1 shall have been satisfied.
"Eligible Assignee" means (i) a Lender or any Affiliate
thereof; (ii) a commercial bank organized or licensed under the laws of the
United States or a state thereof in the case of an assignment by a U.S. Lender,
or under the laws of Canada or a province thereof in the case of an assignment
by a Cdn. Lender, in each case having total assets in excess of
US$1,000,000,000; (iii) a finance company, insurance company or other financial
institution or fund, which is regularly engaged in making, purchasing or
investing in loans and having total assets in excess of US$1,000,000,000; or
(iv) a savings and loan association or savings bank organized under the laws of
the United States or a state thereof in the case of an assignment by a U.S.
Lender, or under the laws of Canada or a province thereof in the case of an
assignment by a Cdn. Lender, in each case which has a net worth, determined in
accordance with GAAP, in excess of US$500,000,000; provided, however, that (A)
neither a Loan Party nor an Affiliate of a Loan Party shall qualify as an
Eligible Assignee, (B) each Eligible Assignee under clauses (ii) through (iv)
hereof shall be reasonably acceptable to and subject to the consent of the Agent
and, so long as no Default or Event of Default has occurred and is continuing,
the Administrative Borrower, which consent of the Administrative Borrower, if
required, shall not be unreasonably withheld or delayed, (C) each of the
financial institutions specified in Schedule 4 and its Affiliates shall be
deemed an Eligible Assignee, (D) nothing herein shall restrict or require the
consent of any Person to the pledge by any U.S. Lender of all or any portion of
its rights and interests under this Agreement, its U.S. Note or any other Loan
Document to any Federal Reserve Bank in accordance with Regulation A of the
Board of Governors of the Federal Reserve System or U.S. Treasury Regulation 31
CFR 203.14, and such Federal Reserve Bank may enforce such pledge in any manner
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permitted by applicable law and (E) no Person that would be subject to interest
withholding obligations on account of any payment by any Borrower of interest on
the Obligations under the income tax laws of the United States, with respect to
any assignment by a U.S. Lender, or under the tax laws of Canada, with respect
to an assignment by a Cdn. Lender, shall constitute an Eligible Assignee.
"Eligible Inventory" means only such Inventory of a Borrower
located in the United States, or, in the case of the Cdn. Borrower, Canada
consisting of raw materials, work in process the marketability of which is
satisfactory to the Agent, or finished goods, which is free from any claim of
title or Lien in favor of any Person (other than Liens in favor of the Agent or
Permitted Liens) and with respect to which no event has occurred and no
condition exists which could be reasonably expected to impair substantially such
Borrower's ability to use or sell such Inventory in the ordinary course of its
business and which the Agent, in its reasonable discretion, shall deem eligible
to serve as collateral for Advances, based on such considerations as the Agent
may deem appropriate from time to time and less any such reserves as the Agent,
in its reasonable discretion, may require, including, without limitation,
reserves for special order goods for a specific customer that the Agent
determines cannot reasonably be expected to be marketed and sold in the ordinary
course of the Borrowers' business. No Inventory of a Borrower shall be Eligible
Inventory unless the Agent (or the Cdn. Agent, as the case may be) has a
perfected first priority Lien thereon. The value of Eligible Inventory shall be
computed at the lower of cost (computed on a "first in, first out" basis) or
market. Any Inventory of a Borrower that is not in the control or possession of
such Borrower and is covered by a warehouse receipt, a bill of lading or other
document of title shall in no event be Eligible Inventory unless such warehouse
receipt, bill of lading or document of title is in the name of or held by the
Agent. No Inventory of a Borrower shall be Eligible Inventory unless (i) it is
located on property owned by such Borrower; or (ii) (A) it is either located on
property leased by such Borrower or in a contract warehouse or on the premises
of a third party processor which is subject to a Collateral Access Agreement
executed by the mortgagee, lessor, contract warehouseman or processor, as the
case may be, and segregated or otherwise separately identifiable from goods of
others, if any, stored on the premises, provided that, in the case that
Inventory is located on the premises of such a third party processor which is
not the subject of a Collateral Access Agreement, the Agent may, in its sole
discretion, allow the inclusion of such Inventory in the calculation of Eligible
Inventory, provided that such Inventory is the subject of an adequate reserve
(which will reduce the amount of Inventory available for such calculation) to be
determined in the Agent's sole discretion, or (B) in the case of lease or
warehouse premises, it is the subject of an Availability
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Reserve, the amount of which is subtracted from the value of Eligible Inventory
so as to account for Inventory located on such lease or warehouse premises for
which there is no Collateral Access Agreement. No Inventory of a Borrower shall
be Eligible Inventory if it is in transit or it is consigned to or from such
Borrower. In addition, and without limitation of the foregoing, the Agent may
treat any Inventory as ineligible if:
(a) it is not owned solely by a Borrower or a Borrower does
not have sole and good, valid and marketable title thereto; or
(b) it is packing or shipping materials or maintenance
supplies; or
(c) it is goods returned or rejected by a Borrower's customer
for any reason that the Agent reasonably determines makes such goods
non-saleable in the ordinary course of such Borrower's business; or
(d) it (i) is excess (as so reserved by a Borrower from time
to time or as otherwise reasonably determined by the Agent) or (ii) is obsolete,
defective, damaged, slow moving or unmerchantable, or (iii) is samples or
Inventory on hand which is used for promotional and other sales activities, or
(iv) does not otherwise conform to the representations and warranties contained
in the Loan Documents in any material respect; or
(e) it is repossessed, attached, seized, made subject to a
writ or distress warrant, levied upon or brought within the possession of any
receiver, trustee, custodian or assignee for the benefit of creditors; or
(f) it is goods acquired by a Borrower in or as part of a
"bulk" transfer or sale of assets and such acquisition is not consummated in the
ordinary course of business unless such Borrower has complied with all
applicable bulk sales or bulk transfer laws in connection with such acquisition.
"Eligible Receivables" means and includes only those unpaid
Receivables of a Borrower, without duplication, which (i) arise out of a bona
fide sale of goods of the kind ordinarily sold by such Borrower in the ordinary
course of its business, (ii) are made to a Person competent to contract therefor
who is not an Affiliate of such Borrower and is not controlled by an Affiliate
of such Borrower, (iii) are not subject to renegotiation or redating and (iv)
are free and clear of any Lien in favor of any Person other than Liens in favor
of the Agent or the Cdn. Agent and Liens permitted under Section 7.2(i). No
Receivable of a Borrower shall be an Eligible Receivable unless the Agent (or
the Cdn. Agent, as the case may be) has a perfected first priority Lien thereon.
No Receivable of a Borrower shall
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<PAGE> 12
be an Eligible Receivable if it is more than 120 days past the date of the
original invoice therefor or more than sixty days past the due date. No
Receivable of a Borrower shall be an Eligible Receivable unless the delivery of
the goods giving rise to such Receivable has been completed (it being understood
that delivery is deemed completed once such goods are delivered to the place of
delivery where title passes). The Agent may treat any Receivable as ineligible
if:
(a) any warranty contained in this Agreement or in any other
Loan Document with respect to such Receivable or in any assignment or statement
of warranties or representations relating to such Receivable delivered by a
Borrower to the Agent has been breached or is untrue in any material respect; or
(b) the account debtor or any Affiliate of the account debtor
has disputed liability, has or has asserted a right of setoff or has made any
claim with respect to any other Receivable due from such account debtor or
Affiliate to a Borrower, in each case to the extent of the amount of such
dispute or claim or the amount of such actual or asserted right of setoff, as
the case may be; or
(c) the account debtor or any of its assets or any Material
Affiliate of the account debtor is the subject of an Insolvency Event or, in the
reasonable discretion of the Agent, is likely to become the subject of an
Insolvency Event; or
(d) the account debtor or any Material Affiliate of the
account debtor has called a meeting of its creditors to obtain any general
financial accommodation; or
(e) the account debtor is also a supplier to or creditor of a
Borrower, to the extent of the aggregate amount owed by such Borrower to the
account debtor; or
(f) the sale is to an account debtor outside the United
States, or, in the case of an account debtor of the Cdn. Borrower, outside of
Canada and the United States unless it is on letter of credit, acceptance or
other terms acceptable to the Agent or the account debtor is specified in
Schedule 5 or has a credit rating acceptable to the Agent; or
(g) 50% or more of the aggregate Receivables owed to the
Borrowers by the account debtor and the Affiliates of such account debtor whose
Receivables are not rendered ineligible under clause (f) hereof are unpaid more
than 120 days past the date of the original invoices therefor; or
(h) the account debtor is the United States or any department,
agency or instrumentality thereof, unless the applicable Borrower assigns its
right to payment under such
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<PAGE> 13
account to the Agent as collateral hereunder in full compliance with (including,
without limitation, the filing of a written notice of the assignment and a copy
of the assignment with, and receipt of acknowledgment thereof by, the
appropriate contracting and disbursing offices pursuant to) the Assignment of
Claims Act of 1940, as amended (31 U.S.C. Sections 203, 3727; 41 U.S.C. Section
15); or
(i) the Agent believes, in its reasonable discretion, that
collection of such Receivable is insecure or that such Receivable may not be
paid by reason of the account debtor's inability or unwillingness to pay.
"Environmental Laws" means all federal, state, provincial and
local statutes, laws, rulings, regulations or final and enforceable
governmental, administrative or judicial policies, directives, orders or
interpretations applicable to the business or property of a Person relating to
prevention of pollution or protection of human health or the environment
(including, without limitation, ambient air, surface water, ground water, land
surface or subsurface strata) including, without limitation, laws and
regulations relating to emissions, discharges, releases or threatened releases
of Hazardous Materials, or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling of any
Hazardous Materials.
"Equipment" means all machinery, equipment, furniture,
fixtures, leasehold improvements, conveyors, tools, materials, storage and
handling equipment, hydraulic presses, cutting equipment, computer equipment and
hardware, including central processing units, terminals, drives, memory units,
printers, keyboards, screens, peripherals and input or output devices, molds,
dies, stamps, and other equipment of every kind and nature and wherever situated
now or hereafter owned by a Person or in which a Person may have any interest as
lessee or otherwise (to the extent of such interest), together with all
additions and accessions thereto, all replacements and all accessories and parts
therefor, all manuals, blueprints, know-how, warranties and records in
connection therewith and all rights against suppliers, warrantors,
manufacturers, and sellers or others in connection therewith, together with all
substitutes for any of the foregoing.
"Equivalent Amount" means, with respect to any two currencies,
the amount obtained in one such currency when an amount in the other currency is
translated into the first currency using the spot wholesale transactions buying
rate of the Bank of Canada for the purchase of the applicable amount of the
first currency with the other currency in effect as of 12:00 noon in the place
where such translation occurs on the Business Day with respect to which such
computation is required for the purpose of this Agreement or, in the absence of
such a buying rate on such date, using such other rate as the Agent may
reasonably select.
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"ERISA" means the Employee Retirement Income Security Act of
1974, 29 U.S.C. Sections 1000 et seq., amendments thereto, successor statutes,
and regulations or guidelines promulgated thereunder.
"ERISA Affiliate" means any entity required to be aggregated
with a Borrower under Section 414(b), (c), (m) or (o) of the Internal Revenue
Code.
"Event of Default" means the occurrence of any of the events
specified in Section 9.1.
"Excess Cash Flow" means, for any period, with respect to GPI
and its Subsidiaries on a consolidated basis (i) Adjusted Earnings, less (ii)
all Capital Expenditures paid during such period other than with proceeds of
Indebtedness (other than proceeds of the Loans) or Net Cash Proceeds, less (iii)
all principal amounts of Indebtedness paid during such period other than
payments on account of Indebtedness owed to the Lenders and payments made using
Net Cash Proceeds or proceeds of Permitted Refinancing Indebtedness, less (iv)
all interest and fees for the use of money or availability of money, including
commitment, facility and like fees and charges upon Indebtedness (including
Indebtedness to the Lenders) paid during such period, less (v) all Restricted
Payments (to the extent permitted under this Agreement) made during such period
other than Restricted Payments that were made during such period (A) using
Qualified Capital Stock, (B) using proceeds of Permitted Subordinated
Indebtedness and (C) as purchases of Capital Stock of GPI relating to Grant
Prideco, Inc. Executive Deferred Compensation Plans or employee benefit plans
for tax withholding or pursuant to the cashless exercise of stock options or
warrants in connection with customary employee compensation programs.
"Expiration Date" means the earliest of (i) April 14, 2003, as
such date may be extended from time to time under Section 2.7, (ii) the date on
which all or any part of the principal amount of the Subordinated Note becomes
due and payable and (iii) the date of termination of the Commitments.
"Federal Funds Rate" means, for any period, a fluctuating
interest rate per annum equal, for each day during such period, to the weighted
average of the rates on overnight Federal Funds transactions with members of the
Federal Reserve System arranged by Federal Funds brokers, as published for such
day (or, if such day is not a Business Day, for the next preceding Business Day)
by the Federal Reserve Bank of New York, or, if such rate is not so published
for any day that is a Business Day, the average of the quotations for such day
on such transactions received by the Agent from three Federal Funds brokers of
recognized standing selected by it.
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<PAGE> 15
"Federal Reserve Board" means the Board of Governors of the
Federal Reserve System or any Person succeeding to the functions thereof.
"Financial Covenants" means the covenants set forth in Article
VIII.
"Financial Statements" means, with respect to GPI and its
Subsidiaries on a consolidated and consolidating (by operating division and,
with respect to all periods ending more than six months after the Closing Date,
by legal entity) basis, the balance sheets, profit and loss statements and
statements of cash flow for the period specified, prepared in accordance with
GAAP and consistent with prior practices.
"Fixed Charge Coverage Ratio" means (without duplication),
with respect to GPI and its Subsidiaries for each consecutive twelve-month
period (or, until the first anniversary of the Closing Date, the applicable
three, six, or nine-month period) ending with the last month of the then most
recent fiscal quarter for which Financial Statements are required to be
delivered to the Agent under Section 7.1(k)(iii) as of the date of determination
thereof (after giving effect on a pro forma basis to any Acquisition consummated
during or after the end of such most recent fiscal quarter in accordance with
GAAP), the ratio of (i) (A) Adjusted Earnings for such period, plus (B) 50% of
all Net Cash Proceeds received during such period, less (C) all Capital
Expenditures paid or payable during such period other than with the proceeds of
Indebtedness (other than proceeds of the Loans) or Net Cash Proceeds (to the
extent such Net Cash Proceeds are not included in clause (i)(B) above), less (D)
all tax liabilities paid during such period to (ii) (A) all principal amounts of
Indebtedness scheduled or required to be repaid by GPI or any of its
Subsidiaries during such period (other than repayments made with Net Cash
Proceeds (to the extent such Net Cash Proceeds are not included in clause (i)(B)
or (C) above) and with proceeds of Permitted Refinancing Indebtedness or
Permitted Subordinated Indebtedness), plus (B) all interest and fees (other than
a one-time charge in an aggregate total amount not to exceed US$5,000,000 for
costs and expenses incurred by the Borrower with respect to the refinancing of
the Subordinated Note) for the use of money or the availability of money,
including commitment, facility and like fees and charges upon Indebtedness
(including Indebtedness to the Lenders) paid or payable during such period, plus
(C) Restricted Payments made or required to be made during such period (but
excluding (I) Restricted Payments using Qualified Capital Stock, (II) Restricted
Payments effected by purchases of Capital Stock of GPI relating to Grant
Prideco, Inc. Executive Deferred Compensation Plans, (III) Restricted Payments
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<PAGE> 16
effected by purchases of Capital Stock of GPI pursuant to employee benefit plans
for tax withholding and (IV) Restricted Payments made pursuant to the cashless
exercise of stock options or warrants in connection with customary employee
compensation programs) provided that nothing in this clause (C) shall be deemed
to limit the restrictions of Section 7.2(j).
"Foreign Subsidiary" means a Subsidiary of GPI formed under
the laws of any jurisdiction other than the United States or Canada or any state
or province thereof.
"GAAP" means generally accepted accounting principles set
forth in the opinions and pronouncements of the Accounting Principles Board of
the American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board that are applicable
to the circumstances as of the date of determination or, in the case of the Cdn.
Borrower, the accounting principles recognized as being generally accepted in
Canada as set out in the handbook published by the Canadian Institute of
Chartered Accountants as in effect on the date of determination.
"Governing Documents" means, with respect to any Person, the
certificate of incorporation and bylaws or similar organizational documents of
such Person.
"Governmental Authority" means any nation or government, any
state, province or other political subdivision thereof or any entity exercising
executive, legislative, judicial, regulatory or administrative functions thereof
or pertaining thereto.
"GPI" means Grant Prideco, Inc., a Delaware corporation.
"Guarantors" means each of the guarantors identified as
Guarantors on Schedule 3.
"Guaranty" means the guaranty by the Guarantors in favor of
the Agent, substantially in the form of Exhibit F, as amended, supplemented or
otherwise modified from time to time.
"Hazardous Materials" means any and all pollutants,
contaminants and toxic, caustic, radioactive and hazardous materials, substances
and wastes that are regulated under any Environmental Laws.
"Hedging Agreement" means any interest rate protection
agreement, foreign currency exchange agreement, commodity price protection
agreement or other interest or currency exchange rate or commodity price hedging
agreement.
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<PAGE> 17
"Indebtedness" means, with respect to any Person, as of the
date of determination thereof (without duplication), (i) all obligations of such
Person for borrowed money of any kind or nature, including funded and unfunded
debt, and any Hedging Agreement or arrangements therefor, regardless of whether
the same is evidenced by any note, debenture, bond or other instrument, (ii) all
obligations of such Person to pay the deferred purchase price of property or
services (other than current trade accounts required to be paid in less than one
year and which arise in the ordinary course of business), (iii) all obligations
of such Person to acquire or for the acquisition or use of any fixed asset,
including Capitalized Lease Obligations (other than, in any such case, any
portion thereof representing interest or deemed interest or payments in respect
of taxes, insurance, maintenance or service), or improvements in each case which
are payable over a period longer than one year, regardless of the term thereof
or the Person or Persons to whom the same are payable, (iv) the then outstanding
amount of withdrawal or termination liability incurred under ERISA, (v) all
Indebtedness of others secured by (or for which the holder of such Indebtedness
has an existing right to be secured) a Lien on any asset of such Person whether
or not the Indebtedness is assumed by such Person, provided that for the purpose
of determining the amount of Indebtedness of the type described in this clause
(v), if recourse with respect to such Indebtedness is limited to the assets of
such Person, then the amount of Indebtedness shall be limited to the fair market
value of such assets, (vi) all Indebtedness of others to the extent guaranteed
by such Person and (vii) all obligations of such Person in respect of letters of
credit, bankers acceptances or similar instruments issued or accepted by banks
or other financial institutions for the account of such Person.
"Insolvency Event" means, with respect to any Person, the
occurrence of any of the following: (a) such Person shall be adjudicated
insolvent or bankrupt, or shall generally fail to pay or admit in writing its
inability to pay its debts as they become due, (b) such Person shall seek
dissolution or reorganization or the appointment of a receiver, trustee,
custodian or liquidator for it or a substantial portion of its property, assets
or business or to effect a plan or other arrangement with its creditors, (c)
such Person shall make a general assignment for the benefit of its creditors, or
consent to or acquiesce in the appointment of a receiver, trustee, custodian or
liquidator for a substantial portion of its property, assets or business, (d)
such Person shall file a voluntary petition under any bankruptcy, insolvency or
similar law or take any corporate or similar act in furtherance thereof, or (e)
such Person, or a substantial portion of its property, assets or business shall
become the subject of (i) an involuntary proceeding or petition for its
dissolution or reorganization, and such proceeding is not dismissed or stayed
within sixty days, or (ii) the appointment of a receiver,
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<PAGE> 18
trustee, custodian or liquidator, and such receiver, trustee, custodian or
liquidator is not dismissed within sixty days; provided, however, that during
the pendency of any sixty-day period described in clauses (i) and (ii), the
Lenders shall have no obligation to make any Advance and the Agent shall have no
obligation to cause to be issued any Letter of Credit.
"Interest Period" means the period commencing on the date of a
LIBOR Rate Advance and ending on the corresponding date of the month one, two or
three months thereafter; provided, however, that (i) the Administrative Borrower
may not select any Interest Period that ends after the Expiration Date, (ii)
whenever the last day of an Interest Period would otherwise occur on a day other
than a Business Day, the last day of such Interest Period shall be extended to
occur on the next succeeding Business Day, except that if such extension would
cause the last day of such Interest Period to occur in the next following
calendar month, then the last day of such Interest Period shall occur on the
next preceding Business Day and (iii) if there is no corresponding date in the
month in which an Interest Period ends, then the last day of such Interest
Period shall be the last Business Day of such month.
"Internal Revenue Code" means the Internal Revenue Code of
1986, any amendments thereto, any successor statute and any regulations and
guidelines promulgated thereunder.
"Internal Revenue Service" or "IRS" means the United States
Internal Revenue Service and any successor agency.
"Inventory" means all present and future goods intended for
sale, lease or other disposition including, without limitation, all raw
materials, work in process, finished goods and other retail inventory, goods in
the possession of outside processors or other third parties, consigned goods (to
the extent of the consignee's interest therein), materials and supplies of any
kind, nature or description which are or might be used in connection with the
manufacture, packing, shipping, advertising, selling or finishing of any such
goods, all documents of title or documents representing the same and all
records, files and writings with respect thereto.
"Investment" in any Person means, as of the date of
determination thereof, (i) any payment or contribution, or commitment to make a
payment or contribution, by a Person including, without limitation, property
contributed or committed to be contributed by such Person for or in connection
with its acquisition of any stock, bonds, notes, debentures, partnership or
other ownership interest or any other security of the Person in whom such
Investment is made or (ii) any loan, advance or other extension of credit (other
than trade credit for the sale of goods or services in the ordinary course of
business) or
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<PAGE> 19
guaranty of or other surety obligation for any Indebtedness of such Person in
whom the Investment is made. In determining the aggregate amount of Investments
outstanding at any particular time, (i) a guaranty (or other surety obligation)
shall be valued at not less than the principal amount outstanding of the primary
obligation; (ii) returns of capital (but only by repurchase, redemption,
retirement, repayment, dividend or other distribution) shall be deducted; (iii)
earnings not distributed in cash shall not be deducted; and (iv) decreases in
the market value shall not be deducted unless such decreases are computed in
accordance with GAAP.
"Letter of Credit Agreement" means the collective reference to
any and all agreements from time to time entered into by the Agent and a bank or
financial institution (each, an "issuing bank") pursuant to which the Agent
causes such issuing bank to issue Letters of Credit for the account or benefit
of a Borrower in accordance with the terms of this Agreement.
"Letters of Credit" means all letters of credit issued for the
account or benefit of the Borrowers under Section 2.10, and all amendments,
renewals, extensions or replacements thereof.
"Leverage Ratio" means, for any period, with respect to GPI
and its Subsidiaries on a consolidated basis as of the date of determination
thereof, the ratio of (i) all Indebtedness of GPI and its Subsidiaries to (ii)
Adjusted Earnings for the consecutive twelve-month period then most recently
ended.
"Liabilities" of a Person as of the date of determination
thereof means the liabilities of such Person on such date as determined in
accordance with GAAP. Liabilities to Affiliates of such Person shall be treated
as Liabilities except where eliminated by consolidation in financial statements
prepared in accordance with GAAP or as otherwise provided herein.
"LIBOR Rate" means, with respect to each Interest Period for
each LIBOR Rate Advance, the reserve adjusted rate per annum equal to the rate
per annum at which deposits in United States dollars are offered by the
principal office of Citibank, N.A. in London, England to prime banks in the
London interbank market at 11:00 a.m. (London time) two Business Days before the
first day of such Interest Period in an amount substantially equal to such LIBOR
Rate Advance and for a period equal to such Interest Period; provided, however,
that if such rate is not available on any day, there shall be substituted for
such rate the London Interbank Offered Rate for such amount and period which
appears on the Reuters Screen ISDA Page for the London Interbank Offered Rate.
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<PAGE> 20
"LIBOR Rate Advance" means an Advance that bears interest as
provided in Section 4.1(c).
"Lien" means any lien, claim, charge, pledge, security
interest, assignment, hypothecation, deed of trust, mortgage, lease, conditional
sale, retention of title or other preferential arrangement having substantially
the same economic effect as any of the foregoing, whether voluntary or imposed
by law.
"Loan Account" has the meaning specified in Section 2.5.
"Loan Documents" means this Agreement and all documents and
instruments to be delivered by the Borrowers or any of their Affiliates or any
other Loan Party under or in connection with this Agreement, as each of the same
may be amended, supplemented or otherwise modified from time to time, including,
without limitation, the Notes, the Guaranty, the Security Agreement, the
Contribution Agreement, the Pledge Agreement, the Lockbox Agreements, the
Blocked Account Agreement, the Subordination Agreement and the Letter of Credit
Agreement.
"Loan Party" means each Borrower and each Guarantor.
"Loans" means the U.S. Loans, the Cdn. Loans and all financial
accommodations made by the Agent or the Lenders hereunder or under the Letter of
Credit Agreement.
"Lockbox Agreement" means an agreement entered into by a U.S.
Borrower, the Agent and the Lockbox Bank in substantially the form of Exhibit H,
as amended, supplemented or otherwise modified from time to time.
"Lockbox Bank" means Chase Bank of Texas, National Association
or any of its affiliates or any successor or any other bank acceptable to the
Agent to act as such.
"Material Adverse Effect" means (i) a material adverse effect
on the business, prospects, operations, results of operations, assets,
liabilities or condition (financial or otherwise) of GPI and the Borrowers taken
as a whole, or (ii) the material impairment of (A) a Loan Party's ability to
perform its obligations under the Loan Documents to which it is a party or (B)
the ability of the Agent, the Cdn. Agent or the Lenders to enforce the
Obligations or realize upon the Collateral.
"Material Affiliate" means an Affiliate of a Person that has a
net worth, as determined in accordance with GAAP, of more than US$1,000,000 or
annual revenues in excess of US$5,000,000.
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<PAGE> 21
"Material Contract" means any contract or other arrangement
that requires the purchase of materials or supplies, or that requires the sale
of goods or services, by a Borrower or any Designated Affiliate and which
involves an amount in excess of US$5,000,000 in any year or any other contract
or arrangement the termination of which would require public disclosure under
any federal or state securities law, rule or regulation.
"Material Indebtedness" means Indebtedness (other than the
Loans), or obligations in respect of one or more Hedging Agreements, of a
Borrower or any Designated Affiliate in an aggregate principal amount exceeding
US$10,000,000. For purposes of this definition, the "principal amount" of the
obligations of any Person in respect of any Hedging Agreement at any time shall
be the maximum aggregate amount (giving effect to any netting agreements) that
such Person would be required to pay if such Hedging Agreement were terminated
at such time.
"Multiemployer Plan" means a multiemployer plan, as defined in
Section 4001(a)(3) of ERISA, to which a Borrower or any ERISA Affiliate has
contributed within the past six years or with respect to which a Borrower or any
ERISA Affiliate may incur any liability.
"Net Cash Proceeds" means the net cash proceeds received by
GPI from the issuance of Qualified Stock of GPI, including any net cash proceeds
received by GPI upon exercise of any rights, options or warrants, other than in
connection with the conversion or exchange of any Indebtedness or Disqualified
Stock of GPI.
"Notes" means the U.S. Notes and the Cdn. Notes.
"Obligations" means and includes all loans (including the
Loans), advances (including the Advances), debts, liabilities, obligations,
covenants and duties owing by the Loan Parties to the Agent, the Cdn. Agent or
the Lenders of any kind or nature, present or future, whether or not evidenced
by any note, guaranty or other instrument, which may arise under, out of, or in
connection with, this Agreement, the Notes, the other Loan Documents or any
other agreement executed in connection herewith or therewith, including, without
limitation, any Hedging Agreement to which the Agent and any Loan Party, or any
of their respective Affiliates, are parties, whether or not for the payment of
money, whether arising by reason of an extension of credit, opening,
guaranteeing or confirming of a letter of credit (including, without limitation,
the Letters of Credit), loan, guaranty, indemnification or in any other manner,
whether direct or indirect (including those acquired by assignment, purchase,
discount or otherwise), whether absolute or contingent, due or to become due,
and however acquired. The term includes, without limitation, all interest
(including interest accruing on or after
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<PAGE> 22
an Insolvency Event, whether or not such interest constitutes an allowed claim),
charges, expenses, commitment, facility, closing and collateral management fees,
letter of credit fees, attorneys' fees, and any other sum properly chargeable to
the Borrowers under this Agreement, the Notes, the other Loan Documents or any
other agreement executed in connection herewith or therewith.
"OCTL" means Oil Country Tubular Limited, a company organized
under the Companies Act of India.
"PBGC" means the Pension Benefit Guaranty Corporation and any
Person succeeding to the functions thereof.
"Pension Plan" means a pension plan (as defined in Section
3(2) of ERISA) subject to Title IV of ERISA (other than a Multiemployer Plan)
which a Borrower or any ERISA Affiliate sponsors or maintains, or to which it
makes, is making, or is obligated to make contributions, or in the case of a
multiple employer plan (as described in Section 4064(a) of ERISA) has made
contributions at any time during the immediately preceding five plan years.
"Permitted Acquisition" means an Acquisition:
(i) that does not contravene or, after giving effect
to such Acquisition on a pro forma consolidated basis
determined in accordance with GAAP, would not contravene any
provision of this Agreement including, without limitation, the
Financial Covenants;
(ii) in the case of an Acquisition with respect to
which the consideration consists entirely of Capital Stock of
GPI or any of its Subsidiaries (other than fractional share
payments), (A) the ratio of (I) any Person's Indebtedness
being purchased or assumed by GPI or any of its Subsidiaries
in connection with such Acquisition to (II) the sum of such
Person's Indebtedness being purchased or assumed and the
market value of such Capital Stock on the date on which the
agreement to make such Acquisition becomes binding on the
parties thereto, does not exceed .50:1.00, or (B) (I) the
amount of any Person's Indebtedness being purchased or assumed
by GPI or any of its Subsidiaries in connection with such
Acquisition, plus (II) all other Indebtedness so purchased or
assumed in the current fiscal year of the Borrowers in
connection with all completed Acquisitions with respect to
which the consideration consists entirely of Capital Stock of
GPI or any of its Subsidiaries (other than fractional share
payments), less (III) all Indebtedness so purchased or assumed
in connection with all such Acquisitions in such fiscal year
to the extent such Indebtedness does
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<PAGE> 23
not exceed fifty percent (50%) of the sum described in clause
(A)(II) hereof with respect to all such Acquisitions in such
fiscal year, does not exceed US$40,000,000 in the aggregate in
such fiscal year;
(iii) in the case of an Acquisition with respect to
which the consideration consists of cash in whole or in part
(excluding cash payments for fractional shares totalling less
than US$50,000 in connection with such Acquisition), the sum
of such cash consideration and all Indebtedness purchased or
assumed by GPI or any of its Subsidiaries in connection with
such Acquisition does not exceed US$45,000,000 in the
aggregate, when taken together with the sum of the cash
portion of the consideration paid for, and all Indebtedness
purchased or assumed by GPI and its Subsidiaries in connection
with, all other Acquisitions completed during any fiscal year
of the Borrowers; and
(iv) that involves an Investment by or through GPI or
a Borrower;
provided that, if the Capital Stock of a Person is issued or otherwise acquired
by GPI or a Borrower in connection with such Acquisition, (i) such Person (if
such Person's jurisdiction of formation is the United States or any state
thereof) shall simultaneously become (A) a Guarantor or Borrower pursuant to a
supplement to the Guaranty in the form of Annex I thereto or pursuant to an
amendment to this Agreement in form and substance satisfactory to the Agent, and
(B) in the case such Person becomes a Guarantor, a party to the Contribution
Agreement by executing a supplement thereto in the form of Annex 1 thereto, (ii)
such Capital Stock shall simultaneously be pledged to the Agent pursuant to a
supplement to the Pledge Agreement in the form of Annex III thereto (provided
that, if such Person's jurisdiction of formation is not the United States or any
state thereof, only 65% of such Person's Capital Stock shall be pledged) and
(iii) GPI or such Borrower shall take, and shall cause such Person to take, all
such further actions and execute all such further documents and instruments as
the Agent reasonably determines to be necessary or desirable to cause the
execution, delivery and performance of such documentation to be duly authorized
and to perfect, protect or enforce the Liens (and the first priority status
thereof) granted to the Agent.
"Permitted Business" means the drill pipe and tubular
business, tubular steel mills, drilling tools and any businesses, services or
activities reasonably incident or related thereto.
"Permitted Business Investments" means (i) loans and other
extensions of credit to officers, directors and employees of any Loan Party or
any of its Subsidiaries for travel,
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<PAGE> 24
entertainment and moving and other relocation expenses made in direct
furtherance and in the ordinary course of the business of any such Loan Party or
any of its Subsidiaries, provided that the aggregate principal amount of loans
and other extensions of credit made pursuant to this clause (i) does not exceed
US$1,000,000 at any time outstanding; and (ii) payments to any employee, officer
or director of any Loan Party or any of its Subsidiaries pursuant to employee
benefit plans or compensation arrangements entered into in the ordinary course
of business and approved by the Board of Directors of the applicable Loan Party
or such Subsidiary or payments, contributions or transactions relating to such
plans.
"Permitted Financial Investments" means (i) currency price
Hedging Agreements, using customary ISDA swap documentation or comparable
documentation, entered into for the purpose of hedging actual exposure on the
currency or commodity price risks of its Permitted Business and not for
speculation; and (ii) the acquisition or ownership of Capital Stock or
obligations or other securities received in settlement of debts owing to any
Loan Party (other than Eligible Receivables) created and settled in the ordinary
course of business, which Capital Stock, obligations or other securities have
been pledged to the Agent (or the Cdn. Agent, as the case may be) under
documentation satisfactory to the Agreement.
"Permitted Indebtedness" means, without duplication, (i)
Permitted Intercompany Debt; (ii) Indebtedness of any Person existing or any
Indebtedness assumed, at the time such Person or any of its assets is acquired
by any Loan Party or any Subsidiary thereof in connection with a Permitted
Acquisition, provided that (A) such Indebtedness is not created, incurred or
assumed in contemplation of such Permitted Acquisition of such Person or assets
and (B) any Indebtedness discharged at the closing of such Permitted Acquisition
shall not be deemed to be or to constitute assumed Indebtedness; (iii)
Indebtedness arising from the honoring by a bank or other financial institution
of a check, draft or similar instrument drawn against insufficient funds in the
ordinary course of business, provided that such Indebtedness is discharged
within two Business Days; (iv) Indebtedness arising from agreements providing
for indemnification, adjustment of purchase price or similar obligations, or
from guarantees, letters of credit, surety bonds or performance bonds securing
any obligation of any Loan Party, or any Subsidiary thereof, incurred or assumed
in connection with a Permitted Acquisition or the disposition of any business,
assets or Capital Stock other than, in the case of an acquisition, guaranties by
any Loan Party or any Subsidiary thereof of Indebtedness incurred by any Person
acquiring all or a portion of such business, asset or Capital Stock for the
purpose of financing such Permitted Acquisition, provided that, in the case of a
disposition, the maximum aggregate liability with respect to all such
Indebtedness and the
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<PAGE> 25
amount of Indebtedness subject to such guaranties, in each case with respect to
a particular transaction, shall at no time exceed the gross proceeds actually
received from the disposition of such business, asset or Capital Stock; (v)
Indebtedness constituting the net obligations of a Person as of the date of a
required calculation under currency or commodity Hedging Agreements entered into
in the ordinary course of business and not for the purposes of speculation (A)
none of which is secured by any of the Collateral and (B) to the extent such
Indebtedness is secured by any other assets of the Borrowers, such Indebtedness
does not exceed US$35,000,000 in the aggregate at any time; (vi) Permitted
Refinancing Indebtedness; (vii) Indebtedness of a Subsidiary of any Loan Party
incurred in connection with a transaction permitted under Section 7.1(c) or
7.2(k); (viii) Indebtedness of a Loan Party to the Agent or the Lenders arising
under this Agreement or any of the other Loan Documents; (ix) Indebtedness
evidenced by the Subordinated Note and any other Permitted Subordinated
Indebtedness, and any Permitted Refinancing Indebtedness with respect thereto;
and (x) Indebtedness consisting of current trade accounts required to be paid in
less than eighteen months to the extent such Indebtedness does not exceed
US$1,000,000 in the aggregate at any time.
"Permitted Intercompany Debt" means loans, advances,
intercompany accounts, transfers of goods, services, or intellectual property,
and Investments (including, but not limited to, loans made pursuant to GPI's
cash management system for collections of accounts receivable or disbursements
to trade creditors) by any Loan Party in, with or to any other Loan Party,
provided that (i) each such lender and borrower Loan Party is Solvent after
giving effect thereto, and (ii) each such Loan Party has received reasonably
equivalent value and fair consideration in exchange for the transfers made and
obligations incurred by it in connection therewith.
"Permitted Joint Ventures" means an equity Investment by a
Loan Party or any Subsidiary thereof in a Person for which there is no recourse
liability beyond the amount of the investment made other than an Investment in a
Person (i) that is engaged in a Permitted Business; and (ii) with respect to
which no debt or equity interest (other than directors' qualifying shares with
respect to corporations formed under the laws of any country other than the
United States) in such Person (other than any Loan Party or any Subsidiary
thereof) is or will be held by an officer or director of such Loan Party or
Subsidiary, or any spouse or immediate family member of, or other relative
having the same principal residence as, any such officer or director, or any
trust the beneficiary of which is any of the foregoing parties or any other
Affiliate of such Loan Party or Subsidiary.
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<PAGE> 26
"Permitted Liens" means (i) Liens for taxes, assessments and
other governmental charges or levies for Liens of local, state or provincial
authorities (excluding federal income tax liens) for franchise or other like
taxes (and interest and penalties thereon), provided that the aggregate amounts
of such taxes relating to such Liens shall not exceed US$2,000,000 in the
aggregate at any time and with respect to which no enforcement, collection,
execution, levy or foreclosure proceeding shall have been commenced and be
continuing (unless such enforcement, collection, levy or foreclosure is being
contested by the applicable Loan Party in good faith by appropriate proceedings
diligently conducted and for which adequate reserves are being maintained in
accordance with GAAP); (ii) Liens, claims or demands of landlords, carriers,
warehousemen, mechanics, laborers, materialmen and other like Persons arising by
operation of law in the ordinary course of business for sums which are not yet
due and payable (or which are being contested in good faith by appropriate
proceedings or other appropriate actions which are sufficient to prevent
imminent foreclosure of such Liens); (iii) deposits or pledges (other than Liens
on Receivables of a Borrower) including, without limitation, security deposits
for leases, surety bonds and appeal bonds to secure the payment of workmen's
compensation, unemployment insurance or other social security benefits or
obligations, public or statutory obligations, surety or appeal bonds, bid or
performance bonds, or other obligations of a like nature incurred in the
ordinary course of business; (iv) zoning restrictions, easements, encroachments,
licenses, restrictions or covenants on the use of any Property which do not
materially impair either the use of such Property in the operation of the
business of the applicable Loan Party or the value of such Property, immaterial
defects or irregularities in title and other immaterial restrictions, charges or
encumbrances on any Property; (v) inchoate Liens arising under ERISA to secure
current service pension liabilities as they are incurred under the provisions of
employee benefit plans from time to time in effect and inchoate Liens for unpaid
franchise taxes; (vi) rights of general application reserved to or vested in any
Governmental Authority to control or regulate any Property, or to use any
Property in a manner which does not materially impair the use of such Property
for the purposes for which it is held by the applicable Loan Party; (vii)
judgment and attachment liens not giving rise to an Event of Default or Liens
created by or existing from any litigation or legal proceeding that are being
contested in good faith by appropriate proceedings, promptly instituted and
diligently conducted, and for which adequate reserves have been made to the
extent required by GAAP; (viii) Liens created pursuant to this Agreement or any
of the other Loan Documents in favor of the Agent or the Cdn. Agent; (ix) Liens
in favor of collecting or payor banks having a right of setoff, revocation,
refund or chargeback in favor of collecting or payor banks with respect to money
or instruments of any Loan Party on deposit with or in the possession of such
bank that do not constitute proceeds of Collateral; (x) Liens existing on the
date hereof and specified in Schedule 7.2(i) and other
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<PAGE> 27
Liens expressly permitted or consented to in writing by the Agent from time to
time; (xi) any Lien renewing, substituted for or replacing any Lien permitted
under the preceding clause (x) with respect to the assets originally subject to
such Lien, provided that (A) the obligation secured is not increased to an
amount greater than the outstanding amount secured by such Lien as of the date
of such renewal, substitution or replacement, (B) the terms of the obligation
secured by such Lien remain substantially the same as the original terms and (C)
such obligation is secured only by the assets that secured such obligation prior
to such renewal, substitution or replacement; (xii) Liens securing Permitted
Refinancing Indebtedness, so long as such Permitted Refinancing Indebtedness is
secured only by Liens on those assets that secured such Indebtedness prior to
the renewal, extension, refinancing, refunding or repurchase thereof or by Liens
otherwise permitted by this definition; and (xiii) Liens securing Indebtedness
of the type specified in clause (ii) or (v) of the definition of Permitted
Indebtedness.
