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EXHIBIT 10.4
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HYDRIL COMPANY
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NOTE PURCHASE AGREEMENT
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DATED AS OF JUNE 25, 1998
$60,000,000 6.85% SENIOR SECURED NOTES DUE JUNE 30, 2003
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TABLE OF CONTENTS
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1. AUTHORIZATION OF NOTES ................................................. 1
2. SALE AND PURCHASE OF NOTES ............................................. 1
3. CLOSING ................................................................ 2
4. CONDITIONS TO CLOSING .................................................. 2
4.1 Representations and Warranties .................................... 2
4.2 Performance; No Default ........................................... 2
4.3 Compliance Certificates ........................................... 2
4.4 Opinions of Counsel ............................................... 3
4.5 Purchase Permitted By Applicable Law, etc. ........................ 3
4.6 Sale of Other Notes ............................................... 3
4.7 Payment of Special Counsel Fees ................................... 3
4.8 Private Placement Number .......................................... 3
4.9 Changes in Corporate Structure .................................... 4
4.10 Intercreditor Agreement ........................................... 4
4.11 Collateral ........................................................ 4
4.12 Bank Agreement .................................................... 4
4.13 Proceedings and Documents ......................................... 4
5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY .......................... 5
5.1 Organization; Power and Authority ................................. 5
5.2 Authorization, etc. ............................................... 5
5.3 Disclosure ........................................................ 5
5.4 Organization and Ownership of Shares of Subsidiaries; Affiliates .. 6
5.5 Financial Statements .............................................. 6
5.6 Compliance with Laws, Other Instruments, etc. ..................... 6
5.7 Governmental Authorizations, etc. ................................. 7
5.8 Litigation; Observance of Agreements, Statutes and Orders ......... 7
5.9 Taxes ............................................................. 7
5.10 Title to Property; Leases ......................................... 8
5.11 Licenses, Permits; etc. ........................................... 8
5.12 Compliance with ERISA ............................................. 9
5.13 Private Offering by the Company ................................... 10
5.14 Use of Proceeds; Margin Regulations ............................... 10
5.15 Existing Debt; Future Liens ....................................... 10
5.16 Foreign Assets Control Regulations, etc. .......................... 11
5.17 Status under Certain Statutes ..................................... 11
5.18 Environmental Matters ............................................. 11
5.19 Labor Relations ................................................... 12
6. REPRESENTATIONS OF THE PURCHASER........................................ 12
6.1 Purchase for Investment ............................................ 12
6.2 Source of Funds .................................................... 12
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HYDRIL COMPANY i NOTE PURCHASE AGREEMENT
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TABLE OF CONTENTS (CONT.)
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7. INFORMATION AS TO COMPANY ............................................ 14
7.1 Financial and Business Information ............................. 14
7.2 Officer's Certificate .......................................... 17
7.3 Inspection ..................................................... 17
8. PAYMENT OF THE NOTES ................................................. 18
8.1 Payment at Maturity ............................................ 18
8.2 Optional Prepayments with Make-Whole Amount .................... 18
8.3 Change in Control .............................................. 18
8.4 Allocation of Partial Prepayments .............................. 19
8.5 Maturity; Surrender, etc. ...................................... 20
8.6 No Other Optional Prepayments or Purchase of Notes.............. 20
8.7 Make-Whole Amount .............................................. 20
9. AFFIRMATIVE COVENANTS ................................................ 22
9.1 Compliance with Law ............................................ 22
9.2 Insurance ...................................................... 22
9.3 Maintenance of Properties ...................................... 22
9.4 Payment of Taxes and Claims .................................... 22
9.5 Corporate Existence, etc. ...................................... 23
9.6 Further Assurances ............................................. 23
9.7 Maintenance of Most Favored Lender Status ...................... 23
9.8 Subsidiary Guaranties .......................................... 24
10. NEGATIVE COVENANTS ................................................... 24
10.1 Consolidated Funded Debt ....................................... 24
10.2 Subsidiary Debt ................................................ 25
10.3 Tangible Net Worth ............................................. 26
10.4 Liens .......................................................... 26
10.5 Restricted Investments and Restricted Payments ................. 29
10.6 Merger, Consolidation, etc. .................................... 30
10.7 Disposition of Assets .......................................... 31
10.8 Transactions with Affiliates ................................... 33
10.9 Line of Business ............................................... 33
10.10 EVI Indebtedness ............................................... 33
11. EVENTS OF DEFAULT .................................................... 34
12. REMEDIES ON DEFAULT, ETC. ............................................ 37
12.1 Acceleration ................................................... 37
12.2 Other Remedies ................................................. 37
12.3 Rescission ..................................................... 37
12.4 No Waivers or Election of Remedies, Expenses, etc. ............. 38
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HYDRIL COMPANY ii NOTE PURCHASE AGREEMENT
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TABLE OF CONTENTS (CONT.)
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13. REGISTRATION; EXCHANGE; SUBSTITUTION OF NOTES ....................... 38
13.1 Registration of Notes ......................................... 38
13.2 Transfer and Exchange of Notes ................................ 38
13.3 Replacement of Notes .......................................... 39
14. PAYMENTS ON NOTES ................................................... 39
14.1 Place of Payment .............................................. 39
14.2 Home Office Payment ........................................... 39
15. EXPENSES, ETC. ...................................................... 40
15.1 Transaction Expenses .......................................... 40
15.2 Survival ...................................................... 40
16. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ENTIRE
AGREEMENT ........................................................... 41
17. AMENDMENT AND WAIVER ................................................ 41
17.1 Requirements .................................................. 41
17.2 Solicitation of Holders of Notes .............................. 41
17.3 Binding Effect, etc. .......................................... 42
17.4 Notes held by Company, etc. ................................... 42
18. NOTICES ............................................................. 42
19. REPRODUCTION OF DOCUMENTS ........................................... 42
20. CONFIDENTIAL INFORMATION ............................................ 43
21. SUBSTITUTION OF PURCHASER ........................................... 44
22. MISCELLANEOUS ....................................................... 45
22.1 Successors and Assigns ........................................ 45
22.2 Payments Due on Non-Business Days; When Payments Deemed
Received ...................................................... 45
22.3 Maximum Interest Payable ...................................... 45
22.4 Release of Liens .............................................. 46
22.5 Severability .................................................. 46
22.6 Construction .................................................. 46
22.7 Counterparts .................................................. 46
22.8 Governing Law ................................................. 46
22.9 Consent to Jurisdiction; etc. ................................. 46
22.10 Section Headings and Table of Contents ........................ 47
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HYDRIL COMPANY iii NOTE PURCHASE AGREEMENT
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TABLE OF CONTENTS (cont.)
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SCHEDULE A -- Information Relating to Purchasers
SCHEDULE B -- Defined Terms
SCHEDULE 3 -- Payment Instructions
SCHEDULE 4.9 -- Changes in Corporate Structure
SCHEDULE 4.11 -- Collateral Documents
SCHEDULE 5.3 -- Disclosure Materials
SCHEDULE 5.4 -- Subsidiaries of the Company and Ownership of
Subsidiary Stock
SCHEDULE 5.5 -- Financial Statements
SCHEDULE 5.8 -- Certain Litigation
SCHEDULE 5.11 -- Patents, etc.
SCHEDULE 5.12 -- ERISA Affiliates
SCHEDULE 5.14 -- Use of Proceeds
SCHEDULE 5.15 -- Existing Debt and Liens
SCHEDULE 5.19 -- Collective Bargaining Agreements
SCHEDULE 10.5 -- Existing Investments
SCHEDULE 10.8 -- Permitted Transactions with Affiliates
EXHIBIT 1 -- Form of Note
EXHIBIT 4.4(a) -- Form of Opinion of Special Counsel for the Company
EXHIBIT 4.4(b) -- Form of Opinion of Special Counsel for the Purchasers
EXHIBIT 4.10 -- Form of Intercreditor Agreement
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HYDRIL COMPANY iv NOTE PURCHASE AGREEMENT
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HYDRIL COMPANY
3300 NORTH SAM HOUSTON PARKWAY EAST
HOUSTON, TEXAS 77032-3411
6.85% SENIOR SECURED NOTES DUE JUNE 30, 2003
Dated as of June 25, 1998
To the Purchaser Named on
the Signature Page Hereto
Ladies and Gentlemen:
HYDRIL COMPANY, a Delaware corporation (together with its successors and
assigns, the "COMPANY"), agrees with you as follows:
1. AUTHORIZATION OF NOTES.
The Company will authorize the issue and sale of $60,000,000 aggregate
principal amount of its 6.85% Senior Secured Notes due June 30, 2003 (the
"NOTES", such term to include any such notes issued in substitution therefor
pursuant to Section 13 of this Agreement or the Other Agreements (as hereinafter
defined)). The Notes shall be substantially in the form set out in Exhibit 1.
Certain capitalized terms used in this Agreement are defined in Schedule B;
references to a "Schedule" or an "Exhibit" are, unless otherwise specified, to a
Schedule or an Exhibit attached to this Agreement.
2. SALE AND PURCHASE OF NOTES.
Subject to the terms and conditions of this Agreement, the Company will
issue and sell to you and you will purchase from the Company, at the Closing
provided for in Section 3, Notes in the principal amount specified below your
name in Schedule A at the purchase price of 100% of the principal amount
thereof. Contemporaneously with entering into this Agreement, the Company is
entering into separate Note Purchase Agreements (the "OTHER AGREEMENTS")
identical with this Agreement with each of the other purchasers named in
Schedule A (the "OTHER PURCHASERS"), providing for the sale at such Closing to
each of the Other Purchasers of Notes in the principal amount specified below
its name in Schedule A. Your obligation hereunder and the obligations of the
Other Purchasers under the Other Agreements are several and not joint
obligations and you shall have no obligation under any Other Agreement and no
liability to any Person for the performance or non-performance by any Other
Purchaser thereunder.
HYDRIL COMPANY NOTE PURCHASE AGREEMENT
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3. CLOSING.
The sale and purchase of the Notes to be purchased by you and the Other
Purchasers shall occur at the offices of Andrews & Kurth L.L.P., 600 Travis,
Houston, Texas 77002, at 10:00 a.m., local time, at a closing (the "CLOSING") on
June 26, 1998 or on such other Business Day thereafter on or prior to June 30,
1998 as may be agreed upon by the Company and you and the Other Purchasers. At
the Closing the Company will deliver to you the Notes to be purchased by you in
the form of a single Note (or such greater number of Notes in denominations of
at least $100,000 as you may request), dated the date of the Closing and
registered in your name (or in the name of your nominee), as indicated in
Schedule A, against payment by federal funds wire transfer in immediately
available funds of the amount of the purchase price therefor as directed by the
Company in Schedule 3. If at the Closing the Company shall fail to tender such
Notes to you as provided above in this Section 3, or any of the conditions
specified in Section 4 shall not have been fulfilled to your satisfaction, you
shall, at your election, be relieved of all further obligations under this
Agreement, without thereby waiving any rights you may have by reason of such
failure or such nonfulfillment.
4. CONDITIONS TO CLOSING.
Your obligation to purchase and pay for the Notes to be sold to you at the
Closing is subject to the fulfillment to your satisfaction, prior to or at the
Closing, of the following conditions:
4.1 REPRESENTATIONS AND WARRANTIES.
The representations and warranties of the Company in this Agreement shall
be correct when made and at the time of the Closing.
4.2 PERFORMANCE; NO DEFAULT.
The Company shall have performed and complied with all agreements and
conditions contained in this Agreement required to be performed or complied with
by it prior to or at the Closing and after giving effect to the issue and sale
of the Notes (and the application of the proceeds thereof as contemplated by
Schedule 5.14) no Default or Event of Default shall have occurred and be
continuing. Except as shall be described in Schedule 5.3, neither the Company
nor any Subsidiary shall have entered into any transaction since the date of the
Memorandum that would have been prohibited by Section 10 had such Section
applied since such date.
4.3 COMPLIANCE CERTIFICATES.
(a) OFFICER'S CERTIFICATE. The Company shall have delivered to you an
Officer's Certificate, dated the date of the Closing, certifying that the
conditions specified in Sections 4.1, 4.2 and 4.9 have been fulfilled.
(b) SECRETARY'S CERTIFICATE. The Company shall have delivered to you a
certificate of its Secretary or one of its Assistant Secretaries, dated
the date of the Closing, certifying as to the resolutions attached thereto
and other corporate proceedings relating to the authorization, execution
and delivery of the Financing Documents to which it is a party.
HYDRIL COMPANY NOTE PURCHASE AGREEMENT
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4.4 OPINIONS OF COUNSEL.
You shall have received opinions in form and substance satisfactory to you,
dated the date of the Closing, from
(a) Baker & Botts, counsel for the Company, substantially in the form
set out in Exhibit 4.4(a), and covering such other matters incident to the
transactions contemplated hereby as you or your counsel may reasonably
request (and the Company hereby instructs such counsel to deliver such
opinion to you), and
(b) Hebb & Gitlin, your special counsel in connection with such
transactions, substantially in the form set out in Exhibit 4.4(b), and
covering such other matters incident to such transactions as you may
reasonably request.
4.5 PURCHASE PERMITTED BY APPLICABLE LAW, ETC.
On the date of the Closing your purchase of Notes shall (a) be permitted by
the laws and regulations of each jurisdiction to which you are subject, without
recourse to provisions (such as section 1405(a)(8) of the New York Insurance
Law) permitting limited investments by insurance companies without restriction
as to the character of the particular investment, (b) not violate any applicable
law or regulation (including, without limitation, Regulation T, U or X of the
Board of Governors of the Federal Reserve System) and (c) not subject you to any
tax, penalty or liability under or pursuant to any applicable law or regulation.
If requested by you, you shall have received an Officer's Certificate certifying
as to such matters of fact as you may reasonably specify to enable you to
determine whether such purchase is so permitted.
4.6 SALE OF OTHER NOTES.
Contemporaneously with the Closing the Company shall sell to the Other
Purchasers and the Other Purchasers shall purchase the Notes to be purchased by
them at the Closing as specified in Schedule A.
4.7 PAYMENT OF SPECIAL COUNSEL FEES.
Without limiting the provisions of Section 15.1, the Company shall have
paid on or before the Closing the reasonable fees, charges and disbursements of
your special counsel referred to in Section 4.4(b) to the extent reflected in a
statement of such counsel rendered to the Company on or prior to the date of the
Closing.
4.8 PRIVATE PLACEMENT NUMBER.
A Private Placement Number issued by Standard & Poor's CUSIP Service Bureau
(in cooperation with the Securities Valuation Office of the National Association
of Insurance Commissioners) shall have been obtained for the Notes.
HYDRIL COMPANY NOTE PURCHASE AGREEMENT
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4.9 CHANGES IN CORPORATE STRUCTURE.
Except as specified in Schedule 4.9, the Company shall not have changed its
jurisdiction of incorporation or been a party to any merger or consolidation and
shall not have succeeded to all or any substantial part of the liabilities of
any other entity, at any time following the date of the most recent financial
statements referred to in Schedule 5.5.
4.10 INTERCREDITOR AGREEMENT.
An intercreditor and collateral agency agreement substantially in the form
of Exhibit 4.10 (as amended from time to time, the "INTERCREDITOR AGREEMENT")
shall have been duly executed and delivered by you, each of the Other
Purchasers, the Banks, Bank One, as agent for the Banks, and the Collateral
Agent, and an original copy thereof evidencing such due execution and delivery
shall be delivered to you.
4.11 COLLATERAL.
The Company and the Collateral Agent shall have entered into the Second
Lien Deed of Trust and Security Agreements identified on Schedule 4.11
(collectively, the "DEEDS OF TRUST") and amendments to or assignments of the
documents set forth on Schedule 4.11 (such documents, including the Deeds of
Trust and any other security agreement, pledge agreement, collateral assignment,
mortgage or other instrument or agreement relating to the Collateral, whether
existing on or entered into after the date of Closing, as so amended or
assigned, and as may be further amended, modified or restated from time to time,
collectively, the "COLLATERAL DOCUMENTS"), in form and substance satisfactory to
you, and copies thereof shall be delivered to you, certified as true and correct
by the Company.
4.12 BANK AGREEMENT.
The Company shall have delivered to you a fully executed copy of the Bank
Agreement as in effect on, and as amended as of, the date of Closing, certified
as true, complete and correct by a Responsible Officer of the Company, and such
agreement shall be in form and substance reasonably satisfactory to you.
4.13 PROCEEDINGS AND DOCUMENTS.
All corporate and other proceedings in connection with the transactions
contemplated by this Agreement and all documents and instruments incident to
such transactions shall be satisfactory to you and your special counsel, and you
and your special counsel shall have received all such counterpart originals or
certified or other copies of such documents as you or they may reasonably
request.
HYDRIL COMPANY NOTE PURCHASE AGREEMENT
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5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company represents and warrants to you, as of the date of the Closing,
that:
5.1 ORGANIZATION; POWER AND AUTHORITY.
The Company is a corporation duly organized, validly existing and in good
standing under the laws of its jurisdiction of incorporation, and is duly
qualified as a foreign corporation and is in good standing in each jurisdiction
in which such qualification is required by law, other than those jurisdictions
as to which the failure to be so qualified or in good standing could not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect. The Company has the corporate power and authority, to own or
hold under lease the Properties it purports to own or hold under lease, to
transact the business it transacts and proposes to transact, to execute and
deliver the Financing Documents to which it is a party and to perform the
provisions thereof.
5.2 AUTHORIZATION, ETC.
Each of the Financing Documents has been duly authorized by all necessary
corporate action on the part of the Company, and constitutes the legal, valid
and binding obligation of the Company enforceable against the Company in
accordance with its terms, except as such enforceability may be limited by (a)
applicable bankruptcy, insolvency, reorganization, moratorium or other similar
laws affecting the enforcement of creditors' rights generally and (b) general
principles of equity (regardless of whether such enforceability is considered in
a proceeding in equity or at law).
5.3 DISCLOSURE.
The Company, through its agent, Dain Rauscher Wessels, a division of Dain
Rauscher Incorporated, has delivered to you and each Other Purchaser a copy of a
Confidential Private Placement Memorandum, dated May 1998 (the "MEMORANDUM"),
relating to the transactions contemplated hereby. The Memorandum fairly
describes, in all material respects, the general nature of the business and
principal Properties of the Company and its Subsidiaries. Except as disclosed in
Schedule 5.3, this Agreement, the memorandum, the documents, certificates or
other writings delivered to you by or on behalf of the Company in connection
with the transactions contemplated hereby and the financial statements listed in
Schedule 5.5, taken as a whole, do not contain any untrue statement of a
material fact or omit to state any material fact necessary to make the
statements therein not misleading in light of the circumstances under which they
were made. Except as disclosed in the Memorandum or as expressly described in
Schedule 5.3, or in one of the documents, certificates or other writings
identified therein, or in the financial statements listed in Schedule 5.5, since
December 31, 1997, there has been no change in the financial condition,
operations, business, Properties or prospects of the Company or any Subsidiary
except changes that individually or in the aggregate could not reasonably be
expected to have a Material Adverse Effect. There is no fact known to the
Company that could reasonably be expected to have a Material Adverse Effect that
has not been set forth herein or in the Memorandum or in the other documents,
certificates and other writings delivered to you by or on behalf of the Company
specifically for use in connection with the transactions contemplated hereby.
HYDRIL COMPANY NOTE PURCHASE AGREEMENT
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5.4 ORGANIZATION AND OWNERSHIP OF SHARES OF SUBSIDIARIES; AFFILIATES.
