UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934
(Amendment No. ____)*
DEEPTECH INTERNATIONAL INC.
(Name of Issuer)
Common Stock, Par Value $.01 Per Share
(Title of Class of Securities)
24379P 10 7
(CUSIP Number)
(Name, Address and Telephone Number of Person Authorized to
Receive Notices and Communications)
Copies to:
Karen Manson
Lehman Brothers Holdings Inc.
3 World Financial Center
New York, New York 10285
(212) 526-1911
February 16, 1996
(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule
13G to report the acquisition which is the subject of this
Schedule 13D, and is filing this schedule because of Rule 13d-
1(b)(3) or (4), check the following box .
Check the following box if a fee is being paid with the statement
(A fee is not required only if the reporting person: (1) has a
previous statement on file reporting beneficial ownership of more
than five percent of the class of securities described in Item 1;
and (2) has filed no amendment subsequent thereto reporting
beneficial ownership of five percent or less of such class.)
(See Rule 13d-7.)
Note: Six copies of this statement, including all exhibits,
should be filed with the Commission. See Rule 13d-1(a) for other
parties to whom copies are to be sent.
*The remainder of this cover page shall be filled out for a
reporting person's initial filing on this form with respect to
the subject class of securities, and for any subsequent amendment
containing information which would alter disclosures provided in
a prior cover page.
The information required on the remainder of this cover page
shall not be deemed to be "filed" for the purpose of Section 18
of the Securities Exchange Act of 1934 ("Act") or otherwise
subject to the liabilities of that section of the Act but shall
be subject to all other provisions of the Act (however, see the
Notes).
SCHEDULE 13D
CUSIP No. 24379P 10 7
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
LEHMAN BROTHERS HOLDINGS INC.
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*
(a)
(b)
3 SEC USE ONLY
4 SOURCE OF FUNDS*
00.
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(d) or 2(e)
6 CITIZENSHIP OR PLACE OF ORGANIZATION
DELAWARE
Number of shares of Beneficially owned by each reporting person with
7 SOLE VOTING POWER
1,333,333.5
8 SHARED VOTING POWER
None.
9 SOLE DISPOSITIVE POWER
1,333,333.5
10 SHARED DISPOSITIVE POWER
None.
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
1,333,333.5
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN
SHARES*
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
7.43%
14 TYPE OF REPORTING PERSON*
HC/CO
*SEE INSTRUCTIONS BEFORE FILLING OUT!
INCLUDE BOTH SIDES OF THE COVER PAGE, RESPONSES TO ITEMS 1-7
(INCLUDING EXHIBITS) OF THE SCHEDULE AND THE SIGNATURE
ATTESTATION
STATEMENT PURSUANT TO RULE 13d-1
OF THE
GENERAL RULES AND REGULATIONS
UNDER THE
SECURITIES EXCHANGE ACT OF 1934, AS AMENDED
Item 1. Security and Issuer.
This Statement on Schedule 13D (the "Schedule 13D") relates
to the common stock, par value $.01 per share (the "Common
Stock"), of DeepTech International Inc., a corporation organized
under the laws of the State of Delaware (the "Company"). The
principal executive offices of the Company are located at
DeepTech International Inc., 7500 Texas Commerce Tower, 600
Travis Street, Houston, Texas 77002.
Item 2. Identity and Background.
This statement is filed on behalf of the following entity
(the "Reporting Person"):
Lehman Brothers Holdings Inc., a Delaware corporation
("Holdings")
3 World Financial Center
200 Vesey Street
New York, N.Y. 10285
Holdings through its domestic and foreign subsidiaries
is a full-line securities firm.
The names, residence or business addresses,
citizenships and present principal occupations or
employment of the executive officers and directors of the
Reporting Person are set forth in Appendix A hereto.
Neither the Reporting Person, nor, to the best
knowledge of the Reporting Person, any of the persons
listed in Appendix A hereto has during the last five years
(i) been convicted in a criminal proceeding (excluding
traffic violations or similar misdemeanors) or (ii) been a
party to a civil proceeding of a judicial or administrative
body of competent jurisdiction and as a result of such
proceeding was or is subject to a judgment, decree or final
order enjoining future violations of, or mandating
activities subject to, federal or state securities laws or
finding any violation with respect to such laws.
Item 3. Source and Amount of Funds or Other
Consideration.
A subsidiary of the Company acquired warrants
("Warrants") to purchase 1,333,333.5 shares of Common Stock
of the Company as additional consideration for the making
of the loan to DeepFlex Production Services, Inc.
("DeepFlex").
Item 4. Purpose of Transaction.
Lehman Commercial Paper Inc., a subsidiary of the
Reporting Person, extended a loan to a wholly-owned
subsidiary of the Company, DeepFlex, pursuant to a
syndicated Credit Agreement dated as of February 16, 1996
among DeepFlex, as borrower, the other financial
institutions (including the Reporting Person) from time to
time parties thereto (the "Lenders") and Citicorp USA, Inc.
a Delaware corporation, as administrative agent for the
Lenders (the "Credit Agreement").
The Warrants are held for investment purposes. The
Reporting Person, directly or through subsidiaries, may
acquire additional shares of Common Stock of the Company in
the ordinary course of its business as a securities firm
depending on its evaluation of a number of factors,
including, the Company's business, prospects and financial
condition, the market for the Company's securities, other
opportunities available to the Reporting Person, general
economic conditions and money and stock market conditions.
Depending upon, among other things, the factors described
above, the Reporting Person reserves the right to dispose
of all or a part of the Warrants or shares of Common Stock
of the Company covered thereby at any time.
Item 5. Interest in Securities of the Issuer.
(a) The Warrants were acquired on February 16,
1996. The Warrants constitute the total beneficial
ownership of securities of the Company by the Reporting
Person and, to its knowledge, by the persons listed in
Appendix A hereto.
(b) The Reporting Person has the sole power to vote
and dispose of all of the Warrants and the Common Stock
covered thereby.
(c) Except as described above and herein, there were
no purchases or sales of Warrants or Common Stock effected
during the past 60 days by the Reporting Person or, to its
knowledge, any person listed in Appendix A hereto, other
than purchases and sales by Lehman Brothers Inc. in the
ordinary course of its business as a broker/dealer for the
account of its customers.
(d) Neither the Reporting Person nor, to its
knowledge, any of the persons listed in Appendix A hereto
knows of any other person who has the right to receive or
the power to direct the receipt of dividends from, or the
proceeds from the sale of, any shares of Common Stock
beneficially owned by the Reporting Person.
(e) Not Applicable.
Item 6. Contracts, Arrangements or Understandings with
Respect to Securities of the Issuer.
The Warrants were acquired in connection with a loan
made by a subsidiary of the Reporting Person pursuant to
the Credit Agreement.
The Warrants were acquired pursuant to a Warrant
Agreement dated as of February 16, 1996 (the "Warrant
Agreement") between the Company and Lehman Brothers
Commercial Paper Inc. and are held by a subsidiary of the
Reporting Person. The Warrants are immediately exercisable
and expire on July 15, 1997. The exercise price is $4.50
per share of Common Stock. The Warrants are subject to
registration rights as specified in the Warrant Agreement.
There is no other agreement or understanding relating to the
Warrants or Common Stock between the Reporting Person and
any other person.
Item 7. Material to Be Filed as Exhibits.
Exhibit 1. Credit Agreement.
Exhibit 2. Warrant Agreement.