"Permitted Refinancing Indebtedness" means (i) Permitted
Indebtedness of any Loan Party or any of its Subsidiaries existing on the
Closing Date, the terms of which have been amended, modified or supplemented in
a manner such that such Indebtedness does not (A) adversely affect the parri
passu or subordinated status of such Indebtedness in right of payment in
relation to the Obligations, (B) accelerate the maturity of such Indebtedness,
(C) shorten the Average Life of such Indebtedness or (D) increase the aggregate
amount of such Indebtedness or any scheduled payment thereof and (ii)
Indebtedness of any Loan Party or any of its Subsidiaries, the net proceeds of
which are used to renew, extend, refinance, refund or repurchase outstanding
Permitted Indebtedness of such Loan Party or any of its Subsidiaries, provided
that (A) such Indebtedness is parri passu with or subordinated in right of
payment to the Obligations at least to the same extent as the Indebtedness being
renewed, extended, refinanced, refunded or repurchased, (B) the Average Life of
such Indebtedness is equal to or greater than the remaining Average Life of the
Indebtedness being renewed, extended, refinanced, refunded or repurchased at the
time such Indebtedness is incurred, (C) such Indebtedness is in an aggregate
principal amount (or, if such Indebtedness is issued at a price less than the
principal amount thereof, the aggregate amount of gross proceeds therefrom is)
not in excess of the sum of (I) the aggregate principal amount then outstanding
of the Indebtedness being renewed, extended, refinanced, refunded or repurchased
(or if the Indebtedness being renewed, extended, refinanced, refunded or
repurchased was issued at a price less than the principal amount thereof, then
not in excess of the amount of liability in respect thereof determined in
accordance with GAAP), (II) the amount of accrued and unpaid interest, if any,
on the Indebtedness being renewed, extended, refinanced, refunded or repurchased
and (III) the amount of fees, expenses
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<PAGE> 28
and costs related to the incurrence of such Permitted Refinancing Indebtedness,
provided that, after giving effect thereto, the scheduled payments or aggregate
outstanding amount of such Indebtedness is not increased to an amount greater
than the outstanding amount thereof as of the date of such renewal, extension,
refinancing, refunding or repurchase, and (D) the material terms of such
Indebtedness shall be substantially identical to the terms that existed prior to
such renewal, extension, refinancing, refunding or repurchase except as
expressly provided above.
"Permitted Subordinated Indebtedness" means Indebtedness of
any Loan Party or any of its Subsidiaries that is subordinated to the repayment
of the Obligations on terms and under documentation satisfactory to the Agent.
"Person" means any individual, sole proprietorship,
partnership, limited liability company, joint venture, trust, unincorporated
organization, joint stock company, association, corporation, institution,
entity, party or government (including any division, agency or department
thereof) or any other legal entity, whether acting in an individual, fiduciary
or other capacity, and, as applicable, the successors, heirs and assigns of
each.
"Plan" means any employee benefit plan, as defined in Section
3(3) of ERISA, maintained or contributed to by a Borrower or any ERISA Affiliate
or with respect to which any of them may incur liability.
"Pledge Agreement" means the pledge agreement by GPI and
certain Subsidiaries of GPI party thereto in favor of the Agent, substantially
in the form of Exhibit E, as amended, supplemented or otherwise modified from
time to time.
"Pledgor" means GPI and each of the other pledgors party to
the Pledge Agreement.
"PPSA" means the Personal Property Security Act of Alberta,
from time to time in effect.
"Pricing Increment" means (i) from the date hereof until
December 31, 2000, (A) .75% per annum for Base Rate Advances or Prime Rate
Advances and (B) 2.50% per annum for LIBOR Rate Advances or Letters of Credit
and (ii) thereafter, a percentage per annum determined by reference to the
Leverage Ratio as set forth below:
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<PAGE> 29
<TABLE>
<CAPTION>
Base or LIBOR Rate Advances
Leverage Ratio Prime Rate Advances or Letters of Credit
-------------- ------------------- -------------------
<S> <C> <C>
less than 2.00:1.00 0% 1.50%
greater than or equal to 2.00:1.00 .50% 2.00%
but less than 3.00:1.00
greater than or equal to 3.00:1.00 .75% 2.50%
</TABLE>
Commencing as of December 31, 2000, the Pricing Increment shall be determined as
of December 31, 2000 and each June 30 and December 31 thereafter based on the
most recent Financial Statements delivered by the Administrative Borrower under
Section 7.1(k)(iii) determined for the twelve-month period ending on such June
30 or December 31, provided that (i) each change in the Pricing Increment shall
be effective three Business Days after the date on which the Agent receives the
relevant Financial Statements and a duly executed Compliance Certificate
demonstrating such ratio (including during any Interest Period), (ii) upon
written notice from the Agent, the Pricing Increment shall be determined on the
basis of a Leverage Ratio greater than 3.00:1.00 for so long as the Agent has
not received the information described in clause (i) of this proviso under
Section 7.1(k)(iii) with respect to any month ending June 30 or December 31
(without prejudice to the Agent's right to charge interest as provided in
Section 4.2) and (iii) the Pricing Increment shall not be reduced more than .25%
with respect to Base Rate Advances and Prime Rate Advances or .50% with respect
to LIBOR Rate Advances, in each case with respect to any such six-month period.
"Prime Rate" means a fluctuating rate of interest per annum,
expressed on the basis of a year of 365 or 366 days, as applicable, which, in
the case of amounts in respect of which interest is to be calculated under this
Agreement on the basis of the Prime Rate, is equal at all times to the greater
of:
(i) the reference rate of interest (however
designated) of Royal Bank of Canada for determining interest
chargeable by it on Cdn. Dollar commercial loans made in
Canada; and
(ii) 0.75% above CDOR from time to time for
thirty-day Canadian bankers' acceptances.
"Prime Rate Advance" means an Advance made to the Cdn.
Borrower denominated in Cdn. Dollars that bears interest as provided in Section
4.1(b).
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<PAGE> 30
"Prohibited Transaction" has the meaning specified in Section
6.1(x)(v).
"Property" means any real property owned, leased or controlled
by a Borrower or any Subsidiary of a Borrower.
"Pro Rata Share" of any amount means, with respect to any
Lender, a fraction (expressed as a percentage) (i) at any time before the
Expiration Date, the numerator of which is the Commitment of such Lender and the
denominator of which is the aggregate amount of the Commitments of all the
Lenders at such time and (ii) at any time on and after the Expiration Date, the
numerator of which is the aggregate unpaid principal amount of the Loans made by
such Lender and the denominator of which is the aggregate unpaid principal
amount of all Loans at such time.
"Qualification" or "Qualified" means, with respect to any
report of independent public accountants covering Financial Statements, a
material qualification to such report (i) resulting from a limitation on the
scope of examination of such Financial Statements or the underlying data, (ii)
as to the capability of a Borrower or any other Loan Party to continue
operations as a going concern or (iii) which could be eliminated by changes in
Financial Statements or notes thereto covered by such report (such as by the
creation of or increase in a reserve or a decrease in the carrying value of
assets) and which if so eliminated by the making of any such change and after
giving effect thereto would result in a Default or an Event of Default.
"Qualified Stock" means, with respect to any Person, any
Capital Stock of such Person that is not Disqualified Stock.
"Receivables" means all present and future accounts, contract
rights, promissory notes, chattel paper, tax refunds, rights to receive tax
refunds, rights of indemnification, contribution and subrogation, causes of
action, choses in action, judgments, claims against third parties of every kind
or nature, instruments, drafts, acceptances, letters of credit, rights to
receive payments under letters of credit, book accounts, each Blocked Account
and all money, balances, credits, deposits or other financial assets therein or
represented thereby, credits and reserves and all forms of obligations
whatsoever owing, and books, ledgers, files, computer tapes, programs, discs and
software, trade secrets, computer service contracts and records with respect to
any collateral or security, together with all right, title, security and
guaranties with respect to any Receivable, including any right of stoppage in
transit.
"Replacement Lender" means a financial institution proposed by
the Administrative Borrower in accordance with Section 2.9(d) that is
satisfactory to the Agent in its sole discretion and which has agreed to acquire
and assume all or a part of a Defaulting Lender's Loans and Commitments under
Section 2.9(d).
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<PAGE> 31
"Reportable Event" means any of the events described in
Section 4043 of ERISA and the regulations thereunder, other than a reportable
event for which the thirty-day notice requirement to the PBGC has been waived.
"Required Lenders" means (i) before the Expiration Date, the
Lenders holding more than fifty percent of the aggregate Commitments at such
time and (ii) on and after the Termination Date, the Lenders holding more than
fifty percent of the aggregate unpaid principal amount of the Loans at such
time.
"Requirement of Law" means (i) any law, treaty, rule,
regulation, order or determination of an arbitrator, court or other Governmental
Authority or (ii) any franchise, license, lease, permit, certificate,
authorization, qualification, easement, right of way, or other right or approval
of any Governmental Authority binding on a Borrower or any Designated Affiliate
or any of their respective property.
"Responsible Officer" means the President, the Chief Executive
Officer, the Chief Financial Officer or the Chief Operating Officer of a Loan
Party.
"Restricted Payment" means (i) any dividend or other
distribution, direct or indirect, on account of any shares of any class of
Capital Stock of any Loan Party now or hereafter outstanding or any warrants,
options or other rights to acquire such Capital Stock, (ii) any redemption,
retirement, purchase or other acquisition, direct or indirect, of any shares of
any class of Capital Stock of any Loan Party, now or hereafter outstanding, or
of any warrants, rights or options to acquire any such shares, except to the
extent that the consideration therefor consists of shares of Qualified Stock
(including warrants, rights or options relating thereto) of GPI, and (iii) any
Investment by any Loan Party not permitted under Section 7.2(k) or 7.2(l).
"Security Agreement" means the security agreement by the Cdn.
Borrower in favor of the Cdn. Agent, substantially in the form of Exhibit I, as
amended, supplemented or otherwise modified from time to time.
"Security Documents" means the Pledge Agreement, the Lockbox
Agreements, the Security Agreement, the Blocked Account Agreement and any other
agreement delivered in connection herewith which purports to grant a Lien in
favor of the Agent or the Cdn. Agent to secure all or any of the Obligations.
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<PAGE> 32
"Solvent" means, when used with respect to any Person, that as
of the date as to which such Person's solvency is to be measured:
(i) the fair saleable value of its assets is in
excess of the total amount of its liabilities (including
contingent liabilities as valued in accordance with applicable
law) as they become absolute and matured;
(ii) it has sufficient capital to conduct its
business; and
(iii) it is able to meet its debts as they mature.
"Spinoff" means the distribution of all of the outstanding
shares of common stock of GPI by Weatherford as described in Form 10 filed by
GPI with the Securities Exchange Commission and declared effective by the
Securities and Exchange Commission on or about March 20, 2000, as amended
through the date hereof.
"Subordinated Note" means the Subordinated Note of even date
herewith made by GPI in favor of Weatherford in the original principal amount of
US$100,000,000, as amended, supplemented or otherwise modified, replaced or
extended from time to time.
"Subordination Agreement" means the Subordination Agreement
among GPI, Weatherford and the Agent, substantially in the form of Exhibit K, as
amended, supplemented or otherwise modified from time to time.
"Subsidiary" means, as to any Person, a corporation or other
entity in which that Person directly or indirectly owns or controls the shares
of stock or other ownership interests having ordinary voting power to elect a
majority of the board of directors or other governing body, or to appoint the
majority of the managers of, such corporation or other entity, it being
understood that Voest-Alpine is not a Subsidiary of GPI, any other Loan Party or
any Subsidiary thereof as of the date hereof.
"Termination Event" means (i) a Reportable Event with respect
to any Pension Plan or Multiemployer Plan; (ii) the withdrawal of a Borrower or
any ERISA Affiliate from a Pension Plan during a plan year in which it was a
"substantial employer" (as defined in Section 4001(a)(2) of ERISA); (iii) the
providing of notice of intent to terminate a Pension Plan in a distress
termination (as described in Section 4041(c) of ERISA); (iv) the institution by
the PBGC of proceedings to terminate a Pension Plan or Multiemployer Plan; (v)
any event or condition (a) which is reasonably likely to constitute grounds
under Section 4042 of
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<PAGE> 33
ERISA for the termination of, or the appointment of a trustee to administer, any
Pension Plan or Multiemployer Plan, or (b) that is reasonably likely to result
in termination of a Multiemployer Plan pursuant to Section 4041A of ERISA; or
(vi) the partial or complete withdrawal, within the meaning of Sections 4203 and
4205 of ERISA, of a Borrower or any ERISA Affiliate from a Multiemployer Plan.
"Type" means a Base Rate Advance, a Prime Rate Advance or a
LIBOR Rate Advance.
"U.S. Borrower" means each Borrower other than the Cdn.
Borrower.
"U.S. Borrowers' Account" means the account maintained by the
U.S. Borrowers at The Chase Manhattan Bank in New York, New York, account number
9102717965, or such other account which the U.S. Borrowers may designate to the
Agent from time to time.
"U.S. Borrowing Base" has the meaning specified in Section
2.1(a).
"U.S. Dollars," "US$" and "$" means lawful currency of the
United States.
"U.S. Lenders" means the Lenders other than the Cdn. Lenders.
"U.S. Letter of Credit" means a Letter of Credit issued for
the account of a U.S. Borrower.
"U.S. Loans" has the meaning specified in Section 2.1(a).
"U.S. Notes" has the meaning specified in Section 2.1(d).
"Voest-Alpine" means, collectively, Voest-Alpine Stahlrohr
Kindberg GmbH, an Austrian limited liability company, Voest-Alpine Stahlrohr
Kindberg GmbH & Co. KG, an Austrian limited partnership, Voest-Alpine Middle
East Free Establishment Zone, a United Arab Emirates corporation and
Voest-Alpine South America, S.A., a Venezuelan corporation.
"Weatherford" means Weatherford International, Inc., a
Delaware corporation.
"Year 2000 Compliant" means, with respect to any Person, that
(i) all software in goods produced or sold by, or used by and material to the
business, operations or financial condition of, such Person are able to
interpret and manipulate data on and involving all calendar dates correctly and
without
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<PAGE> 34
causing any abnormal ending scenario, including dates in and after the year
2000, and (ii) all equipment containing embedded microchips (including, without
limitation, all systems and equipment supplied by others or with which such
Person's information systems interface) will function properly with respect to
all dates in and after the year 2000.
SECTION 1.2. Accounting Terms and Determinations. Unless
otherwise defined or specified herein, all accounting terms used in this
Agreement shall be construed in accordance with GAAP, applied on a basis
consistent in all material respects with the Financial Statements delivered to
the Agent on or before the Closing Date. All accounting determinations for
purposes of determining compliance with Article VIII shall be made in accordance
with GAAP as in effect on the Closing Date and applied on a basis consistent in
all material respects with the audited Financial Statements delivered to the
Agent on or before the Closing Date. The Financial Statements required to be
delivered hereunder from and after the Closing Date, and all financial records,
shall be maintained in accordance with GAAP. If GAAP shall change from the basis
used in preparing the audited Financial Statements delivered to the Agent on or
before the Closing Date, the Compliance Certificates required to be delivered
pursuant to Section 7.1(k)(iii) shall include calculations setting forth the
adjustments necessary to demonstrate how the Borrowers are in compliance with
the Financial Covenants based upon GAAP as in effect on the Closing Date.
SECTION 1.3. Other Terms; Headings. Unless otherwise defined
herein, terms used herein that are defined in the Uniform Commercial Code, from
time to time in effect in the State of New York (the "Code") or in the PPSA,
from time to time in effect in the Province of Alberta, shall have the meanings
given in the Code or in the PPSA, as the case may be. An Event of Default shall
"continue" or be "continuing" unless and until such Event of Default has been
waived or cured within any grace period specified therefor under Section 9.1.
The headings and the Table of Contents are for convenience only and shall not
affect the meaning or construction of any provision of this Agreement. Whenever
the context may require, any pronoun shall include the corresponding masculine,
feminine and neuter forms. The words "include", "includes" and "including" shall
be deemed to be followed by the phrase "without limitation". The word "will"
shall be construed to have the same meaning and effect as the word "shall".
Unless the context requires otherwise (i) any definition of or reference to any
agreement, instrument or other document herein or in any other Loan document
shall be construed as referring to such agreement, instrument or other document
as from time to time amended, supplemented or otherwise modified (subject to any
restrictions on such amendments, supplements or modifications set forth herein
or in any other Loan Document),
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<PAGE> 35
(ii) any reference herein to any Person shall be construed to include such
Person's successors and assigns, (iii) the words "herein", "hereof" and
"hereunder", and words of similar import, shall be construed to refer to this
Agreement in its entirety and not to any particular provision hereof, (iv) all
references herein to Articles, Sections, Exhibits and Schedules shall be
construed to refer to Articles and Sections of, and Exhibits and Schedules to,
this Agreement and (v) the words "asset" and "property" shall be construed to
have the same meaning and effect and to refer to any and all tangible and
intangible assets and properties, including cash, securities, accounts and
contract rights.
ARTICLE II.
THE CREDIT FACILITIES
SECTION 2.1. Loans.
(a) Each U.S. Lender severally agrees, subject to Section
2.4(a) and the other terms and conditions of this Agreement, to make revolving
credit loans (the "U.S. Loans"), from time to time from the Closing Date to but
excluding the Expiration Date, at the Administrative Borrower's request to the
Agent, in an aggregate principal amount for all U.S. Lenders at any one time
outstanding which, when combined with the aggregate undrawn amount of all
unexpired U.S. Letters of Credit, does not exceed the sum of (i) 85% of the
aggregate Eligible Receivables of the U.S. Borrowers plus (ii) 50% of the
aggregate Eligible Inventory other than work in process of the U.S. Borrowers
plus (iii) 35% of the aggregate Eligible Inventory consisting of work in process
of the U.S. Borrowers (provided that the sum of the amounts in clauses (ii) and
(iii) hereof in respect of Eligible Inventory shall not exceed 70% of the
aggregate amount of all U.S. Loans and U.S. Letters of Credit outstanding at
such time), all of the foregoing less such reserves as the Agent may establish
in its reasonable discretion including, without limitation, the Availability
Reserve (the "U.S. Borrowing Base"); provided, however, that in no event shall
the aggregate amount of the U.S. Loans and the U.S. Letters of Credit
outstanding at any time exceed the aggregate amount of the Commitments less the
aggregate amount of the Commitments amount of Cdn. Loans and the undrawn amount
of Cdn. Letters of Credit outstanding at such time.
(b) Each Cdn. Lender severally agrees, subject to Section
2.4(a) and the other terms and conditions of this Agreement, to make revolving
credit loans denominated in Cdn. Dollars or U.S. Dollars (the "Cdn. Loans"),
from time to time from the Closing Date to but excluding the Expiration Date, at
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<PAGE> 36
the Administrative Borrower's request to the Agent, in an aggregate principal
amount for all Cdn. Lenders at any one time outstanding which, when combined
with the aggregate undrawn amount of all unexpired Cdn. Letters of Credit, does
not exceed the sum of (i) 85% of the Eligible Receivables of the Cdn. Borrower
plus (ii) 50% of the Eligible Inventory other than work in process of the Cdn.
Borrower plus (iii) 35% of the aggregate Eligible Inventory consisting of work
in process of the Cdn. Borrower (provided that the sum of the amounts in clauses
(ii) and (iii) hereof in respect of Eligible Inventory shall not exceed 70% of
the aggregate amount of all Cdn. Loans and Cdn. Letters of Credit outstanding at
such time), all of the foregoing less such reserves as the Agent may establish
in its reasonable discretion including, without limitation, the Availability
Reserve (the "Cdn. Borrowing Base"); provided, however, that in no event shall
the aggregate amount of the Cdn. Loans and the Cdn. Letters of Credit
outstanding at any time exceed US$7,000,000 in the aggregate.
(c) The Agent, at any time in the exercise of its reasonable
discretion, may (i) establish and increase or decrease reserves against Eligible
Receivables and Eligible Inventory, (ii) reduce the advance rates against
Eligible Receivables and Eligible Inventory, or thereafter increase such advance
rates to any level equal to or below the advance rates in effect on the Closing
Date and (iii) impose additional restrictions (or eliminate the same) to the
standards of eligibility set forth in the definitions of Eligible Receivables
and Eligible Inventory.
(d) The U.S. Loans made by each U.S. Lender shall be evidenced
by a promissory note payable to the order of such Lender, substantially in the
form of Exhibit A (each as amended, supplemented or otherwise modified from time
to time, a "U.S. Note"), executed by the U.S. Borrowers and delivered to the
Agent on the Closing Date. The U.S. Note of each U.S. Lender shall be in a
stated maximum principal amount equal to such Lender's Commitment.
(e) The Cdn. Loans made by each Cdn. Lender shall be evidenced
by a promissory note payable in Cdn. Dollars, substantially in the form of
Exhibit B, and a promissory note payable in U.S. Dollars, substantially in the
form of Exhibit C, each payable to the order of such Lender (each as amended,
supplemented or otherwise modified from time to time, a "Cdn. Note"), executed
by the Cdn. Borrower and delivered to the Agent on the Closing Date. Each Cdn.
Note of each Cdn. Lender shall be in a stated maximum principal amount equal to
such Lender's Commitment.
(f) The Loans shall be payable in full, with all interest
accrued thereon, on the Expiration Date. The Borrowers may borrow, repay or
prepay (subject to the obligation of the
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<PAGE> 37
Borrowers to indemnify the Lenders under Section 2.2(e)(iii) upon any prepayment
of a LIBOR Rate Advance) and reborrow Loans, in whole or in part, in accordance
with the terms hereof.
(g) Each Cdn. Loan or Cdn. Letter of Credit shall be
denominated solely in Cdn. Dollars or U.S. Dollars, as the Administrative
Borrower may request. Each U.S. Loan or U.S. Letter of Credit shall be
denominated solely in U.S. Dollars.
SECTION 2.2. Procedure for Borrowing; Notices of Borrowing;
Notices of Continuation; Notices of Conversion.
(a) Each Borrowing shall be made on notice, given not later
than 12:00 Noon (Chicago time) on the third Business Day prior to the proposed
Borrowing Date in the case of a LIBOR Rate Advance, and not later than 11:00
A.M. (Chicago time) on the date of the proposed Borrowing in the case of a Base
Rate Advance or a Prime Rate Advance, by the Administrative Borrower to the
Agent. Each such notice of a Borrowing shall be by telephone, confirmed
immediately in writing (by telecopier or otherwise as permitted hereunder), in
substantially the form of Exhibit Q (a "Notice of Borrowing"), specifying
therein the requested (i) date of such Borrowing, (ii) Type of Advance
comprising such Borrowing and, in the case of a LIBOR Rate Advance, the
requested Interest Period therefor and (iii) aggregate principal amount of such
Borrowing. Upon the Agent's receipt of any Notice of Borrowing, the Agent shall
promptly notify each Lender thereof. On each date on which any Loan is made,
each Lender having a Commitment to make such a Loan will, subject to the
satisfaction of the conditions for each Loan under Section 5.1 (for the initial
Loan) and Section 5.2 (for each other Loan), make the amount of its Pro Rata
Share of such Loan available to the Agent for the account of the applicable
Borrower or Borrowers, (i) in the case of a U.S. Loan, at the Agent's U.S.
Payment Account prior to 2:00 P.M. (Chicago time), or (ii) in the case of a Cdn.
Loan, at the Agent's Cdn. Payment Account prior to 2:00 P.M., Toronto time, in
each case on the Borrowing Date requested by the Administrative Borrower, in
U.S. Dollars or Cdn. Dollars, as applicable, immediately available to the Agent.
The proceeds of such Borrowing will then be made available to the applicable
Borrower or Borrowers by the Agent wire transferring to the U.S. Borrowers'
Account or the applicable Cdn. Borrower's Account, as applicable, the aggregate
of the amounts made available to the Agent by the U.S. Lenders or the Cdn.
Lenders, as applicable, and in like funds as received by the Agent by 2:00 P.M.
(Chicago or Toronto time), as applicable on the requested Borrowing Date. Unless
the Agent receives contrary written notice prior to the date of any proposed
Borrowing, the Agent is entitled to assume that each applicable Lender will make
available its Pro Rata Share of such Borrowing and in reliance upon that
assumption, but without any obligation to do so, may advance such Pro Rata Share
on behalf of such Lender. If and to the extent that such Lender shall not have
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<PAGE> 38
made such amount available to the Agent, but the Agent has made such amount
available to the Administrative Borrower, such Lender and the applicable
Borrower or Borrowers jointly and severally agree to pay and repay the Agent
forthwith on demand such corresponding amount and to pay interest thereon, for
each day from the date such amount is transferred by the Agent to the
Administrative Borrower until the date such amount is paid or repaid to the
Agent, at (i) in the case of the applicable Borrower or Borrowers, the interest
rate applicable at such time to such Loan and (ii) in the case of each Lender,
for the period from the date such amount was wire transferred to the
Administrative Borrower to (and including) three days after demand therefor by
the Agent to such Lender, at the Federal Funds Rate and, following such third
day, at the interest rate applicable at such time to such Loan together with all
costs and expenses incurred by the Agent in connection therewith. If a Lender
shall pay to the Agent any or all of such amount, such amount so paid shall
constitute a Loan by such Lender to the applicable Borrower or Borrowers for
purposes of this Agreement.
(b) With respect to any Borrowing consisting of a LIBOR Rate
Advance, the Borrowers may, subject to the provisions of Section 2.2(d) and so
long as all the conditions set forth in Article V have been fulfilled, elect to
maintain such Borrowing or any portion thereof as a LIBOR Rate Advance by
selecting a new Interest Period for such Borrowing, which new Interest Period
shall commence on the last day of the Interest Period then ending. Each
selection of a new Interest Period (a "Continuation") shall be made by notice
given not later than 12:00 Noon (Chicago time) on the third Business Day prior
to the date of any such Continuation by the Administrative Borrower to the
Agent. Such notice by the Administrative Borrower of a Continuation shall be by
telephone, confirmed immediately in writing (by telecopier or otherwise as
permitted hereunder), in substantially the form of Exhibit R (a "Notice of
Continuation"), specifying the requested (i) date of such Continuation and (ii)
aggregate amount of the Advance subject to such Continuation, which shall comply
with all limitations on Loans hereunder. Upon the Agent's receipt of any Notice
of Continuation, the Agent shall promptly notify each Lender thereof. Unless, on
or before 12:00 Noon (Chicago time) of the third Business Day prior to the
expiration of an Interest Period, the Agent shall have received a Notice of
Continuation from the Administrative Borrower for the entire Borrowing
consisting of the LIBOR Rate Advance outstanding during such Interest Period,
any amount of such Advance comprising such Borrowing remaining outstanding at
the end of such Interest Period (or any unpaid portion of such Advance not
covered by a timely Notice of Continuation) shall, upon the expiration of such
Interest Period, be Converted to a Base Rate Advance or, if such Borrowing is by
the Cdn. Borrower, a Prime Rate Advance.
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(c) The Borrowers may on any Business Day upon notice (each
such notice, a "Notice of Conversion") given by the Administrative Borrower to
the Agent, and subject to the provisions of Section 2.2(d), Convert the entire
amount of or a portion of an Advance of one Type into an Advance of another
Type; provided, however, that (i) the Borrowers may not Convert a Base Rate
Advance or a Prime Rate Advance into a LIBOR Rate Advance if an Event of Default
has occurred and is continuing, (ii) any Conversion of a LIBOR Rate Advance into
a Base Rate Advance shall be made on, and only on, the last day of an Interest
Period for such LIBOR Rate Advance and (iii) only the Cdn. Borrower may Convert
an Advance to a Prime Rate Advance. Each such Notice of Conversion shall be
given not later than 12:00 P.M. (Chicago time) on the Business Day prior to the
date of any proposed Conversion into a Base Rate Advance or a Prime Rate Advance
and on the third Business Day prior to the date of any proposed Conversion into
a LIBOR Rate Advance. Subject to the restrictions specified above, each Notice
of Conversion shall be by telephone, confirmed immediately in writing (by
telecopier or otherwise as permitted hereunder), in substantially the form of
Exhibit S, specifying (i) the requested date of such Conversion, (ii) the Type
of Advance to be Converted, the Type of Advance into which such Advance is
requested to be Converted and, in the case of an Advance to be Converted to a
LIBOR Rate Advance, the requested Interest Period therefor and (iii) the amount
of such Advance to be Converted. Upon the Agent's receipt of any Notice of
Conversion, the Agent shall promptly notify each Lender thereof. Each Conversion
shall be in an aggregate amount not less than US$1,000,000 or Cdn.$1,000,000, as
applicable, or an integral multiple of US$1,000,000 or Cdn.$1,000,000, as
applicable, in excess thereof.
(d) Anything in subsection (b) or (c) above to the contrary
notwithstanding,
(i) if, at least one Business Day before the date of
any requested LIBOR Rate Advance, the introduction of or any
change in or in the interpretation of any law or regulation
makes it unlawful, or any central bank or other governmental
authority asserts that it is unlawful, for any Lender or any
of its Affiliates to perform its obligations hereunder to make
a LIBOR Rate Advance or to fund or maintain a LIBOR Rate
Advance hereunder (including in the case of a Continuation or
a Conversion), such Lender shall promptly give written notice
of such circumstance to the Agent, and the Agent shall
promptly deliver such notice to the Administrative Borrower,
and the right of the Borrowers to select a LIBOR Rate Advance
for such Borrowing or any subsequent Borrowing (including a
Continuation or a Conversion) shall be suspended until the
circumstances causing such suspension no longer exist, and any
Advance comprising such requested Borrowing shall be a Base
Rate Advance;
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(ii) if, at least one Business Day before the first
day of any Interest Period, the Agent is unable to determine
the LIBOR Rate for LIBOR Rate Advances comprising any
requested Borrowing, Continuation or Conversion, the Agent
shall promptly give written notice of such circumstance to the
Administrative Borrower, and the right of the Borrowers to
select or maintain LIBOR Rate Advances for such Borrowing or
any subsequent Borrowing shall be suspended until the Agent
shall notify the Administrative Borrower that the
circumstances causing such suspension no longer exist, and any
Advance comprising such Borrowing shall be a Base Rate Advance
(or, in the case of a Borrowing by the Cdn. Borrower, a Prime
Rate Advance);
(iii) if any Lender shall, at least one Business Day
before the date of any requested Borrowing or Continuation of,
or Conversion into, a LIBOR Rate Advance, notify the Agent,
which notice the Agent shall promptly deliver to the
Administrative Borrower, that the LIBOR Rate for Advances
comprising such Borrowing, Continuation or Conversion will not
adequately reflect the cost to such Lender of making or
funding Advances for such Borrowing, the right of the
Borrowers to select LIBOR Rate Advances shall be suspended
until such Lender shall notify the Administrative Borrower
that the circumstances causing such suspension no longer
exist, and any Advance comprising such Borrowing shall be a
Base Rate Advance (or, in the case of a Borrowing by the Cdn.
Borrower, a Prime Rate Advance);
(iv) there shall not be outstanding at any time more
than ten Borrowings which consist of LIBOR Rate Advances;
(v) each Borrowing which consists of LIBOR Rate
Advances shall be in an amount equal to US$1,000,000 or a
whole multiple of US$1,000,000 in excess thereof; and
(vi) if an Event of Default has occurred and is
continuing, no LIBOR Rate Advances may be borrowed or
continued as such.
(e) Each Notice of Borrowing, Notice of Continuation and
Notice of Conversion shall be irrevocable and binding on the Borrowers. The
Borrowers agree, jointly and severally, to indemnify each Lender against any
loss, cost or expense incurred by such Lender as a result of (i) default by the
Borrowers in
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making a Borrowing of, Conversion into or Continuation of a LIBOR Rate Advance
after the Administrative Borrower has given notice requesting the same, (ii)
default by the Borrowers in payment when due of the principal amount of or
interest on any LIBOR Rate Advance or (iii) the making of a payment or
prepayment of a LIBOR Rate Advance on a day which is not the last day of an
Interest Period with respect thereto, including, without limitation, any loss
(including loss of anticipated profits), cost or expense incurred by reason of
the liquidation or reemployment of deposits or other funds acquired by such
Lender to fund such Advance.
SECTION 2.3. Application of Proceeds. The proceeds of the
Loans shall be used by the Borrowers (i) to refinance the Borrowers' existing
short term indebtedness, (ii) to finance, directly or indirectly, Permitted
Acquisitions by GPI and the Borrowers and (iii) to provide for their general
working capital purposes and for expenses incurred by the Borrowers in
connection herewith.
SECTION 2.4. Maximum Amount of the Loans; Mandatory
Prepayments; Early Termination of Agreement; Release of Equipment
Collateral.
(a) In no event shall the sum of the aggregate outstanding
principal balance of the U.S. Loans and the aggregate undrawn amount of all
unexpired U.S. Letters of Credit exceed the lesser of (i) the U.S. Borrowing
Base and (ii) the aggregate amount of the Commitments less the aggregate amount
of Cdn. Loans and the undrawn amount of Cdn. Letters of Credit outstanding. In
no event shall the sum of (A) the aggregate outstanding principal balances of
the Cdn. Loans and (B) the aggregate undrawn amount of all unexpired Cdn.
Letters of Credit exceed the lesser of (I) the Cdn. Borrowing Base and (II)
US$7,000,000.
(b) In addition to any prepayment required as a result of an
Event of Default hereunder, upon discovery by or notice to the Administrative
Borrower that any of the lending limits set forth in Section 2.1(a) or (b) or
Section 2.4(a) has been exceeded, an amount sufficient to reduce the outstanding
balances (and Collateralize outstanding Letters of Credit) to the applicable
maximum allowed amount shall become due and payable by the Borrowers without the
necessity of a demand by the Agent or any Lender.
(c) The Borrowers shall have the right to terminate this
Agreement at any time on 45 days' prior written notice by the Administrative
Borrower to the Agent, provided that on the date of such termination all
Obligations, including all amounts required for the Collateralization of Letters
of Credit and interest, fees and expenses (including, without limitation, costs
and expenses of the type specified in Section 2.2(e)(iii)) payable to the date
of such termination, shall be paid in full.
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(d) The Administrative Borrower may request, in a notice
delivered to the Agent not more than once in any fiscal quarter of the
Borrowers, that the Agent release its Lien on Equipment of the U.S. Borrowers to
the extent such Lien encumbers Equipment with an Orderly Liquidation Value in
excess of US$50,000,000 (that is located on Property or any other realty unless
(i) such Property or realty is not subject to any lease or mortgage or (ii) any
lessor or mortgagor of such Property or realty has executed and delivered to the
Agent a Collateral Access Agreement) and in which Equipment the Agent has a
perfected, first priority security interest subject to no other Liens other than
Permitted Liens. For purposes hereof, "Orderly Liquidation Value" means the
amount of net proceeds that could be obtained from a sale of the U.S. Borrowers'
Equipment within 180 days, as determined by an independent appraiser of
recognized standing in a current appraisal reasonably satisfactory to the Agent.
If the Agent shall have received such a satisfactory appraisal meeting the
requirements of this subsection, it shall, at the Borrowers' expense, release
its Lien under release documentation satisfactory to the Agent and the
Administrative Borrower on such items of Equipment as it shall determine in its
discretion from such appraisal comprise the amount of Orderly Liquidation Value
of the U.S. Borrowers' Equipment (that is located on Property or any other
realty unless (i) such Property or realty is not subject to any lease or
mortgage or (ii) any lessor or mortgagor of such Property or realty has executed
and delivered to the Agent a Collateral Access Agreement) in excess of
US$50,000,000 in which Equipment the Agent has a perfected, first priority
security interest subject to no other Liens other than Permitted Liens.
(e) The entire outstanding principal amount of the Loans,
together with all accrued and unpaid interest thereon and all fees, costs and
expenses payable by the Borrowers hereunder, shall become due and payable on the
Expiration Date.
SECTION 2.5. Maintenance of Loan Account; Statements of
Account. The Agent shall maintain accounts on its books in the name of the U.S.
Borrowers jointly and in the name of the Cdn. Borrower, respectively
(collectively, the "Loan Account"), in which the applicable Borrowers will be
charged with all loans and advances made by each Lender to the applicable
Borrowers or for the applicable Borrowers' account, together with all interest,
fees, expenses and any other Obligations chargeable to the Borrowers hereunder,
that are not paid by the Borrowers when due, and each Lender's Pro Rata Share
thereof. All amounts of interest, fees and expenses so charged to the Borrowers'
account shall accrue interest at the rate applicable to LIBOR Rate Advances with
an Interest Period of one month. The Loan Account will be credited with all
amounts received by the Agent from the Borrowers or for the Borrowers' account,
including, as set forth
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below, all amounts received from the Lockbox Banks or, in the case of the Cdn.
Borrower, the Blocked Account Bank. The Agent shall send the Administrative
Borrower a monthly statement reflecting the activity in the Loan Account. Each
such statement shall be an account stated and shall be final, conclusive and
binding on the Borrowers, absent manifest error.
SECTION 2.6. Collection of Receivables.
(a) At all times during the term of this Agreement, (i) each
U.S. Borrower shall maintain, pursuant to a Lockbox Agreement, a lockbox (a
"Lockbox") and (ii) each Borrower shall maintain, pursuant to a Lockbox
Agreement, or, in the case of the Cdn. Borrower, pursuant to the Blocked Account
Agreement, one or more blocked accounts (each, a "Blocked Account"). Each U.S.
Borrower shall instruct its account debtors to remit to a Lockbox, and the Cdn.
Borrower shall instruct its account debtors to remit to a Blocked Account, all
Collections including, without limitation, all checks, drafts and other
documents and instruments evidencing remittances in payment (collectively,
"Items of Payment"), provided that the Cdn. Borrower shall be permitted to take
physical delivery of any Items of Payment so long as no Event of Default has
occurred and is continuing and the Cdn. Borrower remits such Items of Payment to
a Blocked Account within one Business Day following its receipt thereof. Items
of Payment remitted to a Blocked Account will be processed in accordance with
the applicable Lockbox Agreement or, in the case of the Cdn. Borrower, the
Blocked Account Agreement.