(a) Schedule 5.4 contains (except as noted therein) complete and
correct lists of the Company's Subsidiaries, showing, as to each
Subsidiary, the correct name thereof, the jurisdiction of its organization,
and the percentage of shares of each class of its Capital Stock outstanding
owned by the Company and each other Subsidiary. The Company has no
Affiliates other than trusts and charitable organizations, none of which is
engaged in any operating business.
(b) All of the outstanding shares of Capital Stock of each Subsidiary
shown in Schedule 5.4 as being owned by the Company and its Subsidiaries
have been validly issued, are fully paid and nonassessable and are owned
by the Company or another Subsidiary free and clear of any Lien (except as
otherwise disclosed in Schedule 5.4).
(c) Each Subsidiary identified in Schedule 5.4 is a corporation or
other legal entity duly organized, validly existing and in good standing
under the laws of its jurisdiction of organization, and is duly qualified
as a foreign corporatIon or other legal entity and is in good standing in
each jurisdiction in which such qualification is required by law, other
than those jurisdictions as to which the failure to be so qualified or in
good standing could not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect. Each such Subsidiary has the
corporate or other power and authority to own or hold under lease the
Properties it purports to own or hold under lease and to transact the
business it transacts and proposes to transact.
(d) No Subsidiary is a party to, or otherwise subject to any legal
restriction or any agreement (other than this Agreement, the agreements
listed in Schedule 5.4 and customary limitations imposed by corporate law
statutes) restricting the ability of such Subsidiary to pay dividends out
of profits or make any other similar distributions of profits to the
Company or any of its Subsidiaries that owns outstanding shares of Capital
Stock of such Subsidiary.
5.5 FINANCIAL STATEMENTS.
The Company has delivered to you and each Other Purchaser copies of the
financial statements of the Company and its Subsidiaries listed in Schedule 5.5.
All of said financial statements (including in each case the related schedules
and notes) fairly present in all material respects the consolidated financial
position of the Company and its Subsidiaries as of the respective dates
specified in such Schedule and the consolidated results of their operations and
cash flows for the respective periods so specified and have been prepared in
accordance with GAAP consistently applied throughout the periods involved except
as set forth in the notes thereto (subject, in the case of any interim financial
statements, to normal year-end adjustments and the inclusion of abbreviated
footnotes).
5.6 COMPLIANCE WITH LAWS, OTHER INSTRUMENTS, ETC.
The execution, delivery and performance by the Company of this Agreement,
the Notes and the other Financing Documents will not
HYDRIL COMPANY NOTE PURCHASE AGREEMENT
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(a) contravene, result in any breach of, or constitute a default
under, or result in the creation of any Lien (other than Liens on the
Collateral in favor of the Collateral Agent) in respect of any Property of
the Company or any Subsidiary under, any indenture, mortgage, deed of
trust, loan, purchase or credit agreement, lease, corporate charter or
by-laws, or any other agreement or instrument to which the Company or any
Subsidiary is bound or by which the Company or any Subsidiary or any of
their respective Properties may be bound or affected,
(b) conflict with or result in a breach of any of the terms,
conditions or provisions of any order, judgment, decree, or ruling of any
court, arbitrator or Governmental Authority applicable to the Company or
any Subsidiary, or
(c) violate any provision of any statute or other rule or regulation
of any Governmental Authority applicable to the Company or any Subsidiary.
5.7 GOVERNMENTAL AUTHORIZATIONS, ETC.
No consent, approval or authorization of, or registration, filing or
declaration with, any Governmental Authority is required in connection with the
execution, delivery or performance by the Company of the Financing Documents.
5.8 LITIGATION; OBSERVANCE OF AGREEMENTS, STATUTES AND ORDERS.
(a) Except as disclosed in Schedule 5.8, there are no actions, suits
or proceedings pending or, to the knowledge of the Company, threatened
against or affecting the Company or any Subsidiary or any Property of the
Company or any Subsidiary in any court or before any arbitrator of any kind
or before or by any Governmental Authority that, individually or in the
aggregate, could reasonably be expected to have a Material Adverse Effect.
(b) Neither the Company nor any Subsidiary is in default under any
term of any agreement or instrument to which it is a party or by which it
is bound, or any order, judgment, decree or ruling of any court, arbitrator
or Governmental Authority or is in violation of any applicable law,
ordinance, rule or regulation (including, without limitation, Environmental
Laws) of any Governmental Authority, which default or violation,
individually or in the aggregate, could reasonably be expected to have a
Material Adverse Effect.
5.9 TAXES.
The Company and its Subsidiaries have filed all tax returns that are
required to have been filed in any jurisdiction, and have paid all taxes shown
to be due and payable on such returns and all other taxes and assessments levied
upon them or their Properties, assets, income or franchises, to the extent such
taxes and assessments have become due and payable and before they have become
delinquent, except for any taxes and assessments (a) the amount of which is not
individually or in the aggregate Material or (b) the amount, applicability or
validity of which is currently being contested in good faith by appropriate
proceedings and with respect to which the Company or a Subsidiary, as the case
may be, has established adequate reserves in accordance with GAAP. The Company
knows of no basis for any other tax or assessment that could reasonably be
expected to have a Material Adverse Effect. The charges, accruals and
HYDRIL COMPANY NOTE PURCHASE AGREEMENT
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reserves on the books of the Company and its Subsidiaries in respect of Federal,
state or other taxes for all fiscal periods are adequate. The Federal income tax
liabilities of the Company and its Subsidiaries have been determined by the
Internal Revenue Service and paid for all fiscal years up to and including the
fiscal year ended December 31, 1993.
5.10 TITLE TO PROPERTY; LEASES.
The Company and its Subsidiaries have good and sufficient title to their
respective Properties that individually or in the aggregate are Material,
including all such Properties reflected in the most recent audited balance sheet
referred to in Section 5.5 or purported to have been acquired by the Company or
any Subsidiary after said date (except as sold or otherwise disposed of in the
ordinary course of business), in each case free and clear of Liens prohibited by
this Agreement. All leases that individually or in the aggregate are Material
are valid and subsisting and are in full force and effect in all material
respects.
5.11 LICENSES, PERMITS, ETC.
Except as disclosed in Schedule 5.11,
(a) the Company and its Subsidiaries own or possess all licenses,
permits, franchises, authorizations, patents, copyrights, service marks,
trademarks and trade names, or rights thereto, without known conflict with
the rights of others, unless the failure to have such ownership or
possession could not reasonably be expected to result in a Material Adverse
Effect;
(b) to the best knowledge of the Company, no product or practice of
the Company or any Subsidiary infringes in any respect any license, permit,
franchise, authorization, patent, copyright, service mark, trademark, trade
name or other right owned by any other Person, unless such infringement
could not reasonably be expected to result in a Material Adverse Effect;
(c) to the best knowledge of the Company, there is no violation by any
Person of any right of the Company or any of its Subsidiaries with respect
to any patent, copyright, service mark, trademark, trade name or other
right owned or used by the Company or any of its Subsidiaries, which
violation could reasonably be expected to result in a Material Adverse
Effect;
(d) all filings in federal and state offices (including, without
limitation, the United States Patent and Trademark Office) in respect of
all Material patents, pending patents, copyrights, service marks,
trademarks and trade names, and licenses with respect thereto, necessary to
protect the rights therein of the Company and its Subsidiaries against
third parties, have been made; and
(e) Schedule 5.11 correctly lists all United States patents and
trademarks (including those pending) held by the Company and its
Subsidiaries.
HYDRIL COMPANY NOTE PURCHASE AGREEMENT
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5.12 COMPLIANCE WITH ERISA.
(a) COMPLIANCE WITH LAW. The Company and each ERISA Affiliate have
operated and administered each Plan in compliance with all applicable laws
except for such instances of noncompliance as have not resulted in and
could not reasonably be expected to result in a Material Adverse Effect.
Neither the Company nor any ERISA Affiliate has incurred any liability
pursuant to Title I or IV of ERISA or the penalty or excise tax provisions
of the Code relating to employee benefit plans (as defined in section 3 of
ERISA), and no event, transaction or condition has occurred or exists that
could reasonably be expected to result in the incurrence of any such
liability by the Company or any ERISA Affiliate, or in the imposition of
any Lien on any of the rights, Properties or assets of the Company or any
ERISA Affiliate, in either case pursuant to Title I or IV of ERISA or to
such penalty or excise tax provisions or to section 401(a)(29) or 412 of
the Code, other than such liabilities or Liens as would not reasonably be
expected, individually or in the aggregate, to have a Material Adverse
Effect.
(b) BENEFIT LIABILITIES. The present value of the aggregate benefit
liabilities under each of the Plans (other than Multiemployer Plans),
determined as of the end of such Plan's most recently ended plan year on
the basis of the actuarial assumptions specified for funding purposes in
such Plan's most recent actuarial valuation report, did not exceed the
aggregate current value of the assets of such Plan allocable to such
benefit liabilities by more than $4,800,000. The term "BENEFIT LIABILITIES"
has the meaning specified in section 4001 of ERISA and the terms "CURRENT
VALUE" and "PRESENT VALUE" have the meaning specified in section 3 of
ERISA.
(c) MULTIEMPLOYER WITHDRAWAL LIABILITIES. The Company and the ERISA
Affiliates have not incurred withdrawal liabilities (and are not subject to
contingent withdrawal liabilities) under section 4201 or 4204 of ERISA in
respect of Multiemployer Plans that individually or in the aggregate are
Material.
(d) POSTRETIREMENT BENEFITS. The expected postretirement benefit
obligation (determined as of the last day of the Company's most recently
ended fiscal year in accordance with Financial Accounting Standards Board
Statement No. 106, without regard to liabilities attributable to
continuation coverage mandated by section 4980B of the Code) of the Company
and its Subsidiaries could not reasonably be expected to have a Material
Adverse Effect.
(e) PROHIBITED TRANSACTIONS. The execution and delivery of this
Agreement and the issuance and sale of the Notes hereunder will not involve
any transaction that is subject to the prohibitions of section 406 of ERISA
or in connection with which a tax could be imposed pursuant to section
4975(c)(1)(A)-(D) of the Code. The representation by the Company in the
first sentence of this Section 5.12(e) is made in reliance upon and subject
to the accuracy of your representation in Section 6.2 as to the Sources
used to pay the purchase price of the Notes to be purchased by you.
(f) PLANS. Schedule 5.12 sets forth all ERISA Affiliates and all
"employee benefit plans" maintained by the Company (or any "affiliate"
thereof) or in respect of which the Notes could constitute an "employer
security" ("EMPLOYEE BENEFIT PLAN" has the meaning specified in section 3
of ERISA, "AFFILIATE" has the meaning specified in section
HYDRIL COMPANY NOTE PURCHASE AGREEMENT
9
<PAGE> 15
407(d) of ERISA and section V of the Department of Labor Prohibited
Transaction Exemption 95-60 (60 FR 35925, July 12, 1995) and "EMPLOYER
SECURITY" has the meaning specified in section 407(d) of ERISA).
(g) FOREIGN PENSION PLANS. All Foreign Pension Plans have been
established, operated, administered and maintained in compliance with all
laws, regulations and orders applicable thereto except for such failures,
in the aggregate for all such failures, to comply that could not reasonably
be expected to have a Material Adverse Effect. All premiums, contributions
and any other amounts required by applicable Foreign Pension Plan documents
or applicable laws have been paid or accrued as required, except for
premiums, contributions and amounts that, in the aggregate for all such
obligations, could not reasonably be expected to have a Material Adverse
Effect. The present value of all benefits vested under each Foreign Pension
Plan, determined as of the most recent valuation date in respect thereof
does not exceed the value of the assets of such Foreign Pension Plan, and
all required payments in respect of funding such Foreign Pension Plan have
been made, unless any such excess or the failure to make any such payments
could not reasonably be expected to have a Material Adverse Effect.
5.13 PRIVATE OFFERING BY THE COMPANY.
Neither the Company nor anyone acting on its behalf has offered the Notes
or any similar securities for sale to, or solicited any offer to buy any of the
same from, or otherwise approached or negotiated in respect thereof with, any
Person other than you, the Other Purchasers and not more than 30 other
Institutional Investors, each of which has been offered the Notes at a private
sale for investment. Neither the Company nor anyone acting on its behalf has
taken, or will take, any action that would subject the issuance or sale of the
Notes to the registration requirements of section 5 of the Securities Act.
5.14 USE OF PROCEEDS; MARGIN REGULATIONS.
The Company will apply the proceeds of the sale of the Notes as set forth
in Schedule 5.14. No part of the proceeds from the sale of the Notes hereunder
will be used, directly or indirectly, for the purpose of buying or carrying any
margin stock within the meaning of Regulation U of the Board of Governors of the
Federal Reserve System (12 CFR 221), or for the purpose of buying or carrying or
trading in any securities under such circumstances as to involve the Company in
a violation of Regulation X of said Board (12 CFR 224) or to involve any broker
or dealer in a violation of Regulation T of said Board (12 CFR 220). Margin
stock does not constitute more than 1% of the value of the consolidated assets
of the Company and its Subsidiaries and the Company does not have any present
intention that margin stock will constitute more than 1% of the value of such
assets. As used in this Section, the terms "MARGIN STOCK" and "PURPOSE OF BUYING
OR CARRYING" shall have the meanings assigned to them in said Regulation U.
5.15 EXISTING DEBT; FUTURE LIENS.
(a) Except as described therein, Schedule 5.15 sets forth a complete
and correct list of all outstanding Debt of the Company and its
Subsidiaries, with a principal amount in excess of $500,000, as of May 31,
1998 (and specifying, as to each such Debt, the collateral, if any,
securing such Debt), since which date there has been no Material
HYDRIL COMPANY NOTE PURCHASE AGREEMENT
10
<PAGE> 16
change in the amounts, interest rates, sinking funds, instalment payments
or maturities of the Debt of the Company or its Subsidiaries. Neither the
Company nor any Subsidiary is in default and no waiver of default is
currently in effect, in the payment of any principal or interest on any
Debt of the Company or such Subsidiary and no event or condition exists
with respect to any Debt of the Company or any Subsidiary that would permit
(or that with notice or the lapse of time, or both, would permit) one or
more Persons to cause such Debt to become due and payable before its stated
maturity or before its regularly scheduled dates of payment.
(b) Except as disclosed in Schedule 5.15, neither the Company nor any
Subsidiary has agreed or consented to cause or permit in the future (upon
the happening of a contingency or otherwise) any of its Property, whether
now owned or hereafter acquired, to be subject to a Lien not permitted by
Section 10.4.
(c) No Subsidiary has given any Guaranty of any obligations owing by
the Company under the Bank Agreement.
5.16 FOREIGN ASSETS CONTROL REGULATIONS, ETC.
Neither the sale of the Notes by the Company hereunder nor its use of the
proceeds thereof will violate the Trading with the Enemy Act, as amended, or any
of the foreign assets control regulations of the United States Treasury
Department (31 CFR, Subtitle B, Chapter V, as amended) or any enabling
legislation or executive order relating thereto.
5.17 STATUS UNDER CERTAIN STATUTES.
Neither the Company nor any Subsidiary is subject to regulation under the
Investment Company Act of 1940, as amended, the Public Utility Holding Company
Act of 1935, as amended, the Transportation Acts (49 U.S.C.), as amended, or the
Federal Power Act, as amended.
5.18 ENVIRONMENTAL MATTERS.
Neither the Company nor any Subsidiary has knowledge of any claim or has
received any notice of any claim, and no proceeding has been instituted raising
any claim against the Company or any of its Subsidiaries or any of their
respective real Properties or other assets now or formerly owned, leased or
operated by any of them, alleging any damage to the environment or violation of
any Environmental Laws, except, in each case, such as could not reasonably be
expected to result in a Material Adverse Effect. Except as otherwise disclosed
to you in writing,
(a) neither the Company nor any Subsidiary has knowledge of any facts
which would give rise to any claim, public or private, of violation of
Environmental Laws or damage to the environment emanating from, occurring
on or in any way related to real Properties now or formerly owned, leased
or operated by any of them or to other assets or their use, except, in each
case, such as could not reasonably be expected to result in a Material
Adverse Effect;
(b) neither the Company nor any of its Subsidiaries has stored any
Hazardous Materials on real Properties now or formerly owned, leased or
operated by any of them
HYDRIL COMPANY NOTE PURCHASE AGREEMENT
11
<PAGE> 17
or disposed of any Hazardous Materials in a manner contrary to any
Environmental Laws in each case in any manner that could reasonably be
expected to result in a Material Adverse Effect; and
(c) all buildings on all real Properties now owned, leased or operated
by the Company or any of its Subsidiaries are in compliance with applicable
Environmental Laws, except where failure to comply could not reasonably be
expected to result in a Material Adverse Effect.
5.19 LABOR RELATIONS.
Except as set forth on Schedule 5.19, neither the Company nor any
Subsidiary is a party to any collective bargaining agreement. There are no
grievances, disputes or controversies with any union or other organization
affecting the Company or any Subsidiary that could, individually or in the
aggregate, be expected to have a Material Adverse Effect.
6. REPRESENTATIONS OF THE PURCHASER.
6.1 PURCHASE FOR INVESTMENT.
You represent that you are purchasing the Notes for your own account or for
one or more separate accounts maintained by you or for the account of one or
more pension or trust funds and not with a view to the distribution thereof,
provided that the disposition of your or their Property shall at all times be
within your or their control. You understand that the Notes have not been
registered under the Securities Act and may be resold only if registered
pursuant to the provisions of the Securities Act or if an exemption from
registration is available, except under circumstances where neither such
registration nor such an exemption is required by law, and that the Company is
not required to register the Notes.
6.2 SOURCE OF FUNDS.
You represent that at least one of the following statements is an accurate
representation as to each source of funds (a "SOURCE") to be used by you to pay
the purchase price of the Notes to be purchased by you hereunder:
(a) the Source is an "insurance company general account" as defined
in United States Department of Labor Prohibited Transaction Exemption
("PTE") 95-60 (60 FR 35925, July 12, 1995) and in respect thereof you
represent that there is no "employee benefit plan" (as defined in section
3(3) of ERISA and section 4975(e)(1) of the Code, treating as a single plan
all plans maintained by the same employer or employee organization or
affiliate thereof) with respect to which the amount of the general account
reserves and liabilities of all contracts held by or on behalf of such plan
exceeds 10% of the total reserves and liabilities of such general account
(exclusive of separate account liabilities) plus surplus, as set forth in
the National Association of Insurance Commissioners' Annual Statement filed
with your state of domicile and that such acquisition is eligible for and
satisfies the other requirements of such exemption; or
(b) if you are an insurance company, the Source does not include
assets allocated to any separate account maintained by you in which any
employee benefit plan
HYDRIL COMPANY NOTE PURCHASE AGREEMENT
12
<PAGE> 18
(or its related trust) has any interest, other than a separate account that
is maintained solely in connection with your fixed contractual obligations
under which the amounts payable, or credited, to such plan and to any
participant or beneficiary of such plan (including any annuitant) are not
affected in any manner by the investment performance of the separate
account; or
(c) the Source is either (i) an insurance company pooled separate
account, within the meaning of PTE 90-1 (issued January 29, 1990), or (ii)
a bank collective investment fund, within the meaning of the PTE 91-38
(issued July 12,1991) and, except as you have disclosed to the Company in
writing pursuant to this clause (c), no employee benefit plan or group of
plans maintained by the same employer or employee organization beneficially
owns more than 10% of all assets allocated to such pooled separate account
or collective investment fund; or
(d) the Source constitutes assets of an "investment fund" (within the
meaning of part V of PTE 84-14 (the "QPAM EXEMPTION")) managed by a
"qualified professional asset manager" or "QPAM" (within the meaning of
part V of the QPAM Exemption), no employee benefit plan's assets that are
included in such investment fund, when combined with the assets of all
other employee benefit plans established or maintained by the same employer
or by an affiliate (within the meaning of section V(c)(1) of the QPAM
Exemption) of such employer or by the same employee organization and
managed by such QPAM, exceed 20% of the total client assets managed by such
QPAM, the conditions of part I(c) and (g) of the QPAM Exemption are
satisfied, neither the QPAM nor a person controlling or controlled by the
QPAM (applying the definition of "control" in section V(e) of the QPAM
Exemption) owns a 5% or more interest in the Company and
(i) the identity of such QPAM and
(ii) the names of all employee benefit plans whose assets are
included in such investment fund
have been disclosed to the Company in writing pursuant to this clause (d);
or
(e) the Source is a governmental plan; or
(f) the Source is one or more employee benefit plans, or a separate
account or trust fund comprised of one or more employee benefit plans, each
of which has been identified to the Company in writing pursuant to this
clause (f); or
(g) the Source does not include assets of any employee benefit plan,
other than a plan exempt from the coverage of ERISA.
