<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 20, 1996
REGISTRATION NO. 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
VERITAS DGC INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
DELAWARE 76-0343152
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
</TABLE>
3701 KIRBY DRIVE, SUITE 112
HOUSTON, TEXAS 77098
(713) 526-5611
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
RICHARD W. MCNAIRY
3701 KIRBY DRIVE, SUITE 112
HOUSTON, TEXAS 77098
(713) 526-5611
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
With copies to:
<TABLE>
<S> <C>
T. WILLIAM PORTER J. MARK METTS
PORTER & HEDGES, L.L.P. VINSON & ELKINS L.L.P.
700 LOUISIANA, 35TH FLOOR 1001 FANNIN
HOUSTON, TEXAS 77002 2300 FIRST CITY TOWER
(713) 226-0600 HOUSTON, TEXAS 77002
(713) 758-2222
</TABLE>
Approximate date of commencement of proposed sale to the public: As soon as
practicable after this Registration Statement becomes effective.
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. / /
If the registrant elects to deliver its latest annual report to security
holders, or a complete and legible facsimile thereof, pursuant to Item 11(a)(1)
of this Form, check the following box. / /
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act of 1933, please check the
following box and list the Securities Act of 1933 registration statement number
of the earlier effective registration statement for the same offering. / /
__________________
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act of 1933, check the following box and list the
Securities Act of 1933 registration statement number of the earlier effective
registration statement for the same offering. / / __________________
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
==============================================================================================
PROPOSED MAXIMUM
TITLE OF EACH CLASS OF SECURITIES AGGREGATE OFFERING AMOUNT OF
TO BE REGISTERED PRICE(1) REGISTRATION FEE
- ----------------------------------------------------------------------------------------------
<S> <C> <C>
% Senior Notes due 2003................................. $75,000,000 $25,863
==============================================================================================
</TABLE>
(1) Estimated pursuant to Rule 457(o) solely for the purpose of calculating the
registration fee.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
================================================================================
<PAGE> 2
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* *
* INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A *
* REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED *
* WITH THE SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT *
* BE SOLD NOR MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE *
* REGISTRATION STATEMENT BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT *
* CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY *
* NOR SHALL THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE IN WHICH *
* SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO *
* REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH *
* STATE. *
* *
***************************************************************************
SUBJECT TO COMPLETION, DATED SEPTEMBER 20, 1996
$75,000,000
[VERITAS LOGO]
VERITAS DGC INC.
% SENIOR NOTES DUE 2003
---------------------
The % Senior Notes due 2003 (the "Senior Notes") are being offered (the
"Offering") by Veritas DGC Inc. (the "Company"). Interest on the Senior Notes is
payable on and of each year, commencing , 1997.
The Company will not be required to make any mandatory redemption or sinking
fund payments with respect to the Senior Notes prior to maturity. The Senior
Notes are redeemable on or after , 2000 at the option of the Company,
in whole or in part, at the redemption prices set forth herein, plus accrued and
unpaid interest, if any, to the date of redemption. In addition, at any time
prior to , 1999, the Company may redeem up to $20.0 million in
aggregate principal amount of the Senior Notes with the net proceeds of one or
more public offerings of common stock of the Company, at a redemption price of
% of the principal amount thereof, plus accrued and unpaid interest, if any,
to the redemption date; provided that at least $55.0 million principal amount of
the Senior Notes remain outstanding after such redemption.
In the event of a Change of Control (as defined in "Description of Senior
Notes"), holders of the Senior Notes will have the right to require the Company
to purchase their Senior Notes, in whole or in part, at a price equal to 101% of
the aggregate principal amount thereof, plus accrued and unpaid interest, if
any, to the date of purchase. There can be no assurance that the Company will
have sufficient funds available or will be permitted by its other debt
agreements to repurchase the Senior Notes upon the occurrence of a Change of
Control.
The Senior Notes will be senior unsecured obligations of the Company and
will rank pari passu in right of payment with all senior Indebtedness (as
defined) of the Company and senior to all Subordinated Indebtedness (as defined)
of the Company. The Senior Notes will be effectively subordinated to secured
Indebtedness of the Company with respect to the assets securing such
Indebtedness and to all Indebtedness of its subsidiaries, whether secured or
unsecured. At July 31, 1996, the Company and its subsidiaries had $41.1 million
of Indebtedness outstanding, all of which will be repaid with the proceeds of
the Offering. The Indenture pursuant to which the Senior Notes will be issued
will limit the ability of the Company and its subsidiaries to incur additional
indebtedness. The Senior Notes will be represented by a Global Note registered
in the name of the nominee of The Depository Trust Company, which will act as
the Depository (the "Depository"). Beneficial interests in the Global Note will
be shown on, and transfers thereof will be effected only through, records
maintained by the Depository and its participants. Except as described herein,
Senior Notes in definitive form will not be issued. See "Description of Senior
Notes -- Book-Entry; Delivery and Form."
The Company does not intend to apply for listing of the Senior Notes on any
securities exchange or for inclusion of the Senior Notes in any automated
quotation system.
SEE "RISK FACTORS" BEGINNING AT PAGE 11 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED IN EVALUATING AN INVESTMENT IN THE SENIOR NOTES.
---------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION
OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY
OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
---------------------
<TABLE>
<CAPTION>
UNDERWRITING
DISCOUNTS
PRICE TO AND PROCEEDS TO
PUBLIC* COMMISSIONS+ COMPANY++
<S> <C> <C> <C>
Per Senior Note........................................... % % %
Total..................................................... $ $ $
</TABLE>
- ---------------
* Plus accrued interest, if any, from the date of issuance.
+ The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933. See
"Underwriting."
++ Before deducting expenses payable by the Company, estimated to be
$500,000.
The Senior Notes are being offered by the Underwriters as set forth under
"Underwriting" herein. It is expected that the delivery of the Global Note will
be made on or about , 1996 in book-entry form through the facilities
of the Depository against payment therefor in same day funds. The Underwriters
are:
DILLON, READ & CO. INC.
SALOMON BROTHERS INC
RAUSCHER PIERCE REFSNES, INC.
RAYMOND JAMES & ASSOCIATES, INC.
THE DATE OF THIS PROSPECTUS IS , 1996.
<PAGE> 3
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-
ALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE
SENIOR NOTES AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
This Prospectus contains certain statements of a forward-looking nature
relating to future events or the future financial performance of the Company.
Prospective investors are cautioned that such statements are only predictions
and that actual events or results may differ materially. In evaluating such
statements, prospective investors should specifically consider the various
factors identified in this Prospectus, including the matters set forth under the
caption "Risk Factors," which could cause actual results to differ materially
from those indicated by such forward-looking statements.
AVAILABLE INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission") in Washington, D.C., a Registration Statement on Form S-2
(together with all amendments and exhibits thereto, the "Registration
Statement") under the Securities Act of 1933, as amended (the "Securities Act"),
with respect to the Senior Notes offered by this Prospectus. Certain portions of
the Registration Statement have not been included in this Prospectus. For
further information, reference is made to the Registration Statement. Statements
made in this Prospectus regarding the contents of any contract or document filed
as an exhibit to the Registration Statement are not necessarily complete and, in
each instance, reference is hereby made to the copy of such contract or document
so filed. Each such statement is qualified in its entirety by such reference.
The Company is subject to the information requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements and other information with the
Commission. The Registration Statement, as well as such reports, proxy
statements and other information can be inspected and copied at the public
reference facilities maintained by the Commission at Room 1024, Judiciary Plaza,
450 Fifth Street, N.W., Washington, D.C. 20549, and its regional offices at the
Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661 and Seven World Trade Center, Suite 13, New York, New York 10048.
Copies of such material can be obtained at prescribed rates from the Public
Reference Section of the Commission at its principal office at Room 1024,
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549. Such materials
also can be inspected at the offices of the New York Stock Exchange, 20 Broad
Street, New York, New York 10005, on which the common stock of the Company (the
"Common Stock") is listed. The Commission maintains a site on the World Wide Web
that contains certain documents filed with the Commission electronically. The
address of such site is http://www.sec.gov, and the Registration Statement may
be inspected at such site.
2
<PAGE> 4
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents, which have been filed by the Company with the
Commission pursuant to the Exchange Act (File No. 1-7427), are incorporated in
this Prospectus by reference and shall be deemed to be a part hereof:
(a) the Company's Annual Report on Form 10-K for the year ended July 31,
1995, as amended by Form 10-K/A dated June 17, 1996, Form 10-K/A-2
dated July 19, 1996 and Form 10-K/A-3 dated August 20, 1996;
(b) the Company's Quarterly Reports on Form 10-Q for the quarters ended
October 31, 1995, January 31, 1996 and April 30, 1996;
(c) the Company's Current Reports on Form 8-K dated March 19, 1996, May 17,
1996 and September 16, 1996; and
(d) Definitive Joint Management Information Circular and Proxy Statement of
the Company and Veritas Energy Services Inc. filed with the Commission
on July 22, 1996.
Any statement contained herein or in a document incorporated by reference
herein shall be deemed to be modified or superseded for purposes of this
Prospectus to the extent that a statement contained herein modifies or
supersedes such statement. Any statement so modified or superseded shall not be
deemed, except as so modified or superseded, to constitute a part of this
Prospectus.
The Company hereby undertakes to provide without charge to each person to
whom a copy of this Prospectus has been delivered, on the written or oral
request of any such person, a copy of any or all of the documents referred to
above which have been or may be incorporated in this Prospectus by reference,
other than exhibits to such documents (unless such exhibits are specifically
incorporated by reference in such documents). Written or telephone requests for
such copies should be directed to the Company at its principal executive offices
located at 3701 Kirby Drive, Suite 112, Houston, Texas 77098, Attention:
Corporate Secretary (telephone number: (713) 526-5611).
3
<PAGE> 5
PROSPECTUS SUMMARY
The Company was formerly named Digicon Inc. ("Digicon"). On August 30,
1996, Digicon and Veritas Energy Services Inc. ("VES") consummated a business
combination (the "Combination") pursuant to which, among other things, (i) VES
became a wholly-owned subsidiary of Digicon and (ii) Digicon's corporate name
was changed to "Veritas DGC Inc." Unless the context otherwise requires, all
references to the "Company" are to Veritas DGC Inc. and its subsidiaries and
give effect to the consummation of the Combination. Unless the context otherwise
requires, all references to activities of, and financial information with
respect to, the Company are presented on a combined basis, even with respect to
periods prior to the consummation of the Combination.
The following summary should be read in conjunction with and is qualified
in its entirety by the information and supplemental consolidated financial
statements (including the notes thereto) appearing elsewhere in this Prospectus
and the documents incorporated by reference herein. Unless the context otherwise
requires, the number of shares, per share prices, weighted average number of
shares outstanding and per share amounts in this Prospectus have been adjusted
to reflect (i) a one-for-three reverse stock split effected in January 1995 and
(ii) the Combination. All capitalized terms used in this Summary without a
definition are defined as set forth elsewhere in this Prospectus, including
under the caption "Description of Senior Notes."
THE COMPANY
GENERAL
The Company is a leading provider of seismic data acquisition, data
processing, multi-client data surveys, and information services to the oil and
gas industry in selected markets worldwide. Oil and gas companies utilize
seismic data for the determination of suitable locations for drilling
exploratory wells and, increasingly, in reservoir management for the development
and production of oil and gas reserves. The Company acquires seismic data on
land and in marine, and in marsh, swamp and tidal ("transition zone")
environments, processes data acquired by its own crews and crews of other
operators and provides comprehensive data management, mapping services and
products. The Company acquires seismic data both on an exclusive contractual
basis for its customers and on its own behalf for licensing to multiple
customers on a non-exclusive basis.
To increase its presence in the rapidly expanding market for onshore
geophysical services, the Company recently effected the Combination with VES, a
leading seismic contractor with ten land seismic crews, nine workstation-based
land seismic data processing centers and 800 operating personnel. Pursuant to
the Combination, the Company acquired all of the voting securities of VES in
exchange for the issuance to VES' shareholders of the economic equivalent of
approximately 7.0 million shares of the Company's Common Stock.
Prior to the Combination, the Company initiated a comprehensive program
designed to refocus each of the Company's geographic and operational lines of
business. The Company's actions included: (i) selling its marine and land
seismic equipment manufacturing operations; (ii) selling its joint venture
interest in the former Soviet Union ("FSU"); (iii) deploying its land and
transition zone crews and its marine crews into markets where the Company's
presence would be significant; (iv) expanding its accumulation and licensing of
multi-client data surveys to exploit the historically higher margins associated
with non-exclusive data sales; (v) emphasizing research and development on its
proprietary software in order to capitalize on its reputation for seismic data
processing innovation; and (vi) streamlining its cost structure through
personnel reductions, office consolidations, vessel deactivations and the
outsourcing of certain development and manufacturing functions.
In the current fiscal year, the Company has embarked upon a $67.4 million
capital expenditure program designed to increase its efficiency and improve the
competitive position of its principal products and services and to enable the
Company to capitalize on high growth/high margin opportunities in selected
markets.
4
<PAGE> 6
In its land and transition zone activities, the Company expects to spend
approximately $14.3 million to upgrade and standardize the equipment utilized by
its crews to improve operating efficiency and to provide the capability to
expand its activities in transition zone environments in the United States and
abroad.
In its marine activities, the Company expects to spend approximately $40.0
million to upgrade and add to its multi-streamer vessel capability. This
increased capability is expected to improve operations and to provide increased
multi-client survey opportunities, particularly in the deeper water sectors of
the Gulf of Mexico and the North Sea where demand is expected to grow
significantly.
The Company also expects to spend approximately $11.0 million to upgrade
its data processing equipment and to expand overall data processing capacity to
further enhance its capabilities for sophisticated processing of acquired
seismic data.
INDUSTRY OVERVIEW
Geophysical services enable oil and gas companies to determine whether
subsurface conditions are likely to be favorable for finding new oil and gas
accumulations and assist oil and gas companies in determining the size and
structure of previously identified oil and gas fields. These services consist of
the acquisition and processing of three-dimensional ("3D") and two-dimensional
("2D") seismic and other geophysical data, which is used to produce
computer-generated graphic cross-sections and maps of the subsurface strata. The
resulting cross-sections and maps are then analyzed and interpreted by
geophysicists and are used by oil and gas companies in the acquisition of new
leases, the selection of drilling locations on exploratory prospects and in
reservoir development and management.
Geophysical data is acquired by land, transition zone and marine crews. In
data acquisition, a source of acoustical energy is employed at or below the
earth's surface and an acoustical wave is produced through the discharge of
compressed air, the detonation of small explosive charges, or other energy
generating techniques. As the acoustical wave travels through the earth,
portions are reflected by variations in the underlying rock layers, and the
reflected energy is captured by geophones situated at intervals along specified
paths from the point of acoustical impulse. The resulting signals are then
transmitted to a recording unit which amplifies the reflected energy wave and
converts it into digital data. This data is then input into a specialized data
processing system that enhances the recorded signal by reducing noise and
distortion and improving resolution and arranges the input data to produce, with
the aid of plotting devices, an image of the subsurface strata. By interpreting
seismic data, oil and gas companies create detailed maps of prospective areas
and producing oil and gas reservoirs.
Three-dimensional surveys involve the acquisition of a very dense grid of
seismic data over a precisely defined area. This heavy concentration of data
requires extensive computer processing, involving the use of sophisticated
proprietary techniques, to produce an accurate image of the subsurface. Computer
analysis of the 3D survey data allows geophysicists to better examine and
interpret important subsurface features.
Over the last several years, worldwide demand for 3D surveys by major oil
and gas companies and independent producers has increased. The greater precision
and improved subsurface resolution obtainable from 3D seismic data have assisted
oil and gas companies in finding new fields and more accurately delineating
existing fields, as well as enhancing existing reservoir management and
production monitoring techniques. Enhanced subsurface resolution obtainable from
3D studies has been a key factor in improving drilling success ratios and
lowering finding and field extension costs in land, transition zone and marine
environments. This improved technology, coupled with advances in drilling and
completion techniques, are enhancing the industry's ability to develop oil and
gas reserves, particularly in transition zone and deep water environments.
5
<PAGE> 7
COMPANY OVERVIEW
The Company provides land and transition zone data acquisition, marine data
acquisition, and data processing services to the oil and gas industry on an
exclusive contractual basis and acquires and processes seismic data for its own
account for licensing to multiple customers on a non-exclusive basis. It also
develops and markets exploration and development information services.
Land and transition zone data acquisition. The Company's land and
transition zone data acquisition crews consist of (i) a surveying unit that lays
out the lines to be recorded, (ii) an explosives or mechanical vibrating unit
and (iii) a recording unit that lays out the geophones and recording
instruments. The Company also utilizes helicopters to aid its crews in seismic
data acquisition in situations where such use will reduce overall costs and/or
improve productivity. The Company's land and transition zone data acquisition
services are currently conducted by 16 seismic crews, seven of which are
operating in the continental United States, five of which are operating in
Canada, and the remaining four of which are operating in South America,
currently in Argentina, Ecuador and Peru. In fiscal 1996, land and transition
zone data acquisition accounted for approximately 47% of the Company's revenues.
The successful utilization of 3D seismic survey data in offshore
exploration efforts has led to a significant increase in demand for 3D seismic
surveys in onshore and transition zone environments. In recent years,
exploration activity in land and transition zone areas by the major oil and gas
companies and independents has increased. In fiscal 1996, as compared to fiscal
1993, the Company's land and transition zone data acquisition revenues have
increased 159%.
The Company plans to spend approximately $14.3 million during fiscal 1997
which it believes will provide efficiencies and additional capacity in its land
and transition zone data acquisition operations. Of this amount, approximately
$3.4 million will be used to acquire geophones and cables which will result in
standardization of this equipment so that such equipment will be interchangeable
among the Company's seismic crews. In addition, three of the transition zone
crews have been recently upgraded to Input/Output System Two Remote Seismic
Recorder ("I/O System Two-RSR") equipment at a cost of approximately $6.0
million.
Marine data acquisition. The Company's marine data acquisition crews
operate on chartered vessels equipped with a full complement of seismic,
navigational and communications equipment. All of the vessels operated by the
Company are equipped to perform both 3D and 2D seismic surveys. As of September
1, 1996, the Company had seven vessels in operation, with three located in the
Gulf of Mexico, two located in the North Sea, and one located in each of
Australia and Indonesia. Except for the two vessels in the Far East, the
Company's chartered vessels are predominantly engaged in acquiring 3D surveys.
In fiscal 1996, marine data acquisition accounted for approximately 22% of the
Company's revenues.
Vessels with multiple streamers and multiple energy sources acquire more
lines of data with each pass, reducing time to completion and the effective
acquisition cost. At present, only one of the Company's vessels is equipped for
multi-streamer operation. Accordingly, the Company is reviewing options with
respect to its expiring charters and upgrading vessels or adding a new vessel at
an aggregate cost of approximately $34.8 million. The Company presently expects
to operate a total of three multi-streamer vessels in the Gulf of Mexico and the
North Sea. These expansions and upgrades represent the primary portion of the
Company's $40.0 million capital expenditure budget for marine operations in
fiscal 1997.
Data processing. The Company currently operates 16 geophysical data
processing centers, including two under contract to major oil and gas companies.
These centers process data acquired by the Company's own crews and crews of
other operators. Seven of these centers are configured primarily for processing
large-scale offshore surveys and operate high capacity, advanced technology NEC
and Hewlett Packard mainframe computer systems with high speed networks. The
other nine centers are utilized primarily for smaller scale land seismic surveys
and operate data processing systems with
6
<PAGE> 8
47 Sun workstations. In fiscal 1996, data processing accounted for approximately
20% of the Company's revenues.
The Company has dedicated approximately $11.0 million of its fiscal 1997
capital budget to data processing activities. Because of the increased
complexity of processing 3D surveys, the Company plans to retire certain of its
older mainframe equipment and upgrade to more powerful and flexible
workstation-based systems at five of its data processing centers which are
dedicated primarily to processing marine data. In its land processing
operations, the Company is acquiring additional Sun workstations to add capacity
at existing processing centers and to equip two new processing centers. These
expansions and upgrades are expected to increase capacity and lower operating
costs.
Licensing of multi-client data surveys. The Company also acquires and
processes seismic data for its own account through surveys either partially or
wholly funded by multiple customers. In this mode of operation, the Company
retains ownership of the data and may later license such data on a non-exclusive
basis. During the two year period ended July 31, 1996, 188,642 line miles of new
seismic data were added to the Company's data library, and the Company expects
to continue its recent emphasis on the licensing of its own library of seismic
data to multiple customers. In fiscal 1996, the licensing of such multi-client
data surveys accounted for 9% of the Company's revenues.
The industry has experienced a proliferation of both offshore and onshore
multi-client data surveys as a result of modifications in oil and gas company
spending strategies. In response to this increased demand, the Company is adding
data to its library, primarily in the Gulf of Mexico and the North Sea. Recent
surveys have received significant initial funding from customers, which has
reduced the related risk for the Company. Generally, the Company obtains
pre-funding commitments for a majority of the cost of such surveys.
Historically, the licensing of multi-client data has produced higher returns
than the Company's other classes of services.
Exploration and Development Information Services. The Company also provides
various exploration and development information services to the oil and gas
industry. These services include data verification through geophysical survey
audit, seismic database management, service bureau mapping of surface and
subsurface oil and gas information, data supply for grid, culture, wells,
pipelines, land and related data sets and mapping systems, as well as
geographical information systems software development. In fiscal 1996,
information services accounted for approximately 2% of the Company's revenues.
7
<PAGE> 9
THE OFFERING
Securities Offered......... $75 million principal amount of % Senior Notes
due 2003.
Maturity Date.............. , 2003.
Interest Rate and Payment
Dates.................... The Senior Notes will bear interest at a rate of
% per annum. Interest on the Senior Notes will
accrue from the date of issuance thereof and will
be payable semi-annually in cash in arrears on
and of each year, commencing
, 1997.
Optional Redemption........ The Senior Notes will be redeemable at the option
of the Company, in whole or in part, at any time on
or after , 2000, at the redemption prices
set forth herein, together with accrued and unpaid
interest to the date of redemption. In the event
the Company consummates a Public Equity Offering on
or prior to , 1999, the Company may at
its option use all or a portion of the proceeds
from such offering to redeem up to $20.0 million
principal amount of the Senior Notes at a
redemption price equal to % of the aggregate
principal amount thereof, together with accrued and
unpaid interest to the date of redemption, provided
that at least $55.0 million in aggregate principal
amount of Senior Notes remain outstanding
immediately after such redemption. See "Description
of Senior Notes -- Redemption."
Change of Control.......... Upon the occurrence of a Change of Control, each
holder of Senior Notes will have the right to
require the Company to purchase all or a portion of
such holder's Senior Notes at a price equal to 101%
of the aggregate principal amount thereof, together
with accrued and unpaid interest to the date of
purchase. See "Description of Senior
Notes -- Certain Covenants -- Change of Control."
Certain Covenants.......... The Indenture relating to the Senior Notes will
contain certain covenants, including covenants
which limit: (i) indebtedness; (ii) restricted
payments; (iii) issuances and sales of capital
stock of restricted subsidiaries; (iv)
sale/leaseback transactions; (v) transactions with
affiliates; (vi) liens; (vii) asset sales; (viii)
dividends and other payment restrictions affecting
restricted subsidiaries; (ix) conduct of business;
and (x) mergers, consolidations and sales of
assets. See "Description of Senior Notes -- Certain
Covenants" and "-- Merger, Consolidation and Sale
of Assets."
Ranking.................... The Senior Notes will be senior unsecured
obligations of the Company, ranking pari passu in
right of payment with all senior Indebtedness of
the Company and senior to all Subordinated
Indebtedness of the Company. The Senior Notes,
however, will be effectively subordinated to
secured Indebtedness of the Company with respect to
the assets securing such Indebtedness and to all
Indebtedness of its subsidiaries, whether secured
or unsecured. The Indenture will restrict the
incurrence of both secured Indebtedness and
subsidiary borrowings. At July 31, 1996, the
Company and its subsidiaries had $41.1 million of
outstanding Indebtedness, all of which will be
repaid with the proceeds of the Offering. See
"Management's Discussion
8
<PAGE> 10
and Analysis of Financial Condition and Results of
Operations" and "Description of Senior
Notes -- Ranking."
Use of Proceeds............ The net proceeds to the Company from the sale of
the Senior Notes are estimated to be approximately
$72.2 million. Of this amount, approximately $41.1
million will be used to retire outstanding
Indebtedness and the remaining $31.1 million will
be utilized to fund a portion of the Company's
$67.4 million capital expenditure budget for fiscal
1997. See "Use of Proceeds" and
"Business -- Technology and Capital Expenditures."
9
<PAGE> 11
VERITAS DGC INC.
SUMMARY SUPPLEMENTAL CONSOLIDATED FINANCIAL INFORMATION
The following table sets forth summary supplemental consolidated financial
information ("Selected Information") for each of the five years in the period
ended July 31, 1996. Such Selected Information for the three years ended July
31, 1995 has been derived from the audited Supplemental Consolidated Financial
Statements of the Company and the related notes thereto included elsewhere
herein, which statements have been audited by Deloitte & Touche LLP, independent
auditors ("Deloitte & Touche"), whose report is included elsewhere herein. The
Selected Information for the year ended July 31, 1992 and 1996 has been derived
from the unaudited supplemental consolidated financial statements of the Company
and related notes thereto. In the opinion of management, the Selected
Information for the years ended July 31, 1992 and 1996 include all adjustments
necessary to present fairly the results of such periods. Such information should
be read in conjunction with "Management's Discussion and Analysis of Financial
Condition and Results of Operations" appearing elsewhere in this Prospectus.
As a result of the differing year ends of Digicon and VES, results of
operations for dissimilar year ends have been combined. Digicon's results of
operations for fiscal years ended July 31, 1992, 1993, 1994 and 1995 have been
combined with VES' results of operations for fiscal years ended October 31,
1992, 1993, 1994 and 1995, respectively. Digicon's results of operations for the
year ended July 31, 1996 have been combined with VES' results of operations for
the twelve months ended July 31, 1996. Accordingly, VES' operating results for
the period August 1, 1995 through October 31, 1995 are included in the years
ended July 31, 1995 and 1996. An adjustment in an amount equal to the results of
operations for the three-month period is included in the unaudited supplemental
consolidated statements of changes in stockholders' equity. Revenues, net income
and net income per share were $22,150,000, $936,000 and $.05, respectively, for
the period August 1, 1995 through October 31, 1995.
<TABLE>
<CAPTION>
FOR THE YEARS ENDED JULY 31,
-----------------------------------------------------------------------
1992 1996
(UNAUDITED) 1993 1994 1995 (UNAUDITED)
----------- ----------- ----------- ----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues............................................... $ 116,826 $ 146,090 $ 178,392 $ 215,630 $ 250,596
Costs and expenses:
Operating expenses:
Cost of services..................................... 95,022 121,873 144,984 170,424 198,711
Restructuring........................................ 838
Write-off/write-down for impairment of assets.......... 5,235 3,628
Depreciation and amortization.......................... 7,836 11,741 19,119 23,732 26,921
Selling, general and administrative.................... 4,183 4,797 6,296 5,855 7,255
Interest............................................... 2,579 1,928 3,213 5,170 5,466
Merger related costs................................... 3,666
Gain on sale of investment in FSU joint ventures....... (4,370)
Other.................................................. 181 (210) (1,833) 232 546
-------- -------- -------- -------- --------
Total............................................ 109,801 140,129 177,852 201,043 246,193
-------- -------- -------- -------- --------
Income loss before provision for income taxes and
equity in loss (earnings) of 50% or less-owned
companies and joint ventures......................... 7,025 5,961 540 14,587 4,403
Provision for income taxes............................. 1,229 3,183 5,929 3,807 2,009
Equity in (earnings) loss of 50% or less-owned
companies and joint ventures......................... 1,521 2,204 4,965 5,186 1,113
-------- -------- -------- -------- --------
Net income............................................. $ 4,275 $ 574 $ (10,354) $ 5,594 $ 1,281
======== ======== ======== ======== ========
OTHER DATA:
EBITDA(1).............................................. $ 17,440 $ 19,630 $ 28,945 $ 39,119 $ 44,084
Pro forma interest expense(2).......................... -- -- -- -- $ 8,081
Capital expenditures................................... $ 18,157 $ 42,148 $ 29,773 $ 33,633 $ 32,860
Investments in multi-client surveys.................... $ 6,578 $ 9,203 $ 18,500 $ 27,976 $ 25,628
EBITDA/Pro forma interest expense...................... -- -- -- -- 5.46x
Consolidated Fixed Charge Coverage Ratio(3)............ -- -- -- -- 3.95x
Pro forma debt/EBITDA(2)............................... -- -- -- -- 1.70x
Ratio of earnings to fixed charges(4)(5)............... 1.58x 1.44x 0.59x 1.65x 1.22x
</TABLE>
<TABLE>
<CAPTION>
AS OF JULY 31,
-----------------------------------------------------------------------
1992 1993 1994 1995 1996
----------- ----------- ----------- ----------- -----------
(UNAUDITED) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash................................................... $ 8,567 $ 5,321 $ 15,545 $ 10,082 $ 10,072
Working capital........................................ 16,362 9,704 16,794 14,830 22,479
Property and equipment -- net.......................... 30,509 60,889 68,423 75,379 79,010
Total assets........................................... 93,378 141,464 171,814 184,340 198,592
Long-term debt (including current maturities).......... 17,933 30,890 31,104 36,788 41,090
Stockholders' equity................................... 46,748 69,380 94,517 98,000 105,923
OPERATING DATA:
Land crews in operation................................ 8 12 16 15 14
Land crews system channels............................. 6,248 12,740 14,526 17,200 18,308
Marine vessels in operation............................ 9 7 5 6 7
Marine vessels system channels......................... 2,400 2,160 1,680 1,920 3,840
Data processing centers in operation................... 13 15 17 17 16
</TABLE>
- ---------------
(1) EBITDA represents income before provision for income taxes and equity in
(earnings) loss of 50% or less-owned companies and joint ventures plus
restructuring costs plus write-down/write-off for impairment of assets plus
depreciation and amortization plus interest expense plus merger related
costs less gain on sale of investment in FSU joint ventures. EBITDA is
presented not as an alternative measure of operating results or cash flow
for operations (as determined in accordance with generally accepted
accounting principles), but rather to provide additional information
related to the debt servicing ability of the Company.
(2) After giving effect to the issuance of the Senior Notes and the application
of proceeds therefrom.
(3) As defined in "Description of Senior Notes -- Certain Definitions --
Consolidated Fixed Charge Coverage Ratio."
(4) For the year ended July 31, 1994, earnings were insufficient to cover fixed
charges by $4.4 million.
(5) The effect of the refinancing impacts the ratio of earnings to fixed
charges by less than 10%. Therefore the pro forma ratio is not presented.
10
<PAGE> 12
RISK FACTORS
Prospective investors should carefully consider the following factors, as
well as the other information contained in this Prospectus.
RANKING OF THE SENIOR NOTES; SECURITY
Although the Senior Notes will be senior unsecured obligations of the
Company ranking pari passu with all other existing and future senior debt of the
Company, the indebtedness of the Company under the Credit Agreement dated as of
July 18, 1996 among the Company and Digicon Geophysical Corp., Veritas DGC Land
Inc. (formerly Digicon/GFS Inc.), Digicon Geophysical Limited, and Digicon
Exploration, Ltd., as Borrowers, each of the banks named therein, and Wells
Fargo Bank (Texas), National Association (the "Credit Facility"), is secured by
certain assets of the Company. Accordingly, the Senior Notes will be effectively
subordinated to the extent of such security interests. After the application of
the proceeds from this Offering, all indebtedness outstanding under the Credit
Facility will be repaid, but future borrowings under the Credit Facility (or
under other secured lending arrangements) will be permitted, subject to the
applicable terms, conditions and limitations thereof and to the Indenture. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and "Description of Senior Notes."
DEPENDENCE ON SUBSIDIARIES; HOLDING COMPANY STRUCTURE; EFFECTIVE SUBORDINATION
The Company is principally a holding company whose assets consist primarily
of stock in its subsidiaries. Consequently, the Company's ability to repay its
indebtedness, including the Senior Notes, depends on the earnings of its
subsidiaries and on its ability to receive funds from such subsidiaries through
dividends, repayment of intercompany notes or other payments. In addition, the
ability of the Company's subsidiaries to pay dividends, repay intercompany notes
or make other advances to the Company is subject to restrictions imposed by
corporate law and certain United States, state and foreign tax considerations.
Several of the Company's subsidiaries are incorporated outside the United
States.
Because the Company is a holding company and the Senior Notes are not
guaranteed by any of its subsidiaries, the Senior Notes are effectively
subordinated to all existing and future liabilities of the Company's
subsidiaries, including both senior and subordinated Indebtedness of these
subsidiaries, and regardless of whether such liabilities are secured or
unsecured. Without limiting the generality of the foregoing, the Senior Notes
will be effectively subordinated to the trade creditors of the Company's
subsidiaries. Immediately after the Offering, the subsidiaries will have no
material Indebtedness. Certain of the subsidiaries are co-borrowers under the
Credit Facility.
The Indenture will not restrict the incurrence of Indebtedness by any
Unrestricted Subsidiary. The Indenture will prohibit the Restricted Subsidiaries
from incurring Indebtedness except for (i) one or more working capital credit
facilities in an aggregate principal amount at any time outstanding up to the
Maximum Bank Credit Amount (initially $20 million), (ii) Indebtedness to the
Company; or (iii) Indebtedness in an aggregate principal amount at any time
outstanding up to the excess, if any, of (A) 10% of the Company's Consolidated
Net Tangible Assets over (B) $20 million; provided, however, that the
Indebtedness described in clause (iii) may be incurred only if, on a pro forma
basis after giving effect to such incurrence and the application of the proceeds
therefrom, the Consolidated Fixed Charge Coverage Ratio for the four full
quarters immediately preceding such event, taken as one period, would have been
equal to or greater than 2.5 to 1.0. See "Description of Senior Notes -- Certain
Covenants -- Limitation on Indebtedness and Disqualified Capital Stock."
LEVERAGE AND LIQUIDITY
At July 31, 1996, after giving effect to the issuance of the Senior Notes
offered hereby and the application of the net proceeds therefrom, the Company
would have had total consolidated debt of approximately $75 million and a ratio
of total consolidated debt to total capitalization of approximately
11
<PAGE> 13
41.4%. The degree to which the Company will be leveraged could have important
consequences to holders of the Senior Notes, including the following: (i) the
Company's ability to obtain financing in the future for working capital, capital
expenditures and general corporate purposes may be impaired; (ii) a substantial
portion of the Company's cash flow from operations must be dedicated to the
payment of principal and interest on its indebtedness; and (iii) a high degree
of leverage may make the Company more vulnerable to economic downturns and may
limit its ability to withstand competitive pressures.
Based on current operations, the Company expects that it will be able to
service the interest and principal obligations on its indebtedness as well as
its working capital needs and to fund its capital expenditures and other
operating expenses out of cash flow from operations and available borrowings
under the Credit Facility. However, there can be no assurance that the Company's
business will continue to generate cash flows at levels sufficient to meet these
requirements. If the Company is unable to generate sufficient cash flow from
operations in the future to service its debt and capital expenditures, it may be
required to sell assets, reduce capital expenditures, refinance all or a portion
of its existing debt (including the Senior Notes) or obtain additional
financing. There can be no assurance that any such asset sales or refinancing
would be possible or that any additional financing could be obtainable. The
Company's ability to meet its debt service obligations will be dependent upon
its future performance which, in turn, will be subject to future economic
conditions and to financial, business and other factors, many of which are
beyond the Company's control.
ENERGY INDUSTRY SPENDING
Demand for the Company's seismic services depends upon the level of capital
expenditures by oil and gas companies for exploration, production, development
and field management activities. These activities depend in part on oil and gas
prices, expectations about future prices, the cost of exploring for, producing
and delivering oil and gas, the sale and expiration dates of leases in the
United States, Canada and abroad, local and international political, regulatory
and economic conditions and the ability of oil and gas companies to obtain
capital. In addition, a decrease in oil and gas expenditures could result from
such factors as unfavorable tax and other legislation or uncertainty concerning
national energy policies. No assurance can be given that current levels of oil
and gas activities will be maintained or that demand for the Company's services
will reflect the level of such activities. Decreases in oil and gas activity
could have a significant adverse effect upon the demand for the Company's
services and the Company's results of operations.
COMPETITION FOR SEISMIC BUSINESS
Competition among seismic contractors historically has been intense.
Competitive factors include price, crew experience, equipment availability,
technological expertise and reputation for quality and dependability. Certain of
the Company's major competitors operate more data acquisition crews than the
Company, have substantially greater revenues than the Company and are
subsidiaries or divisions of major industrial enterprises having far greater
financial and other resources than the Company. There can be no assurance that
the Company will be able to compete successfully against its competitors for
contracts to conduct seismic surveys and process data. See "Business --
Competition and Other Business Conditions."
HAZARDOUS OPERATING CONDITIONS
The Company's data acquisition activities involve operating under extreme
weather and other hazardous conditions. Accordingly, these operations are
subject to risks of loss to property and injury to personnel from such causes as
fires, adverse weather and accidental explosions. The Company carries insurance
against the destruction of, damage to or loss of its geophysical equipment in
amounts that it considers adequate. The Company may not, however, be able to
obtain insurance against certain risks or for certain equipment located from
time to time in certain areas of the world.
12
<PAGE> 14
INVESTMENT IN MULTI-CLIENT DATA SURVEYS
The Company has invested significant amounts in acquiring and processing
multi-client data that is owned by the Company (book carrying value of $25.6
million at July 31, 1996), and it expects to continue doing so for the
foreseeable future. Though the Company normally obtains prefunding commitments
for a majority of the cost of such surveys, future data licensing to multiple
customers may not fully recoup the associated costs of acquisition and
processing and will be affected by a variety of factors. These include possible
technological, regulatory or other industry or general economic developments,
any of which could render all or portions of the Company's library of
multi-client data obsolete or otherwise impair its value. In addition, the
timing of multi-client data licensing is typically less dependable from period
to period than are revenues from surveys performed on an exclusive contract
basis for single customers.
HIGH FIXED COSTS; CAPITAL INTENSIVE BUSINESS; RISK OF TECHNOLOGICAL OBSOLESCENCE
Because of the high fixed costs involved in the major components of the
Company's business, downtime or low productivity due to reduced demand, weather
interruptions, equipment failures or other causes can result in significant
operating losses. In recent years, the Company's contracts for data acquisition
have been predominately on a turnkey or on a combination of turnkey/time basis.
Under the turnkey method, payments for data acquisition services are based upon
the amount of data collected, and the Company bears substantially all of the
risk of business interruption caused by inclement weather and other hazards.
When a combination of both turnkey and time methods is used, the risk of
business interruptions is shared in an agreed percentage by the Company and the
customer.
Seismic data acquisition and processing is a capital intensive business.
The development of seismic data acquisition and processing equipment has been
characterized by rapid technological advancements in recent years and the
Company expects this trend to continue. There can be no assurance that
manufacturers of seismic equipment will not develop new systems that have
competitive advantages over systems now in use that either render the Company's
current equipment obsolete or require the Company to make significant capital
expenditures to maintain its competitive position. The Company intends to
upgrade its data acquisition and processing equipment as often as necessary to
maintain its competitive position. However, to do so may require large
expenditures of capital in addition to the Company's planned capital
expenditures. There can be no assurance that the Company will have the necessary
capital or that financing will be available on favorable terms. If the Company
is unable to raise the capital necessary for its capital expenditure program and
to upgrade its data acquisition and processing equipment to the extent
necessary, it may be materially and adversely affected.
RISKS INHERENT IN INTERNATIONAL OPERATIONS
In fiscal 1995 and 1996, 61% and 62%, respectively, of the Company's
revenues were derived from international operations and export sales, which are
subject in varying degrees to risks inherent in doing business abroad. Such
risks include the possibility of unfavorable circumstances arising from host
country laws or regulations. For example, the Company has approximately 6,500
line miles of offshore Peru seismic data (book value of approximately $1.4
million at July 31, 1996) which will become saleable only upon receipt of
previously expected governmental licenses which have been delayed for more than
a year and has a $2.6 million claim for income taxes withheld by its client, a
foreign national oil company (no book carrying value), which will become
collectible only upon approval by the host country's taxation authorities. In
addition, foreign operations include risks of partial or total expropriation;
currency exchange rate fluctuations and restrictions on currency repatriation;
the disruption of operations from labor and political disturbances, insurrection
or war; and the requirements of partial local ownership of operations in certain
countries. To minimize such risks, the Company generally denominates its
contracts in U.S. dollars and other currencies it believes to be stable. The
Company also obtains insurance against war, expropriation, confiscation and
nationalization when such insurance is available and when management considers
it advisable to do so. Such coverage is not always
13
<PAGE> 15
available, and when available, is subject to unilateral cancellation by the
insuring companies on short notice.
ENVIRONMENTAL AND OTHER REGULATIONS
The Company's operations are subject to a variety of foreign, federal,
state and local laws and regulations, including laws and regulations relating to
the protection of the environment. The Company is required to invest financial
and managerial resources to comply with such laws and related permit
requirements in its operations and anticipates that it will continue to do so in
the future. In recent years, an increased number of the Company's data
acquisition contracts have required customers to obtain all necessary permits.
Customers' failure to timely obtain the required permits may result in crew
downtime and operating losses. To date, the Company's cost of complying with
governmental regulation has not been material, but the fact that such laws or
regulations are changed frequently makes it impossible for the Company to
predict the cost or impact of such laws and regulations on its future
operations. The modification of existing laws or regulations or the adoption of
new laws or regulations curtailing offshore drilling for oil and gas or imposing
more stringent restrictions on seismic operations could adversely affect the
Company.
CHANGE OF CONTROL
Upon a Change of Control (as defined herein), the Company will be required
to offer to repurchase all of the outstanding Senior Notes at 101% of the
principal amount thereof, plus accrued and unpaid interest to the date of
repurchase. There can be no assurance that the Company will have sufficient
funds available or will be permitted by its other debt agreements to repurchase
the Senior Notes upon the occurrence of a Change of Control. In addition, a
Change of Control may require the Company to offer to repurchase other
outstanding indebtedness and may cause a default under the Credit Facility. The
inability to repurchase all of the tendered Senior Notes would constitute an
Event of Default (as defined herein) under the Indenture. See "Description of
the Senior Notes -- Certain Covenants -- Change of Control."
LACK OF PUBLIC MARKET FOR THE SENIOR NOTES
The Senior Notes will constitute a new issue of securities with no
established trading market. The Company does not intend to list the Senior Notes
on any national securities exchange or to seek the admission thereof to trading
in the Nasdaq National Market System. The Company has been advised by the
Underwriters that the Underwriters presently intend to make a market in the
Senior Notes following completion of the Offering. However, the Underwriters are
not obligated to do so and any market-making activities with respect to the
Senior Notes may be discontinued at any time without notice. Accordingly, no
assurance can be given that an active market will develop for the Senior Notes
or as to the liquidity of or the trading market for the Senior Notes. If a
trading market does not develop or is not maintained, holders of the Senior
Notes may experience difficulty in reselling the Senior Notes or may be unable
to sell them at all. If a market for the Senior Notes develops, any such market
may be discontinued at any time. If a public trading market develops for the
Senior Notes, future trading prices of the Senior Notes (which could be at a
discount to the principal amount thereof) will depend on many factors,
including, among other things, prevailing interest rates, the Company's results
of operations and financial condition and the market for similar securities.
14
<PAGE> 16
THE COMPANY
The Company is a leading provider of seismic data acquisition, data
processing, multi-client data surveys, and exploration and development
information services to the oil and gas industry in selected markets worldwide.
The Company was incorporated in Texas in 1965 and was reincorporated in Delaware
in 1969. The Company's principal offices are located at 3701 Kirby Drive,
Houston, Texas 77098, and its telephone number is (713) 526-5611.
USE OF PROCEEDS
The net proceeds from the sale of the Senior Notes offered hereby are
estimated to be $72.2 million. Of this amount, approximately $41.1 million will
be used to retire outstanding indebtedness having a weighted average interest
cost of 9.42% (including borrowings under the Credit Facility). A description of
the interest rates, maturities and other material terms of such indebtedness is
incorporated by reference to Note 9 of Notes to the Supplemental Consolidated
Financial Statements appearing elsewhere in this Prospectus. The remaining $31.1
million will be used to fund a portion of the Company's $67.4 million capital
expenditure budget for fiscal 1997. It is anticipated that the balance of the
fiscal 1997 capital expenditure budget will be financed from internally
generated funds, and, if necessary, from the Credit Facility or other borrowings
permitted by the Indenture. See "Prospectus Summary -- Company Overview,"
"Business -- Technology and Capital Expenditures" and "Management's Discussion
and Analysis of Financial Condition and Results of Operations -- Liquidity and
Capital Resources."
Of the $41.1 million of indebtedness to be retired with a portion of the
proceeds of the Offering, $14.1 million was incurred during the past 12 months
to finance capital expenditures. Subject to the terms of the Credit Facility and
the borrowing limits imposed by the Indenture, the Company may make new
borrowings under the Credit Facility from time to time, including capital
expenditure projects and acquisition opportunities in areas related to the
Company's existing lines of business. The Company currently has no plans,
agreements or commitments with respect to any acquisition project.
15
<PAGE> 17
CAPITALIZATION
The following table sets forth the consolidated capitalization of the
Company as of July 31, 1996, and as adjusted to reflect the sale of the Senior
Notes offered by the Company hereby and the application of the estimated net
proceeds therefrom. See "Use of Proceeds."
<TABLE>
<CAPTION>
(UNAUDITED)
AS OF JULY 31, 1996
------------------------
AS
ACTUAL ADJUSTED
--------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Long-term debt including current maturities(1):
Revolving credit agreement due July 1998 at prime plus 1/4%
(8.50% at July 31, 1996)....................................... $ 11,458
Secured term loans due July 1999 at interest rates ranging from
prime plus 1/2% to prime plus 3/4% (weighted average rate
8.59% at July 31, 1996)........................................ 10,072
Equipment purchase obligations maturing through July 1999 at an
average rate of 10.28% at July 31, 1996)....................... 19,319
Mortgage note payable due October 2005 at 10.00%.................. 241
Senior Notes...................................................... $ 75,000
-------- --------
Total long-term debt including current maturities......... 41,090 75,000
Stockholders' equity................................................ 105,923 105,923
-------- --------
Total capitalization................................................ $ 147,013 $ 180,923
======== ========
</TABLE>
- ---------------
(1) For a further description of the terms of the Company's long-term debt, see
Note 9 of Notes to the Supplemental Consolidated Financial Statements.
16
<PAGE> 18
VERITAS DGC INC.
SELECTED SUPPLEMENTAL CONSOLIDATED FINANCIAL DATA
The following table sets forth selected supplemental consolidated financial
data ("Selected Information") for each of the five years in the period ended
July 31, 1996. Such Selected Information for the three years ended July 31, 1995
has been derived from the audited Supplemental Consolidated Financial Statements
of the Company and the related notes thereto included elsewhere herein, which
statements have been audited by Deloitte & Touche LLP, independent auditors
("Deloitte & Touche"), whose report is included elsewhere herein. The Selected
Information for the year ended July 31, 1992 and 1996 has been derived from the
unaudited supplemental consolidated financial statements of the Company and
related notes thereto. In the opinion of management, the Selected Information
for the years ended July 31, 1992 and 1996 include all adjustments necessary to
present fairly the results of such periods. Such information should be read in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations" appearing elsewhere in this Prospectus.
As a result of the differing year ends of Digicon and VES, results of
operations for dissimilar year ends have been combined. Digicon's results of
operations for fiscal years ended July 31, 1992, 1993, 1994 and 1995 have been
combined with VES' results of operations for fiscal years ended October 31,
1992, 1993, 1994 and 1995, respectively. Digicon's results of operations for the
year ended July 31, 1996 have been combined with VES' results of operations for
the twelve months ended July 31, 1996. Accordingly, VES' operating results for
the period August 1, 1995 through October 31, 1995 are included in the years
ended July 31, 1995 and 1996. An adjustment in an amount equal to the results of
operations for the three-month period is included in the unaudited supplemental
consolidated statements of changes in stockholders' equity. Revenues, net income
and net income per share were $22,150,000, $936,000 and $.05, respectively, for
the period August 1, 1995 through October 31, 1995.
<TABLE>
<CAPTION>
FOR THE YEARS ENDED JULY 31,
-----------------------------------------------------------------------
1992 1996
(UNAUDITED) 1993 1994 1995 (UNAUDITED)
----------- ----------- ----------- ----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues............................................... $ 116,826 $ 146,090 $ 178,392 $ 215,630 $ 250,596
Costs and expenses:
Operating expenses:
Cost of services..................................... 95,022 121,873 144,984 170,424 198,711
Restructuring........................................ 838
Write-off/write-down for impairment of assets.......... 5,235 3,628
Depreciation and amortization.......................... 7,836 11,741 19,119 23,732 26,921
Selling, general and administrative.................... 4,183 4,797 6,296 5,855 7,255
Interest............................................... 2,579 1,928 3,213 5,170 5,466
Merger related costs................................... 3,666
Gain on sale of investment in FSU joint ventures....... (4,370)
Other.................................................. 181 (210) (1,833) 232 546
-------- -------- -------- -------- --------
Total............................................ 109,801 140,129 177,852 201,043 246,193
-------- -------- -------- -------- --------
Income loss before provision for income taxes and
equity in loss (earnings) of 50% or less-owned
companies and joint ventures......................... 7,025 5,961 540 14,587 4,403
Provision for income taxes............................. 1,229 3,183 5,929 3,807 2,009
Equity in (earnings) loss of 50% or less-owned
companies and joint ventures......................... 1,521 2,204 4,965 5,186 1,113
-------- -------- -------- -------- --------
Net income............................................. $ 4,275 $ 574 $ (10,354) $ 5,594 $ 1,281
======== ======== ======== ======== ========
Net income (loss) per share............................ .46 .05 (.66) .31 .07
Weighted average shares................................ 11,874 15,633 17,771 17,882
OTHER DATA:
EBITDA(1).............................................. $ 17,440 $ 19,630 $ 28,945 $ 39,119 $ 44,084
Pro forma interest expense(2).......................... -- -- -- -- $ 8,081
Capital expenditures................................... $ 18,157 $ 42,148 $ 29,773 $ 33,633 $ 32,860
Investments in multi-client surveys.................... $ 6,578 $ 9,203 $ 18,500 $ 27,976 $ 25,628
EBITDA/Pro forma interest expense...................... -- -- -- -- 5.46x
Consolidated Fixed Charge Coverage Ratio(3)............ -- -- -- -- 3.95x
Pro forma debt/EBITDA(3)............................... 1.70x
Ratio of earnings to fixed charges(4)(5)............... 1.58x 1.44x 0.59x 1.65x 1.22x
</TABLE>
<TABLE>
<CAPTION>
AS OF JULY 31,
-----------------------------------------------------------------------
1992 1993 1994 1995 1996
----------- ----------- ----------- ----------- -----------
(UNAUDITED) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash................................................... $ 8,567 $ 5,321 $ 15,545 $ 10,082 $ 10,072
Working capital........................................ 16,362 9,704 16,794 14,830 22,479
Property and equipment -- net.......................... 30,509 60,889 68,423 75,379 79,010
Total assets........................................... 93,378 141,464 171,814 184,340 198,592
Long-term debt (including current maturities).......... 17,933 30,890 31,104 36,788 41,090
Stockholders' equity................................... 46,748 69,380 94,517 98,000 105,923
OPERATING DATA:
Land crews in operation................................ 8 12 16 15 14
Land crews system channels............................. 6,248 12,740 14,526 17,200 18,308
Marine vessels in operation............................ 9 7 5 6 7
Marine vessels system channels......................... 2,400 2,160 1,680 1,920 3,840
Data processing centers in operation................... 13 15 17 17 16
</TABLE>
- ---------------
(1) EBITDA represents income before provision for income taxes and equity in
(earnings) loss of 50% or less-owned companies and joint ventures plus
restructuring costs plus write-down/write-off for impairment of assets plus
depreciation and amortization plus interest expense plus merger related
costs less gain on sale of investment in FSU joint ventures. EBITDA is
presented not as an alternative measure of operating results or cash flow
for operations (as determined in accordance with generally accepted
accounting principles), but rather to provide additional information related
to the debt servicing ability of the Company.
(2) After giving effect to the issuance of the Senior Notes and the application
of proceeds therefrom.
(3) As defined in "Description of Senior Notes -- Certain Definitions --
Consolidated Fixed Charge Coverage Ratio."
(4) For the year ended July 31, 1994, earnings were insufficient to cover fixed
charges by $4.4 million.
(5) The effect of the refinancing impacts the ratio of earnings to fixed
charges by less than 10%. Therefore the pro forma ratio is not presented.
17
<PAGE> 19
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the
Supplemental Consolidated Financial Statements and Notes thereto and Selected
Consolidated Financial Data included elsewhere herein.
RESULTS OF OPERATIONS
Fiscal 1996 Compared with Fiscal 1995
Revenues. For the year ended July 31, 1996, total revenues increased 16%
from $215.6 million to $250.6 million. Land revenues increased 9% from $108.1
million to $117.7 million primarily from increased capacity in Canada and
expansion in the United States and Argentina. Marine revenues increased 66% from
$32.8 million to $54.4 million, primarily resulting from the reassignment of two
vessels to contract work and higher funding levels on multi-client data surveys.
This increase was partially offset by lower prices in the Far East. Data
processing revenue increased 1% from $50.3 million to $50.9 million. Improved
results at the Holland, Singapore and Australia centers were offset by the
closing of the Company's Oklahoma City and Colombia centers and its dedicated
center in Malaysia, and by reduced European data processing prices. Multi-client
data survey revenues increased 16% from $19.8 million to $23.0 million,
resulting from an expansion of the Company's data library in response to an
increase in demand by oil and gas companies for multi-client data surveys.
Information services revenues increased 5% from $4.4 million to $4.6 million.
Operating Expenses. Cost of services for the period increased 17% from
$170.4 million to $198.7 million, and, as a percentage of total revenues, costs
of services remained constant at approximately 79%.
Write-off/Write-down for Impairment of Assets. Write-off/write-down for
impairment of assets of $3.6 million relates to mainframe data processing
equipment used in the Company's seismic data processing operations that will be
replaced by more powerful and flexible workstation-based systems by the first
quarter of fiscal 1997.
Depreciation and Amortization. Depreciation and amortization expense
increased 14% from $23.7 million to $26.9 million, due to equipment purchases to
upgrade and expand the Company's operations.
Selling, General and Administrative. Selling, general and administrative
expenses increased 24% from $5.9 million to $7.3 million, resulting primarily
from additional costs incurred in implementing a new administrative data
processing system and from the addition of staff to support the Company's
increasing operations.
Interest. Interest expense increased 6% from $5.2 million to $5.5 million,
resulting primarily from prepayment penalties incurred to pay off a $17.0
million revolving credit agreement.
Merger Related Costs. Merger related costs of $3.7 million consist
primarily of investment banking and professional fees and expenses incurred in
connection with the Combination.
Income Taxes. Provision for income taxes decreased from $3.8 million to
$2.0 million. An $876,000 tax benefit was recognized as a result of taxable
losses in Argentina generated by deductions allowed for social security taxes
and employee compensation.
Equity in Loss. Current year equity in loss is attributable to the
Indonesian joint venture. In addition, fiscal 1996 includes a recovery of bad
debt of approximately $120,000. The prior year included loss on abandonment of
seismic data processing operations of $1.0 million. Furthermore, the Company
recorded $1.5 million in equity losses related to the 1995 sale of joint
ventures in the FSU.
18
<PAGE> 20
Fiscal 1995 Compared with Fiscal 1994
Revenues. For the fiscal year ended July 31, 1995, total revenues increased
21% from $178.4 million to $215.6 million. Land revenues increased 30% from
$83.2 million to $108.1 million, resulting from increased capacity to satisfy
customer demand in Canada and Argentina. This increase was partially offset by
reduced United States and Far East revenues. Land acquisition revenues in the
Far East declined as a result of the decommissioning of an Australian crew.
Marine revenues decreased 10% from $36.5 million to $32.8 million, resulting
from the derigging of two seismic vessels, lower production from three vessels
due to offshore obstructions and bad weather, and the redeployment of one vessel
from contract work to multi-client data surveys. However, improved market
conditions for 2D surveys continued in the Far East where marine revenues
increased $6.6 million during the current year. Data processing revenues
increased 21% from $41.6 million to $50.3 million resulting from increased
capacity and increased demand at existing centers and the successful opening of
two additional remote site processing centers in Texas and Venezuela during the
year. Multi-client data survey revenues increased 71% from $11.6 million to
$19.8 million, resulting from an expansion of the Company's data library in
response to increased demand by oil and gas companies for multi-client data
surveys.
Operating Expenses. Cost of services increased 18% from $145.0 million to
$170.4 million, primarily resulting from increased operating levels. Cost of
services as a percentage of sales declined from 81% to 79% due to savings from
the restructuring program implemented during fiscal 1994 and the higher
profitability associated with multi-client data surveys. These improvements in
margins were partially offset by decreases in Canadian margins caused by a very
weak market in the summer months, and by inclement weather and operational
challenges experienced in the United States market by the land seismic
acquisition division. Furthermore, gross margin in the information services
division was reduced due to substantial software development costs which are
expensed as incurred. In fiscal 1994, restructuring charges of $838,000 were
recognized, primarily relating to severance costs associated with a reduction in
the Company's work force.
Depreciation and Amortization. Depreciation and amortization expense
increased 24% from $19.1 million to $23.7 million due to substantial asset
purchases during the current year. Fiscal 1995 also includes decreases in
charges resulting from the prior year's restructuring program of $2.2 million.
Selling, General and Administrative. Selling, general and administrative
expenses decreased 6% from $6.3 million to $5.9 million, primarily resulting
from the accrual in the prior year for benefits payable over five years under an
employment contract with a former executive.
Interest. Interest expense increased 63% from $3.2 million to $5.2 million
as a result of increased borrowings on working capital facilities and equipment
financing, as well as higher borrowing costs.
FSU Joint Ventures. In April 1994, the Company acquired interests in joint
ventures that operate in the FSU. In acquiring these interests, the Company
exchanged common stock and cash commitments valued in excess of the fair market
value of the net assets received. The excess value was to be amortized over a 20
year period, and the Company recorded $392,000 of amortization expense during
fiscal 1995. The joint ventures were in the start-up phase and the Company
recorded $1.5 million of equity losses during fiscal 1995. In June 1995, the
Company disposed of its FSU interests and recorded a $4.4 million gain on sale.
See Note 4 of Notes to the Supplemental Consolidated Financial Statements.
Other. Other (income) expenses decreased from income of $1.8 million to an
expense of $232,000. In fiscal 1995, net losses were recorded on the disposition
of property and equipment, partially offset by a gain on the sale of a vessel.
Income recorded in the prior year resulted primarily from a gain on the sale of
a vessel.
Income Taxes. Provision for income taxes decreased from $5.9 million to
$3.8 million in 1995 due to the decrease in taxable income in Canada and the
United States.
19
<PAGE> 21
Equity in Loss. Equity in loss increased 4% from $5.0 million to $5.2
million primarily due to losses from the FSU joint ventures as discussed
previously. Losses in the Indonesian joint venture remained constant as a result
of restructuring charges of $1.4 million recognized in 1994 compared to losses
on abandonment of $1.0 million recognized in 1995.
Fiscal 1994 Compared with Fiscal 1993
Revenues. During the year ended July 31, 1994, total revenue increased 22%
from $146.1 million to $178.4 million. Land revenue increased 83% from $45.5
million to $83.2 million resulting from the addition of three land crews and
other seismic acquisition equipment during 1994. Marine revenue decreased 27%
from $49.9 million to $36.5 million, primarily resulting from the Company
derigging four of its vessels during fiscal 1993 and 1994. Higher land activity
levels in Canada and the opening of three additional remote site processing
centers in Texas, Argentina, and Venezuela were offset by lower prices for data
processing caused by excess capacity in the industry. Multi-client data survey
revenues increased 231% from $3.5 million to $11.6 million in response to
increased demand by oil and gas companies for such surveys. Information services
revenue increased 25% from $3.6 million to $4.5 million.
Operating Expenses. Cost of services increased 19% from $121.9 million to
$145.0 million, primarily resulting from increased operating levels. Cost of
services as a percentage of sales decreased from 83% to 81% primarily due to
operating efficiencies. In fiscal 1994, the Company incurred restructuring
charges of $838,000 as previously discussed.
Write-off/Write-down for Impairment of Assets. In fiscal 1994, the Company
recorded $5.2 million in expenses associated with the write-off/write-down of
certain assets including $2.4 million of marine and $552,000 of land acquisition
assets related to decommissioned marine vessels and stacked land crews. The
write-off/write-down also included the write-down of other marine and land
acquisition assets of $1.0 million. In addition, due to decreased activity in
the Far East, the Company wrote down data processing equipment by $1.2 million.
Depreciation and Amortization. Depreciation and amortization expense
increased 63% from $11.7 million to $19.1 million. During fiscal 1993 and 1994,
the Company spent approximately $72.0 million for upgrades to marine vessels,
equipment for new land crews and new processing equipment to enhance its market
position. As a result, depreciation expense for fiscal 1994 increased $7.4
million, net of approximately $500,000 in depreciation savings recognized as a
result of the write-off/write-down for impairment of assets.
Selling, General and Administrative. Selling, general and administrative
expenses increased 31% from $4.8 million to $6.3 million, as a result of
increased activity, expanded international operations, enhancements to
communication and management information systems infrastructures, and the
expensing of severance benefits.
Interest. Interest expense increased 68% from $1.9 million to $3.2 million.
To provide additional working capital during fiscal 1994, the Company obtained a
new revolving credit facility providing advances up to $15.0 million, borrowed
$6.1 million in short-term related party debt (of which $3.4 million was
outstanding for a majority of fiscal 1994) and financed approximately $4.2
million of equipment purchases.
Other. Other income increased from $210,000 to $1.8 million, resulting from
improved United States to foreign currency exchange rates and gain on the sale
of a vessel.
Income Taxes. Provision for income taxes increased from $3.2 million to
$5.9 million. Of the total provision of $5.9 million in 1994, $3.2 million was
classified as deferred tax relating primarily to the corporate structure of the
Canadian operations which were conducted through a partnership. Income generated
from the partnership was deferred for tax purposes by approximately 11 months.
20
<PAGE> 22
Equity in Loss. Equity in loss increased $2.8 million primarily due to
expenses incurred by the Indonesian joint venture relating to a restructuring
program initiated in April 1994 in response to continuing operating losses and
poor liquidity to the joint venture. In connection with the restructuring, the
Company incurred $1.3 million in total expenses.
LIQUIDITY AND CAPITAL RESOURCES
The Company's internal sources of liquidity are cash balances ($10.1
million at July 31, 1996) and cash flow from operations ($20.8 million for the
year ended July 31, 1996). External sources include the unutilized portion of
the revolving credit facility described below, equipment financing and trade
credit. The Company maintains a $15.0 million revolving credit facility (the
"Credit Facility") with a commercial bank (the "Bank") which, as of the date of
this Prospectus, provides for borrowings of up to 80% of the majority of the
Company's domestic and foreign receivables (excluding the receivables of VES) at
an interest rate of 1/4% over the prime rate, secured by most of the Company's
worldwide assets excluding the assets of VES. In connection with the Credit
Facility, the Company is limited, without the consent of the lender, in taking
certain actions, including creating indebtedness, declaring and paying dividends
and is required, among other provisions, to maintain certain financial ratios.
The facility matures on July 11, 1998.
The Company intends to amend the Credit Facility so that it will be secured
only by a majority of the Company's domestic and foreign receivables (including
VES receivables). The Bank has informally agreed to such amendment, the terms of
which have not yet been finalized. For information with respect to certain
limitations of the Company's and its subsidiaries' ability to incur
indebtedness, see "Description of Senior Notes -- Certain
Covenants -- Limitation of Indebtedness and Disqualified Capital Stock."
The Company expects that approximately $41.1 million of the net proceeds
from the Offering will be used to retire outstanding indebtedness (including
borrowings under the Credit Facility). The remaining net proceeds will be used
to fund a portion of the Company's $67.4 million capital expenditure budget for
fiscal 1997. It is anticipated that the balance of the 1997 capital expenditure
budget will be financed from internally generated funds, and, if necessary, from
the Credit Facility or other borrowings permitted by the Indenture. See
"Business -- Technology and Capital Expenditures."
The Company requires significant amounts of working capital to support its
operations and to fund its capital spending and research and development
programs. The Company's foreign operations which accounted for 61% of fiscal
1995 revenues and 62% of revenues for the year ended July 31, 1996, require
greater amounts of working capital than similar domestic activities, as the
average collection period of foreign receivables is generally longer than for
comparable domestic accounts. In addition, the Company has increased its
participation in multi-client data surveys and has significantly expanded its
library of multi-client data. Because of the lead time between survey execution
and sale, non-exclusive surveys generally require greater amounts of working
capital than contract work. During the first half of the past two fiscal years,
this circumstance was exacerbated as, for budgeting purposes, several clients
deferred payments on data library purchases until January 1995 and 1996,
respectively, at which time substantially all of such receivables were
collected. Depending on the timing of future sales of the data and the
collection of the proceeds from such sales, the Company's liquidity will
continue to be affected; however, management believes that these multi-client
surveys have long-term sales, earnings and cash flow potential.
The utilization of net operating loss carryforwards ("NOLs") with respect
to the Company is subject to certain limitations. Additionally, when such NOLs
are utilized, the benefit will be recognized as an addition to paid-in capital
and will not be reflected in the consolidated statements of operations.
The Company will require substantial cash flow to continue operations on a
satisfactory basis, complete its capital expenditure program, and meet its
principal and interest obligations with respect to the Senior Notes. The Company
anticipates that the net proceeds from the Offering, cash flow
21
<PAGE> 23
generated from operations and borrowings under the Credit Facility, will provide
sufficient liquidity to fund its cash operating expenses, capital expenditures
and general and administrative expenses and meet its debt service obligations
until the Senior Notes become due. However, the Company's ability to meet its
debt service and other obligations depends on its future performance, which, in
turn, is subject to general economic conditions and to financial performance,
business and other factors, including factors beyond the Company's control. If
the Company is unable to generate sufficient cash flow from operations or
otherwise to comply with the terms of the Credit Facility or the Indenture, it
may be required to refinance all or a portion of its existing debt or obtain
additional financing, although there can be no assurance that the Company will
be able to obtain such refinancing or additional financing.
22
<PAGE> 24
BUSINESS
GENERAL
The Company is a leading provider of seismic data acquisition, data
processing, multi-client data surveys, and information services to the oil and
gas industry in selected markets worldwide. Oil and gas companies utilize
seismic data for the determination of suitable locations for drilling
exploratory wells and, increasingly, in reservoir management for the development
and production of oil and gas reserves. The Company acquires seismic data on
land and in transition zone and marine environments, processes data acquired by
its own crews and crews of other operators and provides comprehensive data
management, mapping services and products. The Company acquires seismic data
both on an exclusive contractual basis for its customers and on its own behalf
for licensing to multiple customers on a non-exclusive basis.
To increase its presence in the rapidly expanding market for onshore
geophysical services, the Company recently effected the Combination with VES, a
leading seismic contractor with ten land seismic crews, nine workstation-based
land seismic data processing centers and 800 operating personnel. Pursuant to
the Combination, the Company acquired all of the voting securities of VES in
exchange for the issuance to VES' shareholders of the economic equivalent of
approximately 7.0 million shares of the Company's Common Stock.
Prior to the Combination, the Company initiated a comprehensive program
designed to refocus each of the Company's geographic and operational lines of
business. The Company's actions included: (i) selling its marine and land
seismic equipment manufacturing operations; (ii) selling its joint venture
interest in the FSU; (iii) deploying its land and transition zone crews and its
marine crews into markets where the Company's presence would be significant;
(iv) expanding its accumulation and licensing of multi-client data surveys to
exploit the historically higher margins associated with non-exclusive data
sales; (v) emphasizing research and development on its proprietary software in
order to capitalize on its reputation for seismic data processing innovation;
and (vi) streamlining its cost structure through personnel reductions, office
consolidations, vessel deactivations and the outsourcing of certain development
and manufacturing functions.
In the current fiscal year, the Company has embarked upon a $67.4 million
capital expenditure program designed to increase its efficiency and improve the
competitive position of its principal products and services and to enable the
Company to capitalize on high growth/high margin opportunities in selected
markets.
In its land and transition zone activities, the Company expects to spend
approximately $14.3 million to upgrade and standardize the equipment utilized by
its crews to improve operating efficiency and to provide the capability to
expand its activities in transition zone environments in the United States and
abroad.
In its marine activities, the Company expects to spend approximately $40.0
million to upgrade and add to its multi-streamer vessel capability. This
increased capability is expected to improve operations and to provide increased
multi-client survey opportunities, particularly in the deeper water sectors of
the Gulf of Mexico and the North Sea where demand is expected to grow
significantly.
The Company also expects to spend approximately $11.0 million to upgrade
its data processing equipment and to expand overall data processing capacity to
further enhance its capabilities for sophisticated processing of acquired
seismic data.
INDUSTRY OVERVIEW
Geophysical services enable oil and gas companies to determine whether
subsurface conditions are likely to be favorable for finding new oil and gas
accumulations and assist oil and gas companies in determining the size and
structure of previously identified oil and gas fields. These services consist of
the acquisition and processing of 3D and 2D seismic and other geophysical data,
which is used to produce computer-generated graphic cross-sections and maps of
the subsurface strata. The resulting
23
<PAGE> 25
cross-sections and maps are then analyzed and interpreted by geophysicists and
are used by oil and gas companies in the acquisition of new leases, the
selection of drilling locations on exploratory prospects and in reservoir
development and management.
Geophysical data is acquired by land, transition zone and marine crews. In
data acquisition, a source of acoustical energy is employed at or below the
earth's surface and an acoustical wave is produced through the discharge of
compressed air, the detonation of small explosive charges, or other energy
generating techniques. As the acoustical wave travels through the earth,
portions are reflected by variations in the underlying rock layers, and the
reflected energy is captured by geophones situated at intervals along specified
paths from the point of acoustical impulse. The resulting signals are then
transmitted to a recording unit which amplifies the reflected energy wave and
converts it into digital data. This data is then input into a specialized data
processing system that enhances the recorded signal by reducing noise and
distortion and improving resolution and arranges the input data to produce, with
the aid of plotting devices, an image of the subsurface strata. By interpreting
seismic data, oil and gas companies create detailed maps of prospective areas
and producing oil and gas reservoirs.
Three-dimensional surveys involve the acquisition of a very dense grid of
seismic data over a precisely defined area. This heavy concentration of data
requires extensive computer processing, involving the use of sophisticated
proprietary techniques, to produce an accurate image of the subsurface. Computer
analysis of the 3D survey data allows geophysicists to better examine and
interpret important subsurface features.
Over the last several years, worldwide demand for 3D surveys by major oil
and gas companies and independent producers has increased. The greater precision
and improved subsurface resolution obtainable from 3D seismic data have assisted
oil and gas companies in finding new fields and more accurately delineating
existing fields, as well as enhancing existing reservoir management and
production monitoring techniques. Enhanced subsurface resolution obtainable from
3D studies has been a key factor in improving drilling success ratios and
lowering finding and field extension costs in land, transition zone and marine
environments. This improved technology, coupled with advances in drilling and
completion techniques, are enhancing the industry's ability to develop oil and
gas reserves, particularly in transition zone and deep water environments.
SERVICES AND MARKETS
The Company acquires seismic data in land, transition zone and marine
environments and processes data acquired from its own crews as well as data
acquired by other geophysical crews. The Company currently operates seven land
and transition zone crews in the continental United States, five land crews in
Canada and four land crews in South America, currently in Argentina, Ecuador and
Peru. The Company's seven marine crews operate in selected markets worldwide.
The Company also operates 16 seismic data processing facilities, most of which
are located in major petroleum centers around the world. In fiscal 1995 and
1996, 61% and 62%, respectively, of the Company's revenues were attributable to
international operations and export sales.
When performing geophysical services under contract for oil and gas
producers, the Company may be employed to acquire and/or process geophysical
data. Under these arrangements, the Company's entire work-product belongs to the
contracting party. The Company also acquires and processes geophysical data for
its own account, preserving its work-product in a data library for later
licensing on a non-exclusive basis. When acquiring data for its library, the
Company generally obtains pre-funding commitments for a majority of the cost of
such surveys from multiple clients.
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<PAGE> 26
The following tables set forth the Company's revenues by service group and
geographical area:
REVENUES BY SERVICE GROUP(1)
<TABLE>
<CAPTION>
YEARS ENDED JULY 31,
--------------------------------------------------
1993 1994 1995 1996
--------- --------- --------- -----------
(UNAUDITED)
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Land and transition zone data acquisition...... $ 45,454 $ 83,229 $ 108,133 $ 117,667
Marine data acquisition........................ 49,935 36,509 32,781 54,360
Data processing................................ 42,053 41,591 50,309 50,945
Licensing of multi-client data surveys......... 3,522 11,604 19,804 23,003
Exploration and development information
services..................................... 3,617 4,533 4,378 4,621
Other.......................................... 1,509 926 225
-------- -------- -------- --------
Total................................ $ 146,090 $ 178,392 $ 215,630 $ 250,596
======== ======== ======== ========
</TABLE>
- ---------------
(1) Revenues from data acquisition and data processing services are recorded as
revenues based on contractual rates set forth in the related contract if the
contract provides a separate rate for each segment. If the contract only
provides a rate for the overall service, revenue is recognized based on the
percentage of the work effort completed compared with the total work effort
involved in the contract.
REVENUES BY GEOGRAPHICAL AREA
<TABLE>
<CAPTION>
YEARS ENDED JULY 31,
--------------------------------------------------
1993 1994 1995 1996
--------- --------- --------- -----------
(UNAUDITED)
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
United States(1)............................... $ 43,773 $ 67,373 $ 87,318 $ 98,876
Canada......................................... 32,244 46,501 44,297 47,423
Europe and Middle East......................... 24,699 29,891 20,230 37,393
Africa......................................... 13,020
Far East....................................... 27,783 16,958 25,918 30,558
South America.................................. 4,571 17,669 37,867 36,346
-------- -------- -------- --------
Total................................ $ 146,090 $ 178,392 $ 215,630 $ 250,596
======== ======== ======== ========
</TABLE>
- ---------------
(1) Includes export sales of $10,138; $1,501; $2,228 and $4,774 in fiscal 1993,
1994, 1995 and 1996, respectively.
See Note 20 of Notes to the Supplemental Consolidated Financial Statements for
additional geographical information.
Geophysical services are marketed from the Company's Houston and Calgary
offices and from its regional administrative centers by personnel whose duties
also typically include technical, supervisory or executive responsibilities.
Contracts are obtained either through competitive bidding in response to
invitations for bids, by direct negotiation with the prospective customer or
through the initiation by the Company of surveys for its data library, which
surveys are then offered for license on a non-exclusive basis.
Contracts for exclusive data acquisition involve payments on either a
turnkey or a time basis or on a combination of both methods. Under the turnkey
method, payments for data acquisition services are based upon the amount of data
collected, and the Company bears substantially all of the risk of business
interruption caused by inclement weather and other hazards. When operating on a
time basis, payments are based on agreed rates per unit of time, which may be
expressed in periods ranging from days to months, and most of the risk of
business interruption (except for interruptions caused by
25
<PAGE> 27
failure of the Company's equipment) is borne by the customer. When a combination
of both turnkey and time methods is used, the risk of business interruptions is
shared in an agreed percentage by the Company and the customer. In each case,
progress payments are usually required unless it is expected that the job can be
accomplished in a brief period. In recent years, the Company's contracts for
data acquisition have been predominantly on a turnkey or on a combination of
turnkey/time basis. Substantially all exclusive data processing work is done on
a turnkey basis.
LAND AND TRANSITION ZONE DATA ACQUISITION
The Company's land and transition zone data acquisition services are
conducted by 16 seismic crews, with a combined seismic recording capacity of
approximately 18,000 channels. Seven of the crews are operating in the
continental United States, five in Canada and four in South American markets.
The Company's land and transition zone crews are equipped to perform both
3D and 2D surveys. Each of the Company's crews consists of a surveying unit
which lays out the lines to be recorded and marks the site for shot-hole
placement or equipment location; an explosives or mechanical vibrating unit (a
vibroseis); and a recording unit that lays out the geophones and recording
instruments, directs shooting operations and records the acoustical signal
reflected from subsurface strata. On the typical land seismic survey, the
seismic crew is supported by several drill crews, which are furnished by third
parties under short-term contracts. Drill crews operate in advance of the
seismic crew and bore shallow holes for explosive charges which, when detonated
by the seismic crew, produce the necessary acoustical impulse. In locations
where the use of explosives is precluded due to population density, technical
requirements or ecological factors, a mechanical vibrating unit or compressed
air is substituted for explosives as the acoustical source. The Company owns 49
vibroseis units which provide 44,000 to 51,000 pounds of energy force.
The Company uses helicopters to aid its crews in seismic data acquisition
in situations where such use will reduce overall costs and/or improve
productivity. In a helicopter-supported project, seismic lines are cut
approximately two meters wide compared to five meters wide when trucks are used
to move cables, geophones and personnel. The use of helicopters, which is often
required in areas with rugged terrain and in agricultural areas, results in
better access and lessened surface damage. In such a project, each seismic crew
is typically supported by one or two helicopters specifically suited to seismic
acquisition requirements.
The Company plans to spend approximately $14.3 million during fiscal 1997
which it believes will provide efficiencies and additional capacity in its land
and transition zone data acquisition operations. Of this amount, approximately
$3.4 million will be used to acquire geophones and cables which will result in
standardization of this equipment so that such equipment will be interchangeable
among the Company's seismic crews. In addition, three of the transition zone
crews have been upgraded to I/O System Two-RSR equipment at a cost of
approximately $6.0 million.
MARINE DATA ACQUISITION
Marine data acquisition services are carried out by the Company's crews
operating from vessels which have been modified or equipped to the Company's
specifications and outfitted with a full complement of seismic, navigational and
communications equipment.
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<PAGE> 28
The following table sets forth certain information concerning the
geophysical vessels operated by the Company as of September 1, 1996:
<TABLE>
<CAPTION>
YEAR
ENTERED SEISMIC RECORDING
VESSEL SERVICE LOCATION LENGTH BEAM CAPACITY (CHANNELS)
- ------------------------------- ------- --------------- ---------- -------- -------------------
<S> <C> <C> <C> <C> <C>
Acadian Searcher............... 1983 Australia 217 feet 44 feet 480/3D
Ross Seal...................... 1987 Indonesia 176 feet 38 feet 240/3D
Seacor Surf(1)................. 1991 Gulf of Mexico 135 feet 35 feet 240/3D
Polar Search................... 1992 North Sea 300 feet 51 feet 1,920/3D
Pearl Chouest(1)............... 1995 Gulf of Mexico 210 feet 40 feet 240/3D
Cape Romano(1)................. 1996 Gulf of Mexico 155 feet 36 feet 240/3D
Polar Princess................. 1996 North Sea 250 feet 46 feet 480/3D
</TABLE>
- ---------------
(1) Current vessel charter to expire in fiscal 1997.
The Polar Search is chartered from a ship operator for an initial term
which expires on December 31, 1999. The vessel has recently been upgraded and
equipped with advanced technology including the capability to simultaneously
record up to eight seismic lines utilizing any combination of up to four Syntrak
480 streamers and two energy sources, as well as the most advanced navigation
and positioning equipment obtainable. The Polar Princess has been chartered from
a ship operator initially on a short-term charter and will acquire primarily
multi-client data. A longer-term charter is currently being negotiated on the
Polar Princess. The Polar Princess is equipped with a Syntron marine digital
telemetry system and one Syntron streamer, and will be upgraded to the latest
technology, a multi-streamer Syntron system, in fiscal 1997.
The Company's vessels (other than the Polar Search) are operated under
charter arrangements expiring at various times throughout fiscal 1997.
Historically, the Company has been able to extend its vessel charters on terms
and at rates closely approximating the expiring terms and rates. The Company is
reviewing the charters on the Seacor Surf, the Pearl Chouest, and Cape Romano,
which expire in fiscal 1997. Decisions on whether to extend or renew the
expiring vessel charters or enter into charters with other vessel owners are
pending and will be made prior to each charter expiration date.
All of the vessels operated by the Company are equipped to perform both 3D
and 2D seismic surveys. During the last several years, a majority of the marine
seismic data acquisition services performed by the Company involved 3D surveys.
The Company frequently upgrades seismic survey equipment on its vessels to
enhance performance quality and incorporate new technology. Each vessel
generally has an equipment complement consisting of seismic recording
instrumentation, of digital seismic streamer cable, cable location and seismic
data location systems, multiple navigation systems, a source control system
which controls the synchronization of the energy source and a firing system
which generates the acoustical impulses. The streamer cable contains hydrophones
that receive the acoustical impulses reflected by variations in the subsurface
strata. Data acquired by each channel in the digital cable is partially
processed before it is transmitted to recording instruments for storage on
magnetic media, thus reducing subsequent processing time and the effective
acquisition costs to the customer.
Vessels with multiple streamers and multiple energy sources acquire more
lines of data with each pass, reducing time to completion and the effective
acquisition cost. At present, only one of the Company's vessels is equipped for
multi-streamer operation. Accordingly, the Company is reviewing options with
respect to its expiring charters and upgrading vessels or adding a new vessel at
an aggregate cost of approximately $34.8 million. The Company presently expects
to operate a total of three multi-streamer vessels in the Gulf of Mexico and the
North Sea. These expansions and upgrades represent the primary portion of the
Company's $40.0 million capital expenditure budget for marine operations in
fiscal 1997.
Each marine seismic crew consists of approximately 20 persons, excluding
the ship's captain and ship personnel. Seismic personnel live aboard ship during
their tours of duty, which are staggered to
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<PAGE> 29
permit continuous operations. During seismic operations, the Company's personnel
direct the positioning of the vessel using sophisticated navigational equipment,
deploy and retrieve the seismic streamer cable and energy-source array, and
operate all other systems relating to data collection activities. The Company's
personnel do not, however, have ultimate responsibility for the vessel, which is
operated by the captain and personnel who are employees of the vessel owner.
DATA PROCESSING
The Company currently operates 16 geophysical data processing centers,
including two under contract to major oil companies. Seven of the data
processing centers are fully portable, with short set-up times. These centers
allow the Company to meet seismic processing demand in changing international
locations. At each of the centers, data received from the field, both from the
Company and other geophysical crews, is processed to produce an image of the
earth's subsurface using proprietary computer software and techniques developed
by the Company. The Company also reprocesses older seismic data using new
techniques designed to enhance the quality of the data. A majority of the
Company's data processing services are performed on 3D seismic data. The
Company's data processing centers have opened at various times from 1966 through
1996 and are located in Houston, Texas (two locations); Hurst, Texas; Dallas,
Texas; Midland, Texas; Denver, Colorado; Singapore; London, England; Calgary,
Alberta; Brisbane, Australia; Assen, Holland; Jakarta, Indonesia; Kuala Lumpur,
Malaysia; Buenos Aires, Argentina; Neuquen, Argentina; and Caracas, Venezuela.
The Assen center is operated under a customer contract which expires in December
1996. The Company plans to close the Jakarta center in fiscal 1997.
Seven of the Company's centers operate high capacity, advanced technology
data processing systems based on NEC and Hewlett Packard ("HP") computer systems
with high speed networks. These systems utilize the Company's proprietary
software, seismicTANGO, originally developed by Digicon, which is installed on
three marine vessels. The data acquisition crews run seismicTANGO software
identical to that utilized in the NEC and HP systems, allowing for ease in the
movement of data from the field to the data processing centers. The seismicTANGO
software is being used and developed primarily for marine data processing which
involves large projects in comparison with typically smaller scale land data
processing projects.
Nine of the Company's centers process seismic data on Sun workstations.
These systems use SAGE, a proprietary processing system originally developed by
VES. SAGE is being used and developed primarily for land data processing. The
Company intends to continue development of both SAGE and seismicTANGO until such
time as a single software system, utilizing the best features of SAGE and
seismicTANGO, is developed for use in all Company data processing centers.
The Company has dedicated approximately $11.0 million of its fiscal 1997
capital budget to data processing activities. Because of the increased
complexity of processing 3D surveys, the Company plans to retire certain of its
older mainframe equipment and upgrade to more powerful and flexible
workstation-based systems at five of its data processing centers which are
dedicated primarily to processing marine data. In its land processing
operations, the Company is acquiring additional Sun workstations to add capacity
at existing processing centers and to equip two new processing centers. These
expansions and upgrades are expected to increase capacity and lower operating
costs.
LICENSING OF MULTI-CLIENT DATA SURVEYS
In its data acquisition and processing efforts, the Company acquires and
processes data for its own account through surveys partially or wholly funded by
multiple customers. Once acquired and processed, such surveys are then licensed
for use to other customers on a non-exclusive basis. Factors considered in
determining whether to undertake such surveys include the availability of
initial participants to underwrite a majority of the costs, the location to be
surveyed, the probability and timing of future lease, concession and development
activity in the area, and the availability, quality and price of competing data.
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<PAGE> 30
During the past three years, the Company has increased its emphasis on its
multi-client data surveys. During the two year period ended July 31, 1996,
188,642 line miles of new seismic data were added to the Company's library. The
Company expects to continue its emphasis on the licensing of multi-client data
surveys and in fiscal 1997 expects to selectively add additional Gulf of Mexico
and North Sea data to its library. For additional information with respect to
the multi-client data library, see "Risk Factors -- Investment in Multi-Client
Data Surveys."
EXPLORATION AND DEVELOPMENT INFORMATION SERVICES
The Company also provides various exploration and development information
services to the oil and gas industry. These services include data verification
through geophysical survey audit, seismic database management, service bureau
mapping of surface and subsurface oil and gas information, data supply for grid,
culture, wells, pipelines, land and related data sets and mapping systems, as
well as geographical information systems software development.
TECHNOLOGY AND CAPITAL EXPENDITURES
The geophysical industry is highly technical, and the requirements for the
acquisition and processing of seismic data have evolved continuously over the
past 50 years. Accordingly, it is of significance to the Company that its
technological capabilities are comparable or superior to those of its
competitors, whether through continuing research and development, strategic
alliances with equipment manufacturers or by acquiring technology under license
from others. The Company has introduced several technological innovations in its
geophysical service business, which have become industry standard practice in
both acquisition and processing.
Currently, the Company employs approximately 44 persons in its research and
development activities, substantially all of whom are scientists, engineers or
programmers. During fiscal 1994, 1995 and 1996, research and development
expenditures were $5.8 million, $3.6 million and $3.2 million, respectively. The
reduced level of expenditures in fiscal 1995 and 1996 reflects the transfer of
the Company's marine and land engineering department to Syntron in August 1994.
The Company rarely applies for patents on internally developed technology.
This policy is based upon the belief that most proprietary technology, even
where regarded as patentable, can be more effectively protected by maintaining
confidentiality than through disclosure and a patent enforcement program.
Certain of the equipment, processes and techniques used by the Company are
subject to the patent rights of others, and the Company holds non-exclusive
licenses with respect to a number of such patents. While the Company regards as
beneficial its access to others' technology through licensing, the Company
believes that substantially all presently licensed technology could be replaced
without significant disruption to the business should the need arise.
The capital expenditure program for fiscal 1997 requires expenditures of
approximately $67.4 million and $3.3 million for research and development
activities. The amount of future capital expenditures will depend on the
availability of funding and market requirements as dictated by oil and gas
company activity levels.
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<PAGE> 31
The following table sets forth a summary of the Company's capital
expenditures for the four years ended July 31, 1996, and its budgeted capital
expenditures for the year ending July 31, 1997.
<TABLE>
<CAPTION>
YEARS ENDED JULY 31,
--------------------------------------------------------
1993 1994 1995 1996 1997
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
(BUDGETED)
<CAPTION>
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Land and transition zone data acquisition... $ 15,992 $ 21,566 $ 18,004 $ 15,020 $ 14,321
Marine data acquisition..................... 19,021 3,370 8,296 7,757 39,979
Data processing centers..................... 6,252 3,789 6,064 8,215 11,004
Exploration and development information
services.................................. 561 585 431 179 503
Other....................................... 322 463 838 1,689 1,622
-------- -------- -------- -------- --------
Total............................. $ 42,148 $ 29,773 $ 33,633 $ 32,860 $ 67,429(1)
======= ======= ======= ======= =======
</TABLE>
- ---------------
(1) Of this amount, approximately $7.7 million represents capital spending
necessary to maintain the Company's operating equipment and the remainder is
for discretionary capital spending, including approximately $26.2 million
for the replacement of older operating equipment with a view to
substantially enhancing operating efficiency and the remaining $33.5 million
for expansion of its equipment complement to meet increased demand for
seismic services.
COMPETITION AND OTHER BUSINESS CONDITIONS
Competition. The acquisition and processing of seismic data for the oil and
gas exploration industry has historically been highly competitive worldwide.
However, as a result of changing technology and increased capital requirements,
the seismic industry has consolidated substantially since the late 1980s. The
consolidation has reduced the number of competitors, and the largest competitors
remaining in the market are Western Geophysical (a division of Western Atlas
Inc.), Geco-Prakla (a division of Schlumberger), Compagnie Generale Geophysique
and Petroleum Geo-Services A/S. Although reliable comparative figures are not
available in all cases, the Company believes that its largest competitors have
more extensive and diversified operations and have financial and operating
resources in excess of those available to the Company. Competition for available
seismic surveys is based on several competitive factors, including price,
performance, dependability, crew experience and equipment availability.
Operating Conditions/Seasonality. The Company's data acquisition activities
often are conducted under extreme weather and other hazardous conditions.
Accordingly, these operations are subject to risks of injury to personnel and
loss of equipment. The Company carries insurance against the destruction of, or
damage to, its chartered vessels and its geophysical equipment in amounts that
it considers adequate. The Company may not, however, be able to obtain insurance
against certain risks or for equipment located from time to time in certain
areas of the world. The Company obtains insurance against war, expropriation,
confiscation and nationalization when such insurance is available and when
management considers it advisable to do so. Such coverage is not always
available and, when available, is subject to unilateral cancellation by the
insuring companies on short notice. The Company also carries insurance against
pollution hazards and injury to persons and property that may result from its
operations and considers the amounts of such insurance to be adequate.
Fixed costs, including costs associated with vessel charters and operating
leases, labor costs, depreciation and interest expense, account for a
substantial percentage of the Company's costs and expenses. As a result,
downtime or low productivity resulting from reduced demand, equipment failures,
weather interruptions or otherwise, can result in significant operating losses.
The Company's seismic operations and quarterly financial results
historically have been subject to seasonal fluctuation, with the greatest volume
of both data acquisition and data processing occurring during the summer and
fall in the Northern Hemisphere. However, as a result of the expansion of the
Company's foreign operations and the deployment of its seismic vessels and crews
into regions having opposing seasons or less severe weather conditions, the
Company believes that the impact of seasonal
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<PAGE> 32
fluctuations has been reduced. In addition to seasonality, the Company
historically has experienced quarterly fluctuations in operating results.
Operating results in any fiscal quarter may vary as a result of (i) the
magnitude of certain contracts for the acquisition or sale of data, (ii)
customers' budgetary cycles and (iii) seismic data sales occurring as a result
of offshore lease sales. In light of customer budgetary considerations, the
majority of the Company's sales of proprietary seismic data has historically
tended to occur in the Company's first and second quarters.
BACKLOG
At July 31, 1996, the Company's backlog of commitments for services was
$158.8 million, compared with $139.6 million at July 31, 1995, substantially all
of which was attributable to large-scale, longer duration seismic acquisition
and processing services. Such backlog consisted of written orders or commitments
believed to be firm. Contracts for services are occasionally varied or modified
by mutual consent and in certain instances are cancelable by the customer on
short notice without penalty. In addition, because of the short contract lead
times and the smaller scale and relatively short duration (typically less than
one month) of land seismic surveys typical in the North American highlands
markets served by VES prior to the Combination, backlog is insubstantial with
respect to that portion of the Company's business. As a result of these factors,
the Company's backlog as of any particular date may not be indicative of the
Company's actual operating results for any succeeding fiscal period. It is
anticipated that substantially all of the orders and commitments included in
backlog at July 31, 1996, will be completed within the next twelve months.
SIGNIFICANT CUSTOMERS
Historically, the Company's principal customers have been international oil
and gas companies, foreign national oil companies and independent oil and gas
companies. In fiscal 1993, Mobil Oil Corporation and its subsidiaries accounted
for 12% of the Company revenues. Due to the contractual nature of the Company's
operations, it is anticipated that significant portions of future consolidated
revenues may be attributable to a few customers, although it is likely that the
identity of such customers may change from period to period.
EMPLOYEES
At July 31, 1996, the Company employed approximately 2,700 full-time
personnel. With the exception of approximately 39 unionized employees in the
Company's Singapore data processing center, none of its employees is subject to
collective bargaining agreements. The Company considers the relations with its
employees to be good.
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<PAGE> 33
MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS OF THE COMPANY
The table below sets forth certain information regarding the Company's
executive officers and directors.
<TABLE>
<CAPTION>
NAME AGE POSITION(S)
- ---------------------------------- --- -------------------------------------------------
<S> <C> <C>
David B. Robson................... 57 Chairman of the Board and Chief Executive
Officer, Director
Stephen J. Ludlow................. 46 President and Chief Operating Officer, Director
Lawrence C. Fichtner.............. 51 Executive Vice President -- Corporate
Communications, Director
Richard W. McNairy................ 56 Executive Vice President, Treasurer and Chief
Financial Officer
Rene M.J. VandenBrand............. 38 Vice President -- Business Development and
Corporate Secretary
George F. Baker................... 57 Director
Clayton P. Cormier................ 64 Director
Ralph M. Eeson.................... 48 Director
Steven J. Gilbert................. 49 Director
Brian F. MacNeill................. 57 Director
Douglas B. Thompson............... 47 Director
Jack C. Threet.................... 68 Director
</TABLE>
David B. Robson. Mr. Robson has been chairman of the board and chief
executive officer of the Company since consummation of the Combination on August
30, 1996. Prior thereto, he had held similar positions with VES or its
predecessors since 1974.
Stephen J. Ludlow. Mr. Ludlow became president and chief operating officer
of the Company in August 1996, upon consummation of the Combination. He was
employed by Digicon for 24 years and served as president and chief executive
officer of Digicon for the preceding two years. Prior to 1994, he served as
executive vice president of Digicon for the preceding four years following eight
years of service in a variety of progressively more responsible management
positions, including several years of service as the executive responsible for
operations in Europe, Africa and the Middle East.
Lawrence C. Fichtner. Mr. Fichtner became executive vice
president -- corporate communications of the Company in August 1996, upon
consummation of the Combination. Prior thereto, he had been executive vice
president of VES or its predecessors since 1978. During the ten years prior to
joining VES, he held various positions as a geophysicist with Geophysical
Services Inc., Texas Exploration Ltd. and Bow Valley Exploration Ltd.
Richard W. McNairy. Mr. McNairy was appointed executive vice president,
chief financial officer, and treasurer of the Company in August 1996, upon
consummation of the Combination. He served as vice president and chief financial
officer of Digicon from February 1994 until consummation of the Combination.
Prior to joining Digicon, Mr. McNairy was corporate controller of Halliburton
Energy Services Group for three years and vice president -- finance for its
geophysical services subsidiary for the preceding two years. Prior to 1989 and
since 1974 he was employed in various financial and operational management
capacities with predecessor companies acquired by Halliburton.
Rene M.J. VandenBrand. Mr. VandenBrand became vice president -- business
development and corporate secretary of the Company in August 1996 upon
consummation of the Combination. Prior thereto, he had been vice president
finance and secretary of VES since November 1995, following two years of service
in comparable positions with Taro Industries Limited. He was previously a
partner of Coopers & Lybrand Chartered Accountants in Calgary.
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<PAGE> 34
George F. Baker. Mr. Baker has been president of Cambridge Capital
Holdings, Inc., a private investment firm, for more than five years. He also
serves as chairman of the board and president of Whitehall Corporation, a
manufacturer of seismic towed arrays for offshore oil exploration, and through
its Aerocorp subsidiary, is a provider of aircraft maintenance for the airline
industry.
Clayton P. Cormier. Mr. Cormier is currently a financial and insurance
consultant. From 1986 to 1991, Mr. Cormier was a senior vice president in the
oil and gas division of Johnson & Higgins, an insurance broker, and previously
served as chairman of the board, president, and chief executive officer of Ancon
Insurance Company, S.A. and as an assistant treasurer of Exxon Corporation.
Ralph M. Eeson. Mr. Eeson has been co-owner and chairman of the board of
Kids Only Clothing Club Inc., a manufacturer and direct seller of children's
clothing, since 1991. From 1977 to 1991, he was a senior partner at Code Hunter,
Barristers and Solicitors, Calgary. He remains counsel to Code Hunter.
Steven J. Gilbert. Mr. Gilbert has been managing general partner of Soros
Capital L.P. since 1992. Soros Capital L.P. is the principal venture capital and
leveraged transaction entity of Quantum Group of Funds. He is also the managing
director of Commonwealth Capital Partners, L.P., a private entity investment
fund. Mr. Gilbert is a director of Katz Media Group, Inc., NFO Research, Inc.,
The Asian Infrastructure Fund, Peregrine Indonesia Fund, Inc., Terra Nova
(Bermuda) Holdings, Ltd., GTS -- Duratek, Inc., Sydney Harbour Casino Holdings,
Ltd., and UroMed, Inc., and is a member of the Advisory Committee of Donaldson,
Lufkin & Jenrette Merchant Banking.
Brian F. MacNeill. Mr. MacNeill has been president and chief executive
officer of IPL Energy Inc., a crude oil and liquids transportation and natural
gas distribution company, formerly Interprovincial Pipe Line, Inc. ("IPL"),
since 1991. He was executive vice president and chief operating officer of IPL
from 1990 to 1991 and previously served as chief financial officer of Interhome
Energy, Inc. and Home Oil Company Limited and as vice president and treasurer of
Hiram Walker Resources Ltd.
Douglas B. Thompson. Mr. Thompson served as chairman of the board of the
Company from May 1994 until consummation of the Combination in August 1996. He
is a private investor and also served as chairman of the board of WellTech,
Inc., a privately-held workover drilling company, until its sale in March 1996.
Jack C. Threet. Mr. Threet was formerly vice president for exploration of
Shell Oil Company. Prior to his retirement from Shell Oil Company in 1987, Mr.
Threet was also a member of the boards of directors of several affiliates of
Shell Oil Company.
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<PAGE> 35
DESCRIPTION OF SENIOR NOTES
The Senior Notes will be issued under an indenture (the "Indenture") to be
entered into between the Company, as issuer, and Fleet National Bank, as trustee
(the "Trustee"). The terms of the Senior Notes include those stated in the
Indenture and those made part of the Indenture by reference to the Trust
Indenture Act of 1939, as amended (the "Trust Indenture Act"). The Senior Notes
are subject to all such terms, and Holders of Senior Notes are referred to the
Indenture and the Trust Indenture Act for a statement thereof. The following
summary of certain provisions of the Indenture does not purport to be complete
and is qualified in its entirety by reference to the Indenture, including the
definitions of certain terms contained therein. The definitions of certain
capitalized terms used in the following summary are set forth below under
"-- Certain Definitions."
GENERAL
The Senior Notes will be senior unsecured obligations of the Company
limited to $75 million aggregate principal amount. The Senior Notes will be
issued only in registered form, without coupons, in denominations of $1,000 and
integral multiples thereof. Principal of, premium, if any, and interest on the
Senior Notes will be payable, and the Senior Notes will be transferable, at the
office or agency of the Company in the City of New York maintained for such
purposes, which initially will be the corporate trust office or agency of the
Trustee maintained at Shawmut Trust Company, c/o First Chicago Trust Company of
New York, 14 Wall Street, 8th Floor, Window-2, New York, New York 10005. No
service charge will be made for any transfer, exchange or redemption of the
Senior Notes, but the Company or the Trustee may require payment of a sum
sufficient to cover any tax or other governmental charge that may be payable in
connection therewith.
MATURITY, INTEREST AND PRINCIPAL PAYMENTS
The Senior Notes will mature on , 2003. Interest on the Senior
Notes will accrue from , 1996 at the rate of % per annum and will
be payable semiannually in cash in arrears on and of each
year, commencing , 1997, to the Persons in whose name the Senior Notes
are registered in the Note Register at the close of business on the
or next preceding such interest payment date.
Interest will be computed on the basis of a 360-day year comprised of twelve
30-day months.
REDEMPTION
Optional Redemption. The Senior Notes will be redeemable at the option of
the Company, in whole or in part, at any time on or after , 2000, upon
not less than 30 nor more than 60 days' notice, at the redemption prices
(expressed as percentages of principal amount) set forth below, plus accrued and
unpaid interest, if any, to the date of redemption (subject to the right of
Holders of record on the relevant record date to receive interest due on an
interest payment date that is on or prior to the date of redemption), if
redeemed during the 12-month period beginning on of the years
indicated below:
<TABLE>
<CAPTION>
REDEMPTION
YEAR PRICE
------------------------------------------------------------------ ----------
<S> <C>
2000.............................................................. %
2001.............................................................. %
2002 and thereafter............................................... 100.00%
</TABLE>
Notwithstanding the foregoing, at any time on or prior to , 1999,
up to $20 million in aggregate principal amount of Senior Notes will be
redeemable, at the option of the Company, from the Net Cash Proceeds of a Public
Equity Offering, at a redemption price equal to % of the principal amount
thereof, together with accrued and unpaid interest to the date of redemption,
provided that at least $55 million in aggregate principal amount of Senior Notes
remains outstanding immediately after
34
<PAGE> 36
such redemption and that such redemption occurs within 60 days following the
closing of such Public Equity Offering.
In the event that less than all of the Senior Notes are to be redeemed, the
particular Senior Notes (or any portion thereof that is an integral multiple of
$1,000) to be redeemed shall be selected not less than 30 nor more than 60 days
prior to the date of redemption by the Trustee, from the outstanding Senior
Notes not previously called for redemption, pro rata, by lot or by any other
method the Trustee shall deem fair and appropriate.
Mandatory Redemption. The Company will not be required to make mandatory
redemption or sinking fund payments with respect to the Senior Notes.
Offers to Purchase. As described below, (a) upon the occurrence of a Change
of Control, the Company will be obligated to make an offer to purchase all
outstanding Senior Notes at a purchase price equal to 101% of the principal
amount thereof, together with accrued and unpaid interest, if any, to the date
of purchase and (b) upon certain sales or other dispositions of assets, the
Company may be obligated to make offers to purchase Senior Notes with a portion
of the Net Available Proceeds of such sales or other dispositions at a purchase
price equal to 100% of the principal amount thereof, together with accrued and
unpaid interest, if any, to the date of purchase. See "-- Certain
Covenants -- Change of Control" and "-- Limitation on Asset Sales."
RANKING
The Senior Notes will be senior unsecured obligations of the Company and
will rank pari passu in right of payment with all other senior Indebtedness of
the Company. The Senior Notes, however, will be effectively subordinated to
secured Indebtedness of the Company with respect to the assets securing such
Indebtedness. At July 31, 1996, the Company had $41.1 million principal amount
of Indebtedness outstanding, all of which will be repaid with the proceeds of
the Offering. Because the Company is a holding company and the Senior Notes are
not guaranteed by any of its Subsidiaries, the Senior Notes are effectively
subordinated to all existing and future liabilities of the Company's
Subsidiaries, including both senior and subordinated Indebtedness of these
Subsidiaries, and regardless of whether such liabilities are secured or
unsecured. Immediately after the Offering, the Subsidiaries will have no
material Indebtedness. Certain of the subsidiaries are co-borrowers under the
Credit Facility. See "Capitalization." Subject to certain limitations, the
Company and its Subsidiaries may incur additional Indebtedness in the future.
See "Risk Factors -- Dependence on Subsidiaries; Holding Company Structure;
Effective Subordination" and "-- Certain Covenants -- Limitation on Indebtedness
and Disqualified Capital Stock."
CERTAIN COVENANTS
The Indenture will contain, among others, the covenants described below.
Limitation on Indebtedness and Disqualified Capital Stock. (a) The Company
will not, and will not permit any of its Restricted Subsidiaries to, create,
incur, issue, assume, guarantee or in any manner become directly or indirectly
liable for the payment of (collectively, "incur") any Indebtedness (including
any Acquired Indebtedness but excluding any Permitted Indebtedness) or any
Disqualified Capital Stock, unless, on a pro forma basis after giving effect to
such incurrence and the application of the proceeds therefrom, the Consolidated
Fixed Charge Coverage Ratio for the four full quarters immediately preceding
such event, taken as one period, would have been equal to or greater than 2.5 to
1.0.
(b) The Company will not incur any Indebtedness that is expressly
subordinated to any other Indebtedness of the Company unless such Indebtedness,
by its terms or the terms of any agreement or instrument pursuant to which such
Indebtedness is issued or outstanding, is also expressly made subordinate to the
Senior Notes at least to the extent it is subordinated to such other
Indebtedness.
(c) The Company will not permit any of its Restricted Subsidiaries to incur
any Indebtedness (excluding Permitted Indebtedness referred to in clauses (i)
and (vi) (to the extent consisting of
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<PAGE> 37
Indebtedness to the Company) of the definition thereof and Permitted Subsidiary
Indebtedness) or to issue any Preferred Stock.
Limitation on Restricted Payments. (a) The Company will not, and will not
permit any Restricted Subsidiary to, directly or indirectly:
(i) declare or pay any dividend on, or make any other distribution to
holders of, any shares of Capital Stock of the Company (other than
dividends or distributions payable solely in shares of Qualified Capital
Stock of the Company or in options, warrants or other rights to purchase
Qualified Capital Stock of the Company);
(ii) purchase, redeem or otherwise acquire or retire for value any
Capital Stock of the Company or any Affiliate thereof (other than any
Restricted Subsidiary or except pursuant to a Permitted Investment) or any
options, warrants or other rights to acquire such Capital Stock;
(iii) make any principal payment on or repurchase, redeem, defease or
otherwise acquire or retire for value, prior to any scheduled principal
payment, scheduled sinking fund payment or maturity, any Subordinated
Indebtedness, except in any case out of the Net Cash Proceeds of any
Permitted Indebtedness referred to in clause (ix) of the definition
thereof; or
(iv) make any Restricted Investment;
(such payments or other actions described in clauses (i) through (iv) being
collectively referred to as "Restricted Payments"), unless at the time of and
after giving effect to the proposed Restricted Payment (the amount of any such
Restricted Payment, if other than cash, shall be the amount determined by the
Board of Directors of the Company, whose determination shall be conclusive and
evidenced by a Board Resolution),
(1) no Default or Event of Default shall have occurred and be continuing,
(2) the Company could incur $1.00 of additional Indebtedness (other than
Permitted Indebtedness) in accordance with paragraph (a) of the "-- Limitation
on Indebtedness and Disqualified Capital Stock" covenant, and
(3) the aggregate amount of all Restricted Payments declared or made after
the date of the Indenture shall not exceed the sum (without duplication) of the
following:
(A) 50% of the Consolidated Net Income of the Company accrued on a
cumulative basis during the period beginning on August 1, 1996 and ending
on the last day of the Company's last fiscal quarter ending prior to the
date of such proposed Restricted Payment (or, if such Consolidated Net
Income is a loss, minus 100% of such loss),
(B) the aggregate Net Cash Proceeds received after the date of the
Indenture by the Company from the issuance or sale (other than to any of
its Restricted Subsidiaries) of shares of Qualified Capital Stock of the
Company or any options, warrants or rights to purchase such shares of
Qualified Capital Stock of the Company,
(C) the aggregate Net Cash Proceeds received after the date of the
Indenture by the Company (other than from any of its Restricted
Subsidiaries) upon the exercise of any options, warrants or rights to
purchase shares of Qualified Capital Stock of the Company,
(D) the aggregate Net Cash Proceeds received after the date of the
Indenture by the Company from the issuance or sale (other than to any of
its Restricted Subsidiaries) of Indebtedness or shares of Disqualified
Capital Stock that have been converted into or exchanged for Qualified
Capital Stock of the Company, together with the aggregate cash received by
the Company at the time of such conversion or exchange,
(E) to the extent not otherwise included in Consolidated Net Income,
the net reduction in Investments in Unrestricted Subsidiaries resulting
from dividends, repayments of loans or ad-
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vances, or other transfers of assets, in each case to the Company or a
Restricted Subsidiary after the date of the Indenture from any Unrestricted
Subsidiary or from the redesignation of an Unrestricted Subsidiary as a
Restricted Subsidiary (valued in each case as provided in the definition of
Investment), not to exceed in the case of any Unrestricted Subsidiary the
total amount of Investments (other than Permitted Investments) in such
Unrestricted Subsidiary made by the Company and its Restricted Subsidiaries
in such Unrestricted Subsidiary that which was previously treated as a
Restricted Payment, and
(F) $2.5 million.
(b) Notwithstanding paragraph (a) above, the Company and its Restricted
Subsidiaries may take the following actions so long as (in the case of clauses
(ii) and (iii) below) no Default or Event of Default shall have occurred and be
continuing:
(i) the payment of any dividend on any Capital Stock of the Company or
any Restricted Subsidiary within 60 days after the date of declaration
thereof, if at such declaration date such declaration complied with the
provisions of paragraph (a) above (and such payment shall be deemed to have
been paid on such date of declaration for purposes of any calculation
required by the provisions of paragraph (a) above);
(ii) the repurchase, redemption or other acquisition or retirement of
any shares of any class of Capital Stock of the Company or any Restricted
Subsidiary, in exchange for, or out of the aggregate Net Cash Proceeds
from, a substantially concurrent issuance and sale (other than to a
Restricted Subsidiary) of shares of Qualified Capital Stock of the Company;
and
(iii) the repurchase, redemption, repayment, defeasance or other
acquisition or retirement for value of any Subordinated Indebtedness in
exchange for, or out of the aggregate Net Cash Proceeds from, a
substantially concurrent issuance and sale (other than to a Restricted
Subsidiary) of shares of Qualified Capital Stock of the Company.
The actions described in clauses (i), (ii) and (iii) of this paragraph (b)
shall be Restricted Payments that shall be permitted to be made in accordance
with this paragraph (b) but shall reduce the amount that would otherwise be
available for Restricted Payments under clause (3) of paragraph (a), provided
that any dividend paid pursuant to clause (i) of this paragraph (b) shall reduce
the amount that would otherwise be available under clause (3) of paragraph (a)
when declared, but not also when subsequently paid pursuant to such clause (i).
Limitation on Issuances and Sales of Capital Stock of Restricted
Subsidiaries. The Company (i) will not permit any Restricted Subsidiary to issue
or sell any Capital Stock to any Person other than the Company or a Wholly Owned
Restricted Subsidiary and (ii) will not permit any Person other than the Company
or a Wholly Owned Restricted Subsidiary to own any Capital Stock of any
Restricted Subsidiary, in each case except with respect to a Wholly Owned
Restricted Subsidiary as described in clause (i) or (ii) of the definition of
"Wholly Owned Restricted Subsidiary." The sale of all of the Capital Stock of
any Restricted Subsidiary is permitted by this covenant but is subject to the
limitations described under "-- Limitations on Asset Sales."
Limitation on Sale/Leaseback Transactions. The Company will not, and will
not permit any Restricted Subsidiary to, directly or indirectly, enter into,
assume, guarantee or otherwise become liable with respect to any Sale/Leaseback
Transaction unless the Company or such Restricted Subsidiary, as the case may
be, would be able to incur Indebtedness (not including the incurrence of
Permitted Indebtedness) pursuant to and in an amount equal to the Attributable
Indebtedness with respect to such Sale/Leaseback Transaction pursuant to the
covenants described in paragraphs (a) and (c) under "-- Limitation on
Indebtedness and Disqualified Capital Stock," the Company or such Restricted
Subsidiary receives proceeds from such Sale/Leaseback Transaction at least equal
to the fair market value of the property or assets subject thereto (as
determined in good faith by the Company's Board of Directors, whose
determination in good faith and evidenced by a Board Resolution will be
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<PAGE> 39
conclusive) and the Company applies an amount in cash equal to the Net Available
Proceeds of the Sale/Leaseback Transaction in accordance with the provisions of
the "Limitation on Asset Sales" covenant as if such Sale/Leaseback Transaction
were an Asset Sale.
Limitation on Transactions with Affiliates. The Company will not, and will
not permit any Restricted Subsidiary to, directly or indirectly, enter into or
suffer to exist any transaction or series of related transactions (including,
without limitation, the sale, purchase, exchange or lease of assets or property
or the rendering of any services) with, or for the benefit of, any Affiliate of
the Company (other than the Company or a Restricted Subsidiary), unless (i) such
transaction or series of transactions is on terms that are no less favorable to
the Company or such Restricted Subsidiary, as the case may be, than those that
would be available in a comparable arm's length transaction with unrelated third
parties, (ii) with respect to any one transaction or series of related
transactions involving aggregate payments in excess of $1.0 million but less
than $5.0 million in the aggregate, the Company delivers an Officers'
Certificate to the Trustee certifying that (A) such transaction or series of
related transactions complies with clause (i) above and (B) such transaction or
series of related transactions has been approved by the Board of Directors
(including a majority of the Disinterested Directors) of the Company, and (iii)
with respect to any one transaction or series of related transactions involving
aggregate payments in excess of $5.0 million, the Company delivers an Officers'
Certificate to the Trustee certifying to the two matters referred to in clause
(ii) above and that the Company has obtained a written opinion from an
independent nationally recognized investment banking firm or appraisal firm
specializing or having a speciality in the type and subject matter of the
transaction or series of related transactions at issue, which opinion shall be
to the effect set forth in clause (i) above or shall state that such transaction
or series of related transactions is fair from a financial point of view to the
Company or such Restricted Subsidiary; provided, however, that the foregoing
restriction shall not apply to (w) loans or advances to officers, directors and
employees of the Company or any Restricted Subsidiary made in the ordinary
course of business and consistent with past practices of the Company and its
Restricted Subsidiaries in an aggregate amount not to exceed $1.0 million
outstanding at any one time, (x) indemnities of officers, directors and
employees of the Company or any Restricted Subsidiary permitted by bylaw or
statutory provisions, (y) the payment of reasonable and customary regular fees
to directors of the Company or any of its Restricted Subsidiaries who are not
employees of the Company or any Affiliate and (z) the Company's employee
compensation and other benefit arrangements.
Limitation on Liens. The Company will not, and will not permit any
Restricted Subsidiary to, directly or indirectly, create, incur, assume, affirm
or suffer to exist or become effective any Lien of any kind, except for
Permitted Liens, upon any of their respective property or assets, whether now
owned or acquired after the date of the Indenture, or any income, profits or
proceeds therefrom, to secure any Indebtedness of the Company or such Restricted
Subsidiary, unless prior to, or contemporaneously therewith, the Senior Notes
are equally and ratably secured; provided, however, that if such Indebtedness is
expressly subordinated to the Senior Notes, the Lien securing such Indebtedness
will be subordinated and junior to the Lien securing the Senior Notes, with the
same relative priority as such Indebtedness has with respect to the Senior
Notes. The foregoing covenant will not apply to any Lien securing Acquired
Indebtedness, provided that any such Lien extends only to the property or assets
that were subject to such Lien prior to the related acquisition by the Company
or such Restricted Subsidiary and was not created, incurred or assumed in
contemplation of such transaction. The incurrence of additional secured
Indebtedness by the Company and its Restricted Subsidiaries is subject to
further limitations on the incurrence of Indebtedness as described under
"-- Limitation on Indebtedness and Disqualified Capital Stock."
Change of Control. Upon the occurrence of a Change of Control, the Company
will be obligated to make an offer to purchase all of the then outstanding
Senior Notes (a "Change of Control Offer"), and will purchase, on a Business Day
(the "Change of Control Purchase Date"), not more than 60 nor less than 30 days
following such Change of Control, all of the then outstanding Senior Notes
validly tendered pursuant to such Change of Control Offer and not withdrawn, at
a purchase price (the
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<PAGE> 40
"Change of Control Purchase Price") equal to 101% of the principal amount
thereof plus accrued and unpaid interest, if any, to the Change of Control
Purchase Date. The Change of Control Offer is required to remain open for at
least 20 Business Days and until the close of business on the fifth Business Day
prior to the Change of Control Purchase Date.
In order to effect such Change of Control Offer, the Company will, not
later than the 30th day after the Change of Control, mail to the Trustee and
each Holder a notice of the Change of Control Offer, which notice shall govern
the terms of the Change of Control Offer and shall state, among other things,
the procedures that Holders must follow to accept the Change of Control Offer.
The occurrence of a Change of Control may result in lenders under the
Credit Facility having the right to require the Company to repay all
Indebtedness outstanding thereunder. There can be no assurance that the Company
will have available funds sufficient to repay all Indebtedness owing under the
Credit Facility or to fund the purchase of the Senior Notes upon a Change of
Control. In the event a Change of Control occurs at a time when the Company does
not have available funds sufficient to pay the Change of Control Purchase Price
for all of the Senior Notes delivered by Holders seeking to accept the Change of
Control Offer, an Event of Default would occur under the Indenture. The
definition of Change of Control includes an event by which the Company sells,
conveys, transfers, leases or otherwise disposes of all or substantially all of
the properties and assets of the Company and its Restricted Subsidiaries, taken
as a whole; the phrase "all or substantially all" is subject to applicable legal
precedent and, as a result, in the future there may be uncertainty as to whether
or not a Change of Control has occurred.
The Company will not be required to make a Change of Control Offer upon a
Change of Control if another Person makes the Change of Control Offer at the
same purchase price, at the same time and otherwise in substantial compliance
with the requirements applicable to a Change of Control Offer to be made by the
Company and purchases all Senior Notes validly tendered and not withdrawn under
such Change of Control Offer.
The Company will comply with Rule 14e-1 under the Exchange Act and any
other securities laws and regulations thereunder, if applicable, in the event
that a Change of Control occurs and the Company is required to purchase Senior
Notes as described above. The existence of a Holder's right to require, subject
to certain conditions, the Company to repurchase its Senior Notes upon a Change
of Control may deter a third party from acquiring the Company in a transaction
that constitutes, or results in, a Change of Control.
Limitation on Asset Sales. (a) The Company will not, and will not permit
any Restricted Subsidiary to, engage in any Asset Sale unless (i) the Company or
such Restricted Subsidiary, as the case may be, receives consideration at the
time of such Asset Sale at least equal to the fair market value of the assets
and properties sold or otherwise disposed of pursuant to the Asset Sale (as
determined by the Board of Directors of the Company, whose determination in good
faith shall be conclusive and evidenced by a Board Resolution), (ii) at least
80% of the consideration received by the Company or the Restricted Subsidiary,
as the case may be, in respect of such Asset Sale consists of cash or Cash
Equivalents and (iii) the Company delivers to the Trustee an Officers'
Certificate certifying that such Asset Sale complies with clauses (i) and (ii).
The amount (without duplication) of any Indebtedness (other than Subordinated
Indebtedness) of the Company or such Restricted Subsidiary that is expressly
assumed by the transferee in such Asset Sale and with respect to which the
Company or such Restricted Subsidiary, as the case may be, is unconditionally
released by the holder of such Indebtedness, shall be deemed to be cash or Cash
Equivalents for purposes of clause (ii) and shall also be deemed to constitute a
repayment of, and a permanent reduction in, the amount of such Indebtedness for
purposes of the following paragraph.
(b) If the Company or any Restricted Subsidiary engages in an Asset Sale,
the Company or such Restricted Subsidiary may either, no later than 270 days
after such Asset Sale, (i) apply all or any of the Net Available Proceeds
therefrom to repay Indebtedness (other than Subordinated Indebtedness) of the
Company or any Restricted Subsidiary, provided, in each case, that the related
loan commitment
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(if any) is thereby permanently reduced by the amount of such Indebtedness so
repaid, or (ii) invest all or any part of the Net Available Proceeds thereof in
properties and assets that replace the properties or assets that were the
subject of such Asset Sale or in other properties or assets that will be used in
the business of the Company and its Restricted Subsidiaries. The amount of such
Net Available Proceeds not applied or invested as provided in this paragraph
will constitute "Excess Proceeds."