(b) So long as no Event of Default has occurred and is
continuing, all Collections deposited in a Blocked Account shall be transferred
to an operating account of the applicable Borrower or otherwise released to such
Borrower. Following the occurrence and during the continuance of an Event of
Default, the Agent may apply all amounts received by it from the Lockbox Banks
or, in the case of the Cdn. Borrower, the Blocked Account Bank, to such of the
Obligations (provided that no Collections from the Receivables of the Cdn.
Borrower shall be deemed to secure or be applied to any of the Obligations owed
by any Loan Party organized under the laws of any state of the United States)
and in such order as it may elect in its sole and absolute discretion. All
Collections and other amounts received by a Borrower from any account debtor, in
addition to all other cash received by such Borrower from any other source,
shall, upon receipt, be deposited into a Blocked Account. The Borrowers will at
all times (i) not commingle any Items of Payment with any of their other funds
or property, but will segregate them from their other assets and will hold them
in trust and for the account and as the property of the Agent and (ii) endorse
any Items of Payment. The Agent will credit all such payments to the Borrowers'
account, conditional upon final collection; credit will be given only for
cleared funds received prior to 2:00 p.m.
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(Chicago or Toronto time, as applicable) by the Agent at the Agent's U.S.
Payment Account or the Agent's Cdn. Payment Account, as applicable, or such
other account as the Agent may designate. In all cases, the Borrowers' account
will be credited only with the net amounts actually received in payment of their
Receivables.
SECTION 2.7. Term. The term of this Agreement shall be for a
period from the Closing Date to but not including April 14, 2003, provided that
the Expiration Date shall automatically be extended, and this Agreement shall
automatically and continuously renew, for successive additional terms of one
year each, unless the Agent gives the Administrative Borrower or the
Administrative Borrower gives the Agent written notice, not less than sixty days
prior to the next Expiration Date, that such party elects to terminate this
Agreement effective on the next Expiration Date, provided, further, that the
Commitments shall terminate and the Loans shall become immediately due and
payable (i) on any earlier date on which all or any part of the principal amount
of the Subordinated Note becomes due and payable unless such principal amount is
paid from the proceeds of Permitted Refinancing Indebtedness or Net Cash
Proceeds or (ii) as provided in Section 9.2. Notwithstanding the foregoing, the
Borrowers shall have no right to terminate this Agreement at any time that any
principal of or interest on any of the Loans is outstanding, except upon
prepayment of all Obligations, the Collateralization of the amount of all
outstanding Letters of Credit and the satisfaction of all other conditions set
forth in the Loan Documents with respect thereto. On the Expiration Date or on
any earlier termination of this Agreement, the Borrowers shall pay in full all
Obligations and Collateralize all outstanding Letters of Credit, and
notwithstanding any termination of this Agreement, all of the Agent's and the
Cdn. Agent's security interests and all of the Agent's and the Cdn. Agent's
other rights and remedies shall continue in full force and effect until payment
and performance in full of all Obligations.
SECTION 2.8. Payment Procedures.
(a) The Borrowers hereby authorize the Agent to charge the
Loan Account with the amount of all interest, fees, expenses and other payments
to be made hereunder and under the other Loan Documents. The Agent may, but
shall not be obligated to, discharge the Borrowers' payment obligations
hereunder by so charging the Loan Account.
(b) Each payment by a Borrower on account of principal,
interest, fees or expenses hereunder shall be made to the Agent for the benefit
of the Agent and the Lenders according to the their respective rights thereto.
All payments to be made by the Borrowers hereunder and under the Notes, whether
on account of principal, interest, fees or otherwise, shall be made
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without setoff, deduction or counterclaim and shall be made prior to 2:00 P.M.
(Chicago time) on the due date thereof to the Agent, for the account of the
Lenders (except as expressly otherwise provided), at the Agent's U.S. Payment
Account in the case of the U.S. Borrowers' Obligations and at the Agent's Cdn.
Payment Account in the case of the Cdn. Borrower's Obligations and in
immediately available funds. Except for payments which are expressly provided to
be made to the account of the Agent only, the Agent shall distribute all
payments to the applicable Lenders on the Business Day following receipt in like
funds as received. Notwithstanding anything to the contrary contained in this
Agreement, if a Lender exercises its right of setoff under Section 11.3 or
otherwise, any amounts so recovered shall promptly be shared by such Lender with
the other Lenders according to their respective Pro Rata Shares.
(c) Whenever any payment to be made hereunder shall be stated
to be due on a day that is not a Business Day, the payment may be made on the
next succeeding Business Day and such extension of time shall be included in the
computation of the amount of interest due hereunder.
SECTION 2.9. Defaulting Lenders.
(a) A Lender who fails to pay the Agent its Pro Rata Share of
any Loans made available by the Agent on such Lender's behalf, or who fails to
pay any other amount owing by it to the Agent hereunder, is a defaulting lender
(a "Defaulting Lender"). The Agent may recover all such amounts owing by a
Defaulting Lender on demand.
(b) The failure of any Lender to fund its Pro Rata Share of
any Borrowing shall not relieve any other Lender of its obligation to fund its
Pro Rata Share of such Borrowing. Conversely, no Lender shall be responsible for
the failure of another Lender to fund such other Lender's Pro Rata Share of a
Borrowing.
(c) The Agent shall not be obligated to transfer to a
Defaulting Lender any payments made by the Borrowers to the Agent for the
Defaulting Lender's benefit; nor shall a Defaulting Lender be entitled to the
sharing of any payments hereunder. Amounts payable to a Defaulting Lender shall
instead be paid to or retained by the Agent. The Agent may hold and, in its
discretion, re-lend to the applicable Borrower or Borrowers the amount of all
such payments received or retained by it for the account of such Defaulting
Lender. For purposes of voting or consenting to matters with respect to the Loan
Documents and determining Pro Rata Shares, such Defaulting Lender shall be
deemed not to be a Lender and such Lender's Commitment for such purposes shall
be deemed to be zero. This Section shall remain effective with respect to such
Lender until (i) the Defaulting
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Lender has paid all amounts required to be paid to the Agent hereunder or (ii)
the Required Lenders, the Agent and the Administrative Borrower shall have
waived such Lender's default in writing. The operation of this Section shall not
be construed to increase or otherwise affect the Commitment of any Lender, or
relieve or excuse the performance by any of the Borrowers of its duties and
obligations hereunder.
(d) The Administrative Borrower may, by notice (a "Replacement
Notice") in writing to the Agent and a Defaulting Lender, (i) request such
Defaulting Lender to cooperate with the Administrative Borrower in obtaining a
Replacement Lender for such Defaulting Lender; (ii) request the non-Defaulting
Lenders to acquire and assume all or a portion of such Defaulting Lender's Loans
and Commitment, but none of such Lenders shall be obligated to do so; or (iii)
propose a Replacement Lender. If a Replacement Lender shall be accepted by the
Agent or one or more of the non-Defaulting Lenders shall agree to acquire and
assume all or part of a Defaulting Lender's Loans and Commitment, then such
Defaulting Lender shall assign, in accordance with Section 11.7, all or part, as
the case may be, of its Loans, Commitment, Note and other rights and obligations
under this Agreement and all other Loan Documents to such Replacement Lender or
non-Defaulting Lenders, as the case may be, in exchange for payment of the
principal amount of the Loans so assigned and all interest and fees accrued on
such amount so assigned; provided, however, that (i) such assignment shall be on
the terms and conditions set forth in Section 11.7, and (ii) prior to any such
assignment, the Borrowers shall have (A) paid to such Defaulting Lender all
amounts properly demanded and theretofore unpaid by the Borrowers under the
second sentence of Section 2.2(e) (less costs and expenses incurred by the
Borrowers directly as a result of the actions of the Defaulting Lender in
violation of this Agreement) and (B) paid to the Agent all amounts properly
demanded and theretofore unpaid by the Borrowers under Article IV. If the
Replacement Lender and the non-Defaulting Lenders shall only be willing to
acquire less than all of a Defaulting Lender's outstanding Loans and Commitment,
the Commitment of such Defaulting Lender shall not terminate, but shall be
reduced proportionately, and such Defaulting Lender shall continue to be a
"Lender" hereunder with a reduced Commitment and Pro Rata Share. Upon the
effective date of such assignment, the Borrowers shall issue replacement Notes
to such Replacement Lender, non-Defaulting Lenders and Defaulting Lender, as the
case may be, in exchange for the Note of such Defaulting Lender theretofore
outstanding, and such Replacement Lender shall, if not already a Lender, become
a "Lender" for all purposes under this Agreement and the other Loan Documents.
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SECTION 2.10. Letters of Credit.
(a) The Agent, in its discretion, upon the request of the
Administrative Borrower, shall, subject to the other terms and conditions of
this Agreement, use its best efforts to cause a bank or financial institution
acceptable to the Agent to issue for the account of one or more of the Borrowers
Letters of Credit of a tenor and containing terms acceptable to the
Administrative Borrower, the Lenders and the issuer of such Letter of Credit, in
a maximum aggregate face amount outstanding at any time not to exceed (i)
US$18,000,000 in the case of Letters of Credit issued for the account of one or
more of the U.S. Borrowers and (ii) US$2,000,000 in the case of Letters of
Credit issued for the account of the Cdn. Borrower, provided that no Letter of
Credit shall have an expiration date after the Expiration Date. All Letters of
Credit shall be subject to the limitations set forth in Section 2.4(a), and a
sum equal to the aggregate amount of all outstanding U.S. Letters of Credit or
Cdn. Letters of Credit, as applicable, shall be included in calculating
outstanding amounts for purposes of determining compliance with Section 2.4(a).
(b) Immediately upon issuance or amendment of any Letter of
Credit in accordance with the procedures set forth in this Section 2.10, each
U.S. Lender or Cdn. Lender, as applicable, shall be deemed to have irrevocably
and unconditionally purchased and received from the Agent, without recourse or
warranty, an undivided interest and participation, to the extent of such
Lender's Pro Rata Share, of the liability and obligations under and with respect
to such Letter of Credit and the Letter of Credit Agreement (including, without
limitation, all obligations of the applicable Borrower or Borrowers with respect
thereto, other than amounts owing to the Agent pursuant to the first sentence of
Section 4.4(c)) and any security therefor or guaranty pertaining thereto.
(c) Whenever the Administrative Borrower desires the issuance
of a Letter of Credit, the Administrative Borrower shall deliver to the Agent a
written notice no later than 12:00 Noon (Chicago time) at least ten Business
Days (or such shorter period as may be agreed to by the Agent) in advance of the
proposed date of issuance of a letter of credit request in substantially the
form attached as Exhibit T (a "Letter of Credit Request"). The transmittal by
the Administrative Borrower of each Letter of Credit Request shall be deemed to
be a representation and warranty by the Administrative Borrower that the Letter
of Credit may be issued in accordance with and will not violate any of the
requirements of this Section 2.10. Prior to the date of issuance of each Letter
of Credit, the Administrative Borrower shall provide to the Agent a precise
description of the documents and the text of any certificate to be presented by
the beneficiary of such Letter of Credit which, if presented by such beneficiary
on or prior to the expiration date of such Letter of Credit, would
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require the issuing bank to make payment under such Letter of Credit. The Agent,
in its reasonable judgment, may require changes in any such documents and
certificates. No Letter of Credit shall require payment against a conforming
draft to be made thereunder prior to the second Business Day after the date on
which such draft is presented.
(d) Upon any request for a drawing under any Letter of Credit
by the beneficiary thereof, (i) the Administrative Borrower shall be deemed to
have timely given a Notice of Borrowing to the Agent for a U.S. Loan or a Cdn.
Loan, as applicable, on the date on which such drawing is honored in an amount
equal to the amount of such drawing and (ii) without regard to satisfaction of
the applicable conditions specified in Section 5.2 and the other terms and
conditions of borrowings contained herein, the applicable Lenders shall, on the
date of such drawing, make Base Rate Advances or Prime Rate Advances, as
applicable depending upon the currency in which such Letter of Credit is
payable, in the amount of such drawing, the proceeds of which shall be applied
directly by the Agent to reimburse the issuing bank for the amount of such
drawing or payment. If for any reason, proceeds of Advances are not received by
the Agent on such date in an amount equal to the amount of such drawing, the
applicable Borrower or Borrowers shall be obligated to and shall reimburse the
Agent, on the Business Day immediately following the date of such drawing, in an
amount in same day funds equal to the excess of the amount of such drawing over
the amount of such Loans, if any, which are so received, plus accrued interest
on such amount at the rate set forth in Section 4.1(a) or 4.2, as applicable.
(e) As among the Borrowers, the Agent and each Lender, the
Borrowers assume all risks of the acts and omissions of the Agent and the
issuing bank (other than for the gross negligence or willful misconduct of the
Agent or such issuing bank) or misuse of the Letters of Credit by the respective
beneficiaries of such Letters of Credit. In furtherance and not in limitation of
the foregoing, neither the Agent nor any of the Lenders shall be responsible (i)
for the accuracy, genuineness or legal effects of any document submitted by any
party in connection with the application for and issuance of or any drawing
honored under such Letters of Credit even if it should in fact prove to be in
any or all respects invalid, inaccurate, fraudulent or forged, (ii) for the
validity or sufficiency of any instrument transferring or assigning or
purporting to transfer or assign any such Letter of Credit, or the rights or
benefits thereunder or proceeds thereof, in whole or in part, which may prove to
be invalid or ineffective for any reason, (iii) for errors, omissions,
interruptions or delays in transmission or delivery of any messages, by mail,
cable, telegraph, telex, telecopy or otherwise, whether or not they be in
cipher, (iv) for errors in interpretation of technical terms, (v) for any loss
or delay in the transmission or otherwise
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of any document required to make a drawing under any such Letter of Credit, or
of the proceeds thereof, (vi) for the misapplication by the beneficiary of any
such Letter of Credit, of the proceeds of any drawing honored under such Letter
of Credit, and (vii) for any consequences arising from causes beyond the control
of the issuing bank, the Agent or the Lenders, provided that the foregoing shall
not release the Agent or the issuing bank for any liability for its gross
negligence or willful misconduct. None of the above shall affect, impair, or
prevent the vesting of any of the Agent's rights or powers hereunder. Any action
taken or omitted to be taken by the Agent under or in connection with any Letter
of Credit, if taken or omitted in the absence of gross negligence or willful
misconduct of the Agent, shall not create any liability of the Agent to any
Borrower or any Lender.
(f) The obligations of the applicable Borrower or Borrowers to
reimburse the Agent for drawings honored under the Letters of Credit and the
obligations of the Lenders under this Section 2.10 shall be unconditional and
irrevocable and shall be paid strictly in accordance with the terms of this
Agreement under all circumstances including, without limitation, the following
circumstances: (i) any lack of validity or enforceability of this Agreement, any
Letter of Credit, any Letter of Credit Agreement or any other agreement or
instrument relating thereto (the "Letter of Credit Related Documents"); (ii) the
existence of any claim, setoff, defense or other right which any Borrower or any
Affiliate of any Borrower may have at any time against a beneficiary or any
transferee of any Letter of Credit (or any Persons or entities for whom any such
beneficiary or transferee may be acting), the Agent, any Lender or any other
Person, whether in connection with this Agreement, the other Loan Documents, the
transactions contemplated herein or therein or any unrelated transaction; (iii)
any draft, demand, certificate or other documents presented under any Letter of
Credit proving to be forged, fraudulent or invalid in any respect or any
statement therein being untrue or inaccurate in any respect; (iv) the surrender
or impairment of any security for the performance or observance of any of the
terms of any of the Loan Documents; (v) failure of any drawing under a Letter of
Credit or any non-application or misapplication by the beneficiary of the
proceeds of any drawing; or (vi) that a Default or Event of Default shall have
occurred and be continuing.
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ARTICLE III.
SECURITY
SECTION 3.1. General. To secure the prompt and complete
payment and performance when due (whether at stated maturity, by acceleration or
otherwise) of all of the Obligations, each of the U.S. Borrowers hereby grants
to the Agent for the ratable benefit of the U.S. Lenders a Lien on and security
interest in all of its right, title and interest in and to all of its
Receivables, Inventory and Equipment (other than Equipment that is subject to a
lease which prohibits or creates a default or right of termination upon the
assignment of or the granting of a security interest in or other Lien on the
applicable Borrower's rights thereunder, wherever located, whether now owned or
hereafter acquired, and all proceeds (whether in the form of cash or other
property) and products thereof including, without limitation, all proceeds of
insurance covering the same.
SECTION 3.2. Further Security. Each of the U.S. Borrowers also
grants to the Agent for the ratable benefit of the U.S. Lenders, as further
security for all of the Obligations, a security interest in all of its right,
title and interest in and to all property of such U.S. Borrower in the
possession of or deposited with or in the custody of the Agent or any Affiliate
of the Agent or any representative, agent or correspondent of the Agent. For
purposes of this Agreement, any property in which the Agent or any such
Affiliate has any security or title retention interest shall be deemed to be in
the custody of the Agent or of such Affiliate.
SECTION 3.3. Recourse to Security. Recourse to security shall
not be required for any Obligation hereunder and each Borrower hereby waives any
requirement that the Agent or the Lenders exhaust any right or take any action
against any of the Collateral before proceeding to enforce the Obligations
against such Borrower.
SECTION 3.4. Special Provisions Relating to Inventory SECTION
3.4. Special Provisions Relating to Inventory .
(a) All Inventory. The security interest in the Inventory
granted to the Agent hereunder shall continue through all steps of manufacture
and sale and attach without further act to raw materials, work in process,
finished goods, returned goods, documents of title and warehouse receipts, and
to proceeds resulting from the sale or other disposition of such Inventory.
Until all of the Obligations have been satisfied, all Letters of Credit have
been terminated or Collateralized and the Commitments have been terminated, the
Agent's security interest in such
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Inventory and in all proceeds thereof shall continue in full force and effect
and the Agent shall have, in its sole and absolute discretion at any time if an
Event of Default has occurred and is continuing or the Agent believes that fraud
has occurred, the right to take physical possession of such Inventory and to
maintain it on the premises of a Borrower, in a public warehouse, or at such
other place as the Agent may deem appropriate. If the Agent exercises such right
to take possession of such Inventory, the Borrowers will, upon demand, and at
the Borrowers' cost and expense, assemble such Inventory and make it available
to the Agent at a place or places convenient to the Agent.
(b) Further Assurances. Each Borrower will perform any and all
steps that the Agent may request to perfect the Agent's or the Cdn. Agent's
security interests in such Borrower's Inventory including, without limitation,
placing and maintaining signs, executing and filing financing or continuation
statements in form and substance satisfactory to the Agent, maintaining stock
records and conducting lien searches. In each case, each Borrower shall take
such action as promptly as possible after requested by the Agent but in any
event within five Business Days after any such request is made except that each
Borrower shall take such action immediately upon the Agent's request following
the occurrence of an Event of Default. If any Borrower's Inventory is in the
possession or control of any Person other than a purchaser in the ordinary
course of business, a carrier for such Person or a public warehouseman where the
warehouse receipt is in the name of or held by the Agent, such Borrower shall
notify such Person of the Agent's or the Cdn. Agent's security interest therein
and, upon request, instruct such Person or Persons to hold all such Inventory
for the account of the Agent or the Cdn. Agent and subject to the Agent's
instructions. If so requested by the Agent, each Borrower (as promptly as
possible after requested by the Agent but in any event within five Business Days
after any such request is made) will deliver (i) to the Agent or the Cdn. Agent
warehouse receipts covering any of such Borrower's Inventory located in
warehouses showing the Agent or the Cdn. Agent as the beneficiary thereof and
(ii) to the warehouseman such agreements relating to the release of warehouse
Inventory as the Agent may request. A physical verification of all of each
Borrower's Inventory wherever located will be taken by such Borrower at least
every twelve months and, in any case, as often as reasonably requested by the
Agent and a copy of such physical verification shall be promptly thereafter
submitted to the Agent. Each Borrower shall also submit to the Agent a copy of
the annual physical Inventory of such Borrower as observed and tested by its
public accountants in accordance with generally accepted auditing standards and
GAAP. If so requested by the Agent, each Borrower shall execute and deliver to
the Agent or the Cdn. Agent a confirmatory written instrument, in form and
substance satisfactory to the Agent, listing all its
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Inventory, but any failure to execute or deliver the same shall not limit or
otherwise affect the Agent's or the Cdn. Agent's security interest in and to
such Inventory. Each Borrower shall deliver a monthly report of its Inventory by
location, based upon a physical count, which shall describe such Inventory by
category and by item (in reasonable detail) and report the value thereof at the
lower of cost or market.
(c) Inventory Records. Each Borrower shall maintain full,
accurate and complete records of its Inventory describing the kind, type and
quantity of such Inventory and such Borrower's cost therefor, withdrawals
therefrom and additions thereto, including a perpetual inventory for work in
process and finished goods.
SECTION 3.5. Special Provisions Relating to Receivables
(a) Assignments, Etc. On the Agent's request therefor, each
Borrower shall furnish to the Agent copies of invoices to customers and shipping
and delivery receipts or warehouse receipts thereof. Each Borrower shall deliver
to the Agent the originals of all letters of credit, notes, and instruments in
its favor and such endorsements or assignments as the Agent may reasonably
request.
(b) Records, Collections, Etc. Each Borrower shall provide to
the Agent information relating to its customer credits granted during each month
at the time it provides to the Agent its accounts receivable aging reports for
such month under Section 7.1(k)(vi). No Borrower shall settle or adjust any
dispute or claim, or grant any discount (except ordinary trade discounts),
credit or allowance or accept any return of merchandise, except in the ordinary
course of its business, without the Agent's consent. Upon the occurrence and
during the continuance of an Event of Default or at any time that the Agent
believes that fraud has occurred, at the Agent's request, (i) each Borrower
shall promptly report to the Agent each such return, repossession or recovery of
merchandise, (ii) the Agent or, in the case of account debtors of the Cdn.
Borrower, the Cdn. Agent may settle or adjust disputes or claims directly with
account debtors for amounts and upon terms which it considers advisable and
(iii) the Agent or the Cdn. Agent, as applicable, may notify account debtors on
a Borrower's Receivables that such Receivables have been assigned to the Agent
or the Cdn. Agent, and that payments in respect thereof shall be made directly
to the Agent or the Cdn. Agent. Where a Borrower receives collateral of any kind
or nature by reason of transactions between itself and its customers or account
debtors, such Borrower will hold the same on the Agent's or the Cdn. Agent's
behalf, subject to the Agent's or the Cdn. Agent's instructions, and as property
forming part of such Borrower's Receivables.
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Where a Borrower sells goods or services to a customer which also sells goods or
services to it or which may have other claims against it, such Borrower will so
advise the Agent immediately to permit the Agent to establish a reserve
therefor. Each Borrower hereby irrevocably authorizes and appoints the Agent or
the Cdn. Agent, as applicable, or any Person the Agent may designate, as its
attorney-in-fact, at such Borrower's sole cost and expense, to exercise, if an
Event of Default has occurred and is continuing or the Agent believes that fraud
has occurred, all of the following powers, which being coupled with an interest,
shall be irrevocable until all of the Obligations have been indefeasibly paid
and satisfied in full in cash: (A) to receive, take, endorse, sign, assign and
deliver, all in the name of the Agent or the Cdn. Agent, as applicable or such
Borrower, any and all checks, notes, drafts, and other documents or instruments
relating to the Collateral; (B) to receive, open and dispose of all mail
addressed to such Borrower and to notify postal authorities to change the
address for delivery thereof to such address as the Agent or the Cdn. Agent, as
applicable, may designate; and (C) to take or bring, in the name of the Agent or
such Borrower, all steps, actions, suits or proceedings deemed by the Agent
necessary or desirable to enforce or effect collection of such Borrower's
Receivables or file and sign such Borrower's name on a proof of claim in
bankruptcy or similar document against any obligor of such Borrower.
SECTION 3.6. Special Provisions Relating to Equipment.
(a) Repair. Each Borrower shall keep all of its Equipment
constituting Collateral in a satisfactory state of repair and satisfactory
operating condition in accordance with industry standards, ordinary wear and
tear excepted, and will, consistent with the exercise of its reasonable business
judgment, make all repairs and replacements when and where necessary and
practical, will not waste or destroy (in any material respect) it or any part
thereof, and will not be negligent (in any material respect) in the care or use
thereof. Each Borrower shall repair and maintain all of its Equipment
constituting Collateral in accordance with industry practices in a manner
sufficient to continue the operation of its business as heretofore conducted.
Each Borrower shall use or cause its Equipment constituting Collateral to be
used (in all material respects) in accordance with law and the manufacturer's
instructions.
(b) Disposal. Where a Borrower is permitted to dispose of any
of its Equipment under this Agreement or by any consent thereto hereafter given
by the Agent, such Borrower shall do so as permitted under Section 7.1(c) or
otherwise at arm's length and in good faith and without materially impairing the
operating integrity or value of its remaining Equipment constituting Collateral.
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SECTION 3.7. Continuation of Liens, Etc. Each Borrower shall
defend the Collateral against all claims and demands of all Persons at any time
claiming any interest therein, other than claims relating to Liens permitted by
the Loan Documents. Each Borrower agrees to comply with the requirements of all
state, provincial and federal laws to grant to the Agent or the Cdn. Agent, as
applicable, valid and perfected first priority security interests in the
Collateral. The Agent or the Cdn. Agent, as applicable, is hereby authorized by
each Borrower to sign such Borrower's name on any document or instrument as may
be necessary or desirable to establish and maintain the Liens covering the
Collateral and the priority and continued perfection thereof or file any
financing or continuation statements or similar documents or instruments
covering the Collateral whether or not such Borrower's signature appears
thereon. Each Borrower agrees, from time to time, at the Agent's or the Cdn.
Agent's request, to execute and deliver to the Agent or the Cdn. Agent or to
file notices of Liens, financing statements, similar documents or instruments,
and amendments, renewals and continuations thereof, and cooperate with the
Agent's or the Cdn. Agent's representatives, in connection with the continued
perfection (and the priority status thereof) and protection of the Collateral
and the Agent's or the Cdn. Agent's Liens thereon. Each Borrower agrees that the
Agent or the Cdn. Agent may file a carbon, photographic or other reproduction of
this Agreement (or any financing statement related hereto) as a financing
statement.
SECTION 3.8. Power of Attorney. In addition to all of the
powers granted to the Agent and the Cdn. Agent in this Article III, each
Borrower hereby appoints and constitutes the Agent or the Cdn. Agent, as
applicable, as such Borrower's attorney-in-fact to sign such Borrower's name on
any of the documents, instruments and other items described in Section 3.7, to
request at any time from customers indebted on its Receivables verification of
information concerning such Receivables and the amount owing thereon (provided
that any verification prior to an Event of Default shall not contain the Agent's
or the Cdn. Agent's name), and, upon the occurrence and during the continuance
of an Event of Default, (i) to convey any item of Collateral to any purchaser
thereof and (ii) to make any payment or take any act necessary or desirable to
protect or preserve any Collateral. The Agent's or the Cdn. Agent's authority
hereunder shall include, without limitation, the authority to execute and give
receipt for any certificate of ownership or any document, to transfer title to
any item of Collateral and to take any other actions arising from or incident to
the powers granted to the Agent or the Cdn. Agent under this Agreement. This
power of attorney is coupled with an interest and is irrevocable.
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ARTICLE IV.
INTEREST, FEES AND EXPENSES
SECTION 4.1. Interest. The U.S. Borrowers and the Cdn.
Borrower shall pay to the Agent for the ratable benefit of the U.S. Lenders and
the Cdn. Lenders, respectively, interest on the Advances, payable monthly in
arrears on the first Business Day of each month, commencing with the month
immediately following the Closing Date, and on the Expiration Date, at the
following rates per annum:
(a) Base Rate Advances. If such Advance is a Base Rate
Advance, at a fluctuating rate which is equal to (i) the Base Rate then in
effect plus (ii) the Pricing Increment, each change in such fluctuating rate to
take effect simultaneously with the corresponding change in the Base Rate.
(b) Prime Rate Advances. If such Advance is a Prime Rate
Advance, at a fluctuating rate which is equal to (i) the Prime Rate then in
effect plus (ii) the Pricing Increment, each change in such fluctuating rate to
take effect simultaneously with the corresponding change in the Prime Rate.
(c) LIBOR Rate Advances. If such Advance is a LIBOR Rate
Advance, at a rate which is equal at all times during the Interest Period for
such LIBOR Rate Advance to (i) the LIBOR Rate plus (ii) the Pricing Increment.
SECTION 4.2. Interest and Letter of Credit Fees After Event of
Default. From the date of occurrence of any Event of Default until the earlier
of the date upon which (i) all Obligations shall have been paid and satisfied in
full and all Letters of Credit have expired or been terminated or (ii) such
Event of Default shall have been cured within any grace period specified
therefor in Section 9.1 or waived, interest on the Loans shall be payable on
demand at a rate per annum equal to the rate that would be otherwise applicable
thereto under Section 4.1 plus up to an additional two percent (2%) and the
letter of credit fee pursuant to Section 4.4(c) shall be payable at the rate
that would otherwise apply under Section 4.4(c) plus up to an additional two
percent (2%).
SECTION 4.3. Closing Fee. The U.S. Borrowers and the Cdn.
Borrower, as applicable, shall pay in immediately available funds to the Agent
for the ratable benefit of the applicable Lenders a closing fee (a) on the
Effective Date in an amount equal to one-half of one percent (.50%) of the
aggregate amount of the Commitments of the U.S. Lenders and the Cdn. Lenders,
respectively, in effect on such date and (b) on the date of each
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increase in the aggregate amount of the Commitments of the U.S. Lenders
and the Cdn. Lenders, respectively, after the Effective Date in an amount equal
to one-half of one percent (.50%) of the aggregate amount of such increase.
SECTION 4.4. Unused Line Fee; Letter of Credit Fees.
(a) The U.S. Borrowers shall pay to the Agent for the ratable
benefit of the U.S. Lenders on the first Business Day of each month, commencing
with the month immediately following the Closing Date, and on the Expiration
Date, in arrears, an unused line fee equal to three-eighths of one percent
(.375%) per annum of the difference, if positive, between (i) the lesser of (A)
the aggregate amount of the Commitments at such time and (B) the U.S. Borrowing
Base, less the aggregate amount of Cdn. Loans and the undrawn amount of Cdn.
Letters of Credit outstanding and (ii) the average daily outstanding amount of
the U.S. Loans plus the average daily aggregate undrawn amount available for
drawing under all U.S. Letters of Credit during the immediately preceding month
or portion thereof.
(b) The Cdn. Borrower shall pay to the Agent for the ratable
benefit of the Cdn. Lenders on the first Business Day of each month, commencing
with the month immediately following the Closing Date, and on the Expiration
Date, in arrears, an unused line fee equal to three-eighths of one percent
(.375%) per annum of the difference, if positive, between (i) US$7,000,000 and
(ii) the average daily outstanding amount of the Cdn. Loans plus the average
daily aggregate undrawn amount available for drawing under all Cdn. Letters of
Credit during the immediately preceding month or portion thereof.
(c) The Borrowers shall promptly pay to the Agent for its own
account all fees charged to the Agent by any issuer of a Letter of Credit which
relate directly to the opening, amending or drawing under Letters of Credit. In
addition, the Borrowers shall pay to the Agent for the ratable benefit of the
Lenders on the first Business Day of each month, commencing with the month
immediately following the Closing Date, and on the Expiration Date, in arrears,
a fee in an amount equal to the percentage per annum equal to the then
applicable Pricing Increment multiplied by the daily average of the undrawn
amount of the Letters of Credit outstanding and available for drawing during the
preceding month or during the interim period ending on the Expiration Date, as
the case may be.
SECTION 4.5. Calculations. All calculations of interest and
fees hereunder shall be made by the Agent on the basis of a year of 360 days (or
365 or 366 days, as applicable, in the case of Prime Rate Advances to the Cdn.
Borrower) for the actual number of days elapsed in the period for which such
interest or fees are payable. Each determination by the Agent of an interest
rate, fee or other payment hereunder shall be conclusive and binding for all
purposes, absent manifest error.
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SECTION 4.6. Indemnification in Certain Events. If, after the
Closing Date, (i) any change in or in the interpretation of any law or
regulation is introduced including, without limitation, with respect to reserve
requirements, applicable to any Lender or any other banking or financial
institution from which any Lender borrows funds or obtains credit, (ii) any
Lender complies with any future guideline or request from any central bank or
other Governmental Authority or (iii) any Lender determines that the adoption of
any applicable law, rule or regulation regarding capital adequacy, or any change
therein, or any change in the interpretation or administration thereof by any
Governmental Authority, central bank or comparable agency charged with the
interpretation or administration thereof has or would have the effect described
below, or any Lender complies with any request or directive regarding capital
adequacy (whether or not having the force of law) of any such authority, central
bank or comparable agency, and in the case of any event set forth in this clause
(iii), such adoption, change or compliance has or would have the direct or
indirect effect of reducing the rate of return on such Lender's capital as a
consequence of its obligations hereunder to a level below that which such Lender
could have achieved but for such adoption, change or compliance (taking into
consideration such Lender's policies as the case may be with respect to capital
adequacy) by an amount deemed by such Lender to be material, and any of the
foregoing events described in clauses (i), (ii) and (iii) increases the cost to
such Lender of funding or maintaining the Loans made or to be made by such
Lender, or reduces the amount receivable in respect thereof by such Lender, then
the applicable Borrower or Borrowers shall, upon demand by the Agent, pay to the
Agent for the benefit of such Lender additional amounts sufficient to indemnify
such Lender against such increase in cost or reduction in amount receivable.
SECTION 4.7. Taxes.
(a) Any and all payments by the Borrowers hereunder or under
the Notes shall be made free and clear of and without deduction for any and all
present or future taxes, levies, imposts, deductions, charges or withholdings
and penalties, interest and all other liabilities with respect thereto imposed
by any Governmental Authority of the United States or Canada, including any
taxes imposed under Section 7701(l) of the Internal Revenue Code, excluding in
the case of the Agent and any Lender, taxes imposed on its net income
(including, without limitation, any taxes imposed on branch profits) and
franchise taxes imposed on the Agent and any Lender by any applicable
jurisdiction and further excluding any taxes, levies, imposts, deductions,
charges, fees, duties, penalties, interest and all other
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liabilities with respect to such excluded income and franchise taxes (such
non-excluded items hereinafter referred to as "Taxes"). If the Borrowers shall
be required by law to deduct any Taxes from or in respect of any sum payable
hereunder or under any Loan to or for the benefit of the Agent or any Lender,
(A) the sum payable shall be increased by additional amounts ("Additional
Amounts") as may be necessary so that after making all required deductions of
Taxes (including deductions of Taxes applicable to Additional Amounts payable
under this Section 4.7) the Agent or such Lender receives an amount equal to the
sum it would have received had no such deductions been made, (B) the applicable
Borrower or Borrowers shall make such deductions and (C) the applicable Borrower
or Borrowers shall pay the full amount so deducted to the relevant taxation
authority in accordance with applicable law.
(b) In addition, each Borrower agrees to pay any present or
future stamp, documentary, excise, privilege, intangible or similar taxes or
levies imposed by any Governmental Authority of the United States or Canada that
arise at any time or from time to time (i) from any payment made under any and
all Loan Documents, or (ii) from the execution or delivery by such Borrower of,
or from the filing or recording or maintenance of, or otherwise with respect to
the exercise by the Agent or any Lender of its rights under, any and all Loan
Documents (hereinafter referred to as "Other Taxes").
(c) Each Borrower indemnifies the Agent and each Lender for
the full amount of (i) Taxes imposed on or with respect to amounts payable
hereunder and (ii) Other Taxes.
(d) Within thirty days after the date of any payment of Taxes
or Other Taxes, the Administrative Borrower will, upon request, furnish to the
Agent the original or a certified copy of a receipt or other documentation
reasonably satisfactory to the Agent evidencing payment thereof.
(e) In the event that any Borrower reimburses any Lender or
the Agent for any Taxes or pays any Taxes on any Lender's or the Agent's behalf
pursuant to this Section 4.7 and such Lender or the Agent thereafter receives
any refund or credit of such Taxes, such Lender or the Agent shall promptly pay
to such Borrower the amount of any such refund or credit together with interest
on such amount at the Federal Funds Rate from the date the refund is received or
the credit is applied through the date of payment to such Borrower.
(f) The Agent and each Lender that (i) with respect to the
U.S. Loans and the U.S. Letters of Credit, is organized under the laws of a
jurisdiction outside the United States, and (ii) with respect to the Cdn. Loans
and the Cdn. Letters of Credit, is organized under the laws of a jurisdiction
outside of
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Canada, shall, on the Closing Date and from time to time thereafter if requested
by the Administrative Borrower, provide the Administrative Borrower with the
forms prescribed by the Internal Revenue Service or the Canada Customs and
Revenue Agency, as the case may be, properly completed and certifying as to the
Agent's and such Lender's status for purposes of determining exemption from
United States and Canadian Taxes with respect to all payments to be made to the
Agent and such Lender hereunder, or other documents satisfactory to the
Administrative Borrower confirming that all payments to be made to the Agent and
such Lender hereunder are not subject to United States Taxes or Canadian Taxes,
as the case may be. Unless the Administrative Borrower shall have received,
within thirty days of a request by the Administrative Borrower therefor, such
properly completed forms or such other documents indicating that payments to the
Agent and such Lender hereunder are not subject to United States Taxes or
Canadian Taxes, as the case may be, the Borrowers shall be entitled to withhold
Taxes from such payments at the applicable statutory rate, and no Additional
Amounts shall be payable with respect to United States Taxes or Canadian Taxes,
as the case may be, under this Agreement.
(g) Without prejudice to the survival of any other agreement
of the Borrowers hereunder, the agreements and obligations of the Borrowers
contained in this Section 4.7 shall survive the indefeasible payment in full of
the Obligations.
ARTICLE V.
CONDITIONS OF LENDING
SECTION 5.1. Conditions to Initial Loan or Letter of Credit.
The obligation of the Lenders to make the initial Loan or of the Agent to use
its best efforts to cause to be issued the initial Letter of Credit is subject
to the satisfaction of the following conditions prior to or concurrent with such
initial Loan:
(a) the Agent shall have received the following, each dated
the date of the initial Loan or Letter of Credit or as of an earlier date
acceptable to the Agent, in form and substance satisfactory to the Agent and its
counsel:
(i) the U.S. Notes, each duly executed by each of the
U.S. Borrowers;
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(ii) the Cdn. Notes, each duly executed by the Cdn.
Borrower;
(iii) (A) each Lockbox Agreement, duly executed by
the Borrower or Borrowers (other than the Cdn. Borrower) and
the Lockbox Bank party thereto, and (B) the Blocked Account
Agreement, duly executed by the Cdn. Borrower and the Blocked
Account Bank;
(iv) the Pledge Agreement, duly executed by GPI and
certain Subsidiaries of GPI party thereto and acknowledged by
each of the Subsidiaries of GPI whose shares of stock or other
equity interests or promissory notes payable are pledged
thereunder, together with (A) the original certificates
evidencing the shares of stock or other equity interests
pledged thereunder and undated transfer powers therefor,
executed in blank, and (B) the original promissory notes
pledged thereunder and undated note powers therefor, executed
in blank;
(v) the Guaranty, duly executed by each of the
Guarantors;
(vi) the Security Agreement, duly executed by the
Cdn. Borrower;
(vii) (A) executed Uniform Commercial Code financing
statements (Form UCC-1) naming the Agent as secured party and
each of the U.S. Borrowers and the other Pledgors as debtors,
(B) executed financing statements for registration under the
PPSA naming the Cdn. Agent as secured party and the Cdn.