As used in this Section 6.2, the terms "EMPLOYEE BENEFIT PLAN", "GOVERNMENTAL
PLAN" and "SEPARATE ACCOUNT" shall have the respective meanings assigned to such
terms in section 3 of ERISA.
HYDRIL COMPANY NOTE PURCHASE AGREEMENT
13
<PAGE> 19
7. INFORMATION AS TO COMPANY.
7.1 FINANCIAL AND BUSINESS INFORMATION.
The Company shall deliver to each holder of Notes that is an
Institutional Investor:
(a) QUARTERLY STATEMENTS -- within 45 days after the end of
each quarterly fiscal period in each fiscal year of the Company (other
than the last quarterly fiscal period of each such fiscal year),
duplicate copies of,
(i) a consolidated balance sheet of the Company and
its Subsidiaries as at the end of such quarter, and
(ii) consolidated statements of income and cash flows
of the Company and its Subsidiaries, for such quarter and (in
the case of the second and third quarters) for the portion of
the fiscal year ending with such quarter,
setting forth in each case in comparative form the figures for the
corresponding periods in the previous fiscal year, all in reasonable
detail, prepared in accordance with GAAP applicable to quarterly
financial statements generally, and certified by a Senior Financial
Officer as fairly presenting, in all material respects, the
consolidated financial position of the companies being reported on and
their consolidated results of operations and cash flows, subject to
changes resulting from year-end adjustments;
(b) ANNUAL STATEMENTS -- within 120 days after the end of each
fiscal year of the Company, duplicate copies of,
(i) a consolidated balance sheet of the Company and
its Subsidiaries, as at the end of such year, and
(ii) consolidated statements of income, shareholders'
equity and cash flows of the Company and its Subsidiaries, for
such year,
setting forth in each case in comparative form the figures for the
previous fiscal year, all in reasonable detail, prepared in accordance
with GAAP, and accompanied by
(A) an opinion thereon of independent
certified public accountants of recognized national
standing, which opinion shall state that such
financial statements present fairly, in all material
respects, the consolidated financial position of the
companies being reported upon and their consolidated
results of operations and cash flows and have been
prepared in conformity with GAAP, and that the
examination of such accountants in connection with
such financial statements has been made in accordance
with generally accepted auditing standards, and that
such audit provides a reasonable basis for such
opinion in the circumstances, and
(B) a report of such accountants stating
whether, in making their audit, they have become
aware of any condition or event that then
HYDRIL COMPANY 14 NOTE PURCHASE AGREEMENT
<PAGE> 20
constitutes a Default or an Event of Default, and, if
they are aware that any such condition or event then
exists, specifying the nature and period of the
existence thereof (it being understood that such
accountants shall not be liable, directly or
indirectly, for any failure to obtain knowledge of
any Default or Event of Default unless such
accountants should have obtained knowledge thereof in
making an audit in accordance with generally accepted
auditing standards or did not make such an audit);
(c) SEC AND OTHER REPORTS -- promptly upon their becoming
available, one copy of (i) each financial statement, report (including,
without limitation, the Company's annual report to shareholders, if
any, prepared pursuant to Rule 14a-3 under the Exchange Act), notice
or proxy statement sent by the Company or any Subsidiary to public
securities holders generally, and (ii) each regular or periodic report,
each registration statement (without exhibits except as expressly
requested by such holder), and each prospectus and all amendments
thereto filed by the Company or any Subsidiary with the Securities and
Exchange Commission and of all press releases and other statements made
available generally by the Company or any Subsidiary to the public
concerning developments that are Material;
(d) NOTICE OF DEFAULT OR EVENT OF DEFAULT -- promptly, and in
any event within five Business Days after a Responsible Officer
becoming aware
(i) of the existence of any Default or Event of
Default, or
(ii) that any Person has given any notice or taken
any action with respect to a claimed default hereunder, or
(iii) that any Person has given any notice or taken
any action with respect to a claimed default under the Bank
Agreement, or
(iv) that any Person has given any notice or taken
any action with respect to a claimed default of the type
referred to in Section 11(f),
a written notice specifying the nature, the period of existence thereof
and what action the Company is taking or proposes to take with respect
thereto;
(e) ERISA MATTERS -- promptly, and in any event within five
days after a Responsible Officer becoming aware of any of the
following, a written notice setting forth the nature thereof and the
action, if any, that the Company or an ERISA Affiliate proposes to take
with respect thereto:
(i) with respect to any Plan, any reportable event,
as defined in section 4043(c) of ERISA and the regulations
thereunder, for which notice thereof has not been waived
pursuant to such regulations as in effect on the date of the
Closing; or
(ii) the taking by the PBGC of steps to institute, or
the threatening by the PBGC of the institution of, proceedings
under section 4042 of ERISA for the termination of, or the
appointment of a trustee to administer, any Plan, or the
HYDRIL COMPANY 15 NOTE PURCHASE AGREEMENT
<PAGE> 21
receipt by the Company or any ERISA Affiliate of a notice from
a Multiemployer Plan that such action has been taken by the
PBGC with respect to such Multiemployer Plan;
(iii) any event, transaction or condition that could
result in the incurrence of any liability by the Company or
any ERISA Affiliate pursuant to Title I or IV of ERISA or the
penalty or excise tax provisions of the Code relating to
employee benefit plans, or in the imposition of any Lien on
any of the rights, Properties or assets of the Company or any
ERISA Affiliate pursuant to Title I or IV of ERISA or such
penalty or excise tax provisions, if such liability or Lien,
taken together with any other such liabilities or Liens then
existing, could reasonably be expected to have a Material
Adverse Effect; or
(iv) any material contributions to any Foreign
Pension Plan have not been made when due and such default
cannot immediately be remedied, or any Foreign Pension Plan is
not funded to the extent required by applicable law, based
upon reasonable actuarial assumptions, or any material change
is anticipated to any Foreign Pension Plan, except for changes
that individually or in the aggregate could not reasonably be
expected to have a Material Adverse Effect;
(f) NOTICES FROM GOVERNMENTAL AUTHORITY -- promptly, and in
any event within 30 days of receipt thereof, copies of any notice to
the Company or any Subsidiary from any Federal or state Governmental
Authority relating to any order, ruling, statute or other law or
regulation that could reasonably be expected to have a Material Adverse
Effect;
(g) ACTIONS, PROCEEDINGS -- promptly after a Responsible
Officer becomes aware of the commencement thereof, notice of any action
or proceeding relating to the Company or any Subsidiary in any court or
before any Governmental Authority or arbitration board or tribunal as
to which there is a reasonable possibility of an adverse determination
and that, if adversely determined, could reasonably be expected to have
a Material Adverse Effect;
(h) OTHER CREDITORS -- as soon as practicable, copies of any
financial statements, projections or reports (other than routine
notices, communications or other documents delivered in connection with
ordinary course borrowing, or the administration of any borrowing base
or similar test for ordinary course advances under a credit agreement)
furnished to any Bank (or its agent) pursuant to the Bank Agreement to
the extent that the information contained in such statement, report or
certificate has not already been delivered to each holder of Notes;
(i) RULE 144A -- with reasonable promptness, such information
regarding the Company as may from time to time be required to satisfy
the requirements of 17 C.F.R. Section 230.144A, as amended, in
connection with any contemplated transfer of the Notes; and
(j) REQUESTED INFORMATION -- with reasonable promptness, such
other data and information relating to the business, operations,
financial condition, assets or Properties of the Company or any of its
Subsidiaries or relating to the ability of the
HYDRIL COMPANY 16 NOTE PURCHASE AGREEMENT
<PAGE> 22
Company to perform its obligations hereunder and under the Notes as
from time to time may be reasonably requested by any such holder of
Notes.
7.2 OFFICER'S CERTIFICATE.
Each set of financial statements delivered to a holder of Notes
pursuant to Section 7.1(a) or Section 7.1(b) hereof shall be accompanied by a
certificate of a Senior Financial Officer setting forth:
(a) COVENANT COMPLIANCE -- the information (including detailed
calculations) required in order to establish whether the Company was in
compliance with the requirements of Sections 10.1 through 10.7,
inclusive, during the quarterly or annual period covered by the
statements then being furnished (including with respect to each such
Section, where applicable, the calculations of the maximum or minimum
amount, ratio or percentage, as the case may be, permissible under the
terms of such Sections, and the calculation of the amount, ratio or
percentage then in existence); and
(b) EVENT OF DEFAULT -- a statement that such officer has
reviewed the relevant terms hereof and has made, or caused to be made,
under his or her supervision, a review of the transactions and
conditions of the Company and its Subsidiaries from the beginning of
the quarterly or annual period covered by the statements then being
furnished to the date of the certificate and that such review has not
disclosed the existence during such period of any condition or event
that constitutes a Default or an Event of Default or, if any such
condition or event existed or exists (including, without limitation,
any such event or condition resulting from the failure of the Company
or any Subsidiary to comply with any Environmental Law), specifying the
nature and period of existence thereof and what action the Company
shall have taken or proposes to take with respect thereto.
7.3 INSPECTION.
The Company shall permit the representatives of each holder of Notes
that is an Institutional Investor:
(a) NO DEFAULT -- if no Default or Event of Default then
exists, at the expense of such holder and upon reasonable prior notice
to the Company, to visit the principal executive office of the Company,
to discuss the affairs, finances and accounts of the Company and its
Subsidiaries with the Company's officers, and (with the consent of the
Company, which consent will not be unreasonably withheld) its
independent public accountants, and (with the consent of the Company,
which consent will not be unreasonably withheld) to visit the other
offices and Properties of the Company and each Subsidiary, all at such
reasonable times and as often as may be reasonably requested in
writing, provided that an officer of the Company shall be entitled to
be present during any such visit; and
(b) DEFAULT -- if a Default or Event of Default then exists,
at the expense of the Company, to visit and inspect any of the offices
or Properties of the Company or any Subsidiary, to examine all their
respective books of account, records, reports and other papers, to make
copies and extracts therefrom, and to discuss their respective affairs,
HYDRIL COMPANY 17 NOTE PURCHASE AGREEMENT
<PAGE> 23
finances and accounts with their respective officers and independent
public accountants (and by this provision the Company authorizes said
accountants to discuss the affairs, finances and accounts of the
Company and its Subsidiaries), all at such times and as often as may be
requested.
8. PAYMENT OF THE NOTES.
8.1 PAYMENT AT MATURITY.
On June 30, 2003, the Company will pay $60,000,000 principal amount
(or such lesser principal amount as shall then be outstanding) of the Notes at
par and without payment of the Make-Whole Amount or any premium. Such payment
shall be made together with interest on the outstanding principal amount of the
Notes accrued to the date of such payment.
8.2 OPTIONAL PREPAYMENTS WITH MAKE-WHOLE AMOUNT.
The Company may, at its option, upon notice as provided below, prepay
at any time all, or from time to time any part of, the Notes (but if in part, in
an amount not less than $1,000,000 or such lesser amount as shall then be
outstanding), at 100% of the principal amount so prepaid, plus the Make-Whole
Amount determined for the prepayment date with respect to such principal amount.
The Company will give each holder of Notes written notice of each optional
prepayment under this Section 8.2 not less than 20 days and not more than 60
days prior to the date fixed for such prepayment. Each such notice shall specify
(a) the prepayment date,
(b) the aggregate principal amount of the Notes to be prepaid
on such date,
(c) the principal amount of each Note held by such holder to
be prepaid (determined in accordance with Section 8.4), and
(d) the interest to be paid on the prepayment date with
respect to such principal amount being prepaid,
and shall be accompanied by a certificate of a Senior Financial Officer as to
the estimated Make-Whole Amount due in connection with such prepayment
(calculated as if the date of such notice were the date of the prepayment),
setting forth the details of such computation. Two Business Days prior to such
prepayment, the Company shall deliver to each holder of Notes a certificate of a
Senior Financial Officer specifying the calculation of such Make-Whole Amount as
of the specified prepayment date.
8.3 CHANGE IN CONTROL.
(a) NOTICE OF CHANGE IN CONTROL OR CONTROL EVENT. The Company
will, within 5 Business Days after any Responsible Officer has
knowledge of the occurrence of any Change in Control or Control Event,
give written notice of such Change in Control or Control Event to each
holder of Notes. In the case that a Change in Control has occurred,
such notice shall contain and constitute an offer to prepay Notes as
described
HYDRIL COMPANY 18 NOTE PURCHASE AGREEMENT
<PAGE> 24
in clause (b) of this Section 8.3 and shall be accompanied by the
certificate described in clause (e) of this Section 8.3.
(b) OFFER TO PREPAY NOTES. The offer to prepay Notes
contemplated by clause (a) of this Section 8.3 shall be an offer to
prepay, in accordance with and subject to this Section 8.3, all, but
not less than all, the Notes held by each holder (in this case only,
"holders" in respect of any Note registered in the name of a nominee
for a disclosed beneficial owner shall mean such beneficial owner) on a
date specified in such offer (the "PROPOSED PREPAYMENT DATE") that is
not less than 30 days and not more than 45 days after the date of such
offer (if the Proposed Prepayment Date shall not be specified in such
offer, the Proposed Prepayment Date shall be the 45th day after the
date of such offer).
(c) ACCEPTANCE; REJECTION. A holder of Notes may accept the
offer to prepay made pursuant to this Section 8.3 by causing a notice
of such acceptance to be delivered to the Company at least five days
prior to the Proposed Prepayment Date. A failure by a holder of Notes
to respond to an offer to prepay made pursuant to this Section 8.3
shall be deemed to constitute a rejection of such offer by such holder.
(d) PREPAYMENT. Prepayment of the Notes to be prepaid pursuant
to this Section 8.3 shall be at 100% of the principal amount of such
Notes, plus the Make-Whole Amount determined for the date of prepayment
with respect to such principal amount, together with interest on such
Notes accrued to the date of prepayment. On the Business Day preceding
the date of prepayment, the Company shall deliver to each holder of
Notes being prepaid a statement showing the Make-Whole Amount due in
connection with such prepayment and setting forth the details of the
computation of such amount. The prepayment shall be made on the
Proposed Prepayment Date.
(e) OFFICER'S CERTIFICATE. Each offer to prepay the Notes
pursuant to this Section 8.3 shall be accompanied by a certificate,
executed by a Senior Financial Officer of the Company and dated the
date of such offer, specifying: (i) the Proposed Prepayment Date; (ii)
that such offer is made pursuant to this Section 8.3; (iii) the
principal amount of each Note offered to be prepaid; (iv) the estimated
Make-Whole Amount due in connection with such prepayment (calculated as
if the date of such notice were the date of the prepayment), setting
forth the details of such computation; (v) the interest that would be
due on each Note offered to be prepaid, accrued to the Proposed
Prepayment Date; (vi) that the conditions of this Section 8.3 have been
fulfilled; and (vii) in reasonable detail, the nature and date of the
Change in Control.
8.4 ALLOCATION OF PARTIAL PREPAYMENTS.
In the case of each partial prepayment of the Notes pursuant to Section
8.2, the principal amount of the Notes to be prepaid shall be allocated among
all of the Notes at the time outstanding in proportion, as nearly as
practicable, to the respective unpaid principal amounts thereof not theretofore
called for prepayment.
HYDRIL COMPANY 19 NOTE PURCHASE AGREEMENT
<PAGE> 25
8.5 MATURITY; SURRENDER, ETC.
In the case of each prepayment of Notes pursuant to this Section 8, the
principal amount of each Note to be prepaid shall mature and become due and
payable on the date fixed for such prepayment, together with interest on such
principal amount accrued to such date and the applicable Make-Whole Amount, if
any. From and after such date, unless the Company shall fail to pay such
principal amount when so due and payable, together with the interest and
Make-Whole Amount, if any, as aforesaid, interest on such principal amount shall
cease to accrue. Any Note paid or prepaid in full shall be surrendered to the
Company and cancelled and shall not be reissued, and no Note shall be issued in
lieu of any prepaid principal amount of any Note.
8.6 NO OTHER OPTIONAL PREPAYMENTS OR PURCHASE OF NOTES.
The Company will not prepay (whether directly or indirectly by
purchase, redemption or other acquisition) any of the outstanding Notes except
upon the payment or prepayment of the Notes in accordance with the terms of this
Section 8. The Company will promptly cancel all Notes acquired by it or any
Affiliate, and no Notes may be issued in substitution or exchange for any such
Notes.
8.7 MAKE-WHOLE AMOUNT.
The term "MAKE-WHOLE AMOUNT" means, with respect to any Note, an amount
equal to the excess, if any, of the Discounted Value of the Remaining Scheduled
Payments with respect to the Called Principal of such Note over the amount of
such Called Principal, provided that the Make-Whole Amount may in no event be
less than zero. For the purposes of determining the Make-Whole Amount, the
following terms have the following meanings:
"CALLED PRINCIPAL" means, with respect to any Note, the
principal of such Note that is to be prepaid pursuant to Section 8.2 or
Section 8.3 or has become or is declared to be immediately due and
payable pursuant to Section 12.1, as the context requires.
"DISCOUNTED VALUE" means, with respect to the Called Principal
of any Note, the amount obtained by discounting all Remaining Scheduled
Payments with respect to such Called Principal from their respective
scheduled due dates to the Settlement Date with respect to such Called
Principal, in accordance with accepted financial practice and at a
discount factor (applied on the same periodic basis as that on which
interest on the Notes is payable) equal to the Reinvestment Yield with
respect to such Called Principal.
"REINVESTMENT YIELD" means, with respect to the Called
Principal of any Note, 0.50% over the yield to maturity implied by
(i) the yields reported, as of 10:00 A.M. (New York
City time) on the second Business Day preceding the Settlement
Date with respect to such Called Principal, on the display
designated as "Page 678" on the Dow Jones Markets Service (or
such other display as may replace Page 678 on the Dow Jones
Markets Service) for actively traded U.S. Treasury securities
having a maturity equal to the Remaining Average Life of such
Called Principal as of such Settlement Date, or
HYDRIL COMPANY 20 NOTE PURCHASE AGREEMENT
<PAGE> 26
(ii) if such yields are not reported as of such time
or the yields reported as of such time are not ascertainable,
the Treasury Constant Maturity Series Yields reported, for the
latest day for which such yields have been so reported as of
the second Business Day preceding the Settlement Date with
respect to such Called Principal, in Federal Reserve
Statistical Release H.15 (519) (or any comparable successor
publication) for activity traded U.S. Treasury securities
having a constant maturity equal to the Remaining Average Life
of such Called Principal as of such Settlement Date.