SIGNATURE
SIGNATURE
After reasonable inquiry and to the best of my
knowledge and belief, I certify that the information set forth in
this statement is true, complete and correct.
Dated: February 26, 1996
LEHMAN BROTHERS HOLDINGS INC.
BY:/s/ Karen C. Manson
Name: Karen C. Manson
Title:Vice President and Secretary
APPENDIX A
DIRECTORS, EXECUTIVE OFFICERS, TREASURER AND SECRETARY
Directors:
John F. Akers
U.S. citizen
IBM Corporation
208 Harbor Drive
Stamford, CT 06904
Private Investor
Roger S. Berlind
U.S. citizen
Berlind Productions
10 East 53rd Street
30th Floor
New York, New York 10028
Private Investor
Richard S. Fuld, Jr.
U.S. citizen
Lehman Brothers Inc.
3 World Financial Center
10th Floor
New York, New York 10285
Chairman and Chief Executive Officer
Katsumi Funaki
Japanese citizen
Nippon Life Insurance Company
2-2, Yuraka-cho 1 Chome
Chiyoda-ku 100 Tokyo Japan
Senior General Manager for International Business of the
Finance and Investment Business Office of the Nippon
Life Insurance Company
Henry Kaufman
U.S. citizen
Henry Kaufman & Co. Inc.
65 E. 55th Street
New York, New York 10022
John D. Macomber
U.S. citizen
JDM Investment Group
2806 N. Street, N.W.
Washington D.C. 20007
Chairman of JDM Investment Group
Dina Merrill
U.S. citizen
NY Office-RKO Pavilion
551 Madison Avenue
New York, New York 10285
Actress and Private Investor
T. Christopher Pettit
U.S. citizen
Lehman Brothers Inc.
3 World Financial Center
10th Floor
New York, New York 10285
President and Chief Operating Officer
Masataka Shimasaki
Japanese citizen
Nippon Life Insurance Company
1251 Avenue of the Americas
52nd Floor
New York, New York 10020
General Manager for the Americas, Nippon Life Insurance Company
Malcolm Wilson
U.S. citizen
Kent, Hazzard, Jaeger, Greer,
Wilson & Fay
50 Main Street
White Plains, New York 10606-1920
Counsel to Kent, Hazzard, Jaeger, Greer,
Wilson & Fay
Officers who are not Directors:
John L. Cecil
U.S. citizen
Lehman Brothers Inc.
3 World Financial Center
10th Floor
New York, New York 10285
Managing Director and Chief Administrative Officer
Karen C. Manson
U.S. citizen
Lehman Brothers Inc.
3 World Financial Center
24th Floor
New York, New York 10285
Secretary
Robert Matza
U.S. citizen
Lehman Brothers Inc.
3 World Financial Center
10th Floor
New York, New York 10285
Senior Vice President and Chief Financial Officer
Michael R. Milversted
U.S. citizen
Lehman Brothers Inc.
3 World Financial Center
28th Floor
New York, New York 10285
Treasurer
Thomas A. Russo
U.S. citizen
Lehman Brothers Inc.
3 World Financial Center
10th Floor
New York, New York 10285
Senior Vice President and Chief Legal Officer
Exhibit 1
CREDIT AGREEMENT, dated as of February 16, 1996 among
DeepFlex Production Services, Inc., a Delaware corporation (the
"Borrower"), the several banks and other financial institutions
from time to time parties to this Agreement (the "Lenders") and
Citicorp USA, Inc., a Delaware corporation, as administrative
agent for the Lenders hereunder (the "Administrative Agent").
W I T N E S S E T H :
WHEREAS, the Borrower has requested the Administrative
Agent and the Lenders to enter into this Credit Agreement and the
Lenders to make the loans as provided for herein to provide the
Borrower with funds to be used for the purposes set forth herein;
and
WHEREAS, the Lenders have agreed to make such loans to
the Borrower on the terms and subject to the conditions set forth
herein and for no other purposes except as set forth herein;
NOW, THEREFORE, in consideration of the premises and
the mutual covenants herein contained, the parties hereto agree
as follows:
SECTION 1. DEFINITIONS
1.1 Defined Terms. As used in this Agreement, the
following terms shall have the following meanings:
"Affiliate": as to any Person, any other Person (other
than a wholly-owned Subsidiary) which, directly or
indirectly, is in control of, is controlled by, or is under
common control with, such Person. For purposes of this
definition, "control" of a Person means the power, directly
or indirectly, either to (a) vote 10% or more of the
securities having ordinary voting power for the election of
directors of such Person or (b) direct or cause the
direction of the management and policies of such Person,
whether by contract or otherwise. For purposes of this
definition DeepTech, TOFF and Leviathan Holdings Company,
Deepwater Drillers, L.L.C., Offshore Gas Marketing, Inc.,
OffShore Gas Processors, Inc. and their respective
Subsidiaries, controlling Persons, officers and directors
shall be deemed to be Affiliates of the Borrower.
"Agreement": this Credit Agreement, as amended,
supplemented or otherwise modified from time to time.
"Borrower Security Agreement": the Security Agreement
to be executed and delivered by the Borrower, substantially
in the form of Exhibit B-1, as the same may be amended,
supplemented or otherwise modified from time to time.
"Borrower Security Documents": the collective
reference to the Pledge Agreement and the Borrower Security
Agreement.
"Borrowing Date": February 16, 1996.
"Business": as defined in subsection 3.17.
"Business Day": a day other than a Saturday, Sunday or
other day on which commercial banks in New York City are
authorized or required by law to close.
"Capital Stock": any and all shares, interests,
participations, membership interests or other equivalents
(however designated) of capital stock of a corporation, any
and all equivalent ownership interests in a Person (other
than a corporation) and any and all warrants or options to
purchase any of the foregoing.
"Cash Equivalents": (a) securities with maturities of
one year or less from the date of acquisition issued or
fully guaranteed or insured by the United States Government
or any agency thereof, (b) certificates of deposit and
eurodollar time deposits with maturities of one year or less
from the date of acquisition and overnight bank deposits of
any Lender or of any commercial bank having capital and
surplus in excess of $2,000,000,000, (c) repurchase
obligations of any Lender or of any commercial bank
satisfying the requirements of clause (b) of this
definition, having a term of not more than 30 days with
respect to securities issued or fully guaranteed or insured
by the United States Government, (d) commercial paper of a
domestic issuer rated at least A-2 by Standard and Poor's
Rating Group ("S&P") or P-2 by Moody's Investors Service,
Inc. ("Moody's"), (e) securities with maturities of one year
or less from the date of acquisition issued or fully
guaranteed by any state, commonwealth or territory of the
United States, by any political subdivision or taxing
authority of any such state, commonwealth or territory or by
any foreign government, the securities of which state,
commonwealth, territory, political subdivision, taxing
authority or foreign government (as the case may be) are
rated at least A by S&P or A by Moody's, (f) securities with
maturities of one year or less from the date of acquisition
backed by standby letters of credit issued by any Lender or
any commercial bank satisfying the requirements of clause
(b) of this definition or (g) shares of money market mutual
or similar funds which invest exclusively in assets
satisfying the requirements of clauses (a) through (f) of
this definition.