Borrower as debtor and (C) termination statements, each in
form and substance satisfactory to the Agent, in each case in
proper form for filing in all jurisdictions that the Agent
deems necessary or desirable to perfect and protect the Liens
created hereunder and under the Security Documents and the
priority thereof;
(viii) completed requests for information, dated on
or before the date of the initial Loan, listing all effective
financing statements or registrations filed in the
jurisdictions referred to in clause (vii) above, that name
each of the Borrowers as debtor, together with copies of such
financing statements or verification statements, as the case
may be;
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(ix) a completed perfection certificate,
substantially in the form of Exhibit P, signed by the
president or a vice president of each Borrower;
(x) the Contribution Agreement, duly executed by the
Guarantors;
(xi) a solvency certificate of the Chief Financial
Officer or the principal financial and accounting officer of
each of the Loan Parties, substantially in the form of Exhibit
M;
(xii) (A) the Subordination Agreement, duly executed
by Weatherford and GPI, and (B) a copy of the Subordinated
Note, certified by the Secretary or an Assistant Secretary of
GPI;
(xiii) an initial Borrowing Base Certificate for the
U.S. Borrowers and for the Cdn. Borrower, each duly executed
by the Administrative Borrower's Chief Financial Officer;
(xiv) (A) the audited Financial Statements for the
fiscal year of the Borrowers ended December 31, 1999,
certified by the Auditors, (B) a pro forma consolidated and
consolidating balance sheet of each Loan Party, after giving
effect to the consummation of the transactions contemplated
hereby reflecting a satisfactory tangible net worth of such
Loan Party and otherwise in form and substance satisfactory to
the Agent and (C) a certificate executed by a Responsible
Officer certifying that since December 31, 1999, no change,
event, occurrence or development or event involving a
prospective change in the business, prospects, operations,
results of operations, assets, liabilities or condition
(financial or otherwise) has occurred which has had or could
reasonably be expected to have a Material Adverse Effect, and
that all information provided by or on behalf of a Borrower to
the Agent hereunder or in connection herewith is true and
correct in all material respects;
(xv) an opinion of counsel for each Loan Party
covering such matters incident to the transactions
contemplated by this Agreement as the Agent may reasonably
require, which such counsel is hereby requested by the Loan
Parties to provide;
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(xvi) certified summaries of all policies of
insurance required by this Agreement and the other Loan
Documents, together with loss payee endorsements for all such
policies naming the Agent or the Cdn. Agent, as applicable, as
lender loss payee and an additional insured;
(xvii) a copy of the Business Plan for the period
commencing January 1, 2000, accompanied by a certificate
executed by a Responsible Officer certifying to the Agent that
the Business Plan has been prepared in good faith based upon
the assumptions contained therein and all information
available at the time of preparation thereof and, as of the
date of such certificate, such Responsible Officer is not
aware of any information contained in the Business Plan which
is false or misleading or of any omission of information which
causes the Business Plan to be false or misleading;
(xviii) copies of the Governing Documents of each
Loan Party and a copy of the resolutions of the Board of
Directors (or similar evidence of authorization) of each Loan
Party authorizing the execution, delivery and performance of
this Agreement or the other Loan Documents to which such Loan
Party is or is to be a party, and the transactions
contemplated hereby and thereby, attached to which is a
certificate of the Secretary or an Assistant Secretary of such
Loan Party certifying (A) that such copies of the Governing
Documents and resolutions (or similar evidence of
authorization) of such Loan Party are true, complete and
accurate copies thereof, have not been amended or modified
since the date of such certificate and are in full force and
effect and (B) the incumbency, names and true signatures of
the officers of such Loan Party authorized to sign the Loan
Documents to which it is a party;
(xix) a certified copy of a certificate of the
Secretary of State (or similar official or authorized Person)
of the state or jurisdiction of organization of each Loan
Party, dated within thirty days of the Closing Date, listing
the certificate of incorporation, partnership or organization
(or similar organizational document) of such Loan Party and
each amendment thereto on file in the office of such official
or jurisdiction and certifying that (A) such amendments are
the only amendments to such certificate of incorporation on
file in that office, (B) such Loan Party is not delinquent in
paying any franchise taxes to the date of such certificate and
(C) such Loan Party is in good standing in that jurisdiction;
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(xx) a good standing certificate from the Secretary
of State (or similar official or authorized Person) of each
state or jurisdiction in which each Loan Party is qualified as
a foreign corporation, partnership or limited liability
company, each dated within thirty days of the Closing Date;
(xxi) a Collateral Access Agreement for each Property
specified on Schedule 5.1(a)(xxi) (other than a Property for
which an Availability Reserve has been established), duly
executed by each Person in possession thereof or with a Lien
thereon or other interest therein;
(xxii) a copy of each Borrower's employee stock
option plan as in effect on the Closing Date;
(xxiii) a letter from GPI to the Auditors authorizing
the Agent to discuss the financial condition of the Loan
Parties with the Auditors and their personnel and directing
the Auditors to cooperate with the Agent with respect thereto;
(xxiv) a letter agreement as to the payment of the
agency fee payable to the Agent for its own account, duly
executed by the Borrowers; and
(xxv) such other agreements, instruments, documents
and evidence as the Agent deems necessary in its sole and
absolute discretion in connection with the transactions
contemplated hereby.
(b) There shall be no pending or, to the knowledge of each
Borrower after due inquiry, threatened litigation, proceeding, inquiry or other
action (i) seeking an injunction or other restraining order, damages or other
relief with respect to the transactions contemplated by this Agreement or the
other Loan Documents or (ii) which affects or could affect the business,
prospects, operations, assets, liabilities or condition (financial or otherwise)
of any Loan Party, except, in the case of clause (ii), where such litigation,
proceeding, inquiry or other action could not reasonably be expected to have a
Material Adverse Effect.
(c) The Borrowers shall have paid (i) all reasonable fees and
expenses of the Agent in connection with the negotiation, preparation, execution
and delivery of the Loan Documents (including, without limitation, all of the
Agent's examination, audit, appraisal and travel expenses and the fees
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and expenses of counsel to the Agent) and (ii) the closing fee payable under
Section 4.3 and all other fees referred to in this Agreement that are required
to be paid by the Effective Date.
(d) Except for (i) the filing of the financing and termination
statements under the Code and registrations under the PPSA specified in Section
5.1(a)(vii) and (ii) consents or authorizations which have been obtained and are
specified in Schedule 6.1(f), no consent or authorization of, filing with or
other act by or in respect of any Governmental Authority or any other Person is
required in connection with the execution, delivery, performance, validity or
enforceability of this Agreement, the Notes or the other Loan Documents or the
consummation of the transactions contemplated hereby or thereby or the
continuing operations of each Loan Party following the consummation of such
transactions.
(e) No change, occurrence, event or development or event
involving a prospective change that could reasonably be expected to have a
Material Adverse Effect shall have occurred and be continuing since December 31,
1999.
(f) The Agent and its counsel shall have performed (i) a
review satisfactory to the Agent of all of the Material Contracts and other
assets (including, without limitation, leases of operating facilities) of each
Loan Party, the financial condition of each Loan Party, including all of its
tax, litigation, environmental and other potential contingent liabilities, the
corporate and capital structure of each Loan Party, the cash management system
of each Loan Party and the ability of each Loan Party to be Year 2000 Compliant,
(ii) a pre-closing audit and collateral review and (iii) reviews and
investigations of such other matters as the Agent and its counsel deem
appropriate, in each case with results satisfactory to the Agent both before and
after giving effect to the Spinoff.
(g) The Spinoff shall have been consummated in accordance with
its terms to the satisfaction of the Agent.
(h) The Loan Parties shall be in compliance with all
Requirements of Law, Material Contracts and terms of their Governing Documents,
other than such noncompliance that could not have a Material Adverse Effect.
(i) The Liens in favor of the Agent and the Cdn. Agent shall
have been duly perfected and shall constitute first priority Liens (subject only
to Permitted Liens on Inventory), and the Collateral shall be free and clear of
all Liens other than Liens in favor of the Agent and the Cdn. Agent and
Permitted Liens.
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(j) After giving effect to all Loans to be made and all
Letters of Credit to be issued on the Effective Date, the amount of Loans
available to be borrowed and Letters of Credit available to be issued under
Section 2.4(a) shall exceed US$25,000,000.
SECTION 5.2. Conditions Precedent to Each Loan and Each Letter
of Credit. The obligation of the Lenders to make any Loan or the Agent to use
its best efforts to cause to be issued any Letter of Credit is subject to the
satisfaction of the following conditions precedent:
(a) all representations and warranties contained in this
Agreement and the other Loan Documents shall be true and correct in all material
respects (and subject to the delivery to the Agent of updated schedules to this
Agreement as provided in Section 6.3) on and as of the date of such Loan or
Letter of Credit as if then made, other than representations and warranties that
expressly relate solely to an earlier date, in which case they shall have been
true and correct as of such earlier date;
(b) no Default or Event of Default shall have occurred and be
continuing or would result from the making of the requested Loan or the issuance
of the requested Letter of Credit as of the date of such request; and
(c) no event or condition shall have occurred that has had a
Material Adverse Effect.
ARTICLE VI.
REPRESENTATIONS AND WARRANTIES
SECTION 6.1. Representations and Warranties of the Borrowers.
Each Borrower represents and warrants as follows:
(a) Organization, Good Standing and Qualification. Each
Borrower and each Designated Affiliate (i) is a corporation, limited partnership
or limited liability company duly organized, validly existing and in good
standing under the laws of the state or province of its organization, (ii) has
the corporate, partnership or limited liability company power and authority to
own its properties and assets and to transact the businesses in which it
presently is, or proposes to be, engaged and (iii) is duly qualified, authorized
to do business and in good standing in each jurisdiction where it presently is,
or proposes to be, engaged in business, except to the extent that the failure to
so qualify or be in good standing could not reasonably be expected to have a
Material Adverse Effect. Schedule 6.1(a) specifies all the jurisdictions in
which each Borrower and each Designated Affiliate (other than the Foreign
Subsidiaries) is qualified to do business as a foreign corporation, limited
partnership or limited liability company as of the Closing Date.
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(b) Locations of Offices, Records and Collateral. The address
of the principal place of business and chief executive office of such Borrower
is, and the books and records of each Borrower and all of its chattel paper and
records of Receivables are maintained exclusively in the possession of such
Borrower at, the address of such Borrower specified for it in Schedule 6.1(b).
Except for Collateral with an aggregate value for all the Borrowers of up to
US$500,000, each jurisdiction in which a Borrower maintains any Collateral is
specified for it in Schedule 6.1(b).
(c) Authority. Such Borrower and each of the other Loan
Parties has the requisite corporate, partnership or limited liability power and
authority to execute, deliver and perform its obligations under each of the Loan
Documents to which it is a party. All corporate, partnership or limited
liability company action necessary for the execution, delivery and performance
by such Borrower or other Loan Party of the Loan Documents to which it is a
party (including the consent of shareholders, partners or members where
required) has been taken.
(d) Enforceability. This Agreement is and, when executed and
delivered, each other Loan Document to which such Borrower and each of the other
Loan Parties is a party, will be, the legal, valid and binding obligation of
such Borrower or other Loan Party enforceable in accordance with its terms,
except as enforceability may be limited by (i) bankruptcy, insolvency or similar
laws affecting creditors' rights generally and (ii) general principles of
equity.
(e) No Conflict. The execution, delivery and performance by
such Borrower and each of the other Loan Parties of each Loan Document to which
it is a party do not and will not breach or violate (i) any of the Governing
Documents of such Borrower or other Loan Party, (ii) any Requirement of Law or
(iii) any Material Contract and will not result in the imposition of any Liens
upon any of its properties except in favor of the Agent or the Cdn. Agent.
(f) Consents and Filings. No consent, authorization or
approval of, or filing with or other act by, any shareholders, partners or
members of such Borrower or any of the other Loan Parties, any Governmental
Authority or any other Person is required in connection with the execution,
delivery, performance, validity or enforceability of this Agreement or any other
Loan Document, the consummation of the transactions contemplated hereby or
thereby or the continuing operations of a Loan Party following such
consummation, except (i) those that have been obtained or made and are specified
in Schedule 6.1(f) and (ii) the filing of financing and termination statements
under the Code or registrations under the PPSA.
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(g) Ownership; Subsidiaries. The Capital Stock of each of GPI
and its Subsidiaries and, to such Borrower's knowledge, other Affiliates of GPI
is owned by the Persons and in the amounts specified in Schedule 6.1(g).
Schedule 6.1(g) sets forth all of the Subsidiaries and other Affiliates of GPI.
(h) Solvency. Such Borrower and each of the other Loan Parties
is Solvent and will be Solvent upon the completion of all transactions
contemplated to occur on or before the Closing Date (including, without
limitation, the Loans to be made and the Letters of Credit to be issued on the
Closing Date).
(i) Financial Data. Such Borrower has provided to the Agent
complete and accurate copies of the annual audited Financial Statements for the
fiscal year ended December 31, 1999. Such Financial Statements have been
prepared in accordance with GAAP consistently applied throughout the periods
involved and fairly present the financial position, results of operations and
cash flows of GPI and its Subsidiaries for each of the periods covered. Except
as specified in Schedule 6.1(i), none of GPI or any of its Subsidiaries has any
Contingent Obligation or liability for taxes, unrealized losses, unusual forward
or long-term commitments which involve liabilities in excess of US$5,000,000,
that is not reflected in such Financial Statements or the footnotes thereto or
in filings made with the Securities and Exchange Commission and delivered to the
Agent. Except as specified in Schedule 6.1(i), during the period from December
31, 1999 to and including the date hereof, there has been no sale, transfer or
other disposition by GPI or any of its Subsidiaries of any material part of its
business or property and no purchase or other acquisition of any business or
property (including any Capital Stock of any other Person) material in relation
to the financial condition of GPI and its Subsidiaries at December 31, 1999.
Since December 31, 1999, there has been no change, occurrence, development or
event which has had or could reasonably be expected to have a Material Adverse
Effect.
(j) Accuracy and Completeness of Information. All data,
reports and information heretofore, contemporaneously or hereafter furnished by
or on behalf of such Borrower or any other Loan Party in writing to the Agent or
the Auditors for purposes of or in connection with this Agreement or any other
Loan Document, or any transaction contemplated hereby or thereby, are or will be
true and accurate in all material respects on the date as of which such data,
reports and information are dated or certified and not incomplete by omitting to
state any material fact necessary to make such data, reports and information not
misleading at such time. There are no facts now known to any Responsible Officer
of such Borrower which individually or in the
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aggregate could reasonably be expected to have a Material Adverse Effect and
which have not been specified herein, in the Financial Statements, or in any
certificate, opinion or other written statement previously furnished by such
Borrower to the Agent.
(k) No Joint Ventures or Partnerships. Except for individually
immaterial arrangements incident to the conduct of such Borrower's or any
Designated Affiliate's business, such Borrower or Designated Affiliate is not
engaged in any joint venture or partnership with any other Person, except as
specified in Schedule 6.1(k).
(l) Corporate and Trade Name. Except as specified in Schedule
6.1(l), during the past five years, such Borrower has not been known by or used
in any material transaction any other corporate, partnership, trade or
fictitious name except for its name as set forth on the signature page of this
Agreement.
(m) No Actual or Pending Material Modification of Business.
There exists no actual or, to the best of such Borrower's knowledge, threatened
termination, cancellation or limitation of, or any modification or change in,
the business relationship of such Borrower or any Designated Affiliate with any
customer or group of customers the cancellation of any of whose services could
reasonably be expected to have a Material Adverse Effect.
(n) No Broker's or Finder's Fees. No broker or finder brought
about the obtaining, making or closing of the Loans or financial accommodations
afforded hereunder or in connection herewith by the Agent, any Lender or any of
its Affiliates. No broker's or finder's fees or commissions will be payable by
any Borrower to any Person in connection with the transactions contemplated by
this Agreement.
(o) Investment Company. Such Borrower is not an "investment
company," or an "affiliated person" of, or "promoter" or "principal underwriter"
for, an "investment company," as such terms are defined in the Investment
Company Act of 1940, as amended. Neither the making of any Loans, the issuance
of any Letters of Credit or the application of the proceeds or repayment thereof
by such Borrower or any beneficiary of such Letters of Credit, nor the
consummation of the other transactions contemplated by this Agreement or the
other Loan Documents, will violate any provision of such Act or any rule,
regulation or order of the Securities and Exchange Commission thereunder.
(p) Margin Stock. Such Borrower does not own any "margin
stock" as that term is defined in Regulation U of the Federal Reserve Board, and
the proceeds of Loans will be used only for the purposes contemplated hereunder.
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(q) Taxes and Tax Returns.
(i) Such Borrower and each Designated Affiliate has
properly completed and timely filed all income tax returns it
is required to file. The information filed is complete and
accurate in all material respects.
(ii) All taxes, assessments, fees and other
governmental charges for periods beginning prior to the date
hereof have been timely paid (or, if not yet due, adequate
reserves therefor have been established) and neither such
Borrower nor any such Affiliate has any liability for taxes in
excess of the amounts so paid or reserves so established,
except for such taxes that are being contested in good faith
or which involve an amount that could reasonably be expected
to give rise to a Lien that is not permitted to exist under
Section 7.2(i).
(iii) Except as specified in Schedule 6.1(q), no
deficiencies for taxes have been claimed, proposed or assessed
by any taxing or other Governmental Authority against such
Borrower or any Designated Affiliate and, to such Borrower's
knowledge, no tax Liens have been filed against it. Except as
specified in Schedule 6.1(q), there are no pending or
threatened audits, investigations or claims for or relating to
any liability for taxes and there are no matters under
discussion with any Governmental Authority which could
reasonably be expected to result in a Lien that is not
permitted to exist under Section 7.2(i). No extension of a
statute of limitations relating to taxes, assessments, fees or
other governmental charges is in effect with respect to such
Borrower.
(iv) Neither such Borrower nor any Designated
Affiliate is a party to or has any obligations under any
written tax sharing agreement or agreement regarding payments
in lieu of taxes, except as specified in Schedule 6.1(q).
(r) No Judgments or Litigation. Except as specified in
Schedule 6.1(r), no judgments, orders, writs or decrees are outstanding against
such Borrower, nor is there now pending or, to the best knowledge of such
Borrower or any Designated Affiliate after due inquiry, threatened litigation,
contested claim, investigation, arbitration, or governmental proceeding by or
against such Borrower or Affiliate that (i) individually or in the aggregate
could reasonably be expected to have a Material Adverse Effect or (ii) purports
to affect the legality, validity or enforceability of this Agreement, the Notes,
any other Loan Document or the consummation of the transactions contemplated
hereby or thereby.
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(s) Title to Property. Except as specified in Schedule 6.1(s),
such Borrower and each Designated Affiliate has (i) good and indefeasible fee
simple title to or valid leasehold interests in all of its Property and (ii)
good title to all of its other property, in each case free and clear of Liens
other than Liens permitted by Section 7.2(i) and other than any exceptions to
such title to property that does not constitute Collateral as could not
reasonably be expected to have a Material Adverse Effect.
(t) No Other Indebtedness. On the Closing Date and after
giving effect to the transactions contemplated hereby, such Borrower and each
Designated Affiliate has no Indebtedness other than Indebtedness permitted under
Section 7.2(a).
(u) Investments; Contracts. Except as specified in Schedule
6.1(u), neither such Borrower nor any Designated Affiliate (i) has committed to
make any Investment other than Investments permitted under Section 7.2(k); (ii)
is a party to any indenture, agreement, contract, instrument or lease, or
subject to any charter, bylaw or other corporate restriction or any injunction,
order, restriction or decree, which could materially and adversely affect its
business, operations, assets or financial condition; (iii) is a party to any
"take or pay" contract as to which it is the purchaser and which, if such
Borrower or Affiliate were to fail to perform thereunder, could reasonably be
expected to have a Material Adverse Effect; or (iv) has any material contingent
or long-term liability, including any management contract, which could
reasonably be expected to have a Material Adverse Effect.
(v) No Defaults. On the Closing Date, after giving effect to
the transactions contemplated hereby, neither such Borrower nor any Designated
Affiliate is in default under any term of any Material Contract or Requirement
of Law other than any default which, when taken together with all other similar
defaults, could reasonably be expected to have a Material Adverse Effect.
(w) Rights in Collateral; Priority of Liens. All of its
Receivables, Inventory and Equipment are owned by such Borrower, free and clear
of any and all Liens in favor of third parties, other than Liens in favor of the
Agent and the Cdn. Agent and Permitted Liens. Upon the proper filing of the
financing and termination statements and registrations specified in Section
5.1(a)(vii), the Liens granted pursuant to this Loan Agreement constitute valid,
enforceable, perfected and, except
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for Liens permitted to exist under Section 7.2(i) with respect to Inventory and
Equipment, first priority Liens on the Collateral.
(x) ERISA.
(i) No Borrower or ERISA Affiliate maintains or
contributes to any Plan, other than those specified in
Schedule 6.1(x).
(ii) Each Borrower and ERISA Affiliate have fulfilled
all contribution obligations for each Plan (including
obligations related to the minimum funding standards of ERISA
and the Internal Revenue Code), and no application for a
funding waiver or an extension of any amortization period
pursuant to Sections 303 and 304 of ERISA or Section 412 of
the Internal Revenue Code has been made with respect to any
Plan.
(iii) No Termination Event has occurred nor has any
other event occurred that is likely to result in a Termination
Event. No Borrower or ERISA Affiliate, or any fiduciary of any
Plan, is subject to any direct or indirect liability with
respect to any Plan under any Requirement of Law or agreement,
except for ordinary funding obligations which are not past
due.
(iv) No Borrower or ERISA Affiliate is required to or
reasonably expects to be required to provide security to any
Plan under Section 307 of ERISA or Section 401(a)(29) of the
Internal Revenue Code.
(v) Each Borrower and ERISA Affiliate is in
compliance in all material respects with all applicable
provisions of ERISA and the Internal Revenue Code with respect
to all Plans. There has been no prohibited transaction as
defined in Section 406 of ERISA or Section 4975 of the
Internal Revenue Code (a "Prohibited Transaction") with
respect to any Plan or any Multiemployer Plan. Each Borrower
and ERISA Affiliate have made when due any and all payments
required to be made under any agreement relating to a
Multiemployer Plan or any Requirement of Law pertaining
thereto. With respect to each Plan and Multiemployer Plan, no
Borrower or ERISA Affiliate has incurred any liability to the
PBGC or had asserted against it any penalty for failure to
fulfill the minimum funding requirements of ERISA other than
for payments of premiums in the ordinary course of business.
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(vi) Each Plan which is intended to qualify under
Section 401(a) of the Internal Revenue Code has received a
favorable determination letter from the IRS or the remedial
amendment period under Section 401(b) of the Code has not
expired with respect to the Plan and no event has occurred
which would cause the loss of such qualification.
(vii) The aggregate actuarial present value of all
benefit liabilities (whether or not vested) under each Pension
Plan, determined on a plan termination basis, as disclosed in,
and as of the date of, the most recent actuarial report for
such Pension Plan, does not exceed the aggregate fair market
value of the assets of such Pension Plan.
(viii) No Borrower or ERISA Affiliate has incurred or
reasonably expects to incur any liability (and no event has
occurred which, with the giving of notice under Section 4219
of ERISA, would result in any such liability) under Section
4201 or 4243 of ERISA with respect to any Multiemployer Plan.
(ix) To the extent that any Plan is funded with
insurance, each Borrower and ERISA Affiliate have paid when
due all premiums required to be paid for all periods through
and including the Closing Date. To the extent that any Plan is
funded other than with insurance, each Borrower and ERISA
Affiliate have made when due all contributions required to be
paid for all periods through and including the Closing Date.
(y) Intellectual Property. Set forth on Schedule 6.1(y)-A is a
complete and accurate list of all material patents, trademarks, trade names,
service marks and copyrights, and all applications therefor and licenses
thereof, of such Borrower and each Designated Affiliate, showing as of the date
hereof the jurisdiction in which registered, the registration number, the date
of registration and the expiration date. Such Borrower and each Designated
Affiliate owns or licenses all patents, trademarks, service marks, logos,
tradenames, trade secrets, know-how, copyrights, or licenses and other rights
with respect to any of the foregoing, which are necessary or advisable for the
operation of its business as presently conducted or proposed to be conducted.
Except as specified in Schedule 6.1(y)-B, neither such Borrower nor any
Designated Affiliate has infringed any patent, trademark, service mark,
tradename, copyright, license or other right owned by any other Person by the
sale or use of any product, process, method, substance, part or other material
presently contemplated to be sold or used, where such sale or use could
reasonably be expected to have a Material Adverse Effect and, except as
specified in
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Schedule 6.1(y)-B, no claim or litigation is pending, or to the best of such
Borrower's knowledge, threatened against or affecting such Borrower or any
Designated Affiliate that contests its right to sell or use any such product,
process, method, substance, part or other material that could reasonably be
expected to have a Material Adverse Effect.
(z) Labor Matters. Schedule 6.1(z) accurately sets forth all
collective bargaining agreements to which such Borrower or any Designated
Affiliate is a party as of the Closing Date, and their dates of expiration.
There are no existing or threatened strikes, lockouts or other disputes relating
to any collective bargaining or similar agreement to which such Borrower or any
Designated Affiliate is a party which, individually or in the aggregate, could
reasonably be expected to have a Material Adverse Effect.
(aa) Compliance with Environmental Laws. Except as specified
in Schedule 6.1(aa), (i) Neither such Borrower nor any Designated Affiliate is
the subject of a judicial or administrative proceeding or investigation relating
to the violation of any Environmental Law or asserting potential liability
arising from the release or disposal by any Person of any Hazardous Materials,
(ii) neither such Borrower nor any Designated Affiliate has filed or received
any notice under any Environmental Law concerning the treatment, storage,
disposal, spill or release or threatened release of any Hazardous Materials at,
on, beneath or adjacent to property owned or leased by such Borrower, or the
release or threatened release at any other location of any Hazardous Material
generated, used, stored, treated, transported or released by or on behalf of
such Borrower and (iii) such Borrower has no knowledge of any contingent
liability of itself or any Designated Affiliate for any release of any Hazardous
Materials, in each case which could reasonably be expected to have a Material
Adverse Effect.
(ab) Licenses and Permits. Such Borrower and each Designated
Affiliate has obtained and holds in full force and effect all franchises,
licenses, leases, permits, certificates, authorizations, qualifications,
easements, rights of way and other rights and approvals which are necessary or
advisable for the operation of its business as presently conducted and as
proposed to be conducted, except where the failure to possess any of the
foregoing (individually or in the aggregate) could not have a Material Adverse
Effect.
(ac) Government Regulation. Neither such Borrower nor any
other Loan Party is subject to regulation under the Public Utility Holding
Company Act of 1935, the Federal Power Act, the Interstate Commerce Act or any
other Requirement of Law that limits its ability to incur Indebtedness or its
ability to consummate the transactions contemplated by this Agreement and the
other Loan Documents.
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(ad) Material Contracts. Set forth on Schedule 6.1(ad) is a
complete and accurate list of all Material Contracts of each Borrower and each
Designated Affiliate, showing as of the date hereof the parties, subject matter
and term thereof. Each such contract has been duly authorized, executed and
delivered by such Borrower or Designated Affiliate and each other party thereto.
Except as specified in Schedule 6.1(ad), each such Material Contract is in full
force and effect and, to the best of such Borrower's knowledge, is binding upon
and enforceable against all parties thereto in accordance with its terms, and
there exists no default under such contract by any party thereto.
(ae) Business and Properties. Since December 31, 1999, no
fire, explosion, accident, drought, storm, hail, earthquake, embargo, act of God
or of the public enemy or other casualty has occurred which event is not covered
by insurance and that could reasonably be expected to have a Material Adverse
Effect.
(af) Business Plan. The Business Plan and the Financial
Statements delivered to the Agent on the Closing Date were prepared in good
faith on the basis of assumptions which were fair in the context of the
conditions existing at the time of delivery thereof, and, with respect to the
Business Plan, represented, at the time of delivery, such Borrower's reasonable
best estimate of the future financial performance of GPI and its Subsidiaries.
(ag) Affiliate Transactions. Except as specified in Schedule
6.1(ag), neither such Borrower nor any Designated Affiliate is a party to or
bound by any agreement or arrangement (whether oral or written) to which any
Affiliate of such Borrower or Designated Affiliate is a party except (i) in the
ordinary course of and pursuant to the reasonable requirements of the business
of such Borrower or Designated Affiliate and (ii) upon fair and reasonable terms
no less favorable to such Borrower or Designated Affiliate than it could obtain
in a comparable arm's-length transaction with an unaffiliated Person.
(ah) Year 2000 Compliance. (i) Such Borrower and each
Designated Affiliate and their respective products are Year 2000 Compliant, (ii)
to the best of such Borrower's knowledge, all of the material suppliers and
vendors of such Borrower and Affiliates are Year 2000 Compliant and (iii) the
cost to such Borrower and Affiliates of being Year 2000 Compliant as provided in
clause (A), and the testing for the reasonably foreseeable consequences of any
programming errors or systems failures related to the year 2000, could not
reasonably be expected to have a Material Adverse Effect.
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SECTION 6.2. Survival of Representations and Warranties. All
representations and warranties made by each Borrower in this Agreement and by
each Borrower and each other Loan Party in, or by incorporation by reference in,
each other Loan Document to which it is a party shall survive the execution and
delivery hereof and thereof and the closing of the transactions contemplated
hereby and thereby.
SECTION 6.3. Updating of Schedules. The Borrowers shall have
the right to deliver to the Agent updated schedules to this Agreement from time
to time, provided that no event or condition that would otherwise constitute a
Default or an Event of Default shall be deemed to be cured solely by virtue of
the delivery of an updated schedule hereunder, and provided, further, that all
representations and warranties that refer to the schedules to this Agreement
shall, as of the date such representations and warranties are made by the
Borrowers hereunder, be deemed to refer to such schedules as updated and
delivered to the Agent as of such date.
ARTICLE VII.
CONVENANTS OF THE BORROWERS
SECTION 7.1. Affirmative Covenants. Until termination of the
Commitments, payment and satisfaction of all Obligations in full, and
termination, Collateralization or expiration of all Letters of Credit:
(a) Corporate Existence. Each Borrower shall, and shall cause
each Designated Affiliate to, (i) maintain its corporate existence, (ii)
maintain in full force and effect all material licenses, bonds, franchises,
leases, trademarks, qualifications and authorizations to do business, and all
material patents, contracts and other rights necessary or advisable to the
profitable conduct of its businesses, and (iii) continue in a Permitted
Business; provided, however, that nothing in this Section 7.1(a) shall prohibit
(i) a merger, amalgamation or other business combination of (A) a Borrower with
and into another Borrower, (B) a Guarantor with and into a Borrower, (C) a
Guarantor (other than GPI) with and into another Guarantor, or (D) any
Subsidiary of a Loan Party (other than a Borrower or a Guarantor) with and into
any Loan Party or any of its Subsidiaries, in each case so long as (I) each
party to such merger, amalgamation or other business combination is Solvent both
before and after giving effect thereto and (II) no Default or Event of Default
has occurred and is continuing or would result therefrom; and (ii) the
recapitalization or conversion of a Borrower or a Guarantor or any of its
respective Subsidiaries into a new corporate form or jurisdiction of formation,
so long
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as such new corporate form does not adversely affect any Lender's rights under
the Loan Documents and such jurisdiction of formation is in the United States or
any state thereof.
(b) Maintenance of Property. Each Borrower shall, and shall
cause each Designated Affiliate to, keep all property useful and necessary to
its business in good working order and condition (ordinary wear and tear
excepted) in accordance with its past operating practices except as could not
reasonably be expected to have a Material Adverse Effect.
(c) Affiliate Transactions. Each Borrower shall, and shall
cause each Designated Affiliate to, conduct transactions with any of its
Affiliates on an arm's-length basis or other basis no less favorable to such
Borrower or Designated Affiliate than would apply in a transaction with a
non-Affiliate and which are approved by the board of directors of such Borrower
or Designated Affiliate, except that this Section 7.1(c) shall not limit,
restrict or prohibit (i) the payment of reasonable and customary regular fees to
directors of such Borrower or any of its Subsidiaries who are not employees
thereof; (ii) loans and advances to officers, directors and employees of such
Borrower or any of its Subsidiaries for travel, entertainment and moving and
other relocation expenses made in direct furtherance and in the ordinary course
of business of such Borrower or such Subsidiary not to exceed US$2,000,000 in
the aggregate at any time; (iii) any other transaction with any employee,
officer or director of such Borrower or any of its Subsidiaries pursuant to
employee benefit or compensation arrangements entered into in the ordinary
course of business and approved by the Board of Directors of such Borrower or
Subsidiary; (iv) any transaction entered into in the ordinary course of business
with any Subsidiary of GPI including, without limitation, intercompany charges
for administrative services, allocations of overhead, concentrated cash
management systems for collections and disbursements, and sales of goods and
services in connection with the business of GPI or any of its Subsidiaries in
the ordinary course of business of such Subsidiary; (v) licenses and other
transfers of patents, trademarks, trade names, copyrights, trade secrets,
know-how and other intellectual property to or from any Subsidiary of GPI; (vi)
the payment or prepayment of the Subordinated Note to the extent not prohibited
by the Subordination Agreement; (vii) transactions entered into with Weatherford
or any of its Subsidiaries in connection with a preferred supplier agreement, a
transition services agreement, a tax allocation agreement, or other agreements
and understandings with Weatherford or such Subsidiary entered into in
connection with or in contemplation of the Spinoff and specified in Schedule
6.1(ag); or (viii) other transactions with Affiliates that are expressly
permitted under other provisions of this Agreement including, without
limitation, the making of any Restricted Payment, the making of any loan,
advance or transfer
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to the extent it results in Permitted Intercompany Debt or the making of any
Investment otherwise permitted under other provisions of this Agreement.
(d) Taxes. Each Borrower shall, and shall cause each
Designated Affiliate to, pay, when due, subject to any extension obtained or
timely requested by such Borrower or Affiliate from or with the applicable
taxing authority, (i) all tax assessments, and other governmental charges and
levies imposed against it or any of its property and (ii) all lawful claims
that, if unpaid, might by law become a Lien upon its property; provided,
however, that, unless such tax assessment, charge, levy or claim (excluding
Liens specified in Schedule 7.2(i)) has become a Lien on any of the property of
such Borrower or Affiliate and relates to obligations which, when taken together
with the amount of all such assessments, charges, levies and claims for all the
Borrowers and such Affiliates, exceed US$2,000,000 in the aggregate, it need not
be paid if it is being contested in good faith, by appropriate proceedings
diligently conducted and an adequate reserve or other appropriate provision
shall have been established therefor as required in accordance with GAAP.
(e) Governing Documents; Requirements of Law. Each Borrower
shall, and shall cause each Designated Affiliate to, comply with all terms of
its respective Governing Documents and with all Requirements of Law applicable
to it, including, without limitation, all applicable federal, state, provincial,
local or foreign laws and regulations, including, without limitation, those
relating to environmental matters, employee matters (including the collection,
payment and deposit of employees' income, unemployment, Social Security and
Medicare hospital insurance taxes) and with respect to pension liabilities,
provided that it shall not be deemed to be a violation hereof if such Borrower's
or Affiliate's failure to comply with any of the foregoing could not be
reasonably expected to have a Material Adverse Effect.
(f) Insurance. Each Borrower shall, and shall cause each
Designated Affiliate to, maintain public liability insurance, business
interruption insurance, third party property damage insurance and replacement
value insurance on its assets (including the Collateral) under such policies of
insurance, with such insurance companies, in such amounts and covering such
risks as are at all times reasonably satisfactory to the Agent, all of which
policies covering the Collateral shall name the Agent or the Cdn. Agent, as
applicable, as an additional insured and the lender loss payee in case of loss,
and contain other provisions as the Agent may require to protect fully the
Agent's and the Cdn. Agent's interest in the Collateral and any payments to be
made under such policies.
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(g) Books and Records; Inspections. Each Borrower shall, and
shall cause each Designated Affiliate to, (i) maintain books and records
(including computer records and programs) of account pertaining to the assets,
liabilities and financial transactions of such Borrower and Affiliates in such
detail, form and scope as is consistent with good business practice and (ii)
provide the Agent and its agents access to the premises of such Borrower and
each of such Affiliates at any time and from time to time, during normal
business hours and upon reasonable notice under the circumstances, and at any
time after the occurrence and during the continuance of a Default or Event of
Default, for the purposes of (A) inspecting and verifying the Collateral, (B)
inspecting and copying (at the Borrowers' expense) any and all records
pertaining thereto, and (C) discussing the affairs, finances and business of
such Borrower or Affiliate with any officer, employee or director thereof or
with the Auditors, all of whom are hereby authorized to disclose to the Agent
all financial statements, work papers, and other information relating to such
affairs, finances or business. The Borrowers shall reimburse the Agent for the
reasonable travel and related expenses of the Agent's employees or, at the
Agent's option, of such outside accountants or examiners as may be retained by
the Agent to verify or inspect Collateral, records or documents of a Borrower or
such Affiliate on a regular basis or for a special inspection if the Agent deems
the same appropriate. If the Agent's own employees are used, the Borrowers shall
also pay such reasonable per diem allowance as the Agent may from time to time
establish, or, if outside examiners or accountants are used, the Borrowers shall
also pay the Agent such sum as the Agent may be obligated to pay as fees
therefor. All such Obligations may be charged to the Loan Account or any other
account of the Borrowers with the Agent or any of its Affiliates. The Borrowers
hereby authorize the Agent to communicate directly with the Auditors to disclose
to the Agent any and all financial information regarding any of the Loan Parties
including, without limitation, matters relating to any audit and copies of any
letters, memoranda or other correspondence related to the business, financial
condition or other affairs of any of the Borrowers or the Designated Affiliates.
(h) Notification Requirements. The Administrative Borrower
shall timely give the Agent the following notices and other documents:
(i) Notice of Defaults. Within two Business Days
after becoming aware of the occurrence of a Default or Event
of Default that is continuing, a certificate of a Responsible
Officer specifying the nature thereof and the Borrowers'
proposed response thereto, each in reasonable detail.
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(ii) Proceedings or Adverse Changes. Within five
Business Days after a Borrower becomes aware of (A) any
proceeding being instituted or threatened to be instituted by
or against it or any Designated Affiliate in any federal,
state, local or foreign court or before any commission or
other regulatory body (federal, state, local or foreign)
involving a sum not otherwise covered by insurance, together
with the sum involved in all other similar proceedings, in
excess of US$5,000,000 in the aggregate with respect to all
the Borrowers and such Affiliates, (B) any order, judgment or
decree involving a sum, together with the sum of all other
orders, judgments or decrees, in excess of US$5,000,000 in the
aggregate being entered against all the Borrowers and such
Affiliates or any of their respective property or assets which
could reasonably be expected to have a Material Adverse
Effect, (C) any notice or correspondence issued to any
Borrower or any Designated Affiliate by a Governmental
Authority warning, threatening or advising of the commencement
of any investigation involving such Borrower or any Designated
Affiliate or any of its respective property or assets which
could reasonably be expected to have a Material Adverse
Effect, (D) any actual or prospective change, development or
event which has had or could reasonably be expected to have a
Material Adverse Effect, (E) a change in the location of any
Collateral from the locations specified in Schedule 6.1(b) or
other locations previously identified to the Agent where
Collateral has been moved as permitted under Section 7.2(h) or
(F) a proposed or actual change of any Borrower's name,
identity or corporate structure, a written statement
describing such proceeding, order, judgment, decree, change,
development or event and any action being taken by the
Borrowers with respect thereto.