(c) When the aggregate amount of Excess Proceeds equals or exceeds $5.0
million, the Company will be required to make an offer to purchase, from all
Holders of the Notes, an aggregate principal amount of Senior Notes equal to
such Excess Proceeds as follows:
(i) The Company will make an offer to purchase (a "Net Proceeds
Offer") from all Holders of the Senior Notes in accordance with the
procedures set forth in the Indenture the maximum principal amount
(expressed as a multiple of $1,000) of Senior Notes that may be purchased
out of the amount (the "Payment Amount") of such Excess Proceeds.
(ii) The offer price for the Senior Notes will be payable in cash in
an amount equal to 100% of the principal amount of the Senior Notes
tendered pursuant to a Net Proceeds Offer, plus accrued and unpaid
interest, if any, to the date such Net Proceeds Offer is consummated (the
"Offered Price"), in accordance with the procedures set forth in the
Indenture. To the extent that the aggregate Offered Price of the Senior
Notes tendered pursuant to a Net Proceeds Offer is less than the Payment
Amount relating thereto (such shortfall constituting a "Net Proceeds
Deficiency"), the Company may use such Net Proceeds Deficiency, or a
portion thereof, for general corporate purposes, subject to the limitations
of the "Limitation on Restricted Payments" covenant.
(iii) If the aggregate Offered Price of Notes validly tendered and not
withdrawn by Holders thereof exceeds the Payment Amount, Notes to be
purchased will be selected on a pro rata basis.
(iv) Upon completion of such Net Proceeds Offer, the amount of Excess
Proceeds shall be reset to zero.
The Company will not permit any Restricted Subsidiary to enter into or suffer to
exist any agreement that would place any restriction of any kind (other than
pursuant to law or regulation) on the ability of the Company to make a Net
Proceeds Offer following any Asset Sale. The Company will comply with Rule 14e-1
under the Exchange Act, and any other securities laws and regulations
thereunder, if applicable, in the event that an Asset Sale occurs and the
Company is required to purchase Senior Notes as described above.
Limitation on Dividends and Other Payment Restrictions Affecting Restricted
Subsidiaries. The Company will not, and will not permit any Restricted
Subsidiary to, directly or indirectly, create or suffer to exist or allow to
become effective any consensual encumbrance or restriction of any kind on the
ability of any Restricted Subsidiary (a) to pay dividends, in cash or otherwise,
or make any other distributions on its Capital Stock, or make payments on any
Indebtedness owed, to the Company or any other Restricted Subsidiary, (b) to
make loans or advances to the Company or any other Restricted Subsidiary, (c) to
transfer any of its property or assets to the Company or any other Restricted
Subsidiary or (d) to guarantee the Senior Notes (any such restrictions being
collectively referred to herein as a "Payment Restriction"), except in any such
case for such encumbrances or restrictions existing under or by reason of (i)
the Indenture, the Credit Facility or any other agreement in effect or entered
into on the date of the Indenture, or (ii) any agreement, instrument or charter
of or in respect of a Restricted Subsidiary entered into prior to the date on
which such Restricted Subsidiary became a Restricted Subsidiary and outstanding
on such date and not entered into in connection with or in contemplation of
becoming a Restricted Subsidiary, provided such consensual encumbrance or
restriction is not applicable to any properties or assets other than those owned
or held by the Restricted Subsidiary at the time it became a Restricted
Subsidiary or subsequently acquired by such Restricted Subsidiary other than
from the Company or any other Restricted Subsidiary, or (iii) pursuant to an
agreement effecting a modification, renewal, refinancing, replacement or
extension of any agreement, instrument or charter (other than the Indenture)
referred to in clause (i) or (ii) above, provided,
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<PAGE> 42
however, that the provisions relating to such encumbrance or restriction are not
materially less favorable to the Holders of the Senior Notes than those under or
pursuant to the agreement, instrument or charter so modified, renewed,
refinanced, replaced or extended, or (iv) customary provisions restricting the
subletting or assignment of any lease or the transfer of copyrighted or patented
materials, or (v) provisions in agreements that restrict the assignment of such
agreements or rights thereunder, or (vi) the sale or other disposition of any
properties or assets subject to a Lien securing Indebtedness.
Limitation on Conduct of Business. The Company will not, and will not
permit any of its Restricted Subsidiaries to, engage in the conduct of any
business other than the business being conducted on the date of the Indenture
(and described therein and herein) and such other businesses as are reasonably
necessary or desirable to facilitate the conduct and operation of such
businesses.
Reports. The Company will file on a timely basis with the Commission, to
the extent such filings are accepted by the Commission and whether or not the
Company has a class of securities registered under the Exchange Act, the annual
reports, quarterly reports and other documents that the Company would be
required to file if it were subject to Section 13 or 15 of the Exchange Act. The
Company will also be required (a) to file with the Trustee (with exhibits), and
provide to each Holder of Senior Notes (without exhibits), without cost to such
Holder, copies of such reports and documents within 15 days after the date on
which the Company files such reports and documents with the Commission or the
date on which the Company would be required to file such reports and documents
if the Company were so required and (b) if filing such reports and documents
with the Commission is not accepted by the Commission or is prohibited under the
Exchange Act, to supply at its cost copies of such reports and documents
(including any exhibits thereto) to any Holder of Senior Notes promptly upon
written request.
Future Designation of Restricted and Unrestricted Subsidiaries. The
foregoing covenants (including calculation of financial ratios and the
determination of limitations on the incurrence of Indebtedness and Liens) may be
affected by the designation by the Company of any existing or future Subsidiary
of the Company as an Unrestricted Subsidiary. The definition of "Unrestricted
Subsidiary" set forth under the caption "-- Certain Definitions" describes the
circumstances under which a Subsidiary of the Company may be designated as an
Unrestricted Subsidiary by the Board of Directors of the Company.
MERGER, CONSOLIDATION AND SALE OF ASSETS
The Company will not, in any single transaction or series of related
transactions, merge or consolidate with or into any other Person, or sell,
assign, convey, transfer, lease or otherwise dispose of all or substantially all
of the properties and assets of the Company and its Restricted Subsidiaries on a
consolidated basis to any Person or group of Affiliated Persons, and the Company
will not permit any of its Restricted Subsidiaries to enter into any such
transaction or series of transactions if such transaction or series of
transactions, in the aggregate, would result in the sale, assignment,
conveyance, transfer, lease or other disposition of all or substantially all of
the properties and assets of the Company and its Restricted Subsidiaries on a
consolidated basis to any other Person or group of Affiliated Persons, unless at
the time and after giving effect thereto (i) either (A) if the transaction is a
merger or consolidation, the Company shall be the surviving Person of such
merger or consolidation, or (B) the Person (if other than the Company) formed by
such consolidation or into which the Company is merged or to which the
properties and assets of the Company or its Restricted Subsidiaries, as the case
may be, are sold, assigned, conveyed, transferred, leased or otherwise disposed
of (any such surviving Person or transferee Person being the "Surviving Entity")
shall be a corporation organized and existing under the laws of the United
States of America, any state thereof or the District of Columbia and shall, in
either case, expressly assume by a supplemental indenture to the Indenture
executed and delivered to the Trustee, in form satisfactory to the Trustee, all
the obligations of the Company under the Senior Notes and the Indenture, and, in
each case, the Indenture shall remain in full force and effect; (ii) immediately
before and immediately after giving effect to such transaction or series of
transactions on a pro forma basis (and treating any Indebtedness not previously
an obligation of
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Company or any of its Restricted Subsidiaries which becomes an obligation of the
Company or any of its Restricted Subsidiaries in connection with or as a result
of such transaction or transactions as having been incurred at the time of such
transaction or transactions), no Default or Event of Default shall have occurred
and be continuing; (iii) except in the case of the consolidation or merger of
any Restricted Subsidiary with or into the Company, immediately after giving
effect to such transaction or transactions on a pro forma basis, the
Consolidated Net Worth of the Company (or the Surviving Entity if the Company is
not the continuing obligor under the Indenture) is at least equal to the
Consolidated Net Worth of the Company immediately before such transaction or
transactions; (iv) except in the case of the consolidation or merger of the
Company with or into a Restricted Subsidiary or any Restricted Subsidiary with
or into the Company or another Restricted Subsidiary, immediately before and
immediately after giving effect to such transaction or transactions on a pro
forma basis (assuming that the transaction or transactions occurred on the first
day of the period of four fiscal quarters ending immediately prior to the
consummation of such transaction or transactions, with the appropriate
adjustments with respect to the transaction or transactions being included in
such pro forma calculation), the Company (or the Surviving Entity if the Company
is not the continuing obligor under the Indenture) could incur $1.00 of
additional Indebtedness (other than Permitted Indebtedness) pursuant to the
first paragraph of the "-- Limitation on Indebtedness and Disqualified Capital
Stock" covenant; (v) if any of the properties or assets of the Company or any of
its Restricted Subsidiaries would upon such transaction or series of related
transactions become subject to any Lien (other than a Permitted Lien), the
creation and imposition of such Lien shall have been in compliance with the
"Limitation on Liens" covenant; and (vi) the Company (or the Surviving Entity if
the Company is not the continuing obligor under the Indenture) shall have
delivered to the Trustee, in form and substance reasonably satisfactory to the
Trustee, (a) an Officers' Certificate stating that such consolidation, merger,
transfer, lease or other disposition and any supplemental indenture in respect
thereto comply with the requirements under the Indenture and (b) an Opinion of
Counsel stating that the requirements of clause (i) of this paragraph have been
satisfied.
Upon any consolidation or merger or any sale, assignment, lease,
conveyance, transfer or other disposition of all or substantially all of the
properties and assets of the Company and its Restricted Subsidiaries on a
consolidated basis in accordance with the foregoing, in which the Company is not
the continuing corporation, the Surviving Entity shall succeed to, and be
substituted for, and may exercise every right and power of, the Company under
the Indenture with the same effect as if the Surviving Entity had been named as
the Company therein, and thereafter the Company, except in the case of a lease,
will be discharged from all obligations and covenants under the Indenture and
the Senior Notes and may be liquidated and dissolved.
EVENTS OF DEFAULT
The following will be "Events of Default" under the Indenture:
(i) default in the payment of the principal of or premium, if any, on
any of the Senior Notes, whether such payment is due at Stated Maturity,
upon redemption, upon repurchase pursuant to a Change of Control Offer or a
Net Proceeds Offer, upon acceleration or otherwise; or
(ii) default in the payment of any installment of interest on any of
the Senior Notes, when due, and the continuance of such default for a
period of 30 days; or
(iii) default in the performance or breach of the provisions of the
"Merger, Consolidation and Sale of Assets" section of the Indenture, the
failure to make or consummate a Change of Control Offer in accordance with
the provisions of the "Change of Control" covenant or the failure to make
or consummate a Net Proceeds Offer in accordance with the provisions of the
"Limitation on Asset Sales" covenant; or
(iv) the Company shall fail to perform or observe any other term,
covenant or agreement contained in the Senior Notes or the Indenture (other
than a default specified in (i), (ii) or (iii) above) for a period of
30 days after written notice of such failure stating that it is a "notice
of
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<PAGE> 44
default" under the Indenture and requiring the Company to remedy the same
shall have been given (x) to the Company by the Trustee or (y) to the
Company and the Trustee by the Holders of at least 25% in aggregate
principal amount of the Senior Notes then outstanding; or
(v) the occurrence and continuation beyond any applicable grace period
of any default in the payment of the principal of, premium, if any, or
interest on any Indebtedness of the Company (other than the Senior Notes)
or any Restricted Subsidiary for money borrowed when due, or any other
default resulting in acceleration of any Indebtedness of the Company or any
Restricted Subsidiary for money borrowed, provided that the aggregate
principal amount of such Indebtedness shall exceed $5.0 million and
provided, further, that if any such default is cured or waived or any such
acceleration rescinded, or such Indebtedness is repaid, within a period of
10 days from the continuation of such default beyond the applicable grace
period or the occurrence of such acceleration, as the case may be, such
Event of Default under the Indenture and any consequential acceleration of
the Senior Notes shall be automatically rescinded, so long as such
rescission does not conflict with any judgment or decree; or
(vi) final judgments or orders rendered against the Company or any
Restricted Subsidiary that are unsatisfied and that require the payment in
money, either individually or in an aggregate amount, that is more than
$5.0 million over the coverage under applicable insurance policies and
either (A) commencement by any creditor of an enforcement proceeding upon
such judgment (other than a judgment that is stayed by reason of pending
appeal or otherwise) or (B) the occurrence of a 30-day period during which
a stay of such judgment or order, by reason of pending appeal or otherwise,
was not in effect; or
(vii) the entry of a decree or order by a court having jurisdiction in
the premises (A) for relief in respect of the Company or any Restricted
Subsidiary in an involuntary case or proceeding under any applicable
federal or state bankruptcy, insolvency, reorganization or other similar
law or (B) adjudging the Company or any Restricted Subsidiary bankrupt or
insolvent, or approving a petition seeking reorganization, arrangement,
adjustment or composition of the Company or any Restricted Subsidiary under
any applicable federal or state law, or appointing under any such law a
custodian, receiver, liquidator, assignee, trustee, sequestrator or other
similar official of the Company or any Restricted Subsidiary or of a
substantial part of its consolidated assets, or ordering the winding up or
liquidation of its affairs, and the continuance of any such decree or order
for relief or any such other decree or order unstayed and in effect for a
period of 60 consecutive days; or
(viii) the commencement by the Company or any Restricted Subsidiary of
a voluntary case or proceeding under any applicable federal or state
bankruptcy, insolvency, reorganization or other similar law or any other
case or proceeding to be adjudicated bankrupt or insolvent, or the consent
by the Company or any Restricted Subsidiary to the entry of a decree or
order for relief in respect thereof in an involuntary case or proceeding
under any applicable federal or state bankruptcy, insolvency,
reorganization or other similar law or to the commencement of any
bankruptcy or insolvency case or proceeding against it, or the filing by
the Company or any Restricted Subsidiary of a petition or consent seeking
reorganization or relief under any applicable federal or state law, or the
consent by it under any such law to the filing of any such petition or to
the appointment of or taking possession by a custodian, receiver,
liquidator, assignee, trustee or sequestrator (or other similar official)
of the Company or any Restricted Subsidiary or of any substantial part of
its consolidated assets, or the making by it of an assignment for the
benefit of creditors under any such law, or the admission by it in writing
of its inability to pay its debts generally as they become due or taking of
corporate action by the Company or any Restricted Subsidiary in furtherance
of any such action.
If an Event of Default (other than as specified in clause (vii) or (viii)
above) shall occur and be continuing, the Trustee, by written notice to the
Company, or the Holders of at least 25% in aggregate principal amount of the
Senior Notes then outstanding, by written notice to the Trustee and the
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Company, may, and the Trustee upon the request of the Holders of not less than
25% in aggregate principal amount of the Senior Notes then outstanding shall,
declare the principal of, premium, if any, and accrued and unpaid interest on
all of the Senior Notes due and payable immediately, upon which declaration all
amounts payable in respect of the Senior Notes shall be immediately due and
payable. If an Event of Default specified in clause (vii) or (viii) above occurs
and is continuing, then the principal of, premium, if any, and accrued and
unpaid interest on all of the Senior Notes shall become and be immediately due
and payable without any declaration, notice or other act on the part of the
Trustee or any Holder of Senior Notes.
After a declaration of acceleration under the Indenture, but before a
judgment or decree for payment of the money due has been obtained by the
Trustee, the Holders of a majority in aggregate principal amount of the
outstanding Senior Notes, by written notice to the Company and the Trustee, may
rescind and annul such declaration if (a) the Company has paid or deposited with
the Trustee a sum sufficient to pay (i) all sums paid or advanced by the Trustee
under the Indenture and the reasonable compensation, expenses, disbursements and
advances of the Trustee, its agents and counsel, (ii) all overdue interest on
all Senior Notes, (iii) the principal of and premium, if any, on any Senior
Notes which have become due otherwise than by such declaration of acceleration
and interest thereon at the rate borne by the Senior Notes, and (iv) to the
extent that payment of such interest is lawful, interest upon overdue interest
and overdue principal at the rate borne by the Senior Notes (without duplication
of any amount paid or deposited pursuant to clause (ii, or (iii)); (b) the
rescission would not conflict with any judgment or decree of a court of
competent jurisdiction; and (c) all Events of Default, other than the
non-payment of principal of, premium, if any, or interest on the Senior Notes
that has become due solely by such declaration of acceleration, have been cured
or waived.
No Holder will have any right to institute any proceeding with respect to
the Indenture or any remedy thereunder, unless such Holder has notified the
Trustee of a continuing Event of Default and the Holders of at least 25% in
aggregate principal amount of the outstanding Senior Notes have made written
request, and offered reasonable indemnity, to the Trustee to institute such
proceeding as Trustee under the Senior Notes and the Indenture, the Trustee has
failed to institute such proceeding within 60 days after receipt of such notice
and the Trustee, within such 60-day period, has not received directions
inconsistent with such written request by Holders of a majority in aggregate
principal amount of the outstanding Senior Notes. Such limitations will not
apply, however, to a suit instituted by the Holder of a Senior Note for the
enforcement of the payment of the principal of, premium, if any, or interest on
such Senior Note on or after the respective due dates expressed in such Senior
Note.
During the existence of an Event of Default, the Trustee will be required
to exercise such rights and powers vested in it under the Indenture and use the
same degree of care and skill in its exercise thereof as a prudent person would
exercise under the circumstances in the conduct of such person's own affairs.
Subject to the provisions of the Indenture relating to the duties of the Trustee
in case an Event of Default shall occur and be continuing, the Trustee will not
be under any obligation to exercise any of its rights or powers under the
Indenture at the request or direction of any of the Holders unless such Holders
shall have offered to the Trustee reasonable security or indemnity. Subject to
certain provisions concerning the rights of the Trustee, the Holders of a
majority in aggregate principal amount of the outstanding Senior Notes will have
the right to direct the time, method and place of conducting any proceeding for
any remedy available to the Trustee, or exercising any trust or power conferred
on the Trustee under the Indenture.
If a Default or an Event of Default occurs and is continuing and is known
to the Trustee, the Trustee shall mail to each Holder notice of the Default or
Event of Default within 60 days after the occurrence thereof. Except in the case
of a Default or an Event of Default in payment of principal of, premium, if any,
or interest on any Senior Notes, the Trustee may withhold the notice to the
Holders of the Senior Notes if the Trustee determines in good faith that
withholding the notice is in the interest of the Holders of the Senior Notes.
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The Company will be required to furnish to the Trustee annual and quarterly
statements as to the performance by the Company of its obligations under the
Indenture and as to any default in such performance. The Company will also be
required to notify the Trustee within 10 days of any Default or Event of
Default.
LEGAL DEFEASANCE OR COVENANT DEFEASANCE OF INDENTURE
The Company may, at its option and at any time, terminate the obligations
of the Company with respect to the outstanding Senior Notes (such action being a
"legal defeasance"). Such legal defeasance means that the Company shall be
deemed to have paid and discharged the entire Indebtedness represented by the
outstanding Senior Notes and to have been discharged from all their other
obligations with respect to the Senior Notes, except for (i) the rights of
Holders of outstanding Senior Notes to receive payment in respect of the
principal of, premium, if any, and interest on such Senior Notes when such
payments are due, (ii) the Company's obligations to replace any temporary Senior
Notes, register the transfer or exchange of any Senior Notes, replace mutilated,
destroyed, lost or stolen Senior Notes and maintain an office or agency for
payments in respect of the Senior Notes, (iii) the rights, powers, trusts,
duties and immunities of the Trustee, and (iv) the legal defeasance provisions
of the Indenture. In addition, the Company may, at its option and at any time,
elect to terminate the obligations of the Company with respect to certain
covenants that are set forth in the Indenture, some of which are described under
" --Certain Covenants" above, and any omission to comply with such obligations
shall not constitute a Default or an Event of Default with respect to the Senior
Notes (such action being a "covenant defeasance"). In the event covenant
defeasance occurs, certain events (not including nonpayment, bankruptcy,
insolvency and reorganization events) described under "Events of Default" will
no longer constitute an Event of Default with respect to the Senior Notes.
In order to exercise either legal defeasance or covenant defeasance, (i)
the Company must irrevocably deposit with the Trustee, in trust, for the benefit
of the Holders of the Senior Notes, cash in United States dollars, U.S.
Government Obligations (as defined in the Indenture), or a combination thereof,
in such amounts as will be sufficient, in the opinion of a nationally recognized
firm of independent public accountants, to pay the principal of, premium, if
any, and interest on the outstanding Senior Notes to redemption or maturity;
(ii) the Company shall have delivered to the Trustee an Opinion of Counsel to
the effect that the Holders of the outstanding Senior Notes will not recognize
income, gain or loss for federal income tax purposes as a result of such legal
defeasance or covenant defeasance and will be subject to federal income tax on
the same amounts, in the same manner and at the same times as would have been
the case if such legal defeasance or covenant defeasance had not occurred (in
the case of legal defeasance, such opinion must refer to and be based upon a
published ruling of the Internal Revenue Service or a change in applicable
federal income tax laws); (iii) no Default or Event of Default shall have
occurred and be continuing on the date of such deposit or insofar as clauses
(vii) and (viii) under the first paragraph of "Events of Default" are concerned,
at any time during the period ending on the 91st day after the date of deposit;
(iv) such legal defeasance or covenant defeasance shall not cause the Trustee to
have a conflicting interest under the Indenture or the Trust Indenture Act with
respect to any securities of the Company; (v) such legal defeasance or covenant
defeasance shall not result in a breach or violation of, or constitute a default
under, any material agreement or instrument to which the Company is a party or
by which it is bound; and (vi) the Company shall have delivered to the Trustee
an Officers' Certificate and an Opinion of Counsel satisfactory to the Trustee,
which, taken together, state that all conditions precedent under the Indenture
to either legal defeasance or covenant defeasance, as the case may be, have been
complied with.
SATISFACTION AND DISCHARGE
The Indenture will be discharged and will cease to be of further effect
(except as to surviving rights of registration of transfer or exchange of the
Senior Notes, as expressly provided for in the Indenture)
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<PAGE> 47
as to all outstanding Senior Notes when (i) either (a) all the Senior Notes
theretofore authenticated and delivered (except lost, stolen, mutilated or
destroyed Senior Notes which have been replaced or paid and Senior Notes for
whose payment money or certain United States government obligations have
theretofore been deposited in trust or segregated and held in trust by the
Company and thereafter repaid to the Company or discharged from such trust) have
been delivered to the Trustee for cancellation or (b) all Senior Notes not
theretofore delivered to the Trustee for cancellation have become due and
payable or will become due and payable at their Stated Maturity within one year,
or are to be called for redemption within one year under arrangements
satisfactory to the Trustee for the serving of notice of redemption by the
Trustee in the name, and at the expense, of the Company, and the Company has
irrevocably deposited or caused to be deposited with the Trustee funds in an
amount sufficient to pay and discharge the entire Indebtedness on the Senior
Notes not theretofore delivered to the Trustee for cancellation, for principal
of, premium, if any, and interest on the Senior Notes to the date of deposit (in
the case of Senior Notes which have become due and payable) or to the Stated
Maturity or Redemption Date, as the case may be, together with instructions from
the Company irrevocably directing the Trustee to apply such funds to the payment
thereof at maturity or redemption, as the case may be; (ii) the Company has paid
all other sums payable under the Indenture by the Company; and (iii) the Company
has delivered to the Trustee an Officers' Certificate and an Opinion of Counsel
which, taken together, state that all conditions precedent under the Indenture
relating to the satisfaction and discharge of the Indenture have been complied
with.
AMENDMENTS AND WAIVERS
From time to time, the Company and the Trustee may, without the consent of
the Holders of the Senior Notes, amend or supplement the Indenture or the Senior
Notes for certain specified purposes, including, among other things, curing
ambiguities, defects or inconsistencies, qualifying, or maintaining the
qualification of, the Indenture under the Trust Indenture Act or making any
change that does not materially adversely affect the rights of any Holder of
Senior Notes. Other amendments and modifications of the Indenture or the Senior
Notes may be made by the Company and the Trustee with the consent of the Holders
of not less than a majority of the aggregate principal amount of the outstanding
Senior Notes; provided, however, that no such modification or amendment may,
without the consent of the Holder of each outstanding Senior Note affected
thereby, (a) change the Stated Maturity of the principal of, or any installment
of interest on, any Senior Note, (b) reduce the principal amount of, premium, if
any, or interest on any Senior Note, (c) change the coin or currency of payment
of principal of, premium, if any, or interest on, any Senior Note, (d) impair
the right to institute suit for the enforcement of any payment on or with
respect to any Senior Note, (e) reduce the above-stated percentage of aggregate
principal amount of outstanding Senior Notes necessary to modify or amend the
Indenture, (f) reduce the percentage of aggregate principal amount of
outstanding Senior Notes necessary for waiver of compliance with certain
provisions of the Indenture or for waiver of certain defaults, (g) modify any
provisions of the Indenture relating to the modification and amendment of the
Indenture or the waiver of past defaults or covenants, except as otherwise
specified, (h) change the ranking of the Senior Notes in a manner adverse to the
Holders or expressly subordinate in right of payment the Senior Notes to any
other Indebtedness or (i) amend, change or modify the obligation of the Company
to make and consummate a Change of Control Offer in the event of a Change of
Control or make and consummate a Net Proceeds Offer with respect to any Asset
Sale or modify any of the provisions or definitions with respect thereto.
The Holders of not less than a majority in aggregate principal amount of
the outstanding Senior Notes may, on behalf of the Senior Holders of all Notes,
waive any past default under the Indenture, except a default in the payment of
principal of, premium, if any, or interest on the Senior Notes, or in respect of
a covenant or provision which under the Indenture cannot be modified or amended
without the consent of the Holder of each Senior Note outstanding.
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THE TRUSTEE
Fleet National Bank will serve as trustee under the Indenture.
The Indenture (including provisions of the Trust Indenture Act incorporated
by reference therein) will contain limitations on the rights of the Trustee
thereunder, should it become a creditor of the Company, to obtain payment of
claims in certain cases or to realize on certain property received by it in
respect of any such claims, as security or otherwise. The Indenture will permit
the Trustee to engage in other transactions; provided, however, if it acquires
any conflicting interest (as defined in the Trust Indenture Act) it must
eliminate such conflict or resign.
GOVERNING LAW
The Indenture and the Senior Notes will be governed by the laws of the
State of New York, without regard to the principles of conflicts of law.
CERTAIN DEFINITIONS
"Acquired Indebtedness" means Indebtedness of a Person (a) existing at the
time such Person becomes a Restricted Subsidiary or (b) assumed in connection
with acquisitions of properties or assets from such Person (other than any
Indebtedness incurred in connection with, or in contemplation of, such Person
becoming a Restricted Subsidiary or such acquisition). Acquired Indebtedness
shall be deemed to be incurred on the date the acquired Person becomes a
Restricted Subsidiary or the date of the related acquisition of properties or
assets from such Person.
"Affiliate" means, with respect to any specified Person, any other Person
directly or indirectly controlling or controlled by or under direct or indirect
common control with such specified Person. For the purposes of this definition,
"control," when used with respect to any Person, means the power to direct the
management and policies of such Person, directly or indirectly, whether through
the ownership of voting securities, by contract or otherwise; and the terms
"controlling" and "controlled" have meanings correlative to the foregoing. For
purposes of this definition, beneficial ownership of 10% or more of the voting
common equity (on a fully diluted basis) or options or warrants to purchase such
equity (but only if exercisable at the date of determination or within 60 days
thereof) of a Person shall be deemed to constitute control of such Person.
"Asset Sale" means any sale, issuance, conveyance, transfer, lease or other
disposition to any Person other than the Company or any of its Restricted
Subsidiaries (including, without limitation, by means of a Sale/Leaseback
Transaction or a merger or consolidation) (collectively, for purposes of this
definition, a "transfer"), directly or indirectly, in one or a series of related
transactions, of (a) any Capital Stock of any Restricted Subsidiary held by the
Company or any other Restricted Subsidiary, (b) all or substantially all of the
properties and assets of any division or line of business of the Company or any
of its Restricted Subsidiaries or (c) any other properties or assets of the
Company or any of its Restricted Subsidiaries other than transfers of cash, Cash
Equivalents, accounts receivable or other properties or assets in the ordinary
course of business or transfers in accordance with the proviso to clause (vi) of
the definition of Permitted Investments. For the purposes of this definition,
the term "Asset Sale" also shall not include any of the following: (i) any
transfer of properties or assets (including Capital Stock) that is governed by,
and made in accordance with, the provisions described under "-- Merger,
Consolidation and Sale of Assets"; (ii) any transfer of properties or assets to
an Unrestricted Subsidiary, if permitted under the "Limitation on Restricted
Payments" covenant; (iii) sales of damaged, worn-out or obsolete equipment or
assets that, in the Company's reasonable judgment, are either (x) no longer used
or (y) no longer useful in the business of the Company or its Restricted
Subsidiaries; (iv) any lease of any property entered into in the ordinary course
of business and with respect to which the Company or any Restricted Subsidiary
is the lessor, except any such lease that provides for the acquisition of such
property by the lessee during or at the end of the term thereof for an amount
that is less than the fair market value thereof at the time the right to acquire
such property is granted; and (v) any transfers that, but for this clause (v),
would be Asset Sales, if (A) the
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Company elects to designate such transfers as not constituting Asset Sales and
(B) after giving effect to such transfers, the aggregate fair market value of
the properties or assets transferred in such transaction or any such series of
related transactions so designated by the Company does not exceed $500,000.
"Attributable Indebtedness" means, with respect to any particular lease
under which any Person is at the time liable, whether or not accounted for as a
Capitalized Lease Obligation, and at any date as of which the amount thereof is
to be determined, the present value of the total net amount of rent required to
be paid by such Person under the lease during the primary term thereof, without
giving effect to any renewals at the option of the lessee, discounted from the
respective due dates thereof to such date of determination at a rate per annum
equal to the discount rate which would be applicable to a Capitalized Lease
Obligation with a like term in accordance with GAAP. As used in the preceding
sentence, the "net amount of rent" under any such lease for any such period
shall mean the sum of rental and other payments required to be paid with respect
to such period by the lessee thereunder, excluding any amounts required to be
paid by such lessee on account of maintenance and repairs, insurance, taxes,
assessments, water rates or similar charges. In the case of any lease which is
terminable by the lessee upon payment of a penalty, such net amount of rent
shall also include the amount of such penalty, but no rent shall be considered
as required to be paid under such lease subsequent to the first date upon which
it may be so terminated.
"Average Life" means, with respect to any Indebtedness, as at any date of
determination, the quotient obtained by dividing (a) the sum of the products of
(i) the number of years (and any portion thereof) from the date of determination
to the date or dates of each successive scheduled principal payment (including,
without limitation, any sinking fund or mandatory redemption payment
requirements) of such Indebtedness multiplied by (ii) the amount of each such
principal payment by (b) the sum of all such principal payments.
"Capital Stock" means, with respect to any Person, any and all shares,
interests, participations, rights or other equivalents in the equity interests
(however designated) in such Person, and any rights (other than debt securities
convertible into an equity interest), warrants or options exercisable for,
exchangeable for or convertible into such an equity interest in such Person (for
purposes of the Indenture the Exchangeable Shares of VES shall be treated as
Capital Stock of the Company, for which they are exchangeable, and shall not be
treated as Capital Stock of VES).
"Capitalized Lease Obligation" means any obligation to pay rent or other
amounts under a lease of (or other agreement conveying the right to use) any
property (whether real, personal or mixed) that is required to be classified and
accounted for as a capital lease obligation under GAAP and, for the purpose of
the Indenture, the amount of such obligation at any date shall be the
capitalized amount thereof at such date, determined in accordance with GAAP.
"Cash Equivalents" means (i) any evidence of Indebtedness with a maturity
of 180 days or less issued or directly and fully guaranteed or insured by the
United States of America or any agency or instrumentality thereof (provided that
the full faith and credit of the United States of America is pledged in support
thereof); (ii) demand and time deposits and certificates of deposit or
acceptances with a maturity of 180 days or less of any financial institution
that is a member of the Federal Reserve System having combined capital and
surplus and undivided profits of not less than $500 million or any Commercial
bank organized under the laws of any other country that is a member of the
Organization for Economic Cooperation and Development and has total assets in
excess of $500 million; (iii) commercial paper with a maturity of 180 days or
less issued by a corporation that is not an Affiliate of the Company and is
organized under the laws of any state of the United States or the District of
Columbia and rated at least A-1 by S&P or at least P-l by Moody's; (iv)
repurchase obligations with a term of not more than seven days for underlying
securities of the types described in clause (i) above entered into with any
commercial bank meeting the specifications of clause (ii) above; (v) overnight
bank deposits and bankers acceptances at any commercial bank meeting the
qualifications specified in clause (ii) above; (vi) demand and time deposits and
certificates of deposit with any commercial bank organized in the United States
not meeting the qualifications specified in clause
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(ii) above, provided that such deposits and certificates support bond, letter of
credit and other similar types of obligations incurred in the ordinary course of
business; and (vii) investments in money market or other mutual funds
substantially all of whose assets comprise securities of the types described in
clauses (i) through (v) above.
"Change of Control" means the occurrence of any event or series of events
by which: (a) any "person" or "group" (as such terms are used in Sections 13(d)
and 14(d) of the Exchange Act) is or becomes the beneficial owner (as defined in
Rule 13d-3 under the Exchange Act), directly or indirectly, of more than 50% of
the total Voting Stock of the Company, (b) the Company consolidates with or
merges into another Person or any Person consolidates with, or merges into, the
Company, in any such event pursuant to a transaction in which the outstanding
Voting Stock of the Company is changed into or exchanged for cash, securities or
other property, other than any such transaction where (i) the outstanding Voting
Stock of the Company is changed into or exchanged for Voting Stock of the
surviving or resulting Person that is Qualified Capital Stock and (ii) the
holders of the Voting Stock of the Company immediately prior to such transaction
own, directly or indirectly, not less than a majority of the Voting Stock of the
surviving or resulting Person immediately after such transaction; (c) the
Company, either individually or in conjunction with one or more Restricted
Subsidiaries, sells, assigns, conveys, transfers, leases or otherwise disposes
of, or the Restricted Subsidiaries sell, assign, convey, transfer, lease or
otherwise dispose of, all or substantially all of the properties and assets of
the Company and its Restricted Subsidiaries, taken as a whole (either in one
transaction or a series of related transactions), including Capital Stock of the
Restricted Subsidiaries, to any Person (other than the Company or a Wholly Owned
Restricted Subsidiary); (d) during any consecutive two-year period, individuals
who at the beginning of such period constituted the Board of Directors of the
Company (together with any new directors whose election by such Board of
Directors or whose nomination for election by the stockholders of the Company
was approved by a vote of two-thirds of the directors then still in office who
were either directors at the beginning of such period or whose election or
nomination for election was previously so approved) cease for any reason to
constitute a majority of the Board of Directors of the Company then in office;
or (e) the liquidation or dissolution of the Company.
"Common Stock" of any Person means Capital Stock of such Person that does
not rank prior, as to the payment of dividends or as to the distribution of
assets upon any voluntary or involuntary liquidation, dissolution or winding up
of such Person, to shares of Capital Stock of any other class of such Person.
"Consolidated Fixed Charge Coverage Ratio" means, for any period, the ratio
on a pro forma basis of (a) the sum of Consolidated Net Income, Consolidated
Fixed Charges, Consolidated Income Tax Expense, and Consolidated Non-cash
Charges deducted in computing Consolidated Net Income, in each case, for such
period, of the Company and its Restricted Subsidiaries on a consolidated basis,
all determined in accordance with GAAP, to (b) the sum of such Consolidated
Fixed Charges for such period; provided, however, that (i) the Consolidated
Fixed Charge Coverage Ratio shall be calculated on a pro forma basis assuming
that (A) the Indebtedness to be incurred (and all other Indebtedness incurred
after the first day of such period of four full fiscal quarters referred to in
the covenant described in paragraph (a) under "-- Certain
Covenants -- Limitation on Indebtedness and Disqualified Capital Stock" through
and including the date of determination), and (if applicable) the application of
the net proceeds therefrom (and from any other such Indebtedness), including to
refinance other Indebtedness, had been incurred on the first day of such four
quarter period and, in the case of Acquired Indebtedness, on the assumption that
the related transaction (whether by means of purchase, merger or otherwise) also
had occurred on such date with the appropriate adjustments with respect to such
acquisition being included in such pro forma calculation and (B) any acquisition
or disposition by the Company or any Restricted Subsidiary of any properties or
assets outside the ordinary course of business, or any repayment of any
principal amount of any Indebtedness of the Company or any Restricted Subsidiary
prior to the Stated Maturity thereof, in either case since the first day of such
period of four full fiscal quarters through and including the date of
determination, had been consummated on such first day of such four-quarter
period, (ii) in making such computation, the Consolidated Fixed Charges
attributa-
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ble to interest on any Indebtedness required to be computed on a pro forma basis
in accordance with the covenant described in paragraph (a) under "-- Certain
Covenants -- Limitation on Indebtedness and Disqualified Capital Stock" and (A)
bearing a floating interest rate shall be computed as if the rate in effect on
the date of computation had been the applicable rate for the entire period and
(B) which was not outstanding during the period for which the computation is
being made but which bears, at the option of the Company, a fixed or floating
rate of interest, shall be computed by applying, at the option of the Company,
either the fixed or floating rate, (iii) in making such computation, the
Consolidated Fixed Charges attributable to interest on any Indebtedness under a
revolving credit facility required to be computed on a pro forma basis in
accordance with the covenant described in paragraph (a) under "-- Certain
Covenants -- Limitation on Indebtedness and Disqualified Capital Stock" shall be
computed based upon the average daily balance of such Indebtedness during the
applicable period, provided that such average daily balance shall be reduced by
the amount of any repayment of Indebtedness under a revolving credit facility
during the applicable period, which repayment permanently reduced the
commitments or amounts available to be reborrowed under such facility, (iv)
notwithstanding clauses (ii) and (iii) of this proviso, interest on Indebtedness
determined on a fluctuating basis, to the extent such interest is covered by
agreements relating to Interest Rate Protection Obligations, shall be deemed to
have accrued at the rate per annum resulting after giving effect to the
operation of such agreements, and (v) if after the first day of the period
referred to in clause (a) of this definition the Company has permanently retired
any Indebtedness out of the Net Cash Proceeds of the issuance and sale of shares
of Qualified Capital Stock of the Company within 30 days of such issuance and
sale, Consolidated Fixed Charges shall be calculated on a pro forma basis as if
such Indebtedness had been retired on the first day of such period.
"Consolidated Income Tax Expense" means, for any period, the provision for
federal, state, local and foreign income taxes (including state franchise taxes
accounted for as income taxes in accordance with GAAP) of the Company and its
Restricted Subsidiaries for such period as determined on a consolidated basis in
accordance with GAAP.
"Consolidated Fixed Charges" means, for any period, without duplication,
(i) the sum of (a) the interest expense of the Company and its Restricted
Subsidiaries for such period as determined on a consolidated basis in accordance
with GAAP, including, without limitation, (A) any amortization of debt discount,
(B) the net cost under Interest Rate Protection Obligations (including any
amortization of discounts), (C) the interest portion of any deferred payment
obligation constituting Indebtedness, (D) all commissions, discounts and other
fees and charges owed with respect to letters of credit and bankers' acceptance
financing and (E) all accrued interest, in each case to the extent attributable
to such period, (b) to the extent any Indebtedness of any Person (other than the
Company or a Restricted Subsidiary) is guaranteed by the Company or any
Restricted Subsidiary, the aggregate amount of interest paid (to the extent not
accrued in a prior period) or accrued by such other Person during such period
attributable to any such Indebtedness, in each case to the extent attributable
to that period, (c) the aggregate amount of the interest component of
Capitalized Lease Obligations paid (to the extent not accrued in a prior
period), accrued or scheduled to be paid or accrued by the Company and its
Restricted Subsidiaries during such period, (d) the aggregate amount of
dividends paid (to the extent not accrued in a prior period) or accrued on
Preferred Stock or Disqualified Capital Stock of the Company and its Restricted
Subsidiaries, to the extent such Preferred Stock or Disqualified Capital Stock
is owned by Persons other than the Company or any Restricted Subsidiary and (e)
one-third of the rental expense (including without limitation marine vessel
charter payments) under operating leases with remaining noncancellable terms of
at least one year (excluding leases in respect of office space) of the Company
and its Restricted Subsidiaries for such period as determined on a consolidated
basis in accordance with GAAP, less (ii), to the extent included in clause (i)
above, amortization of capitalized debt issuance costs of the Company and its
Restricted Subsidiaries during such period.
"Consolidated Net Income" means, for any period, the consolidated net
income (or loss) of the Company and its Restricted Subsidiaries for such period
as determined in accordance with GAAP, adjusted by excluding (a) net after-tax
extraordinary gains or losses (less all fees and expenses relating
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<PAGE> 52
thereto), (b) net after-tax gains or losses (less all fees and expenses relating
thereto) attributable to Asset Sales, (c) the net income (or net loss) of any
Person (other than the Company or any of its Restricted Subsidiaries), in which
the Company or any of its Restricted Subsidiaries has an ownership interest,
except to the extent of the amount of dividends or other distributions actually
paid to the Company or any of its Restricted Subsidiaries in cash by such other
Person during such period (regardless of whether such cash dividends or
distributions are attributable to net income (or net loss) of such Person during
such period or during any prior period), (d) net income (or net loss) of any
Person (other than VES) combined with the Company or any of its Restricted
Subsidiaries on a "pooling of interests" basis attributable to any period prior
to the date of combination, (e) the net income of any Restricted Subsidiary to
the extent that the declaration or payment of dividends or similar distributions
by that Restricted Subsidiary of its net income is not at the date of
determination permitted, directly or indirectly, by operation of the terms of
its charter or any agreement, instrument, judgment, decree, order, statute, rule
or governmental regulation applicable to that Restricted Subsidiary or its
stockholders, (f) income resulting from transfers of assets received by the
Company or any Restricted Subsidiary from an Unrestricted Subsidiary, and (g)
for the fiscal year ended July 31, 1996, merger related costs reflected in the
Company's consolidated financial statements.
"Consolidated Net Tangible Assets" means, at any date, the aggregate amount
of assets included on the most recent consolidated balance sheet of the Company
and its Restricted Subsidiaries, less (i) without duplication, applicable
reserves and other properly deductible items and after deducting therefrom all
goodwill, trade names, trademarks, patents, unamortized debt discount and
expense and other like intangibles, and (ii) current liabilities (other than
current liabilities constituting Indebtedness for borrowed money), as determined
in accordance with GAAP.
"Consolidated Net Worth" means, at any date, the consolidated stockholders'
equity of the Company less (without duplication) the amount of such
stockholders' equity attributable to Disqualified Capital Stock or treasury
stock of the Company and its Restricted Subsidiaries, as determined in
accordance with GAAP.
"Consolidated Non-cash Charges" means, for any period, the aggregate
depreciation, depletion, amortization and other non-cash expenses (excluding
non-cash expenses related to multi-client seismic data sales and write-offs and
write-downs related to the Company's multi-client seismic data library) of the
Company and its Restricted Subsidiaries reducing Consolidated Net Income for
such period, determined on a consolidated basis in accordance with GAAP
(excluding any such non-cash charge for which an accrual of or reserve for cash
charges for any future period is required).
"Currency Hedge Obligations" means, at any time as to any Person, the
obligations of such Person at such time which were incurred in the ordinary
course of business pursuant to any foreign currency exchange agreement, option
or futures contract or other similar agreement or arrangement designed to
protect against or manage such Person's or any of its Subsidiaries' exposure to
fluctuations in foreign currency exchange rates.
"Default" means any event, act or condition that is, or after notice or
passage of time or both would become, an Event of Default.
"Disinterested Director" means, with respect to any transaction or series
of transactions in respect of which the Board of Directors of the Company is
required to deliver a resolution of the Board of Directors under the Indenture,
a member of the Board of Directors of the Company who does not have any material
direct or indirect financial interest (other than an interest arising solely
from the beneficial ownership of Capital Stock of the Company) in or with
respect to such transaction or series of transactions.
"Disqualified Capital Stock" means any Capital Stock that, either by its
terms, by the terms of any security into which it is convertible or exchangeable
or by contract or otherwise, is, or upon the happening of an event or passage of
time would be, required to be redeemed or repurchased, in whole or in part,
prior to the final Stated Maturity of the Senior Notes or is redeemable at the
option of the
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holder thereof at any time prior to such final Stated Maturity, or is
convertible into or exchangeable for debt securities at any time prior to such
final Stated Maturity. For purposes of the covenant described in paragraph (a)
under "-- Certain Covenants -- Limitation on Indebtedness and Disqualified
Capital Stock," Disqualified Capital Stock shall be valued at the greater of its
voluntary or involuntary maximum fixed redemption or repurchase price plus
accrued and unpaid dividends. For such purposes, the "maximum fixed redemption
or repurchase price" of any Disqualified Capital Stock which does not have a
fixed redemption or repurchase price shall be calculated in accordance with the
terms of such Disqualified Capital Stock as if such Disqualified Capital Stock
were redeemed or repurchased on the date of determination, and if such price is
based upon, or measured by, the fair market value of such Disqualified Capital
Stock, such fair market value shall be determined in good faith by the board of
directors of the issuer of such Disqualified Capital Stock; provided, however,
that if such Disqualified Capital Stock is not at the date of determination
permitted or required to be redeemed or repurchased, the "maximum fixed
redemption or repurchase price" shall be the book value of such Disqualified
Capital Stock.
"Event of Default" has the meaning set forth above under the caption
"Events of Default."
"GAAP" means generally accepted accounting principles, consistently
applied, that are set forth in the opinions and pronouncements of the Accounting
Principles Board of the American Institute of Certified Public Accountants and
statements and pronouncements of the Financial Accounting Standards Board or in
such other statements by such other entity as may be approved by a significant
segment of the accounting profession of the United States of America, which are
applicable as of the date of the Indenture.
The term "guarantee" means, as applied to any obligation, (i) a guarantee
(other than by endorsement of negotiable instruments for collection in the
ordinary course of business), direct or indirect, in any manner, of any part or
all of such obligation and (ii) an agreement, direct or indirect, contingent or
otherwise, the practical effect of which is to assure in any way the payment or
performance (or payment of damages in the event of non-performance) of all or
any part of such obligation, including, without limiting the foregoing, the
payment of amounts drawn down under letters of credit. When used as a verb,
"guarantee" has a corresponding meaning.
"Holder" means a Person in whose name a Senior Note is registered in the
Note Register.
"Indebtedness" means, with respect to any Person, without duplication, (a)
all liabilities of such Person, contingent or otherwise, for borrowed money or
for the deferred purchase price of property or services (excluding any trade
accounts payable and other accrued current liabilities incurred in the ordinary
course of business) and all liabilities of such Person incurred in connection
with any letters of credit, bankers' acceptances or other similar credit
transactions or any agreement to purchase, redeem, exchange, convert or
otherwise acquire for value any Capital Stock of such Person, or any warrants,
rights or options to acquire such Capital Stock, outstanding on the date of the
Indenture or thereafter, if, and to the extent, any of the foregoing would
appear as a liability upon a balance sheet of such Person prepared in accordance
with GAAP, (b) all obligations of such Person evidenced by bonds, notes,
debentures or other similar instruments, if, and to the extent, any of the
foregoing would appear as a liability upon a balance sheet of such Person
prepared in accordance with GAAP, (c) all Indebtedness of such Person created or
arising under any conditional sale or other title retention agreement with
respect to property acquired by such Person (even if the rights and remedies of
the seller or lender under such agreement in the event of default are limited to
repossession or sale of such property), but excluding trade accounts payable
arising in the ordinary course of business, (d) the Attributable Indebtedness
respecting all Capitalized Lease Obligations of such Person, (e) all
Indebtedness referred to in the preceding clauses of other Persons and all
dividends of other Persons, the payment of which is secured by (or for which the
holder of such Indebtedness has an existing right, contingent or otherwise, to
be secured by) any Lien upon property (including, without limitation, accounts
and contract rights) owned by such Person, even though such Person has not
assumed or become liable for the payment of such Indebtedness (the amount of
such obligation being deemed to be
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the lesser of the value of such property or the amount of the obligation so
secured), (f) all guarantees by such Person of Indebtedness referred to in this
definition (g) all obligations of such Person under or in respect of Currency
Hedge Obligations and Interest Rate Protection Obligations and (h) deferred
credits respecting discontinued services.
"Interest Rate Protection Obligations" means the obligations of any Person
pursuant to any arrangement with any other Person whereby, directly or
indirectly, such Person is entitled to receive from time to time periodic
payments calculated by applying either a floating or a fixed rate of interest on
a stated notional amount in exchange for periodic payments made by such Person
calculated by applying a fixed or a floating rate of interest on the same
notional amount and shall include, without limitation, interest rate swaps,
caps, floors, collars and similar agreements or arrangements designed to protect
against or manage such Person's or any of its Subsidiaries exposure to
fluctuations in interest rates.
"Investment" means, with respect to any Person, any direct or indirect
advance, loan, guarantee of Indebtedness or other extension of credit or capital
contribution to (by means of any transfer of cash or other property or assets to
others or any payment for property, assets or services for the account or use of
others), or any purchase or acquisition by such Person of any Capital Stock,
bonds, notes, debentures or other securities (including derivatives) or
evidences of Indebtedness issued by, any other Person. In addition, the fair
market value of the net assets of any Restricted Subsidiary at the time that
such Restricted Subsidiary is designated an Unrestricted Subsidiary shall be
deemed to be an "Investment" made by the Company in such Unrestricted Subsidiary
at such time. "Investments" shall exclude (a) extensions of trade credit or
other advances to customers on commercially reasonable terms in accordance with
normal trade practices or otherwise in the ordinary course of business, (b)
Interest Rate Protection Obligations and Currency Hedge Obligations, but only to
the extent that the same constitute Permitted Indebtedness and (c) endorsements
of negotiable instruments and documents in the ordinary course of business.
"Lien" means any mortgage, charge, pledge, lien (statutory or other),
security interest, hypothecation, assignment for security, claim or similar type
of encumbrance (including, without limitation, any agreement to give or grant
any lease, conditional sale or other title retention agreement having
substantially the same economic effect as any of the foregoing) upon or with
respect to any property of any kind. A Person shall be deemed to own subject to
a Lien any property which such Person has acquired or holds subject to the
interest of a vendor or lessor under any conditional sale agreement, capital
lease or other title retention agreement.
"Maturity" means, with respect to any Senior Note, the date on which any
principal of such Senior Note becomes due and payable as therein or in the
Indenture provided, whether at the Stated Maturity with respect to such
principal or by declaration of acceleration, call for redemption or purchase or
otherwise.
"Moody's" means Moody's Investors Service, Inc. and its successors.
"Net Available Proceeds" means, with respect to any Asset Sale, the
proceeds thereof in the form of cash or Cash Equivalents including payments in
respect of deferred payment obligations when received in the form of cash or
Cash Equivalents (except to the extent that such obligations are financed or
sold with recourse to the Company or any Restricted Subsidiary), net of (i)
brokerage commissions and other fees and expenses (including fees and expenses
of legal counsel, accountants and investment banks) related to such Asset Sale,
(ii) provisions for all taxes payable as a result of such Asset Sale, (iii)
amounts required to be paid to any Person (other than the Company or any
Restricted Subsidiary) owning a beneficial interest in the properties or assets
subject to the Asset Sale or having a Lien thereon and (iv) appropriate amounts
to be provided by the Company or any Restricted Subsidiary, as the case may be,
as a reserve required in accordance with GAAP against any liabilities associated
with such Asset Sale and retained by the Company or any Restricted Subsidiary,
as the case may be, after such Asset Sale, including, without limitation,
pension and other postemployment benefit liabilities, liabilities related to
environmental matters and liabilities under any indemnifica-
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tion obligations associated with such Asset Sale, all as reflected in an
Officers' Certificate delivered to the Trustee; provided, however, that any
amounts remaining after adjustments, revaluations or liquidations of such
reserves shall constitute Net Available Proceeds.
"Net Cash Proceeds," with respect to any issuance or sale of Qualified
Capital Stock or other securities, means the cash proceeds of such issuance or
sale net of attorneys' fees, accountants' fees, underwriters' or placement
agents' fees, discounts or commissions and brokerage, consultant and other fees
and expenses actually incurred in connection with such issuance or sale and net
of taxes paid or payable as a result thereof.
"Non-Recourse Indebtedness" means Indebtedness or that portion of
Indebtedness of the Company or any Restricted Subsidiary incurred in connection
with the acquisition by the Company or such Restricted Subsidiary of any
property or assets and as to which (a) the holders of such Indebtedness agree
that they will look solely to the property or assets so acquired and securing
such Indebtedness for payment on or in respect of such Indebtedness, and neither
the Company nor any Subsidiary (other than an Unrestricted Subsidiary) (i)
provides credit support, including any undertaking, agreement or instrument
which would constitute Indebtedness or (ii) is directly or indirectly liable for
such Indebtedness, and (b) no default with respect to such Indebtedness would
permit (after notice or passage of time or both), according to the terms
thereof, any holder of any Indebtedness of the Company or a Restricted
Subsidiary to declare a default on such Indebtedness or cause the payment
thereof to be accelerated or payable prior to its Stated Maturity.
"Note Register" means the register maintained by or for the Company in
which the Company shall provide for the registration of the Senior Notes and the
transfer of the Senior Notes.
"Permitted Indebtedness" means any of the following:
(i) Indebtedness (and any guarantee thereof) under one or more working
capital credit facilities with banks and other financial institutions in an
aggregate principal amount at any one time outstanding not to exceed $20
million, less any amounts derived from Asset Sales and applied to the
permanent reduction of the Indebtedness under any such credit facilities as
contemplated by the "Limitation on Asset Sales" covenant (the "Maximum Bank
Credit Amount"), and any renewals, amendments, extensions, supplements,
modifications, deferrals, refinancings or replacements (each, for purposes
of this clause (i), a "refinancing") thereof, including any successive
refinancing thereof, so long as the aggregate principal amount of any such
new Indebtedness, together with the aggregate principal amount of all other
Indebtedness outstanding pursuant to this clause (i), shall not at any one
time exceed the Maximum Bank Credit Amount;
(ii) Indebtedness under the Senior Notes;
(iii) Indebtedness outstanding or in effect on the date of the
Indenture (and not repaid or defeased with the proceeds of the offering of
the Senior Notes);
(iv) Indebtedness under Interest Rate Protection Obligations, provided
that (1) such Interest Rate Protection Obligations are related to payment
obligations on Permitted Indebtedness or Indebtedness otherwise permitted
by paragraph (a) of the "Limitation on Indebtedness and Disqualified
Capital Stock" covenant, and (2) the notional principal amount of such
Interest Rate Protection Obligations does not exceed the principal amount
of such Indebtedness to which such Interest Rate Protection Obligations
relate;
(v) Indebtedness under Currency Hedge Obligations, provided that (1)
such Currency Hedge Obligations are related to payment obligations on
Permitted Indebtedness or Indebtedness otherwise permitted by paragraph (a)
of the "Limitation on Indebtedness and Disqualified Capital Stock" covenant
or to the foreign currency cash flows reasonably expected to be generated
by the Company and its Restricted Subsidiaries, and (2) the notional
principal amount of such Currency Hedge Obligations does not exceed the
principal amount of such Indebtedness and the amount of such foreign
currency cash flows to which such Currency Hedge Obligations relate;
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(vi) Indebtedness of the Company to a Wholly Owned Restricted
Subsidiary and Indebtedness of any Restricted Subsidiary to the Company or
a Wholly Owned Restricted Subsidiary; provided, however, that upon any
subsequent issuance or transfer of any Capital Stock or any other event
which results in any such Wholly Owned Restricted Subsidiary ceasing to be
a Wholly Owned Restricted Subsidiary or any other subsequent transfer of
any such Indebtedness (except to the Company or a Wholly Owned Restricted
Subsidiary), such Indebtedness shall be deemed, in each case, to be
incurred and shall be treated as an incurrence for purposes of paragraph
(a) of the "Limitation on Indebtedness and Disqualified Capital Stock"
covenant at the time the Wholly Owned Restricted Subsidiary in question
ceased to be a Wholly Owned Restricted Subsidiary or the time such
subsequent transfer occurred;
(vii) Indebtedness in respect of bid, performance or surety bonds
issued for the account of the Company in the ordinary course of business,
including guaranties or obligations of the Company with respect to letters
of credit supporting such bid, performance or surety obligations (in each
case other than for an obligation for money borrowed);
(viii) Non-Recourse Indebtedness;
(ix) any renewals, substitutions, refinancing or replacements (each,
for purposes of this clause (ix), a "refinancing") by the Company or a
Restricted Subsidiary of any Indebtedness, including any successive
refinances by the Company or such Restricted Subsidiary, so long as (A) any
such new Indebtedness shall be in a principal amount that does not exceed
the principal amount (or, if such Indebtedness being refinanced provides
for an amount less than the principal amount thereof to be due and payable
upon a declaration of acceleration thereof, such lesser amount as of the
date of determination) so refinanced plus the amount of any premium
required to be paid in connection with such refinancing pursuant to the
terms of the Indebtedness refinanced or the amount of any premium
reasonably determined by the Company or such Restricted Subsidiary as
necessary to accomplish such refinancing, plus the amount of expenses of
the Company or such Restricted Subsidiary incurred in connection with such
refinancing, (B) in the case of any refinancing of Indebtedness (including
the Senior Notes) that is pari passu with or subordinated in right of
payment to the Senior Notes, then such new Indebtedness is pari passu with
or subordinated in right of payment to the Senior Notes at least to the
same extent as the Indebtedness being refinanced and (C) such new
Indebtedness has an Average Life equal to or longer than the Average Life
of the Indebtedness being refinanced and a final Stated Maturity that is at
least 91 days later than the final Stated Maturity of the Indebtedness
being refinanced; and
(x) any additional Indebtedness in an aggregate principal amount not
in excess of $5 million at any one time outstanding and any guarantee
thereof.
"Permitted Investments" means any of the following: (i) Investments in Cash
Equivalents; (ii) Investments in the Company or any of its Wholly Owned
Restricted Subsidiaries; (iii) Investments by the Company or any of its
Restricted Subsidiaries in another Person, if as a result of such Investment (A)
such other Person becomes a Wholly Owned Restricted Subsidiary or (B) such other
Person is merged or consolidated with or into, or transfers or conveys all or
substantially all of its properties and assets to, the Company or a Wholly Owned
Restricted Subsidiary; (iv) Investments permitted under the "Limitation on Asset
Sales" covenant or the "Limitation on Transactions with Affiliates" covenant;
(v) Investments made in the ordinary course of business in prepaid expenses,
lease, utility, workers' compensation, performance and other similar deposits;
and (vi) Investments in stock, obligations or securities received in settlement
of debts owing to the Company or any Restricted Subsidiary as a result of
bankruptcy or insolvency proceedings or upon the foreclosure, perfection or
enforcement of any Lien in favor of the Company or any Restricted Subsidiary, in
each case as to debt owing to the Company or any Restricted Subsidiary that
arose in the ordinary course of business of the Company or any such Restricted
Subsidiary, provided that any stocks, obligations or securities received in
settlement of debts that arose in the ordinary course of business (and received
other than as a result of bankruptcy or insolvency proceedings or upon
foreclosure, perfection or enforcement of any Lien) that are, within
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<PAGE> 57
30 days of receipt, converted into cash or Cash Equivalents shall be treated as
having been cash or Cash Equivalents at the time received.
"Permitted Liens" means the following types of Liens:
(a) Liens existing as of the date of the Indenture;
(b) Liens securing the Senior Notes;
(c) Liens in favor of the Company;
(d) Liens on accounts receivable or inventory securing Indebtedness
that constitutes (A) Permitted Indebtedness pursuant to clause (i) of the
definition of "Permitted Indebtedness" or (B) Permitted Subsidiary
Indebtedness;
(e) Liens securing Indebtedness that constitutes Permitted
Indebtedness pursuant to clause (ix) of the definition of "Permitted
Indebtedness" incurred as a refinancing of any Indebtedness secured by
Liens described in clause (a) or (d) of this definition;
(f) statutory Liens of landlords and Liens of carriers, warehousemen,
mechanics, suppliers, materialmen, repairmen and other Liens imposed by law
incurred in the ordinary course of business for sums not delinquent or
being contested in good faith, if such reserve or other appropriate
provision, if any, as shall be required by GAAP shall have been made in
respect thereof;
(g) Liens incurred or deposits made in the ordinary course of business
in connection with workers' compensation, unemployment insurance and other
types of social security, or to secure the payment or performance of
tenders, statutory or regulatory obligations, surety and appeal bonds,
bids, government contracts and leases, performance and return of money
bonds and other similar obligations (exclusive of obligations for the
payment of borrowed money);
(h) judgment Liens not giving rise to an Event of Default so long as
any appropriate legal proceedings which may have been duly initiated for
the review of such judgment shall not have been finally terminated or the
period within which such proceeding may be initiated shall not have
expired;
(i) any interest or title of a lessor under any Capitalized Lease
Obligation (to the extent the Attributable Indebtedness related thereto
constitutes Indebtedness permitted to be incurred under the terms of the
Indenture) or operating lease;
(j) purchase money Liens; provided, however, that (i) the related
purchase money Indebtedness shall not be secured by any property or assets
of the Company or any Restricted Subsidiary other than the property or
assets so acquired and any proceeds therefrom and (ii) the Lien securing
such Indebtedness shall be created within 90 days of such acquisition;
(k) Liens securing obligations under or in respect of either Currency
Hedge Obligations or Interest Rate Protection Obligations;
(l) Liens upon specific items of inventory or other goods of any
Person securing such Person's obligations in respect of bankers acceptances
issued or created for the account of such Person to facilitate the
purchase, shipment or storage of such inventory or other goods;
(m) Liens securing reimbursement obligations with respect to
commercial letters of credit which encumber documents and other property or
assets relating to such letters of credit and products and proceeds
thereof;
(n) Liens encumbering deposits made to secure obligations arising from
statutory, regulatory, contractual or warranty requirements of the Company
or any of its Restricted Subsidiaries, including rights of offset and
setoff; and
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(o) Liens securing Non-Recourse Indebtedness; provided, however, that
the related Non-Recourse Indebtedness shall not be secured by any property
or assets of the Company or any Restricted Subsidiary other than the
property and assets acquired by the Company or any Restricted Subsidiary
with the proceeds of such Non-Recourse Indebtedness.
"Permitted Subsidiary Indebtedness" means, with respect to and Restricted
Subsidiaries, Indebtedness in an aggregate principal amount at any time
outstanding up to the excess, if any, of (A) 10% of the Company's Consolidated
Net Tangible Assets over (B) $20 million.
"Person" means any individual, corporation, limited liability company,
partnership, joint venture, association, joint stock company, trust,
unincorporated organization or government or any agency or political subdivision
thereof.
"Preferred Stock" means, with respect to any Person, any and all shares,
interests, participations or other equivalents (however designated) of such
Person's preferred or preference stock, whether now outstanding or issued after
the date of the Indenture, including, without limitation, all classes and series
of preferred or preference stock of such Person.
"Public Equity Offering" means an offer and sale of Common Stock of the
Company pursuant to a registration statement that has been declared effective by
the Commission pursuant to the Securities Act (other than a registration
statement on Form S-8 or otherwise relating to equity securities issuable under
any employee benefit plan of the Company).
"Qualified Capital Stock" of any Person means any and all Capital Stock of
such Person other than Disqualified Capital Stock.
"Restricted Investment" means (without duplication) (i) the designation of
a Subsidiary as an Unrestricted Subsidiary in the manner described in the
definition of "Unrestricted Subsidiary" and (ii) any Investment other than a
Permitted Investment.
"Restricted Subsidiary" means any Subsidiary of the Company, whether
existing on or after the date of the Indenture, unless such Subsidiary of the
Company is an Unrestricted Subsidiary or is designated as an Unrestricted
Subsidiary pursuant to the terms of the Indenture.
"S&P" means Standard and Poor's Ratings Services, a division of The
McGraw-Hill Companies, Inc., and its successors.
"Sale/Leaseback Transaction" means any direct or indirect arrangement
pursuant to which properties or assets are sold or transferred by the Company or
a Restricted Subsidiary and are thereafter leased back from the purchaser or
transferee thereof by the Company or one of its Restricted Subsidiaries.
"Stated Maturity" means, when used with respect to any Indebtedness or any
installment of interest thereon, the date specified in the instrument evidencing
or governing such Indebtedness as the fixed date on which the principal of such
Indebtedness or such installment of interest is due and payable.
"Subordinated Indebtedness" means any Indebtedness of the Company which is
expressly subordinated in right of payment to the Senior Notes.
"Subsidiary" means, with respect to any Person, (i) a corporation a
majority of whose Voting Stock is at the time, directly or indirectly, owned by
such Person, by one or more Subsidiaries of such Person or by such Person and
one or more Subsidiaries thereof or (ii) any other Person (other than a
corporation), including, without limitation, a joint venture, in which such
Person, one or more Subsidiaries thereof or such Person and one or more
Subsidiaries thereof, directly or indirectly, at the date of determination
thereof, have at least majority ownership interest entitled to vote in the
election of directors, managers or trustees thereof (or other Person performing
similar functions).
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"Unrestricted Subsidiary" means (i) any Subsidiary of the Company that at
the time of determination will be designated an Unrestricted Subsidiary by the
Board of Directors of the Company as provided below and (ii) any Subsidiary of
an Unrestricted Subsidiary. The Board of Directors of the Company may designate
any Subsidiary of the Company as an Unrestricted Subsidiary so long as (a)
neither the Company nor any Restricted Subsidiary is directly or indirectly
liable pursuant to the terms of any Indebtedness of such Subsidiary; (b) no
default with respect to any Indebtedness of such Subsidiary would permit (upon
notice, lapse of time or otherwise) any holder of any other Indebtedness of the
Company or any Restricted Subsidiary to declare a default on such other
Indebtedness or cause the payment thereof to be accelerated or payable prior to
its Stated Maturity; (c) such designation as an Unrestricted Subsidiary would be
permitted under the "Limitation on Restricted Payments" covenant; and (d) such
designation shall not result in the creation or imposition of any Lien on any of
the properties or assets of the Company or any Restricted Subsidiary (other than
any Permitted Lien or any Lien the creation or imposition of which shall have
been in compliance with the "Limitation on Liens" covenant); provided, however,
that with respect to clause (a), the Company or a Restricted Subsidiary may be
liable for Indebtedness of an Unrestricted Subsidiary if (x) such liability
constituted a Permitted Investment or a Restricted Payment permitted by the
"Limitation on Restricted Payments" covenant, in each case at the time of
incurrence, or (y) the liability would be a Permitted Investment at the time of
designation of such Subsidiary as an Unrestricted Subsidiary. Any such
designation by the Board of Directors of the Company shall be evidenced to the
Trustee by filing a Board Resolution with the Trustee giving effect to such
designation. The Board of Directors of the Company may designate any
Unrestricted Subsidiary as a Restricted Subsidiary if, immediately after giving
effect to such designation on a pro forma basis, (i) no Default or Event of
Default shall have occurred and be continuing, (ii) the Company could incur
$1.00 of additional Indebtedness (not including the incurrence of Permitted
Indebtedness) under the first paragraph of the "Limitation on Indebtedness and
Disqualified Capital Stock" covenant and (iii) if any of the properties and
assets of the Company or any of its Restricted Subsidiaries would upon such
designation become subject to any Lien (other than a Permitted Lien), the
creation or imposition of such Lien shall have been in compliance with the
"Limitation on Liens" covenant.
"Voting Stock" means any class or classes of Capital Stock pursuant to
which the holders thereof have the general voting power under ordinary
circumstances to elect at least a majority of the board of directors, managers
or trustees of any Person (irrespective of whether or not, at the time, stock of
any other class or classes shall have, or might have, voting power by reason of
the happening of any contingency).
"Wholly Owned Restricted Subsidiary" means any Restricted Subsidiary to the
extent (i) all of the Capital Stock or other ownership interests in such
Restricted Subsidiary, other than any directors' qualifying shares mandated by
applicable law, is owned directly or indirectly by the Company or (ii) such
Restricted Subsidiary is organized in a foreign jurisdiction and is required by
the applicable laws and regulations of such foreign jurisdiction to be partially
owned by the government of such foreign jurisdiction or individual or corporate
citizens of such foreign jurisdiction in order for such Restricted Subsidiary to
transact business in such foreign jurisdiction, provided that the Company,
directly or indirectly, owns the remaining Capital Stock or ownership interest
in such Restricted Subsidiary and, by contract or otherwise, controls the
management and business of such Restricted Subsidiary and derives the economic
benefits of ownership of such Restricted Subsidiary to substantially the same
extent as if such Restricted Subsidiary were a wholly owned Subsidiary.
BOOK ENTRY; DELIVERY AND FORM
The Senior Notes will be issued in the form of a single, permanent global
certificate in definitive, fully registered form (the "Global Note"). The Global
Note will be deposited with, or on behalf of, DTC and registered in the name of
the nominee of DTC.
Except as set forth below, the Global Note may be transferred, in whole and
not in part, only to another nominee of DTC or to a successor of DTC or its
nominee.
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DTC has advised the Company and the Underwriters as follows: It is a
limited-purpose trust company which was created to hold securities for its
participating organizations (the "Participants") and to facilitate the clearance
and settlement of transactions in such securities between Participants through
electronic book-entry changes in accounts of its Participants. Participants
include securities brokers and dealers (including the Underwriters), banks,
trust companies, clearing corporations and certain other organizations. Access
to the DTC's book-entry system is also available to others, such as banks,
brokers, dealers and trust companies that clear through or maintain a custodial
relationship with a Participant, either directly or indirectly ("indirect
participants"). Persons who are not Participants may beneficially own securities
held by DTC only through Participants or indirect participants.
DTC has also advised that pursuant to procedures established by it (i) upon
the issuance by the Company of the Senior Notes, DTC will credit the accounts of
Participants designated by the Underwriters with the principal amount of the
Senior Notes purchased by the Underwriters, and (ii) ownership of beneficial
interests in the Global Note will be shown on, and the transfer of that
ownership will be effected only through, records maintained by DTC (with respect
to Participants' interests), the Participants and the indirect participants. The
laws of some states require that certain persons take physical delivery in
definitive form of securities which they own. Consequently, the ability to
transfer beneficial interests in the Global Note is limited to such extent.
So long as a nominee of DTC is the registered owner of the Global Note,
such nominee will be considered the sole owner or holder of the Senior Notes for
all purposes under the Indenture. Except as provided below, owners of beneficial
interests in the Global Note will not be entitled to have Senior Notes
registered in their names, will not receive or be entitled to receive physical
delivery of Senior Notes in definitive form and will not be considered the
owners or holders thereof under the Indenture.
Neither the Company, the Trustee, the paying agent nor the Senior Notes
registrar will have any responsibility or liability for any aspect of the
records relating to or payments made on account of beneficial ownership
interests in the Global Note, or for maintaining, supervising or reviewing any
records relating to such beneficial ownership interests.
Principal and interest payments on the Global Note registered in the name
of DTC's nominee of DTC will be made by the Company, either directly or through
a paying agent, to DTC's nominee as the registered owner of the Global Note.
Under the terms of the Indenture, the Company and the Trustee will treat the
persons in whose names the Senior Notes are registered as the owners of such
Senior Notes for the purpose of receiving payments of principal and interest on
such Senior Notes and for all other purposes whatsoever. Therefore, neither the
Company, the Trustee nor any paying agent has any direct responsibility or
liability for the payment of principal or interest on the Senior Notes to owners
of beneficial interests in the Global Note. DTC has advised the Company and the
Trustee that its present practice is, upon receipt of any payment of principal
or interest to credit immediately the accounts of the Participants with payment
in amounts proportionate to their respective holdings in principal amount of
beneficial interests in the Global Note as shown on the records of DTC. Payments
by Participants and indirect participants to owners of beneficial interests in
the Global Note will be governed by standing instructions and customary
practices, as is now the case with securities held for the accounts of customers
in bearer form or registered in "street name" and will be the responsibility of
such Participants or indirect participants.
As long as the Senior Notes are represented by a Global Note, DTC's nominee
will be the holder of the Senior Notes and therefore will be the only entity
that can exercise a right to repayment or repurchase of the Senior Notes. See
"-- Certain Covenants -- Change of Control" and "-- Limitation on Asset Sales."
Notice by Participants or indirect participants or by owners of beneficial
interests in a Global Note held through such Participants or indirect
participants of the exercise of the option to elect repayment of beneficial
interests in Senior Notes represented by a Global Note must be transmitted to
DTC in accordance with its procedures on a form required by DTC and provided to
Participants. In order to ensure that DTC's nominee will timely exercise a right
to repayment with respect to a particular Senior Note, the beneficial owner of
such Senior Note must instruct the broker or other
59
<PAGE> 61
Participant or exercise a right to repayment. Different firms have cut-off times
for accepting instructions from their customers and, accordingly, each
beneficial owner should consult the broker or other Participant or indirect
participant through which it holds an interest in a Senior Note in order to
ascertain the cut-off time by which such an instruction must be given in order
for timely notice to be delivered to DTC. The Company will not be liable for any
delay in delivery of notices of the exercise of the option to elect repayment.
The Company will issue Senior Notes in definitive form in exchange for the
Global Note if, and only if, DTC is at any time unwilling or unable to continue
as depositary and a successor depositary is not appointed by the Company within
90 days. In such an instance, an owner of a beneficial interest in the Global
Note will be entitled to have Senior Notes equal in principal amount to such
beneficial interest registered in its name and will be entitled to physical
delivery of such Senior Notes in definitive form. Senior Notes so issued in
definitive form will be issued in denominations of $1,000 and integral multiples
thereof and will be issued in registered form only, without coupons.
60
<PAGE> 62
UNDERWRITING
Subject to terms and conditions set forth in an underwriting agreement (the
"Underwriting Agreement"), the Company has agreed to sell to Dillon, Read & Co.
Inc. ("Dillon Read"), Salomon Brothers Inc, Rauscher Pierce Refsnes, Inc. and
Raymond James & Associates, Inc. (together with Dillon Read, the "Underwriters")
and the Underwriters have severally agreed to purchase the respective principal
amounts of the Senior Notes set forth opposite their names below.
<TABLE>
<CAPTION>
PRINCIPAL
UNDERWRITER AMOUNT
--------------------------------------------------------------- -----------
<S> <C>
Dillon, Read & Co. Inc. .......................................
Salomon Brothers Inc...........................................
Rauscher Pierce Refsnes, Inc. .................................
Raymond James & Associates, Inc. ..............................
-----------
Total................................................ $75,000,000
===========
</TABLE>
The Underwriting Agreement provides that the Underwriters are obligated to
purchase all of the Senior Notes if any are purchased.
The Underwriters propose to offer the Senior Notes directly to the public
at the initial public offering price set forth on the cover page of this
Prospectus and to certain dealers at such price less a commission not in excess
of % of the principal amount. The Underwriters may allow, and such dealers
may reallow, a commission not in excess of % of the principal amount on
sales to certain other dealers. The offering of the Senior Notes is made for
delivery when, as and if accepted by the Underwriters and subject to prior sale
and to withdrawal, cancellation or modification of the offer without notice. The
Underwriters reserve the right to reject any offer for the purchase of the
Senior Notes. After the initial public offering, the public offering price and
other selling terms may be changed by the Underwriters.
The Company has agreed in the Underwriting Agreement to indemnify the
Underwriters against certain liabilities, including civil liabilities under the
Securities Act or to contribute to payments that the Underwriters may be
required to make in respect thereof.
The Senior Notes will constitute a new issue of securities with no
established trading market. The Company does not intend to list the Senior Notes
on any national securities exchange or to seek the admission thereof to trading
in the Nasdaq National Market System. The Company has been advised by the
Underwriters that the Underwriters presently intend to make a market in the
Senior Notes following completion of the Offering. However, the Underwriters are
not obligated to do so and any market-making activities with respect to the
Senior Notes may be discontinued at any time without notice. Accordingly, no
assurance can be given that an active market will develop for the Senior Notes
or as to the liquidity of or the trading market for the Senior Notes. If a
trading market does not develop or is not maintained, holders of the Senior
Notes may experience difficulty in reselling the Senior Notes or may be unable
to sell them at all. If a market for the Senior Notes develops, any such market
may be discontinued at any time. If a public trading market develops for the
Senior Notes, future trading prices of the Senior Notes (which could be at a
discount to the principal amount thereof) will depend on many factors,
including, among other things, prevailing interest rates, the Company's results
of operations and financial condition and the market for similar securities.
The Underwriters and their respective affiliates may engage in transactions
with and perform services for the Company or one or more of its affiliates in
the ordinary course of business. Rauscher Pierce Refsnes, Inc. ("Rauscher
Pierce") provided services to VES in connection with the Combination and
received $350,000 for such services. These services were in the ordinary course
of Rauscher Pierce's business.
61
<PAGE> 63
LEGAL MATTERS
Certain legal matters in connection with the validity of the Senior Notes
offered hereby will be passed on for the Company by Porter & Hedges, L.L.P.,
Houston, Texas. Certain legal matters in connection with such securities are
being passed upon for the Underwriters by Vinson & Elkins L.L.P., Houston,
Texas.
EXPERTS
The supplemental consolidated financial statements of Veritas DGC Inc. as
of July 31, 1994 and 1995 and for each of the three years in the period ended
July 31, 1995 included in this Prospectus, have been audited by Deloitte &
Touche LLP, independent auditors, as stated in their report which has been
included herein in reliance upon the report of such firm given upon their
authority as experts in accounting and auditing.
The consolidated financial statements of Digicon Inc. incorporated in this
Prospectus by reference from Digicon Inc.'s Annual Report on Form 10-K, for the
year ended July 31, 1995 as amended by Form 10-K/A, Form 10-K/A-2 and 10-K/A-3
dated June 17, 1996, July 19, 1996 and August 20, 1996, respectively, have been
audited by Deloitte & Touche LLP, independent auditors, as stated in their
report which is incorporated herein by reference, and have been so incorporated
in reliance upon the report of such firm given upon their authority as experts
in accounting and auditing.
The consolidated financial statements of Veritas Energy Services Inc.,
incorporated by reference herein as of October 31, 1994 and 1995, and for each
of the three years ended October 31, 1993, 1994 and 1995, have been audited by
Price Waterhouse, Chartered Accountants, as set forth in their report thereon
incorporated by reference herein, and are incorporated by reference herein in
reliance upon such report given upon the authority of such firm as experts in
accounting and auditing.
62
<PAGE> 64
INDEX TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Independent Auditors' Report.......................................................... F-2
Supplemental Consolidated Statements of Operations for the years ended July 31, 1993,
1994, 1995 and (unaudited) for the year ended July 31, 1996......................... F-3
Supplemental Consolidated Balance Sheets as of July 31, 1994, 1995 and (unaudited)
July 31, 1996....................................................................... F-4
Supplemental Consolidated Statements of Cash Flows for the years ended July 31, 1993,
1994, 1995 and (unaudited) for the year ended July 31, 1996......................... F-5
Supplemental Consolidated Statements of Changes in Stockholders' Equity for the years
ended July 31, 1993, 1994, 1995 and (unaudited) for the year ended July 31, 1996.... F-7
Notes to Supplemental Consolidated Financial Statements............................... F-9
</TABLE>
F-1
<PAGE> 65
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders of
Veritas DGC Inc.
Houston, Texas
We have audited the supplemental consolidated balance sheets of Veritas DGC
Inc. and subsidiaries as of July 31, 1994 and 1995, and the related supplemental
consolidated statements of operations, cash flows and changes in stockholders'
equity for each of the three years in the period ended July 31, 1995. These
supplemental consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on the
supplemental consolidated financial statements based on our audits. The
supplemental consolidated financial statements give retroactive effect to the
merger of Digicon Inc. and Veritas Energy Services, Inc., which has been
accounted for as a pooling of interests as described in Note 2 to the
supplemental consolidated financial statements. We did not audit the balance
sheets of Veritas Energy Services Inc. as of October 31, 1994 or 1995, or the
related statements of operations, cash flows and changes in stockholders' equity
of Veritas Energy Services Inc. for each of the three years in the period ended
October 31, 1995, which statements reflect total assets of $47,186,000 and
$53,910,000 as of October 31, 1994 and 1995, respectively, and total revenues of
$53,161,000, $90,070,000 and $109,996,000 for the years ended October 31, 1993,
1994 and 1995, respectively. Those statements were audited by other auditors
whose report has been furnished to us, and our opinion, insofar as it relates to
the amounts included for Veritas Energy Services Inc. for 1993, 1994 and 1995,
is based solely on the report of such other auditors.
We conducted our audits in accordance with generally accepted auditing
standards. These standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits and the report of the other auditors provide a
reasonable basis for our opinion.
In our opinion, based on our audits and the report of the other auditors,
the supplemental consolidated financial statement referred to above present
fairly, in all material respects, the financial position of Veritas DGC Inc. and
subsidiaries as of July 31, 1994 and 1995, and the results of their operations
and their cash flows for each of the three years in the period ended July 31,
1995 in conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Houston Texas
July 15, 1996
(September 20, 1996 as to Note 2)
F-2
<PAGE> 66
VERITAS DGC INC.
SUPPLEMENTAL CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
(UNAUDITED)
FOR THE YEARS ENDED FOR THE
JULY 31, YEAR ENDED
----------------------------------- JULY 31,
1993 1994 1995 1996
--------- --------- --------- -----------
(AS COMBINED -- SEE NOTE 2)
<S> <C> <C> <C> <C>
REVENUES....................................... $ 146,090 $ 178,392 $ 215,630 $ 250,596
COSTS AND EXPENSES:
Operating expenses:
Cost of services.......................... 121,873 144,984 170,424 198,711
Restructuring............................. 838
Write-off/write-down for impairment of
assets.................................... 5,235 3,628
Depreciation and amortization................ 11,741 19,119 23,732 26,921
Selling, general and administrative.......... 4,797 6,296 5,855 7,255
Interest..................................... 1,928 3,213 5,170 5,466
Merger related costs......................... 3,666
Gain on sale of investment in FSU joint
ventures.................................. (4,370)
Other........................................ (210) (1,833) 232 546
-------- -------- -------- --------
Total................................ 140,129 177,852 201,043 246,193
-------- -------- -------- --------
Income before provision for income taxes and
equity in loss of 50% or less-owned companies
and joint ventures........................... 5,961 540 14,587 4,403
Provision for income taxes..................... 3,183 5,929 3,807 2,009
Equity in loss of 50% or less-owned companies
and joint ventures........................... 2,204 4,965 5,186 1,113
-------- -------- -------- --------
NET INCOME (LOSS).............................. $ 574 $ (10,354) $ 5,594 $ 1,281
======== ======== ======== ========
PER SHARE OF COMMON STOCK:
Earnings (loss) per share.................... $ .05 $ (.66) $ .31 $ .07
======== ======== ======== ========
Weighted average shares...................... 11,874 15,633 17,771 17,882
======== ======== ======== ========
Cash dividends -- common stock............... None None None None
======== ======== ======== ========
</TABLE>
See Notes to Supplemental Consolidated Financial Statements
F-3
<PAGE> 67
VERITAS DGC INC.
SUPPLEMENTAL CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT FOR PAR VALUE AND NUMBER OF SHARES)
<TABLE>
<CAPTION>
JULY 31, (UNAUDITED)
------------------------ JULY 31,
1994 1995 1996
--------- --------- ---------
(AS COMBINED -- SEE NOTE 2)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash............................................................ $ 15,545 $ 10,082 $ 10,072
Restricted cash investments..................................... 320 670 327
Accounts and notes receivable (net of allowance for doubtful
accounts: 1994, $659; 1995, $607; 1996, $740)................. 43,080 54,587 65,447
Note receivable from FSU joint venture, current portion......... 443
Materials and supplies inventory (net of reserves: 1994, $68;
1995, $66; 1996, $0).......................................... 5,437 1,418 1,659
Prepayments and other........................................... 2,468 5,805 8,199
-------- -------- --------
Total current assets..................................... 67,293 72,562 85,704
Property and equipment:
Seismic equipment............................................... 79,358 92,538 103,899
Data processing equipment....................................... 31,372 32,506 34,403
Seismic ships................................................... 8,291
Leasehold improvements and other................................ 28,640 32,085 26,802
-------- -------- --------
Total.................................................... 147,661 157,129 165,104
Less accumulated depreciation................................. 79,238 81,750 86,094
-------- -------- --------
Property and equipment -- net............................ 68,423 75,379 79,010
Multi-client survey data.......................................... 18,500 27,976 25,628
Investment in and advances to joint ventures...................... 9,639 187 1,463
Goodwill (net of accumulated amortization: 1994, $1,145; 1995,
$1,701; 1996, 2,214)............................................ 3,594 4,223 3,674
Other assets...................................................... 3,478 4,013 3,113
Note receivable from FSU joint venture, non-current portion....... 887
-------- -------- --------
Total.................................................... $ 171,814 $ 184,340 $ 198,592
======== ======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term related party loans.................................. $ 2,695
Current maturities of long-term debt............................ 7,650 $ 10,895 $ 13,739
Accounts payable -- trade....................................... 26,573 23,526 27,454
Accrued interest................................................ 291 408 313
Other accrued liabilities....................................... 11,368 19,213 19,905
Income taxes payable............................................ 1,922 3,690 1,814
-------- -------- --------
Total current liabilities................................ 50,499 57,732 63,225
Non-current liabilities:
Long-term debt--less current maturities......................... 23,454 25,893 27,351
Deferred credits................................................ 1,323 1,084 364
Other non-current liabilities................................... 2,021 1,631 1,729
-------- -------- --------
Total non-current liabilities............................ 26,798 28,608 29,444
Commitments and contingent liabilities (Note 12)
Stockholders' equity:
Common stock, $.01 par value; authorized: 40,000,000 shares;
issued: 10,450,758 shares, 11,134,939 shares and 11,334,352
shares at July 31, 1994, 1995 and 1996, respectively (See Note
14)........................................................... 314 111 113
Additional paid-in capital...................................... 98,240 100,797 104,469
Accumulated earnings (deficit) (from August 1, 1991 with respect
to Digicon Inc.).............................................. (3,664) 1,930 2,275
Less: Treasury stock, at cost; 858,497 shares................... (4,772)
Cumulative foreign currency translation adjustment.............. (373) (66) (934)
-------- -------- --------
Stockholders' equity..................................... 94,517 98,000 105,923
-------- -------- --------
Total.................................................... $ 171,814 $ 184,340 $ 198,592
======== ======== ========
</TABLE>
See Notes to Supplemental Consolidated Financial Statements
F-4
<PAGE> 68
VERITAS DGC INC.
SUPPLEMENTAL CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
(UNAUDITED)
FOR THE YEARS ENDED FOR THE
JULY 31, YEAR ENDED
--------------------------------- JULY 31,
1993 1994 1995 1996
--------- --------- --------- -----------
<S> <C> <C> <C> <C>
(AS COMBINED -- SEE NOTE 2)
OPERATING ACTIVITIES:
Net income (loss).................................................... $ 574 $ (10,354) $ 5,594 $ 1,281
Non-cash items included in income (loss):
Restructuring accrual.............................................. 252 14
Write-off/write-down for impairment of assets...................... 5,235 3,628
Depreciation and amortization...................................... 11,741 19,119 23,732 26,921
Amortization of warrants issued with short-term related party
loans............................................................ 89
Amortization of deferred gain on sale/leaseback.................... (898) (103)
(Gain) loss on disposition of property and equipment............... (488) (1,592) 919 875
Equity in (earnings) loss of 50% or less-owned companies and joint
ventures......................................................... 2,204 4,965 5,186 1,113
Gain on sale of investment in FSU joint ventures................... (4,370)
Write-down of proprietary seismic data to market................... 589 778 1,786 1,774
Other.............................................................. (713) (842) (339) (278)
Change in operating assets/liabilities (exclusive of the effects of
the purchase of GFS in 1993 and Data Graphics Ltd. in 1994):
Accounts and notes receivable...................................... (3,632) (1,626) (8,230) (11,003)
Accounts and note receivable from FSU joint venture................
Materials and supplies inventory................................... (2,520) 910 235 (241)
Prepayments and other.............................................. 574 4 (2,702) 2,074
Multi-client data.................................................. (3,214) (10,075) (11,262) 574
Other.............................................................. (2,326) (596) 389 886
Accounts payable -- trade.......................................... 1,882 (6,103) (4,888) 1,770
Accrued interest................................................... (54) 131 117 (96)
Other accrued liabilities.......................................... 617 4,584 7,737 796
Income taxes payable............................................... (2,119) 1,116 1,721 2,229
Deferred credits................................................... (14) (455) (239) (720)
Other non-current liabilities...................................... 551 1,679 (376) (6,135)
Adjustment to conform fiscal year of Veritas Energy Services Inc..... (5,268)
Total cash provided (used) by operating activities............ 3,652 7,130 14,215 20,077
FINANCING ACTIVITIES:
Payment of long-term debt............................................ (11,790) (9,777) (9,634) 11,437
Proceeds from long-term debt......................................... 3,036 531
Net borrowings (payments) under credit agreements.................... 6,282 7,446 1,676 2,665
Net proceeds from sale of common stock............................... 21,083 28,219 (44) 4,470
Net proceeds from sale of treasury stock............................. 3,984 3,972
Borrowings of short-term related party loans......................... 6,081 30 1,500
Payments of short-term related party loans........................... (41) (4,801) (2,725)
Total cash provided (used) by financing activities............ 18,570 27,168 (6,182) (4,160)
INVESTING ACTIVITIES:
(Increase) decrease in restricted cash investments................... 79 304 (350) 343
Increase in investment in and advances to joint ventures............. (2,847) (1,185) (4,231) 2,372
Sale to Syntron, Inc.:
Inventories and technologies....................................... 1,630
Property and equipment............................................. 1,370
Sale of investment in FSU joint ventures............................. 6,000
Purchase of property and equipment................................... (25,442) (24,487) (19,231) (14,459)
Sale of property and equipment....................................... 2,995 1,402 1,651 668
Purchase of subsidiary............................................... (407)
Total cash provided (used) by investing activities............ (25,215) (23,966) (13,568) (15,820)
Currency (gain) loss on foreign cash................................. (253) (108) 72 (107)
Change in cash and cash equivalents.................................. (3,246) 10,224 (5,463) (10)
Beginning cash and cash equivalents balance.......................... 8,567 5,321 15,545 10,082
Ending cash and cash equivalents balance............................. $ 5,321 $ 15,545 $ 10,082 $10,072
</TABLE>
See Notes to Supplemental Consolidated Financial Statements
F-5
<PAGE> 69
VERITAS DGC INC.
SUPPLEMENTARY SCHEDULES TO SUPPLEMENTAL CONSOLIDATED
STATEMENTS OF CASH FLOWS
(IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
(UNAUDITED)
FOR THE YEARS ENDED FOR THE
JULY 31, YEAR ENDED
----------------------------- JULY 31,
1993 1994 1995 1996
------- ------- ------- -----------
(AS COMBINED -- SEE NOTE 2)
<S> <C> <C> <C> <C>
SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
Increase in assets/liabilities due to purchase of GFS Company:
Cash..................................................................... $ 65
Restricted cash investments.............................................. 75
Accounts and notes receivable............................................ 3,025
Materials and supplies inventory......................................... 183
Prepayments and other.................................................... 363
Property and equipment -- net............................................ 3,168
Goodwill................................................................. 4,245
Long-term debt........................................................... 2,431
Accounts payable -- trade................................................ 6,558
Accrued interest......................................................... 13
Other accrued liabilities................................................ 969
Common stock............................................................. 1,153
Increase in assets/liabilities due to purchase of Data Graphic Ltd.:
Accounts receivable...................................................... $ 354
Property and equipment-net............................................... 213
Goodwill................................................................. 748
Accounts payable-trade................................................... 637
Long-term debt........................................................... 678
Increase (decrease) in investment in FSU joint ventures for:
Common stock............................................................. $ 7,299
Accounts and note receivable from FSU joint ventures..................... 135
Other assets.............................................................
Long-term debt...........................................................
Increase (decrease) in property and equipment for:
Accounts and notes receivable............................................ $ 2,045 $ 866
Execution of capital leases and notes.................................... 13,612 4,227 12,024 16,963
Accounts payable -- trade................................................ 2,289 1,058 334 572
Deferred credits payable................................................. 805
Prepayments and other.................................................... (1,104)
Increase in materials and supplies inventory for deferred credits.......... 987
Increase in prepayments on property and equipment for notes payable........ 601
Increase in notes receivable for:
Sale of property and equipment........................................... 250
Sale of other assets..................................................... 1,330
Sale of investment in FSU joint ventures resulting in an increase
(decrease) in:
Accounts and notes receivable from purchaser............................. 1,790
Accounts and note receivable from FSU joint ventures..................... (1,740)
Accounts payable -- trade................................................ 78
Treasury stock........................................................... 8,756
Sale of inventories, property and equipment and technologies to Syntron,
Inc. resulting in an increase (decrease) in:
Accounts and notes receivable -- deferred credits........................ 3,255
Materials and supplies inventory......................................... (2,154)
Other assets -- deferred credits receivable.............................. 857
Accounts payable -- trade................................................ 957
Other accrued liabilities -- deferred gain............................... 891
Other non-current liabilities -- deferred gain........................... 110
Sale of accounts receivable and property and equipment resulting in a
decrease in:
Accounts and notes receivable............................................ (78)
Property and equipment -- net............................................ (247)
Long-term debt........................................................... (199)
Accounts payable -- trade................................................ (18)
Other non-current liabilities............................................ (108)
Increase in additional paid-in capital as a result of warrants issued with
short-term related party loans........................................... 89
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION (AS RESTATED -- SEE NOTE
21):
Cash paid for:
Interest --
Equipment purchase obligations and unsecured notes payable............. 1,262 1,538 1,280 1,878
Secured term loan...................................................... 584 585 635 506
Credit agreements...................................................... 46 461 1,723 1,843
Short-term related party loans......................................... 206 199
Other.................................................................. 239 339 1,388 1,286
Income taxes............................................................. 436 1,272 2,276 5,086
</TABLE>
See Notes to Supplemental Consolidated Financial Statements
F-6
<PAGE> 70
VERITAS DGC INC.
SUPPLEMENTAL CONSOLIDATED STATEMENTS OF CHANGES
IN STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED JULY 31, 1993, 1994, 1995 AND 1996
(IN THOUSANDS, EXCEPT FOR NUMBER OF SHARES)
<TABLE>
<CAPTION>
ACCUMULATED
EARNINGS CUMULATIVE
COMMON STOCK ISSUED TREASURY STOCK, (DEFICIT) (FROM FOREIGN
------------------- AT COST ADDITIONAL EMPLOYEE AUGUST 1, 1991 CURRENCY
PAR -------------------- PAID-IN NOTES WITH RESPECT TO TRANSLATION
SHARES VALUE SHARES AMOUNT CAPITAL RECEIVABLE DIGICON INC.) ADJUSTMENT
----------- ----- ---------- ------- -------- -------- ---------------- ----------
(AS COMBINED -- SEE NOTE 2)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE, AUGUST 1, 1992 --
(AS PREVIOUSLY REPORTED BY
DIGICON INC.) ............. 22,597,423 $ 226 $ 40,007 $ (48) $ 4,554
Pooling of interest with
Veritas Energy Services
Inc. ...................... 483 1,562 $ (66)
Common stock issued in
acquisition of GFS, net of
issue costs................ 225,000 2 1,137
Common stock issued for cash,
net of issue costs......... 5,456,900 55 20,994
Collections of employee notes
receivable................. 48
Cumulative foreign currency
translation
adjustment................. (149)
Net income................... 574
---------- ---- -------- ------ ------- -------- -------- ------
BALANCE, JULY 31, 1993....... 28,279,323 283 62,621 6,690 (215)
Common stock issued for
investment in FSU joint
ventures, net of issue
costs...................... 3,072,950 31 7,228
Common stock issued for cash,
net of issue
costs -- Veritas Energy
Services, Inc. ............ 28,255
Common stock issued for cash
under employee purchase
plan -- Veritas Energy
Services, Inc. ............ 9
Common stock issued for cash
under employee stock option
plan -- Veritas Energy
Services, Inc. ............ 127
Cumulative foreign currency
translation adjustment..... (158)
Net loss..................... (10,354)
---------- ---- -------- ------ ------- -------- -------- ------
BALANCE, JULY 31, 1994....... 31,352,273 314 -- -- 98,240 -- (3,664) (373)
</TABLE>
(Continued)
F-7
<PAGE> 71
VERITAS DGC INC.
SUPPLEMENTAL CONSOLIDATED STATEMENTS OF CHANGES
IN STOCKHOLDERS' EQUITY -- (CONTINUED)
FOR THE YEARS ENDED JULY 31, 1993, 1994, 1995 AND 1996
(IN THOUSANDS, EXCEPT FOR NUMBER OF SHARES)
<TABLE>
<CAPTION>
ACCUMULATED
EARNINGS CUMULATIVE
COMMON STOCK ISSUED TREASURY STOCK, (DEFICIT) (FROM FOREIGN
------------------- AT COST ADDITIONAL EMPLOYEE AUGUST 1, 1991 CURRENCY
PAR -------------------- PAID-IN NOTES WITH RESPECT TO TRANSLATION
SHARES VALUE SHARES AMOUNT CAPITAL RECEIVABLE DIGICON INC.) ADJUSTMENT
----------- ----- ---------- ------- -------- -------- --------------- ----------
(AS COMBINED -- SEE NOTE 2)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Common stock issued for
investment in FSU joint
ventures, net of issue
costs...................... 2,052,543 20 2,265
One for three reverse stock
split, net of issue
costs...................... (22,269,877) (223) 175
Warrants issued in
conjunction with short-term
related party loans........ 89
Common stock issued for cash
under employee purchase
plan -- Veritas Energy
Services, Inc. ............ 28
Common stock reacquired in
sale of investment in FSU
joint ventures............. (1,708,497) $(8,756)
Treasury stock issued for
cash....................... 850,000 3,984
Cumulative foreign currency
translation adjustment..... 307
Net income................... 5,594
---------- ---- -------- ------ ------- -------- -------- ------
BALANCE, JULY 31, 1995....... 11,134,939 111 (858,497) (4,772) 100,797 1,930 (66)
Treasury stock issued for
cash, net of issue costs
(unaudited)................ 858,497 4,772 (800)
Common stock issued upon
exercise of warrants
(unaudited)................ 29,433 530
Common stock issued for cash
under employee stock option
plan (unaudited)........... 181,497 2 2,448
Common stock certificates
cancelled (unaudited)...... (11,517)
Registration and filing costs
(unaudited)................ (30)
Common stock issued for cash
under employee stock
purchase plan -- Veritas
Energy Services, Inc.
(unaudited)................ 12
Common stock issued for cash
under employee stock option
plan -- Veritas Energy
Services, Inc.
(unaudited)................ 1,512
Cumulative foreign currency
translation adjustment
(unaudited)................ (868)
Net income (unaudited)....... 1,281
Adjustment to conform fiscal
year of Veritas Energy
Services Inc............... (936)
---------- ---- -------- ------ ------- -------- -------- ------
BALANCE, JULY 31, 1996
(UNAUDITED)................ 11,334,352 $ 113 $104,469 $ 2,275 $ (934)
========== ==== ======== ====== ======= ======== ======== ======
</TABLE>
See Notes to Supplemental Consolidated Financial Statements
F-8
<PAGE> 72
VERITAS DGC INC.
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED JULY 31, 1993, 1994, 1995 AND
UNAUDITED AS TO THE YEAR ENDED JULY 31, 1996
AS COMBINED -- SEE NOTE 2
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
CONSOLIDATION
The accompanying supplemental consolidated financial statements include the
accounts of Veritas DGC Inc., formerly Digicon Inc., ("the Company") and all
majority-owned domestic and foreign subsidiaries. Investments in 50% or
less-owned companies and joint ventures are accounted for on the equity method.
All material intercompany balances and transactions have been eliminated.
All financial information for all periods presented prior to the merger on
August 30, 1996 between Digicon Inc. ("Digicon") and Veritas Energy Services
Inc. ("VES") includes the results of VES. (See Note 2). The merger has been
accounted for as a pooling of interests. These supplemental consolidated
financial statements, subject to audit adjustments, if any, will become the
primary historical consolidated financial statements of Veritas DGC Inc. upon
issuance of consolidated financial statements for a period that includes the
date of consummation, August 30, 1996.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
UNAUDITED FINANCIAL INFORMATION
In the opinion of management, the unaudited supplemental consolidated
financial statements as of July 31, 1996 contain all adjustments necessary to
present fairly the financial position of Veritas DGC Inc. and subsidiaries, and
the results of its operations and its cash flows for the year ended July 31,
1996.
RECLASSIFICATION OF PRIOR YEAR BALANCES
Certain prior year balances have been reclassified for consistent
presentation.
NEW ACCOUNTING PRONOUNCEMENTS NOT YET ADOPTED
In March 1995, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 121 "Accounting for
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of."
This statement establishes accounting standards for the impairment of long-lived
assets, certain identifiable intangibles, and goodwill related to those assets
to be held and used and for long-lived assets and certain identifiable
intangibles to be disposed of. This statement is effective for financial
statements with fiscal years beginning after December 15, 1995. The Company will
be required to implement this statement for the fiscal year 1997. Implementation
of this pronouncement is not expected to have a material effect on the Company's
supplemental consolidated financial statements.
In October 1995, the FASB issued SFAS No. 123 "Accounting for Stock-Based
Compensation." This statement established a fair value method of accounting for
stock-based compensation plans either through recognition or disclosure. This
statement is effective for fiscal years beginning after December 15, 1995. The
Company will be required to implement this statement for the fiscal year 1997.
The
F-9
<PAGE> 73
VERITAS DGC INC.
NOTES TO SUPPLEMENTAL CONSOLIDATED
FINANCIAL STATEMENTS -- (CONTINUED)
Company intends to adopt this standard by disclosing the pro forma net income
(loss) and net income (loss) per share amounts assuming the fair value method
was adopted on August 1, 1995. The adoption of this statement will have no
material impact on the Company's supplemental consolidated financial statements.
TRANSLATION OF FOREIGN CURRENCIES
The Company has determined that the U.S. dollar is its primary functional
currency and, accordingly, most foreign entities translate property and
equipment (and related depreciation) and inventories into U.S. dollars at the
exchange rate in effect at the time of their acquisition while other assets and
liabilities are translated at year-end rates. Operating results (other than
depreciation) are translated at the average rates of exchange prevailing during
the year and remeasurement gains and losses are included in the determination of
net income and are reflected in other costs and expenses (See Note 19). The
remaining foreign entities use the Canadian dollar as the functional currency
and translate all assets and liabilities at year-end exchange rates and
operating results at average exchange rates prevailing during the year.
Adjustments resulting from the translation of assets and liabilities are
recorded in the cumulative foreign currency translation account in the
stockholders' equity section.
CASH EQUIVALENTS
For purposes of the Supplemental Consolidated Statements of Cash Flows, the
Company has elected to define "cash equivalents" as items readily convertible
into known amounts of cash with original maturities of three months or less.
RESTRICTED CASH INVESTMENTS
Restricted cash investments in the amounts of $320,000, $670,000 and
$327,000 at July 31, 1994, 1995 and 1996, respectively, were pledged as
collateral on certain bank guarantees.
ACCOUNTS RECEIVABLE
Included in accounts and notes receivable at July 31, 1994, 1995 and 1996
are unbilled amounts of approximately $8,600,000, $11,036,000 and $12,682,000,
respectively. Such amounts are either not billable to the customer at July 31 in
accordance with the provisions of the contract and generally will be billed in
one to four months or are currently billable and will be invoiced in the next
monthly statement cycle.
INVENTORIES
Inventories of materials and supplies are stated at the lower of average
cost or market.
MULTI-CLIENT SURVEY DATA
The Company collects and processes certain seismic data for its own account
to which it retains all ownership rights and which it resells to clients on a
non-transferable, non-exclusive basis. The Company may obtain precommitted sales
contracts to help fund the cash requirements of these surveys which generally
last from 5 to 7 months. The Company capitalizes the unfunded portion using an
estimated sales method. Under that method the amount capitalized equals actual
costs incurred less costs attributed to the precommitted sales contracts based
on the percentage of total estimated costs to total estimated sales multiplied
by actual sales. The cost of multi-client survey data is charged to operations
in the period sales occur based on the percentage of total estimated costs to
total estimated sales
F-10
<PAGE> 74
VERITAS DGC INC.
NOTES TO SUPPLEMENTAL CONSOLIDATED
FINANCIAL STATEMENTS -- (CONTINUED)
multiplied by actual sales. The Company periodically reviews the carrying value
of multi-client survey data to assess whether there has been a permanent
impairment of value and records losses in periods when the total estimated costs
exceed total estimated sales or in periods when it is determined that sales
would not be sufficient to cover the carrying value of the asset. In general,
costs are expected to be recovered from sales over a period of less than 5
years.
GOODWILL
The Company records the purchase price of businesses or joint venture
interests in excess of the fair value of net assets acquired as goodwill which
is amortized over a period of 10 to 20 years which approximates the period
benefits are expected to be derived. The Company periodically reviews the
carrying value of goodwill in relation to the current and expected operating
results of the businesses or joint ventures in order to assess whether there has
been a permanent impairment of such amounts. There were no write-downs as a
result of such review during the years ended July 31, 1993, 1994, 1995 or 1996.
See Notes 4, 5 and 6 relating to the purchase of investment in FSU joint
ventures, GFS Company and Data Graphics Ltd.
MOBILIZATION COST
Transportation and make-ready expenses of seismic operations prior to
commencement of business in an area, that would not have been incurred
otherwise, are deferred and amortized over the lesser of the term of the related
contract or backlog of contracts in that area or one year. Amounts applicable to
operations for the Company's own account are included in the cost of
multi-client survey data. Unamortized mobilization costs are shown as other
assets and totaled $973,000, $1,421,000 and $517,000 at July 31, 1994, 1995 and
1996, respectively.
INCOME TAXES
The Company's policy is not to provide for the income taxes, if any, which
would be payable if undistributed earnings of foreign consolidated subsidiaries
were paid as dividends to the parent company, since such earnings have been or
will be reinvested in the business.
In February 1992, the FASB issued SFAS 109 "Accounting for Income Taxes",
which requires the use of the "liability method" in place of the previously
required "deferred method". Under the liability method, deferred income taxes
reflect the net tax effects of (a) temporary differences between the carrying
amounts of assets and liabilities for financial reporting purposes and the
amounts used for income tax purposes, and (b) operating loss and tax credit
carryforwards. SFAS 109 allows recognition of all or a portion of benefits from
net operating loss carryforwards as deferred tax assets if realization is "more
likely than not". In periods of changing income tax rates, the liability method
will cause fluctuations in net income of companies with deferred taxes. The
Company adopted SFAS 109 effective August 1, 1993. The adoption of this standard
did not result in a cumulative effect adjustment to equity or income for the
year ended July 31, 1994.
Recognition is given in the accompanying supplemental consolidated balance
sheets to the future income tax benefits of loss carryforwards only to the
extent that they can be used to offset existing deferred taxes. Since the
Company's quasi-reorganization with respect to Digicon Inc. on July 31, 1991, in
accordance with Staff Accounting Bulletin No. 86, the tax benefits of loss
carryforwards existing at the date of the quasi-reorganization, when realized,
have been recognized in the supplemental consolidated statements of operations
by a charge in lieu of income taxes, representing the additional
F-11
<PAGE> 75
VERITAS DGC INC.
NOTES TO SUPPLEMENTAL CONSOLIDATED
FINANCIAL STATEMENTS -- (CONTINUED)
income taxes which otherwise would have been provided, with an equal and
offsetting direct addition to paid-in capital reflecting the utilization of the
loss carryforward.
LEASES
Operating leases include those for office space, specialized seismic
equipment rented for short periods of time, and the Company's seismic ships
which generally are chartered on a short-term basis.
QUASI-REORGANIZATION
Digicon Inc. effected a quasi-reorganization adjustment as of July 31, 1991
in which its accumulated deficit at July 31, 1991 of $139,751,000 was offset
against additional paid-in capital.
REVENUES
Revenues from data acquisition and data processing services are recorded as
revenues based on contractual rates set forth in the related contract if the
contract provides a separate rate for each segment. If the contract only
provides a rate for the overall service, revenue is recognized based on the
percentage of the work effort completed compared with the total work effort
involved in the contract.
DEPRECIATION
Provision for depreciation is computed using the straight-line method based
on estimated useful lives as follows:
<TABLE>
<CAPTION>
AVERAGE
YEARS
----
<S> <C>
Seismic equipment..................................... 5
Data processing equipment............................. 3-6
Seismic ships......................................... 14
Leasehold improvements and other...................... 3-7
</TABLE>
Expenditures for routine repairs and maintenance are charged to expense as
incurred; expenditures for additions and improvements are capitalized and
depreciated over the estimated remaining life of the related asset. Significant
vessel biennial drydocking expenses are recorded as deferred charges in other
assets and are amortized over a six to twelve month period. The net gain or loss
on items of property and equipment retired or disposed of is included in other
costs and expenses. See Note 19.
It is the Company's policy to periodically review property and equipment
lives. In fiscal 1993, a study indicated that the actual lives for certain asset
categories generally were longer than the useful lives used for depreciation
purposes in the Company's financial statements and accordingly, the Company
extended the estimated useful lives for certain of its seismic acquisition
equipment. The effect of this change was to reduce 1993 depreciation expense by
$490,000 and increase net income by $490,000, or $.04 per share (as restated for
the Reverse Split -- See Note 14).
In fiscal 1994 and 1996, the Company recognized impairment of assets in the
amount of $5,235,000 and $3,628,000, respectively or $.33 and $.20 respectively
per share (as restated for the Reverse Split -- See Notes 14 and 18).
F-12
<PAGE> 76
VERITAS DGC INC.
NOTES TO SUPPLEMENTAL CONSOLIDATED
FINANCIAL STATEMENTS -- (CONTINUED)
RESEARCH AND DEVELOPMENT
Research and development costs are charged to expense when incurred.
Research and development costs for the years ended July 31, 1993, 1994, 1995 and
1996 were $4,727,000, $5,764,000, $3,589,000 and $3,193,000, respectively.
EARNINGS (LOSS) PER SHARE
Weighted average shares and earnings (loss) per share have been restated
for all periods presented to reflect the effect of the Reverse Split consummated
on January 17, 1995 (see Note 14) and shares issuable upon exchange of the
Veritas Energy Services Inc. Exchangeable Stock (see Note 2).
Primary loss per share is computed based on the weighted average number of
shares of common stock. Primary earnings per share is computed based on the
weighted average number of shares of common stock plus common stock equivalents.
Common stock equivalents include (i) stock options (see Note 13), (ii) warrants
(see Note 17) and (iii) contingent shares issuable. Shares issuable upon the
conversion of stock options and warrants were disregarded since the treasury
stock method of calculation produced no incremental shares or resulted in
dilution of less than 3%. For the year ended July 31, 1994, contingent shares
issuable under the second stage of the agreements discussed in Note 4 were
disregarded due to net losses incurred.
Fully diluted earnings per share is not presented for the year ended July
31, 1994 due to net losses incurred. Fully diluted earnings per share is not
presented for the years ended July 31, 1993, 1995 and 1996 since stock options
and warrants referenced above had no dilutive effect or resulted in dilution of
less than 3%.
2. BUSINESS COMBINATION
On August 30, 1996, Veritas Energy Services Inc. ("VES"), a Canadian
company, was combined with and into Digicon Inc. ("Digicon"), a Delaware
corporation (the "Combination"). The combined company changed its name to
Veritas DGC Inc. (the "Company"). As a result of the Combination, each share of
VES no par value common shares outstanding was converted into the right to
receive VES no par value exchangeable stock (the "Exchangeable Stock") at an
exchange ratio of 0.8 of a share of Exchangeable Stock per VES common share. All
of the holders of VES common shares, except for those shareholders who perfected
and properly exercised their right to dissent from the Combination and received
fair value of their shares in cash, became holders of Exchangeable Stock and
accordingly, 7,023,701 shares of Exchangeable Stock were issued. The aggregate
stated capital of the Exchangeable Stock is equal to the aggregate stated
capital immediately prior to the Combination of the VES common shares that were
exchanged or $30,396,000. The Exchangeable Stock is convertible, at the
discretion of the stockholder, on a one-for-one basis into shares of the
Company's $0.01 par value common stock and their holders have rights identical
to the holders of the Company's common stock. Options to purchase shares of VES
common stock ("VES Option") were converted into options to purchase shares of
the Company's common stock at an exchange ratio of 0.8 of an option in the
Company's common stock per VES Option. See Note 13. The VES articles of
amalgamation were amended to reduce the number of authorized VES common shares
to one which will be held by the Company.
The Combination has been accounted for as a pooling-of-interests and,
accordingly, the accompanying supplemental consolidated financial statements
have been prepared on a basis that includes the accounts of Digicon and VES.
Information concerning common stock and per share data has been restated on an
equivalent share basis. As a result of differing year ends of Digicon and VES,
results of
F-13
<PAGE> 77
VERITAS DGC INC.
NOTES TO SUPPLEMENTAL CONSOLIDATED
FINANCIAL STATEMENTS -- (CONTINUED)
operations for dissimilar year ends have been combined. Digicon's results of
operations for each of the three years ended July 31, 1995 have been combined
with VES' results of operations for each of the three years ended October 31,
1995. Digicon's results of operations for the year ended July 31, 1996 have been
combined with VES' results of operations for the twelve months ended July 31,
1996 and, accordingly, VES' operating results for the period August 1, 1995
through October 31, 1995 is included in the years ended July 31, 1995 and July
31, 1996. An adjustment in an amount equal to the results of operations for this
three-month period is included in the unaudited supplemental consolidated
statements of changes in stockholders' equity. Revenues, net income and net
income per share were $22,150,000, $936,000 and $0.05, respectively, for the
period August 1, 1995 through October 31, 1995.
Presented below is the effect of the pooling of interests on previously
reported results of operations. Amounts related to VES have been converted into
the Company's reporting currency, United States ("U.S.") dollars, using weighted
average exchange rates prevailing during the period and reflects adjustments for
differences between U.S. and Canadian generally accepted accounting principles
("GAAP") and reclassifications to conform financial statement presentation. GAAP
adjustments include adjustments to (i) write off foreign exchange gains and
(losses) on borrowings which are deferred and amortized over the period of the
debt affecting net income by approximately ($220,000), $253,000, ($25,000) and
($71,000) for the years ended July 31, 1993, 1994, 1995 and 1996, respectively,
and (ii) reverse the effect of a prior period adjustment affecting net income by
approximately ($834,000) and $314,000 for the years ended July 31, 1994 and
1995, respectively. Reclassification of $13,994,000, $27,213,000, $25,493,000
and $28,842,000 for the years ended July 31, 1993, 1994, 1995 and 1996 have been
made to net amounts billed to customers for reimbursable costs against VES'
revenues.
<TABLE>
<CAPTION>
YEARS ENDED JULY 31,
-----------------------------------------------
1993 1994 1995 1996
-------- -------- -------- --------
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
Revenues:
Digicon.................................... $106,923 $115,535 $131,127 $160,847
VES........................................ 53,161 90,070 109,996 118,591
Reclassifications/adjustments.............. (13,994) (27,213) (25,493) (28,842)
-------- -------- -------- --------
Total.............................. $146,090 $178,392 $215,630 $250,596
======== ======== ======== ========
Net income (loss):
Digicon.................................... $ (1,258) $(14,426) $ 2,778 $ 385
VES........................................ 2,052 4,653 2,527 967
Adjustments................................ (220) (581) 289 (71)
-------- -------- -------- --------
Total.............................. $ 574 $(10,354) $ 5,594 $ 1,281
======== ======== ======== ========
Net income (loss) per share:
As previously reported..................... $ (.15) $ (1.48) $ .25 $ .04
======== ======== ======== ========
As restated................................ $ .05 $ (.66) $ .31 $ .07
======== ======== ======== ========
</TABLE>
There were no material adjustments to the net assets of VES as a result of
adopting the same accounting principles as the Company.
During the year ended July 31, 1996, the Company incurred $3,666,000 of
costs associated with the merger. These costs consist primarily of professional
fees.
F-14
<PAGE> 78
VERITAS DGC INC.
NOTES TO SUPPLEMENTAL CONSOLIDATED
FINANCIAL STATEMENTS -- (CONTINUED)
3. INVESTMENT IN INDONESIAN JOINT VENTURE
Summarized financial information of this joint venture is as follows:
<TABLE>
<CAPTION>
JULY 31, JULY 31, JULY 31,
1994 1995 1996
--------- --------- ---------
(IN THOUSANDS OF DOLLARS)
<S> <C> <C> <C>
Current assets................................... $ 2,734 $ 1,492 $ 1,837
Property and equipment -- net.................... 1,593
Proprietary seismic data......................... 1,138 468 617
-------- -------- --------
Total assets........................... $ 5,465 $ 1,960 $ 2,454
======== ======== ========
Current liabilities.............................. 2,247 1,192 923
Other long-term liabilities...................... 635
Long-term debt................................... 922
Advances from Digicon............................ 9,692 12,439 14,531
-------- -------- --------
Total non-current liabilities.......... 10,614 13,074 14,531
Stockholders' equity
Common stock..................................... 2,576 2,576 2,576
Accumulated deficit.............................. (9,972) (14,882) (15,576)
-------- -------- --------
Total stockholders' equity............. (7,396) (12,306) (13,000)
-------- -------- --------
Total liabilities and stockholders'
equity............................... $ 5,465 $ 1,960 $ 2,454
======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
FOR THE YEARS ENDED JULY 31,
--------------------------------------------------
1993 1994 1995 1996
-------- -------- -------- --------
(IN THOUSANDS OF DOLLARS)
<S> <C> <C> <C> <C>
Revenues.............................. $ 11,012 $ 2,518 $ 1,443 $ 4,188
Operating Expenses.................... 10,776 5,367 5,368 4,764
Depreciation and amortization......... 1,779 1,065 430
Other................................. 518 174 196 (48)
------- ------ ------ ------
Total....................... 13,073 6,606 5,994 4,716
Loss before (provision) benefit for
income taxes........................ (2,061) (4,088) (4,551) (528)
(Provision) benefit for income
taxes............................... 36 -- (359) (166)
------- ------ ------ ------
Net loss.............................. $ (2,025) $ (4,088) $ (4,910) $ (694)
======= ====== ====== ======
</TABLE>
4. INVESTMENT IN FSU JOINT VENTURES
During the year ended July 31, 1994, the Company entered into a joint
venture agreement with MD Seis International Ltd. to perform geophysical
services in the former Soviet Union ("FSU"). In connection with the agreement,
the Company placed 5,431,615 shares of its pre-Reverse Split common stock in
escrow to be distributed in stages upon the execution and completion of certain
conditions.
The first stage was completed on April 1, 1994 and the Company exchanged
3,072,950 shares of pre-Reverse Split common stock valued at $2.375 per share,
or $7,298,256, and a $1,000,000 cash commitment in return for interests in
certain jointly owned companies. The second stage of the agreement was completed
on August 25, 1994, and the Company increased its ownership interest in
F-15
<PAGE> 79
VERITAS DGC INC.
NOTES TO SUPPLEMENTAL CONSOLIDATED
FINANCIAL STATEMENTS -- (CONTINUED)
certain of these companies by exchanging 2,052,543 shares of pre-Reverse Split
common stock valued at $1.125 per share, or $2,309,111, and an additional
$2,000,000 cash commitment. In addition, the Company agreed to guarantee certain
liabilities of the joint ventures. After adjustment for the Reverse Split
consummated on January 17, 1995, MD Seis owned 1,708,497 shares of common stock.