"Change of Control": the occurrence of any of the
following:
(a) the acquisition by any Person or two or
more Persons acting in concert (other than the
management of DeepTech as of the Borrowing Date) of
beneficial ownership (within the meaning of Rule 13d-3,
promulgated by the Securities and Exchange Commission
and now in effect under the Securities Exchange Act of
1934, as amended) of 50% or more of the issued and
outstanding shares of voting stock of DeepTech;
(b) the Tatham Group shall cease to legally
and beneficially own at least 25% of the common stock
of DeepTech, free and clear of Liens other than Liens
created pursuant to that certain Loan Agreement dated
May 19, 1995 among Tatham, Virginia S. Tatham and
Nationsbank, N.A. (Carolinas) and that certain Pledge
and Security Agreement dated May 19, 1995 made by
Tatham in favor of Nationsbank, N.A. (Carolinas), as
such Agreements are in effect on the date hereof;
(c) DeepTech shall cease to legally and
beneficially own at least 85% of the Capital Stock of
the Borrower, free and clear of Liens other than Liens
created pursuant to the Indenture dated as of March 21,
1994 and security documents delivered thereunder by
DeepTech in favor of First Interstate Bank of Texas,
N.A., as trustee, as such Indenture and documents are
in effect on the date hereof;
(d) (i) the Borrower shall cease to legally
and beneficially own at least 50% of the limited
partnership interests of DeepFlex Partners, free and
clear of Liens, except Liens created by the Pledge
Agreement, or (ii) the Borrower shall cease to legally
and beneficially own at least 50% of the Capital Stock
of DeepFlex General Partner, free and clear of Liens,
except Liens created by the Pledge Agreement, or (iii)
DeepFlex General Partner shall cease to legally and
beneficially own 100% of the general partnership
interests of DeepFlex Partners, free and clear of
Liens;
(e) a "change of control" or similar event
shall occur under and as defined in any agreement
creating or evidencing any Indebtedness of DeepTech or
any of its Subsidiaries; or
(f) DeepFlex General Partner shall cease to
be the sole general partner of DeepFlex Partners other
than in connection with a dissolution of the
Partnership pursuant to subsection 6.16.
"Charter": the Charter made October 13, 1995 between
the Charterer and DeepFlex Partners, as the same may be
amended, modified or supplemented from time to time.
"Charterer": the Sedco Forex Division of Schlumberger
Technology Corporation.
"Citicorp": Citicorp USA, Inc.
"Closing Date": the date on which the conditions
precedent set forth in subsection 4.1 shall be satisfied.
"Code": the Internal Revenue Code of 1986, as amended
from time to time.
"Coflexip": Coflexip Stena DeepFlex, Inc., a Delaware
corporation.
"Collateral": all assets of the Loan Parties, now
owned or hereafter acquired, upon which a Lien is purported
to be created by any Security Document.
"Collateral Agent": Citicorp USA, Inc. in its capacity
as collateral agent under the DeepFlex Partners Security
Documents.
"Commitment": as to any Lender, the obligation of such
Lender to make Loans to the Borrower hereunder in an
aggregate principal amount at any one time outstanding not
to exceed the amount set forth opposite such Lender's name
on Schedule I, as such amount may be reduced from time to
time in accordance with the provisions of this Agreement.
"Commitment Percentage": as to any Lender at any time,
the percentage which the aggregate principal amount of such
Lender's Loans then outstanding constitutes of the aggregate
principal amount of the Loans then outstanding.
"Commonly Controlled Entity": an entity, whether or
not incorporated, which is under common control with the
Borrower within the meaning of Section 4001 of ERISA or is
part of a group which includes the Borrower and which is
treated as a single employer under Section 414 of the Code.
"Consent": the Consent and Agreement dated as of
February 16, 1996 among the Administrative Agent, the
Collateral Agent, DeepFlex Partners, the Borrower and
Coflexip, substantially in the form of Exhibit J.
"Contractual Obligation": as to any Person, any
provision of any security issued by such Person or of any
agreement, instrument or other undertaking to which such
Person is a party or by which it or any of its property is
bound.
"Current Assets": at any date of determination, all
assets of the Borrower, determined in accordance with GAAP,
which would be classified on a balance sheet of the Borrower
as current assets.
"Current Liabilities": at any date of determination,
all liabilities of the Borrower which, in accordance with
GAAP, would be classified on a balance sheet of the Borrower
as current liabilities, excluding the current portion of
long-term Indebtedness.
"Current Ratio": as of the date of determination, the
ratio of Current Assets to Current Liabilities at such date.
"Deed of Covenants": the deed of covenants dated as of
the date of the Bahamian Ship Mortgage between the Borrower
and the Collateral Agent.
"DeepFlex General Partner": DeepFlex Holdings L.L.C.,
a Delaware limited liability company and the sole general
partner of DeepFlex Partners.
"DeepFlex Partners": DeepFlex Production Partners
L.P., a Delaware limited partnership.
"DeepFlex Partners Security Agreement": the Security
Agreement to be executed and delivered by DeepFlex Partners
in favor of the Collateral Agent, substantially in the form
of Exhibit B-2, as the same may be amended, supplemented or
otherwise modified from time to time.
"DeepFlex Partners Security Documents": the collective
reference to the Ship Mortgage, the DeepFlex Partners
Security Agreement and any other documents and agreements
executed and delivered to secure the obligations of DeepFlex
Partners under the Pledged PIK Notes.
"DeepTech": DeepTech International Inc., a Delaware
corporation and the owner of all of the Capital Stock of the
Borrower.
"DeepTech Note": the Senior Promissory Note dated
March 1, 1995 in the stated principal amount of $40,000,000
payable by the Borrower to DeepTech, as amended, modified
and supplemented from time to time. The outstanding
principal balance of the DeepTech Note is estimated by the
Borrower to be approximately $30,600,000 on the Closing
Date.
"DeepTech Warrant Agreements": the Warrant Agreements
to be executed and delivered by DeepTech to each Lender on
the Closing Date, substantially in the form of Exhibit D, as
the same may be amended, supplemented or otherwise modified
from time to time.
"DeepTech Warrants": the warrants to purchase up to
2,666,667 shares of common stock of DeepTech issued pursuant
to the DeepTech Warrant Agreements.
"Default": any of the events specified in Section 7,
whether or not any requirement for the giving of notice, the
lapse of time, or both, or any other condition, has been
satisfied.
"Dollars" and "$": dollars in lawful currency of the
United States of America.
"Domestic Subsidiary": any Subsidiary of the Borrower
organized under the laws of any jurisdiction within the
United States.
"Environmental Laws": any and all foreign, Federal,
state, local or municipal laws, rules, orders, regulations,
statutes, ordinances, codes, decrees, requirements of any
Governmental Authority or other Requirements of Law
(including common law) regulating, relating to or imposing
liability or standards of conduct concerning protection of
human health or the environment, as now or may at any time
hereafter be in effect.
"ERISA": the Employee Retirement Income Security Act
of 1974, as amended from time to time.
"Event of Default": any of the events specified in
Section 7, provided that any requirement for the giving of
notice, the lapse of time, or both, or any other condition,
has been satisfied.
"Excess Cash Flow": for any period, the Borrower's
cash receipts (excluding receipts related to the sale or
refinancing of any asset that is not Collateral) for such
period minus the sum of (i) the Borrower's cash operating
expenses for such period and (ii) the Borrower's cash
interest expense for such period, including, for purposes of
this clause (ii), interest paid in cash by the Borrower on
the Wilrig Indebtedness and, at any time prior to the first
day after the date hereof that the Treasure Searcher is
subject to charter, lease or similar hire, interest paid in
cash by the Borrower in respect of the Highwood
Indebtedness.