Such implied yield will be determined, if necessary, by (a) converting
U.S. Treasury bill quotations to bond-equivalent yields in accordance
with accepted financial practice and (b) interpolating linearly between
(1) the actively traded U.S. Treasury security with the duration
closest to and greater than the Remaining Average Life and (2) the
actively traded U.S. Treasury security with the duration closest to and
less than the Remaining Average Life.
"REMAINING AVERAGE LIFE" means, with respect to any Called
Principal, the number of years (calculated to the nearest one-twelfth
year) obtained by dividing
(i) such Called Principal into
(ii) the sum of the products obtained by multiplying
(a) the principal component of each
Remaining Scheduled Payment with respect to such
Called Principal by
(b) the number of years (calculated to the
nearest one-twelfth year) that will elapse between
the Settlement Date with respect to such Called
Principal and the scheduled due date of such
Remaining Scheduled Payment.
"REMAINING SCHEDULED PAYMENTS" means, with respect to the
Called Principal of any Note, all payments of such Called Principal and
interest thereon that would be due after the Settlement Date with
respect to such Called Principal if no payment of such Called Principal
were made prior to its scheduled due date, provided that if such
Settlement Date is not a date on which interest payments are due to be
made under the term of the Notes, then the amount of the next
succeeding scheduled interest payment will be reduced by the amount of
interest accrued to such Settlement Date and required to be paid on
such Settlement Date pursuant to Section 8.2, Section 8.3 or 12.1.
"SETTLEMENT DATE" means, with respect to the Called Principal
of any Note, the date on which such Called Principal is to be prepaid
pursuant to Section 8.2 or Section 8.3 or has become or is declared to
be immediately due and payable pursuant to Section 12.1, as the context
requires.
HYDRIL COMPANY 21 NOTE PURCHASE AGREEMENT
<PAGE> 27
9. AFFIRMATIVE COVENANTS.
The Company covenants that so long as any of the Notes are outstanding:
9.1 COMPLIANCE WITH LAW.
The Company will and will cause each of its Subsidiaries to comply with
all laws, ordinances or governmental rules or regulations to which each of them
is subject, and will obtain and maintain in effect all licenses, certificates,
permits, franchises and other governmental authorizations necessary to the
ownership of their respective Properties or to the conduct of their respective
businesses, in each case to the extent necessary to ensure that non-compliance
with such laws, ordinances or governmental rules or regulations or failures to
obtain or maintain in effect such licenses, certificates, permits, franchises
and other governmental authorizations could not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect.
9.2 INSURANCE.
The Company will and will cause each of its Subsidiaries to maintain,
with financially sound and reputable insurers, insurance with respect to their
respective Properties and businesses against such casualties and contingencies,
of such types, on such terms and in such amounts (including deductibles,
co-insurance and self-insurance, if adequate reserves are maintained with
respect thereto) as is customary in the case of entities of established
reputations engaged in the same or a similar business and similarly situated.
9.3 MAINTENANCE OF PROPERTIES.
The Company will and will cause each of its Subsidiaries to maintain
and keep, or cause to be maintained and kept, their respective Properties in
good repair, working order and condition (other than ordinary wear and tear), so
that the business carried on in connection therewith may be properly conducted
at all times, provided that this Section shall not prevent the Company or any
Subsidiary from discontinuing the operation and the maintenance of any of its
Properties if such discontinuance is desirable in the conduct of its business
and the Company has concluded that such discontinuance could not, individually
or in the aggregate, reasonably be expected to have a Material Adverse Effect.
9.4 PAYMENT OF TAXES AND CLAIMS.
The Company will and will cause each of its Subsidiaries to
(a) file all tax returns required to be filed in any
jurisdiction and to pay and discharge all taxes shown to be due and
payable on such returns and all other taxes, assessments, governmental
charges, or levies imposed on them or any of their Properties, assets,
income or franchises, and
(b) pay all claims of materialmen, mechanics, carriers,
warehousemen, vendors, landlords and other like Persons,
to the extent such taxes, assessments, charges, levies or claims have become due
and payable and before they have become delinquent or that have or might become
a Lien on Properties or
HYDRIL COMPANY 22 NOTE PURCHASE AGREEMENT
<PAGE> 28
assets of the Company or any Subsidiary, provided that neither the Company nor
any Subsidiary need pay any such tax or assessment or claim if (i) the amount,
applicability or validity thereof is contested by the Company or such Subsidiary
on a timely basis in good faith and in appropriate proceedings, and the Company
or a Subsidiary has established adequate reserves therefor in accordance with
GAAP on the books of the Company or such Subsidiary or (ii) the nonpayment of
all such taxes, assessments, charges, levies and claims in the aggregate could
not reasonably be expected to have a Material Adverse Effect.
9.5 CORPORATE EXISTENCE, ETC.
The Company will at all times preserve and keep in full force and
effect its existence as a corporation organized under the laws of a State of the
United States of America. Subject to Sections 10.6 and 10.7, the Company will at
all times preserve and keep in full force and effect the corporate or other
existence of each of its Subsidiaries and all rights and franchises of the
Company and its Subsidiaries unless, in the good faith judgment of the Company,
the termination of or failure to preserve and keep in full force and effect such
existence, right or franchise could not, individually or in the aggregate, have
a Material Adverse Effect.
9.6 FURTHER ASSURANCES.
(a) GENERALLY. The Company will, and will cause each
Subsidiary to, execute and deliver, within 30 days after any request
therefor by the Required Holders, all further instruments and documents
and take all further action that may be necessary, in order to give
effect to, and to aid in the exercise and enforcement of the Liens,
rights and remedies of the holders of Notes under, the Financing
Documents.
(b) LIENS. The Company will, and will cause each Subsidiary
to, execute and deliver, within 30 days after any request therefor by
the Required Holders, all further instruments and documents and take
all further action that may be necessary, in order to create and
perfect Liens in favor of the Collateral Agent in any Property of the
Company or the Subsidiaries that is not then subject to, but under the
Collateral Documents is intended to be subject to, a Lien or to a
perfected Lien.
9.7 MAINTENANCE OF MOST FAVORED LENDER STATUS.
The Company and the holders of the Notes hereby acknowledge and agree
that if the Company shall enter into any amendment to the Bank Agreement that
provides for the benefit of the lenders thereunder any Financial Covenants that
are relatively more favorable to such lenders than the Financial Covenants that
are currently in effect pursuant to the Bank Agreement as compared to the
Financial Covenants set forth in this Agreement, then, and in each and any such
event, the Financial Covenants in this Agreement shall be and shall be deemed to
be, notwithstanding the provisions of Section 17 and without any further action
on the part of the Company or any other Person being necessary or required,
amended to afford the holders of Notes the same benefits and rights as such
amendment to, or other agreements in respect of, the Financial Covenants of the
Bank Agreement afforded to such lenders; provided, however, that if any such
amendment shall be modified or terminated, then the deemed amendment to this
Agreement effected by this Section 9.7 shall be deemed to have been
simultaneously modified (if any such modification of the Bank Agreement
amendment would itself require a deemed amendment pursuant to this Section 9.7)
or terminated (if such Bank Agreement amendment has
HYDRIL COMPANY 23 NOTE PURCHASE AGREEMENT
<PAGE> 29
been terminated or if such modification of the Bank Agreement amendment would
not itself require a deemed amendment pursuant to this Section 9.7). (If such
deemed amendment shall be deemed to have been terminated, the relevant Financial
Covenant or Financial Covenants herein shall be deemed to provide as it or they
would have if such deemed amendment had never come into effect). The Company
will promptly deliver to each holder of the Notes a copy of each amendment or
other modification to or waiver of any provision of the Bank Agreement entered
into after the date of Closing. "FINANCIAL COVENANTS" means any covenant (or
substantially equivalent default provision) which requires the Company to attain
or maintain a prescribed level of financial condition or financial achievement,
including, without limitation, covenants of the type set forth in Section 10 of
this Agreement, but excluding provisions equivalent to Section 10.8 and Section
10.9, and any borrowing base or similar test for ordinary course advances under
the Bank Agreement.
9.8 SUBSIDIARY GUARANTIES.
If any Subsidiary shall give a Guaranty (a "BANK GUARANTY") of any
obligations owing by the Company under the Bank Agreement, the Company shall
take such action as shall be necessary so that such Subsidiary shall, within one
Business Day after giving a Bank Guaranty, give to each holder of Notes a
Guaranty of all obligations of the Company hereunder and under the Notes
containing substantially the same terms and conditions as the Bank Guaranty.
10. NEGATIVE COVENANTS.
The Company covenants that, on and after date of the Closing and so
long as any of the Notes are outstanding:
10.1 CONSOLIDATED FUNDED DEBT.
The Company will not, and will not permit any Subsidiary to, directly
or indirectly, create, incur, assume, guarantee, or otherwise become directly or
indirectly liable with respect to, any Funded Debt, other than Funded Debt of a
Subsidiary owing to the Company or another Subsidiary, other than:
(a) the Notes;
(b) Funded Debt outstanding on the date of the Closing and
identified on Schedule 5.15;
(c) all Funded Debt available to be borrowed under the Bank
Agreement, the UBS Facility and the Clydesdale Bank Facility, in each
case, as in effect on the date of Closing; and
(d) renewals, extensions, substitutions, refinancings or
replacements of any Funded Debt outstanding pursuant to the foregoing
clauses (a) through (c), inclusive, provided that such renewals,
extensions, substitutions, refinancings or replacements do not exceed
the amount so renewed, extended, substituted, refinanced or replaced;
unless, immediately after giving effect to the creation, incurrence, assumption,
guarantee, or becoming liable in respect thereof and to the application of the
proceeds thereof,
HYDRIL COMPANY 24 NOTE PURCHASE AGREEMENT
<PAGE> 30
(i) no Event of Default would exist;
(ii) Consolidated Funded Debt would not exceed 55% of
Consolidated Total Capitalization; and
(iii) the ratio of (a) Consolidated EBITDA for the
period of four full consecutive fiscal quarters of the Company
ending on, or most recently ended prior to, the date of such
creation, incurrence, assumption, guarantee, or becoming
liable, to (b) Consolidated Fixed Charges for such period
would be greater than 1.5 to 1.0.
For purposes of the foregoing clause (iii), Consolidated EBITDA and Consolidated
Fixed Charges shall be determined on the basis that
(x) (I) such Funded Debt, together with all other Funded
Debt incurred during such four fiscal quarter period, was
incurred on the first day of such period,
(II) any Debt repaid with the proceeds of such Funded
Debt, or such other Funded Debt, was repaid on the first day
of such period, and
(III) the interest rate in effect for such Funded
Debt, and such other Funded Debt, on the date of incurrence
thereof was in effect at all times during such period, and
such Funded Debt, and such other Funded Debt, was outstanding
at all times during such period, and
(y) all acquisitions of Voting Stock or other equity interests
of a Person sufficient to cause such Person to become a Subsidiary, and
all acquisitions of all or substantially all of an operating unit of a
business, in each case made by the Company or a Subsidiary during such
period, occurred on the first day of such period.
Any such determination of Consolidated EBITDA and Consolidated Fixed Charges
shall be made in good faith and on a reasonable basis by a Responsible Officer.
For the purposes of this Section 10.1 and Section 10.2, any Person
becoming a Subsidiary after the date hereof shall be deemed, at the time it
becomes a Subsidiary, to have incurred all of its then outstanding Debt, and any
Person extending, renewing or refunding any Debt shall be deemed to have
incurred such Debt at the time of such extension, renewal or refunding.
10.2 SUBSIDIARY DEBT.
The Company will not permit any Subsidiary to, directly or indirectly,
create, incur, assume, guarantee, or otherwise become directly or indirectly
liable with respect to, any Debt, other than Debt owing to the Company or
another Subsidiary, unless, immediately after giving effect thereto and to the
application of the proceeds thereof:
(a) no Event of Default would exist;
(b) such Debt would be incurred in compliance with Section
10.1; and
HYDRIL COMPANY 25 NOTE PURCHASE AGREEMENT
<PAGE> 31
(c) the sum of
(i) the aggregate Debt of all Subsidiaries (other
than Debt owing to the Company or other Subsidiaries) plus
(ii) the aggregate amount of obligations secured by
Liens permitted pursuant to Section 10.4(k) outstanding at
such time,
would not exceed 15% of Consolidated Tangible Net Worth at such time.
10.3 TANGIBLE NET WORTH.
The Company will not, at any time, permit Consolidated Tangible Net
Worth to be less than $75,000,000.
10.4 LIENS.
The Company will not, and will not permit any Subsidiary to, directly
or indirectly create, incur, assume or permit to exist (upon the happening of a
contingency or otherwise) any Lien on or with respect to any Property
(including, without limitation, any document or instrument in respect of goods
or accounts receivable) of the Company or any such Subsidiary, whether now owned
or held or hereafter acquired, or any income or profits therefrom (whether or
not provision is made for the equal and ratable securing of the Notes in
accordance with the last paragraph of this Section 10.4), or assign or otherwise
convey any right to receive income or profits, except:
(a) Liens securing Debt of the Company and the Subsidiaries
outstanding on the date of the Closing and listed on Schedule 5.15;
(b) Liens renewing or replacing Liens then in existence and
permitted by clause (a) of this Section 10.4 to the extent that the
underlying obligations secured by such existing Liens are being
extended, renewed or refunded, provided that
(i) no such renewal or replacement Lien shall extend
to any Property of the Company or any Subsidiary other than
Property already encumbered by the existing Lien being so
renewed or replaced,
(ii) the principal amount of the underlying
obligation secured by such existing Lien which could have been
outstanding at the time of such renewal or replacement shall
not be increased in connection with such renewal or
replacement, and
(iii) immediately prior to, and immediately after
giving effect to, such renewal or replacement, no Event of
Default exists or would exist;
(c) Liens (other than any Lien imposed by ERISA) incurred or
deposits made in the ordinary course of business
(i) in connection with workers' compensation,
unemployment insurance and other types of social security or
retirement benefits, or
HYDRIL COMPANY 26 NOTE PURCHASE AGREEMENT
<PAGE> 32
(ii) to secure (or to obtain letters of credit that
secure) the performance of tenders, statutory obligations,
surety bonds, bids, leases (other than Capital Leases),
performance bonds, purchase, construction or sales contracts
and other similar obligations,
in each case not incurred or made in connection with the borrowing of
money, the obtaining of advances or credit or the payment of the
deferred purchase price of Property and which Liens, in the aggregate,
do not materially affect the value of the Property of the Company or
its Subsidiaries affected thereby and do not materially impair the use
of such Property in the ordinary course of the business of the Company
or any such Subsidiary;
(d) any Lien created to secure all or any part of the purchase
price, or to secure Debt incurred or assumed to pay all or any part of
the purchase price or cost of construction, of Property (or any
improvement thereon) acquired or constructed by the Company or a
Subsidiary after the date of the Closing, provided that
(i) any such Lien shall extend solely to the item or
items of such Property (or improvement thereon or proceeds
thereof) so acquired or constructed and, if required by the
terms of the instrument originally creating such Lien, other
Property (or improvement thereon or proceeds thereof) which is
an improvement to or is acquired for specific use in
connection with such acquired or constructed Property (or
improvement thereon or proceeds thereof) or which is real
Property being improved by such acquired or constructed
Property (or improvement thereon or proceeds thereof),
(ii) the principal amount of the Debt secured by any
such Lien shall at no time exceed an amount equal to 80% (or,
in the case of any such Debt which is a Capital Lease
Obligation, 100%) of the lesser of (A) the cost to the Company
or such Subsidiary of the Property (or improvement thereon) so
acquired or constructed and (B) the Fair Market Value (as
determined in good faith by the board of directors of the
Company or by a Senior Financial Officer acting pursuant to
delegated or standing authority granted by the board of
directors of the Company) of such Property (or improvement
thereon) at the time of such acquisition or construction, and
(iii) any such Lien shall be created
contemporaneously with, or within twelve months after, the
acquisition or construction of such Property;
(e) statutory Liens of landlords and Liens of carriers,
warehousemen, mechanics, materialmen and, other similar Liens, in each
case incurred in the ordinary course of business for sums not yet due
and payable or the payment of which is not at the time required by
Section 9.4;
(f) Liens arising from judicial attachments or judgments, or
securing appeal bonds, and other similar Liens, provided that
(i) all claims secured thereby are no more than
$3,000,000 in the aggregate, or
HYDRIL COMPANY 27 NOTE PURCHASE AGREEMENT
<PAGE> 33
(ii) the execution or other enforcement of such Liens
is effectively stayed and the claims secured thereby are being
actively contested in good faith and adequate reserves in
respect thereof have been established by the Company or such
Subsidiary in accordance with GAAP;
(g) leases or subleases granted to others, easements,
rights-of-way, restrictions and other similar charges or encumbrances,
in each case incidental to, and not interfering with, the ordinary
conduct of the business of the Company or any of the Subsidiaries,
provided that such Liens do not, in the aggregate, materially impair
use by the Company or such Subsidiary of the Property affected thereby;
(h) Liens for taxes, assessments or other governmental charges
which are not yet due and payable or the payment of which is not at the
time required by Section 9.4;
(i) any Lien existing on Property of a Person immediately
prior to its being consolidated with or merged into the Company or a
Subsidiary, or any Lien existing on any Property acquired by the
Company or any Subsidiary at the time such Property is so acquired
(whether or not the Debt secured thereby shall have been assumed),
provided that (i) no such Lien shall have been created or assumed in
contemplation of such consolidation or merger or such acquisition of
Property, and (ii) each such Lien shall extend solely to the item or
items of Property so acquired;
(j) Liens on Property of a Subsidiary, provided that such
Liens secure only Debt owing to the Company or a Subsidiary; and
(k) other Liens not otherwise permitted by clauses (a) through
(j) of this Section 10.4, so long as immediately after giving effect to
the creation thereof,
(i) the sum, without duplication, of
(A) the aggregate amount of Debt secured by
such Liens, plus
(B) the aggregate amount of Debt of all
Subsidiaries (other than any such Debt owing to the
Company or other Subsidiaries),
does not exceed 15% of Consolidated Tangible Net Worth,
(ii) no Event of Default would exist, and
(iii) the Company would be permitted by the
provisions of Section 10.1 to incur at least $1.00 of
additional Funded Debt (other than Funded Debt owing to a
Subsidiary or Funded Debt incurred pursuant to clauses (a)
through (d), inclusive, of Section 10.1).
If, notwithstanding the prohibition contained herein, the Company
shall, or shall permit any of the Subsidiaries to, directly or indirectly
create, incur, assume or permit to exist any Lien, other than those Liens
permitted by the provisions of clauses (a) through (k) of this Section 10.4, the
Company will make or cause to be made effective provision whereby the Notes will
be secured equally and ratably with any and all other obligations thereby
secured, such security to be
HYDRIL COMPANY 28 NOTE PURCHASE AGREEMENT
<PAGE> 34
pursuant to agreements reasonably satisfactory to the Required Holders and, in
any such case, the Notes shall have the benefit, to the fullest extent that, and
with such priority as, the holders of the Notes may be entitled under applicable
law, of an equitable Lien on the affected Property. Such violation of this
Section 10.4 will constitute an Event of Default, whether or not provision is
made for an equal and ratable Lien pursuant to this Section 10.4.