The investments were being accounted for under the equity method. The FSU
joint ventures generated total revenues of approximately $300,000 and $6,994,000
and net losses of approximately $921,000 and $2,954,000 during the years ended
July 31, 1994 and 1995, respectively. The Company's share of net losses was
approximately $391,000 and $1,477,000 during the years ended July 31, 1994 and
1995, respectively. The excess purchase price over the fair value of the net
assets acquired in the amount of $9,292,000 was being amortized over a 20 year
period. Amortization expense for the years ended July 31, 1994 and 1995 was
$100,000 and $392,000, respectively.
On June 6, 1995, the Company sold its interests in the joint ventures for
$6,000,000 in cash and the return of the 1,708,497 shares of the post-Split
common stock owned by MD Seis (valued at $5.125 per share). In addition, the
Company received $2,992,144 in short-term notes, which were collected on July
31, 1995, representing payments for equipment sold and a return of amounts
previously advanced to the joint ventures and is entitled to receive royalties
of up to $1,500,000 based on future sales of speculative data currently being
acquired by the joint ventures. The net effect of these transactions was a gain
of $4,370,000 which was recognized during 1995.
5. PURCHASE OF GFS COMPANY
On October 30, 1992, the Company acquired GFS Company ("GFS") of Jackson,
Mississippi. GFS operates land and transition zone seismic crews. Under the
agreement, Digicon issued 225,000 shares of its pre-Reverse Split common stock
(valued at $1,153,000) and $117,000 in notes in exchange for all of the
outstanding stock of GFS. On completion of the transaction, GFS became a
wholly-owned subsidiary of the Company. The acquisition was accounted for using
the purchase method of accounting, and accordingly, goodwill of $4,245,000 was
recorded representing the excess of the purchase price over the fair value of
the net assets acquired. The goodwill is being amortized over a ten-year period
and the operations of GFS are included in the consolidated financial statements
beginning November 1, 1992.
6. PURCHASE OF DATA GRAPHICS LTD.
On December 1, 1994, VES acquired all of the outstanding capital stock of
Data Graphics Ltd. for a purchase price of $1,723,000, including $1,315,000 of
assumed liabilities. The acquisition has been accounted for using the purchase
method of accounting, and accordingly, goodwill of $1,155,000 was recorded
representing the excess of the purchase price over the fair value of the assets
acquired. The goodwill is being amortized over a ten-year period and the
operations of Data Graphics Ltd. are included in the consolidated financial
statements beginning December 1, 1994.
7. SALE OF INVENTORIES, ASSETS AND TECHNOLOGIES
On August 31, 1994, the Company entered into a series of agreements with
Syntron, Inc. ("Syntron") that provided for the sale of certain assets,
inventories, and technologies by the Company to Syntron and the assumption of
certain liabilities by Syntron. The sale price was $7,500,000 payable in cash of
$3,000,000 and $4,500,000 in credits to be applied by the Company against future
purchases from Syntron. The agreements also provide that for a period of three
years, Syntron will be the sole supplier to the Company of certain acquisition,
monitoring, and recording equipment that is competitively priced, deliverable on
a timely basis and is technologically competitive. In addition, the Company
F-16
<PAGE> 80
VERITAS DGC INC.
NOTES TO SUPPLEMENTAL CONSOLIDATED
FINANCIAL STATEMENTS -- (CONTINUED)
agreed to lease back certain marine and land recording equipment from Syntron
for a period of up to 36 months with minimum lease terms ranging from 7 1/2 to
17 1/2 months. The difference between the sale price and the net book value of
the net assets sold after discounting the credits by 2 1/2% was a $1,001,000
gain which was recognized on a pro rata basis over the minimum lease terms as a
reduction in rental expense. Unused credits in the amount of $1,168,000 are
included in accounts and notes receivable at July 31, 1996.
8. SHORT-TERM RELATED PARTY LOANS
The short-term related party loans provided for up to $3,000,000 in
advances and were collateralized, on a subordinated basis, by a majority of the
assets of Digicon. Interest was payable at prime plus 3% through January 26,
1995 and at prime plus 6% thereafter. Interest expense for the years ended July
31, 1994 and 1995 was $206,000 and $376,000, respectively. The loans were
subject to mandatory prepayment from a portion of the proceeds of certain
specified transactions, if and when such transactions occurred. As a result of
the completion of several such transactions, the loans were fully repaid on June
13, 1995. As further consideration for the facility, the Company issued common
stock purchase warrants in an amount directly related to the average outstanding
balance of the loans. See Notes 17 and 21.
9. LONG-TERM DEBT
The Company's long-term debt is as follows:
<TABLE>
<CAPTION>
JULY 31, JULY 31, JULY 31,
1994 1995 1996
-------- -------- --------
(IN THOUSANDS OF DOLLARS)
<S> <C> <C> <C>
Revolving credit agreement due July 1998, at prime
plus 1/4% (8.5% at July 31, 1996)................. $ 11,458
Revolving credit agreement due April 1997, at prime
plus 3%............................................ $ 12,446 $ 14,123
Secured term loan due July 1999, at prime plus 3/4%
(9.0% at July 31, 1996)............................ 6,000
Secured term loan due June 1997, at 10.75%........... 6,000 4,500
Secured term loan due July 1999, at prime plus 1/2%
(6.25% at July 31, 1996)........................... 1,240
Secured term loan due July 1999, at prime plus 1/2%
(8.75% at July 31, 1996)........................... 2,832
Equipment purchase obligations maturing through July
1999, at a weighted average rate of 10.28% at July
31, 1996........................................... 12,089 17,720 19,319
Secured term loan due July 1996, at 7.75%............ 454 185
Mortgage note payable due October 2005, at 10%....... 260 241
Real estate note maturing April 1995, at prime plus
1.25%.............................................. 80
Unsecured notes maturing through January 1995, at
10%................................................ 35
------- ------- -------
Total...................................... 31,104 36,788 41,090
Less current maturities.............................. 7,650 10,895 13,739
------- ------- -------
Due after one year......................... $ 23,454 $ 25,893 $ 27,351
======= ======= =======
</TABLE>
The revolving credit agreement due July 1998 is with a commercial bank and
provides a facility of up to $15,000,000. Advances under the agreement are
limited by a borrowing formula and are
F-17
<PAGE> 81
VERITAS DGC INC.
NOTES TO SUPPLEMENTAL CONSOLIDATED
FINANCIAL STATEMENTS -- (CONTINUED)
collateralized by a majority of the assets of the Company (except those assets
directly or indirectly owned by VES). The agreement provides for the collection
of certain of the Company's accounts receivable into cash collateral accounts.
Amounts applied against outstanding advances are available for reborrowing upon
presentation of evidence of adequate borrowing base coverage. Interest is
payable monthly at prime plus 1/4%. The agreement limits, among other things,
the Company's right, without consent of the lender, to take certain actions
including creating indebtedness in excess of specified amounts and declaring or
paying dividends, and requires the Company to maintain certain financial ratios.
At July 31, 1996, $3,542,000 was available for borrowing under this agreement.
The revolving credit agreement due April 1997 was with a finance company
and provided a revolving credit facility of up to $17,000,000 (increased from
$15,000,000 in April 1995) through April 11, 1997. The facility was repaid in
July 1996 with proceeds from the revolving credit agreement due July 1998.
The secured term loan due July 1999 is with a commercial bank and is due in
36 monthly installments of $166,667 plus interest at prime plus 3/4% and is
secured by a majority of the assets of the Company (except those assets directly
or indirectly owned by VES.
The secured term loan due June 30, 1997, bore interest at 10.75% payable
quarterly. A principal payment of $1,500,000 was paid on June 30, 1996, and the
remaining unpaid principal was due June 30, 1997. In connection with the loan,
the Company issued common stock purchase warrants to the lender. See Note 17.
The loan was repaid with proceeds from the secured term loan due July 1999.
The secured term loans due July 1999 provide for advances for equipment
purchases up to Canadian $5.5 million and Canadian $4.0 million, respectively,
and advances are payable in 36 equal monthly installments. Advances bear
interest at the prime rate (as defined) plus .5% and are secured by the
equipment purchased. The agreements require VES to maintain certain financial
ratios. Amounts available for borrowing under the agreements at July 31, 1996
were $2,760,000 and $76,000, respectively.
The Company's equipment purchase obligations represent installment loans
and capitalized lease obligations primarily related to computer and seismic
equipment.
Annual maturities of long-term debt for the next five years are as follows:
<TABLE>
<CAPTION>
JULY 31, JULY 31,
FISCAL YEAR 1995 1996
------------------------------------------------------- -------- --------
(IN THOUSANDS OF
DOLLARS)
<S> <C> <C>
1996................................................. $ 10,895
1997................................................. 22,246 $ 13,739
1998................................................. 3,231 21,531
1999................................................. 230 5,555
2000................................................. 24 86
2001................................................. 162 29
Thereafter........................................... 150
-------- --------
Total........................................ $ 36,788 $ 41,090
======= =======
</TABLE>
F-18
<PAGE> 82
VERITAS DGC INC.
NOTES TO SUPPLEMENTAL CONSOLIDATED
FINANCIAL STATEMENTS -- (CONTINUED)
During the year ended July 31, 1993, the Company incurred interest costs of
$1,928,000. The Company capitalized $204,000 of this amount as a cost of
leasehold improvements to a chartered vessel. No interest was capitalized during
the years ended July 31, 1994, 1995 and 1996.
10. INCOME TAXES
The tax effects of significant items comprising the Company's net deferred
tax position are as follows:
<TABLE>
<CAPTION>
JULY 31, JULY 31, JULY 31,
1994 1995 1996
-------- -------- --------
(IN THOUSANDS OF DOLLARS)
<S> <C> <C> <C>
Deferred tax assets:
Difference between book and tax basis
of property and equipment........... $ 3,488 $ 4,544 $ 3,107
Difference between book and tax basis
of proprietary seismic data......... 1,943 4,526 8,443
Operating loss carryforwards........... 47,046 50,156 45,902
Tax credit carryforwards............... 6,023 5,761 3,580
Other.................................. 595 156 1,304
-------- -------- --------
Total.......................... 59,095 65,143 62,336
Deferred tax liabilities:
Other.................................. (1,923) (840) (1,748)
-------- -------- --------
Net deferred tax assets.................. 57,172 64,303 60,588
Valuation allowance...................... (58,612) (64,829) (61,055)
-------- -------- --------
Net deferred tax liability............... $ (1,440) $ (526) $ (467)
======== ======== ========
</TABLE>
Provision for income taxes consists of the following:
<TABLE>
<CAPTION>
FOR THE YEARS ENDED JULY 31,
---------------------------------------
1993 1994 1995 1996
------ ------ ------ ------
(IN THOUSANDS OF DOLLARS)
<S> <C> <C> <C> <C>
Current -- U.S........................ $ 54 $ 34
Current -- foreign.................... 3,143 $2,449 4,687 $2,068
Deferred -- foreign................... (14) 3,480 (914) (59)
------ ------ ------ ------
Total....................... $3,183 $5,929 $3,807 $2,009
====== ====== ====== ======
</TABLE>
As of July 31, 1995 and 1996, the Company had U.S. net operating loss
carryforwards ("NOL's") of approximately $88,756,000 and $86,890,000,
respectively which expire in the years 1998 through 2010. Included in such
amounts are $76,885,000 and $73,681,000, at July 31, 1995 and 1996,
respectively, of NOL's that existed prior to the quasi-reorganization. See Note
1. As of July 31, 1995 and 1996, approximately $5,761,000 and $3,580,000,
respectively of investment tax credit carryforwards, which will expire in the
years 1997 through 1999, were available to reduce future U.S. income taxes.
Foreign operations had NOL's of approximately $62,498,000 and $49,061,000
at July 31, 1995 and 1996, respectively, which are available indefinitely to
reduce future foreign taxable income in specific jurisdictions. Included in such
amounts are $48,900,000 and $38,315,000 at July 31, 1995 and 1996, respectively
of NOL's that existed prior to the quasi-reorganization. See Note 1. The foreign
component of income (loss) before provision for income taxes was $241,000,
$4,018,000, $(747,000) and $(135,000) for the years ended July 31, 1993, 1994,
1995 and 1996, respectively.
F-19
<PAGE> 83
VERITAS DGC INC.
NOTES TO SUPPLEMENTAL CONSOLIDATED
FINANCIAL STATEMENTS -- (CONTINUED)
A reconciliation of income tax expense computed at the statutory rate to
the provision included in the supplemental Consolidated Statements of Operations
is as follows:
<TABLE>
<CAPTION>
YEARS ENDED JULY 31,
-------------------------------------
1993 1994 1995 1996
----- ----- ------ ------
<S> <C> <C> <C> <C>
Income tax at the statutory rate...................... 2,027 183 5,105 1,541
Increase (reduction) in taxes resulting from:
Foreign losses with no tax recovery................. 764 4,221 2,505 4,985
Foreign withholding tax cost........................ 0 1,400 274
Foreign exchange capital loss....................... 2,410 148 51
Foreign rate adjustment............................. (710) (93) (131)
Non deductible expenses............................. 419 258 315
Write-off of capital investment in foreign
subsidiary....................................... 0 (5,775) (4,734)
Other............................................... 392 (594) 259 (292)
----- ------ ------ ------
3,183 5,929 3,807 2,009
===== ====== ====== ======
</TABLE>
IRS regulations restrict utilization of NOL's for any company in which an
"ownership change" (as defined in Section 382 of the Internal Revenue Code) has
occurred. The Company has performed the required testing and has concluded that
an "ownership change" occurred in connection with the issuance of common stock
through a public offering made by the Company on January 6, 1992. As a result,
the future utilization of U.S. NOL's existing at the date of the "ownership
change" will be limited to approximately $4,000,000 per year. This limitation
had no effect on the provision for income taxes for the years ended July 31,
1993, 1994, 1995 and 1996. To the extent that any portion of this annual
limitation is not used in any year, it may be carried over and added to the
annual limitation of succeeding years. At July 31, 1995 and 1996, the
accumulated unused limitation on NOL's existing at the date of the "ownership
change" was approximately $12,948,000 and $16,003,000, respectively.
11. DEFERRED CREDITS
In August 1992, the Company entered into agreements with a customer
pursuant to which the Company received certain seismic equipment with a fair
value of approximately $1,792,000 and was obligated to allow $7,800,000 in
discounts at specified rates on future seismic services performed by the Company
for such customer. The Company recorded deferred revenue equal to the fair value
of seismic equipment at the time the equipment was received. The deferred
revenue is amortized as an adjustment to revenues at a rate determined by the
ratio of revenues generated by the customer during a reporting period to total
revenues as the customer purchases seismic services eligible for the discounts.
At July 31, 1996 remaining discounts in the amount of $3,041,000 were available
to such customer and the remaining unrecognized deferred revenue is $363,000.
The Company also has $1,500,000, $880,000 and $2,078,000 at July 31, 1994,
1995 and 1996, respectively, included in other accrued liabilities relating to
deferred credits earned by certain customers in conjunction with their original
participation in certain of the Company's multi-client data surveys. These
credits may be applied by the customers against future invoiced amounts.
F-20
<PAGE> 84
VERITAS DGC INC.
NOTES TO SUPPLEMENTAL CONSOLIDATED
FINANCIAL STATEMENTS -- (CONTINUED)
12. COMMITMENTS AND CONTINGENT LIABILITIES
Total rentals of vessels, equipment and office facilities charged to
operations amounted to $17,904,000, $22,631,000, $27,651,000 and $28,210,000 for
the years ended July 31, 1993, 1994, 1995 and 1996, respectively.
Minimum rentals payable under operating leases, principally for office
space and vessel charters with remaining noncancellable terms of at least one
year are as follows:
<TABLE>
<CAPTION>
FISCAL JULY 31, JULY 31,
YEAR 1995 1996
--------------------------------------------------------------- -------- --------
(IN THOUSANDS OF
DOLLARS)
<S> <C> <C>
1996......................................................... $ 15,532
1997......................................................... 8,640 $ 15,268
1998......................................................... 7,539 9,650
1999......................................................... 6,855 8,373
2000......................................................... 3,576 4,222
2001......................................................... 7,562 7,373
2002-2013...................................................... 6,745
</TABLE>
In connection with the Company's 1997 capital expenditure program the
Company has commitments of $4,546,000 outstanding at July 31, 1996.
The Company has an employment agreement with a former employee, who was
also a director, that provides for salary payments of $25,417 per month plus
certain employee benefits through December 31, 1995, the end of the employment
period as defined. The agreement also contains a non-compete clause for a period
of three years after the employment period during which time the employee will
receive payments of $12,709 per month plus certain employee benefits.
13. EMPLOYEE BENEFITS
The Company maintains a 401(k) plan in which employees of certain of
Digicon's majority-owned domestic foreign subsidiaries are eligible to
participate. However, employees of Digicon's foreign subsidiaries who are
covered under a foreign deferred compensation plan are not eligible. Employees
are permitted to make contributions of up to 10% of their salary to a maximum of
$9,240 per year. Generally, the Company will contribute an amount equal to
one-half of the employee's contribution up to $6,000 or 6% (whichever is less)
of the employee's salary; however, if consolidated pre-tax income for any fiscal
year is less than the amount required to be contributed by the Company, the
Company may elect to reduce its contribution, but in no event may it reduce the
total contribution to less than 25% of the employee contribution. The Company
may make additional contributions from its current or cumulative net profits in
an amount to be determined by the Board of Directors. Employer matching
contributions to the 401(k) plan were $137,000 in 1993, $286,000 in 1994,
$281,000 in 1995 and $314,000 in 1996.
F-21
<PAGE> 85
VERITAS DGC INC.
NOTES TO SUPPLEMENTAL CONSOLIDATED
FINANCIAL STATEMENTS -- (CONTINUED)
The Company initiated an employee nonqualified stock option plan on
September 1, 1992. Options are granted to Digicon's officers and key employees
and are exercisable no earlier than six months after the date of grant. The
option price per share shall not be less than the lesser of (i) fair market
value of the common stock on the date the option is granted or (ii) the average
fair market value for the common stock during the 30 trading days ending on the
trading day next preceding the date the option is granted. Options expire ten
years from the date of grant. The exercise prices and number of options existing
prior to January 17, 1995 have been adjusted for the Reverse Split. See Note 14.
The Company has authorized 1,158,333 shares of post-Reverse Split common stock
to be issued under the plan.
<TABLE>
<CAPTION>
NUMBER OF EXERCISE
OPTIONS PRICE
--------- ------------
<S> <C> <C>
Balance, July 31, 1993............................ 560,000 $13.50
Options cancelled............................... (70,667) $6.40-$13.50
-------
Balance, July 31, 1994............................ 489,333 $13.50
Options issued.................................. 13,333 $6.00
Options cancelled............................... (79,666) $13.50
-------
Balance, July 31, 1995............................ 423,000 $6.00-$13.50
Options issued.................................. 195,500 $5.25
Options cancelled............................... (31,680) $5.25-$13.50
Options exercised............................... (181,497) $13.50
-------
Balance, July 31, 1996............................ 405,323 $5.25-$13.50
=======
Options exercisable, July 31, 1996................ 234,823
=======
</TABLE>
The Company also initiated a stock option plan for Digicon's non-employee
directors (the "Director Plan") providing for stock options to be granted to
each non-employee director of the Company. The Director Plan provides that on
December 31 of each year, each eligible director shall be granted an option to
purchase 3,333 shares of the Company's post-Reverse Split common stock, subject
to an aggregate limit of 16,667 shares for each director. The exercise price for
each option granted shall be the average closing price of the common stock for
the 30 trading days prior to the date of grant. The exercise prices of options
existing prior to January 17, 1995 have been adjusted for the Reverse Split.
Options may be exercised at any time (i) after the later of six months following
the date of grant or the first anniversary of the director's service on the
board and (ii) before the sixth anniversary of the date of grant, when the
option expires. No options under the Director Plan have been exercised. The
Company has authorized 200,000 shares of post-Reverse Split common stock to be
issued under the Director Plan.
<TABLE>
<CAPTION>
NUMBER
OF EXERCISE
OPTIONS PRICE
------ ------------
<S> <C> <C>
Balance, July 31, 1993.............................. 20,000 $12.87
Options issued.................................... 16,667 $6.72
------
Balance, July 31, 1994.............................. 36,667 $6.72-$12.87
Options issued.................................... 19,998 $4.13
------
Balance, July 31, 1995.............................. 56,665 $4.13-$12.87
Options issued.................................... 19,994 $6.76
------
Balance, July 31, 1996.............................. 76,659 $4.13-$12.87
======
Options exercisable, July 31, 1996.................. 76,659
======
</TABLE>
F-22
<PAGE> 86
VERITAS DGC INC.
NOTES TO SUPPLEMENTAL CONSOLIDATED
FINANCIAL STATEMENTS -- (CONTINUED)
The Company maintains a contributory defined benefit pension plan (the
"Pension Plan") for eligible participating employees in Digicon's United Kingdom
offices. Monthly contributions by employees are equal to 3.5% of their salaries
with the Company providing an additional contribution in an actuarially
determined amount necessary to fund future benefits to be provided under the
Pension Plan. Benefits provided are based upon 1/60 of the employee's final
pensionable salary (as defined) for each complete year of service up to 2/3 of
the employee's final pensionable salary and increase annually at 5%. The Pension
Plan also provides for 50% of such actual or expected benefits to be paid to a
surviving spouse upon the death of a participant. Pension Plan assets consist
mainly of investments in marketable securities which are held and managed by an
independent trustee. The net periodic pension costs are as follows:
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
JULY 31,
----------------------------
1994 1995 1996
------ ------ ------
(IN THOUSANDS OF DOLLARS)
<S> <C> <C> <C>
Service costs (benefits earned during the
period)........................................ $ 288 $ 275 $ 224
Interest costs on projected benefit obligation... 249 253 292
Return on assets................................. (226) (275) (312)
Net amortization and deferral.................... 4 5 5
----- ----- ------
Net periodic pension costs....................... $ 315 $ 258 $ 209
===== ===== ======
</TABLE>
The funded status of the Pension Plan is as follows:
<TABLE>
<CAPTION>
JULY 31, JULY 31, JULY 31,
1994 1995 1996
------ ------ ------
(IN THOUSANDS OF DOLLARS)
<S> <C> <C> <C>
Plan assets at fair value...................... $2,841 $3,444 $4,029
Actuarial present value of accumulated vested
benefit obligations.......................... 2,472 3,026 3,696
Effect of future salary increases.............. 437 517 633
------- ------- ------
Projected benefit obligation................. 2,909 3,543 4,329
------- ------- ------
Projected benefit obligation in excess of plan
assets....................................... (68) (99) (300)
Unrecognized prior service cost................ 68 13 179
------- ------- ------
Pension liability.............................. $ $ (86) $ (121)
======= ======= ======
</TABLE>
The weighted average assumptions used to determine the projected benefit
obligation and the expected long-term rate of return on assets for the years
ended July 31, 1994, 1995 and 1996 are as follows:
<TABLE>
<S> <C>
Discount rate........................................................ 8.5%
Rates of increase in compensation levels............................. 6.5%
Expected long-term rate of return on assets.......................... 9.0%
</TABLE>
F-23
<PAGE> 87
VERITAS DGC INC.
NOTES TO SUPPLEMENTAL CONSOLIDATED
FINANCIAL STATEMENTS -- (CONTINUED)
At the date of combination (see Note 2), options to purchase of VES Common
Stock ("VES Option") were converted into options to purchase shares of the
Company's common stock at an exchange ratio of 0.8 of an option in the Company's
common stock per VES Option. All options are immediately exercisable. Options to
purchase the Company's common stock converted from VES Options are as follows:
<TABLE>
<CAPTION>
NUMBER OF EXERCISE
OPTIONS PRICE
--------- ------------
<S> <C> <C>
Balance, July 31, 1993............................ -- --
Options issued.................................. 256,500 $7.28
Options cancelled............................... (14,200) $7.28
Options exercised............................... (17,620) $7.28
-------
Balance, July 31, 1994............................ 224,680 $7.28
Options issued.................................. 200,016 $7.28
Options cancelled............................... (27,098) $7.28
Balance, July 31, 1995............................ 397,598 $7.28
Options issued.................................. 184,666 $5.79-$7.16
Options cancelled............................... (19,734) $5.79-$7.28
Options exercised............................... (206,674) $5.79-$7.28
-------
Balance, July 31, 1996............................ 355,858 $5.79-$7.28
=======
</TABLE>
14. REVERSE STOCK SPLIT
On December 14, 1994, shareholders approved a one for three reverse stock
split (the "Reverse Split") to holders of record on January 17, 1995, with no
change in par value. On January 17, 1995, there were 33,404,816 shares of common
stock outstanding which were converted into 11,134,939 shares of post-Reverse
Split common stock. The net effect of these transactions was a charge to common
stock and a credit to additional paid-in capital of approximately $223,000. All
references to the number of shares and per share amounts have been retroactively
adjusted for the effects of the Reverse Split unless otherwise indicated.
On January 17, 1995, there were 1,363,637 publicly traded common stock
purchase warrants expiring on July 5, 1996 with an exercise price of $6.00 per
share. In connection with the Reverse Split and as required by the American
Stock Exchange, the publicly traded warrants were converted, effective January
17, 1995, into approximately 454,545 post-Reverse Split common stock purchase
warrants with an exercise price of $18.00. Also on January 17, 1995, there were
340,000 common stock purchase warrants expiring on June 29, 1997 with an
exercise price of $2.00 per share which were adjusted in connection with the
Reverse Split to represent 113,333 shares of post-Reverse Split common stock
issuable upon exercise of these warrants at an exercise price of $6.00.
Additionally, there were 1,975,000 and 600,000 shares of pre-Reverse Split
common stock authorized under the 1992 Employee Nonqualified Stock Option Plan
and 1992 Non-Employee Director Stock Option Plan, respectively. In connection
with the Reverse Split, these authorized shares were decreased to 658,333 and
200,000 authorized shares of post-Reverse Split common stock under the Employee
Plan and Director Plan, respectively, and the new exercise prices were tripled.
F-24
<PAGE> 88
VERITAS DGC INC.
NOTES TO SUPPLEMENTAL CONSOLIDATED
FINANCIAL STATEMENTS -- (CONTINUED)
15. COMMON AND PREFERRED STOCK
See Note 14 relating to the Reverse Split consummated on January 17, 1995.
In December 1992, the Company sold, in an underwritten public offering,
5,456,900 shares of pre-Reverse Split common stock at $4.25 per share. The
Company incurred approximately $2,104,000 of issuance costs in conjunction with
the offering and these costs have been charged to additional paid-in capital.
See also Notes 4 and 5 relating to the issuance of pre-Reverse Split common
stock for the purchase of investment in FSU joint ventures and GFS Company.
On June 6, 1995, 850,000 shares of treasury stock were sold to an
institutional investor at a price of $4.6875 per share.
In September 1995, the Company sold its 858,497 shares of treasury stock to
a group of institutional investors at a price of $4.6875 per share for total
cash proceeds of $4,024,204.
The board of directors, without any action by the stockholders, is
authorized to issue up to 1 million shares of preferred stock, par value, $.01,
in one or more series and to determine the voting rights, preferences as to
dividends and in liquidation and the conversion and other rights of such stock.
There are no shares of preferred stock outstanding as of July 31, 1996.
16. EMPLOYEE STOCK PURCHASE
In July 1991, the Company authorized 707,547 shares of pre-Reverse Split
common stock for sale to its employees at a price of $2.12 per share. Employee
purchases were voluntary and the stock was fully subscribed at the Closing Date.
On the Closing Date, the Company issued the stock to the employees upon receipt
of cash in an amount of par value. At the employee's option, the remaining
purchase price could be paid in cash on the Closing Date or by payroll
deductions over a period of 24 months.
At July 31, 1992, agreements in the amount of $48,000 were outstanding and
in accordance with Staff Accounting Bulletin No. 40, Topic 4-E were excluded
from additional paid-in capital. As of July 31, 1993, all proceeds due under the
agreements had been received and are included in additional paid-in capital.
17. WARRANTS
The following number of warrants issued and exercise prices have been
adjusted for the Reverse Split consummated on January 17, 1995. See Note 14.
In conjunction with the cancellation of a previous issue of common and
preferred stock and certain other liabilities, the Company authorized 454,545
warrants which could exercised for 454,545 shares of common stock. The warrants
were issued for a term of five years beginning July 5, 1991 at an exercise price
of $18.00 per share. The warrants could only be exercised for cash. Warrants for
29,433 shares were exercised on July 5, 1996 and the remaining warrants expired.
In conjunction with the Company's secured term loan due June 30, 1997, the
Company issued 113,333 warrants which expire June 29, 1997. The warrants were
exercisable for cash at a price of $18.00 per share. In conjunction with an
amendment to the loan in August 1994, which revised certain financial ratio
covenants, the exercise price of the warrants was reduced to $6.00 per share.
F-25
<PAGE> 89
VERITAS DGC INC.
NOTES TO SUPPLEMENTAL CONSOLIDATED
FINANCIAL STATEMENTS -- (CONTINUED)
In conjunction with the Company's short-term related party loans, the
Company issued warrants to purchase 120,000 common shares to the lenders. The
warrants may be exercised for cash at a price of $4.50 per share and will expire
July 26, 1999.
18. WRITE-OFF/WRITE-DOWN OF ASSETS AND RESTRUCTURING CHARGES
In connection with the Combination (see Note 2), management committed the
Company to a plan to upgrade its seismic data processing hardware (see Note 12).
Certain equipment is scheduled to be replaced by October 1996. During July 1996,
the Company recognized impairment of $3,628,000 relating to the abandonment of
the equipment to be replaced.
In response to operating losses in certain markets which adversely impacted
the Company's liquidity during the year ended July 31, 1994, management made a
decision to restructure its operations and revalue certain assets in April 1994
and accordingly incurred $7,261,000 in total expenses relating to such decision.
Costs of $1,188,000 are included in cost of services and include non-recurring
expenses associated with certain contract liabilities. Also included in the
$7,261,000 is $5,235,000 for the write-off/write-down for the impairment of
assets to their net realizable value. A portion of the write-off pertains to
marine ($2,437,000) and land ($552,000) acquisition assets related to
decommissioned marine vessels and stacked land crews. The write-off/write-down
for impairment of assets also includes the write-down of certain other marine
and land acquisition assets that were not a direct result of the restructuring
program ($1,048,000). In addition, the Company wrote down data processing
equipment ($1,198,000), particularly in the Far East, based on the declining
market. The remaining costs are restructuring charges of $838,000 which relates
to severance costs for a reduction in the Company's workforce of 82 employees.
Employees to be terminated are from the processing centers, marine and land
crews, marine support, manufacturing, research and development and corporate
groups. As of July 31, 1996, 79 employees have been terminated and $670,000 in
severance costs have been paid. The Company estimates that all remaining
liabilities in the amount of $168,000 will be paid during fiscal 1997.
19. OTHER COSTS AND EXPENSES
Other costs and expenses consist of the following:
<TABLE>
<CAPTION>
FOR THE YEARS ENDED JULY 31,
-----------------------------------------
1993 1994 1995 1996
------ -------- ------ ------
(IN THOUSANDS OF DOLLARS)
<S> <C> <C> <C> <C>
Net foreign currency exchange (gains) losses... $ 636 $ 554 $ 290 $ (156)
Net (gain) loss on disposition of property and
equipment.................................... (488) (1,592) 919 875
Interest income................................ (320) (540) (943) (547)
Other.......................................... (38) (255) (34) 374
---- ---- ---- ----
Total................................ $ (210) $ (1,833) $ 232 $ 546
==== ==== ==== ====
</TABLE>
F-26
<PAGE> 90
VERITAS DGC INC.
NOTES TO SUPPLEMENTAL CONSOLIDATED
FINANCIAL STATEMENTS -- (CONTINUED)
20. GEOGRAPHICAL INFORMATION
Substantially all of the Company's operations consist of geophysical
services. The following tables provide relevant information for the four years
ended July 31, 1993, 1994, 1995 and 1996, grouped by major geographic areas.
Intersegment sales between geographic areas are valued at current market prices.
<TABLE>
<CAPTION>
REVENUES
---------------------------------------- OPERATING
UNAFFILIATED INTERSEGMENT PROFIT IDENTIFIABLE
CUSTOMERS SALES TOTAL (LOSS) ASSETS
--------- -------- --------- -------- ---------
(IN THOUSANDS OF DOLLARS)
<S> <C> <C> <C> <C> <C>
YEAR ENDED JULY 31, 1993:
Geographic areas:
Europe & Middle East......... $ 24,699 $ 108 $ 24,807 $ 4,374 $ 33,327
Africa....................... 13,020 13,020 2,392 3,850
Far East..................... 27,783 74 27,857 (425) 17,159
South America................ 4,571 4,571 697 8,172
Canada....................... 32,244 32,244 5,605 10,815
Eliminations................. (182) (182)
--------- -------- --------- -------- ---------
Totals.................. 102,317 102,317 12,643 73,323
United States................ 43,773* 4,520 48,293* (852) 53,745
Eliminations................. (4,520) (4,520)
--------- -------- --------- -------- ---------
Totals.................. 146,090 146,090 11,791 127,068
Other........................ 210
Corporate, general and
administrative expenses.... (4,112)
Interest..................... (1,928)
Income taxes................. (3,183)
Investments in 50% or less-
owned companies and joint
ventures................... (2,204) 7,033
Corporate assets............. 7,364
--------- -------- --------- -------- ---------
Totals.................. $ 146,090 $ $ 146,090 $ 574 $ 141,465
======== ======= ======== ======= ========
</TABLE>
- ---------------
* Includes export sales of $10,138.
During 1993, United States, Europe & Middle East, Africa and Far East
revenues include sales to a client which accounted for 12% of total revenues.
Depreciation and amortization expense was $2,363,000 for Europe & Middle East,
$230,000 for Africa, $430,000 for Far East, $140,000 for South America,
$3,529,000 for Canada and $5,049,000 for United States. Capital expenditures
were $15,302,000 for Europe & Middle East, $275,000 for Africa, $2,688,000 for
Far East, $3,692,000 for South America, $8,690,000 for Canada and $11,456,000
for United States.
F-27
<PAGE> 91
VERITAS DGC INC.
NOTES TO SUPPLEMENTAL CONSOLIDATED
FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
REVENUES
---------------------------------------- OPERATING
UNAFFILIATED INTERSEGMENT PROFIT IDENTIFIABLE
CUSTOMERS SALES TOTAL (LOSS) ASSETS
--------- -------- --------- -------- ---------
(IN THOUSANDS OF DOLLARS)
<S> <C> <C> <C> <C> <C>
YEAR ENDED JULY 31, 1994:
Geographic areas:
Europe & Middle East........ $ 29,891 $ 1,697 $ 31,588 $ (3,120) $ 28,848
Far East.................... 16,958 16,958 (7,851) 14,151
South America............... 17,669 17,669 (531) 16,545
Canada...................... 46,501 26 46,527 8,552 26,048
Eliminations................ (1,697) (1,697)
--------- ------- --------- --------- ---------
Totals................. 111,019 26 111,045 (2,950) 85,592
United States............... 67,373* 1,936 69,309* 8,061 69,365
Eliminations................ (1,962) (1,962)
--------- ------- --------- --------- ---------
Totals................. 178,392 178,392 5,111 154,957
Other....................... 1,833
Corporate, general and
administrative expenses... (3,191)
Interest.................... (3,213)
Income taxes................ (5,929)
Investments in 50% or less-
owned companies and joint
ventures.................. (4,965) 9,639
Corporate assets............ 7,218
--------- ------- --------- --------- ---------
Totals................. $ 178,392 $ $ 178,392 $ (10,354) $ 171,814
======== ======= ======== ======== ========
</TABLE>
- ---------------
* Includes export sales of $1,501.
There was no single client that accounted for 10% or more of total revenues
during the year ended July 31, 1994. Operating profit (loss) includes
restructuring charges and write-off/writedown for impairment of assets of
$182,000 for Europe & Middle East, $1,416,000 for Far East, and $5,663,000 for
United States. Depreciation and amortization expense was $4,214,000 for Europe &
Middle East, $877,000 for Far East, $1,730,000 for South America, $4,927,000 for
Canada, and $7,350,000 for United States. Capital expenditures were $2,031,000
for Europe & Middle East, $444,000 for Far East, $2,291,000 for South America,
$16,481,000 for Canada and $8,514,000 for United States.
F-28
<PAGE> 92
VERITAS DGC INC.
NOTES TO SUPPLEMENTAL CONSOLIDATED
FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
REVENUES
------------------------------------ OPERATING
UNAFFILIATED INTERSEGMENT PROFIT IDENTIFIABLE
CUSTOMERS SALES TOTAL (LOSS) ASSETS
--------- ------ --------- -------- ---------
(IN THOUSANDS OF DOLLARS)
<S> <C> <C> <C> <C> <C>
YEAR ENDED JULY 31, 1995:
Geographic areas:
Europe & Middle East........... $ 20,230 $ 579 $ 20,809 $ 2,188 $ 11,976
Far East....................... 25,918 22 25,940 2,621 20,455
South America.................. 37,867 83 37,950 (82) 26,735
Canada......................... 44,297 148 44,445 5,668 27,617
Eliminations................... (601) (601)
--------- ------ --------- -------- ---------
Totals.................... 128,312 231 128,543 10,395 86,783
United States.................. 87,318 387 87,705 8,170 90,522
Eliminations................... (618) (618)
--------- ------ --------- -------- ---------
Totals.................... 215,630 215,630 18,565 177,305
Other.......................... (232)
Corporate, general and
administrative expenses...... (2,946)
Interest....................... (5,170)
Income taxes................... (3,807)
Gain on sale of investment in
FSU joint ventures........... 4,370
Investments in 50% or
less-owned companies and
joint ventures............... (5,186) 187
Corporate assets............... 6,848
--------- ------ --------- -------- ---------
Totals.................... $ 215,630 $ $ 215,630 $ 5,594 $ 184,340
======== ====== ======== ======= ========
</TABLE>
- ---------------
* Includes export sales of $ .
There was no single client that accounted for 10% or more of total revenues
during the year ended July 31, 1995. During 1995, depreciation and amortization
expense was $3,984,000 for Europe & Middle East, $1,040,000 for Far East,
$4,390,000 for South America, $6,593,000 for Canada and $7,919,000 for United
States. Capital expenditures were $1,709,000 for Europe & Middle East,
$1,240,000 for Far East, $6,651,000 for South America, $10,531,000 for Canada
and $13,502,000 for United States.
F-29
<PAGE> 93
VERITAS DGC INC.
NOTES TO SUPPLEMENTAL CONSOLIDATED
FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
REVENUES
-------------------------------------- OPERATING
UNAFFILIATED INTERSEGMENT PROFIT IDENTIFIABLE
CUSTOMERS SALES TOTAL (LOSS) ASSETS
--------- -------- --------- -------- ---------
(IN THOUSANDS OF DOLLARS)
<S> <C> <C> <C> <C> <C>
YEAR ENDED JULY 31, 1996:
Geographic areas:
Europe & Middle East......... $ 37,394 $ 1,532 $ 38,926 $ 7,220 $ 35,463
Far East..................... 30,558 30,558 1,055 23,590
South America................ 36,346 92 36,438 (1,915) 29,758
Canada....................... 47,423 87 47,510 3,683 30,666
Eliminations.................
--------- -------- --------- -------- ---------
Totals.................. 151,721 1,711 153,432 10,043 119,477
United States................ 98,875 61 98,936 6,910 77,561
Eliminations................. (1,772) (1,772)
--------- -------- --------- -------- ---------
Totals.................. 250,596 250,596 16,953 197,038
Other........................ (546)
Corporate, general and
administrative expenses.... (2,872)
Interest..................... (5,466)
Income taxes................. (2,009)
Merger Related Costs......... (3,666)
Gain on sale of investment in
FSU joint ventures.........
Investments in 50% or less-
owned companies and joint
ventures................... (1,113) 1,463
Corporate assets............. 92
--------- -------- --------- -------- ---------
Totals.................. $ 250,596 $ $ 250,596 $ 1,281 198,593
======== ======= ======== ======= ========
</TABLE>
- ---------------
* Includes export sales of $ .
There was no single client that accounted for 10% or more of total revenues
during the year ended July 31, 1996. During 1996, depreciation and amortization
expense was $5,182,000 for Europe & Middle East, $1,707,000 for Far East,
$4,655,000 for South America, $7,689,000 for Canada and $7,682,000 for United
States. Capital expenditures were $4,088,000 for Europe & Middle East,
$6,795,000 for Far East, $4,945,000 for South America, $5,737,000 for Canada and
$14,016,000 for United States.
F-30
<PAGE> 94
VERITAS DGC INC.
NOTES TO SUPPLEMENTAL CONSOLIDATED
FINANCIAL STATEMENTS -- (CONTINUED)
21. CERTAIN TRANSACTIONS
During fiscal 1994, the Company entered into two credit facilities with
shareholders SOROS Capital L.P., CCF Jupiter L.P. and Jupiter Management Co.,
Inc. (collectively, "the Lenders"). In November 1993, the Company executed a
secured term loan agreement with the Lenders which provided loans totaling
$3,386,000. The loans were repaid in full in April 1994, and the facility was
terminated. In July 1994, the Company executed a second secured loan agreement
with the Lenders providing up to $3,000,000 of advances. See Note 8. The second
facility was repaid in full in June 1995. In connection with the second
facility, the Lenders received warrants to purchase the Company's common stock.
See Note 17. During the fiscal year ended July 31, 1994 and 1995, $206,000 and
$376,000, respectively, was paid to the Lenders as interest and fees under the
two facilities.
In fiscal 1994 and 1995, the Company performed certain data acquisition,
processing, marketing and training services for various co-venturers and
recorded sales in the amount of $1,279,000 and $1,633,000, respectively. At July
31, 1994 and 1995, there was approximately $310,000 and $300,000, respectively,
in outstanding receivables related to these transactions.
The Company sold certain assets during July 1994 to Caspian Geophysical, a
joint venture in which the Company had an indirect 10% interest, for a note
receivable payable in 36 monthly installments of $41,667 with an imputed
interest rate of 10%. The net gain recorded after eliminating intercompany
profits was $148,000. The note receivable was repaid in June 1995 as a result of
the sale of the Company's interest in the joint venture. See Note 4.
The Company is party to transactions with P.T. Digicon Mega Pratama ("P.T.
Digicon"), on 80% owned joint venture (see Note 3) in the normal course of
business. During the years ended July 31, 1993, 1994, 1995 and 1996 the Company
charged P.T. Digicon $3,762,000, $1,069,000, $607,000 and $1,207,000 relating to
allocations of corporate administrative expenses and actual expenses incurred by
P.T. Digicon for salary cost, insurance and equipment charges. The Company
purchased certain equipment from P.T. Digicon during the years ended July 31,
1993 and 1994 for a purchase price of $108,000 and $1,580,000, respectively,
which represented P.T. Digicon's net book value of such equipment. Additionally,
during the year ended July 31, 1993, P.T. Digicon purchased certain proprietary
software from the Company for $1,436,000. Advances from the Company to P.T.
Digicon of $9,692,000, $12,439,000 and $14,531,000 at July 31, 1994, 1995 and
1996, respectively, have no formal repayment terms and do not bear interest.
F-31
<PAGE> 95
VERITAS DGC INC.
NOTES TO SUPPLEMENTAL CONSOLIDATED
FINANCIAL STATEMENTS -- (CONTINUED)
22. SELECTED UNAUDITED SUPPLEMENTAL QUARTERLY FINANCIAL DATA
The Company's quarterly supplemental consolidated financial statements for
the years ended July 31, 1994, 1995 and 1996 have been restated to account for a
pooling of interests between Digicon Inc. and Veritas Energy Services Inc. (See
Note 2). In addition, the Company's quarterly supplemental consolidated
financial statements for the year ended July 31, 1996 has been restated to
account for the Company's investment in an 80% owned joint venture on the equity
method of accounting rather than on consolidation accounting (See Note 3).
FOR THE YEARS ENDED JULY 31, 1994, 1995 AND 1996
(IN THOUSANDS OF DOLLARS, EXCEPT PER SHARE AMOUNTS)*
<TABLE>
<CAPTION>
FOR THE YEAR ENDED JULY 31, 1994
---------------------------------------------------------------------------------------------
1ST QUARTER 2ND QUARTER 3RD QUARTER 4TH QUARTER
--------------------- --------------------- --------------------- ---------------------
AS AS AS AS
PREVIOUSLY AS PREVIOUSLY AS PREVIOUSLY AS PREVIOUSLY AS
REPORTED RESTATED REPORTED RESTATED REPORTED RESTATED REPORTED RESTATED
---------- -------- ---------- -------- ---------- -------- ---------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues...................... $ 31,384 $48,013 $ 29,759 $46,614 $ 24,882 $ 37,519 $ 29,510 $46,246
Operating expense:
Cost of services............ 25,259 37,185 24,580 36,683 25,092 35,169 23,340 35,947
Restructuring............... 838 838
Write-off/write-down for
impairment of assets........ 5,235 5,235
Depreciation and
amortization................ 2,969 4,287 3,257 4,758 3,291 4,890 3,176 5,184
Selling, general and
administrative.............. 1,080 1,263 1,716 1,963 1,438 1,721 867 1,349
Income (loss) before provision
for income taxes and equity
in (earnings) loss of 50% or
less-owned companies and
joint ventures.............. 1,554 4,539 42 2,817 (10,791) (9,890) 1,255 3,074
Net income (loss)............. 717 1,762 (982) 543 (13,688) (12,964) (473) 305
Net income (loss) per share of
common stock................ .08 .12 (.10) .04 (1.40) (.82) (.05) .02
</TABLE>
<TABLE>
<CAPTION>
FOR THE YEAR ENDED JULY 31, 1995
---------------------------------------------------------------------------------------------
1ST QUARTER 2ND QUARTER 3RD QUARTER 4TH QUARTER
--------------------- --------------------- --------------------- ---------------------
AS AS AS AS
PREVIOUSLY AS PREVIOUSLY AS PREVIOUSLY AS PREVIOUSLY AS
REPORTED RESTATED REPORTED RESTATED REPORTED RESTATED REPORTED RESTATED
---------- -------- ---------- -------- ---------- -------- ---------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues...................... $ 31,811 $54,558 $ 29,993 $51,482 $ 34,197 $ 52,314 $ 35,126 $57,276
Operating expense:
Cost of services............ 24,109 41,441 22,225 38,718 27,320 44,008 29,163 46,257
Write-off/write-down for
impairment of assets........
Depreciation and
amortization................ 3,285 5,670 3,346 5,891 3,361 5,994 3,341 6,177
Selling, general and
administrative.............. 1,106 1,520 1,058 1,504 1,244 1,482 1,020 1,349
Gain on sale of investment in
FSU joint ventures.......... (4,370) (4,370 )
Income (loss) before provision
for income taxes and equity
in (earnings) loss of 50% or
less-owned companies and
joint ventures.............. 2,557 5,176 1,825 3,899 1,054 (301) 3,939 5,813
Net income (loss)............. 607 2,023 829 2,047 479 (276) 863 1,800
Net income (loss) per share of
common stock................ .06 .11 .07 .11 .04 (.02) .08 .10
</TABLE>
F-32
<PAGE> 96
VERITAS DGC INC.
NOTES TO SUPPLEMENTAL CONSOLIDATED
FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
FOR THE YEAR ENDED JULY 31, 1996
---------------------------------------------------------------------------------------------
1ST QUARTER 2ND QUARTER 3RD QUARTER 4TH QUARTER
--------------------- --------------------- --------------------- ---------------------
AS AS AS AS
PREVIOUSLY AS PREVIOUSLY AS PREVIOUSLY AS PREVIOUSLY AS
REPORTED RESTATED REPORTED RESTATED REPORTED RESTATED REPORTED RESTATED
---------- -------- ---------- -------- ---------- -------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues...................... $ 38,178 $59,824 $ 40,068 $62,719 $ 36,279 $ 59,139 $ 68,914
Operating expense:
Cost of services............ 30,433 46,806 33,247 53,297 27,837 44,991 53,617
Write-off/write-down for
impairment of assets........ 3,628
Depreciation and
amortization................ 3,623 6,352 3,899 6,695 4,015 6,954 6,920
Selling, general and
administrative.............. 1,251 1,580 1,276 1,824 1,431 1,866 1,985
Merger related costs.......... 3,666
Income (loss) before provision
for income taxes and equity
in loss of 50% or less-owned
companies and joint
ventures.................... 1,478 3,683 351 (412 ) 2,041 4,010 (2,878)
Net income (loss)............. 752 1,690 1,077 1,269 1,864 2,829 (4,507)
Net income (loss) per share of
common stock................ .07 .10 .10 .07 .17 .16 (.25)
</TABLE>
- ------------
* Reported quarterly earnings (loss) per share is based on each quarter's
weighted average shares outstanding. The quarters may not total to the
reported annual earnings (loss) per share due in part to fluctuations in
common shares outstanding. Weighted average shares for all periods presented
have been restated for the Reverse Split consummated on January 17, 1995. See
Note 14.
F-33
<PAGE> 97
- ------------------------------------------------------
- ------------------------------------------------------
NO DEALER, SALESMAN, OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS IN CONNECTION WITH THE OFFER CONTAINED HEREIN, AND IF GIVEN OR MADE,
SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY OR ANY UNDERWRITER. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL, OR SOLICITATION OF AN OFFER TO BUY SENIOR NOTES IN
ANY JURISDICTION TO ANY PERSON TO WHOM IT IS NOT LAWFUL TO MAKE ANY SUCH OFFER
OR SOLICITATION IN SUCH JURISDICTION OR IN WHICH THE PERSON MAKING SUCH OFFER OR
SOLICITATION IS NOT QUALIFIED TO DO SO. NEITHER THE DELIVERY OF THIS PROSPECTUS
NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY
IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE
THE DATE HEREOF.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary..................... 4
Risk Factors........................... 11
The Company............................ 15
Use of Proceeds........................ 15
Capitalization......................... 16
Selected Supplemental Consolidated
Financial Data....................... 17
Management's Discussion and Analysis of
Financial Condition and Results of
Operations........................... 18
Business............................... 23
Management............................. 32
Description of Senior Notes............ 34
Underwriting........................... 61
Legal Matters.......................... 62
Experts................................ 62
Index to Supplemental Consolidated
Financial Statements................. F-1
</TABLE>
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
[VERITAS LOGO]
VERITAS DGC INC.
------------------------
$75,000,000
% SENIOR NOTES DUE 2003
--------------------
PROSPECTUS
--------------------
DILLON, READ & CO. INC.
SALOMON BROTHERS INC
RAUSCHER PIERCE REFSNES, INC.
RAYMOND JAMES & ASSOCIATES, INC.
- ------------------------------------------------------
- ------------------------------------------------------
<PAGE> 98
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The estimated expenses payable by the Company in connection with the
offering of the Senior Notes to be registered and offered hereby are as follows:
<TABLE>
<S> <C>
Commission registration fee....................................... $ 25,863
National Association of Securities Dealers, Inc. fees............. 8,000
Printing expenses................................................. 125,000
Legal fees and expenses........................................... 150,000
Blue Sky fees and expenses (including legal expenses)............. 10,000
Rating agency fees................................................ 50,000
Accounting fees and expenses...................................... 115,000
Trustee fees and expenses......................................... 10,000
Miscellaneous..................................................... 6,137
---------
Total................................................... $ 500,000
=========
</TABLE>
All such expenses are estimated except for the Commission registration fee
and the NASD fee.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the General Corporation Law of the State of Delaware permits
a corporation to indemnify any person who was or is a party or is threatened to
be made a party to any threatened pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative, by reason
of the fact that he is or was a director, officer, employee or agent of the
corporation or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement actually and reasonably incurred
by him in connection with such action.
In a suit brought to obtain a judgment in the corporation's favor, whether
by the corporation itself or derivatively by a stockholder, the corporation may
only indemnify for expenses, including attorney's fees, actually and reasonably
incurred in connection with the defense or settlement of the case, and the
corporation may not indemnify for amounts paid in satisfaction of a judgment or
in settlement of the claim. In any such action, no indemnification may be paid
in respect of any claim, issue or matter as to which such persons shall have
been adjudged liable to the corporation except as otherwise approved by the
Delaware Court of Chancery or the court in which the claim was brought. In any
other type of proceeding, the indemnification may extend to judgments, fines and
amounts paid in settlement, actually and reasonably incurred in connection with
such other proceeding, as well as to expenses (including attorneys' fees).
The statute does not permit indemnification unless the person seeking
indemnification has acted in good faith and in a manner he reasonably believed
to be in, or not opposed to, the best interests of the corporation and, in the
case of criminal actions or proceedings, the person had no reasonable cause to
believe his conduct was unlawful. There are additional limitations applicable to
criminal actions and to actions brought by or in the name of the corporation.
The determination as to whether a person seeking indemnification has met the
required standard of conduct is to be made (i) by a majority vote of a quorum of
disinterested members of the board of directors, or (ii) by independent legal
counsel in a written opinion, if such a quorum does not exist or if the
disinterested directors so direct, or (iii) by the stockholders.
II-1
<PAGE> 99
The certificate of incorporation and bylaws of the Company require the
Company to indemnify the Company's directors and officers to the fullest extent
permitted under Delaware law, and to implement provisions pursuant to
contractual indemnity agreements the Company has entered into with its directors
and executive officers. The Company's Certificate of Incorporation limits the
personal liability of a director to the corporation or its stockholders to
damages for breach of the director's fiduciary duty.
The Company has purchased insurance on behalf of its directors and officers
against certain liabilities that may be asserted against, or incurred by, such
persons in their capacities as directors or officers of the registrant, or that
may arise out of their status as directors or officers of the registrant,
including liabilities under the federal and state securities laws.
ITEM 16. EXHIBITS.
The following is a list of all the exhibits and financial statement
schedules filed as part of the Registration Statement.
(a) Exhibits
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- --------------------- ----------------------------------------------------------------------
<S> <C>
*1 Form of Underwriting Agreement by and among Dillon, Read & Co. Inc.,
Salomon Brothers Inc, Rauscher Pierce Refsnes, Inc., Raymond James &
Associates, Inc., and Veritas DGC Inc.
2 Combination Agreement dated as of May 10, 1996, between Digicon Inc.
and Veritas Energy Services Inc. (Incorporated herein by reference to
Exhibit 2.1 of Digicon Inc.'s Current Report on Form 8-K, dated May
10, 1996)
4-A Specimen certificate for Senior Notes. (Included as part of Section
201 of Exhibit 4-B)
*4-B Form of Trust Indenture relating to the % Senior Notes due 2003
of Veritas DGC Inc. between Veritas DGC Inc. and Fleet National Bank,
as trustee.
*5 Opinion of Porter & Hedges, L.L.P. with respect to legality of
securities, including consent.
9 Voting and Exchange Trust Agreement dated August 30, 1996, among
Digicon Inc., Veritas Energy Services Inc. and The R-M Trust Company.
(Incorporated herein by reference to Exhibit 9.1 of Veritas DGC Inc.'s
Current Report on Form 8-K, dated August 30, 1996)
10-A Salary Continuation Agreement executed by Nicholas A. C. Bright, Kevin
P. Callaghan, Richard W. McNairy and Allen C. Pogach. (Incorporated
herein by reference to Exhibit 10-E of Digicon Inc.'s Annual Report on
Form 10-K for the year ended July 31, 1994)
*10-B Salary Continuation Agreement executed by Stephen J. Ludlow.
10-C Asset Purchase Agreement dated August 31, 1994, between Syntron, Inc.
and Digicon Geophysical Corp., Euroseis, Inc., Digicon/GFS Inc. and
Digicon Inc. (Incorporated herein by reference to Exhibit 10-M of
Digicon Inc.'s Annual Report on Form 10-K for the year ended July 31,
1994)
10-D 1992 Non-Employee Director Stock Option Plan. (Incorporated herein by
reference to Exhibit 10-T of Digicon Inc.'s Amendment No. 3 to
Registration Statement No. 33-54384, dated December 17, 1992)
*10-E Amended and Restated 1992 Employee Nonqualified Stock Option Plan.
</TABLE>
II-2
<PAGE> 100
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- --------------------- ----------------------------------------------------------------------
<S> <C>
10-F Support Agreement dated August 30, 1996, between Digicon Inc. and
Veritas Energy Services Inc. (Incorporated herein by reference to
Exhibit 10.1 of Veritas DGC Inc.'s Current Report on Form 8-K, dated
August 30, 1996)
*10-G Credit Agreement dated July 18, 1996, among Digicon Inc. and Digicon
Geophysical Corp., Digicon/GFS Inc., Digicon Geophysical Limited and
Digicon Exploration, Ltd., as Borrowers, each of the banks named
therein, and Wells Fargo Bank (Texas), National Association, as
issuing bank, as a bank and as agent for the banks.
11-A Computation of Income (Loss) Per Common and Common Equivalent Share
for the years ended July 31, 1993, 1994 and 1995. (Exhibit 11 to
Digicon Inc.'s Annual Report on Form 10-K for the year ended July 31,
1995).
*12 Computation of historical and pro forma earnings to fixed charges
ratio.
*23-A Consent of Deloitte & Touche LLP.
*23-B Consent of Price Waterhouse, Chartered Accountants.
23-C Consent of Porter & Hedges, L.L.P. (included in Exhibit 5)
24 Power of Attorney. (included on the signature page hereto)
*25 Form T-1 Statement of Eligibility and Qualification of Fleet National
Bank to act as Trustee of the Senior Notes.
*27 Financial Data Schedule
</TABLE>
- ------------
* Filed herewith.
ITEM 17. UNDERTAKINGS
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the Company
pursuant to the foregoing provisions, or otherwise, the Company has been advised
that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Company of expenses
incurred or paid by a director, officer or controlling person of the Company in
the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Company will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
The undersigned registrant hereby undertakes that: (1) for purposes of
determining any liability under the Securities Act, the information omitted from
the form of prospectus filed as part of a registration statement in reliance
upon Rule 430A and contained in the form of prospectus filed by the registrant
pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be
deemed to be part of the registration statement as of the time it was declared
effective; and (2) for the purpose of determining any liability under the
Securities Act, each post-effective amendment that contains a form of prospectus
shall be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
II-3
<PAGE> 101
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints David B. Robson, Stephen J. Ludlow, Richard W.
McNairy and Rene M. J. VandenBrand, and each of them, any of whom may act
without joinder of the other, his true and lawful attorneys-in-fact and agents,
with full power of substitution and resubstitution, for him and in his name,
place and stead, in any and all capacities, to sign any or all pre- and
post-effective amendments to this Registration Statement, and to file the same,
with all exhibits thereto and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto such attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorneys-in-fact and
agents, and each of them, or the substitute or substitutes of any of them, may
lawfully do or cause to be done by virtue hereof.
SIGNATURES
Pursuant to the requirements of the Securities Act, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Houston, State of Texas, on September 19, 1996.
VERITAS DGC INC.
By: /s/ DAVID B. ROBSON
------------------------------------
David B. Robson, Chairman of the
Board and Chief Executive Officer
Pursuant to the requirements of the Securities Act, this Registration
Statement has been signed by the following persons in the indicated capacities
and on the 19th day of September, 1996.
<TABLE>
<CAPTION>
SIGNATURE TITLE
- --------------------------------------------- ----------------------------
<S> <C>
/s/ DAVID B. ROBSON Director, Chairman of the
- --------------------------------------------- Board and Chief Executive
David B. Robson Officer
/s/ RICHARD W. McNAIRY Executive Vice President and
- --------------------------------------------- Chief Accounting and
Richard W. McNairy Financial Officer
/s/ GEORGE F. BAKER Director
- ---------------------------------------------
George F. Baker
/s/ CLAYTON P. CORMIER Director
- ---------------------------------------------
Clayton P. Cormier
Director
- ---------------------------------------------
Ralph M. Eeson
</TABLE>
II-4
<PAGE> 102
<TABLE>
<CAPTION>
SIGNATURE TITLE
- --------------------------------------------- ----------------------------
<S> <C>
/s/ LAWRENCE C. FICHTNER Director
- ---------------------------------------------
Lawrence C. Fichtner
Director
- ---------------------------------------------
Steven J. Gilbert
/s/ STEPHEN J. LUDLOW Director
- ---------------------------------------------
Stephen J. Ludlow
/s/ BRIAN F. MacNEILL Director
- ---------------------------------------------
Brian F. MacNeill
/s/ DOUGLAS B. THOMPSON Director
- ---------------------------------------------
Douglas B. Thompson
/s/ JACK C. THREET Director
- ---------------------------------------------
Jack C. Threet
</TABLE>
II-5
<PAGE> 103
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- --------------------- ----------------------------------------------------------------------
<S> <C>
*1 Form of Underwriting Agreement by and among Dillon, Read & Co. Inc.,
Salomon Brothers Inc, Rauscher Pierce Refsnes, Inc., Raymond James &
Associates, Inc., and Veritas DGC Inc.
2 Combination Agreement dated as of May 10, 1996, between Digicon Inc.
and Veritas Energy Services Inc. (Incorporated herein by reference to
Exhibit 2.1 of Digicon Inc.'s Current Report on Form 8-K, dated May
10, 1996)
4-A Specimen certificate for Senior Notes. (Included as part of Section
201 of Exhibit 4-B)
*4-B Form of Trust Indenture relating to the % Senior Notes due 2003
of Veritas DGC Inc. between Veritas DGC Inc. and Fleet National Bank,
as trustee.
*5 Opinion of Porter & Hedges, L.L.P. with respect to legality of
securities, including consent.
9 Voting and Exchange Trust Agreement dated August 30, 1996, among
Digicon Inc., Veritas Energy Services Inc. and The R-M Trust Company.
(Incorporated herein by reference to Exhibit 9.1 of Veritas DGC Inc.'s
Current Report on Form 8-K, dated August 30, 1996)
10-A Salary Continuation Agreement executed by Nicholas A. C. Bright, Kevin
P. Callaghan, Richard W. McNairy and Allen C. Pogach. (Incorporated
herein by reference to Exhibit 10-E of Digicon Inc.'s Annual Report on
Form 10-K for the year ended July 31, 1994)
*10-B Salary Continuation Agreement executed by Stephen J. Ludlow.
10-C Asset Purchase Agreement dated August 31, 1994, between Syntron, Inc.
and Digicon Geophysical Corp., Euroseis, Inc., Digicon/GFS Inc. and
Digicon Inc. (Incorporated herein by reference to Exhibit 10-M of
Digicon Inc.'s Annual Report on Form 10-K for the year ended July 31,
1994)
10-D 1992 Non-Employee Director Stock Option Plan. (Incorporated herein by
reference to Exhibit 10-T of Digicon Inc.'s Amendment No. 3 to
Registration Statement No. 33-54384, dated December 17, 1992)
*10-E Amended and Restated 1992 Employee Nonqualified Stock Option Plan.
10-F Support Agreement dated August 30, 1996, between Digicon Inc. and
Veritas Energy Services Inc. (Incorporated herein by reference to
Exhibit 10.1 of Veritas DGC Inc.'s Current Report on Form 8-K, dated
August 30, 1996)
*10-G Credit Agreement dated July 18, 1996, among Digicon Inc. and Digicon
Geophysical Corp., Digicon/GFS Inc., Digicon Geophysical Limited and
Digicon Exploration, Ltd., as Borrowers, each of the banks named
therein, and Wells Fargo Bank (Texas), National Association, as
issuing bank, as a bank and as agent for the banks.
11-A Computation of Income (Loss) Per Common and Common Equivalent Share
for the years ended July 31, 1993, 1994 and 1995. (Exhibit 11 to
Digicon Inc.'s Annual Report on Form 10-K for the year ended July 31,
1995).
*12 Computation of historical and pro forma earnings to fixed charges
ratio.
*23-A Consent of Deloitte & Touche LLP.
*23-B Consent of Price Waterhouse, Chartered Accountants.
</TABLE>
<PAGE> 104
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- --------------------- ----------------------------------------------------------------------
<S> <C>
23-C Consent of Porter & Hedges, L.L.P. (included in Exhibit 5)
24 Power of Attorney. (included on the signature page hereto)
*25 Form T-1 Statement of Eligibility and Qualification of Fleet National
Bank to act as Trustee of the Senior Notes.
*27 Financial Data Schedule
</TABLE>
- ------------
* Filed herewith.
<PAGE> 1
EXHIBIT 1
VERITAS DGC INC.
$75,000,000
___% Senior Notes due 2003
UNDERWRITING AGREEMENT
,1996
<PAGE> 2
UNDERWRITING AGREEMENT
,1996
DILLON, READ & CO. INC.
SALOMON BROTHERS INC
RAUSCHER PIERCE REFNSES, INC.
RAYMOND JAMES & ASSOCIATES, INC.
as Managing Underwriters
535 Madison Avenue
New York, New York 10022
Ladies and Gentlemen:
Veritas DGC Inc., a Delaware corporation, (the "Company")
proposes to issue and sell to the underwriters named in Schedule A annexed
hereto (the "Underwriters") $75,000,000 aggregate principal amount of its ___%
Senior Notes Due 2003 (the "Notes"). The Notes are to be issued pursuant to
the provisions of an indenture dated as of _________, 1996 (the "Indenture")
between the Company and Fleet National Bank, as Trustee (the "Trustee").
The Company has filed, in accordance with the provisions of
the Securities Act of 1933, as amended, and the rules and regulations
thereunder (collectively called the "Act"), with the Securities and Exchange
Commission (the "Commission") a registration statement on Form S-2, including a
prospectus, relating to the Notes which incorporates by reference documents
which the Company has filed in accordance with the provisions of the Securities
Exchange Act of 1934, as amended, and the rules and regulations thereunder
(collectively called the "Exchange Act"). The Company has furnished to you,
for use by the Underwriters and by dealers, copies of one or more preliminary
prospectuses and the documents incorporated by reference therein (each thereof,
including the documents incorporated therein by reference, being herein called
a "Preliminary Prospectus") relating to the Notes. Except where the context
otherwise requires, the registration statement, as amended when it becomes
effective, including all documents filed as a part thereof or incorporated by
reference therein, and including any information contained in a prospectus
subsequently filed with the Commission pursuant to Rule 424(b) under the Act
and deemed to be part of the registration statement at the time of
effectiveness pursuant to Rule 430(A) under the Act, is herein called the
"Registration Statement," and the prospectus, including all documents
incorporated therein by reference, in the form filed by the Company with the
Commission pursuant to Rule 424(b) under the Act or, if no such filing is
required, the form of final prospectus included in the Registration Statement
at the time it became effective, is herein called the "Prospectus."
<PAGE> 3
The Company and the Underwriters agree as follows:
1. Sale and Purchase. Upon the basis of the
representations and warranties and agreements herein contained, but subject to
the terms and conditions herein set forth, the Company agrees to issue and sell
to the Underwriters, and each Underwriter agrees, severally and not jointly, to
purchase from the Company at a purchase price of ___% of the principal amount
per Note (the "purchase price per Note") plus accrued interest, if any, from
_______, 1996 to the date of payment and delivery, the respective principal
amount of Notes set forth opposite such Underwriter's name on Schedule A
hereto.
2. Payment and Delivery. Payment of the purchase price
for the Notes shall be made to the Company by wire transfer of immediately
available funds against delivery of the certificates for the Notes to you for
the respective accounts of the Underwriters. Such payment and delivery shall
be made at 10:00 A.M., New York City time, on , 1996 (unless another time shall
be agreed to by you and the Company or unless postponed in accordance with the
provisions of Section 10 hereof). The time at which such payment and delivery
are actually made is hereinafter sometimes called the "time of purchase."
Certificates for the Notes shall be delivered to you in definitive form in such
denominations and registered in such names as you shall specify on the second
business day preceding the time of purchase. For the purpose of expediting the
checking of the certificates for the Notes by you, the Company agrees to make
such certificates available to you for such purpose at least one full business
day preceding the time of purchase.
3. Representations and Warranties of the Company. The
Company represents and warrants to each of the Underwriters that:
(a) when the Registration Statement becomes effective,
the Registration Statement and the Prospectus will fully comply in all
material respects with the provisions of the Act and the Trust
Indenture Act of 1939, as amended (the "TIA"), and the Registration
Statement will not contain an untrue statement of a material fact or
omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading, and the
Prospectus will not contain an untrue statement of a material fact or
omit to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading; provided,
however, that the Company makes no warranty or representation with
respect to any statement contained in the Registration Statement or
the Prospectus in reliance upon and in conformity with (a) information
concerning the Underwriters and furnished in writing by or on behalf
of any Underwriter through you to the Company expressly for use in the
Registration Statement or the Prospectus or (b) the Trustee's
Statement of Eligibility and Qualification (Form T-1) under the TIA;
the documents incorporated by reference in the Prospectus, at the time
they were filed with the Commission, complied in all material respects
with the requirements of the Exchange Act, and do not contain an
untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading;
-2-
<PAGE> 4
(b) as of the date of this Agreement, the Company has
authorized capital stock as set forth under the heading entitled
"Actual" in the section of the Registration Statement and the
Prospectus entitled "Capitalization"; all of the issued and
outstanding shares of capital stock of the Company have been duly and
validly authorized and issued and are fully paid and non-assessable;
the Indenture, the Notes and the Credit Facility conform in all
material respects to their respective descriptions thereof contained in
the Registration Statement and Prospectus;
(c) the only subsidiaries of the Company are the
subsidiaries on Exhibit A attached hereto (the "Subsidiaries"); the
Company has been duly incorporated and is validly existing as a
corporation in good standing under the laws of the State of Delaware
and each of its Subsidiaries has been duly incorporated and is validly
existing under the laws of its respective jurisdiction of
incorporation; each of the Company and its Subsidiaries have full
power and authority to own its properties and conduct its business as
described in the Registration Statement and the Prospectus,
(d) the Company and each of its Subsidiaries are duly
qualified or licensed by and are in good standing in each jurisdiction
in which they conduct their respective businesses and in which the
failure, individually or in the aggregate, to be so licensed or
qualified could have a material adverse effect on the operations,
business or condition of the Company and its Subsidiaries, taken as a
whole; and the Company and each of its Subsidiaries are in compliance
in all material respects with the laws, orders, rules, regulations and
directives issued or administered by such jurisdictions;
(e) neither the Company nor any of its Subsidiaries is in
breach of, or in default under (nor has any event occurred which with
notice, lapse of time, or both would constitute a breach of, or
default under), its respective charter or by-laws or in the
performance or observance of any obligation, agreement, covenant or
condition contained in any indenture, mortgage, deed of trust, bank
loan or credit agreement or other agreement or instrument to which the
Company or any of its Subsidiaries is a party or by which any of them
is bound, and the execution, delivery and performance of this
Agreement, the Indenture and the Notes and the consummation of the
transactions contemplated hereby and thereby will not conflict with,
not result in the creation or imposition of any lien, charge or
encumbrance upon any of the assets of the Company or any of its
Subsidiaries pursuant to, or result in any breach of or constitute a
default under (nor constitute any event which with notice, lapse of
time, or both would constitute a breach of, or default under), or
result in the acceleration of any obligation under, any provisions of
the charter or by-laws, of the Company or any of its Subsidiaries or
under any provision of any license, indenture, mortgage, deed of
trust, bank loan or credit agreement or other agreement or instrument
to which the Company or any of its Subsidiaries is a party or by which
any of them or their respective properties may be bound or affected,
or under any federal, state, local or foreign law, regulation or rule
or any decree, judgment or order applicable to the Company or any of
its Subsidiaries;
-3-
<PAGE> 5
(f) the Company has full corporate power and authority to
execute and deliver this Agreement, the Indenture and the Notes; this
Agreement has been duly authorized, executed and delivered by the
Company and is a legal, valid and binding agreement of the Company
enforceable in accordance with its terms, subject to applicable laws
of bankruptcy, insolvency or similar laws relating to creditors'
rights generally and to general principles of equity (whether applied
in a proceeding in law or equity); the Indenture has been duly
authorized and, when executed and delivered by the Company and the
Trustee and qualified under the Trust Indenture Act, will constitute a
legal, valid and binding agreement of the Company enforceable in
accordance with its terms, subject to applicable laws of bankruptcy,
insolvency or similar laws relating to creditors' rights generally and
to general principles of equity (whether applied in a proceeding in
law or equity);
(g) the Notes have been duly and validly authorized for
issuance and sale to the Underwriters by the Company pursuant to this
Agreement and, when issued, authenticated and delivered to the
Underwriters against payment therefor in accordance with the terms of
this Agreement and the Indenture, the Notes will be legal, valid and
binding obligations of the Company entitled to the benefits of the
Indenture and enforceable against the Company in accordance with their
terms, subject to applicable laws of bankruptcy, insolvency or similar
laws relating to creditors' rights generally and to general principles
of equity (whether applied in a proceeding in law or equity);
(h) no approval, authorization, consent or order of or
filing with any national, state or local governmental or regulatory
commission, board, body, authority or agency is required in connection
with the issuance and sale of the Notes as contemplated hereby other
than registration of the Notes under the Act, any necessary
qualification under the securities or blue sky laws of the various
jurisdictions in which the Notes are being offered by the Underwriters
and the TIA, and any filings required to be made with the National
Association of Securities Dealers, Inc. (the "NASD");
(i) Deloitte & Touche LLP, whose reports on the
consolidated financial statements of the Company and its Subsidiaries
are filed with the Commission as part of the Registration Statement
and Prospectus, are independent public accountants as required by the
Act and the applicable published rules and regulations thereunder;
(j) each of the Company and its Subsidiaries has all
necessary licenses, authorizations, consents and approvals and has
made all necessary filings required under any federal, state, local or
foreign law, regulation or rule, and has obtained all necessary
authorizations, consents and approvals from other persons, in order to
conduct its respective business; neither the Company nor any of its
Subsidiaries is in violation of, or in default
-4-
<PAGE> 6
under, any such license, authorization, consent or approval or any
federal, state, local or foreign law, regulation or rule or any
decree, order or judgment applicable to the Company or any of its
Subsidiaries the effect of which could have a material adverse effect
on the Company and its Subsidiaries taken as a whole;
(k) all legal or governmental proceedings, contracts or
documents of a character required to be described in the Registration
Statement or the Prospectus or to be filed as an exhibit to the
Registration Statement have been so described or filed as required;
(l) there are no actions, suits or proceedings pending or
threatened against the Company or any of its Subsidiaries or any of
their respective properties, at law or in equity, or before or by any
federal, state, local or foreign governmental or regulatory
commission, board, body, authority or agency which could result in a
judgment, decree or order having a material adverse effect on the
business, condition, prospects or property of the Company and its
Subsidiaries taken as a whole;
(m) the audited financial statements included in the
Registration Statement and the Prospectus present fairly the
consolidated financial position of the Company and its Subsidiaries as
of the dates indicated and the consolidated results of operations and
changes in financial position of the Company and its Subsidiaries for
the periods specified; such financial statements have been prepared in
conformity with generally accepted accounting principles applied on a
consistent basis during the periods involved;
(n) subsequent to the respective dates as of which
information is given in the Registration Statement and Prospectus, and
except as may be otherwise stated in the Registration Statement or
Prospectus, there has not been (A) any material and unfavorable
change, financial or otherwise, in the business, properties,
prospects, regulatory environment, results of operations or condition
(financial or otherwise), present or prospective, of the Company and
its Subsidiaries taken as a whole, (B) any transaction, which is
material to the Company and its Subsidiaries taken as a whole,
contemplated or entered into by the Company or any of its Subsidiaries
or (C) any obligation, contingent or otherwise, directly or indirectly
incurred by the Company or any of its Subsidiaries which is material
to the Company and its Subsidiaries taken as a whole;
4. Certain Covenants of the Company. The Company hereby
agrees:
(a) to furnish such information as may be required and
otherwise to cooperate in qualifying the Notes for offering and sale
under the securities or blue sky laws of such states as you may
designate and to maintain such qualifications in effect so long as
required for the distribution of the Notes provided that the Company
shall not be required to qualify as a foreign corporation or to
consent to the service of process under the laws of any such state
(except services of process with respect to the offering and sale of
the Notes); and to promptly advise you of the receipt by the Company
of any notification with respect to the
-5-
<PAGE> 7
suspension of the qualification of the Notes for sale in any
jurisdiction or the initiation or threatening of any proceeding for
such purpose;
(b) to make available to you in New York City, as soon as
practicable after the Registration Statement becomes effective, and
thereafter from time to time to furnish to the Underwriters, as many
copies of the Prospectus (or of the Prospectus as amended or
supplemented if the Company shall have made any amendments or
supplements thereto after the effective date of the Registration
Statement) as the Underwriters may request for the purposes
contemplated by the Act;
(c) to advise you promptly and (if requested by you) to
confirm such advice in writing, (i) when the Registration Statement
has become effective and when any post-effective amendment thereto
becomes effective and (ii) if Rule 430A under the Act is used, when
the Prospectus is filed with the Commission pursuant to Rule 424(b)
under the Act (which the Company agrees to file in a timely manner
under such Rules);
(d) to advise you promptly, confirming such advice in
writing, of any request by the Commission for amendments or
supplements to the Registration Statement or Prospectus or for
additional information with respect thereto, or of notice of
institution of proceedings for, or the entry of a stop order
suspending the effectiveness of the Registration Statement and, if the
Commission should enter a stop order suspending the effectiveness of
the Registration Statement, to make every reasonable effort to obtain
the lifting or removal of such order as soon as possible; to advise
you promptly of any proposal to amend or supplement the Registration
Statement or Prospectus including by filing any documents that would
be incorporated therein by reference and to file no such amendment or
supplement to which you shall object in writing;
(e) to furnish to you and, upon request, to each of the
other Underwriters for a period of five years from the date of this
Agreement (i) copies of any reports or other communications which the
Company shall send to its stockholders or shall from time to time
published or publicly disseminate, (ii) copies of all annual,
quarterly and current reports filed with the Commission on Forms 10-K,
10-Q and 8-K, or such other similar form as may be designated by the
Commission, and (iii) such other information as you may reasonably
request regarding the Company or its Subsidiaries;
(f) to advise the Underwriters promptly of the happening
of any event known to the Company within the time during which a
prospectus relating to the Notes is required to be delivered under the
Act which, in the judgment of the Company, would require the making of
any change in the Prospectus then being used, or in the information
incorporated therein by reference, so that the Prospectus would not
include an untrue statement of material fact or omit to state a
material fact necessary to make the statements therein, in the light
of the circumstances under which they are made, not misleading, and,
during such time, to prepare and furnish, at the Company's expense, to
the Underwriters promptly such amendments or supplements to such
Prospectus as may be necessary to reflect any such
-6-
<PAGE> 8
change and to furnish you a copy of such proposed amendment or
supplement before filing any such amendment or supplement with the
Commission;
(g) to make generally available to its security holders,
and to deliver to you, an earnings statement of the Company (which
will satisfy the provisions of Section 11(a) of the Act) covering a
period of twelve months beginning after the effective date of the
Registration Statement as soon as is reasonably practicable after the
termination of such twelve-month period but no later than January 31,
1998;
(h) to furnish to you four signed copies of the
Registration Statement, as initially filed with the Commission, and of
all amendments thereto (including all exhibits thereto and documents
incorporated by reference therein) and sufficient conformed copies of
the foregoing (other than exhibits) for distribution of a copy to each
of the other Underwriters;
(i) to furnish to you as early as practicable prior to
the time of purchase but not later than two business days prior
thereto, a copy of the latest available unaudited interim consolidated
financial statements, if any, of the Company and its Subsidiaries
which have been read by the Company's independent certified public
accountants, as stated in their letter to be furnished pursuant to
Section 7(b) of this Agreement;
(j) to apply the net proceeds from the sale of the Notes
in the manner set forth under the caption "Use of Proceeds" in the
Prospectus;
(k) to furnish to you, before filing with the Commission
subsequent to the effective date of the Registration Statement and
during the period referred to in paragraph (e) above, a copy of any
document proposed to be filed pursuant to Sections 13, 14, or 15(d) of
the Exchange Act;
5. Payment of Expenses. The Company agrees to pay all
expenses, fees and taxes (other than any transfer taxes and fees and
disbursements of counsel for the Underwriters except as set forth under Section
6 hereof or (iii) or (iv) below) in connection with (i) the preparation and
filing of the Registration Statement, each Preliminary Prospectus, the
Prospectus, and any amendments or supplements thereto, and the printing and
furnishing of copies of each thereof to the Underwriters and to dealers
(including costs of mailing and shipment), (ii) the issuance (including the
printing and engraving of the Notes), sale and delivery of the Notes by the
Company, (iii) the word processing and/or printing of this Agreement, the
Indenture, any Agreement Among Underwriters, any dealer agreements, any
Statements of Information and the reproduction and/or printing and furnishing of
copies of each thereof to the Underwriters and to dealers (including costs of
mailing and shipment), (iv) the qualification of the Notes for offering and sale
under state laws and the determination of their eligibility for investment under
state law as aforesaid (including the legal fees and filing fees and other
disbursements of counsel to the Underwriters) and the printing and furnishing of
copies of any blue sky surveys or legal investment surveys to the Underwriters
and to dealers, (v) the fees and expenses of rating agencies, (vi) the filing
for review of the public offering of the Notes by the NASD (vii) all fees and
expenses of the Trustee and (viii) the performance of the Company's other
obligations hereunder.
-7-
<PAGE> 9
6. Reimbursement of Underwriters' Expenses. If the
Notes are not delivered for any reason other than the termination of this
Agreement pursuant to the first two paragraphs of Section 9 hereof or the
default by one or more of the Underwriters in its or their respective
obligations hereunder, the Company shall reimburse the Underwriters for all of
their out-of-pocket expenses, including the fees and disbursements of their
counsel.
7. Conditions of Underwriters' Obligations. The several
obligations of the Underwriters hereunder are subject to the accuracy of the
representations and warranties on the part of the Company on the date hereof
and at the time of purchase, the performance by the Company of their
obligations hereunder and to the following conditions:
(a) The Company shall furnish to you at the time of
purchase an opinion of Porter & Hedges, L.L.P., counsel for the
Company, addressed to the Underwriters, and dated the time of
purchase, with reproduced copies for each of the other Underwriters
and in form satisfactory to Vinson & Elkins L.L.P., counsel for the
Underwriters, stating that:
(i) the Company has been duly incorporated and is
validly existing as a corporation in good standing under the
laws of the State of Delaware, with full corporate power and
authority to own its properties and conduct its business as
described in the Registration Statement and the Prospectus, to
execute and deliver this Agreement and to issue, sell and
deliver the Notes as herein contemplated;
(ii) each of the Subsidiaries has been duly
incorporated and is validly existing as a corporation in good
standing under the laws of its respective jurisdiction of
incorporation with full corporate power and authority to own
its respective properties and to conduct its respective
business;
(iii) the Company and its Subsidiaries are duly
qualified or licensed by each jurisdiction in which they
conduct their respective businesses and in which the failure,
individually or in the aggregate, to be so licensed or
qualified could have a material adverse effect on the
operations, business or condition of the Company and its
Subsidiaries taken as a whole, and the Company and its
Subsidiaries are duly qualified, and are in good standing, in
each jurisdiction in which they own or lease real property or
maintain an office and in which such qualification is
necessary;
(iv) the Company has full corporate power and
authority to enter into this Agreement, and this Agreement has
been duly authorized, executed and delivered by the Company is
a legal, valid and binding obligation of the Company,
enforceable in accordance with its terms;
-8-
<PAGE> 10
(v) the Indenture has been duly authorized and,
when executed and delivered by the Company and the Trustee and
qualified under the TIA, will constitute a legal, valid and
binding agreement of the Company, enforceable in accordance
with its terms, subject to applicable laws of bankruptcy,
insolvency or similar laws relating to creditors' rights
generally and to general principles of equity (whether
applied in a proceeding in law or equity);
(vi) the Notes have been duly and validly
authorized and, when issued, delivered and sold and
authenticated by the Trustee, in accordance with this
Agreement and the Indenture, will constitute legal, valid and
binding obligations of the Company, enforceable against the
Company in accordance with their respective terms and entitled
to the benefits provided by the Indenture, subject to
applicable laws of bankruptcy, insolvency or similar laws
relating to creditors' rights generally and to general
principles of equity (whether applied in a proceeding in law
or equity);
(vii) statements set forth in the Prospectus under
the heading "Description of Senior Notes" and in the
Registration Statement in Item 15 insofar as such statements
constitute summary of the legal matters, documents or
proceedings referred to therein fairly present the
information called for with respect to such legal matters,
documents and proceedings;
(viii) the Registration Statement and the
Prospectus (except as to the financial statements and schedules
and other financial and statistical data contained or
incorporated by reference therein, as to which such counsel
need express no opinion) comply as to form in all material
respects with the requirements of the Act and the TIA;
(ix) the Registration Statement has become
effective under the Act and, to the best of such counsel's
knowledge, no stop order proceedings with respect thereto are
pending or threatened under the Act;
(x) no approval, authorization, consent or order
of or filing with any national, state or local governmental or
regulatory commission, board, body, authority or agency is
required in connection with the issuance and sale of the Notes
as contemplated hereby other than registration of the Notes
under the Act, qualification of the Indenture under the TIA
and filings required to be made with the NASD (except such
counsel need express no opinion as to any necessary
qualification under the state securities or blue sky laws of
the various jurisdictions in which the Notes are being offered
by the Underwriters);
-9-
<PAGE> 11
(xi) the execution, delivery and performance of
this Agreement, the Notes and the Indenture by the Company and
the consummation by the Company of the transactions
contemplated hereby do not and will not conflict with, or
result in any breach of, or constitute a default under (nor
constitute any event which with notice, lapse of time, or
both, would constitute a breach of or default under), or
result in the creation of any lien, charge or encumbrance on
any property, or assets of the Company or any of its
Subsidiaries pursuant to, any provisions of the charter or
by-laws of the Company or any of its Subsidiaries or under any
provision of any license, indenture, mortgage, deed of trust,
bank loan, credit agreement or other agreement or instrument
to which the Company or any of its Subsidiaries is a party or
by which any of them or their respective properties may be
bound or affected, or under any law, regulation or rule or any
decree, judgment or order applicable to the Company or any of
its Subsidiaries;
(xii) to the best of such counsel's knowledge,
neither the Company nor any of its Subsidiaries is in breach
of, or in default under (nor has any event occurred which with
notice, lapse of time, or both would constitute a breach of,
or default under), any license, indenture, mortgage, deed of
trust, bank loan or any other agreement or instrument to which
the Company or any of its Subsidiaries is a party or by which
any of them or their respective properties may be bound or
affected or under any law, regulation or rule or any decree,
judgment or order applicable to the Company or any of its
Subsidiaries;
(xiii) to the best of such counsel's knowledge,
there are no contracts, licenses, agreements, leases or
documents of a character which are required to be filed as
exhibits to the Registration Statement or to be summarized or
described in the Prospectus which have not been so filed,
summarized or described;
(xiv) to the best of such counsel's knowledge,
there are no actions, suits or proceedings pending or
threatened against the Company or any of its Subsidiaries or
any of their respective properties, at law or in equity or
before or by any commission, board, body, authority or agency
which are required to be described in the Prospectus but are
not so described;
(xv) the documents incorporated by reference in
the Registration Statement and Prospectus, when they were
filed (or, if an amendment with respect to any such document
was filed when such amendment was filed), complied as to form
in all material respects with the Exchange Act (except as to
the financial statements and schedules and other financial and
statistical data contained or incorporated by reference
therein as to which such counsel need express no opinion); and
(xvi) such counsel have participated in conferences
with officers and other representatives of the Company,
representatives of the independent public accountants of the
Company and representatives of the Underwriters at which the
-10-
<PAGE> 12
contents of the Registration Statement and Prospectus were
discussed and, although such counsel is not passing upon and
does not assume responsibility for the accuracy, completeness
or fairness of the statements contained in the Registration
Statement or Prospectus (except as and to the extent stated in
subparagraphs (vii) and (viii) above), on the basis of the
foregoing (relying as to materiality to a large extent upon
the opinions of officers and other representatives of the
Company) nothing has come to the attention of such counsel
that causes them to believe that the Registration Statement or
any amendment thereto at the time such Registration Statement
or amendment became effective contained an untrue statement of
a material fact or omitted to state a material fact required
to be stated therein or necessary to make the statements
therein not misleading, or that the Prospectus or any
supplement thereto at the date of such Prospectus or such
supplement, and at all times up to and including the time of
purchase or additional time of purchase, as the case may be,
contained an untrue statement of a material fact or omitted to
state a material fact required to be stated therein or
necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading (it
being understood that such counsel need express no opinion
with respect to the financial statements and schedules and
other financial and statistical data included in the
Registration Statement or Prospectus).
(b) You shall have received from Deloitte & Touche LLP,
letters dated, respectively, the date of this Agreement and the time
of purchase and addressed to the Underwriters (with reproduced copies
for each of the Underwriters) in the forms heretofore approved by the
Managing Underwriters.
(c) You shall have received at the time of purchase, the
favorable opinion of Vinson & Elkins L.L.P., counsel for the
Underwriters, dated the time of purchase or the additional time of
purchase, as the case may be, as to the matters referred to in
subparagraphs (iv), (v), (vi), (vii) (but only as to statements in the
Prospectus under "Description of Senior Notes"), and (x) of paragraph
(a) of this Section 7.
In addition, such counsel shall state that such counsel have
participated in conferences with officers and other representatives of
the Company, counsel for the Company, representatives of the
independent public accountants of the Company and representatives of
the Underwriters at which the contents of the Registration Statement
and Prospectus and related matters were discussed and, although such
counsel is not passing upon and does not assume any responsibility for
the accuracy, completeness or fairness of the statements contained in
the Registration Statement and Prospectus (except as to matters
referred to under subparagraph (vii) of paragraph (a) of this Section
7), on the basis of the foregoing (relying as to materiality to a
large extent upon the opinions of officers and other representatives
of the Company), no facts have come to the attention of such counsel
which lead them to believe that the Registration Statement or any
amendment thereto at the time such Registration Statement or amendment
became effective contained an untrue statement of a material fact or
omitted to state a material fact required to be stated therein or
necessary
-11-
<PAGE> 13
to make the statements therein not misleading or that the Prospectus
as of its date or any supplement thereto as of its date contained an
untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading (it being understood that such counsel need express no
comment with respect to the financial statements and schedules and
other financial and statistical data included in the Registration
Statement or Prospectus).
(d) No amendment or supplement to the Registration
Statement or Prospectus, including documents deemed to be incorporated
by reference therein, shall be filed prior to the time the
Registration Statement becomes effective to which you object in
writing.
(e) The Registration Statement shall become effective, or
if Rule 430A under the Act is used, the Prospectus shall have been
filed with the Commission pursuant to Rule 424(b) under the Act, at or
before 5:00 P.M., New York City time, on the date of this Agreement,
unless a later time (but not later than 5:00 P.M., New York City time,
on the second full business day after the date of this Agreement)
shall be agreed to by the Company and you; provided, however, that the
Company, and you and any group of Underwriters, including you, who
have agreed hereunder to purchase in the aggregate at least 50% of the
principal amount of the Notes may from time to time agree on a later
date.
(f) Prior to the time of purchase, (i) no stop order with
respect to the effectiveness of the Registration Statement shall have
been issued under the Act or proceedings initiated under Section 8(d)
or 8(e) of the Act; (ii) the Registration Statement and all amendments
thereto, or modifications thereof, if any, shall not contain an untrue
statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements therein not
misleading; and (iii) the Prospectus and all amendments or supplements
thereto, or modifications thereof, if any, shall not contain an untrue
statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements therein, in
the light of the circumstances under which they are made, not
misleading.
(g) Between the time of execution of this Agreement and
the time of purchase (i) no material and unfavorable change, financial
or otherwise (other than as referred to in the Registration Statement
and Prospectus), in the business, condition or prospects of the
Company and its Subsidiaries taken as a whole shall occur or become
known and (ii) no transaction which is material and unfavorable to the
Company shall have been entered into by the Company or any of its
Subsidiaries.
(h) The Company will, at the time of purchase, deliver to
you a certificate of two of its executive officers to the effect that
the representations and warranties of the Company as set forth in this
Agreement and the conditions set forth in paragraph (f) and paragraph
(g) have been met and that they are true and correct as of such date.
-12-
<PAGE> 14
(i) The Company shall have furnished to you such other
documents and certificates as to the accuracy and completeness of any
statement in the Registration Statement and the Prospectus as of the
time of purchase, as you may reasonably request.
(j) The Company shall perform such of their respective
obligations under this Agreement as are to be performed by the terms
hereof at or before the time of purchase and at or before the
additional time of purchase, as the case may be.
8. Effective Date of Agreement; Termination: This
Agreement shall become effective (i) if Rule 430A under the Act is not used,
when you shall have received notification of the effectiveness of the
Registration Statement, or (ii) if Rule 430A under the Act is used, when the
parties hereto have executed and delivered this Agreement.
The obligations of the several Underwriters hereunder shall be
subject to termination in the absolute discretion of you or any group of
Underwriters (which may include you) which has agreed to purchase in the
aggregate at least 50% of the principal amount of the Notes, if, at any time
prior to the time of purchase, trading in securities on the New York Stock
Exchange or American Stock Exchange shall have been suspended or minimum prices
shall have been established on the New York Stock Exchange or American Stock
Exchange, or if a banking moratorium shall have been declared either by the
United States or New York State authorities, or if the United States shall have
declared war in accordance with its constitutional processes or there shall
have occurred any material outbreak or escalation of hostilities or other
national or international calamity or crisis of such magnitude in its effect on
the financial markets of the United States as, in your judgment or in the
judgment of such group of Underwriters, to make it impracticable to proceed
with the offering of the Notes on the terms and as contemplated in the
Registration Statement and the Prospectus.
If you or any group of Underwriters elects to terminate this
agreement as provided in this Section 9, the Company and each other Underwriter
shall be notified promptly by letter or telegram.
If the sale to the Underwriters of the Notes, as contemplated
by this Agreement, is not carried out by the Underwriters for any reason
permitted under this Agreement or if such sale is not carried out because the
Company shall be unable to comply with any of the terms of this Agreement, the
Company shall not be under any obligation or liability under this Agreement
(except to the extent provided in Sections 5, 6 and 10 hereof), and the
Underwriters shall be under no obligation or liability to the Company under
this Agreement (except to the extent provided in Section 10 hereof) or to one
another hereunder.
9. Increase in Underwriters' Commitments: If any
Underwriter shall default in its obligation to take up and pay for the Notes to
be purchased by it hereunder and if the aggregate principal amount of Notes
which all Underwriters so defaulting shall have agreed but failed to take up
and pay for does not exceed 10% of the total aggregate principal amount of
Notes , the non-defaulting Underwriters shall take up and pay for (in addition
to the aggregate principal amount of Notes they are obligated to purchase
pursuant to Section 1 hereof) the aggregate principal amount
-13-
<PAGE> 15
of Notes agreed to be purchased by all such defaulting Underwriters, as
hereinafter provided. Such Notes shall be taken up and paid for by such
non-defaulting Underwriter or Underwriters in such amount or amounts as you may
designate with the consent of each Underwriter so designated or, in the event
no such designation is made, such Notes shall be taken up and paid for by all
non-defaulting Underwriters pro rata in proportion to the aggregate principal
amount of Notes set opposite the names of such non-defaulting Underwriters in
Schedule A.
Without relieving any defaulting Underwriter from its
obligations hereunder, the Company agrees with the non-defaulting Underwriters
that they will not sell any Notes hereunder unless all of the Notes are
purchased by the Underwriters (or by substituted Underwriters selected by you
with the approval of the Company or selected by the Company with your
approval).
If a new Underwriter or Underwriters are substituted by the
Underwriters or by the Company for a defaulting Underwriter or Underwriters in
accordance with the foregoing provision, the Company or you shall have the
right to postpone the time of purchase for a period not exceeding five business
days in order that any necessary changes in the Registration Statement and
Prospectus and other documents may be effected.
The term Underwriter as used in this agreement shall refer to
and include any Underwriter substituted under this Section 9 with like effect
as if such substituted Underwriter had originally been named in Schedule A.
10. Indemnity by the Company and the Underwriters.
(a) The Company agrees to indemnify, defend and hold
harmless each Underwriter and any person who controls any Underwriter
within the meaning of Section 15 of the Act or Section 20 of the
Exchange Act, from and against any loss, expense, liability or claim
(including the reasonable cost of investigation) which, jointly or
severally, any such Underwriter or any such controlling person may
incur under the Act, the Exchange Act or otherwise insofar as such
loss, expense, liability or claim arises out of or is based upon any
untrue statement or alleged untrue statement of a material fact
contained in the Registration Statement (or in the Registration
Statement as amended by any post-effective amendment thereof by the
Company) or in a Prospectus (the term "Prospectus" for the purpose of
this Section 10 being deemed to include any Preliminary Prospectus,
the Prospectus and the Prospectus as amended or supplemented by the
Company), or arises out of or is based upon any omission or alleged
omission to state a material fact required to be stated in either such
Registration Statement or Prospectus or necessary to make the
statements made therein not misleading, except insofar as any such
loss, expense, liability or claim arises out of or is based upon any
untrue statement or alleged untrue statement of a material fact
contained in and in conformity with information furnished in writing
by any Underwriter through you to the Company expressly for use with
reference to such Underwriter in such Registration Statement or such
Prospectus or arises out of or is based upon any omission or alleged
omission to state a material fact in connection with such information
required to be stated
-14-
<PAGE> 16
in either such Registration Statement or Prospectus or necessary to
make such information not misleading;
If any action is brought against an Underwriter or
controlling person in respect of which indemnity may be sought against
the Company pursuant to the foregoing paragraph, such Underwriter
shall promptly notify the Company in writing of the institution of
such action and the Company shall assume the defense of such action,
including the employment of counsel and payment of expenses. Such
Underwriter or such controlling person shall have the right to employ
its or their own counsel in any such case, but the fees and expenses
of such counsel shall be at the expense of such Underwriter or of such
controlling person unless the employment of such counsel shall have
been authorized in writing by the Company in connection with the
defense of such action or the Company shall not have employed counsel
to have charge of the defense of such action or such indemnified party
or parties shall have reasonably concluded that there may be defenses
available to it or them which are different from or additional to
those available to the Company (in which case the Company shall not
have the right to direct the defense of such action on behalf of the
indemnified party or parties), in any of which events such fees and
expenses shall be borne by the Company as the case may be, and paid as
incurred (it being understood, however, that the Company shall not be
liable for the expenses of more than one separate counsel in any one
action or series of related actions in the same jurisdiction
representing the indemnified parties who are parties to such action).
Anything in this paragraph to the contrary notwithstanding, the
Company shall not be liable for any settlement of any such claim or
action effected without its written consent.
(b) Each Underwriter severally agrees to indemnify,
defend and hold harmless the Company, its directors and officers, and
any person who controls the Company within the meaning of Section 15
of the Act or Section 20 of the Exchange Act from and against any
loss, expense, liability or claim (including the reasonable cost of
investigation) which, jointly or severally, the Company or any such
person may incur under the Act or otherwise, insofar as such loss,
expense, liability or claim arises out of or is based upon any untrue
statement or alleged untrue statement of a material fact contained in
and in conformity with information furnished in writing by or on
behalf of such Underwriter through you to the Company expressly for
use with reference to such Underwriter in the Registration Statement
(or in the Registration Statement as amended by any post-effective
amendment thereof by the Company) or in a Prospectus, or arises out of
or is based upon any omission or alleged omission to state a material
fact in connection with such information required to be stated either
in such Registration Statement or Prospectus or necessary to make such
information not misleading.
If any action is brought against the Company or any
such person in respect of which indemnity may be sought against any
Underwriter pursuant to the foregoing paragraph, the Company or such
person shall promptly notify such Underwriter in writing of the
institution of such action and such Underwriter shall assume the
defense of such action, including the employment of counsel and
payment of expenses. The Company or
-15-
<PAGE> 17
such person shall have the right to employ its own counsel in any such
case, but the fees and expenses of such counsel shall be at the
expense of the Company or such person unless the employment of such
counsel shall have been authorized in writing by such Underwriter in
connection with the defense of such action or such Underwriter shall
not have employed counsel to have charge of the defense of such action
or such indemnified party or parties shall have reasonably concluded
that there may be defenses available to it or them which are different
from or additional to those available to such Underwriter (in which
case such Underwriter shall not have the right to direct the defense
of such action on behalf of the indemnified party or parties), in any
of which events such fees and expenses shall be borne by such
Underwriter and paid as incurred (it being understood, however, that
such Underwriter shall not be liable for the expenses of more than one
separate counsel in any one action or series of related actions in the
same jurisdiction representing the indemnified parties who are parties
to such action). Anything in this paragraph to the contrary
notwithstanding, no Underwriter shall be liable for any settlement of
any such claim or action effected without the written consent of such
Underwriter.
(c) If the indemnification provided for in this Section
10 is unavailable to an indemnified party under subsections (a) and
(b) of this Section 10 in respect of any losses, expenses, liabilities
or claims referred to therein, then each applicable indemnifying
party, in lieu of indemnifying such indemnified party, shall
contribute to the amount paid or payable by such indemnified party as
a result of such losses, expenses, liabilities or claims (i) in such
proportion as is appropriate to reflect the relative benefits received
by the Company on the one hand and the Underwriters on the other hand
from the offering of the Notes or (ii) if the allocation provided by
clause (i) above is not permitted by applicable law, in such
proportion as is appropriate to reflect not only the relative benefits
referred to in clause (i) above but also the relative fault of the
Company on the one hand and of the Underwriters on the other in
connection with the statements or omissions which resulted in such
losses, expenses, liabilities or claims, as well as any other relevant
equitable considerations. The relative benefits received by the
Company on the one hand and the Underwriters on the other shall be
deemed to be in the same proportion as the total proceeds from the
offering (net of underwriting discounts and commissions but before
deducting expenses) received by the Company bear to the total
underwriting discounts and commissions received by the Underwriters.
The relative fault of the Company on the one hand and of the
Underwriters on the other shall be determined by reference to, among
other things, whether the untrue statement or alleged untrue statement
of a material fact or omission or alleged omission relates to
information supplied by the Company or by the Underwriters and the
parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission. The
amount paid or payable by a party as a result of the losses, expenses,
liabilities and claims referred to above shall be deemed to include
any legal or other fees or expenses reasonably incurred by such party
in connection with investigating or defending any claim or action.
(d) The Company and the Underwriters agree that it would
not be just and equitable if contribution pursuant to this Section 10
were determined by pro rata allocation
-16-
<PAGE> 18
(even if the Underwriters were treated as one entity for such purpose)
or by any other method of allocation that does not take account of the
equitable considerations referred to in subsection (c) above.
Notwithstanding the provisions of this Section 10, no Underwriter
shall be required to contribute any amount in excess of the amount by
which the total price at which the Notes underwritten by such
Underwriter and distributed to the public were offered to the public
exceeds the amount of any damages which such Underwriter has otherwise
been required to pay by reason of such untrue statements or alleged
untrue statement or omission or alleged omission. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of
the Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation. The Underwriter's
obligations to contribute pursuant to this Section 10 are several in
proportion to their respective underwriting commitments and not joint.
(e) The indemnity and contribution agreements contained
in this Section 10 and the covenants, warranties and representations
of the Company contained in this Agreement shall remain in full force
and effect regardless of any investigation made by or on behalf of any
Underwriter, or any person who controls any Underwriter within the
meaning of Section 15 of the Act or Section 20 of the Exchange Act, or
by or on behalf of the Company, its directors and officers, or any
person who controls the Company within the meaning of Section 15 of
the Act or Section 20 of the Exchange Act, and shall survive any
termination of this Agreement or the issuance and delivery of the
Notes. The Company and each Underwriter agree promptly to notify the
others of the commencement of any litigation or proceeding against it
and, in the case of the Company against any of the Company's officers
and directors in connection with the issuance and sale of the Notes,
or in connection with the Registration Statement or Prospectus.
11. Notices. Except as otherwise herein provided, all
statements, requests, notices and agreements shall be in writing or by telegram
and, if to the Underwriters, shall be sufficient in all respects if delivered
or sent to Dillon, Read & Co. Inc., 535 Madison Avenue, New York, N.Y. 10022,
Attention: Syndicate Department and if to the Company shall be sufficient in
all respects if delivered or sent to the Company at the offices of the Company
at 3701 Kirby Drive, Houston, Texas 77098, Attention: Richard W. McNairy.
12. Construction. This Agreement shall be governed by,
and construed in accordance with, the laws of the State of New York. The
Section headings in this Agreement have been inserted as a matter of
convenience of reference and are not a part of this Agreement.
13. Parties at Interest. The Agreement herein set forth
has been and is made solely for the benefit of the Underwriters, the Company
and the controlling persons, directors and officers referred to in Section 10
hereof, and their respective successors, assigns, executors and administrators.
No other person, partnership, association or corporation (including a
purchaser, as such purchaser, from any of the Underwriters) shall acquire or
have any right under or by virtue of this Agreement.
-17-
<PAGE> 19
14. Counterparts. This agreement may be signed by the
parties in counterparts which together shall constitute one and the same
agreement among the parties.
If the foregoing correctly sets forth the understanding among the
Company and the Underwriters, please so indicate in the space provided below
for the purpose, whereupon this letter and your acceptance shall constitute a
binding agreement between the Company and the Underwriters, severally.
Very truly yours,
VERITAS DGC INC.
By
--------------------------------
Title:
Accepted and agreed to as of the date
first above written, on behalf of themselves
and the other several Underwriters named
in Schedule A.
DILLON, READ & CO. INC.
SALOMON BROTHERS INC
RAYMOND JAMES & ASSOCIATES, INC.
RAUSCHER PIERCE REFNES, INC.
By: DILLON, READ & CO. INC.
By:
--------------------------------
Title:
-18-
<PAGE> 20
SCHEDULE A
PRINCIPAL AMOUNT
UNDERWRITER OF NOTES
- ----------- ----------------
DILLON, READ & CO. INC.
SALOMON BROTHERS INC
RAYMOND JAMES & ASSOCIATES, INC.
RAUSCHER PIERCE REFNES, INC.
-----------
TOTAL
-----------
<PAGE> 1
EXHIBIT 4-B
________________________________________________________________________________
VERITAS DGC INC.
and
FLEET NATIONAL BANK
Trustee
_______________
INDENTURE
Dated as of _________, 1996
_______________
$75,000,000
_____% Senior Notes due 2003
________________________________________________________________________________
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C>
ARTICLE I
DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION . . . . . . . . . . . . . . . 2
Section 1.1 Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 1.2 Other Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 1.3 Incorporation by Reference of Trust Indenture Act . . . . . . . . . . 21
Section 1.4 Rules of Construction . . . . . . . . . . . . . . . . . . . . . . . . 21
ARTICLE II
SECURITY FORMS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Section 2.1 Forms Generally . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Section 2.2 Form of Face of Security . . . . . . . . . . . . . . . . . . . . . . 22
Section 2.3 Form of Reverse of Security . . . . . . . . . . . . . . . . . . . . . 24
Section 2.4 Form of Trustee's Certificate of Authentication . . . . . . . . . . . 28
ARTICLE III
THE SECURITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Section 3.1 Title and Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Section 3.2 Denominations . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Section 3.3 Execution, Authentication, Delivery and Dating . . . . . . . . . . . 29
Section 3.4 Temporary Securities . . . . . . . . . . . . . . . . . . . . . . . . 30
Section 3.5 Registration of Transfer and Exchange . . . . . . . . . . . . . . . . 31
Section 3.6 Book-Entry Provisions for Global Securities . . . . . . . . . . . . . 32
Section 3.7 Mutilated, Destroyed, Lost and Stolen Securities . . . . . . . . . . 33
Section 3.8 Payment of Interest; Interest Rights Preserved . . . . . . . . . . . 33
Section 3.9 Persons Deemed Owners . . . . . . . . . . . . . . . . . . . . . . . . 34
Section 3.10 Cancellation . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Section 3.11 Computation of Interest . . . . . . . . . . . . . . . . . . . . . . . 35
ARTICLE IV
SATISFACTION AND DISCHARGE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Section 4.1 Satisfaction and Discharge of Indenture . . . . . . . . . . . . . . . 35
Section 4.2 Application of Trust Money . . . . . . . . . . . . . . . . . . . . . 36
ARTICLE V
REMEDIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Section 5.1 Events of Default. . . . . . . . . . . . . . . . . . . . . . . . . . 37
Section 5.2 Acceleration of Maturity; Rescission and Annulment . . . . . . . . . 38
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C>
Section 5.3 Collection of Indebtedness and Suits for Enforcement by Trustee . . . 40
Section 5.4 Trustee May File Proofs of Claim . . . . . . . . . . . . . . . . . . 41
Section 5.5 Trustee May Enforce Claims Without Possession of Securities . . . . . 41
Section 5.6 Application of Money Collected . . . . . . . . . . . . . . . . . . . 42
Section 5.7 Limitation on Suits . . . . . . . . . . . . . . . . . . . . . . . . . 42
Section 5.8 Unconditional Right of Holders to Receive Principal, Premium
and Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Section 5.9 Restoration of Rights and Remedies . . . . . . . . . . . . . . . . . 43
Section 5.10 Rights and Remedies Cumulative . . . . . . . . . . . . . . . . . . . 43
Section 5.11 Delay or Omission Not Waiver . . . . . . . . . . . . . . . . . . . . 43
Section 5.12 Control by Holders . . . . . . . . . . . . . . . . . . . . . . . . . 44
Section 5.13 Waiver of Past Defaults . . . . . . . . . . . . . . . . . . . . . . . 44
Section 5.14 Waiver of Stay, Extension or Usury Laws . . . . . . . . . . . . . . . 44
ARTICLE VI
THE TRUSTEE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
Section 6.1 Duties of Trustee. . . . . . . . . . . . . . . . . . . . . . . . . . 45
Section 6.2 Certain Rights of Trustee . . . . . . . . . . . . . . . . . . . . . . 45
Section 6.3 Trustee Not Responsible for Recitals or Issuance of Securities . . . 47
Section 6.4 May Hold Securities . . . . . . . . . . . . . . . . . . . . . . . . . 47
Section 6.5 Money Held in Trust . . . . . . . . . . . . . . . . . . . . . . . . . 47
Section 6.6 Compensation and Reimbursement . . . . . . . . . . . . . . . . . . . 47
Section 6.7 Corporate Trustee Required; Eligibility . . . . . . . . . . . . . . . 48
Section 6.8 Conflicting Interests . . . . . . . . . . . . . . . . . . . . . . . . 48
Section 6.9 Resignation and Removal; Appointment of Successor . . . . . . . . . . 48
Section 6.10 Acceptance of Appointment by Successor . . . . . . . . . . . . . . . 50
Section 6.11 Merger, Conversion, Consolidation or Succession to Business . . . . . 50
Section 6.12 Preferential Collection of Claims Against Company . . . . . . . . . . 50
Section 6.13 Notice of Defaults . . . . . . . . . . . . . . . . . . . . . . . . . 51
ARTICLE VII
HOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY . . . . . . . . . . . . . . . . . . 51
Section 7.1 Holders' Lists; Holder Communications; Disclosures
Respecting Holders . . . . . . . . . . . . . . . . . . . . . . . . . 51
Section 7.2 Reports By Trustee . . . . . . . . . . . . . . . . . . . . . . . . . 51
Section 7.3 Reports by Company . . . . . . . . . . . . . . . . . . . . . . . . . 52
ARTICLE VIII
CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE . . . . . . . . . . . . . . . . . 52
Section 8.1 Company May Consolidate, etc., Only on Certain Terms . . . . . . . . 52
Section 8.2 Successor Substituted . . . . . . . . . . . . . . . . . . . . . . . . 54
</TABLE>
ii
<PAGE> 4
<TABLE>
<S> <C>
ARTICLE IX
SUPPLEMENTAL INDENTURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
Section 9.1 Supplemental Indentures Without Consent of Holders . . . . . . . . . 54
Section 9.2 Supplemental Indentures with Consent of Holders . . . . . . . . . . . 55
Section 9.3 Execution of Supplemental Indentures . . . . . . . . . . . . . . . . 56
Section 9.4 Effect of Supplemental Indentures . . . . . . . . . . . . . . . . . . 56
Section 9.5 Conformity with Trust Indenture Act . . . . . . . . . . . . . . . . . 56
Section 9.6 Reference in Securities to Supplemental Indentures . . . . . . . . . 56
Section 9.7 Notice of Supplemental Indentures and Waivers . . . . . . . . . . . . 57
ARTICLE X
COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
Section 10.1 Payment of Principal, Premium, if any, and Interest . . . . . . . . . 57
Section 10.2 Maintenance of Office or Agency . . . . . . . . . . . . . . . . . . . 57
Section 10.3 Money for Security Payments to Be Held in Trust . . . . . . . . . . . 58
Section 10.4 Corporate Existence . . . . . . . . . . . . . . . . . . . . . . . . . 59
Section 10.5 Payment of Taxes; Maintenance of Properties; Insurance . . . . . . . 59
Section 10.6 Limitation on Sale-Leaseback Transactions . . . . . . . . . . . . . . 60
Section 10.7 Limitation on Conduct of Business . . . . . . . . . . . . . . . . . . 60
Section 10.8 Statement by Officers as to Default . . . . . . . . . . . . . . . . . 60
Section 10.9 Provision of Financial Information . . . . . . . . . . . . . . . . . 61
Section 10.10 Limitation on Restricted Payments . . . . . . . . . . . . . . . . . . 61
Section 10.11 Limitation on Indebtedness and Disqualified Capital Stock . . . . . . 64
Section 10.12 Limitation on Issuances and Sales of Capital Stock by
Restricted Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . 64
Section 10.13 Limitation on Liens . . . . . . . . . . . . . . . . . . . . . . . . . 64
Section 10.14 Purchase of Securities Upon Change of Control . . . . . . . . . . . . 65
Section 10.15 Limitation on Asset Sales . . . . . . . . . . . . . . . . . . . . . . 66
Section 10.16 Limitation on Transactions with Affiliates . . . . . . . . . . . . . 69
Section 10.17 Limitation on Dividends and Other Payment Restrictions
Affecting Restricted Subsidiaries . . . . . . . . . . . . . . . . . . 70
Section 10.18 Waiver of Certain Covenants . . . . . . . . . . . . . . . . . . . . . 70
ARTICLE XI
REDEMPTION OF SECURITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
Section 11.1 Right of Redemption . . . . . . . . . . . . . . . . . . . . . . . . . 71
Section 11.2 Applicability of Article . . . . . . . . . . . . . . . . . . . . . . 71
Section 11.3 Election to Redeem; Notice to Trustee . . . . . . . . . . . . . . . . 71
Section 11.4 Selection by Trustee of Securities to Be Redeemed . . . . . . . . . . 72
Section 11.5 Notice of Redemption . . . . . . . . . . . . . . . . . . . . . . . . 72
Section 11.6 Deposit of Redemption Price . . . . . . . . . . . . . . . . . . . . . 73
Section 11.7 Securities Payable on Redemption Date. . . . . . . . . . . . . . . . 73
</TABLE>
iii
<PAGE> 5
<TABLE>
<S> <C>
Section 11.8 Securities Redeemed in Part . . . . . . . . . . . . . . . . . . . . . 73
ARTICLE XII
DEFEASANCE AND COVENANT DEFEASANCE . . . . . . . . . . . . . . . . . . . . . . . . . . 74
Section 12.1 Company's Option to Effect Defeasance or Covenant Defeasance . . . . 74
Section 12.2 Defeasance and Discharge . . . . . . . . . . . . . . . . . . . . . . 74
Section 12.3 Covenant Defeasance . . . . . . . . . . . . . . . . . . . . . . . . . 74
Section 12.4 Conditions to Defeasance or Covenant Defeasance . . . . . . . . . . . 75
Section 12.5 Deposited Money and U.S. Government Obligations to Be
Held in Trust; Other Miscellaneous Provisions . . . . . . . . . . . . 77
Section 12.6 Reinstatement . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
ARTICLE XIII
MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78
Section 13.1 Compliance Certificates and Opinions . . . . . . . . . . . . . . . . 78
Section 13.2 Form of Documents Delivered to Trustee . . . . . . . . . . . . . . . 78
Section 13.3 Acts of Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
Section 13.4 Notices, etc. to Trustee and the Company . . . . . . . . . . . . . . 80
Section 13.5 Notice to Holders; Waiver . . . . . . . . . . . . . . . . . . . . . . 80
Section 13.6 Effect of Headings and Table of Contents . . . . . . . . . . . . . . 81
Section 13.7 Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . 81
Section 13.8 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81
Section 13.9 Benefits of Indenture . . . . . . . . . . . . . . . . . . . . . . . . 81
Section 13.10 Governing Law; Trust Indenture Act Controls . . . . . . . . . . . . . 81
Section 13.11 Legal Holidays . . . . . . . . . . . . . . . . . . . . . . . . . . . 82
Section 13.12 No Recourse Against Others . . . . . . . . . . . . . . . . . . . . . 82
Section 13.13 Duplicate Originals . . . . . . . . . . . . . . . . . . . . . . . . . 82
Section 13.14 No Adverse Interpretation of Other Agreements . . . . . . . . . . . . 82
Exhibit A - Form of Legend for Global Securities
</TABLE>
iv
<PAGE> 6
Reconciliation and Tie between Trust Indenture Act
of 1939 and Indenture, dated as of_________________ ____, 1996
<TABLE>
<CAPTION>
Trust Indenture Indenture
Act Section Section
<S> <C> <C>
Section 310 (a)(1) . . . . . . . . . . . . . . . . . . . . 6.7
(a)(2) . . . . . . . . . . . . . . . . . . . . 6.7
(b) . . . . . . . . . . . . . . . . . . . . 6.7,6.8, 6.9
Section 311 (a) . . . . . . . . . . . . . . . . . . . . 6.12
(b) . . . . . . . . . . . . . . . . . . . . 6.12
Section 312 . . . . . . . . . . . . . . . . . . . . 7.1
Section 313 . . . . . . . . . . . . . . . . . . . . 7.2
Section 314 (a) . . . . . . . . . . . . . . . . . . . . 7.3
(a)(4) . . . . . . . . . . . . . . . . . . . . 10.8(a)
(c)(1) . . . . . . . . . . . . . . . . . . . . 13.1
(c)(2) . . . . . . . . . . . . . . . . . . . . 13.1
(e) . . . . . . . . . . . . . . . . . . . . 13.1
Section 315 (a) . . . . . . . . . . . . . . . . . . . . 6.1
(b) . . . . . . . . . . . . . . . . . . . . 6.13
(c) . . . . . . . . . . . . . . . . . . . . 6.1
(d) . . . . . . . . . . . . . . . . . . . . 6.1
Section 316 (a) (last
sentence) . . . . . . . . . . . . . . . . . . . . 1.1("Outstanding")
(a)(1)(A) . . . . . . . . . . . . . . . . . . . . 5.2,5.12
(a)(1)(B) . . . . . . . . . . . . . . . . . . . . 5.13
(b) . . . . . . . . . . . . . . . . . . . . 5.8
(c) . . . . . . . . . . . . . . . . . . . . 13.3(d)
Section 317 (a)(1) . . . . . . . . . . . . . . . . . . . . 5.3
(a)(2) . . . . . . . . . . . . . . . . . . . . 5.4
(b) . . . . . . . . . . . . . . . . . . . . 10.3
Section 318 (a) . . . . . . . . . . . . . . . . . . . . 14.10(b)
</TABLE>
Note: This reconciliation and tie shall not, for any purpose,
be deemed to be a part of the Indenture.
<PAGE> 7
THIS INDENTURE, dated as of ___________ ___,1996, is between VERITAS
DGC INC., a Delaware corporation (hereinafter called the "Company") and FLEET
NATIONAL BANK, a national banking association (hereinafter called the
"Trustee").
RECITALS OF THE COMPANY
The Company has duly authorized the creation of an issue of _____%
Senior Notes due 2003, (herein, as amended or supplemented from time to time in
accordance with the terms hereof, called the "Securities"), of substantially
the tenor and in the aggregate principal amount hereinafter set forth, and to
provide therefor the Company has duly authorized the execution and delivery of
this Indenture.
All things necessary have been done on the part of the Company to make
the Securities, when issued and executed by the Company and authenticated and
delivered by the Trustee as herein provided, the valid obligations of the
Company and to make this Indenture a valid agreement of the Company and the
Trustee, in accordance with their respective terms.