"Federal Funds Effective Rate": for any day, the
weighted average of the rates on overnight federal funds
transactions with members of the Federal Reserve System
arranged by federal funds brokers, as published on the next
succeeding Business Day by the Federal Reserve Bank of New
York, or, if such rate is not so published for any day which
is a Business Day, the average of the quotations for the day
of such transactions received by the Agent from three
federal funds brokers of recognized standing selected by it.
"Final Maturity Date": July 15, 1997.
"Financing Lease": any lease of property, real or
personal, the obligations of the lessee in respect of which
are required in accordance with GAAP to be capitalized on a
balance sheet of the lessee.
"Foreign Subsidiary": any Subsidiary of the Borrower
organized under the laws of any jurisdiction outside the
United States of America.
"FPS II": FPS II, Inc., a Delaware corporation and a
wholly-owned Subsidiary of the Borrower.
"FPS III": FPS III, Inc., a Delaware corporation and
wholly-owned Subsidiary of the Borrower.
"GAAP": generally accepted accounting principles in
the United States of America in effect from time to time.
"Governmental Authority": any nation or government,
any state or other political subdivision thereof and any
entity exercising executive, legislative, judicial,
regulatory or administrative functions of or pertaining to
government.
"Guarantee Obligation": as to any Person (the
"guaranteeing person"), any obligation of (a) the
guaranteeing person or (b) another Person (including,
without limitation, any bank under any letter of credit) to
induce the creation of which the guaranteeing person has
issued a reimbursement, counterindemnity or similar
obligation, in either case guaranteeing or in effect
guaranteeing any Indebtedness, leases, dividends or other
obligations (the "primary obligations") of any other third
Person (the "primary obligor") in any manner, whether
directly or indirectly, including, without limitation, any
obligation of the guaranteeing person, whether or not
contingent, (i) to purchase any such primary obligation or
any property constituting direct or indirect security
therefor, (ii) to advance or supply funds (1) for the
purchase or payment of any such primary obligation or (2) to
maintain working capital or equity capital of the primary
obligor or otherwise to maintain the net worth or solvency
of the primary obligor, (iii) 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 (iv) otherwise to assure or hold harmless the
owner of any such primary obligation against loss in respect
thereof; provided, however, that the term Guarantee
Obligation shall not include endorsements of instruments for
deposit or collection in the ordinary course of business.
The amount of any Guarantee Obligation of any guaranteeing
person shall be deemed to be the lower of (a) an amount
equal to the stated or determinable amount of the primary
obligation in respect of which such Guarantee Obligation is
made and (b) the maximum amount for which such guaranteeing
person may be liable pursuant to the terms of the instrument
embodying such Guarantee Obligation, unless such primary
obligation and the maximum amount for which such
guaranteeing person may be liable are not stated or
determinable, in which case the amount of such Guarantee
Obligation shall be such guaranteeing person's maximum
reasonably anticipated liability in respect thereof as
determined by the Borrower in good faith.
"Highwood": Highwood Partners, L.P., a Delaware
limited partnership.
"Highwood Guaranty": that certain Guaranty dated as of
December 5, 1995, made and entered into by the Borrower for
the benefit of Highwood, as amended, modified or
supplemented from time to time.
"Highwood Indebtedness": Indebtedness of the Borrower
to Highwood arising under (a) the Highwood Loan Agreement,
(b) the Highwood Guaranty, and/or (c) the Highwood Security
Agreement.
"Highwood Loan Agreement": that certain Term Loan
Agreement dated as of December 5, 1995, between the Borrower
and Highwood, as amended, modified or supplemented from time
to time.
"Highwood Loan Documents": the collective reference to
the Highwood Loan Agreement, the Highwood Guaranty, the
Highwood Security Agreement, the Highwood Master Agreement
and other agreements relating to the Highwood Loan
Documents.
"Highwood Master Agreement": that certain Master
Agreement dated as of November 29, 1995, among Highwood, the
Borrower and certain other Persons.
"Highwood PIK Notes": PIK Notes pledged to Highwood
pursuant to the Highwood Security Agreement, including any
PIK Notes issued in lieu of payment of interest on any
Highwood PIK Note.
"Highwood Security Agreement": that certain Security
Agreement and Pledge dated as of December 5, 1995, by and
between the Borrower and Highwood, as amended, modified or
supplemented from time to time.
"Indebtedness": of any Person at any date, (a) all
indebtedness of such Person for borrowed money or for the
deferred purchase price of property or services (other than
current trade liabilities incurred in the ordinary course of
business and payable in accordance with customary
practices), (b) any other indebtedness of such Person which
is evidenced by a note, bond, debenture or similar
instrument, (c) all obligations of such Person under
Financing Leases, (d) all obligations of such Person in
respect of acceptances issued or created for the account of
such Person and (e) all liabilities secured by any Lien on
any property owned by such Person even though such Person
has not assumed or otherwise become liable for the payment
thereof.
"Insolvency": with respect to any Multiemployer Plan,
the condition that such Plan is insolvent within the meaning
of Section 4245 of ERISA.
"Insolvent": pertaining to a condition of Insolvency.
"Interest Payment Date": the first day of each
calendar month, commencing March 1, 1996, and if such day is
not a Business Day, the Business Day following such day.
"Lien": any mortgage, pledge, hypothecation,
assignment, deposit arrangement, encumbrance, lien
(statutory or other), charge or other security interest or
any preference, priority or other security agreement or
preferential arrangement of any kind or nature whatsoever
(including, without limitation, any conditional sale or
other title retention agreement and any Financing Lease
having substantially the same economic effect as any of the
foregoing).
"Loan": as defined in subsection 2.1.
"Loan Documents": this Agreement, any Notes, the
Tatham Guarantee, the Charter and the Security Documents.
"Loan Parties": the Borrower, DeepTech, Tatham and
each Subsidiary of the Borrower and other Person which is a
party to a Loan Document.
"Material Adverse Effect": a material adverse effect
on (a) the business, operations, property, condition
(financial or otherwise) or prospects of the Borrower or of
DeepFlex Partners or (b) the validity or enforceability of
this or any of the other Loan Documents or the rights or
remedies (including those acquired by assignment) of the
Collateral Agent, the Administrative Agent or the Lenders
hereunder or thereunder.
"Material Environmental Amount": an amount payable by
the Borrower and/or its Subsidiaries in excess of $100,000
(to the extent not covered by insurance) for remedial costs,
compliance costs, compensatory damages, punitive damages,
fines, penalties or any combination thereof.
"Materials of Environmental Concern": any gasoline or
petroleum (including crude oil or any fraction thereof) or
petroleum products or any hazardous or toxic substances,
materials or wastes, defined or regulated as such in or
under any Environmental Law, including, without limitation,
asbestos, polychlorinated biphenyls and urea-formaldehyde
insulation.
"Multiemployer Plan": a Plan which is a multiemployer
plan as defined in Section 4001(a)(3) of ERISA.
"Net Worth": as of any date of determination, the sum
of (i) all items which in conformity with GAAP would be
included under shareholders' equity on a balance sheet of
the Borrower at such date and (ii) the aggregate principal
amount of the DeepTech Note (excluding interest that accrues
after the Closing Date).
"Non-Excluded Taxes": as defined in subsection 2.9.