Notwithstanding anything to the contrary set forth in this Section 10.4
or any other provision of this Agreement, if any bank or other financing
institution shall obtain collateral for any obligations owing to it in respect
of term loans, revolving loans, or lines of credit (regardless of whether the
grant of a Lien on such collateral shall be specifically permitted hereunder),
then the Company shall take such action as shall be necessary or appropriate so
that the Notes and all obligations of the Company in respect of this Agreement
shall be secured equally and ratably with such obligations owing to such bank or
other financing institution.
10.5 RESTRICTED INVESTMENTS AND RESTRICTED PAYMENTS.
(a) LIMITATION. The Company will not, and will not permit any
of the Subsidiaries to, at any time, (i) declare or make, or incur any
liability to declare or make, any Restricted Payment or (ii) make, or
incur any liability to make, any Restricted Investment unless,
immediately after giving effect to such action:
(i) the sum of (x) the aggregate amount of Restricted
Payments of the Company and the Subsidiaries declared or made
during the period commencing on the date of Closing, and
ending on the date such Restricted Payment is declared or
made, inclusive, plus (y) the aggregate amount of all
outstanding Restricted Investments would not exceed the sum of
(A) $5,000,000, plus
(B) 50% of Consolidated Net Income for the
period commencing on April 1, 1998 and ending with
the last day of the fiscal quarter of the Company
most recently ended at the time of such action (or
minus 100% of Consolidated Net Income for such period
if Consolidated Net Income for such period is a
loss), plus
(C) the aggregate net cash proceeds received
by the Company from the issue or sale of Capital
Stock of the Company after the date of Closing to a
Person other than a Subsidiary;
(ii) no Default or Event of Default would exist; and
(iii) the Company would be permitted by the
provisions of Section 10.1 to incur at least $1.00 of
additional Funded Debt (other than Funded Debt owing to a
Subsidiary or Funded Debt incurred pursuant to clauses (a)
through (d), inclusive, of Section 10.1).
(b) INVESTMENTS OF SUBSIDIARIES. Each Person which becomes a
Subsidiary after the date of Closing will be deemed to have made, on
the date such Person becomes a Subsidiary, all Restricted Investments
of such Person in existence on such date.
HYDRIL COMPANY 29 NOTE PURCHASE AGREEMENT
<PAGE> 35
Investments in any Person that ceases to be a Subsidiary after the date
of Closing (but in which the Company or another Subsidiary continues to
maintain an Investment) will be deemed to have been made on the date on
which such Person ceases to be a Subsidiary of the Company.
(c) TIME OF PAYMENT. The Company will not, nor will it permit
any of its Subsidiaries to, authorize a Restricted Payment that is not
payable within 60 days of authorization.
10.6 MERGER, CONSOLIDATION, ETC.
The Company will not, and will not permit any Subsidiary to,
consolidate with or merge with any other corporation or convey, transfer or
lease substantially all of its assets in a single transaction or series of
transactions to any Person, except that:
(a) the Company may consolidate with or merge with another
corporation or convey or transfer (except by lease) all or
substantially all of its assets in a single transaction or series of
transactions to another Person if:
(i) the successor formed by such consolidation or the
survivor of such merger or the Person that acquires by
conveyance or transfer all or substantially all of the assets
of the Company as an entirety, as the case may be (the
"SUCCESSOR CORPORATION"), shall be a solvent Person organized
and existing under the laws of the United States of America,
any State thereof or the District of Columbia;
(ii) if the Company is not the Successor Corporation,
such Person shall have executed and delivered to each holder
of Notes its assumption of the due and punctual performance
and observance of each covenant and condition of the Financing
Documents (pursuant to such agreements and instruments as
shall be reasonably satisfactory to the Required Holders), and
the Company shall have caused to be delivered to each holder
of Notes an opinion of nationally recognized outside counsel,
or other outside counsel reasonably satisfactory to the
Required Holders, to the effect that all agreements or
instruments effecting such assumption are enforceable in
accordance with their terms and comply with the terms hereof;
and
(iii) immediately after giving effect to such
transaction,
(A) no Default or Event of Default would
exist, and
(B) the Successor Corporation would be
permitted by the provisions of Section 10.1 to incur
at least $1.00 of additional Funded Debt (other than
Funded Debt owing to a Subsidiary or Funded Debt
incurred pursuant to clauses (a) through (d),
inclusive, of Section 10.1);
(b) a Subsidiary may consolidate with or merge with the
Company (so long as the Company is the surviving corporation) or
another Subsidiary or convey, transfer or
HYDRIL COMPANY 30 NOTE PURCHASE AGREEMENT
<PAGE> 36
lease all or substantially all of its assets in a single transaction or
series of transactions to the Company or another Subsidiary; and
(c) a Subsidiary may consolidate with or merge with another
corporation or convey, transfer or lease all or substantially all of
its assets in a single transaction or series of transactions to another
Person if such transaction is effected in compliance with Section 10.7.
No such conveyance, transfer or lease of all or substantially all of the assets
of the Company shall have the effect of releasing the Company or any Successor
Corporation from its liability under this Agreement, the Notes or any other
Financing Document.
10.7 DISPOSITION OF ASSETS.
(a) PROHIBITED AND PERMITTED TRANSFERS. The Company will not,
and will not permit any Subsidiary to, sell, lease as lessor, transfer
or otherwise dispose of any Property (including, without limitation,
(x) any sale, lease, transfer or other disposition of Capital Stock of
any Subsidiary and (y) any transfer of Capital Stock of any Subsidiary
or Property of any Subsidiary, in either case, by means of a merger or
consolidation of such Subsidiary, except as permitted with respect to
the Company under Section 10.6) (herein referred to, collectively, as
"TRANSFERS"), except:
(i) Transfers of inventory and other assets for cash
(or cash equivalents) equal to the Fair Market Value of such
inventory or other assets, in each case in the ordinary course
of business of the Person making such Transfer;
(ii) Transfers consisting of a swap of Property of
the Company or a Subsidiary for Property of another Person
that (x) will be used and useful in the business of the
Company or such Subsidiary and (y) has a Fair Market Value
substantially the same as the Property Transferred by the
Company or such Subsidiary, so long as such swap is customary
in the industry in which the Company or such Subsidiary
operates and is consummated on customary terms and conditions;
(iii) Transfers from a Subsidiary to the Company or
a Wholly-Owned Subsidiary;
(iv) Transfers from the Company to a Wholly-Owned
Subsidiary;
(v) the issuance of directors' qualifying shares or,
in the case of a Person organized under the laws of a
jurisdiction outside the United States, the issuance of equity
to local residents to the extent required by local law
("REQUIRED LOCAL EQUITY"); and
(vi) a Transfer (other than as specified in the
foregoing clauses (i) to (v), inclusive) of Property in
exchange for the Fair Market Value thereof, provided that,
immediately after giving effect thereto,
(A) no Event of Default would exist, and
HYDRIL COMPANY 31 NOTE PURCHASE AGREEMENT
<PAGE> 37
(B) the aggregate net book value of all
Transfers consummated under this Section 10.7(a)(vi)
(such net book value being determined immediately
after the consummation of each such Transfer) during
the then current fiscal year of the Company would not
exceed 15% of Consolidated Total Capitalization
determined as of the last day of the then most
recently ended fiscal year of the Company;
provided, that if the requirements set forth in the foregoing
clause (B) shall not be satisfied immediately after
consummation of such Transfer, the Company shall be deemed to
be in compliance with such clause (B) on a provisional basis,
with respect to such Transfer (a "PROVISIONAL QUALIFIED
TRANSFER"), for a period of 365 days following such
consummation, so long as such Transfer was in exchange for
cash (or cash equivalents).
If all Net Proceeds arising from any Provisional
Qualified Transfer (x) shall be invested by the Company and
the Subsidiaries in Operating Assets at any time during such
365 day period or (y) shall be applied to the prepayment of
the principal of any Senior Funded Debt during such period,
then the Company shall be deemed to have complied with this
Section 10.7(a) with respect to such Provisional Qualified
Transfer. If all such Net Proceeds shall not be so invested or
applied by the end of such period, the Company shall be deemed
not to have complied with this Section 10.7(a) with respect to
such Provisional Qualified Transfer.
(b) SUBSIDIARY STOCK. Anything contained herein to the
contrary notwithstanding, the Company will not at any time, and will
not at any time permit any of the Subsidiaries to, sell or otherwise
dispose of any shares of Capital Stock (or any options or warrants to
purchase Capital Stock or other Securities exchangeable for or
convertible into Capital Stock) of a Subsidiary (said Capital Stock,
options, warrants and other Securities being herein referred to as
"SUBSIDIARY STOCK"), nor will any Subsidiary issue, sell or otherwise
dispose of any shares of its own Subsidiary Stock, if the effect of the
transaction would be to reduce the proportionate interest of the
Company and the other Subsidiaries in the outstanding Subsidiary Stock
of the Subsidiary whose shares are the subject of the transaction to a
level whereby such corporation would no longer constitute a
"Subsidiary" as such term is defined in this Agreement, provided that
the foregoing restrictions do not apply to:
(i) Subsidiary Stock pledged to the Collateral Agent
pursuant to any of the Collateral Documents;
(ii) the issuance of directors' qualifying shares or
Required Local Equity; and
(iii) the sale, to the extent permitted by Section
10.7(a), to a Person (other than directly or indirectly to an
Affiliate) of the entire Investment (whether represented by
stock, debt, claims or otherwise) of the Company and the other
Subsidiaries in any Subsidiary, if all of the following
conditions are met:
HYDRIL COMPANY 32 NOTE PURCHASE AGREEMENT
<PAGE> 38
(A) the Subsidiary being disposed of has no
continuing Investment in any other Subsidiary not
being simultaneously disposed of, or in the Company;
and
(B) immediately after the consummation of
the transaction, and after giving effect thereto, no
Default or Event of Default would exist.
For purposes of determining the book value of Property
constituting Subsidiary Stock being Transferred as provided in the
foregoing clause (iii), such book value shall be deemed to be equal to
the percentage of aggregate book value of the Property of the
Subsidiary that shall have issued such Subsidiary Stock that is equal
to the percentage of the entire equity of such Subsidiary represented
by the Subsidiary Stock being Transferred.
(c) PREFERRED STOCK. Without limiting the foregoing, the
Company will not permit any Subsidiary to issue or have outstanding any
Preferred Stock if such Preferred Stock is to be held by a Person other
than the Company or a Wholly-Owned Subsidiary, and the Company shall
not sell, or permit any Subsidiary to sell, any Preferred Stock of any
Subsidiary to any Person other than to the Company or to a Wholly-Owned
Subsidiary.
10.8 TRANSACTIONS WITH AFFILIATES.
Except as set forth in Schedule 10.8 and except for transactions
involving only the Company and Wholly-Owned Subsidiaries, the Company will not,
and will not permit any Subsidiary to, enter into directly or indirectly any
transaction or group of related transactions (including, without limitation, the
purchase, lease, sale or exchange of Properties of any kind, the rendering of
any service, or any other transaction in the ordinary course of business) with
any Affiliate, except upon fair and reasonable terms not materially less
favorable to the Company or such Subsidiary than would be obtainable in a
comparable arm's-length transaction with a Person not an Affiliate.
10.9 LINE OF BUSINESS.
The Company will not, and will not permit any of its Subsidiaries to,
engage to any substantial extent in any business other than the businesses in
which the Company and its Subsidiaries were engaged during the fiscal year ended
December 31, 1997, as described in the Memorandum, and businesses reasonably
related thereto or in furtherance thereof.
10.10 EVI INDEBTEDNESS.
In making any determination of the Company's compliance with any
provision of this Section 10, the EVI Indebtedness and all interest charges and
other expenses incurred in connection therewith shall be disregarded. The "EVI
INDEBTEDNESS" means all of the obligations of the Company under that certain
Master Agreement between the Company and The Chase Manhattan Bank with respect
to the two transactions thereunder confirmed by the two letter agreements dated
January 6, 1998.
HYDRIL COMPANY 33 NOTE PURCHASE AGREEMENT
<PAGE> 39
11. EVENTS OF DEFAULT.
An "EVENT OF DEFAULT" shall exist if any of the following conditions or
events shall occur and be continuing:
(a) PRINCIPAL OR MAKE-WHOLE AMOUNT PAYMENT -- the Company
defaults in the payment of any principal or Make-Whole Amount, if any,
on any Note when the same becomes due and payable, whether at maturity
or at a date fixed for prepayment or by declaration or otherwise; or
(b) INTEREST PAYMENT -- the Company defaults in the payment of
any interest on any Note for more than five days after the same becomes
due and payable; or
(c) SPECIFIED COVENANTS -- the Company defaults in the
performance of or compliance with (i) its obligations under Section
7.1(d) or (ii) any covenant contained in Section 10; or
(d) OTHER COVENANTS -- the Company defaults in the performance
of or compliance with any term contained herein (other than those
referred to in clauses (a), (b) and (c) of this Section 11) and such
default is not remedied within 30 days after the earlier of (i) a
Responsible Officer obtaining actual knowledge of such default and (ii)
the Company receiving written notice of such default from any holder of
a Note; or
(e) REPRESENTATIONS AND WARRANTIES -- any representation or
warranty made in writing by or on behalf of the Company or by any
officer of the Company in any Financing Document or in any writing
furnished in connection with the transactions contemplated hereby
proves to have been false or misleading in any material respect on the
date as of which made; or
(f) CROSS-DEFAULT --
(i) the Company or any Subsidiary is in default (as
principal or as guarantor or other surety) in the payment of
any principal of or premium or make-whole amount or interest
on any Debt (other than Debt under this Agreement and the
Notes) beyond any period of grace provided with respect
thereto, that individually or together with such other Debt as
to which any such failure exists has an aggregate outstanding
principal amount of at least $3,000,000, or
(ii) the Company or any Subsidiary is in default in
the performance of or compliance with any term of any evidence
of any Debt (other than Debt under this Agreement and the
Notes) that, individually or together with such other Debt as
to which any such failure exists has an aggregate outstanding
principal amount of at least $3,000,000, or of any mortgage,
indenture or other agreement relating thereto or any other
condition exists, and as a consequence of such default or
condition such Debt has become, or has been declared (or one
or more Persons are entitled to declare such Debt to be), due
and payable before its stated maturity or before its regularly
scheduled dates of payment, or
HYDRIL COMPANY 34 NOTE PURCHASE AGREEMENT
<PAGE> 40
(iii) as a consequence of the occurrence or
continuation of any event or condition (other than the passage
of time or the right of the holder of Debt to convert such
Debt into equity interests),
(A) the Company or any Subsidiary has become
obligated to purchase or repay Debt before its
regular maturity or before its regularly scheduled
dates of payment in an aggregate outstanding
principal amount of at least $3,000,000, or
(B) one or more Persons have the right to
require the Company or any Subsidiary so to purchase
or repay such Debt; or
(g) INSOLVENCY -- the Company or any Subsidiary
(i) is generally not paying, or admits in writing its
inability to pay, its debts as they become due,
(ii) files, or consents by answer or otherwise to the
filing against it of, a petition for relief or reorganization
or arrangement or any other petition in bankruptcy, for
liquidation or to take advantage of any bankruptcy,
insolvency, reorganization, moratorium or other similar law of
any jurisdiction,
(iii) makes an assignment for the benefit of its
creditors,
(iv) consents to the appointment of a custodian,
receiver, trustee or other officer with similar powers with
respect to it or with respect to any substantial part of its
Property,
(v) is adjudicated as insolvent or to be liquidated,
or
(vi) takes corporate action for the purpose of any of
the foregoing; or
(h) APPOINTMENT OF A RECEIVER -- a court or governmental
authority of competent jurisdiction enters an order appointing, without
consent by the Company or any Subsidiary, a custodian, receiver,
trustee or other officer with similar powers with respect to the
Company or such Subsidiary or with respect to any substantial part of
the Property of the Company or any such Subsidiary, or constituting an
order for relief or approving a petition for relief or reorganization
or any other petition in bankruptcy or for liquidation or to take
advantage of any bankruptcy or insolvency law of any jurisdiction, or
ordering the dissolution, winding-up or liquidation of the Company or
any of the Subsidiaries, or any such petition shall be filed against
the Company or any of the Subsidiaries and such petition shall not be
dismissed within 60 days; or
(i) FINAL JUDGMENT -- a final judgment or judgments for the
payment of money aggregating in excess of $5,000,000 are rendered
against one or more of the Company and the Subsidiaries and such
judgment or judgments are not, within 60 days after entry thereof,
bonded, discharged or stayed pending appeal, or are not discharged
within 60 days after the expiration of such stay, provided that the
calculation of the $5,000,000 shall exclude all or any portion of any
final judgment to the extent, but only to the extent, such
HYDRIL COMPANY 35 NOTE PURCHASE AGREEMENT
<PAGE> 41
portion of such judgment will be covered by payments from insurance
policies issued by sound and reputable insurers, so long as each such
insurer shall have agreed, in writing, to make such payment in respect
of such judgment; or
(j) ERISA -- if
(i) any Plan shall fail to satisfy the minimum
funding standards of ERISA or the Code for any plan year or
part thereof or a waiver of such standards or extension of any
amortization period is sought or granted under section 412 of
the Code,
(ii) a notice of intent to terminate any Plan shall
have been or is reasonably expected to be filed with the PBGC
or the PBGC shall have instituted proceedings under ERISA
section 4042 to terminate or appoint a trustee to administer
any Plan or the PBGC shall have notified the Company or any
ERISA Affiliate that a Plan may become a subject of any such
proceedings,
(iii) the aggregate "amount of unfunded benefit
liabilities" (within the meaning of section 4001(a)(18) of
ERISA) under all Plans, determined in accordance with Title IV
of ERISA, shall at any time exceed $3,000,000,
(iv) the Company or any ERISA Affiliate shall have
incurred or is reasonably expected to incur any liability
pursuant to Title I or IV of ERISA or the penalty or excise
tax provisions of the Code relating to employee benefit plans,
(v) the Company or any ERISA Affiliate withdraws from
any Multiemployer Plan, or
(vi) the Company or any Subsidiary establishes or
amends any employee welfare benefit plan that provides
post-employment welfare benefits in a manner that would
increase the liability of the Company or any Subsidiary
thereunder;
and any such event or events described in clauses (i) through (vi)
above, either individually or together with any other such event or
events, could reasonably be expected to have a Material Adverse Effect
(as used in this Section 11(j), the terms "EMPLOYEE BENEFIT PLAN" and
"EMPLOYEE WELFARE BENEFIT PLAN" shall have the respective meanings
assigned to such terms in section 3 of ERISA); or
(k) FINANCING DOCUMENTS -- any Financing Document shall cease
to be in full force and effect or shall be declared by a court or other
Governmental Authority of competent jurisdiction to be void, voidable
or unenforceable against the Company; the validity or enforceability of
any Financing Document against the Company shall be contested by the
Company or any Subsidiary or Affiliate; the Company or any Subsidiary
or Affiliate shall deny that the Company has any further liability or
obligation under any Financing Document; or the Company or any
Subsidiary or Affiliate shall default in the performance of any of its
obligations in any Financing Document beyond any period of grace
provided therefor.