NOW, THEREFORE, THIS INDENTURE WITNESSETH:
For and in consideration of the premises and the purchase of the
Securities by the Holders thereof, it is mutually covenanted and agreed, for
the equal and proportionate benefit of all Holders of the Securities, as
follows:
1
<PAGE> 8
ARTICLE I
DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION
Section 1.1 Definitions.
"Acquired Indebtedness" means Indebtedness of a Person (a) existing at
the time such Person becomes a Restricted Subsidiary or (b) assumed in
connection with acquisitions of Properties from such Person (other than any
Indebtedness incurred in connection with, or in contemplation of, such Person
becoming a Restricted Subsidiary or such acquisition). Acquired Indebtedness
shall be deemed to be incurred on the date the acquired Person becomes a
Restricted Subsidiary or the date of the related acquisition of Properties from
such Person.
"Act," when used with respect to any Holder, has the meaning specified
in Section 13.3.
"Affiliate" means, with respect to any specified Person, any other
Person directly or indirectly controlling or controlled by or under direct or
indirect common control with such specified Person. For the purposes of this
definition, "control," when used with respect to any Person, means the power to
direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise;
and the terms "controlling" and "controlled" have meanings correlative to the
foregoing. For purposes of this definition, beneficial ownership of 10% or
more of the voting common equity (on a fully diluted basis) or options or
warrants to purchase such equity (but only if exercisable at the date of
determination or within 60 days thereof) of a Person shall be deemed to
constitute control of such Person.
"Asset Sale" means any sale, issuance, conveyance, transfer, lease or
other disposition to any Person other than the Company or any of its Restricted
Subsidiaries (including, without limitation, by means of a Sale/Leaseback
Transaction or a merger or consolidation) (collectively, for purposes of this
definition, a "transfer"), directly or indirectly, in one or a series of
related transactions, of (a) any Capital Stock of any Restricted Subsidiary
held by the Company or any other Restricted Subsidiary, (b) all or
substantially all of the Properties of any division or line of business of the
Company or any of its Restricted Subsidiaries or (c) any other Properties of
the Company or any of its Restricted Subsidiaries other than transfers of cash,
Cash Equivalents, accounts receivable, or other Properties in the ordinary
course of business or transfers in accordance with the proviso to clause (vi)
of the definition of Permitted Investments. For the purposes of this
definition, the term "Asset Sale" also shall not include any of the following:
(i) any transfer of Properties (including Capital Stock) which is governed by,
and made in accordance with, the provisions of Article VIII hereof; (ii) any
transfer of Properties to an Unrestricted Subsidiary, if permitted under
Section 10.10 hereof; (iii) sales of damaged, worn-out or obsolete equipment or
assets that, in the Company's reasonable judgment, are either (x) no longer
used or (y) no longer useful in the business of the Company or its Restricted
Subsidiaries; (iv) any lease of any Property entered into in the ordinary
course of business and with respect to which the Company or any Restricted
Subsidiary is the lessor, except any such lease that provides for the
acquisition of such Property by the lessee during or at the end of the term
thereof for an amount
2
<PAGE> 9
that is less than the fair market value thereof at the time the right to
acquire such property is granted; (v) any transfers that, but for this clause
(v), would be Asset Sales, if (A) the Company elects to designate such
transfers as not constituting Asset Sales and (B) after giving effect to such
transfers, the aggregate fair market value of the Properties transferred in
such transaction or any such series of related transactions so designated by
the Company does not exceed $500,000.
"Attributable Indebtedness" means, with respect to any particular
lease under which any Person is at the time liable, whether or not accounted
for as a Capitalized Lease Obligation, and at any date as of which the amount
thereof is to be determined, the present value of the total net amount of rent
required to be paid by such Person under the lease during the primary term
thereof, without giving effect to any renewals at the option of the lessee,
discounted from the respective due dates thereof to such date of determination
at a rate of interest per annum equal to the discount rate which would be
applicable to a Capitalized Lease Obligation with a like term in accordance
with GAAP. As used in the preceding sentence, the "net amount of rent" under
any such lease for any such period shall mean the sum of rental and other
payments required to be paid with respect to such period by the lessee
thereunder, excluding any amounts required to be paid by such lessee on account
of maintenance and repairs, insurance, taxes, assessments, water rates or
similar charges. In the case of any lease which is terminable by the lessee
upon payment of a penalty, such net amount of rent shall also include the
amount of such penalty, but no rent shall be considered as required to be paid
under such lease subsequent to the first date upon which it may be so
terminated.
"Average Life" means, with respect to any Indebtedness, as at any date
of determination, the quotient obtained by dividing (a) the sum of the products
of (i) the number of years (and any portion thereof) from the date of
determination to the date or dates of each successive scheduled principal
payment (including, without limitation, any sinking fund or mandatory
redemption payment requirements) of such Indebtedness multiplied by (ii) the
amount of each such principal payment by (b) the sum of all such principal
payments.
"Board of Directors" means, with respect to the Company, either the
board of directors of the Company or any duly authorized committee of such
board of directors, and, with respect to any Subsidiary, either the board of
directors of such Subsidiary or any duly authorized committee of that board.
"Board Resolution" means a copy of a resolution certified by the
Secretary or an Assistant Secretary of the Company to have been duly adopted by
its Board of Directors and to be in full force and effect on the date of such
certification, and delivered to the Trustee, and with respect to a Subsidiary,
a copy of a resolution certified by the Secretary or an Assistant Secretary of
such Subsidiary to have been duly adopted by its Board of Directors and to be
in full force and effect on the date of such certification, and delivered to
the Trustee.
"Business Day" means each Monday, Tuesday, Wednesday, Thursday and
Friday which is not a day on which banking institutions in The City of New York
or Hartford, Connecticut are authorized or obligated by law or executive order
to close.
3
<PAGE> 10
"Capital Stock" means, with respect to any Person, any and all shares,
interests, participations, rights in or other equivalents in the equity
interests (however designated) in such Person, and any rights (other than debt
securities convertible into an equity interest), warrants or options
exercisable for, exchangeable for or convertible into such an equity interest
in such Person (for purposes of the Indenture the Exchangeable Shares of VES
shall be treated as Capital Stock of the Company, for which they are
exchangeable, and shall not be treated as Capital Stock of VES).
"Capitalized Lease Obligation" means any obligation to pay rent or
other amounts under a lease of (or other agreement conveying the right to use)
any Property (whether real, personal or mixed) that is required to be
classified and accounted for as a capital lease obligation under GAAP, and, for
the purpose of this Indenture, the amount of such obligation at any date shall
be the capitalized amount thereof at such date, determined in accordance with
GAAP.
"Cash Equivalents" means (i) any evidence of Indebtedness with a
maturity of 180 days or less issued or directly and fully guaranteed or insured
by the United States of America or any agency or instrumentality thereof
(provided that the full faith and credit of the United States of America is
pledged in support thereof); (ii) demand and time deposits and certificates of
deposit or acceptances with a maturity of 180 days or less of any financial
institution that is a member of the Federal Reserve System having combined
capital and surplus and undivided profits of not less than $500,000,000 or any
commercial bank organized under the laws of any other country that is a member
of the Organization for Economic Cooperation and Development and has total
assets in excess of $500,000,000; (iii) commercial paper with a maturity of 180
days or less issued by a corporation that is not an Affiliate of the Company
and is organized under the laws of any state of the United States or the
District of Columbia and rated at least A-l by S&P or at least P-l by Moody's;
(iv) repurchase obligations with a term of not more than seven days for
underlying securities of the types described in clause (i) above entered into
with any commercial bank meeting the specifications of clause (ii) above; (v)
overnight bank deposits and bankers' acceptances at any commercial bank meeting
the qualifications specified in clause (ii) above; (vi) demand and time
deposits and certificates of deposit with any commercial bank organized in the
United States not meeting the qualifications specified in clause (ii) above,
provided that such deposits and certificates support bond, letter of credit and
other similar types of obligations incurred in the ordinary course of business;
and (vii) investments in money market or other mutual funds substantially all
of whose assets comprise securities of the types described in clauses (i)
through (v) above.
"Change of Control" means the occurrence of any event or series of
events by which: (a) any "person" or "group" (as such terms are used in
Sections 13(d) and 14(d) of the Exchange Act) is or becomes the "beneficial
owner" (as defined in Rule 13d-3 under the Exchange Act), directly or
indirectly, of more than 50% of the total Voting Stock of the Company; (b) the
Company consolidates with or merges into another Person or any Person
consolidates with, or merges into, the Company, in any such event pursuant to a
transaction in which the outstanding Voting Stock of the Company is changed
into or exchanged for cash, securities or other Property, other than any such
transaction where (i) the outstanding Voting Stock of the Company is changed
into or exchanged for Voting Stock of the surviving or resulting Person that is
Qualified Capital Stock and (ii) the holders of the Voting Stock of the Company
immediately prior to such transaction own, directly or indirectly, not less
than a majority of the Voting Stock of the surviving or resulting Person
immediately after such transaction; (c) the Company, either individually or in
conjunction with one or more Restricted Subsidiaries, sells, assigns, conveys,
transfers, leases or otherwise disposes of,
4
<PAGE> 11
or the Restricted Subsidiaries sell, assign, convey, transfer, lease or
otherwise dispose of, all or substantially all of the Properties of the Company
and the Restricted Subsidiaries, taken as a whole (either in one transaction or
a series of related transactions), including Capital Stock of the Restricted
Subsidiaries, to any Person (other than the Company or a Wholly Owned
Restricted Subsidiary); (d) during any consecutive two-year period, individuals
who at the beginning of such period constituted the Board of Directors of the
Company (together with any new directors whose election by such Board of
Directors or whose nomination for election by the stockholders of the Company
was approved by a vote of a two-thirds of the directors then still in office
who were either directors at the beginning of such period or whose election or
nomination for election was previously so approved) cease for any reason to
constitute a majority of the Board of Directors of the Company then in office;
or (e) the liquidation or dissolution of the Company.
"Code" shall mean the Internal Revenue Code of 1986, as amended, as
now or hereafter in effect, together with all regulations thereunder issued by
the Internal Revenue Service.
"Commission" or "SEC" means the Securities and Exchange Commission, as
from time to time constituted, created under the Exchange Act, or, if at any
time after the execution of this Indenture such Commission is not existing and
performing the duties now assigned to it under the Trust Indenture Act, then
the body performing such duties at such time.
"Common Stock" of any Person means Capital Stock of such Person that
does not rank prior, as to the payment of dividends or as to the distribution
of assets upon any voluntary or involuntary liquidation, dissolution or
winding-up of such Person, to shares of Capital Stock of any other class of
such Person.
"Company" means the Person named as the "Company" in the first
paragraph of this Indenture, until a successor Person shall have become such
pursuant to the applicable provisions of this Indenture, and thereafter
"Company" shall mean such successor Person.
"Company Request" or "Company Order" means a written request or order
signed in the name of the Company by its Chairman, its President, any Vice
President, its Treasurer or an Assistant Treasurer, and delivered to the
Trustee.
"Consolidated Fixed Charge Coverage Ratio" means, for any period, the
ratio on a pro forma basis of (a) the sum of Consolidated Net Income,
Consolidated Fixed Charge, Consolidated Income Tax Expense and Consolidated
Non-cash Charges deducted in computing Consolidated Net Income, in each case,
for such period, of the Company and its Restricted Subsidiaries on a
consolidated basis, all determined in accordance with GAAP, to (b) the sum of
such Consolidated Fixed Charges for such period; provided, however, that (i)
the Consolidated Fixed Charge Coverage Ratio shall be calculated on a pro forma
basis assuming that (A) the Indebtedness to be incurred (and all other
Indebtedness incurred after the first day of such period of four full fiscal
quarters referred to in Section 10.11(a) hereof through and including the date
of determination), and (if applicable) the application of the net proceeds
therefrom (and from any other such Indebtedness), including to refinance other
Indebtedness, had been incurred on the first day of such four-quarter period
and, in the case of Acquired Indebtedness, on the assumption that the related
transaction (whether by means
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<PAGE> 12
of purchase, merger or otherwise) also had occurred on such date with the
appropriate adjustments with respect to such acquisition being included in such
pro forma calculation and (B) any acquisition or disposition by the Company or
any Restricted Subsidiary of any Properties outside the ordinary course of
business, or any repayment of any principal amount of any Indebtedness of the
Company or any Restricted Subsidiary prior to the Stated Maturity thereof, in
either case since the first day of such period of four full fiscal quarters
through and including the date of determination, had been consummated on such
first day of such four-quarter period, (ii) in making such computation, the
Consolidated Fixed Charge attributable to interest on any Indebtedness required
to be computed on a pro forma basis in accordance with Section 10.11(a) hereof
and (A) bearing a floating interest rate shall be computed as if the rate in
effect on the date of computation had been the applicable rate for the entire
period and (B) which was not outstanding during the period for which the
computation is being made but which bears, at the option of the Company, a
fixed or floating rate of interest, shall be computed by applying, at the
option of the Company, either the fixed or floating rate, (iii) in making such
computation, the Consolidated Fixed Charges attributable to interest on any
Indebtedness under a revolving credit facility required to be computed on a pro
forma basis in accordance with Section 10.11(a) hereof shall be computed based
upon the average daily balance of such Indebtedness during the applicable
period, provided that such average daily balance shall be reduced by the amount
of any repayment of Indebtedness under a revolving credit facility during the
applicable period, which repayment permanently reduced the commitments or
amounts available to be reborrowed under such facility, (iv) notwithstanding
clauses (ii) and (iii) of this proviso, interest on Indebtedness determined on
a fluctuating basis, to the extent such interest is covered by agreements
relating to Interest Rate Protection Obligations, shall be deemed to have
accrued at the rate per annum resulting after giving effect to the operation of
such agreements, and (v) if after the first day of the period referred to in
clause (a) of this definition the Company has permanently retired any
Indebtedness out of the Net Cash Proceeds of the issuance and sale of shares of
Qualified Capital Stock of the Company within 30 days of such issuance and
sale, Consolidated Fixed Charges shall be calculated on a pro forma basis as if
such Indebtedness had been retired on the first day of such period.
"Consolidated Income Tax Expense" means, for any period, the provision
for federal, state, local and foreign income taxes (including state franchise
taxes accounted for as income taxes in accordance with GAAP) of the Company and
its Restricted Subsidiaries for such period as determined on a consolidated
basis in accordance with GAAP.
"Consolidated Fixed Charges" means, for any period, without
duplication, (i) the sum of (a) the interest expense of the Company and its
Restricted Subsidiaries for such period as determined on a consolidated basis
in accordance with GAAP, including, without limitation, (A) any amortization of
debt discount, (B) the net cost under Interest Rate Protection Obligations
(including any amortization of discounts), (C) the interest portion of any
deferred payment obligation constituting Indebtedness, (D) all commissions,
discounts and other fees and charges owed with respect to letters of credit and
bankers' acceptance financing and (E) all accrued interest, in each case to the
extent attributable to such period, (b) to the extent any Indebtedness of any
Person (other than the Company or a Restricted Subsidiary) is guaranteed by the
Company or any Restricted Subsidiary, the aggregate amount of interest paid (to
the extent not accrued in a prior period) or accrued by such other Person
during such period attributable to any such Indebtedness, in each case
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<PAGE> 13
to the extent attributable to that period, (c) the aggregate amount of the
interest component of Capitalized Lease Obligations paid (to the extent not
accrued in a prior period), accrued or scheduled to be paid or accrued by the
Company and its Restricted Subsidiaries during such period and (d) the
aggregate amount of dividends paid (to the extent not accrued in a prior
period) or accrued on Preferred Stock or Disqualified Capital Stock of the
Company and its Restricted Subsidiaries, to the extent such Preferred Stock or
Disqualified Capital Stock is owned by Persons other than the Company or its
Restricted Subsidiaries and (e) one third of the rental expense (including
without limitation marine vessel charter payments) under operating leases with
remaining noncancellable terms of at least one year excluding leases in respect
of office space of the Company and its Restricted Subsidiaries for such period
as determined on a consolidated basis in accordance with GAAP, less (ii), to
the extent included in clause (i) above, amortization of capitalized debt
issuance costs of the Company and its Restricted Subsidiaries during such
period.
"Consolidated Net Income" means, for any period, the consolidated net
income (or loss) of the Company and its Restricted Subsidiaries for such period
as determined in accordance with GAAP, adjusted by excluding (a) net after-tax
extraordinary gains or losses (less all fees and expenses relating thereto),
(b) net after-tax gains or losses (less all fees and expenses relating thereto)
attributable to Asset Sales, (c) the net income (or net loss) of any Person
(other than the Company or any of its Restricted Subsidiaries), in which the
Company or any of its Restricted Subsidiaries has an ownership interest, except
to the extent of the amount of dividends or other distributions actually paid
to the Company or any of its Restricted Subsidiaries in cash by such other
Person during such period (regardless of whether such cash dividends or
distributions are attributable to net income (or net loss) of such Person
during such period or during any prior period), (d) net income (or net loss) of
any Person (other than Veritas Energy Services, Inc.) combined with the Company
or any of its Restricted Subsidiaries on a "pooling of interests" basis
attributable to any period prior to the date of combination, (e) the net income
of any Restricted Subsidiary to the extent that the declaration or payment of
dividends or similar distributions by that Restricted Subsidiary of its net
income is not at the date of determination permitted, directly or indirectly,
by operation of the terms of its charter or any agreement, instrument,
judgment, decree, order, statute, rule or governmental regulation applicable to
that Restricted Subsidiary or its stockholders, (f) income resulting from
transfers of assets received by the Company or any Restricted Subsidiary from
an Unrestricted Subsidiary and (g) for the fiscal year ended July 31, 1996,
merger related costs reflected in the Company's consolidated financial
statements.
"Consolidated Net Tangible Assets" means, at any date, the aggregate
amount of assets included on the most recent consolidated balance sheet of the
Company and its Restricted Subsidiaries, less applicable reserves and other
properly deductible items and after deducting therefrom all goodwill, trade
names, trademarks, patents, unamortized debt discount and expense and other
like intangibles, and (ii) current liabilities (other than current liabilities
constituting Indebtedness for borrowed money), all in accordance with GAAP.
"Consolidated Net Worth" means, at any date, the consolidated
stockholders' equity of the Company less the amount of such stockholders'
equity attributable to Disqualified Capital Stock or treasury stock of the
Company and its Restricted Subsidiaries, as determined in accordance with GAAP.
"Consolidated Non-cash Charges" means, for any period, the aggregate
depreciation, depletion, amortization and other non-cash expenses (excluding
non-cash expenses related to multi-
7
<PAGE> 14
client seismic data sales and write-offs and write-downs related to its
multi-client data library) of the Company and its Restricted Subsidiaries
reducing Consolidated Net Income for such period, determined on a consolidated
basis in accordance with GAAP (excluding any such non-cash charge for which an
accrual of or reserve for cash charges for any future period is required).
"Corporate Trust Office" means the principal corporate trust office of
the Trustee at which at any particular time its corporate trust business shall
be administered, which office at the date of execution of this Indenture is
located at 777 Main Street, Hartford, Connecticut 06115.
"Currency Hedge Obligations" means, at any time as to any Person, the
obligations of such Person at such time which were incurred in the ordinary
course of business pursuant to any foreign currency exchange agreement, option
or futures contract or other similar agreement or arrangement designed to
protect against or manage such Person's or any of its Subsidiaries' exposure to
fluctuations in foreign currency exchange rates.
"Default" means any event, act or condition that is, or after notice
or passage of time or both would become, an Event of Default.
"Defaulted Interest" has the meaning specified in Section 3.8 hereof.
"Depository" means The Depository Trust Company, its nominees and
their respective successors.
"Disinterested Director" means, with respect to any transaction or
series of transactions in respect of which the Board of Directors of the
Company is required to deliver a Board Resolution hereunder, a member of the
Board of Directors of the Company who does not have any material direct or
indirect financial interest (other than an interest arising solely from the
beneficial ownership of Capital Stock of the Company) in or with respect to
such transaction or series of transactions.
"Disqualified Capital Stock" means any Capital Stock that, either by
its terms, by the terms of any security into which it is convertible or
exchangeable or by contract or otherwise, is, or upon the happening of an event
or passage of time would be, required to be redeemed or repurchased, in whole
or in part, prior to the final Stated Maturity of the Securities or is
redeemable at the option of the holder thereof at any time prior to such final
Stated Maturity, or is convertible into or exchangeable for debt securities at
any time prior to such final Stated Maturity. For purposes of Section 10.11(a)
hereof, Disqualified Capital Stock shall be valued at the greater of its
voluntary or involuntary maximum fixed redemption or repurchase price plus
accrued and unpaid dividends. For such purposes, the "maximum fixed redemption
or repurchase price" of any Disqualified Capital Stock which does not have a
fixed redemption or repurchase price shall be calculated in accordance with the
terms of such Disqualified Capital Stock as if such Disqualified Capital Stock
were redeemed or repurchased on the date of determination, and if such price is
based upon, or measured by, the fair market value of such Disqualified Capital
Stock, such fair market value shall be determined in good faith by the board of
directors of the issuer of such Disqualified Capital Stock; provided, however,
that if such Disqualified Capital Stock is not at the date of determination
8
<PAGE> 15
permitted or required to be redeemed or repurchased, the "maximum fixed
redemption or repurchase price" shall be the book value of such Disqualified
Capital Stock.
"Event of Default" has the meaning specified in Section 5.1 hereof.
"Exchange Act" means the Securities Exchange Act of 1934, as amended
from time to time, and any successor act thereto.
"Fair Market Value" means the fair market value of a Property
(including shares of Capital Stock) as determined in good faith by the Board of
Directors of the Company and evidenced by a Board Resolution, which
determination shall be conclusive for purposes of this Indenture; provided,
however, that unless otherwise specified herein, the Board of Directors shall
be under no obligation to obtain any valuation or assessment from any
investment banker, appraiser or other third party.
"Federal Bankruptcy Code" means the United States Bankruptcy Code of
Title 11 of the United States Code, as amended from time to time.
"GAAP" means generally accepted accounting principles, consistently
applied, that are set forth in the opinions and pronouncements of the
Accounting Principles Board of the American Institute of Certified Public
Accountants and statements and pronouncements of the Financial Accounting
Standards Board or in such other statements by such other entity as may be
approved by a significant segment of the accounting profession of the United
States of America, which are applicable as of the date of this Indenture.
The term "guarantee" means, as applied to any obligation, (i) a
guarantee (other than by endorsement of negotiable instruments or documents for
collection in the ordinary course of business), direct or indirect, in any
manner, of any part or all of such obligation and (ii) an agreement, direct or
indirect, contingent or otherwise, the practical effect of which is to assure
in any way the payment or performance (or payment of damages in the event of
non-performance) of all or any part of such obligation, including, without
limiting the foregoing, the payment of amounts drawn down under letters of
credit. When used as a verb, "guarantee" has a corresponding meaning.
"Holder" means a Person in whose name a Security is registered in a
Security Register.
"Indebtedness" means, with respect to any Person, without duplication,
(a) all liabilities of such Person, contingent or otherwise, for borrowed money
or for the deferred purchase price of Property or services (excluding any trade
accounts payable and other accrued current liabilities incurred in the ordinary
course of business) and all liabilities of such Person incurred in connection
with any letters of credit, bankers' acceptances or other similar credit
transactions or any agreement to purchase, redeem, exchange, convert or
otherwise acquire for value any Capital Stock of such Person, or any warrants,
rights or options to acquire such Capital Stock, outstanding on the date of
this Indenture or thereafter, if, and to the extent, any of the foregoing would
appear as a liability upon a balance sheet of such Person prepared in
accordance with
9
<PAGE> 16
GAAP, (b) all obligations of such Person evidenced by bonds, notes, debentures
or other similar instruments, if, and to the extent, any of the foregoing would
appear as a liability upon a balance sheet of such Person prepared in
accordance with GAAP, (c) all Indebtedness of such Person created or arising
under any conditional sale or other title retention agreement with respect to
Property acquired by such Person (even if the rights and remedies of the seller
or lender under such agreement in the event of default are limited to
repossession or sale of such Property), but excluding trade accounts payable
arising in the ordinary course of business, (d) the Attributable Indebtedness
respecting all Capitalized Lease Obligations of such Person, (e) all
Indebtedness referred to in the preceding clauses of other Persons and all
dividends of other Persons, the payment of which is secured by (or for which
the holder of such Indebtedness has an existing right, contingent or otherwise,
to be secured by) any Lien upon Property (including, without limitation,
accounts and contract rights) owned by such Person, even though such Person has
not assumed or become liable for the payment of such Indebtedness (the amount
of such obligation being deemed to be the lesser of the value of such Property
or the amount of the obligation so secured), (f) all guarantees by such Person
of Indebtedness referred to in this definition and (g) all obligations of such
Person under or in respect of Currency Hedge Obligations and Interest Rate
Protection Obligations and (h) deferred credits respecting discontinued
services.
"Indenture" means this instrument as originally executed and as it may
from time to time be supplemented or amended by one or more indentures
supplemental hereto entered into pursuant to the applicable provisions hereof.
"Insolvency or Liquidation Proceeding" means, with respect to any
Person, (a) an insolvency or bankruptcy case or proceeding, or any
receivership, liquidation, reorganization or similar case or proceeding in
connection therewith, relative to such Person or its creditors, as such, or its
assets or (b) any liquidation, dissolution or other winding-up proceeding of
such Person, whether voluntary or involuntary and whether or not involving
insolvency or bankruptcy or (c) any assignment for the benefit of creditors or
any other marshaling of assets and liabilities of such Person.
"Interest Payment Date" means the Stated Maturity of an installment of
interest on the Securities.
"Interest Rate Protection Obligations" means the obligations of any
Person pursuant to any arrangement with any other Person whereby, directly or
indirectly, such Person is entitled to receive from time to time periodic
payments calculated by applying either a floating or a fixed rate of interest
on a stated notional amount in exchange for periodic payments made by such
Person calculated by applying a fixed or a floating rate of interest on the
same notional amount and shall include, without limitation, interest rate
swaps, caps, floors, collars and similar agreements or arrangements designed to
protect against or manage such Person's and any of its Subsidiaries' exposure
to fluctuations in interest rates.
"Investment" means, with respect to any Person, any direct or indirect
advance, loan, guarantee of Indebtedness or other extension of credit or
capital contribution to (by means of any transfer of cash or other Property to
others or any payment for Property or services for the
10
<PAGE> 17
account or use of others), or any purchase or acquisition by such Person of any
Capital Stock, bonds, notes, debentures or other securities (including
derivatives) or evidences of Indebtedness issued by, any other Person. In
addition, the Fair Market Value of the net assets of any Restricted Subsidiary
at the time that such Restricted Subsidiary is designated an Unrestricted
Subsidiary shall be deemed to be an "Investment" made by the Company in such
Unrestricted Subsidiary at such time. "Investments" shall exclude (a)
extensions of trade credit or other advances to customers on commercially
reasonable terms in accordance with normal trade practices or otherwise in the
ordinary course of business, (b) Interest Rate Protection Obligations and
Currency Hedge Obligations, but only to the extent that the same constitute
Permitted Investments, and (c) endorsements of negotiable instruments and
documents in the ordinary course of business.
"Issue Date" means the date of first issuance of the Securities under
this Indenture.
"Lien" means any mortgage, charge, pledge, lien (statutory or other),
security interest, hypothecation, assignment for security, claim or similar
type of encumbrance (including, without limitation, any agreement to give or
grant any lease, conditional sale or other title retention agreement having
substantially the same economic effect as any of the foregoing) upon or with
respect to any Property of any kind. A Person shall be deemed to own subject
to a Lien any Property which such Person has acquired or holds subject to the
interest of a vendor or lessor under any conditional sale agreement, capital
lease or other title retention agreement.
"Maturity" means, with respect to any Security, the date on which any
principal of such Security becomes due and payable as therein or herein
provided, whether at the Stated Maturity with respect to such principal or by
declaration of acceleration, call for redemption or purchase or otherwise.
"Moody's" means Moody's Investors Service, Inc. and its successors.
"Net Available Proceeds" means, with respect to any Asset Sale, the
proceeds thereof in the form of cash or Cash Equivalents including payments in
respect of deferred payment obligations when received in the form of cash or
Cash Equivalents (except to the extent that such obligations are financed or
sold with recourse to the Company or any Restricted Subsidiary), net of (i)
brokerage commissions and other fees and expenses (including fees and expenses
of legal counsel, accountants and investment banks) related to such Asset Sale,
(ii) provisions for all taxes payable as a result of such Asset Sale, (iii)
amounts required to be paid to any Person (other than the Company or any
Restricted Subsidiary) owning a beneficial interest in the Property subject to
the Asset Sale or having a Lien thereon and (iv) appropriate amounts to be
provided by the Company or any Restricted Subsidiary, as the case may be, as a
reserve required in accordance with GAAP consistently applied against any
liabilities associated with such Asset Sale and retained by the Company or any
Restricted Subsidiary, as the case may be, after such Asset Sale, including,
without limitation, pension and other post-employment benefit liabilities,
liabilities related to environmental matters and liabilities under any
indemnification obligations associated with such Asset Sale, all as reflected
in an Officers' Certificate delivered to the Trustee; provided, however, that
any amounts remaining after adjustments, revaluations or liquidations of such
reserves shall constitute Net Available Proceeds.
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<PAGE> 18
"Net Available Proceeds" means, with respect to any Event of Loss, the proceeds
to the Company or any Restricted Subsidiary as a result thereof in the form of
cash or Cash Equivalents, including insurance proceeds paid to the Company or
any Restricted Subsidiary, and all payments received by the Company or any
Restricted Subsidiary from any government or any instrumentality or agency
thereof by way of compensation for the requisition of title to Property, net of
all fees and expenses incurred by the Company or any Restricted Subsidiary
related to the collection or receipt of such proceeds, all as reflected in an
Officers' Certificate delivered to the Trustee.
"Net Cash Proceeds," with respect to any issuance or sale of Qualified
Capital Stock or other securities, means the cash proceeds of such issuance or
sale net of attorneys' fees, accountants' fees, underwriters' or placement
agents' fees, discounts or commissions and brokerage, consultant and other fees
and expenses actually incurred in connection with such issuance or sale and net
of taxes paid or payable as a result thereof.
"Non-Recourse Indebtedness" means Indebtedness or that portion of
Indebtedness of the Company or any Restricted Subsidiary incurred in connection
with the acquisition by the Company or such Restricted Subsidiary of any
Property and as to which (a) the holders of such Indebtedness agree that they
will look solely to the Property so acquired and securing such Indebtedness for
payment on or in respect of such Indebtedness, and neither the Company nor any
Subsidiary (other than an Unrestricted Subsidiary) (i) provides credit support,
including any undertaking, agreement or instrument which would constitute
Indebtedness or (ii) is directly or indirectly liable for such Indebtedness,
and (b) no default with respect to such Indebtedness would permit (after notice
or passage of time or both), according to the terms thereof, any holder of any
Indebtedness of the Company or a Restricted Subsidiary to declare a default on
such Indebtedness or cause the payment thereof to be accelerated or payable
prior to its Stated Maturity.
"Officers" means, with respect to any Person, the Chief Executive
Officer, the President, any Vice President, the Chief Financial Officer and the
Treasurer of such Person.
"Officers' Certificate" means a certificate signed by the Chairman of
the Board, the President or a Vice President, and by the Treasurer, an
Assistant Treasurer, the Secretary or an Assistant Secretary of the Company,
and delivered to the Trustee.
"Opinion of Counsel" means a written opinion of counsel, who may be
counsel for the Company including an employee of the Company, and who shall be
reasonably acceptable to the Trustee.
"Outstanding," when used with respect to Securities, means, as of the
date of determination, all Securities theretofore authenticated and delivered
under this Indenture, except:
(i) Securities theretofore canceled by the Trustee or
delivered to the Trustee for cancellation;
(ii) Securities, or portions thereof, for whose payment or
redemption money in the necessary amount has been theretofore
deposited with the Trustee or any Paying Agent
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<PAGE> 19
(other than the Company) in trust or set aside and segregated in trust
by the Company (if the Company shall act as its own Paying Agent) for
the Holders of such Securities, provided that, if such Securities are
to be redeemed, notice of such redemption has been duly given pursuant
to this Indenture or provision therefor satisfactory to the Trustee
has been made;
(iii) Securities, except to the extent provided in Sections
12.2 and 12.3 hereof, with respect to which the Company has effected
legal defeasance or covenant defeasance as provided in Article XII
hereof; and
(iv) Securities which have been paid pursuant to Section
3.7 hereof or in exchange for or in lieu of which other Securities
have been authenticated and delivered pursuant to this Indenture,
other than any such Securities in respect of which there shall have
been presented to the Trustee proof satisfactory to it that such
securities are held by a bona fide purchaser in whose hands the
Securities are valid obligations of the Company;
provided, however, that in determining whether the Holders of the requisite
principal amount of Outstanding Securities have given any request, demand,
authorization, direction, consent, notice or waiver hereunder, and for the
purpose of making the calculations required by TIA Section 313, Securities
owned by the Company or any other obligor upon the Securities or any Affiliate
of the Company or such other obligor shall be disregarded and deemed not to be
Outstanding, except that, in determining whether the Trustee shall be protected
in making such calculation or in relying upon any such request, demand,
authorization, direction, consent, notice or waiver, only Securities which the
Trustee knows to be so owned shall be so disregarded. Securities so owned
which have been pledged in good faith may be regarded as Outstanding if the
pledgee establishes to the satisfaction of the Trustee the pledgee's right so
to act with respect to such Securities and that the pledgee is not the Company
or any other obligor upon the Securities or any Affiliate of the Company or
such other obligor.
"Paying Agent" means any Person (including the Company acting as
Paying Agent) authorized by the Company to pay the principal of (and premium,
if any, on) or interest on any Securities on behalf of the Company.
"Permitted Indebtedness" means any of the following:
(i) Indebtedness (and any guarantee thereof) under one or
more working capital credit facilities with banks and other financial
institutions in an aggregate principal amount at any one time
outstanding not to exceed $20,000,000, less any amounts derived from
Asset Sales and applied to the permanent reduction of the Indebtedness
under any such credit facilities as contemplated by Section 10.15
hereof (the "Maximum Bank Credit Amount"), and any renewals,
amendments extensions, supplements, modifications, deferrals,
refinancings or replacements (each, for purposes of this clause (i), a
"refinancing") thereof, including any successive refinancings thereof,
so long as the aggregate principal amount of any such new
Indebtedness, together with the aggregate
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<PAGE> 20
principal amount of all other Indebtedness outstanding pursuant to
this clause (i), shall not at any one time exceed the Maximum Bank
Credit Amount;
(ii) Indebtedness under the Securities;
(iii) Indebtedness outstanding or in effect on the date of
this Indenture (and not repaid or defeased with the proceeds of the
offering of the Securities);
(iv) Indebtedness under Interest Rate Protection
Obligations, provided that (1) such Interest Rate Protection
Obligations are related to payment obligations on Permitted
Indebtedness or Indebtedness otherwise permitted by Section 10.11(a)
hereof, and (2) the notional principal amount of such Interest Rate
Protection Obligations does not exceed the principal amount of such
Indebtedness to which such Interest Rate Protection Obligations
relate;
(v) Indebtedness under Currency Hedge Obligations,
provided that (1) such Currency Hedge Obligations are related to
payment obligations on Permitted Indebtedness or Indebtedness
otherwise permitted by Section 10.11(a) hereof, or to the foreign
currency cash flows reasonably expected to be generated by the Company
and its Restricted Subsidiaries, and (2) the notional principal amount
of such Currency Hedge Obligations does not exceed the principal
amount of such Indebtedness and the amount of such foreign currency
cash flows to which such Currency Hedge Obligations relate;
(vi) Indebtedness of the Company to a Wholly Owned
Restricted Subsidiary and Indebtedness of any Restricted Subsidiary to
the Company or a Wholly Owned Restricted Subsidiary; provided,
however, that upon any subsequent issuance or transfer of any Capital
Stock or any other event which results in any such Wholly Owned
Restricted Subsidiary ceasing to be a Wholly Owned Restricted
Subsidiary or any other subsequent transfer of any such Indebtedness
(except to the Company or a Wholly Owned Restricted Subsidiary), such
Indebtedness shall be deemed, in each case, to be incurred and shall
be treated as an incurrence for purposes of Section 10.11(a) hereof at
the time the Wholly Owned Restricted Subsidiary in question ceased to
be a Wholly Owned Restricted Subsidiary or the time such subsequent
transfer occurred;
(vii) Indebtedness in respect of bid, performance or surety
bonds issued for the account of the Company in the ordinary course of
business, including guaranties or obligations of the Company with
respect to letters of credit supporting such bid, performance or
surety obligations (in each case other than for an obligation for
money borrowed);
(viii) Non-Recourse Indebtedness;
(ix) any renewals, substitutions, refinancings or
replacements (each, for purposes of this clause (ix), a "refinancing")
by the Company or a Restricted Subsidiary of any Indebtedness,
including any successive refinancings by the Company or such
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<PAGE> 21
Restricted Subsidiary, so long as (A) any such new Indebtedness shall
be in a principal amount that does not exceed the principal amount
(or, if such new Indebtedness being refinanced provides for an amount
less than the principal amount thereof to be due and payable upon a
declaration of acceleration thereof, such lesser amount as of the date
of determination) so refinanced plus the amount of any premium
required to be paid in connection with such refinancing pursuant to
the terms of the Indebtedness refinanced or the amount of any premium
reasonably determined by the Company or such Restricted Subsidiary as
necessary to accomplish such refinancing, plus the amount of expenses
of the Company or such Restricted Subsidiary incurred in connection
with such refinancing, (B) in the case of any refinancing of
Indebtedness (including the Securities) that is pari passu with or
subordinated in right of payment to the Securities, then such new
Indebtedness is pari passu with or subordinated in right of payment to
the Securities at least to the same extent as the Indebtedness being
refinanced and (C) such new Indebtedness has an Average Life equal to
or longer than the Average Life of the Indebtedness being refinanced
and a final Stated Maturity that is at lease 91 days later than the
final Stated Maturity of the Indebtedness being refinanced; and
(x) any additional Indebtedness in an aggregate principal
amount not in excess of $5,000,000 at any one time outstanding and any
guarantee thereof.
"Permitted Investments" means any of the following: (i) Investments
in Cash Equivalents; (ii) Investments in the Company or any of its Wholly Owned
Restricted Subsidiaries; (iii) Investments by the Company or any of its
Restricted Subsidiaries in another Person, if as a result of such Investment
(A) such other Person becomes a Wholly Owned Restricted Subsidiary or (B) such
other Person is merged or consolidated with or into, or transfers or conveys
all or substantially all of its Properties to, the Company or a Wholly Owned
Restricted Subsidiary; (iv) Investments permitted under Section 10.15 or 10.16
hereof; (v) Investments made in the ordinary course of business in prepaid
expenses, lease, utility, workers' compensation, performance and other similar
deposits; and (vi) Investments in stock, obligations or securities received in
settlement of debts owing to the Company or any Restricted Subsidiary as a
result of bankruptcy or insolvency proceedings or upon the foreclosure,
perfection or enforcement of any Lien in favor of the Company or any Restricted
Subsidiary, in each case as to debt owing to the Company or any Restricted
Subsidiary that arose in the ordinary course of business of the Company or any
such Restricted Subsidiary, provided that any stocks, obligations or securities
received in settlement of debts that arose in the ordinary course of business
(and received other than as a result of bankruptcy or insolvency proceedings or
upon foreclosure, perfection or enforcement of any Lien) that are, within 30
days of receipt, converted into cash or Cash Equivalents shall be treated as
having been cash or Cash Equivalents at the time received.
"Permitted Liens" means the following types of Liens:
(a) Liens existing as of the date of this Indenture;
(b) Liens securing the Securities or the Subsidiary
Guarantees;
15
<PAGE> 22
(c) Liens in favor of the Company;
(d) Liens on accounts receivable or inventory securing
Indebtedness that constitutes (A) Permitted Indebtedness pursuant to
clause (i) of the definition of "Permitted Indebtedness" or (B)
Permitted Subsidiary Indebtedness;
(e) Liens securing Indebtedness that constitutes
Permitted Indebtedness pursuant to clause (ix) of the definition of
"Permitted Indebtedness" incurred as a refinancing of any Indebtedness
secured by Liens described in clause (a) or (d) of this definition;
(f) statutory Liens of landlords and Liens of carriers,
warehousemen, mechanics, suppliers, materialmen, repairmen and other
Liens imposed by law incurred in the ordinary course of business for
sums not delinquent or being contested in good faith, if such reserve
or other appropriate provision, if any, as shall be required by GAAP
shall have been made in respect thereof;
(g) Liens incurred or deposits made in the ordinary
course of business in connection with workers' compensation,
unemployment insurance and other types of social security, or to
secure the payment or performance of tenders, statutory or regulatory
obligations, surety and appeal bonds, bids, government contracts and
leases, performance and return of money bonds and other similar
obligations (exclusive of obligations for the payment of borrowed
money);
(h) judgment Liens not giving rise to an Event of Default
so long as any appropriate legal proceedings which may have been duly
initiated for the review of such judgment shall not have been finally
terminated or the period within which such proceeding may be initiated
shall not have expired;
(i) any interest or title of a lessor under any
Capitalized Lease Obligation (to the extent the Attributable
Indebtedness related thereto constitutes Indebtedness permitted to be
incurred under the terms of the Indenture) or operating lease;
(j) purchase money Liens; provided, however, that (i) the
related purchase money Indebtedness shall not be secured by any
Property of the Company or any Restricted Subsidiary other than the
Property so acquired and the proceeds thereof and (ii) the Lien
securing such Indebtedness shall be created within 90 days of such
acquisition;
(k) Liens securing obligations under or in respect of
either Currency Hedge Obligations or Interest Rate Protection
Obligations;
(l) Liens upon specific items of inventory or other goods
and proceeds of any Person securing such Person's obligations in
respect of bankers' acceptances issued or created for the account of
such Person to facilitate the purchase, shipment or storage of such
inventory or other goods;
16
<PAGE> 23
(m) Liens securing reimbursement obligations with respect
to commercial letters of credit which encumber documents and other
Property relating to such letters of credit and products and proceeds
thereof;
(n) Liens encumbering deposits made to secure obligations
arising from statutory, regulatory, contractual or warranty
requirements of the Company or any of its Restricted Subsidiaries,
including rights of offset and set-off and;
(o) Liens securing Non-Recourse Indebtedness; provided,
however, that the related Non-Recourse Indebtedness shall not be
secured by any Property of the Company or any Restricted Subsidiary
other than the Property acquired by the Company or any Restricted
Subsidiary with the proceeds of such Non-Recourse Indebtedness.
"Permitted Subsidiary Indebtedness" means Indebtedness in an aggregate
principal amount at any time outstanding up to the excess, if any, of (A) 10%
of the Company's Consolidated Net Tangible Assets over (B) $20,000,000.
"Person" means any individual, corporation, limited liability company,
partnership, joint venture, association, joint stock company, trust,
unincorporated organization or government or any agency or political
subdivision thereof.
"Predecessor Security" of any particular Security means every previous
Security, including any Security of a different series, evidencing all or a
portion of the same debt as that evidenced by such particular Security; and,
for the purposes of this definition, any Security authenticated and delivered
under Section 3.7 hereof in exchange for a mutilated security or in lieu of a
lost, destroyed or stolen Security shall be deemed to evidence the same debt as
the mutilated, lost, destroyed or stolen Security.
"Preferred Stock" means, with respect to any Person, any and all
shares, interests, participations or other equivalents (however designated) of
such Person's preferred or preference stock, whether now outstanding or issued
after the date of this Indenture, including, without limitation, all classes
and series of preferred or preference stock of such Person.
"Property" means, with respect to any Person, any interest of such
Person in any kind of property or asset, whether real, personal or mixed, or
tangible or intangible, including, without limitation, Capital Stock in any
other Person.
"Qualified Capital Stock" of any Person means any and all Capital
Stock of such Person other than Disqualified Capital Stock.
"Record Date" for the interest payable on any Interest Payment Date
means the or (whether or not a Business Day), as the case may
be, next preceding such Interest Payment Date.
"Redemption Date," when used with respect to any Security to be
redeemed, in whole or in part, means the date fixed for such redemption by or
pursuant to this Indenture.
"Redemption Price," when used with respect to any Security to be
redeemed, means the price at which it is to be redeemed pursuant to this
Indenture.
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<PAGE> 24
"Responsible Officer," when used with respect to the Trustee, means
any officer in the Corporate Trust Department of the Trustee, and also means,
with respect to a particular corporate trust matter, any other officer of the
Trustee to whom such matter is referred because of his knowledge of and
familiarity with the particular subject.
"Restricted Investment" means (without duplication) (i) the
designation of a Subsidiary as an Unrestricted Subsidiary in the manner
described in the definition of "Unrestricted Subsidiary" and (ii) any
Investment other than a Permitted Investment.
"Restricted Subsidiary" means any Subsidiary of the Company, whether
existing on or after the date of this Indenture, unless such Subsidiary of the
Company is an Unrestricted Subsidiary or is designated as an Unrestricted
Subsidiary pursuant to the terms of this Indenture.
"S&P" means Standard and Poor's Ratings Services, a division of The
McGraw-Hill Companies, Inc., and its successors.
"Sale/Leaseback Transaction" means any direct or indirect arrangement
pursuant to which Properties are sold or transferred by the Company or a
Restricted Subsidiary and are thereafter leased back from the purchaser or
transferee thereof by the Company or one of its Restricted Subsidiaries.
"Securities" has the meaning stated in the first recital of this
Indenture and more particularly means any Securities authenticated and
delivered under this Indenture.
"Securities Act" means the Securities Act of 1933, as amended from
time to time, and any successor act thereto.
"Security Register" and "Security Registrar" have the respective
meanings specified in Section 3.5 hereof.
"Special Record Date" for the payment of any Defaulted Interest means
a date fixed by the Trustee pursuant to Section 3.8 hereof.
"Stated Maturity" means, when used with respect to any Indebtedness or
any installment of interest thereon, means the date specified in the instrument
evidencing or governing such Indebtedness as the fixed date an which the
principal of such Indebtedness or such installment of interest is due and
payable.
"Subordinated Indebtedness" means Indebtedness of the Company which is
expressly subordinated in right of payment to the Securities.
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<PAGE> 25
"Subsidiary" means, with respect to any Person, (i) a corporation a
majority of whose Voting Stock is at the time, directly or indirectly, owned by
such Person, by one or more Subsidiaries of such Person or by such Person and
one or more Subsidiaries thereof or (ii) any other Person (other than a
corporation), including, without limitation, a joint venture, in which such
Person, one or more Subsidiaries thereof or such Person and one or more
Subsidiaries thereof, directly or indirectly, at the date of determination
thereof, have at least majority ownership interest entitled to vote in the
election of directors, managers or trustees thereof (or other Persons
performing similar functions).
"Trust Indenture Act" or "TIA" means the Trust Indenture Act of 1939,
as amended and in force at the date as of which this Indenture was executed
until such time as this Indenture is qualified under the TIA, and thereafter as
in effect on the date on which this Indenture is qualified under the TIA,
except as provided in Section 9.5 hereof.
"Trustee" means the Person named as the "Trustee" in the first
paragraph of this Indenture until a successor Trustee shall have become such
pursuant to the applicable provisions of this Indenture, and thereafter
"Trustee" shall mean such successor Trustee.
"Unrestricted Subsidiary" means (i) any Subsidiary of the Company that
at the time of determination will be designated an Unrestricted Subsidiary by
the Board of Directors of the Company as provided below and (ii) any Subsidiary
of an Unrestricted Subsidiary. The Board of Directors of the Company may
designate any Subsidiary of the Company as an Unrestricted Subsidiary so long
as (a) neither the Company nor any Restricted Subsidiary is directly or
indirectly liable pursuant to the terms of any Indebtedness of such Subsidiary;
(b) no default with respect to any Indebtedness of such Subsidiary would permit
(upon notice, lapse of time or otherwise) any holder of any other Indebtedness
of the Company or any Restricted Subsidiary to declare a default on such other
Indebtedness or cause the payment thereof to be accelerated or payable prior to
its Stated Maturity; (c) such designation as an Unrestricted Subsidiary would
be permitted under Section 10.10 hereof; and (d) such designation shall not
result in the creation or imposition of any Lien on any of the Properties of
the Company or any Restricted Subsidiary (other than any Permitted Lien or any
Lien the creation or imposition of which shall have been in compliance with
Section 10.13 hereof); provided, however, that with respect to clause (a), the
Company or a Restricted Subsidiary may be liable for Indebtedness of an
Unrestricted Subsidiary if (x) such liability constituted a Permitted
Investment or a Restricted Payment permitted by Section 10.10 hereof, in each
case at the time of incurrence, or (y) the liability would be a Permitted
Investment at the time of designation of such Subsidiary as an Unrestricted
Subsidiary. Any such designation by the Board of Directors of the Company shall
be evidenced to the Trustee by filing a Board Resolution with the Trustee
giving effect to such designation. The Board of Directors of the Company may
designate any Unrestricted Subsidiary as a Restricted Subsidiary if,
immediately after giving effect to such designation, on a pro forma basis (i)
no Default or Event of Default shall have occurred and be continuing, (ii) the
Company could incur $1.00 of additional Indebtedness (not including the
incurrence of Permitted Indebtedness) under Section 10.11(a) hereof and (iii)
if any of the Properties of the Company or any of its Restricted Subsidiaries
would upon such designation become subject to any Lien (other than a Permitted
19
<PAGE> 26
Lien), the creation or imposition of such Lien shall have been in compliance
with Section 10.13 hereof.
"Vice President," when used with respect to the Company or the
Trustee, means any vice president, whether or not designated by a number or a
word or words added before or after the title "vice president."
"Voting Stock" means any class or classes of Capital Stock pursuant to
which the holders thereof have the general voting power under ordinary
circumstances to elect at least a majority of the board of directors, managers
or trustees of any Person (irrespective of whether or not, at the time, stock
of any other class or classes shall have, or might have, voting power by reason
of the happening of any contingency).
"Wholly Owned Restricted Subsidiary" means any Restricted Subsidiary
to the extent (i) all of the Capital Stock or other ownership interests in such
Restricted Subsidiary, other than any directors' qualifying shares mandated by
applicable law, is owned directly or indirectly by the Company or (ii) such
Restricted Subsidiary is organized in a foreign jurisdiction and is required by
the applicable laws and regulations of such foreign jurisdiction to be
partially owned by the government of such foreign jurisdiction or individual or
corporate citizens of such foreign jurisdiction in order for such Restricted
Subsidiary to transact business in such foreign jurisdiction, provided that the
Company, directly or indirectly, owns the remaining Capital Stock or ownership
interest in such Restricted Subsidiary and, by contract or otherwise, controls
the management and business of such Restricted Subsidiary and derives the
economic benefits of ownership of such Restricted Subsidiary to substantially
the same extent as if such Restricted Subsidiary were a wholly owned
Subsidiary.
Section 1.2 Other Definitions.
<TABLE>
<CAPTION>
Defined
Term in Section
---- ----------
<S> <C>
"Additional Interest" . . . . . . . . . . . . . . . . . . 3.1
"Agent Members" . . . . . . . . . . . . . . . . . . . . . 3.6
"Change of Control Notice" . . . . . . . . . . . . . . . 10.14(c)
"Change of Control Offer" . . . . . . . . . . . . . . . . 10.14(a)
"Change of Control Purchase Date" . . . . . . . . . . . . 10.14(c)
"Change of Control Purchase Price" . . . . . . . . . . . 10.14(a)
"Defaulted Interest" . . . . . . . . . . . . . . . . . . 3.8
"Excess Proceeds" . . . . . . . . . . . . . . . . . . . . 10.15(b)
"Global Security" . . . . . . . . . . . . . . . . . . . . 2.1
"Net Proceeds Deficiency" . . . . . . . . . . . . . . . . 10.15(c)
"Net Proceeds Offer" . . . . . . . . . . . . . . . . . . 10.15(c)
"Net Proceeds Payment Date" . . . . . . . . . . . . . . . 10.15(c)
"Offered Price" . . . . . . . . . . . . . . . . . . . . . 10.15(c)
"Payment Amount" . . . . . . . . . . . . . . . . . . . . 10.15(c)
"Payment Restriction" . . . . . . . . . . . . . . . . . . 10.17
"Physical Securities" . . . . . . . . . . . . . . . . . . 2.1
"Purchase Notice" . . . . . . . . . . . . . . . . . . . . 10.15(c)
"Restricted Payment" . . . . . . . . . . . . . . . . . . 10.10(a)
"Surviving Entity" . . . . . . . . . . . . . . . . . . . 8.1(a)
"Trigger Date" . . . . . . . . . . . . . . . . . . . . . 10.15(c)
"U.S. Government Obligations" . . . . . . . . . . . . . . 12.4(a)
</TABLE>
20
<PAGE> 27
Section 1.3 Incorporation by Reference of Trust Indenture Act.
Whenever this Indenture refers to a provision of the TIA, the
provision is incorporated by reference in and made a part of this Indenture.
The following TIA terms used in this Indenture have the following meanings:
"indenture securities" means the Securities,
"indenture security holder" means a Holder,
"indenture to be qualified" means this Indenture,
"indenture trustee" or "institutional trustee" means the
Trustee, and
"obligor" on the indenture securities means the Company or any
other obligor on the Securities.
All other TIA terms used in this Indenture that are defined by the
TIA, defined by TIA reference to another statute or defined by Commission rule
and not otherwise defined herein have the meanings assigned to them therein.
Section 1.4 Rules of Construction.
For all purposes of this Indenture, except as otherwise expressly
provided or unless the context otherwise requires:
(a) the terms defined in this Article have the meanings assigned
to them in this Article, and include the plural as well as the singular;
(b) all accounting terms not otherwise defined herein have the
meanings assigned to them in accordance with GAAP and all accounting
calculations will be determined in accordance with GAAP;
(c) the words "herein," "hereof" and "hereunder" and other words
of similar import refer to this Indenture as a whole and not to any particular
Article, Section or other subdivision;
(d) the masculine gender includes the feminine and the neuter;
(e) a "day" means a calendar day;
(f) the term "merger" includes a statutory share exchange and the
term "merged" has a correlative meaning; and
(g) references to agreements and other instruments include
subsequent amendments and waivers but only to the extent not prohibited by this
Indenture.
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<PAGE> 28
ARTICLE II
SECURITY FORMS
Section 2.1 Forms Generally.
The definitive Securities shall be printed, lithographed or engraved
on steel-engraved borders or may be produced in any other manner, all as
determined by the officers executing such Securities as evidenced by their
execution of such Securities.
Securities (including the Trustee's certificate of authentication)
shall be issued initially in the form of one or more permanent global
Securities substantially in the form set forth in Sections 2.2 through 2.4
hereof (each being herein called a "Global Security") deposited with the
Trustee, as custodian for the Depository, duly executed by the Company and
authenticated by the Trustee as hereinafter provided. Subject to the
limitation set forth in Section 3.1, the principal amounts of the Global
Securities may be increased or decreased from time to time by adjustments made
on the records of the Trustee, as custodian for the Depository, as hereinafter
provided.
Securities (including the Trustee's certificate of authentication)
exchanged for beneficial interest in a Global Security as described in Section
3.6 shall be issued in the form of permanent certificated securities in
registered form in substantially the form set forth in Sections 2.2 through 2.4
hereto ("Physical Securities").
The Securities and the Trustee's certificate of authentication shall
be in substantially the respective forms set forth in this Article, with such
appropriate insertions, omissions, substitutions and other variations as are
required or permitted by this Indenture, and may have such letters, CUSIP or
other numbers or other marks of identification and such legends or endorsements
placed thereon as may be required to comply with the rules of any securities
exchange or as may, consistently herewith, be determined by the officers
executing such Securities, as evidenced by their execution of the Securities.
Any portion of the text of any Security may be set forth on the reverse
thereof, with an appropriate reference thereto on the face of the Security. In
addition to the requirements of Section 2.3, the Securities may also have set
forth on the reverse side thereof a form of assignment and forms to elect
purchase by the Company pursuant to Section 10.14 or 10.15 hereof.
Section 2.2 Form of Face of Security.
VERITAS DGC INC.
_______% Senior Note due 2003
No._____ $____________
CUSIP No.__________
22
<PAGE> 29
Veritas DGC Inc., a Delaware corporation (herein called the "Company,"
which term includes any successor Person under the Indenture hereinafter
referred to), for value received, hereby promises to pay to _________ or
registered assigns the principal sum of _________ Dollars on_________, ___
2003, at the office or agency of the Company referred to below, and to pay
interest thereon, commencing on ___________ ___, 1996 and continuing
semiannually thereafter, on __________ ___and __________ ___in each year, from
__________ ___ 1997, or from the most recent Interest Payment Date to which
interest has been paid or duly provided for, at the rate of _____%per annum,
until the principal hereof is paid or duly provided for, and (to the extent
lawful) to pay on demand interest on any overdue interest at the rate borne by
the Securities from the date on which such overdue interest becomes payable to
the date payment of such interest has been made or duly provided for. The
interest so payable, and punctually paid or duly provided for, on any Interest
Payment Date will, as provided in such Indenture, be paid to the Person in
whose name this Security (or one or more Predecessor Securities) is registered
on the Security Register at the close of business on the Regular Record Date
for such interest, which shall be the __________ ___or __________ ___(whether
or not a Business Day), as the case may be, next preceding such Interest
Payment Date. Any such interest not so punctually paid or duly provided for
shall forthwith cease to be payable to the Holder on such Regular Record Date,
and such Defaulted Interest, and (to the extent lawful) interest on such
Defaulted Interest at the rate borne by the Securities, may be paid to the
Person in whose name this Security (or one or more Predecessor Securities) is
registered on the Security Register at the close of business on a Special
Record Date for the payment of such Defaulted Interest to be fixed by the
Trustee, notice whereof shall be given to Holders of Securities not less than
10 days prior to such Special Record Date, or may be paid at any time in any
other lawful manner not inconsistent with the requirements of any securities
exchange on which the Securities may be listed, and upon such notice as may be
required by such exchange, all as more fully provided in said Indenture.
Payment of the principal of (and premium, if any, on) and interest on
this Security will be made at the office or agency of the Company maintained
for that purpose in The City of New York, in such coin or currency of the
United States of America as at the time of payment is legal tender for payment
of public and private debts; provided, however, that payment of interest may
be made on Physical Securities at the option of the Company on or before the
due date (i) by check mailed to the address of the Person entitled thereto as
such address shall appear on the Security Register or (ii) with respect to any
Holder owning Securities in the principal amount of $500,000 or more, by wire
transfer to an account maintained by the Holder located in the United States,
as specified in a written notice to the Trustee by any such Holder requesting
payment by wire transfer and specifying the account to which transfer is
requested.
Reference is hereby made to the further provisions of this Security
set forth on the reverse hereof, which further provisions shall for all
purposes have the same effect as if set forth at this place.
Unless the certificate of authentication hereon has been duly executed
by the trustee referred to on the reverse hereof by manual signature, this
Security shall not be entitled to any benefit under the Indenture, or be valid
or obligatory for any purpose.
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<PAGE> 30
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed under its corporate seal.
VERITAS DGC INC.
By:
-------------------------------
President
Attest:
- ----------------------------
Secretary
Section 2.3 Form of Reverse of Security.
This Security is one of a duly authorized issue of securities of the
Company designated as its _____% Senior Notes due 2003, (herein called the
"Securities"), limited (except as otherwise provided in the Indenture referred
to below) in aggregate principal amount to $75,000,000 which may be issued
under an indenture (herein called the "Indenture") dated as of __________
___,1996 between the Company and Fleet National Bank (herein called the
"Trustee," which term includes any successor trustee under the Indenture), to
which Indenture and all indentures supplemental thereto reference is hereby
made for a statement of the respective rights, limitations of rights, duties,
obligations and immunities thereunder of the Company, the Trustee and the
Holders of the Securities, and of the terms upon which the Securities are, and
are to be, authenticated and delivered.
The Securities are subject to redemption, at the option of the
Company, in whole or in part, at any time on or after __________, 2000, upon not
less than 30 or more than 60 days' notice at the following Redemption Prices
(expressed as percentages of principal amount) set forth below if redeemed
during the 12-month period beginning October 1 of the years indicated below:
<TABLE>
<CAPTION>
Redemption
Year Price
---- ----------
<S> <C>
2000 . . . . . . . . . . . . . . . . . . . . _____%
2001 . . . . . . . . . . . . . . . . . . . . _____%
2002 and thereafter . . . . . . . . . . . . . 100.00%
</TABLE>
together in the case of any such redemption with accrued and unpaid interest,
if any, to the Redemption Date (subject to the right of Holders of record on
the relevant Record Date to receive interest due on an Interest Payment Date
that is on or prior to the Redemption Date), all as provided in the Indenture.
24
<PAGE> 31
Notwithstanding the foregoing, at any time on or prior to __________,
1999, up to $20,000,000 in aggregate principal amount of Securities may be
redeemed, at the option of the Company, upon not less than 30 or more than 60
days' notice, from the Net Cash Proceeds of a Public Equity Offering, at a
Redemption Price equal to _____% of the principal amount thereof, together with
accrued and unpaid interest to the Redemption Date, provided that at least
$55,000,000 in aggregate principal amount of Securities remains Outstanding
immediately after such redemption and that such redemption occurs within 60
days following the closing of such Public Equity Offering.
In the case of any redemption of Securities, interest installments
whose Stated Maturity is on or prior to the Redemption Date will be payable to
Holders of such Securities, or one or more Predecessor Securities, of record at
the close of business on the relevant Record Date referred to on the face
hereof. Securities (or portions thereof) for whose redemption and payment
provision is made in accordance with the Indenture shall cease to bear interest
from and after the Redemption Date. In the event of redemption or purchase of
this Security in part only, a new Security or Securities for the unredeemed or
unpurchased portion hereof shall be issued in the name of the Holder hereof
upon the cancellation hereof.
The Securities do not have the benefit of any mandatory redemption of
sinking fund obligations.
In the event of a Change of Control of the Company, and subject to
certain conditions and limitations provided in the Indenture, the Company will
be obligated to make an offer to purchase, on a Business Day not more than 60
or less than 30 days following the occurrence of a Change of Control of the
Company, all of the then Outstanding Securities at a purchase price equal to
101% of the principal amount thereof, together with accrued and unpaid
interest, if any, to the Change of Control Purchase Date, all as provided in
the Indenture.
In the event of Asset Sales, under certain circumstances, the Company
will be obligated to make a Net Proceeds Offer to purchase all or a specified
portion of each Holder's Securities at a purchase price equal to 100% of the
principal amount of the Securities, together with accrued and unpaid interest,
if any, to the Net Proceeds Payment Date.
As set forth in the Indenture, an Event of Default is generally (i)
failure to pay principal upon maturity, redemption or otherwise (including
pursuant to a Change of Control Offer or a Net Proceeds Offer); (ii) default
for 30 days in payment of interest on any of the Securities; (iii) default in
the performance of agreements relating to mergers, consolidations and sales of
all or substantially all assets or the failure to make or consummate a Change
of Control Offer or a Net Proceeds Offer; (iv) failure for 30 days after notice
to comply with any other covenants in the Indenture or the Securities; (v)
certain payment defaults under, and the acceleration prior to the maturity of,
certain Indebtedness of the Company or any Restricted Subsidiary in an
aggregate principal amount in excess of $5,000,000; (vi) certain final
judgments or orders against the Company or any Restricted Subsidiary in an
aggregate amount of more than $5,000,000 over the coverage under applicable
insurance policies which remain unsatisfied and either become subject to
commencement of enforcement proceedings or remain unstayed for a period of 30
days; and (vii) certain events of bankruptcy, insolvency or reorganization of
the Company or any Restricted
25
<PAGE> 32
Subsidiary. If any Event of Default occurs and is continuing, the Trustee or
the holders of at least 25% in aggregate principal amount of the Outstanding
Securities may declare the principal amount of all the Securities to be due and
payable immediately, except that (i) in the case of an Event of Default arising
from certain events of bankruptcy, insolvency or reorganization of the Company
or any Restricted Subsidiary, the principal amount of the Securities will
become due and payable immediately without further action or notice, and (ii)
in the case of an Event of Default which relates to certain payment defaults or
acceleration with respect to certain Indebtedness, any such Event of Default
and any consequential acceleration of the Securities will be automatically
rescinded if any such Indebtedness is repaid or if the default relating to such
Indebtedness is cured or waived and if the holders thereof have accelerated
such Indebtedness then such holders have rescinded their declaration of
acceleration. No Holder may pursue any remedy under the Indenture unless the
Trustee shall have failed to act after notice from such Holder of an Event of
Default and written request by Holders of at least 25% in aggregate principal
amount of the Outstanding Securities, and the offer to the Trustee of indemnity
reasonably satisfactory to it; however, such provision does not affect the
right to sue for enforcement of any overdue payment on a Security by the Holder
thereof. Subject to certain limitations, Holders of a majority in aggregate
principal amount of the Outstanding Securities may direct the Trustee in its
exercise of any trust or power. The Trustee may withhold from Holders notice
of any continuing default (except default in payment of principal, premium or
interest) if it determines in good faith that withholding the notice is in the
interest of the Holders. The Company is required to file annual and quarterly
reports with the Trustee as to the absence or existence of defaults.
The Indenture contains provisions for (i) defeasance at any time of
the entire indebtedness of the Company on this Security and (ii) discharge from
certain restrictive covenants and the related Defaults and Events of Default,
upon compliance by the Company with certain conditions set forth therein, which
provisions apply to this Security.
The Indenture permits, with certain exceptions as therein provided,
the amendment thereof and the modification of the rights and obligations of the
Company and the rights of the Holders under the Indenture at any time by the
Company and the Trustee with the consent of the Holders of a majority in
aggregate principal amount of the Securities at the time Outstanding. The
Indenture also contains provisions permitting the Holders of specified
percentages in aggregate principal amount of the Securities at the time
Outstanding, on behalf of the Holders of all the Securities, to waive
compliance by the Company with certain provisions of the Indenture and certain
past defaults under the Indenture and their consequences. Any such consent or
waiver by or on behalf of the Holder of this Security shall be conclusive and
binding upon such Holder and upon all future Holders of this Security and of
any Security issued upon the registration of transfer hereof or in exchange
herefor or in lieu hereof whether or not notation of such consent or waiver is
made upon this Security. Without the consent of any Holder, the Company and
the Trustee may amend or supplement the Indenture or the Securities to cure any
ambiguity, defect or inconsistency, to qualify or maintain the qualification of
the Indenture under the Trust Indenture Act and to make certain other specified
changes and other changes that do not materially adversely affect the interests
of any Holder in any material respect.
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No reference herein to the Indenture and no provision of this Security
or of the Indenture shall alter or impair the obligation of the Company, which
is absolute and unconditional, to pay the principal of (and premium, if any,
on) and interest on this Security at the times, place, and rate, and in the
coin or currency, herein prescribed.
As provided in the Indenture and subject to certain limitations
therein set forth, the transfer of this Security is registerable on the
Security Register of the Company, upon surrender of this Security for
registration of transfer at the office or agency of the Company maintained for
such purpose duly endorsed by, or accompanied by a written instrument of
transfer in form satisfactory to the Company and the Security Registrar duly
executed by, the Holder hereof or his attorney duly authorized in writing, and
thereupon one or more new Securities, of authorized denominations and for the
same aggregate principal amount, will be issued to the designated transferee or
transferees.
The Securities are issuable only in registered form without coupons in
denominations of $1,000 and any integral multiple thereof. As provided in the
Indenture and subject to certain limitations therein set forth, the Securities
are exchangeable for a like aggregate principal amount of Securities of a
different authorized denomination, as requested by the Holder surrendering the
same.
No service charge shall be made for any registration of transfer or
exchange of Securities, but the Company may require payment of a sum sufficient
to cover any tax or other governmental charge payable in connection therewith.
A director, officer, employee, incorporator, stockholder or Affiliate
of the Company, as such, past, present or future shall not have any personal
liability under this Security or any other Security or the Indenture by reason
of his or its status as such director, officer, employee, incorporator,
stockholder or Affiliate, or any liability for any obligations of the Company
under the Securities or the Indenture or for any claim based on, in respect of,
or by reason of such obligations or their creation. Each Holder, by accepting
this Security, waives and releases all such liability. Such waiver and release
are part of the consideration for the issuance of this Security.
Prior to the time of due presentment of this Security for registration
of transfer, the Company, the Trustee and any agent of the Company or the
Trustee may treat the Person in whose name this Security is registered as the
owner hereof for all purposes, whether or not this Security is overdue, and
neither the Company, the Trustee nor any agent shall be affected by notice to
the contrary.
All terms used in this Security which are defined in the Indenture
shall have the meanings assigned to them in the Indenture. The Company will
furnish to any Holder upon written request and without charge a copy of the
Indenture. Requests may be made to the Company at 3701 Kirby Drive, Suite 112,
Houston, Texas 77098, Attention: Richard W. McNairy (or such other address as
the Company may have furnished in writing to the Trustee).
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Pursuant to a recommendation promulgated by the Committee on Uniform
Security Identification Procedures, the Company has caused CUSIP numbers to be
printed on the Securities as a convenience to the Holders thereof. No
representation is made as to the accuracy of such numbers as printed on the
Securities and reliance may be placed only on the other identifying information
printed hereon.
Interest on this Security shall be computed on the basis of a 360-day
year comprised of twelve 30-day months.
This Security shall be governed by and construed in accordance with
the laws of the State of New York without regard to conflicts of law
principles.
Section 2.4 Form of Trustee's Certificate of Authentication.
The Trustee's certificate of authentication shall be in substantially
the following form:
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Securities referred to in the within mentioned
Indenture.
Dated: Fleet National Bank,
-------------------------- Trustee
By:
--------------------------
Authorized Signatory
ARTICLE III
THE SECURITIES
Section 3.1 Title and Terms.
The aggregate principal amount of Securities which may be
authenticated and delivered under this Indenture for original issue is limited
to $75,000,000. The aggregate principal amount of Securities Outstanding at
any one time may not exceed such amount except as provided in Section 3.7
hereof.
The Securities shall be known and designated as the "_____% Senior
Notes due 2003" of the Company. Their Stated Maturity shall be __________ ___,
2003, and they shall bear interest at the rate of _____% per annum from
__________ ___, 1996, or from the most recent Interest Payment Date to which
interest has been paid or duly provided for, payable semiannually on
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__________ ___ and __________ ___ in each year, commencing __________ ___,
1997, and at said Stated Maturity, until the principal thereof is paid or duly
provided for.
The principal of (and premium, if any, on) and interest on the
Securities shall be payable at the office or agency of the Company maintained
for such purpose in The City of New York; provided, however, that, at the
option of the Company, interest may be paid on Physical Securities on or before
the due date (i) by check mailed to addresses of the Persons entitled thereto
as such addresses shall appear on the Security Register, or (ii) with respect
to any Holder owning Securities in the principal amount of $500,000 or more, by
wire transfer to an account maintained by the Holder located in the United
States, as specified in a written notice to the Trustee by any such Holder
requesting payment by wire transfer and specifying the account to which
transfer is requested.
The Securities shall be redeemable as provided in Article XI hereof.
The Securities shall be subject to defeasance at the option of the
Company as provided in Article XII hereof.
Section 3.2 Denominations.
The Securities shall be issuable only in registered form without
coupons and only in denominations of $1,000 and any integral multiple thereof.
Section 3.3 Execution, Authentication, Delivery and Dating.
The Securities shall be executed on behalf of the Company by its
Chairman of the Board, its President or a Vice President of the Company, under
its corporate seal reproduced thereon and attested by its Secretary or an
Assistant Secretary of the Company. The signature of any of these officers on
the Securities may be manual or facsimile signatures of the present or any
future such authorized officer and may be imprinted or otherwise reproduced on
the Securities.
Securities bearing the manual or facsimile signatures of individuals
who were at any time the proper officers of the Company shall bind the Company,
notwithstanding that such individuals or any of them have ceased to hold such
offices prior to the authentication and delivery of such Securities or did not
hold such offices at the date of such Securities.
At any time after the execution and delivery of this Indenture, the
Company may deliver Securities executed by the Company to the Trustee for
authentication, together with a Company Order for the authentication and
delivery of such Securities, and the Trustee in accordance with such Company
Order shall authenticate and deliver such Securities thereon as provided in
this Indenture. Such Company Order shall specify the principal amount of the
Securities to be authenticated and the date on which the original issue of
Securities is to be authenticated.
Each Security shall be dated the date of its authentication.
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No Security shall be entitled to any benefit under this Indenture or
be valid or obligatory for any purpose unless there appears on such Security a
certificate of authentication substantially in the form provided for herein
duly executed by the Trustee by manual signature of an authorized signatory,
and such certificate upon any Security shall be conclusive evidence, and the
only evidence, that such Security has been duly authenticated and delivered
hereunder and is entitled to the benefits of this Indenture.
In case the Company, pursuant to and in compliance with Article VIII
hereof, shall be consolidated or merged with or into any other Person or shall
sell, convey, transfer, lease or otherwise dispose of all or substantially all
of its Properties to any Person, and the successor Person resulting from such
consolidation, or surviving such merger, or into which the Company shall have
been merged, or the Person which shall have received a sale, conveyance,
transfer, lease or other disposition as aforesaid, shall have executed an
indenture supplemental hereto with the Trustee pursuant to Article VIII hereof,
any of the Securities authenticated or delivered prior to such sale,
consolidation, merger, conveyance, transfer, lease or other disposition may,
from time to time, at the request of the successor Person be exchanged for
other Securities executed in the name of the successor Person with such changes
in phraseology and form as may be appropriate, but otherwise in substance of
like tenor as the Securities surrendered for such exchange and of like
principal amount; and the Trustee, upon Company Request of the successor
Person, shall authenticate and deliver Securities as specified in such request
for the purpose of such exchange. If Securities shall at any time be
authenticated and delivered in any new name of a successor Person pursuant to
this Section in exchange or substitution for or upon registration of transfer
of any Securities, such successor Person, at the option of the Holders but
without expense to them, shall provide for the exchange of all Securities at
the time Outstanding for Securities authenticated and delivered in such new
name.
Section 3.4 Temporary Securities.
Pending the preparation of definitive Securities, the Company may
execute, and upon Company Order the Trustee shall authenticate and deliver,
temporary Securities which are printed, lithographed, typewritten, mimeographed
or otherwise produced, in any authorized denomination, substantially of the
tenor of the definitive Securities in lieu of which they are issued and with
such appropriate insertions, omissions, substitutions and other variations as
the officers executing such Securities may determine, as conclusively evidenced
by their execution of such Securities.
If temporary Securities are issued, the Company will cause definitive
Securities to be prepared without unreasonable delay. After the preparation of
definitive Securities, the temporary Securities shall be exchangeable for
definitive Securities upon surrender of the temporary Securities at the office
or agency of the Company designated for such purpose pursuant to Section 10.2
hereof, without charge to the Holder. Upon surrender for cancellation of any
one or more temporary Securities, the Company shall execute and the Trustee
shall authenticate and deliver in exchange therefor a like principal amount of
definitive Securities of authorized denominations. Until so exchanged, the
temporary Securities shall in all respects be entitled to the same benefits
under this Indenture as definitive Securities.
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Section 3.5 Registration of Transfer and Exchange.
The Company shall cause to be kept a register (the "Security
Register") in which, subject to such reasonable regulations as it may
prescribe, the Company shall provide for the registration of Securities and of
transfers of Securities. The Security Register shall be in written form or any
other form capable of being converted into written form within a reasonable
time. At all reasonable times and during normal business hours, the Security
Register shall be open to inspection by the Trustee. The Trustee is hereby
initially appointed as security registrar (the "Security Registrar") for the
purpose of registering Securities and transfers of Securities as herein
provided.
Upon surrender for registration of transfer of any Security at the
office or agency of the Company designated pursuant to Section 10.2 hereof, the
Company shall execute, and the Trustee shall authenticate and deliver, in the
name of the designated transferee or transferees, one or more new Securities of
like tenor and of any authorized denomination and of a like aggregate principal
amount, each such Security.
Furthermore, any Holder of a Global Security shall, by acceptance of
such Global Security, be deemed to have agreed that transfers of beneficial
interests in such Global Security may be effected only through a book-entry
system maintained by the Depository (or its agent), and that ownership of a
beneficial interest in a Global Security shall be required to be reflected in a
book entry.
At the option of any Holder, Securities may be exchanged for other
Securities of any authorized denomination and of a like aggregate principal
amount, upon surrender of the Securities to be exchanged at the office or
agency of the Company designated pursuant to Section 10.2 hereof. Whenever any
Securities are so surrendered for exchange, the Company shall execute and the
Trustee shall authenticate and deliver, the Securities which the Holder making
the exchange is entitled to receive.
All Securities issued upon any registration of transfer or exchange of
Securities shall be the valid obligations of the Company, evidencing the same
debt, and entitled to the same benefits under this Indenture, as the Securities
surrendered upon such registration of transfer or exchange.
Every Security presented or surrendered for registration of transfer
or for exchange shall (if so required by the Company or the Security Registrar)
be duly endorsed, or be accompanied by a written instrument of transfer, in
form satisfactory to the Company and the Security Registrar, duly executed by
the Holder thereof or his attorney duly authorized in writing.
No service charge shall be made for any registration of transfer or
exchange or redemption of Securities, but the Company may require payment of a
sum sufficient to cover any tax or other governmental charge that may be
imposed in connection with any registration of transfer or exchange of
Securities, other than exchanges pursuant to Section 3.4, 9.6 or 11.8 hereof
not involving any transfer.
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Neither the Trustee, the Security Registrar nor the Company shall be
required (i) to issue, register the transfer of or exchange any Physical
Security during a period beginning at the opening of business 15 days before
the mailing of a notice of redemption of Securities selected for redemption
under Section 11.4 hereof and ending at the close of business on the day of
such mailing of the relevant notice of redemption, or (ii) to register the
transfer of or exchange any Physical Security so selected for redemption in
whole or in part, except the unredeemed portion of any such Security being
redeemed in part.
Section 3.6 Book-Entry Provisions for Global Securities.
Each Global Security shall be registered in the name of the Depository
for such Global Security or the nominee of such Depository and be delivered to
the Trustee as custodian for such Depository.
Members of, or participants in, the Depository ("Agent Members") shall
have no rights under this Indenture with respect to any Global Security held on
their behalf by the Depository, or the Trustee as its custodian, or under such
Global Security, and the Depository may be treated by the Company, the Trustee
and any agent of the Company or the Trustee as the absolute owner of such
Global Security for all purposes whatsoever. Notwithstanding the foregoing,
nothing herein shall prevent the Company, the Trustee or any agent of the
Company or the Trustee from giving effect to any written certification, proxy
or other authorization furnished by the Depository or shall impair, as between
the Depository and its Agent Members, the operation of customary practices
governing the exercise of the rights of a holder of any Security.
Transfers of a Global Security shall be limited to transfers of such
Global Security in whole, but not in part, to the Depository, its successors or
their respective nominees. Interests of beneficial owners in a Global Security
may be transferred or exchanged for Physical Securities if, and only if, the
Depository notifies the Company that it is unwilling or unable to continue as
depositary for the Global Security and a successor depositary is not appointed
by the Company within 90 days of such notice.
In connection with the transfer of an entire Global Security to
beneficial owners pursuant to this Section, the Global Security shall be deemed
to be surrendered to the Trustee for cancellation, and the Company shall
execute, and the Trustee shall upon Company Order authenticate and deliver, to
each beneficial owner identified by the Depository, in exchange for its
beneficial interest in the Global Security, an equal aggregate principal amount
of Physical Securities of authorized denominations.
The Holder of a Global Security may grant proxies and otherwise
authorize any Person, including Agent Members and Persons that may hold
interests through Agent Members, to take any action which a Holder is entitled
to take under this Indenture or the Securities.
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Section 3.7 Mutilated, Destroyed, Lost and Stolen Securities.
If (i) any mutilated Security is surrendered to the Trustee or (ii)
the Company and the Trustee receive evidence to their satisfaction of the
destruction, loss or theft of any Security, and there is delivered to the
Company and the Trustee such security or indemnity as may be required by them
to save each of them harmless, then, in the absence of notice to the Company or
the Trustee that such Security has been acquired by a bona fide purchaser, the
Company shall execute and upon Company Order the Trustee shall authenticate and
deliver, in exchange for any such mutilated Security or in lieu of any such
destroyed, lost or stolen Security, a new Security and principal amount bearing
a number not contemporaneously outstanding.
In case any such mutilated, destroyed, lost or stolen Security has
become or is about to become due and payable, the Company in its discretion
may, instead of issuing a new Security, pay such Security.
Upon the issuance of any new Security under this Section, the Company
may require the payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in relation thereto and any other
expenses (including the fees and expenses of the Trustee) connected therewith.
Every new Security issued pursuant to this Section in lieu of any
mutilated, destroyed, lost or stolen Security shall constitute an original
additional contractual obligation of the Company whether or not the mutilated,
destroyed, lost or stolen Security shall be at any time enforceable by anyone,
and shall be entitled to all benefits of this Indenture equally and
proportionately with any and all other Securities duly issued hereunder.
The provisions of this Section are exclusive and shall preclude (to
the extent lawful) all other rights and remedies with respect to the
replacement or payment of mutilated, destroyed, lost or stolen Securities.
Section 3.8 Payment of Interest; Interest Rights Preserved.
Interest on any Security which is payable, and is punctually paid or
duly provided for, on any Interest Payment Date shall be paid to the Person in
whose name such Security (or one or more Predecessor Securities) is registered
at the close of business on the Regular Record Date for such interest at the
office or agency of the Company maintained for such purpose pursuant to Section
10.2 hereof.
Any interest on any Security which is payable, but is not punctually
paid or duly provided for, on any Interest Payment Date shall forthwith cease
to be payable to the Holder on the Regular Record Date by virtue of having been
such Holder, and such defaulted interest and (to the extent lawful) interest on
such defaulted interest at the rate borne by the Securities (such defaulted
interest and interest thereon herein collectively called "Defaulted Interest")
may be paid by the Company, at its election in each case, as provided in clause
(a) or (b) below:
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(a) The Company may elect to make payment of any Defaulted
Interest to the Persons in whose names the Securities (or their respective
Predecessor Securities) are registered at the close of business on a Special
Record Date for the payment of such Defaulted Interest, which shall be fixed in
the following manner. The Company shall notify the Trustee in writing of the
amount of Defaulted Interest proposed to be paid on each Security and the date
of the proposed payment, and at the same time the Company shall deposit with
the Trustee an amount of money equal to the aggregate amount proposed to be
paid in respect of such Defaulted Interest or shall make arrangements
satisfactory to the Trustee for such deposit prior to the date of the proposed
payment, and such money when deposited shall be held in trust for the benefit
of the Persons entitled to such Defaulted Interest as in this clause provided.
Thereupon the Trustee shall fix a Special Record Date for the payment of such
Defaulted Interest which shall be not more than 15 days and not less than 10
days prior to the date of the proposed payment and not less than 10 days after
the receipt by the Trustee of the notice of the proposed payment. The Trustee
shall promptly notify the Company of such Special Record Date, and in the name
and at the expense of the Company, shall cause notice of the proposed payment
of such Defaulted Interest and the Special Record Date therefor to be given in
the manner provided for in Section 13.5 hereof, not less than 10 days prior to
such Special Record Date. Notice of the proposed payment of such Defaulted
Interest and the Special Record Date therefor having been so given, such
Defaulted Interest shall be paid to the Persons in whose names the Securities
(or their respective Predecessor Securities) are registered at the close of
business on such Special Record Date and shall no longer be payable pursuant to
the following clause (b).
(b) The Company may make payment of any Defaulted Interest in any
other lawful manner not inconsistent with the requirements of any securities
exchange on which the Securities may be listed, and upon such notice as may be
required by such exchange, if, after notice given by the Company to the Trustee
of the proposed payment pursuant to this clause, such manner of payment shall
be deemed practicable by the Trustee.
Subject to the foregoing provisions of this Section, each Security
delivered under this Indenture upon registration of transfer of or in exchange
for or in lieu of any other Security shall carry the rights to interest accrued
and unpaid, and to accrue, which were carried by such other Security.
Section 3.9 Persons Deemed Owners.
Prior to the due presentment of a Security for registration of
transfer, the Company, the Security Registrar, the Trustee and any agent of the
Company or the Trustee may treat the Person in whose name such Security is
registered as the owner of such Security for the purpose of receiving payment
of principal of (and premium, if any, on) and (subject to Section 3.8 hereof)
interest on such Security and for all other purposes whatsoever, whether or not
such Security be overdue, and none of the Company, the Security Registrar, the
Trustee or any agent of the Company or the Trustee shall be affected by notice
to the contrary.
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Section 3.10 Cancellation.
All Securities surrendered for payment, redemption, registration of
transfer or exchange shall, if surrendered to any Person other than the
Trustee, be delivered to the Trustee and shall be promptly canceled by it. The
Company may at any time deliver to the Trustee for cancellation any Securities
previously authenticated and delivered hereunder which the Company may have
acquired in any manner whatsoever, and all Securities so delivered shall be
promptly canceled by the Trustee. No Securities shall be authenticated in lieu
of or in exchange for any Securities canceled as provided in this Section,
except as expressly permitted by this Indenture. All canceled Securities held
by the Trustee shall be disposed of as directed by a Company Order or in
accordance with the Trustee's usual practice; provided, however, that the
Trustee shall not be required to destroy canceled Securities.
Section 3.11 Computation of Interest.
Interest on the Securities shall be computed on the basis of a 360-day
year comprised of twelve 30-day months.
ARTICLE IV
SATISFACTION AND DISCHARGE
Section 4.1 Satisfaction and Discharge of Indenture.
This Indenture shall upon Company Request cease to be of further
effect (except as to surviving rights of registration of transfer or exchange
of Securities, as expressly provided for in this Indenture) as to all
Outstanding Securities, and the Trustee, at the expense of the Company, shall,
upon payment of all amounts due the Trustee under Section 6.6 hereof, execute
proper instruments acknowledging satisfaction and discharge of this Indenture
when
(a) either
(1) all Securities theretofore authenticated and
delivered (other than (i) Securities which have been destroyed, lost
or stolen and which have been replaced or paid as provided in Section
3.7 hereof and (ii) Securities for whose payment money or United
States governmental obligations of the type described in clause (i) of
the definition of Cash Equivalents have theretofore been deposited in
trust with the Trustee or any Paying Agent or segregated and held in
trust by the Company and thereafter repaid to the Company or
discharged from such trust, as provided in Section 10.3 hereof) have
been delivered to the Trustee for cancellation, or
(2) all such Securities not theretofore delivered to the
Trustee for cancellation
(i) have become due and payable, or
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(ii) will become due and payable at their Stated
Maturity within one year, or
(iii) are to be called for redemption within one
year under arrangements satisfactory to the Trustee
for the giving of notice of redemption by the Trustee
in the name, and at the expense, of the Company,
and the Company, in the case of clause (2)(i), (2)(ii) or (2)(iii)
above, has irrevocably deposited or caused to be deposited with the
Trustee funds in an amount sufficient to pay and discharge the entire
indebtedness on such Securities not theretofore delivered to the
Trustee for cancellation, for principal (and premium, if any) and
interest to the date of such deposit (in the case of Securities which
have become due and payable) or to the Stated Maturity or Redemption
Date, as the case may be, together with instructions from the Company
irrevocably directing the Trustee to apply such funds to the payment
thereof at maturity or redemption, as the case may be;
(b) the Company has paid or caused to be paid all other
sums then due and payable hereunder by the Company; and
(c) the Company has delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, which, taken together, state
that all conditions precedent herein relating to the satisfaction and
discharge of this Indenture have been complied with.
Notwithstanding the satisfaction and discharge of this Indenture, the
obligations of the Company to the Trustee under Section 6.6 hereof and, if
money shall have been deposited with the Trustee pursuant to this Section, the
obligations of the Trustee under Section 4.2 hereof and the last paragraph of
Section 10.3 hereof shall survive.
Section 4.2 Application of Trust Money.
Subject to the provisions of the last paragraph of Section 10.3
hereof, all money deposited with the Trustee pursuant to Section 4.1 hereof
shall be held in trust and applied by it, in accordance with the provisions of
the Securities and this Indenture, to the payment, either directly or through
any Paying Agent (including the Company acting as its own Paying Agent) as the
Trustee may determine, to the Persons entitled thereto, of the principal (and
premium, if any) and interest for whose payment such money has been deposited
with the Trustee.
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ARTICLE V
REMEDIES
Section 5.1 Events of Default.
"Event of Default," wherever used herein, means any one of the
following events (whatever the reason for such Event of Default and whether it
shall be voluntary or involuntary or be effected by operation of law or
pursuant to any judgment, decree or order of any court or any order, rule or
regulation of any administrative or governmental body):
(a) default in the payment of the principal of or premium, if any,
on any of the Securities when the same becomes due and payable, whether such
payment is due at Stated Maturity, upon redemption, upon repurchase pursuant to
a Change of Control Offer or a Net Proceeds Offer, upon acceleration or
otherwise; or
(b) default in the payment of any installment of interest on any
of the Securities, when it becomes due and payable, and the continuance of such
default for a period of 30 days; or
(c) default in the performance or breach of the provisions of
Article VIII hereof, the failure to make or consummate a Change of Control
Offer in accordance with the provisions of Section 10.14 or the failure to make
or consummate a Net Proceeds Offer in accordance with the provisions of Section
10.15; or
(d) the Company shall fail to perform or observe any other term,
covenant or agreement contained in the Securities or this Indenture (other than
a default specified in subparagraph (a), (b) or (c) above) for a period of 30
days after written notice of such failure stating that it is a "notice of
default" hereunder and requiring the Company to remedy the same shall have been
given (x) to the Company by the Trustee or (y) to the Company and the Trustee
by the Holders of at least 25% in aggregate principal amount of the Securities
then Outstanding; or
(e) the occurrence and continuation beyond any applicable grace
period of any default in the payment of the principal of or premium, if any, on
or interest on any Indebtedness of the Company (other than the Securities) or
any Restricted Subsidiary for money borrowed when due, or any other default
resulting in acceleration of any Indebtedness of the Company or any Restricted
Subsidiary for money borrowed, provided that the aggregate principal amount of
such Indebtedness shall exceed $5,000,000 and provided, further, that if any
such default is cured or waived or any such acceleration rescinded, or such
Indebtedness is repaid, within a period of 10 days from the continuation of
such default beyond the applicable grace period or the occurrence of such
acceleration, as the case may be, such Event of Default under the Indenture and
any consequential acceleration of the Senior Notes shall be automatically
rescinded, so long as such rescission does not conflict with any judgment or
decree; or
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(f) final judgments or orders rendered against the Company or any
Restricted Subsidiary that are unsatisfied and that require the payment in
money, either individually or in an aggregate amount, that is more than
$5,000,000 over the coverage under applicable insurance policies and either (A)
commencement by any creditor of an enforcement proceeding upon such judgment
(other than a judgment that is stayed by reason of pending appeal or otherwise)
or (B) the occurrence of a 30-day period during which a stay of such judgment
or order, by reason of pending appeal or otherwise, was not in effect: or
(g) the entry of a decree or order by a court having jurisdiction
in the premises (A) for relief in respect of the Company or any Restricted
Subsidiary in an involuntary case or proceeding under the Federal Bankruptcy
Code or any other applicable federal or state bankruptcy, insolvency,
reorganization or other similar law or (B) adjudging the Company or any
Restricted Subsidiary bankrupt or insolvent, or approving a petition seeking
reorganization, arrangement, adjustment or composition of the Company or any
Restricted Subsidiary under the Federal Bankruptcy Code or any applicable
federal or state law, or appointing under any such law a custodian, receiver,
liquidator, assignee, trustee, sequestrator or other similar official of the
Company or any Restricted Subsidiary or of a substantial part of its
consolidated assets, or ordering the winding up or liquidation of its affairs,
and the continuance of any such decree or order for relief or any such other
decree or order unstayed and in effect for a period of 60 consecutive days; or
(h) the commencement by the Company or any Restricted Subsidiary
of a voluntary case or proceeding under the Federal Bankruptcy Code or any
other applicable federal or state bankruptcy, insolvency, reorganization or
other similar law or any other case or proceeding to be adjudicated bankrupt or
insolvent, or the consent by the Company or any Restricted Subsidiary to the
entry of a decree or order for relief in respect thereof in an involuntary case
or proceeding under the Federal Bankruptcy Code or any other applicable federal
or state bankruptcy, insolvency, reorganization or other similar law or to the
commencement of any bankruptcy or insolvency case or proceeding against it, or
the filing by the Company or any Restricted Subsidiary of a petition or consent
seeking reorganization or relief under any applicable federal or state law, or
the consent by it under any such law to the filing of any such petition or to
the appointment of or taking possession by a custodian, receiver, liquidator,
assignee, trustee or sequestrator (or other similar official) of the Company or
any Restricted Subsidiary or of any substantial part of its consolidated
assets, or the making by it of an assignment for the benefit of creditors under
any such law, or the admission by it in writing of its inability to pay its
debts generally as they become due or taking of corporate action by the Company
or any Restricted Subsidiary in furtherance of any such action.
Section 5.2 Acceleration of Maturity; Rescission and Annulment.
If an Event of Default (other than an Event of Default specified in
Section 5.1(g) or (h) hereof) occurs and is continuing, the Trustee or the
Holders of not less than 25% in aggregate principal amount of the Securities
then Outstanding, by written notice to the Company (and to the Trustee if such
notice is given by the Holders), may, and the Trustee upon the request of the
Holders of not less than 25% in aggregate principal amount of the Outstanding
Securities shall,
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by a notice in writing to the Company, declare all unpaid principal of,
premium, if any, and accrued and unpaid interest on all the Securities to be
due and payable immediately, upon which declaration all amounts payable in
respect of the Securities shall be immediately due and payable. If an Event of
Default specified in Section 5.1(f) or (h) hereof occurs and is continuing, the
amounts described above shall become and be immediately due and payable without
any declaration, notice or other act on the part of the Trustee or any Holder.
At any time after a declaration of acceleration has been made and
before a judgment or decree for payment of the money due has been obtained by
the Trustee as hereinafter in this Article provided, the Holders of a majority
in aggregate principal amount of the Securities Outstanding, by written notice
to the Company and the Trustee, may rescind and annul such declaration and its
consequences if
(a) the Company has paid or deposited with the Trustee a sum
sufficient to pay,
(1) all overdue interest on all Outstanding Securities,
(2) all unpaid principal of (and premium, if any, on) any
Outstanding Securities which have become due otherwise than by such
declaration of acceleration, including any Securities required to have
been purchased on a Change of Control Date or a Net Proceeds Payment
Date pursuant to a Change of Control Offer or a Net Proceeds Offer, as
applicable, and interest on such unpaid principal at the rate borne by
the Securities,
(3) to the extent that payment of such interest is
lawful, interest on overdue interest and overdue principal at the rate
borne by the Securities (without duplication of any amount paid or
deposited pursuant to clauses (1) and (2) above), and
(4) all sums paid or advanced by the Trustee hereunder
and the reasonable compensation, expenses, disbursements and advances
of the Trustee, its agents and counsel;
(b) the rescission would not conflict with any judgment or decree
of a court of competent jurisdiction as certified to the Trustee by the
Company; and
(c) all Events of Default, other than the non-payment of amounts
of principal of (or premium, if any, on) or interest on Securities which have
become due solely by such declaration of acceleration, have been cured or
waived as provided in Section 5.13 hereof.
No such rescission shall affect any subsequent default or impair any
right consequent thereon.
Notwithstanding the foregoing, if an Event of Default specified in
Section 5.1(e) hereof shall have occurred and be continuing, such Event of
Default and any consequential acceleration shall be automatically rescinded if
the Indebtedness that is the subject of such Event of Default has been repaid,
or if the default relating to such Indebtedness is waived or cured and if such
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Indebtedness has been accelerated, then the holders thereof have rescinded
their declaration of acceleration in respect of such Indebtedness (provided, in
each case, that such repayment, waiver, cure or rescission is effected within a
period of 10 days from the continuation of such default beyond the applicable
grace period or the occurrence of such acceleration), and written notice of
such repayment, or cure or waiver and rescission, as the case may be, shall
have been given to the Trustee by the Company and countersigned by the holders
of such Indebtedness or a trustee, fiduciary or agent for such holders or other
evidence satisfactory to the Trustee of such events is provided to the Trustee,
within 30 days after any such acceleration in respect of the Securities, and so
long as such rescission of any such acceleration of the Securities does not
conflict with any judgment or decree as certified to the Trustee by the
Company.
Section 5.3 Collection of Indebtedness and Suits for Enforcement
by Trustee.
The Company covenants that if
(a) default is made in the payment of any installment of interest
on any Security when such interest becomes due and payable and such default
continues for a period of 30 days, or
(b) default is made in the payment of the principal of (or
premium, if any, on) any Security at the Maturity thereof or with respect to
any Security required to have been purchased by the Company on the Change of
Control Purchase Date or the Net Proceeds Payment Date pursuant to a Change of
Control Offer or Net Proceeds Offer, as applicable,
then the Company will, upon demand of the Trustee, pay to the Trustee for the
benefit of the Holders of such Securities, the whole amount then due and
payable on such Securities for principal (and premium, if any) and interest,
and interest on any overdue principal (and premium, if any) and, to the extent
that payment of such interest shall be legally enforceable, upon any overdue
installment of interest, at the rate borne by the Securities, and, in addition
thereto, such further amount as shall be sufficient to cover the costs and
expenses of collection, including the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel.
If the Company fails to pay such amounts forthwith upon such demand,
the Trustee, in its own name as trustee of an express trust, may institute a
judicial proceeding for the collection of the sums so due and unpaid, may
prosecute such proceeding to judgment or final decree and may enforce the same
against the Company or any other obligor upon the Securities and collect the
money adjudged or decreed to be payable in the manner provided by law out of
the Property of the Company or any other obligor upon the Securities, wherever
situated.
If an Event of Default occurs and is continuing, the Trustee may in
its discretion proceed to protect and enforce its rights and the rights of the
Holders by such appropriate judicial proceedings as the Trustee shall deem most
effectual to protect and enforce any such rights,
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whether for the specific enforcement of any covenant or agreement in this
Indenture or in aid of the exercise of any power granted herein, or to enforce
any other proper remedy.
Section 5.4 Trustee May File Proofs of Claim.
In case of the pendency of any receivership, insolvency, liquidation,
bankruptcy, reorganization, arrangement, adjustment, composition or other
judicial proceeding relative to the Company, or any other obligor upon the
Securities, their creditors or the Property of the Company or of such other
obligor, the Trustee (irrespective of whether the principal of the Securities
shall then be due and payable as therein expressed or by declaration or
otherwise and irrespective of whether the Trustee shall have made any demand on
the Company or such other obligor for the payment of overdue principal,
premium, if any, or interest) shall be entitled and empowered, by intervention
in such proceeding or otherwise,
(a) to file and prove a claim for the whole amount of principal
(and premium, if any) and interest owing and unpaid in respect of the
Securities and to file such other papers or documents and take any other
actions including participation as a full member of any creditor or other
committee as may be necessary or advisable in order to have the claims of the
Trustee (including any claim for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel) and of the
Holders allowed in such judicial proceeding, and
(b) to collect and receive any money or other Property payable or
deliverable on any such claims and to distribute the same;
and any custodian, receiver, assignee, trustee, liquidator, sequestrator or
similar official in any such judicial proceeding is hereby authorized by each
Holder to make such payments to the Trustee and, in the event that the Trustee
shall consent to the making of such payments directly to the Holders, to pay
the Trustee any amount due to it for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel, and any
other amounts due the Trustee under Section 6.6 hereof.
Nothing herein contained shall be deemed to authorize the Trustee to
authorize or consent to or accept or adopt on behalf of any Holder any plan of
reorganization, arrangement, adjustment or composition affecting the Securities
or the rights of any Holder thereof, or to authorize the Trustee to vote in
respect of the claim of any Holder in any such proceeding.
Section 5.5 Trustee May Enforce Claims Without Possession of
Securities.
All rights of action and claims under this Indenture or the Securities
may be prosecuted and enforced by the Trustee without the possession of any of
the Securities or the production thereof in any proceeding relating thereto,
and any such proceeding instituted by the Trustee shall be brought in its own
name and as trustee of an express trust, and any recovery of judgment shall,
after provision for the payment of the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel, be for the
ratable benefit of the Holders of the Securities in respect of which such
judgment has been recovered.
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Section 5.6 Application of Money Collected.
Any money collected by the Trustee pursuant to this Article shall be
applied in the following order, at the date or dates fixed by the Trustee and,
in the case of the distribution of such money on account of principal (or
premium, if any) or interest, upon presentation of the Securities and the
notation thereon of the payment if only partially paid and upon surrender
thereof if fully paid:
FIRST: to the payment of all amounts due the Trustee under
Section 6.6 hereof;
SECOND: to the payment of the amounts then due and unpaid for
principal of (and premium, if any, on) and interest on the Securities
in respect of which or for the benefit of which such money has been
collected, ratably, without preference or priority of any kind,
according to the amounts due and payable on such Securities for
principal (and premium, if any) and interest, respectively; and
THIRD: the balance, if any, to the Company.
Section 5.7 Limitation on Suits.
No Holder of any Securities shall have any right to institute any
proceeding, judicial or otherwise, with respect to this Indenture, or for the
appointment of a receiver or trustee, or for any other remedy hereunder,
unless:
(a) such Holder has previously given written notice to the Trustee
of a continuing Event of Default;
(b) the Holders of not less than 25% in aggregate principal amount
of the Outstanding Securities shall have made written request to the Trustee to
institute proceedings in respect of such Event of Default in its own name as
Trustee hereunder;
(c) such Holder or Holders have offered to the Trustee reasonable
indemnity against the costs, expenses and liabilities to be incurred in
compliance with such request;
(d) the Trustee for 60 days after its receipt of such notice,
request and offer of indemnity has failed to institute any such proceeding; and
(e) no direction inconsistent with such written request has been
given to the Trustee during such 60-day period by the Holders of a majority or
more in aggregate principal amount of the Outstanding Securities;
it being understood and intended that no one or more Holders shall have any
right in any manner whatever by virtue of, or by availing of, any provision of
this Indenture to affect, disturb or prejudice the rights of any other Holders,
or to obtain or to seek to obtain priority or preference
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over any other Holders or to enforce any right under this Indenture, except in
the manner herein provided and for the equal and ratable benefit of all the
Holders.
Section 5.8 Unconditional Right of Holders to Receive Principal,
Premium and Interest.
Notwithstanding any other provision in this Indenture, the Holder of
any Security shall have the right, which is absolute and unconditional, to
receive payment, as provided herein (including, if applicable, Article XII
hereof) and in such Security of the principal of (and premium if any, on) and
(subject to Section 3.8 hereof) interest on, such Security on the respective
Stated Maturities expressed in such Security (or, in the case of redemption, on
the Redemption Date) and to institute suit for the enforcement of any such
payment, and such rights shall not be impaired without the consent of such
Holder.
Section 5.9 Restoration of Rights and Remedies.
If the Trustee or any Holder has instituted any proceeding to enforce
any right or remedy under this Indenture and such proceeding has been
discontinued or abandoned for any reason, or has been determined adversely to
the Trustee or to such Holder, then and in every such case, subject to any
determination in such proceeding, the Company, the Trustee and the Holders
shall be restored severally and respectively to their former positions
hereunder and thereunder and all rights and remedies of the Trustee and the
Holders shall continue as though no such proceeding had been instituted.
Section 5.10 Rights and Remedies Cumulative.
Except as otherwise provided with respect to the replacement or
payment of mutilated, destroyed, lost or stolen Securities in the last
paragraph of Section 3.7 hereof, no right or remedy herein conferred upon or
reserved to the Trustee or to the Holders is intended to be exclusive of any
other right or remedy, and every right and remedy shall, to the extent
permitted by law, be cumulative and in addition to every other right and remedy
given hereunder or now or hereafter existing at law or in equity or otherwise.
The assertion or employment of any right or remedy hereunder, or otherwise,
shall not prevent the concurrent assertion or employment of any other
appropriate right or remedy.
Section 5.11 Delay or Omission Not Waiver.
No delay or omission of the Trustee or of any Holder of any Security
to exercise any right or remedy accruing upon any Event of Default shall impair
any such right or remedy or constitute a waiver of any such Event of Default or
an acquiescence therein. Every right and remedy given by this Article or by
law to the Trustee or to the Holders may be exercised from time to time, and as
often as may be deemed expedient, by the Trustee or by the Holders, as the case
may be.
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Section 5.12 Control by Holders.
The Holders of not less than a majority in aggregate principal amount
of the Outstanding Securities shall have the right to direct the time, method
and place of conducting any proceeding for any remedy available to the Trustee,
or exercising any trust or power conferred on the Trustee, provided that
(a) such direction shall not be in conflict with any rule of law
or with this Indenture,
(b) the Trustee may take any other action deemed proper by the
Trustee which is not inconsistent with such direction, and
(c) the Trustee need not take any action which might involve it in
personal liability or be unduly prejudicial to the Holders not joining therein.
Section 5.13 Waiver of Past Defaults.
The Holders of not less than a majority in aggregate principal amount
of the Outstanding Securities may on behalf of the Holders of all the
Securities waive any existing Default or Event of Default hereunder and its
consequences, except a Default or Event of Default
(a) in respect of the payment of the principal of (or premium, if
any, on) or interest on any Security, or
(b) in respect of a covenant or provision hereof which under
Article IX hereof cannot be modified or amended without the consent of the
Holder of each Outstanding Security affected thereby.
Upon any such waiver, such Default or Event of Default shall cease to
exist for every purpose under this Indenture, but no such waiver shall extend
to any subsequent or other fault or Event of Default or impair any right
consequent thereon.
Section 5.14 Waiver of Stay, Extension or Usury Laws.
The Company covenants (to the extent that each may lawfully do so)
that it will not at any time insist upon, plead or in any manner whatsoever
claim or take the benefit or advantage of, any stay, extension, or usury law or
other law wherever enacted, now or at any time hereafter in force, which would
prohibit or forgive the Company from paying all or any portion of the principal
of (premium, if any, on) or interest on the Securities as contemplated herein,
or which may affect the covenants or the performance of this Indenture; and (to
the extent that it may lawfully do so) the Company hereby expressly waives all
benefit or advantage of any such law, and covenant that they will not hinder,
delay or impede the execution of any power herein granted to the Trustee, but
will suffer and permit the execution of every such power as though no such law
had been enacted.
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ARTICLE VI
THE TRUSTEE
Section 6.1 Duties of Trustee.
(a) If an Event of Default has occurred and is continuing, the
Trustee shall exercise the rights and powers vested in it by this Indenture and
use the same degree of care and skill in their exercise as a prudent person
would exercise or use under the circumstances in the conduct of his own
affairs.
(b) Except during the continuance of an Event of Default:
(i) the Trustee undertakes to perform such duties and only such
duties as are specifically set forth in this Indenture and no implied covenants
or obligations shall be read into this Indenture against the Trustee; and
(ii) in the absence of bad faith on its part, the Trustee may
conclusively rely, and shall be fully protected in so relying, as to the truth
of the statements and the correctness of the opinions expressed therein, upon
certificates or opinions furnished to the Trustee and conforming to the
requirements of this Indenture; provided, however, the Trustee shall examine
the certificates and opinions to determine whether or not they conform to the
requirements of this Indenture.
(c) The Trustee may not be relieved from liability for its own
negligent action, its own negligent failure to act or its own wilful
misconduct, except that:
(i) this paragraph shall not limit the effect of Section 6.1(b);
(ii) the Trustee shall not be liable for any error of judgment made
in good faith by a Responsible Officer, unless it is proved that the Trustee
was negligent in ascertaining the pertinent facts; and
(iii) the Trustee shall not be liable with respect to any action it
takes or omits to take in good faith in accordance with a direction received by
it pursuant to Section 5.12.
Section 6.2 Certain Rights of Trustee.
Subject to the provisions of Section 6.1 hereof:
(a) the Trustee may conclusively rely and shall be protected in
acting or refraining from acting upon any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent, order, bond,
debenture, note, other evidence of indebtedness or other paper or document
believed by it to be genuine and to have been signed or presented by the proper
party or parties;
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(b) any request or direction of the Company mentioned herein shall
be sufficiently evidenced by a Company Request or Company Order and any
resolution of the Board of Directors may be sufficiently evidenced by a Board
Resolution;
(c) whenever in the administration of this Indenture the Trustee
shall deem it desirable that a matter be proved or established prior to taking,
suffering or omitting any action hereunder, the Trustee (unless other evidence
be herein specifically prescribed) may, in the absence of bad faith on its
part, rely upon an Officers' Certificate;
(d) the Trustee may consult with counsel and the written advice of
such counsel or any Opinion of Counsel shall be full and complete authorization
and protection in respect of any action taken, suffered or omitted by it
hereunder in good faith and in reliance thereon;
(e) the Trustee shall be under no obligation to exercise any of
the rights or powers vested in it by this Indenture at the request or direction
of any of the Holders pursuant to this Indenture, unless such Holders shall
have offered to the Trustee reasonable security or indemnity against the costs,
expenses and liabilities which might be incurred by it in compliance with such
request or direction;
(f) the Trustee shall not be bound to make any investigation into
the facts or matters stated in any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent, order, bond,
debenture, note, other evidence of indebtedness or other paper or document, but
the Trustee, in its discretion, may make such further inquiry or investigation
into such facts or matters as it may reasonably see fit;
(g) the Trustee may execute any of the trusts or powers hereunder
or perform any duties hereunder either directly or by or through agents or
attorneys and the Trustee shall not be responsible for any misconduct or
negligence on the part of any agent or attorney appointed with due care by it
hereunder;
(h) the Trustee shall not be liable for any action taken, suffered
or omitted by it in good faith and believed by it in good faith to be
authorized or within the discretion or rights or powers conferred upon it by
this Indenture; and
(i) the Trustee shall not be deemed to have notice or knowledge of
any matter unless a Responsible Officer has actual knowledge thereof or unless
written notice thereof is received by the Trustee at its Corporate Trust Office
and such notice references the Securities generally, the Company or this
Indenture.
The Trustee shall not be required to advance, expend or risk its own
funds or otherwise incur any financial liability in the performance of any of
its duties hereunder, or in the exercise of any of its rights or powers if it
shall have reasonable grounds for believing that repayment of such funds or
adequate indemnity against such risk or liability is not reasonably assured to
it.
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Section 6.3 Trustee Not Responsible for Recitals or Issuance of
Securities.
The recitals contained herein and in the Securities, except for the
Trustee's certificates of authentication, shall be taken as the statements of
the Company, and the Trustee assumes no responsibility for their correctness.
The Trustee makes no representations as to the validity or sufficiency of this
Indenture or the Securities, except that the Trustee represents that it is duly
authorized to execute and deliver this Indenture, authenticate the Securities
and perform its obligations hereunder. The Trustee shall not be accountable
for the use or application by the Company of any Securities or the proceeds
thereof.
Section 6.4 May Hold Securities.
The Trustee, any Paying Agent, any Security Registrar or any other
agent of the Company or of the Trustee, in its individual or any other
capacity, may become the owner or pledgee of Securities and, subject to TIA
Sections 310(b) and 311 in the case of the Trustee, may otherwise deal with the
Company with the same rights it would have if it were not the Trustee, Paying
Agent, Security Registrar or such other agent.
Section 6.5 Money Held in Trust.
Money held by the Trustee in trust hereunder need not be segregated
from other funds except to the extent required by law. The Trustee shall be
under no liability for interest on any money received by it hereunder except as
otherwise agreed with the Company.
Section 6.6 Compensation and Reimbursement.
The Company agrees:
(a) to pay to the Trustee from time to time reasonable
compensation for all services rendered by it hereunder (which compensation
shall not be limited by any provision of law in regard to the compensation of a
trustee of an express trust);
(b) except as otherwise expressly provided herein, to reimburse
the Trustee upon its request for all reasonable expenses, disbursements and
advances incurred or made by the Trustee in accordance with any provision of
this Indenture (including the reasonable compensation and the expenses and
disbursements of its agents and counsel), except any such expense, disbursement
or advance as may be attributable to the Trustee's wilful misconduct,
negligence or bad faith; and
(c) to indemnify the Trustee for, and to hold it harmless against,
any loss, liability or expense incurred without wilful misconduct, negligence
or bad faith on its part, (i) arising out of or in connection with the
acceptance or administration of this trust, including the costs and expenses of
defending itself against any claim or liability in connection with the exercise
or performance of any of its powers or duties hereunder or (ii) in connection
with enforcing this indemnification provision.
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The obligations of the Company under this Section 6.6 to compensate
the Trustee, to pay or reimburse the Trustee for expenses, disbursements and
advances and to indemnify and hold harmless the Trustee shall constitute
additional indebtedness hereunder and shall survive the satisfaction and
discharge of this Indenture or any other termination under any Insolvency or
Liquidation Proceeding. As security for the performance of such obligations of
the Company, the Trustee shall have a claim and lien prior to the Securities
upon all property and funds held or collected by the Trustee as such, except
funds held in trust for payment of principal of (and premium, if any, on) or
interest on particular Securities. Such lien shall survive the satisfaction
and discharge of this Indenture or any other termination under any Insolvency
or Liquidation Proceeding.
When the Trustee incurs expenses or renders services after the
occurrence of an Event of Default specified in paragraph (g) or (h) of Section
5.1 of this Indenture, such expenses and the compensation for such services are
intended to constitute expenses of administration under any Insolvency or
Liquidation Proceeding.
Section 6.7 Corporate Trustee Required; Eligibility.
There shall at all times be a Trustee hereunder which shall be
eligible to act as Trustee under TIA Section 310(a)(1) and shall have a
combined capital and surplus of at least $50,000,000. If such corporation
publishes reports of condition at least annually, pursuant to law or to the
requirements of federal, state, territorial or District of Columbia supervising
or examining authority, then for the purposes of this Section 6.7, the combined
capital and surplus of such corporation shall be deemed to be its combined
capital and surplus as set forth in its most recent report of condition so
published. If at any time the Trustee shall cease to be eligible in accordance
with the provisions of this Section, it shall resign immediately in the manner
and with the effect hereinafter specified in this Article.
Section 6.8 Conflicting Interests.
The Trustee shall comply with the provisions of Section 310(b) of the
Trust Indenture Act; provided, however, that there shall be excluded from the
operation of TIA Section 310(b)(1) any indenture or indentures under which
other securities or certificates of interest or participation in other
securities of the Company are outstanding if the requirements for such
exclusion set forth in TIA Section 310(b)(1) are met.
Section 6.9 Resignation and Removal; Appointment of Successor.
(a) No resignation or removal of the Trustee and no appointment of
a successor Trustee pursuant to this Article shall become effective until the
acceptance of appointment by the successor Trustee in accordance with the
applicable requirements of Section 6.10 hereof.
(b) The Trustee may resign at any time by giving written notice
thereof to the Company. If the instrument of acceptance by a successor Trustee
required by Section 6.10 hereof shall not have been delivered to the Trustee
within 30 days after the giving of such notice of
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resignation, the resigning Trustee may petition any court of competent
jurisdiction for the appointment of a successor Trustee.
(c) The Trustee may be removed at any time by Act of the Holders
of not less than a majority in aggregate principal amount of the Outstanding
Securities, delivered to the Trustee and to the Company.
(d) If at any time:
(1) the Trustee shall fail to comply with the provisions
of TIA Section 310(b) after written request therefor by the Company or
by any Holder who has been a bona fide Holder of a Security for at
least six months, or
(2) the Trustee shall cease to be eligible under Section
6.7 hereof and shall fail to resign after written request therefor by
the Company or by any Holder who has been a bona fide Holder of a
Security for at least six months, or
(3) the Trustee shall become incapable of acting or shall
be adjudged a bankrupt or insolvent or a receiver of the Trustee or of
its property shall be appointed or any public officer shall take
charge or control of the Trustee or of its property or affairs for the
purpose of rehabilitation, conservation or liquidation,
then, in any such case, (i) the Company, by a Board Resolution, may remove the
Trustee, or (ii) subject to TIA Section 315(e), any Holder who has been a bona
fide Holder of a Security for at least six months may, on behalf of himself and
all others similarly situated, petition any court of competent jurisdiction for
the removal of the Trustee and the appointment of a successor Trustee.
(e) If the Trustee shall resign, be removed or become incapable of
acting, or if a vacancy shall occur in the office of Trustee for any cause, the
Company, by a Board Resolution, shall promptly appoint a successor Trustee.
If, within one year after such resignation, removal or incapability, or the
occurrence of such vacancy, a successor Trustee shall be appointed by Act of
the Holders of a majority in aggregate principal amount of the Outstanding
Securities delivered to the Company and the retiring Trustee, the successor
Trustee so appointed shall, forthwith upon its acceptance of such appointment,
become the successor Trustee and supersede the successor Trustee appointed by
the Company. If no successor Trustee shall have been so appointed by the
Company or the Holders and accepted appointment in the manner hereinafter
provided, any Holder who has been a bona fide Holder of a Security for at least
six months may, on behalf of himself and all others similarly situated,
petition any court of competent jurisdiction for the appointment of a successor
Trustee. The evidence of such successorship may, but need not be, evidenced by
a supplemental indenture.
(f) The Company shall give notice of each resignation and each
removal of the Trustee and each appointment of a successor Trustee to the
Holders of Securities in the manner provided
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for in Section 13.5 hereof. Each notice shall include the name of the
successor Trustee and the address of its Corporate Trust Office.
Section 6.10 Acceptance of Appointment by Successor.
Every successor Trustee appointed hereunder shall execute, acknowledge
and deliver to the Company and to the retiring Trustee an instrument accepting
such appointment, and thereupon the resignation or removal of the retiring
Trustee shall become effective and such successor Trustee, without any further
act, deed or conveyance, shall become vested with all the rights, powers,
trusts and duties of the retiring Trustee; but, on request of the Company or
the successor Trustee, such retiring Trustee shall, upon payment of all amounts
due it under Section 6.6 hereof, execute and deliver an instrument transferring
to such successor Trustee all the rights, powers and trusts of the retiring
Trustee and shall duly assign, transfer and deliver to such successor Trustee
all money and other Property held by such retiring Trustee hereunder. Upon
request of any such successor Trustee, the Company shall execute any and all
instruments for more fully and certainly vesting in and confirming to such
successor Trustee all such rights, powers and trusts.
No successor Trustee shall accept its appointment unless at the time
of such acceptance such successor Trustee shall be qualified and eligible under
this Article.
Section 6.11 Merger, Conversion, Consolidation or Succession to
Business.
Any corporation into which the Trustee may be merged or converted or
with which it may be consolidated, or any corporation resulting from any
merger, conversion or consolidation to which the Trustee shall be a party, or
any corporation succeeding to all or substantially all of the corporate trust
business of the Trustee, shall be the successor of the Trustee hereunder,
provided such corporation shall be otherwise qualified and eligible under this
Article, without the execution or filing of any paper or any further act on the
part of any of the parties hereto. In case any Securities shall have been
authenticated, but not delivered, by the Trustee then in office, any successor
by merger, conversion or consolidation to such authenticating Trustee may adopt
such authentication and deliver the Securities so authenticated with the same
effect as if such successor Trustee had itself authenticated such Securities;
and in case at that time any of the Securities shall not have been
authenticated, any successor Trustee may authenticate such Securities either in
the name of any predecessor hereunder or in the name of the successor Trustee;
and in all such cases such certificates shall have the full force which it is
anywhere in the Securities of like tenor or in this Indenture provided;
provided, however, that the right to adopt the certificate of authentication of
any predecessor Trustee or to authenticate Securities in the name of any
predecessor Trustee shall apply only to its successor or successors by merger,
conversion or consolidation.
Section 6.12 Preferential Collection of Claims Against Company.
If and when the Trustee shall be or become a creditor of the Company
(or any other obligor under the Securities), the Trustee shall be subject to
the provisions of the Trust Indenture Act regarding the collection of claims
against the Company (or any such other obligor).
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Section 6.13 Notice of Defaults.
Within 60 days after the occurrence of any Default hereunder, the
Trustee shall transmit in the manner and to the extent provided in TIA Section
313(c), notice of such Default hereunder known to the Trustee, unless such
Default shall have been cured or waived; provided, however, that, except in the
case of a Default in the payment of the principal of (or premium, if any, on)
or interest on any Security, the Trustee shall be protected in withholding such
notice if and so long as the board of directors, the executive committee or a
trust committee of directors and/or Responsible Officers of the Trustee in good
faith determines that the withholding of such notice is in the interest of the
Holders.