(iii) ERISA Notices.
(A) Promptly, and in any event within ten
Business Days after a Termination Event has occurred, a
written statement of a Responsible Officer describing such
Termination Event and any action that is being taken with
respect thereto by any Borrower or ERISA Affiliate, and any
action taken or threatened by the Internal Revenue Service,
the Department of Labor or the PBGC with respect thereto;
(B) promptly, and in any event within three
Business Days after the filing thereof with the Internal
Revenue Service, a copy of each funding waiver request filed
with respect to any Plan subject to the
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funding requirements of Section 412 of the Internal Revenue
Code and all communications received by any Borrower or ERISA
Affiliate with respect to such request;
(C) promptly, and in any event within three
Business Days after receipt by any Borrower or ERISA Affiliate
of the PBGC's intention to terminate a Pension Plan or to have
a trustee appointed to administer a Pension Plan, a copy of
each such notice;
(D) promptly, and in any event within three
Business Days after the occurrence thereof, notice (including
the nature of the event and, when known, any action taken or
threatened by the Internal Revenue Service or the PBGC with
respect thereto) of:
(I) any Prohibited Transaction which
could subject any Borrower or ERISA Affiliate to a
civil penalty assessed pursuant to Section 502(i) of
ERISA or a tax imposed by Section 4975 of the
Internal Revenue Code in connection with any Plan, or
any trust created thereunder,
(II) any cessation of operations (by any
Borrower or ERISA Affiliate) at a facility in the
circumstances described in Section 4062(e) of ERISA,
(III) a failure by any Borrower or ERISA
Affiliate to make a payment to a Plan required to
avoid imposition of a Lien under Section 302(f) of
ERISA or Section 412(n) of the Internal Revenue Code,
(IV) the adoption of an amendment to a
Plan requiring the provision of security to such Plan
pursuant to Section 307 of ERISA or Section
401(a)(29) of the Internal Revenue Code, or
(V) any change in the actuarial
assumptions or funding methods used for any Plan,
where the effect of such change is to increase
materially or reduce materially the unfunded benefit
liability or obligation to make periodic
contributions;
(E) promptly upon the request of the Agent,
each annual report (IRS Form 5500 series) and all accompanying
schedules, the most recent actuarial reports, the most recent
financial information concerning the financial status of each
Plan
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administered or maintained by any Borrower or ERISA Affiliate,
and schedules showing the amounts contributed to each Pension
Plan by or on behalf of any Borrower or ERISA Affiliate in
which any of its personnel participate or from which such
personnel may derive a benefit, and each Schedule B (Actuarial
Information) to the annual report filed by any Borrower or
ERISA Affiliate with the Internal Revenue Service with respect
to each such Plan;
(F) promptly upon the filing thereof, copies
of any Form 5310, or any successor or equivalent form to Form
5310, filed with the Internal Revenue Service in connection
with the termination of any Plan, and copies of any standard
termination notice or distress termination notice filed with
the PBGC in connection with the termination of any Pension
Plan;
(G) promptly, and in any event within three
Business Days after receipt thereof by any Borrower or ERISA
Affiliate, notice and demand for payment of withdrawal
liability under Section 4201 of ERISA with respect to a
Multiemployer Plan;
(H) promptly, and in any event within three
Business Days after receipt thereof by any Borrower or ERISA
Affiliate, notice by the Department of Labor of any penalty or
any purported violation of ERISA with respect to a Plan;
(I) promptly, and in any event within three
Business Days after receipt thereof by any Borrower or ERISA
Affiliate, notice by the Internal Revenue Service or the
Treasury Department of any income tax deficiency or
delinquency, excise tax penalty, audit or investigation with
respect to a Plan; and
(J) promptly, and in any event within three
Business Days after receipt thereof by any Borrower or ERISA
Affiliate, notice of any administrative or judicial complaint,
or the entry of a judgment, award or settlement agreement, in
either case with respect to a Plan that could reasonably be
expected to have a Material Adverse Effect.
(iv) Material Contracts. Within ten Business Days
after any Material Contract is terminated or amended in any
material respect that is adverse to a Borrower or any
Designated Affiliate, or any new Material Contract is entered
into, a written statement describing such event, with copies
of amendments or new contracts, and an explanation of any
actions being taken with respect thereto.
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(v) Environmental Matters. Within ten Business
Days after receipt by a Borrower thereof, copies of each (A)
written notice from a Governmental Authority that any
violation of any Environmental Law may have been committed or
is about to be committed by a Borrower or any Designated
Affiliate which violation could reasonably be expected to
result in liability or involve remediation costs in excess of
US$1,000,000 per violation or US$5,000,000 in the aggregate
for all such liability or costs of the Borrowers and such
Affiliates in the aggregate payable at any time, (B) written
notice that any administrative or judicial complaint or order
has been filed or is about to be filed against a Borrower or
any Designated Affiliate alleging violations of any
Environmental Law or requiring a Borrower or such Affiliate to
take any action in connection with the release of toxic or
Hazardous Materials into the environment which violation or
action could reasonably be expected to result in liability or
involve remediation costs in excess of US$1,000,000 per
violation or US$5,000,000 in the aggregate for all such
liability or costs of the Borrowers and such Affiliates in the
aggregate payable at any time, (C) written notice from a
Governmental Authority or other Person alleging that a
Borrower or any Designated Affiliate may be liable or
responsible for costs associated with a response to or cleanup
of a release of a Hazardous Material into the environment or
any damages caused thereby which costs could reasonably be
expected to exceed US$1,000,000 per release or US$5,000,000 in
the aggregate for all such liability or costs of the Borrowers
and the Designated Affiliates in the aggregate payable at any
time or (D) any Environmental Law of the United States or
Canada adopted, enacted or issued after the date hereof of
which a Borrower becomes aware which could reasonably be
expected to have a Material Adverse Effect.
(i) Casualty Loss. Each Borrower shall (i) provide written
notice to the Agent, within ten Business Days, of any material damage to, the
destruction of or any other material loss to any tangible asset or property
owned or used by such Borrower or any Designated Affiliate other than any such
asset or property (A) with a net book value (individually or in the aggregate)
less than US$2,000,000 or (B) does not constitute Collateral and is covered by
insurance complying with the terms of this Agreement, or any condemnation,
confiscation or other taking, in whole or in part, or any event that otherwise
diminishes so as to render impracticable or unreasonable the use of such asset
or property
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owned or used by such Borrower or any Designated Affiliate together with a
statement of the amount of the damage, destruction, loss or diminution in value
(a "Casualty Loss") and (ii) diligently file and prosecute its claim for any
award or payment in connection with a Casualty Loss.
(j) Qualify to Transact Business. Each Borrower shall, and
shall cause each Designated Affiliate to, qualify to transact business as a
foreign corporation in each jurisdiction where the nature or extent of its
business or the ownership of its property requires it to be so qualified or
authorized and where failure to qualify or be authorized could reasonably be
expected to have a Material Adverse Effect.
(k) Financial Reporting. The Administrative Borrower shall
deliver to the Agent the following:
(i) Annual Financial Statements. (A) As soon as
available, but not later than ninety days after the end of
each fiscal year of GPI, beginning with the fiscal year ended
December 31, 1999, (I) the annual audited and certified
consolidated Financial Statements of GPI and its Subsidiaries
and the annual unaudited consolidating Financial Statements of
GPI and its Subsidiaries, (II) a comparison in reasonable
detail to the prior fiscal year's audited Financial Statements
(it being agreed that GPI's Management Discussion and Analysis
of Financial Condition and Results of Operations contained in
its Form 10-K for such fiscal year shall be deemed to be a
sufficient comparison) and (III) the Auditors' opinion without
Qualification and a statement indicating that the Auditors
have not obtained knowledge of the existence of any Default or
Event of Default during their audit, each of which shall be in
form and substance reasonably satisfactory to the Agent, and
(B) as soon as practicable following receipt thereof by the
Administrative Borrower, the Management Letter delivered by
the Auditors for such fiscal year.
(ii) Projections. Not later than thirty days after
the end of each fiscal year of GPI, the Business Plan for the
upcoming fiscal year, certified by a Responsible Officer of
GPI.
(iii) Monthly Financial Statements. As soon as
available, but not later than thirty days after the end of
each month, commencing with the month in which the Closing
Date occurs, (A) the interim consolidated and consolidating
Financial Statements of GPI and its Subsidiaries as at the end
of such month and for the fiscal year to date, (B) a
certification by GPI's Chief
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Financial Officer that such Financial Statements have been
prepared in accordance with GAAP and present fairly in all
material respects the financial condition and results of
operations of GPI and its Subsidiaries taken as a whole
(subject to normal year-end audit adjustments and the absence
of footnotes), (C) a comparison of the interim consolidated
and consolidating Financial Statements of GPI and its
Subsidiaries as of the end of such month and for the fiscal
year to date to the projected Financial Statements set forth
in the Business Plan for the same period and (D) a compliance
certificate, substantially in the form of Exhibit O (a
"Compliance Certificate"), signed by GPI's Chief Financial
Officer, with an attached schedule of calculations
demonstrating compliance with the Financial Covenants as of
the end of such month.
(iv) Quarterly Cash Flow Statements. As soon as
available, but not later than forty-five days after the end of
each fiscal quarter of GPI (except for the fourth quarter, in
which such statements will be delivered with the annual
statements pursuant to Section 7.1(k)(i)), a consolidated
statement of cash flows of GPI and its Subsidiaries for such
quarter, prepared in accordance with GAAP and consistent with
prior practices.
(v) Borrowing Base Certificate. Monthly (or more
frequently as the Agent may from time to time request), not
later than the tenth Business Day of each month, a borrowing
base certificate, substantially in the form of Exhibit N,
detailing the Eligible Receivables and the Eligible Inventory
of the U.S. Borrowers and of the Cdn. Borrower, containing a
calculation of availability and reflecting all sales,
collections, and debit and credit adjustments, as of the last
day of the preceding month (or as of a more recent date as the
Agent may from time to time request), which shall be prepared
by or under the supervision of the Chief Financial Officer of
the Administrative Borrower and certified by such officer (a
"Borrowing Base Certificate"); provided, however, that in the
event the average borrowing availability for any consecutive
sixty-day period is less than US$10,000,000, such Borrowing
Base Certificate shall, at the request of the Agent, be
provided weekly.
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(vi) Agings. Monthly, not later than the tenth
Business Day of each month, agings and reconciliations of the
Receivables of the U.S. Borrowers and the Cdn. Borrower and
accounts payable, in scope and detail satisfactory to the
Agent, as of the last day of the preceding month; provided,
however, that in the event the average borrowing availability
for any consecutive sixty-day period is less than
US$10,000,000, such agings and reconciliations shall, at the
request of the Agent, be provided weekly.
(vii) Inventory Report. Monthly, not later than the
tenth Business Day of each month, a report listing all
Inventory of the U.S. Borrowers and the Cdn. Borrower by
location, in form and substance satisfactory to the Agent;
provided, however, that in the event the average borrowing
availability for any consecutive sixty-day period is less than
US$10,000,000, such inventory reports shall, at the request of
the Agent, be provided weekly.
(viii) Shareholder and SEC Reports. As soon as
available, but not later than five days after the same are
sent or filed, as the case may be, copies of all financial
statements and reports that GPI or any of its Subsidiaries
sends to any of its shareholders or files with the Securities
and Exchange Commission.
(ix) Other Financial Information. Promptly after the
request by the Agent therefor, such additional financial
statements and other related data and information as to the
business, prospects, operations, results of operations,
assets, liabilities or condition (financial or otherwise) of
any Borrower or any Designated Affiliate as the Agent may from
time to time reasonably request.
(l) Payment of Liabilities. Each Borrower shall, and shall
cause each Designated Affiliate to, pay and discharge, in the ordinary course of
business, all obligations and liabilities (including, without limitation, tax
liabilities and other governmental charges), except where the same may be
contested in good faith by appropriate proceedings and for which adequate
reserves with respect thereto have been established in accordance with GAAP.
(m) ERISA. Each Borrower shall, and shall cause each of its
ERISA Affiliates to, (i) maintain each Plan intended to qualify under Section
401(a) of the Internal Revenue Code so as to satisfy the qualification
requirements thereof, (ii) contribute, or require that contributions be made, in
a timely manner (A) to each Plan in amounts sufficient (I) to
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satisfy the minimum funding requirements of Section 302 of ERISA or Section 412
of the Internal Revenue Code, if applicable, (II) to satisfy any other
Requirements of Law and (III) to satisfy the terms and conditions of each such
Plan, and (B) to each Foreign Plan in amounts sufficient to satisfy the minimum
funding requirements of any applicable law or regulation, without any
application for a waiver from any such funding requirements, (iii) cause each
Plan or Foreign Plan to comply in all material respects with applicable law
(including all applicable statutes, orders, rules and regulations) and (iv) pay
in a timely manner, in all material respects, all required premiums to the PBGC.
As used in this Section 7.1(m), "Foreign Plan" means a plan
that provides retirement or health benefits and that is maintained by, or
otherwise contributed to, a Borrower for the benefit of employees outside the
United States.
(n) Environmental Matters. Each Borrower shall, and shall
cause each Designated Affiliate to, conduct its business so as to comply in all
respects with all applicable Environmental Laws including, without limitation,
compliance with the terms and conditions of all permits and governmental
authorizations except for such failures to comply that could not reasonably be
expected to have a Material Adverse Effect.
(o) Trademarks. Each Borrower shall, and shall cause each
Designated Affiliate to, do and cause to be done all things necessary to
preserve and keep in full force and effect all of its material registrations of
trademarks, service marks and other marks, trade names and other trade rights.
(p) Solvency. Each Borrower shall, and shall cause each
Designated Affiliate to, be and remain Solvent at all times.
(q) Billing Practices. The Administrative Borrower shall
notify the Agent of any Receivable of any Borrower generated pursuant to the
sale of goods on any basis other than on the terms specified in Schedule 7.1(q).
(r) Year 2000 Compliance. Each Borrower shall be, and shall
cause each Designated Affiliate to be, Year 2000 Compliant.
(s) Foreign Subsidiary Capital Stock Pledge and Guaranty;
Additional Stock Pledge Documentation.
(i) If, following a change in the relevant sections
of the Internal Revenue Code or the regulations issued or
promulgated thereunder, counsel for the Loan Parties
reasonably concludes, within thirty days after a request from
the Agent, with respect to any Foreign Subsidiary or Cdn.
Subsidiary all of whose Capital Stock has not been pledged to
the
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Agent under the Pledge Agreement that (A) a pledge of (I)
66-2/3% or more of the total combined voting power of all
classes of Capital Stock of such Subsidiary entitled to vote
and (II) any promissory note held by such Subsidiary and (B)
the entering into by such Subsidiary of a guaranty in
substantially the form of the Guaranty, in either such case
could not reasonably be expected to cause at the time of such
change in law (w) any undistributed earnings of such
Subsidiary as determined for federal income tax purposes to be
treated as a deemed dividend to such Subsidiary's United
States parent for federal income tax purposes or (x) other
material adverse federal income tax consequences to the Loan
Parties (or if counsel for the Loan Parties either does not
respond to such request or delivers an unreasonable conclusion
within such thirty-day period), then, (1) that portion of such
Subsidiary's outstanding Capital Stock or any promissory notes
held by such Subsidiary, in each case not theretofore pledged
under the Pledge Agreement, shall be pledged to the Agent for
the benefit of the Lenders under the Pledge Agreement or a
Supplement in the form of Annex III thereto and deliver all
remaining certificates representing such additional Capital
Stock to the Agent and undated stock or other transfer powers
therefor, executed by the applicable pledgor in blank, and (2)
such Subsidiary shall execute and deliver to the Agent (y) a
Supplement to the Guaranty in the form of Annex 1 thereto,
guaranteeing the Obligations, and (z) a Supplement to the
Contribution Agreement in the form of Annex 1 thereto.
(ii) GPI or XLS Holding, Inc., as applicable, shall,
on each applicable date specified in Schedule 7.1(s), deliver
to the Agent all certificates representing the shares of
Capital Stock of each Subsidiary specified in Schedule 7.1(s)
required to be pledged to the Agent under the Pledge
Agreement, together with undated stock powers therefor,
executed by the applicable Pledgor in blank, and an opinion of
counsel to such Pledgor covering such matters incident to such
pledge as the Agent may reasonably require, and each such
Pledgor and Subsidiary shall take all such further actions and
execute all such further documents and instruments as may be
required to grant and perfect in favor of the Agent a first
priority Lien on such Capital Stock.
(t) Further Assurances. Each Borrower shall, and shall cause
each Designated Affiliate to, take all such further actions and execute all such
further documents and instruments as the Agent may reasonably determine to be
necessary or desirable to perfect or protect the Liens (and the priority status
thereof) of the Agent and the Cdn. Agent on the Collateral.
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SECTION 7.2. Negative Covenants. Until termination of the
Commitments, payment and satisfaction of all Obligations in full, and
termination, Collateralization or expiration of all Letters of Credit:
(a) Indebtedness. Each Borrower will not, and will not permit
any Designated Affiliate (other than any Foreign Subsidiary) to, directly or
indirectly, at any time create, incur, assume or suffer to exist any
Indebtedness other than the following Indebtedness (so long as, in the case of
Indebtedness of the type specified in clauses (iv), (v) and (vi) below, no
Default or Event of Default has occurred and is continuing or would result
therefrom at the time of the incurrence thereof:
(i) Permitted Indebtedness;
(ii) endorsement of negotiable instruments for
deposit or collection in the ordinary course of business;
(iii) Indebtedness specified in Schedule 7.2(a);
(iv) unsecured Indebtedness with respect to which not
more than 25% of the original principal amount thereof is
payable or may be declared payable (other than by acceleration
upon the occurrence of a default or an event of default) by
any holder thereof on or before the then effective Expiration
Date;
(v) Indebtedness incurred to finance Capital
Expenditures to the extent permitted under Section 8.2 or
Indebtedness assumed or acquired in connection with a
Permitted Acquisition; and
(vi) Indebtedness of Foreign Subsidiaries,
provided that nothing herein shall prohibit any Indebtedness to continue to
exist if such Indebtedness was not prohibited hereunder at the time it was
created, incurred, assumed or first suffered to exist.
(b) Contingent Obligations. Except as specified in Schedule 6.1(i),
each Borrower will not, and will not permit any Designated Affiliate to,
directly or indirectly, incur, assume, or suffer to exist any Contingent
Obligation, excluding (i) indemnities given in connection with this Agreement or
the other Loan Documents in favor of the Agent and (ii) such Contingent
Obligations as would be permitted to be incurred if such Contingent Obligations
were incurred as Indebtedness by such Borrower or any Designated Subsidiary
under Section 7.2(a).
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(c) Corporate Changes, Etc. Each Borrower will not, and will not permit
any Designated Affiliate to, directly or indirectly, merge or consolidate with
any Person or amend, alter or modify its corporate or partnership name, mailing
address, chief executive office or principal place of business, structure,
status or existence, or liquidate or dissolve itself (or suffer any liquidation
or dissolution) or issue any capital stock or other equity interests, other than
(i) Permitted Acquisitions, (ii) transactions permitted under Section 7.1(a) and
(iii) any change of name, mailing address, chief executive office or principal
place of business so long as (A) the Administrative Borrower provides written
notice of such event to the Agent at least thirty days before the occurrence
thereof and (B) the Administrative Borrower provides, before the occurrence of
such event, to the Agent all such documents and instruments, and takes all such
further acts of the type specified in Section 3.7, as may be necessary or
desirable to maintain the Liens in favor of the Agent and the Cdn. Agent
covering the Collateral and the priority and continued perfection thereof, all
of which shall be at the Borrowers' expense.
(d) Change in Nature of Business. Each Borrower will not, and will not
permit any Designated Affiliate to, engage in or enter into any new line of
business other than a Permitted Business.
(e) Sales, Etc. of Assets. Each Borrower will not, and will not permit
any Designated Affiliate (other than any Foreign Subsidiary) to, directly or
indirectly, in any fiscal year, sell, transfer or otherwise dispose of any of
its assets, or grant any option or other right to purchase or otherwise acquire
any of its assets, other than the sale of Inventory in the ordinary course of
business and, so long as no Default or Event of Default has occurred and is
continuing or would result therefrom (including, without limitation, an Event of
Default under Section 2.1(a) or (b) or Section 2.4(b) as the result of such
sale, transfer or other disposition causing the amount of outstanding Loans and
Letters of Credit to exceed the U.S. Borrowing Base or the Cdn. Borrowing Base,
as applicable) and such sale, lease, assignment, transfer, license or other
disposition is for fair consideration (which may consist of Indebtedness
constituting Permitted Intercompany Debt arising thereby in favor of such
Borrower or Affiliate) and, to the extent applicable, complies with Section
7.1(c), (i) the sale, transfer or other disposition of Property and Equipment in
any fiscal year of the Borrowers with an aggregate value not to exceed 5% of the
shareholders equity of GPI as of the end of the prior fiscal year; (ii) sales or
transfers of assets between and among GPI and any of its Subsidiaries pursuant
to the Spinoff
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specified in Schedule 6.1(i); (iii) the lease of Equipment in the ordinary
course of business; (iv) the sale, lease, assignment, transfer or other
disposition of any or all of the assets (other than Collateral) of such Borrower
or Subsidiary thereof to any other Loan Party or Subsidiary thereof; (v) the
license of patents, trademarks or copyrights to any other Loan Party or
Subsidiary thereof; (vi) like-kind exchanges of assets (other than Collateral);
(vii) sales or dispositions of Equipment the proceeds of which are used to repay
outstanding Obligations; (viii) sales of obsolete, underutilized or damaged or
defective Equipment; or (ix) transfers of assets (other than Receivables) (A) in
the ordinary course of such Borrower's or Affiliate's business to any Subsidiary
of GPI or (B) outside the ordinary course of such Borrower's or Affiliate's
business to any Subsidiary of GPI that is not a Borrower or a Subsidiary of a
Borrower so long as the aggregate value of all such assets transferred under
this clause (ix) (I) in any fiscal year of GPI is not greater than US$25,000,000
less the amount of all Investments made under Section 7.2(k)(ii)(C) in such
fiscal year or (II) during any consecutive three-fiscal year period is not
greater than US$50,000,000 less the amount of all Investments made under Section
7.2(k)(ii)(C) during such consecutive three-fiscal year period.
(f) Use of Proceeds. Each Borrower will not (i) use any portion of the
proceeds of any Loan in violation of Section 2.3 or for the purpose of
purchasing or carrying any "margin stock" (as defined in Regulation U of the
Federal Reserve Board) in any manner which violates the provisions of Regulation
T, U or X of the Federal Reserve Board or for any other purpose in violation of
any applicable statute or regulation, or of the terms and conditions of this
Agreement, or (ii) take, or permit any Person acting on its behalf to take, any
action which could reasonably be expected to cause this Agreement or any
document or instrument delivered pursuant hereto to violate any regulation of
the Federal Reserve Board.
(g) Cancellation of Debt. Except with respect to amounts owed by OCTL
to a Loan Party, each Borrower will not, and will not permit any Designated
Affiliate to, cancel any liability owed to it, except for (i) the cancellation
of liabilities for consideration in the ordinary course of business and (ii) so
long as no Default or Event of Default has occurred and is continuing or would
result therefrom, the cancellation of (A) liabilities (that do not constitute
part of the Collateral) relating to the Loan Parties' and their Subsidiaries'
investment in, and manufacturing arrangement with, OCTL; (B) liabilities (that
do not constitute part of the Collateral) that are cancelled for fair
consideration, as determined by the Board of Directors of the applicable
Borrower or Affiliate; and (C) liabilities that are cancelled in the ordinary
course of business in connection with the workout of slow paying or doubtful
accounts.
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(h) Location of Inventory and Equipment. No Borrower shall move any
Inventory or Equipment (other than Equipment with respect to which the Agent has
released its Lien under Section 2.4(d)) owned by it at such time from any of the
jurisdictions therefor specified in Schedule 6.1(b) to any jurisdiction not
specified in Schedule 6.1(b), except that, so long as no Default or Event of
Default has occurred and is continuing or would result therefrom, a Borrower may
move Inventory or Equipment from such jurisdictions (i) with an aggregate value
not to exceed US$500,000 to any other jurisdiction, (ii) to any other
jurisdiction such that the security interest of the Agent or the Cdn. Agent, as
the case may be, in such Inventory or Equipment would continue to be perfected
and of the same priority without the taking of any further action at any time
(other than the filing of continuation statements upon expiration of any then
effective financing statements, registrations or similar filings covering such
Inventory or Equipment), (iii) to any other jurisdiction in the United States or
Canada, as the case may be, upon thirty days' prior written notice to the Agent
and the delivery to the Agent, before the occurrence thereof, of all documents
and instruments, and the taking of all further acts of the type specified in
Section 3.7, as may be necessary or desirable to maintain the Liens in favor of
the Agent and the Cdn. Agent covering such Inventory or Equipment and the
priority and continued perfection thereof, all of which shall be at the
Borrowers' expense and (iv) in connection with any sale or other disposition of
such Inventory or Equipment that is sold or disposed of by a Borrower in
accordance with Section 7.2(e).
(i) Liens, Etc. Each Borrower will not, and will not permit any
Designated Affiliate (other than any Foreign Subsidiary) to, directly or
indirectly, at any time create, incur, assume or suffer to exist any Lien on or
with respect to any assets, other than:
(i) Permitted Liens; and
(ii) Liens securing Indebtedness of a Borrower or any
such Affiliate to finance the acquisition of fixed or capital
assets, provided that (A) such Liens shall be created
substantially simultaneously with the acquisition of such
assets, (B) such Liens do not at any time encumber any assets
other than the assets financed by such Indebtedness, (C) such
Liens are not modified to secure other Indebtedness and the
amount of Indebtedness secured thereby is not increased and
(D) the principal amount of Indebtedness secured by any such
Lien shall at no time exceed the original purchase price of
such assets;
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provided that nothing herein shall prohibit any Lien to continue to exist if
such Lien was not prohibited hereunder at the time it was created, incurred,
assumed or first suffered to exist.
(j) Restricted Payments. Each Borrower will not, and will not
permit GPI or any Designated Affiliate (other than any Foreign Subsidiary) to,
make any Restricted Payment, directly or indirectly, or make any payment on
account of or set apart assets for a sinking or other analogous fund for the
making of any Restricted Payment, either directly or indirectly, whether in cash
or property or in obligations of GPI or such Affiliate or Borrower, except that,
so long as no Default or Event of Default has occurred and is continuing or
would result therefrom, (i) GPI or such Affiliate or Borrower may make any
Restricted Payment payable solely to one or more of the Loan Parties to the
extent such Restricted Payment is made on account of a Permitted Intercompany
Debt; (ii) GPI or such Affiliate or Borrower may make any Restricted Payment to
a Loan Party or a Subsidiary thereof (but not to any other Person) if the
aggregate amount of all Restricted Payments expended subsequent to the Closing
Date (the amount so expended, if other than in cash, to be valued at its fair
market value as reasonably determined by the Board of Directors of GPI or such
Affiliate or Borrower) does not exceed the sum of (A) US$20,000,000, plus (B)
50% of the Excess Cash Flow during the period (treated as one accounting period)
subsequent to December 31, 1999, and ending on the last day of the fiscal
quarter immediately preceding the date of such Restricted Payment, the amount of
which shall be determined as of the date of delivery of the consolidated cash
flow statement for such fiscal quarter under Section 7.1(k)(iv), plus (C) 50% of
the aggregate Net Cash Proceeds (other than to the extent such proceeds have
been used to make Capital Expenditures or to repay Indebtedness) received by GPI
subsequent to December 31, 1999, and ending on the last day of the fiscal
quarter immediately preceding the date of such Restricted Payment; (iii) such
Affiliate or Borrower may declare or pay dividends or otherwise effect
distributions on account of its Capital Stock to GPI or any other Loan Party;
(iv) GPI or such Affiliate may make offsets against and acquisitions of Capital
Stock of GPI in satisfaction of indemnification and other obligations owed to
GPI and its Subsidiaries under acquisition arrangements in which Capital Stock
of GPI is issued as consideration for the acquisition; (v) GPI or such Affiliate
or Borrower may make Restricted Payments payable solely in shares of Capital
Stock of GPI or warrants, rights or options to acquire shares of Capital Stock
of GPI including, without limitation, any stock split or stock dividend effected
by GPI; (vi) GPI may purchase, redeem, retire or otherwise acquire any shares of
its Capital Stock in exchange for other shares of Qualified Stock of GPI or from
Net Cash Proceeds; and (vii) GPI or such Affiliate or Borrower may purchase or
otherwise acquire Capital Stock of GPI relating to Grant Prideco, Inc. Executive
Deferred Compensation Plans or
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employee benefit plans for tax withholding or pursuant to the cashless exercise
of stock options or warrants in connection with customary employee compensation
programs, in each case so long as such purchase or exercise has been approved by
the Board of Directors of GPI or such Affiliate or Borrower.
(k) Investments. Each Borrower will not, and will not permit
any Designated Affiliate (other than any Foreign Subsidiary) to, directly or
indirectly, at any time make or acquire any Investment in any Person (whether in
cash, securities or other property of any kind), provided that, so long as (i)
such Investment is not otherwise prohibited by this Agreement and (ii) in the
case of clauses (D) and (F) below, no Default or Event of Default has occurred
and is continuing or would result therefrom, such Borrower or Affiliate may make
(A) Permitted Acquisitions; (B) Investments in any Loan Party; (C) Investments
in any Subsidiary (that is not a Loan Party) or other Affiliate of GPI or in any
other Permitted Joint Venture so long as the aggregate amount of such
Investments (net of, and after being reduced from time to time by, all
Restricted Payments by such other Subsidiary or Affiliate to a Loan Party) in
any fiscal year of GPI does not exceed US$25,000,000 less the value of all
assets transferred under Section 7.2(e)(ix)(B) in such fiscal year or during any
consecutive three-fiscal year period does not exceed US$50,000,000 less the
value of all assets transferred under Section 7.2(e)(ix)(B) during such
consecutive three-fiscal year period; (D) Investments in Cash Equivalents; (E)
Investments that constitute Permitted Intercompany Debt, (F) Permitted Business
Investments; (G) Permitted Financial Investments; (H) Investments, made with
cash or other property that could otherwise be used to make a Restricted Payment
under Section 7.2(j) at such time; (I) Investments resulting from a merger,
amalgamation or other business combination or other change or transaction
permitted under Section 7.1(a); (J) any Investment in any Person to the extent
the consideration paid consists of Qualified Stock of GPI; (K) any Investment
arising from (I) the conversion of any indebtedness of OCTL to any Loan Party
into Capital Stock of OCTL and (II) the reinvestment of up to US$2,500,000 of
proceeds received by any Loan Party from OCTL as a result of the repayment of
such indebtedness; or (L) the acquisition of Capital Stock or securities of any
Loan Party or Subsidiary thereof by another Loan Party or Subsidiary thereof if
the acquiring Loan Party would be permitted to have the other Loan Party or
Subsidiary thereof merge into it pursuant to Section 7.1(a).
(l) Partnerships; Subsidiaries; Joint Ventures; Management
Contracts. Except as permitted under Section 7.2(k), each Borrower will not, and
will not permit any Designated Affiliate to, at any time create any direct or
indirect Subsidiary, enter into any joint venture or similar arrangement or
become a partner in any general or limited partnership or
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enter into any management contract permitting third party management rights with
respect to such Borrower's or Subsidiary's business, provided that, so long as
no Default or Event of Default has occurred and is continuing or would result
therefrom, such Borrower or any of its Subsidiaries may (i) form or acquire a
Subsidiary (a "New Subsidiary") whereupon (A) the Administrative Borrower shall
give the Agent written notice of such formation or acquisition within five
Business Days thereof, (B) such Borrower or Subsidiary shall, within ten
Business Days of such formation or acquisition, (I) cause such New Subsidiary to
execute and deliver to the Agent (x) a Supplement to the Guaranty in the form of
Annex 1 thereto and (y) a Supplement to the Contribution Agreement in the form
of Annex 1 thereto, whereupon such New Subsidiary shall become a Loan Party, and
(II) execute and deliver to the Agent (x) if the pledgor is theretofore a
Pledgor, an amendment to the Pledge Agreement, in form and substance
satisfactory to the Agent, or, if the pledgor is not theretofore a Pledgor, a
Supplement to the Pledge Agreement in the form of Annex II thereto, in each case
pledging all (or, subject to Section 7.1(s), if such New Subsidiary is a Foreign
Subsidiary or a Cdn. Subsidiary, 65% (excluding Qualified Stock issued to
directors of such Subsidiary and immaterial interests in one share of any such
Subsidiary held to meet the Requirements of Law of the jurisdiction of
organization of such Subsidiary)) of the Capital Stock of such New Subsidiary
together with all certificates representing such Capital Stock and undated stock
or other transfer powers therefor, executed by the Pledgor in blank, and (C)
such Borrower or Subsidiary, as the case may be, and such New Subsidiary shall
take all such further actions and execute all such further documents and
instruments as may be required to authorize the execution, delivery and
performance of such documents and instruments and to grant and perfect in favor
of the Agent a first priority Lien on all (or, subject to Section 7.1(s), 65%,
as the case may be) of the Capital Stock of such New Subsidiary including,
without limitation, the execution and delivery to the Agent by such New
Subsidiary of an Acknowledgment and Consent to the Pledge Agreement in the form
attached thereto, or (ii) enter into management contracts or similar
arrangements between or among such Borrower or Subsidiary and any Loan Party or
any Subsidiary thereof, provided that the Person that obtains managerial rights
under such management or similar contract is a Loan Party; provided, however,
that nothing contained in this Section 7.2(l) shall, (i) subject to Section
7.1(s), be deemed or construed to require (A) any pledge of more than 65% of the
Capital Stock of any Foreign Subsidiary or Cdn. Subsidiary, (B) the granting of
any Lien on any asset of any Cdn. Subsidiary (including the Capital Stock owned
by such Subsidiary in any other Person) to secure any Obligations of the U.S.
Lenders, (C) the granting of any Liens on any assets of any Foreign Subsidiary
(including the Capital Stock owned by such Subsidiary in any other Person) or
(D) the guaranty by any Foreign Subsidiary of any of the Obligations or by any
Cdn.
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Subsidiary of any of the Obligations of the U.S. Borrowers or (ii) be deemed or
construed to require the pledge of the Capital Stock of, or the guaranty of the
Obligations by, any Subsidiary with a net worth of less than US$250,000.
(m) Fiscal Year. Each Borrower will not, and will not permit
any of its Subsidiaries to, change its fiscal year from a year ending December
31.
(n) Accounting Changes. Each Borrower will not, and will not
permit any of its Subsidiaries to, at any time make or permit any change in
accounting policies or reporting practices, except as required by or in
accordance with GAAP.
(o) No Prohibited Transactions Under ERISA. Each Borrower will
not, and will not permit any of its ERISA Affiliates to, directly or indirectly:
(i) Engage in any Prohibited Transaction which could
reasonably be expected to result in a civil penalty or excise
tax described in Section 406 of ERISA or Section 4975 of the
Internal Revenue Code for which a statutory or class exemption
is not available or a private exemption has not been
previously obtained from the Department of Labor;
(ii) permit to exist with respect to any Pension Plan
any accumulated funding deficiency (as defined in Section 302
of ERISA and Section 412 of the Internal Revenue Code),
whether or not waived;
(iii) terminate any Pension Plan where such event
would result in any liability of any Borrower or ERISA
Affiliate under Title IV of ERISA;
(iv) fail to make any required contribution or
payment to any Multiemployer Plan;
(v) fail to pay any required installment or any other
payment required under Section 412 of the Internal Revenue
Code on or before the due date for such installment or other
payment;
(vi) amend a Pension Plan resulting in an increase in
current liability for the plan year such that any Borrower or
ERISA Affiliate is required to provide security to such Plan
under Section 307 of ERISA or Section 401(a)(29) of the
Internal Revenue Code;
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(vii) withdraw from any Multiemployer Plan where such
withdrawal is reasonably likely to result in any liability of
any such entity under Title IV of ERISA; or
(viii) take any action that would cause the
imposition of an excise tax under Section 4978 or Section
4979A of the Internal Revenue Code.
(p) Prepayments and Amendments of Material Contracts. Each
Borrower will not, and will not permit any Designated Affiliate to, at any time
(i) make any prepayment of any Indebtedness, other than the prepayment of the
Loans in accordance with the terms of this Agreement and, so long as no Default
or Event of Default shall have occurred and be continuing or would result
therefrom, (A) prepayments that would be permitted to be made as Restricted
Payments under Section 7.2(j), (B) the prepayment of the Subordinated Note from
the proceeds of Permitted Refinancing Indebtedness or from Net Cash Proceeds,
and (C) the prepayment of Permitted Intercompany Debt, or (ii) amend, modify,
cancel or terminate, or permit the amendment, modification, cancellation or
termination of, any Material Contract, except where such amendment or
modification could not be reasonably expected to have a Material Adverse Effect.
(q) Lease Obligations. Each Borrower will not, and will not
permit any Designated Affiliate to, at any time create, incur or assume any
obligations as lessee for the rental or hire of real or personal property in
connection with any sale and leaseback transaction.
(r) Bank Accounts. Each Borrower will not, and will not permit
any Designated Affiliate to, open, maintain or otherwise have any checking,
savings or other accounts at any bank or other financial institution, or any
other account where money is or may be deposited or maintained with any other
Person, other than (i) payroll accounts, (ii) accounts specified in Schedule
7.2(r) and (iii) other accounts of which the Administrative Borrower has given
the Agent written notice and which are subject to a blocked account arrangement
in favor of the Agent or the Cdn. Agent, as applicable, under documentation
satisfactory to the Agent.
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ARTICLE VIII.
FINANCIAL COVENANTS
Until termination of the Commitments, payment and satisfaction
of all Obligations in full, and termination, Collateralization or expiration of
all Letters of Credit:
SECTION 8.1. Fixed Charge Coverage Ratio. The Fixed Charge
Coverage Ratio for any period set forth below shall not be less than the ratio
set forth below opposite such period:
<TABLE>
<CAPTION>
Period Minimum Fixed Charge
Coverage Ratio
------ --------------------
<S> <C>
January 1, 2000 to March 31, 2000 0.54 to 1.00
January 1, 2000 to June 30, 2000 0.22 to 1.00
January 1, 2000 to September 30, 2000 0.32 to 1.00
January 1, 2000 to December 31, 2000 0.70 to 1.00
April 1, 2000 to March 31, 2001 0.83 to 1.00
July 1, 2000 to June 30, 2001 1.14 to 1.00
Each consecutive twelve-month period ending each fiscal 1.50 to 1.00
quarter-end thereafter
</TABLE>
SECTION 8.2. Capital Expenditures. The aggregate amount of
GPI's and its Subsidiaries' consolidated Capital Expenditures made or committed
to be made in any fiscal year commencing with the fiscal year ending December
31, 1999 shall not exceed US$45,000,000, provided that, if a Default or Event of
Default shall have occurred and be continuing or would result therefrom, no such
Capital Expenditures may be made or committed to be made.
SECTION 8.3. Net Worth. The Borrowers shall cause GPI and its
Subsidiaries to maintain a consolidated net worth of GPI and its Subsidiaries,
determined in accordance with GAAP, (A) of not less than US$400,000,000 at all
times from the Closing Date through the fiscal year ending December 31, 2000 and
(B) of not less than US$400,000,000 plus 50% of the consolidated net earnings
(if positive) of GPI and its Subsidiaries for each fiscal year since fiscal year
2000, determined on a cumulative basis, at all times in each subsequent fiscal
year.