HYDRIL COMPANY 36 NOTE PURCHASE AGREEMENT
<PAGE> 42
12. REMEDIES ON DEFAULT, ETC.
12.1 ACCELERATION.
(a) If an Event of Default with respect to the Company
described in clause (g) or clause (h) of Section 11 (other than an
Event of Default described in such clause (i) of clause (g) or
described in such clause (vi) of clause (g) by virtue of the fact that
such clause encompasses clause (i) of clause (g)) has occurred, all the
Notes then outstanding shall automatically become immediately due and
payable.
(b) If any other Event of Default has occurred and is
continuing, any holder or holders of more than 25% in principal amount
of the Notes at the time outstanding may at any time at its or their
option, by notice or notices to the Company, declare all the Notes then
outstanding to be immediately due and payable.
(c) If any Event of Default described in clause (a) or (b) of
Section 11 has occurred and is continuing, any holder or holders of
Notes at the time outstanding affected by such Event of Default may at
any time, at its or their option, by notice or notices to the Company,
declare all the Notes held by it or them to be immediately due and
payable.
Upon any Notes becoming due and payable under this Section 12.1,
whether automatically or by declaration, such Notes will forthwith mature and
the entire unpaid principal amount of such Notes, plus (x) all accrued and
unpaid interest thereon and (y) the Make-Whole Amount determined in respect of
such principal amount (to the full extent permitted by applicable law), shall
all be immediately due and payable, in each and every case without presentment,
demand, protest or further notice, all of which are hereby waived. The Company
acknowledges, and the parties hereto agree, that each holder of a Note has the
right to maintain its investment in the Notes free from repayment by the Company
(except as herein specifically provided for) and that the provision for payment
of a Make-Whole Amount by the Company in the event that the Notes are prepaid or
are accelerated as a result of an Event of Default, is intended to provide
compensation for the deprivation of such right under such circumstances.
12.2 OTHER REMEDIES.
If any Default or Event of Default has occurred and is continuing, and
irrespective of whether any Notes have become or have been declared immediately
due and payable under Section 12.1, the holder of any Note at the time
outstanding may proceed to protect and enforce the rights of such holder by an
action at law, suit in equity or other appropriate proceeding, whether for the
specific performance of any agreement contained herein or in any Note, or for an
injunction against a violation of any of the terms hereof or thereof, or in aid
of the exercise of any power granted hereby or thereby or by law or otherwise.
12.3 RESCISSION.
At any time after any Notes have been declared due and payable pursuant
to clause (b) or clause (c) of Section 12.1, the holders of not less than 76% in
principal amount of the Notes then outstanding, by written notice to the
Company, may rescind and annul any such declaration and its consequences if
HYDRIL COMPANY 37 NOTE PURCHASE AGREEMENT
<PAGE> 43
(a) the Company has paid all overdue interest on the Notes,
all principal of and Make-Whole Amount, if any, due and payable on any
Notes other than by reason of such declaration, and all interest on
such overdue principal and Make-Whole Amount, if any, and (to the
extent permitted by applicable law) any overdue interest in respect of
the Notes, at the Default Rate,
(b) all Events of Default and Defaults, other than non-payment
of amounts that have become due solely by reason of such declaration,
have been cured or have been waived pursuant to Section 17, and
(c) no judgment or decree has been entered for the payment of
any monies due pursuant hereto or to the Notes.
No rescission and annulment under this Section 12.3 will extend to or affect any
subsequent Event of Default or Default or impair any right consequent thereon.
12.4 NO WAIVERS OR ELECTION OF REMEDIES, EXPENSES, ETC.
No course of dealing and no delay on the part of any holder of any Note
in exercising any right, power or remedy shall operate as a waiver thereof or
otherwise prejudice such holder's rights, powers or remedies. No right, power or
remedy conferred by any Financing Document upon any holder thereof shall be
exclusive of any other right, power or remedy referred to herein or therein or
now or hereafter available at law, in equity, by statute or otherwise. Without
limiting the obligations of the Company under Section 15, the Company will pay
to the holder of each Note on demand such further amount as shall be sufficient
to cover all costs and expenses of such holder incurred in any enforcement or
collection under this Section 12, including, without limitation, reasonable
attorneys' fees, expenses and disbursements.
13. REGISTRATION; EXCHANGE; SUBSTITUTION OF NOTES.
13.1 REGISTRATION OF NOTES.
The Company shall keep at its principal executive office a register for
the registration and registration of transfers of Notes. The name and address of
each holder of one or more Notes, each transfer thereof and the name and address
of each transferee of one or more Notes shall be registered in such register.
Prior to due presentment for registration of transfer, the Person in whose name
any Note shall be registered shall be deemed and treated as the owner and holder
thereof for all purposes hereof, and the Company shall not be affected by any
notice or knowledge to the contrary. The Company shall give to any holder of a
Note that is an Institutional Investor promptly upon request therefor, a
complete and correct copy of the names and addresses of all registered holders
of Notes.
13.2 TRANSFER AND EXCHANGE OF NOTES.
Upon surrender of any Note at the principal executive office of the
Company for registration of transfer or exchange (and in the case of a surrender
for registration of transfer, duly endorsed or accompanied by a written
instrument of transfer duly executed by the registered holder of such Note or
its attorney duly authorized in writing and accompanied by the address for
notices of each transferee of such Note or part thereof), the Company shall
execute and
HYDRIL COMPANY 38 NOTE PURCHASE AGREEMENT
<PAGE> 44
deliver, at the Company's expense (except as provided below), one or more new
Notes (as requested by the holder thereof) in exchange therefor, in an aggregate
principal amount equal to the unpaid principal amount of the surrendered Note.
Each such new Note shall be payable to such Person as such holder may request
and shall be substantially in the form of Exhibit 1. Each such new Note shall be
dated and bear interest from the date to which interest shall have been paid on
the surrendered Note or dated the date of the surrendered Note if no interest
shall have been paid thereon. The Company may require payment of a sum
sufficient to cover any stamp tax or governmental charge imposed in respect of
any such transfer of Notes. Notes shall not be transferred in denominations of
less than $100,000, provided that if necessary to enable the registration of
transfer by a holder of its entire holding of Notes, one Note may be in a
denomination of less than $100,000. Any transferee, by its acceptance of a Note
registered in its name (or the name of its nominee), shall be deemed to have
made the representation set forth in Section 6.2.
13.3 REPLACEMENT OF NOTES.
Upon receipt by the Company of evidence reasonably satisfactory to it
of the ownership of and the loss, theft, destruction or mutilation of any Note
(which evidence shall be, in the case of an Institutional Investor, notice from
such Institutional Investor of such ownership and such loss, theft, destruction
or mutilation), and
(a) in the case of loss, theft or destruction, of indemnity
reasonably satisfactory to it (provided that if the holder of such Note
is, or is a nominee for, an original purchaser or a Qualified
Institutional Buyer, such Person's own unsecured agreement of indemnity
shall be deemed to be satisfactory), or
(b) in the case of mutilation, upon surrender and cancellation
thereof,
the Company at its own expense shall execute and deliver, in lieu thereof, a new
Note, dated and bearing interest from the date to which interest shall have been
paid on such lost, stolen, destroyed or mutilated Note or dated the date of such
lost, stolen, destroyed or mutilated Note if no interest shall have been paid
thereon.
14. PAYMENTS ON NOTES.
14.1 PLACE OF PAYMENT.
Subject to Section 14.2, payments of principal, Make-Whole Amount, if
any, and interest becoming due and payable on the Notes shall be made in
Houston, Texas at the principal office of the Company in such jurisdiction. The
Company may at any time, by notice to each holder of a Note, change the place of
payment of the Notes so long as such place of payment shall be either the
principal office of the Company in such jurisdiction or the principal office of
a bank or trust company in such jurisdiction.
14.2 HOME OFFICE PAYMENT.
So long as you or your nominee shall be the holder of any Note, and
notwithstanding anything contained in Section 14.1 or in such Note to the
contrary, the Company will pay all sums becoming due on such Note for principal,
Make-Whole Amount, if any, and interest by the
HYDRIL COMPANY 39 NOTE PURCHASE AGREEMENT
<PAGE> 45
method and at the address specified for such purpose below your name in Schedule
A, or by such other method or at such other address as you shall have from time
to time specified to the Company in writing for such purpose, without the
presentation or surrender of such Note or the making of any notation thereon,
except that upon written request of the Company made concurrently with or
reasonably promptly after payment or prepayment in full of any Note, you shall
surrender such Note for cancellation, reasonably promptly after any such
request, to the Company at its principal executive office or at the place of
payment most recently designated by the Company pursuant to Section 14.1. Prior
to any sale or other disposition of any Note held by you or your nominee you
will, at your election, either endorse thereon the amount of principal paid
thereon and the last date to which interest has been paid thereon or surrender
such Note to the Company in exchange for a new Note or Notes pursuant to Section
13.2. The Company will afford the benefits of this Section 14.2 to any
Institutional Investor that is the direct or indirect transferee of any Note
purchased by you under this Agreement and that has made the same agreement
relating to such Note as you have made in this Section 14.2.
15. EXPENSES, ETC.
15.1 TRANSACTION EXPENSES.
Whether or not the transactions contemplated hereby are consummated,
the Company will pay all reasonable costs and expenses (including reasonable
attorneys' fees of a special counsel and, if reasonably required, local or other
counsel) incurred by you and each Other Purchaser or holder of a Note in
connection with such transactions and in connection with any amendments, waivers
or consents under or in respect of any of the Financing Documents (whether or
not such amendment, waiver or consent becomes effective), including, without
limitation:
(a) the costs and expenses incurred in enforcing or defending
(or determining whether or how to enforce or defend) any rights under
the Financing Documents or in responding to any subpoena or other legal
process or informal investigative demand issued in connection with the
Financing Documents, or by reason of being a holder of any Note; and
(b) the reasonable costs and expenses, including financial
advisors' fees, incurred in connection with the insolvency or
bankruptcy of the Company or any Subsidiary or in connection with any
work-out or restructuring of the transactions contemplated hereby and
by the Notes.
The Company will pay, and will save you and each other holder of a Note
harmless from, all claims in respect of any fees, costs or expenses if
any, of brokers and finders retained by the Company.
15.2 SURVIVAL.
The obligations of the Company under this Section 15 will survive the
payment or transfer of any Note, the enforcement, amendment or waiver of any
provision of any Financing Document, and the termination of any Financing
Document.
HYDRIL COMPANY 40 NOTE PURCHASE AGREEMENT
<PAGE> 46
16. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ENTIRE AGREEMENT.
All representations and warranties contained in the Financing Documents
shall survive the execution and delivery of this Agreement and the Notes, the
purchase or transfer by you of any Note or portion thereof or interest therein
and the payment of any Note, and may be relied upon by any subsequent holder of
a Note, regardless of any investigation made at any time by or on behalf of you
or any other holder of a Note. All statements contained in any certificate or
other instrument signed by an officer of the Company and delivered by the
Company pursuant to any Financing Document shall be deemed representations and
warranties of the Company under this Agreement. Subject to the preceding
sentence, the Financing Documents embody the entire agreement and understanding
between you and the Company and supersede all prior agreements and
understandings relating to the subject matter hereof.
17. AMENDMENT AND WAIVER.
17.1 REQUIREMENTS.
This Agreement and the Notes may be amended, and the observance of any
term hereof or of the Notes may be waived (either retroactively or
prospectively), with (and only with) the written consent of the Company and the
Required Holders, except that (a) no amendment or waiver of any of the
provisions of any of Sections 1, 2, 3, 4, 5, 6 and 21, or any defined term (as
it is used therein), will be effective as to you unless consented to by you in
writing, and (b) no such amendment or waiver may, without the written consent of
the holder of each Note at the time outstanding affected thereby, (i) subject to
the provisions of Section 12 relating to acceleration or rescission, change the
amount or time of any prepayment or payment of principal of, or reduce the rate
or change the time of payment or method of computation of interest or of the
Make-Whole Amount on, the Notes, (ii) change the percentage of the principal
amount of the Notes the holders of which are required to consent to any such
amendment or waiver, or (iii) amend any of Sections 8, 11(a), 11(b), 12, 17 and
20.
17.2 SOLICITATION OF HOLDERS OF NOTES.
(a) SOLICITATION. The Company will provide each holder of the
Notes (irrespective of the amount of Notes then owned by it) with
sufficient information, sufficiently far in advance of the date a
decision is required, to enable such holder to make an informed and
considered decision with respect to any proposed amendment, waiver or
consent in respect of any of the provisions hereof or of the Notes.
The Company will deliver executed or true and correct copies of each
amendment, waiver or consent effected pursuant to the provisions of
this Section 17 to each holder of outstanding Notes promptly following
the date on which it is executed and delivered by, or receives the
consent or approval of, the requisite holders of Notes.
(b) PAYMENT. The Company will not directly or indirectly pay
or cause to be paid any remuneration, whether by way of supplemental or
additional interest, fee or otherwise, or grant any security, to any
holder of Notes as consideration for or as an inducement to the
entering into by any holder of Notes of any waiver or amendment of any
of the terms and provisions hereof unless such remuneration is
concurrently paid, or security is concurrently granted, on the same
terms, ratably to each holder of Notes then outstanding even if such
holder did not consent to such waiver or amendment.
HYDRIL COMPANY 41 NOTE PURCHASE AGREEMENT
<PAGE> 47
17.3 BINDING EFFECT, ETC.
Any amendment or waiver consented to as provided in this Section 17
applies equally to all holders of Notes and is binding upon them and upon each
future holder of any Note and upon the Company without regard to whether such
Note has been marked to indicate such amendment or waiver. No such amendment or
waiver will extend to or affect any obligation, covenant, agreement, Default or
Event of Default not expressly amended or waived or impair any right consequent
thereon. No course of dealing between the Company and the holder of any Note nor
any delay in exercising any rights hereunder or under any Note shall operate as
a waiver of any rights of any holder of such Note. As used herein, the term
"THIS AGREEMENT" and references thereto shall mean this Agreement as it may from
time to time be amended or supplemented.
17.4 NOTES HELD BY COMPANY, ETC.
Solely for the purpose of determining whether the holders of the
requisite percentage of the aggregate principal amount of Notes then outstanding
approved or consented to any amendment, waiver or consent to be given under any
Financing Document, or have directed the taking of any action provided herein or
in the Notes to be taken upon the direction of the holders of a specified
percentage of the aggregate principal amount of Notes then outstanding, Notes
directly or indirectly owned by the Company or any of its Affiliates shall be
deemed not to be outstanding.
18. NOTICES.
All notices and communications provided for hereunder shall be in
writing and sent (a) by telecopy if the sender on the same day sends a
confirming copy of such notice by a recognized overnight delivery service
(charges prepaid), or (b) by registered or certified mail with return receipt
requested (postage prepaid), or (c) by a recognized overnight delivery service
(with charges prepaid). Any such notice must be sent:
(i) if to you or your nominee, to you or it at the address
specified for such communications in Schedule A, or at such other
address as you or it shall have specified to the Company in writing,
(ii) if to any other holder of any Note, to such holder at
such address as such other holder shall have specified to the Company
in writing, or
(iii) if to the Company, to the Company at its address set
forth at the beginning hereof to the attention of the Chief Financial
Officer, telecopier: (281) 985-3287, or at such other address as the
Company shall have specified to the holder of each Note in writing.
Notices under this Section 18 will be deemed given only when actually received.
19. REPRODUCTION OF DOCUMENTS.
This Agreement and all documents relating hereto, including, without
limitation, (a) consents, waivers and modifications that may hereafter be
executed, (b) documents received by you at the Closing (except the Notes
themselves), and (c) financial statements, certificates and
HYDRIL COMPANY 42 NOTE PURCHASE AGREEMENT
<PAGE> 48
other information previously or hereafter furnished to you, may be reproduced by
you by any photographic, photostatic, microfilm, microcard, miniature
photographic or other similar process and you may destroy any original document
so reproduced. The Company agrees and stipulates that, to the extent permitted
by applicable law, any such reproduction shall be admissible in evidence as the
original itself in any judicial or administrative proceeding (whether or not the
original is in existence and whether or not such reproduction was made by you in
the regular course of business) and any enlargement, facsimile or further
reproduction of such reproduction shall likewise be admissible in evidence. This
Section 19 shall not prohibit the Company or any other holder of Notes from
contesting any such reproduction to the same extent that it could contest the
original, or from introducing evidence to demonstrate the inaccuracy of any such
reproduction.
20. CONFIDENTIAL INFORMATION.
For the purposes of this Section 20, "CONFIDENTIAL INFORMATION" means
information delivered to you by or on behalf of the Company or any Subsidiary in
connection with the transactions contemplated by or otherwise pursuant to this
Agreement that was clearly marked or labeled or otherwise adequately identified
when received by you as being confidential information of the Company or such
Subsidiary, provided that such term does not include information that
(a) was publicly known or otherwise known to you prior to the
time of such disclosure,
(b) subsequently becomes publicly known through no act or
omission by you or any Person acting on your behalf,
(c) otherwise becomes known to you other than through
disclosure by the Company or any Subsidiary, or
(d) constitutes financial statements delivered to you under
Section 7.1 that are otherwise publicly available.
You will maintain the confidentiality of such Confidential Information in
accordance with procedures adopted by you in good faith to protect confidential
information of third parties delivered to you and you will use such information
only in connection with your investment in the Notes, provided that you may
deliver or disclose Confidential Information to:
(i) your directors, officers, trustees, employees, agents,
attorneys and affiliates (to the extent such disclosure reasonably
relates to the administration of the investment represented by your
Notes),
(ii) your financial advisors and other professional advisors
who agree to hold confidential the Confidential Information
substantially in accordance with the terms of this Section 20,
(iii) any other holder of any Note,
HYDRIL COMPANY 43 NOTE PURCHASE AGREEMENT
<PAGE> 49
(iv) any Institutional Investor to which you sell or offer to
sell such Note or any part thereof or any participation therein (if
such Person has agreed in writing prior to its receipt of such
Confidential Information to be bound by the provisions of this Section
20),
(v) any Person from which you offer to purchase any security
of the Company (if such Person has agreed in writing prior to its
receipt of such Confidential Information to be bound by the provisions
of this Section 20),
(vi) any federal or state regulatory authority having
jurisdiction over you,
(vii) the National Association of Insurance Commissioners or
any similar organization, or any nationally recognized rating agency
that requires access to information about your investment portfolio or
(viii) any other Person to which such delivery or disclosure
may be necessary or appropriate
(A) to effect compliance with any law, rule,
regulation or order applicable to you,
(B) in response to any subpoena or other legal
process,
(C) in connection with any litigation to which you
are a party, or
(D) if an Event of Default has occurred and is
continuing, to the extent you may reasonably determine such
delivery and disclosure to be necessary or appropriate in the
enforcement or for the protection of the rights and remedies
under your Notes, this Agreement and the other Financing
Documents,
provided that, prior to your disclosure of any information described in
this clause (viii) and to the extent practicable in the circumstances,
you will attempt to provide advance notice of such disclosure to the
Company but your failure to give such notice shall not result in any
liability for you.
Each holder of a Note, by its acceptance of a Note, will be deemed to have
agreed to be bound by and to be entitled to the benefits of this Section 20 as
though it were a party to this Agreement. On reasonable request by the Company
in connection with the delivery to any holder of a Note of information required
to be delivered to such holder under this Agreement or requested by such holder
(other than a holder that is a party to this Agreement or its nominee), such
holder will enter into an agreement with the Company embodying the provisions of
this Section 20.