"Note": as defined in subsection 2.3(e).
"Obligations": as defined in the Borrower Security
Agreement.
"Participant": as defined in subsection 9.6(b).
"Partnership Agreement": the Limited Partnership
Agreement of DeepFlex Partners dated effective March 24,
1995, as amended, modified and supplemented from time to
time.
"PBGC": the Pension Benefit Guaranty Corporation
established pursuant to Subtitle A of Title IV of ERISA.
"Permitted Investments": investments of the Borrower
in (i) TOFF Capital Stock pursuant to the TOFF Rights
Offering and the exercise of the TOFF Warrants; (ii)
Indebtedness and equity issued by any joint venture (whether
now existing or hereafter acquired) in which the Borrower
owns at least 50% of the Capital Stock and substantially all
of the business of which consists of providing oil drilling-
related services; and (iii) subject to subsection 6.18,
loans by the Borrower to DeepFlex Partners evidenced by PIK
Notes for the sole purpose of upgrading, maintaining and
mobilizing the Pincay provided that such PIK Notes are
Pledged PIK Notes or are pledged to DeepTech in connection
with Permitted Investments financed by DeepTech; provided
further that no such investment may be made during the
continuation of any Default or Event of Default.
"Person": an individual, partnership, corporation,
business trust, joint stock company, trust, unincorporated
association, joint venture, Governmental Authority or other
entity of whatever nature.
"PIK Notes": subordinated payment-in-kind notes of
DeepFlex Partners issued pursuant to Sections 3.6(a) and
3.6(c) of, and in the form attached as Exhibit B to, the
Partnership Agreement as the Partnership Agreement is in
effect on the date hereof.
"Pincay": the FPS Laffit Pincay currently registered
under the United States flag (Official No. 574670) owned by
DeepFlex Partners, including, without limitation, all
boilers, engines, machinery, masts, spars, rigging, boats,
covers, anchors, chains, tackle, apparel, furniture,
fittings and equipment, drilling equipment, production
equipment, processing facilities (including, without
limitation, separators, dehydration equipment, heaters and
gas compressors), components including, without limitation,
pumps, drill pipes, collars, racking, housing, blowout
preventers, spare parts and supporting inventory and
vehicles (whether on board or not on board), living quarters
and all other appurtenances thereto appertaining or
belonging, whether now owned or hereafter acquired, whether
on board or not, and all additions, improvements and
replacements hereafter made in or to the Pincay, and all
proceeds and products of the foregoing, as more particularly
described in the Ship Mortgage.
"Plan": at a particular time, any employee benefit
plan which is covered by ERISA and in respect of which the
Borrower or a Commonly Controlled Entity is (or, if such
plan were terminated at such time, would under Section 4069
of ERISA be deemed to be) an "employer" as defined in
Section 3(5) of ERISA.
"Pledge Agreement": the Pledge Agreement to be
executed and delivered by the Borrower, substantially in the
form of Exhibit C, as the same may be amended, supplemented
or otherwise modified from time to time.
"Pledged Account Agreement": the Pledged Account
Agreement, substantially in the form of Exhibit L, with such
changes or additions to such form as shall be approved by
the Administrative Agent (which approval shall not be
unreasonably withheld), among the Borrower, the Pledged
Account Bank and the Administrative Agent, as the same may
be amended, supplemented, waived or otherwise modified from
time to time.
"Pledged Account Bank": First Interstate Bank of
Texas, N.A. and each other bank approved by the
Administrative Agent.
"Pledged PIK Notes": PIK Notes which are pledged
pursuant to the Pledge Agreement.
"Properties": as defined in subsection 3.17.
"Register": as defined in subsection 9.6(d).
"Regulation U": Regulation U of the Board of Governors
of the Federal Reserve System as in effect from time to
time.
"Reorganization": with respect to any Multiemployer
Plan, the condition that such plan is in reorganization
within the meaning of Section 4241 of ERISA.
"Reportable Event": any of the events set forth in
Section 4043(b) of ERISA, other than those events as to
which the thirty day notice period is waived under
subsections .13, .14, .16, .18, .19 or .20 of PBGC Reg.
2615.
"Required Lenders": at any time, Lenders the
Commitment Percentages of which aggregate at least 66-2/3%;
provided, however, with respect to acceleration of the Loans
pursuant to Section 7 and the exercise of any remedies under
the Loan Documents, Required Lenders shall mean Lenders the
Commitment Percentages of which aggregate at least 50%.
"Requirement of Law": as to any Person, the
Certificate of Incorporation and By-Laws or other
organizational or governing documents of such Person, and
any law, treaty, rule or regulation or determination of an
arbitrator or a court or other Governmental Authority, in
each case applicable to or binding upon such Person or any
of its property or to which such Person or any of its
property is subject.
"Responsible Officer": as to any Person, the chief
executive officer and the president of such Person or, with
respect to financial matters, the principal financial
officer or chief executive officer of such Person. The
Responsible Officer of DeepFlex General Partner shall be any
manager thereof which is a citizen of the United States of
America.
"Security Agreements": the collective reference to the
Borrower Security Agreement and the DeepFlex Partners
Security Agreement.
"Security Documents": the collective reference to the
Ship Mortgage, the Pledge Agreement, the Security
Agreements, the Subordination Agreement, the Consent, the
Pledged Account Agreement and all other security documents
hereafter delivered to the Administrative Agent or the
Collateral Agent granting a Lien on any asset or assets of
any Person to secure the obligations and liabilities of the
Borrower hereunder and under any of the other Loan Documents
or of DeepFlex Partners under the PIK Notes or to secure any
guarantee of any such obligations and liabilities.
"Ship Mortgage": the collective reference to (a) the
Ship Mortgage and related Deed of Covenants to be executed
and delivered by DeepFlex Partners in favor of the
Collateral Agent pursuant to subsection 9.18, as the same
may be amended, supplemented or otherwise modified from time
to time, in which a mortgage is granted on the Pincay to
secure the payment of the Pledged PIK Notes (b) upon
dissolution of DeepFlex Partners pursuant to subsection 6.16
or otherwise, the Ship Mortgage and related Deed of
Covenants to be executed and delivered by the Borrower in
favor of the Administrative Agent, as the same may be
modified from time to time, in which a mortgage is granted
on the Pincay to secure the payment of the Obligations and
(c) the ship mortgage and related assignment delivered
pursuant to subsection 5.11.
"Single Employer Plan": any Plan which is covered by
Title IV of ERISA, but which is not a Multiemployer Plan.
"Subordination Agreement": the Intercreditor and
Subordination Agreement, dated as of February 16, 1996, by
and among the Subordinated Creditors (as defined therein),
DeepTech, the Borrower and the Administrative Agent,
substantially in the form of Exhibit K.
"Subsidiary": as to any Person, a corporation,
partnership, limited liability company or other entity of
which shares of stock or other ownership interests having
ordinary voting power (other than stock or such other
ownership interests having such power only by reason of the
happening of a contingency) to elect a majority of the board
of directors or other managers of such corporation,
partnership, limited liability company or other entity are
at the time owned, or the management of which is otherwise
controlled, directly or indirectly through one or more
intermediaries, or both, by such Person; provided, that in
the case of the Borrower and except for the financial
condition covenants set forth in subsection 6.1 and related
definitions, the term "Subsidiary" shall also include
DeepFlex Partners. Unless otherwise qualified, all
references to a "Subsidiary" or to "Subsidiaries" in this
Agreement shall refer to a Subsidiary or Subsidiaries of the
Borrower.