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SECTION 8.4. Business Plan. The Agent and the Borrowers
acknowledge that the foregoing financial covenants were established by the Agent
and the Borrowers on the basis of the Business Plan delivered to the Agent on
the Closing Date, after leaving a margin in favor of the Borrowers which the
Agent and the Borrowers have agreed is fair. Accordingly, the parties hereto
have agreed that any failure by the Borrowers to comply with the terms of any
Financial Covenant shall be deemed material for purposes of this Agreement.
ARTICLE IX.
EVENTS OF DEFAULT
SECTION 9.1. Events of Default. The occurrence of any of the
following events shall constitute an "Event of Default":
(a) the Borrowers shall fail to pay any principal, interest,
fees, expenses or other Obligations when payable, whether at stated maturity, by
acceleration, or otherwise; or
(b) any Loan Party shall (i) default in the performance or
observance of any agreement, covenant, condition, provision or term contained in
Section 2.3, 2.4, 2.6, 7.1(a)(i), 7.1(f), 7.1(h), 7.1(k), 7.2, 8.1, 8.2, 8.3,
8.4 or 11.4 hereof, or in Section 4(c) or 5 of the Pledge Agreement; or (ii)
default in the performance or observance of any agreement, covenant, condition,
provision or term contained in this Agreement or any other Loan Document (other
than those referred to in Sections 9.1(a) and (b)(i)) and such failure continues
for a period of ten days without cure; or
(c) any Loan Party shall (except as otherwise expressly
permitted under Sections 7.1(a) and 7.2(c)) dissolve, wind up or otherwise cease
to conduct its business; or
(d) any Loan Party shall become the subject of an Insolvency
Event; or
(e) (i) any Loan Party shall fail to make any payment (whether
of principal, interest or otherwise and regardless of amount) in respect of any
Material Indebtedness when due (whether at scheduled maturity or by required
prepayment, acceleration, demand or otherwise), or (ii) any event or condition
occurs (other than due to an event that accelerates GPI's obligations under the
Subordinated Note which obligations are simultaneously repaid as permitted under
Section 7.2(p)(i) that results in any Material Indebtedness becoming due prior
to its scheduled maturity or that enables or permits the holder or holders (or a
trustee or agent on behalf of such holder or holders) to declare any Material
Indebtedness to be due, or to require the prepayment, repurchase, redemption or
defeasance thereof, prior to its scheduled maturity; or
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(f) any representation or warranty made by any Loan Party
under or in connection with any Loan Document or amendment or waiver thereof, or
any Financial Statement, report, document or certificate delivered in connection
therewith, shall prove to have been incorrect in any material respect when made
or deemed made; or
(g) any judgment or order for the payment of money which, when
taken together with all other judgments and orders rendered and outstanding
against the Loan Parties taken together, exceeds US$5,000,000 in the aggregate
shall be rendered against the Loan Parties and shall not be stayed, vacated,
bonded or discharged within thirty days; or
(h) Any Person or group (as such term is used in Section
13(d)(3) and 14(d)(2) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), other than any Loan Party either (i) becomes the "beneficial
owner" (as defined in Rule 13d-3 under the Exchange Act) of more than 49.9% of
the voting power of the Capital Stock of any Loan Party entitled to vote for the
election of directors (or persons performing similar functions) and by reason
thereof such Person or group is entitled to elect a majority of the members of
the board of directors (or similar governing body) of such Loan Party or (ii)
otherwise has the ability to elect, directly or indirectly, a majority of the
members of any such board of directors (or similar governing body); or
(i) any material covenant, agreement or obligation of a Loan
Party contained in or evidenced by any of the Loan Documents shall cease to be
enforceable, or shall be determined to be unenforceable, in accordance with its
terms; a Borrower or any other Loan Party shall deny or disaffirm its
obligations under any of the Loan Documents or any Liens granted in connection
therewith or shall otherwise challenge any of its obligations under any of the
Loan Documents; or any Liens granted on any of the Collateral with a fair market
value in excess of US$250,000 in the aggregate shall be determined to be void,
voidable or invalid, are subordinated or are not given the priority contemplated
by this Agreement or any other Loan Document; or
(j) a Security Document shall for any reason cease to create a
valid and perfected first priority Lien (subject, in the case of Inventory, to
Permitted Liens) on the Collateral purported to be covered thereby; or
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(k) the independent public accountants for the Borrowers shall
deliver a Qualified opinion on any Financial Statement; or
(l) the occurrence of any event or condition that, in the
Required Lenders' judgment, could be expected to have a Material Adverse Effect;
or
(m) the amount or terms of credit provided by suppliers of raw
materials or services necessary for the operation of any Borrower's business
shall be materially less favorable to such Borrower than the amount or terms of
such credit provided by suppliers to competitors of such Borrower.
SECTION 9.2. Acceleration, Termination and Cash
Collateralization. Upon the occurrence and during the continuance of an Event of
Default, the Agent may or, upon the request of the Required Lenders, the Agent
shall, take any or all of the following actions:
(a) Acceleration. To declare all Obligations
immediately due and payable (except with respect to any Event
of Default with respect to a Loan Party specified in Section
9.1(d), in which case all Obligations shall automatically
become immediately due and payable) without presentment,
demand, protest or any other action or obligation of the Agent
or any Lender.
(b) Termination of Commitments. To declare the
Commitments immediately terminated (except with respect to any
Event of Default with respect to a Loan Party set forth in
Section 9.1(d), in which case the Commitments shall
automatically terminate) and, at all times thereafter, any
Loan made by a Lender or Letter of Credit caused to be issued
by the Agent pursuant to this Agreement shall be in such
Lender's or the Agent's sole and absolute discretion.
Notwithstanding any termination of this Agreement, until all
Obligations shall have been fully and indefeasibly paid and
satisfied, the Agent shall retain all security in all
guaranties and in all existing and future Receivables,
Inventory and Equipment of the Borrowers and all other
Collateral held by it hereunder and under the Security
Documents, and the Borrowers shall continue to turn over all
Collections to the Agent.
(c) Cash Collateralization. With respect to all
Letters of Credit outstanding at the time of the acceleration
of the Obligations under Section 9.2(a) or otherwise at any
time after the Expiration Date, the Borrowers shall at such
time (i) deposit in a cash collateral account established by
or on behalf of the
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Agent an amount equal to 105% of the aggregate then undrawn
and unexpired amount of such Letters of Credit or (ii) provide
to the Agent backstopping letters of credit in form and
substance satisfactory to the Agent in an amount equal to the
aggregate then undrawn and unexpired amount of such Letters of
Credit. Amounts held in such cash collateral account shall be
under the sole dominion and control of the Agent and applied
by the Agent to the payment of drafts drawn under such Letters
of Credit, and the balance, if any, in such cash collateral
account, after all such Letters of Credit shall have expired
or been fully drawn upon shall be applied to repay the other
Obligations. After all such Letters of Credit shall have
expired or been fully drawn upon and all Obligations shall
have been satisfied, the balance, if any, in such cash
collateral account (or the originals of any letters of credit
delivered to the Agent to backstop any Letters of Credit)
shall be returned to the Borrowers or to such other Person as
may be lawfully entitled thereto.
SECTION 9.3. Other Remedies.
(a) Upon the occurrence and during the continuance of an Event
of Default, the Agent shall have all rights and remedies with respect to the
Obligations and the Collateral under applicable law and the Loan Documents, and
the Agent may do any or all of the following:
(i) remove for copying all documents, instruments,
files and records (including the copying of any computer
records) relating to a Borrower's Receivables or use (at the
expense of a Borrower) such supplies or space of a Borrower at
such Borrower's places of business necessary to administer and
collect such Receivables;
(ii) accelerate or extend the time of payment,
compromise, issue credits, or bring suit on a Borrower's
Receivables (in the name of such Borrower or the Agent) and
otherwise administer and collect such Receivables;
(iii) sell, assign and deliver a Borrower's
Receivables with or without advertisement, at public or
private sale, for cash, on credit or otherwise, subject to
applicable law; and
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(iv) foreclose the security interests created
pursuant to the Loan Documents by any available procedure, or
take possession of any or all of the Collateral, without
judicial process and enter any premises where any Collateral
may be located for the purpose of taking possession of or
removing the same.
(b) The Agent may bid or become a purchaser at any sale, free
from any right of redemption, which right is expressly waived by each Borrower.
If notice of intended disposition of any Collateral is required by law, it is
agreed that five days' notice shall constitute reasonable notification. Each
Borrower will assemble the Collateral in its possession and make it available at
such locations as the Agent may specify, whether at the premises of such
Borrower or elsewhere, and will make available to the Agent the premises and
facilities of such Borrower for the purpose of the Agent's taking possession of
or removing the Collateral or putting the Collateral in saleable form. The Agent
may sell the Collateral or any part thereof in one or more parcels at public or
private sale, at any exchange, broker's board or at any of the Agent's offices
or elsewhere, for cash, on credit or for future delivery, and upon such other
terms as the Agent may deem commercially reasonable. The Agent shall not be
obligated to make any sale of Collateral regardless of notice of sale having
been given. The Agent may adjourn any public or private sale from time to time
by announcement at the time and place fixed therefor, and such sale may, without
further notice, be made at the time and place to which it was so adjourned. Each
Borrower hereby grants the Agent a license to enter and occupy any of such
Borrower's leased or owned premises and facilities, without charge, to exercise
any of the Agent's rights or remedies.
SECTION 9.4. License for Use of Software and Other
Intellectual Property. To the extent permitted by law and not otherwise
prohibited by contracts with third parties, each Borrower hereby grants to the
Agent, for use by the Lenders and the Agent solely in connection with the
preservation or sale of any Collateral, a license or other right to use, without
charge by any Loan Party or Subsidiary thereof, all computer software programs,
data bases, processes, trademarks, tradenames, copyrights, labels, trade
secrets, service marks, patents, advertising materials and other rights, assets
and materials used by such Borrower and needed in connection with the
preservation or sale of such Collateral.
SECTION 9.5. No Marshalling; Deficiencies; Remedies
Cumulative. The Agent shall have no obligation to marshal any Collateral or to
seek recourse against or satisfaction of any of the Obligations from one source
before seeking recourse against or satisfaction from another source. The net
cash proceeds resulting from the Agent's exercise of any of the foregoing
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rights to liquidate all or substantially all of the Collateral, including any
and all Collections (after deducting all of the Agent's expenses related
thereto), shall be applied by the Agent to such of the Obligations and in such
order as the Agent shall elect in its sole and absolute discretion, whether due
or to become due. The Borrowers shall remain liable to the Agent and the Lenders
for any deficiencies and the Agent and the Lenders in turn agree to remit to the
applicable Loan Party or its successor or assign, any surplus resulting
therefrom. All of the Agent's and the Lenders' remedies under the Loan Documents
shall be cumulative, may be exercised simultaneously against any Collateral and
any Loan Party or in such order and with respect to such Collateral or such Loan
Party as the Agent may deem desirable, and are not intended to be exhaustive.
SECTION 9.6. Waivers. Except as may be otherwise specifically
provided herein or in any other Loan Document, each Borrower hereby waives any
right to a judicial or other hearing with respect to any action or prejudgment
remedy or proceeding by the Agent to take possession, exercise control over, or
dispose of any item of Collateral in any instance (regardless of where the same
may be located) where such action is permitted under the terms of this Agreement
or any other Loan Document or by applicable law or of the time, place or terms
of sale in connection with the exercise of the Agent's rights hereunder and also
waives any bonds, security or sureties required by any statute, rule or other
law as an incident to any taking of possession by the Agent of any Collateral.
Each Borrower also waives any damages (direct, consequential or otherwise)
occasioned by the enforcement of the Agent's rights under this Agreement or any
other Loan Document including the taking of possession of any Collateral or the
giving of notice to any account debtor or the collection of any Receivable of
such Borrower. Each Borrower also consents that the Agent may enter upon any
premises owned by or leased to it without obligations to pay rent or for use and
occupancy, through self-help, without judicial process and without having first
obtained an order of any court. These waivers and all other waivers provided for
in this Agreement and the other Loan Documents have been negotiated by the
parties, and each Borrower acknowledges that it has been represented by counsel
of its own choice, has consulted such counsel with respect to its rights
hereunder and has freely and voluntarily entered into this Agreement and the
other Loan Documents as the result of arm's-length negotiations.
SECTION 9.7. Further Rights of the Agent. In the event that a
Borrower shall fail to purchase or maintain insurance (where applicable), or to
pay any tax, assessment, governmental charge or levy, except as the same may be
otherwise permitted hereunder or which is being contested in good faith by
appropriate proceedings and for which adequate reserves have been established in
accordance with GAAP, or in the event that any
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Lien prohibited hereby shall not be paid in full or discharged, or in the event
that a Borrower shall fail to perform or comply with any other covenant, promise
or obligation to the Agent or any Lender hereunder or under any other Loan
Document, the Agent may (but shall not be required to) perform, pay, satisfy,
discharge or bond the same for the account of such Borrower, and all amounts so
paid by the Agent shall be treated as a Loan hereunder to the Borrowers and
shall constitute part of the Obligations.
SECTION 9.8. Interest and Letter of Credit Fees After Event of
Default. Each Borrower agrees and acknowledges that the additional interest and
fees that may be charged under Section 4.2 are (a) an inducement to the Lenders
to make Advances and to the Agent to use its best efforts to cause Letters of
Credit to be issued hereunder and that the Agent and the Lenders would not
consummate the transactions contemplated by this Agreement without the inclusion
of such provisions; (b) are fair and reasonable estimates of the Agent's and the
Lenders' costs of administering the credit facility upon an Event of Default;
and (c) are intended to estimate the Agent's and the Lenders' increased risks
upon an Event of Default.
ARTICLE X.
THE AGENT
SECTION 10.1. Appointment of Agents.
(a) Each Lender hereby designates Transamerica Business Credit
Corporation as its agent and irrevocably authorizes it to take action on such
Lender's behalf under the Loan Documents and to exercise the powers and to
perform the duties described therein and to exercise such other powers as are
reasonably incidental thereto. Each Cdn. Lender hereby designates Transamerica
Commercial Finance Corporation, Canada as its agent and irrevocably authorizes
it to take action on such Cdn. Lender's behalf under the Security Agreement, the
Blocked Account Agreement and any other Loan Document to which the Cdn. Agent is
a party and to exercise the powers and to perform the duties described therein
and to exercise such other powers as are reasonably incidental thereto. Either
of the Agents may perform any of its respective duties by or through its agents
or employees.
(b) The provisions of this Article are solely for the benefit
of the Agents and the Lenders, and the Borrowers shall not have any rights as
third party beneficiaries of any of the provisions hereof. The Agents shall act
solely as agents of the Lenders and assume no obligation toward or relationship
of agency or trust with or for the Borrowers.
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SECTION 10.2. Nature of Duties of Agents. Neither of the
Agents shall have any duties or responsibilities except those expressly set
forth in the Loan Documents. Neither of the Agents nor any of their respective
officers, directors, employees or agents shall be liable for any action taken or
omitted by it or them as such hereunder or in connection herewith, unless caused
by its or their gross negligence or willful misconduct. The duties of the Agents
shall be mechanical and administrative in nature. The Agents do not have a
fiduciary relationship with or any implied duties to any Lender or any
participant of any Lender.
SECTION 10.3. Lack of Reliance on Agents.
(a) Independently and without reliance upon either of the
Agents, each Lender, to the extent it deems appropriate, has made and shall
continue to make (i) its own independent investigation of the financial or other
condition and affairs of the Borrowers and the other Loan Parties, in connection
with the taking or not taking of any action in connection herewith and (ii) its
own appraisal of the creditworthiness of the Borrowers and the other Loan
Parties, and except as expressly provided in this Agreement, neither of the
Agents shall have any duty or responsibility, either initially or on a
continuing basis, to provide any Lender with any credit or other information
with respect thereto, whether coming into its possession before the making of
the initial Loans or the issuance of the Initial Letter of Credit or at any time
or times thereafter.
(b) Neither of the Agents shall be responsible to any Lender
for any recitals, statements, information, representations or warranties herein
or in any document, certificate or other writing delivered in connection
herewith or for the execution, effectiveness, genuineness, validity,
enforceability, collectibility, priority or sufficiency of this Agreement or the
Notes or the financial or other condition of the Borrowers and the other Loan
Parties. Neither of the Agents shall be required to make any inquiry concerning
either the performance or observance of any of the terms, provisions or
conditions of this Agreement or any other Loan Document, or the financial
condition of the Borrowers and the other Loan Parties, or the existence or
possible existence of any Default or Event of Default.
SECTION 10.4. Certain Rights of the Agents. Either of the
Agents may request instructions from the Required Lenders at any time. If either
of the Agents requests instructions from the Required Lenders with respect to
any action or inaction, it shall be entitled to await instructions from the
Required Lenders before such action or inaction. No Lender shall have any right
of action based upon either of the Agents' action or inaction in response to
instructions from the Required Lenders.
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SECTION 10.5. Reliance by Agent. Each of the Agents may rely
upon written or telephonic communication it believes to be genuine and to have
been signed, sent or made by the proper Person. Each of the Agents may obtain
the advice of legal counsel (including counsel for the Borrowers with respect to
matters concerning the Borrowers), independent public accountants and other
experts selected by it and shall have no liability for any action or inaction
taken or omitted to be taken by it in good faith based upon such advice.
SECTION 10.6. Indemnification of Agents. To the extent either
of the Agents is not reimbursed and indemnified by the Borrowers, each Lender
will reimburse and indemnify such Agent to the extent of such Lender's Pro Rata
Share (determined as of the time that such indemnity payment is sought) for any
and all liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses (including counsel fees and disbursements) or
disbursements of any kind or nature whatsoever which may be imposed on, incurred
by or asserted against either of the Agents in performing its duties hereunder
or otherwise relating to the Loan Documents unless resulting from such Agent's
gross negligence or willful misconduct. The agreements contained in this Section
shall survive any termination of this Agreement and the other Loan Documents and
the payment in full of the Obligations.
SECTION 10.7. The Agents in Their Individual Capacity. In its
individual capacity, each of the Agents shall have the same rights and powers
hereunder as any other Lender or holder of a Note or participation interest and
may exercise the same as though it was not performing the duties specified
herein. The terms "Lenders," "Required Lenders," "holders of Notes," or any
similar terms shall, unless the context clearly otherwise indicates, include
each of Transamerica Business Credit Corporation and Transamerica Commercial
Finance Corporation, Canada in its individual capacity. Each of the Agent and
its Affiliates may accept deposits from, lend money to, acquire equity interests
in, and generally engage in any kind of banking, trust, financial advisory or
other business with the Borrowers or any Affiliate of the Borrowers as if it
were not performing the duties specified herein, and may accept fees and other
consideration from the Borrowers for services in connection with this Agreement
and otherwise without having to account for the same to the Lenders.
SECTION 10.8. Holders of Notes. The Agent may deem and treat
the payee of any Note as the owner thereof for all purposes hereof unless and
until a written notice of the assignment or transfer thereof shall have been
filed with the Agent. Any request, authority or consent of any Person who, at
the time of making such request or giving such authority or
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consent, is the holder of any Note, shall be conclusive and binding on any
subsequent holder, transferee or assignee of such Note or of any Note or Notes
issued in exchange therefor.
SECTION 10.9. Successor Agent.
(a) Either of the Agents may, upon twenty Business Days'
notice to the Lenders and the Borrowers, resign by giving written notice thereof
to the Lenders and the Borrowers. Any such resignation shall be effective upon
the appointment of a successor Agent.
(b) Upon receipt of notice of resignation by either of the
Agents, the Required Lenders may appoint a successor agent which shall also be a
Lender. If a successor agent has not accepted its appointment within fifteen
Business Days, then the retiring agent may, on behalf of the Lenders, appoint a
successor agent which shall be subject to approval by the Borrowers, which
approval shall not be unreasonably withheld and shall be delivered to the
Required Lenders within ten Business Days after the Borrowers' receipt of notice
of a proposed successor agent.
(c) Upon its acceptance of the agency hereunder, such
successor agent shall succeed to and become vested with all the rights, powers,
privileges and duties of the retiring agent, and the retiring agent shall be
discharged from its duties and obligations under this Agreement. The retiring
agent shall continue to have the benefit of the provisions of this Article for
any action or inaction while it was agent.
SECTION 10.10. Collateral Matters.
(a) Except as otherwise set forth herein, any action or
exercise of powers by either of the Agents (at the request of the Required
Lenders) under the Loan Documents, together with such other powers as are
reasonably incidental thereto, shall be deemed authorized by and binding upon
all of the Lenders. Without limiting the generality of the foregoing, each
Lender authorizes the Agent, on behalf of such Lender, to execute, deliver and
perform its obligations under the Subordination Agreement, and each Lender
agrees that the Subordination Agreement shall be binding on it. At any time and
without notice to or consent from any Lender, the Agents may take any action
necessary or advisable to perfect and maintain the perfection of the Liens upon
the Collateral.
(b) Each of the Agents is authorized to release any Lien
granted to or held by such Agent upon any Collateral (i) upon termination of the
Commitments, termination or Collateralization of all outstanding Letters of
Credit and payment and satisfaction of all of the Obligations, (ii) required to
be delivered from permitted sales of Collateral hereunder, if
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any, upon receipt of the proceeds or (iii) if the release can be and is approved
by the Required Lenders. Either of the Agents may request and the Lenders will
provide confirmation of such Agent's authority to release particular types or
items of Collateral.
(c) Upon any sale or transfer of Collateral which is expressly
permitted pursuant to the terms of this Agreement, or consented to in writing by
the Required Lenders or all of the Lenders, as applicable, and upon at least
five Business Days' prior written request by the Administrative Borrower, the
Agent or the Cdn. Agent, as applicable, shall (and is hereby irrevocably
authorized by the Lenders to) execute such documents as may be necessary to
evidence the release of the Liens granted to such Agent for the benefit of the
Lenders herein or pursuant hereto upon the Collateral that was sold or
transferred, provided that (i) such Agent shall not be required to execute any
such document on terms which, in such Agent's opinion, would expose such Agent
to liability or create any obligation or entail any consequence other than the
release of such Liens without recourse or warranty and (ii) such release shall
not in any manner discharge, affect or impair the Obligations or any Liens upon
(or obligations of the Borrowers in respect of) all interests retained by the
Borrowers, including (without limitation) the proceeds of the sale, all of which
shall continue to constitute part of the Collateral. In the event of any sale or
transfer of Collateral, or any foreclosure with respect to any of the
Collateral, the Agent shall be authorized to deduct all of the expenses
reasonably incurred by the Agent or the Cdn. Agent, as the case may be, from the
proceeds of any such sale, transfer or foreclosure.
(d) Neither of the Agents shall have any obligation to assure
that the Collateral exists or is owned by any Borrower, that such Collateral is
cared for, protected or insured, or that the Liens on the Collateral have been
created, perfected or have any particular priority. With respect to the
Collateral, the Agent or the Cdn. Agent, as the case may be, may act in any
manner it may deem appropriate, in its sole discretion, given Transamerica
Business Credit Corporation's or Transamerica Commercial Finance Corporation,
Canada's, as the case may be, own interest in the Collateral as one of the
Lenders, and it shall have no duty or liability whatsoever to the Lenders,
except for its gross negligence or willful misconduct.
SECTION 10.11. Actions with Respect to Defaults. In addition
to each of the Agents' right to take actions on its own accord as permitted
under this Agreement, such Agent shall take such action with respect to an Event
of Default as shall be directed by the Required Lenders. Until either of the
Agents shall have received such directions, such Agent may act or not act as it
deems advisable and in the best interests of the Lenders.
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SECTION 10.12. Delivery of Information. Neither of the Agents
shall be required to deliver to any Lender originals or copies of any documents,
instruments, notices, communications or other information received by the Agent
from the Borrowers, the Required Lenders, any Lender or any other Person under
or in connection with this Agreement or any other Loan Document except (i) as
specifically provided in this Agreement or any other Loan Document and (ii) as
specifically requested from time to time in writing by any Lender with respect
to a specific document, instrument, notice or other written communication
received by and in the possession of such Agent at the time of receipt of such
request and then only in accordance with such specific request.
ARTICLE XI.
GENERAL PROVISIONS
SECTION 11.1. Notices. Except as otherwise provided herein,
all notices and other communications hereunder shall be in writing and sent by
certified or registered mail, return receipt requested, by overnight delivery
service, with all charges prepaid, or by telecopier followed by a hard copy sent
by regular mail, if to the Agent or the Cdn. Agent, then to Transamerica
Business Credit Corporation, 555 Theodore Fremd Avenue, Suite C-301, Rye, New
York 10580, Telecopy: (914) 921-0110, Attn.: Mr. Steven R. Fischer, Executive
Vice President, with a copy to Transamerica Business Credit Corporation, 9399
West Higgins Road, Suite 600, Rosemont, Illinois 60018, Telecopy: (847)
685-1143, Attn.: General Counsel, if to any Lender, then to its address
specified on Schedule 2 or in the Assignment and Acceptance Agreement pursuant
to which it became a party hereto and if to a Borrower, then c/o the
Administrative Borrower, to Grant Prideco, LP, 1450 Lake Robbins Drive, Suite
600, The Woodlands, Texas 77380, Telecopy: (281) 297-8688, Attn.: Ms. Frances R.
Powell and Philip A. Choyce, Esq., with a copy to Fulbright & Jaworski L.L.P.,
1301 McKinney, Suite 5100, Houston, Texas 77010-3095, Telecopy: (713) 651-5246,
Attn.: Joshua P. Agrons, Esq., or, in each case, to such other address as the
Agent, the Borrowers or a Lender may specify to the other parties in the manner
required hereunder. All such notices and correspondence shall be deemed given
(i) if sent by certified or registered mail, three Business Days after being
postmarked, (ii) if sent by overnight delivery service, when received at the
above stated addresses or when delivery is refused and (iii) if sent by
telecopier transmission, when such transmission is confirmed.
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SECTION 11.2. Delays; Partial Exercise of Remedies. No delay
or omission of the Agent or any Lender to exercise any right or remedy hereunder
shall impair any such right or operate as a waiver thereof. No single or partial
exercise by the Agent or any Lender of any right or remedy shall preclude any
other or further exercise thereof, or preclude any other right or remedy.
SECTION 11.3. Right of Setoff. In addition to and not in
limitation of all rights of offset that the Agent, any Lender or any of their
respective Affiliates may have under applicable law, and whether or not the
Agent has made any demand or the Obligations of the Borrowers have matured, the
Agent, the Lenders and their respective Affiliates shall have the right to set
off and apply any and all deposits (general or special, time or demand,
provisional or final, or any other type) at any time held and any other
Indebtedness at any time owing by the Agent, any of the Lenders or any of their
Affiliates to or for the credit or the account of any Borrower or any Borrower's
Affiliate against any and all of the Obligations. In the event that the Agent or
any Lender exercises any of its rights under this Section 11.3, the Agent or
such Lender shall provide notice to the Administrative Borrower of such
exercise, provided that the failure to give such notice shall not affect the
validity of the exercise of such rights.
SECTION 11.4. Indemnification; Reimbursement of Expenses of
Collection.
(a) Each Borrower hereby agrees that, whether or not any of
the transactions contemplated by this Agreement or the other Loan Documents are
consummated, such Borrower will indemnify, defend and hold harmless (on an
after-tax basis) the Agents and the Lenders, and their respective successors and
assigns and their respective directors, officers, agents, employees, advisors,
shareholders, attorneys and Affiliates (each, an "Indemnified Party") from and
against any and all losses, claims, damages, liabilities, deficiencies,
obligations, fines, penalties, actions (whether threatened or existing),
judgments, suits (whether threatened or existing) or expenses (including,
without limitation, reasonable fees and disbursements of counsel, experts,
consultants and other professionals) incurred by any of them (collectively,
"Claims")(except, in the case of each Indemnified Party, to the extent that any
Claim is determined in a final and non-appealable judgment by a court of
competent jurisdiction to have directly resulted from such Indemnified Party's
gross negligence or willful misconduct) arising out of or by reason of (i) any
litigation, investigation, claim or proceeding related to (A) this Agreement,
any other Loan Document or the transactions contemplated hereby or thereby, (B)
any actual or proposed use by a Borrower of the proceeds of the Loans, (C) the
issuance of any Letter of Credit or the acceptance or payment of any document or
draft presented to any
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issuer thereof or (D) the Agents' or any Lender's entering into this Agreement,
the other Loan Documents or any other agreements and documents relating hereto
(other than consequential damages and loss of anticipated profits or earnings),
including, without limitation, amounts paid in settlement, court costs and the
fees and disbursements of counsel incurred in connection with any such
litigation, investigation, claim or proceeding, (ii) any remedial or other
environmental response action taken or required to be taken by a Borrower in
connection with compliance by such Borrower, or any of its properties, with any
Environmental Laws and (iii) any pending, threatened or actual action, claim,
proceeding or suit by any shareholder or director of a Borrower or any actual or
purported violation of a Borrower's Governing Documents or any other agreement
or instrument to which a Borrower is a party or by which any of its properties
is bound. In addition, the Borrowers shall, upon demand, pay to the Agents all
costs and expenses incurred by the Agents (including the fees and disbursements
of counsel and other professionals) in connection with the preparation,
execution, delivery, administration, modification and amendment of the Loan
Documents, and pay to the Agents and each Lender all costs and expenses
(including the fees and disbursements of counsel and other professionals) paid
or incurred by the Agents or such Lender in (A) enforcing or defending its
rights under or in respect of this Agreement, the other Loan Documents or any
other document or instrument now or hereafter executed and delivered in
connection herewith, (B) collecting the Obligations or otherwise administering
this Agreement and (C) foreclosing or otherwise realizing upon the Collateral or
any part thereof. If and to the extent that the obligations of the Borrowers
hereunder are unenforceable for any reason, the Borrowers hereby agree to make
the maximum contribution to the payment and satisfaction of such obligations
that is permissible under applicable law.
(b) The Borrowers' obligations under Sections 4.6 and 4.7 and
this Section 11.4 shall survive any termination of this Agreement and the other
Loan Documents, the termination, expiration or Collateralization of all Letters
of Credit and the payment in full of the Obligations, and are in addition to,
and not in substitution of, any of the other Obligations.
SECTION 11.5. Amendments, Waivers and Consents. No amendment
or waiver of any provision of this Agreement or any other Loan Document, or
consent to any departure by the Borrowers therefrom, shall in any event be
effective unless the same shall be in writing and signed by the Borrowers and
the Required Lenders (or by the Agents on their behalf), without taking into
account the Commitments or Loans held by Defaulting Lenders, and then such
amendment, waiver or consent shall be effective only in the specific instance
and for the specific purpose for which given; provided, however, that no
amendment, waiver or consent shall, unless in writing and signed by the
Borrowers and all the
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Lenders (other than any Defaulting Lender), do any of the following at any time:
(a) change the number of Lenders that shall be required for the Lenders or any
of them to take any action hereunder; (b) amend the definition of "Required
Lenders"; (c) amend this Section 11.5; (d) reduce the amount of principal of, or
interest on, or the interest rate applicable to, the Loans or any fees or other
amounts payable hereunder; (e) postpone any date on which any payment of
principal of, or interest on, the Loans or any fees or other amounts payable
hereunder is required to be made; or (f) release any material portion of the
Collateral except as otherwise provided in this Agreement, or permit the
creation, incurrence, assumption or existence of any Lien on any item of
Collateral, provided, further that no amendment, waiver or consent shall, unless
in writing and signed by (i) a Lender, change the Pro Rata Share or increase the
Commitment of such Lender, and (ii) the Agents, in addition to the Lenders
required above, to take any such action that affects the rights or duties of the
Agents under this Agreement or any other Loan Document. Anything contained
herein to the contrary notwithstanding, the Agents are hereby authorized, on
behalf of the Lenders, to execute such documents as may be required to terminate
Liens on such Collateral as any Loan Party is authorized to sell, transfer or
otherwise dispose of in accordance with the terms hereof, provided that the
Administrative Borrower has requested such release of Liens by the Agents in
accordance with the terms hereof.
SECTION 11.6. Nonliability of Agents and Lenders. The
relationship among each Borrower and each Lender shall be solely that of
borrower and lender. Neither the Agents nor any Lender shall have any fiduciary
responsibilities to the Borrowers. Neither the Agents nor any Lender undertakes
any responsibility to the Borrowers to review or inform the Borrowers of any
matter in connection with any phase of the Borrowers' business or operations.
SECTION 11.7. Assignments and Participations.
(a) Borrower Assignment. None of the Borrowers shall assign
this Agreement or any of its rights or obligations hereunder without the prior
written consent of the Agent and the Required Lenders.
(b) Lender Assignments. Each Lender may assign to one or more
Eligible Assignees all or a portion of its rights and obligations under this
Agreement, the Notes and the other Loan Documents, with the consent of the Agent
(not to be unreasonably withheld), and upon execution and delivery to the Agent,
for its acceptance and recording in the Register, of an Assignment and
Acceptance, together with surrender of any Note or Notes subject to such
assignment and a processing and recordation fee payable to the Agent for its
account of US$3,500. No such assignment
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shall be for less than US$5,000,000 of the Commitments or Loans in the case of
an assignment by a U.S. Lender or less than US$1,000,000 of the Commitments or
Loans in the case of an assignment by a Cdn. Lender, in each case unless it is
to another Lender. Upon the execution and delivery to the Agent of an Assignment
and Acceptance and the payment of the recordation fee to the Agent, from and
after the date specified as the effective date in the Assignment and Acceptance
(the "Acceptance Date"), (x) the assignee thereunder shall be a party hereto,
and, to the extent that rights and obligations hereunder have been assigned to
it pursuant to such Assignment and Acceptance, such assignee shall have the
rights and obligations of a Lender hereunder and (y) the assignor thereunder
shall, to the extent that rights and obligations hereunder have been assigned by
it pursuant to such Assignment and Acceptance, relinquish its rights (other than
any rights it may have pursuant to Sections 4.6, 4.7 and 11.4 which shall
survive such assignment) and be released from its obligations under this
Agreement (and, in the case of an Assignment and Acceptance covering all or the
remaining portion of an assigning Lender's rights and obligations under this
Agreement, such Lender shall cease to be a party hereto).
(c) Agreements of Assignee. By executing and delivering an
Assignment and Acceptance, the assignee thereunder confirms and agrees as
follows: (i) other than as provided in such Assignment and Acceptance, the
assigning Lender makes no representation or warranty and assumes no
responsibility with respect to any statements, warranties or representations
made in or in connection with this Agreement or the execution, legality,
validity, enforceability, genuineness, sufficiency or value of this Agreement,
the Notes or any other Loan Documents, (ii) such assigning Lender makes no
representation or warranty and assumes no responsibility with respect to the
financial condition of any Loan Party or the performance or observance by any
Loan Party of any of its obligations under this Agreement or any other Loan
Document, (iii) such assignee confirms that it is an Eligible Assignee and has
received a copy of this Agreement, together with copies of the Financial
Statements referred to in Section 6.1(i), the Financial Statements delivered
pursuant to Section 7.1(k), if any, and such other documents and information as
it has deemed appropriate to make its own credit analysis and decision to enter
into such Assignment and Acceptance, (iv) such assignee will, independently and
without reliance upon the Agent, such assigning Lender or any other Lender and
based on such documents and information as it shall deem appropriate at the
time, continue to make its own credit decisions in taking or not taking action
under this Agreement, (v) such assignee appoints and authorizes the Agent to
take such action as agent on its behalf and to exercise such powers under this
Agreement as are delegated to the Agent by the terms hereof, together with such
powers as are reasonably incidental thereto and (vi) such assignee agrees that
it will perform in accordance with their terms all of the obligations which by
the terms of this Agreement are required to be performed by it as a Lender.
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(d) Agent's Register. The Agent shall maintain a register of
the names and addresses of the Lenders, their Commitments and the principal
amount of their Loans (the "Register"). The Agent shall also maintain a copy of
each Assignment and Acceptance delivered to and accepted by it and modify the
Register to give effect to each Assignment and Acceptance. The entries in the
Register shall be conclusive and binding for all purposes, absent manifest
error, and the Borrowers, 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
Agreement. The Register and copies of each Assignment and Acceptance shall be
available for inspection by the Borrowers or any Lender at any reasonable time
and from time to time upon reasonable prior notice. Upon its receipt of each
Assignment and Acceptance and surrender of the affected Note or Notes subject to
such assignment, the Agent will give prompt notice thereof to the Administrative
Borrower. Within five Business Days after its receipt of such notice, the
Borrowers shall execute and deliver to the Agent a new Note to the order of the
assignee in the amount of the applicable Commitment or Loans assumed by it and
to the assignor in the amount of the applicable Commitment or Loans retained by
it, if any. Such new Note or Notes shall re-evidence the indebtedness
outstanding under the surrendered Note or Notes and shall be in an aggregate
principal amount equal to the aggregate principal amount of such surrendered
Note or Notes and shall be dated as of the Effective Date. The Agent shall be
entitled to rely upon the Register exclusively for purposes of identifying the
Lenders hereunder.
(e) Lender Participations. Each Lender may sell participations
to one or more parties (each, a "Participant") in or to all or a portion of its
rights and obligations under this Agreement, the Notes and the other Loan
Documents. Notwithstanding a Lender's sale of a participation interest, such
Lender's obligations hereunder shall remain unchanged. The Borrowers, the Agent,
and the other Lenders shall continue to deal solely and directly with such
Lender. No Lender shall grant any Participant the right to approve any amendment
or waiver of this Agreement except to the extent such amendment or waiver would
(i) increase the Commitment of the Lender from which the Participant purchased
its participation interest; (ii) reduce the principal of, or rate or amount of
interest on, the Loans subject to such participation interest; (iii) postpone
any date fixed for any payment of principal of, or interest on, the Loans
subject to such participation interest; or (iv) release all or a substantial
portion of the Collateral, other than in each case when otherwise permitted
hereunder. To the extent permitted by applicable law, each Participant shall
also be entitled to the benefits of Section 11.3 as if it were a Lender,
provided that such Participant agrees to be subject to the last sentence of
Section 2.8(b) as if it were a Lender.
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(f) Securities Laws. Each Lender agrees that it will not make
any assignment hereunder in any manner or under any circumstances that would
require registration or qualification of, or filings in respect of, any Loan,
Note or other Obligation under the securities laws of the United States or of
any other jurisdiction.
(g) Information. In connection with their efforts to assign
their rights or obligations or sell participations pursuant to Sections 11.7(b)
and (e) hereof, the Agent and the Lenders may disclose any information they
have, now or in the future, with respect to the business of the Loan Parties to
prospective assignees or purchasers, provided that such disclosure is subject to
written confidentiality arrangements customary for assignment or participation
transactions of such type.
(h) Pledge to Federal Reserve Bank. Any Lender may at any time
pledge or assign a security interest in all or any portion of its rights under
this Agreement to secure obligations of such Lender, including any pledge or
assignment to secure obligations to a Federal Reserve Bank, and this Section
shall not apply to any such pledge or assignment of a security interest;
provided that no such pledge or assignment of a security interest shall release
a Lender from any of its obligations hereunder or substitute any such pledgee or
assignee for such Lender as a party hereto.
SECTION 11.8. Counterparts; Telecopied Signatures. This
Agreement and any waiver or amendment hereto may be executed in counterparts and
by the parties hereto in separate counterparts, each of which when so executed
and delivered shall be an original, but all of which shall together constitute
one and the same instrument. This Agreement and each of the other Loan Documents
may be executed and delivered by telecopier or other facsimile transmission all
with the same force and effect as if the same was a fully executed and delivered
original manual counterpart.