21. SUBSTITUTION OF PURCHASER.
You shall have the right to substitute any one of your Affiliates as
the purchaser of the Notes that you have agreed to purchase hereunder, by
written notice to the Company, which notice shall be signed by both you and such
Affiliate, shall contain such Affiliate's agreement to be bound by this
Agreement and shall contain a confirmation by such Affiliate of the accuracy
with respect to it of the representations set forth in Section 6. Upon receipt
of such notice,
HYDRIL COMPANY 44 NOTE PURCHASE AGREEMENT
<PAGE> 50
wherever the word "you" is used in this Agreement (other than in this Section
21), such word shall be deemed to refer to such Affiliate in lieu of you. In the
event that such Affiliate is so substituted as a purchaser hereunder and such
Affiliate thereafter transfers to you all of the Notes then held by such
Affiliate, upon receipt by the Company of notice of such transfer, wherever the
word "you" is used in this Agreement (other than in this Section 21), such word
shall no longer be deemed to refer to such Affiliate, but shall refer to you,
and you shall have all the rights of an original holder of the Notes under this
Agreement.
22. MISCELLANEOUS.
22.1 SUCCESSORS AND ASSIGNS.
All covenants and other agreements contained in this Agreement by or on
behalf of any of the parties hereto bind and inure to the benefit of their
respective successors and assigns (including, without limitation, any subsequent
holder of a Note) whether so expressed or not.
22.2 PAYMENTS DUE ON NON-BUSINESS DAYS; WHEN PAYMENTS DEEMED RECEIVED.
(a) PAYMENTS DUE ON NON-BUSINESS DAYS. Anything in this
Agreement or the Notes to the contrary notwithstanding, any payment of
principal of or Make-Whole Amount or interest on any Note that is due
on a date other than a Business Day shall be made on the next
succeeding Business Day without including the additional days elapsed
in the computation of the interest payable on such next succeeding
Business Day.
(b) PAYMENTS, WHEN RECEIVED. Any payment to be made to the
holders of Notes hereunder or under the Notes shall be deemed to have
been made on the Business Day such payment actually becomes available
to such holder at such holder's bank prior to 1:00 p.m. (local time of
such bank).
22.3 MAXIMUM INTEREST PAYABLE.
The Company and each holder of Notes specifically intend and agree to
limit contractually the amount of interest payable under this Agreement and the
Notes, and all other instruments and agreements related hereto and thereto, to
the maximum amount of interest lawfully permitted to be charged under applicable
law. If applicable law is ever construed so as to render usurious any amounts
called for under this Agreement, the Notes or any related document, or
contracted for, charged, taken, reserved or received with respect to the
extension of credit evidenced hereby and thereby, or if acceleration of maturity
of any of the Notes or if any prepayment by the Company results in the Company
having paid, or demand having been made on the Company to pay, any interest in
excess of that permitted by applicable law, then all excess amounts theretofore
received by the holder or holders of the Notes shall be credited on the
principal balances of the Notes (or, if the Notes have been or would thereby be
repaid in full, refunded to the Company), and the provisions of this Agreement,
the Notes and any related document or demand on the Company shall immediately be
deemed reformed and the amounts thereafter collectible hereunder and thereunder
shall immediately be reduced, without the necessity of the execution of any new
documents, so as to comply with applicable law, but so as to permit the recovery
of the fullest amounts otherwise called for hereunder and thereunder.
HYDRIL COMPANY 45 NOTE PURCHASE AGREEMENT
<PAGE> 51
22.4 RELEASE OF LIENS.
At such time as all obligations owing to the Banks have been
indefeasibly paid in full and the Bank Agreement has been terminated, or at such
time as the Banks shall execute documents releasing all Liens created in their
favor pursuant to the Collateral Documents or any other agreements, and if no
Default or Event of Default shall be continuing either immediately prior to,
or immediately after giving effect to, such payment and termination, or such
release, the holders of the Notes shall execute all commercially reasonable
documents, prepared at the Company's expense, required to release all Liens
created in their favor pursuant to the Collateral Documents.
22.5 SEVERABILITY.
Any provision of this Agreement that is prohibited or unenforceable in
any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall (to the full extent permitted by law) not invalidate or
render unenforceable such provision in any other jurisdiction.
22.6 CONSTRUCTION.
Each covenant contained herein shall be construed (absent express
provision to the contrary) as being independent of each other covenant contained
herein, so that compliance with any one covenant shall not (absent such an
express contrary provision) be deemed to excuse compliance with any other
covenant. Where any provision herein refers to action to be taken by any Person,
or which such Person is prohibited from taking, such provision shall be
applicable whether such action is taken directly or indirectly by such Person.
22.7 COUNTERPARTS.
This Agreement may be executed in any number of counterparts, each of
which shall be an original but all of which together shall constitute one
instrument. Each counterpart may consist of a number of copies hereof, each
signed by less than all, but together signed by all, of the parties hereto.
22.8 GOVERNING LAW.
THIS AGREEMENT SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, AND
THE RIGHTS OF THE PARTIES SHALL BE GOVERNED BY, THE LAW OF THE STATE OF NEW YORK
EXCLUDING CHOICE-OF-LAW PRINCIPLES OF THE LAW OF SUCH STATE THAT WOULD REQUIRE
THE APPLICATION OF THE LAWS OF A JURISDICTION OTHER THAN SUCH STATE.
22.9 CONSENT TO JURISDICTION; ETC.
(a) CONSENT TO JURISDICTION. ANY SUIT, ACTION OR PROCEEDING
ARISING OUT OF OR RELATING TO THIS AGREEMENT, OR ANY OF THE DOCUMENTS,
AGREEMENTS OR TRANSACTIONS CONTEMPLATED HEREBY OR ANY ACTION OR
PROCEEDING TO EXECUTE OR OTHERWISE ENFORCE ANY JUDGMENT IN RESPECT OF
ANY BREACH UNDER THIS AGREEMENT OR ANY
HYDRIL COMPANY 46 NOTE PURCHASE AGREEMENT
<PAGE> 52
DOCUMENT OR AGREEMENT CONTEMPLATED HEREBY MAY BE BROUGHT BY SUCH PARTY
IN ANY FEDERAL DISTRICT COURT LOCATED IN NEW YORK CITY, NEW YORK, OR
ANY NEW YORK STATE COURT LOCATED IN NEW YORK CITY, NEW YORK AS SUCH
PARTY MAY IN ITS SOLE DISCRETION ELECT, AND BY THE EXECUTION AND
DELIVERY OF THIS AGREEMENT, THE PARTIES HERETO IRREVOCABLY AND
UNCONDITIONALLY SUBMIT TO THE NON-EXCLUSIVE IN PERSONAM JURISDICTION OF
EACH SUCH COURT, AND EACH OF THE PARTIES HERETO IRREVOCABLY WAIVE AND
AGREE NOT TO ASSERT IN ANY PROCEEDING BEFORE ANY TRIBUNAL, BY WAY OF
MOTION, AS A DEFENSE OR OTHERWISE, ANY CLAIM THAT IT IS NOT SUBJECT TO
THE IN PERSONAM JURISDICTION OF ANY SUCH COURT. IN ADDITION, EACH OF
THE PARTIES HERETO IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED
BY LAW, ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE LAYING
OF VENUE IN ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING
TO THIS AGREEMENT OR ANY DOCUMENT, AGREEMENT OR TRANSACTION
CONTEMPLATED HEREBY BROUGHT IN ANY SUCH COURT, AND HEREBY IRREVOCABLY
WAIVES ANY CLAIM THAT ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN
ANY SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.
(b) SERVICE OF PROCESS. EACH PARTY HERETO IRREVOCABLY AGREES
THAT PROCESS PERSONALLY SERVED, SERVED BY U.S. REGISTERED MAIL OR
SERVED IN THE MANNER PROVIDED FOR NOTICES IN THIS AGREEMENT, AT THE
ADDRESSES PROVIDED HEREIN FOR NOTICES, SHALL CONSTITUTE, TO THE EXTENT
PERMITTED BY LAW, ADEQUATE SERVICE OF PROCESS IN ANY SUIT, ACTION OR
PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY
DOCUMENT, AGREEMENT OR TRANSACTION CONTEMPLATED HEREBY, OR ANY ACTION
OR PROCEEDING TO EXECUTE OR OTHERWISE ENFORCE ANY JUDGMENT IN RESPECT
OF ANY BREACH HEREUNDER OR UNDER ANY DOCUMENT OR AGREEMENT CONTEMPLATED
HEREBY. RECEIPT OF PROCESS SO SERVED SHALL BE CONCLUSIVELY PRESUMED AS
EVIDENCED BY A DELIVERY RECEIPT FURNISHED BY THE UNITED STATES POSTAL
SERVICE OR ANY COMMERCIAL DELIVERY SERVICE.
(c) OTHER FORUMS. NOTHING HEREIN SHALL IN ANY WAY BE DEEMED TO
LIMIT THE ABILITY OF ANY PARTY HERETO TO SERVE ANY WRITS, PROCESS OR
SUMMONSES IN ANY MANNER PERMITTED BY APPLICABLE LAW OR TO OBTAIN
JURISDICTION OVER ANY OTHER PARTY HERETO IN SUCH OTHER JURISDICTION,
AND IN SUCH OTHER MANNER, AS MAY BE PERMITTED BY APPLICABLE LAW.
22.10 SECTION HEADINGS AND TABLE OF CONTENTS.
The titles of the Sections and the Table of Contents appear as a matter
of convenience only, do not constitute a part hereof and shall not affect the
construction hereof. The words "HEREIN", "HEREOF", "HEREUNDER" and "HERETO"
refer to this Agreement as a whole and not to any particular Section or other
subdivision. References to Sections are, unless otherwise specified, references
to Sections of this Agreement.
[Remainder of page intentionally blank. Next page is signature page.]
HYDRIL COMPANY 47 NOTE PURCHASE AGREEMENT
<PAGE> 53
If you are in agreement with the foregoing, please sign the form of
agreement on the accompanying counterpart of this Agreement and return it to the
Company, whereupon the foregoing shall become a binding agreement between you
and the Company.
Very truly yours,
HYDRIL COMPANY
By
---------------------------------------
Name:
Title:
The foregoing is hereby
agreed to as of the
date thereof.
[NAME OF PURCHASER]
By
---------------------------------------
Name:
Title:
By
---------------------------------------
Name:
Title:
HYDRIL COMPANY NOTE PURCHASE AGREEMENT
<PAGE> 54
SCHEDULE B
DEFINED TERMS
As used herein, the following terms have the respective meanings
set forth below or set forth in the Section hereof following such term:
"AFFILIATE" means, at any time, and with respect to any Person,
(a) any other Person that at such time directly or
indirectly through one or more intermediaries Controls, or is
Controlled by, or is under common Control with, such first
Person, and
(b) any Person beneficially owning or holding, directly
or indirectly, 10% or more of any class of voting or equity
interests of the Company or any Subsidiary or any corporation of
which the Company and the Subsidiaries beneficially own or hold,
in the aggregate, directly or indirectly, 10% or more of any
class of voting or equity interests.
As used in this definition, "CONTROL" means the possession, directly or
indirectly, of the power to direct or cause the direction of the
management and policies of a Person, whether through the ownership of
voting securities, by contract or otherwise. Unless the context
otherwise clearly requires, any reference to an "Affiliate" is a
reference to an Affiliate of the Company.
"AGREEMENT, THIS" -- Section 17.3.
"BANK AGREEMENT" means the Amended and Restated Loan Agreement,
dated as of March 23, 1998, among each of the Company, the Banks and
Bank One, as agent for the Banks, as amended by a First Amendment to
Amended and Restated Loan Agreement dated as of June 25, 1998 and as
may be further amended, supplemented, refinanced or modified from time
to time.
"BANK GUARANTY" -- Section 9.8.
"BANK ONE" means Bank One, Texas, N.A.
"BANKS" means, collectively, the "Lenders" (as defined in the
Bank Agreement) which are parties to the Bank Agreement from time to
time.
"BUSINESS DAY" means (a) for the purposes of Section 8.7 only,
any day other than a Saturday, a Sunday or a day on which commercial
banks in New York City are required or authorized to be closed, and (b)
for the purposes of any other provision of this Agreement, any day
other than a Saturday, a Sunday or a day on which commercial banks in
Houston, Texas, or New York City, New York are required or authorized
to be closed.
"CAPITAL LEASE" means a lease with respect to which the lessee
is required concurrently to recognize the acquisition of an asset and
the incurrence of a liability on its balance sheet in accordance with
GAAP.
HYDRIL COMPANY SCHEDULE B-1 NOTE PURCHASE AGREEMENT
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"CAPITAL STOCK" means any class of capital stock, share capital
or similar equity interest of a Person.
"CAPITAL LEASE OBLIGATION" means, with respect to any Person and
a Capital Lease to which such Person is a party, the amount of the
obligation of such Person as the lessee under such Capital Lease which
would, in accordance with GAAP, appear as a liability on a balance
sheet of such Person.
"CHANGE IN CONTROL" means the failure, at any time and for any
reason, of the Initial Stockholder Affiliates, as a group, to
beneficially own (as such term is used in Section 13(d) of the Exchange
Act as in effect on the date of Closing) and to control more than 50%
of the Voting Stock of the Company outstanding at such time.
"CLYDESDALE BANK FACILITY" means the $3,000,000 unsecured line
of credit provided by Clydesdale Bank of Scotland for the benefit of
the Company.
"CLOSING" -- Section 3.
"CODE" means the Internal Revenue Code of 1986, as amended from
time to time, and the rules and regulations promulgated thereunder from
time to time.
"COLLATERAL" means any and all Property that at any time is
granted to the Collateral Agent pursuant to the Collateral Documents as
security for the payment of any or all of the obligations of the
Company under this Agreement, the Other Agreements, the Notes and the
Bank Agreement.
"COLLATERAL AGENT" means Bank One, solely in its capacity as
collateral agent under the Collateral Documents and the Intercreditor
Agreement, and together with any successor or co-agent that becomes
such in accordance with the provisions of the Collateral Documents and
the Intercreditor Agreement.
"COLLATERAL DOCUMENTS" -- Section 4.11.
"COMPANY" -- introductory sentence.
"CONFIDENTIAL INFORMATION" -- Section 20.
"CONSOLIDATED DEPRECIATION EXPENSE" means, for any period, the
amount of depreciation, depletion and amortization expense of the
Company and the Subsidiaries, determined on a consolidated basis for
such period, but only to the extent deducted from revenues in the
determination of Consolidated Net Income for such period.
"CONSOLIDATED EBITDA" means, for any period, the sum of:
(a) Consolidated Net Income; plus
(b) Consolidated Interest Expense; plus
(c) Consolidated Tax Expense; plus
HYDRIL COMPANY SCHEDULE B-2 NOTE PURCHASE AGREEMENT
<PAGE> 56
(d) Consolidated Depreciation Expense;
in each case determined in respect of such period.
"CONSOLIDATED FIXED CHARGES" means, in respect of any period,
the sum of (a) Consolidated Interest Expense for such period, plus (b)
Lease Rentals of the Company and the Subsidiaries for such period,
after eliminating all offsetting debits and credits between the Company
and the Subsidiaries and all other items required to be eliminated in
the course of the preparation of consolidated financial statements of
the Company and the Subsidiaries in accordance with GAAP.
"CONSOLIDATED FUNDED DEBT" means, as of any date of
determination, the total of all Funded Debt of the Company and the
Subsidiaries outstanding on such date, after eliminating all offsetting
debits and credits between the Company and the Subsidiaries and all
other items required to be eliminated in the course of the preparation
of consolidated financial statements of the Company and the
Subsidiaries in accordance with GAAP.
"CONSOLIDATED INTEREST EXPENSE" means, for any period, the
amount of interest accrued on, or with respect to, interest bearing
obligations of the Company and the Subsidiaries, including, without
limitation, amortization of debt discount, imputed interest on Capital
Leases and interest on the Notes, determined in accordance with GAAP on
a consolidated basis for such period, but only to the extent deducted
from revenues in the determination of Consolidated Net Income for such
period.
"CONSOLIDATED NET INCOME" means, with reference to any period,
the net income (or loss) of the Company and the Subsidiaries for such
period (taken as a cumulative whole), as determined in accordance with
GAAP, after eliminating all offsetting debits and credits between the
Company and the Subsidiaries and all other items required to be
eliminated in the course of the preparation of consolidated financial
statements of the Company and the Subsidiaries in accordance with GAAP,
provided that there shall be excluded therefrom:
(a) the income (or loss) of any Person accrued prior to
the date it becomes a Subsidiary or is merged into or
consolidated with the Company or a Subsidiary, and the income
(or loss) of any Person, substantially all of the assets of
which have been acquired in any manner, realized by such other
Person prior to the date of acquisition, and
(b) the income (or loss) of any business, Properties or
assets acquired (by means of a merger, consolidation, purchase
or otherwise) by the Company or any Subsidiary, which income (or
loss) accrued prior to the date of such acquisition.
"CONSOLIDATED TANGIBLE NET WORTH" means, at any time,
(a) the total assets of the Company and the Subsidiaries
which would be shown as assets on a consolidated balance sheet
of the Company and the Subsidiaries as of such time prepared in
accordance with GAAP, after eliminating all amounts properly
attributable to minority interests, if any, in the stock and
surplus of such Subsidiaries, minus
HYDRIL COMPANY SCHEDULE B-3 NOTE PURCHASE AGREEMENT
<PAGE> 57
(b) the total liabilities of the Company and the
Subsidiaries which would be shown as liabilities on a
consolidated balance sheet of the Company and the Subsidiaries
as of such time prepared in accordance with GAAP, minus
(c) the net book amount of all assets of the Company and
the Subsidiaries (after deducting any reserves applicable
thereto) which would be shown as intangible assets on a
consolidated balance sheet of the Company and the Subsidiaries
as of such time prepared in accordance with GAAP including,
without limitation, good will, trademarks, trade names, service
marks, brand names, copyrights, patents, capitalized research
and development expenses, unamortized debt discount and expense
and other similar intangible assets.
"CONSOLIDATED TAX EXPENSE" means, for any period, tax expense of
the Company and the Subsidiaries, determined on a consolidated basis in
accordance with GAAP for such period, but only to the extent deducted
from revenues in the determination of Consolidated Net Income for such
period.
"CONSOLIDATED TOTAL CAPITALIZATION" means, at any time, the sum
of Consolidated Tangible Net Worth and Consolidated Funded Debt.
"CONTROL EVENT" means
(a) the execution of any written agreement which, when
fully performed by the parties thereto, would result in a Change
in Control; or
(b) the making of any written offer by any person (as
such term is used in Section 13(d) and Section 14(d)(2) of the
Exchange Act as in effect on the date of Closing) or related
persons constituting a group (as such term is used in Rule 13d-5
under the Exchange Act as in effect on the date of Closing) to
the holders of the common stock which offer, if accepted by
the requisite number of such holders, would result in a Change
in Control.
"DEBT" means, with respect to any Person, without duplication,
(a) its liabilities for borrowed money;
(b) its liabilities for the deferred purchase price of
Property acquired by such Person (excluding accounts payable and
accrued liabilities arising in the ordinary course of business
but including, without limitation, all liabilities created or
arising under any conditional sale or other title retention
agreement with respect to any such Property);
(c) its Capital Lease Obligations;
(d) all liabilities for borrowed money secured by any
Lien with respect to any Property owned by such Person (whether
or not it has assumed or otherwise become liable for such
liabilities); and
HYDRIL COMPANY SCHEDULE B-4 NOTE PURCHASE AGREEMENT
<PAGE> 58
(e) any Guaranty of such Person with respect to
liabilities of a type described in any of clauses (a) through
(d) hereof.