ARTICLE VII
HOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY
Section 7.1 Holders' Lists; Holder Communications; Disclosures
Respecting Holders.
The Trustee shall preserve in as current a form as is reasonably
practicable the most recent list available to it of the names and addresses of
the Holders. Neither the Company nor the Trustee shall be under any
responsibility with regard to the accuracy of such list. If the Trustee is not
the Security Registrar, the Company shall furnish to the Trustee semi-annually
before each Regular Record Date, and at such other times as the Trustee may
reasonably request in writing, a list, in such form as the Trustee may
reasonably request, as of such date of the names and addresses of the Holders
then known to the Company. The Company and the Trustee shall also satisfy any
other requirements imposed upon each of them by TIA Section 312(a).
Holders may communicate pursuant to Section 312(b) of the TIA with
other Holders with respect to their rights under this Indenture or the
Securities. Every Holder of Securities, by receiving and holding the same,
agrees with the Company, the Security Registrar and the Trustee that none of
the Company, the Security Registrar or the Trustee, or any agent of any of
them, shall be held accountable by reason of the disclosure of any information
as to the names and addresses of the Holders in accordance with TIA Section
312, regardless of the source from which such information was derived, that
each of such Persons shall have the protection of TIA Section 312(c) and that
the Trustee shall not be held accountable by reason of mailing any material
pursuant to a request made under TIA Section 312(b).
Section 7.2 Reports By Trustee.
Within 60 days after __________ ___ of each year commencing with
__________ ___, 1997, the Trustee shall transmit by mail to the Holders, as
their names and addresses appear in the Security Register, a brief report dated
as of such __________ ___ in accordance with and to
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the extent required under TIA Section 313(a). The Trustee shall also comply
with TIA Sections 313(b) and 313(c).
The Company shall promptly notify the Trustee in writing if the
Securities become listed on any stock exchange or automatic quotation system.
A copy of each Trustee's report, at the time of its mailing to Holders
of Securities, shall be mailed to the Company and filed with the Commission and
each stock exchange, if any, on which the Securities are listed.
Section 7.3 Reports by Company.
The Company shall:
(a) file with the Trustee, within 30 days after the Company is
required to file the same with the Commission, copies of the annual reports and
of the information, documents and other reports (or copies of such portions of
any of the foregoing as the Commission may from time to time by rules and
regulations prescribe) which the Company may be required to file with the
Commission pursuant to Section 13 or Section 15(d) of the Exchange Act; or, if
the Company is not required to file information, documents or reports pursuant
to either of said Sections, then the Company shall file with the Trustee such
information, documents or reports as required pursuant to Section 10.9 hereof;
(b) file with the Trustee and the Commission, in accordance with
rules and regulations prescribed from time to time by the Commission, such
additional information, documents and reports with respect to compliance by the
Company with the conditions and covenants of this Indenture as may be required
from time to time by such rules and regulations; and
(c) transmit by mail to all Holders, in the manner and to the
extent provided in TIA Section 313(c), such summaries of any information,
documents and reports (without exhibits except to the extent required by TIA
Section 313(c)) required to be filed by the Company pursuant to paragraph (a)
or (b) of this Section as may be required by rules and regulations prescribed
from time to time by the Commission.
ARTICLE VIII
CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE
Section 8.1 Company May Consolidate, etc., Only on Certain Terms.
The Company shall not, in any single transaction or a series of
related transactions, merge or consolidate with or into any other Person, or
sell, assign, convey, transfer, lease or otherwise dispose of all or
substantially all the Properties of the Company and its Restricted Subsidiaries
on a consolidated basis to any Person or group of Affiliated Persons, and the
Company shall not
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permit any of its Restricted Subsidiaries to enter into any such transaction or
series of transactions if such transaction or series of transactions, in the
aggregate, would result in a sale, assignment, conveyance, transfer, lease or
other disposition of all or substantially all of the Properties of the Company
and its Restricted Subsidiaries on a consolidated basis to any other Person or
group of Affiliated Persons, unless at the time and after giving affect
thereto:
(a) either (i) if the transaction is a merger or consolidation,
the Company shall be the surviving Person of such merger or consolidation, or
(ii) the Person (if other than the Company) formed by such consolidation or
into which the Company is merged or to which the Properties of the Company or
its Restricted Subsidiaries, as the case may be, are sold, assigned, conveyed,
transferred, leased or otherwise disposed of (any such surviving Person or
transferee Person being called the "Surviving Entity") shall be a corporation
organized and existing under the laws of the United States of America, any
state thereof or the District of Columbia and shall, in either case, expressly
assume by a supplemental indenture to this Indenture executed and delivered to
the Trustee, in form satisfactory to the Trustee, all the obligations of the
Company under the Securities and this Indenture, and, in each case, this
Indenture shall remain in full force and effect;
(b) immediately before and immediately after giving effect to such
transaction or series of transactions on a pro forma basis (and treating any
Indebtedness not previously an obligation of the Company or any of its
Restricted Subsidiaries which becomes the obligation of the Company or any of
its Restricted Subsidiaries in connection with or as a result of such
transaction or transactions as having been incurred at the time of such
transaction or transactions), no Default or Event of Default shall have
occurred and be continuing;
(c) except in the case of the consolidation or merger of any
Restricted Subsidiary with or into the Company, immediately after giving effect
to such transaction or transactions on a pro forma basis, the Consolidated Net
Worth of the Company (or the Surviving Entity if the Company is not the
continuing obligor under this Indenture) is at least equal to the Consolidated
Net Worth of the Company immediately before such transaction or transactions;
(d) except in the case of the consolidation or merger of the
Company with or into a Restricted Subsidiary or any Restricted Subsidiary with
or into the Company or another Restricted Subsidiary, immediately before and
immediately after giving effect to such transaction or transactions on a pro
forma basis (assuming that the transaction or transactions occurred on the
first day of the period of four full fiscal quarters ending immediately prior
to the consummation of such transaction or transactions, with the appropriate
adjustments with respect to the transaction or transactions being included in
such pro forma calculation), the Company (or the Surviving Entity if the
Company is not the continuing obligor under this Indenture) could incur $1.00
of additional Indebtedness (excluding Permitted Indebtedness) under Section
10.11(a) hereof;
(e) if any of the Properties of the Company or any of its
Restricted Subsidiaries would upon such transaction or series of related
transactions become subject to any Lien (other than a Permitted Lien), the
creation or imposition of such Lien shall have been in compliance with Section
10.13 hereof; and
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(f) the Company (or the Surviving Entity if the Company is not the
continuing obligor under this Indenture) shall have delivered to the Trustee,
in form and substance reasonably satisfactory to the Trustee, (i) an Officers'
Certificate stating that such consolidation, merger, conveyance, transfer,
lease or other disposition and, if a supplemental indenture is required in
connection with such transaction, such supplemental indenture, comply with this
Indenture and (ii) an Opinion of Counsel stating that the requirements of
Section 8.1(a) have been satisfied.
Section 8.2 Successor Substituted.
Upon any consolidation of the Company with or merger of the Company
into any other corporation or any sale, assignment, lease, conveyance, transfer
or other disposition of all or substantially all of the Properties of the
Company and its Restricted Subsidiaries on a consolidated basis in accordance
with Section 8.1 hereof, the Surviving Entity shall succeed to, and be
substituted for, and may exercise every right and power of, the Company under
this Indenture with the same effect as if such Surviving Entity had been named
as the Company herein, and in the event of any such sale, assignment, lease,
conveyance, transfer or other disposition, the Company (which term shall for
this purpose mean the Person named as the "Company" in the first paragraph of
this Indenture or any successor Person which shall theretofore become such in
the manner described in Section 8.1 hereof), except in the case of a lease,
shall be discharged of all obligations and covenants under this Indenture and
the Securities, and the Company may be dissolved and liquidated and such
dissolution and liquidation shall not cause a Change of Control under clause
(e) of the definition thereof to occur unless the sale, assignment, lease,
conveyance, transfer or other disposition of all or substantially all of the
Properties of the Company and its Restricted Subsidiaries on a consolidated
basis to any Person otherwise results in a Change of Control.
ARTICLE IX
SUPPLEMENTAL INDENTURES
Section 9.1 Supplemental Indentures Without Consent of Holders.
Without the consent of any Holders, the Company, when authorized by a
Board Resolution and the Trustee upon Company Request, at any time and from
time to time, may enter into one or more indentures supplemental hereto, in
form satisfactory to the Trustee, for any of the following purposes:
(a) to evidence the succession of another Person to the Company
and the assumption by any such successor of the covenants of the Company
contained herein and in the Securities; or
(b) to add to the covenants of the Company for the benefit of the
Holders or to surrender any right or power herein conferred upon the Company;
or
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(c) to comply with any requirement of the SEC in order to effect
or maintain the qualification of this Indenture under the TIA; or
(d) to evidence and provide for the acceptance of appointment
hereunder by a successor Trustee pursuant to the requirements of Sections 6.9
and 6.10 hereof; or
(e) to cure any ambiguity, to correct or supplement any provision
herein which may be defective or inconsistent with any other provision herein,
or to make any other provisions with respect to matters or questions arising
under this Indenture provided that such action shall not adversely affect the
interests of the Holders in any material respect; or
(f) to secure the Securities pursuant to the requirements of
Section 10.13 hereof or otherwise; or
(g) to provide for uncertificated Securities in addition to or in
place of certificated Securities.
Section 9.2 Supplemental Indentures with Consent of Holders.
With the consent of the Holders of not less than a majority in
aggregate principal amount of the Outstanding Securities, by Act of said
Holders delivered to the Company and the Trustee, the Company, when authorized
by a Board Resolution and the Trustee upon Company Request may enter into an
indenture or indentures supplemental hereto for the purpose of adding any
provisions to or changing in any manner or eliminating any of the provisions of
this Indenture or of modifying in any manner the rights of the Holders under
this Indenture; provided, however, that no such supplemental indenture shall,
without the consent of the Holder of each Outstanding Security affected
thereby:
(a) change the Stated Maturity of the principal of, or any
installment of interest on, any Security, or reduce the principal amount
thereof or the rate of interest thereon or any premium thereon, or change the
coin or currency in which principal of any Security or any premium or the
interest on any Security is payable, or impair the right to institute suit for
the enforcement of any such payment after the Stated Maturity thereof (or, in
the case of redemption, on or after the Redemption Date); or
(b) reduce the percentage of aggregate principal amount of the
Outstanding Securities, the consent of whose Holders is required for any such
supplemental indenture, or the consent of whose Holders is required for any
waiver of compliance with certain provisions of this Indenture or certain
defaults hereunder or the consequences of a default provided for in this
Indenture; or
(c) modify any of the provisions of this Section or Sections 5.13
and 10.18 hereof, except to increase any such percentage or to provide that
certain other provisions of this Indenture cannot be modified or waived without
the consent of the Holder of each Outstanding Security affected thereby;
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(d) change the ranking of the Securities in a manner adverse to
the Holders or expressly subordinate in right of payment the Securities to any
other Indebtedness; or
(e) amend, change or modify the obligation of the Company to make
and consummate a Change of Control Offer in the event of a Change of Control,
or to make and consummate a Net Proceeds Offer with respect to any Asset Sale,
or modify any of the provisions or definitions with respect thereto.
It shall not be necessary for any Act of the Holders under this
Section to approve the particular form of any proposed supplemental indenture,
but it shall be sufficient if such Act shall approve the substance thereof.
Section 9.3 Execution of Supplemental Indentures.
In executing, or accepting the additional trusts created by, any
supplemental indenture permitted by this Article or the modifications thereby
of the trusts created by this Indenture, the Trustee shall be entitled to
receive, and shall be fully protected in relying upon, an Opinion of Counsel
stating that the execution of such supplemental indenture is authorized or
permitted by this Indenture. The Trustee may, but shall not be obligated to,
enter into any such supplemental indenture which affects the Trustee's own
rights, duties or immunities under this Indenture or otherwise.
Section 9.4 Effect of Supplemental Indentures.
Upon the execution of any supplemental indenture under this Article,
this Indenture shall be modified in accordance therewith, and such supplemental
indenture shall form a part of this Indenture for all purposes; and every
Holder of Securities theretofore or thereafter authenticated and delivered
hereunder shall be bound thereby.
Section 9.5 Conformity with Trust Indenture Act.
Every supplemental indenture executed pursuant to this Article shall
conform to the requirements of the Trust Indenture Act as then in effect.
Section 9.6 Reference in Securities to Supplemental Indentures.
Securities authenticated and delivered after the execution of any
supplemental indenture pursuant to this Article may, and shall if required by
the Trustee, bear a notation in form approved by the Trustee as to any matter
provided for in such supplemental indenture. If the Company shall so
determine, new Securities so modified as to conform, in the opinion of the
Trustee and the Company, to any such supplemental indenture may be prepared and
executed by the Company and authenticated and delivered by the Trustee in
exchange for Outstanding Securities of like tenor.
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Section 9.7 Notice of Supplemental Indentures and Waivers.
Promptly after (i) the execution by the Company and the Trustee of any
supplemental indenture pursuant to the provisions of Section 9.2 hereof or (ii)
a waiver under Section 5.13 or 10.18 hereof becomes effective, the Company
shall give notice thereof to the Holders of each Outstanding Security affected,
in the manner provided for in Section 13.5 hereof, setting forth in general
terms the substance of such supplemental indenture or waiver, as the case may
be.
ARTICLE X
COVENANTS
Section 10.1 Payment of Principal, Premium, if any, and Interest.
The Company covenants and agrees for the benefit of the Holders that
it will duly and punctually pay the principal of (and premium, if any, on) and
interest (including Additional Interest) on the Securities in accordance with
the terms of the Securities and this Indenture.
Section 10.2 Maintenance of Office or Agency.
The Company shall maintain an office or agency where Securities may be
presented or surrendered for payment, where Securities may be surrendered for
registration of transfer or exchange and where notices and demands to or upon
the Company in respect of the Securities and this Indenture may be served. The
Corporate Trust Office shall be such office or agency of the Company, unless
the Company shall designate and maintain some other office or agency for one or
more of such purposes. The Company will give prompt written notice to the
Trustee of any change in the location of any such office or agency. If at any
time the Company shall fail to maintain any such required office or agency or
shall fail to furnish the Trustee with the address thereof, such presentations,
surrenders, notices and demands may be made or served at the aforementioned
office of the Trustee, and the Company hereby appoints the Trustee as its agent
to receive all such presentations, surrenders, notices and demands.
The Company may also from time to time designate one or more other
offices or agencies where the Securities may be presented or surrendered for
any or all such purposes and may from time to time rescind any such
designation. Further, if at any time there shall be no such office or agency
in The City of New York where the Securities may be presented or surrendered
for payment, the Company shall forthwith designate and maintain such an office
or agency in The City of New York, in order that the Securities shall at all
times be payable in The City of New York. The Company will give prompt written
notice to the Trustee of any such designation or rescission and any change in
the location of any such other office or agency.
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Section 10.3 Money for Security Payments to Be Held in Trust.
If the Company shall at any time act as its own Paying Agent, it
shall, on or before 11:00 a.m., Eastern time, on each due date of the principal
of (and premium, if any, on) or interest on any of the Securities, segregate
and hold in trust for the benefit of the Persons entitled thereto a sum
sufficient to pay the principal (and premium, if any) or interest so becoming
due until such sum shall be paid to such Persons or otherwise disposed of as
herein provided and will promptly notify the Trustee of its action or failure
so to act.
Whenever the Company shall have one or more Paying Agents for the
Securities, it will on or before 11:00 a.m., Eastern time, on each due date of
the principal of (and premium, if any, on), or interest on, any Securities,
deposit with a Paying Agent immediately available funds sufficient to pay the
principal (and premium, if any) or interest so becoming due, such funds to be
held in trust for the benefit of the Persons entitled to such principal,
premium or interest, and (unless such Paying Agent is the Trustee) the Company
shall promptly notify the Trustee of such action or any failure so to act.
The Company shall cause each Paying Agent (other than the Trustee) to
execute and deliver to the Trustee an instrument in which such Paying Agent
shall agree with the Trustee, subject to the provisions of this Section, that
such Paying Agent will:
(a) hold all sums held by it for the payment of the principal of
(and premium, if any, on) or interest on Securities in trust for the benefit of
the Persons entitled thereto until such sums shall be paid to such Persons or
otherwise disposed of as herein provided;
(b) give the Trustee notice of any default by the Company (or any
other obligor upon the Securities) in the making of any payment of principal
(and premium, if any) or interest; and
(c) at any time during the continuance of any such default, upon
the written request of the Trustee, forthwith pay to the Trustee all sums so
held in trust by such Paying Agent.
The Company may at any time, for the purpose of obtaining the
satisfaction and discharge of this Indenture or for any other purpose, pay, or
by Company Order direct any Paying Agent to pay, to the Trustee all sums held
in trust by the Company or such Paying Agent, such sums to be held by the
Trustee upon the same trusts as those upon which such sums were held by the
Company or such Paying Agent; and, upon such payment by any Paying Agent to the
Trustee, such Paying Agent shall be released from all further liability with
respect to such sums.
Subject to applicable escheat and abandoned property laws, any money
deposited with the Trustee or any Paying Agent, or then held by the Company, in
trust for the payment of the principal of (and premium, if any, on) or interest
on any Security and remaining unclaimed for two years after such principal (and
premium, if any) or interest has become due and payable shall be paid to the
Company on Company Request, or (if then held by the Company) shall be
discharged from such trust; and the Holder of such Security shall thereafter,
as an unsecured general creditor, look only to the Company for payment thereof,
and all liability of the Trustee
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or such Paying Agent with respect to such trust money, and all liability of the
Company as trustee thereof, shall thereupon cease; provided, however, that the
Trustee or such Paying Agent, before being required to make any such repayment,
may at the expense of the Company cause to be published once, in a newspaper
published in the English language, customarily published on each Business Day
and of general circulation in the Borough of Manhattan, The City of New York,
notice that such money remains unclaimed and that, after a date specified
therein, which shall not be less than 30 days from the date of such
publication, any unclaimed balance of such money then remaining will be repaid
to the Company.
Section 10.4 Corporate Existence.
Except as expressly permitted by Article VIII hereof, Section 10.15
hereof or other provisions of this Indenture, the Company shall do or cause to
be done all things necessary to preserve and keep in full force and effect the
corporate existence, rights (charter and statutory) and franchises of the
Company and each Restricted Subsidiary; provided, however, that the Company
shall not be required to preserve any such existence of its Restricted
Subsidiaries, rights or franchises, if the Board of Directors of the Company
shall determine that the preservation thereof is no longer desirable in the
conduct of the business of the Company and its Restricted Subsidiaries, taken
as a whole, and that the loss thereof is not disadvantageous in any material
respect to the Holders.
Section 10.5 Payment of Taxes; Maintenance of Properties;
Insurance.
The Company shall or, as applicable, shall cause its Restricted
Subsidiaries to, pay or discharge or cause to be paid or discharged, before the
same shall become delinquent, (a) all material taxes, assessments and
governmental charges levied or imposed upon the Company or any Restricted
Subsidiary or upon the income, profits or Property of the Company or any
Restricted Subsidiary and (b) all lawful claims for labor, materials and
supplies, which, if unpaid, might by law become a Lien upon the Property of the
Company or any Restricted Subsidiary; provided, however, that the Company shall
not be required to pay or discharge or cause to be paid or discharged any such
tax, assessment, charge or claim whose amount, applicability or validity is
being contested in good faith by appropriate proceedings and for which
appropriate provision has been made in accordance with GAAP.
The Company shall or, as applicable, shall cause its Restricted
Subsidiaries to, cause all material Properties owned by the Company or any
Restricted Subsidiary and used or held for use in the conduct of its business
or the business of any Restricted Subsidiary to be maintained and kept in good
condition, repair and working order (ordinary wear and tear excepted), all as
in the judgment of the Company or such Restricted Subsidiary may be necessary
so that its business may be properly and advantageously conducted at all times;
provided, however, that nothing in this Section shall prevent the Company or
any Restricted Subsidiary from discontinuing the maintenance of any of such
Properties if such discontinuance is, in the judgment of the Company or such
Restricted Subsidiary, as the case may be, desirable in the conduct of the
business of the Company or such Restricted Subsidiary and not disadvantageous
in any material respect to the Holders. Notwithstanding the foregoing, nothing
contained in this Section 10.5 shall limit or
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impair in any way the right of the Company and its Restricted Subsidiaries to
sell, divest and otherwise to engage in transactions that are otherwise
permitted by this Indenture.
The Company shall at all times keep all of its, and cause its
Restricted Subsidiaries to keep their, Properties which are of an insurable
nature insured with insurers, believed by the Company to be responsible,
against loss or damage to the extent that property of similar character and in
a similar location is usually so insured by corporations similarly situated and
owning like Properties.
The Company or any Restricted Subsidiary may adopt such other plan or
method of protection, in lieu of or supplemental to insurance with insurers,
whether by the establishment of an insurance fund or reserve to be held and
applied to make good losses from casualties, or otherwise, conforming to the
systems of self-insurance maintained by corporations similarly situated and in
a similar location and owning like Properties, as may be determined by the
Board of Directors of the Company or such Restricted Subsidiary.
Section 10.6 Limitation on Sale-Leaseback Transactions.
The Company shall not, and shall not permit any Restricted Subsidiary
to, directly or indirectly, enter into, assume, guarantee or otherwise become
liable with respect to any Sale/Leaseback Transaction unless (a) the Company or
such Restricted Subsidiary, as the case may be, would be able to incur
Indebtedness (not including the incurrence of Permitted Indebtedness) pursuant
to and in an amount equal to the Attributable Indebtedness with respect to such
Sale/Leaseback Transaction pursuant to Section 10.11(a) and 10.11(c) hereof,
(b) the Company or such Restricted Subsidiary receives proceeds from such
Sale/Leaseback Transaction at least equal to the Fair Market Value of the
Property subject thereto and (c) the Company applies an amount in cash equal to
the Net Available Proceeds of the Sale/Leaseback Transaction in accordance with
the provisions of Section 10.15 hereof as if such Sale/Leaseback Transaction
were an Asset Sale.
Section 10.7 Limitation on Conduct of Business.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, engage in the conduct of any business other than the
businesses being conducted on the date of this Indenture (such businesses being
providing data acquisition, data processing, multi-client data surveys and
information services to the petroleum industry) and such other businesses as
are reasonably necessary or desirable to facilitate the conduct and operation
of such businesses.
Section 10.8 Statement by Officers as to Default.
(a) The Company shall deliver to the Trustee, within 120 days
after the end of each fiscal year of the Company and within 45 days of the end
of each of the first, second and third quarters of each fiscal year of the
Company, an Officers' Certificate stating that a review of the activities of
the Company and its Restricted Subsidiaries during the preceding fiscal quarter
or fiscal year, as applicable, has been made under the supervision of the
signing Officers with a view
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to determining whether the Company has kept, observed, performed and fulfilled
its obligations under this Indenture, and further stating, as to each such
Officer signing such certificate, that to the best of such Officer's knowledge
the Company has kept, observed, performed and fulfilled each and every covenant
contained in this Indenture and no Default or Event of Default has occurred and
is continuing (or, if a Default or Event of Default shall have occurred to
either such Officer's knowledge, describing all such Defaults or Events of
Default of which such Officer may have knowledge and what action the Company is
taking or proposes to take with respect thereto). Such Officers' Certificate
shall comply with TIA Section 314(a)(4). For purposes of this Section 10.8(a),
such compliance shall be determined without regard to any period of grace or
requirement of notice under this Indenture.
(b) The Company shall, so long as any of the Securities is
outstanding, deliver to the Trustee, upon any of its Officers becoming aware of
any Default or Event of Default, an Officers' Certificate specifying such
Default or Event of Default and what action the Company proposes to take with
respect thereto, within 10 days of its occurrence.
Section 10.9 Provision of Financial Information.
The Company shall file on a timely basis with the SEC, to the extent
such filings are accepted by the Commission and whether or not the Company has
a class of securities registered under the Exchange Act, the annual reports,
quarterly reports and other documents that the Company would be required to
file if it were subject to Section 13 or 15 of the Exchange Act. The Company
shall also file with the Trustee (with exhibits), and provide to each Holder of
Securities (without exhibits), without cost to such Holder, copies of such
reports and documents within 15 days after the date on which the Company files
such reports and documents with the Commission or the date on which the Company
would be required to file such reports and documents if the Company were so
required and, if filing such reports and documents with the Commission is not
accepted by the Commission or is prohibited under the Exchange Act, the Company
shall supply at its cost copies of such reports and documents (including any
exhibits thereto) to any Holder of Securities, securities analyst or
prospective investor promptly upon written request given in accordance with
Section 13.4 hereof.
Section 10.10 Limitation on Restricted Payments.
(a) The Company shall not, and shall not permit any Restricted
Subsidiary to, directly or indirectly, take the following actions:
(i) declare or pay any dividend on, or make any other
distribution to holders of, any shares of Capital Stock of the Company
(other than dividends or distributions payable solely in shares of
Qualified Capital Stock of the Company or in options, warrants or
other rights to purchase Qualified Capital Stock of the Company);
(ii) purchase, redeem or otherwise acquire or retire for
value any Capital Stock of the Company or any Affiliate thereof (other
than any Restricted Subsidiary or except pursuant to a Permitted
Investment) or any options, warrants or other rights to acquire such
Capital Stock;
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(iii) make any principal payment on or repurchase, redeem,
defease or otherwise acquire or retire for value, prior to any
scheduled principal payment, scheduled sinking fund payment or
maturity, any Subordinated Indebtedness, except in any case out of the
Net Cash Proceeds of any Permitted Indebtedness referred to in clause
(ix) of the definition thereof, or
(iv) make any Restricted Investment;
(such payments or other actions described in clauses (i) through (iv) being
collectively referred to as "Restricted Payments"), unless at the time of and
after giving effect to the proposed Restricted Payment (the amount of any such
Restricted Payment, if other than cash, shall be the amount determined by the
Board of Directors of the Company, whose determination shall be conclusive and
evidenced by a Board Resolution), (A) no Default or Event of Default shall have
occurred and be continuing, (B) the Company could incur $1.00 of additional
Indebtedness (excluding Permitted Indebtedness) in accordance with Section
10.11(a) hereof and (C) the aggregate amount of all Restricted Payments
declared or made after the date of this Indenture shall not exceed the sum
(without duplication) of the following:
(1) 50% of the Consolidated Net Income of the Company accrued on a
cumulative basis during the period beginning on August 1, 1996 and
ending on the last day of the Company's last fiscal quarter ending
prior to the date of such proposed Restricted Payment (or, if such
Consolidated Net Income shall be a loss, minus 100% of such loss),
plus
(2) the aggregate Net Cash Proceeds received after the date of
this Indenture by the Company from the issuance or sale (other than to
any of its Restricted Subsidiaries) of shares of Qualified Capital
Stock of the Company or any options, warrants or rights to purchase
such shares of Qualified Capital Stock of the Company, plus
(3) the aggregate Net Cash Proceeds received after the date of
this Indenture by the Company (other than from any of its Restricted
Subsidiaries) upon the exercise of any options, warrants or rights to
purchase shares of Qualified Capital Stock of the Company, plus
(4) the aggregate Net Cash Proceeds received after the date of
this Indenture by the Company from the issuance or sale (other than to
any of its Restricted Subsidiaries) of Indebtedness or shares of
Disqualified Capital Stock that have been converted into or exchanged
for Qualified Capital Stock of the Company, together with the
aggregate cash received by the Company at the time of such conversion
or exchange, plus
(5) to the extent not otherwise included in Consolidated Net
Income, the net reduction in Investments in Unrestricted Subsidiaries
resulting from dividends, repayments of loans or advances, or other
transfers of assets, in each case to the Company or a Restricted
Subsidiary after the date of this Indenture from any Unrestricted
Subsidiary or from the redesignation of an Unrestricted Subsidiary as
a Restricted Subsidiary (valued in each case as provided in the
definition of Investment), not to exceed in the case of any
Unrestricted
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Subsidiary the total amount of Investments (other than Permitted
Investments) in such Unrestricted Subsidiary made by the Company and
its Restricted Subsidiaries in such Unrestricted Subsidiary that which
was previously treated as a Restricted Payment, plus
(6) $2,500,000.
(b) Notwithstanding paragraph (a) above, the Company and its
Restricted Subsidiaries may take the following actions so long as (in the case
of clauses (ii) and (iii) below) no Default or Event of Default shall have
occurred and be continuing:
(i) the payment of any dividend on any Capital Stock of
the Company or any Restricted Subsidiary within 60 days after the date
of declaration thereof, if at such declaration date such declaration
complied with the provisions of paragraph (a) above (and such payment
shall be deemed to have been paid on such date of declaration for
purposes of any calculation required by the provisions of paragraph
(a) above);
(ii) the repurchase, redemption or other acquisition or
retirement of any shares of any class of Capital Stock of the Company
or any Restricted Subsidiary, in exchange for, or out of the aggregate
Net Cash Proceeds of, a substantially concurrent issue and sale (other
than to a Restricted Subsidiary) of shares of Qualified Capital Stock
of the Company; and
(iii) the repurchase, redemption, repayment, defeasance or
other acquisition or retirement for value of any Subordinated
Indebtedness in exchange for, or out of the aggregate Net Cash
Proceeds from, a substantially concurrent issue and sale (other than
to a Restricted Subsidiary) of shares of Qualified Capital Stock of
the Company.
The actions described in clauses (i), (ii) and (iii) of this paragraph (b)
shall be Restricted Payments that shall be permitted to be made in accordance
with this paragraph (b) but shall reduce the amount that would otherwise be
available for Restricted Payments under clause (C) of paragraph (a), provided
that any dividend paid pursuant to clause (i) of this paragraph (b) shall
reduce the amount that would otherwise be available under clause (C) of
paragraph (a) when declared, but not also when subsequently paid pursuant to
such clause (i).
(c) In computing Consolidated Net Income under paragraph (a)
above, (1) the Company shall use audited financial statements for the portions
of the relevant period for which audited financial statements are available on
the date of determination and unaudited financial statements and other current
financial data based on the books and records of the Company for the remaining
portion of such period and (2) the Company shall be permitted to rely in good
faith on the financial statements and other financial data derived from the
books and records of the Company that are available on the date of
determination. If the Company makes a Restricted Payment which, at the time of
the making of such Restricted Payment would in the good faith determination of
the Company be permitted under the requirements of this Indenture, such
Restricted Payment shall be deemed to have been made in compliance with this
Indenture
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notwithstanding any subsequent adjustments made in good faith to the Company's
financial statements affecting Consolidated Net Income of the Company for any
period.
Section 10.11 Limitation on Indebtedness and Disqualified Capital
Stock.
(a) The Company shall not, and shall not permit any of its
Restricted Subsidiaries to, create, incur, assume, guarantee or in any manner
become directly or indirectly liable for the payment of (collectively, "incur")
any Indebtedness (including any Acquired Indebtedness but excluding any
Permitted Indebtedness), or any Disqualified Common Stock, unless, on a pro
forma basis after giving effect to such incurrence and the application of the
proceeds therefrom, the Consolidated Fixed Charge Coverage Ratio for the four
full fiscal quarters immediately preceding such event, taken as one period,
would have been equal to or greater than 2.5 to 1.0.
(b) The Company shall not incur any Indebtedness that is expressly
subordinated to any other Indebtedness of the Company unless such Indebtedness,
by its terms or the terms of any agreement or instrument pursuant to which such
Indebtedness is issued or outstanding, is also expressly made subordinate to
the Securities at least to the extent it is subordinated to such other
Indebtedness.
(c) The Company will not permit any of its Restricted Subsidiaries
to incur any Indebtedness (excluding Permitted Indebtedness referred to in
clauses (i) and (vi) (to the extent consisting of Indebtedness to the Company)
of the definition thereof and Permitted Subsidiary Indebtedness) or to issue
any Preferred Stock.
(d) For purposes of this Section 10.11, Indebtedness of any Person
that becomes a Restricted Subsidiary by merger, consolidation or other
acquisition shall be deemed to have been incurred by the Company and the
Restricted Subsidiary at the time such Person becomes a Restricted Subsidiary.
Section 10.12 Limitation on Issuances and Sales of Capital Stock by
Restricted Subsidiaries.
The Company (a) shall not permit any Restricted Subsidiary to issue or
sell any Capital Stock to any Person other than to the Company or a Wholly
Owned Restricted Subsidiary and (b) shall not permit any Person other than the
Company or a Wholly Owned Restricted Subsidiary to own any Capital Stock of any
Restricted Subsidiary, in each case except with respect to a Wholly Owned
Restricted Subsidiary as described in clause (i) or (ii) of the definition of
"Wholly Owned Restricted Subsidiary."
Section 10.13 Limitation on Liens.
The Company shall not, and shall not permit any Restricted Subsidiary
to, directly or indirectly, create, incur, assume, affirm or suffer to exist or
become effective any Lien of any kind, except for Permitted Liens, upon any of
their respective Properties, whether now owned or acquired after the date of
this Indenture, or any income or profits therefrom, to secure (a) any
Indebtedness of the Company or such Restricted Subsidiary, unless prior to, or
contemporaneously
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therewith, the Securities are equally and ratably secured; provided, however,
that if such Indebtedness is expressly subordinated to the Securities, the Lien
securing such Indebtedness shall be subordinated and junior to the Lien
securing the Securities with the same relative priority as such Indebtedness
has with respect to the Securities. The foregoing covenant shall not apply to
any Lien securing Acquired Indebtedness, provided that any such Lien extends
only to the Properties that were subject to such Lien prior to the related
acquisition by the Company or such Restricted Subsidiary and was not created,
incurred or assumed in contemplation of such transaction.
Section 10.14 Purchase of Securities Upon Change of Control.
(a) Upon the occurrence of a Change of Control, the Company shall
be obligated to make an offer to purchase (a "Change of Control Offer") all of
the then Outstanding Securities, in whole or in part, from the Holders of such
Securities in integral multiples of $1,000, at a purchase price (the "Change of
Control Purchase Price") equal to 101% of the principal amount of such
Securities, plus accrued and unpaid interest, if any, to the Change of Control
Purchase Date (as defined below), in accordance with the procedures set forth
in paragraphs (b), (c) and (d) of this Section. The Company shall, subject to
the provisions described below, be required to purchase all Securities properly
tendered into the Change of Control Offer and not withdrawn. The Company will
not be required to make a Change of Control Offer upon a Change of Control if
another Person makes the Change of Control Offer at the same purchase price, at
the same times and otherwise in substantial compliance with the requirements
applicable to a Change of Control Offer to be made by the Company and purchases
all Securities validly tendered and not withdrawn under such Change of Control
Offer.
(b) The Change of Control Offer is required to remain open for at
least 20 Business Days and until the close of business on the fifth Business
Day prior to the Change of Control Purchase Date (as defined below).
(c) Not later than the 30th day following any Change of Control,
the Company shall give to the Trustee in the manner provided in Section 13.4
and each Holder of the Securities in the manner provided in Section 13.5, a
notice (the "Change of Control Notice") governing the terms of the Change of
Control Offer and stating:
(1) that a Change in Control has occurred and that such
Holder has the right to require the Company to repurchase such
Holder's Securities, or portion thereof, at the Change of Control
Purchase Price;
(2) any information regarding such Change of Control
required to be furnished pursuant to Rule 13e-1 under the Exchange Act
and any other securities laws and regulations thereunder;
(3) a purchase date (the "Change of Control Purchase
Date") which shall be on a Business Day and no earlier than 30 days
nor later than 60 days from the date the Change of Control occurred;
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(4) that any Security, or portion thereof, not tendered
or accepted for payment will continue to accrue interest:
(5) that unless the Company defaults in depositing money
with the Paying Agent in accordance with the last paragraph of clause
(d) of this Section 10.14, or payment is otherwise prevented, any
Security, or portion thereof, accepted for payment pursuant to the
Change of Control Offer shall cease to accrue interest after the
Change of Control Purchase Date; and
(6) the instructions a Holder must follow in order to
have his Securities repurchased in accordance with paragraph (d) of
this Section.
(d) Holders electing to have Securities purchased will be required
to surrender such Securities to the Paying Agent at the address specified in
the Change of Control Notice at least five Business Days prior to the Change of
Control Purchase Date. Holders will be entitled to withdraw their election if
the Paying Agent receives, not later than three Business Days prior to the
Change of Control Purchase Date, a telegram, telex, facsimile transmission or
letter setting forth the name of the Holder, the certificate number(s) (in the
case of Physical Securities) and principal amount of the Securities delivered
for purchase by the Holder as to which his election is to be withdrawn and a
statement that such Holder is withdrawing his election to have such Securities
purchased. Holders whose Securities are purchased only in part will be issued
new Securities equal in principal amount to the unpurchased portion of the
Securities surrendered.
On the Change of Control Purchase Date, the Company shall (i) accept
for payment Securities or portions thereof validly tendered pursuant to a
Change of Control Offer, (ii) irrevocably deposit with the Paying Agent money
sufficient to pay the purchase price of all Securities or portions thereof so
tendered, and (iii) deliver or cause to be delivered to the Trustee the
Securities so accepted. The Paying Agent shall promptly mail or deliver to
Holders of the Securities so tendered payment in an amount equal to the
purchase price for the Securities, and the Company shall execute and the
Trustee shall authenticate and mail or make available for delivery to such
Holders a new Security equal in principal amount to any unpurchased portion of
the Security which any such Holder did not surrender for purchase. The Company
shall announce the results of a Change of Control Offer on or as soon as
practicable after the Change of Control Purchase Date. For purposes of this
Section 10.14, the Trustee will act as the Paying Agent.
(e) The Company shall comply with Rule 14e-1 under the Exchange
Act and any other securities laws and regulations thereunder to the extent such
laws and regulations are applicable, in the event that a Change of Control
occurs and the Company is required to purchase Securities as described in this
Section 10.14.
Section 10.15 Limitation on Asset Sales.
(a) The Company shall not, and shall not permit any Restricted
Subsidiary to, engage in any Asset Sale unless (i) the Company or such
Restricted Subsidiary, as the case may be, receives consideration at the time
of such Asset Sale at least equal to the Fair Market Value of the
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Properties sold or otherwise disposed of pursuant to the Asset Sale, (ii) at
least 80% of the consideration received by the Company or the Restricted
Subsidiary, as the case may be, in respect of such Asset Sale consists of cash
or Cash Equivalents and (iii) the Company delivers to the Trustee an Officers'
Certificate certifying that such Asset Sale complies with clauses (i) and (ii)
of this Section 10.15(a). The amount (without duplication) of any Indebtedness
(other than Subordinated Indebtedness) of the Company or such Restricted
Subsidiary that is expressly assumed by the transferee in such Asset Sale and
with respect to which the Company or such Restricted Subsidiary, as the case
may be, is unconditionally released by the holder of such Indebtedness, shall
be deemed to be cash or Cash Equivalents for purposes of clause (ii) and shall
also be deemed to constitute a repayment of, and a permanent reduction in, the
amount of such Indebtedness for purposes of the following paragraph.
(b) If the Company or any Restricted Subsidiary engages in an
Asset Sale or incurs an Event of Loss, the Company or such Restricted
Subsidiary may either, no later than 270 days after such Asset Sale or such
Event of Loss, (i) apply all or any of the Net Available Proceeds therefrom to
repay Indebtedness (other than Subordinated Indebtedness) of the Company or any
Restricted Subsidiary, provided, in each case, that the related loan commitment
(if any) is thereby permanently reduced by the amount of such Indebtedness so
repaid, or (ii) invest all or any part of the Net Available Proceeds thereof in
Properties that replace the Properties that were the subject of such Asset Sale
or such Event of Loss, as the case may be, or in other Properties that will be
used in the business of the Company and its Restricted Subsidiaries. The
amount of such Net Available Proceeds not applied or invested as provided in
this paragraph shall constitute "Excess Proceeds."
(c) When the aggregate amount of Excess Proceeds equals or exceeds
$5,000,000 (the "Trigger Date"), the Company shall make an offer to purchase,
from all Holders of the Securities, an aggregate principal amount of Securities
equal to such Excess Proceeds as follows:
(1) Not later than the 30th day following the Trigger
Date, the Company shall give to the Trustee in the manner provided in
Section 13.4 hereof and each Holder of the Securities in the manner
provided in Section 13.5 hereof, a notice (a "Purchase Notice")
offering to purchase (a "Net Proceeds Offer") from all Holders of the
Securities the maximum principal amount (expressed as a multiple of
$1,000) of Securities that may be purchased out of an amount (the
"Payment Amount") equal to such Excess Proceeds.
(2) The offer price for the Securities shall be payable
in cash in an amount equal to 100% of the principal amount of the
Securities tendered pursuant to a Net Proceeds Offer, plus accrued and
unpaid interest, if any, to the date such Net Proceeds Offer is
consummated (the "Offered Price"), in accordance with the procedures
set forth in paragraph (d) of this Section. To the extent that the
aggregate Offered Price of the Securities tendered pursuant to a Net
Proceeds Offer is less than the Payment Amount relating thereto (such
shortfall constituting a "Net Proceeds Deficiency"), the Company may
use such Net Proceeds Deficiency, or a portion thereof, for general
corporate purposes, subject to the limitations of Section 10.10
hereof.
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(3) If the aggregate Offered Price of Securities validly
tendered and not withdrawn by Holders thereof exceeds the Payment
Amount, Securities to be purchased will be selected on a pro rata
basis by the Trustee based on the aggregate principal amount of
Securities so tendered. Upon completion of a Net Proceeds Offer, the
amount of Excess Proceeds shall be reset to zero.
(4) The Purchase Notice shall set forth a purchase date
(the "Net Proceeds Payment Date"), which shall be on a Business Day no
earlier than 30 days nor later than 60 days from the Trigger Date.
The Purchase Notice shall also state (i) that a Trigger Date with
respect to one or more Asset Sales has occurred and that such Holder
has the right to require the Company to repurchase such Holder's
Securities at the Offered Price, subject to the limitations described
in the foregoing paragraph (3), (ii) any information regarding such
Net Proceeds Offer required to be furnished pursuant to Rule 13e-1
under the Exchange Act and any other securities laws and regulations
thereunder, (iii) that any Security, or portion thereof, not tendered
or accepted for payment will continue to accrue interest, (iv) that,
unless the Company defaults in depositing money with the Paying Agent
in accordance with the last paragraph of clause (d) of this Section
10.15, or payment is otherwise prevented, any Security, or portion
thereof, accepted for payment pursuant to the Net Proceeds Offer shall
cease to accrue interest after the Net Proceeds Payment Date, and (v)
the instructions a Holder must follow in order to have his Securities
repurchased in accordance with paragraph (d) of this Section.
(d) Holders electing to have Securities purchased will be required
to surrender such Securities to the Paying Agent at the address specified in
the Purchase Notice at least five Business Days prior to the Net Proceeds
Payment Date. Holders will be entitled to withdraw their election if the
Paying Agent receives, not later than three Business Days prior to the Net
Proceeds Payment Date, a telegram, telex, facsimile transmission or letter
setting forth the name of the Holder, the certificate number(s) (in the case of
Physical Securities) and principal amount of the Securities delivered for
purchase by the Holder as to which his election is to be withdrawn and a
statement that such Holder is withdrawing his election to have such Securities
purchased. Holders whose Securities are purchased only in part will be issued
new Securities equal in principal amount to the unpurchased portion of the
Securities surrendered.
On the Net Proceeds Payment Date, the Company shall (i) accept for
payment Securities or portions thereof validly tendered pursuant to a Net
Proceeds Offer in an aggregate principal amount equal to the Payment Amount or
such lesser amount of Securities as has been tendered, (ii) irrevocably deposit
with the Paying Agent money sufficient to pay the purchase price of all
Securities or portions thereof so tendered in an aggregate principal amount
equal to the Payment Amount or such lesser amount and (iii) deliver or cause to
be delivered to the Trustee the Securities so accepted. The Paying Agent shall
promptly mail or deliver to Holders of the Securities so accepted payment in an
amount equal to the purchase price, and the Company shall execute and the
Trustee shall authenticate and mail or make available for delivery to such
Holders a new Security equal in principal amount to any unpurchased portion of
the Security which any such Holder did not surrender for purchase. Any
Securities not so accepted will be promptly mailed or delivered to the Holder
thereof. The Company shall announce the results of a Net
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Proceeds Offer on or as soon as practicable after the Net Proceeds Payment
Date. For purposes of this Section 10.15, the Trustee will act as the Paying
Agent.
(e) The Company shall not permit any Restricted Subsidiary to
enter into or suffer to exist any agreement that would place any restriction of
any kind (other than pursuant to law or regulation) on the ability of the
Company to make a Net Proceeds Offer following any Asset Sale. The Company
shall comply with Rule 14e-1 under the Exchange Act and any other securities
laws and regulations thereunder, if applicable, in the event that an Asset Sale
occurs and the Company is required to purchase Securities as described in this
Section 10.15.
Section 10.16 Limitation on Transactions with Affiliates.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly, enter into or suffer to exist any
transaction or series of related transactions (including, without limitation,
the sale, purchase, exchange or lease of Property or the rendering of any
services) with, or for the benefit of, any Affiliate of the Company (other than
the Company or a Restricted Subsidiary), unless (i) such transaction or series
of related transactions is on terms that are no less favorable to the Company
or such Restricted Subsidiary, as the case may be, than would be available in a
comparable transaction in arm's-length dealings with an unrelated third party,
(ii) with respect to any one transaction or series of related transactions
involving aggregate payments in excess of $1,000,000 but less than $5,000,000
in the aggregate, the Company delivers an Officers' Certificate to the Trustee
certifying that (A) such transaction or series of related transactions complies
with clause (i) above and (B) such transaction or series of related
transactions has been approved by the Board of Directors (including a majority
of the Disinterested Directors) of the Company, and (iii) with respect to any
one transaction or series of related transactions involving aggregate payments
in excess of $5,000,000, the Company delivers an Officers' Certificate to the
Trustee certifying to the two matters referred to in clause (ii) above and that
the Company has obtained a written opinion from an independent nationally
recognized investment banking firm or appraisal firm specializing or having a
speciality in the type and subject matter of the transaction or series of
related transactions at issue, which opinion shall be to the effect set forth
in clause (i) above or shall state that such transaction or series of related
transactions is fair from a financial point of view to the Company or such
Restricted Subsidiary; provided, however, that the foregoing restriction shall
not apply to (w) loans or advances to officers, directors and employees of the
Company or any Restricted Subsidiary made in the ordinary course of business
and consistent with past practices of the Company and its Restricted
Subsidiaries in an aggregate amount not to exceed $1,000,000 outstanding at any
one time, (x) indemnities of officers, directors and employees of the Company
or any Restricted Subsidiary permitted by bylaw or statutory provisions, (y)
the payment of reasonable and customary regular fees to directors of the
Company or any of its Restricted Subsidiaries who are not employees of the
Company or any Affiliate and (z) the Company's employee compensation and other
benefit arrangements.
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Section 10.17 Limitation on Dividends and Other Payment
Restrictions Affecting Restricted Subsidiaries.
The Company shall not, and shall not permit any Restricted Subsidiary
to, directly or indirectly, create or suffer to exist or allow to become
effective any consensual encumbrance or restriction of any kind on the ability
of any Restricted Subsidiary (a) to pay dividends, in cash or otherwise, or
make any other distributions on its Capital Stock, or make payments on any
Indebtedness owed, to the Company or any other Restricted Subsidiary, (b) to
make loans or advances to the Company or any other Restricted Subsidiary, (c)
to transfer any of its Property to the Company or any other Restricted
Subsidiary or (d) to guarantee the Securities (any such restrictions being
collectively referred to herein as a "Payment Restriction"), except in any such
case for such encumbrances or restrictions existing under or by reason of (i)
this Indenture, the Credit Facility or any other agreement in effect or entered
into on the date of this Indenture, or (ii) any agreement, instrument or
charter of or in respect of a Restricted Subsidiary entered into prior to the
date on which such Restricted Subsidiary became a Restricted Subsidiary and
outstanding on such date and not entered into in connection with or in
contemplation of becoming a Restricted Subsidiary, provided such consensual
encumbrance or restriction is not applicable to any Properties other than those
owned or held by the Restricted Subsidiary at the time it became a Restricted
Subsidiary or subsequently acquired by such Restricted Subsidiary other than
the Company or any other Restricted Subsidiary, or (iii) pursuant to an
agreement effecting a modification, renewal, refinancing, replacement or
extension of any agreement, instrument or charter (other than this Indenture)
referred to in clause (i) or (ii) above, provided, however, that the provisions
relating to such encumbrance or restriction are not materially less favorable
to the Holders of the Securities than those under or pursuant to the agreement,
instrument or charter so modified, renewed, refinanced, replaced or extended,
or (iv) customary provisions restricting the subletting or assignment of any
lease or the transfer of copyrighted or patented materials, or (v) provisions
in agreements that restrict the assignment of such agreements or rights
thereunder, or (vi) the sale or other disposition of any Properties subject to
a Lien securing Indebtedness.
Section 10.18 Waiver of Certain Covenants.
The Company may omit in any particular instance to comply with any
term, provision or condition set forth in Sections 10.5 through 10.11, Sections
10.12 and 10.13 and Sections 10.16 through 10.17 hereof if, before or after the
time for such compliance, the Holders of at least a majority in aggregate
principal amount of the Outstanding Securities, by Act of such Holders, waive
such compliance in such instance with such term, provision or condition, but no
such waiver shall extend to or affect such term, provision or condition except
to the extent so expressly waived, and, until such waiver shall become
effective, the obligations of the Company and the duties of the Trustee in
respect of any such term, provision or condition shall remain in full force and
effect.
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ARTICLE XI
REDEMPTION OF SECURITIES
Section 11.1 Right of Redemption.
The Securities may be redeemed, at the election of the Company, as a
whole or from time to time in part, at any time on or after ___________, 2000,
upon not less than 30 or more than 60 days' notice to each Holder of Securities
to be redeemed, subject to the conditions and at the Redemption Prices
(expressed as percentages of principal amount) specified in the form of
Security, together with accrued and unpaid interest, if any, to the Redemption
Date (subject to the right of Holders on the relevant record date to receive
interest due on an Interest Payment Date that is on or prior to the Redemption
Date).
In addition, at any time on or prior to ______________, 1999, up to
$20,000,000 in aggregate principal amount of Securities may be redeemed, at the
election of the Company, upon not less than 30 or more than 60 days' notice to
each Holder of Securities to be redeemed, from the Net Cash Proceeds of a
Public Equity Offering, at the Redemption Price (expressed as a percentage of
principal amount) specified in the form of Security, together with accrued and
unpaid interest, if any, to the Redemption Date, provided that at least
$55,000,000 in aggregate principal amount of Securities remains Outstanding
immediately after such redemption and that such redemption occurs within 60
days following the closing of such Public Equity Offering.
Section 11.2 Applicability of Article.
Redemption of Securities at the election of the Company or otherwise,
as permitted or required by any provision of this Indenture, shall be made in
accordance with such provision and this Article.
Section 11.3 Election to Redeem; Notice to Trustee.
The election of the Company to redeem any Securities pursuant to
Section 11.1 hereof shall be evidenced by a Board Resolution. In case of any
redemption at the election of the Company, the Company shall, at least 60 days
prior to the Redemption Date fixed by the Company (unless a shorter notice
shall be satisfactory to the Trustee), notify the Trustee of such Redemption
Date and of the principal amount of Securities to be redeemed and shall deliver
to the Trustee such documentation and records as shall enable the Trustee to
select the Securities to be redeemed pursuant to Section 11.4 hereof. Any
election to redeem Securities shall be revocable until the Company gives a
notice of redemption pursuant to Section 11.5 hereof to the Holders of
Securities to be redeemed.
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Section 11.4 Selection by Trustee of Securities to Be Redeemed.
If less than all the Securities are to be redeemed, the particular
Securities to be redeemed shall be selected not less than 30 days nor more than
60 days prior to the Redemption Date by the Trustee, from the Outstanding
Securities not previously called for redemption, pro rata, by lot or by any
other method as the Trustee shall deem fair and appropriate and which may
provide for the selection for redemption of portions of the principal of
Securities; provided, however, that any such partial redemption shall be in
integral multiples of $1,000.
The Trustee shall promptly notify the Company in writing of the
Securities selected for redemption and, in the case of any Securities selected
for partial redemption, the principal amount thereof to be redeemed.
The provisions of the two preceding paragraphs of this Section 11.4
shall not apply with respect to any redemption affecting only a Global
Security, whether such Global Security is to be redeemed in whole or in part.
In the case of any such redemption in part, the unredeemed portion of the
principal amount of the Global Security shall be in an authorized denomination.
For all purposes of this Indenture, unless the context otherwise
requires, all provisions relating to redemption of Securities shall relate, in
the case of any Security redeemed or to be redeemed only in part, to the
portion of the principal amount of such Security which has been or is to be
redeemed.
Section 11.5 Notice of Redemption.
Notice of redemption shall be given in the manner provided for in
Section 13.5 hereof not less than 30 nor more than 60 days prior to the
Redemption Date, to each Holder of Securities to be redeemed.
All notices of redemption shall state:
(a) the Redemption Date;
(b) the Redemption Price;
(c) in the case of a partial redemption of Physical Securities,
the identification of the particular Securities to be redeemed, and, if any
Global Security or Physical Security is to be redeemed in part, the portion of
the principal amount thereof to be redeemed;
(d) that on the Redemption Date the Redemption Price (together
with accrued interest, if any, to the Redemption Date payable as provided in
Section 11.7 hereof) will become due and payable upon each such Security, or
the portion thereof, to be redeemed, and that, unless the Company shall default
in the payment of the Redemption Price and any applicable accrued and unpaid
interest, interest thereon will cease to accrue on and after said date; and
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(e) the place or places where such Securities are to be
surrendered for payment of the Redemption Price.
Notice of redemption of Securities to be redeemed at the election of
the Company shall be given by the Company or, at the Company's request, by the
Trustee in the name and at the expense of the Company. Failure to give such
notice by mailing to any Holder of Securities or any defect therein shall not
affect the validity of any proceedings for the redemption of other Securities.
Section 11.6 Deposit of Redemption Price.
On or before 11:00 a.m., Eastern time, on any Redemption Date, the
Company shall deposit with the Trustee or with a Paying Agent (or, if the
Company is acting as its own Paying Agent, segregate and hold in trust as
provided in Section 10.3 hereof) immediately available funds in an amount
sufficient to pay the Redemption Price of, and accrued and unpaid interest on,
all the Securities which are to be redeemed on such Redemption Date.
Section 11.7 Securities Payable on Redemption Date.
Notice of redemption having been given as aforesaid, the Securities so
to be redeemed shall, on the Redemption Date, become due and payable at the
Redemption Price therein specified (together with accrued and unpaid interest,
if any, to the Redemption Date), and from and after such date (unless the
Company shall default in the payment of the Redemption Price and accrued and
unpaid interest) such Securities shall cease to bear interest. Upon surrender
of any such Security for redemption in accordance with said notice, such
Security shall be paid by the Company at the Redemption Price, together with
accrued and unpaid interest, if any, to the Redemption Date; provided, however,
that installments of interest whose Stated Maturity is on or prior to the
Redemption Date shall be payable to the Holders of such Securities, or one or
more Predecessor Securities, registered as such at the close of business on the
relevant Record Dates according to their terms and the provisions of Section
3.8 hereof.
If any Security called for redemption shall not be so paid upon
surrender thereof for redemption, the principal (and premium, if any) shall,
until paid, bear interest from the Redemption Date at the rate borne by the
Securities.
Section 11.8 Securities Redeemed in Part.
Any Security which is to be redeemed only in part shall be surrendered
at the office or agency of the Company maintained for such purpose pursuant to
Section 10.2 hereof (with, if the Company or the Trustee so requires, due
endorsement by, or a written instrument of transfer in form satisfactory to the
Company and the Trustee duly executed by, the Holder thereof or such Holder's
attorney duly authorized in writing), and the Company shall execute, and the
Trustee shall authenticate and deliver to the Holder of such Security without
service charge, a new Security or Securities, of any authorized denomination as
requested by such Holder, in aggregate
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principal amount equal to and in exchange for the unredeemed portion of the
principal amount of the Security so surrendered.
ARTICLE XII
DEFEASANCE AND COVENANT DEFEASANCE
Section 12.1 Company's Option to Effect Defeasance or Covenant
Defeasance.
The Company may, at its option by Board Resolution, at any time, with
respect to the Securities, elect to have either Section 12.2 or Section 12.3
hereof be applied to all Outstanding Securities upon compliance with the
conditions set forth below in this Article XII.
Section 12.2 Defeasance and Discharge.
Upon the Company's exercise under Section 12.1 hereof of the option
applicable to this Section 12.2, the Company shall be deemed to have been
discharged from their respective obligations with respect to all Outstanding
Securities on the date the conditions set forth in Section 12.4 hereof are
satisfied (hereinafter, "legal defeasance"). For this purpose, such legal
defeasance means that the Company shall be deemed (i) to have paid and
discharged their respective obligations under the Outstanding Securities,
provided, however, that the Securities shall continue to be deemed to be
"Outstanding" for purposes of Section 12.5 hereof and the other Sections of
this Indenture referred to in clauses (A) and (B) below, and (ii) to have
satisfied all their other obligations with respect to such Securities and this
Indenture (and the Trustee, at the expense and direction of the Company, shall
execute proper instruments acknowledging the same), except for the following
which shall survive until otherwise terminated or discharged hereunder: (A)
the rights of Holders of Outstanding Securities to receive, solely from the
trust fund described in Section 12.4 hereof and as more fully set forth in such
Section, payments in respect of the principal of (and premium if any, on) and
interest on such Securities when such payments are due (or at such time as the
Securities would be subject to redemption at the option of the Company in
accordance with this Indenture), (B) the obligations of the Company under
Sections 3.3, 3.4, 3.5, 3.6, 3.7, 5.8, 6.6, 6.9, 6.10, 10.2, 10.3 (to the
extent it relates to the foregoing Sections and this Article XII), (C) the
rights, powers, trusts, duties and immunities of the Trustee hereunder, and (D)
the obligations of the Company under this Article XII. Subject to compliance
with this Article XII, the Company may exercise its option under this Section
12.2 notwithstanding the prior exercise of its option under Section 12.3 hereof
with respect to the Securities.
Section 12.3 Covenant Defeasance.
Upon the Company's exercise under Section 12.1 hereof of the option
applicable to this Section 12.3, (i) the Company and shall be released from its
obligations under any covenant contained in Article VIII, in Sections 10.5
through 10.17 and (ii) the occurrence of any event specified in Section 5.1(c)
or 5.1(d) hereof (with respect to any of Article VIII, Sections 10.5 through
10.17, and Section 10.19) shall be deemed not to be or result in an Event of
Default, in
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each case with respect to the Outstanding Securities on and after the date the
conditions set forth below are satisfied (hereinafter, "covenant defeasance"),
and the Securities shall thereafter be deemed not to be "Outstanding" for the
purposes of any direction, waiver, consent or declaration or Act of Holders
(and the consequences of any thereof) in connection with such covenants, but
shall continue to be deemed "Outstanding" for all other purposes hereunder.
For this purpose, such covenant defeasance means that, with respect to the
Outstanding Securities, the Company may omit to comply with and shall have no
liability in respect of any term, condition or limitation set forth in any such
Article or Section (to the extent so specified in the case of Sections 5.1(c)
and 5.1(d) hereof), whether directly or indirectly, by reason of any reference
elsewhere herein to any such Article or Section or by reason of any reference
in any such Article or Section to any other provision herein or in any other
document, but, except as specified above, the remainder of this Indenture and
such Securities shall be unaffected thereby. In addition, upon the Company's
exercise under Section 12.1 hereof of the option applicable to this Section
12.3, subject to the satisfaction of the conditions set forth in Section 12.4
hereof, Sections 5.1(e) and 5.1(f) hereof shall not constitute Events of
Default.
Section 12.4 Conditions to Defeasance or Covenant Defeasance.
The following shall be the conditions to application of either Section
12.2 or Section 12.3 hereof to the Outstanding Securities:
(a) The Company shall irrevocably have deposited or caused to be
deposited with the Trustee (or another trustee satisfying the requirements of
Section 6.7 hereof who shall agree to comply with the provisions of this
Article XII applicable to it) as trust funds in trust for the purpose of making
the following payments, specifically pledged as security for, and dedicated
solely to, the benefit of the Holders of such Securities, (A) cash in United
States dollars in an amount, or (B) U.S. Government Obligations which through
the scheduled payment of principal and interest in respect thereof in
accordance with their terms will provide, not later than one day before the due
date of any payment, money in an amount, or (C) a combination thereof,
sufficient, in the opinion of a nationally recognized firm of independent
public accountants expressed in a written certification thereof delivered to
the Trustee, to pay and discharge, and which shall be applied by the Trustee
(or other qualifying trustee) to pay and discharge, the principal of (and
premium, if any, on) and interest on the Outstanding Securities on the Stated
Maturity thereof (or Redemption Date, if applicable), provided that the Trustee
shall have been irrevocably instructed in writing by the Company to apply such
money or the proceeds of such U.S. Government Obligations to said payments with
respect to the Securities. Before such a deposit, the Company may give to the
Trustee, in accordance with Section 11.3 hereof, a notice of its election to
redeem all of the Outstanding Securities at a future date in accordance with
Article XI hereof, which notice shall be irrevocable. Such irrevocable
redemption notice, if given, shall be given effect in applying the foregoing.
For this purpose, "U.S. Government Obligations" means securities that are (x)
direct obligations of the United States of America for the timely payment of
which its full faith and credit is pledged or (y) obligations of a Person
controlled or supervised by and acting as an agency or instrumentality of the
United States of America the timely payment of which is unconditionally
guaranteed as a full faith and credit obligation by the United States of
America, which, in either case, are not callable or redeemable at the option of
the issuer thereof,
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and shall also include a depository receipt issued by a bank (as defined in
Section 3(a)(2) of the Securities Act), as custodian with respect to any such
U.S. Government Obligation or a specific payment of principal of or interest on
any such U.S. Government Obligation held by such custodian for the account of
the holder of such depository receipt, provided that (except as required by
law) such custodian is not authorized to make any deduction from the amount
payable to the holder of such depository receipt from any amount received by
the custodian in respect of the U.S. Government Obligation or the specific
payment of principal of or interest on the U.S. Government Obligation evidenced
by such depository receipt.
(b) No Default or Event of Default with respect to the Securities
shall have occurred and be continuing on the date of such deposit or, insofar
as Sections 5.1(g) and 5.1(h) are concerned, at any time during the period
ending on the 91st day after the date of such deposit.
(c) Such legal defeasance or covenant defeasance shall not cause
the Trustee to have a conflicting interest under this Indenture or the Trust
Indenture Act with respect to any securities of the Company.
(d) Such legal defeasance or covenant defeasance shall not result
in a breach or violation of, or constitute a default under, any other material
agreement or instrument to which the Company is a party or by which it is
bound, as evidenced to the Trustee in an Officers' Certificate delivered to the
Trustee concurrently with such deposit.
(e) In the case of an election under Section 12.2 hereof, the
Company shall have delivered to the Trustee an Opinion of Counsel stating that
(i) the Company has received from, or there has been published by, the Internal
Revenue Service a ruling, or (ii) since the date of this Indenture there has
been a change in the applicable federal income tax laws, in either case
providing that the Holders of the Outstanding Securities will not recognize
income, gain or loss for federal income tax purposes as a result of such legal
defeasance and will be subject to federal income tax on the same amounts, in
the same manner and at the same times as would have been the case if such legal
defeasance had not occurred (it being understood that (x) such Opinion of
Counsel shall also state that such ruling or applicable law is consistent with
the conclusions reached in such Opinion of Counsel and (y) the Trustee shall be
under no obligation to investigate the basis or correctness of such ruling).
(f) In the case of an election under Section 12.3 hereof, the
Company shall have delivered to the Trustee an Opinion of Counsel to the effect
that the Holders of the Outstanding Securities will not recognize income, gain
or loss for federal income tax purposes as a result of such covenant defeasance
and will be subject to federal income tax on the same amounts, in the same
manner and at the same times as would have been the case if such covenant
defeasance had not occurred.
(g) The Company shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, which, taken together, state that all
conditions precedent provided for relating to either the legal defeasance under
Section 12.2 hereof or the covenant defeasance under Section 12.3 (as the case
may be) have been complied with.
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Section 12.5 Deposited Money and U.S. Government Obligations to Be
Held in Trust; Other Miscellaneous Provisions.
Subject to the provisions of the last paragraph of Section 10.3
hereof, all money and U.S. Government Obligations (including the proceeds
thereof) deposited with the Trustee (or other qualifying trustee--collectively
for purposes of this Section 12.5, the "Trustee") pursuant to Section 12.4
hereof in respect of the Outstanding Securities shall be held in trust and
applied by the Trustee, in accordance with the provisions of such Securities
and this Indenture, to the payment, either directly or through any Paying Agent
(including the Company acting as its own Paying Agent) as the Trustee may
determine, to the Holders of such Securities of all sums due and to become due
thereon in respect of principal (and premium, if any) and interest, but such
money need not be segregated from other funds except to the extent required by
law.
The Company shall pay and indemnify the Trustee against all taxes,
fees or other charges imposed on or assessed against the U.S. Governmental
Obligations deposited pursuant to Section 12.4 hereof or the principal and
interest received in respect thereof other than any such tax, fee or other
charge which by law is for the account of the Holders of the Outstanding
Securities.
Anything in this Article XII to the contrary notwithstanding, the
Trustee shall deliver or pay to the Company from time to time upon Company
Request any money or U.S. Government Obligations held by it as provided in
Section 12.4 hereof which, in the opinion of a nationally recognized firm of
independent public accountants expressed in a written certification thereof
delivered to the Trustee, are in excess of the amount thereof which would then
be required to be deposited to effect an equivalent legal defeasance or
covenant defeasance, as applicable, in accordance with this Article.
Section 12.6 Reinstatement.
If the Trustee or any Paying Agent is unable to apply any money in
accordance with Section 12.5 hereof by reason of any order or judgment of any
court or governmental authority enjoining, restraining or otherwise prohibiting
such application, then the Company's obligations under this Indenture and the
Securities shall be revived and reinstated as though no deposit had occurred
pursuant to Section 12.2 or 12.3 hereof, as the case may be, until such time as
the Trustee or Paying Agent is permitted to apply all such money in accordance
with Section 12.5 hereof; provided, however, that if the Company makes any
payment of principal of (or premium, if any, on) or interest on any Security
following the reinstatement of its obligations, the Company shall be subrogated
to the rights of the Holders of such Securities to receive such payment from
the money held by the Trustee or Paying Agent.
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ARTICLE XIII
MISCELLANEOUS
Section 13.1 Compliance Certificates and Opinions.
Upon any application or request by the Company to the Trustee to take
any action under any provision of this Indenture, the Company shall furnish to
the Trustee such certificates and opinions as may be required under the Trust
Indenture Act or this Indenture. Each such certificate and each such opinion
shall be in the form of an Officers' Certificate or an Opinion of Counsel, as
applicable, and shall comply with the requirements of this Indenture.
Every certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture shall include:
(1) a statement that each Person signing such certificate
or opinion has read such covenant or condition and the definitions
herein relating thereto;
(2) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or opinions
contained in such certificate or opinion are based;
(3) a statement that, in the opinion of each such Person,
such Person has made such examination or investigation as is necessary
to enable him to express an informed opinion as to whether or not such
covenant or condition has been complied with; and
(4) a statement as to whether, in the opinion of each
such Person, such condition or covenant has been complied with.
The certificates and opinions provided pursuant to this Section 13.1
and the statements required by this Section 13.1 shall comply in all respects
with TIA Sections 314(c) and (e).
Section 13.2 Form of Documents Delivered to Trustee.
In any case where several matters are required to be certified by, or
covered by an opinion of, any specified Person, it is not necessary that all
such matters be certified by, or covered by the opinion of, only one such
Person, or that they be so certified or covered by only one document, but one
such Person may certify or give an opinion with respect to some matters and one
or more other such Persons as to other matters, and any such Person may certify
or give an opinion as to such matters in one or several documents.
Any certificate or opinion of an officer may be based, insofar as it
relates to legal matters, upon a certificate or opinion of, or representations
by, counsel, unless such officer knows, or in the exercise of reasonable care
should know, that the certificate or opinion or representations with respect to
the matters upon which his certificate or opinion is based are erroneous. Any
such
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Opinion of Counsel may be based, insofar as it relates to factual matters, upon
an officers' certificate, unless such counsel knows, or in the exercise of
reasonable care should know, that the certificate with respect to such matters
is erroneous.
Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions or other
instruments under this Indenture, they may, but need not, be consolidated and
form one instrument.
Section 13.3 Acts of Holders.
(a) Any request, demand, authorization, direction, notice,
consent, waiver or other action provided by this Indenture to be given or taken
by Holders may be embodied in and evidenced by one or more instruments of
substantially similar tenor signed by such Holders in person or by agents duly
appointed in writing; and, except as herein otherwise expressly provided, such
action shall become effective when such instrument or instruments are delivered
to the Trustee and, where it is hereby expressly required, to the Company.
Such instrument or instruments (and the action embodied therein and evidenced
thereby) are herein sometimes referred to as the "Act" of the Holders signing
such instrument or instruments. Proof of execution of any such instrument or
of a writing appointing any such agent shall be sufficient for any purpose of
this Indenture and conclusive in favor of the Trustee and the Company, if made
in the manner provided in this Section.
(b) The fact and date of the execution by any Person of any such
instrument or writing may be proved by the affidavit of a witness of such
execution or by a certificate of a notary public or other officer authorized by
law to take acknowledgments of deeds, certifying that the individual signing
such instrument or writing acknowledged to him the execution thereof. Where
such execution is by a signer acting in a capacity other than his individual
capacity, such certificate or affidavit shall also constitute sufficient proof
of authority. The fact and date of the execution of any such instrument or
writing, or the authority of the Person executing the same, may also be proved
in any other manner which the Trustee deems sufficient.
(c) The ownership, principal amount and serial numbers of
Securities held by any Person, and the date of holding the same, shall be
proved by the Security Register.
(d) If the Company shall solicit from the Holders of Securities
any request, demand, authorization, direction, notice, consent, waiver or other
Act, the Company may, at its option, by or pursuant to a Board Resolution, fix
in advance a record date for the determination of Holders entitled to give such
request, demand, authorization, direction, notice, consent, waiver or other
Act, but the Company shall have no obligation to do so. Notwithstanding TIA
Section 316(c), such record date shall be the record date specified in or
pursuant to such Board Resolution, which shall be a date not earlier than the
date 30 days prior to the first solicitation of Holders generally in connection
therewith and not later than the date such solicitation is completed. If such
a record date is fixed, such request, demand, authorization, direction, notice,
consent, waiver or other Act may be given before or after such record date, but
only the Holders of record at the close of business on such record date shall
be deemed to be Holders for the
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purposes of determining whether Holders of the requisite proportion of
Outstanding Securities have authorized or agreed or consented to such request,
demand, authorization, direction, notice, consent, waiver or other Act, and for
that purpose the Outstanding Securities shall be computed as of such record
date, provided that no such authorization, agreement or consent by the Holders
on such record date shall be deemed effective unless it shall become effective
pursuant to the provisions of this Indenture not later than eleven months after
the record date.
(e) Any request, demand, authorization, direction, notice,
consent, waiver or other Act of the Holder of any Security shall bind every
future Holder of the same Security and the Holder of every Security issued upon
the registration of transfer thereof or in exchange therefor or in lieu
thereof, in respect of anything done, omitted or suffered to be done by the
Trustee or the Company in reliance thereon, whether or not notation of such
action is made upon such Security.
Section 13.4 Notices, etc. to Trustee and the Company
Any request, demand, authorization, direction, notice, consent, waiver
or Act of Holders or other document provided or permitted by this Indenture to
be made upon, given or furnished to or filed with,
(1) the Trustee by any Holder or the Company shall be sufficient
for every purpose hereunder if made, given, furnished or filed in
writing (in the English language) and delivered in person or mailed by
certified or registered mail (return receipt requested) to the Trustee
at its Corporate Trust Office; or
(2) the Company by the Trustee or by any Holder shall be
sufficient for every purpose hereunder (unless otherwise herein
expressly provided) if in writing (in the English language) and
delivered in person or mailed by certified or registered mail (return
receipt requested) to the Company, addressed to it at the Company's
offices located at 3701 Kirby Drive, Suite 112, Houston, Texas 77098,
Attention: Richard W. McNairy, or at any other address otherwise
furnished in writing to the Trustee by the Company.
Section 13.5 Notice to Holders; Waiver.
Where this Indenture provides for notice of any event to Holders by
the Company, the Trustee or any Paying Agent, such notice shall be sufficiently
given (unless otherwise herein expressly provided) if in writing (in the
English language) and mailed, first-class postage prepaid, to each Holder
affected by such event, at his address as it appears in the Security Register,
not later than the latest date, and not earlier than the earliest date,
prescribed for the giving of such notice. In any case where notice to Holders
is given by mail, neither the failure to mail such notice, nor any defect in
any notice so mailed, to any particular Holder shall affect the sufficiency of
such notice with respect to other Holders. Any notice mailed to a Holder in
the manner herein prescribed shall be conclusively deemed to have been received
by such Holder, whether or not such Holder actually receives such notice.
Where this Indenture provides for notice in any manner, such notice may be
waived in writing by the Person entitled to receive such notice, either before
or after the event, and such waiver shall be the equivalent of such notice.
Waivers of
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notice by Holders shall be filed with the Trustee, but such filing shall not be
a condition precedent to the validity of any action taken in reliance upon such
waiver.
In case by reason of the suspension of or irregularities in regular
mail service or by reason of any other cause, it shall be impracticable to mail
notice of any event to Holders when such notice is required to be given
pursuant to any provision of this Indenture, then any manner of giving such
notice as shall be satisfactory to the Trustee shall be deemed to be a
sufficient giving of such notice for every purpose hereunder.
Section 13.6 Effect of Headings and Table of Contents.
The Article and Section headings herein and the Table of Contents are
for convenience only and shall not affect the construction hereof.
Section 13.7 Successors and Assigns.
All covenants and agreements in this Indenture by the Company shall
bind its successors and assigns, whether so expressed or not. All agreements
of the Trustee in this Indenture shall bind its successor.
Section 13.8 Severability.
In case any provision in this Indenture or in the Securities shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby,
and a Holder shall have no claim therefor against any party hereto.
Section 13.9 Benefits of Indenture.
Nothing in this Indenture or in the Securities, express or implied,
shall give to any Person (other than the parties hereto, any Paying Agent, any
Securities Registrar and their successors hereunder and the Holders) any
benefit or any legal or equitable right, remedy or claim under this Indenture.
Section 13.10 Governing Law; Trust Indenture Act Controls.
(a) THIS INDENTURE AND THE SECURITIES SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATE OF NEW YORK. THE COMPANY
IRREVOCABLY SUBMITS TO THE NON-EXCLUSIVE JURISDICTION OF ANY UNITED STATES
FEDERAL OR NEW YORK STATE COURT SITTING IN THE BOROUGH OF MANHATTAN, THE CITY
OF NEW YORK IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS
INDENTURE, THE SECURITIES, AND THE COMPANY IRREVOCABLY AGREES THAT ALL CLAIMS
IN RESPECT OF SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED BY ANY SUCH
COURT.
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(b) This Indenture is subject to the provisions of the Trust
Indenture Act that are required to be part of this Indenture and shall, to the
extent applicable, be governed by such provisions. If and to the extent that
any provision of this Indenture limits, qualifies or conflicts with the duties
imposed by operation of Section 318(c) of the Trust Indenture Act, or conflicts
with any provision (an "incorporated provision") required by or deemed to be
included in this Indenture by operation of such Trust Indenture Act section,
such imposed duties or incorporated provision shall control.
Section 13.11 Legal Holidays.
In any case where any Interest Payment Date, Redemption Date, or
Stated Maturity or Maturity of any Security shall not be a Business Day, then
(notwithstanding any other provision of this Indenture or of the Securities)
payment of interest or principal (and premium, if any) need not be made on such
date, but may be made on the next succeeding Business Day with the same force
and effect as if made on the Interest Payment Date, Redemption Date or at the
Stated Maturity or Maturity; provided, however, that no interest shall accrue
for the period from and after such Interest Payment Date, Redemption Date,
Stated Maturity or Maturity, as the case may be.
Section 13.12 No Recourse Against Others.
A director, officer, employee, stockholder, incorporator or Affiliate,
as such, past, present or future, of the Company shall not have any personal
liability under the Securities or this Indenture by reason of his or its status
as a director, officer, employee, stockholder, incorporator or Affiliate or any
liability for any obligations of the Company under the Securities or this
Indenture or for any claim based on, in respect of or by reason of such
obligations or their creation. Each Holder, by accepting any of the
Securities, waives and releases all such liability to the extent permitted by
applicable law.
Section 13.13 Duplicate Originals.
The parties may sign any number of copies or counterparts of this
Indenture. Each signed copy shall be an original, but all of them together
represent the same agreement.
Section 13.14 No Adverse Interpretation of Other Agreements.
This Indenture may not be used to interpret another indenture, loan or
debt agreement of the Company. Any such indenture, loan or debt agreement may
not be used to interpret this Indenture.
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IN WITNESS WHEREOF, the parties hereto have caused this
Indenture to be duly executed, all as of the day and year first above written.
ISSUER:
VERITAS DGC INC.
By:
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Name:
------------------------------
Title:
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TRUSTEE:
FLEET NATIONAL BANK
By:
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Name:
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Title:
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<PAGE> 90
EXHIBIT A
FORM OF LEGEND FOR GLOBAL SECURITIES
Any Global Security authenticated and delivered hereunder shall bear a
legend in substantially the following form:
THIS SECURITY IS A GLOBAL SECURITY WITHIN THE MEANING OF THE
INDENTURE HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF A
DEPOSITORY OR A NOMINEE OF A DEPOSITORY OR A SUCCESSOR DEPOSITORY.
THIS SECURITY IS NOT EXCHANGEABLE FOR SECURITIES REGISTERED IN THE
NAME OF A PERSON OTHER THAN THE DEPOSITORY OR ITS NOMINEE EXCEPT IN
THE LIMITED CIRCUMSTANCES DESCRIBED IN THE INDENTURE, AND NO TRANSFER
OF THIS SECURITY (OTHER THAN A TRANSFER OF THIS SECURITY AS A WHOLE BY
THE DEPOSITORY TO A NOMINEE OF THE DEPOSITORY OR BY A NOMINEE OF THE
DEPOSITORY TO THE DEPOSITORY OR ANOTHER NOMINEE OF THE DEPOSITORY) MAY
BE REGISTERED EXCEPT IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE
INDENTURE.
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION
("DTC"), TO THE ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER,
EXCHANGE, OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE
NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE &
CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR
VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE
REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
A-1
<PAGE> 1
EXHIBIT 5
[PORTER & HEDGES, L.L.P. LETTERHEAD]
September 20, 1996
Veritas DGC Inc.
3701 Kirby Drive, Suite 112
Houston, Texas 77098
Re: Opinion as to legality of __% Senior Notes due October 1,
2003
Gentlemen:
We have examined the Certificate of Incorporation, the bylaws, and the
corporate proceedings of Veritas DGC Inc., a Delaware corporation (the
"Company"), and the proceedings before the Securities and Exchange Commission
relating to the registration under the Securities Act of 1933 of $75,000,000
aggregate principal amount of __% Senior Notes due October 1, 2003 (the
"Notes"), to be issued pursuant to an Indenture dated as of October 1, 2003,
between the Company and Fleet National Bank, as Trustee (the "Indenture"); and
the qualification of the Indenture under the Trust Indenture Act of 1939, on
behalf of the Company, for the purpose of sale to the underwriter for offering
to the public, and have made such other examinations as we deem necessary in
the premises; and from such examinations we are of the opinion that:
1. The Company has been duly incorporated and is validly existing as a
corporation in good standing under the laws of the State of Delaware.
2. The Indenture has been duly authorized by all necessary corporate
action, and upon execution and delivery, it will constitute a legal, valid, and
binding instrument enforceable in accordance with its terms, except as
enforcement may be limited by bankruptcy, insolvency, or other laws relating to
or affecting enforcement of creditors' rights generally, and except that
remedies of specific performance and other forms of equitable relief are
subject to certain equitable defenses and to the discretion of the court.
3. The issuance and sale of the Notes of the Company have been duly
authorized by all necessary corporate action, and when authenticated, and
delivered to and paid for by the underwriters, will be legal, valid, and
binding obligations of the Company, entitled to the benefits of the Indenture
and enforceable in accordance with its and their terms, except as enforcement
may be limited by bankruptcy, insolvency or other laws relating to or affecting
enforcement of creditors'
<PAGE> 2
Veritas DGC Inc.
September 20, 1996
Page 2
rights generally, and except that remedies of specific performance and other
forms of equitable relief are subject to certain equitable defenses and to the
discretion of the court.
We consent to the use of this opinion as an exhibit to the Registration
Statement and to the reference to our firm under the caption "Legal Matters" in
the Prospectus included as a part of the Registration Statement.
Very truly yours,
PORTER & HEDGES, L.L.P.
<PAGE> 1
EXHIBIT 10-B
CONFIDENTIAL
ANNEX B
DIGICON INC.
December 21, 1995
Stephen J. Ludlow
Digicon, Inc.
3701 Kirby Drive
Houston, Texas 77098
Dear Steve:
Digicon Inc. (the "Company") hereby agrees that in the event that the
Company terminates your employment with the Company for any reason other than
"cause" (as that term is defined in Exhibit A attached), the Company will
continue for the period of one year following such termination to pay you your
base salary (as of the date of termination), plus a bonus equal to that earned
for the most recent fiscal year, each in the manner in which the Company's
payroll is customarily handled. The Company's agreement set forth herein will
terminate on December 31, 2000. All services to be performed by you as an
employee (other than for temporary trips in connection with the Company's
business) shall be performed at the Company's main office in Houston.
This letter is executed in consideration of and is intended to
encourage your continued employment with the Company.
DIGICON INC.
By: /s/ Jack C. Threet
----------------------------------
Jack C. Threet,
Chairman, Compensation Committee
of the Board of Directors
ACCEPTED AND AGREED TO:
By: /s/ Stephen J. Ludlow
------------------------------
Stephen J. Ludlow
Date: 01/31/96
----------------------------
<PAGE> 2
EXHIBIT A
As used in the letter dated December 21, 1995 to Steven J. Ludlow
("Employee") the word "cause" means:
(a) the conviction of Employee by a court of competent
jurisdiction, from which conviction no further appeal can be taken, of any
felony, or of an other crime involving moral turpitude committed during the
period of employment; or
(b) the commission by Employee of an act of "fraud" upon, or
materially evidencing bad faith toward, the Company with the term "fraud"
defined for this purpose to encompass only the commission of any act defined by
a relevant statute of the United States or a state thereof to constitute fraud
and the commission of which by Employee is accompanied by scienter, or
(c) the willful, continued or unreasonable failure by Employee to
(i) perform the lawful duties assigned to him, or (ii) abide by the material
policies of the Company or (iii) perform up to the standards of performance
expected of the position occupied by Employee; or
(d) the knowing engagement in any direct conflict of interest with
the Company by Employee.
<PAGE> 1
EXHIBIT 10-E
DIGICON INC.
AMENDED AND RESTATED
1992 EMPLOYEE NONQUALIFIED STOCK OPTION PLAN
1. PURPOSE.
The purpose of this 1992 Employee Nonqualified Stock Option Plan (the
"Plan") of Digicon Inc. (the "Company") is to provide officers and other key
employees with a continuing proprietary interest in the Company. The Plan is
intended to advance the interests of the Company by enabling it (i) to increase
the interest in the Company's welfare of those members of management who share
the primary responsibility for the management, growth, and protection of the
business of the Company, (ii) to furnish an incentive to such persons to
continue their services to the Company, (iii) to provide a means through which
the Company may continue to induce able management personnel to enter its
employ, and (iv) to provide a means through which the Company may effectively
compete with other organizations offering similar incentive benefits in
obtaining and retaining the services of competent management personnel.
2. STOCK SUBJECT TO THE PLAN.
The Company may grant from time to time options to purchase shares of the
Company's authorized but unissued common stock, par value $.01 per share, or
treasury shares of the common stock. Subject to adjustment as provided in
Section 11 hereof, the aggregate number of shares which may be issued or
covered by options pursuant to the Plan is 1,158,333 shares, as adjusted for
the one for three reverse stock split effective January 17, 1995. Shares of
common stock applicable to options which have expired unexercised or terminated
for any reason may again be subject to an option or options under the Plan.
3. ADMINISTRATION.
(a) The Plan shall be administered by the Compensation Committee of the
Company's board of directors (the "Committee"). The board of directors may,
from time to time, remove members from or add members to the Committee.
Vacancies in the Committee, however caused, shall be filled by the board of
directors. No member of the Committee shall be eligible to receive options
under the Plan. The Committee shall select one of its members chairman and
shall hold meetings at such times and places as it may determine. The
Committee may appoint a secretary and, subject to the provisions of the Plan
and to policies determined by the board of directors, may make such rules and
regulations for the conduct of its business as it shall deem advisable. A
majority of the Committee shall constitute a quorum. All action of the
Committee shall be taken by a majority of its members. Any action may be taken
by a written instrument signed by a majority of the members, and action so
taken shall be fully as effective as if it had been taken by a vote of the
majority of the members at a meeting duly called and held.
(b) Subject to the express terms and conditions of the Plan, the Committee
shall have full power to construe or interpret the Plan, to prescribe, amend,
and rescind rules and regulations relating to it and to make all other
determinations necessary or advisable for its administration.
<PAGE> 2
(c) Subject to the provisions of Sections 4 and 5 hereof, the Committee
may, from time to time, determine which employees of the Company or subsidiary
corporations shall be granted options under the Plan, the number of shares
subject to each option, and the time or times at which options shall be
granted.
(d) The Committee shall report to the board of directors the names of
employees granted options, and the number of option shares subject to, and the
terms and conditions of, each option.
(e) No member of the board of directors or of the Committee shall be
liable for any action or determination made in good faith with respect to the
Plan or any option.
4. ELIGIBILITY.
Only full-time salaried officers and other key personnel of the Company
and of its majority-owned subsidiaries shall be eligible to participate in the
Plan. In determining the employees to whom options shall be granted and the
number of shares to be covered by each option, the Committee may take into
account the nature of the services rendered by the respective employees, their
present and potential contributions to the success of the Company, and such
other factors as the Committee in its discretion shall deem relevant. The
Company shall effect the granting of options under the Plan in accordance with
the determination made by the Committee.
5. PRICE OF OPTIONS.
The option price per share shall be not less than the lesser of (i) fair
market value of the common stock on the date the option is granted or (ii) the
average fair market value for the common stock during the thirty trading days
ending on the trading day next preceding the date the option is granted. Fair
market value on any day shall be deemed to be the last reported sale price of
the common stock on the principal stock exchange on which the Company's common
stock is traded on that date. If no trading occurred on such date, or, if at
the time the common stock shall not be listed for trading, fair market value
shall be deemed to be the mean between the quoted bid and asked prices for the
common stock on such exchange or in the over-the-counter market, as the case
may be, on that date.
6. TERM OF OPTION.
No option shall be exercisable after the expiration of ten years from the
date the option is granted.
7. EXERCISE OF OPTIONS.
(a) General. Except as provided below, each option may be exercised at
such times and in such amounts as the Committee in its discretion may provide.
No option may be exercised prior to six months from the date of grant.
(b) Manner of Exercising Options. Shares of common stock purchased under
options shall at the time of purchase be paid for in full. To the extent that
the right to purchase shares has
-2-
<PAGE> 3
accrued hereunder, options may be exercised from time to time by written notice
to the Company stating the full number of shares with respect to which the
option is being exercised, and the time of delivery thereof, which shall be at
least 15 days after the giving of such notice unless an earlier date shall have
been mutually agreed upon. At such time, the Company shall, without transfer
or issue tax to the optionee (or other person entitled to exercise the option)
deliver to the optionee (or to such other person) at the principal office of
the Company, or such other place as shall be mutually acceptable, a certificate
or certificates for such shares against prior payment of the option price in
full on the date of notice of exercise for the number of shares to be delivered
by certified or official bank check or the equivalent thereof acceptable to the
Company; provided, however, that the time of such issuance and delivery may be
postponed by the Company for such period as may be required for it with
reasonable diligence to comply with any requirements of law, the listing
requirements of the American Stock Exchange or any other exchange on which the
common stock may then be listed. If the optionee (or other person entitled to
exercise the option) fails to pay for all or any part of the number of shares
specified in such notice or to accept delivery of such shares upon tender of
delivery thereof, the right to exercise the option with respect to such
undelivered shares shall be terminated.
8. NON-ASSIGNABILITY OF OPTION RIGHTS.
No option granted under the Plan shall be assignable or transferable
otherwise than by will or by the laws of descent and distribution. During the
lifetime of an optionee, the option shall be exercisable only by him.
9. TERMINATION OF EMPLOYMENT.
Except as otherwise provided in this paragraph, options shall terminate 90
days following the termination of the optionee's employment with the Company
for any reason, but shall be exercisable following termination only to the
extent that the option had become vested on the termination date. In the event
that the optionee retires from the Company (at or after normal retirement age)
the optionee shall have the right, subject to the provisions of Section 6, to
exercise his option at any time within one year after such termination, to the
extent that such option had become vested on the termination date. If,
however, the optionee shall die in the employment of the Company, then for the
lesser of the maximum period during which such option might have been
exercisable or one year after the date of death, his estate, personal
representative, or beneficiary shall have the same right to exercise the option
of such employee as he would have had if he had survived and remained in the
employment of the Company. For purposes of this Section 9, employment by any
majority-owned subsidiary corporation of the Company shall be deemed employment
by the Company.
In the discretion of the Committee, a leave of absence approved in writing
by the board of directors of the Company shall not be deemed a termination of
employment; however, no option may be exercised during such leave of absence.
-3-
<PAGE> 4
10. CHANGE OF CONTROL.
If, at any time, a person, entity or group (including, in each case, all
other persons, entities or groups controlling, controlled by, or under common
control with or acting in concert or concurrently with, such person, entity or
group) shall hold, purchase or acquire beneficial ownership (including, without
limitation, power to vote) of 50% or more of the then outstanding shares of the
Company's common stock, then any portion of the Options which have not yet
become exercisable shall thereupon become immediately exercisable, and, except
with respect to the limitations set forth in paragraph 6 hereof, the
limitations set forth above as to the earliest date at which an option may be
exercised shall thereupon become null and void and of no further effect
whatsoever.
11. ADJUSTMENT OF OPTIONS ON RECAPITALIZATION OR REORGANIZATION.
The aggregate number of shares of common stock on which options may be
granted to persons participating under the Plan, the aggregate number of shares
of common stock on which options may be granted to any one such person, the
number of shares thereof covered by each outstanding option, and the price per
share thereof in each such option, shall be proportionately adjusted for any
increase or decrease in the number of issued shares of common stock of the
Company resulting from the subdivision or combination of shares or other
capital adjustments, or the payment of a stock dividend after the effective
date of this Plan, or other increase or decrease in such shares effected
without receipt of consideration by the Company; provided, however, that no
adjustment shall be made unless the aggregate effect of all such increases and
decreases occurring in any one fiscal year after the effective date of this
Plan will increase or decrease the number of issued shares of common stock of
the Company by 5% or more; and, provided, further, that any options to purchase
fractional shares resulting from any such adjustment shall be eliminated.
Subject to any required action by the stockholders, if the Company shall
be the surviving or resulting corporation in any merger or consolidation, any
option granted hereunder shall pertain to and apply to the securities to which
a holder of the number of shares of common stock subject to option would have
been entitled had such option been exercised immediately preceding such merger
or consolidation; but a dissolution or liquidation of the Company, or a merger
or consolidation in which the Company is not the surviving or resulting
corporation, shall cause every option outstanding hereunder to terminate,
except that the surviving or resulting corporation may, in its absolute and
uncontrolled discretion, tender an option or options to purchase its shares on
its terms and conditions, both as to the number of shares and otherwise.
Adjustments under this Section shall be made by the Committee, whose
determination as to what adjustments shall be made, and the extent thereof,
shall be final, binding and conclusive.
12. AGREEMENTS BY OPTIONEE.
Each individual optionee shall agree:
(a) if requested by the Company, at the time of exercise of any option, to
execute an agreement stating that he is purchasing the shares subject to option
for investment purposes and not with a view to the resale or distribution
thereof;
-4-
<PAGE> 5
(b) to authorize the Company to withhold from his gross pay any tax which
it believes is required to be withheld with respect to any benefit under the
Plan, and to hold as security for the amount to be withheld any property
otherwise distributable to the optionee under the Plan until the amounts
required to be withheld have been so withheld.
13. RIGHTS AS A SHAREHOLDER.
The optionee shall have no rights as a stockholder with respect to any
shares of common stock of the Company held under option until the date of
issuance of the stock certificates to him for such shares.
14. EFFECTIVE DATE.
The plan shall be effective as of September 1, 1992, if within one year of
that date it shall have been approved by the holders of a majority of the
shares of outstanding capital stock present at a duly called meeting of the
Company's stockholders at which a quorum is present.
15. AMENDMENTS.
(a) The board of directors may, from time to time, alter, suspend or
terminate the Plan, or alter or amend any and all option agreements granted
thereunder but only for one or more of the following purposes:
(1) to modify the administrative provisions of the Plan or options;
or
(2) to make any other amendment which does not materially alter the
intent or benefits of the Plan.
(b) It is expressly provided that no such action of the board of directors
may, without the approval of the stockholders, alter the provisions of the Plan
or option agreements granted thereunder so as to:
(1) increase the maximum number of shares as to which options may be
granted under the Plan either to all persons participating in the Plan or
to any one such person;
(2) decrease the option price applicable to any options granted
under the Plan, provided, however, that the provisions of this clause (2)
shall not prevent the granting, to any person holding an option under the
Plan, of additional options under the Plan exercisable at a lower option
price; or
(3) alter any outstanding option agreement to the detriment of the
optionee, without his consent.
-5-
<PAGE> 6
16. EMPLOYMENT OBLIGATION.
The granting of any option under this Plan shall not impose upon the
Company any obligation whatsoever to employ or to continue to employ any
optionee, and the right of the Company to terminate the employment of any
officer or other employee shall not be diminished or affected by reason of the
fact that an option has been granted to him under the Plan.
17. VERITAS OPTIONS.
In order to carry out the terms of (i) the Combination Agreement dated May
10, 1996, between the Company and Veritas Energy Services Inc. ("Veritas")
which was approved by the Company's stockholders at a special meeting held on
August 20, 1996 and (ii) the Plan of Arrangement under Part 15 of the Business
Corporations Act (Alberta) relating to the combination of the Company and
Veritas which, pursuant to an interim order of the Court of Queen's Bench of
Alberta date July 18, 1996, was approved at special meetings of Veritas
optionholders and shareholders held August 20, 1996, this Plan shall include
under its terms each of the options (the "Veritas Options") outstanding on the
Effective Date (as defined in the Combination Agreement)(which includes all
outstanding options granted under Veritas' Stock Option Plan for Directors,
Officers and Key Employees (the "Veritas Option Plan")) without any further
action on the part of any holder thereof (each a "Veritas Optionholder").
Effective as of the Effective Time, each Veritas Option will be exercisable to
purchase that number of shares of the Company's common stock determined by
multiplying the number of Veritas common shares (the "Veritas Common Shares")
subject to such Veritas Option at the Effective Time by the Exchange Ration (as
defined in the Combination Agreement), at an exercise price per share of such
Veritas Option immediately prior to the Effective Time, divided by the Exchange
Ratio. On the Effective Date (as defined in the Combination Agreement), such
option price shall be converted into a United States dollar equivalent based on
the noon spot rate of exchange of the Bank of Canada on such date. If the
foregoing calculation results in an exchanged Veritas Option being exercisable
for a fractional share of Digicon Common Stock, then the number of shares of
Digicon common stock subject to such option will be rounded down to the nearest
whole number of shares and the total exercise price for the option will be
reduced by the exercise price of the fractional share. The term,
exercisability, vesting schedule and all other terms and conditions of the
Veritas Options will otherwise be unchanged and shall operate in accordance
with their terms, notwithstanding anything to the contrary contained herein.
-6-
<PAGE> 1
EXHIBIT 10-G
******************************************************************************
DIGICON INC., DIGICON GEOPHYSICAL CORP., DIGICON/GFS INC.,
DIGICON GEOPHYSICAL LIMITED AND DIGICON EXPLORATION, LTD.
AS BORROWERS
CREDIT AGREEMENT
DATED AS OF JULY __, 1996
WELLS FARGO BANK (TEXAS), NATIONAL ASSOCIATION
AS ISSUING BANK, AS A BANK
AND AS AGENT FOR THE BANKS
******************************************************************************
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
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<S> <C>
ARTICLE I Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.1 Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.2 Other Definitional Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE II Revolving Credit Advances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 2.1 Revolving Credit Commitments . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 2.2 The Revolving Credit Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 2.3 Repayment of Revolving Credit Advances . . . . . . . . . . . . . . . . . . . . . . . 2
Section 2.4 Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 2.5 Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Section 2.6 Revolving Credit Commitment Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Section 2.7 Reduction or Termination of Revolving Credit Commitment . . . . . . . . . . . . . . . 3
ARTICLE III Term Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Section 3.1 Term Loan Commitments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Section 3.2 The Term Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Section 3.3 Repayment of Term Loan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Section 3.4 Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Section 3.5 Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
ARTICLE IV Letters of Credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Section 4.1 Letters of Credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Section 4.4 Letter of Credit Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 4.5 Participation by Banks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 4.6 Payments Constitute Revolving Credit Loans . . . . . . . . . . . . . . . . . . . . . 6
Section 4.7 Obligations Absolute . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 4.8 Limitation of Liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Section 4.9 Letter of Credit Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Section 4.10 Replacement of the Issuing Bank . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
ARTICLE V Borrowing Procedure; Payments; Facilities Fees; Joint Borrower Provisions . . . . . . 8
Section 5.1 Borrowing Procedure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 5.2 Method of Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 5.3 Voluntary Prepayment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 5.4 Mandatory Prepayment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 5.5 Pro Rata Treatment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 5.6 Non-Receipt of Funds by the Agent . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 5.7 Withholding Tax Exemption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 5.8 Computation of Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 5.9 Facilities Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
</TABLE>
<PAGE> 3
<TABLE>
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Section 5.10 Joint Borrower Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
ARTICLE VI Yield Protection . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 6.1 Capital Adequacy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
ARTICLE VII Security . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Section 7.1 Collateral . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Section 7.2 Setoff . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
ARTICLE VIII Conditions Precedent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 8.1 Initial Advance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 8.2 All Advances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
ARTICLE IX Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 9.1 Corporate Existence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 9.2 Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 9.3 Corporate Action; No Breach . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 9.4 Operation of Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Section 9.5 Litigation and Judgments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Section 9.6 Rights in Properties; Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Section 9.7 Enforceability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Section 9.8 Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Section 9.9 Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Section 9.10 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Section 9.11 Use of Proceeds; Margin Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Section 9.12 ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Section 9.13 Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Section 9.14 Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Section 9.15 Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 9.16 Compliance with Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 9.17 Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 9.18 Investment Company Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 9.19 Public Utility Holding Company Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 9.20 Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
ARTICLE X Positive Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 10.1 Reporting Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 10.2 Maintenance of Existence; Conduct of Business . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 10.3 Maintenance of Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
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Section 10.4 Taxes and Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Section 10.5 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Section 10.6 Inspection Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Section 10.7 Keeping Books and Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Section 10.8 Compliance with Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Section 10.9 Compliance with Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Section 10.10 Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Section 10.11 ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Section 10.12 Annual Collateral and Systems Review . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Section 10.13 Lockboxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Section 10.14 Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
ARTICLE XI Negative Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Section 11.1 Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Section 11.2 Limitation on Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Section 11.3 Mergers, Dissolutions, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Section 11.4 Restricted Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Section 11.5 Loans and Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Section 11.6 Transactions With Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Section 11.7 Disposition of Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Section 11.8 Sale and Leaseback . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Section 11.9 Nature of Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Section 11.10 Environmental Protection . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Section 11.11 Accounting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Section 11.12 Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
ARTICLE XII Financial Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Section 12.1 Consolidated Tangible Net Worth . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Section 12.2 Cash Flow Coverage Ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Section 12.3 Funded Debt to Capitalization Ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Section 12.4 Capital Expenditures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Section 12.5 Current Ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Section 12.6 Renegotiation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
ARTICLE XIII Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Section 13.1 Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Section 13.2 Remedies Upon Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Section 13.3 Letters of Credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Section 13.4 Performance by the Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
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ARTICLE XIV The Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Section 14.1 Appointment, Powers and Immunities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Section 14.2 Rights of Agent as a Bank . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Section 14.3 Sharing of Payments, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Section 14.4 Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Section 14.5 Independent Credit Decisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Section 14.6 Several Commitments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Section 14.7 Successor Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Section 14.8 Partial Releases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
ARTICLE XV Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Section 15.1 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Section 15.2 Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Section 15.3 Limitation of Liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
Section 15.4 No Duty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
Section 15.5 Lender Not Fiduciary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
Section 15.6 Equitable Relief . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
Section 15.7 No Waiver; Cumulative Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
Section 15.8 Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
Section 15.9 Survival . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
Section 15.10 Entire Agreement; Amendment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
Section 15.11 Maximum Interest Rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
Section 15.12 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
Section 15.13 Governing Law; Venue; Service of Process . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
Section 15.14 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
Section 15.15 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
Section 15.16 Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
Section 15.17 Non-Application of Chapter 15 of Texas Credit Code . . . . . . . . . . . . . . . . . . . . . . 50
Section 15.18 Construction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
Section 15.19 Independence of Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
Section 15.20 Arbitration Program . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
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CREDIT AGREEMENT
THIS CREDIT AGREEMENT, dated as of July _____, 1996, is among DIGICON INC., a
Delaware corporation ("Digicon"), DIGICON GEOPHYSICAL CORP., a Delaware
corporation ("Geophysical Corp."), DIGICON/GFS INC., a Mississippi corporation
("GFS"), DIGICON EXPLORATION, LTD., a Delaware corporation ("Exploration") and
DIGICON GEOPHYSICAL LIMITED, a company organized under the laws of England and
Wales ("Geophysical Limited", and together with Digicon, Geophysical Corp.,
GFS, and Exploration, collectively the "Borrowers", and each individually a
"Borrower"), each of the banks or other lending institutions which is or which
may from time to time become a signatory hereto or any successor or assignee
thereof (individually, a "Bank" and, collectively, the "Banks") and WELLS FARGO
BANK (TEXAS), NATIONAL ASSOCIATION, a national banking association as issuing
bank (in such capacity, together with its successors in such capacity, the
"Issuing Bank") and as agent for itself, the Issuing Bank and the other Banks
(in such capacity, together with its successors in such capacity, the "Agent").
R E C I T A L S :
The Borrowers have requested the Banks to extend credit to the Borrowers in
the form of (a) a revolving credit facility not to exceed $15,000,000
outstanding at any time under which the Borrowers may request (i) Revolving
Credit Advances and (ii) Letters of Credit (subject to a $5,000,000 sublimit)
and (b) Term Loans to the Borrowers in the aggregate principal amount of
$6,000,000. The Banks are willing to make such credit facilities available to
the Borrowers upon the terms and conditions hereinafter set forth.
NOW THEREFORE, in consideration of the premises and the mutual covenants
herein contained, the parties hereto agree as follows:
ARTICLE I
Definitions
Section 1 Definitions. As used in this Agreement, the terms defined in
Appendix A hereto have the meanings ascribed to them in Appendix A.
Section 2 Other Definitional Provisions. All definitions contained
in this Agreement or incorporated herein from Appendix A are equally applicable
to the singular and plural forms of the terms defined. The words "hereof",
"herein", and "hereunder" and words of similar import referring to this
Agreement refer to this Agreement as a whole and not to any particular
provision of this Agreement. Unless otherwise specified, all Article and
Section references pertain to this Agreement. All accounting terms not
specifically defined herein or in Appendix A shall be construed in accordance
with GAAP. Terms used herein that are defined in the UCC, unless otherwise
defined herein, shall have the meanings specified in the UCC.
<PAGE> 7
ARTICLE II
Revolving Credit Advances
Section 1 Revolving Credit Commitments. Subject to the terms and
conditions of this Agreement, each Bank severally agrees to make one or more
Revolving Credit Advances to the Borrowers from time to time from the date
hereof to and including the Revolving Credit Termination Date in an aggregate
principal amount at any time outstanding up to but not exceeding the amount of
such Bank's Revolving Credit Commitment, provided that the aggregate amount of
all Revolving Credit Advances at any time outstanding shall not exceed the
lesser of (a) the aggregate of the Revolving Credit Commitments minus the
outstanding Letter of Credit Liabilities and (b) the Borrowing Base minus the
outstanding Letter of Credit Liabilities. Subject to the foregoing
limitations, and the other terms and provisions of this Agreement, the
Borrowers may borrow, repay, and reborrow hereunder the aggregate amount of the
Revolving Credit Commitments by means of Revolving Credit Advances. Each
Revolving Credit Advance made by each Bank shall be made and maintained at such
Bank's Principal Office.
Section 2 The Revolving Credit Notes. The joint and several
obligation of the Borrowers to repay the Revolving Credit Advances and interest
thereon shall be evidenced by a Revolving Credit Note executed by the
Borrowers, payable to the order of each Bank, in the principal amount of such
Bank's Revolving Credit Commitment as originally in effect and dated the date
hereof or such later date as may be required with respect to transactions
contemplated by Section 15.8.
Section 3 Repayment of Revolving Credit Advances. The Borrowers
shall repay the unpaid principal amount of all Revolving Credit Advances on the
Revolving Credit Termination Date.
Section 4 Interest. The unpaid principal amount of the Revolving
Credit Advances shall bear interest prior to maturity at a varying rate per
annum equal from day to day to the lesser of (a) the Maximum Rate, and (b) the
Applicable Rate. If at any time the Applicable Rate for any Revolving Credit
Advance shall exceed the Maximum Rate, thereby causing the interest accruing on
such Revolving Credit Advance to be limited to the Maximum Rate, then any
subsequent reduction in the Applicable Rate for such Revolving Credit Advance
shall not reduce the rate of interest on such Revolving Credit Advance below
the Maximum Rate until the aggregate amount of interest accrued on such
Revolving Credit Advance equals the aggregate amount of interest which would
have accrued on such Revolving Credit Advance if the Applicable Rate had at all
times been in effect. Accrued and unpaid interest on the Revolving Credit
Advances shall be due and payable as follows:
(i) on each Monthly Payment Date; and
(ii) on the Revolving Credit Termination Date.
Notwithstanding the foregoing, any outstanding principal of any Revolving
Credit Advance and (to the fullest extent permitted by law) any other amount
payable by the Borrowers under this Agreement
2
<PAGE> 8
or any other Loan Document that is not paid in full when due (whether at stated
maturity, by acceleration, or otherwise) shall bear interest at the Default
Rate for the period from and including the due date thereof to but excluding
the date the same is paid in full. Interest payable at the Default Rate shall
be payable from time to time on demand.
Section 5 Use of Proceeds. The proceeds of Advances shall be used by
the Borrowers to pay off and retire existing Debt to Foothill Capital
Corporation, a California corporation, and for general corporate purposes
(including the purchase of fixed assets) in the ordinary course of business.
Section 6 Revolving Credit Commitment Fee. The Borrowers jointly and
severally agree to pay to the Agent for the account of each Bank a commitment
fee on the daily average unused amount of such Bank's Revolving Credit
Commitment for the period from and including the date of this Agreement to and
including the Revolving Credit Termination Date at the rate of 0.375% per annum
based on a 360 day year and the actual number of days elapsed. Accrued
commitment fee shall be payable in arrears on each Quarterly Fee Payment Date
and on the Revolving Credit Termination Date.
Section 7 Reduction or Termination of Revolving Credit Commitment.
The Borrowers shall have the right to terminate in whole or reduce in part the
unused portion of the Revolving Credit Commitments upon at least three Business
Days prior notice (which notice shall be irrevocable) to the Agent specifying
the effective date thereof, whether a termination or reduction is being made,
and the amount of any partial reduction, provided, however, that the Revolving
Credit Commitments shall never be reduced below an amount equal to the
aggregate outstanding Letter of Credit Liabilities. Each partial reduction
shall be in the amount of $1,000,000 or an integral multiple thereof and the
Borrowers shall simultaneously prepay the Revolving Credit Advances by the
amount by which the unpaid principal amount of the Revolving Credit Advances
exceeds the sum of (a) all of the Revolving Credit Commitments (after giving
effect to such notice) plus (b) the aggregate outstanding Letter of Credit
Liabilities, plus accrued and unpaid interest on the principal amount so
prepaid. The Revolving Credit Commitments may not be reinstated after they
have been terminated or reduced.
ARTICLE III
Term Loans
Section 1 Term Loan Commitments. Subject to the terms and conditions
of this Agreement, each Bank agrees to make a loan (the "Term Loans") to the
Borrowers in a principal amount equal to the amount of such Bank's Term Loan
Commitment in a single Advance on the date hereof.
Section 2 The Term Notes. The joint and several obligation of the
Borrowers to repay the Term Loans shall be evidenced by a Term Note executed by
the Borrowers, payable to the order of such Bank, in the principal amount of
such Bank's Term Loan Commitment, and dated the date
3
<PAGE> 9
hereof or such later date as may be required with respect to transactions
contemplated by Section 15.8.
Section 3 Repayment of Term Loan. The Borrowers shall repay the
unpaid principal amount of the Term Loan in 35 equal consecutive installments
in the amount of $166,667 each, payable on each Monthly Payment Date, with a
final additional installment in the amount of all outstanding principal of the
Term Loan payable on the Term Loan Maturity Date.
Section 4 Interest. The unpaid principal amount of the Term Loans
shall bear interest prior to maturity at a varying rate per annum equal from
day to day to the lesser of (a) the Maximum Rate and (b) the Applicable Rate.
If at any time the Applicable Rate shall exceed the Maximum Rate, thereby
causing the interest accruing on the Term Loans to be limited to the Maximum
Rate, then any subsequent reduction in the Applicable Rate shall not reduce the
rate of interest on the Term Loans below the Maximum Rate until the aggregate
amount of interest accrued on the Term Loans equals the aggregate amount of
interest which would have accrued on the Term Loans if the Applicable Rate had
at all times been in effect. Accrued and unpaid interest on the Term Loan
Advances shall be payable on each Monthly Payment Date. Notwithstanding the
foregoing, any outstanding principal of any Term Loan Advance and (to the
fullest extent permitted by law) any other amount payable by the Borrower under
this Agreement or any other Loan Document that is not paid in full when due
(whether at stated maturity, by acceleration, or otherwise) shall bear interest
at the Default Rate for the period from and including the due date thereof to
but excluding the date the same is paid in full. Interest payable at the
Default Rate shall be payable from time to time on demand.
Section 5 Use of Proceeds. The proceeds of the Term Loans shall be
used by the Borrowers to refinance existing term Debt.
ARTICLE IV
Letters of Credit
Section 1 Letters of Credit.
(a) Subject to, and upon the terms, conditions, covenants and agreements
contained herein and in the Letter of Credit Agreements, prior to the
Revolving Credit Termination Date, the Issuing Bank agrees to issue
irrevocable standby letters of credit ("Letters of Credit"), in form
satisfactory to the Issuing Bank, for the account of any Borrower; provided,
however, that the outstanding Letter of Credit Liabilities shall not at any
time exceed the least of (a) $5,000,000, (b) an amount equal to the aggregate
amount of the Revolving Credit Commitments minus the outstanding Revolving
Credit Advances, and (c) the Borrowing Base minus the outstanding Revolving
Credit Advances. In the event of an actual conflict between the terms and
conditions of this Agreement and the terms and conditions of any Letter of
Credit Agreement, then the terms and conditions of this Agreement shall
prevail. Letters of Credit shall expire no later than one year after the
4
<PAGE> 10
Revolving Credit Termination Date, must be satisfactory in form to the
Issuing Bank, and must be issued pursuant to a Letter of Credit Agreement.
No Letter of Credit shall require any payment by the Issuing Bank to the
beneficiary thereof pursuant to a drawing prior to the third Business Day
following presentment of a draft and any related documents to the Issuing
Bank.
(b) On or before the Revolving Credit Termination Date, the
Borrowers jointly and severally agree to deposit with and pledge to the
Agent cash or cash equivalent investments in an amount equal to all
outstanding Letter of Credit Liabilities.
Section 2 Letter of Credit Procedure. Each Letter of Credit shall be
issued upon receipt by the Issuing Bank of a written request of any Borrower (a
"Credit Request"), together with a duly executed Letter of Credit Agreement,
not later than 11:00 A.M., (Houston, Texas time) three Business Days prior to
the date set for the issuance of such Letter of Credit. Each Credit Request
shall contain or specify, among other things:
(a) the proposed date of the issuance of the Letter of Credit, which
shall be a Business Day;
(b) the stated amount of the Letter of Credit;
(c) the date of expiration of the Letter of Credit;
(d) the name and address of the beneficiary of the Letter of Credit;
(e) the documents to be presented by the beneficiary of the Letter of
Credit in case of any drawing thereunder;
(f) the full text of any certificate to be presented by the
beneficiary in case of any drawing thereunder;
(g) the purpose of the Letter of Credit; and
(h) the aggregate amount of Letter of Credit Liabilities (including
the requested Letter of Credit) to be existing on the date of issuance of such
requested Letter of Credit.
Section 3 Amendments to Letters of Credit. Any request for amendment
to or extension of the expiry date of any previously issued Letter of Credit
shall be submitted pursuant to a Credit Request by the Borrowers to the Issuing
Bank not later than three Business Days prior to the date of the proposed
amendment or extension. The Issuing Bank shall not amend or extend the expiry
date of any Letter of Credit if the issuance of a new Letter of Credit having
the same terms and conditions as such Letter of Credit as so amended or
extended would be prohibited by any provision hereof.
5
<PAGE> 11
Section 4 Letter of Credit Fees. The Borrowers jointly and severally
agree in all instances, to pay to the Issuing Bank a letter of credit fee for
the account of the Banks that is equal to 1% per annum of the Dollar equivalent
at the applicable Exchange Rate of the face amount of each Letter of Credit
(with a $400 minimum letter of credit fee per Letter of Credit issued), each
computed from the date of issuance until the stated termination date based on
the initial face amount of such Letter of Credit, and payable in advance,
non-refundable, and based on a year of 360 days.
Section 5 Participation by Banks. By the issuance of any Letter of
Credit and without any further action on the part of the Issuing Bank or any of
the Banks in respect thereof, the Issuing Bank hereby grants to each Bank and
each Bank hereby agrees to acquire from the Issuing Bank a participation in
each such Letter of Credit and the related Letter of Credit Liabilities,
effective upon the issuance thereof without recourse or warranty, equal to such
Bank's pro rata part (based on the Revolving Credit Commitments) of such Letter
of Credit and Letter of Credit Liabilities. The Issuing Bank shall provide a
copy of each Letter of Credit to each other Bank promptly after issuance. This
agreement to grant and acquire participations is an agreement between the
Issuing Bank and the Banks, and neither Borrower nor any beneficiary of a
Letter of Credit shall be entitled to rely thereon. Borrowers agree that each
Bank purchasing a participation from the Issuing Bank pursuant to this Section
4.5 may exercise all its rights to payment against Borrowers including the
right of setoff, with respect to such participation as fully as if such Bank
were the direct creditor of Borrowers in the amount of such participation.
Section 6 Payments Constitute Revolving Credit Loans. Each payment
by the Issuing Bank pursuant to a drawing under a Letter of Credit shall
constitute and be deemed a Revolving Credit Loan by each Bank in its percentage
of the aggregate Revolving Credit Commitments to the Borrowers under such
Bank's Revolving Credit Note and this Agreement as of the day and time such
payment is made by the Issuing Bank and in the Dollar equivalent at the
applicable Exchange Rate of the aggregate amount of such payment.
Section 7 Obligations Absolute. The obligations of the Borrowers
under this Agreement and the other Loan Documents (including without limitation
the obligation of the Borrower to reimburse the Issuing Bank for draws under
any Letter of Credit) shall be joint and several, absolute, unconditional, and
irrevocable, and shall be performed strictly in accordance with the terms of
this Agreement and the other Loan Documents under all circumstances whatsoever,
including without limitation the following circumstances:
(a) Any lack of validity or enforceability of any Letter of Credit
or any other Loan Document;
(b) Any amendment or waiver of or any consent to departure from any
Loan Document;
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(c) The existence of any claim, set-off, counterclaim, defense or
other rights which any Borrower, any Obligated Party, or any other
Person may have at any time against any beneficiary of any Letter of Credit,
the Issuing Bank, or any other Person, whether in connection with this
Agreement or any other Loan Document or any unrelated transaction; or
(d) Any statement, draft, or other document presented under any
Letter of Credit proving to be forged, fraudulent, invalid, or
insufficient in any respect or any statement therein being untrue or
inaccurate in any respect whatsoever.
Section 8 Limitation of Liability. The Borrowers jointly and
severally assume all risks of the acts or omissions of any beneficiary of any
Letter of Credit with respect to its use of such Letter of Credit. Neither the
Issuing Bank, the Agent, any Bank nor any of their officers or directors shall
have any responsibility or liability to any Borrower or any other Person for:
(a) errors, omissions, interruptions, or delays in transmission or delivery of
any messages, or (b) the validity, sufficiency, or genuineness of any draft or
other document, or any endorsement(s) thereon, even if any such draft, document
or endorsement should in fact prove to be in any and all respects invalid,
insufficient, fraudulent, or forged or any statement therein is untrue or
inaccurate in any respect, provided that in each case such actions taken or
omitted by the Issuing Bank, the Agent or any Bank are done or omitted in the
absence of gross negligence or willful misconduct. The Issuing Bank may accept
documents that appear on their face to be in order, without responsibility for
further investigation, regardless of any notice or information to the contrary.
Section 9 Letter of Credit Agreements. Certain additional provisions
regarding the obligations, liabilities, rights, remedies and agreements of the
Borrowers and the Issuing Bank relative to the Letters of Credit shall be set
forth in the Letter of Credit Agreements.
Section 10 Replacement of the Issuing Bank. The Borrowers may, with
the approval of the Required Banks, appoint a successor Issuing Bank hereunder
upon the condition precedent that such successor Issuing Bank shall become a
party to this Agreement and expressly agree to be bound by the terms and
conditions contained in this Agreement pertaining to the Issuing Bank. Upon
the appointment of a successor Issuing Bank, the Issuing Bank replaced by such
successor Issuing Bank shall cease to issue Letters of Credit but shall
continue to carry out its obligations hereunder and shall continue to have the
benefit of this Agreement and the other Loan Documents with respect to the
outstanding Letters of Credit issued by it until all such Letters of Credit
have expired and any drawings thereunder have been reimbursed in full.
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ARTICLE V
Borrowing Procedure; Payments; Facilities Fees; Joint Borrower Provisions
Section 1 Borrowing Procedure. The Borrowers shall give the Agent
notice by means of the appropriate Advance Request Form of each requested
Advance at least one Business Day before the requested Advance (unless the
Agent is the only Bank in which case notice shall be by 11:00 A.M. Houston,
Texas time on the day of such requested Advance), specifying: (a) the
requested date of such Advance (which shall be a Business Day), and (b) the
amount of such Advance. The Agent at its option may accept telephonic requests
for Advances, provided that such acceptance shall not constitute a waiver of
the Agent's right to delivery of the appropriate Advance Request Form in
connection with subsequent Advances. Any telephonic request for an Advance by
the Borrowers shall be promptly confirmed by submission of a properly completed
Advance Request Form to the Agent. Each Revolving Credit Advance shall be in a
minimum principal amount of $100,000 or an integral multiple thereof and the
Term Loans shall be in a single aggregate Advance in the aggregate amount of
the Term Loan Commitments. The Agent shall notify each Bank of the contents of
each such notice. Not later than 11:00 A.M. Houston, Texas time on the date
specified for each Advance hereunder, each Bank will make available to the
Agent at the Principal Office in immediately available funds, for the account
of the Borrowers, its pro rata share of each Advance. After the Agent's
receipt of such funds and subject to the other terms and conditions of this
Agreement, the Agent will make each Advance available to the Borrowers by
depositing the same, in immediately available funds, in an account of the
Borrowers (designated by the Borrowers) maintained with the Agent at the
Principal Office. All notices under this Section shall be irrevocable and
shall be given not later than 11:00 A.M. Houston, Texas, time on the day which
is not less than the number of Business Days specified above for such notice.