"T-75 Litigation": FPS I, Inc. v. T-75 Rig Investment,
L.P. vs. DeepTech International Inc., Deepwater Production
Systems, Inc. and FPS I, Inc., 95th Judicial District Court
of Dallas County, Texas; Cause No. 94-09991.
"Tatham": Thomas P. Tatham.
"Tatham Group": Tatham, his spouse, their children and
trusts controlled by any of the foregoing the sole
beneficiaries of which are any of the foregoing.
"Tatham Guarantee": the Guarantee to be executed and
delivered by Tatham substantially in the form of Exhibit F,
and any Guarantees delivered pursuant to Section 16 thereof
and successors thereto, as the same may be amended,
supplemented or otherwise modified from time to time.
"TOFF": Tatham Offshore, Inc., a Delaware corporation.
"TOFF Bridge Facility": that certain Loan Agreement
between TOFF and the Borrower dated October 1, 1995.
"TOFF Capital Stock": any Capital Stock issued by
TOFF.
"TOFF Rights Offering": the Rights Offering made by
TOFF pursuant to the Registration Statement on Form S-1
(File No. 33-99388) filed by TOFF effective December 26,
1995.
"TOFF Warrants": warrants to purchase securities of
TOFF, including, without limitation, the TOFF Capital Stock.
"Trade Expenses": payables due any Person in respect
of any repairs, supplies, towage, use of dry dock or marine
railway or other "necessaries" as defined in 46 USC Section
31301 in respect of the Pincay.
"Transferee": as defined in subsection 9.6(f).
"Wilrig Indebtedness": Indebtedness under the Wilrig
Loan Documents.
"Wilrig Loan Documents": the collective reference to
(a) the Promissory Note dated November 8, 1994 in the
original principal amount of $9,350,000 by DeepTech in favor
of Wilrig AS ("Wilrig"), (b) the Promissory Note dated
November 8, 1994 in the original principal amount of
$1,650,000 by FPS II in favor of Wilrig, (c) that certain
Contribution Agreement dated November 8, 1994 between
DeepTech and FPS II and (iv) that certain Assignment and
Assumption Agreement dated September 8, 1993 between FPS II
and the Borrower.
1.2 Other Definitional Provisions. (a) Unless
otherwise specified therein, all terms defined in this Agreement
shall have the defined meanings when used in any Notes or any
certificate or other document made or delivered pursuant hereto.
(b) As used herein and in any Notes, and any
certificate or other document made or delivered pursuant hereto,
accounting terms relating to the Borrower and its Subsidiaries
not defined in subsection 1.1 and accounting terms partly defined
in subsection 1.1, to the extent not defined, shall have the
respective meanings given to them under GAAP.
(c) The words "hereof", "herein" and "hereunder" and
words of similar import when used in this Agreement shall refer
to this Agreement as a whole and not to any particular provision
of this Agreement, and Section, subsection, Schedule and Exhibit
references are to this Agreement unless otherwise specified.
(d) The meanings given to terms defined herein shall
be equally applicable to both the singular and plural forms of
such terms.
SECTION 2. AMOUNT AND TERMS OF LOANS
2.1 Loans. Subject to the terms and conditions
hereof, each Lender severally agrees to make a term loan (a
"Loan") to the Borrower on the Borrowing Date in an amount not to
exceed the amount of the Commitment of such Lender then in
effect.
2.2 Procedure for Loan Borrowing. The Borrower shall
give the Administrative Agent irrevocable notice (which notice
must be received by the Administrative Agent prior to 3:00 P.M.,
New York City time, one Business Day prior to the Borrowing Date,
requesting that the Lenders make the Loans on the Borrowing Date
and specifying the amount to be borrowed. Upon receipt of such
notice the Administrative Agent shall promptly notify each Lender
thereof. In such case, not later than 11:00 A.M. on the
Borrowing Date each Lender shall make available to the
Administrative Agent at its office specified in subsection 9.2
the amount of such Lender's pro rata share of such borrowing in
immediately available funds. The Administrative Agent shall on
such date credit the account of the Borrower on the books of such
office of the Administrative Agent with the aggregate of the
amounts made available to the Administrative Agent by the Lenders
and in like funds as received by the Administrative Agent.
2.3 Repayment of Loans; Evidence of Debt. (a) The
Borrower hereby unconditionally promises to pay to the
Administrative Agent for the account of each Lender the principal
amount of the Loan of such Lender, in consecutive monthly
installments, payable on the first day of each calendar month,
commencing on November 1, 1996 (or the then unpaid principal
amount of such Loan, on the date that the Loans become due and
payable pursuant to Section 7). The amount of each such monthly
installment shall be equal to Excess Cash Flow for the preceding
calendar month. All amounts remaining outstanding under the
Loans and all other amounts due and owing under this Agreement
and any other Loan Document shall be due in full on the Final
Maturity Date. The Borrower hereby further agrees to pay
interest on the unpaid principal amount of the Loans from time to
time outstanding from the date hereof until payment in full
thereof at the rates per annum, and on the dates, set forth in
subsection 2.5.
(b) Each Lender shall maintain in accordance with its
usual practice an account or accounts evidencing indebtedness of
the Borrower to such Lender resulting from each Loan of such
Lender from time to time, including the amounts of principal and
interest payable and paid to such Lender from time to time under
this Agreement.
(c) The Administrative Agent shall maintain the
Register pursuant to subsection 9.6(d), and a subaccount therein
for each Lender, in which shall be recorded (i) the amount of
each Loan made hereunder, (ii) the amount of any principal or
interest due and payable or to become due and payable from the
Borrower to each Lender hereunder and (iii) both the amount of
any sum received by the Administrative Agent hereunder from the
Borrower and each Lender's share thereof.
(d) The entries made in the Register and the accounts
of each Lender maintained pursuant to subsection 2.3(b) shall, to
the extent permitted by applicable law, be prima facie evidence
of the existence and amounts of the obligations of the Borrower
therein recorded; provided, however, that the failure of any
Lender or the Administrative Agent to maintain the Register or
any such account, or any error therein, shall not in any manner
affect the obligation of the Borrower to repay (with applicable
interest) the Loans made to such Borrower by such Lender in
accordance with the terms of this Agreement.
(e) The Borrower agrees that, upon the request to the
Administrative Agent by any Lender, the Borrower will execute and
deliver to such Lender a promissory note of the Borrower
evidencing the Loan of such Lender, substantially in the form of
Exhibit A with appropriate insertions as to date and principal
amount (a "Note").
2.4 Mandatory Prepayment; Optional Prepayments. (a)
Mandatory Prepayments On September 1, 1996, the Borrower shall
prepay the Loans, in an amount equal to the lesser of (i)
$6,000,000 minus the aggregate amount paid by the Borrower in
cash (and not funded by DeepTech or any other source) as (A) the
purchase price of TOFF Capital Stock issued pursuant to the
exercise of the TOFF Warrants or (B) consideration for any other
Permitted Investments from the Closing Date through the close of
business on September 1, 1996 and (ii) $2,000,000, in either case
together with accrued interest and fees to the date of prepayment
and all other amounts payable hereunder.