Debt of any Person shall include all obligations of such Person of the
character described in clauses (a) through (e) above to the extent such
Person remains legally liable in respect thereof notwithstanding that
any such obligation is deemed to be extinguished under GAAP.
"DEEDS OF TRUST" -- Section 4.11.
"DEFAULT" means an event or condition the occurrence or
existence of which would, with the lapse of time or the giving of
notice or both, become an Event of Default.
"DEFAULT RATE" means 8.85% per annum.
"ENVIRONMENTAL LAWS" means any and all Federal, state, local,
and foreign statutes, laws, regulations, ordinances, rules, judgments,
orders, decrees, permits, concessions, grants, franchises, licenses,
agreements or governmental restrictions relating to pollution and the
protection of the environment or the release of any materials into the
environment, including but not limited to those related to hazardous
substances or wastes, air emissions and discharges to waste or public
systems.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended from time to time, and the rules and regulations
promulgated thereunder from time to time in effect.
"ERISA AFFILIATE" means any trade or business (whether or not
incorporated) that is treated as a single employer together with the
Company under section 414 of the Code.
"EVENT OF DEFAULT" -- Section 11.
"EVI INDEBTEDNESS" -- Section 10.10.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended from time to time.
"FAIR MARKET VALUE" means, at any time and with respect to any
Property, the sale value of such Property that would be realized in an
arm's-length sale at such time between an informed and willing buyer
and an informed and willing seller (neither being under a compulsion to
buy or sell).
"FINANCIAL COVENANTS" -- Section 9.7.
"FINANCING DOCUMENTS" means this Agreement, the Other
Agreements, the Notes, the Collateral Documents, the Intercreditor
Agreement and each other document or agreement executed from time to
time in connection therewith, all as amended from time to time.
HYDRIL COMPANY SCHEDULE B-5 NOTE PURCHASE AGREEMENT
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"FOREIGN PENSION PLAN" means any plan, fund or other similar
program
(a) established or maintained outside of the United
States of America by the Company or any Subsidiary primarily for
the benefit of the employees (substantially all of whom are
aliens not residing in the United States of America) of the
Company or such Subsidiary, as the case may be, which plan, fund
or other similar program provides for retirement income for such
employees or results in a deferral of income for such employees
in contemplation of retirement, and
(b) not otherwise subject to ERISA.
"FUNDED DEBT" means, with respect to any Person, all Debt of
such Person which by its terms or by the terms of any instrument or
agreement relating thereto matures, or which is otherwise payable or
unpaid, one year or more from, or is directly or indirectly renewable
or extendible at the option of the obligor in respect thereof to a date
one year or more (including, without limitation, an option of such
obligor under a revolving credit or similar agreement obligating the
lender or lenders to extend credit over a period of one year or more)
from, the date of the creation thereof.
"GAAP" means generally accepted accounting principles as in
effect from time to time in the United States of America.
"GOVERNMENTAL AUTHORITY" means
(a) the government of
(i) the United States of America or any state or
other political subdivision thereof, or
(ii) any jurisdiction in which the Company or any
Subsidiary conducts all or any part of its business, or
that asserts jurisdiction over any Properties of the
Company or any Subsidiary, or
(b) any entity exercising executive, legislative,
judicial, regulatory or administrative functions of, or
pertaining to, any such government.
"GUARANTY" means, with respect to any Person, any obligation
(except the endorsement in the ordinary course of business of
negotiable instruments for deposit or collection) of such Person
guaranteeing or in effect guaranteeing any indebtedness, dividend or
other obligation of any other Person in any manner, whether directly or
indirectly, including, without limitation, obligations incurred through
an agreement, contingent or otherwise, by such Person:
(a) to purchase such indebtedness or obligation or any
Property constituting security therefor;
(b) to advance or supply funds (i) for the purchase or
payment of such indebtedness or obligation, or (ii) to maintain
any working capital or other balance sheet condition or any
income statement condition of any other Person or otherwise to
HYDRIL COMPANY SCHEDULE B-6 NOTE PURCHASE AGREEMENT
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advance or make available funds for the purchase or payment of
such indebtedness or obligation;
(c) to lease Properties or to purchase Properties or
services primarily for the purpose of assuring the owner of such
indebtedness or obligation of the ability of any other Person to
make payment of the indebtedness or obligation; or
(d) otherwise to assure the owner of such indebtedness or
obligation against loss in respect thereof.
In any computation of the indebtedness or other liabilities of the
obligor under any Guaranty, the indebtedness or other obligations that
are the subject of such Guaranty shall be assumed to be direct
obligations of such obligor.
"HAZARDOUS MATERIAL" means any and all pollutants, toxic or
hazardous wastes or any other substances that might pose a hazard to
health or safety, the removal of which may be required or the
generation, manufacture, refining, production, processing, treatment,
storage, handling, transportation, transfer, use, disposal, release,
discharge, spillage, seepage, or filtration of which is or shall be
restricted, prohibited or penalized by any applicable law (including,
without limitation, asbestos, urea formaldehyde foam insulation and
polychlorinated biphenyls).
"HOLDER" means, with respect to any Note, the Person in whose
name such Note is registered in the register maintained by the Company
pursuant to Section 13.1.
"INITIAL STOCKHOLDER" means and includes Richard C. Seaver and
Christopher T. Seaver.
"INITIAL STOCKHOLDER AFFILIATES" means
(a) any Initial Stockholder;
(b) a spouse, child, lineal descendant, parent or sibling
of an Initial Stockholder and any of their estates and legal
representatives (each a "Related Person");
(c) any trust or charitable organization of which any
Related Person is a trustee, director, beneficiary or grantor;
and
(d) a corporation, partnership, limited liability company
or other similar business entity of which more than 50% of the
Voting Stock thereof is controlled, directly or indirectly, by
any Person described in clause (a) or clause (b) of this
definition.
"INSTITUTIONAL INVESTOR" means (a) any original purchaser of a
Note, (b) any holder of a Note holding more than 5% of the aggregate
principal amount of the Notes then outstanding, and (c) any bank, trust
company, savings and loan association or other financial institution,
any pension plan, any investment company, any insurance company, any
broker or dealer, or any other similar financial institution or entity,
regardless of legal form, holding (together with any of its affiliates)
Notes in an aggregate principal amount equal to at least $750,000.
HYDRIL COMPANY SCHEDULE B-7 NOTE PURCHASE AGREEMENT
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"INTERCREDITOR AGREEMENT" -- Section 4.10.
"INVESTMENT" means any investment, made in cash or by delivery
of Property, by the Company or any of the Subsidiaries in any Person,
whether by acquisition of stock, indebtedness or other obligation or
Security, or by loan, Guaranty, advance, capital contribution or
otherwise. An Investment shall be valued at the greater of (x) the cost
thereof to the Company or any Subsidiary or (y) the amount originally
entered on the books of the Company or any Subsidiary with respect
thereto, less, in each case, any return of capital (after income taxes
applicable thereto) upon such Investment through the sale or other
liquidation thereof or part thereof or otherwise.
"LEASE RENTALS" of any Person means, with respect to any period
of 12 consecutive calendar months, the sum of the rental and other
obligations required to be paid during such period by such Person or
any of its Subsidiaries as lessee under all leases of real or personal
Property (other than Capital Leases), excluding any amount required to
be paid by the lessee (whether or not therein designated as rental or
additional rental) on account of maintenance and repairs, insurance,
taxes, assessments, water rates and similar charges, provided that, if
at the date of determination, any such rental or other obligations are
contingent or not otherwise definitely determinable by the terms of the
related lease, the amount of such obligations (a) shall be assumed to
be equal to the amount of such obligations for the period of 12
consecutive calendar months immediately preceding the date of
determination or (b) if the related lease was not in effect during such
preceding 12-month period, shall be the amount estimated by a Senior
Financial Officer of such Person on a reasonable basis and in good
faith.
"LIEN" means, with respect to any Person, any mortgage, lien,
pledge, charge, security interest or other encumbrance, or any interest
or title of any vendor, lessor, lender or other secured party to or of
such Person under any conditional sale or other title retention
agreement or Capital Lease, upon or with respect to any Property or
asset of such Person (including in the case of stock, stockholder
agreements, voting trust agreements and all similar arrangements).
"MAKE-WHOLE AMOUNT" -- Section 8.7.
"MATERIAL" means material in relation to the business,
operations, affairs, financial condition, assets or Properties of the
Company and the Subsidiaries taken as a whole.
"MATERIAL ADVERSE EFFECT" means a material adverse effect on
(a) the business, operations, financial condition, assets
or Properties of the Company and its Subsidiaries taken as a
whole,
(b) the ability of the Company to perform its obligations
under this Agreement, the Notes, or any other Financing Document
to which it is a party, or
(c) the validity or enforceability of any of the terms or
provisions of this Agreement, the Notes or any other Financing
Document.
"MEMORANDUM" -- Section 5.3.
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"MULTIEMPLOYER PLAN" means any Plan that is a "multiemployer
plan" (as such term is defined in section 4001(a)(3) of ERISA).
"NET PROCEEDS" means, with respect to any Transfer of any
Property by any Person, an amount equal to:
(a) the aggregate amount of the consideration (valued at
the Fair Market Value of such consideration at the time of the
consummation of such Transfer) received by such Person in
respect of such Transfer; minus
(b) all reasonable out-of-pocket costs, fees, commissions
and other expenses incurred by such Person in connection with
such Transfer and income taxes and indemnification obligations
paid or reasonably estimated to be payable in connection
therewith; minus
(c) all obligations required to be paid by such Person as
a result of such Transfer.
"NOTES" -- Section 1.
"OFFICER'S CERTIFICATE" means a certificate of a Senior
Financial Officer or of any other officer of the Company whose
responsibilities extend to the subject matter of such certificate.
"OPERATING ASSETS" means operating assets of the Company or any
Subsidiary used in the ordinary course of business of the Company or
such Subsidiary, as such businesses were conducted on the date of
Closing.
"OTHER AGREEMENTS" -- Section 2.
"OTHER PURCHASERS" -- Section 2.
"PBGC" means the Pension Benefit Guaranty Corporation referred
to and defined in ERISA or any successor thereto.
"PERSON" means an individual, partnership, corporation, limited
liability company, association, trust, unincorporated organization, or
a government or agency or political subdivision thereof.
"PLAN" means an "employee benefit plan" (as defined in section
3(3) of ERISA) that is or, within the preceding five years, has been
established or maintained, or to which contributions are or, within the
preceding five years, have been made or required to be made, by the
Company or any ERISA Affiliate or with respect to which the Company or
any ERISA Affiliate may have any liability.
"PREFERRED STOCK" means any class of Capital Stock of a Person
that is preferred over any other class of Capital Stock of such Person
as to the payment of dividends or other equity distributions or the
payment of any amount upon liquidation or dissolution of such Person.
HYDRIL COMPANY SCHEDULE B-9 NOTE PURCHASE AGREEMENT
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"PROPERTY" means, unless otherwise specifically limited, real or
personal property of any kind, tangible or intangible, choate or
inchoate.
"PROPOSED PREPAYMENT DATE" -- Section 8.3(b).
"PROVISIONAL QUALIFIED TRANSFER" -- Section 10.7(a).
"PTE" -- Section 6.2(a).
"QPAM EXEMPTION" -- Section 6.2(d).
"QUALIFIED INSTITUTIONAL BUYER" means any Person who is a
"qualified institutional buyer" within the meaning of such term as set
forth in Rule 144A(a)(1) under the Securities Act.
"REQUIRED HOLDERS" means, at any time, the holders of at least
66 2/3% in principal amount of the Notes at the time outstanding
(exclusive of Notes then owned by the Company, any Subsidiary, or any
Affiliate).
"REQUIRED LOCAL EQUITY" -- Section 10.7(a)(v).
"RESPONSIBLE OFFICER" means any Senior Financial Officer and any
other officer of the Company with responsibility for the administration
of the relevant portion of this Agreement.
"RESTRICTED INVESTMENTS" means all Investments other than the
following:
(a) Investments existing on the date of the Closing and
disclosed on Schedule 10.5 hereto;
(b) Investments in the Company, one or more Subsidiaries,
or any Person that concurrently with such investment becomes a
Subsidiary;
(c) Investments in commercial paper maturing not more
than 270 days from the date of acquisition thereof by the
Company or a Subsidiary and, at the time of such acquisition,
given the highest rating by S&P, Moody's or any other credit
rating agency of recognized national standing;
(d) Investments in United States Governmental Securities,
provided that such obligations mature within 365 days from the
date of acquisition thereof;
(e) Investments in certificates of deposit issued by an
Acceptable Bank, provided that such obligations mature within
365 days from the date of acquisition thereof;
(f) Investments in Eurodollar certificates of deposit or
time deposits issued by an Acceptable Eurodollar Bank, provided
that such obligations mature within 365 days from the date of
acquisition thereof; and
(g) Investments in Repurchase Agreements.
HYDRIL COMPANY SCHEDULE B-10 NOTE PURCHASE AGREEMENT
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As used in this definition:
"Acceptable Bank" means any bank or trust company (A) which is
organized under the laws of the United States of America or any State
thereof and (B) which has capital, surplus and undivided profits
aggregating at least $100,000,000.
"Acceptable Eurodollar Bank" means any bank or trust company
which has capital, surplus and undivided profits aggregating at least
One Billion Dollars ($1,000,000,000) (or the equivalent in another
currency).
"Moody's" means Moody's Investors Service, Inc.
"Repurchase Agreement" means any written agreement:
(a) that provides for (i) the transfer of one or more
United States Governmental Securities in an aggregate principal
amount at least equal to the amount of the Transfer Price
(defined below) to the Company or any of its Subsidiaries from
an Acceptable Bank against a transfer of funds (the "Transfer
Price") by the Company or such Subsidiary to such Acceptable
Bank, and (ii) a simultaneous agreement by the Company or such
Subsidiary, in connection with such transfer of funds, to
transfer to such Acceptable Bank the same or substantially
similar United States Governmental Securities for a price not
less than the Transfer Price plus a reasonable return thereon
at a date certain not later than 30 days after such transfer of
funds;
(b) in respect of which the Company or such Subsidiary
shall have the right, whether by contract or pursuant to
applicable law, to liquidate such agreement upon the occurrence
of any default thereunder; and
(c) in connection with which the Company or such
Subsidiary, or an agent thereof, shall have taken all action
required by applicable law or regulations to perfect a lien in
such United States Governmental Securities.
"S&P" means Standard & Poor's Ratings Group, a division of
McGraw Hill, Inc.
"United States Governmental Security" means any direct
obligation of, or obligation guaranteed by, the United States of
America, or any agency controlled or supervised by or acting as an
instrumentality of the United States of America pursuant to authority
granted by the Congress of the United States of America, so long as
such obligation or guarantee shall have the benefit of the full faith
and credit of the United States of America which shall have been
pledged pursuant to authority granted by the Congress of the United
States of America.
"RESTRICTED PAYMENT" means:
(a) any dividend or other distribution, direct or
indirect, on account of any shares of Capital Stock or Rights of the
Company (including, without limitation, any common stock of the
Company), now or hereafter outstanding, except a dividend or other
distribution payable solely in shares of common stock of the Company;
HYDRIL COMPANY SCHEDULE B-11 NOTE PURCHASE AGREEMENT
<PAGE> 65
(b) any dividend or other distribution, direct or
indirect, on account of any shares of Capital Stock or Rights of
any Subsidiary, now or hereafter outstanding, except:
(i) a dividend payable solely in shares of common
stock of such Subsidiary; and
(ii) to the extent that such dividend or distribution
is, directly or indirectly, payable to the Company or a
Wholly-Owned Subsidiary;
(c) any redemption, retirement, purchase or other
acquisition, direct or indirect, of any shares of Capital Stock
or Rights of the Company now or hereafter outstanding, except to
the extent that such redemption, retirement, purchase or other
acquisition is effected solely by the issuance of common stock
(or the sale proceeds from the issuance thereof); and
(d) any payment, whether in respect of principal,
premium, interest, fees, expenses or otherwise, in respect of,
or any redemption, retirement, purchase or other acquisition,
direct or indirect, of, any Debt owed by the Company or any
Subsidiary to any Affiliate (other than a Subsidiary) to the
extent that all such payments subsequent to April 1, 1998 and on
or prior to any date of determination are in excess of all
similar amounts paid by any Affiliate (other than a Subsidiary)
to the Company or any Subsidiary on or after April 1, 1998 and
on or prior to such date of determination.
For purposes of this Agreement, the amount of any Restricted Payment
made in Property shall be the greater of (x) the Fair Market Value of
such Property (as determined in good faith by the board of directors
(or equivalent governing body) of the Person making such Restricted
Payment) and (y) the net book value thereof on the books of such
Person, in each case determined as of the date on which such Restricted
Payment is made.
"RIGHTS" means, with respect to any Person, any right, warrant,
option or other similar right to purchase or receive Capital Stock of
such Person.
"SECURITIES ACT" means the Securities Act of 1933, as amended
from time to time.
"SECURITY" means "security" as defined by section 2(1) of the
Securities Act.
"SENIOR FINANCIAL OFFICER" means the chief financial officer,
principal accounting officer, treasurer or comptroller of the Company.
"SENIOR FUNDED DEBT" means the Notes and Funded Debt outstanding
under the Bank Agreement ("Bank Funded Debt"), provided that, in
connection with a repayment of Senior Funded Debt under Section 10.7,
the availability of Bank Funded Debt under the Bank Agreement is
permanently reduced in an amount equal to the amount of Bank Funded
Debt so repaid.
"SOURCE" -- Section 6.2.
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<PAGE> 66
"SUBSIDIARY" shall mean, as to any Person, any corporation,
association or other business entity in which such Person or one or
more of its Subsidiaries or such Person and one or more of its
Subsidiaries owns more than 50% (by number of votes) of each class of
the Voting Stock or sufficient equity or voting interests to enable it
or them (as a group) ordinarily, in the absence of contingencies, to
elect a majority of the directors (or Persons performing similar
functions) of such entity. Unless the context otherwise clearly
requires, any reference to a "Subsidiary" is a reference to a
Subsidiary of the Company.
"SUBSIDIARY STOCK" -- Section 10.7(b).
"SUCCESSOR CORPORATION" -- Section 10.6.
"TRANSFERS" -- Section 10.7(a).
"UBS FACILITY" means the $10,000,000 unsecured revolving line
of credit provided by Union Bank of Switzerland for the benefit of
Hydril S.A. or any replacement, refunding, amendment, refinancing or
modification thereof.
"UNAPPLIED NET PROCEEDS" means, at any date, the Net Proceeds
from Provisional Qualified Transfers that have not been applied as
provided in either clause (x) or clause (y) of the last paragraph of
Section 10.7(a) as of such date.
"VOTING STOCK" shall mean, with respect to any Person, Capital
Stock of any class or classes of a corporation, an association or
another business entity the holders of which are ordinarily, in the
absence of contingencies, entitled to vote in the election of corporate
directors (or individuals performing similar functions) of such Person
or which permit the holders thereof to control the management of such
Person, including general partnership interests in a partnership and
membership interests in a limited liability company.
"WHOLLY-OWNED SUBSIDIARY" shall mean, as to any Person, any
Subsidiary 100% of all of the capital stock or other ownership interest
of which is owned by any one or more of such Person and such Person's
other Wholly-Owned Subsidiaries.
HYDRIL COMPANY SCHEDULE B-13 NOTE PURCHASE AGREEMENT