SECTION 11.9. Severability. In case any provision in or
obligation under this Agreement, any Note or any other Loan Document shall be
invalid, illegal or unenforceable in any jurisdiction, the validity, legality
and enforceability of the remaining provisions or obligations, or of such
provision or obligation in any other jurisdiction, shall not in any way be
affected or impaired thereby.
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SECTION 11.10. Maximum Rate. Notwithstanding anything to the
contrary contained elsewhere in this Agreement or in any other Loan Document,
the parties hereto hereby agree that all agreements between them under this
Agreement and the other Loan Documents, whether now existing or hereafter
arising and whether written or oral, are expressly limited so that in no
contingency or event whatsoever shall the amount paid, or agreed to be paid, to
the Agent or any Lender for the use, forbearance, or detention of the money
loaned to the Borrowers and evidenced hereby or thereby or for the performance
or payment of any covenant or obligation contained herein or therein, exceed the
maximum non-usurious interest rate, if any, that at any time or from time to
time may be contracted for, taken, reserved, charged or received on the
Obligations, under the laws of the State of New York (or the laws of any other
jurisdiction whose laws may be mandatorily applicable notwithstanding other
provisions of this Agreement and the other Loan Documents), or under applicable
federal laws which may presently or hereafter be in effect and which allow a
higher maximum non-usurious interest rate than under the laws of the State of
New York (or such other jurisdiction), in any case after taking into account, to
the extent permitted by applicable law, any and all relevant payments or charges
under this Agreement and the other Loan Documents executed in connection
herewith, and any available exemptions, exceptions and exclusions (the "Highest
Lawful Rate"). If due to any circumstance whatsoever, fulfillment of any
provision of this Agreement or any of the other Loan Documents at the time
performance of such provision shall be due shall exceed the Highest Lawful Rate,
then, automatically, the obligation to be fulfilled shall be modified or reduced
to the extent necessary to limit such interest to the Highest Lawful Rate, and
if from any such circumstance any Lender should ever receive anything of value
deemed interest by applicable law which would exceed the Highest Lawful Rate,
such excessive interest shall be applied to the reduction of the principal
amount then outstanding hereunder or on account of any other then outstanding
Obligations and not to the payment of interest, or if such excessive interest
exceeds the principal unpaid balance then outstanding hereunder and such other
then outstanding Obligations, such excess shall be refunded to the Borrowers.
All sums paid or agreed to be paid to the Lenders for the use, forbearance, or
detention of the Obligations and other Indebtedness of the Borrowers to the
Lenders shall, to the extent permitted by applicable law, be amortized,
prorated, allocated and spread throughout the full term of such Indebtedness,
until payment in full thereof, so that the actual rate of interest on account of
all such Indebtedness does not exceed the Highest Lawful Rate throughout the
entire term of such Indebtedness. The terms and provisions of this Section shall
control every other provision of this Agreement, the other Loan Documents and
all other agreements among the parties hereto.
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SECTION 11.11. Administrative Borrower; Nature of Borrowers'
Liabilities; Equivalent Amounts.
(a) Each Borrower hereby appoints the Administrative Borrower
irrevocably for the term of this Agreement, to act as its agent,
attorney-in-fact and legal representative in all matters pertaining to the
administration of this Agreement and the other Loan Documents including, without
limitation, to execute and deliver to the Agent or any Lender any notices,
certificates or other documents permitted or required to be executed and
delivered, and to take any and all other actions as are permitted or required to
be taken, under or in connection with the Loan Documents. Any such action taken
by the Administrative Borrower shall bind each of the Borrowers.
(b) The Borrowers' liabilities in respect of the Obligations
shall at all times be joint and several notwithstanding that, from time to time,
any one Borrower may use or derive the exclusive benefit of any Loan or the
proceeds thereof or of any Letter of Credit, provided that neither the Cdn.
Borrower nor any Foreign Subsidiary shall be liable for, and none of the assets
of the Cdn. Borrower or any Foreign Subsidiary shall serve as direct or indirect
security for, any of the U.S. Loans or the U.S. Letters of Credit, or any
interest thereon or fees related thereto.
(c) All monetary amounts expressed in this Agreement or any
other Loan Document in U.S. Dollars that may, as the context permits, include
Cdn. Dollars shall, for purposes of such Cdn. Dollar amounts, be computed at the
Equivalent Amount thereof in U.S. Dollars.
SECTION 11.12. Entire Agreement; Successors and Assigns. This
Agreement and the other Loan Documents constitute the entire agreement among the
parties, supersede any prior written and verbal agreements among them, and shall
bind and benefit the parties and their respective successors and permitted
assigns.
SECTION 11.13. LIMITATION OF LIABILITY. NEITHER THE AGENTS NOR
ANY LENDER SHALL HAVE ANY LIABILITY TO ANY BORROWER (WHETHER SOUNDING IN TORT,
CONTRACT, OR OTHERWISE) FOR LOSSES SUFFERED BY ANY BORROWER IN CONNECTION WITH,
ARISING OUT OF, OR IN ANY WAY RELATED TO THE TRANSACTIONS OR RELATIONSHIPS
CONTEMPLATED BY THIS AGREEMENT, OR ANY ACT, OMISSION OR EVENT OCCURRING IN
CONNECTION THEREWITH, UNLESS IT IS DETERMINED BY A FINAL AND NONAPPEALABLE
JUDGMENT OR COURT ORDER BINDING ON THE AGENTS OR SUCH LENDER THAT THE LOSSES
WERE THE RESULT OF ACTS OR OMISSIONS CONSTITUTING GROSS NEGLIGENCE OR WILLFUL
MISCONDUCT OF THE AGENTS OR SUCH LENDER. EACH BORROWER HEREBY WAIVES ALL FUTURE
CLAIMS AGAINST EACH LENDER FOR SPECIAL, INDIRECT, CONSEQUENTIAL OR PUNITIVE
DAMAGES.
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SECTION 11.14. GOVERNING LAW. THE VALIDITY, INTERPRETATION AND
ENFORCEMENT OF THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS AND ANY DISPUTE
ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT OR ANY OF THE OTHER LOAN
DOCUMENTS, WHETHER SOUNDING IN CONTRACT, TORT, EQUITY OR OTHERWISE, SHALL BE
GOVERNED BY THE INTERNAL LAWS (AS OPPOSED TO THE CONFLICTS OF LAW PROVISIONS
OTHER THAN SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW) AND DECISIONS
OF THE STATE OF NEW YORK.
SECTION 11.15. SUBMISSION TO JURISDICTION. ALL DISPUTES
BETWEEN OR AMONG A BORROWER, THE AGENTS AND A LENDER, WHETHER SOUNDING IN
CONTRACT, TORT, EQUITY OR OTHERWISE, SHALL BE RESOLVED ONLY BY STATE AND FEDERAL
COURTS LOCATED IN NEW YORK, NEW YORK AND THE COURTS TO WHICH AN APPEAL THEREFROM
MAY BE TAKEN; PROVIDED, HOWEVER, THAT THE AGENTS OR A LENDER SHALL HAVE THE
RIGHT, TO THE EXTENT PERMITTED BY APPLICABLE LAW, TO PROCEED AGAINST EACH
BORROWER OR ITS PROPERTY IN ANY LOCATION SELECTED BY THE AGENTS OR SUCH LENDER
TO ENABLE THE AGENTS TO REALIZE ON SUCH PROPERTY, OR TO ENFORCE A JUDGMENT OR
OTHER COURT ORDER IN FAVOR OF THE AGENTS OR SUCH LENDER. EACH BORROWER AGREES
THAT IT WILL NOT ASSERT ANY PERMISSIVE COUNTERCLAIMS, SETOFFS OR CROSS-CLAIMS IN
ANY PROCEEDING BROUGHT BY THE AGENTS. EACH BORROWER WAIVES ANY OBJECTION THAT IT
MAY HAVE TO THE LOCATION OF THE COURT IN WHICH THE AGENTS OR A LENDER HAVE
COMMENCED A PROCEEDING, INCLUDING, WITHOUT LIMITATION, ANY OBJECTION TO THE
LAYING OF VENUE OR BASED ON FORUM NON CONVENIENS.
SECTION 11.16. SERVICE OF PROCESS. THE BORROWERS HEREBY
IRREVOCABLY DESIGNATE CSC UNITED STATES CORPORATION, 80 STATE STREET, 6TH FLOOR,
ALBANY, NEW YORK 12207, AS THE DESIGNEE AND AGENT OF THE BORROWERS TO RECEIVE,
FOR AND ON BEHALF OF EACH BORROWER, SERVICE OF PROCESS IN ANY LEGAL ACTION OR
PROCEEDING WITH RESPECT TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT. IT IS
UNDERSTOOD THAT A COPY OF SUCH PROCESS SERVED ON SUCH AGENT AT ITS ADDRESS WILL
BE PROMPTLY FORWARDED BY MAIL TO THE ADMINISTRATIVE BORROWER, BUT THE FAILURE OF
THE ADMINISTRATIVE BORROWER TO RECEIVE SUCH COPY SHALL NOT AFFECT IN ANY WAY THE
SERVICE OF SUCH PROCESS. NOTHING HEREIN SHALL AFFECT THE RIGHT OF THE AGENT OR
ANY LENDER TO SERVE LEGAL PROCESS IN ANY OTHER MANNER PERMITTED BY LAW.
SECTION 11.17. JURY TRIAL. EACH OF THE PARTIES HERETO HEREBY
WAIVES TO THE FULLEST EXTENT PERMITTED BY LAW ANY RIGHT TO A TRIAL BY JURY IN
ANY ACTION OR PROCEEDING BASED UPON, ARISING OUT OF, OR IN ANY WAY RELATING TO
(I) THIS AGREEMENT; (II) ANY OTHER LOAN DOCUMENT OR OTHER PRESENT OR FUTURE
INSTRUMENT OR AGREEMENT BETWEEN OR AMONG A BORROWER, THE AGENTS AND A LENDER; OR
(III) ANY CONDUCT, ACTS OR OMISSIONS OF A BORROWER, THE AGENTS, A LENDER OR ANY
OF THEIR RESPECTIVE DIRECTORS, OFFICERS, EMPLOYEES, AGENTS, ATTORNEYS OR OTHER
AFFILIATES, IN EACH CASE WHETHER SOUNDING IN CONTRACT OR TORT OR OTHERWISE.
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SECTION 11.18. JUDGMENT.
(a) IF FOR THE PURPOSES OF OBTAINING JUDGMENT IN ANY COURT IT
IS NECESSARY TO CONVERT A SUM DUE HEREUNDER IN DOLLARS INTO ANOTHER CURRENCY,
THE PARTIES HERETO AGREE, TO THE FULLEST EXTENT THAT THEY MAY EFFECTIVELY DO SO,
THAT THE RATE OF EXCHANGE USED SHALL BE THAT AT WHICH IN ACCORDANCE WITH NORMAL
BANKING PROCEDURES THE AGENT COULD PURCHASE DOLLARS WITH SUCH OTHER CURRENCY AT
NEW YORK, NEW YORK ON THE BUSINESS DAY PRECEDING THAT ON WHICH FINAL JUDGMENT IS
GIVEN.
(b) THE OBLIGATION OF THE BORROWERS IN RESPECT OF ANY SUM DUE
FROM THEM TO ANY LENDER OR THE AGENT HEREUNDER SHALL, NOTWITHSTANDING ANY
JUDGMENT IN A CURRENCY OTHER THAN DOLLARS, BE DISCHARGED ONLY TO THE EXTENT THAT
ON THE BUSINESS DAY FOLLOWING RECEIPT BY SUCH LENDER OR THE AGENT (AS THE CASE
MAY BE) OF ANY SUM ADJUDGED TO BE SO DUE IN SUCH OTHER CURRENCY SUCH LENDER OR
THE AGENT (AS THE CASE MAY BE) MAY IN ACCORDANCE WITH NORMAL BANKING PROCEDURES
PURCHASE DOLLARS WITH SUCH OTHER CURRENCY. IF THE DOLLARS SO PURCHASED ARE LESS
THAN THE SUM ORIGINALLY DUE TO SUCH LENDER OR THE AGENT (AS THE CASE MAY BE) IN
DOLLARS, THE BORROWERS AGREE, AS A SEPARATE OBLIGATION AND NOTWITHSTANDING ANY
SUCH JUDGMENT, TO INDEMNIFY SUCH LENDER OR THE AGENT (AS THE CASE MAY BE)
AGAINST SUCH LOSS, AND IF THE DOLLARS SO PURCHASED EXCEED THE SUM ORIGINALLY DUE
TO ANY LENDER OR THE AGENT (AS THE CASE MAY BE) IN DOLLARS, SUCH LENDER OR THE
AGENT (AS THE CASE MAY BE) AGREES TO REMIT TO THE BORROWERS SUCH EXCESS.
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IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed by its (or its general partner's) proper and duly
authorized officer as of the date first set forth above.
U.S. BORROWERS
GRANT PRIDECO, LP
By: Grant Prideco Holding, LLC,
its general partner
By: /s/ PHILIP A. CHOYCE
---------------------------------
Philip A. Choyce
Vice President
XL SYSTEMS, INC.
By: /s/ PHILIP A. CHOYCE
---------------------------------
Philip A. Choyce
Vice President
TEXAS ARAI, INC.
By: /s/ PHILIP A. CHOYCE
---------------------------------
Philip A. Choyce
Vice President
TUBE-ALLOY CORPORATION
By: /s/ PHILIP A. CHOYCE
---------------------------------
Philip A. Choyce
Vice President
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<PAGE> 121
DRILL TUBE INTERNATIONAL, INC.
By: /s/ PHILIP A. CHOYCE
---------------------------------
Philip A. Choyce
Vice President
PETRO-DRIVE, INC.
By: /s/ PHILIP A. CHOYCE
---------------------------------
Philip A. Choyce
Vice President
CDN. BORROWER
GRANT PRIDECO CANADA LTD.
By: /s/ PHILIP A. CHOYCE
---------------------------------
Philip A. Choyce
Secretary
U.S. LENDER
TRANSAMERICA BUSINESS CREDIT
CORPORATION
By: /s/ STEVEN R. FISCHER
---------------------------------
Steven R. Fischer
Executive Vice President
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CDN. LENDER
TRANSAMERICA COMMERCIAL FINANCE
CORPORATION, CANADA
By: Transamerica Business Credit
Corporation, as Attorney-in-Fact
By: /s/ STEVEN R. FISCHER
---------------------------------
Stephen R. Fischer
Executive Vice President
AGENT
TRANSAMERICA BUSINESS CREDIT
CORPORATION
By: /s/ STEVEN R. FISCHER
---------------------------------
Steven R. Fischer
Executive Vice President
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<PAGE> 1
GUARANTY
GUARANTY dated as of April 14, 2000 (this "Guaranty") made by
Grant Prideco, Inc. ("GPI") and each of its direct and indirect subsidiaries
specified in Schedule 1 (each a "Guarantor," and collectively, the "Guarantors")
in favor of Transamerica Business Credit Corporation, as agent for the Lenders
referred to below (in such capacity, the "Agent").
W I T N E S S E T H :
WHEREAS, the subsidiaries of GPI specified in Schedule 2 (the
"Borrowers"), the lenders party thereto (the "Lenders") and the Agent are
parties to the Loan and Security Agreement dated as of even date herewith (as
amended, supplemented or otherwise modified from time to time, the "Loan
Agreement"; capitalized terms used herein and not otherwise defined herein shall
have the meanings assigned to such terms in the Loan Agreement) pursuant to
which the Lenders have agreed to make Loans to, and to provide for the issuance
of Letters of Credit for the account of, the Borrowers, subject to the terms and
conditions set forth in the Loan Agreement;
WHEREAS, each Guarantor is an Affiliate of each Borrower, has
an interest in the financial affairs and well being of each Borrower and will
benefit from the Loan Agreement; and
WHEREAS, it is a condition precedent to the effectiveness of
the Loan Agreement that the Guarantors shall have executed and delivered this
Guaranty in favor of the Agent for the benefit of the Lenders.
NOW, THEREFORE, in consideration of the promises contained
herein and to induce the Agent and the Lenders to enter into the Loan Agreement,
and to make Loans to, and to provide for the issuance of Letters of Credit for
the account of, the Borrowers thereunder, the Guarantors hereby agree as
follows:
<PAGE> 2
SECTION 1. GUARANTY.
(a) Each Guarantor, jointly and severally, hereby
unconditionally and irrevocably (i) guarantees to the Agent for the benefit of
the Lenders the prompt and complete payment and performance when due (whether at
stated maturity, by acceleration or otherwise) of all of the Obligations and
(ii) agrees to pay all costs and expenses incurred by the Agent (including the
fees and disbursements of counsel and other professionals) in connection with
(a) enforcing or defending its rights under or in respect of this Guaranty or
any other document or instrument now or hereafter executed and delivered in
connection herewith, or (b) collecting the Obligations or otherwise
administering this Guaranty.
(b) Each Guarantor hereby agrees that all payments
hereunder will be paid to the Agent for the benefit of the Lenders without
setoff, deduction or counterclaim at the office of the Agent located at the
address specified in Section 9 in U.S. Dollars, in the case of the U.S. Loans
and the other Obligations of the U.S. Borrowers, and in the same currency as the
currency in which the Cdn. Loans were made (U.S. Dollars or Cdn. Dollars), in
the case of the Cdn. Loans and the other Obligations of the Cdn. Borrower, in
each case in immediately available funds.
(c) Anything contained in this Guaranty to the
contrary notwithstanding, the amount of the obligations payable by any of the
Guarantors under this Guaranty shall be the aggregate amount of the Obligations
unless a court of competent jurisdiction adjudicates such Guarantor's
obligations to be invalid or unenforceable for any reason (including, without
limitation, because of any applicable state or federal law relating to
fraudulent conveyances or transfers), in which case the amount of the
obligations payable by such Guarantor hereunder shall be limited to the maximum
amount that could be guaranteed by such Guarantor without rendering such
Guarantor's obligations under this Guaranty invalid or unenforceable under such
applicable law.
SECTION 2. GUARANTY ABSOLUTE. Each Guarantor, jointly and
severally, guarantees that the Obligations will be paid strictly in accordance
with the terms of the Loan Agreement, the Notes and the other Loan Documents
regardless of any law, regulation or order now or hereafter in effect in any
jurisdiction affecting any of such terms or the rights of the Agent or any of
the Lenders with respect thereto. The liability of each of the Guarantors under
this Guaranty shall be absolute and unconditional irrespective of:
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<PAGE> 3
(a) any lack of validity, regularity or
enforceability of the Loan Agreement or any other Loan Document;
(b) any lack of validity, regularity or
enforceability of this Guaranty;
(c) any change in the time, manner or place of
payment of, or in any other term of, all or any of the Obligations, or any other
amendment or waiver of or any consent to departure from the Loan Agreement or
any other Loan Document;
(d) any exchange, release or non-perfection of any
security interest in any collateral, or any release or amendment or waiver of or
consent to departure from any other guaranty, for all or any of the Obligations;
(e) any failure on the part of the Agent, any Lender
or any other Person to exercise, or any delay in exercising, any right under the
Loan Agreement or any other Loan Document; or
(f) any other circumstance which might otherwise
constitute a defense available to, or a discharge of, any of the Borrowers, any
Guarantor or any other guarantor with respect to the Obligations (including,
without limitation, all defenses based on suretyship or impairment of
collateral, and all defenses that the Borrowers may assert to the repayment of
the Obligations, including, without limitation, failure of consideration, breach
of warranty, payment, statute of frauds, bankruptcy, lack of legal capacity,
statute of limitations, lender liability, accord and satisfaction, and usury),
this Guaranty and the obligations of the Guarantors under this Guaranty.
Each Guarantor hereby agrees that if any Borrower or any other guarantor of all
or a portion of the Obligations is the subject of a bankruptcy proceeding under
the Bankruptcy Code, it will not assert the pendency of such proceeding or any
order entered therein as a defense to the timely payment of the Obligations.
Each Guarantor hereby waives notice of or proof of reliance by the Agent or the
Lenders upon this Guaranty, and the Obligations shall conclusively be deemed to
have been created, contracted, incurred, renewed, extended, amended or reduced
(as to the Borrowers only) in reliance upon this Guaranty.
SECTION 3. WAIVER. Each Guarantor hereby waives (a)
promptness, diligence, notice of acceptance and any other notice with respect to
any of the Obligations and any of the amounts payable under Section 1(a)(ii) and
(b) any requirement that the Agent or any Lender protect, secure, perfect or
insure any Lien or any property subject thereto or exhaust any right to
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<PAGE> 4
take any action against the Borrowers or any other Person or any
collateral.
SECTION 4. SUBROGATION. Each Guarantor hereby agrees that it
will not exercise or assert any rights or claims which it may acquire against
the Borrowers or any other guarantor of all or part of the Obligations that
arise from the existence, payment, performance or enforcement of its obligations
hereunder (including, without limitation, any rights or claims of subrogation,
reimbursement or contribution), until the termination of the Commitments, the
indefeasible payment in full in cash of the Obligations and the termination,
Collateralization or expiration of all Letters of Credit. If any amount shall be
paid to any Guarantor in violation of the immediately preceding sentence, such
amount shall be held in trust for the benefit of the Agent and shall forthwith
be paid to the Agent for the benefit of the Lenders to be credited and applied
against the Obligations and all other amounts payable under Section 1(a)(ii),
whether matured or unmatured, in such order as the Agent may determine. Nothing
contained herein shall prohibit, limit or restrict intercompany loan repayments
and prepayments, intercompany dividends and other intercompany transfers to the
extent not prohibited under the Loan Agreement and this Guaranty.
SECTION 5. REPRESENTATIONS AND WARRANTIES.
(a) The representations and warranties made by the
Borrowers in the Loan Agreement are true and correct insofar as such
representations and warranties relate to such Guarantor in its capacity as a
Loan Party or a Designated Affiliate.
(b) Each Guarantor has, independently and without
reliance upon the Agent or any of the Lenders and based on such documents and
information as it has deemed appropriate, made its own credit analysis and
decision to enter into this Guaranty.
SECTION 6. COVENANTS. Each Guarantor covenants and agrees
that, until the termination of the Commitments, the payment in full of the
Obligations and the termination, Collateralization or expiration of all Letters
of Credit, such Guarantor will perform, observe and otherwise comply with all of
the terms, covenants and agreements contained in the Loan Agreement insofar as
such terms, covenants and agreements relate to such Guarantor in its capacity as
a Loan Party or a Designated Affiliate.
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<PAGE> 5
SECTION 7. RIGHT OF SETOFF. In addition to and not in
limitation of all rights of offset that the Agent, any Lender or any of their
respective Affiliates may have under applicable law, and whether or not the
Agent has made any demand or the obligations of the Guarantors have matured, the
Agent, the Lenders and their respective Affiliates shall have the right to set
off and apply any and all deposits (general or special, time or demand,
provisional or final, or any other type) at any time held and any other
Indebtedness at any time owing by the Agent, any of the Lenders or any of their
Affiliates to or for the credit or the account of any Guarantor or any
Guarantor's Affiliate against any and all of the Obligations. In the event that
the Agent or any Lender exercises any of its rights under this Section 7, the
Agent or such Lender shall provide notice to the Administrative Borrower of such
exercise, provided that the failure to give such notice shall not affect the
validity of the exercise of such rights.
SECTION 8. SURVIVAL OF PROVISIONS. All representations,
warranties and covenants made by each Guarantor in this Guaranty shall survive
the execution and delivery hereof and the closing of the transactions
contemplated hereby.
SECTION 9. NOTICES. All notices and other communications
hereunder shall be in writing and sent by certified or registered mail, return
receipt requested, by overnight delivery service, with all charges prepaid, or
by telecopier followed by a hard copy sent by regular mail, if to the Agent,
then to Transamerica Business Credit Corporation, 555 Theodore Fremd Avenue,
Suite C-301, Rye, New York 10580, Telecopy: (914) 921-0110, Attn.: Mr. Steven R.
Fischer, Executive Vice President, with a copy to Transamerica Business Credit
Corporation, 9399 West Higgins Road, Suite 600, Rosemont, Illinois 60018,
Telecopy: (847) 685-1143, Attn.: General Counsel, and if to a Guarantor, then to
such Guarantor at Grant Prideco, Inc., 1450 Lake Robbins Drive, Suite 600, The
Woodlands, Texas 77380, Telecopy: (281) 297-8688, Attn.: Ms. Frances R. Powell
and Philip A. Choyce, Esq., with a copy to Fulbright & Jaworski, L.L.P., 1301
McKinney, Suite 5100, Houston, Texas 77010-3095, Telecopy: (713) 651-5246, Attn:
Joshua P. Agrons, Esq., or in each case, to such other address as the Guarantors
or the Agent may specify to the other party in the manner required hereunder.
All such notices and correspondence shall be deemed given (i) if sent by
certified or registered mail, three Business Days after being postmarked, (ii)
if sent by overnight delivery service, when received at the above stated
addresses or when delivery is refused and (iii) if sent by telecopier
transmission, when such transmission is confirmed.
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<PAGE> 6
SECTION 10. AMENDMENTS, WAIVERS AND CONSENTS. No amendment or
waiver of any provision of this Guaranty, or consent to any departure by any
Guarantor therefrom, shall in any event be effective unless the same shall be in
writing and signed by the Agent, and then such amendment, waiver or consent
shall be effective only in the specific instance and for the specific purpose
for which given.
SECTION 11. DELAYS; PARTIAL EXERCISE OF REMEDIES. No delay or
omission of the Agent to exercise any right or remedy hereunder shall impair any
such right or operate as a waiver thereof. No single or partial exercise by the
Agent of any right or remedy shall preclude any other or further exercise
thereof, or preclude any other right or remedy.
SECTION 12. COUNTERPARTS; TELECOPIED SIGNATURES. This Guaranty
and any waiver or amendment hereto may be executed in counterparts and by the
Guarantors in separate counterparts, each of which when so executed and
delivered shall be an original, but all of which shall together constitute one
and the same instrument. This Guaranty may be executed and delivered by
telecopier or other facsimile transmission all with the same force and effect as
if the same was a fully executed and delivered original manual counterpart.
SECTION 13. SEVERABILITY. In case any provision in or
obligation under this Guaranty shall be invalid, illegal or unenforceable in any
jurisdiction, the validity, legality and enforceability of the remaining
provisions or obligations, or of such provision or obligation in any other
jurisdiction, shall not in any way be affected or impaired thereby.
SECTION 14. INTERPRETATION. All terms not defined herein or in
the Loan Agreement shall have the meaning set forth in the Code, except where
the context otherwise requires. To the extent a term or provision of this
Guaranty conflicts with the Loan Agreement and is not addressed herein with more
specificity, the Loan Agreement shall control with respect to the subject matter
of such term or provision.
SECTION 15. CONTINUING GUARANTY; ASSIGNMENTS OF GUARANTEED
DEBT. This Guaranty is a continuing guaranty and shall (a) remain in full force
and effect until released in accordance herewith, (b) be binding upon each
Guarantor and its successors and assigns, and (c) inure, together with the
rights and remedies of the Agent hereunder, to the benefit of the Agent and its
successors and assigns. Without limiting the generality of the foregoing clause
(c), the Agent may, in accordance with the terms of the Loan Agreement, assign
or otherwise transfer all or any portion of its rights and obligations under the
Loan Agreement to any other Person, and such other Person shall
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<PAGE> 7
thereupon become vested with all the benefits in respect hereof granted to the
Agent herein or otherwise, in each case as provided in the Loan Agreement.
SECTION 16. REINSTATEMENT. To the extent permitted by law,
this Guaranty shall continue to be effective or be reinstated if at any time any
amount received by the Agent in respect of the Obligations is rescinded or must
otherwise be restored or returned by the Agent upon the occurrence or during the
pendency of any bankruptcy, reorganization or other similar proceeding
applicable to a Guarantor, or upon or during the occurrence of any dissolution,
liquidation or winding up of a Guarantor, all as though such payments had not
been made.
SECTION 17. ADDITIONAL GUARANTORS. Under (and subject to all
the terms and restrictions set forth in) Section 7.2(l) of the Loan Agreement,
certain Subsidiaries of the Borrowers that are not in existence or otherwise are
not Guarantors on the date of the Loan Agreement are required to become
borrowers under the Loan Agreement or to enter into this Guaranty, all as more
specifically set forth therein. Upon execution and delivery by the Agent and
such a Subsidiary of an instrument substantially in the form of Annex 1 hereto,
such Subsidiary shall become a Guarantor hereunder with the same force and
effect as any other Guarantor herein and such Subsidiary shall automatically be
deemed to be added to the Guaranty without any further action. The execution and
delivery of any such instruments shall not require the consent of the Borrowers
or any then existing Guarantor hereunder. The rights and obligations of each
then existing Guarantor shall remain in full force and effect notwithstanding
the addition of any new Guarantor as a party to this Guaranty.
SECTION 18. ENTIRE AGREEMENT; SUCCESSORS AND ASSIGNS. This
Guaranty constitutes the entire agreement among the parties, supersedes any
prior written and verbal agreements among them, and shall bind and benefit the
parties and their respective successors and permitted assigns.
SECTION 19. GOVERNING LAW. THE VALIDITY, INTERPRETATION AND
ENFORCEMENT OF THIS GUARANTY AND ANY DISPUTE ARISING OUT OF OR IN CONNECTION
WITH THIS GUARANTY, WHETHER SOUNDING IN CONTRACT, TORT, EQUITY OR OTHERWISE,
SHALL BE GOVERNED BY THE INTERNAL LAWS (AS OPPOSED TO THE CONFLICTS OF LAW
PROVISIONS OTHER THAN SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW)
AND DECISIONS OF THE STATE OF NEW YORK.
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<PAGE> 8
SECTION 20. SUBMISSION TO JURISDICTION. ALL DISPUTES BETWEEN
ANY GUARANTOR AND THE AGENT, WHETHER SOUNDING IN CONTRACT, TORT, EQUITY OR
OTHERWISE, SHALL BE RESOLVED ONLY BY STATE AND FEDERAL COURTS LOCATED IN NEW
YORK, NEW YORK, AND THE COURTS TO WHICH AN APPEAL THEREFROM MAY BE TAKEN;
PROVIDED, HOWEVER, THAT THE AGENT ON BEHALF OF THE LENDERS SHALL HAVE THE RIGHT,
TO THE EXTENT PERMITTED BY APPLICABLE LAW, TO PROCEED AGAINST ANY GUARANTOR IN
ANY LOCATION REASONABLY SELECTED BY THE AGENT TO ENFORCE A JUDGMENT OR OTHER
COURT ORDER IN FAVOR OF THE AGENT. EACH GUARANTOR AGREES THAT IT WILL NOT ASSERT
ANY PERMISSIVE COUNTERCLAIMS, SETOFFS OR CROSS-CLAIMS IN ANY PROCEEDING BROUGHT
BY THE AGENT. EACH GUARANTOR WAIVES ANY OBJECTION THAT IT MAY HAVE TO THE
LOCATION OF THE COURT IN WHICH THE AGENT HAS COMMENCED A PROCEEDING, INCLUDING,
WITHOUT LIMITATION, ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON FORUM NON
CONVENIENS.
SECTION 21. SERVICE OF PROCESS. EACH GUARANTOR HEREBY
IRREVOCABLY DESIGNATES CSC UNITED STATES CORPORATION, 80 STATE STREET, 6TH
FLOOR, ALBANY, NEW YORK 12207, AS THE DESIGNEE AND AGENT OF SUCH GUARANTOR TO
RECEIVE, FOR AND ON BEHALF OF SUCH GUARANTOR, SERVICE OF PROCESS IN ANY LEGAL
ACTION OR PROCEEDING WITH RESPECT TO THIS GUARANTY. IT IS UNDERSTOOD THAT A COPY
OF SUCH PROCESS SERVED ON SUCH AGENT AT ITS ADDRESS WILL BE PROMPTLY FORWARDED
BY MAIL TO THE GUARANTORS, BUT THE FAILURE OF THE GUARANTORS TO RECEIVE SUCH
COPY SHALL NOT AFFECT IN ANY WAY THE SERVICE OF SUCH PROCESS. NOTHING HEREIN
SHALL AFFECT THE RIGHT OF THE AGENT TO SERVE LEGAL PROCESS IN ANY OTHER MANNER
PERMITTED BY LAW.
SECTION 22. JURY TRIAL. EACH OF THE PARTIES HERETO HEREBY
WAIVES TO THE FULLEST EXTENT PERMITTED BY LAW ANY RIGHT TO A TRIAL BY JURY IN
ANY ACTION OR PROCEEDING BASED UPON, ARISING OUT OF, OR IN ANY WAY RELATING TO
(I) THIS GUARANTY OR (II) ANY CONDUCT, ACTS OR OMISSIONS OF A GUARANTOR, THE
AGENT OR ANY OF THEIR RESPECTIVE DIRECTORS, OFFICERS, EMPLOYEES, AGENTS,
ATTORNEYS OR OTHER AFFILIATES, IN EACH CASE WHETHER SOUNDING IN CONTRACT OR TORT
OR OTHERWISE.
SECTION 23. LIMITATION OF LIABILITY. THE AGENT SHALL HAVE NO
LIABILITY TO ANY GUARANTOR (WHETHER SOUNDING IN TORT, CONTRACT, OR OTHERWISE)
FOR LOSSES SUFFERED BY SUCH GUARANTOR IN CONNECTION WITH, ARISING OUT OF, OR IN
ANY WAY RELATED TO THE TRANSACTIONS OR RELATIONSHIPS CONTEMPLATED BY THIS
GUARANTY, OR ANY ACT, OMISSION OR EVENT OCCURRING IN CONNECTION THEREWITH,
UNLESS IT IS DETERMINED BY A FINAL AND NONAPPEALABLE JUDGMENT OR COURT ORDER
BINDING ON THE AGENT THAT THE LOSSES WERE THE RESULT OF ACTS OR OMISSIONS
CONSTITUTING GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF THE AGENT. THE GUARANTORS
HEREBY WAIVE ALL FUTURE CLAIMS AGAINST THE AGENT FOR SPECIAL, INDIRECT,
CONSEQUENTIAL OR PUNITIVE DAMAGES UNLESS RESULTING FROM THE GROSS NEGLIGENCE OR
WILLFUL MISCONDUCT OF THE AGENT.
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<PAGE> 9
IN WITNESS WHEREOF, each Guarantor has caused this Guaranty to
be executed by its (or its managing member's) proper and duly authorized officer
as of the date first set forth above.
GRANT PRIDECO, INC.
By:/s/ PHILIP A. CHOYCE
------------------------------------------
Philip A. Choyce
Vice President
CHANNELVIEW REAL PROPERTY, INC.
By:/s/ PHILIP A. CHOYCE
------------------------------------------
Philip A. Choyce
Vice President
XL SYSTEMS INTERNATIONAL, INC.
By:/s/ PHILIP A. CHOYCE
------------------------------------------
Philip A. Choyce
Vice President
XLS HOLDING, INC.
By:/s/ PHILIP A. CHOYCE
------------------------------------------
Philip A. Choyce
Vice President
TA INDUSTRIES, INC.
By:/s/ PHILIP A. CHOYCE
------------------------------------------
Philip A. Choyce
Vice President
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<PAGE> 10
TUBE-ALLOY CAPITAL CORPORATION
By:/s/ PHILIP A. CHOYCE
------------------------------------------
Philip A. Choyce
Vice President
TUBE-ALLOY CORPORATION INTERNATIONAL
By:/s/ PHILIP A. CHOYCE
------------------------------------------
Philip A. Choyce
Vice President
PETROLEUM EQUIPMENT SUPPLY COMPANY
By:/s/ PHILIP A. CHOYCE
------------------------------------------
Philip A. Choyce
Vice President
GRANT AUSTRIA, INC.
By:/s/ PHILIP A. CHOYCE
------------------------------------------
Philip A. Choyce
Vice President
GRANT PRIDECO HOLDING, LLC
By:/s/ PHILIP A. CHOYCE
------------------------------------------
Philip A. Choyce
Vice President
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<PAGE> 11
GRANT PRIDECO USA, LLC
By:/s/ LINDA S. BUBACZ
------------------------------------------
Name: Linda S. Bubacz
Title: Vice President
GRANT PRIDECO TECHNOLOGY, INC.
By:/s/ LINDA S. BUBACZ
------------------------------------------
Name: Linda S. Bubacz
Title: Vice President
-11-
<PAGE> 1
PLEDGE AGREEMENT
PLEDGE AGREEMENT dated as of April 14, 2000 (this "Agreement") made by
Grant Prideco, Inc. ("GPI") and each of its direct and indirect subsidiaries
specified as a "pledgor" in Schedules 1 and 2 (each a "Pledgor," and
collectively, the "Pledgors"), in favor of Transamerica Business Credit
Corporation, as agent for the Lenders referred to below (the "Pledgee").
W I T N E S S E T H :
WHEREAS, the subsidiaries of GPI specified in Schedule 3 (the "Borrowers"),
the lenders party thereto (the "Lenders") and the Pledgee are parties to the
Loan and Security Agreement dated as of even date herewith (as amended,
supplemented or otherwise modified from time to time, the "Loan Agreement";
capitalized terms used herein and not otherwise defined herein shall have the
meanings assigned to such terms in the Loan Agreement) pursuant to which the
Lenders have agreed to make Loans to, and to provide for the issuance of Letters
of Credit for the account of, the Borrowers, subject to the terms and conditions
set forth in the Loan Agreement;
WHEREAS, the Pledgors are, collectively, the legal and beneficial owners of
all of the Pledged Interests (as defined below) and of all of the Pledged Debt
(as defined below);
WHEREAS, it is a condition precedent to the effectiveness of the Loan
Agreement that the Pledgors shall have executed and delivered this Agreement and
made the pledge in favor of the Pledgee contemplated hereby.
NOW, THEREFORE, in consideration of the promises contained herein and to
induce the Pledgee and the Lenders to enter into the Loan Agreement and to make
Loans to, and to provide for the issuance of Letters of Credit for the account
of, the Borrowers thereunder, the Pledgors hereby agree as follows:
<PAGE> 2
SECTION 1. PLEDGE; PLEDGE DOCUMENTATION.
(a) The Pledgors hereby pledge and grant to the Pledgee for the benefit
of the Lenders a lien on and security interest in the following, whether now
owned or at any time hereafter acquired by any of the Pledgors (collectively,
the "Collateral"):
(i) all of the issued and outstanding shares of capital stock,
partnership interests and limited liability company interests set forth
on Schedule 1 (the "Pledged Interests") of the Subsidiaries of the
Pledgors set forth on Schedule 1 (the "Issuers") and the certificates
representing the Pledged Interests, and all dividends, distributions,
cash, instruments and other property from time to time received,
receivable or otherwise distributed in respect of or in exchange for
any or all of the Pledged Interests, and all or, in the case of Issuers
that are Foreign Subsidiaries, 65% (less any additional interest
consisting of one share of any such Subsidiary held to meet the
Requirements of Law of the jurisdiction of organization of such
Subsidiary) of all additional shares of capital stock, partnership
interests and limited liability company interests of or in the Issuers
from time to time acquired in any manner by any of the Pledgors, and
the certificates, if any, representing such additional shares of
capital stock, partnership interests and limited liability company
interests, and all dividends, distributions, cash, instruments and
other property from time to time received, receivable or otherwise
distributed in respect of or in exchange for any or all of such
additional shares of capital stock, partnership interests and limited
liability company interests (all of the foregoing being the "Interest
Collateral");
(ii) all loans, liabilities and indebtedness, whether now or
hereafter incurred, owed to a Pledgor (collectively, the "Pledged
Debt") and evidenced by each of the promissory notes payable to a
Pledgor set forth on Schedule 2 (as amended, supplemented or otherwise
modified from time to time, copies of which are annexed hereto
collectively as Annex I (collectively, the "Pledged Notes")), all other
instruments evidencing the Pledged Debt, and all interest, cash,
instruments, rights, and other property from time to time received,
receivable or otherwise distributed in respect of or in exchange for
any or all of the Pledged Debt;
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<PAGE> 3
(iii) all additional indebtedness, loans and liabilities from time
to time owed to the Pledgors, whether now or hereafter incurred, and
the instruments evidencing such indebtedness, loans and liabilities,
and all interest, cash, instruments, rights and other property from
time to time received, receivable or otherwise distributed in respect
of or in exchange for any or all of such indebtedness, loans and
liabilities; and
(iv) all proceeds of any of the foregoing (including, without
limitation, proceeds constituting any property of the types described
above).