(b) Mandatory Prepayments from Asset Sales. (i)
Proceeds from the sale, assignment, lease or other disposition of
Collateral (including insurance and condemnation proceeds) shall
be applied solely to prepay the Loans on each date of receipt of
such proceeds, together with accrued interest and fees to the
date of prepayment and all other amounts payable hereunder,
provided that proceeds from the sale of the Pincay shall be used
to prepay the Loans and the Highwood PIK Notes ratably based on
the respective principal amounts of the Pledged PIK Notes and the
Highwood PIK Notes. (ii) Proceeds from the sale of any assets of
the Borrower not constituting Collateral shall be used to repay
any Indebtedness incurred in connection with the acquisition of
such assets. Any such proceeds remaining after repayment of any
such Indebtedness shall be applied to prepay Indebtedness of the
Borrower, subject to the Subordination Agreement, or shall be
reinvested in the business of the Borrower.
(c) Optional Prepayments. The Borrower may at any
time and from time to time prepay the Loans, in whole or in part,
without premium or penalty, upon at least four Business Days'
irrevocable notice to the Administrative Agent, specifying the
date and amount of prepayment. Upon receipt of any such notice
the Administrative Agent shall promptly notify each Lender
thereof. If any such notice is given, the amount specified in
such notice shall be due and payable on the date specified
therein, together with any amounts payable pursuant to subsection
2.10 and accrued interest to such date on the amount prepaid.
Partial prepayments of the Loans shall be applied to the
installments of principal thereof in the inverse order of their
scheduled maturities. Partial prepayments pursuant to this
paragraph (c) shall be in an aggregate principal amount of
$1,000,000 or a whole multiple thereof.
(d) No Reborrowing. Amounts prepaid pursuant to this
Section 2.4 may not be reborrowed.
2.5 Interest Rate and Payment Dates. (a) The Loan of
each Lender shall bear interest for each day at a rate per annum
equal to the interest rate set forth in its Note.
(b) During the continuation of any Event of Default,
the principal of the Loans and any overdue interest, commitment
fee or other amount shall bear interest at a rate per annum of 3%
over the rate otherwise applicable thereto, in each case from the
date of commencement such Event of Default (as well after as
before judgment).
(c) Interest shall be payable in arrears on each
Interest Payment Date, provided that interest accruing pursuant
to paragraph (b) of this subsection shall be payable from time to
time on demand.
2.6 Computation of Interest and Fees. Interest shall
be calculated on the basis of a 360 day year for the actual days
elapsed.
2.7 Pro Rata Treatment and Payments. (a) Each
payment (including each prepayment) by the Borrower on account of
principal of and interest on the Loans shall be made pro rata
according to the respective outstanding principal amounts of the
Loans then held by the Lenders, provided that interest payable to
each Lender shall be based on the rate set forth in such Lender's
Note. All payments (including prepayments) to be made by the
Borrower hereunder, whether on account of principal, interest,
fees or otherwise, shall be made without set off or counterclaim
and shall be made prior to 12:00 Noon, New York City time, on the
due date thereof to the Administrative Agent, for the account of
the Lenders, at the Administrative Agent's office specified in
subsection 9.2, in Dollars and in immediately available funds.
The Administrative Agent shall distribute such payments to the
Lenders promptly upon receipt in like funds as received. If any
payment hereunder becomes due and payable on a day other than a
Business Day, such payment shall be extended to the next
succeeding Business Day, and, with respect to payments of
principal, interest thereon shall be payable at the then
applicable rate during such extension.
(b) Unless the Administrative Agent shall have been
notified in writing by any Lender prior to the borrowing that
such Lender will not make the amount that would constitute its
Commitment Percentage of the borrowing available to the
Administrative Agent, the Administrative Agent may assume that
such Lender is making such amount available to the Administrative
Agent, and the Administrative Agent may, in reliance upon such
assumption, make available to the Borrower a corresponding
amount. If such amount is not made available to the
Administrative Agent by the required time on the Borrowing Date
therefor, such Lender shall pay to the Administrative Agent, on
demand, such amount with interest thereon at a rate equal to the
daily average Federal Funds Effective Rate for the period until
such Lender makes such amount immediately available to the
Administrative Agent. A certificate of the Administrative Agent
submitted to any Lender with respect to any amounts owing under
this subsection shall be conclusive in the absence of manifest
error. If such Lender's Commitment Percentage of the borrowing
is not made available to the Administrative Agent by such Lender
within three Business Days of the Borrowing Date, the
Administrative Agent shall also be entitled to recover such
amount with interest thereon, on demand, from the Borrower.
2.8 Requirements of Law. (a) If the adoption of or
any change in any Requirement of Law or in the interpretation or
application thereof or compliance by any Lender with any request
or directive (whether or not having the force of law) from any
central bank or other Governmental Authority made subsequent to
the date hereof:
(i) shall subject any Lender to any tax of any kind
whatsoever with respect to this Agreement or any Note or
change the basis of taxation of payments to such Lender in
respect thereof (except for Non-Excluded Taxes covered by
subsection 2.9 and changes in the rate of tax on the overall
net income of such Lender);
(ii) shall impose, modify or hold applicable any
reserve, special deposit, compulsory loan or similar
requirement against assets held by, deposits or other
liabilities in or for the account of, advances, loans or
other extensions of credit by, or any other acquisition of
funds by, any office of such Lender; or
(iii) shall impose on such Lender any other
condition;
and the result of any of the foregoing is to increase the cost to
such Lender, by an amount which such Lender deems to be material,
of making, converting into, continuing or maintaining Loans or to
reduce any amount receivable hereunder in respect thereof, then,
in any such case, the Borrower shall promptly pay such Lender
such additional amount or amounts as will compensate such Lender
for such increased cost or reduced amount receivable.
(b) If any Lender shall have determined that the
adoption of or any change in any Requirement of Law regarding
capital adequacy or in the interpretation or application thereof
or compliance by such Lender or any corporation controlling such
Lender with any request or directive regarding capital adequacy
(whether or not having the force of law) from any Governmental
Authority made subsequent to the date hereof shall have the
effect of reducing the rate of return on such Lender's or such
corporation's capital as a consequence of its obligations
hereunder to a level below that which such Lender or such
corporation could have achieved but for such adoption, change or
compliance (taking into consideration such Lender's or such
corporation's policies with respect to capital adequacy) by an
amount deemed by such Lender to be material, then from time to
time, the Borrower shall promptly pay to such Lender such
additional amount or amounts as will compensate such Lender for
such reduction.
(c) If any Lender becomes entitled to claim any
additional amounts pursuant to this subsection, it shall notify
the Borrower (with a copy to the Administrative Agent) of the
event by reason of which it has become so entitled. A
certificate as to any additional amounts payable pursuant to this
subsection submitted by such Lender to the Borrower (with a copy
to the Administrative Agent) shall be conclusive in the absence
of manifest error. The agreements in this subsection shall
survive the termination of this Agreement and the payment of the
Loans and all other amounts payable hereunder.