Section 2 Method of Payment. All payments of principal, interest,
and other amounts to be made by the Borrowers under this Agreement and the
other Loan Documents shall be made to the Agent at the Principal Office for the
account of each Bank's Principal Office in Dollars and in immediately available
funds, without setoff, deduction, or counterclaim, not later than 11:00 A.M.,
Houston, Texas time on the date on which such payment shall become due (each
such payment made after such time on such due date to be deemed to have been
made on the next succeeding Business Day). The Borrowers shall, at the time of
making each such payment, specify to the Agent the sums payable by the
Borrowers under this Agreement and the other Loan Documents to which such
payment is to be applied (and in the event that the Borrowers fail to so
specify, or if an Event of Default has occurred and is continuing, the Agent
may apply such payment to the Obligations in such order and manner as it may
elect in its sole discretion, subject to Section 5.5 hereof). Each payment
received by the Agent under this Agreement or any other Loan Document for the
account of a Bank shall be paid promptly to such Bank, in immediately available
funds, for the account of such Bank's Principal Office. Whenever any payment
under this Agreement or any other Loan Document shall be stated to be due on a
day that is not a Business Day, such payment may be made on the next succeeding
Business Day, and such extension of time shall in such case be included in the
computation of the payment of interest and commitment fee, as the case may be.
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Section 3 Voluntary Prepayment. The Borrower may, upon at least one
Business Days' prior notice to the Agent, prepay the Term Loan Advances in
whole at any time or from time to time in part without premium or penalty but
with accrued interest to the date of prepayment on the amount so prepaid,
provided that each partial prepayment shall be in the principal amount of
$100,000 or an integral multiple thereof. All notices under this Section shall
be irrevocable and shall be given not later than 11:00 A.M. Houston, Texas,
time on the day which is not less than the number of Business Days specified
above for such notice.
Section 4 Mandatory Prepayment. If at any time the sum of the
outstanding Revolving Credit Advances plus the outstanding Letter of Credit
Liabilities exceeds the Borrowing Base, the Borrowers shall promptly (and in
any event within 15 Business Days after the earlier of (a) the discovery of
such excess by the Borrower and (b) the delivery by the Borrowers of the
Borrowing Base Report indicating such excess) prepay the outstanding Revolving
Credit Advances by the amount of the excess plus accrued and unpaid interest on
the amount so prepaid or, if no Revolving Credit Advances are outstanding
(either before or after such prepayments), the Borrowers shall immediately
pledge to the Agent for the benefit of itself, the Issuing Bank, and the Banks,
cash or cash equivalent investments in an amount equal to the excess as
security for the Obligations.
Section 5 Pro Rata Treatment. Except to the extent otherwise
provided herein: (a) each Advance shall be made by the Banks under Section 2.1
and Section 3.1 or deemed made by the Banks under Section 4.6, each payment of
fees under Section 2.6 and Section 5.10 and letter of credit fees under Section
4.4 shall be made for the account of the Banks, and each termination or
reduction of the Revolving Credit Commitments under Section 2.7 shall be
applied to the Revolving Credit Commitments of the Banks, pro rata according to
the respective unused Revolving Credit Commitments and each Letter of Credit
shall be deemed participated in by the Banks, pro rata according to the amounts
of their respective Revolving Credit Commitments; and (b) each payment and
prepayment of principal of or interest on Advances by the Borrower shall be
made to the Agent for the account of the Banks pro rata in accordance with the
respective unpaid principal amounts of such Advances held by such Banks.
Section 6 Non-Receipt of Funds by the Agent. Unless the Agent shall
have been notified by a Bank or the Borrowers (the "Payor") prior to the date
on which such Bank is to make payment to the Agent of the proceeds of an
Advance to be made or participated in as applicable, by it hereunder or the
Borrowers is to make a payment to the Agent for the account of one or more of
the Banks, as the case may be (such payment being herein called the "Required
Payment"), which notice shall be effective upon receipt, that the Payor does
not intend to make the Required Payment to the Agent, the Agent may assume that
the Required Payment has been made and may, in reliance upon such assumption
(but shall not be required to), make the amount thereof available to the
intended recipient on such date and, if the Payor has not in fact made the
Required Payment to the Agent, the recipient of such payment shall, on demand,
pay to the Agent the amount made available to it together with interest thereon
in respect of the period commencing on the date such amount was so made
available by the Agent until the date the Agent recovers such amount at a rate
per annum equal to the Federal Funds Rate for such period.
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Section 7 Withholding Tax Exemption. Each Bank that is not
incorporated under the laws of the United States of America or a state thereof
agrees that it will deliver to Digicon for distribution to the Borrowers and
the Agent two duly completed copies of Form 1001 or 4224, certifying in either
case that such Bank is entitled to receive payments from the Borrowers under
any Loan Document without deduction or withholding of any United States federal
income taxes. Each Bank which so delivers a Form 1001 or 4224 further
undertakes to deliver to Digicon for distribution to Borrowers and the Agent
two additional copies of such form (or a successor form) on or before the date
such form expires or becomes obsolete or after the occurrence of any event
requiring a change in the most recent form so delivered by it, and such
amendments thereto or extensions or renewals thereof as may be reasonably
requested by the Borrowers or the Agent, in each case certifying that such Bank
is entitled to receive payments from the Borrowers under any Loan Document
without deduction or withholding of any United States federal income taxes,
unless an event (including without limitation any change in treaty, law or
regulation) has occurred prior to the date on which any such delivery would
otherwise be required which renders all such forms inapplicable or which would
prevent such Bank from duly completing and delivering any such form with
respect to it and such Bank advises the Borrowers and the Agent that it is not
capable of receiving such payments without any deduction or withholding of
United States federal income tax.
Section 8 Computation of Interest. Interest on the Advances and all
other amounts payable by the Borrowers hereunder shall be computed on the basis
of a year of 360 days and the actual number of days elapsed (including the
first day but excluding the last day) unless such calculation would result in a
usurious rate, in which case interest shall be calculated on the basis of a
year of 365 or 366 days, as the case may be.
Section 9 Facilities Fees. The Borrowers jointly and severally agree
to pay to the Agent for the account of the Banks a non-refundable facilities
fee in connection with the Revolving Credit Commitments and the Term Loan
Commitments of $75,000 payable in full upon the execution of this Agreement
(Agent acknowledging that it has already received $25,000 of such fee).
Section 10 Joint Borrower Provisions.
(a) The Borrowers agree to establish and maintain a single designated
deposit account for the purpose of receiving the proceeds of the Advances to
be made by the Agent hereunder. Any Advance made by the Agent hereunder
shall be made jointly to the Borrowers and shall be charged to the Borrowers,
jointly and severally. Any payments received by the Agent hereunder likewise
shall be credited, jointly and severally, for the account of the Borrowers.
(b) The Agent is authorized to make Advances under this Agreement
based upon telephonic or other instructions received from anyone
purporting to be an authorized officer of any Borrower. Unless otherwise
instructed by any of the Borrowers, the Agent will credit the amount of
Advances made to Borrowers to Borrowers' designated deposit account. It
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is expressly agreed and understood by each Borrower that neither the Agent or
any Bank shall have any responsibility to inquire into the apportionment,
allocation, or disposition of any Advances made to the Borrowers. All
Advances are to be made for the collective account of Borrowers.
(c) For the purpose of implementing the joint borrower provisions of
the Loan Documents, each Borrower hereby irrevocably appoints each
other Borrower as its agent and attorney-in-fact, coupled with an interest,
for all purposes of the Loan Documents, including the making of requests for
Advances, or Letters of Credit, the execution and delivery of certificates
and the receiving and allocating of disbursements from the Agent, the Issuing
Bank or any Bank.
(d) It is understood and agreed that the handling of the Advances
and the Letters of Credit on a joint borrowing basis as set forth in
this Agreement is solely as an accommodation to the Borrowers and at their
request, and that the Agent, the Issuing Bank and the Banks shall incur no
liability to the Borrowers as a result thereof. To induce the Agent, the
Issuing Bank and the Banks to do so, and in consideration thereof, each of
the Borrowers hereby agrees to indemnify each of the Agent, the Issuing Bank
and the Banks and hold each such Person harmless from and against any and all
liabilities, expenses, losses, damages or claims of damage or injury asserted
against any such Person by any of the Borrowers or by any other Person
arising form or incurred by reason of the handling by any of the Agent, the
Issuing Bank or the Banks of the financing arrangement of the Borrowers as
herein provided, reliance by any of the Agent, the Issuing Bank or the Banks
on any requests or instructions from any Borrower, or any other related
action taken by any of the Agent, the Issuing Bank or the Banks hereunder in
the absence of gross negligence or willful misconduct.
(e) Each Borrower represents and warrants to the Agent, the Issuing
Bank and the Banks that the request for joint handling of the advances
and other financial accommodations to be made by the Agent, the Issuing Banks
and the Banks hereunder was made because the Borrowers are engaged in an
integrated operation that requires financing on a basis permitting the
availability of credit from time to time to each of the Borrowers. Each of
the Borrowers expects to derive benefit, directly or indirectly, from such
availability because the successful operation of the Borrowers is dependent
on the continued successful performance of the functions of the integrated
group.
(f) Each of the Borrowers represents and warrants to the Agent, the
Issuing Bank and the Banks that (i) such Borrower has established adequate
means of obtaining from the other Borrowers on a continuing basis financial
and other information pertaining to the business, operations, and condition
(financial and otherwise) of the other Borrowers, and their property, and
(ii) such Borrower now is and hereafter will be completely familiar with the
business, operations and condition (financial and otherwise) of the other
Borrowers, and their property. Each of the Borrowers hereby waives and
relinquishes any duty on the part of any
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of the Agent, the Issuing Bank or the Banks to disclose to such Borrower any
matter, fact or thing relating to the business, operations or condition
(financial or otherwise) of the other Borrowers, or the property of the other
Borrowers, whether now or hereafter known by any of the Agent, the Issuing
Bank or the Banks during the term of this Agreement.
(g) Each Borrower acknowledges that the obligations of such Borrower
undertaken herein might be construed to consist, at least in part, of the
guaranty of obligations of Persons or entities other than such Borrower
(including the other Borrowers party hereto and the Guarantors) and, in full
recognition of that fact, each Borrower consents and agrees that the Agent
may, at any time and from time to time, without notice or demand, except as
otherwise required herein, whether before or after any actual or purported
termination, repudiation or revocation of this Agreement by any one or more
Borrowers, and without affecting the enforceability or continuing
effectiveness hereof as to each Borrower, agree with one or more Borrowers or
Guarantors to: (i) supplement, restate, modify, amend, increase, decrease,
extend, renew, accelerate or otherwise change the time for payment or the
terms of the Obligations or any part thereof, including any increase or
decrease of the rate(s) of interest thereon; (ii) supplement, restate,
modify, amend, increase, decrease or waive, or enter into or give any
agreement, approval or consent with respect to, the Obligations or any part
thereof, or any of the Loan Documents or any additional security or
guarantees, or any condition, covenant, default, remedy, right,
representation or term thereof or thereunder; (iii) accept new or additional
instruments, documents or agreements in exchange for or relative to any of
the Loan Documents or the Obligations or any part thereof; (iv) accept
partial payments on the Obligations; (v) receive and hold additional security
or guarantees for the Obligations or any part hereof; (vi) release, reconvey,
terminate, waive, abandon, fail to perfect, subordinate, exchange,
substitute, transfer or enforce any security or guarantees, and apply any
security and direct the order or manner of the sale thereof as the Agent in
its sole and absolute discretion may determine; (vii) release any Person from
any personal liability with respect to the Obligations or any part thereof;
(viii) settle, release on terms satisfactory to the Agent or by operation of
applicable laws or otherwise liquidate or enforce any Obligations and any
security therefor or guaranty thereof in any manner, consent to the transfer
of any security and bid and purchase at any sale; or (ix) consent to the
merger, change or any other restructuring or termination of the corporate or
partnership existence of any Borrower or any other Person, and
correspondingly restructure the Obligations, and any such merger, change,
restructuring or termination shall not affect the liability of any Borrower
or the continuing effectiveness hereof, or the enforceability hereof with
respect to all or any part of the Obligations.
(h) Upon the occurrence and during the continuance of any Event of
Default, the Agent may enforce this Agreement independently as to each
Borrower and independently of any other remedy or security the Agent at any
time may have or hold in connection with the Obligations, and it shall not be
necessary for the Agent to marshal assets in favor of any Borrower or any
other person or to proceed upon or against or exhaust any security or remedy
before proceeding to enforce this Agreement. Each Borrower expressly waives
any
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right to require the Agent to marshal assets in favor of any Borrower or any
other Person or to proceed against any other Borrower or any collateral
provided by any Person, and agrees that the Agent may proceed against
Borrowers or any Collateral in such order as it shall determine in its sole
and absolute discretion.
(i) The Agent may file a separate action or actions against any
Borrower, whether such action is brought or prosecuted with respect to
any security or against any other Person, or whether any other Person is
joined in any such action or actions. Each Borrower agrees that the Agent
and any Borrower and any Affiliate of any Borrower may deal with each other
in connection with the Obligations or otherwise, or alter any contracts or
agreements now or hereafter existing between any of them, in any manner
whatsoever, all without in any way altering or affecting the continuing
efficacy of this Agreement. Each Borrower expressly waives the benefit of any
statute of limitations affecting its liability hereunder or the enforcement
of the Obligations or any rights of the Agent, the Banks or the Issuing Bank
created or granted herein.
(j) The Agent's, the Banks' and the Issuing Bank's rights hereunder
shall be reinstated and revived, and the enforceability of this
Agreement shall continue, with respect to any amount at any time paid on
account of the Obligations which thereafter shall be required to be restored
or returned by any of the Agent, any Bank or the Issuing Bank, all as though
such amount had not been paid. The rights of the Agent, the Banks and/or the
Issuing Bank created or granted herein and the enforceability of this
Agreement at all times shall remain effective to cover the full amount of all
the Obligations even though the Obligations, including any part thereof or
any other security or guaranty therefor, may be or hereafter may become
invalid or otherwise unenforceable as against any Borrower and whether or not
any other Borrower shall have any personal liability with respect thereto.
(k) To the maximum extent permitted by applicable law, each Borrower
expressly waives any and all defenses now or hereafter arising or asserted by
reason of (i) any disability or other defense of any other Borrower with
respect to the Obligations, (ii) the unenforceability or invalidity of any
security or guaranty for the Obligations or the lack of perfection or
continuing perfection or failure of priority of any security for the
Obligations, (iii) the cessation for any cause whatsoever of the liability of
any other Borrower (other than by reason of the full payment and performance
of all Obligations), (iv) any failure of the Agent to marshal assets in favor
of any Borrower or any other Person, (v) any failure of the Agent to give
notice of sale or other disposition of collateral to any Borrower or any
other Person or any defect in any notice that may be given in connection with
any sale or disposition of collateral, (vi) any failure of the Agent to
comply with applicable law in connection with the sale or other disposition
of any Collateral or other security for any Obligation, including any failure
of the Agent to conduct a commercially reasonable sale or other disposition
of any Collateral or other security for any Obligation, (vii) any act or
omission of any Bank or the Issuing Bank or others that directly or
indirectly results in or aids the discharge or release of any of any
Borrower, any Guarantor or the Obligations or any security or guaranty
therefor
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by operation of law or otherwise, (viii) any law which provides that the
obligation of a surety or guarantor must neither be larger in amount nor in
other respects more burdensome than that of the principal or which reduces a
surety's or guarantor's obligation in proportion to the principal obligation,
(ix) any failure of the Agent to file or enforce a claim in any bankruptcy or
other proceeding with respect to any Person, (x) the election by the Agent of
the application or non-application of Section 1111(b)(2) of the Bankruptcy
Code, (xi) any extension of credit or the grant of any lien under Section 364
of the Bankruptcy Code, (xii) any use of cash collateral under Section 363 of
the Bankruptcy Code, (xiii) any agreement or stipulation with respect to the
provision of adequate protection in any bankruptcy proceeding of any Person,
(xiv) the avoidance of any lien in favor of the Agent for any reason, or (xv)
any action taken by the Agent, any Bank or the Issuing Bank that is
authorized by this Section or any other provision of any Loan Document.
Until such time, if any, as all of the Obligations have been paid and
performed in full and no portion of any commitment of the Agent to any
Borrower under any Loan Document remains in effect, no Borrower shall have
any right of subrogation, contribution, reimbursement or indemnity, and each
Borrower expressly waives any right to enforce any remedy that the Agent, any
Bank or the Issuing Bank now has or hereafter may have against any other
Person and waives the benefit of, or any right to participate in, any
Collateral now or hereafter held by the Agent. Each Borrower expressly
waives all presentments, demands for payment or performance, notices of
nonpayment or nonperformance, protests, notices of protest, notices of
dishonor and all other notices or demands of any kind or nature whatsoever
with respect to the Obligations, and all notices of acceptance of this
Agreement or of the existence, creation or incurring of new or additional
Obligations.
(l) To the fullest extent permitted by applicable law, each Borrower
expressly waives any suretyship defenses to the enforcement of this Agreement
or any rights of any of the Agent, any Bank or the Issuing Bank created or
granted hereby or to the recovery by any such Person against any Borrower,
any Guarantor or any other Person liable therefor of any deficiency after a
judicial or nonjudicial foreclosure or sale, even though such a foreclosure
or sale may impair the subrogation rights of the Borrowers and may preclude
the Borrowers from obtaining reimbursement or contribution from other
Borrowers. Each Borrower expressly waives any defenses or benefits that may
be derived pursuant to or from Rule 31 of the Texas Rules of Civil Procedure,
Section 17.001 of the Civil Practice and Remedies Code and Chapter 34 of the
Texas Business and Commerce Code, as amended, or comparable provisions of the
laws of any other jurisdiction, and all other suretyship defenses it
otherwise might or would have under Texas law or other applicable law.
(m) The Borrowers and each of them warrant and agree that each of the
waivers and consents set forth herein are made after consultation with legal
counsel and with full knowledge of their significance and consequences, with
the understanding that events giving rise to any defense or right waived may
diminish, destroy or otherwise adversely affect rights which the Borrowers
otherwise may have against other Borrowers, the Guarantors, the Agent, the
Banks, the Issuing Bank or others, or against Collateral, and that, under the
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circumstances, the waivers and consents herein given are reasonable and not
contrary to public policy or law. If any of the waivers or consents herein
are determined to be contrary to any applicable law or public policy, such
waivers and consents shall be effective to the maximum extent permitted by
law.
ARTICLE VI
Yield Protection
Section 1 Capital Adequacy. If after the date hereof, any adoption
or implementation of any applicable law, rule, or regulation regarding capital
adequacy (including, without limitation, any law, rule, or regulation
implementing the Basle Accord), or any change therein, or any change in the
interpretation or administration thereof by any central bank or other
Governmental Authority charged with the interpretation or administration
thereof, or compliance by such Bank (or its parent) with any guideline,
request, or directive regarding capital adequacy (whether or not having the
force of law) of any such central bank or other Governmental Authority
(including, without limitation, any guideline or other requirement implementing
the Basle Accord), has or would have the effect of reducing the rate of return
on such Bank's (or its parent's) capital as a consequence of its obligations
hereunder or the transactions contemplated hereby to a level below that which
such Bank (or its parent) could have achieved but for such adoption,
implementation, change, or compliance (taking into consideration such Bank's
policies with respect to capital adequacy) by an amount deemed by such Bank to
be material, then from time to time, within 10 Business Days after demand by
the such Bank (with a copy to the Agent), the Borrowers agree to jointly and
severally pay to such Bank (or its parent) such additional amount or amounts as
will compensate such Bank for such reduction. Any such demand shall be
accompanied by a certificate of such Bank claiming compensation under this
Section and setting forth in reasonable detail the calculation of the
additional amount or amounts to be paid to it hereunder shall be conclusive
(absent manifest error), provided that the determination thereof is made on a
reasonable basis. In determining such amount or amounts, such Bank may use any
reasonable averaging and attribution methods.
ARTICLE VII
Security
Section 1 Collateral. To secure full and complete payment and
performance of the Obligations, the Borrowers shall execute and deliver or
cause to be executed and delivered the documents described below covering the
property and collateral described in this Section 7.1 each in form and
substance satisfactory to the Agent, (which, together with any other property
and collateral which may now or hereafter secure the Obligations or any part
thereof, is sometimes herein called the "Collateral"):
(a) Each of the Borrowers and the Guarantors shall grant to the
Agent for the benefit of the Banks a first priority security interest
in all of its respective domestic, and as
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applicable, foreign, Data Library, accounts, accounts receivable, equipment,
machinery, fixtures, inventory, chattel paper, documents, instruments,
investment property (other than stock of Subsidiaries), goods, general
intangibles and other property as more fully described in its, as applicable,
respective Security Agreement, Charge Debenture (U.K.), or Charge Debenture
(Malaysia), whether now owned or hereafter acquired, and all products and
proceeds thereof, pursuant to such security documents.
(b) The Borrowers and the Guarantors shall execute and cause to be
executed such further documents and instruments, including without
limitation, as applicable, Uniform Commercial Code financing statements, as
the Agent, in its sole discretion, deems necessary or desirable to create,
preserve, evidence, and perfect its liens and security interests in the
Collateral.
Section 2 Setoff. If an Event of Default shall have occurred and is
continuing, the Agent, the Issuing Bank and each Bank are hereby authorized at
any time and from time to time, without notice to any Borrower (any such notice
being hereby expressly waived by the Borrowers), to set off and apply any and
all deposits (general, time or demand, provisional or final) at any time held
and other indebtedness at any time owing by the Issuing Bank, the Agent or such
Bank to or for the credit or the account of any Borrower against any and all of
the obligations of such Borrower now or hereafter existing under this
Agreement, the Notes, or any other Loan Document, irrespective of whether or
not the Agent, the Issuing Bank or such Bank shall have made any demand under
this Agreement, the Notes or any other Loan Document and although such
obligations may be unmatured. The Issuing Bank, the Agent and each Bank agree
promptly to notify such Borrower (with a copy to the Agent) after any such
setoff and application, provided that the failure to give such notice shall not
affect the validity of such setoff and application. The rights and remedies of
the Issuing Bank, the Agent and each Bank hereunder are in addition to other
rights and remedies (including, without limitation, other rights of setoff)
which the Issuing Bank, the Agent and such Bank may have.
ARTICLE VIII
Conditions Precedent
Section 1 Initial Advance. The obligation of each Bank to make any
initial Advance and of the Issuing Bank to issue any initial Letter of Credit
is subject to the condition precedent that the Agent shall have received on or
before the day of such Advance or Letter of Credit issuance all of the
following, each dated (unless otherwise indicated) the date hereof, in form and
substance satisfactory to the Agent:
(a) Resolutions. Resolutions of the Board of Directors of each
Borrower and each Guarantor certified by a Secretary or an Assistant
Secretary of such Person which authorize the execution, delivery, and
performance by such Person, as applicable, of this Agreement and the other
Loan Documents to which such Person is or is to be a party;
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(b) Incumbency Certificates. A certificate of incumbency certified
by the Secretary or an Assistant Secretary of each Borrower and each
Guarantor certifying the names of the officers of such Person authorized to
sign, as applicable, this Agreement and each of the other Loan Documents to
which such Person is or is to be a party (including the certificates
contemplated herein) together with specimen signatures of such officers;
(c) Articles of Incorporation. The articles of incorporation of each
Borrower and each Guarantor certified by the Secretary of State of state of
incorporation or, as applicable, the appropriate governmental official of any
foreign jurisdiction of organization, of such Person and dated within 10 days
prior to the date of any initial Advance or Letter of Credit issuance;
(d) Bylaws. The bylaws or, as applicable, other similar
organizational document of each Borrower and each Guarantor certified
by the Secretary or an Assistant Secretary of such Person;
(e) Governmental Certificates. Certificates of the appropriate
government officials of the state of incorporation or, as applicable,
foreign jurisdiction of organization, of each Borrower and each Guarantor as
to the existence and account status of such Person, each dated within 10 days
prior to the date of any initial Advance or Letter of Credit issuance;
(f) Revolving Credit Notes. The Revolving Credit Notes executed by
the Borrowers;
(g) Term Notes. The Term Notes executed by the Borrowers;
(h) Security Agreements. A Security Agreement, Charge Debenture
(U.K.) or Charge Debenture (Malaysia), executed, as applicable, by the
Borrowers and the Guarantors;
(i) Trademark Assignment. A trademark assignment executed by
Digicon in form and substance satisfactory to the Agent;
(j) Patent Assignment. A patent assignment executed by Digicon in
form and substance satisfactory to the Agent;
(k) Financing Statements. Uniform Commercial Code financing
statements executed by the Borrowers and Euroseis and covering such
Collateral as the Lender may request;
(l) Guaranties. A Guaranty executed by each Guarantor;
(m) Lockbox Agreements. A Lockbox Agreement executed by each of
Digicon, Geophysical Corp., GFS and Geophysical Limited;
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(n) Insurance Policies. Copies of all insurance policies or a
certificate reflecting the insurance coverages required by Section
10.5, together with loss payable endorsements in favor of the Agent with
respect to all insurance policies covering Collateral;
(o) UCC Searches. The results of a Uniform Commercial Code search
showing all financing statements and other documents or instruments on
file against any of the domestically incorporated Borrowers and Guarantors in
the offices of the Secretary of State of the States of Texas, Delaware, and
Mississippi, as applicable, such searches to be as of a date no more than 10
days prior to the date of any initial Advance or Letter of Credit issuance;
(p) Foreign Searches. The results of a company registry search for
Geophysical Limited in England and Wales and Digicon (Malaysia) in the
Federation of Malaysia;
(q) Opinions of Counsel. A favorable opinion of:
(i) Porter & Hedges, legal counsel to the Borrowers and the
Guarantor in such form as the Agent may request;
(ii) Baker & McKenzie, legal counsel to Geophysical Limited, in
such form as the Agent may request; and
(iii) Skrine & Co., legal counsel to the Guarantor, in such form
as the Agent may request;
(r) Facilities Fee. Evidence satisfactory to the Agent that the
Borrowers have paid the $75,000 facilities fee required hereunder to
the Agent;
(s) Payoff of Other Debt/Releases. Evidence satisfactory
to the Agent that the Borrowers have made arrangements satisfactory to
the Agent to (i) repay in full all (1) Debt of the Borrowers outstanding to
Foothill Capital Corporation and (2) Debt of Digicon to Hanseatic
Corporation, as agent, and (ii) to obtain all releases and terminations as
requested by the Agent;
(t) Collateral Audit. The Agent shall have conducted a
satisfactory pre-closing collateral audit and accounts receivable
systems review, the costs and expenses of which must have been paid by the
Borrowers;
(u) Fiscal 1996 and 1997 Financial Projections. The Agent shall
have received and approved in its sole discretion financial projections
for Digicon and the Subsidiaries for fiscal years 1996 and 1997;
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(v) Borrowing Base Report. A Borrowing Base Report satisfactory to
the Agent in its sole discretion executed by the Borrowers dated as of the
date hereof; and
(w) Attorneys' Fees and Expenses. Evidence that the costs and
expenses (including attorneys' fees) referred to in Section 15.1, to
the extent incurred, shall have been paid in full by the Borrowers, or
arrangements satisfactory to the Agent shall have been made for payment
thereof.
Section 2 All Advances. The obligation of each Bank to make any Advance
(including any initial Advance) and of the Issuing Bank to issue any
Letter of Credit (including any initial Letter of Credit) is subject to the
following additional conditions precedent:
(a) Advance Request Form. The Agent shall have received, in
accordance with the applicable terms hereof, an appropriate Advance
Request Form, executed by an authorized officer of the Borrowers;
(b) No Default. No Default shall have occurred and be continuing,
or would result from such Advance and/or Letter of Credit issuance, as
applicable;
(c) Representations and Warranties. All of the representations and
warranties contained in Article IX hereof and in the other Loan
Documents shall be true and correct on and as of the date of such Advance
and/or Letter of Credit issuance, as applicable with the same force and
effect as if such representations and warranties had been made on and as of
such date; and
(d) Additional Documentation. The Agent shall have received such
additional approvals, opinions, or documents as the Agent or its legal
counsel, Winstead Sechrest & Minick P.C., may request.
ARTICLE IX
Representations and Warranties
To induce the Agent, the Issuing Bank and the Banks to enter into this
Agreement, each of the Borrowers, jointly and severally, represents and
warrants to each such Person that:
Section 1 Corporate Existence. Each of the Borrowers
and each Guarantor (a) is a corporation duly organized, validly existing, and
in good standing under the laws of the jurisdiction of its incorporation; (b)
has all requisite corporate power and authority to own its assets and carry on
its business as now being or as proposed to be conducted; and (c) is qualified
to do business in all jurisdictions in which the nature of its business makes
such qualification necessary and where failure to so qualify would have a
material adverse effect on its business, condition (financial or otherwise),
operations, prospects, or properties. Each of the Borrowers and each Guarantor
has the corporate
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power and authority to execute, deliver, and perform its obligations under this
Agreement and the other Loan Documents to which it is or may become a party.
Section 2 Financial Statements. Digicon has delivered
to the Agent audited consolidated financial statements of Digicon and its
Subsidiaries as at and for the fiscal year ended July 31, 1995 and unaudited
consolidated financial statements of Digicon and its Subsidiaries for the
nine-month period ended April 30, 1996. Such financial statements are true and
correct, have been prepared in accordance with GAAP, and fairly and accurately
present, on a consolidated basis, the financial condition of Digicon and its
Subsidiaries as of the respective dates indicated therein and the results of
operations for the respective periods indicated therein. Neither Digicon nor
any of its Subsidiaries has any material contingent liabilities, liabilities
for taxes, unusual forward or long-term commitments, or unrealized or
anticipated losses from any unfavorable commitments except as referred to or
reflected in such financial statements. There has been no material adverse
change in the business, condition (financial or otherwise), operations,
prospects, or properties of Digicon or any of its Subsidiaries since the
effective date of the most recent financial statements referred to in this
Section.
Section 3 Corporate Action; No Breach. The execution,
delivery, and performance by the Borrowers of this Agreement and the other Loan
Documents to which any of the Borrowers is or may become a party and compliance
with the terms and provisions hereof and thereof have been duly authorized by
all requisite corporate action on the part of such Borrower and do not and will
not (a) violate or conflict with, or result in a breach of, or require any
consent under (i) the articles of incorporation or bylaws or other
organizational documents of Digicon or any of the Subsidiaries, (ii) any
applicable law, rule, or regulation or any order, writ, injunction, or decree
of any Governmental Authority or arbitrator, or (iii) any agreement or
instrument to which Digicon or any of the Subsidiaries is a party or by which
any of them or any of their property is bound or subject, or (b) constitute a
default under any such agreement or instrument, or result in the creation or
imposition of any Lien (except as provided in Article VII) upon any of the
revenues or assets of Digicon or any Subsidiary.
Section 4 Operation of Business. Digicon and each of
its Subsidiaries possess all licenses, permits, franchises, patents,
copyrights, trademarks, and tradenames, or rights thereto, necessary to conduct
their respective businesses substantially as now conducted and as presently
proposed to be conducted, and Digicon and each of its Subsidiaries are not in
violation of any valid rights of others with respect to any of the foregoing in
any respect that could reasonably be expected to have a Material Adverse
Effect.
Section 5 Litigation and Judgments. Except as
disclosed on Schedule 9.5 hereto, there is no action, suit, investigation, or
proceeding before or by any Governmental Authority or arbitrator pending, or to
the knowledge of Digicon, threatened against or affecting Digicon or any
Subsidiary, that would, if adversely determined, have a Material Adverse
Effect. There are no outstanding judgments against Digicon or any Subsidiary.
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Section 6 Rights in Properties; Liens. Digicon and
each Subsidiary have good and indefeasible title to or valid leasehold
interests in all material respects in their respective properties and assets,
real and personal, including the properties, assets, and leasehold interests
reflected in the financial statements described in Section 9.2, and none of the
properties, assets, or leasehold interests of Digicon or any Subsidiary is
subject to any Lien, except as permitted by Section 11.2.
Section 7 Enforceability. This Agreement constitutes,
and the other Loan Documents to which any of the Borrowers is party, when
delivered, shall constitute legal, valid, and binding obligations of such
Borrower, enforceable against such Borrower in accordance with their respective
terms, except as limited by bankruptcy, insolvency, or other laws of general
application relating to the enforcement of creditors' rights and by general
equitable principles.
Section 8 Approvals. No authorization, approval, or
consent of, and no filing or registration with, any Governmental Authority or
third party is or will be necessary for the execution, delivery, or performance
by any Borrower of this Agreement and the other Loan Documents to which any
such Borrower is or may become a party or the validity or enforceability
thereof, except for (a) filings and recordings in respect of the Liens created
pursuant to Loan Documents, (b) those which have been obtained or made prior to
the date hereof, and (c) authorizations, approvals, consents, filings and
registrations to be made in the ordinary course of business in connection with
such Borrower's performance of its obligations hereunder.
Section 9 Debt. Digicon and its Subsidiaries have no
Debt, except as disclosed on Schedule 9.9 hereto.
Section 10 Taxes. Digicon and each Subsidiary have
filed all tax returns (federal, state, local and foreign) required to be filed,
including all income, franchise, employment, property, and sales tax returns,
and have paid all of their respective liabilities for taxes, assessments,
governmental charges, and other levies that are due and payable. The Borrowers
know of no pending investigation of Digicon or any Subsidiary by any taxing
authority or of any pending but unassessed tax liability of Digicon or any
Subsidiary.
Section 11 Use of Proceeds; Margin Securities. Neither
Digicon nor any Subsidiary is engaged principally, or as one of its important
activities, in the business of extending credit for the purpose of purchasing
or carrying margin stock (within the meaning of Regulations G, T, U, or X of
the Board of Governors of the Federal Reserve System), and no part of the
proceeds of any Advance will be used to purchase or carry any margin stock or
to extend credit to others for the purpose of purchasing or carrying margin
stock.
Section 12 ERISA. Digicon and each Subsidiary are in
compliance in all material respects with all applicable provisions of ERISA and
the applicable provisions of the Code relating thereto. No Reportable Event
which is required to be reported to the PBGC pursuant to Section 4043(b) of
ERISA or Prohibited Transaction which could reasonably be expected to have a
Material Adverse Effect has occurred and is continuing with respect to any
Plan. No notice of intent to terminate a
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Plan has been filed, nor has any Plan been terminated. No circumstances exist
which constitute grounds entitling the PBGC to institute proceedings to
terminate, or appoint a trustee to administer, a Plan, nor has the PBGC
instituted any such proceedings. Neither any Borrower nor any ERISA Affiliate
(nor any predecessor to either a Borrower or any ERISA Affiliate) has
completely or partially withdrawn from a Multiemployer Plan. Each Borrower and
each ERISA Affiliate have met their minimum funding requirements under ERISA
with respect to all of their Plans, and the present value of all vested
benefits under each Plan do not exceed the fair market value of all Plan assets
allocable to such benefits, as determined on the most recent valuation date of
the Plan and in accordance with ERISA. Neither any Borrower nor any ERISA
Affiliate has incurred any liability to the PBGC under ERISA.
Section 13 Disclosure. No statement, information,
report, representation, or warranty made by any Borrower in this Agreement or
in any other Loan Document or furnished to the Agent or any Bank in connection
with this Agreement or any of the transactions contemplated hereby (but
excluding all projections and proforma financial statements which shall have
been prepared in good faith and based upon reasonable assumptions) contains any
untrue statement of a material fact and all such statements, information,
reports, representations and warranties, taken as a whole, do not omit to state
any material fact necessary to make the statements herein or therein not
misleading. There is no fact known to any Borrower which has a Material
Adverse Effect, or which could reasonably be expected to have, in the
reasonable judgment of any Borrower, in the future a Material Adverse Effect,
that has not been disclosed in writing to the Agent.
Section 14 Subsidiaries. Digicon has no Subsidiaries
other than those listed on Schedule 9.14 hereto, and Schedule 9.14 sets forth
the jurisdiction of incorporation of each Subsidiary and the percentage of
Digicon's and its Subsidiaries' ownership of the outstanding voting stock of
each such Subsidiary. All of the outstanding capital stock of each Subsidiary
has been validly issued, is fully paid, and is nonassessable.
Section 15 Agreements. Neither Digicon, any Borrower
nor any Guarantor is a party to any indenture, loan, or credit agreement, or to
any lease or other agreement or instrument, or subject to any charter or
corporate restriction which could reasonably be expected to have a Material
Adverse Effect. Neither Digicon, any Borrower nor any Guarantor is in default
in any respect in the performance, observance, or fulfillment of any of the
obligations, covenants, or conditions contained in any agreement or instrument
material to its business to which it is a party where such default or the
effect thereof could reasonably be expected to result in a Material Adverse
Effect.
Section 16 Compliance with Laws. Neither Digicon nor
any Subsidiary is in violation of any law, rule, regulation, order, or decree
of any Governmental Authority or arbitrator except where such Person's failure
to do so could not reasonably be expected to result in a Material Adverse
Effect.
Section 17 Inventory. All inventory that is produced by
the Borrowers has been and will hereafter be produced in compliance with all
applicable laws, rules, regulations, and governmental standards, domestic and
foreign, including, without limitation, the minimum wage and overtime
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provisions of the Fair Labor Standards Act, as amended (29 U.S.C. Section
Section 201-219), and the regulations promulgated thereunder except where such
Person's failure to do so could not reasonably be expected to result in a
Material Adverse Effect.
Section 18 Investment Company Act. Neither Digicon nor
any Subsidiary is an "investment company" within the meaning of the Investment
Company Act of 1940, as amended.
Section 19 Public Utility Holding Company Act. Neither
Digicon nor any Subsidiary is a "holding company" or a "subsidiary company" of
a "holding company" or an "affiliate" of a "holding company" or a "public
utility" within the meaning of the Public Utility Holding Company Act of 1935,
as amended.
Section 20 Environmental Matters. Except as disclosed
on Schedule 9.20 hereto:
(a) Digicon, each Subsidiary, and all of their respective
properties, assets, and operations are in full compliance with all
Environmental Laws, except for occurrences of noncompliance which
could not individually, or in the aggregate, reasonably be expected to
have a Material Adverse Effect. The Borrowers are not aware of, nor
has any Borrower received notice of, any past, present, or future
conditions, events, activities, practices, or incidents which may
interfere with or prevent the compliance or continued compliance of
Digicon and the Subsidiaries with all Environmental Laws, except for
occurrences of noncompliance which could not individually, or in the
aggregate, reasonably be expected to have a Material Adverse Effect;
(b) Digicon and each Subsidiary have obtained all
permits, licenses, and authorizations that are required under
applicable Environmental Laws, and all such permits are in good
standing and Digicon and its Subsidiaries are in compliance with all
of the terms and conditions of such permits, except where failure to
obtain or comply with such permits, licenses or authorizations could
not, individually or in the aggregate, reasonably be expected to have
a Material Adverse Effect;
(c) No Hazardous Materials exist on, about, or within or
have been used, generated, stored, transported, disposed of on, or
Released from any of the properties or assets of Digicon or any
Subsidiary except (i) in amounts that, individually or in the
aggregate, could not reasonably be expected to have a Material Adverse
Effect and (ii) for dynamite and other explosives for which such
Person possesses all licenses and permits necessary to comply with all
Environmental Laws and other federal, state, local and foreign laws,
regulations and requirements pertaining to the use, possession,
disposal, storage or sale thereof, and such use, possession, disposal,
storage or sale thereof is in compliance with Environmental Laws and
such other laws, regulations and requirements except where failure to
obtain or comply with such licenses or permits or to comply with such
laws, regulations or requirements could not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect.
The use which Digicon and the Subsidiaries make and intend to
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make of their respective properties and assets will not result in the
use, generation, storage, transportation, accumulation, disposal, or
Release of any Hazardous Material on, in, or from any of their
properties or assets except (i) in amounts that, individually or in
the aggregate, could not reasonably be expected to have a Material
Adverse Effect and (ii) for dynamite and other explosives for which
such Person possesses all licenses and permits necessary to comply
with all Environmental Laws and other federal, state, local and
foreign laws, regulations and requirements pertaining to the use,
possession, disposal, storage or sale thereof, and such use,
possession, disposal, storage or sale thereof is in compliance with
Environmental Laws and such other laws, regulations and requirements,
except where failure to comply with such laws, regulations or
requirements could not, individually or int he aggregate reasonably be
expected to have a Materially Adverse Effect;
(d) Neither Digicon nor any of its Subsidiaries nor any
of their respective currently or previously owned or leased properties
or operations is subject to any outstanding or, to the best of its
knowledge, threatened order from or agreement with any Governmental
Authority or other Person or subject to any judicial or docketed
administrative proceeding with respect to (i) failure to comply with
Environmental Laws, (ii) Remedial Action, or (iii) any Environmental
Liabilities arising from a Release or threatened Release, which,
individually or in the aggregate, could reasonably be expected to have
a Material Adverse Effect;
(e) There are no conditions or circumstances associated
with the currently or previously owned or leased properties or
operations of Digicon or any of its Subsidiaries that could reasonably
be expected to have a Material Adverse Effect;
(f) Neither Digicon nor any of its Subsidiaries is a
treatment, storage, or disposal facility requiring a permit under the
Resource Conservation and Recovery Act, 42 U.S.C. Section 6901 et
seq., regulations thereunder or any comparable provision of state law.
Digicon and its Subsidiaries are in compliance with all applicable
financial responsibility requirements of all Environmental Laws except
where failure to be in such compliance could not reasonably be
expected to have a Material Adverse Effect;
(g) Neither Digicon nor any of its Subsidiaries has filed
or failed to file any notice required under applicable Environmental
Law reporting a Release, which Release or any aggregation thereof, or
failure to file, could reasonably be expected to have a Material
Adverse Effect; and
(h) To the best of Digicon's and the other Borrowers'
knowledge, no Lien arising under any Environmental Law has attached to
any property or revenues of Digicon or its Subsidiaries.
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ARTICLE X
Positive Covenants
The Borrower covenants and agrees that, as long as the Obligations or
any part thereof are outstanding or any Bank has any Commitment hereunder or
the Issuing Bank has any obligation to issue any Letter of Credit hereunder or
any Letter of Credit Liabilities exist, each of the Borrowers, jointly and
severally, will perform and observe the following positive covenants:
Section 1 Reporting Requirements. The Borrowers will
furnish to the Agent, the Issuing Bank and the Banks:
(a) Annual Financial Statements. As soon as available,
and in any event within 120 days after the end of each fiscal year of
Digicon, beginning with the fiscal year ending July 31, 1996, (i) a
copy of the annual audit report of Digicon and the Subsidiaries for
such fiscal year containing, on a consolidated basis, balance sheets
and statements of operations, cash flow and changes in stockholders
equity as at the end of such fiscal year and for the 12-month period
then ended, in each case setting forth in comparative form the figures
for the preceding fiscal year, all in reasonable detail and audited
by, and accompanied by the report of, Deloitte & Touche LLP, or other
independent certified public accountants of recognized standing
acceptable to the Agent, to the effect that such report has been
prepared in accordance with GAAP; and (ii) a certificate of such
independent certified public accountants to the Agent (A) stating that
to their knowledge no Default has occurred and is continuing, or if in
their opinion a Default has occurred and is continuing, a statement as
to the nature thereof, and (B) confirming the calculations set forth
in the officer's certificate delivered simultaneously therewith;
(b) Quarterly 10-Q of Digicon. As soon as available, and
in any event within 30 days after filing deadline therefor, a copy of
the 10-Q Quarterly Reports of Digicon filed with the Securities and
Exchange Commission or any successor agency;
(c) Certificate of No Default/Compliance. Concurrently
with the delivery of each of the financial statements or 10-Qs, as
applicable, referred to in subsections 10.1(a) and 10.1(b), a
Compliance/Certificate of No Default of the chief financial officer,
the chief accounting officer or the treasurer of Digicon (i) stating,
among other things, that no Default or Event of Default has occurred
and is continuing, or if a Default or Event of Default has occurred
and is continuing, a statement as to the nature thereof and the action
which is proposed to be taken with respect thereto, and (ii) showing
in reasonable detail the calculations demonstrating compliance with
Article XII;
(d) Annual Projected Financial Statements and Capital
Expenditure Projections. Concurrently with the delivery of the
financial statements referred to in subsection 10.1(a) above,
projected financial statements for the upcoming fiscal year of Digicon
and its Subsidiaries, including projected capital expenditures, in
form and detail satisfactory to the
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Agent and prepared under the supervision of the chief financial
officer or the chief accounting officer of Digicon;
(e) Monthly Borrowing Base Report/Agings. As soon as
available, and in any event within 45 days after the end of each
calendar month or such other request of the Agent, a Borrowing Base
Report in form and detail satisfactory to the Agent, including,
without limitation, (i) a reconciliation of accounts receivable
including a calculation and description of all accounts which are not
or should not be included in the definition of "Eligible
Domestic/Domestic Accounts," "Eligible Domestic/Foreign Accounts" or
"Eligible Foreign/Foreign Accounts" and (ii) detailed agings of
accounts receivable and accounts payable, all certified by the chief
financial officer, the chief accounting officer or the treasurer of
Digicon;
(f) Address List for Account Debtors. Within 15 days
after the request therefor by the Agent, an address list for all of
the Borrowers' and the Guarantors' account debtors in form and detail
satisfactory to the Agent;
(g) Management Letters. Promptly upon receipt thereof, a
copy of any management letter or written report submitted to Digicon
by independent certified public accountants with respect to the
business, condition (financial or otherwise), operations, prospects,
or properties of Digicon and the Subsidiaries;
(h) Notice of Litigation. Promptly after the
commencement thereof, notice of all actions, suits, and proceedings
before any Governmental Authority or arbitrator affecting Digicon or
any Subsidiary which could, in the opinion of the management of
Digicon, reasonably be expected to have a Material Adverse Effect;
(i) Notice of Default. As soon as possible and in any
event within 15 days after any of the chief executive officer, the
chief financial officer, the chief accounting officer, the treasurer
or any other employee serving in a comparable capacity (regardless of
title) of any Borrower or Guarantor obtains any knowledge, becomes
aware or should have known through the exercise of prudent business
judgment of the occurrence of any Default, a written notice setting
forth the details of such Default and the action that the Borrowers
have taken and propose to take with respect thereto;
(j) ERISA Reports. Upon the request of the Agent from
time to time copies of all reports, including annual reports, and
notices which Digicon or any Subsidiary files with or receives from
the PBGC, the U.S. Department of Labor under ERISA or the Internal
Revenue Service under the Code; and as soon as possible and in any
event within five days after Digicon or any Subsidiary knows or has
reason to know that any Reportable Event which is required to be
reported to the PBGC pursuant to Section 4043 (b) of ERISA or
Prohibited Transaction which could be reasonably expected to have a
Material Adverse Effect has occurred with respect to any Plan or that
the PBGC or Digicon or any Subsidiary has
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instituted or will institute proceedings under Title IV of ERISA to
terminate any Plan, a certificate of the chief financial officer of
Digicon setting forth the details as to such Reportable Event or
Prohibited Transaction or Plan termination and the action that the
Borrowers propose to take with respect thereto;
(k) Notice of Material Adverse Change. As soon as
possible and in any event within 15 days after any of the chief
executive officer, the chief financial officer, the chief accounting
officer, the treasurer or any other employee serving in a comparable
capacity (regardless of title) of any other Borrower or any Guarantor
obtains any knowledge, becomes aware or should have known through the
exercise of prudent business judgment of the occurrence thereof,
written notice of any matter that could reasonably be expected to have
a Material Adverse Effect;
(l) Proxy Statements, Etc. As soon as available, one
copy of each financial statement, report, notice or proxy statement
sent by Digicon or any Subsidiary to its stockholders generally and
one copy of each regular, periodic or special report, registration
statement, or prospectus, including, without limitation, each Form
10-K Annual Report and each 8-K Current Report, filed by Digicon or
any Subsidiary with the Securities and Exchange Commission or any
successor agency or with any securities exchange; and
(m) General Information. Promptly, such other
information concerning Digicon or any Subsidiary as the Agent or any
Bank may from time to time reasonably request.
Section 2 Maintenance of Existence; Conduct of
Business. Except as provided in Section 11.3, each Borrower will preserve and
maintain, and will cause each Guarantor to preserve and maintain, its corporate
existence and all of its leases, privileges, licenses, permits, franchises,
qualifications, and rights that are necessary or desirable in the ordinary
conduct of its business, except if (a) in the reasonable business judgment of
such Borrower or such Guarantor, as applicable, it is in the best economic
interest not to preserve and maintain such rights and franchises, and (b) such
failure to preserve and maintain such leases, privileges, licenses, permits,
franchises, qualifications and rights could not reasonably be expected to have
a Material Adverse Effect. Each Borrower will conduct, and will cause each
Subsidiary to conduct, its businesses in an orderly and efficient manner in
accordance with good business practices.
Section 3 Maintenance of Properties. Each Borrower
will maintain, keep, and preserve, and cause each Subsidiary to maintain, keep,
and preserve, in all material respects, all of its properties (tangible and
intangible) necessary in the proper conduct of its business in good working
order and condition.
Section 4 Taxes and Claims. Each Borrower will pay or
discharge, and will cause each Subsidiary to pay or discharge, at or before
maturity or before becoming delinquent all taxes, levies, assessments, and
governmental charges imposed on it or its income or profits or any of its
property; provided, however, that neither the Borrowers nor any Subsidiary
shall be required to pay or
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discharge any tax, levy, assessment, or governmental charge which is being
contested in good faith by appropriate proceedings diligently pursued, and for
which adequate reserves have been established.
Section 5 Insurance. Each Borrower will maintain, and
will cause each of the Subsidiaries to maintain, insurance with financially
sound and reputable insurance companies in such amounts and covering such risks
as is usually carried by corporations engaged in similar businesses and owning
similar properties in the same general areas in which the Borrowers and the
Subsidiaries operate, provided that in any event each Borrower will maintain
and cause each Subsidiary to maintain workmen's compensation insurance,
property insurance, comprehensive general liability insurance, and business
interruption insurance with respect to processing centers in accordance with
Borrowers' current practices reasonably satisfactory to the Agent. Each
insurance policy covering Collateral shall name the Agent as additional insured
and as loss payee for the benefit of the Banks and the Issuing Bank and shall
provide that such policy will not be cancelled or reduced without 10 days prior
written notice to the Agent. Except upon the occurrence and during the
continuance of an Event of Default, any loss payable pursuant to any such
policy of insurance shall be payable to the Borrowers as their interests may
appear. Upon the occurrence and during the continuance of an Event of Default
any such loss shall be payable to the Agent and may be applied (and upon the
request of the Borrower incurring such loss any such loss shall be applied) to
the Obligations.
Section 6 Inspection Rights. At any reasonable time
during business hours and from time to time, each Borrower will permit, and
will cause each Subsidiary to permit, representatives of the Agent, the Banks
and the Issuing Bank to examine, copy, and make extracts from its books and
records, to visit and inspect its properties, and to discuss its business,
operations, and financial condition with its officers, employees, and
independent certified public accountants.
Section 7 Keeping Books and Records. Each Borrower
will maintain, and will cause each Subsidiary to maintain, proper books of
record and account in which full, true, and correct entries in conformity with
GAAP shall be made of all dealings and transactions in relation to its business
and activities.
Section 8 Compliance with Laws. Each Borrower will
comply, and will cause each Subsidiary to comply with all applicable laws,
rules, regulations, orders, and decrees of any Governmental Authority or
arbitrator if its failure to comply could reasonably be expected to result in a
Material Adverse Effect.
Section 9 Compliance with Agreements. Each Borrower
will comply, and will cause each Subsidiary to comply with all agreements,
contracts, and instruments binding on it or affecting its properties or
business if its failure to comply could reasonably be expected to result in a
Material Adverse Effect.
Section 10 Further Assurances. Each Borrower will, and
will cause each Subsidiary to, execute and deliver such further agreements and
instruments and take such further action as may be
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requested by the Lender to carry out the provisions and purposes of this
Agreement and the other Loan Documents and to create, preserve, and perfect the
Liens of the Agent in the Collateral.
Section 11 ERISA. Each Borrower will comply, and will
cause each Subsidiary to comply, with all minimum funding requirements, and all
other material requirements, of ERISA and the applicable provisions of the Code
relating thereto, if applicable, so as not to give rise to any liability
thereunder if its failure to comply could reasonably be expected to result in a
Material Adverse Effect.
Section 12 Annual Collateral and Systems Review. At any
reasonable time and from time to time, upon reasonable notice to the Borrowers,
not more than once during any fiscal year of Digicon (unless a Default or Event
of Default then exists, in which case such reviews shall not be so limited),
the Borrowers will permit, and the Borrowers will cause each Guarantor to
permit, the Agent and its representatives, at the sole cost and expense of such
Borrower or such Guarantor, as applicable, not to exceed $5,000 per annum in
the aggregate as to the Borrowers and the Guarantors taken as a group if no
Default exists, to conduct an audit of the accounts receivable of the Borrowers
and the Guarantors and reviews of accounts receivable control systems of the
Borrowers and the Guarantors, and in connection therewith, examine, copy, and
make extracts from the Borrowers' and the Guarantors' books and records, to
visit and inspect its properties and facilities.
Section 13 Lockboxes.
(a) Each of Digicon, Geophysical Corp. and GFS will
direct its respective account debtors to send all payments on their
accounts to the appropriate Domestic Lockbox, or if payment is to be
made by wire transfer to such Person, then to the appropriate Domestic
Lockbox Account.
(b) Geophysical Limited will direct its account debtors
to send all Dollar denominated payments on their accounts to the
appropriate U.K. Lockbox, or if payment is to be made by wire transfer
to such Person, then to the appropriate U.K. Lockbox Account.
(c) Borrowers will deliver to the Agent, at the Agent's
request, copies of all letters and/or sales invoices from such Person
to its account debtors directing that accounts be paid into such
Lockbox and/or Lockbox Account.
Section 14 Contracts.
(a) The Borrowers shall disclose to the Agent in writing
any express rights of offset arising under geophysical or seismic
service contracts of any of the Borrowers or the Guarantors and under
amendments, modifications, addenda, or supplements thereto.
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(b) The Borrowers shall disclose each geophysical or
seismic service contract to which any Borrower or the Guarantors shall
hereafter become a party, and each amendment, supplement, addendum, or
modification hereafter made to any existing geophysical or seismic
service contract, that contains an express provision that restricts
such Person from freely assigning its rights to payment under such
contract.
(c) To the extent practicable, each Borrower will use
reasonable efforts to select, and shall cause each Guarantor to use
reasonable efforts to select, as the choice of law to govern future
geophysical or seismic service contracts to which such Person is a
party, the law of a state of the United States, England, or a foreign
jurisdiction that permits free transferability of the rights to
payment under such contracts.
(d) Within 15 days after the request by the Agent the
Borrowers shall provide the Agent with true and complete copies of all
existing geophysical and seismic service contracts to which any
Borrower or any Guarantor is a party and that provide for aggregate
consideration payable to such Person in excess of $1,000,000, and all
future amendments, supplements, addenda, or modifications to any such
existing or future geophysical or seismic service contract.
ARTICLE XI
Negative Covenants
The Borrowers jointly and severally covenant and agree that, as long
as the Obligations or any part thereof are outstanding or any Bank has any
Commitment hereunder or the Issuing Bank has any obligation to issue any Letter
of Credit hereunder or any Letter of Credit Liabilities exist, each of the
Borrowers, jointly and severally, will observe the following negative
covenants:
Section 1 Debt. No Borrower will incur, create,
assume, or permit to exist, and will permit any Guarantor to incur, create,
assume, or permit to exist, any Debt, except:
(a) Debt and Contingent Liabilities to the Agent, the
Banks and the Issuing Banks pursuant to the Loan Documents;
(b) Purchase money Debt incurred solely for the purpose
of financing the acquisition of fixed assets so long as Borrowers are
and remain in compliance with all of the terms and conditions hereof
including without limitation Section 12.3;
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(c) Existing Debt and Contingent Liabilities described on
Schedule 9.9 hereto;
(d) Extensions, renewals or replacements of Debt
permitted by clauses (b) and (c) above provided that no such
extension, renewal or replacement shall (i) if such Debt is
Subordinated Debt, amend or modify any subordination provisions, if
any, contained in the original Debt so that the Debt, as extended,
renewed or replaced, is not longer Subordinated Debt, or (ii) shorten
the fixed maturity or increase the principal amount of, or increase
the rate of interest to a rate greater than the current market rate at
the time of the extension, renewal or replacement of the original
Debt;
(e) Debt (without duplication) of the type described in
sub-clauses (f) and (h) in the definition of Debt (other than (i)
Funded Debt and (ii) Contingent Liabilities unless the primary obligor
is Digicon or one of its Subsidiaries) incurred in the ordinary course
of business;
(f) Subordinated Indebtedness; and
(g) Additional Debt in an aggregate principal amount not
to exceed $5,000,000 at any time outstanding.
Section 2 Limitation on Liens. The Borrowers will not
incur, create, assume, or permit to exist, and will not permit any Guarantor to
incur, create, assume, or permit to exist, any Lien upon any of their
respective properties, assets, or revenues, whether now owned or hereafter
acquired, except the following (herein referred to as "Permitted Liens"):
(a) Liens disclosed on Schedule 11.2 hereto;
(b) Liens in favor of the Agent for the benefit of the
Banks and the Issuing Bank;
(c) Encumbrances consisting of minor easements, zoning
restrictions, or other restrictions on the use of property that do not
(individually or in the aggregate) materially affect the value of the
assets encumbered thereby or materially impair the ability of the
Borrowers or the Subsidiaries to use such assets in their respective
businesses, and none of which is violated in any material respect by
existing or proposed structures or land use;
(d) Liens for taxes, assessments, or other governmental
charges which are not delinquent for longer than 90 days or which are
being contested in good faith and for which adequate reserves have
been established;
(e) Liens of landlords, tenants, vendors, mechanics,
materialmen, warehousemen, carriers, or other similar statutory Liens
securing obligations that are not delinquent for longer
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than 90 days and are incurred in the ordinary course of business or
which are being contested in good faith and for which adequate
reserves have been established;
(f) Liens resulting from good faith deposits to secure
payments of workmen's compensation or other social security programs
or to secure the performance of tenders, statutory obligations, surety
and appeal bonds, bids, or contracts (other than for payment of Debt),
or leases made in the ordinary course of business;
(g) Liens on property securing purchase money Debt
permitted by Section 11.1 incurred solely for the purpose of financing
the acquisition of such property; and
(h) Licenses of surveys or portions thereof in the Data
Library to others in the ordinary course of business.
Section 3 Mergers, Dissolutions, Etc. The Borrowers
will not, and will not permit any Guarantor to, become a party to a merger or
consolidation, or sell all or substantially all of their assets or wind-up,
dissolve, or liquidate except (a) the Combination, (b) any Borrower or any
Guarantor may be merged or consolidated with or into another Borrower or
another Guarantor, as applicable (provided that a Borrower shall be the
continuing or surviving corporation) and (c) any Borrower or any Guarantor may
liquidate or dissolve itself if, in connection therewith, all of its assets are
transferred to a Borrower.
Section 4 Restricted Payments. Digicon will not
declare or pay any Dividends (other than Dividends payable in common stock of
Digicon) without the prior written approval of the Agent or make any other
payment or distribution (in cash, property, or obligations) on account of its
capital stock, or redeem, purchase, retire, or otherwise acquire any of its
capital stock, or permit any of their respective Subsidiaries to purchase or
otherwise acquire any capital stock of Digicon or another Subsidiary, or set
apart any money for a sinking or other analogous fund for any dividend or other
distribution on its capital stock or for any redemption, purchase, retirement,
or other acquisition of any of its capital stock.
Section 5 Loans and Investments. The Borrowers will
not make, and will not permit any Guarantor to make, any advance, loan,
extension of credit, or capital contribution to or investment in, or purchase,
or permit any Guarantor to purchase, any stock, bonds, notes, debentures or
other securities of, any Person, except:
(a) advances or loans to, or investments in, Subsidiaries
(other than the Borrowers and the Guarantors) not to exceed $5,000,000
in the aggregate at any time outstanding (net of repayments of
advances and loans by such Subsidiaries taken as a group and of
returns on such investments) plus the proceeds of equity offerings
after the date hereof;
(b) the non-cash allocation of overhead by Digicon to its
various Subsidiaries in accordance with its historical practices;
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(c) investments in and loans and advances by one Borrower
or one Guarantor to another Borrower or, as applicable, another
Guarantor;
(d) acquisitions of stock or assets, individually or in
the aggregate, during the term hereof, less than $25,000,000 in total
purchase price (including assumed liabilities), whether for cash,
debt, stock or other property, or any combination thereof;
(e) the Combination;
(f) extensions of credit to customers in the ordinary
course of business;
(g) stocks, bonds, notes, debentures and other securities
accepted from customers in connection with good faith work-outs of
past due receivables or in bankruptcy, insolvency or similar
proceedings;
(h) loans and advances to employees of Digicon or any
Subsidiary for travel, entertainment and relocation expenses incurred
in the ordinary course of business;
(i) the making or acquisition of beneficial interests in,
or the making of loans, advances or capital contributions to, one or
more joint ventures as to which Digicon or any Subsidiary is a
venturer, so long as such joint ventures are formed for the purpose of
operating seismic data acquisition or processing businesses, in an
aggregate principal amount not to exceed $3,000,000 at any time
outstanding;
(j) any bonds or other obligations of the United States
of America which, as to principal and interest, constitute direct
obligations or are guaranteed by the United States of America;
(k) any bonds, debentures, participation certificates,
notes or other obligations of any agency or corporation or
instrumentality of the United States of America, the obligations of
which are unconditionally guaranteed by the United States of America;
(l) obligations of a state, territory or possession of
the United States, the interest on which is excluded from gross income
for federal income taxation purposes and which bear a rating in one of
the two highest rating categories by Standard & Poor's Corporation or
Moody's Investors Service;
(m) interest bearing accounts, interest bearing deposits,
eurodollar investments, or certificates of deposit issued by or
bankers acceptances drawn or accepted by, banks or trust companies,
including the Agent, organized under the laws of the United States or
any state thereof, but only with institutions whose capital and
surplus is in excess of $50,000,000;
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(n) commercial paper, floating rate notes or master notes
rated A-2 or better by Standard & Poor's Corporation or P-2 or better
by Moody's Investors Service;
(o) repurchase agreements collateralized by obligations
issued or guaranteed as to the payment of principal and interest by
the full faith and credit of the United States;
(p) units of taxable money market mutual funds comprised
of obligations described in (j) through (o) above; and
(q) loans, advances, extensions of credit, capital
contributions to or investments in, or purchases of stocks, bonds,
notes, debentures, or other securities in an aggregate principal
amount not to exceed $2,000,000 at any time outstanding.
Section 6 Transactions With Affiliates. The Borrowers
will not enter into, and will not permit any Guarantor to enter into, any
transaction, including, without limitation, the purchase, sale, or exchange of
property or the rendering of any service, with any Affiliate of any Borrower or
any Guarantor, except in the ordinary course of and pursuant to the reasonable
requirements of such Borrower's or such Guarantor's business and upon fair and
reasonable terms no less favorable to such Borrower or such Guarantor's than
would be obtained in a comparable arm's-length transaction with a Person not an
Affiliate of such Borrower or such Guarantor; provided that the foregoing shall
not prohibit the Borrowers or the Guarantors from entering into management
contracts with Affiliates upon fair and reasonable terms in the ordinary course
of business or from entering into transactions permitted by this Agreement.
Section 7 Disposition of Assets. The Borrowers will
not sell, lease, assign, transfer, or otherwise dispose of any of their assets,
or permit any Guarantor to do so with any of its assets, except (a) licensing
of surveys in the Data Library in the ordinary course of business, (b)
dispositions of inventory in the ordinary course of business, and, (c) so long
as no Event of Default has occurred and is continuing, isolated dispositions of
tangible personal property of the Borrowers (not including the Data Library)
that do not exceed $250,000 individually or that do not aggregate in excess of
$1,000,000, in each case per annum.
Section 8 Sale and Leaseback. The Borrowers will not
enter into, and will not permit any Guarantor to enter into, any arrangement
with any Person pursuant to which any of them leases from such Person real or
personal property that has been or is to be sold or transferred, directly or
indirectly, by any of them to such Person, except that the Borrowers and the
Guarantors may enter into such arrangements as financing techniques affecting
assets acquired after the date hereof to the extent permitted by Section 11.1
hereof.
Section 9 Nature of Business. The Borrowers will not,
and will not permit any Guarantor to, engage in any business other than the
businesses in which they are engaged as of the date hereof and other businesses
reasonably related thereto.
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Section 10 Environmental Protection. If, as a result
thereof, a Material Adverse Effect could be reasonably be expected to result
therefrom, the Borrowers will not, and will not permit any Guarantor to, (a)
use (or permit any tenant to use) any of their respective properties or assets
for the handling, processing, storage, transportation, or disposal of any
Hazardous Material except in compliance with Environmental Law, (b) generate
any Hazardous Material except in compliance with Environmental Law, (c) conduct
any activity that is likely to cause a Release or threatened Release of any
Hazardous Material, or (d) otherwise conduct any activity or use any of their
respective properties or assets in any manner that is likely to violate any
Environmental Law or create any Environmental Liabilities for which any
Borrower or any of the Subsidiaries would be responsible.
Section 11 Accounting. The Borrowers will not, and will
not permit any of their respective Subsidiaries to, change its fiscal year or
make any change (a) in accounting treatment or reporting practices, except as
required by GAAP and disclosed to the Agent, the Banks and the Issuing Banks,
or (b) in tax reporting treatment, except as required by law and disclosed to
the Agent, the Banks and the Issuing Banks.
Section 12 Contracts.
The Borrowers will not, and will not permit any Guarantor to, assign
the rights to payment under a geophysical or seismic service contract to any
Person, other than to the Agent.
ARTICLE XII
Financial Covenants
The Borrowers jointly and severally covenant and agree that, as long
as the Obligations or any part thereof are outstanding or any Bank has any
Commitment hereunder or the Issuing Bank has any obligation to issue Letters of
Credit hereunder or any Letter of Credit Liabilities exist, the Borrowers
jointly and severally will observe and perform the following financial
covenants:
Section 1 Consolidated Tangible Net Worth. Digicon
will maintain Consolidated Tangible Net Worth, in an amount not less than
$64,000,000 less expenses and asset writedowns incurred or made, as applicable,
in connection with the Combination and other mergers permitted under Section
11.3, from the date hereof throughout the remainder of the term of this
Agreement.
Section 2 Cash Flow Coverage Ratio. Digicon and its
Subsidiaries will at all times maintain on a consolidated basis a Cash Flow
Coverage Ratio, calculated quarterly as at the end of each January, April, July
and October, of at least 1.30 to 1.00.
Section 3 Funded Debt to Capitalization Ratio. Digicon
and its Subsidiaries will at all times maintain on a consolidated basis a
Funded Debt to Capitalization Ratio, calculated quarterly as at the end of each
January, April, July and October, of not greater than 0.50 to 1.00 from the
date hereof throughout the remaining term of this Agreement.
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Section 4 Capital Expenditures. Digicon will not
permit the aggregate capital expenditures, calculated on a consolidated basis,
of Digicon and the Subsidiaries to exceed $25,000,000 during any fiscal year of
Digicon plus amounts financed through equity offering proceeds received after
the date hereof during such fiscal year.
Section 5 Current Ratio. Digicon and its Subsidiaries
will at all times maintain a minimum Current Ratio, calculated quarterly as of
the end of each January, April, July and October, of at least 1.15 to 1.00.
Section 6 Renegotiation. Upon the completion of any
merger or acquisition involving at least $25,000,000, including without
limitation, the Combination, the financial covenants in this Article XII shall
be renegotiated as agreed among the Borrowers and the Agent. If the Borrowers
and the Agent do not agree on new financial covenants within 30 days of the
Combination or any merger or acquisition, the Revolving Credit Commitments and
the Term Loan Commitments shall terminate 180 days thereafter, and the
Revolving Credit Advances and the Term Loan Advances shall automatically become
due in each case 180 days after such merger, acquisition or Combination. The
Borrowers jointly and severally agree to repay the Revolving Credit Notes and
the Term Notes in full on or before the expiration of such 180 day period and
deposit with and pledge to the Agent cash or cash equivalent investments in an
amount equal to outstanding Letter of Credit Liabilities on such date.
ARTICLE XIII
Default
Section 1 Events of Default. Each of the following
shall be deemed an "Event of Default":
(a) The Borrowers shall fail to pay any interest or
principal portion of the Obligations when due or any other portion of
the Obligations within five days after notice from the Agent or any
Bank.
(b) Any representation or warranty made or deemed made by
any Borrower or any Obligated Party (or any of their respective
officers) in any Loan Document or in any certificate, report, notice,
or financial statement furnished at any time in connection with this
Agreement shall be false, misleading, or erroneous in any material
respect when made or deemed to have been made.
(c) Any Borrower or any Obligated Party shall fail to
perform, observe, or comply with any covenant, agreement, or term
contained in Section 10.1(i), Article XI or Article XII of this
Agreement.
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(d) Any Borrower or any Obligated Party shall fail to
perform, observe, or comply with any covenant, agreement, or term
contained in this Agreement (other than the covenants, agreements and
terms the subject of Sections 13.1(a) or 13.1(c) above) or any other
Loan Document and such failure shall continue unremedied for a period
ended on the earlier to occur of (i) 15 days after notice from the
Agent or any Bank and (ii) the chief executive officer, the chief
financial officer, the chief accounting officer, the treasurer or any
other employee serving in a comparable capacity (regardless of title)
of any Borrower or any Guarantor obtains knowledge thereof.
(e) Any Borrower or any Obligated Party shall commence a
voluntary proceeding seeking liquidation, reorganization, or other
relief with respect to itself or its debts under any bankruptcy,
insolvency, or other similar law now or hereafter in effect or seeking
the appointment of a trustee, receiver, liquidator, custodian, or
other similar official of it or a substantial part of its property or
shall consent to any such relief or to the appointment of or taking
possession by any such official in an involuntary case or other
proceeding commenced against it or shall make a general assignment for
the benefit of creditors or shall generally fail to pay its debts as
they become due or shall take any corporate action to authorize any of
the foregoing.
(f) An involuntary proceeding shall be commenced against
any Borrower or any Obligated Party seeking liquidation,
reorganization, or other relief with respect to it or its debts under
any bankruptcy, insolvency, or other similar law now or hereafter in
effect or seeking the appointment of a trustee, receiver, liquidator,
custodian, or other similar official for it or a substantial part of
its property, and such involuntary proceeding shall remain undismissed
and unstayed for a period of 60 days.
(g) Any Borrower or any Obligated Party shall fail to
discharge within a period of 30 days after the commencement thereof
any attachment, sequestration, or similar proceeding or proceedings
involving an aggregate amount in excess of $1,000,000 against any of
its assets or properties.
(h) A final judgment or judgments for the payment of
money in excess of $1,000,000 in the aggregate shall be rendered by a
court or courts against any Borrower, any of its Subsidiaries, or any
Obligated Party and the same shall not be discharged (or provision
shall not be made for such discharge), or a stay of execution thereof
shall not be procured, within 30 days from the date of entry thereof
and such Borrower or the relevant Subsidiary or Obligated Party shall
not, within said period of 30 days, or such longer period during which
execution of the same shall have been stayed, appeal therefrom and
cause the execution thereof to be stayed during such appeal.
(i) Any Borrower, any Subsidiary, or any Obligated Party
shall fail to pay when due any principal of or interest on any Debt
(other than the Obligations), or the maturity of
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any such Debt shall have been accelerated, or any such Debt shall have
been required to be prepaid prior to the stated maturity thereof.
(j) This Agreement or any other Loan Document shall cease
to be in full force and effect or shall be declared null and void or
the validity or enforceability thereof shall be contested or
challenged by any Borrower, any Subsidiary, any Obligated Party or any
of their respective shareholders, or any Borrower or any Obligated
Party shall deny that it has any further liability or obligation under
any of the Loan Documents, or any lien or security interest created by
the Loan Documents shall for any reason cease to be a valid, first
priority perfected security interest in and lien upon any of the
Collateral purported to be covered thereby.
(k) The Consolidated Net Income of Digicon for any two
consecutive calendar quarters shall be negative (i.e., a loss) and 15
days shall have expired since the requested time for delivery of the
financial statements reflecting such loss; provided that for the
fiscal quarter during which the Combination is consummated, expenses
related to the Combination and writedowns (determined in accordance
with GAAP) shall be excluded from the computation of Consolidated Net
Income for the purposes of this sub-section.
(l) The Consolidated Net Income of Digicon for any fiscal
year shall be negative (i.e., a loss) and 15 days shall have expired
since the requested time for delivery of the financial statements
reflecting such loss; provided that for fiscal year end 1996, Merger
related expenses and writedowns (determined in accordance with GAAP)
shall be excluded from the computation of Consolidated Net Income for
the purposes of this sub-section.
(m) Any Borrower, any of its Subsidiaries, or any
Obligated Party, or any of their properties, revenues, or assets,
shall become subject to an order of forfeiture, seizure, or
divestiture (whether under RICO or otherwise) and the same shall not
have been discharged within 30 days from the date of entry thereof.
Section 2 Remedies Upon Default. If any Event of
Default shall occur and be continuing, the Agent may (and if directed by
Required Banks, shall) without notice terminate the Commitments and declare the
Obligations or any part thereof to be immediately due and payable, and the same
shall thereupon become immediately due and payable, without notice, demand,
presentment, notice of dishonor, notice of acceleration, notice of intent to
accelerate, notice of intent to demand, protest, or other formalities of any
kind, all of which are hereby expressly waived by the Borrowers; provided,
however, that upon the occurrence of an Event of Default under Section 13.1(e)
or Section 13.1(f), the Commitments shall automatically terminate, and the
Obligations shall become immediately due and payable without notice, demand,
presentment, notice of dishonor, notice of acceleration, notice of intent to
accelerate, notice of intent to demand, protest, or other formalities of any
kind, all of which are hereby expressly waived by the Borrowers. Except as
otherwise set forth herein, if any Event of Default shall occur and be
continuing, the Agent may exercise all rights and remedies available to it in
law or in equity, under the Loan Documents, or otherwise.
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Section 3 Letters of Credit. If any Event of Default
shall occur and be continuing, Borrower shall, if requested by the Agent,
immediately deposit with and pledge to the Agent cash or cash equivalent
investments in an amount equal to outstanding Letter of Credit Liabilities.
Section 4 Performance by the Agent. If any Borrower
shall fail to perform any covenant or agreement contained in any of the Loan
Documents, the Agent may, at the direction of Required Banks, perform or
attempt to perform such covenant or agreement on behalf of such Borrower. In
such event, the Borrowers shall, at the request of the Agent, promptly pay any
amount expended by the Agent or the Banks in connection with such performance
or attempted performance to the Agent, together with interest thereon at the
Default Rate from and including the date of such expenditure to but excluding
the date such expenditure is paid in full. Notwithstanding the foregoing, it
is expressly agreed that neither the Agent, the Issuing Bank nor any Bank shall
have any liability or responsibility for the performance of any obligation of
any Borrower under this Agreement or any other Loan Document.
ARTICLE XIV
The Agent
Section 1 Appointment, Powers and Immunities. In order
to expedite the various transactions contemplated by this Agreement, the Banks
and the Issuing Bank hereby irrevocably appoint and authorize Agent to act as
their Agent hereunder and under each of the other Loan Documents. Agent
consents to such appointment and agrees to perform the duties of the Agent as
specified herein. The Banks and the Issuing Bank authorize and direct the
Agent to take such action in their name and on their behalf under the terms and
provisions of the Loan Documents and to exercise such rights and powers
thereunder as are specifically delegated to or required of the Agent for the
Banks and the Issuing Bank, together with such rights and powers as are
reasonably incidental thereto. The Agent is hereby expressly authorized to act
as the Agent on behalf of itself, the other Banks and the Issuing Bank:
(a) To receive on behalf of each of the Banks, the
Issuing Bank and the Agent any payment of principal, interest, fees or
other amounts paid pursuant to this Agreement and the Notes and to
distribute to each Bank, the Issuing Bank and the Agent, or any or
some of them its share of all payments so received as provided in this
Agreement;
(b) To receive all documents and items to be furnished
under the Loan Documents;
(c) To act as nominee for and on behalf of the Banks, the
Issuing Bank and the Agent in and under the Loan Documents;
(d) To arrange for the means whereby the funds of the
Banks are to be made available to the Borrower;
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(e) To distribute to the Banks and the Issuing Bank
information, requests, notices, payments, prepayments, documents and
other items received from the Borrower, the other Obligated Parties,
and other Persons;
(f) To execute and deliver to the Borrower, the other
Obligated Parties, and other Persons, all requests, demands,
approvals, notices, and consents received from the Banks and the
Issuing Bank;
(g) To the extent permitted by the Loan Documents, to
exercise on behalf of itself, each Bank and the Issuing Bank all
rights and remedies of Banks upon the occurrence of any Event of
Default;
(h) To accept, execute, and deliver any security
documents as the secured party, including, without limitation all UCC
financing statements; and
(i) To take such other actions as may be requested by
Required Banks.
Neither the Agent nor any of its Affiliates, officers, directors,
employees, attorneys, or agents shall be liable for any action taken or omitted
to be taken by any of them hereunder or otherwise in connection with this
Agreement or any of the other Loan Documents except for its or their own gross
negligence or willful misconduct. Without limiting the generality of the
preceding sentence, the Agent (i) may treat the payee of any Note as the holder
thereof until the Agent receives written notice of the assignment or transfer
thereof signed by such payee and in form satisfactory to the Agent; (ii) shall
have no duties or responsibilities except those expressly set forth in this
Agreement and the other Loan Documents, and shall not by reason of this
Agreement or any other Loan Document be a trustee or fiduciary for any Bank or
the Issuing Bank; (iii) shall not be required to initiate any litigation or
collection proceedings hereunder or under any other Loan Document except to the
extent requested by Required Banks; (iv) shall not be responsible to the Banks
or the Issuing Bank for any recitals, statements, representations or warranties
contained in this Agreement or any other Loan Document, or any certificate or
other document referred to or provided for in, or received by any of them
under, this Agreement or any other Loan Document, or for the value, validity,
effectiveness, enforceability, or sufficiency of this Agreement or any other
Loan Document or any other document referred to or provided for herein or
therein or for any failure by any Person to perform any of its obligations
hereunder or thereunder; (v) may consult with legal counsel (including counsel
for the Borrowers), independent public accountants, and other experts selected
by it and shall not be liable for any action taken or omitted to be taken in
good faith by it in accordance with the advice of such counsel, accountants, or
experts; and (vi) shall incur no liability under or in respect of any Loan
Document by acting upon any notice, consent, certificate, or other instrument
or writing believed by it to be genuine and signed or sent by the proper party
or parties. As to any matters not expressly provided for by this Agreement,
the Agent shall in all cases be fully protected in acting, or in refraining
from acting, hereunder in accordance with instructions signed by Required
Banks, and such instructions of Required Banks and any action taken or failure
to act pursuant thereto shall be binding on all of the
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Banks; provided, however, that the Agent shall not be required to take any
action which exposes the Agent to personal liability or which is contrary to
this Agreement or any other Loan Document or applicable law.
Section 2 Rights of Agent as a Bank. With respect to
its Commitment, the Advances made by it and the Notes issued to it, Agent in
its capacity as a Bank hereunder shall have the same rights and powers
hereunder as any other Bank and may exercise the same as though it were not
acting as the Agent or the Issuing Bank and the term "Bank" or "Banks" shall,
unless the context otherwise indicates, include the Agent in its individual
capacity. The Agent and its Affiliates may (without having to account therefor
to any Banks or the Issuing Bank) accept deposits from, lend money to, act as
trustee under indentures of, provide merchant banking services to, and
generally engage in any kind of business with the Borrowers, any of their
Subsidiaries, any other Obligated Party, and any other Person who may do
business with or own securities of any of the Borrowers, any Subsidiary, or any
other Obligated Party, all as if it were not acting as the Agent and without
any duty to account therefor to the Banks or the Issuing Bank.
Section 3 Sharing of Payments, Etc. If any Bank shall
obtain any payment of any principal of or interest on any Advance made by it
under this Agreement or payment of any other obligation under the Loan
Documents then owed by any Borrower or any other Obligated Party to such Bank,
whether voluntary, involuntary, through the exercise of any right of setoff,
banker's lien, counterclaim or similar right, or otherwise, in excess of its
pro rata share, such Bank shall promptly purchase from the other Banks
participations in the Advances held by them hereunder in such amounts, and make
such other adjustments from time to time as shall be necessary to cause such
purchasing Bank to share the excess payment ratably with each of the other
Banks in accordance with its pro rata portion thereof. To such end, all of the
Banks shall make appropriate adjustments among themselves (by the resale of
participations sold or otherwise) if all or any portion of such excess payment
is thereafter rescinded or must otherwise be restored. Each Borrower agrees,
to the fullest extent it may effectively do so under applicable law, that any
Bank so purchasing a participation in the Advances made by the other Banks may
exercise all rights of setoff, banker's lien, counterclaim, or similar rights
with respect to such participation as fully as if such Bank were a direct
holder of Advances to such Borrower in the amount of such participation.
Nothing contained herein shall require any Bank to exercise any such right or
shall affect the right of any Bank to exercise, and retain the benefits of
exercising, any such right with respect to any other indebtedness or obligation
of any Borrower.
Section 4 INDEMNIFICATION. THE BANKS HEREBY AGREE TO
INDEMNIFY THE AGENT FROM AND HOLD THE AGENT AND THE ISSUING BANK HARMLESS
AGAINST (TO THE EXTENT NOT REIMBURSED UNDER SECTIONS 15.1 AND 15.2, BUT WITHOUT
LIMITING THE OBLIGATIONS OF THE BORROWERS UNDER SECTIONS 15.1 AND 15.2),
RATABLY IN ACCORDANCE WITH THEIR RESPECTIVE COMMITMENTS, ANY AND ALL
LIABILITIES, OBLIGATIONS, LOSSES, DAMAGES, PENALTIES, ACTIONS, JUDGMENTS,
DEFICIENCIES, SUITS, COSTS, EXPENSES (INCLUDING ATTORNEYS' FEES), AND
DISBURSEMENTS OF ANY KIND OR
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NATURE WHATSOEVER WHICH MAY BE IMPOSED ON, INCURRED BY, OR ASSERTED AGAINST THE
AGENT OR THE ISSUING BANK IN ANY WAY RELATING TO OR ARISING OUT OF ANY OF THE
LOAN DOCUMENTS OR ANY ACTION TAKEN OR OMITTED TO BE TAKEN BY THE AGENT OR THE
ISSUING BANK UNDER OR IN RESPECT OF ANY OF THE LOAN DOCUMENTS; PROVIDED,
FURTHER, THAT NO BANK SHALL BE LIABLE FOR ANY PORTION OF THE FOREGOING TO THE
EXTENT CAUSED BY THE AGENT'S OR THE ISSUING BANK'S GROSS NEGLIGENCE OR WILLFUL
MISCONDUCT. WITHOUT LIMITATION OF THE FOREGOING, IT IS THE EXPRESS INTENTION
OF THE BANKS THAT THE AGENT AND THE ISSUING BANK SHALL BE INDEMNIFIED HEREUNDER
FROM AND HELD HARMLESS AGAINST ALL OF SUCH LIABILITIES, OBLIGATIONS, LOSSES,
DAMAGES, PENALTIES, ACTIONS, JUDGMENTS, DEFICIENCIES, SUITS, COSTS, EXPENSES
(INCLUDING ATTORNEYS' FEES), AND DISBURSEMENTS OF ANY KIND OR NATURE DIRECTLY
OR INDIRECTLY ARISING OUT OF OR RESULTING FROM THE SOLE OR CONTRIBUTORY
NEGLIGENCE OF THE AGENT OR THE ISSUING BANK. WITHOUT LIMITING ANY OTHER
PROVISION OF THIS SECTION, EACH BANK AGREES TO REIMBURSE THE AGENT AND THE
ISSUING BANK PROMPTLY UPON DEMAND FOR ITS PRO RATA SHARE (CALCULATED ON THE
BASIS OF THE COMMITMENTS) OF ANY AND ALL OUT-OF-POCKET EXPENSES (INCLUDING
ATTORNEYS' FEES) INCURRED BY THE AGENT OR THE ISSUING BANK IN CONNECTION WITH
THE PREPARATION, EXECUTION, DELIVERY, ADMINISTRATION, MODIFICATION, AMENDMENT
OR ENFORCEMENT (WHETHER THROUGH NEGOTIATIONS, LEGAL PROCEEDINGS, OR OTHERWISE)
OF, OR LEGAL ADVICE IN RESPECT OF RIGHTS OR RESPONSIBILITIES UNDER, THE LOAN
DOCUMENTS, TO THE EXTENT THAT THE AGENT OR THE ISSUING BANK IS NOT REIMBURSED
FOR SUCH EXPENSES BY THE BORROWERS.
Section 5 Independent Credit Decisions. Each Bank
agrees that it has independently and without reliance on the Agent, the Issuing
Bank, or any other Bank, and based on such documents and information as it has
deemed appropriate, made its own credit analysis of the Borrowers and decision
to enter into this Agreement and that it will, independently and without
reliance upon the Agent, the Issuing Bank, or any other Bank, and based upon
such documents and information as it shall deem appropriate at the time,
continue to make its own analysis and decisions in taking or not taking action
under this Agreement or any of the other Loan Documents. The Agent shall not
be required to keep itself informed as to the performance or observance by the
Borrowers or any Obligated Party of this Agreement or any other Loan Document
or to inspect the properties or books of the Borrowers or any Obligated Party.
Except for notices, reports and other documents and information expressly
required to be furnished to the Banks by the Agent hereunder or under the other
Loan Documents, the Agent shall not have any duty or responsibility to provide
the Issuing Bank, or any Bank with any credit or other financial information
concerning the affairs, financial condition or business of the Borrowers or any
Obligated Party (or any of their Affiliates) which may come into the possession
of the Agent or any of its Affiliates.
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Section 6 Several Commitments. The Commitments and
other obligations of the Banks under this Agreement are several. The default
by any Bank in making an Advance in accordance with its Commitment shall not
relieve the other Banks of their obligations under this Agreement. In the
event of any default by any Bank in making any Advance, each nondefaulting Bank
shall be obligated to make its Advance but shall not be obligated to advance
the amount which the defaulting Bank was required to advance hereunder. In no
event shall any Bank be required to advance an amount or amounts which shall in
the aggregate exceed such Bank's Commitment. No Bank shall be responsible for
any act or omission of any other Bank.
Section 7 Successor Agent. Subject to the appointment
and acceptance of a successor Agent as provided below, the Agent may resign at
any time by giving notice thereof to the Banks and the Borrower and the Agent
may be removed at any time with or without cause by Required Banks. Upon any
such resignation or removal, Required Banks (with the consent of Digicon, with
consent will not be unreasonably withheld) will have the right to appoint a
successor Agent. If no successor Agent shall have been so appointed by
Required Banks and shall have accepted such appointment within 30 days after
the retiring Agent's giving of notice of resignation or the Required Banks'
removal of the retiring Agent, then the retiring Agent may, on behalf of the
Banks, appoint a successor Agent, which shall be a commercial bank organized
under the laws of the United States of America or any State thereof and having
combined capital and surplus of at least $500,000,000. Upon the acceptance of
its appointment as successor Agent, such successor Agent shall thereupon
succeed to and become vested with all rights, powers, privileges, immunities,
and duties of the resigning or removed Agent, and the resigning or removed
Agent shall be discharged from its duties and obligations under this Agreement
and the other Loan Documents. After any Agent's resignation or removal as
Agent, the provisions of this Article XIV shall continue in effect for its
benefit in respect of any actions taken or omitted to be taken by it while it
was the Agent.
Section 8 Partial Releases. So long as no Event of
Default (or event which, with the giving of notice or the passage of time or
both, would constitute an Event of Default) has occurred and is continuing, the
Agent (on behalf of itself, the Issuing Bank and the Banks) shall release its
security interest in any item or items sold or otherwise disposed of in a
transaction permitted hereby, and hereby agrees to execute such partial
releases and other statements or agreements as the Borrowers shall reasonably
request and at the Borrower's expense to evidence the release of Agent's
security interest therein.
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ARTICLE XV
Miscellaneous
Section 1 Expenses. The Borrowers hereby jointly and
severally agree to pay on demand: (a) all reasonable costs and expenses of the
Agent in connection with the preparation, negotiation, execution, and delivery
of this Agreement and the other Loan Documents and any and all amendments,
modifications, renewals, extensions, and supplements thereof and thereto,
including, without limitation, the reasonable fees and expenses of legal
counsel for the Agent, the Issuing Bank and/or the Banks, (b) all reasonable
costs and expenses of the Agent, the Issuing Bank and/or the Banks in
connection with any Default and the enforcement of this Agreement or any other
Loan Document, including, without limitation, the reasonable fees and expenses
of legal counsel for the Agent, the Issuing Bank and/or the Banks, (c) all
transfer, stamp, documentary, or other similar taxes, assessments, or charges
levied by any Governmental Authority in respect of this Agreement or any of the
other Loan Documents, (d) all costs, expenses, assessments, and other charges
incurred in connection with any filing, registration, recording, or perfection
of any security interest or Lien contemplated by this Agreement or any other
Loan Document, and (e) all other reasonable costs and expenses incurred by the
Agent, the Issuing Bank and/or the Banks in connection with this Agreement or
any other Loan Document, including, without limitation, all costs, expenses,
and other charges incurred in connection with obtaining audit, or appraisal in
respect of the Collateral.
SECTION 2 INDEMNIFICATION. THE BORROWERS JOINTLY AND
SEVERALLY SHALL INDEMNIFY EACH OF THE AGENTS, THE ISSUING BANK, AND THE BANKS
AND EACH AFFILIATE THEREOF AND THEIR RESPECTIVE OFFICERS, DIRECTORS, EMPLOYEES,
ATTORNEYS, AND AGENTS FROM, AND HOLD EACH OF THEM HARMLESS AGAINST, ANY AND ALL
LOSSES, LIABILITIES, CLAIMS, DAMAGES, PENALTIES, JUDGMENTS, DISBURSEMENTS,
COSTS, AND EXPENSES (INCLUDING ATTORNEYS' FEES) TO WHICH ANY OF THEM MAY BECOME
SUBJECT WHICH DIRECTLY OR INDIRECTLY ARISE FROM OR RELATE TO (A) THE
NEGOTIATION, EXECUTION, DELIVERY, PERFORMANCE, ADMINISTRATION, OR ENFORCEMENT
OF ANY OF THE LOAN DOCUMENTS, (B) ANY OF THE TRANSACTIONS CONTEMPLATED BY THE
LOAN DOCUMENTS, (C) ANY BREACH BY ANY BORROWER OF ANY REPRESENTATION, WARRANTY,
COVENANT, OR OTHER AGREEMENT CONTAINED IN ANY OF THE LOAN DOCUMENTS, (D) THE
PRESENCE, RELEASE, THREATENED RELEASE, DISPOSAL, REMOVAL, OR CLEANUP OF ANY
HAZARDOUS MATERIAL LOCATED ON, ABOUT, WITHIN, OR AFFECTING ANY OF THE
PROPERTIES OR ASSETS OF ANY BORROWER OR ANY SUBSIDIARY, OR (E) ANY
INVESTIGATION, LITIGATION, OR OTHER PROCEEDING, INCLUDING, WITHOUT LIMITATION,
ANY THREATENED INVESTIGATION, LITIGATION, OR OTHER PROCEEDING, RELATING TO ANY
OF THE FOREGOING. WITHOUT LIMITING ANY PROVISION OF THIS AGREEMENT OR OF ANY
OTHER LOAN DOCUMENT, IT IS THE EXPRESS INTENTION OF THE PARTIES HERETO THAT
EACH PERSON TO BE INDEMNIFIED UNDER THIS SECTION SHALL BE INDEMNIFIED FROM AND
HELD HARMLESS AGAINST ANY AND ALL LOSSES,
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LIABILITIES, CLAIMS, DAMAGES, PENALTIES, JUDGMENTS, DISBURSEMENTS, COSTS, AND
EXPENSES (INCLUDING ATTORNEYS' FEES) ARISING OUT OF OR RESULTING FROM THE SOLE
OR CONTRIBUTORY NEGLIGENCE OF SUCH PERSON, BUT NOT SUCH PARTIES' GROSS
NEGLIGENCE OR WILLFUL MISCONDUCT.
Section 3 Limitation of Liability. Neither the Agent,
the Issuing Bank or the Banks nor any Affiliate, officer, director, employee,
attorney, or agent of the Agent, the Issuing Bank or the Banks shall have any
liability with respect to, and the Borrowers hereby waive, release, and agree
not to sue any of them upon, any claim for any special, indirect, incidental,
or consequential damages suffered or incurred by any Borrower in connection
with, arising out of, or in any way related to, this Agreement or any of the
other Loan Documents, or any of the transactions contemplated by this Agreement
or any of the other Loan Documents. The Borrowers hereby waive, release, and
agree not to sue the Agent, the Issuing Bank or the Banks or any of such
Person's Affiliates, officers, directors, employees, attorneys, or agents for
punitive damages in respect of any claim in connection with, arising out of, or
in any way related to, this Agreement or any of the other Loan Documents, or
any of the transactions contemplated by this Agreement or any of the other Loan
Documents. Nothing contained in this Section shall affect the rights of the
Borrowers to collect actual damages awarded to them against any of the Agents,
the Issuing Bank, the Banks or any Affiliate of any of the foregoing Persons.
Section 4 No Duty. All attorneys, accountants,
appraisers, and other professional Persons and consultants retained by any of
the Agent, the Issuing Bank or the Banks shall have the right to act
exclusively in the interest of such Persons and shall have no duty of
disclosure, duty of loyalty, duty of care, or other duty or obligation of any
type or nature whatsoever to the Borrowers or any of the Borrowers'
shareholders or any other Person.
Section 5 Lender Not Fiduciary. The relationship
between the Borrowers, on one hand, and the Agent, the Issuing Bank and the
Banks, on the other hand, is solely that of debtor and creditor, and no such
Person has any fiduciary or other special relationship with the Borrowers, and
no term or condition of any of the Loan Documents shall be construed so as to
deem the relationship between the Borrowers and such Persons to be other than
that of debtor and creditor.
Section 6 Equitable Relief. The Borrowers recognize
that in the event the Borrowers fail to pay, perform, observe, or discharge any
or all of the Obligations, any remedy at law may prove to be inadequate relief
to the Agent, the Issuing Bank and the Banks. The Borrowers therefore agree
that the Agent, the Issuing Bank and the Banks, if any of such Persons so
requests, shall be entitled to temporary and permanent injunctive relief in any
such case without the necessity of proving actual damages.
Section 7 No Waiver; Cumulative Remedies. No failure
on the part of any of the Agent, the Issuing Bank or the Banks to exercise and
no delay in exercising, and no course of dealing with respect to, any right,
power, or privilege under this Agreement shall operate as a waiver thereof, nor
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shall any single or partial exercise of any right, power, or privilege under
this Agreement preclude any other or further exercise thereof or the exercise
of any other right, power, or privilege. The rights and remedies provided for
in this Agreement and the other Loan Documents are cumulative and not exclusive
of any rights and remedies provided by law.
Section 8 Successors and Assigns.
(a) This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and
assigns. The Borrowers may not assign or transfer any of their rights
or obligations hereunder without the prior written consent of the
Agent and all of the Banks. Any Bank may sell participations to one
or more banks or other institutions in or to all or a portion of its
rights and obligations under this Agreement and the other Loan
Documents (including, without limitation, all or a portion of its
Commitments and the Advances owing to it); provided, however, that (i)
such Bank's obligations under this Agreement and the other Loan
Documents (including, without limitation, its Commitments) shall
remain unchanged, (ii) such Bank shall remain solely responsible to
the Borrowers for the performance of such obligations, (iii) such Bank
shall remain the holder of its Notes for all purposes of this
Agreement, (iv) the Borrowers shall continue to deal solely and
directly with such Bank in connection with such Bank's rights and
obligations under this Agreement and the other Loan Documents, and (v)
such Bank shall not sell a participation that conveys to the
participant the right to vote or give or withhold consents under this
Agreement or any other Loan Document, other than the right to vote
upon or consent to (A) any increase of such Bank's Commitments, (B)
any reduction of the principal amount of, or interest to be paid on,
the Advances of such Bank, (C) any reduction of any commitment fee or
other amount payable to such Bank under any Loan Document, or (D) any
postponement of any date for the payment of any amount payable in
respect of the Advances of such Bank.
(b) The Borrowers and each of the Banks agree that any
Bank (the "Assigning Bank") may, with the Agent's consent and unless
an Event of Default has occurred, the Borrowers' consent, which
consent of the Borrowers shall not be unreasonably withheld or
delayed, at any time assign to one or more Eligible Assignees all, or
a proportionate part of all, of its rights and obligations under this
Agreement and the other Loan Documents (including, without limitation,
its Commitments and Advances) (each an "Assignee"); provided, however,
that (i) each such assignment shall be of a consistent, and not a
varying, percentage of all of the Assigning Bank's Commitments, rights
and obligations under this Agreement and the other Loan Documents,
(ii) except in the case of an assignment of all of a Bank's rights and
obligations under this Agreement and the other Loan Documents, the
amount of the Commitments of the Assigning Bank being assigned
pursuant to each assignment (determined as of the date of the
Assignment and Acceptance with respect to such assignment) shall in no
event be less than $5,000,000, and (iii) the parties to each such
assignment shall execute and deliver to the Agent for its acceptance
and recording in the Register (as defined below), an Assignment and
Acceptance, together with the Notes subject to such assignment, and a
processing and recordation fee of $3,500 to be paid by the
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Assignee. Upon such execution, delivery, acceptance, and recording,
from and after the effective date specified in each Assignment and
Acceptance, which effective date shall be at least five Business Days
after the execution thereof, or, if so specified in such Assignment
and Acceptance, the date of acceptance thereof by the Agent, (x) the
assignee thereunder shall be a party hereto as a "Bank" and, to the
extent that rights and obligations hereunder have been assigned to it
pursuant to such Assignment and Acceptance, have the rights and
obligations of a Bank hereunder and under the Loan Documents and (y)
the Bank that is an assignor thereunder shall, to the extent that
rights and obligations hereunder have been assigned by it pursuant to
such Assignment and Acceptance, relinquish its rights and be released
from its obligations under this Agreement and the other Loan Documents
(and, in the case of an Assignment and Acceptance covering all or the
remaining portion of a Bank's rights and obligations under the Loan
Documents, such Bank shall cease to be a party thereto).
(c) By executing and delivering an Assignment and
Acceptance, the Bank that is an assignor thereunder and the assignee
thereunder confirm to and agree with each other and the other parties
hereto as follows: (i) other than as provided in such Assignment and
Acceptance, such Assigning Bank makes no representation or warranty
and assumes no responsibility with respect to any statements,
warranties, or representations made in or in connection with the Loan
Documents or the execution, legality, validity, and enforceability,
genuineness, sufficiency, or value of the Loan Documents or any other
instrument or document furnished pursuant thereto; (ii) such Assigning
Bank makes no representation or warranty and assumes no responsibility
with respect to the financial condition of the Borrowers or any
Obligated Party or the performance or observance by the Borrowers or
any Obligated Party of its obligations under the Loan Documents; (iii)
such assignee confirms that it has received a copy of the other Loan
Documents, together with copies of the financial statements referred
to in Section 9.2 and such other documents and information as it has
deemed appropriate to make its own credit analysis and decision to
enter into such Assignment and Acceptance; (iv) such assignee will,
independently and without reliance upon the Agent or such assignor and
based on such documents and information as it shall deem appropriate
at the time, continue to make its own credit decisions in taking or
not taking action under this Agreement and the other Loan Documents;
(v) such assignee confirms that it is an Eligible Assignee; (vi) such
assignee appoints and authorizes the Agent to take such action as
agent on its behalf and exercise such powers under the Loan Documents
as are delegated to the Agent by the terms thereof, together with such
powers as are reasonably incidental thereto; and (vii) such assignee
agrees that it will perform in accordance with their terms all of the
obligations which by the terms of the Loan Documents are required to
be performed by it as a Bank.
(d) The Agent shall maintain at its Principal Office a
copy of each Assignment and Acceptance delivered to and accepted by it
and a register for the recordation of the names and addresses of the
Banks and the Commitments of, and principal amount of the Advances
owing to, each Bank from time to time (the "Register"). The entries
in the Register shall be conclusive and binding for all purposes,
absent manifest error, and the Borrowers, the Agent,
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the Issuing Bank and the Banks may treat each Person whose name is
recorded in the Register as a Bank hereunder for all purposes under
the Loan Documents. The Register shall be available for inspection by
the Borrowers, the Issuing Bank or any Bank at any reasonable time and
from time to time upon reasonable prior notice.
(e) Upon its receipt of an Assignment and Acceptance
executed by an Assigning Bank and assignee representing that it is an
Eligible Assignee, together with any Note subject to such assignment,
the Agent shall, if such Assignment and Acceptance has been completed
and is in the form satisfactory to the Agent in its sole discretion,
(i) accept such Assignment and Acceptance, (ii) record the information
contained therein in the Register, and (iii) give prompt written
notice thereof to the Borrowers. Within five Business Days after its
receipt of such notice, the Borrowers, at their expense, shall execute
and deliver to the Agent in exchange for the surrendered Notes, new
Notes to the order of such Eligible Assignee in an amount equal to the
Commitments assumed by it pursuant to such Assignment and Acceptance
and, if the Assigning Bank has retained a portion of its Commitments,
new Notes to the order of the Assigning Bank in an amount equal to the
Commitments retained by it hereunder (each such promissory note shall
constitute a "Note" for purposes of the Loan Documents). Such new
Notes shall be in an aggregate principal amount of the surrendered
Notes, shall be dated the last interest payment date prior to the
effective date of such Assignment and Acceptance, and shall otherwise
be in substantially the form of the appropriate Notes initially issued
pursuant hereto with appropriate changes.
(f) Any Bank may, in connection with any assignment or
participation or proposed assignment or participation pursuant to this
Section, disclose to the assignee or participant or proposed assignee
or participant, any information relating to the Borrower or its
Subsidiaries furnished to such Bank by or on behalf of the Borrower or
its Subsidiaries.
Section 9 Survival. All representations and warranties
made in this Agreement or any other Loan Document or in any document,
statement, or certificate furnished in connection with this Agreement shall
survive the execution and delivery of this Agreement and the other Loan
Documents, and no investigation by any of the Agent, the Issuing Bank or the
Banks or any closing shall affect the representations and warranties or the
right of any such Person to rely upon them. Without prejudice to the survival
of any other obligation of the Borrowers hereunder, the obligations of the
Borrowers under Article VI and Sections 15.1 and 15.2 shall survive repayment
of the Notes and termination of the Commitments.
SECTION 10 ENTIRE AGREEMENT; AMENDMENT. THIS AGREEMENT,
THE NOTE, AND THE OTHER LOAN DOCUMENTS REFERRED TO HEREIN EMBODY THE FINAL,
ENTIRE AGREEMENT AMONG THE PARTIES HERETO AND SUPERSEDE ANY AND ALL PRIOR
COMMITMENTS, AGREEMENTS, REPRESENTATIONS, AND UNDERSTANDINGS, WHETHER WRITTEN
OR ORAL, RELATING TO THE SUBJECT MATTER HEREOF AND MAY NOT BE CONTRADICTED OR
VARIED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OR
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DISCUSSIONS OF THE PARTIES HERETO. THERE ARE NO ORAL AGREEMENTS AMONG THE
PARTIES HERETO. THE PROVISIONS OF THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS
TO WHICH ANY OF THE BORROWERS IS A PARTY MAY BE AMENDED OR WAIVED ONLY BY AN
INSTRUMENT IN WRITING SIGNED BY THE PARTIES HERETO.
Section 11 Maximum Interest Rate. No provision of this
Agreement or any other Loan Document shall require the payment or the
collection of interest in excess of the maximum amount permitted by applicable
law. If any excess of interest in such respect is hereby provided for, or
shall be adjudicated to be so provided, in any Loan Document or otherwise in
connection with this loan transaction, the provisions of this Section shall
govern and prevail and neither the Borrowers nor the sureties, guarantors,
successors, or assigns of the Borrowers shall be obligated to pay the excess
amount of such interest or any other excess sum paid for the use, forbearance,
or detention of sums loaned pursuant hereto. In the event any of the Agent,
the Issuing Bank or the Banks ever receives, collects, or applies as interest
any such sum, such amount which would be in excess of the maximum amount
permitted by applicable law shall be applied as a payment and reduction of the
principal of the indebtedness evidenced by the Notes; and, if the principal of
the Notes has been paid in full, any remaining excess shall forthwith be paid
to the Borrowers. In determining whether or not the interest paid or payable
exceeds the Maximum Rate, the Borrowers and the Agent, the Issuing Bank and the
Banks shall, to the extent permitted by applicable law, (a) characterize any
non-principal payment as an expense, fee, or premium rather than as interest,
(b) exclude voluntary prepayments and the effects thereof, and (c) amortize,
prorate, allocate, and spread in equal or unequal parts the total amount of
interest throughout the entire contemplated term of the indebtedness evidenced
by the Notes so that interest for the entire term does not exceed the Maximum
Rate.
Section 12 Notices. All notices and other
communications provided for in this Agreement and the other Loan Documents to
which any of the Borrowers is a party shall be given or made by telex,
telegraph, telecopy, cable, or in writing and telexed, telecopied, telegraphed,
cabled, mailed by certified mail return receipt requested, or delivered to the
intended recipient at the "Address for Notices" specified below its name on the
signature pages hereof; or, as to any party at such other address as shall be
designated by such party in a notice to the other party given in accordance
with this Section. Except as otherwise provided in this Agreement, all such
communications shall be deemed to have been duly given when transmitted by
telex or telecopy, subject to telephone confirmation of receipt, or delivered
to the telegraph or cable office, subject to telephone confirmation of receipt,
or when personally delivered or, in the case of a mailed notice, when duly
deposited in the mails, in each case given or addressed as aforesaid; provided,
however, notices to the Agent pursuant to Articles II, III and IV shall not be
effective until received by the Agent.
SECTION 13 GOVERNING LAW; VENUE; SERVICE OF PROCESS.
THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS
OF THE STATE OF TEXAS AND THE APPLICABLE LAWS OF THE UNITED STATES OF AMERICA.
THIS AGREEMENT HAS BEEN ENTERED INTO IN HARRIS COUNTY, TEXAS, AND IT SHALL BE
PERFORMABLE FOR ALL PURPOSES IN HARRIS COUNTY, TEXAS. SUBJECT TO SECTION
15.20, ANY ACTION OR PROCEEDING
49
<PAGE> 55
AGAINST THE BORROWERS UNDER OR IN CONNECTION WITH ANY OF THE LOAN DOCUMENTS MAY
BE BROUGHT IN ANY STATE OR FEDERAL COURT IN HARRIS COUNTY, TEXAS. THE
BORROWERS HEREBY IRREVOCABLY (A) SUBMIT TO THE NONEXCLUSIVE JURISDICTION OF
SUCH COURTS, AND (B) WAIVE ANY OBJECTION THEY MAY NOW OR HEREAFTER HAVE AS TO
THE VENUE OF ANY SUCH ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT OR THAT
ANY SUCH COURT IS AN INCONVENIENT FORUM. THE BORROWERS AGREE THAT SERVICE OF
PROCESS UPON THEM MAY BE MADE BY CERTIFIED OR REGISTERED MAIL, RETURN RECEIPT
REQUESTED, AT THEIR ADDRESSES SPECIFIED OR DETERMINED IN ACCORDANCE WITH THE
PROVISIONS OF SECTION 15.12. NOTHING HEREIN OR IN ANY OF THE OTHER LOAN
DOCUMENTS SHALL AFFECT THE RIGHT OF THE AGENT, THE ISSUING BANK OR THE BANKS TO
SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR, SUBJECT TO SECTION
15.20, SHALL LIMIT THE RIGHT OF SUCH PERSONS TO BRING ANY ACTION OR PROCEEDING
AGAINST THE BORROWERS OR WITH RESPECT TO ANY OF THEIR RESPECTIVE PROPERTY IN
COURTS IN OTHER JURISDICTIONS. SUBJECT TO SECTION 15.20, ANY ACTION OR
PROCEEDING BY THE BORROWERS AGAINST ANY OF THE AGENT, THE ISSUING BANK OR THE
BANKS SHALL BE BROUGHT ONLY IN A COURT LOCATED IN HARRIS COUNTY, TEXAS.
Section 14 Counterparts. This Agreement may be executed
in one or more counterparts, each of which shall be deemed an original, but all
of which together shall constitute one and the same instrument.
Section 15 Severability. Any provision of this
Agreement held by a court of competent jurisdiction to be invalid or
unenforceable shall not impair or invalidate the remainder of this Agreement
and the effect thereof shall be confined to the provision held to be invalid or
illegal.
Section 16 Headings. The headings, captions, and
arrangements used in this Agreement are for convenience only and shall not
affect the interpretation of this Agreement.
Section 17 Non-Application of Chapter 15 of Texas Credit
Code. The provisions of Chapter 15 of the Texas Credit Code (Vernon's Texas
Civil Statutes, Article 5069-15) are specifically declared by the parties
hereto not to be applicable to this Agreement or any of the other Loan
Documents or to the transactions contemplated hereby.
Section 18 Construction. The Borrowers and the Agent,
the Issuing Bank and the Banks acknowledge that each of them has had the
benefit of legal counsel of its own choice and has been afforded an opportunity
to review this Agreement and the other Loan Documents with its legal counsel
and that this Agreement and the other Loan Documents shall be construed as if
jointly drafted by the Borrowers, the Agent, the Issuing Bank and the Banks.
50
<PAGE> 56
Section 19 Independence of Covenants. All covenants
hereunder shall be given independent effect so that if a particular action or
condition is not permitted by any of such covenants, the fact that it would be
permitted by an exception to, or be otherwise within the limitations of,
another covenant shall not avoid the occurrence of a Default if such action is
taken or such condition exists.
SECTION 20 ARBITRATION PROGRAM. THE PARTIES AGREE TO BE
BOUND BY THE TERMS AND CONDITIONS OF THE CURRENT ARBITRATION PROGRAM OF THE
AGENT, WHICH IS INCORPORATED HEREIN BY REFERENCE AND ACKNOWLEDGED AS RECEIVED
BY THE PARTIES, PURSUANT TO WHICH ANY AND ALL DISPUTES SHALL BE RESOLVED BY
MANDATORY BINDING ARBITRATION UPON THE REQUEST OF ANY PARTY. A TRUE AND
CORRECT COPY OF SUCH PROGRAM HAS BEEN FURNISHED TO DIGICON.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.
BORROWERS:
---------
DIGICON INC., a Delaware corporation
By: /s/ ALLAN C. POGACH
---------------------------------------------
Allan C. Pogach
Vice President and Treasurer
Address for Notices:
3701 Kirby Drive, Suite 112
Houston, Texas 77098
Fax No.: (713) 630-4456
Telephone No.: (713) 526-5611
Attention: Allan C. Pogach
51
<PAGE> 57
DIGICON GEOPHYSICAL CORP., a Delaware corporation
By: /s/ ALLAN C. POGACH
-----------------------------------------------
Allan C. Pogach
Vice President and Treasurer
Address for Notices:
3701 Kirby Drive, Suite 112
Houston, Texas 77098
Fax No.: (713) 630-4456
Telephone No.: (713) 526-5611
Attention: Allan C. Pogach
DIGICON/GFS INC., a Mississippi corporation
By: /s/ ALLAN C. POGACH
----------------------------------------------
Allan C. Pogach
Vice President and Treasurer
Address for Notices:
3701 Kirby Drive, Suite 112
Houston, Texas 77098
Fax No.: (713) 630-4456
Telephone No.: (713) 526-5611
Attention: Allan C. Pogach
52
<PAGE> 58
DIGICON GEOPHYSICAL LIMITED, a company
organized under the laws of England and Wales
By: /s/ ALLAN C. POGACH
-----------------------------------------------
Allan C. Pogach
Vice President and Treasurer
Address for Notices:
3701 Kirby Drive, Suite 112
Houston, Texas 77098
Fax No.: (713) 630-4456
Telephone No.: (713) 526-5611
Attention: Allan C. Pogach
DIGICON EXPLORATION, LTD., a Delaware corporation
By: /s/ ALLAN C. POGACH
-----------------------------------------------
Allan C. Pogach
Vice President and Treasurer
Address for Notices:
3701 Kirby Drive, Suite 112
Houston, Texas 77098
Fax No.: (713) 630-4456
Telephone No.: (713) 526-5611
Attention: Allan C. Pogach
53
<PAGE> 59
AGENT:
-----
WELLS FARGO BANK (TEXAS), NATIONAL ASSOCIATION
By: /s/ RANDALL S. WADE
-----------------------------------------------
Randall S. Wade
Banking Officer
Address for Notices:
1000 Louisiana
Houston, Texas 77002
Fax No.: (713) 250-7031
Telephone No.: (713) 250-7240
Attention: Marc A. Dunmire
ISSUING BANK:
------------
WELLS FARGO BANK (TEXAS), NATIONAL ASSOCIATION
By: /s/ RANDALL S. WADE
-----------------------------------------------
Randall S. Wade
Banking Officer
Address for Notices:
1000 Louisiana
Houston, Texas 77002
Fax No.: (713) 250-7031
Telephone No.: (713) 250-7240
Attention: Marc A. Dunmire
54
<PAGE> 60
BANKS:
-----
WELLS FARGO BANK (TEXAS), NATIONAL
ASSOCIATION
Revolving Credit Commitment: $15,000,000 By: /s/ RANDALL S. WADE
- --------------------------- ---------------------------------
Term Loan Commitment: $6,000,000 Randall S. Wade
- --------------------
Banking Officer
Address for Notices:
1000 Louisiana
Houston, Texas 77002
Fax No.: (713) 250-7031
Telephone No.: (713) 250-7240
Attention: Marc A. Dunmire
55
<PAGE> 61
APPENDIX A
to Credit Agreement dated July ___, 1996 among
Digicon Inc., Digicon Geophysical Corp., Digicon/GFS Inc.,
Digicon Geophysical Limited and Digicon Exploration, Ltd., as Borrowers,
Wells Fargo Bank (Texas), National Association as Agent, and the
Issuing Bank and Banks named therein
Reference to Sections and Articles are to Sections and Articles in the
Agreement. As used in the Agreement, the following terms have the following
meanings:
"Advance" means, as applicable, any of a Revolving Credit
Advance or a Term Loan Advance.
"Advance Request Form" means, as applicable, any of a
Revolving Credit Advance Request Form, a Term Loan Advance Request
Form or a Credit Request.
"Affiliate" means, as to any Person, any other Person (a) that
directly or indirectly, through one or more intermediaries, controls
or is controlled by, or is under common control with, such Person; (b)
that directly or indirectly beneficially owns or holds 25% or more of
any class of voting stock of such Person; or (c) 25% or more of the
voting stock of which is directly or indirectly beneficially owned or
held by the Person in question. The term "control" means the
possession, directly or indirectly, of the power to direct or cause
direction of the management and policies of a Person, whether through
the ownership of voting securities, by contract, or otherwise;
provided, however, in no event shall any of the Agent, the Issuing
Bank and the Banks be deemed an Affiliate of Digicon or any of its
Subsidiaries.
"Applicable Lending Office" means as to each Bank the office
located at the address shown on the signature pages hereto for such
Bank or on the signature pages of an Assignment and Acceptance, as the
case may be.
"Applicable Rate" means: (a) for any Revolving Credit
Advance, the sum of the Prime Rate plus 1/4%; and (b) for any Term
Loan Advance, the sum of the Prime Rate plus 3/4%.
"Assignee" has the meaning assigned to it in Section 15.8(b).
"Basle Accord" means the proposals for risk-based capital
framework described by the Basle Committee on Banking Regulations and
Supervisory Practices in its paper entitled "International Convergence
of Capital Measurement and Capital Standards" dated July 1988, as
amended, supplemented and otherwise modified and in effect from time
to time, or any replacement thereof.
Appendix A 1
<PAGE> 62
"Borrowing Base" means, at any particular time, an amount
equal to the sum of (a) 80% of Eligible Domestic/Domestic Accounts,
plus (b) 70% of Eligible Domestic/Foreign Accounts, plus (c) 50% of
Eligible Foreign/Foreign Accounts; provided that all accounts not
payable in Dollars shall be calculated at the applicable Exchange
Rate.
"Borrowing Base Report" means a borrowing base report in
substantially the form of Exhibit "E" attached hereto, properly
completed and delivered or to be delivered to the Agent pursuant to
this Agreement.
"Business Day" means any day on which commercial banks are not
authorized or required to close in Houston, Texas.
"Capital Lease Obligations" means, as to any Person, the
obligations of such Person to pay rent or other amounts under a lease
of (or other agreement conveying the right to use) real and/or
personal property, which obligations are required to be classified and
accounted for as a capital lease on a balance sheet of such Person
under GAAP. For purposes of this Agreement, the amount of such
Capital Lease Obligations shall be the capitalized amount thereof,
determined in accordance with GAAP.
"Cash Flow Coverage Ratio" means as to any Person, at any date
(a) EBITDA for the 12-month period ended on such date (i) minus Cash
Taxes for such period, (ii) minus Dividends for such period, and
(iii) plus Non-Cash Charges for such period, divided by (b) the sum of
(i) Current Maturities as of such date and (ii) Interest Expense for
such period.
"Cash Taxes" means the sum of all cash income taxes paid or
required to be paid during the period in question, as determined in
accordance with GAAP applied consistently, with respect to any Person.
"Charge Debenture (Malaysia)" means a charge debenture of
Guarantor in favor of the Agent, in substantially the form of Exhibit
"B-2" attached hereto, as the same may be amended, supplemented or
modified from time to time.
"Charge Debenture (U.K.)" means a charge debenture of
Geophysical Limited in favor of the Agent, in substantially the form
of Exhibit "B-3" attached hereto with appropriate completions, as the
same may be amended, supplemented or modified from time to time.
"Code" means the Internal Revenue Code of 1986, as amended,
and the regulations promulgated and rulings issued thereunder.
"Collateral" has the meaning specified in Section 7.1.
Appendix A 2
<PAGE> 63
"Combination" means the consummation of the combination of
Digicon with Veritas Energy Services Inc. as substantially described
in that certain Joint Management Informational Circular and Proxy
Statement With Respect To An Arrangement Involving Digicon Inc. And
Veritas Energy Services Inc. dated June 27, 1996.
"Commitment" means, as applicable, any of the Revolving Credit
Commitments, or the Term Loan Commitments.
"Compliance/Certificate of No Default" means a certificate, in
substantially the form of Exhibit "F" attached hereto, properly
completed and signed by the Borrowers in connection with Section
10.1(c).
"Consolidated Current Assets" means, at any particular time,
all amounts which, in conformity with GAAP, would be included as
current assets on a consolidated balance sheet of Digicon and the
Subsidiaries.
"Consolidated Current Liabilities" means, at any particular
time, all amounts which, in conformity with GAAP, would be included as
current liabilities on a consolidated balance sheet of Digicon and the
Subsidiaries.
"Consolidated Liabilities" means, at any particular time, all
amounts which, in conformity with GAAP, would be included as
liabilities on a consolidated balance sheet of Digicon and the
Subsidiaries.
"Consolidated Net Income" means, for any period, the
consolidated net income (or loss) after income and franchise taxes
determined in conformity with GAAP of Digicon and the Subsidiaries,
but excluding: (a) the income of any other Person (other than the
Subsidiaries) in which Digicon or any of the Subsidiaries has an
ownership interest, unless and except to the extent received by such
Person or its Subsidiaries in a cash distribution; and (b) to the
extent not included in clause (a) above, any after tax extraordinary
noncash gains or extraordinary noncash losses.