(b) Each Pledgor has delivered to the Pledgee each of the Pledged Notes
and (except for the certificates to be delivered under Section 7.1(s)(ii) of the
Loan Agreement) the certificates evidencing the Pledged Interests pledged by it
hereunder, accompanied by an undated note power or a stock or other transfer
power, respectively (executed in blank), with respect thereto.
SECTION 2. SECURITY FOR OBLIGATIONS. The pledge and assignment of the
Collateral hereunder secures the prompt and complete payment and performance
when due (whether at the stated maturity, by acceleration or otherwise) of all
of the Obligations.
SECTION 3. REPRESENTATIONS AND WARRANTIES. Each Pledgor represents and
warrants as follows:
(a) It is a corporation, limited partnership or limited liability
company duly organized or formed, as the case may be, validly existing and in
good standing under the laws of the state of its incorporation or formation, as
the case may be, is duly qualified to do business and is in good standing as a
foreign corporation, limited partnership or limited liability company, as the
case may be, in all other states where such qualification is required, except to
the extent that the failure to so qualify or be in good standing could not
reasonably be expected to have a Material Adverse Effect, and has all necessary
corporate, partnership or limited liability company power and authority, as the
case may be, to enter into this Agreement.
(b) It or its general partner or managing member, as the case may be,
has taken all requisite corporate or other action through its board of directors
or otherwise to authorize the execution and delivery of, and the performance of
its obligations under, this Agreement, and this Agreement constitutes the legal,
valid and binding obligation of such Pledgor enforceable against it in
accordance with its terms, except as enforceability may be limited by (i)
bankruptcy, insolvency or similar laws affecting creditors' rights generally and
(ii) equitable principles.
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<PAGE> 4
(c) It is the legal and beneficial owner of record of the Pledged
Interests set forth opposite its name on Schedule 1 and the legal and beneficial
owner of record of each Pledged Note set forth opposite its name on Schedule 2,
free and clear of any Lien, except for the Lien created by this Agreement. On
the date hereof, no effective financing statement or other instrument similar in
effect covering all or any part of the Collateral (other than in favor of the
Pledgee) is on file in any filing or recording office.
(d) The pledge of the Collateral under this Agreement, together with
(i) the delivery to the Pledgee of the Pledged Notes and the related note powers
and the certificates evidencing the Pledged Interests and the related stock and
other transfer powers and (ii) the filing of Uniform Commercial Code financing
statements or financing statements under the PPSA, as the case may be, in the
appropriate filing offices covering all of the Pledged Interests, create (or, in
the case of clause (ii), upon the making of each such filing will create) a
valid and perfected first priority Lien on the Collateral, securing the payment
and performance of the Obligations, and all filing and other actions necessary
or desirable to perfect and protect such Lien have been duly made or taken.
(e) No authorization, approval or other action by, and no notice to or
filing with (other than, in each case, any authorization, approval, action,
notice or filing that has been obtained, taken, given or made including, without
limitation, the consent of the board of directors of Grant Prideco Canada Ltd.
to a transfer of its share capital under or in connection with this Agreement),
any Person is required for (i) the pledge by the Pledgors of the Collateral
pursuant to this Agreement, the grant by the Pledgors of the Lien granted hereby
or the execution, delivery or performance of this Agreement by the Pledgors,
(ii) the perfection of the Lien granted under this Agreement, except for
appropriate filings of Uniform Commercial Code financing statements, or (iii)
the exercise by the Pledgee of the rights or remedies provided for in this
Agreement.
(f) The execution, delivery and performance by each Pledgor of this
Agreement, the granting of the Lien hereunder and the exercise by the Pledgee of
any or all of the remedies hereunder do not and will not breach or violate (i)
any of the Governing Documents of such Pledgor, (ii) any Requirement of Law or
(iii) any Material Contract and will not result in the imposition of any Liens
on any of its assets except in favor of the Pledgee.
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<PAGE> 5
(g) The Pledged Interests, other than Pledged Interests consisting of
Capital Stock issued by Foreign Subsidiaries, constitute all of the issued and
outstanding shares of capital stock, partnership interests and limited liability
company interests of the Issuers.
(h) The Pledged Debt constitutes all of the outstanding indebtedness of
any Person owing to GPI or any of its Subsidiaries (other than a Foreign
Subsidiary) that is evidenced by a promissory note or other instrument and the
Pledged Notes include all of the promissory notes or other instruments
evidencing such indebtedness.
(i) All of the Pledged Interests are duly authorized, fully paid and
nonassessable (or the equivalent under the law of any jurisdiction other than
the United States or any state thereof). All of the Pledged Interests are
evidenced by certificates.
SECTION 4. FURTHER ASSURANCES; COVENANTS.
(a) Each Pledgor covenants and agrees that at any time and from time to
time, at the expense of the Pledgors, such Pledgor will promptly execute and
deliver all further instruments and documents including, without limitation,
financing or continuation statements, or similar instruments or documents, and
amendments thereto, and take all further action, that may be necessary or
desirable to establish and maintain the Lien granted or purported to be granted
hereby and the priority and perfection thereof or to enable the Pledgee to
exercise and enforce its rights and remedies hereunder with respect to any
Collateral.
(b) Each Pledgor hereby authorizes the Pledgee to file one or more
financing or continuation statements, and amendments thereto, relating to all or
any part of the Collateral, without the signature of such Pledgor. The Pledgee
may file a carbon, photographic or other reproduction of this Agreement or any
financing statement covering the Collateral or any part thereof (or any
financing statement related hereto) as a financing statement.
(c) Each Pledgor covenants and agrees that it will not (i) except as
expressly permitted under Sections 7.1(a), 7.2(c) and 7.2(e) of the Loan
Agreement, sell, assign (by operation of law or otherwise) or otherwise dispose
of, or grant any option with respect to, any of the Collateral, (ii) create or
suffer to exist any Lien upon or with respect to any of the Collateral, except
for the Lien under this Agreement and other Permitted Liens, (iii) vote to
enable, or take any other action to permit, the Issuers to issue any other
shares of stock, partnership interests or limited liability company interests of
any nature or to issue any other securities convertible into or
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<PAGE> 6
granting the right to purchase or exchange for any shares of stock, partnership
interests or limited liability company interests of any nature of the Issuers,
except for such shares of stock, partnership interests or limited liability
company interests all (or the appropriate percentage) of which shares or
interests have been pledged to the Agent under a Supplement hereto in the form
of Annex II, (iv) enter into any agreement or undertaking (other than in favor
of the Pledgee) restricting the right or ability of the Pledgee to sell, assign
or transfer any of the Collateral, (v) except as expressly permitted under
Section 7.2(g) of the Loan Agreement, to the extent applicable, cancel (other
than due to any payment in whole or in part), or forgive any of the Pledged Debt
except upon the payment in full to the holder of any Pledged Note or (vi) amend
or waive any terms or provisions of any Pledged Note in any manner that is
adverse in any way to the Agent. Each Pledgor covenants and agrees that, if any
of the Pledged Interests pledged by it becomes evidenced by one or more stock,
partnership or membership certificates, as the case may be, such Pledgor shall
promptly deliver to the Pledgee each such certificate issued to such Pledgor,
accompanied by an undated stock or other transfer power with respect thereto,
executed in blank by such Pledgor.
SECTION 5. VOTING; DISTRIBUTIONS.
(a) So long as no Default or Event of Default shall have occurred and
be continuing, each Pledgor shall be entitled to exercise any and all voting and
other consensual rights pertaining to the Collateral or any part thereof for any
purpose not inconsistent with the terms of this Agreement and in a manner which
does not impair the value or transferability of any of the Collateral.
(b) Except as provided in Section 5(c), each Pledgor shall be entitled
to receive and retain cash distributions (and to disburse any of the foregoing
subject to such restrictions as are set forth in the Loan Agreement) paid in
respect of the Interest Collateral and any and all interest on and principal of
the Pledged Debt; provided, however, that any and all instruments and other
property received or receivable by a Pledgor or otherwise distributed to a
Pledgor in exchange for any Interest Collateral shall, if received by such
Pledgor, be received in trust for the benefit of the Pledgee and be forthwith
delivered to the Pledgee as Interest Collateral in the same form as so received
(with any necessary endorsement).
(c) Upon the occurrence and during the continuance of an Event of
Default:
(i) All rights of each Pledgor to receive the principal, interest
and other cash distributions that it would otherwise be authorized to
receive and
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<PAGE> 7
retain under Section 5(b) shall cease, and all such rights shall
thereupon become vested in the Pledgee who shall thereupon have the
sole right to receive and hold as Collateral such principal, interest
and other distributions.
(ii) Any and all principal, interest and other distributions
payable to any Pledgor in respect of the Collateral shall be received
by such Pledgor in trust for the benefit of the Pledgee, shall be
segregated from other funds of such Pledgor and shall, upon the written
request of the Pledgee, be forthwith paid over to the Pledgee as
Collateral in the same form as so received (with any necessary
endorsement).
SECTION 6. PLACE OF PERFECTION; RECORDS. Each Pledgor shall (a) maintain
books and records pertaining to the Collateral pledged by it hereunder in such
form and scope as is consistent with good business practice, (b) maintain such
books and records at the address specified for such Pledgor in Section 16 or
such other address (so long as thirty days' prior written notice thereof has
been delivered to the Pledgee) and (c) provide the Pledgee and its agents access
to the premises of such Pledgor at any time and from time to time, during normal
business hours and upon reasonable notice under the circumstances, and at any
time after the occurrence and during the continuance of a Default or Event of
Default, for the purposes of (i) inspecting and verifying the documents and
instruments evidencing or pertaining to the Collateral and (ii) inspecting and
copying (at the Pledgors' expense) any and all records pertaining thereto.
SECTION 7. PLEDGEE APPOINTED ATTORNEY-IN-FACT; IRREVOCABLE AUTHORIZATION
AND INSTRUCTION TO ISSUERS. Each Pledgor hereby appoints the Pledgee on behalf
of the Lenders such Pledgor's attorney-in-fact, with full authority in the place
and stead of such Pledgor and in the name of such Pledgor or otherwise, from
time to time in the Pledgee's discretion, (a) to take any action and to execute
any instrument in each case permitted to be taken or executed by the Pledgee
under Section 4(b), and (b) upon the occurrence and during the continuance of an
Event of Default, (i) to exercise the voting and other consensual rights which
such Pledgor would be entitled to exercise under Section 5(a) (whereupon all
rights of such Pledgor to exercise such rights shall cease) and (ii) to receive,
endorse and collect all instruments made payable to such Pledgor representing
any distribution in respect of the Collateral or any part thereof and to give
full discharge for the same. Each Pledgor hereby authorizes and instructs the
Issuers to comply with any instruction received by them from the Pledgee in
writing that (a) states that an Event of Default has occurred and is continuing
and (b) is otherwise in accordance with the terms of this Agreement, without any
other or further instructions from
-7-
<PAGE> 8
such Pledgor, and each Pledgor agrees that the Issuers shall be fully protected
in so complying. The Pledgors hereby ratify all that such attorney shall
lawfully do or cause to be done by virtue hereof. This power of attorney is
coupled with an interest and is irrevocable.
SECTION 8. PLEDGEE MAY PERFORM. If any Pledgor fails to perform any
agreement contained herein, the Pledgee may perform, or cause performance of,
such agreement, and the reasonable expenses of the Pledgee incurred in
connection therewith shall be jointly and severally payable by the Pledgors
provided that, if such Pledgor's failure to perform any such agreement could not
reasonably be expected to affect the Pledgee's rights hereunder in any material
respect, the Pledgee shall give such Pledgor five Business Days' notice and an
opportunity to cure before making or causing such performance.
SECTION 9. REASONABLE CARE; RETURN OF COLLATERAL.
(a) Prior to the exercise of its remedies hereunder, the Pledgee shall
be deemed to have exercised reasonable care in the custody and preservation of
the Collateral in its possession if the Collateral is accorded treatment
substantially equal to that which the Pledgee accords its own property, it being
understood that the Pledgee shall not have the responsibility under this
Agreement for taking any necessary steps to preserve rights against any parties
with respect to any Collateral except as set forth in subsection (b) below.
(b) Upon the termination of the Commitments, the payment and
satisfaction of all Obligations in full and the termination, Collateralization
or expiration of all Letters of Credit, the Pledgors shall be entitled to the
return of all of the Collateral (including all Pledged Notes and note powers
therefor and all certificates representing Pledged Interests and stock or other
transfer powers therefor) and all other cash held by the Pledgee as additional
collateral hereunder which have not been used or applied toward the payment of
the Obligations.
SECTION 10. REMEDIES UPON DEFAULT. If any Event of Default shall have
occurred and be continuing, the Pledgee may exercise in respect of the
Collateral, in addition to all other rights and remedies provided for herein or
otherwise available to it, all the rights and remedies of a secured party under
the Uniform Commercial Code (the "Code"), the PPSA and other applicable law, and
the Pledgee may also, without notice except as specified below, sell the
Collateral or any part thereof in one or more parcels at public or private sale,
at any exchange, broker's board or at any of the Pledgee's offices or elsewhere,
for cash, on credit or for future delivery, and upon such other terms as the
Pledgee may deem commercially reasonable. The Pledgors agree that, to the extent
notice of sale shall be
-8-
<PAGE> 9
required by law, at least five Business Days' notice to the Pledgors of the time
and place of any public or private sale shall constitute reasonable
notification. The Pledgee shall not be obligated to make any sale of Collateral
regardless of notice of sale having been given. The Pledgee may adjourn any
public or private sale from time to time by announcement at the time and place
fixed therefor, and such sale may, without further notice, be made at the time
and place to which it was so adjourned. If an Event of Default shall have
occurred and be continuing, the Pledgee may, under the power of attorney granted
herein, transfer the Collateral on the books of the Pledgors and the Issuers, as
the case may be, in whole or in part, to the name of the Pledgee or such other
Person or Persons as the Pledgee may designate.
SECTION 11. RESTRICTED STOCK. The Pledgee may be unable to effect a public
sale of all or a part of the Collateral by reason of certain prohibitions
contained in the Securities Act of 1933, as amended from time to time (the
"Securities Act"), or in applicable Blue Sky or other state or foreign
securities laws applicable to the Collateral, as now or hereafter in effect, but
may be compelled to resort to one or more private sales to a restricted group of
purchasers who will be obliged to agree, among other things, to acquire such
Collateral for their own account, for investment and not with a view to the
distribution or resale thereof. Each Pledgor agrees that private sales may be
made upon five days' notice to the applicable Pledgor and may be at prices and
other terms less favorable to the seller than if the Collateral were sold at
public sales.
SECTION 12. APPLICATION OF PROCEEDS. All money held by the Pledgee as
Collateral and all cash proceeds received by the Pledgee in respect of any sale
of, collection from, or other realization upon, all or any part of the
Collateral, shall be (a) held by the Pledgee as Collateral hereunder if no Event
of Default has occurred and is continuing or would result therefrom or (b)
applied to the Obligations in accordance with Section 9.5 of the Loan Agreement
if an Event of Default has occurred and is continuing or would result therefrom.
Nothing contained in this Section is intended to prohibit, limit or restrict any
transaction or Investment permitted under the Loan Agreement.
SECTION 13. INDEMNITY AND EXPENSES. The Pledgors jointly and severally
agree to indemnify and hereby indemnify the Pledgee and its successors and
assigns and their respective directors, officers, agents, employees, advisors,
shareholders, attorneys and Affiliates (each, an "Indemnified Party") from and
against any and all Claims (except, in the case of each Indemnified Party, to
the extent that any Claim is determined in a final and non-appealable judgment
by a court of competent jurisdiction to have directly resulted from such
Indemnified Party's gross negligence or willful misconduct) arising out of or by
reason of (i) any litigation, investigation, claim or
-9-
<PAGE> 10
proceeding related to (A) this Agreement or the transactions contemplated hereby
or (B) the Pledgee's entering into this Agreement or any other agreements and
documents relating hereto (other than consequential damages and loss of
anticipated profits or earnings), including, without limitation, amounts paid in
settlement, court costs and the fees and disbursements of counsel incurred in
connection with any such litigation, investigation, claim or proceeding and (ii)
any pending, threatened or actual action, claim, proceeding or suit by any
shareholder or director of a Pledgor or any actual or purported violation of a
Pledgor's Governing Documents or any other agreement or instrument to which a
Pledgor is a party or by which any of its properties is bound. In addition, the
Pledgors shall, upon demand, pay to the Pledgee all costs and expenses incurred
by the Pledgee (including the fees and disbursements of counsel and other
professionals) in connection with (a) enforcing or defending its rights under or
in respect of this Agreement or any other document or instrument now or
hereafter executed and delivered in connection herewith, (b) collecting the
Obligations or otherwise administering this Agreement and (c) foreclosing or
otherwise realizing upon the Collateral or any part thereof. If and to the
extent that the obligations of the Pledgors hereunder are unenforceable for any
reason, the Pledgors hereby agree to make the maximum contribution to the
payment and satisfaction of such obligations that is permissible under
applicable law. The Pledgors' obligations under this Section 13 shall survive
any termination of this Agreement, the termination, expiration or
Collateralization of all Letters of Credit and the payment in full of the
Obligations, and are in addition to, and not in substitution of, any of the
other Obligations.
SECTION 14. SECURITY INTEREST ABSOLUTE. All rights of the Pledgee and the
Lien granted to it hereunder, and all obligations of the Pledgors hereunder,
shall be absolute and unconditional irrespective of:
(a) any lack of enforceability of the Loan Agreement or any of the
other Loan Documents or any other agreement or instrument relating thereto;
(b) any change in the time, manner or place of payment of, or in any
other term of, all or any of the Obligations, or any other amendment or waiver
of or any consent to departure from the Loan Agreement or any of the other Loan
Documents;
(c) any taking and holding of collateral or guarantees for all or any
of the Obligations, or any amendment, alteration, exchange, substitution,
transfer, enforcement, waiver, subordination, termination or release of any
collateral or such guarantees, or any non-perfection of any collateral, or any
consent to departure from any such guaranty;
-10-
<PAGE> 11
(d) any manner of application of collateral, or proceeds thereof, to
all or any of the Obligations, or the manner of sale of any collateral;
(e) any consent by the Pledgee or the Lenders to the restructuring of
the Obligations, or any other restructuring or refinancing of the Obligations or
any portion thereof;
(f) any modification, compromise, settlement or release by the Pledgee
or the Lenders, by operation of law or otherwise, collection or other
liquidation of the Obligations or the liability of any guarantor, or of any
collateral, in whole or in part, and any refusal by the Pledgee or the Lenders
to accept any payment, in whole or in part, from any obligor or guarantor in
connection with any of the Obligations, whether or not with notice to, further
assent by, or any reservation of rights against, the Pledgors except a
settlement or release, duly executed by the Pledgee, which specifically
terminates the security interest hereunder; or
(g) any other circumstance (including, without limitation, any statute
of limitations) which might otherwise constitute a defense available to, or a
discharge of, any third party pledgor or guarantor.
SECTION 15. SURVIVAL OF PROVISIONS. All representations, warranties and
covenants made by each Pledgor in this Agreement shall survive the execution and
delivery hereof and the closing of the transactions contemplated hereby.
SECTION 16. NOTICES. All notices and other communications hereunder shall
be in writing and sent by certified or registered mail, return receipt
requested, by overnight delivery service, with all charges prepaid, or by
telecopier followed by a hard copy sent by regular mail, if to the Pledgee, then
to Transamerica Business Credit Corporation, 555 Theodore Fremd Avenue, Suite
C_301, Rye, New York 10580, Telecopy: (914) 921_0110, Attn.: Mr. Steven R.
Fischer, Executive Vice President, with a copy to Transamerica Business Credit
Corporation, 9399 West Higgins Road, Suite 600, Rosemont, Illinois 60018,
Telecopy: (847) 685-1143, Attn.: General Counsel, and if to a Pledgor, then to
such Pledgor at Grant Prideco, Inc., 1450 Lake Robbins Drive, Suite 600, The
Woodlands, Texas 77380, Telecopy: (281) 297-8688, Attn.: Ms. Frances R. Powell
and Philip A. Choyce, Esq., with a copy to Fulbright & Jaworski, L.L.P., 1301
McKinney, Suite 5100, Houston, Texas 77010-3095, Telecopy: (713) 651-5246, Attn:
Joshua P. Agrons, Esq., or in each case, to such other address as the Pledgors
or the Pledgee may specify to the other party in the manner required hereunder.
All such notices and correspondence shall be deemed given (i) if sent by
certified or registered mail, three Business
-11-
<PAGE> 12
Days after being postmarked, (ii) if sent by overnight delivery service, when
received at the above stated addresses or when delivery is refused and (iii) if
sent by telecopier transmission, when such transmission is confirmed.
SECTION 17. AMENDMENTS, WAIVERS AND CONSENTS. No amendment or waiver of
any provision of this Agreement, or consent to any departure by any Pledgor
therefrom, shall in any event be effective unless the same shall be in writing
and signed by the Pledgee, and then such amendment, waiver or consent shall be
effective only in the specific instance and for the specific purpose for which
given.
SECTION 18. DELAYS; PARTIAL EXERCISE OF REMEDIES. No delay or omission of
the Pledgee to exercise any right or remedy hereunder shall impair any such
right or operate as a waiver thereof. No single or partial exercise by the
Pledgee of any right or remedy shall preclude any other or further exercise
thereof, or preclude any other right or remedy.
SECTION 19. COUNTERPARTS; TELECOPIED SIGNATURES. This Agreement and any
waiver or amendment hereto may be executed in counterparts and by the Pledgors
in separate counterparts, each of which when so executed and delivered shall be
an original, but all of which shall together constitute one and the same
instrument. This Agreement may be executed and delivered by telecopier or other
facsimile transmission all with the same force and effect as if the same was a
fully executed and delivered original manual counterpart.
SECTION 20. SEVERABILITY. In case any provision in or obligation under
this Agreement shall be invalid, illegal or unenforceable in any jurisdiction,
the validity, legality and enforceability of the remaining provisions or
obligations, or of such provision or obligation in any other jurisdiction, shall
not in any way be affected or impaired thereby.
SECTION 21. INTERPRETATION. All terms not defined herein or in the Loan
Agreement shall have the meaning set forth in the Code or the PPSA, as the case
may be, except where the context otherwise requires. To the extent a term or
provision of this Agreement conflicts with the Loan Agreement and is not
addressed herein with more specificity, the Loan Agreement shall control with
respect to the subject matter of such term or provision.
-12-
<PAGE> 13
SECTION 22. CONTINUING SECURITY INTEREST; ASSIGNMENTS OF SECURED DEBT.
This Agreement shall create a continuing security interest in and Lien on the
Collateral and shall (a) remain in full force and effect until released in
accordance herewith, (b) be binding upon each Pledgor and its successors and
assigns, and (c) inure, together with the rights and remedies of the Pledgee
hereunder, to the benefit of the Pledgee and its successors and assigns. Without
limiting the generality of the foregoing clause (c), the Pledgee may, in
accordance with the terms of the Loan Agreement, assign or otherwise transfer
all or any portion of its rights and obligations under the Loan Agreement to any
other Person, and such other Person shall thereupon become vested with all the
benefits in respect hereof granted to the Pledgee herein or otherwise, in each
case as provided in the Loan Agreement.
SECTION 23. REINSTATEMENT. To the extent permitted by law, this Agreement
shall continue to be effective or be reinstated if at any time any amount
received by the Pledgee in respect of the Obligations is rescinded or must
otherwise be restored or returned by the Pledgee upon the occurrence or during
the pendency of any bankruptcy, reorganization or other similar proceeding
applicable to a Pledgor, or upon or during the occurrence of any dissolution,
liquidation or winding up of a Pledgor, all as though such payments had not been
made.
SECTION 24. PLEDGE OF ADDITIONAL CAPITAL STOCK. Under (and subject to all
the terms and restrictions set forth in) Section 7.2(l) of the Loan Agreement,
all the Capital Stock of each Subsidiary of GPI (or, subject to Section 7.1(s)
of the Loan Agreement, 65% (excluding Qualified Stock issued to directors of
such Subsidiary and immaterial interests consisting of one share of Capital
Stock of a Foreign Subsidiary to comply with Requirements of Law applicable to
such Subsidiary) of the Capital Stock of each Foreign Subsidiary) owned by a
Loan Party (other than a Cdn. Subsidiary) shall, unless the owner of the Capital
Stock of such Subsidiary is a Foreign Subsidiary, be pledged hereunder within
ten Business Days of the acquisition or formation of such Subsidiary other than
the Capital Stock of any Subsidiary with a net worth of less than US$250,000,
provided that the Capital Stock of any Subsidiary owned by a Cdn. Subsidiary
shall be pledged to the Cdn. Agent under a pledge agreement in form and
substance satisfactory to the Cdn. Agent to secure the Obligations of the Cdn.
Borrower. An owner of such Capital Stock that is not theretofore a Pledgor
shall, at such time, execute and deliver to the Pledgee a Supplement in the form
of Annex II hereto, whereupon such Capital Stock shall become subject to the
Lien hereunder and such owner shall become a Pledgor hereunder with the same
force and effect as if originally named as a Pledgor herein. Each such new
Subsidiary shall thereupon be deemed an Issuer hereunder and shall execute and
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<PAGE> 14
deliver to the Pledgee an acknowledgment and consent in the form attached
hereto. The execution and delivery of any such instruments shall not require the
consent of the Borrowers or any then existing Pledgor hereunder. The rights and
obligations of each then existing Pledgor shall remain in full force and effect
notwithstanding the addition of any new Pledgor as a party to this Agreement.
SECTION 25. ENTIRE AGREEMENT; SUCCESSORS AND ASSIGNS. This Agreement
constitutes the entire agreement among the parties, supersedes any prior written
and verbal agreements among them, and shall bind and benefit the parties and
their respective successors and permitted assigns.
SECTION 26. GOVERNING LAW. THE VALIDITY, INTERPRETATION AND ENFORCEMENT OF
THIS AGREEMENT AND ANY DISPUTE ARISING OUT OF OR IN CONNECTION WITH THIS
AGREEMENT, WHETHER SOUNDING IN CONTRACT, TORT, EQUITY OR OTHERWISE, SHALL BE
GOVERNED BY THE INTERNAL LAWS (AS OPPOSED TO THE CONFLICTS OF LAW PROVISIONS
OTHER THAN SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW) AND DECISIONS
OF THE STATE OF NEW YORK.
SECTION 27. SUBMISSION TO JURISDICTION. ALL DISPUTES BETWEEN ANY PLEDGOR
AND THE PLEDGEE, WHETHER SOUNDING IN CONTRACT, TORT, EQUITY OR OTHERWISE, SHALL
BE RESOLVED ONLY BY STATE AND FEDERAL COURTS LOCATED IN NEW YORK, NEW YORK, AND
THE COURTS TO WHICH AN APPEAL THEREFROM MAY BE TAKEN; PROVIDED, HOWEVER, THAT
THE PLEDGEE ON BEHALF OF THE LENDERS SHALL HAVE THE RIGHT, TO THE EXTENT
PERMITTED BY APPLICABLE LAW, TO PROCEED AGAINST ANY PLEDGOR OR ANY COLLATERAL IN
ANY LOCATION REASONABLY SELECTED BY THE PLEDGEE TO ENABLE THE PLEDGEE TO REALIZE
ON SUCH COLLATERAL, OR TO ENFORCE A JUDGMENT OR OTHER COURT ORDER IN FAVOR OF
THE PLEDGEE. EACH PLEDGOR AGREES THAT IT WILL NOT ASSERT ANY PERMISSIVE
COUNTERCLAIMS, SETOFFS OR CROSS-CLAIMS IN ANY PROCEEDING BROUGHT BY THE PLEDGEE.
EACH PLEDGOR WAIVES ANY OBJECTION THAT IT MAY HAVE TO THE LOCATION OF THE COURT
IN WHICH THE PLEDGEE HAS COMMENCED A PROCEEDING, INCLUDING, WITHOUT LIMITATION,
ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON FORUM NON CONVENIENS.
SECTION 28. SERVICE OF PROCESS. EACH PLEDGOR HEREBY IRREVOCABLY DESIGNATES
CSC UNITED STATES CORPORATION, 80 STATE STREET, 6TH FLOOR, ALBANY, NEW YORK
12207, AS THE DESIGNEE AND AGENT OF SUCH PLEDGOR TO RECEIVE, FOR AND ON BEHALF
OF SUCH PLEDGOR, SERVICE OF PROCESS IN ANY LEGAL ACTION OR PROCEEDING WITH
RESPECT TO THIS AGREEMENT. IT IS UNDERSTOOD THAT A COPY OF SUCH PROCESS SERVED
ON SUCH AGENT AT ITS ADDRESS WILL BE PROMPTLY FORWARDED BY MAIL TO THE PLEDGORS,
BUT THE FAILURE OF THE PLEDGORS TO RECEIVE SUCH COPY SHALL NOT AFFECT IN ANY WAY
THE SERVICE OF SUCH PROCESS. NOTHING HEREIN SHALL AFFECT THE RIGHT
-14-
<PAGE> 15
OF THE PLEDGEE TO SERVE LEGAL PROCESS IN ANY OTHER MANNER PERMITTED BY LAW.
SECTION 29. JURY TRIAL. EACH OF THE PARTIES HERETO HEREBY WAIVES TO THE
FULLEST EXTENT PERMITTED BY LAW ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION OR
PROCEEDING BASED UPON, ARISING OUT OF, OR IN ANY WAY RELATING TO (I) THIS
AGREEMENT OR (II) ANY CONDUCT, ACTS OR OMISSIONS OF A PLEDGOR, THE PLEDGEE OR
ANY OF THEIR RESPECTIVE DIRECTORS, OFFICERS, EMPLOYEES, AGENTS, ATTORNEYS OR
OTHER AFFILIATES, IN EACH CASE WHETHER SOUNDING IN CONTRACT OR TORT OR
OTHERWISE.
SECTION 30. LIMITATION OF LIABILITY. THE PLEDGEE SHALL HAVE NO LIABILITY
TO ANY PLEDGOR (WHETHER SOUNDING IN TORT, CONTRACT, OR OTHERWISE) FOR LOSSES
SUFFERED BY SUCH PLEDGOR IN CONNECTION WITH, ARISING OUT OF, OR IN ANY WAY
RELATED TO THE TRANSACTIONS OR RELATIONSHIPS CONTEMPLATED BY THIS AGREEMENT, OR
ANY ACT, OMISSION OR EVENT OCCURRING IN CONNECTION THEREWITH, UNLESS IT IS
DETERMINED BY A FINAL AND NONAPPEALABLE JUDGMENT OR COURT ORDER BINDING ON THE
PLEDGEE THAT THE LOSSES WERE THE RESULT OF ACTS OR OMISSIONS CONSTITUTING GROSS
NEGLIGENCE OR WILLFUL MISCONDUCT OF THE PLEDGEE. THE PLEDGORS HEREBY WAIVE ALL
FUTURE CLAIMS AGAINST THE PLEDGEE FOR SPECIAL, INDIRECT, CONSEQUENTIAL OR
PUNITIVE DAMAGES UNLESS RESULTING FROM THE GROSS NEGLIGENCE OR WILLFUL
MISCONDUCT OF THE PLEDGEE.
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<PAGE> 16
IN WITNESS WHEREOF, each Pledgor has caused this Agreement to be executed
by its (or its managing member's) proper and duly authorized officer as of the
date first set forth above.
GRANT PRIDECO, INC.
By:/s/ PHILIP A. CHOYCE
--------------------------------------
Philip A. Choyce
Vice President
GRANT PRIDECO USA, LLC
By:/s/ LINDA S. BUBACZ
--------------------------------------
Name: Linda S. Bubacz
Title: Vice President
XLS HOLDING, INC.
By:/s/ PHILIP A. CHOYCE
--------------------------------------
Philip A. Choyce
Vice President
TA INDUSTRIES, INC.
By:/s/ PHILIP A. CHOYCE
--------------------------------------
Philip A. Choyce
Vice President
TUBE-ALLOY CORPORATION
By:/s/ PHILIP A. CHOYCE
--------------------------------------
Philip A. Choyce
Vice President
-16-
<PAGE> 17
TUBE-ALLOY CAPITAL CORPORATION
By:/s/ PHILIP A. CHOYCE
--------------------------------------
Philip A. Choyce
Vice President
GRANT PRIDECO HOLDING, LLC
By:/s/ PHILIP A. CHOYCE
--------------------------------------
Philip A. Choyce
Vice President
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<PAGE> 18
ACKNOWLEDGMENT AND CONSENT
Each of the undersigned hereby acknowledges receipt of a copy of the Pledge
Agreement, dated as of April 14, 2000 (as amended, supplemented or otherwise
modified from time to time, the "Pledge Agreement"), made by Grant Prideco, Inc.
and its Subsidiaries listed as "pledgors" on Schedules 1 and 2 thereto in favor
of Transamerica Business Credit Corporation, as agent. Each of the undersigned
shall be bound by and comply with the terms of the Pledge Agreement insofar as
such terms are applicable to such undersigned.
CHANNELVIEW REAL PROPERTY, INC.
By:/s/ PHILIP A. CHOYCE
--------------------------------------
Philip A. Choyce
Vice President
XL SYSTEMS INTERNATIONAL, INC.
By:/s/ PHILIP A. CHOYCE
--------------------------------------
Philip A. Choyce
Vice President
XL SYSTEMS, INC.
By:/s/ PHILIP A. CHOYCE
--------------------------------------
Philip A. Choyce
Vice President
TEXAS ARAI, INC.
By:/s/ PHILIP A. CHOYCE
--------------------------------------
Philip A. Choyce
Vice President
<PAGE> 19
TUBE-ALLOY CORPORATION INTERNATIONAL
By:/s/ PHILIP A. CHOYCE
--------------------------------------
Philip A. Choyce
Vice President
PETROLEUM EQUIPMENT SUPPLY COMPANY
By:/s/ PHILIP A. CHOYCE
--------------------------------------
Philip A. Choyce
Vice President
DRILL TUBE INTERNATIONAL, INC.
By:/s/ PHILIP A. CHOYCE
--------------------------------------
Philip A. Choyce
Vice President
GRANT AUSTRIA, INC.
By:/s/ PHILIP A. CHOYCE
--------------------------------------
Philip A. Choyce
Vice President
PETRO-DRIVE, INC.
By:/s/ PHILIP A. CHOYCE
--------------------------------------
Philip A. Choyce
Vice President
-2-
<PAGE> 20
GRANT PRIDECO HOLDING, LLC
By:/s/ PHILIP A. CHOYCE
--------------------------------------
Philip A. Choyce
Vice President
GRANT PRIDECO USA, LLC
By:/s/ LINDA S. BUBACZ
--------------------------------------
Name: Linda S. Bubacz
Title: Vice President
GRANT PRIDECO TECHNOLOGY, INC.
By:/s/ LINDA S. BUBACZ
--------------------------------------
Name: Linda S. Bubacz
Title: Vice President
CITRA GRANT PRIDECO LIMITED
By:/s/ JOHN C. COBLE
--------------------------------------
Name: John C. Coble
Title: Director
GRANT PRIDECO, S.A. DE C.V.
By:/s/ CURTIS W. HUFF
--------------------------------------
Name: Curtis W. Huff
Title: Attorney-in-Fact
-3-
<PAGE> 21
PRIDECOMEX HOLDING, S.A. DE C.V.
By:/s/ CURTIS W. HUFF
--------------------------------------
Name: Curtis W. Huff
Title: Attorney-in-Fact
GRANT PRIDECO (SINGAPORE) PTE. LTD.
By:/s/ JOHN C. COBLE
--------------------------------------
Name: John C. Coble
Title: Director
XL SYSTEMS ANTILLES N.V.
By:/s/ PHILIP A. CHOYCE
--------------------------------------
Name: Philip A. Choyce
Title: Attorney-in-Fact
GRANT PRIDECO CANADA LTD.
By:/s/ PHILIP A. CHOYCE
--------------------------------------
Philip A. Choyce
Secretary
GRANT PRIDECO, LP
By: Grant Prideco Holding, LLC,
its general partner
By:/s/ PHILIP A. CHOYCE
--------------------------------------
Philip A. Choyce
Vice President
-4-
<PAGE> 22
ENERPRO DE MEXICO, S.A. DE C.V.
By:/s/ CURTIS W. HUFF
--------------------------------------
Name: Curtis W. Huff
Title: Attorney-in-Fact
GRANT PRIDECO LIMITED
By:/s/ CURTIS W. HUFF
--------------------------------------
Name: Curtis W. Huff
Title: Director
GRANT PRIDECO DE VENEZUELA, S.A.
By:/s/ JOHN C. COBLE
--------------------------------------
Name: John C. Coble
Title: President
WEATHERFORD MAURITIUS LIMITED
By:/s/ JOHN C. COBLE
--------------------------------------
Name: John C. Coble
Title: Director
-5-
<PAGE> 1
EXHIBIT 12.1
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------
1999 1998 1997 1996 1995
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Earnings:
Income (Loss) Before Income Taxes(1) ..... $(44,495) $105,568 $102,064 $ 37,938 $ 7,367
Add:
Interest Expense ....................... 11,343 12,008 12,976 7,371 7,578
Interest Component of Rent Expense ..... 2,894 1,520 741 1,019 375
Equity loss ............................ 419 -- -- -- --
Subtract:
Minority Interest ....................... 215 -- -- -- --
Equity Income ........................... -- 267 -- -- --
-------- -------- -------- -------- --------
Earnings as Adjusted ............. $(30,054) $118,829 $115,781 $ 46,328 $ 15,230
======== ======== ======== ======== ========
Fixed Charges:
Interest Expense ....................... $ 11,343 $ 12,008 $ 12,976 $ 7,371 $ 7,578
Interest Component of Rent Expense ..... 2,894 1,520 741 1,019 375
-------- -------- -------- -------- --------
Fixed Charges .................... $ 14,237 $ 13,528 $ 13,717 $ 8,390 $ 7,953
======== ======== ======== ======== ========
Ratio of Earnings to Fixed Charges(2)(3).. -- 8.8 8.4 5.5 1.9
======== ======== ======== ======== ========
</TABLE>
(1) Included in the 1999 and 1998 amounts are nonrecurring charges of
$9.5 million and $ 35.0 million, respectively.
(2) Excluding the nonrecurring charges of $9.5 million and $35.0 million, the
ratios for 1999 and 1998 were -- and 11.4, respectively.
(3) 1999 earnings were inadequate to cover fixed charges. The coverage
deficiency was $44.3 million.
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference in this registration statement of our reports dated January 28, 2000
included in Grant Prideco, Inc.'s Form 10 for the year ended December 31, 1999
and to all references to our Firm included in this registration statement.
/s/ Arthur Andersen LLP
Houston, Texas
April 20, 2000