"Consolidated Tangible Net Worth" means, at any particular
time, all amounts which, in conformity with GAAP, would be included as
Stockholders' Equity on a consolidated balance sheet of Digicon and
the Subsidiaries; provided, however, there shall be excluded therefrom
intangible assets (other than the Data Library), including: (a) any
amount at which shares of capital stock of Digicon appear as an asset
on Digicon's balance sheet, (b) goodwill, including any amounts,
however designated, that represent the excess of the purchase price
paid for assets or stock over the value assigned thereto, and (c)
loans (to the extent that such are not fully secured) to any
stockholder, director, officer, or employee of Digicon or any
Affiliate of Digicon.
Appendix A 3
<PAGE> 64
"Contingent Liabilities" means, as applied to any Person,
those direct or indirect liabilities of that Person (other than
non-monetary performance obligations) which in conformity with GAAP,
would be included as liabilities of that Person on a consolidated
balance sheet of Digicon and the Subsidiaries, with respect to any
Debt, lease, dividend, letter of credit or other obligation (the
"primary obligations") of another Person (the "primary obligor"),
including, without limitation, any obligation of such Person, whether
or not contingent, (a) to purchase, repurchase or otherwise acquire
such primary obligations or any property constituting direct or
indirect security therefor, or (b) to advance or provide funds (i) for
the payment or discharge of any such primary obligation, or (ii) to
maintain working capital or equity capital of the primary obligor or
otherwise to maintain the net worth or solvency or any balance sheet
item, level of income or financial condition of the primary obligor,
or (c) to purchase property, securities or services primarily for the
purpose of assuring the owner of any such primary obligation of the
ability of the primary obligor to make payment of such primary
obligation, or (d) otherwise to assure or hold harmless the owner of
any such primary obligation against loss in respect thereof. The
amount of any Contingent Liabilities shall be deemed to be an amount
equal to the stated or determinable amount of the primary obligation
in respect of which such Contingent Liabilities are made or, if not
stated or determinable, the maximum reasonably anticipated liability
in respect thereof as determined by Digicon in good faith.
"Credit Request" has the meaning ascribed to it in Section 4.2
hereof.
"Current Maturities" means as to any Person, at any date, the
current maturities of Funded Debt (other than Revolving Credit
Advances) determined in accordance with GAAP applied consistently.
"Current Ratio" means, at any particular time, the ratio of
Consolidated Current Assets to Consolidated Current Liabilities.
"Data Library" means all of each of Borrowers' and the
Guarantor's library of proprietary seismic reports and other data.
"Debt" means as to any Person at any time (without duplication
as to such Person and as to such Person's Subsidiaries): (a) all
obligations of such Person for borrowed money, (b) all obligations of
such Person evidenced by bonds, notes, debentures, or other similar
instruments, (c) all obligations of such Person to pay the deferred
purchase price of property or services, except trade accounts payable
of such Person arising in the ordinary course of business that are not
past due by more than 120 days or which are being contested in good
faith and for which adequate reserves have been established, (d) all
Capital Lease Obligations of such Person, (e) all obligations secured
by a Lien existing on property owned by such Person, whether or not
the obligations secured thereby have been assumed by such Person or
are non-recourse to the credit of such Person, (f) all reimbursement
obligations of such Person (whether contingent or otherwise) in
respect of letters of credit, bankers' acceptances,
Appendix A 4
<PAGE> 65
surety or other bonds and similar instruments, (g) all liabilities of
such Person in respect of unfunded vested benefits under any Plan, and
(h) all Contingent Liabilities.
"Default" means an Event of Default or the occurrence of an
event or condition which with notice or lapse of time or both would
become an Event of Default.
"Default Rate" means the lesser of (a) the Applicable Rate
plus three percent (3%) and (b) the Maximum Rate.
"Digicon (Malaysia)" means Digicon (Malaysia) Sdn. Bhd., a
company organized under the laws of the Federation of Malaysia.
"Dividends" means as to any Person, for any period, dividends
or other payments or distributions (in cash, property or obligations)
paid or made, as applicable, on account of the capital stock of such
Person, determined in accordance with GAAP applied consistently to any
Person other than Digicon or one of the Subsidiaries.
"Dollars" and "$" mean lawful money of the United States of
America.
"Domestic Lockbox" means a lockbox established pursuant to any
Domestic Lockbox Agreement.
"Domestic Lockbox Account" means a segregated account or
accounts established in the name of the Agent maintained at its
Principal Office into which all of Digicon's, Geophysical Corp.'s,
GFS's and Exploration's receivables will be deposited pursuant to a
Domestic Lockbox Agreement, with the Agent having the right to apply
the same to the Obligations after an Event of Default has occurred and
is continuing.
"Domestic Lockbox Agreement" means the standard lockbox
agreement then called for pursuant to the Agent's standard Cash
Management Terms and Conditions, as the same may be amended, modified
or supplemented from time to time.
"EBITDA" means as to any Person, for any period, the sum of
the Consolidated Net Income for such period, Interest Expense, Cash
Taxes and Non-Cash Charges to the extent deducted from Consolidated
Net Income in such period.
"Eligible Assignee" means any commercial bank, savings and
loan association, savings bank, finance company, insurance company,
pension fund, mutual fund, or other financial institution (whether a
corporation, partnership, or other entity) acceptable to the Agent,
and having combined capital and surplus of at least $500,000,000.
Appendix A 5
<PAGE> 66
"Eligible Domestic/Domestic Accounts" means, at any time, all
aggregate accounts receivable of the Borrowers other than Geophysical
Limited and Exploration that are created in the ordinary course of
business and satisfy the following minimum conditions:
(a) The account complies with all applicable laws, rules, and regulations,
including, without limitation, usury laws, the Federal Truth in Lending Act,
and Regulation Z of the Board of Governors of the Federal Reserve System;
(b) The account has not been outstanding for more than 90 days past the
original due date of the related invoice and 120 days have not expired since
the date of the related invoice;
(c) The account was created in connection with (i) the sale of goods by
such Person in the ordinary course of business and such sale has been
consummated and such goods have been shipped and delivered to and received by
the account debtor, or (ii) the performance of services by such Person in the
ordinary course of business and such services have been completed and accepted
by the account debtor;
(d) The account arises from an enforceable contract, the performance of
which either (i) has been completed by such Person, or (ii) has been partially
completed with respect to accounts which give rise to progress payments;
provided that only that portion of such account for which performance has been
completed is eligible;
(e) The account does not arise from the sale of any goods that is on a
bill-and-hold, guaranteed sale, sale-or-return, sale on approval, consignment,
or any other repurchase or return basis;
(f) Such Person has good and indefeasible title to the account and the
account is not subject to any Lien except perfected first priority Liens in
favor of the Agent;
(g) The account is not subject to any "contra-account", setoff,
counterclaim, defense, dispute, recoupment, or adjustment other than normal
discounts for prompt payment; provided, however, that so long as the account
debtor is not refusing or failing timely to pay the balance of the amounts owed
by it to such Person with respect to the subject account, then there shall be
excluded from eligibility only that portion of the subject account that is the
subject of such "contra-account," set off, counterclaim, defense, dispute,
recoupment or adjustment;
(h) The account debtor is not insolvent or the subject of any bankruptcy
or insolvency proceeding and has not made an assignment for the benefit of
creditors, suspended normal business operations, dissolved, liquidated,
terminated its existence, ceased to pay its debts as they become due, or
suffered a receiver or trustee to be appointed for any of its assets or
affairs;
(i) The account is not evidenced by chattel paper or an instrument;
Appendix A 6
<PAGE> 67
(j) The account debtor has not retained or refused to retain, or otherwise
notified such Person of any dispute concerning, or claimed nonconformity of,
any of the goods from the sale of which the account arose; provided, however,
that so long as the account debtor is not refusing or failing timely to pay the
balance of the amounts owed by it to such Person with respect to the subject
account or other accounts, then there shall be excluded from eligibility only
that portion of the subject account that is subject of such retention, refusal,
notice or claim;
(k) The account is not owed by an Affiliate of such Person or any employee
of such Person or of any such Affiliate;
(l) The account is payable in Dollars by the account debtor;
(m) The account shall be ineligible if more than 25% of the aggregate
balances then outstanding on accounts owed by such account debtor and its
Affiliates to such Person are more than 120 days past due from the due dates of
their original invoices or if more than 150 days have expired from the dates of
the original invoices;
(n) The account shall be ineligible if the account debtor is the United
States of America, any state or municipality, or any department, agency, or
instrumentality of the foregoing;
(o) The account shall be ineligible if the account is owed by an account
debtor not a resident of the United States of America;
(p) That portion of the aggregate amount of accounts owed by any one
account debtor which is in excess of 20% of the then aggregate amount of all
Eligible Domestic/Domestic Accounts, Eligible Domestic/Foreign Accounts and
Eligible Foreign/Foreign Accounts shall be ineligible;
(q) Accounts which arise out of or are bill and holds, retentions and
prebillings shall be ineligible;
(r) The account has not been otherwise determined by the Agent in its
reasonable discretion to be ineligible because of the credit worthiness of the
account debtor; and
(s) The account is subject to a first priority Lien in favor of the Agent.
"Eligible Domestic/Foreign Accounts" means, at any time, all
aggregate accounts of the Borrowers other than Geophysical Limited and
Exploration, that (a) are created in the ordinary course of business
and which would constitute Eligible Domestic/Domestic Accounts
according to the definition thereof in this Appendix A but for either
or both of the requirements set forth at paragraph (o) of such
definition that such account is not eligible if it is owed by an
account debtor not resident in the United States and at paragraph (l)
of such definition that such account is not eligible if it is not
payable in Dollars, and (b) if such accounts are governed by the law
of a jurisdiction other than one of the states of the United States,
(i) are not subject to contractual restrictions of the rights to
payment thereunder, or
Appendix A 7
<PAGE> 68
(ii) the applicable Borrower has obtained written consent to its
assignment of the rights to payment thereunder from the account debtor
and has provided a copy thereof to the Agent, or (iii) the Agent has
received satisfactory legal advice that such restrictions are
unenforceable.
"Eligible Foreign/Foreign Accounts" means, at any time, all
aggregate accounts of Geophysical Limited, Exploration and Guarantor,
that (a) are created in the ordinary course of business and which
would constitute Eligible Domestic/Domestic Accounts according to the
definition thereof set forth in this Appendix A but for any or all of
the requirements that (i) the account be owed to a Borrower other than
Geophysical Limited and Exploration, (ii) the account be payable in
Dollars, (iii) the account be owed by an account debtor resident in
the United States of America, and (b) if such accounts are governed by
the law of a jurisdiction other than one of the States of the United
States or England (i) are not subject to contractual restrictions of
the rights to payment thereunder, or (ii) the applicable Borrower or
the Guarantor, as applicable, has obtained written consent to the
assignment of the rights to payment thereunder from the account debtor
and has provided the Agent with a copy thereof, or (iii) the agent has
received satisfactory legal advice that such restrictions are
unenforceable.
"Environmental Laws" means any and all foreign, federal,
state, and local laws, regulations, and requirements pertaining to
health, safety, or the environment, including, without limitation, the
Comprehensive Environmental Response, Compensation and Liability Act
of 1980, 42 U.S.C. Section 9601 et seq., the Resource Conservation
and Recovery Act of 1976, 42 U.S.C. Section 6901 et seq., the
Occupational Safety and Health Act, 29 U.S.C. Section 651 et seq.,
the Clean Air Act, 42 U.S.C. Section 7401 et seq., the Clean Water
Act, 33 U.S.C. Section 1251 et seq., and the Toxic Substances Control
Act, 15 U.S.C. Section 2601 et seq., as such laws, regulations, and
requirements may be amended or supplemented from time to time.
"Environmental Liabilities" means, as to any Person, all
liabilities, obligations, responsibilities, Remedial Actions, losses,
damages, punitive damages, consequential damages, treble damages,
costs, and expenses, (including, without limitation, all reasonable
fees, disbursements and expenses of counsel, expert and consulting
fees and costs of investigation and feasibility studies), fines,
penalties, sanctions, and interest incurred as a result of any claim
or demand, by any Person, whether based in contract, tort, implied or
express warranty, strict liability, criminal or civil statute,
including any Environmental Law, permit, order or agreement with any
Governmental Authority or other Person, arising from environmental,
health or safety conditions or the Release or threatened Release of a
Hazardous Material into the environment, resulting from the past,
present, or future operations of such Person or its Affiliates.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended from time to time, and the regulations and published
interpretations thereunder.
Appendix A 8
<PAGE> 69
"ERISA Affiliate" means any corporation or trade or business
which is or has been a member of the same controlled group of
corporations (within the meaning of Section 414(b) of the Code) as any
Borrower or is or has been under common control (within the meaning of
Section 414(c) of the Code) with any Borrower.
"Euroseis" means Euroseis, Inc., a Delaware corporation.
"Event of Default" has the meaning specified in Section 13.1.
"Exchange Rate" means and refers to the nominal rate of
exchange available to Agent in a chosen foreign exchange market for
the purchase by Agent at __________, Houston, Texas time, _____
Business Day prior to any date of determination, expressed as the
number of units of such currency per one Dollar.
"Federal Funds Rate" means, for any day, the rate per annum,
(rounded upwards, if necessary, to the nearest 1/16 of 1%) equal to
the weighted average of the rates on overnight Federal funds
transactions with members of the Federal Reserve System arranged by
Federal funds brokers on such day, as published by the Federal Reserve
Bank of New York on the Business Day next succeeding such day,
provided that (a) if the day for which such rate is to be determined
is not a Business Day, the Federal Funds Rate for such day shall be
such rate on such transactions on the next preceding Business Day as
so published on the next succeeding Business Day, and (b) if such rate
is not so published on such next succeeding Business Day, the Federal
Funds Rate for any day shall be the average rate charged to the Agent
on such day on such transactions as determined by the Agent.
"Funded Debt" means, at any time, the aggregate obligations of
Digicon and its Subsidiaries (determined on a consolidated basis) for
Debt for borrowed money and the deferred purchase price of property,
including, without limitation, Capital Lease Obligations.
"Funded Debt to Capitalization Ratio" means, at any time, the
ratio of (a) Funded Debt (other than Subordinated Debt) to (b) the sum
of (i) Funded Debt plus (ii) Stockholders Equity plus (iii)
Subordinated Debt.
"GAAP" means generally accepted accounting principles, applied
on a consistent basis, as set forth in Opinions of the Accounting
Principles Board of the American Institute of Certified Public
Accountants and/or in statements of the Financial Accounting Standards
Board and/or their respective successors and which are applicable in
the circumstances as of the date in question. Accounting principles
are applied on a "consistent basis" when the accounting principles
applied in a current period are comparable in all material respects to
those accounting principles applied in a preceding period.
Appendix A 9
<PAGE> 70
"Governmental Authority" means any nation or government, any
state or political subdivision thereof and any entity exercising
executive, legislative, judicial, regulatory, or administrative
functions of or pertaining to government.
"Guarantee" by any Person means any obligation, contingent or
otherwise, of such Person directly or indirectly guaranteeing any Debt
or other obligation or indebtedness of any other Person and, without
limiting the generality of the foregoing, any obligation, direct or
indirect, contingent or otherwise, of such Person (a) to purchase or
pay (or advance or supply funds for the purchase or payment of) such
Debt or other obligation (whether arising by virtue of partnership
arrangements, by agreement to keep-well, to purchase assets, goods,
securities or services, to take-or-pay, or to maintain financial
statement conditions or otherwise) or (b) entered into for the purpose
of assuring in any other manner the obligee of such Debt or other
obligation of the payment thereof or to protect the obligee against
loss in respect thereof (in whole or in part), provided that the term
Guarantee shall not include endorsements for collection or deposit in
the ordinary course of business. The term "Guarantee" used as a verb
has a corresponding meaning.
"Guarantors" means Digicon (Malaysia) and Euroseis, and
"Guarantor" means any one of the Guarantors.
"Guaranty" means a guaranty of each of Euroseis and Digicon
(Malaysia) in favor of the Agent, in substantially the form attached
hereto as Exhibit "C" with appropriate completions, as the same may be
amended, supplemented, or modified from time to time and Guaranties
means more than one Guaranty.
"Hazardous Material" means any substance, product, waste,
pollutant, material, chemical, contaminant, constituent, or other
material which is or becomes listed, regulated, or addressed under any
Environmental Law, including, without limitation, asbestos, petroleum,
and polychlorinated biphenyls.
"Interest Expense" means the sum of all cash interest expense
paid or required by its terms to be paid during the period in
question, as determined in accordance with GAAP applied consistently,
with respect to the Funded Debt of a Person or any portion thereof.
"Letter of Credit" means a Letter of Credit issued pursuant to
Article IV of the Agreement and "Letters of Credit" means more than
one Letter of Credit.
"Letter of Credit Agreements" means the application and letter
of credit agreements and other documents, if any, then required by the
Issuing Bank now or hereafter executed by the Borrower, such
agreements to be on the Issuing Bank's standard form (with such
changes thereto as the Borrower and the Issuing Bank may agree from
time to time) and completed in form and substance satisfactory to the
Issuing Bank.
Appendix A 10
<PAGE> 71
"Letter of Credit Liabilities" means, at any time, the
aggregate undrawn face amounts of all outstanding Letters of Credit in
Dollars calculated at the applicable Exchange Rate.
"Lien" means any lien, mortgage, security interest, tax lien,
financing statement, pledge, charge, hypothecation, assignment,
preference, priority, or other encumbrance of any kind or nature
whatsoever (including, without limitation, any conditional sale or
title retention agreement), whether arising by contract, operation of
law, or otherwise.
"Loan Documents" means this Agreement and all promissory
notes, security agreements, deeds of trust, assignments, guaranties,
and other instruments, documents, and agreements executed and
delivered pursuant to or in connection with this Agreement, as such
instruments, documents, and agreements may be amended, modified,
renewed, extended, or supplemented from time to time.
"Lockbox" means any U.K. Lockbox or Domestic Lockbox.
"Lockbox Account" means any U.K. Lockbox Account or Domestic
Lockbox Account.
"Lockbox Agreement" means any U.K. Lockbox Agreement or
Domestic Lockbox Agreement.
"Material Adverse Effect" means (a) a material adverse effect
on (i) the business, operations, property, condition (financial or
otherwise) or prospects of the Borrowers and the Guarantor, taken as a
whole, (ii) the ability of the Borrowers and the Guarantor, taken as a
whole, to perform their respective obligations under this Agreement or
any of the other Loan Documents, or (iii) the validity or
enforceability of this Agreement or any of the other Loan Documents,
or the rights or remedies of the Agent, the Banks or the Issuing Bank
hereunder or thereunder or (b) civil or criminal liability for the
Agent or the Banks under Environmental Laws.
"Maximum Rate" means, at any time, the maximum rate of
interest under applicable law that the Agent, the Issuing Bank and the
Banks, as applicable, may charge the Borrowers. The Maximum Rate
shall be calculated in a manner that takes into account any and all
fees, payments, and other charges in respect of the Loan Documents
that constitute interest under applicable law. Each change in any
interest rate provided for herein based upon the Maximum Rate
resulting from a change in the Maximum Rate shall take effect without
notice to the Borrowers at the time of such change in the Maximum
Rate. For purposes of determining the Maximum Rate under Texas law,
the applicable rate ceiling shall be the indicated rate ceiling
described in, and computed in accordance with, Article 5069-1.04,
Vernon's Texas Civil Statutes.
Appendix A 11
<PAGE> 72
"Monthly Payment Date" means the last day of each calendar
month of each year, the first of which shall be the first such day
after the date of this Agreement.
"Multiemployer Plan" means a multiemployer plan defined as
such in Section 3(37) of ERISA to which contributions have been made
by any Borrower or any predecessor thereto or any ERISA Affiliate and
which is covered by Title IV of ERISA.
"Non-Cash Charges" means as to any Person, for any period,
depreciation, amortization and other non-cash charges (including
amortization of the capitalized balance of the Data Library),
determined in accordance with GAAP applied consistently.
"Notes" collectively means the Revolving Credit Notes and the
Term Notes and "Note" means any one of the Notes.
"Obligated Party" means Guarantor or any other Person who is
or becomes party to any agreement that guarantees or secures payment
and performance of the Obligations or any part thereof.
"Obligations" means all obligations, indebtedness, and
liabilities of any and all of the Borrowers to the Agent, the Issuing
Banks and the Banks, or any of some of them, arising pursuant to any
of the Loan Documents, now existing or hereafter arising, whether
direct, indirect, related, unrelated, fixed, contingent, liquidated,
unliquidated, joint, several, or joint and several, including, without
limitation, the obligations, indebtedness, and liabilities of the
Borrowers under this Agreement and the other Loan Documents
(including, without limitation, all of Borrowers' contingent
reimbursement obligations in respect of Letters of Credit), and all
interest accruing thereon and all attorneys' fees and other expenses
incurred in the enforcement or collection thereof.
"Payor" has the meaning assigned to it in Section 5.6.
"PBGC" means the Pension Benefit Guaranty Corporation or any
entity succeeding to all or any of its functions under ERISA.
"Permitted Liens" has the meaning assigned to it in Section
11.2.
"Person" means any individual, corporation, business trust,
association, company, partnership, joint venture, Governmental
Authority, or other entity.
"Plan" means any employee benefit or other plan established or
maintained by any Borrower or any ERISA Affiliate.
"Prime Rate" means the variable per annum rate of interest
then most recently announced by the Agent as its "prime rate", with
the understanding that the Agent's "prime
Appendix A 12
<PAGE> 73
rate" may be one of several base rates and serves as a basis upon which
effective rates of interest from time to time are calculated by making
reference thereto and may not be the lowest rate of the Agent's base
rates. Each change in any interest rate provided for herein based upon
the Prime Rate resulting from a change in the Prime Rate shall take
effect without notice to the Borrowers at the time of such change in
the Prime Rate.
"Principal Office" means the respective principal office of
the Agent, the Issuing Banks and the Banks, presently located for such
Persons at the addresses shown under the signature line of such
Persons in this Agreement.
"Prohibited Transaction" means any transaction set forth in
Section 406 of ERISA or Section 4975 of the Code.
"Quarterly Fee Payment Date" means the last day of each
[March, June, September, and December] of each year, the first of
which shall be the first such day after the date of this Agreement.
"Register" has the meaning assigned to it in Section 15.8(d).
"Regulation D" means Regulation D of the Board of Governors of
the Federal Reserve System as the same may be amended or supplemented
from time to time.
"Release" means, as to any Person, any release, spill,
emission, leaking, pumping, injection, deposit, disposal,
disbursement, leaching, or migration of Hazardous Materials into the
indoor or outdoor environment or into or out of property owned by such
Person, including, without limitation, the movement of Hazardous
Materials through or in the air, soil, surface water, ground water, or
property.
"Remedial Action" means all actions required to (a) clean up,
remove, treat, or otherwise address Hazardous Materials in the indoor
or outdoor environment, (b) prevent the Release or threat of Release
or minimize the further Release of Hazardous Materials so that they do
not migrate or endanger or threaten to endanger public health or
welfare or the indoor or outdoor environment, or (c) perform
pre-remedial studies and investigations in post-remedial monitoring
and care.
"Reportable Event" means any of the events set forth in
Section 4043 of ERISA.
"Revolving Credit Advance" means an advance of funds by a Bank
to the Borrowers pursuant to Article II.
"Revolving Credit Advance Request Form" means a certificate,
in substantially the form attached hereto as Exhibit "D-1", properly
completed and signed by the Borrowers requesting a Revolving Credit
Advance.
Appendix A 13
<PAGE> 74
"Revolving Credit Commitment" means as to each Bank, the
obligation of such Bank to make (a) Revolving Credit Advances and (b)
subject to applicable sublimits, to purchase participations in Letters
of Credit pursuant to Section 4.5, in an aggregate principal amount at
any one time outstanding up to but not exceeding the amount set forth
opposite the name of such Bank on the signature pages hereto under the
heading "Revolving Credit Commitment," or on the signature pages of an
Assignment and Acceptance, as the case may be, as such amount may be
reduced pursuant to Section 2.7 or terminated pursuant to Section 2.7
or Section 13.2.
"Revolving Credit Notes" means the promissory notes of the
Borrowers payable to the order of the Banks, in substantially the form
attached hereto as Exhibit "A-1" with appropriate completions, and all
extensions, renewals, replacements, modifications, supplements or
rearrangements thereof from time to time, and " Revolving Credit Note"
means any one of the Revolving Credit Notes.
"Revolving Credit Termination Date" means 11:00 a.m. Houston,
Texas time on July ____, 1998, or such earlier date and time on which
the Revolving Credit Commitment terminates as provided in this
Agreement.
"RICO" means the Racketeer Influenced and Corrupt Organization
Act of 1970, as amended from time to time.
"Security Agreement" means a security agreement of each of
Digicon, Geophysical Corp., Exploration and GFS in favor of the agent
in substantially the form attached hereto as Exhibit "B-1" with
appropriate completions, as the same may be amended, supplemented, or
modified from time to time and "Security Agreements" means more than
one Security Agreement.
"Stockholders Equity" has the meaning assigned to it under
GAAP.
"Subordinated Debt" means Debt of a Person which has been
subordinated to the Obligations in form and substance and upon terms
satisfactory to the Agent.
"Subsidiary" means any corporation of which at least a
majority of the outstanding shares of stock having by the terms
thereof ordinary voting power to elect a majority of the board of
directors of such corporation (irrespective of whether or not at the
time stock of any other class or classes of such corporation shall
have or might have voting power by reason of the happening of any
contingency) is at the time directly or indirectly owned or controlled
by Digicon or one or more of the Subsidiaries or by Digicon and one or
more of the Subsidiaries.
"Term Loan" means the loan by a Bank to the Borrowers pursuant
to Article III.
"Term Loan Advance" means an advance of funds by a Bank to the
Borrowers pursuant to Article III.
Appendix A 14
<PAGE> 75
"Term Loan Advance Request Form" means a certificate, in
substantially the form attached hereto as Exhibit "D-2", properly
completed and signed by the Borrowers requesting a Term Loan Advance.
"Term Loan Commitment" means, as to each Bank, the obligation
of such Bank to make the Term Loan Advances to the Borrower hereunder
in the principal amount up to but not exceeding the amount set forth
opposite the name of such Bank on the signature pages hereto under the
heading "Term Loan Commitment," or on the signature pages of an
Assignment and Acceptance, as the case may be, as such amount may be
terminated pursuant to Section 13.2.
"Term Loan Maturity Date" means 11:00 a.m., Houston, Texas
time on July __, 1999, or such earlier date and time on which the Term
Notes mature as provided in this Agreement.
"Term Notes" means the promissory notes of the Borrowers
payable to the order of the Banks, in substantially the form attached
hereto as Exhibit "A-2" with appropriate completions, and all
extensions, renewals, replacements, modifications, supplements or
rearrangements thereof from time to time and "
Term Note" means any one of the Term Notes.
"UCC" means the Uniform Commercial Code as in effect in the
State of Texas from time to time.
"U.K. Lockbox" means the lockbox established pursuant to the
U.K. Lockbox Agreement.
"U.K. Lockbox Account" means a segregated account or accounts
established in the name of _________ at _________ Bank in _________,
England into which all of Geophysical Limited's Dollar denominated
receivables will be deposited pursuant to the U.K. Lockbox Agreement,
with the Agent having the right to apply same to the Obligations after
an Event of Default has occurred and is continuing.
"U.K. Lockbox Agreement" means a _____________, as the same
may be amended, modified or supplemented from time to time.
Appendix A 15
<PAGE> 76
INDEX TO APPENDICES
Appendix Section
- -------- -------
A Definitions 1.1
INDEX TO SCHEDULES
- ------------------
Schedule Description of Schedule Section
- -------- ----------------------- -------
9.5 Existing Litigation 9.5
9.9 Existing Debt 9.9
9.14 List of Subsidiaries 9.14
9.20 Environmental Matters 9.20
11.2 Existing Liens 11.2
INDEX TO EXHIBITS
- -----------------
Exhibit Description of Exhibit Section/
------- ---------------------- --------
Appendix
--------
"A-1" Form of Revolving Credit Note
"A-2" Form of Term Note
"B-1" Form of Security Agreement
"B-2" Charge Debenture (Malaysia)
"B-3" Charge Debenture (U.K.)
"C" Form of Guaranty
"D-1" Revolving Credit Advance Request Form
"D-2" Term Loan Advance Request Form
"E" Borrowing Base Report
"F" Form of Compliance/Certificate of No Default
<PAGE> 1
EXHIBIT 12
VERITAS DGC INC.
COMPUTATION OF EARNINGS TO FIXED CHARGES RATIO
(IN 000'S OF DOLLARS)
<TABLE>
<CAPTION>
FOR THE YEARS ENDED JULY 31,
------------------------------------------------------------
1992 1993 1994 1995 1996
-------- -------- -------- -------- --------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
Earnings:
Income before provision for income taxes
and equity in loss of 50% or less-owned
companies and joint ventures............ $ 7,025 $ 5,961 $ 540 $ 14,587 $ 4,403
Equity in loss of 50% or less-owned
companies and joint ventures............ 1,521 2,204 4,965 5,186 1,113
Fixed charges.............................. 9,516 8,100 10,757 14,387 14,869
Capitalized interest....................... 204
------- ------- ------- ------- -------
Total.............................. $ 15,020 $ 11,653 $ 6,332 $ 23,788 $ 18,159
======= ======= ======= ======= =======
Fixed charges:
Interest expense........................... $ 2,579 $ 1,928 $ 3,213 $ 5,170 $ 5,466
Capitalized interest....................... 204
1/3 Rent expense.......................... 6,937 5,968 7,544 9,217 9,403
------- ------- ------- ------- -------
Total.............................. $ 9,516 $ 8,100 $ 10,757 $ 14,387 $ 14,869
------- ------- ------- ------- -------
Ratio of earnings to fixed charges(2)........ 1.58 1.44 0.59(1) 1.65 1.22
======= ======= ======= ======= =======
</TABLE>
- ---------------
(1) Earnings are inadequate to cover fixed charges by $4,425,000.
(2) The effect of the refinancing impacts the ratio of earnings to fixed charges
by less than 10%. Therefore the pro forma ratio is not presented.
<PAGE> 1
EXHIBIT 23-A
CONSENT OF INDEPENDENT AUDITORS
We consent to the use in this Registration Statement of Veritas DGC Inc. on Form
S-3 of our report dated July 15, 1996 (September 20, 1996 as to Note 2), and to
the reference to us under the headings "Selected Financial Data" and "Experts"
appearing in the Prospectus, which is part of this Registration Statement.
We also consent to the incorporation by reference in this Registration Statement
of Veritas DGC Inc. on Form S-3 of our reports dated October 12, 1995 (July 15,
1996 as to Notes 10, 20 and 21) appearing in the Annual Report on Form 10-K of
Digicon Inc. for the year ended July 31, 1995, as amended by Form 10-K/A dated
June 17, 1996, Form 10-K/A-2 dated July 19, 1996 and Form 10-K/A-3 dated August
20, 1996.
We also consent to the incorporation by reference in this Registration Statement
of Veritas DGC Inc. on Form S-3 of our report dated March 10, 1995 (which
expresses an unqualified opinion and includes an explanatory paragraph regarding
substantial doubt about the ability of such entities to continue as a going
concern) on the combined financial statements of DG Seis Overseas Limited and MD
Seis Geophysical Co. Ltd. and Seismic Technology, Inc. as of December 31, 1994
and for the period from April 1, 1994 (date of inception) to December 31, 1994
appearing in Form 10-K/A of Digicon Inc. dated June 17, 1996.
We also consent to the incorporation by reference in this Registration Statement
of Veritas DGC Inc. on Form S-3 of our report dated August 16, 1996 on the
financial statements of P. T. Digicon Mega Pratama as of July 31, 1995 and 1994
and for each of the three years in the period ended July 31, 1995 appearing in
Form 10-K/A-3 of Digicon Inc. dated August 20, 1996.
DELOITTE & TOUCHE LLP
Houston, Texas
September 20, 1996
<PAGE> 1
EXHIBIT 23-B
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectus
constituting part of this Registration Statement on Form S-3 of our report dated
December 11, 1995 which appears on page F-31 of the Definitive Joint Management
Information Circular and Proxy Statement of Digicon Inc. and Veritas Energy
Services Inc. dated July 19, 1996. We also Consent to the references to us under
the heading "Experts" in such prospectus.
PRICE WATERHOUSE
Chartered Accountants
Calgary, Alberta
September 19, 1996
<PAGE> 1
EXHIBIT 25
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------
FORM T-1
----------
STATEMENT OF ELIGIBILITY UNDER THE
TRUST INDENTURE ACT OF 1939 OF A CORPORATION
DESIGNATED TO ACT AS TRUSTEE
----------
/ / CHECK IF AN APPLICATION TO DETERMINE
ELIGIBILITY OF A TRUSTEE PURSUANT TO SECTION 305(B)(2)
FLEET NATIONAL BANK
---------------------------------------------------------
(Exact name of trustee as specified in its charter)
<TABLE>
<S> <C>
Not applicable 04-317415
- ---------------------------------------- -----------------------------
(Jurisdiction of incorporation or (I.R.S. Employer
organization if not a U.S. Identification No.)
national bank)
One Monarch Place, Springfield, MA 01102
- ---------------------------------------- -----------------------------
(Address of principal executive offices) (Zip Code)
</TABLE>
Pat Beaudry, 777 Main Street, Hartford, CT 06115 (203) 728-2065
--------------------------------------------------------------
(Name, address and telephone number of agent for service)
VERITAS DGC INC.
---------------------------------------------------
(Exact name of obligor as specified in its charter)
<TABLE>
<S> <C>
Delaware 76-0343152
- ------------------------------- -----------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3701 Kirby Drive, Suite 112
Houston, Texas 77098
- ---------------------------------------- -----------------------------
(Address of principal executive offices) (Zip Code)
</TABLE>
Senior Notes due 2003
------------------------------------------------------------------
(Title of the indenture securities)
<PAGE> 2
Item 1. General Information.
Furnish the following information as to the trustee:
(a) Name and address of each examining or supervising authority to
which it is subject,
The Comptroller of the Currency,
Washington, D.C.
Federal Reserve Bank of Boston
Boston, Massachusetts
Federal Deposit Insurance Corporation
Washington, D.C.
(b) Whether it is authorized to exercise
corporate trust powers:
The trustee is so authorized.
Item 2. Affiliations with obligor and underwriter.
If the obligor or any underwriter for the obligor is an affiliate of the
trustee, describe each such affiliation.
None with respect to the trustee.
Item 16. List of exhibits.
List below all exhibits filed as a part of this statement of
eligibility and qualification.
(1) A copy of the Articles of Association of the trustee as
now in effect.
(2) A copy of the Certificate of Authority of the trustee
to commence business.
(3) A copy of the Certification of Fiduciary Powers of the
trustee.
(4) A copy of the By-Laws of the trustee as now in effect.
(5) Consent of the trustee required by Section 321(b)
of the Act.
(6) A copy of the latest Consolidated Reports of Condition
and Income of the trustee published pursuant to law or
the requirements of its supervising or examining authority.
NOTES
In as much as this Form T-1 is filed prior to the ascertainment by the trustee
of all facts on which to base answers to Item 2, the answers to said Items are
based upon incomplete information. Said Items may, however, be considered
correct unless amended by an amendment to this Form T-1.
-2-
<PAGE> 3
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939,
the trustee, Fleet National Bank, a national banking association organized and
existing under the laws of the United States, has duly caused this statement
of eligibility and qualification to be signed on its behalf by the undersigned,
thereunto duly authorized, all in the City of Hartford, and State of
Connecticut, on the 17th day of September, 1996.
FLEET NATIONAL BANK,
AS TRUSTEE
By: /s/ ELIZABETH C. HAMMER
---------------------------
Elizabeth C. Hammer
Its Vice President
-3-
<PAGE> 4
EXHIBIT 1
ARTICLES OF ASSOCIATION
OF
FLEET NATIONAL BANK
FIRST. The title of this Association, which shall carry on the business of
banking under the laws of the United States, shall be "Fleet National Bank."
SECOND. The main office of the Association shall be in Springfield, Hampden
County Commonwealth of Massachusetts. The general business of the Association
shall be conducted at its main office and its branches.
THIRD. The board of directors of this Association shall consist of not less
than five (5) nor more than twenty-five (25) shareholders, the exact number of
directors within such minimum and maximum limits to be fixed and determined
from time to time by resolution of a majority of the full board of directors or
by resolution of the shareholders at any annual or special meeting thereof.
Unless otherwise provided by the laws of the United States, any vacancy in the
board of directors for any reason, including an increase in the number thereof,
may be filled by action of the board of directors.
FOURTH. The annual meeting of the shareholders for the election of directors
and the transaction of whatever other business may be brought before said
meeting shall be held at the main office or such other place as the board of
directors may designate, on the day of each year specified therefore in the
bylaws, but if no election is held on that day, it may be held on any
subsequent day according to the provisions of law; and all elections shall be
held according to such lawful regulations as may be prescribed by the board of
directors.
FIFTH. The authorized amount of capital stock of this Association shall be
eight million five hundred thousand (8,500,000) shares of which three million
five hundred thousand (3,500,000) shares shall be common stock with a
par value of six and 25/100 dollars ($6.25) each, and of which five million
(5,000,000) shares without par value shall be preferred stock. The capital
stock may be increased or decreased from time to time, in accordance with
the provisions of the laws of the United States.
No holder of shares of the capital stock of any class of the Association shall
have any pre-emptive or preferential right of subscription to any shares of any
class of stock of the Association, whether now or hereafter authorized, or to
any obligations convertible into stock of the Association, issued or sold, nor
any right of subscription to any thereof other than such, if any, as the board
of directors, in its discretion, may from time to time determine and at such
price as the board of directors may from time to time fix.
<PAGE> 5
The board of directors of the Association is authorized, subject to limitations
prescribed by law and the provisions of this Article, to provide for the
issuance from time to time in one or more series of any number of the preferred
shares, and to establish the number of shares be included in each series, and
to fix the designation, relative rights, preferences, qualifications and
limitations of the shares of each such series. The authority of the board of
directors with respect to each series shall include, but not be limited to,
determination of the following:
a. The number of shares constituting that series and the distinctive
designation of that series;
b. The dividend rate on the shares of that series, whether dividends shall be
cumulative, and, if so, from which date or dates, and whether they shall be
payable in preference to, or in another relation to, the dividends payable
to any other class or classes or series of stock;
c. Whether that series shall have voting rights, in addition to the voting
rights provided by law, and, if so, the terms of such voting rights;
d. Whether that series shall have conversion or exchange privileges, and,
if so, the terms and conditions of such conversion or exchange, including
provision for the adjustment of the conversion or exchange rate in such
events as the board of directors shall determine;
e. Whether or not the shares of that series shall be redeemable, and, if so,
the terms and conditions of such redemption, including the manner of
selecting shares for redemption if less than all shares are to be redeemed,
the date or dates upon or after which they shall be redeemable, and the
amount per share payable in case of redemption, which amount may vary under
different conditions and at different redemption dates;
f. Whether that series shall be entitled to the benefit of a sinking fund to
be applied to the purchase or redemption of shares of that series, and, if
so, the terms and amounts of such sinking fund;
g. The right of the shares of that series to the benefit of conditions and
restrictions upon the creation of indebtedness of the Association or any
subsidiary, upon the issue of any additional stock (including additional
shares of such series or of any other series) and upon the payment of
dividends or the making of other distributions on, and the purchase,
redemption or other acquisition by the Association or any subsidiary of
any outstanding stock of the Association;
h. The right of the shares of that series in the event of voluntary or
involuntary liquidation, dissolution or winding up of the Association and
whether such rights shall be in preference to, or in another relation to,
the comparable rights of any other class or classes or series of stock; and
i. Any other relative, participating, optional or other special rights,
qualifications, limitations or restrictions of that series.
Shares of any series of preferred stock which have been redeemed (whether
through the operation of a sinking fund or otherwise) or which, if convertible
or exchangeable, have been converted into or exchanged for shares of stock of
any other class or classes shall have the status of authorized and unissued
shares of preferred stock of the same series and may be reissued as a part of
the series of which they were originally a part or may be reclassified and
reissued as part of a new series of preferred stock to be created by resolution
or resolutions of the board of directors or as part of any other series or
preferred stock, all subject to the conditions and the restrictions adopted by
the board of directors providing for the issue of any series of preferred
stock and by the provisions of any applicable law.
Subject to the provisions of any applicable law, or except as otherwise
provided by the resolution or resolutions providing for the issue of any series
of preferred stock, the holders of outstanding shares of common stock shall
exclusively possess voting power for the election of directors and for all
purposes, each holder of record of shares of common stock being entitled to one
vote for each share of common stock standing in his name on the books of the
Association.
Except as otherwise provided by the resolution or resolutions providing for the
issue of any series of preferred stock, after payment shall have been made to
the holders of preferred stock of the full amount of dividends to which they
shall be entitled pursuant to the resolution or resolutions providing for the
issue of any other series of preferred stock, the holders of common stock shall
be entitled, to the exclusion of the holders of preferred stock of any and all
series, to receive such dividends as from time to time may be declared by the
board of directors.
Except as otherwise provided by the resolution or resolutions for the issue
of any series of preferred stock, in the event of any liquidation, dissolution
or winding up of the Association, whether voluntary or involuntary, after
payment shall have been made to the holders of preferred stock of the full
amount to which they shall be entitled pursuant to the resolution or
resolutions providing for the issue of any series of preferred stock the
holders of common stock shall be entitled, to the exclusion of the holders of
preferred stock of any and all series, to share, ratable according to the
number of shares of common stock held by them, in all remaining assets of the
Association available for distribution to its shareholders.
The number of authorized shares of any class may be increased or decreased by
the affirmative vote of the holders of a majority of the stock of the
Association entitled to vote.
<PAGE> 6
SIXTH. The board of directors shall appoint one of its members president of
this Association, who shall be chairman of the board, unless the board appoints
another director to be the chairman. The board of directors shall have the
power to appoint one or more vice presidents; and to appoint a secretary and
such other officers and employees as may be required to transact the business
of this Association.
The board of directors shall have the power to define the duties of the
officers and employees of the Association; to fix the salaries to be paid to
them; to dismiss them; to require bonds from them and to fix the penalty
thereof; to regulate the manner in which any increase of the capital of the
Association shall be made; to manage and administer the business and affairs of
the Association; to make all bylaws that it may be lawful for them to make; and
generally to do and perform all acts that it may be legal for a board of
directors to do and perform.
SEVENTH. The board of directors shall have the power to change the location of
the main office to any other place within the limits of the City of Hartford,
Connecticut, without the approval of the shareholders but subject to the
approval of the Comptroller of the Currency; and shall have the power to
establish or change the location of any branch or branches of the Association
to any other location, without the approval of the shareholders but subject to
the approval of the Comptroller of the Currency.
EIGHTH. The corporate existence of this Association shall continue until
terminated in accordance with the laws of the United States.
NINTH. The board of directors of this Association, or any three or more
shareholders owning, in the aggregate, not less than ten percent (10%) of the
stock of this Association, may call a special meeting of shareholders at any
time. Unless otherwise provided by the laws of the United States, a notice of
the time, place and purpose of every annual and special meeting of the
shareholders shall be given by first class mail, postage prepaid, mailed at
least ten (10) days prior to the date of such meeting to each shareholder of
record at his address as shown upon the books of this Association.
TENTH. (a) Right to Indemnification. Each person who was or is made a party
or is threatened to be made a party to any threatened, pending or completed
action, suit, or proceeding, whether civil, criminal, administrative, or
investigative (hereinafter a "proceeding"), by reason of the fact that he or
she is or was a director, officer or employee of the Association or is or was
serving at the request of the Association as a director, officer, employee or
agent of another corporation or of a partnership, joint venture, limited
liability company, trust, or other enterprise, including service with respect
to an employee benefit plan, shall be indemnified and held harmless by the
Association to the fullest extent authorized by the law of the state in which
the Association's ultimate parent company is incorporated, except as provided
in subsection (b). The aforesaid indemnity shall protect the indemnified
person against all expense, liability and loss (including attorney's fees,
judgements, fines ERISA excise taxes or penalties, and amounts paid in
settlement) reasonably incurred by such person in connection with such a
proceeding. Such indemnification shall continue as to a person who has ceased
to be a director, officer or employee and shall inure to the benefit of his or
her heirs, executors, and administrators, but shall only cover such person's
period of service with the Association. The Association may, by action of its
Board of Directors, grant rights to indemnification to agents of the
Association and to any director, officer, employee or agent of any of its
subsidiaries with the same scope and effect as the foregoing indemnification
of directors and officers.
(b) Restrictions on Indemnification. Notwithstanding the foregoing, (i) no
person shall be indemnified hereunder by the Association against expenses,
penalties, or other payments incurred in an administrative proceeding or action
instituted by a federal bank regulatory agency which proceeding or action
results in a final order assessing civil money penalties against that person,
requiring affirmative action by that person in the form of payments to the
Association, or removing or prohibiting that person from service with the
Association, and any advancement of expenses to that person in that proceeding
must be repaid; and (ii) no person shall be indemnified hereunder by the
Association and no advancement of expenses shall be made to any person
hereunder to the extent such indemnification or advancement of expenses would
violate or conflict with any applicable federal statute now or hereafter in
force or any applicable final regulation or interpretation now or hereafter
adopted by the Office of the Comptroller of the Currency ("OCC") or the Federal
Deposit Insurance Corporation ("FDIC"). The Association shall comply with any
requirements imposed on it by any such statue or regulation in connection with
any indemnification or advancement of expenses hereunder by the Association.
With respect to proceedings to enforce a claimant's rights to indemnification,
the Association shall indemnify any such claimant in connection with such a
proceeding only as provided in subsection (d) hereof.
(c) Advancement of Expenses. The conditional right to indemnification
conferred in this section shall be a contract right and shall include the
right to be paid by the Association the reasonable expenses (including
attorney's fees) incurred in defending a proceeding in advance of its final
disposition (an "advancement of expenses"); provided, however, that an
advancement of expenses shall be made only upon (i) delivery to the Association
of a binding written undertaking by or on behalf of the person receiving the
advancement to repay all amounts so advanced if it is ultimately determined
that such person is not entitled to be indemnified in such proceeding,
including if such proceeding results in a final order assessing civil money
penalties against that person, requiring affirmative action by that person
in the form of payments to the Association, or removing or prohibiting that
person from service with the Association, and (ii) compliance with any other
actions or determinations required by applicable law, regulation or OCC or FDIC
interpretation to be taken or made by the Board of Directors of the Association
or other persons prior to an advancement of expenses. The Association shall
cease advancing expenses at any time its Board of Directors believes that any
of the prerequisites for advancement of expenses are no longer being met.
(d) Right of Claimant to Bring Suit. If a claim under subsection (a) of the
section is not paid in full by the Association within thirty (30) days after
written claim has been received by the Association, the claimant may at any time
thereafter bring suit against the Association to recover the unpaid amount
of the claim. If successful in whole or in part in any such suit, or in a
suit brought by the Association to recover an advancement of expenses pursuant
to the terms of an undertaking, the claimant shall be entitled to be paid also
the expense of prosecuting or defending such claim. It shall be a defense to
any such action brought by the claimant to enforce a right to indemnification
hereunder (other than an action brought to enforce a claim for an advancement
of expenses where the required undertaking, if any, has been tendered to the
Association) that the claimant has not met any applicable standard for
indemnification under the law of the state in which the Association's ultimate
parent company is incorporated. In any suit brought by the Association to
recover an advancement of expenses pursuant to the terms of an undertaking, the
Association shall be entitled to recover such expenses upon a final
adjudication that the claimant has not met any applicable standard for
indemnification standard for indemnification under the law of the state in
which the Association's ultimate parent company is incorporated.
(e) Non-Exclusivity of Rights. The rights to indemnification and the
advancement of expenses conferred in this section shall not be exclusive of any
other right which any person may have or hereafter acquired under any statute,
agreement, vote of stockholders or disinterested directors or otherwise.
(f) Insurance. The Association may purchase, maintain, and make payment or
reimbursement for reasonable premiums on, insurance to protect itself and any
director, officer, employee or agent of the Association or another corporation,
partnership, joint venture, trust or other enterprise against any expense,
liability or loss, whether or not the Association would have the power to
indemnify such person against such expense, liability or loss under the law of
the state in which the Association's ultimate parent company is incorporated;
provided however, that such insurance shall explicitly exclude insurance
coverage for a final order of a federal bank regulatory agency assessing civil
money penalties against an Association director, officer, employee or agent.
ELEVENTH. These articles of association may be amended at any regular or
special meeting of the shareholders by the affirmative vote of the holders of a
majority of the stock of this Association, unless the vote of the holders of
greater amount of stock is required by law, and in that case by the vote of the
holders of such greater amount. The notice of any shareholders' meeting at
which an amendment to the articles of association of this Association is to be
considered shall be given as hereinabove set forth.
I hereby certify that the articles of association of this Association, in their
entirety, are listed above in items first through eleventh.
Secretary/Assistant Secretary
- --------------------------------------------------
Dated at , as of .
--------------------------------------- --------------------
Revision of February 15, 1996
<PAGE> 7
EXHIBIT 2
[LOGO]
- --------------------------------------------------------------------------------
COMPTROLLER OF THE CURRENCY
ADMINISTRATOR OF NATIONAL BANKS
- --------------------------------------------------------------------------------
Washington, D.C. 20219
CERTIFICATE
I, Eugene A. Ludwig, Comptroller of the Currency, do hereby certify
that:
(1) The Comptroller of the Currency, pursuant to Revised Statutes
324, et seq., as amended, 12 U.S.C. 1, et seq., as amended, has possession,
custody and control of all records pertaining to the chartering, regulation and
supervision of all National Banking Associations.
(2) "Fleet National Bank", Springfield, Massachusetts
(Charter No. 1338), is a National Banking Association formed under the
laws of the United States and is authorized thereunder to transact the
business of banking on the date of this Certificate.
IN TESTIMONY WHEREOF, I have hereunto
subscribed my name and caused my seal of
office to be affixed to these presents at
the Treasury Department, in the City of
Washington and District of Columbia, this
4th day of April, 1996.
/s/ EUGENE A. LUDWIG
----------------------------------
Comptroller of the Currency
<PAGE> 8
EXHIBIT 3
[LOGO]
- --------------------------------------------------------------------------------
COMPTROLLER OF THE CURRENCY
ADMINISTRATOR OF NATIONAL BANKS
- --------------------------------------------------------------------------------
Washington, D.C. 20219
Certification of Fiduciary Powers
I, Eugene A. Ludwig, Comptroller of the Currency, do hereby certify
the records in this Office evidence "Fleet National Bank",
Springfield, Massachusetts, (Charter No. 1338), was granted, under the hand
and seal of the Comptroller, the right to act in all fiduciary capacities
authorized under the provisions of The Act of Congress approved
September 28, 1962, 76 Stat. 668, 12 U.S.C. 92a. I further certify the
authority so granted remains in full force and effect.
IN TESTIMONY WHEREOF, I have hereunto
subscribed my name and caused my seal of
Office of the Comptroller of the Currency
to be affixed to these presents at the
Treasury Department, in the City of
Washington and District of Columbia, this
4th day of April, 1996.
/s/ EUGENE A. LUDWIG
----------------------------------
Comptroller of the Currency
<PAGE> 9
EXHIBIT 4
AMENDED AND RESTATED BY-LAWS OF
FLEET NATIONAL BANK
ARTICLE I
MEETINGS OF SHAREHOLDERS
Section 1. Annual Meeting. The regular annual meeting of the shareholders for
the election of Directors and the transaction of any other business that may
properly come before the meeting shall be held at the Main Office of the
Association, or such other place as the Board of Directors may designate, on
the fourth Thursday of April in each year at 1:15 o'clock in the afternoon
unless some other hour of such day is fixed by the Board of Directors.
If, from any cause, an election of Directors is not made on such day, the Board
of Directors shall order the election to be held on some subsequent day, of
which special notice shall be given in accordance with the provisions of law,
and of these bylaws.
Section 2. Special Meetings. Special meetings of the shareholders may be called
at any time by the Board of Directors, the President, or any shareholders
owning not less than twenty-five percent (25%) of the stock of the Association.
Section 3. Notice of Meetings of Shareholders. Except as otherwise provided
by law, notice of the time and place of annual or special meetings of the
shareholders shall be mailed, postage prepaid, at least ten (10) days before
the date of the meeting to each shareholder of record entitled to vote thereat
at his address as shown upon the books of the Association; but any failure to
mail such notice to any shareholder or any irregularity therein, shall not
affect the validity of such meeting or of any of the proceedings thereat.
Notice of a special meeting shall also state the purpose of the meeting.
Section 4. Quorum; Adjourned Meetings. Unless otherwise provided by law, a
quorum for the transaction of business at every meeting of the shareholders
shall consist of not less than two-fifths (2/5) of the outstanding capital
stock represented in person or by proxy; less than such quorum may adjourn the
meeting to a future time. No notice need be given of an adjourned annual or
special meeting of the shareholders if the adjournment be to a definite place
and time.
Section 5. Votes and Proxies. At every meeting of the shareholders, each
share of the capital stock shall be entitled to one vote except as otherwise
provided by law. A majority of the votes cast shall decide every question
or matter submitted to the shareholder at any meeting, unless otherwise
provided by law or by the Articles of Association or these By-laws. Share-
holders may vote by proxies duly authorized in writing and filed with the
Cashier, but no officer, clerk, teller or bookeeper of the Association may act
as a proxy.
<PAGE> 10
Section 6. Nominations to Board of Directors. At any meeting of shareholders
held for the election of Directors, nominations for election to the Board of
Directors may be made, subject to the provisions of this section, by any share-
holder of record of any outstanding class of stock of the Association entitled
to vote for the election of Directors. No person other than those whose names
are stated as proposed nominees in the proxy statement accompanying the notice
of the meeting may be nominated as such meeting unless a shareholder shall have
given to the President of the Association and to the Comptroller of the
Currency, Washington, DC written notice of intention to nominate such other
person mailed by certified mail or delivered not less than fourteen (14) days
nor more than fifty (50) days prior to the meeting of shareholders at which
such nomination is to be made; provided, however, that if less than twenty-one
(21) days' notice of such meeting is given to shareholders, such notice of
intention to nominate shall be mailed by certified mail or delivered to said
President and said Comptroller on or before the seventh day following the day
on which the notice of such meeting was mailed. Such notice of intention to
nominate shall contain the following information to the extent known to the
notifying shareholder: (a) the name and address of each proposed nominee; (b)
the principal occupation of each proposed nominee; (c) the total number of
shares of capital stock of the Association that will be voted for each proposed
nominee; (d) the name and residence address of the notifying shareholder; and
(e) the number of shares of capital stock of the Association owned by the
notifying shareholder. In the event such notice is given, the proposed nominee
may be nominated either by the shareholder giving such notice or by any other
shareholder present at the meeting at which such nomination is to be made.
Such notice may contain the names of more than one proposed nominee, and if
more than one is named, any one or more of those named may be nominated.
Section 7. Action Taken Without a Shareholder Meeting. Any action requiring
shareholder approval or consent may be taken without a meeting and without
notice of such meeting by written consent of the shareholders.
ARTICLE II
DIRECTORS
Section 1. Number. The Board of Directors shall consist of such number of
shareholders, not less than five (5) nor more than twenty-five (25), as from
time to time shall be determined by a majority of the votes to which all of its
shareholders are at the time entitled, or by the Board of Directors as
hereinafter provided.
Section 2. Mandatory Retirement for Directors. No person shall be elected a
director who has attained the age of 68 and no person shall continue to serve
as a director after the date of the first meeting of the stockholders of the
Association held on or after the date on which such person attains the age of
68; provided, however, that any director serving on the Board as of December
15, 1995 who has attanined the age of 65 on or prior to such date shall be
permitted to continue to serve as a director until the date of the first
meeting of the stockholders of the Association held on or after the date on
which such person attains the age of 70.
-2-
<PAGE> 11
Section 3. General Powers. The Board of Directors shall exercise all the
coporate powers of the Association, except as expressly limited by law, and
shall have the control, management, direction and dispositon of all its
property and affairs.
Section 4. Annual Meeting. Immediately following a meeting of shareholders
held for the election of Directors, the Cashier shall notify the directors-
elect who may be present of their election and they shall then hold a meeting
at the Main Office of the Association, or such other place as the Board of
Directors may designate, for the purpose of taking their oaths, organizing the
new Board, electing officers and transacting any other business that may come
before such meeting.
Section 5. Regular Meeting. Regular meetings of the Board of Directors shall
be held without notice at the Main Office of the Association, or such other
place as the Board of Directors may designate, at such dates and times as the
Board shall determine. If the day designated for a regular meeting falls on a
legal holiday, the meeting shall be held on the next business day.
Section 6. Special Meetings. A special meeting of the Board of Directors may
be called at anytime upon the written request of the Chairman of the Board, the
President, or of two Directors, stating the purpose of the meeting. Notice of
the time and place shall be given not later than the day before the date of the
meeting, by mailing a notice to each Director at his last known address, by
delivering such notice to him personally, or by telephoning.
Section 7. Quorum; Votes. A majority of the Board of Directors at the time
holding office shall constitute a quorum for the transaction of all business,
except when otherwise provided by law, but less than a quorum may adjourn
a meeting from time to time, and the meeting may be held, as adjourned, without
further notice. If a quorum is present when a vote is taken, the affirmative
vote of a majority of Directors present is the act of the Board of Directors.
Section 8. Action by Directors Without a Meeting. Any action requiring
Director approval or consent may be taken without a meeting and without notice
of such meeting by written consent of all the Directors.
Section 9. Telephonic Participation in Directors' Meetings. A Director or
member of a Committee of the Board of Directors may participate in a meeting of
the Board or of such Committee may participate in a meeting of the Board or of
such Committee by means of a conference telephone or similar communications
equipment enabling all Directors participating in the meeting to hear one
another, and participation in such a meeting shall constitute presence in person
at such a meeting.
Section 10. Vacancies. Vacancies in the Board of Directors may be filled by
the remaining members of the Board at any regular or special meeting of the
Board.
Section 11. Interim Appointments. The Board of Directors shall, if the share-
holders at any meeting for the election of Directors have determined a number
of Directors less than twenty-five (25), have the power, by affirmative vote of
the majority of all the Directors, to increase such number of Directors to not
more than twenty-five (25) and to elect Directors to fill the resulting
vacancies and to serve until the next annual meeting of shareholders or the
next election of Directors; provided, however, that the number of Directors
shall not be so increased by more than two (2) if the number last determined
by shareholders was fifteen (15) or less, or increased by more than four (4) if
the number last determined by shareholders was sixteen (16) or more.
Section 12. Fees. The Board of Directors shall fix the amount and direct the
payment of fees which shall be paid to each Director for attendance at any
meeting of the Board of Directors or of any Committees of the Board.
ARTICLE III
COMMITTEES OF THE BOARD
Section 1. Executive Committee. The Board of Directors shall appoint from its
members an Executive Committee which shall consist of such number of persons as
the Board of Directors shall determine; the Chairman of the Board and the
President shall be members ex-officio of the Executive Committee with full
voting power. The Chairman of the Board or the President may from time to time
appoint from the Board of Directors as temporary additional members of the
Executive Committee, with full voting powers, not more than two members to serve
for such periods as the Chairman of the Board or the President may determine.
The Board of Directors shall designate a member of the Executive Committee to
serve as Chairman thereof. A meeting of the Executive Committee may be called
at any time upon the written request of the Chairman of the Board, the President
or the Chairman of the Executive Committee, stating the purpose of the meeting.
Not less than twenty four hours' notice of said meeting shall be given to each
member of the Committee personally, by telephoning, or by mail. The Chairman of
the Executive Committee or, in his absence, a member of the Committee chosen by
a majority of the members present shall preside at meetings of the Executive
Committee.
-3-
<PAGE> 12
The Executive Committee shall possess and may exercise all the powers of the
Board when the Board is not in session except such as the Board, only, by law,
is authorized to exercise; it shall keep minutes of its acts and proceedings
and cause same to be presented and reported at every regular meeting and at any
special meeting of the Board including specifically, all its actions relating
to loans and discounts.
All acts done and powers and authority conferred by the Executive Committee,
from time to time, within the scope of its authority, shall be deemed to be,
and may be certified as being, the acts of and under the authority of the
Board.
Section 2. Risk Management Committee. The Board shall appoint from its
members a Risk Management Committee which shall consist of such number as the
Board shall determine. The Board shall designate a member of the Risk
Management Committee to serve as Chairman thereof. It shall be the duty of the
Risk Management Committee to (a) serve as the channel of communication with
management and the Board of Directors of Fleet Financial Group, Inc. to assure
that formal processes supported by management information systems are in place
for the identification, evaluation and management of significant risks inherent
in or associated with lending activities, the loan portfolio, asset-liablity
management, the investment portfolio, trust and investment advisory activities,
the sale of nondeposit investment products and new products and services and
such additional activities or functions as the Board may determine from time
to time; (b) assure the formulation and adoption of policies approved by the
Risk Management Committee or Board governing lending activities, management of
the loan portfolio, the maintenance of an adequate allowance for loan and lease
losses, asset-liability management, the investment portfolio, the retail
sale of non-deposit investment products, new products and services and such
additional activities or functions as the Board may determine from time to time
(c) assure that a comprehensive independent loan review program is in place for
the early detection of problem loans and review significant reports of the loan
review department, management's responses to those reports and the risk
attributed to unresolved issues; (d) subject to control of the Board, exercise
general supervision over trust activities, the investment of trust funds, the
disposition of trust investments and the acceptance of new trusts and the terms
of such acceptance, and (e) perform such additional duties and exercise such
additional powers of the Board as the Board may determine from time to time.
Section 3. Audit Committee. The Board shall appoint from its members and
Audit Committee which shall consist of such number as the Board shall determine
no one of whom shall be an active officer or employee of the Association or
Fleet Financial Group, Inc. or any of its affiliates. In addition, members of
the Audit Committee must not (i) have served as an officer or employee of the
Association or any of its affiliates at any time during the year prior to their
appointment; or (ii) own, control, or have owned or controlled at any time
during the year prior to appointment, ten percent (10%) or more of any
outstanding class of voting securities of the Association. At least two (2)
members of the Audit Committee must have significant executive, professional,
educational or regulatory experience in financial, auditing, accounting,
or banking matters. No member of the Audit Commitee may have significant
direct or indirect credit or other relationships with the Association, the
termination of which would materially adversely affect the Association's
financial condition or results of operations.
The Board shall designate a member of the Audit Committee to serve as Chairman
thereof. It shall be the duty of the Audit Committee to (a) cause a continuous
audit and examination to be made on its behalf into the affairs of the
Association and to review the results of such examination; (b) review
significant reports of the internal auditing department, management's responses
to those reports and the risk attributed to unresolved issues; (c) review the
basis for the reports issued under Section 112 of The Federal Deposit Insurance
Corporation Improvement Act of 1991; (d) consider, in consultation with the
independent auditor and an internal auditing executive, the adequacy of the
Association's internal controls, including the resolution of identified material
weakness and reportable conditions; (e) review regulatory communications
received from any federal or state agency with supervisory jurisdiction or
other examining authority and monitor any needed corrective action by
management; (f) ensure that a formal system of internal controls is in place
for maintaining compliance with laws and regulations; (g) cause an audit of the
Trust Department at least once during each calendar year and within 15 months
of the last such audit or, in liew thereof, adopt a continuous audit system and
report to the Board each calendar year and within 15 months of the previous
report on the performance of such audit function; and (h) perform such
additional duties and exercise such additional powers of the Board as the Board
may determine from time to time.
The Audit Committee may consult with internal counsel and retain its own
outside counsel without approval (prior or otherwise) from the Board or
management and obligate the Association to pay the fees of such counsel.
-4-
<PAGE> 13
Section 4. Community Affairs Committee. The Board shall appoint from its
members a Community Affairs Committee which shall consist of such number as the
Board shall determine. The Board shall designate a member of the Community
Affairs Committee to serve as Chairman thereof. It shall be the duty of the
Commmunity Affairs Committee to (a) oversee compliance by the Association with
the Community Reinvestment Act of 1977, as amended, and the regulations
promulgated thereunder; and (b) perform such additional duties and exercise such
additional powers of the Board as the Board may determine from time to time.
Section 5. Regular Meetings. Except for the Executive Committee which shall
meet on an ad hoc basis as set forth in Section 1 of this Article, regular
meetings of the Committees of the Board of Directors shall be held, without
notice, at such time and place as the Committee or the Board of Directors may
appoint and as often as the business of the Association may require.
Section 6. Special Meetings. A Special Meeting of any of the Committees of
the Board of Directors may be called upon the written request of the Chairman
of the Board or the President, or of any two members of the respective
Committee, stating the purpose of the meeting. Not less than twenty-four
hours' notice of such special meeting shall be given to each member of the
Committee personally, by telephoning, or by mail.
Section 7. Emergency Meetings. An Emergency Meeting of any of the Committees
of the Board of Directors may be called at the request of the Chairman of the
Board or the President, who shall state that an emergency exists, upon not
less than one hour's notice to each member of the Committee personally or by
telephoning.
Section 8. Action Taken Without a Committee Meeting. Any Committee of the
Board of Directors may take action without a meeting and without notice of such
meeting by resolution assented to in writing by all members of such Committee.
Section 9. Quorum. A majority of a Committee of the Board of Directors shall
constitute a quorum for the transaction of any business at any meeting of such
Committee. If a quorum is not available, the Chairman of the Board or the
President shall have power to make temporary appointments to a Committee of-
members of the Board of Directors, to act in the place and stead of members who
temporarily cannot attend any such meeting; provided, however, that any
temporary appointment to the Audit Committee must meet the requirements for
members of that Committee set forth in Section 3 of this Article.
Section 10. Record. The committes of the Board of Directors shall keep a
record of their respective meetings and proceedings which shall be presented
at the regular meeting of the Board of Directors held in the calendar month
next following the meetings of the Committees. If there is no regular Board
of Directors meeting held in the calendar month next following the meeting of
a Committee, then such Committee's records shall be presented at the next
regular Board of Directors meeting held in a month subsequent to such Committee
meeting.
Section 11. Changes and Vacancies. The Board of Directors shall have power
to change the members of any Committee at any time and to fill vacancies on any
Committee; provided, however, that any newly appointed member of the Audit
Committee must meet the requirements for members of that Committee set forth in
Section 3 of this Article.
Section 12. Other Committees. The Board of Directors may appoint, from time
to time, other committees of one or more persons, for such purposes and with
such powers as the Board may determine.
ARTICLE IV
WAIVER OF NOTICE OF MEETINGS
Section 1. Waiver. Whenever notice is required to be given to any shareholder,
Director, or member of a Committee of the Board of Directors, such notice may
be waived in writing either before or after such meeting by any shareholder,
Director or Committee member respectively, as the case may be, who may be
entitled to such notice; and such notice will be deemed to be waived by
attendance at any such meeting.
-5-
<PAGE> 14
ARTICLE V
OFFICERS AND AGENTS
Section 1. Officers. The Board shall appoint a Chairman of the Board and a
President, and shall have the power to appoint one or more Executive Vice
Presidents, one or more Senior Vice Presidents, one or more Vice Presidents, a
Cashier, a Secretary, an Auditor, a Controller, one or more Trust Officers and-
such other officers as are deemed necessary or desirable for the proper
transaction of business of the Association. The Chairman of the Board and the
President shall be appointed from members of the Board of Directors. Any two
or more offices, except those of President and Cashier, or Secretary, may be
held by the same person. The Board may, from time to time, by resolution
passed by a majority of the entire Board, designate one or more officers of the
Association or of an affiliate or of Fleet Financial Group, Inc. with power to
appoint one or more Vice Presidents and such other officers of the Association
below the level of Vice President as the officer or officers designated in such
resolution deem necessary or desirable for the proper transaction of the
business of the Association.
Section 2. Chairman of the Board. The chairman of the Board shall preside at
all meetings of the Board of Directors. Subject to definition by the Board of
Directors, he shall have general executive powers and such specific powers and
duties as from time to time may be conferred upon or assigned to him by the
Board of Directors.
Section 3. President. The President shall preside at all meetings of the
Board of Directors if there be no Chairman or if the Chairman be absent.
Subject to definition by the Board of Directors, he shall have general
executive powers and such specific powers and duties as from time to time may
be conferred upon or assigned to him by the Board of Directors.
-6-
<PAGE> 15
Section 4. Cashier and Secretary. The Cashier shall be the Secretary of the
Board and of the Executive Committee, and shall keep accurate minutes of their
meetings and of all meetings of the shareholders. He shall attend to the
giving of all notices required by these By-laws. He shall be custodian of the
corporate seal, records, documents and papers of the Association. He shall
have such powers and perform such duties as pertain by law or regulation to the
office of Cashier, or as are imposed by these By-laws, or as may be delegated
to him from time to time by the Board of Directors, the Chairman of the Board
or the President.
Section 5. Auditor. The Auditor shall be the chief auditing officer of the
Association. He shall continuously examine the affairs of the Association and
from time to time shall report to the Board of Directors. He shall have such
powers and perform such duties as are conferred upon, or assigned to him by
these By-laws, or as may be delegated to him from time to time by the Board
of Directors.
Section 6. Officers Seriatim. The Board of Directors shall designate from
time to time not less than two officers who shall in the absence or disability
of the Chairman or President or both, succeed seriatim to the duties and
responsibilities of the Chairman and President respectively.
Section 7. Clerks and Agents. The Board of Directors may appoint, from time
to time, such clerks, agents and employees as it may deem advisable for the
prompt and orderly transaction of the business of the Association, define
their duties, fix the salaries to be paid them and dismiss them. Subject to
the authority of the Board of Directors, the Chairman of the Board or the
President, or any other officer of the Association authorized by either of them
may appoint and dismiss all or any clerks, agents and employees and prescribe
their duties and the conditions of their employment, and from time to time
fix their compensation.
Section 8. Tenure. The Chairman of the Board of Directors and the President
shall, except in the case of death, resignation, retirement or disqualification
under these By-laws, or unless removed by the affirmative vote of at least two-
thirds of all of the members of the Board of Directors, hold office for the
term of one year or until their respective successors are appointed. Either
of such officers appointed to fill a vacancy occurring in an unexpired term
shall serve for such unexpired term of such vacancy. All other officers,
clerks, agents, attorneys-in-fact and employees of the Association shall hold
office during the pleasure of the Board of Directors or of the officer or
committee appointing them respectively.
ARTICLE VI
TRUST DEPARTMENT
Section 1. General Powers and Duties. All fiduciary powers of the Association
shall be exercised through the Trust Department, subject to such regulations as
the Comptroller of the Currency shall from time to time establish. The Trust
Department shall be to placed under the management and immediate supervision
of an officer or officers appointed by the Board of Directors. The duties of
all officers of the Trust Department shall be to cause the policies and
instructions of the Board and the Risk Management Committee with respect to the
trusts under their supervision to be carried out, and to supervise the due
performance of the trusts and agencies entrusted to the Association and under
their supervision, in accordance with law and in accordance with the terms of
such trusts and agencies.
-7-
<PAGE> 16
ARTICLE VII
BRANCH OFFICES
Section 1. Establishment. The Board of Directors shall have full power to
establish, to discontinue, or, from time to time, to change the location of any
branch office, subject to such limitations as may be provided by law.
Section 2. Supervision and Control. Subject to the general supervision and
control of the Board of Directors, the affairs of branch offices shall be
under the immediate supervision and control of the President or of such other
officer or officers, employee or employees, or other individuals as the Board
of Directors may from time to time determine, with such powers and duties as
the Board of Directors may confer upon or assign to him or them.
ARTICLE VIII
SIGNATURE POWERS
Section 1. Authorization. The power of officers, employees, agents and
attorneys to sign on behalf of and to affix the seal of the Association shall
be prescribed by the Board of Directors or by the Executive Committee or by
both; provided that the President is authorized to restrict such power of any
officer, employee, agent or attorney to the business of a specific department
or departments, or to a specific branch office or branch offices. Facsimile
signatures may be authorized.
-8-
<PAGE> 17
ARTICLE IX
STOCK CERTIFICATES AND TRANSFERS
Section 1. Stock Records. The Trust Department shall have custody of the
stock certificate books and stock ledgers of the Association, and shall make
all transfers of stock, issue certificates thereof and disburse dividends
declared thereon.
Section 2. Form of Certificate. Every shareholder shall be entitled to a
certificate conforming to the requirements of law and otherwise in such form
as the Board of Directors may approve. The certificates shall state on the
face thereof that the stock is transferable only on the books of the
Association and shall be signed by such officers as may be prescribed from time
to time by the Board of Directors or Executive Committee. Facsimile signatures
may be authorized.
Section 3. Transfers of Stock. Transfers of stock shall be made only on the
books of the Association by the holder in person, or by attorney duly
authorized in writing, upon surrender of the certificate therefor properly
endorsed, or upon the surrender of such certificate accompanied by a properly
executed written assignment of the same, or a written power of attorney to
sell, assign or transfer the same or the shares represented thereby.
Section 4. Lost Certificate. The Board of Directors or Executive Committee
may order a new certificate to be issued in place of a certificate lost or
destroyed, upon proof of such loss or destruction and upon tender to the
Association by the shareholder, of a bond in such amount and with or without
surety, as may be ordered, indemnifying the Association against all liability,
loss, cost and damage by reason of such loss or destruction and the issuance
of a new certificate.
Section 5. Closing Transfer Books. The Board of Directors may close the
transfer books for a period not exceeding thirty days preceding any regular
or special meeting of the shareholders, or the day designated for the payment
of a dividend or the allotment of rights. In lieu of closing the transfer
books the Board of Directors may fix a day and hour not more than thirty days
prior to the day of holding any meeting of the shareholders, or the day
designated for the payment of a dividend, or the day designated for the
allotment of rights, or the day when any change of conversion or exchange of
capital stock is to go into effect, as the day as of which shareholders
entitled to notice of and to vote at such meetings or entitled to such dividend
or to such allotment of rights or to exercise the rights in respect of any
such change, conversion or exchange of capital stock, shall be determined, and
only such shareholders as shall be shareholders of record on the day and hour
so fixed shall be entitled to notice of and to vote at such meeting or to
receive payment of such dividend or to receive such allotment of rights or to
exercise such rights, as the case may be.
ARTICLE X
THE CORPORATE SEAL
Section 1. Seal. The following is an impression of the seal of the
Association adopted by the Board of Directors.
ARTICLE XI
BUSINESS HOURS
Section 1. Business Hours. The main office of this Association and each
branch office thereof shall be open for business on such days, and for such
hours as the Chairman, or the President, or any Executive Vice President, or
such other officer as the Board of Directors shall from time to time
designate, may determine as to each office to conform to local custom and
convenience, provided that any one or more of the main and branch offices or
certain departments thereof may be open for such hours as the President, or
such other officer as the Board of Directors shall from time to time designate,
may determine as to each office or department on any legal holiday on which
work is not prohibited by law, and provided further that any one or more of
the main and branch offices or certain departments thereof may be ordered
closed or open on any day for such hours as to each office or department as
the President, or such other officer as the Board of Directors shall from time
to time designate, subject to applicable laws regulations, may determine when
such action may be required by reason of disaster or other emergency condition.
ARTICLE IX
CHANGES IN BY-LAWS
Section 1. Amendments. These By-laws may be amended upon vote of a majority
of the entire Board of Directors at any meeting of the Board, provided ten (10)
day's notice of the proposed amendment has been given to each member of the
Board of Directors. No amendment may be made unless the By-law, as amended, is
consistent with the requirements of law and of the Articles of Association.
These By-laws may also be amended by the Association's shareholders.
A true copy
Attest:
Secretary/Assistant Secretary
- ---------------------------------------
Dated at , as of .
--------------------------------------- ----------------------
Revision of January 11, 1993
-9-
<PAGE> 18
EXHIBIT 5
CONSENT OF THE TRUSTEE
REQUIRED BY SECTION 321(b)
OF THE TRUST INDENTURE ACT OF 1939
The undersigned, as Trustee under the Indenture to be entered into between
Veritas DGC Inc. and Fleet National Bank, as Trustee,
does hereby consent that, pursuant to Section 321(b) of the Trust Indenture
Act of 1939, reports of examinations with respect to the undersigned by Federal,
State, Territorial or District authorities may be furnished by such authorities
to the Securities and Exchange Commission upon request therefor.
FLEET NATIONAL BANK,
AS TRUSTEE
By /s/ Elizabeth C. Hammer
-------------------------------
Elizabeth C. Hammmer
Its: Vice President
Dated:
<PAGE> 19
EXHIBIT 6
Board of Governors of the Federal Reserve System
OMB Number: 7100-0036
Federal Deposit Insurance Corporation
OMB Number: 3064-0052
Office of the Comptroller of the Currency
OMB Number: 1557-0081
Expires March 31, 1999
Federal Financial Institutions Examination Council
- --------------------------------------------------------------------------------
[FEDERAL FINANCIAL Please refer to page i, [1]
INSTITUTIONS EXAMINATION Table of Contents, for
COUNCIL LOGO] the required disclosure
of estimated burden.
- --------------------------------------------------------------------------------
CONSOLIDATED REPORTS OF CONDITION AND INCOME FOR
A BANK WITH DOMESTIC AND FOREIGN OFFICES--FFIEC 031
(960630)
REPORT AT THE CLOSE OF BUSINESS JUNE 30, 1996 -----------
(RCRI 9999)
This report is required by law: 12 U.S.C. Section 324 (State member banks);
12 U.S.C. Section 1817 (State nonmember banks); and 12 U.S.C. Section 161
(National banks).
This report form is to be filed by banks with branches and consolidated
subsidiaries in U.S. territories and possessions, Edge or Agreement
subsidiaries, foreign branches, consolidated foreign subsidiaries, or
International Banking Facilities.
- --------------------------------------------------------------------------------
NOTE: The Reports of Condition and Income must be signed by an authorized
officer and the Report of Condition must be attested to by not less than two
directors (trustees) for State nonmember banks and three directors for State
member and National banks.
I, Giro S. DeRosa, Vice President
-----------------------------------------------------------------------------
Name and Title of Officer Authorized to Sign Report
of the named bank do hereby declare that these Reports of Condition and
Income (including the supporting schedules) have been prepared in conformance
with the instructions issued by the appropriate Federal regulatory authority
and are true to the best of my knowledge and belief.
/s/ Giro DeRosa
- --------------------------------------------------------------------------------
Signature of Officer Authorized to Sign Report
July 25, 1996
- --------------------------------------------------------------------------------
Date of Signature
The Reports of Condition and Income are to be prepared in accordance with
Federal regulatory authority instructions. NOTE: These instructions may in
some cases differ from generally accepted accounting principles.
We, the undersigned directors (trustees), attest to the correctness of this
Report of Condition (including the supporting schedules) and declare that it has
been examined by us and to the best of our knowledge and belief has been
prepared in conformance with the instructions issued by the appropriate Federal
regulatory authority and is true and correct.
/s/
- --------------------------------------------------------------------------------
Director (Trustee)
/s/
- --------------------------------------------------------------------------------
Director (Trustee)
/s/
- --------------------------------------------------------------------------------
Director (Trustee)
- --------------------------------------------------------------------------------
For Banks Submitting Hard Copy Report Forms:
State Member Banks: Return the original and one copy to the appropriate Federal
Reserve District Bank.
State Nonmember Banks: Return the original only in the special return address
envelope provided. If express mail is used in lieu of the special return
address envelope, return the original only to the FDIC, c/o Quality Data
systems, 2127 Espey Court, Suite 204, Crofton, MD 21114.
National Banks: Return the original only in the special return address envelope
provided. If express mail is used in lieu of the special return address
envelope, return the original only to the FDIC, c/o Quality Data Systems, 2127
Espey Court, Suite 204, Crofton, MD 21114.
- --------------------------------------------------------------------------------
FDIC Certificate Number | 0 | 2 | 4 | 9 | 9 | Banks should affix
--------------------- the address label
(RCRI 90150) in this space.
CALL NO. 196 31 06-30-96
STAR: 25-0590 00327 STCERT: 25-02490
FLEET NATIONAL BANK
ONE MONARCH PLACE
SPRINGFIELD, MA 01102
Board of Governors of the Federal Reserve System, Federal Deposit
Insurance Corporation, Office of the Comptroller of the Currency
<PAGE> 20
FOR BANKS SUBMITTING HARD COPY REPORT FORMS:
STATE MEMBER BANKS: Return the original and one copy to the appropriate Federal
Reserve District Bank.
STATE NONMEMBER BANKS: Return the original only in the special return address
envelope provided. If express mail is used in lieu of the special return address
envelope, return the original only to the FDIC, c/o Quality Data Systems, 2127
Espey Court, Suite 204, Crofton, MD 21114.
NATIONAL BANKS: Return the original only in the special return address envelope
provided. If express mail is used in lieu of the special return address
envelope, return the original only to the FDIC, c/o Quality Data Systems, 2127
Espey Court, Suite 204, Crofton, MD 21114.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C>
___ ___
FDIC Certificate Number | 0 | 2 | 4 | 9 | 9 | | Banks should affix the address label in this space. |
______________________
(RCRI 9050) CALL NO. 196 31 06-30-96
STBK: 25-0590 00327 STCERT: 25-02499
FLEET NATIONAL BANK
ONE MONARCH PLACE
SPRINGFIELD, MA 01102
|___ ___|
</TABLE>
Board of Governors of the Federal Reserve System, Federal Deposit Insurance
Corporation, Office of the Comptroller of the Currency
<PAGE> 21
FFIEC 031
Page i
/2/
Consolidated Reports of Condition and Income for
A Bank With Domestic and Foreign Offices
________________________________________________________________________________
TABLE OF CONTENTS
SIGNATURE PAGE Cover
REPORT OF INCOME
Schedule RI--Income Statement...........................................RI-1,2,3
Schedule RI-A--Changes in Equity Capital....................................RI-4
Schedule RI-B--Charge-offs and Recoveries and
Changes in Allowance for Loan and Lease
Losses..................................................................RI-4,5
Schedule RI-C--Applicable Income Taxes by
Taxing Authority..........................................................RI-5
Schedule RI-D--Income from
International Operations..................................................RI-6
Schedule RI-E--Explanations...............................................RI-7,8
REPORT OF CONDITION
Schedule RC--Balance Sheet................................................RC-1,2
Schedule RC-A--Cash and Balances Due
From Depository Institutions..............................................RC-3
Schedule RC-B--Securities...............................................RC-3,4,5
Schedule RC-C--Loans and Lease Financing
Receivables:
Part I. Loans and Leases..............................................RC-6,7
Part II. Loans to Small Businesses and
Small Farms (included in the forms for
June 30 only).....................................................RC-7a,7b
Schedule RC-D--Trading Assets and Liabilities
(to be completed only by selected banks)..................................RC-8
Schedule RC-E--Deposit Liabilities....................................RC-9,10,11
Schedule RC-F--Other Assets................................................RC-11
Schedule RC-G--Other Liabilities...........................................RC-11
Schedule RC-H--Selected Balance Sheet Items for
Domestic Offices.........................................................RC-12
Schedule RC-I--Selected Assets and Liabilities
of IBFs..................................................................RC-13
Schedule RC-K--Quarterly Averages..........................................RC-13
Schedule RC-L--Off-Balance Sheet Items...............................RC-14,15,16
Schedule RC-M--Memoranda................................................RC-17,18
Schedule RC-N--Past Due and Nonaccrual Loans,
Leases, and Other Assets..............................................RC-19,20
Schedule RC-O--Other Data for Deposit
Insurance Assessments.................................................RC-21,22
Schedule RC-R--Regulatory Capital.......................................RC-23,24
Optional Narrative Statement Concerning the
Amounts Reported in the Reports of
Condition and Income.....................................................RC-25
Special Report (TO BE COMPLETED BY ALL BANKS)
Schedule RC-J--Repricing Opportunities (sent only to
and to be completed only by savings banks)
DISCLOSURE OF ESTIMATED BURDEN
The estimated average burden associated with this information collection is
32.2 hours per respondent and is estimated to vary from 15 to 230 hours per
response, depending on individual circumstances. Burden estimates include the
time for reviewing instructions, gathering and maintaining data in the required
form, and completing the information collection, but exclude the time for
compiling and maintaining business records in the normal course of a
respondent's activities. Comments concerning the accuracy of this burden
estimate and suggestions for reducing this burden should be directed to the
Office of Information and Regulatory Affairs, Office of Management and Budget,
Washington, D.C. 20503, and to one of the following:
Secretary
Board of Governors of the Federal Reserve System
Washington, D.C. 20551
Legislative and Regulatory Analysis Division
Office of the Comptroller of the Currency
Washington, D.C. 20219
Assistant Executive Secretary
Federal Deposit Insurance Corporation
Washington, D.C. 20429
For information or assistance, National and State nonmember banks should
contact the FDIC's Call Reports Analysis Unit, 550 17th Street, NW, Washington,
D.C. 20429, toll free on (800) 688-FDIC (3342), Monday through Friday between
8:00 a.m. and 5:00 p.m., Eastern time. State member banks should contact their
Federal Reserve District Bank.
<PAGE> 22
<TABLE>
<CAPTION>
<S> <C>
Legal Title of Bank: FLEET NATIONAL BANK Call Date: 06/30/96 ST-BK: 25-0590 FFIEC 031
Address: ONE MONARCH PLACE Page RI-1
City, State Zip: SPRINGFIELD, MA 01102
FDIC Certificate No.: |0|2|4|9|9|
___________
</TABLE>
Consolidated Report of Income
for the period January 1, 1996 - June 30, 1996
All Report of Income schedules are to be reported on a calendar year-to-date
basis in thousands of dollars.
<TABLE>
<CAPTION>
Schedule RI--Income Statement _________
| I480 |
______________________
Dollar Amounts in Thousands | RIAD Bil Mil Thou |
______________________________________________________________________________________________|_____________________|
<S> <C> <C>
1. Interest income: | ////////////////// |
a. Interest and fee income on loans: | ////////////////// |
(1) In domestic offices: | ////////////////// |
(a) Loans secured by real estate .................................................. | 4011 616,395 | 1.a.(1)(a)
(b) Loans to depository institutions .............................................. | 4019 588 | 1.a.(1)(b)
(c) Loans to finance agricultural production and other loans to farmers ........... | 4024 286 | 1.a.(1)(c)
(d) Commercial and industrial loans ............................................... | 4012 562,807 | 1.a.(1)(d)
(e) Acceptances of other banks .................................................... | 4026 261 | 1.a.(1)(e)
(f) Loans to individuals for household, family, and other personal expenditures: | ////////////////// |
(1) Credit cards and related plans ............................................ | 4054 9,643 | 1.a.(1)(f)(1)
(2) Other ..................................................................... | 4055 97,346 | 1.a.(1)(f)(2)
(g) Loans to foreign governments and official institutions ........................ | 4056 0 | 1.a.(1)(g)
(h) Obligations (other than securities and leases) of states and political | ////////////////// |
subdivisions in the U.S.: | ////////////////// |
(1) Taxable obligations ....................................................... | 4503 0 | 1.a.(1)(h)(1)
(2) Tax-exempt obligations .................................................... | 4504 5,232 | 1.a.(1)(h)(2)
(i) All other loans in domestic offices ........................................... | 4058 84,576 | 1.a.(1)(i)
(2) In foreign offices, Edge and Agreement subsidiaries, and IBFs ..................... | 4059 1,981 | 1.a.(2)
b. Income from lease financing receivables: | ////////////////// |
(1) Taxable leases .................................................................... | 4505 75,341 | 1.b.(1)
(2) Tax-exempt leases ................................................................. | 4307 791 | 1.b.(2)
c. Interest income on balances due from depository institutions:(1) | ////////////////// |
(1) In domestic offices ............................................................... | 4105 914 | 1.c.(1)
(2) In foreign offices, Edge and Agreement subsidiaries, and IBFs ..................... | 4106 142 | 1.c.(2)
d. Interest and dividend income on securities: | ////////////////// |
(1) U.S. Treasury securities and U.S. Government agency and corporation obligations ... | 4027 209,142 | 1.d.(1)
(2) Securities issued by states and political subdivisions in the U.S.: | ////////////////// |
(a) Taxable securities ............................................................ | 4506 0 | 1.d.(2)(a)
(b) Tax-exempt securities ......................................................... | 4507 2,953 | 1.d.(2)(b)
(3) Other domestic debt securities .................................................... | 3657 12,164 | 1.d.(3)
(4) Foreign debt securities ........................................................... | 3658 3,348 | 1.d.(4)
(5) Equity securities (including investments in mutual funds) ......................... | 3659 10,212 | 1.d.(5)
e. Interest income from trading assets.................................................... | 4069 360 | 1.e.
______________________
</TABLE>
____________
(1) Includes interest income on time certificates of deposit not held for
trading.
3
<PAGE> 23
<TABLE>
<S> <C>
Legal Title of Bank: FLEET NATIONAL BANK Call Date: 06/30/96 ST-BK: 25-0590 FFIEC 031
Address: ONE MONARCH PLACE Page RI-2
City, State Zip: SPRINGFIELD, MA 01102
FDIC Certificate No.: |0|2|4|9|9|
___________
</TABLE>
<TABLE>
<CAPTION>
Schedule RI--Continued
________________
Dollar Amounts in Thousands | Year-to-date |
___________________________________________________________________________________ ______________
<S> <C> <C>
1. Interest income (continued) | RIAD Bil Mil Thou |
f. Interest income on federal funds sold and securities purchased | ////////////////// |
under agreements to resell in domestic offices of the bank and of | ////////////////// |
its Edge and Agreement subsidiaries, and in IBFs .................... | 4020 24,925 | 1.f.
g. Total interest income (sum of items 1.a through 1.f) ................ | 4107 1,719,407 | 1.g.
2. Interest expense: | ////////////////// |
a. Interest on deposits: | ////////////////// |
(1) Interest on deposits in domestic offices: | ////////////////// |
(a) Transaction accounts (NOW accounts, ATS accounts, and | ////////////////// |
telephone and preauthorized transfer accounts) .............. | 4508 8,583 | 2.a.(1)(a)
(b) Nontransaction accounts: | ////////////////// |
(1) Money market deposit accounts (MMDAs) ................... | 4509 133,915 | 2.a.(1)(b)(1)
(2) Other savings deposits .................................. | 4511 26,678 | 2.a.(1)(b)(2)
(3) Time certificates of deposit of $100,000 or more ........ | 4174 88,690 | 2.a.(1)(b)(3)
(4) All other time deposits ................................. | 4512 214,225 | 2.a.(1)(b)(4)
(2) Interest on deposits in foreign offices, Edge and Agreement | ////////////////// |
subsidiaries, and IBFs .......................................... | 4172 50,022 | 2.a.(2)
b. Expense of federal funds purchased and securities sold under | ////////////////// |
agreements to repurchase in domestic offices of the bank and of | ////////////////// |
its Edge and Agreement subsidiaries, and in IBFs .................... | 4180 152,094 | 2.b.
c. Interest on demand notes issued to the U.S. Treasury, trading | ////////////////// |
liabilities, and other borrowed money ............................... | 4185 121,525 | 2.c.
d. Interest on mortgage indebtedness and obligations under | ////////////////// |
capitalized leases .................................................. | 4072 361 | 2.d.
e. Interest on subordinated notes and debentures ....................... | 4200 26,110 | 2.e.
f. Total interest expense (sum of items 2.a through 2.e) ............... | 4073 822,203 | 2.f.
___________________________
3. Net interest income (item 1.g minus 2.f) ............................... | ////////////////// | RIAD 4074 | 897,204 | 3.
___________________________
4. Provisions: | ////////////////// |
___________________________
a. Provision for loan and lease losses ................................. | ////////////////// | RIAD 4230 | 21,672 | 4.a.
b. Provision for allocated transfer risk ............................... | ////////////////// | RIAD 4243 | 0 | 4.b.
___________________________
5. Noninterest income: | ////////////////// |
a. Income from fiduciary activities .................................... | 4070 144,614 | 5.a.
b. Service charges on deposit accounts in domestic offices ............. | 4080 111,736 | 5.b.
c. Trading revenue (must equal Schedule RI, sum of Memorandum | ////////////////// |
items 8.a through 8.d)............................................... A220 10,646 5.c.
d. Other foreign transaction gains (losses) ............................ | 4076 247 | 5.d.
e. Not applicable | ////////////////// |
f. Other noninterest income: | ////////////////// |
(1) Other fee income ................................................ | 5407 372,950 | 5.f.(1)
(2) All other noninterest income* ................................... | 5408 211,593 | 5.f.(2)
___________________________
g. Total noninterest income (sum of items 5.a through 5.f) ............. | ////////////////// | RIAD 4079 | 851,786 | 5.g.
6. a. Realized gains (losses) on held-to-maturity securities .............. | ////////////////// | RIAD 3521 | 1 | 6.a.
b. Realized gains (losses) on available-for-sale securities ............ | ////////////////// | RIAD 3196 | 16,126 | 6.b.
___________________________
7. Noninterest expense: | ////////////////// |
a. Salaries and employee benefits ...................................... | 4135 322,146 | 7.a.
b. Expenses of premises and fixed assets (net of rental income) | ////////////////// |
(excluding salaries and employee benefits and mortgage interest) .... | 4217 114,912 | 7.b.
c. Other noninterest expense* .......................................... | 4092 631,554 | 7.c.
___________________________
d. Total noninterest expense (sum of items 7.a through 7.c) ............ | ////////////////// | RIAD 4093 | 1,068,612 | 7.d.
___________________________
8. Income (loss) before income taxes and extraordinary items and other | ////////////////// |
___________________________
adjustments (item 3 plus or minus items 4.a, 4.b, 5.g, 6.a, 6.b, and 7.d)| ////////////////// | RIAD 4301 | 674,833 | 8.
9. Applicable income taxes (on item 8) .................................... | ////////////////// | RIAD 4302 | 280,303 | 9.
___________________________
10. Income (loss) before extraordinary items and other adjustments | ////////////////// |
___________________________
(item 8 minus 9) ....................................................... | ////////////////// | RIAD 4300 | 394,530 | 10.
_________________________________________________
</TABLE>
____________
*Describe on Schedule RI-E--Explanations.
4
<PAGE> 24
<TABLE>
<S> <C>
Legal Title of Bank: FLEET NATIONAL BANK Call Date: 06/30/96 ST-BK: 25-0590 FFIEC 031
Address: ONE MONARCH PLACE Page RI-3
City, State Zip: SPRINGFIELD, MA 01102
FDIC Certificate No.: |0|2|4|9|9|
___________
</TABLE>
<TABLE>
<CAPTION>
Schedule RI--Continued
________________
| Year-to-date |
______ ______________
Dollar Amounts in Thousands | RIAD Bil Mil Thou |
___________________________________________________________________________________ ______________
<S> <C> <C>
11. Extraordinary items and other adjustments: | ////////////////// |
a. Extraordinary items and other adjustments, gross of income taxes* . | 4310 0 | 11.a.
b. Applicable income taxes (on item 11.a)* ........................... | 4315 0 | 11.b.
c. Extraordinary items and other adjustments, net of income taxes | ////////////////// |__________________________
(item 11.a minus 11.b) ............................................ | ////////////////// | RIAD 4320 | 0 | 11.c.
12. Net income (loss) (sum of items 10 and 11.c) ......................... | ////////////////// | RIAD 4340 | 394,530 | 12.
_________________________________________________
</TABLE>
<TABLE>
<CAPTION>
__________
| I481 |
_______________
Memoranda | Year-to-date |
______ ______________
Dollar Amounts in Thousands | RIAD Bil Mil Thou |
______________________________________________________________________________________________________ ____________________
<S> <C> <C>
1. Interest expense incurred to carry tax-exempt securities, loans, and leases acquired after | ////////////////// |
August 7, 1986, that is not deductible for federal income tax purposes .......................... | 4513 1,798 | M.1.
2. Income from the sale and servicing of mutual funds and annuities in domestic offices | ////////////////// |
(included in Schedule RI, item 8) ............................................................... | 8431 20,910 | M.2.
3.-4. Not applicable | ////////////////// |
5. Number of full-time equivalent employees on payroll at end of current period (round to | //// Number |
nearest whole number) ........................................................................... | 4150 9,852 | M.5.
6. Not applicable | ////////////////// |
7. If the reporting bank has restated its balance sheet as a result of applying push down | //// MM DD YY |
accounting this calendar year, report the date of the bank's acquisition ........................ | 9106 00/00/00 | M.7.
8. Trading revenue (from cash instruments and off-balance sheet derivative instruments) | ////////////////// |
(sum of Memorandum items 8.a through 8.d must equal Schedule RI, item 5.c): | //// Bil Mil Thou |
a. Interest rate exposures ...................................................................... | 8757 1,428 | M.8.a.
b. Foreign exchange exposures ................................................................... | 8758 9,218 | M.8.b.
c. Equity security and index exposures .......................................................... | 8759 0 | M.8.c.
d. Commodity and other exposures ................................................................ | 8760 0 | M.8.d.
9. Impact on income of off-balance sheet derivatives held for purposes other than trading: | ////////////////// |
a. Net increase (decrease) to interest income.....................................................| 8761 (5,575)| M.9.a.
b. Net (increase) decrease to interest expense ...................................................| 8762 (5,752)| M.9.b.
c. Other (noninterest) allocations ...............................................................| 8763 (172)| M.9.c.
10. Credit losses on off-balance sheet derivatives (see instructions).................................| A251 0 | M.10.
</TABLE>
____________
*Describe on Schedule RI-E--Explanations.
5
<PAGE> 25
<TABLE>
<S> <C>
Legal Title of Bank: FLEET NATIONAL BANK Call Date: 06/30/96 ST-BK: 25-0590 FFIEC 031
Address: ONE MONARCH PLACE Page RI-4
City, State Zip: SPRINGFIELD, MA 01102
FDIC Certificate No.: |0|2|4|9|9|
___________
</TABLE>
<TABLE>
<CAPTION>
Schedule RI-A--Changes in Equity Capital
Indicate decreases and losses in parentheses. _________
| I483 |
_____________________
Dollar Amounts in Thousands | RIAD Bil Mil Thou |
______________________________________________________________________________________________________|____________________|
<S> <C> <C>
1. Total equity capital originally reported in the December 31, 1995, Reports of Condition | ////////////////// |
and Income ...................................................................................... | 3215 1,342,473 | 1.
2. Equity capital adjustments from amended Reports of Income, net* ................................. | 3216 0 | 2.
3. Amended balance end of previous calendar year (sum of items 1 and 2) ............................ | 3217 1,342,473 | 3.
4. Net income (loss) (must equal Schedule RI, item 12) ............................................. | 4340 394,530 | 4.
5. Sale, conversion, acquisition, or retirement of capital stock, net .............................. | 4346 0 | 5.
6. Changes incident to business combinations, net .................................................. | 4356 4,161,079 | 6.
7. LESS: Cash dividends declared on preferred stock ................................................ | 4470 0 | 7.
8. LESS: Cash dividends declared on common stock ................................................... | 4460 490,634 | 8.
9. Cumulative effect of changes in accounting principles from prior years* (see instructions | ////////////////// |
for this schedule) .............................................................................. | 4411 0 | 9.
10. Corrections of material accounting errors from prior years* (see instructions for this schedule) | 4412 0 | 10.
11. Change in net unrealized holding gains (losses) on available-for-sale securities ................ | 8433 (46,607)| 11.
12. Foreign currency translation adjustments ........................................................ | 4414 0 | 12.
13. Other transactions with parent holding company* (not included in items 5, 7, or 8 above) ........ | 4415 (1,003,722)| 13.
14. Total equity capital end of current period (sum of items 3 through 13) (must equal Schedule RC, | ////////////////// |
item 28) ........................................................................................ | 3210 4,357,119 | 14.
______________________
</TABLE>
____________
*Describe on Schedule RI-E--Explanations.
<TABLE>
<CAPTION>
Schedule RI-B--Charge-offs and Recoveries and Changes
in Allowance for Loan and Lease Losses
Part I. Charge-offs and Recoveries on Loans and Leases
Part I excludes charge-offs and recoveries through
the allocated transfer risk reserve.
__________
| I486 |
__________________________________________
| (Column A) | (Column B) |
| Charge-offs | Recoveries |
____________________ ____________________
| Calendar year-to-date |
_________________________________________
Dollar Amounts in Thousands | RIAD Bil Mil Thou | RIAD Bil Mil Thou |
______________________________________________________________________________ ____________________ ____________________
<S> <C> <C> <C>
1. Loans secured by real estate: | ////////////////// | ////////////////// |
a. To U.S. addressees (domicile) ......................................... | 4651 35,701 | 4661 8,412 | 1.a.
b. To non-U.S. addressees (domicile) ..................................... | 4652 0 | 4662 0 | 1.b.
2. Loans to depository institutions and acceptances of other banks: | ////////////////// | ////////////////// |
a. To U.S. banks and other U.S. depository institutions .................. | 4653 0 | 4663 0 | 2.a.
b. To foreign banks ...................................................... | 4654 0 | 4664 0 | 2.b.
3. Loans to finance agricultural production and other loans to farmers ...... | 4655 2 | 4665 22 | 3.
4. Commercial and industrial loans: | ////////////////// | ////////////////// |
a. To U.S. addressees (domicile) ......................................... | 4645 38,139 | 4617 19,005 | 4.a.
b. To non-U.S. addressees (domicile) ..................................... | 4646 0 | 4618 102 | 4.b.
5. Loans to individuals for household, family, and other personal | ////////////////// | ////////////////// |
expenditures: | ////////////////// | ////////////////// |
a. Credit cards and related plans ........................................ | 4656 1,137 | 4666 733 | 5.a.
b. Other (includes single payment, installment, and all student loans) ... | 4657 7,864 | 4667 2,681 | 5.b.
6. Loans to foreign governments and official institutions ................... | 4643 0 | 4627 0 | 6.
7. All other loans .......................................................... | 4644 826 | 4628 541 | 7.
8. Lease financing receivables: | ////////////////// | ////////////////// |
a. Of U.S. addressees (domicile) ......................................... | 4658 3,729 | 4668 3,241 | 8.a.
b. Of non-U.S. addressees (domicile) ..................................... | 4659 0 | 4669 0 | 8.b.
9. Total (sum of items 1 through 8) ......................................... | 4635 87,398 | 4605 34,737 | 9.
___________________________________________
</TABLE>
6
<PAGE> 26
<TABLE>
<S> <C>
Legal Title of Bank: FLEET NATIONAL BANK Call Date: 06/30/96 ST-BK: 25-0590 FFIEC 031
Address: ONE MONARCH PLACE Page RI-5
City, State Zip: SPRINGFIELD, MA 01102
FDIC Certificate No.: |0|2|4|9|9|
___________
</TABLE>
<TABLE>
<CAPTION>
Schedule RI-B--Continued
Part I. Continued
Memoranda
__________________________________________
| (Column A) | (Column B) |
| Charge-offs | Recoveries |
____________________ ____________________
| Calendar year-to-date |
_________________________________________
Dollar Amounts in Thousands | RIAD Bil Mil Thou | RIAD Bil Mil Thou |
______________________________________________________________________________ ____________________ ____________________
<S> <C> <C> <C>
1-3. Not applicable | ////////////////// | ////////////////// |
4. Loans to finance commercial real estate, construction, and land | ////////////////// | ////////////////// |
development activities (not secured by real estate) included in | ////////////////// | ////////////////// |
Schedule RI-B, part I, items 4 and 7, above .............................. | 5409 383 | 5410 1,374 | M.4.
5. Loans secured by real estate in domestic offices (included in | ////////////////// | ////////////////// |
Schedule RI-B, part I, item 1, above): | ////////////////// | ////////////////// |
a. Construction and land development ..................................... | 3582 189 | 3583 253 | M.5.a.
b. Secured by farmland ................................................... | 3584 145 | 3585 131 | M.5.b.
c. Secured by 1-4 family residential properties: | ////////////////// | ////////////////// |
(1) Revolving, open-end loans secured by 1-4 family residential | ////////////////// | ////////////////// |
properties and extended under lines of credit ..................... | 5411 2,650 | 5412 108 | M.5.c.(1)
(2) All other loans secured by 1-4 family residential properties ...... | 5413 13,892 | 5414 1,231 | M.5.c.(2)
d. Secured by multifamily (5 or more) residential properties ............. | 3588 837 | 3589 395 | M.5.d.
e. Secured by nonfarm nonresidential properties .......................... | 3590 17,988 | 3591 6,294 | M.5.e.
|_________________________________________|
</TABLE>
Part II. Changes in Allowance for Loan and Lease Losses
<TABLE>
<CAPTION>
_____________________
Dollar Amounts in Thousands | RIAD Bil Mil Thou |
___________________________________________________________________________________________________ ____________________
<S> <C> <C>
1. Balance originally reported in the December 31, 1995, Reports of Condition and Income.......... | 3124 266,943 | 1.
2. Recoveries (must equal part I, item 9, column B above) ........................................ | 4605 34,737 | 2.
3. LESS: Charge-offs (must equal part I, item 9, column A above) ................................. | 4635 87,398 | 3.
4. Provision for loan and lease losses (must equal Schedule RI, item 4.a)......................... | 4230 21,672 | 4.
5. Adjustments* (see instructions for this schedule) ................................ ............ | 4815 636,497 | 5.
6. Balance end of current period (sum of items 1 through 5) (must equal Schedule RC, | ////////////////// |
item 4.b) ..................................................................................... | 3123 872,451 | 6.
|____________________|
</TABLE>
____________
*Describe on Schedule RI-E--Explanations.
Schedule RI-C--Applicable Income Taxes by Taxing Authority
Schedule RI-C is to be reported with the December Report of Income.
<TABLE>
<CAPTION>
| I489 | <-
____________ ________
Dollar Amounts in Thousands | RIAD Bil Mil Thou |
___________________________________________________________________________________________________ ____________________
<S> <C> <C>
1. Federal ....................................................................................... | 4780 N/A | 1.
2. State and local................................................................................ | 4790 N/A | 2.
3. Foreign ....................................................................................... | 4795 N/A | 3.
4. Total (sum of items 1 through 3) (must equal sum of Schedule RI, items 9 and 11.b) ............ | 4770 N/A | 4.
____________________________| |
5. Deferred portion of item 4 ........................................ | RIAD 4772 | N/A | ////////////////// | 5.
__________________________________________________
</TABLE>
7
<PAGE> 27
<TABLE>
<S> <C>
Legal Title of Bank: Fleet National Bank Call Date: 6/30/96 ST-BK: 25-0590 FFIEC 031
Address: One Monarch Place Page RI-6
City, State Zip: Springfield, MA 01102
FDIC Certificate No.: |0|2|4|9|9|
___________
</TABLE>
<TABLE>
<CAPTION>
Schedule RI-D--Income from International Operations
For all banks with foreign offices, Edge or Agreement subsidiaries, or IBFs where international operations
account for more than 10 percent of total revenues, total assets, or net income.
Part I. Estimated Income from International Operations
__________
| I492 | <-
______ ________
| Year-to-date |
______ ______________
Dollar Amounts in Thousands | RIAD Bil Mil Thou |
_________________________________________________________________________________________________ ____________________
<S> <C> <C>
1. Interest income and expense booked at foreign offices, Edge and Agreement subsidiaries, | ////////////////// |
and IBFs: | ////////////////// |
a. Interest income booked ................................................................... | 4837 N/A | 1.a.
b. Interest expense booked .................................................................. | 4838 N/A | 1.b.
c. Net interest income booked at foreign offices, Edge and Agreement subsidiaries, and IBFs | ////////////////// |
(item 1.a minus 1.b) ..................................................................... | 4839 N/A | 1.c.
2. Adjustments for booking location of international operations: | ////////////////// |
a. Net interest income attributable to international operations booked at domestic offices .. | 4840 N/A | 2.a.
b. Net interest income attributable to domestic business booked at foreign offices .......... | 4841 N/A | 2.b.
c. Net booking location adjustment (item 2.a minus 2.b) ..................................... | 4842 N/A | 2.c.
3. Noninterest income and expense attributable to international operations: | ////////////////// |
a. Noninterest income attributable to international operations .............................. | 4097 N/A | 3.a.
b. Provision for loan and lease losses attributable to international operations ............. | 4235 N/A | 3.b.
c. Other noninterest expense attributable to international operations ....................... | 4239 N/A | 3.c.
d. Net noninterest income (expense) attributable to international operations (item 3.a | ////////////////// |
minus 3.b and 3.c) ....................................................................... | 4843 N/A | 3.d.
4. Estimated pretax income attributable to international operations before capital allocation | ////////////////// |
adjustment (sum of items 1.c, 2.c, and 3.d) ................................................. | 4844 N/A | 4.
5. Adjustment to pretax income for internal allocations to international operations to reflect | ////////////////// |
the effects of equity capital on overall bank funding costs ................................. | 4845 N/A | 5.
6. Estimated pretax income attributable to international operations after capital allocation | ////////////////// |
adjustment (sum of items 4 and 5) ........................................................... | 4846 N/A | 6.
7. Income taxes attributable to income from international operations as estimated in item 6 .... | 4797 N/A | 7.
8. Estimated net income attributable to international operations (item 6 minus 7) .............. | 4341 N/A | 8.
______________________
<CAPTION>
Memoranda ______________________
Dollar Amounts in Thousands | RIAD Bil Mil Thou |
_________________________________________________________________________________________________ ____________________
<S> <C> <C>
1. Intracompany interest income included in item 1.a above ..................................... | 4847 N/A | M.1.
2. Intracompany interest expense included in item 1.b above .................................... | 4848 N/A | M.2.
______________________
</TABLE>
<TABLE>
<CAPTION>
Part II. Supplementary Details on Income from International Operations Required
by the Departments of Commerce and Treasury for Purposes of the U.S.
International Accounts and the U.S. National Income and Product Accounts
________________
| Year-to-date |
______ ______________
Dollar Amounts in Thousands | RIAD Bil Mil Thou |
_________________________________________________________________________________________________ ____________________
<S> <C> <C>
1. Interest income booked at IBFs .............................................................. | 4849 N/A | 1.
2. Interest expense booked at IBFs ............................................................. | 4850 N/A | 2.
3. Noninterest income attributable to international operations booked at domestic offices | ////////////////// |
(excluding IBFs): | ////////////////// |
a. Gains (losses) and extraordinary items ................................................... | 5491 N/A | 3.a.
b. Fees and other noninterest income ........................................................ | 5492 N/A | 3.b.
4. Provision for loan and lease losses attributable to international operations booked at | ////////////////// |
domestic offices (excluding IBFs) ........................................................... | 4852 N/A | 4.
5. Other noninterest expense attributable to international operations booked at domestic offices | ////////////////// |
(excluding IBFs) ............................................................................ | 4853 N/A | 5.
______________________
</TABLE>
8
<PAGE> 28
<TABLE>
<S> <C>
Legal Title of Bank: Fleet National Bank Call Date: 06/30/96 ST-BK: 25-0590 FFIEC 031
Address: One Monarch Place Page RI-7
City, State Zip: Springfield, MA 01102
FDIC Certificate No.: |0|2|4|9|9|
___________
</TABLE>
<TABLE>
<CAPTION>
Schedule RI-E--Explanations
Schedule RI-E is to be completed each quarter on a calendar year-to-date basis.
Detail all adjustments in Schedules RI-A and RI-B, all extraordinary items and other adjustments in Schedule RI, and all
significant items of other noninterest income and other noninterest expense in Schedule RI. (See instructions for details.)
__________
| I495 | <-
______ ________
| Year-to-date |
______ ______________
Dollar Amounts in Thousands | RIAD Bil Mil Thou |
__________________________________________________________________________________________________ ____________________
<S> <C> <C>
1. All other noninterest income (from Schedule RI, item 5.f.(2)) | ////////////////// |
Report amounts that exceed 10% of Schedule RI, item 5.f.(2): | ////////////////// |
a. Net gains on other real estate owned ..................................................... | 5415 0 | 1.a.
b. Net gains on sales of loans .............................................................. | 5416 0 | 1.b.
c. Net gains on sales of premises and fixed assets .......................................... | 5417 0 | 1.c.
Itemize and describe the three largest other amounts that exceed 10% of | ////////////////// |
Schedule RI, item 5.f.(2): | ////////////////// |
_____________
d. | TEXT 4461 | Income on Mortgages Held for Resale | 4461 81,194 | 1.d.
e. | TEXT 4462 | Gain From Branch Divestitures | 4462 77,976 | 1.e.
___________
f. | TEXT 4463 |______________________________________________________________________________| 4463 | 1.f.
_____________
2. Other noninterest expense (from Schedule RI, item 7.c): | ////////////////// |
a. Amortization expense of intangible assets ................................................ | 4531 135,939 | 2.a.
Report amounts that exceed 10% of Schedule RI, item 7.c: | ////////////////// |
b. Net losses on other real estate owned .................................................... | 5418 0 | 2.b.
c. Net losses on sales of loans ............................................................. | 5419 0 | 2.c.
d. Net losses on sales of premises and fixed assets ......................................... | 5420 0 | 2.d.
Itemize and describe the three largest other amounts that exceed 10% of | ////////////////// |
Schedule RI, item 7.c: | ////////////////// |
_____________
e. | TEXT 4464 | Intercompany Corporate Support Function Charges | 4464 143,184 | 2.e.
___________
f. | TEXT 4467 | Intercompany Data Processing & Programming Charges | 4467 158,034 | 2.f.
___________
g. | TEXT 4468 |______________________________________________________________________________| 4468 | 2.g.
_____________
3. Extraordinary items and other adjustments (from Schedule RI, item 11.a) and | ////////////////// |
applicable income tax effect (from Schedule RI, item 11.b) (itemize and describe | ////////////////// |
all extraordinary items and other adjustments): | ////////////////// |
_____________
a. (1) | TEXT 4469 |__________________________________________________________________________| 4469 | 3.a.(1)
_____________
(2) Applicable income tax effect | RIAD 4486 | | ////////////////// | 3.a.(2)
_____________ ____________________________
b. (1) | TEXT 4487 |__________________________________________________________________________| 4487 | 3.b.(1)
_____________
(2) Applicable income tax effect | RIAD 4488 | | ////////////////// | 3.b.(2)
_____________ ____________________________
c. (1) | TEXT 4489 |__________________________________________________________________________| 4489 | 3.c.(1)
_____________
(2) Applicable income tax effect | RIAD 4491 | | ////////////////// | 3.c.(2)
____________________________
4. Equity capital adjustments from amended Reports of Income (from Schedule RI-A, | ////////////////// |
item 2) (itemize and describe all adjustments): | ////////////////// |
_____________
a. | TEXT 4492 |______________________________________________________________________________| 4492 | 4.a.
___________
b. | TEXT 4493 |______________________________________________________________________________| 4493 | 4.b.
_____________
5. Cumulative effect of changes in accounting principles from prior years (from | ////////////////// |
Schedule RI-A, item 9) (itemize and describe all changes in accounting principles): | ////////////////// |
_____________
a. | TEXT 4494 |______________________________________________________________________________| 4494 | 5.a.
___________
b. | TEXT 4495 |______________________________________________________________________________| 4495 | 5.b.
_____________
6. Corrections of material accounting errors from prior years (from Schedule RI-A, | ////////////////// |
item 10) (itemize and describe all corrections): | ////////////////// |
_____________
a. | TEXT 4496 | 4496 | 6.a.
___________|______________________________________________________________________________
b. | TEXT 4497 4497 | 6.b.
____________|____________________________________________________________________________________________________
</TABLE>
9
<PAGE> 29
<TABLE>
<S> <C>
Legal Title of Bank: Fleet National Bank Call Date: 6/30/96 ST-BK: 25-0590 FFIEC 031
Address: One Monarch Place Page RI-8
City, State Zip: Springfield, MA 01102
FDIC Certificate No.: |0|2|4|9|9|
___________
</TABLE>
<TABLE>
<CAPTION>
Schedule RI-E--Continued
________________
| Year-to-date |
______ ______________
Dollar Amounts in Thousands | RIAD Bil Mil Thou |
__________________________________________________________________________________________________ ____________________
<S> <C> <C>
7. Other transactions with parent holding company (from Schedule RI-A, item 13) | ////////////////// |
(itemize and describe all such transactions): | ////////////////// |
_____________
a. | TEXT 4498 | Fleet National Bank Surplus Distribution to FFG | 4498 (1,003,722) | 7.a.
__________________________________________________________________________________________| |
b. | TEXT 4499 | | 4499 | 7.b.
___________________________________________________________________________________________
8. Adjustments to allowance for loan and lease losses (from Schedule RI-B, part II, | ////////////////// |
item 5) (itemize and describe all adjustments): | ////////////////// |
_____________ | |
a. | TEXT 4521 | 12/31/95 Ending Balance of Pooled Entities | 4521 | 8.a.
___________________________________________________________________________________________| |
b. | TEXT 4522 | | 4522 | 8.b.
___________________________________________________________________________________________| |
____________________
9. Other explanations (the space below is provided for the bank to briefly describe, | I498 | I499 | <-
______________________
at its option, any other significant items affecting the Report of Income):
___
No comment |X| (RIAD 4769)
___
Other explanations (please type or print clearly):
(TEXT 4769)
</TABLE>
10
<PAGE> 30
<TABLE>
<S> <C>
Legal Title of Bank: Fleet National Bank Call Date: 06/30/96 ST-BK: 25-0590 FFIEC 031
Address: One Monarch Place Page RC-1
City, State Zip: Springfield, MA 01102
FDIC Certificate No.: |0|2|4|9|9|
___________
</TABLE>
<TABLE>
<CAPTION>
Consolidated Report of Condition for Insured Commercial
and State-Chartered Savings Banks for June 30, 1996
All schedules are to be reported in thousands of dollars. Unless otherwise indicated,
report the amount outstanding as of the last business day of the quarter.
Schedule RC--Balance Sheet
__________
| C400 | <-
____________ ________
Dollar Amounts in Thousands | RCFD Bil Mil Thou |
__________________________________________________________________________________________________ ____________________
<S> <C> <C>
ASSETS | ////////////////// |
1. Cash and balances due from depository institutions (from Schedule RC-A): | ////////////////// |
a. Noninterest-bearing balances and currency and coin(1) ................................... | 0081 4,130,928 | 1.a.
b. Interest-bearing balances(2) ............................................................ | 0071 46,521 | 1.b.
2. Securities: | ////////////////// |
a. Held-to-maturity securities (from Schedule RC-B, column A) .............................. | 1754 257,441 | 2.a.
b. Available-for-sale securities (from Schedule RC-B, column D) ............................ | 1773 7,250,067 | 2.b.
3. Federal funds sold and securities purchased under agreements to resell in domestic offices | ////////////////// |
of the bank and of its Edge and Agreement subsidiaries, and in IBFs: | ////////////////// |
a. Federal funds sold ...................................................................... | 0276 17,428 | 3.a.
b. Securities purchased under agreements to resell ......................................... | 0277 0 | 3.b.
4. Loans and lease financing receivables: ____________________________| ////////////////// |
a. Loans and leases, net of unearned income (from Schedule RC-C) | RCFD 2122 | 31,278,251 | ////////////////// | 4.a.
b. LESS: Allowance for loan and lease losses ................... | RCFD 3123 | 872,451 | ////////////////// | 4.b.
c. LESS: Allocated transfer risk reserve ....................... | RCFD 3128 | 0 | ////////////////// | 4.c.
____________________________
d. Loans and leases, net of unearned income, | ////////////////// |
allowance, and reserve (item 4.a minus 4.b and 4.c) ..................................... | 2125 30,405,800 | 4.d.
5. Trading assets (from schedule RC-D )........................................................ | 3545 71,354 | 5.
6. Premises and fixed assets (including capitalized leases) ................................... | 2145 534,844 | 6.
7. Other real estate owned (from Schedule RC-M) ............................................... | 2150 34,546 | 7.
8. Investments in unconsolidated subsidiaries and associated companies (from Schedule RC-M) ... | 2130 0 | 8.
9. Customers' liability to this bank on acceptances outstanding ............................... | 2155 16,634 | 9.
10. Intangible assets (from Schedule RC-M) ..................................................... | 2143 2,283,414 | 10.
11. Other assets (from Schedule RC-F) .......................................................... | 2160 3,978,638 | 11.
12. Total assets (sum of items 1 through 11) ................................................... | 2170 49,027,615 | 12.
______________________
</TABLE>
____________
(1) Includes cash items in process of collection and unposted debits.
(2) Includes time certificates of deposit not held for trading.
11
<PAGE> 31
<TABLE>
<S> <C>
Legal Title of Bank: FLEET NATIONAL BANK Call Date: 06/30/96 ST-BK: 25-0590 FFIEC 031
Address: ONE MONARCH PLACE Page RC-2
City, State Zip: SPRINGFIELD, MA 01102
FDIC Certificate No.: |0|2|4|9|9|
___________
</TABLE>
<TABLE>
<CAPTION>
Schedule RC--Continued
___________________________
Dollar Amounts in Thousands | ///////// Bil Mil Thou |
_______________________________________________________________________________________________ _________________________
<S> <C> <C>
LIABILITIES | /////////////////////// |
13. Deposits: | /////////////////////// |
a. In domestic offices (sum of totals of columns A and C from Schedule RC-E, | /////////////////////// |
part I) ............................................................................... | RCON 2200 34,110,580 | 13.a.
____________________________
(1) Noninterest-bearing(1) ................................ | RCON 6631 10,202,036 | /////////////////////// | 13.a.(1)
(2) Interest-bearing ...................................... | RCON 6636 23,908,544 | /////////////////////// | 13.a.(2)
____________________________
b. In foreign offices, Edge and Agreement subsidiaries, and IBFs (from Schedule RC-E, | /////////////////////// |
part II) .............................................................................. | RCFN 2200 1,745,663 | 13.b.
____________________________
(1) Noninterest-bearing ................................... | RCFN 6631 400 | /////////////////////// | 13.b.(1)
(2) Interest-bearing ...................................... | RCFN 6636 1,745,263 | /////////////////////// | 13.b.(2)
____________________________
14. Federal funds purchased and securities sold under agreements to repurchase in domestic | /////////////////////// |
offices of the bank and of its Edge and Agreement subsidiaries, and in IBFs: | /////////////////////// |
a. Federal funds purchased ............................................................... | RCFD 0278 4,302,800 | 14.a.
b. Securities sold under agreements to repurchase ........................................ | RCFD 0279 566,036 | 14.b.
15. a. Demand notes issued to the U.S. Treasury .............................................. | RCON 2840 14,411 | 15.a.
b. Trading liabilities (from Schedule RC-D) .............................................. | RCFD 3548 57,446 | 15.b.
16. Other borrowed money: | /////////////////////// |
a. With a remaining maturity of one year or less.......................................... | RCFD 2332 487,435 | 16.a.
b. With a remaining maturity of more than one year........................................ | RCFD 2333 893,259 | 16.b.
17. Mortgage indebtedness and obligations under capitalized leases ........................... | RCFD 2910 11,561 | 17.
18. Bank's liability on acceptances executed and outstanding ................................. | RCFD 2920 16,634 | 18.
19. Subordinated notes and debentures ........................................................ | RCFD 3200 1,213,219 | 19.
20. Other liabilities (from Schedule RC-G) ................................................... | RCFD 2930 1,251,452 | 20.
21. Total liabilities (sum of items 13 through 20) ........................................... | RCFD 2948 44,670,496 | 21.
| /////////////////////// |
22. Limited-life preferred stock and related surplus ......................................... | RCFD 3282 0 | 22.
EQUITY CAPITAL | /////////////////////// |
23. Perpetual preferred stock and related surplus ............................................ | RCFD 3838 125,000 | 23.
24. Common stock ............................................................................. | RCFD 3230 19,487 | 24.
25. Surplus (exclude all surplus related to preferred stock).................................. | RCFD 3839 2,551,927 | 25.
26. a. Undivided profits and capital reserves ................................................ | RCFD 3632 1,693,408 | 26.a.
b. Net unrealized holding gains (losses) on available-for-sale securities ................ | RCFD 8434 (32,703)| 26.b.
27. Cumulative foreign currency translation adjustments ...................................... | RCFD 3284 0 | 27.
28. Total equity capital (sum of items 23 through 27) ........................................ | RCFD 3210 4,357,119 | 28.
29. Total liabilities, limited-life preferred stock, and equity capital (sum of items 21, 22, | /////////////////////// |
and 28) .................................................................................. | RCFD 3300 49,027,615 | 29.
___________________________
</TABLE>
<TABLE>
<CAPTION>
Memorandum
To be reported only with the March Report of Condition.
1. Indicate in the box at the right the number of the statement below that best describes the Number
most comprehensive level of auditing work performed for the bank by independent external __________________
auditors as of any date during 1995 ............................................................... | RCFD 6724 N/A | M.1.
__________________
<S> <C>
1 = Independent audit of the bank conducted in accordance 4 = Directors' examination of the bank performed by other
with generally accepted auditing standards by a certified external auditors (may be required by state chartering
public accounting firm which submits a report on the bank authority)
2 = Independent audit of the bank's parent holding company 5 = Review of the bank's financial statements by external
conducted in accordance with generally accepted auditing auditors
standards by a certified public accounting firm which 6 = Compilation of the bank's financial statements by external
submits a report on the consolidated holding company auditors
(but not on the bank separately) 7 = Other audit procedures (excluding tax preparation work)
3 = Directors' examination of the bank conducted in 8 = No external audit work
accordance with generally accepted auditing standards
by a certified public accounting firm (may be required by
state chartering authority)
</TABLE>
____________
(1) Includes total demand deposits and noninterest-bearing time and savings
deposits.
12
<PAGE> 32
<TABLE>
<S> <C>
Legal Title of Bank: FLEET NATIONAL BANK Call Date: 06/30/96 ST-BK: 25-0590 FFIEC 031
Address: ONE MONARCH PLACE Page RC-3
City, State Zip: SPRINGFIELD, MA 01102
FDIC Certificate No.: |0|2|4|9|9|
___________
</TABLE>
<TABLE>
<CAPTION>
Schedule RC-A--Cash and Balances Due From Depository Institutions
Exclude assets held for trading.
__________
| C405 | <-
_________________________________ ________
| (Column A) | (Column B) |
| Consolidated | Domestic |
| Bank | Offices |
____________________ ____________________
Dollar Amounts in Thousands | RCFD Bil Mil Thou | RCON Bil Mil Thou |
_____________________________________________________________________________ ____________________ ____________________
<S> <C> <C> <C>
1. Cash items in process of collection, unposted debits, and currency and | ////////////////// | ////////////////// |
coin .................................................................... | 0022 3,402,522 | ////////////////// | 1.
a. Cash items in process of collection and unposted debits .............. | ////////////////// | 0020 2,655,163 | 1.a.
b. Currency and coin .................................................... | ////////////////// | 0080 747,539 | 1.b.
2. Balances due from depository institutions in the U.S. ................... | ////////////////// | 0082 500,301 | 2.
a. U.S. branches and agencies of foreign banks (including their IBFs) ... | 0083 0 | ////////////////// | 2.a.
b. Other commercial banks in the U.S. and other depository institutions | ////////////////// | ////////////////// |
in the U.S. (including their IBFs) ................................... | 0085 500,373 | ////////////////// | 2.b.
3. Balances due from banks in foreign countries and foreign central banks .. | ////////////////// | 0070 7,902 | 3.
a. Foreign branches of other U.S. banks ................................. | 0073 690 | ////////////////// | 3.a.
b. Other banks in foreign countries and foreign central banks ........... | 0074 7,948 | ////////////////// | 3.b.
4. Balances due from Federal Reserve Banks ................................. | 0090 265,916 | 0090 0 | 4.
5. Total (sum of items 1 through 4) (total of column A must equal | ////////////////// | ////////////////// |
Schedule RC, sum of items 1.a and 1.b) .................................. | 0010 4,177,449 | 0010 4,176,641 | 5.
___________________________________________
<CAPTION>
______________________
Memorandum Dollar Amounts in Thousands | RCON Bil Mil Thou |
__________________________________________________________________________________________________ ____________________
<S> <C> <C>
1. Noninterest-bearing balances due from commercial banks in the U.S. (included in item 2, | ////////////////// |
column B above) .............................................................................. | 0050 453,780 | M.1.
______________________
</TABLE>
Schedule RC-B--Securities
Exclude assets held for trading.
<TABLE>
<CAPTION>
_______
| C410 | <-
___________________________________________________________________________ ________
| Held-to-maturity | Available-for-sale |
_________________________________________ _________________________________________
| (Column A) | (Column B) | (Column C) | (Column D) |
| Amortized Cost | Fair Value | Amortized Cost | Fair Value(1) |
____________________ ____________________ ____________________ ____________________
Dollar Amounts in Thousands | RCFD Bil Mil Thou | RCFD Bil Mil Thou | RCFD Bil Mil Thou | RCFD Bil Mil Thou |
______________________________________ ____________________ ____________________ ____________________ ____________________
<S> <C> <C> <C> <C> <C>
1. U.S. Treasury securities ......... | 0211 250 | 0213 250 | 1286 1,274,624 | 1287 1,252,546 | 1.
2. U.S. Government agency | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
and corporation obligations | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
(exclude mortgage-backed | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
securities): | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
a. Issued by U.S. Govern- | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
ment agencies(2) .............. | 1289 0 | 1290 0 | 1291 0 | 1293 0 | 2.a.
b. Issued by U.S. | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
Government-sponsored | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
agencies(3) ................... | 1294 0 | 1295 0 | 1297 498 | 1298 505 | 2.b.
_____________________________________________________________________________________
</TABLE>
_____________
(1) Includes equity securities without readily determinable fair values at
historical cost in item 6.c, column D.
(2) Includes Small Business Administration "Guaranteed Loan Pool Certificates,"
U.S. Maritime Administration obligations, and Export-Import Bank
participation certificates.
(3) Includes obligations (other than mortgage-backed securities) issued by the
Farm Credit System, the Federal Home Loan Bank System, the Federal Home
Loan Mortgage Corporation, the Federal National Mortgage Association, the
Financing Corporation, Resolution Funding Corporation, the Student Loan
Marketing Association, and the Tennessee Valley Authority.
13
<PAGE> 33
<TABLE>
<S> <C>
Legal Title of Bank: FLEET NATIONAL BANK Call Date: 06/30/96 ST-BK: 25-0590 FFIEC 031
Address: ONE MONARCH PLACE Page RC-4
City, State Zip: SPRINGFIELD, MA 01102
FDIC Certificate No.: |0|2|4|9|9|
___________
</TABLE>
<TABLE>
<CAPTION>
Schedule RC-B--Continued
_____________________________________________________________________________________
| Held-to-maturity | Available-for-sale |
_________________________________________ _________________________________________
| (Column A) | (Column B) | (Column C) | (Column D) |
| Amortized Cost | Fair Value | Amortized Cost | Fair Value(1) |
____________________ ____________________ ____________________ ____________________
Dollar Amounts in Thousands | RCFD Bil Mil Thou | RCFD Bil Mil Thou | RCFD Bil Mil Thou | RCFD Bil Mil Thou |
____________________________________ ____________________ ____________________ ____________________ ____________________
<S> <C> <C> <C> <C>
3. Securities issued by states | ////////////////// |/ //////////////// | ////////////////// | ///////////////// |
and political subdivisions | ////////////////// |////////////////// | ////////////////// | ///////////////// |
in the U.S.: | ////////////////// |////////////////// | ////////////////// | ///////////////// |
a. General obligations ......... | 1676 150,357 |1677 150,242 | 1678 0 | 1679 0 | 3.a.
b. Revenue obligations ......... | 1681 8,887 |1686 8,889 | 1690 0 | 1691 0 | 3.b.
c. Industrial development | ////////////////// |////////////////// | ////////////////// | ///////////////// |
and similiar obligations .....| 1694 0 |1695 0 | 1696 0 | 1697 0 | 3.c.
4. Mortgage-backed | ////////////////// |////////////////// | ////////////////// | ///////////////// |
securities (MBS): | ////////////////// |////////////////// | ////////////////// | ///////////////// |
a. Pass-through securities: | ////////////////// |////////////////// | ////////////////// | ///////////////// |
(1) Guaranteed by | ////////////////// |////////////////// | ////////////////// | ///////////////// |
GNMA ....................... | 1698 0 |1699 0 | 1701 861,176 | 1702 852,929 | 4.a.(1)
(2) Issued by FNMA | ////////////////// |////////////////// | ////////////////// | ///////////////// |
and FHLMC ................. | 1703 908 |1705 908 | 1706 4,854,605 | 1707 4,831,023 | 4.a.(2)
(3) Other pass-through | ////////////////// |////////////////// | ///////////////////| ///////////////// |
secruities ................. | 1709 4 |1710 4 | 1711 0 | 1713 0 | 4.a.(3)
b. Other mortgage-backed | ////////////////// |////////////////// | ////////////////// | ///////////////// |
securities (include CMO's, | ////////////////// |////////////////// | ////////////////// | ///////////////// |
REMICs, and stripped | ////////////////// |////////////////// | ////////////////// | ///////////////// |
MBS): | ////////////////// |////////////////// | ////////////////// | ///////////////// |
(1) Issued or guaranteed | ////////////////// |////////////////// | ////////////////// | ///////////////// |
by FNMA, FHLMC, | ////////////////// |////////////////// | ////////////////// | ///////////////// |
or GNMA ............... | 1714 0 |1715 0 | 1716 0 | 1717 0 | 4.b.(1)
(2) Collateralized | ////////////////// |////////////////// | ////////////////// | ///////////////// |
by MBS issued or | ////////////////// |////////////////// | ////////////////// | ///////////////// |
guaranteed by FNMA, | ////////////////// |////////////////// | ////////////////// | ///////////////// |
FHLMC, or GNMA ........ | 1718 0 |1719 0 | 1731 0 | 1732 0 | 4.b.(2)
(3) All other mortgage- | ////////////////// |////////////////// | ////////////////// | //////////////// |
backed securities ..... | 1733 0 |1734 0 | 1735 518 | 1736 518 | 4.b.(3)
5. Other debt securities: | ////////////////// |////////////////// | ////////////////// | ///////////////// |
a. Other domestic debt | ////////////////// |////////////////// | ////////////////// | ///////////////// |
securities.................. | 1737 0 |1738 0 | 1739 817 | 1741 812 | 5.a.
b. Foreign debt | ////////////////// |////////////////// | ////////////////// | ///////////////// |
securities ................. | 1742 97,035 |1743 78,878 | 1744 0 | 1746 0 | 5.b.
6. Equity securities: | ////////////////// |////////////////// | ////////////////// | ///////////////// |
a. Investments in mutual | ////////////////// |////////////////// | ////////////////// | ///////////////// |
funds ...................... | ////////////////// |////////////////// | 1747 0 | 1748 0 | 6.a.
b. Other equity securities | ////////////////// |////////////////// | ////////////////// | ///////////////// |
with readily determin- | ////////////////// |////////////////// | ////////////////// | ///////////////// |
able fair values ........... | ////////////////// |////////////////// | 1749 0 | 1751 0 | 6.b.
c. All other equity | ////////////////// |////////////////// | ////////////////// | ///////////////// |
securities (1) ............. | ////////////////// |////////////////// | 1752 311,734 | 1753 311,734 | 6.c.
7. Total (sum of items 1 | ////////////////// |////////////////// | ////////////////// | ///////////////// |
through 6) (total of | ////////////////// |////////////////// | ////////////////// | ///////////////// |
column A must equal | ////////////////// |////////////////// | ////////////////// | ///////////////// |
Schedule RC, item 2.a) | ////////////////// |////////////////// | ////////////////// | ///////////////// |
(total of column D must | ////////////////// |////////////////// | ////////////////// | ///////////////// |
equal Schedule RC, | ////////////////// |////////////////// | ////////////////// | ///////////////// |
item 2.b) ..................... | 1754 257,441 | 1771 239,171 | 1772 7,303,972 | 1773 7,250,067 | 7.
|__________________________________________________________________________________|
</TABLE>
____________
1) Includes equity securities without readily determinable fair values at
historical cost in item 6.c, column D.
14
<PAGE> 34
<TABLE>
<S> <C>
Legal Title of Bank: FLEET NATIONAL BANK Call Date: 06/30/96 ST-BK: 25-0590 FFIEC 031
Address: ONE MONARCH PLACE Page RC-5
City, State Zip: SPRINGFIELD, MA 01102
FDIC Certificate No.: |0|2|4|9|9|
___________
</TABLE>
<TABLE>
<CAPTION>
Schedule RC-B--Continued
<CAPTION>
___________
Memoranda | C412 | <-
___________ _________
Dollar Amounts in Thousands | RCFD Bil Mil Thou |
__________________________________________________________________________________________________ ____________________
<S> <C> <C>
1. Pledged securities(2) ......................................................................... | 0416 2,308,912 | M.1.
2. Maturity and repricing data for debt securities(2),(3),(4) (excluding those in | ////////////////// |
nonaccrual status): | ////////////////// |
a. Fixed rate debt securities with a remaining maturity of: | ////////////////// |
(1) Three months or less ................................................................... | 0343 72,490 | M.2.a.(1)
(2) Over three months through 12 months .................................................... | 0344 77,125 | M.2.a.(2)
(3) Over one year through five years ....................................................... | 0345 2,734,577 | M.2.a.(3)
(4) Over five years ........................................................................ | 0346 2,925,207 | M.2.a.(4)
(5) Total fixed rate debt securities (sum of Memorandum items 2.a.(1) through 2.a.(4)) ..... | 0347 5,809,399 | M.2.a.(5)
b. Floating rate debt securities with a repricing frequency of: | ////////////////// |
(1) Quarterly or more frequently ........................................................... | 4544 531,365 | M.2.b.(1)
(2) Annually or more frequently, but less frequently than quarterly ........................ | 4545 855,010 | M.2.b.(2)
(3) Every five years or more frequently, but less frequently than annually ................. | 4551 0 | M.2.b.(3)
(4) Less frequently than every five years .................................................. | 4552 0 | M.2.b.(4)
(5) Total floating rate debt securities (sum of Memorandum items 2.b.(1) through 2.b.(4)) .. | 4553 1,386,375 | M.2.b.(5)
c. Total debt securities (sum of Memorandum items 2.a.(5) and 2.b.(5)) (must equal total debt | ////////////////// |
securities from Schedule RC-B, sum of items 1 through 5, columns A and D, minus nonaccrual | ////////////////// |
debt securities included in Schedule RC-N, item 9, column C) ............................... | 0393 7,195,774 | M.2.c.
3. Not applicable | ////////////////// |
4. Held-to-maturity debt securities restructured and in compliance with modified terms (included | ////////////////// |
in Schedule RC-B, items 3 through 5, column A, above) ......................................... | 5365 0 | M.4.
5. Not applicable | ////////////////// |
6. Floating rate debt securities with a remaining maturity of one year or less(2),(4) (included in | ////////////////// |
Memorandum items 2.b(1) through 2.b.(4) above)................................................. | 5519 3,700 | M.6.
7. Amortized cost of held-to-maturity securities sold or transferred to available-for-sale or | ////////////////// |
trading securities during the calendar year-to-date (report the amortized cost at date of sale | ////////////////// |
or transfer ................................................................................... | 1778 0 | m.7.
8. High-risk mortgage securities (included in the held-to-maturity and available-for-sale | ////////////////// |
accounts in Schedule RC-B, item 4.b): | ////////////////// |
a. Amortized cost ............................................................................. | 8780 0 | M.8.a.
b. Fair Value ................................................................................. | 8781 0 | M.8.b.
9. Structured notes (included in the held-to-maturity and available-for-sale accounts in | ////////////////// |
Schedule RC-B, items 2, 3, and 5): | ////////////////// |
a. Amortized cost ............................................................................. | 8782 0 | M.9.a.
b. Fair Value ................................................................................. | 8783 0 | M.9.b.
----------------------
</TABLE>
____________
(2) Includes held-to-maturity securities at amortized cost and
available-for-sale securities at fair value.
(3) Exclude equity securities, e.g., investments in mutual funds, Federal
Reserve stock, common stock, and preferred stock.
(4) Memorandum items 2 and 6 are not applicable to savings banks that must
complete supplemental Schedule RC-J.
15
<PAGE> 35
<TABLE>
<CAPTION>
Legal Title of Bank: FLEET NATIONAL BANK Call Date: 6/30/96 ST-BK: 25-0590 FFIEC 031
Address: ONE MONARCH PLACE Page RC-6
City, State Zip: SPRINGFIELD, MA 01102
FDIC Certificate No.: |0|2|4|9|9|
___________
Schedule RC-C--Loans and Lease Financing Receivables
Part I. Loans and Leases
_________
Do not deduct the allowance for loan and lease losses from amounts | C415 | <-
reported in this schedule. Report total loans and leases, net of unearned _________________________________|________|
income. Exclude assets held for trading. | (Column A) | (Column B) |
| Consolidated | Domestic |
| Bank | Offices |
____________________ ____________________
Dollar Amounts in Thousands | RCFD Bil Mil Thou | RCON Bil Mil Thou |
_____________________________________________________________________________ ____________________ ____________________
<S> <C> <C> <C>
1. Loans secured by real estate ........................................... | 1410 11,754,916 | ////////////////// | 1.
a. Construction and land development ................................... | ////////////////// | 1415 433,880 | 1.a.
b. Secured by farmland (including farm residential and other | ////////////////// | ////////////////// |
improvements) ....................................................... | ////////////////// | 1420 2,172 | 1.b
c. Secured by 1-4 family residential properties: | ////////////////// | ////////////////// |
(1) Revolving, open-end loans secured by 1-4 family residential | ////////////////// | ////////////////// |
properties and extended under lines of credit ................... | ////////////////// | 1797 2,022,596 | 1.c.(1)
(2) All other loans secured by 1-4 family residential properties: | ////////////////// | ////////////////// |
(a) Secured by first liens ...................................... | ////////////////// | 5367 4,418,239 | 1.c.(2)(a)
(b) Secured by junior liens ..................................... | ////////////////// | 5368 492,952 | 1.c.(2)(b)
d. Secured by multifamily (5 or more) residential properties ........... | ////////////////// | 1460 559,373 | 1.d.
e. Secured by nonfarm nonresidential properties ........................ | ////////////////// | 1480 3,825,704 | 1.e.
2. Loans to depository institutions: | ////////////////// | ////////////////// |
a. To commercial banks in the U.S. ..................................... | ////////////////// | 1505 143,682 | 2.a.
(1) To U.S. branches and agencies of foreign banks .................. | 1506 0 | ////////////////// | 2.a.(1)
(2) To other commercial banks in the U.S. ........................... | 1507 143,682 | ////////////////// | 2.a.(2)
b. To other depository institutions in the U.S. ........................ | 1517 0 | 1517 12,345 | 2.b.
c. To banks in foreign countries ....................................... | ////////////////// | 1510 672 | 2.c.
(1) To foreign branches of other U.S. banks ......................... | 1513 149 | ////////////////// | 2.c.(1)
(2) To other banks in foreign countries ............................. | 1516 523 | ////////////////// | 2.c.(2)
3. Loans to finance agricultural production and other loans to farmers .... | 1590 5,889 | 1590 5,889 | 3.
4. Commercial and industrial loans: | ////////////////// | ////////////////// |
a. To U.S. addressees (domicile) ....................................... | 1763 12,446,547 | 1763 12,402,858 | 4.a.
b. To non-U.S. addressees (domicile) ................................... | 1764 83,521 | 1764 54,074 | 4.b.
5. Acceptances of other banks: | ////////////////// | ////////////////// |
a. Of U.S. banks ....................................................... | 1756 0 | 1756 0 | 5.a.
b. Of foreign banks .................................................... | 1757 0 | 1757 0 | 5.b.
6. Loans to individuals for household, family, and other personal | ////////////////// | ////////////////// |
expenditures (i.e., consumer loans) (includes purchased paper) ......... | ////////////////// | 1975 2,217,352 | 6.
a. Credit cards and related plans (includes check credit and other | ////////////////// | ////////////////// |
revolving credit plans) ............................................. | 2008 161,652 | ////////////////// | 6.a.
b. Other (includes single payment, installment, and all student loans).. | 2011 2,055,700 | ////////////////// | 6.b.
7. Loans to foreign governments and official institutions (including | ////////////////// | ////////////////// |
foreign central banks) ................................................. | 2081 0 | 2081 0 | 7.
8. Obligations (other than securities and leases) of states and political | ////////////////// | ////////////////// |
subdivisions in the U.S. (includes nonrated industrial development | ////////////////// | ////////////////// |
obligations) ........................................................... | 2107 167,100 | 2107 167,100 | 8.
9. Other loans ............................................................ | 1563 2,146,172 | ////////////////// | 9.
a. Loans for purchasing or carrying securities (secured and unsecured).. | ////////////////// | 1545 156,275 | 9.a.
b. All other loans (exclude consumer loans) ............................ | ////////////////// | 1564 1,989,897 | 9.b.
10. Lease financing receivables (net of unearned income) ................... | ////////////////// | 2165 2,300,055 | 10.
a. Of U.S. addressees (domicile) ....................................... | 2182 2,300,055 | ////////////////// | 10.a.
b. Of non-U.S. addressees (domicile) ................................... | 2183 0 | ////////////////// | 10.b.
11. LESS: Any unearned income on loans reflected in items 1-9 above ........ | 2123 0 | 2123 0 | 11.
12. Total loans and leases, net of unearned income (sum of items 1 through | ////////////////// | ////////////////// |
10 minus item 11) (total of column A must equal Schedule RC, item 4.a).. | 2122 31,278,251 | 2122 31,205,115 | 12.
___________________________________________
</TABLE>
16
<PAGE> 36
<TABLE>
<S> <C>
Legal Title of Bank: FLEET NATIONAL BANK Call Date: 06/30/96 ST-BK: 25-0590 FFIEC 031
Address: ONE MONARCH PLACE Page: RC-7
City, State Zip: SPRINGFIELD, MA 01102
FDIC Certificate No.: |0|2|4|9|9|
___________
</TABLE>
<TABLE>
<CAPTION>
Schedule RC-C--Continued
Part I. Continued
___________________________________________
| (Column A) | (Column B) |
| Consolidated | Domestic |
Memoranda | Bank | Offices |
____________________ ____________________
Dollar Amounts in Thousands | RCFD Bil Mil Thou | RCON Bil Mil Thou |
_____________________________________________________________________________ ____________________ ____________________
<S> <C> <C> <C>
1. Commercial paper included in Schedule RC-C, part I, above .............. | 1496 0 | 1496 0 | M.1.
2. Loans and leases restructured and in compliance with modified terms | ////////////////// | ////////////////// |
(included in Schedule RC-C, part I, above and not reported as past due | ////////////////// | ////////////////// |
or nonaccrual in Schedule RC-N, Memorandum item 1): | ////////////////// | ////////////////// |
a. Loans secured by real estate: | ////////////////// | ////////////////// |
(1) To U.S. addressees (domicile) ................................... | 1687 511 | M.2.a.(1)
(2) To non-U.S. addressees (domicile) ............................... | 1689 0 | M.2.a.(2)
b. All other loans and all lease financing receivables (exclude loans | ////////////////// |
to individuals for household, family, and other personal expenditures)| 8691 0 | M.2.b.
c. Commercial and industrial loans to and lease financing receivables | ////////////////// |
of non-U.S. addressees (domicile) included in Memorandum item 2.b | ////////////////// |
above ............................................................... | 8692 0 | M.2.c.
3. Maturity and repricing data for loans and leases(1) (excluding those | ////////////////// |
in nonaccrual status): | ////////////////// |
a. Fixed rate loans and leases with a remaining maturity of: | ////////////////// |
(1) Three months or less ............................................ | 0348 10,215,575 | M.3.a.(1)
(2) Over three months through 12 months ............................. | 0349 369,421 | M.3.a.(2)
(3) Over one year through five years ................................ | 0356 3,479,742 | M.3.a.(3)
(4) Over five years ................................................. | 0357 5,791,166 | M.3.a.(4)
(5) Total fixed rate loans and leases (sum of | ////////////////// |
Memorandum items 3.a.(1) through 3.a.(4)) ....................... | 0358 19,855,904 | M.3.a.(5)
b. Floating rate loans with a repricing frequency of: | ////////////////// |
(1) Quarterly or more frequently .................................... | 4554 8,960,876 | M.3.b.(1)
(2) Annually or more frequently, but less frequently than quarterly . | 4555 1,848,295 | M.3.b.(2)
(3) Every five years or more frequently, but less frequently than | ////////////////// |
annually ........................................................ | 4561 250,031 | M.3.b.(3)
(4) Less frequently than every five years ........................... | 4564 12,721 | M.3.b.(4)
(5) Total floating rate loans (sum of Memorandum items 3.b.(1) | ////////////////// |
through 3.b.(4)) ................................................ | 4567 11,071,923 | M.3.b.(5)
c. Total loans and leases (sum of Memorandum items 3.a.(5) and 3.b.(5)) | ////////////////// |
(must equal the sum of total loans and leases, net, from | ////////////////// |
Schedule RC-C, part I, item 12, plus unearned income from | ////////////////// |
Schedule RC-C, part I, item 11, minus total nonaccrual loans and | ////////////////// |
leases from Schedule RC-N, sum of items 1 through 8, column C) ...... | 1479 30,927,827 | M.3.c.
d. FLOATING RATE LOANS WITH A REMAINING MATURITY OF ONE YEAR OR LESS | ////////////////// |
(INCLUDED IN MEMORANDUM ITEMS 3.b.(1) THROUGH 3.b.(4) ABOVE)......... | A246 1,543,411 | M.3.d.
4. Loans to finance commercial real estate, construction, and land | ////////////////// |
development activities (NOT SECURED BY REAL ESTATE) included in | ////////////////// |
Schedule RC-C, part I, items 4 and 9, column A, page RC-6(2) ........... | 2746 271,706 | M.4.
5. Loans and leases held for sale (included in Schedule RC-C, part I, | ////////////////// |
above .................................................................. | 5369 0 | M.5.
| ////////////////// |_____________________
6. Adjustable rate closed-end loans secured by first liens on 1-4 family | ////////////////// | RCON Bil Mil Thou |
residential properties (included in Schedule RC-C, part I, item | ////////////////// | ___________________|
1.c.(2)(a), column B, page RC-6) ....................................... | ////////////////// | 5370 1.655.898 | M.6.
|_________________________________________|
</TABLE>
_____________________________
(1) Memorandum item 3 is not applicable to savings banks that must complete
supplememtal Schedule RC-J.
(2) Exclude loans secured by real estate that are included in Schedule RC-C,
part I, item 1, column A.
17
<PAGE> 37
<TABLE>
<S> <C>
Legal Title of Bank: FLEET NATIONAL BANK Call Date: 6/30/96 ST-BK: 25-0590 FFIEC 031
Address: ONE MONARCH PLACE Page RC-7a
City, State Zip: SPRINGFIELD, MA 01102
FDIC Certificate No.: |0|2|4|9|9|
___________
</TABLE>
<TABLE>
<S> <C>
Schedule RC-C--Continued
Part II. Loans to Small Businesses and Small Farms
Schedule RC-C, Part II is to be reported only with the June Report of Condition.
Report the number and amount currently outstanding as of June 30 of business loans with "original amounts" of $1,000,000 or less
and farm loans with "original amounts" of $500,000 or less. The following guidelines should be used to determine the "original
amount" of a loan: (1) For loans drawn down under lines of credit or loan commitments, the "original amount" of the loan is the
size of the line of credit or loan commitment when the line of credit or loan commitment was most recently approved, extended, or
renewed prior to the report date. However, if the amount currently outstanding as of the report date exceeds this size, the
"original amount" is the amount currently outstanding on the report date. (2) For loan participations and syndications, the
"original amount" of the loan participation or syndication is the entire amount of the credit originated by the lead lender.
(3) For all other loans, the "original amount" is the total amount of the loan at origination or the amount currently
outstanding as of the report date, whichever is larger.
Loans to Small Businesses
</TABLE>
<TABLE>
<S> <C>
1. Indicate in the appropriate box at the right whether all or substantially all of the dollar volume of your
bank's "Loans secured by nonfarm nonresidential properties" in domestic offices reported in Schedule RC-C,
part I, item 1.e, column B, and all or substantially all of the dollar volume of your bank's
"Commercial and industrial loans to U.S. addressees" in domestic offices reported in Schedule RC-C, __________
part I, item 4.a, column B, have original amounts of $100,000 or less (If your bank has no loans ________| C415 | <-
outstanding in both of these two loan categories, place an "X" in the box marked "NO" and go to | RCON YES NO|
Item 5; otherwise, see instructions for further information.).................................. | 6999 | |///| x | 1.
___________________
If YES, complete items 2.a and 2.b below, skip items 3 and 4, and go to item 5.
If NO and your bank has loans outstanding in either loan category, skip items 2.a and 2.b,
complete items 3 and 4 below, and go to item 5. _____________________
| Number of Loans |
2. Report the total number of loans currently outstanding for each of the |____________________|
following Schedule RC-C, part I, loan categories: | RCON |/////////// |
a. "Loans secured by nonfarm nonresidential properties" in domestic | ////////////////// |
offices reported in Schedule RC-C, part I, item 1.e, column B....... | 5562 N/A | 2.a.
b. "Commercial and industrial loans to U.S. addressees" in domestic | ////////////////// |
offices reported in Schedule RC-C, part I, item 4.a, column B ...... | 5563 N/A | 2.b.
______________________
</TABLE>
<TABLE>
<CAPTION>
___________________________________________
| (Column A) | (Column B) |
| | Amount |
| | Currently |
| Number of Loans | Outstanding |
____________________ ____________________
Dollar Amounts in Thousands | RCON | ///////////| RCON Bil Mil Thou |
_____________________________________________________________________________ ____________________ ____________________
<S> <C> <C> <C>
3. Number and amount currently outstanding of "Loans secured by nonfarm | /////////////////////////////////////// | 1.
nonresidential properties" in domestic offices reported in Schedule RC-C | /////////////////////////////////////// | 1.a.
part I item 1.e, column B (sum of items 3.a through 3.c must be less | /////////////////////////////////////// |
or equal to Schedule RC-C, part I, item 1.e, column B): | /////////////////////////////////////// | 1.b
a. With original amounts of $100,000 or less ........................... | 5564 1,988 | 5565 76,370 | 3.a.
b. With original amounts of more than $100,000 through $250,000 ........ | 5566 2,805 | 5567 332,639 | 3.b.
c. With original amounts of more than $250,000 through $1,000,000 ...... | 5568 2,736 | 5569 952,476 | 3.c.
4. Number and amount currently outstanding of "Commercial and industrial | /////////////////////////////////////// |
loans to U.S. addressees" in domestic offices reported in Schedule RC-C, | /////////////////////////////////////// |
part I, item 4.a, column B (sum of items 4.a through 4.c must be less | /////////////////////////////////////// |
than or equal to Schedule RC-C, part I, item 4.a, column B): | /////////////////////////////////////// |
a. With original amounts of $100,000 or less ........................... | 5570 11,433 | 5571 337,759 | 4.a.
b. With original amounts of more than $100,000 through $250,000 ........ | 5572 2,127 | 5573 228,713 | 4.b.
c. With original amounts of more than $250,000 through $1,000,000 ...... | 5574 1,968 | 5575 601,126 | 4.c.
___________________________________________
</TABLE>
17a
<PAGE> 38
<TABLE>
<S> <C>
Legal Title of Bank: FLEET NATIONAL BANK Call Date: 6/30/96 ST-BK: 25-0590 FFIEC 031
Address: ONE MONARCH PLACE Page RC-7b
City, State Zip: SPRINGFIELD, MA 01102
FDIC Certificate No.: |0|2|4|9|9|
___________
</TABLE>
Schedule RC-C -- Continued
Part II. Continued
Agricultural Loans to Small Farms
<TABLE>
<S> <C> <C>
5. Indicate in the appropriate box at the right whether all or substantially all of the
dollar volume of your bank's "Loans secured by farmland (including farm residential
and other improvements)" in domestic offices reported in Schedule RC-C, part I, item
1.b, column B, and all or substantially all of the dollar volume of your bank's
"Loans to finance agricultural production and other loans to farmers" in domestic
offices reported in Schedule RC-C, part I, item 3, column B, have original amounts
of $100,000 or less (If your bank has no loans outstanding in both of these two YES NO
loan categories, place an "X" in the box marked "NO" and do not complete items 7 _______________________
and 8; otherwise, see instructions for further information.)................................... | 6860 | | /// | X | 5.
|_____________________|
If YES, complete items 6.a and 6.b below and do not complete items 7 and 8.
If NO and your bank has loans outstanding in either loan category, skip items 6.a and 6.b
and complete items 7 and 8 below.
</TABLE>
<TABLE>
<S> <C>
______________________
| Number of Loans |
6. Report the total number of loans currently outstanding for each of the |____________________|
following Schedule RC-C, part I, loan categories: | RCON |//////////// |
a. "Loans secured by farmland (including farm residential and other |______| |
improvements)" in domestic offices reported in Schedule RC-C, part I, | ////////////////// |
item 1.b, column B........................................................ | 5576 N/A | 6.a.
b. "Loans to finance agricultural production and other loans to farmers" in | ////////////////// |
domestic offices reported in Schedule RC-C, part I, item 3, column B...... | 5577 N/A | 6.b.
|____________________|
</TABLE>
<TABLE>
<S> <C> <C>
_____________________________________________
| (Column A) | (Column B) |
| | Amount |
| | Currently |
| Number of Loans | Outstanding |
|_____________________|______________________|
Dollar Amounts in Thousands | RCON |/////////////| RCON Bil Mil Thou |
________________________________________________________________________________| ______| |_____________________ |
7. Number and amount currently outstanding of "Loans secured by farmland | ////////////////////////////////////////// |
(including farm residential and other improvements)" in domestic offices | ////////////////////////////////////////// |
reported in Schedule RC-C, part I, item 1.b, column B (sum of items 7.a | ////////////////////////////////////////// |
through 7.c must be less than or equal to Schedule RC-C, part I, item 1.b, | ////////////////////////////////////////// |
column B): | ////////////////////////////////////////// |
a. With original amounts of $100,000 or less............................... | 5578 18 | 5579 292 | 7.a.
b. With original amounts of more than $100,000 through $250,000............ | 5580 8 | 5581 850 | 7.b.
c. With original amounts of more than $250,000 through $500,000............ | 5582 4 | 5583 1,030 | 7.c.
8. Number and amount currently outstanding of "Loans to finance agricultural | ////////////////////////////////////////// |
production and other loans to farmers" in domestic offices reported in | ////////////////////////////////////////// |
Schedule RC-C, part I, item 3, column B (sum of items 8.a through 8.c | ////////////////////////////////////////// |
must be less than or equal to Schedule RC-C, part I, item 3, column B): | ////////////////////////////////////////// |
a. With original amounts of $100,000 or less............................... | 5584 46 | 5585 992 | 8.a.
b. With original amounts of more than $100,000 through $250,000............ | 5586 17 | 5587 1,877 | 8.b.
c. With original amounts of more than $250,000 through $500,000............ | 5588 4 | 5589 1,054 | 8.c.
|_____________________|______________________|
</TABLE>
17b
<PAGE> 39
<TABLE>
<CAPTION>
Legal Title of Bank: FLEET NATIONAL BANK Call Date: 06/30/96 ST-BK: 25-0590 FFIEC 031
Address: ONE MONARCH PLACE Page RC-8
City, State Zip: SPRINGFIELD, MA 01102
FDIC Certificate No.: |0|2|4|9|9|
___________
Schedule RC-D--Trading Assets and Liabilities
Schedule RC-D is to be completed only by banks with $1 billion or more in total assets or with $2 billion or more in par/notional
amount of off-balance sheet derivative contracts (as reported in Schedule RC-L, items 14.a through 14.e, columns A through D).
__________
| C420 |
__________________________
Dollar Amounts in Thousands | ////////// Bil Mil Thou|
__________________________________________________________________________________________________| ________________________|
<S> <C> <C>
ASSETS | /////////////////////// |
1. U.S. Treasury securities in domestic offices ................................................ | RCON 3531 0 | 1.
2. U.S. Government agency and corporation obligations in domestic offices (exclude mortgage- | /////////////////////// |
backed securities) .......................................................................... | RCON 3532 0 | 2.
3. Securities issued by states and political subdivisions in the U.S. in domestic offices ...... | RCON 3533 0 | 3.
4. Mortgage-backed securities (MBS) in domestic offices: | /////////////////////// |
a. Pass-through securities issued or guaranteed by FNMA, FHLMC, or GNMA ..................... | RCON 3534 0 | 4.a.
b. Other mortgage-backed securities issued or guaranteed by FNMA, FHLMC, or GNMA | /////////////////////// |
(include CMOs, REMICs, and stripped MBS) ................................................. | RCON 3535 0 | 4.b.
c. All other mortgage-backed securities ......................................................| RCON 3536 0 | 4.c.
5. Other debt securities in domestic offices ................................................... | RCON 3537 0 | 5.
6. Certificates of deposit in domestic offices ................................................. | RCON 3538 0 | 6.
7. Commercial paper in domestic offices ........................................................ | RCON 3539 0 | 7.
8. Bankers acceptances in domestic offices ..................................................... | RCON 3540 0 | 8.
9. Other trading assets in domestic offices .................................................... | RCON 3541 0 | 9.
10. Trading assets in foreign offices ........................................................... | RCFN 3542 0 | 10.
11. Revaluation gains on interest rate, foreign exchange rate, and other commodity and equity | /////////////////////// |
contracts: | /////////////////////// |
a. In domestic offices ...................................................................... | RCON 3543 66,696 | 11.a.
b. In foreign offices ....................................................................... | RCFN 3544 4,658 | 11.b.
12. Total trading assets (sum of items 1 through 11) (must equal Schedule RC, item 5) ........... | RCFD 3545 71,354 | 12.
<CAPTION>
___________________________
___________________________
| ///////// Bil Mil Thou |
LIABILITIES | ________________________|_
<S> <C> <C>
13. Liability for short positions ............................................................... | RCFD 3546 0 | 13.
14. Revaluation losses on interest rate, foreign exchange rate, and other commodity and equity | /////////////////////// |
contracts ................................................................................... | RCFD 3547 57,446 | 14.
15. Total trading liabilities (sum of items 13 and 14) (must equal Schedule RC, item 15.b) ...... | RCFD 3548 57,446 | 15.
___________________________
</TABLE>
18
<PAGE> 40
<TABLE>
<S> <C>
Legal Title of Bank: FLEET NATIONAL BANK Call Date: 06/30/96 ST-BK: 25-0590 FFIEC 031
Address: ONE MONARCH PLACE Page RC-9
City, State Zip: SPRINGFIELD, MA 01102
FDIC Certificate No.: |0|2|4|9|9|
___________
</TABLE>
<TABLE>
<CAPTION>
Schedule RC-E--Deposit Liabilities
Part I. Deposits in Domestic Offices
__________
| C425 | <-
______________________________________________________ ________
| | Nontransaction |
| Transaction Accounts | Accounts |
_________________________________________ ____________________
| (Column A) | (Column B) | (Column C) |
| Total transaction | Memo: Total | Total |
| accounts (including| demand deposits | nontransaction |
| total demand | (included in | accounts |
| deposits) | column A) | (including MMDAs) |
____________________ ____________________ ____________________
Dollar Amounts in Thousands | RCON Bil Mil Thou | RCON Bil Mil Thou | RCON Bil Mil Thou |
__________________________________________________________ ____________________ ____________________ ____________________
<S> <C> <C> <C> <C>
Deposits of: | ////////////////// | ////////////////// | ////////////////// |
1. Individuals, partnerships, and corporations .......... | 2201 8,615,650 | 2240 8,158,203 | 2346 22,594,478 | 1.
2. U.S. Government ...................................... | 2202 58,650 | 2280 58,605 | 2520 42,512 | 2.
3. States and political subdivisions in the U.S. ........ | 2203 818,151 | 2290 706,072 | 2530 702,686 | 3.
4. Commercial banks in the U.S. ......................... | 2206 836,005 | 2310 836,005 | 2550 771 | 4.
5. Other depository institutions in the U.S. ............ | 2207 221,571 | 2312 221,571 | 2349 2,968 | 5.
6. Banks in foreign countries ........................... | 2213 18,445 | 2320 18,445 | 2236 0 | 6.
7. Foreign governments and official institutions | ////////////////// | ////////////////// | ////////////////// |
(including foreign central banks) .................... | 2216 108 | 2300 108 | 2377 0 | 7.
8. Certified and official checks ........................ | 2330 198,585 | 2330 198,585 | ////////////////// | 8.
9. Total (sum of items 1 through 8) (sum of | ////////////////// | ////////////////// | ////////////////// |
columns A and C must equal Schedule RC, | ////////////////// | ////////////////// | ////////////////// |
item 13.a) ........................................... | 2215 10,767,165 | 2210 10,197,594 | 2385 23,343,415 | 9.
________________________________________________________________
</TABLE>
<TABLE>
<CAPTION>
______________________
Memoranda Dollar Amounts in Thousands | RCON Bil Mil Thou |
____________________________________________________________________________________________________ ____________________
<S> <C> <C>
1. Selected components of total deposits (i.e., sum of item 9, columns A and C): | ////////////////// |
a. Total Individual Retirement Accounts (IRAs) and Keogh Plan accounts ......................... | 6835 2,735,425 | M.1.a.
b. Total brokered deposits ..................................................................... | 2365 1,636,611 | M.1.b.
c. Fully insured brokered deposits (included in Memorandum item 1.b above): | ////////////////// |
(1) Issued in denominations of less than $100,000 ........................................... | 2343 2,350 | M.1.c.(1)
(2) Issued EITHER in denominations of $100,000 OR in denominations greater than $100,000 | ////////////////// |
and participated out by the broker in shares of $100,000 or less ........................ | 2344 1,634,261 | M.1.c.(2)
d. MATURITY DATA FOR BROKERED DEPOSITS: | ////////////////// |
(1) BROKERED DEPOSITS ISSUED IN DENOMINATIONS OF LESS THAN $100,000 WITH A REMAINING | ////////////////// |
MATURITY OF ONE YEAR OR LESS (INCLUDED IN MEMORANDUM ITEM 1.c.(1) ABOVE)................. | A243 171 | M.1.d.(1)
(2) BROKERED DEPOSITS ISSUED IN DENOMINATIONS OF $100,000 OR MORE WITH A REMAINING | ////////////////// |
MATURITY OF ONE YEAR OR LESS (INCLUDED IN MEMORANDUM ITEM 1.b ABOVE)..................... | A244 509,265 | M.1.d.(2)
e. Preferred deposits (uninsured deposits of states and political subdivisions in the U.S. | ////////////////// |
reported in item 3 above which are secured or collateralized as required under state law) ... | 5590 457,587 | M.1.e.
2. Components of total nontransaction accounts (sum of Memoranda items 2.a through 2.d must | ////////////////// |
equal item 9, column C above): | ////////////////// |
a. Savings deposits: | ////////////////// |
(1) Money market deposit accounts (MMDAs) ................................................... | 6810 10,738,339 | M.2.a.(1)
(2) Other savings deposits (excludes MMDAs) ................................................. | 0352 2,655,659 | M.2.a.(2)
b. Total time deposits of less than $100,000 ................................................... | 6648 7,247,099 | M.2.b.
c. Time certificates of deposit of $100,000 or more ............................................ | 6645 2,702,318 | M.2.c.
d. Open-account time deposits of $100,000 or more .............................................. | 6646 0 | M.2.d.
3. All NOW accounts (included in column A above) .................................................. | 2398 569,571 | M.3.
4. Not applicable
______________________
</TABLE>
19
<PAGE> 41
<TABLE>
<S> <C>
Legal Title of Bank: FLEET NATIONAL BANK Call Date: 06/30/96 ST-BK: 25-0590 FFIEC 031
Address: ONE MONARCH PLACE Page RC-10
City, State Zip: SPRINGFIELD, MA 01102
FDIC Certificate No.: |0|2|4|9|9|
___________
Schedule RC-E--Continued
Part I. Continued
Memoranda (continued)
_________________________________________________________________________________________________________________________________
</TABLE>
<TABLE>
<CAPTION>
______________________
Dollar Amounts in Thousands | RCON Bil Mil Thou |
___________________________________________________________________________________________________ ____________________
<S> <C> <C>
5. Maturity and repricing data for time deposits of less than $100,000 (sum of | ////////////////// |
Memorandum items 5.a.(1) through 5.b.(3) must equal Memorandum item 2.b above):(1) | ////////////////// |
a. Fixed rate time deposits of less than $100,000 with a remaining maturity of: | ////////////////// |
(1) Three months or less.................................................................... | A225 1,684,248 | M.5.a.(1)
(2) Over three months through 12 months..................................................... | A226 3,493,722 | M.5.a.(2)
(3) Over one year........................................................................... | A227 2,002,999 | M.5.a.(3)
b. Floating rate time deposits of less than $100,000 with a repricing frequency of: | ////////////////// |
(1) Quarterly or more frequently............................................................ | A228 66,130 | M.5.b.(1)
(2) Annually or more frequently, but less frequently than quarterly......................... | A229 0 | M.5.b.(2)
(3) Less frequently than annually........................................................... | A230 0 | M.5.b.(3)
c. Floating rate time deposits of less than $100,000 with a remaining maturity of | ////////////////// |
one year or less (included in Memorandum items 5.b.(1) through 5.b.(3) above)............... | A231 45,084 | M.5.c.
6. Maturity and repricing data for time deposits of $100,000 or more (i.e., time certificates | ////////////////// |
of deposit of $100,000 or more and open-account time deposits of $100,000 or more) | ////////////////// |
(sum of Memorandum items 6.a.(1) through 6.b.(4) must equal the sum of Memorandum | ////////////////// |
items 2.c and 2.d above):(1) | ////////////////// |
a. Fixed rate time deposits of $100,000 or more with a remaining maturity of: | ////////////////// |
(1) Three months or less ................................................................... | A232 534,657 | M.6.a.(1)
(2) Over three months through 12 months .................................................... | A233 754,429 | M.6.a.(2)
(3) Over one year through five years ....................................................... | A234 1,282,541 | M.6.a.(3)
(4) Over five years ........................................................................ | A235 36,761 | M.6.a.(4)
b. Floating rate time deposits of $100,000 or more with a repricing frequency of: | ////////////////// |
(1) Quarterly or more frequently ........................................................... | A236 31,182 | M.6.b.(1)
(2) Annually or more frequently, but less frequently than quarterly ........................ | A237 37,950 | M.6.b.(2)
(3) Every five years or more frequently, but less frequently than annually ................. | A238 24,798 | M.6.b.(3)
(4) Less frequently than every five years .................................................. | A239 0 | M.6.b.(4)
c. Floating rate time deposits of $100,000 or more with a remaining maturity of | ////////////////// |
one year or less (included in Memorandum items 6.b.(1) through 6.b.(4) above)............... | A240 19,186 | M.6.c.
______________________
</TABLE>
_______________
(1) Memorandum items 5 and 6 are not applicable to savings banks that must
complete supplemental Schedule RC-J.
20
<PAGE> 42
<TABLE>
<S> <C>
Legal Title of Bank: FLEET NATIONAL BANK Call Date: 6/30/96 ST-BK: 25-0590 FFIEC 031
Address: ONE MONARCH PLACE Page RC-11
City, State Zip: SPRINGFIELD, MA 01102
FDIC Certificate No.: |0|2|4|9|9|
___________
</TABLE>
<TABLE>
<CAPTION>
Schedule RC-E--Continued
Part II. Deposits in Foreign Offices (including Edge and
Agreement subsidiaries and IBFs)
______________________
Dollar Amounts in Thousands | RCFN Bil Mil Thou |
___________________________________________________________________________________________________ ____________________
<S> <C> <C>
Deposits of: | ////////////////// |
1. Individuals, partnerships, and corporations ................................................... | 2621 1,730,162 | 1.
2. U.S. banks (including IBFs and foreign branches of U.S. banks) ................................ | 2623 0 | 2.
3. Foreign banks (including U.S. branches and agencies of foreign banks, including their IBFs).... | 2625 0 | 3.
4. Foreign governments and official institutions (including foreign central banks) ............... | 2650 0 | 4.
5. Certified and official checks ................................................................. | 2330 0 | 5.
6. All other deposits ............................................................................ | 2668 15,501 | 6.
7. Total (sum of items 1 through 6) (must equal Schedule RC, item 13.b) .......................... | 2200 1,745,663 | 7.
Memorandum
Dollar Amounts in Thousands |RCFN Bil Mil Thou |
________________________________________________________________________________________________________________________
1. Time deposits with a remaining maturity of one year or less (included in Part II, item 7 above) |A245 1,745,263 | M.1.
______________________
</TABLE>
<TABLE>
<CAPTION>
Schedule RC-F--Other Assets
__________
| C430 | <-
_________________ ________
Dollar Amounts in Thousands | ////////// Bil Mil Thou |
__________________________________________________________________________________________________ _________________________
<S> <C> <C>
1. Income earned, not collected on loans ........................................................ | RCFD 2164 167,538 | 1.
2. Net deferred tax assets(1) ................................................................... | RCFD 2148 0 | 2.
3. Excess residential mortgage servicing fees receivable ........................................ | RCFD 5371 134,288 | 3.
4. Other (itemize and describe amounts that exceed 25% of this item)............................. | RCFD 2168 3,676,812 | 4.
_____________ ___________________________
a. | TEXT 3549 | Mortgages held for Resale | RCFD 3549 | 1,858,683 | /////////////////////// | 4.a.
_________________________________________________________________| | | |
___________
b. | TEXT 3550 |____________________________________________________| RCFD 3550 | | /////////////////////// | 4.b.
___________
c. | TEXT 3551 |____________________________________________________| RCFD 3551 | | /////////////////////// | 4.c.
_____________
___________________________
5. Total (sum of items 1 through 4) (must equal Schedule RC, item 11) ........................... | RCFD 2160 3,978,638 | 5.
___________________________
<CAPTION>
Memorandum ___________________________
Dollar Amounts in Thousands | ////////// Bil Mil Thou |
__________________________________________________________________________________________________ _________________________
<S> <C> <C>
1. Deferred tax assets disallowed for regulatory capital purposes ............................... | RCFD 5610 0 | M.1.
___________________________
</TABLE>
<TABLE>
<CAPTION>
Schedule RC-G--Other Liabilities
__________
| C435 | <-
_________________ ________
Dollar Amounts in Thousands | ////////// Bil Mil Thou |
__________________________________________________________________________________________________ _________________________
<S> <C> <C>
1. a. Interest accrued and unpaid on deposits in domestic offices(2) ............................ | RCON 3645 58,011 | 1.a.
b. Other expenses accrued and unpaid (includes accrued income taxes payable) ................. | RCFD 3646 594,954 | 1.b.
2. Net deferred tax liabilities(1) .............................................................. | RCFD 3049 119,644 | 2.
3. Minority interest in consolidated subsidiaries ............................................... | RCFD 3000 0 | 3.
4. Other (itemize and describe amounts that exceed 25% of this item)............................. | RCFD 2938 478,843 | 4.
_____________ ___________________________
a. | TEXT 3552 |____________________________________________________| RCFD 3552 | | /////////////////////// | 4.a.
___________
b. | TEXT 3553 |____________________________________________________| RCFD 3553 | | /////////////////////// | 4.b.
___________
c. | TEXT 3554 |____________________________________________________| RCFD 3554 | | /////////////////////// | 4.c.
_____________
___________________________
5. Total (sum of items 1 through 4) (must equal Schedule RC, item 20) ........................... | RCFD 2930 1,251,452 | 5.
</TABLE>
____________
(1) See discussion of deferred income taxes in Glossary entry on "income taxes."
(2) For savings banks, include "dividends" accrued and unpaid on deposits.
21
<PAGE> 43
<TABLE>
<S> <C>
Legal Title of Bank: FLEET NATIONAL BANK Call Date: 06/30/96 ST-BK: 25-0590 FFIEC 031
Address: ONE MONARCH PLACE Page RC-12
City, State Zip: SPRINGFIELD, MA 01102
FDIC Certificate No.: |0|2|4|9|9|
___________
</TABLE>
<TABLE>
<CAPTION>
Schedule RC-H--Selected Balance Sheet Items for Domestic Offices
__________
| C440 | <-
____________ ________
| Domestic Offices |
____________________
Dollar Amounts in Thousands | RCON Bil Mil Thou |
_____________________________________________________________________________________________________ ____________________
<S> <C> <C>
1. Customers' liability to this bank on acceptances outstanding .................................... | 2155 16,634 | 1.
2. Bank's liability on acceptances executed and outstanding ........................................ | 2920 16,634 | 2.
3. Federal funds sold and securities purchased under agreements to resell .......................... | 1350 17,428 | 3.
4. Federal funds purchased and securities sold under agreements to repurchase ...................... | 2800 4,868,836 | 4.
5. Other borrowed money ............................................................................ | 3190 1,380,694 | 5.
EITHER | ////////////////// |
6. Net due from own foreign offices, Edge and Agreement subsidiaries, and IBFs ..................... | 2163 N/A | 6.
OR | ////////////////// |
7. Net due to own foreign offices, Edge and Agreement subsidiaries, and IBFs ....................... | 2941 1,669,058 | 7.
| ////////////////// |
8. Total assets (excludes net due from foreign offices, Edge and Agreement subsidiaries, and IBFs) . | 2192 48,946,123 | 8.
| ////////////////// |
9. Total liabilities (excludes net due to foreign offices, Edge and Agreement subsidiaries, and IBFs)| 3129 42,919,946 | 9.
______________________
</TABLE>
<TABLE>
<CAPTION>
Items 10-17 include held-to-maturity and available-for-sale securities in domestic offices. ______________________
| RCON Bil Mil Thou |
____________________
<S> <C> <C>
10. U.S. Treasury securities ....................................................................... | 1779 1,252,796 | 10.
11. U.S. Government agency and corporation obligations (exclude mortgage-backed | ////////////////// |
securities) .................................................................................... | 1785 505 | 11.
12. Securities issued by states and political subdivisions in the U.S. ............................. | 1786 159,244 | 12.
13. Mortgage-backed securities (MBS): | ////////////////// |
a. Pass-through securities: | ////////////////// |
(1) Issued or guaranteed by FNMA, FHLMC, or GNMA ............................................ | 1787 5,684,860 | 13.a.(1)
(2) Other pass-through securities ........................................................... | 1869 4 | 13.a.(2)
b. Other mortgage-backed securities (include CMOs, REMICs, and stripped MBS): | ////////////////// |
(1) Issued or guaranteed by FNMA, FHLMC, or GNMA ............................................ | 1877 0 | 13.b.(1)
(2) All other mortgage-backed securities..................................................... | 2253 518 | 13.b.(2)
14. Other domestic debt securities ................................................................. | 3159 812 | 14.
15. Foreign debt securities ........................................................................ | 3160 97,035 | 15.
16. Equity securities: | ////////////////// |
a. Investments in mutual funds ................................................................. | 3161 0 | 16.a.
b. Other equity securities with readily determinable fair values ............................... | 3162 0 | 16.b.
c. All other equity securities ................................................................. | 3169 311,734 | 16.c.
17. Total held-to-maturity and available-for-sale securities (sum of items 10 through 16) .......... | 3170 7,507,508 | 17.
______________________
</TABLE>
<TABLE>
<CAPTION>
Memorandum (to be completed only by banks with IBFs and other "foreign" offices)
______________________
Dollar Amounts in Thousands | RCON Bil Mil Thou |
_____________________________________________________________________________________________________ ____________________
<S> <C> <C>
EITHER | ////////////////// |
1. Net due from the IBF of the domestic offices of the reporting bank .............................. | 3051 0 | M.1.
OR | ////////////////// |
2. Net due to the IBF of the domestic offices of the reporting bank ................................ | 3059 N/A | M.2.
______________________
</TABLE>
22
<PAGE> 44
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Legal Title of Bank: FLEET NATIONAL BANK Call Date: 06/30/96 ST-BK: 25-0590 FFIEC 031
Address: ONE MONARCH PLACE Page RC-13
City, State Zip: SPRINGFIELD, MA 01102
FDIC Certificate No.: |0|2|4|9|9|
___________
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
Schedule RC-I--Selected Assets and Liabilities of IBFs
To be completed only by banks with IBFs and other "foreign" offices. __________
| C445 | <-
____________ ________
Dollar Amounts in Thousands | RCFN Bil Mil Thou |
_____________________________________________________________________________________________________ ____________________
1. Total IBF assets of the consolidated bank (component of Schedule RC, item 12) ................. | 2133 0 | 1.
2. Total IBF loans and lease financing receivables (component of Schedule RC-C, part I, item 12, | ////////////////// |
column A) ..................................................................................... | 2076 0 | 2.
3. IBF commercial and industrial loans (component of Schedule RC-C, part I, item 4, column A) .... | 2077 0 | 3.
4. Total IBF liabilities (component of Schedule RC, item 21) ..................................... | 2898 0 | 4.
5. IBF deposit liabilities due to banks, including other IBFs (component of Schedule RC-E, | ////////////////// |
part II, items 2 and 3) ....................................................................... | 2379 0 | 5.
6. Other IBF deposit liabilities (component of Schedule RC-E, part II, items 1, 4, 5, and 6) ..... | 2381 0 | 6.
______________________
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
Schedule RC-K--Quarterly Averages (1)
__________
| C455 | <-
_________________ ________
Dollar Amounts in Thousands | ///////// Bil Mil Thou |
_______________________________________________________________________________________________ _________________________
ASSETS | /////////////////////// |
1. Interest-bearing balances due from depository institutions .............................. | RCFD 3381 10,737 | 1.
2. U.S. Treasury securities and U.S. Government agency and corporation obligations(2) ...... | RCFD 3382 6,349,267 | 2.
3. Securities issued by states and political subdivisions in the U.S.(2) ................... | RCFD 3383 155,938 | 3.
4. a. Other debt securities(2) ............................................................. | RCFD 3647 98,458 | 4.a.
b. Equity securities(3) (includes investments in mutual funds and Federal Reserve stock). | RCFD 3648 347,675 | 4.b.
5. Federal funds sold and securities purchased under agreements to resell in domestic | /////////////////////// |
offices of the bank and of its Edge and Agreement subsidiaries, and in IBFs ............. | RCFD 3365 812,114 | 5.
6. Loans: | ///////////////////// // |
a. Loans in domestic offices: | /////////////////////// |
(1) Total loans ...................................................................... | RCON 3360 31,884,320 | 6.a.(1)
(2) Loans secured by real estate ..................................................... | RCON 3385 14,940,513 | 6.a.(2)
(3) Loans to finance agricultural production and other loans to farmers .............. | RCON 3386 5,935 | 6.a.(3)
(4) Commercial and industrial loans .................................................. | RCON 3387 12,923,362 | 6.a.(4)
(5) Loans to individuals for household, family, and other personal expenditures ...... | RCON 3388 2,224,980 | 6.a.(5)
b. Total loans in foreign offices, Edge and Agreement subsidiaries, and IBFs ............ | RCFN 3360 70,458 | 6.b.
7. Trading assets .......................................................................... | RCFD 3401 105,824 | 7.
8. Lease financing receivables (net of unearned income) .................................... | RCFD 3484 2,231,479 | 8.
9. Total assets (4) ........................................................................ | RCFD 3368 52,282,230 | 9.
LIABILITIES | /////////////////////// |
10. Interest-bearing transaction accounts in domestic offices (NOW accounts, ATS accounts, | /////////////////////// |
and telephone and preauthorized transfer accounts) (exclude demand deposits) ............ | RCON 3485 965,535 | 10.
11. Nontransaction accounts in domestic offices: | /////////////////////// |
a. Money market deposit accounts (MMDAs) ................................................ | RCON 3486 9,210,475 | 11.a.
b. Other savings deposits ............................................................... | RCON 3487 3,907,216 | 11.b.
c. Time certificates of deposit of $100,000 or more ..................................... | RCON 3345 2,653,452 | 11.c.
d. All other time deposits .............................................................. | RCON 3469 7,513,443 | 11.d.
12. Interest-bearing deposits in foreign offices, Edge and Agreement subsidiaries, and IBFs.. | RCFN 3404 1,765,593 | 12.
13. Federal funds purchased and securities sold under agreements to repurchase in domestic | /////////////////////// |
offices of the bank and of its Edge and Agreement subsidiaries, and in IBFs ............. | RCFD 3353 6,363,286 | 13.
14. Other borrowed money .................................................................... | RCFD 3355 2,670,145 | 14.
___________________________
</TABLE>
_______________
(1) For all items, banks have the option of reporting either (1) an average of
daily figures for the quarter, or
(2) an average of weekly figures (i.e., the Wednesday of each week of the
quarter).
(2) Quarterly averages for all debt securities should be based on amortized
cost.
(3) Quarterly averages for all equity securities should be based on historical
cost.
(4) The quarterly average for total assets should reflect all debt securities
(not held for trading) at amortized cost, equity securities with readily
determinable fair values at the lower of cost or fair value, and equity
securities without readily determinable fair values at historical cost.
23
<PAGE> 45
<TABLE>
<S> <C>
Legal Title of Bank: FLEET NATIONAL BANK Call Date: 06/30/96 ST-BK: 25-0590 FFIEC 031
Address: ONE MONARCH PLACE Page RC-14
City, State Zip: SPRINGFIELD, MA 01102
FDIC Certificate No.: |0|2|4|9|9|
___________
</TABLE>
<TABLE>
<CAPTION>
Schedule RC-L--Off-Balance Sheet Items
Please read carefully the instructions for the preparation of Schedule RC-L. Some of the amounts
reported in Schedule RC-L are regarded as volume indicators and not necessarily as measures of risk. __________
| C460 | <-
____________ ________
Dollar Amounts in Thousands | RCFD Bil Mil Thou |
____________________________________________________________________________________________________ ____________________
<S> <C> <C>
1. Unused commitments: | ////////////////// |
a. Revolving, open-end lines secured by 1-4 family residential properties, e.g., home | ////////////////// |
equity lines ............................................................................... | 3814 1,637,875 | 1.a.
b. Credit card lines .......................................................................... | 3815 32,940 | 1.b.
c. Commercial real estate, construction, and land development: | ////////////////// |
(1) Commitments to fund loans secured by real estate ....................................... | 3816 648,369 | 1.c.(1)
(2) Commitments to fund loans not secured by real estate ................................... | 6550 383,022 | 1.c.(2)
d. Securities underwriting .................................................................... | 3817 0 | 1.d.
e. Other unused commitments ................................................................... | 3818 18,626,522 | 1.e.
2. Financial standby letters of credit and foreign office guarantees ............................. | 3819 2,337,268 | 2.
___________________________
a. Amount of financial standby letters of credit conveyed to others | RCFD 3820 | 158,029 | ////////////////// | 2.a.
___________________________
3. Performance standby letters of credit and foreign office guarantees ........................... | 3821 175,703 | 3.
a. Amount of performance standby letters of credit conveyed to | ////////////////// |
___________________________
others .......................................................... | RCFD 3822 | 12,580 | ////////////////// | 3.a.
___________________________
4. Commercial and similar letters of credit ...................................................... | 3411 176,335 | 4.
5. Participations in acceptances (as described in the instructions) conveyed to others by | ////////////////// |
the reporting bank ............................................................................ | 3428 16,524 | 5.
6. Participations in acceptances (as described in the instructions) acquired by the reporting | ////////////////// |
(nonaccepting) bank ........................................................................... | 3429 7,409 | 6.
7. Securities borrowed ........................................................................... | 3432 0 | 7.
8. Securities lent (including customers' securities lent where the customer is indemnified | ////////////////// |
against loss by the reporting bank) ........................................................... | 3433 0 | 8.
9. Loans transferred (i.e., sold or swapped) with recourse that have been treated as sold for | ////////////////// |
Call Report purposes: | ////////////////// |
a. FNMA and FHLMC residential mortgage loan pools: | ////////////////// |
(1) Outstanding principal balance of mortgages transferred as of the report date ........... | 3650 246,244 | 9.a.(1)
(2) Amount of recourse exposure on these mortgages as of the report date ................... | 3651 246,244 | 9.a.(2)
b. Private (nongovernment-issued or -guaranteed) residential mortgage loan pools: | ////////////////// |
(1) Outstanding principal balance of mortgages transferred as of the report date ........... | 3652 33,550 | 9.b.(1)
(2) Amount of recourse exposure on these mortgages as of the report date ................... | 3653 33,550 | 9.b.(2)
c. Farmer Mac agricultural mortgage loan pools: | ////////////////// |
(1) Outstanding principal balance of mortgages transferred as of the report date ........... | 3654 0 | 9.c.(1)
(2) Amount of recourse exposure on these mortgages as of the report date ................... | 3655 0 | 9.c.(2)
d. Small business obligations transferred with recourse under Section 208 of the | ////////////////// |
Riegle Community Development and Regulatory Improvement Act of 1994: | ////////////////// |
(1) Outstanding principal balance of small business obligations transferred | ////////////////// |
as of the report date................................................................... | A249 0 | 9.d.(1)
(2) Amount of retained recourse on these obligations as of the report date.................. | A250 0 | 9.d.(2)
10. When-issued securities: | ////////////////// |
a. Gross commitments to purchase .............................................................. | 3434 0 | 10.a.
b. Gross commitments to sell .................................................................. | 3435 0 | 10.b.
11. Spot foreign exchange contracts ............................................................... | 8765 622,366 | 11.
12. All other off-balance sheet liabilities (exclude off-balance sheet derivatives) (itemize and | ////////////////// |
describe each component of this item over 25% of Schedule RC, item 28, "Total equity capital") | 3430 0 | 12.
a. | TEXT 3555 |______________________________________________________| RCFD 3555 | | ////////////////// | 12.a.
b. | TEXT 3556 |______________________________________________________| RCFD 3556 | | ////////////////// | 12.b.
___________
c. | TEXT 3557 |______________________________________________________| RCFD 3557 | | ////////////////// | 12.c.
_____________
d. | TEXT 3558 |______________________________________________________| RCFD 3558 | | ////////////////// | 12.d.
_____________ _______________________________________________
Dollar Amounts in Thousands RCFD Bil Mil Thou
_________________________________________________________________________________________________________________________
13. All other off-balance sheet assets (exclude off-balance sheet derivatives) (itemize and | ////////////////// |
describe each component of this item over 25% of Schedule RC,item 28,"Total equity capital") | 5591 0 | 13.
_____________ __________________________
a. | TEXT 5592 |______________________________________________________| RCFD 5592 | | ////////////////// | 13.a.
___________
b. | TEXT 5593 |______________________________________________________| RCFD 5593 | | ////////////////// | 13.b.
___________
c. | TEXT 5594 |______________________________________________________| RCFD 5594 | | ////////////////// | 13.c.
_____________
d. | TEXT 5595 |______________________________________________________| RCFD 5595 | | ////////////////// | 13.d.
_____________
________________________________________________
</TABLE>
24
<PAGE> 46
<TABLE>
<CAPTION>
Legal Title of Bank: FLEET NATIONAL BANK Call Date: 06/30/96 ST-BK: 25-0590 FFIEC 031
Address: ONE MONARCH PLACE Page RC-15
City, State Zip: SPRINGFIELD, MA 01102
FDIC Certificate No.: |0|2|4|9|9|
Schedule RC-L -- Continued
_____________
| C461 | <-
_________________________________________ ____________________________|___________|
| (Column A) | (Column B) | (Column C) | (Column D) |
| Interest Rate | Foreign Exchange | Equity Derivative | Commodity and other|
| Contracts | Contracts | Contracts | Contracts |
|___________________|____________________|____________________|____________________|
Dollar Amounts in Thousands |Tril Bil Mil Thou | Tril Bil Mil Thou | Tril Bil Mil Thou | Tril Bil Mil Thou |
_______________________________________________________________________________________________________________________|
<S> <C> <C> <C> <C> <C>
| Off-balance Sheet Derivatives | ///////////////// | ////////////////// | ////////////////// | ////////////////// |
| Position Indicators | ///////////////// | ////////////////// | ////////////////// | ////////////////// |
____________________________________| ///////////////// | ////////////////// | ////////////////// | ////////////////// |
14. Gross amounts (e.g., notional | ///////////////// | ////////////////// | ////////////////// | ////////////////// |
amounts) (for each column, sum of | ///////////////// | ////////////////// | ////////////////// | ////////////////// |
items 14.a through 14.e must equal | ///////////////// | ////////////////// | ////////////////// | ////////////////// |
sum of items 15, 16.a, and 16.b): |___________________|____________________|___________________ |____________________|
a. Futures contracts ............. | 1,229,392 | 0 | 0 | 36,486 | 14.a.
|___________________|____________________|____________________|____________________|
| RCFD 8693 | RCFD 8694 | RCFD 8695 | RCFD 8696 |
|___________________|____________________|____________________|____________________|
b. Forward contracts ............. | 2,576,500 | 1,931,682 | 0 | 21,832 | 14.b.
|___________________|____________________|____________________|____________________|
| RCFD 8697 | RCFD 8698 | RCFD 8699 | RCFD 8700 |
|___________________|____________________|____________________|____________________|
c. Exchange-traded option contracts:| ///////////////// | ////////////////// | ////////////////// | ////////////////// |
|___________________|____________________|____________________|____________________|
(1) Written options .......... | 0 | 0 | 0 | 0 | 14.c.(1)
|___________________|____________________|____________________|____________________|
| RCFD 8701 | RCFD 8702 | RCFD 8703 | RCFD 8704 |
|___________________|____________________|____________________|____________________|
(2) Purchased options ........ | 450,000 | 0 | 0 | 2,206 | 14.c.(2)
|___________________|____________________|____________________|____________________|
| RCFD 8705 | RCFD 8706 | RCFD 8707 | RCFD 8708 |
|___________________|____________________|____________________|____________________|
d. Over-the-counter option contracts: | //////////////////| ///////////////// | ///////////////// | //////////////// |
(1) Written options .......... | 1,324,980 | 3,887 | 0 | 0 | 14.d.(1)
|___________________|____________________|____________________|____________________|
| RCFD 8709 | RCFD 8710 | RCFD 8711 | RCFD 8712 |
|___________________|____________________|____________________|____________________|
(2) Purchased options ........ | 10,131,934 | 3,887 | 0 | 0 | 14.d.(2)
|___________________|____________________|____________________|____________________|
| RCFD 8713 | RCFD 8714 | RCFD 8715 | RCFD 8716 |
|___________________|____________________|____________________|____________________|
e. Swaps ............................ | 19,502,262 | 0 | 0 | 0 | 14.e.
|___________________|____________________|____________________|____________________|
| RCFD 3450 | RCFD 3826 | RCFD 8719 | RCFD 8720 |
|___________________|____________________|____________________|____________________|
15. Total gross notional amount of | ///////////////// | ////////////////// | ////////////////// | ////////////////// |
derivative contracts held for | ///////////////// | ////////////////// | ////////////////// | ////////////////// |
trading ......................... | 3,386,305 | 1,939,456 | 0 | 2,206 | 15.
|___________________|____________________|____________________|____________________|
| RCFD A126 | RFD A127 | RCFD 8723 | RCFD 8724 |
|___________________|____________________|____________________|____________________|
16. Total gross notional amount of | ///////////////// | //////////////// | ///////////////// | ////////////////// |
derivative contracts held for | ///////////////// | ///////////////// | ///////////////// | ////////////////// |
purposes other than trading: | ///////////////// | ///////////////// | ///////////////// | ////////////////// |
|___________________|____________________|____________________|____________________|
a. Contracts marked to market ... | 4,202,500 | 0 | 0 | 36,486 | 16.a.
|___________________|____________________|____________________|____________________|
| RCFD 8725 | RCFD 8726 | RCF 8727 | RCFD 8728 |
|___________________|____________________|____________________|____________________|
b. Contracts not marked to market | 27,626,263 | 0 | 0 | 21,832 | 16.b.
|___________________|____________________|____________________|____________________|
| RCFD 8729 | RCFD 8730 | RFD 8731 | RCFD 8732 |
|___________________|____________________|____________________|____________________|
</TABLE>
25
<PAGE> 47
<TABLE>
<CAPTION>
Legal Title of Bank: FLEET NATIONAL BANK Call Date: 06/30/96 ST-BK: 25-0590 FFIEC 031
Address: ONE MONARCH PLACE Page RC-16
City, State Zip: SPRINGFIELD, MA 01102
FDIC Certificate No.: |0|2|4|9|9|
Schedule RC-L -- Continued
<CAPTION>
_________________________________________ _________________________________________
| (Column A) | (Column B) | (Column C) | (Column D) |
Dollar Amounts in Thousands | Interest Rate | Foreign Exchange | Equity Derivative | Commodity and other|
___________________________________| Contracts | Contracts | Contracts | Contracts |
| Off-balance Sheet Derivatives |___________________|____________________|____________________|____________________|
| Position Indicators |RCFD Bil Mil Thou | RCFD Bil Mil Thou | RCFD Bil Mil Thou | RCFD Bil Mil Thou |
|_____________________________________________________________________________________________________________________|
<S> <C> <C> <C> <C> <C>
17. Gross fair values of | ///////////////// | ////////////////// | ////////////////// | ////////////////// |
derivative contracts: | ///////////////// | ////////////////// | ////////////////// | ////////////////// |
a. Contracts held for | ///////////////// | ////////////////// | ////////////////// | ////////////////// |
trading: | ///////////////// | ////////////////// | ////////////////// | ////////////////// |
(1) Gross positive | ///////////////// | ////////////////// | ////////////////// | ////////////////// |
fair value ................... | 8733 29,782 | 8734 41,523 | 8735 0 | 8736 58 | 17.a.(1)
(2) Gross negative | ///////////////// | ////////////////// | ////////////////// | ////////////////// |
fair value ................... | 8737 20,932 | 8738 36,511 | 8739 0 | 8740 0 | 17.a.(2)
b. Contracts held for | ///////////////// | ////////////////// | ////////////////// | ////////////////// |
purposes other than | ///////////////// | ////////////////// | ////////////////// | ////////////////// |
trading that are marked | ///////////////// | ////////////////// | ////////////////// | ////////////////// |
to market: | ///////////////// | ////////////////// | ////////////////// | ////////////////// |
(1) Gross positive | ///////////////// | ////////////////// | ////////////////// | ////////////////// |
fair value ................... | 8741 524 | 8742 0 | 8743 0 | 8744 1,452 | 17.b.(1)
(2) Gross negative | ///////////////// | ////////////////// | ////////////////// | ////////////////// |
fair value ................... | 8745 2,834 | 8746 0 | 8747 0 | 8748 0 | 17.b.(2)
c. Contracts held for | ///////////////// | ////////////////// | ////////////////// | ////////////////// |
purposes other than | ///////////////// | ////////////////// | ////////////////// | ////////////////// |
trading that are not | ///////////////// | ////////////////// | ////////////////// | ////////////////// |
marked to market: | ///////////////// | ////////////////// | ////////////////// | ////////////////// |
(1) Gross positive | ///////////////// | ////////////////// | ////////////////// | ////////////////// |
fair value .................. | 8749 64,085 | 8750 0 | 8751 0 | 8752 100 | 17.c.(1)
(2) Gross negative | ///////////////// | ////////////////// | ////////////////// | ////////////////// |
fair value ................... | 8753 111,703 | 8754 0 | 8755 0 | 8756 0 | 17.c.(2)
|__________________________________________________________________________________|
</TABLE>
<TABLE>
<CAPTION>
______________________
Memoranda Dollar Amounts in Thousands | RCFD Bil Mil Thou |
_________________________________________________________________________________________________________________________
<S> <C> <C>
1. -2. Not applicable | ////////////////// |
3. Unused commitments with an original maturity exceeding one year that are reported in | ////////////////// |
Schedule RC-L, items 1.a through 1.e, above (report only the unused portions of commitments | ////////////////// |
that are fee paid or otherwise legally binding) ................................................ | 3833 16,829,602 | M.3.
a. Participations in commitments with an original maturity | ////////////////// |
exceeding one year conveyed to others ................................|RCFD 3834 | 1,310,691 | ////////////////// | M.3.a.
________________________
4. To be completed only by banks with $1 billion or more in total assets: | ////////////////// |
Standby letters of credit and foreign office guarantees (both financial and performance) issued | ////////////////// |
to non-U.S. addressees (domicile) included in Schedule RC-L, items 2 and 3, above .............. | 3377 341,139 | M.4.
5. Installment loans to individuals for household, family, and other personal expenditures that | ////////////////// |
have been securitized and sold without recourse (with servicing retained), amounts outstanding | ////////////////// |
by type of loan: | ////////////////// |
a. Loans to purchase private passenger automobiles (to be completed for the | ////////////////// |
September report only)....................................................................... | 2741 N/A | M.5.a.
b. Credit cards and related plans (TO BE COMPLETED QUARTERLY)................................... | 2742 0 | M.5.b.
c. All other consumer installment credit (including mobile home loans)(to be completed for the | ////////////////// |
September report only........................................................................ | 2743 N/A | M.5.c
|____________________|
</TABLE>
26
<PAGE> 48
<TABLE>
<CAPTION>
Legal Title of Bank: FLEET NATIONAL BANK Call Date: 06/30/96 ST-BK: 25-0590 FFIEC 031
Address: ONE MONARCH PLACE Page RC-17
City, State Zip: SPRINGFIELD, MA 01102
FDIC Certificate No.: |0|2|4|9|9| _____________
| C465 |
_________|___________|
Schedule RC-M--Memoranda | |
Dollar Amounts in Thousands | RCFD Bil Mil Thou |
______________________________________________________________________________________________________|____________________|
<S> <C> <C>
1. Extensions of credit by the reporting bank to its executive officers, directors, principal | ////////////////// |
shareholders, and their related interests as of the report date: | ////////////////// |
a. Aggregate amount of all extensions of credit to all executive officers, directors, principal | ////////////////// |
shareholders and their related interests ..................................................... | 6164 605,294 | 1.a.
b. Number of executive officers, directors, and principal shareholders to whom the amount of all | ////////////////// |
extensions of credit by the reporting bank (including extensions of credit to | ////////////////// |
related interests) equals or exceeds the lesser of $500,000 or 5 percent Number | ////////////////// |
___________________________| ////////////////// |
of total capital as defined for this purpose in agency regulations. | RCFD 6165 | 24 | ////////////////// |
___________________________| ////////////////// | 1.b.
2. Federal funds sold and securities purchased under agreements to resell with U.S. branches | ////////////////// |
and agencies of foreign banks(1) (included in Schedule RC, items 3.a and 3.b) .................... | 3405 0 | 2.
3. Not applicable. | ////////////////// |
4. Outstanding principal balance of 1-4 family residential mortgage loans serviced for others | ////////////////// |
(include both retained servicing and purchased servicing): | ////////////////// |
a. Mortgages serviced under a GNMA contract ...................................................... | 5500 28,855,729 | 4.a.
b. Mortgages serviced under a FHLMC contract: | ////////////////// |
(1) Serviced with recourse to servicer ........................................................ | 5501 55,604 | 4.b.(1)
(2) Serviced without recourse to servicer ..................................................... | 5502 32,340,522 | 4.b.(2)
c. Mortgages serviced under a FNMA contract: | ////////////////// |
(1) Serviced under a regular option contract .................................................. | 5503 190,640 | 4.c.(1)
(2) Serviced under a special option contract .................................................. | 5504 38,282,672 | 4.c.(2)
d. Mortgages serviced under other servicing contracts ............................................ | 5505 8,508,320 | 4.d.
5. To be completed only by banks with $1 billion or more in total assets: | ////////////////// |
Customers' liability to this bank on acceptances outstanding (sum of items 5.a and 5.b must | ////////////////// |
equal Schedule RC, item 9): | ////////////////// |
a. U.S. addressees (domicile) .................................................................... | 2103 16,297 | 5.a.
b. Non-U.S. addressees (domicile) ................................................................ | 2104 337 | 5.b.
6. Intangible assets: | ////////////////// |
a. Mortgage servicing rights ..................................................................... | 3164 1,483,959 | 6.a.
b. Other identifiable intangible assets: | ////////////////// |
(1) Purchased credit card relationships ....................................................... | 5506 0 | 6.b.(1)
(2) All other identifiable intangible assets .................................................. | 5507 126,463 | 6.b.(2)
c. Goodwill ...................................................................................... | 3163 672,992 | 6.c.
d. Total (sum of items 6.a through 6.c) (must equal Schedule RC, item 10) ........................ | 2143 2,283,414 | 6.d.
e. Amount of intangible assets (included in item 6.b.(2) above) that have been grandfathered or | ////////////////// |
are otherwise qualifying for regulatory capital purposes ...................................... | 6442 0 | 6.e.
7. Mandatory convertible debt, net of common or perpetual preferred stock dedicated to | ////////////////// |
redeem the debt ...................................................................................| 3295 75,000 | 7.
______________________
</TABLE>
- ------------
(1) Do not report federal funds sold and securities purchased under agreements
to resell with other commercial banks in the U.S. in this item.
27
<PAGE> 49
<TABLE>
<CAPTION>
Legal Title of Bank: FLEET NATIONAL BANK Call Date: 06/30/96 ST-BK: 25-0590 FFIEC 031
Address: ONE MONARCH PLACE Page RC-18
City, State Zip: SPRINGFIELD, MA 01102
FDIC Certificate No.: |0|2|4|9|9|
Schedule RC-M--Continued ________________________
Dollar Amounts in Thousands | Bil Mil Thou|
_____________________________________________________________________________________________ |_______________________|
<S> <C> <C>
8. a. Other real estate owned: | /////////////////////// |
(1) Direct and indirect investments in real estate ventures ......................... | RCFD 5372 0 | 8.a.(1)
(2) All other real estate owned: | /////////////////////// |
(a) Construction and land development in domestic offices ....................... | RCON 5508 4,537 | 8.a.(2)(a)
(b) Farmland in domestic offices ................................................ | RCON 5509 0 | 8.a.(2)(b)
(c) 1-4 family residential properties in domestic offices ....................... | RCON 5510 8,067 | 8.a.(2)(c)
(d) Multifamily (5 or more) residential properties in domestic offices .......... | RCON 5511 740 | 8.a.(2)(d)
(e) Nonfarm nonresidential properties in domestic offices ....................... | RCON 5512 21,202 | 8.a.(2)(e)
(f) In foreign offices .......................................................... | RCFN 5513 0 | 8.a.(2)(f)
(3) Total (sum of items 8.a.(1) and 8.a.(2)) (must equal Schedule RC, item 7) ....... | RCFD 2150 34,546 | 8.a.(3)
b. Investments in unconsolidated subsidiaries and associated companies: | /////////////////////// |
(1) Direct and indirect investments in real estate ventures ......................... | RCFD 5374 0 | 8.b.(1)
(2) All other investments in unconsolidated subsidiaries and associated companies ... | RCFD 5375 0 | 8.b.(2)
(3) Total (sum of items 8.b.(1) and 8.b.(2)) (must equal Schedule RC, item 8) ....... | RCFD 2130 0 | 8.b.(3)
c. Total assets of unconsolidated subsidiaries and associated companies ................ | RCFD 5376 0 | 8.c.
9. Noncumulative perpetual preferred stock and related surplus included in Schedule RC, | /////////////////////// |
item 23, "Perpetual preferred stock and related surplus" ............................... | RCFD 3778 125,000 | 9.
10. Mutual fund and annuity sales in domestic offices during the quarter (include | /////////////////////// |
proprietary, private label, and third party products): | /////////////////////// |
a. Money market funds .................................................................. | RCON 6441 55,245 | 10.a.
b. Equity securities funds ............................................................. | RCON 8427 108,359 | 10.b.
c. Debt securities funds ............................................................... | RCON 8428 13,250 | 10.c.
d. Other mutual funds .................................................................. | RCON 8429 0 | 10.d.
e. Annuities ........................................................................... | RCON 8430 102,292 | 10.e.
f. Sales of proprietary mutual funds and annuities (included in items 10.a through | /////////////////////// |
10.e. above) ........................................................................... | RCON 8784 150,100 | 10.f.
_________________________
</TABLE>
<TABLE>
<CAPTION>
_________________________________________________________________________________________________________________________________
| |
______________________
|Memorandum Dollar Amounts in Thousands | RCFD Bil Mil Thou | |
_________________________________________________________________________________________________ ____________________
<S> <C> <C>
|1. Interbank holdings of capital instruments (to be completed for the December report only): | ////////////////// | |
| a. Reciprocal holdings of banking organizations' capital instruments ........................ | 3836 N/A | M.1.a. |
| b. Nonreciprocal holdings of banking organizations' capital instruments ..................... | 3837 N/A | M.1.b. |
______________________
| |
_________________________________________________________________________________________________________________________________
</TABLE>
28
<PAGE> 50
<TABLE>
<S> <C>
Legal Title of Bank: FLEET NATIONAL BANK Call Date: 06/30/96 ST-BK: 25-0590 FFIEC 031
Address: ONE MONARCH PLACE Page RC-19
City, State Zip: SPRINGFIELD, MA 01102
FDIC Certificate No.: |0|2|4|9|9|
___________
</TABLE>
<TABLE>
<CAPTION>
Schedule RC-N--Past Due and Nonaccrual Loans, Leases,
and Other Assets
The FFIEC regards the information reported in __________
all of Memorandum item 1, in items 1 through 10, | C470 | <-
column A, and in Memorandum items 2 through 4, ______________________________________________________ ________
column A, as confidential. | (Column A) | (Column B) | (Column C) |
| Past due | Past due 90 | Nonaccrual |
| 30 through 89 | days or more | |
| days and still | and still | |
| accruing | accruing | |
____________________ ____________________ ____________________
Dollar Amounts in Thousands | RCFD Bil Mil Thou | RCFD Bil Mil Thou | RCFD Bil Mil Thou |
______________________________________________________ ____________________ ____________________ ____________________
<S> <C> <C> <C> <C>
1. Loans secured by real estate: | ////////////////// | ////////////////// | ////////////////// |
a. To U.S. addressees (domicile) ................ | 1245 | 1246 71,390 | 1247 223,962 | 1.a.
b. To non-U.S. addressees (domicile) ............ | 1248 | 1249 0 | 1250 0 | 1.b.
2. Loans to depository institutions and | ///// | ////////////////// | ////////////////// |
acceptances of other banks: | ///// | ////////////////// | ////////////////// |
a. To U.S. banks and other U.S. depository | ///// | ////////////////// | ////////////////// |
institutions ................................. | 5377 | 5378 0 | 5379 0 | 2.a.
b. To foreign banks ............................. | 5380 | 5381 0 | 5382 0 | 2.b.
3. Loans to finance agricultural production and | ///// | ////////////////// | ////////////////// |
other loans to farmers .......................... | 1594 | 1597 385 | 1583 531 | 3.
4. Commercial and industrial loans: | ///// | ////////////////// | ////////////////// |
a. To U.S. addressees (domicile) ................ | 1251 | 1252 11,945 | 1253 108,334 | 4.a.
b. To non-U.S. addressees (domicile) ............ | 1254 | 1255 0 | 1256 0 | 4.b.
5. Loans to individuals for household, family, and | ///// | ////////////////// | ////////////////// |
other personal expenditures: | ///// | ////////////////// | ///////////////// |
a. Credit cards and related plans ............... | 5383 | 5384 1,187 | 5385 669 | 5.a.
b. Other (includes single payment, installment, | ///// | ////////////////// | ////////////////// |
and all student loans) ....................... | 5386 | 5387 22,600 | 5388 8,465 | 5.b.
6. Loans to foreign governments and official | ///// | ////////////////// | ////////////////// |
institutions .................................... | 5389 | 5390 0 | 5391 0 | 6.
7. All other loans ................................. | 5459 | 5460 14,909 | 5461 1,919 | 7.
8. Lease financing receivables: | ///// | ////////////////// | ////////////////// |
a. Of U.S. addressees (domicile) ................ | 1257 | 1258 95 | 1259 6,544 | 8.a.
b. Of non-U.S. addressees (domicile) ............ | 1271 | 1272 0 | 1791 0 | 8.b.
9. Debt securities and other assets (exclude other | ///// | ////////////////// | ////////////////// |
real estate owned and other repossessed assets) . | 3505 | 3506 0 | 3507 85,778 | 9.
________________________________________________________________
</TABLE>
<TABLE>
<CAPTION>
====================================================================================================================================
Amounts reported in items 1 through 8 above include guaranteed and unguaranteed portions of past due and nonaccrual loans and
leases. Report in item 10 below certain guaranteed loans and leases that have already been included in the amounts reported in
items 1 through 8.
________________________________________________________________
| RCFD Bil Mil Thou | RCFD Bil Mil Thou | RCFD Bil Mil Thou |
____________________ ____________________ ____________________
<S> <C> <C> <C> <C>
10. Loans and leases reported in items 1 | | | |
through 8 above which are wholly or partially | ///// | ////////////////// | ////////////////// |
guaranteed by the U.S. Government ............... | 5612 | 5613 18,447 | 5614 21,415 | 10.
a. Guaranteed portion of loans and leases | ///// | ////////////////// | ////////////////// |
included in item 10 above .................... | 5615 | 5616 18,250 | 5617 16,952 | 10.a.
________________________________________________________________
</TABLE>
29
<PAGE> 51
<TABLE>
<S> <C>
Legal Title of Bank: FLEET NATIONAL BANK Call Date: 06/30/96 ST-BK: 25-0590 FFIEC 031
Address: ONE MONARCH PLACE Page RC-20
City, State Zip: SPRINGFIELD, MA 01102
FDIC Certificate No.: |0|2|4|9|9|
___________
</TABLE>
<TABLE>
<CAPTION>
Schedule RC-N--Continued
__________
| C473 | <-
______________________________________________________ ________
| (Column A) | (Column B) | (Column C) |
| Past due | Past due 90 | Nonaccrual |
| 30 through 89 | days or more | |
| days and still | and still | |
Memoranda | accruing | accruing | |
____________________ ____________________ ____________________
Dollar Amounts in Thousands | RCFD Bil Mil Thou | RCFD Bil Mil Thou | RCFD Bil Mil Thou |
______________________________________________________ ____________________ ____________________ ____________________
<S> <C> <C> <C> <C>
1. Restructured loans and leases included in | ///// | /////////////////// | ///////////////// |
Schedule RC-N, items 1 through 8, above (and not | ///// | //// | |
reported in Schedule RC-C, part I, Memorandum | ///// | //// | |
item 2) ......................................... | 1658 | 1659 | | M.1.
2. Loans to finance commercial real estate, | ///// | //// | |
construction, and land development activities | ///// | //// | |
(not secured by real estate) included in | ///// | /////////////////// | ///////////////// |
Schedule RC-N, items 4 and 7, above ............. | 6558 | 6559 826 | 6560 7,043 | M.2.
|____________________|____________________ |___________________
3. Loans secured by real estate in domestic offices | RCON | RCON Bil Mil Thou | RCON Bil Mil Thou|
|___________________ |____________________ ____________________
(included in Schedule RC-N, item 1, above): | ///// | ////////////////// | ////////////////// |
a. Construction and land development ............ | 2759 | 2769 1,100 | 3492 26,422 | M.3.a.
b. Secured by farmland .......................... | 3493 | 3494 161 | 3495 0 | M.3.b.
c. Secured by 1-4 family residential properties: | ///// | ////////////////// | ////////////////// |
(1) Revolving, open-end loans secured by | ///// | ////////////////// | ////////////////// |
1-4 family residential properties and | ///// | ////////////////// | ////////////////// |
extended under lines of credit ........... | 5398 | 5399 5,114 | 5400 17,374 | M.3.c.(1)
(2) All other loans secured by 1-4 family | ///// | ////////////////// | ////////////////// |
residential properties ................... | 5401 | 5402 58,079 | 5403 75,430 | M.3.c.(2)
d. Secured by multifamily (5 or more) | ///// | ////////////////// | ////////////////// |
residential properties ....................... | 3499 | 3500 521 | 3501 12,491 | M.3.d.
e. Secured by nonfarm nonresidential properties . | 3502 | 3503 6,415 | 3504 92,245 | M.3.e.
________________________________________________________________
</TABLE>
<TABLE>
<CAPTION>
___________________________________________
| (Column A) | (Column B) |
| Past due 30 | Past due 90 |
| through 89 days | days or more |
____________________ ____________________
| RCFD Bil Mil Thou | RCFD Bil Mil Thou |
____________________ ____________________
<S> <C> <C> <C>
4. Interest rate, foreign exchange rate, and other | ///// | ////////////////// |
commodity and equity contracts: | ///// | ////////////////// |
a. Book value of amounts carried as assets ...... | 3522 | 3528 0 | M.4.a.
b. Replacement cost of contracts with a | ///// | ////////////////// |
positive replacement cost .................... | 3529 | 3530 0 | M.4.b.
___________________________________________
</TABLE>
30
<PAGE> 52
<TABLE>
<S> <C>
Legal Title of Bank: FLEET NATIONAL BANK Call Date: 06/30/96 ST-BK: 25-0590 FFIEC 031
Address: ONE MONARCH PLACE Page RC-21
City, State Zip: SPRINGFIELD, MA 01102
FDIC Certificate No.: |0|2|4|9|9|
___________
</TABLE>
<TABLE>
<CAPTION>
______________________
Schedule RC-O--Other Data for Deposit Insurance Assessments | C475 |
|____________________|
Dollar Amounts in Thousands | RCON Bil Mil Thou |
___________________________________________________________________________________________________ ____________________
<S> <C> <C>
1. Unposted debits (see instructions): | ////////////////// |
a. Actual amount of all unposted debits ...................................................... | 0030 216 | 1.a.
OR | ////////////////// |
b. Separate amount of unposted debits: | ////////////////// |
(1) Actual amount of unposted debits to demand deposits ................................... | 0031 N/A | 1.b.(1)
(2) Actual amount of unposted debits to time and savings deposits(1) ...................... | 0032 N/A | 1.b.(2)
2. Unposted credits (see instructions): | ////////////////// |
a. Actual amount of all unposted credits ..................................................... | 3510 216 | 2.a.
OR | ////////////////// |
b. Separate amount of unposted credits: | ////////////////// |
(1) Actual amount of unposted credits to demand deposits .................................. | 3512 N/A | 2.b.(1)
(2) Actual amount of unposted credits to time and savings deposits(1) ..................... | 3514 N/A | 2.b.(2)
3. Uninvested trust funds (cash) held in bank's own trust department (not included in total | ////////////////// |
deposits in domestic offices) ................................................................ | 3520 101,763 | 3.
4. Deposits of consolidated subsidiaries in domestic offices and in insured branches in | ////////////////// |
Puerto Rico and U.S. territories and possessions (not included in total deposits): | ////////////////// |
a. Demand deposits of consolidated subsidiaries .............................................. | 2211 206,111 | 4.a.
b. Time and savings deposits(1) of consolidated subsidiaries ................................. | 2351 20,089 | 4.b.
c. Interest accrued and unpaid on deposits of consolidated subsidiaries ...................... | 5514 8 | 4.c.
5. Deposits in insured branches in Puerto Rico and U.S. territories and possessions: | ////////////////// |
a. Demand deposits in insured branches (included in Schedule RC-E, Part II) .................. | 2229 0 | 5.a.
b. Time and savings deposits(1) in insured branches (included in Schedule RC-E, Part II) ..... | 2383 0 | 5.b.
c. Interest accrued and unpaid on deposits in insured branches | ////////////////// |
(included in Schedule RC-G, item 1.b) ..................................................... | 5515 0 | 5.c.
______________________
______________________
Item 6 is not applicable to state nonmember banks that have not been authorized by the | ////////////////// |
Federal Reserve to act as pass-through correspondents. | ////////////////// |
6. Reserve balances actually passed through to the Federal Reserve by the reporting bank on | ////////////////// |
behalf of its respondent depository institutions that are also reflected as deposit liabilities| ////////////////// |
of the reporting bank: | ////////////////// |
a. Amount reflected in demand deposits (included in Schedule RC-E, item 4 or 5, column B)..... | 2314 0 | 6.a.
b. Amount reflected in time and savings deposits(1) (included in Schedule RC-E, Part I, | ////////////////// |
item 4 or 5, column A or C, but not column B).............................................. | 2315 0 | 6.b.
7. Unamortized premiums and discounts on time and savings deposits:(1) | ////////////////// |
a. Unamortized premiums ...................................................................... | 5516 769 | 7.a.
b. Unamortized discounts ..................................................................... | 5517 0 | 7.b.
______________________
_______________________________________________________________________________________________________________________________
| |
|8. To be completed by banks with "Oakar deposits." |
______________________
| Total "Adjusted Attributable Deposits" of all institutions acquired under Section 5(d)(3) of | ////////////////// | |
| the Federal Deposit Insurance Act (from most recent FDIC Oakar Transaction Worksheet(s)) .... | 5518 2,188,589 | 8. |
______________________
| |
_______________________________________________________________________________________________________________________________
______________________
9. Deposits in lifeline accounts ................................................................ | 5596 ///////////// | 9.
10. Benefit-responsive "Depository Institution Investment Contracts" (included in total | ////////////////// |
deposits in domestic offices) ................................................................ | 8432 0 | 10.
______________________
______________
(1) For FDIC insurance assessment purposes, "time and savings deposits" consists of nontransaction
accounts and all transaction accounts other than demand deposits.
</TABLE>
31
<PAGE> 53
<TABLE>
<S> <C>
Legal Title of Bank: FLEET NATIONAL BANK Call Date: 06/30/96 ST-BK: 25-0590 FFIEC 031
Address: ONE MONARCH PLACE Page RC-22
City, State Zip: SPRINGFIELD, MA 01102
FDIC Certificate No.: |0|2|4|9|9|
___________
</TABLE>
<TABLE>
<CAPTION>
Schedule RC-O--Continued
Dollar Amounts in Thousands | RCON Bil Mil Thou |
__________________________________________________________________________________________________ ____________________
<S> <C> <C>
11. Adjustments to demand deposits in domestic offices reported in Schedule RC-E for | ////////////////// |
certain reciprocal demand balances: | ////////////////// |
a. Amount by which demand deposits would be reduced if reciprocal demand balances | ////////////////// |
between the reporting bank and savings associations were reported on a net basis | ////////////////// |
rather than a gross basis in Schedule RC-E .................................................. | 8785 0 | 11.a.
b. Amount by which demand deposits would be increased if reciprocal demand balances | ////////////////// |
between the reporting bank and U.S. branches and agencies of foreign banks were | ////////////////// |
reported on a gross basis rather than a net basis in Schedule RC-E .......................... | A181 0 | 11.b.
c. Amount by which demand deposits would be reduced if cash items in process of | ////////////////// |
collection were included in the calculation of net reciprocal demand balances between | ////////////////// |
the reporting bank and the domestic offices of U.S. banks and savings associations | ////////////////// |
in Schedule RC-E ............................................................................ | A182 0 | 11.c.
____________________
Memoranda (to be completed each quarter except as noted) Dollar Amounts in Thousands | RCON Bil Mil Thou |
_____________________________________________________________________ ___________________________|____________________|
1. Total deposits in domestic offices of the bank (sum of Memorandum it ems 1.a. (1) and | ////////////////// |
1.b.(1) must equal Schedule RC, item 13.a): | ////////////////// |
a. Deposits accounts of $100,000 or less: | ////////////////// |
(1) amount of deposit accounts of $100,000 or less ....................................... | 2702 19,755,631 | M.1.a.(1)
(2) Number of deposit accounts of $100,000 or less (to be Number | ////////////////// |
completed for the June report only) .............................|RCON 3779 3,742,107 | ////////////////// | M.1.a.(2)
b. Deposit accounts of more than $100,000: | ////////////////// |
(1) Amount of deposit accounts of more than $100,000 ..................................... | 2710 14,354,949 | M.1.b.(1)
Number | ////////////////// |
(2) Number of deposit accounts of more than $100,000 ................|RCON 2722 27,062 | ////////////////// | M.1.b.(2)
2. Estimated amount of uninsured deposits in domestic offices of the bank:
a. An estimate of your bank's uninsured deposits can be determined by mutiplying the
number of deposit accounts of more than $100,000 reported in Memorandum item 1.b.(2)
above by $100,000 and subtracting the result from the amount of deposit accounts of
more than $100,000 reported in Memorandum item 1.b.(1) above.
Indicate in the appropriate box at the right whether your bank has a method or
procedure for determining a better estimate of uninsured deposits than the ____________YES_______NO__
estimated described above .................................................................. | 6861| |///| x | M.2.a.
____________________
b. If the box marked YES has been checked, report the estimate of uninsured deposits |RCON Bil Mil Thou|
determined by using your bank's method or procedure .................................... | 5597 N/A | M.2.b.
_____________________________________________________________________________________________________________________________
| C477 | <-
Person to whom questions about the Reports of Condition and Income should be directed: __________
PAMELA S. FLYNN, VICE PRESIDENT (401) 278-5194
___________________________________________________________________________________ ______________________________________
Name and Title (TEXT 8901) Area code and phone number (TEXT 8902)
</TABLE>
32
<PAGE> 54
<TABLE>
<S> <C>
Legal Title of Bank: FLEET NATIONAL BANK Call Date: 06/30/96 ST-BK: 25-0590 FFIEC 031
Address: ONE MONARCH PLACE Page RC-23
City, State Zip: SPRINGFIELD, MA 01102
FDIC Certificate No.: |0|2|4|9|9|
___________
</TABLE>
<TABLE>
<CAPTION>
Schedule RC-R--Regulatory Capital
This schedule must be completed by all banks as follows: Banks that reported total assets of $1 billion or more in Schedule RC,
item 12, for June 30, 1995, must complete items 2 through 9 and Memoranda items 1 and 2. Banks with assets of less than
$1 billion must complete items 1 through 3 below or Schedule RC-R in its entirety, depending on their response to item 1 below.
<S> <C>
____________
| C480 | <-
1. Test for determining the extent to which Schedule RC-R must be completed. To be completed _____|__________|
only by banks with total assets of less than $1 billion. Indicate in the appropriate | YES NO |
box at the right whether the bank has total capital greater than or equal to eight percent___________ _______________
of adjusted total assets ............................................................... | RCFD 6056 | |////| | 1.
_____________________________
For purposes of this test, adjusted total assets equals total assets less cash, U.S. Treasuries, U.S. Government
agency obligations, and 80 percent of U.S. Government-sponsored agency obligations plus the allowance for loan
and lease losses and selected off-balance sheet items as reported on Schedule RC-L (see instructions).
If the box marked YES has been checked, then the bank only has to complete items 2 and 3 below. If the box marked
NO has been checked, the bank must complete the remainder of this schedule.
A NO response to item 1 does not necessarily mean that the bank's actual risk-based capital ratio is less than eight
percent or that the bank is not in compliance with the risk-based capital guidelines.
</TABLE>
<TABLE>
<CAPTION>
___________________________________________
| (Column A) | (Column B) |
|Subordinated Debt(1)| Other |
_________________________________________________________________ | and Intermediate | Limited- |
| NOTE: All banks are required to complete items 2 and 3 below | | Term Preferred | Life Capital |
| See optional worksheet for items 3.a through 3.f. | | Stock | Instruments |
|________________________________________________________________| ____________________ ____________________
Dollar Amounts in Thousands | RCFD Bil Mil Thou | RCFD Bil Mil Thou |
______________________________________________________________________________ ____________________ ____________________
<S> <C> <C> <C>
2. Subordinated debt(1) and other limited-life capital instruments (original | | |
weighted average maturity of at least five years) with a remaining | | |
maturity of: | | |
a. One year or less ...................................................... | 3780 25,737 | 3786 0 | 2.a.
b. Over one year through two years ....................................... | 3781 737 | 3787 0 | 2.b.
c. Over two years through three years .................................... | 3782 10,745 | 3788 0 | 2.c.
d. Over three years through four years ................................... | 3783 0 | 3789 0 | 2.d.
e. Over four years through five years .................................... | 3784 0 | 3790 0 | 2.e.
f. Over five years ....................................................... | 3785 1,101,000 | 3791 0 | 2.f.
3. Amounts used in calculating regulatory capital ratios (report amounts | ////////////////// | ////////////////// |
determined by the bank for its own internal regulatory capital analyses): | ////////////////// | RCFD Bil Mil Thou |
a. Tier 1 capital......................................................... | ////////////////// | 8274 3,590,367 | 3.a.
b. Tier 2 capital......................................................... | ////////////////// | 8275 1,755,646 | 3.b.
c. Total risk-based capital............................................... | ////////////////// | 3792 5,346,013 | 3.c.
d. Excess allowance for loan and lease losses............................. | ////////////////// | A222 297,250 | 3.d.
e. Risk-weighted assets................................................... | ////////////////// | A223 45,718,856 | 3.e.
f. "Average total assets"................................................. | ////////////////// | A224 51,482,775 | 3.f.
___________________________________________
| (Column A) | (Column B) |
Items 4-9 and Memoranda items 1 and 2 are to be completed | Assets | Credit Equiv- |
by banks that answered NO to item 1 above and | Recorded | alent Amount |
by banks with total assets of $1 billion or more. | on the | of Off-Balance |
| Balance Sheet | Sheet Items(2) |
____________________ ____________________
| RCFD Bil Mil Thou | RCFD Bil Mil Thou |
____________________ ____________________
<S> <C> <C> <C>
4. Assets and credit equivalent amounts of off-balance sheet items assigned | | |
to the Zero percent risk category: | ////////////////// | ////////////////// |
a. Assets recorded on the balance sheet: | ////////////////// | ////////////////// |
(1) Securities issued by, other claims on, and claims unconditionally | ////////////////// | ////////////////// |
guaranteed by, the U.S. Government and its agencies and other | ////////////////// | ////////////////// |
OECD central governments .......................................... | 3794 2,147,648 | ////////////////// | 4.a.(1)
(2) All other ......................................................... | 3795 1,115,265 | ////////////////// | 4.a.(2)
b. Credit equivalent amount of off-balance sheet items ................... | ////////////////// | 3796 101,488 | 4.b.
___________________________________________
</TABLE>
_____
(1) Exclude mandatory convertible debt reported in Schedule RC-M, item 7.
(2) Do not report in column B the risk-weighted amount of assets reported in
column A.
33
<PAGE> 55
<TABLE>
<S> <C>
Legal Title of Bank: FLEET NATIONAL BANK Call Date: 06/30/96 ST-BK: 25-0590 FFIEC 031
Address: ONE MONARCH PLACE Page RC-24
City, State Zip: SPRINGFIELD, MA 01102
FDIC Certificate No.: |0|2|4|9|9|
___________
</TABLE>
<TABLE>
<CAPTION>
Schedule RC-R--Continued
___________________________________________
| (Column A) | (Column B) |
| Assets | Credit Equiv- |
| Recorded | alent Amount |
| on the | of Off-Balance |
| Balance Sheet | Sheet Items(1) |
____________________ ____________________
Dollar Amounts in Thousands | RCFD Bil Mil Thou | RCFD Bil Mil Thou |
______________________________________________________________________________ ____________________ ____________________
<S> <C> <C> <C>
5. Assets and credit equivalent amounts of off-balance sheet items | ////////////////// | ////////////////// |
assigned to the 20 percent risk category: | ////////////////// | ////////////////// |
a. Assets recorded on the balance sheet: | ////////////////// | ////////////////// |
(1) Claims conditionally guaranteed by the U.S. Government and its | ////////////////// | ////////////////// |
agencies and other OECD central governments ....................... | 3798 714,375 | ////////////////// | 5.a.(1)
(2) Claims collateralized by securities issued by the U.S. Govern- | ////////////////// | ////////////////// |
ment and its agencies and other OECD central governments; by | ////////////////// | ////////////////// |
securities issued by U.S. Government-sponsored agencies; and | ////////////////// | ////////////////// |
by cash on deposit ................................................ | 3799 0 | ////////////////// | 5.a.(2)
(3) All other ......................................................... | 3800 8,774,345 | ////////////////// | 5.a.(3)
b. Credit equivalent amount of off-balance sheet items ................... | ////////////////// | 3801 791,065 | 5.b.
6. Assets and credit equivalent amounts of off-balance sheet items | ////////////////// | ////////////////// |
assigned to the 50 percent risk category: | ////////////////// | ////////////////// |
a. Assets recorded on the balance sheet .................................. | 3802 5,265,173 | ////////////////// | 6.a.
b. Credit equivalent amount of off-balance sheet items ................... | ////////////////// | 3803 409,680 | 6.b.
7. Assets and credit equivalent amounts of off-balance sheet items | ////////////////// | ////////////////// |
assigned to the 100 percent risk category: | ////////////////// | ////////////////// |
a. Assets recorded on the balance sheet .................................. | 3804 31,799,547 | ////////////////// | 7.a.
b. Credit equivalent amount of off-balance sheet items ................... | ////////////////// | 3805 10,122,631 | 7.b.
8. On-balance sheet asset values excluded from the calculation of the | ////////////////// | ////////////////// |
risk-based capital ratio(2) .............................................. | 3806 83,713 | ////////////////// | 8.
9. Total assets recorded on the balance sheet (sum of | ////////////////// | ////////////////// |
items 4.a, 5.a, 6.a, 7.a, and 8, column A)(must equal Schedule RC, | ////////////////// | ////////////////// |
item 12 plus items 4.b and 4.c) .......................................... | 3807 49,900,066 | ////////////////// | 9.
___________________________________________
Memoranda
______________________
Dollar Amounts in Thousands | RCFD Bil Mil Thou |
__________________________________________________________________________________________________ ____________________
1.Current credit exposure across all off-balance sheet derivative contracts covered by the | ///////////////// |
risked-based capital standards .................................................................| 8764 135,825| M.1.
|___________________|
_____________________________________________________________________
| With a remaining maturity of |
|____________________________________________________________________|
| (Column A) | (Column B) | (Column C) |
| | | |
| One year or less | Over one year | Over five years |
| | through five years | |
|______________________|______________________|______________________|
|RCFD Tril Bil Mil Thou|RCFD Tril Bil Mil Thou|RCFD Tril Bil Mil Thou|
|______________________|______________________|______________________|
2. Notional principal amounts of | | | |
off-balance sheet derivative contracts(3):| | | |
a. Interest rate contracts ................. | 3809 8,320,956 | 8766 18,597,686 | 8767 801,055 | M.2.a.
b. Foreign exchange contracts .............. | 3812 1,578,420 | 8769 101,907 | 8770 0 | M.2.b.
c. Gold contracts .......................... | 8771 15,291 | 8772 0 | 8773 0 | M.2.c.
d. Other precious metals contracts ......... | 8774 8,748 | 8775 0 | 8776 0 | M.2.d.
e. Other commodity contracts ............... | 8777 0 | 8778 0 | 8779 0 | M.2.e.
f. Equity derivative contracts ............. | A000 0 | A001 0 | A002 0 | M.2.f.
|____________________________________________________________________|
</TABLE>
_________________
1) Do not report in column B the risk-weighted amount of
assets reported in column A.
2) Include the difference between the fair value and the amortized cost of
available-for-sale securities in item 8 and report the amortized cost of these
securities in items 4 through 7 above. Item 8 also includes on-balance sheet
asset values (or portions thereof) of off-balance sheet interest rate, foreign
exchange rate, and commodity contracts and those contracts (e.g., futures
contracts) not subject to risk-based capital. Exclude from item 8 margin
accounts and accrued receivables as well as any portion of the allowance for
loan and lease losses in excess of the amount that may be included in Tier 2
capital. 3) Exclude foreign exchange contracts with an original maturity of 14
days or less and all futures contracts.
34
<PAGE> 56
<TABLE>
<S> <C>
Legal Title of Bank: FLEET NATIONAL BANK
Address: ONE MONARCH PLACE Call Date: 06/30/96 ST-BK: 25-0590 FFIEC 031
City, State, Zip: SPRINGFIELD, MA 01102 Page RC-25
FDIC Certificate No.: 02499
</TABLE>
Optional Narrative Statement Concerning the Amounts
Reported in the Reports of Condition and Income
at close of business on June 30, 1996
FLEET NATIONAL BANK SPRINGFIELD , MASSACHUSETTS
- ------------------- ----------------- -------------
Legal Title of Bank City State
The management of the reporting bank may, if it wishes, submit a brief
narrative statement on the amounts reported in the Reports of Condition and
Income. This optional statement will be made available to the public, along
with the publicly available data in the Reports of Condition and Income, in
response to any request for individual bank report data. However, the
information reported in column A and in all of Memorandum item 1 of Schedule
RC-N is regarded as confidential and will not be released to the public.
BANKS CHOOSING TO SUBMIT THE NARRATIVE STATEMENT SHOULD ENSURE THAT THE
STATEMENT DOES NOT CONTAIN THE NAMES OR OTHER IDENTIFICATIONS OF INDIVIDUAL
BANK CUSTOMERS, REFERENCES TO THE AMOUNTS REPORTED IN THE CONFIDENTIAL ITEMS
IN SCHEDULE RC-N, OR ANY OTHER INFORMATION THAT THEY ARE NOT WILLING TO HAVE
MADE PUBLIC OR THAT WOULD COMPROMISE THE PRIVACY OF THEIR CUSTOMERS. Banks
choosing not to make a statement may check the "No comment" box below and
should make no entries of any kind in the space provided for the narrative
statement; i.e., DO NOT enter in this space such phrases as "No statement,"
"Not applicable," "N/A," "No comment," and "None."
The optional statement must be entered on this sheet. The statement should
not exceed 100 words. Further, regardless of the number of words, the
statement must not exceed 750 characters, including punctuation, indentation,
and standard spacing between words and sentences. If any submission should
exceed 750 characters, as defined, it will be truncated at 750 characters with
no notice to the submitting bank and the truncated statement will appear as the
bank's statement both on agency computerized records and in computer-file
releases to the public.
All information furnished by the bank in the narrative statement must be
accurate and not misleading. Appropriate efforts shall be taken by the
submitting bank to ensure the statement's accuracy. The statement must be
signed, in the space provided below, by a senior officer of the bank who
thereby attests to its accuracy.
If, subsequent to the original submission, material changes are submitted for
the data reported in the Reports of Condition and Income, the existing
narrative statement will be deleted from the files, and from disclosure; the
bank, at its option, may replace it with a statement, under signature,
appropriate to the amended data.
The optional narrative statement will appear in agency records and in release
to the public exactly as submitted (or amended as described in the preceding
paragraph) by the management of the bank (except for the truncation of
statements exceeding the 750-character limit described above). THE STATEMENT
WILL NOT BE EDITED OR SCREENED IN ANY WAY BY THE SUPERVISORY AGENCIES FOR
ACCURACY OR RELEVANCE. DISCLOSURE OF THE STATEMENT SHALL NOT SIGNIFY THAT ANY
FEDERAL SUPERVISORY AGENCY HAS VERIFIED OR CONFIRMED THE ACCURACY OF THE
INFORMATION CONTAINED THEREIN. A STATEMENT TO THIS EFFECT WILL APPEAR ON ANY
PUBLIC RELEASE OF THE OPTIONAL STATEMENT SUBMITTED BY THE MANAGEMENT OF THE
REPORTING BANK.
__________________________________________________________________________
No comment |X| (RCON 6979) | c471 | C472 |<-
BANK MANAGEMENT STATEMENT (please type or print clearly):
(TEXT 6980)
/s/__Gero DeRosa_______________________________ ___7/25/96________
Signature of Executive Officer of Bank Date of Signature
35
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUL-31-1996
<PERIOD-START> AUG-01-1995
<PERIOD-END> JUL-31-1996
<CASH> 10,399,000
<SECURITIES> 0
<RECEIVABLES> 66,187,000
<ALLOWANCES> 740,000
<INVENTORY> 1,659,000
<CURRENT-ASSETS> 85,704,000
<PP&E> 165,104,000
<DEPRECIATION> 86,094,000
<TOTAL-ASSETS> 198,592,000
<CURRENT-LIABILITIES> 63,225,000
<BONDS> 27,351,000
<COMMON> 113,000
0
0
<OTHER-SE> 105,810,000
<TOTAL-LIABILITY-AND-EQUITY> 198,592,000
<SALES> 0
<TOTAL-REVENUES> 250,596,000
<CGS> 0
<TOTAL-COSTS> 198,711,600
<OTHER-EXPENSES> 47,482,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 5,466,000
<INCOME-PRETAX> 4,403,000
<INCOME-TAX> 2,009,000
<INCOME-CONTINUING> 1,281,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,281,000
<EPS-PRIMARY> 0.07
<EPS-DILUTED> 0
</TABLE>