2.9 Taxes. (a) All payments made by the Borrower
under this Agreement and any Notes shall be made free and clear
of, and without deduction or withholding for or on account of,
any present or future income, stamp or other taxes, levies,
imposts, duties, charges, fees, deductions or withholdings, now
or hereafter imposed, levied, collected, withheld or assessed by
any Governmental Authority, excluding net income taxes and
franchise taxes (imposed in lieu of net income taxes) imposed on
the Administrative Agent or any Lender as a result of a present
or former connection between the Administrative Agent or such
Lender and the jurisdiction of the Governmental Authority
imposing such tax or any political subdivision or taxing
authority thereof or therein (other than any such connection
arising solely from the Administrative Agent or such Lender
having executed, delivered or performed its obligations or
received a payment under, or enforced, this Agreement or any
Note). If any such non-excluded taxes, levies, imposts, duties,
charges, fees deductions or withholdings ("Non-Excluded Taxes")
are required to be withheld from any amounts payable to the
Administrative Agent or any Lender hereunder or under any Note,
the amounts so payable to the Administrative Agent or such Lender
shall be increased to the extent necessary to yield to the
Administrative Agent or such Lender (after payment of all Non-
Excluded Taxes) interest or any such other amounts payable
hereunder at the rates or in the amounts specified in this
Agreement, provided, however, that the Borrower shall not be
required to increase any such amounts payable to any Lender that
is not organized under the laws of the United States of America
or a state thereof if such Lender fails to comply with the
requirements of paragraph (b) of this subsection. Whenever any
Non-Excluded Taxes are payable by the Borrower, as promptly as
possible thereafter the Borrower shall send to the Administrative
Agent for its own account or for the account of such Lender, as
the case may be, a certified copy of an original official receipt
received by the Borrower showing payment thereof. If the
Borrower fails to pay any Non-Excluded Taxes when due to the
appropriate taxing authority or fails to remit to the
Administrative Agent the required receipts or other required
documentary evidence, the Borrower shall indemnify the
Administrative Agent and the Lenders for any incremental taxes,
interest or penalties that may become payable by the
Administrative Agent or any Lender as a result of any such
failure. The agreements in this subsection shall survive the
termination of this Agreement and the payment of the Loans and
all other amounts payable hereunder.
(b) Each Lender that is not incorporated under the
laws of the United States of America or a state thereof shall:
(i) deliver to the Borrower and the Administrative
Agent (A) two duly completed copies of United States
Internal Revenue Service Form 1001 or 4224, or successor
applicable form, as the case may be, and (B) an Internal
Revenue Service Form W-8 or W-9, or successor applicable
form, as the case may be;
(ii) deliver to the Borrower and the Administrative
Agent two further copies of any such form or certification
on or before the date that any such form or certification
expires or becomes obsolete and after the occurrence of any
event requiring a change in the most recent form previously
delivered by it to the Borrower; and
(iii) obtain such extensions of time for filing and
complete such forms or certifications as may reasonably be
requested by the Borrower or the Administrative Agent;
unless in any such case 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 Lender from duly completing and delivering any such form
with respect to it and such Lender so advises the Borrower and
the Administrative Agent. Such Lender shall certify (i) in the
case of a Form 1001 or 4224, that it is entitled to receive
payments under this Agreement without deduction or withholding of
any United States federal income taxes and (ii) in the case of a
Form W-8 or W-9, that it is entitled to an exemption from United
States backup withholding tax. Each Person that shall become a
Lender or a Participant pursuant to subsection 9.6 shall, upon
the effectiveness of the related transfer, be required to provide
all of the forms and statements required pursuant to this
subsection, provided that in the case of a Participant such
Participant shall furnish all such required forms and statements
to the Lender from which the related participation shall have
been purchased.
2.10 Agent's Fee. The Borrower shall pay to the Agent
for its own account an annual agent's fee of $10,000, payable on
each of the Closing Date and each anniversary thereof. Such fee
shall not be refundable once paid.
2.11 Value of Warrants. The parties agree that as
between the Loans made on the Closing Date and the DeepTech
Warrants issued at the Closing Date, the value of the Loans is
$11,912,000 and the value of the DeepTech Warrants is $88,000.
SECTION 3. REPRESENTATIONS AND WARRANTIES
To induce the Administrative Agent and the Lenders to
enter into this Agreement and to make the Loans, the Borrower
hereby represents and warrants to the Administrative Agent and
each Lender that:
3.1 Financial Condition. (a) The unaudited
consolidated balance sheets of the Borrower and its consolidated
Subsidiaries as at September 30, 1995 and December 31, 1995 and
the related unaudited consolidated statements of income and of
cash flows for the three- and six-month periods ended on such
dates, certified by a Responsible Officer, copies of which have
heretofore been furnished to each Lender, are complete and
correct and present fairly the consolidated financial condition
of the Borrower and its consolidated Subsidiaries as at such
dates, and the consolidated results of their operations and their
consolidated cash flows for the three- and six-month periods then
ended (subject to normal year-end audit adjustments). All such
financial statements, including the related schedules and notes
thereto, have been prepared in accordance with GAAP applied
consistently throughout the periods involved (except as approved
by such accountants or Responsible Officer, as the case may be,
and as disclosed therein). Neither the Borrower nor any of its
consolidated Subsidiaries had, at the date of the most recent
balance sheet referred to above, any material Guarantee
Obligation, contingent liability or liability for taxes, or any
long-term lease or unusual forward or long-term commitment,
including, without limitation, any interest rate or foreign
currency swap or exchange transaction, which is not reflected in
the foregoing statements or in the notes thereto. During the
period from December 31, 1995 to and including the date hereof
there has been no sale, transfer or other disposition by the
Borrower or any of its consolidated Subsidiaries of any material
part of its business or property and no purchase or other
acquisition of any business or property (including any capital
stock of any other Person) material in relation to the
consolidated financial condition of the Borrower and its
consolidated Subsidiaries at December 31, 1995, except as set
forth on Schedule 3.1.
(b) The unaudited balance sheets of DeepFlex Partners
as at September 30, 1995 and December 31, 1995 and the related
unaudited statements of income and of cash flows for the nine-
month period and fiscal year ended on such dates, certified by a
Responsible Officer, copies of which have heretofore been
furnished to each Lender, are complete and correct and present
fairly the financial condition of DeepFlex Partners as at such
dates, and the results of its operations and its consolidated
cash flows for the nine-month period and fiscal year then ended
(subject to normal year-end audit adjustments in the case of the
September 30, 1995 financial statements). All such financial
statements, including the related schedules and notes thereto,
have been prepared in accordance with GAAP applied consistently
throughout the periods involved (except as approved by such
accountants or Responsible Officer, as the case may be, and as
disclosed therein). DeepFlex Partners did not have, at the date
of the most recent balance sheet referred to above, any material
Guarantee Obligation, contingent liability or liability for
taxes, or any long-term lease or unusual forward or long-term
commitment, including, without limitation, any interest rate or
foreign currency swap or exchange transaction, which is not
reflected in the foregoing statements or in the notes thereto.
During the period from December 31, 1995 to and including the
date hereof there has been no sale, transfer or other disposition
by DeepFlex Partners of any material part of its business or
property and no purchase or other acquisition of any business or
property (including any Capital Stock of any other Person)
material in relation to the consolidated financial condition of
DeepFlex Partners at December 31, 1995.
(c) DeepTech has provided the Lenders copies of
DeepTech's most recent annual report on Form 10-K and quarterly
report on Form 10-Q filed since the date of DeepTech's most
recent annual report on Form 10-K. TOFF has provided the Lenders
copies of TOFF's most recent annual report on Form 10-K and
quarterly report on Form 10-Q filed since the date of TOFF's most
recent annual report on Form 10-K. As of the date thereof, the
information contained in such disclosure documents does not
contain any untrue statement of a material fact and does not omit
to state a material fact necessary in order to make the
statements made therein, in the light of the circumstances under
which they were made, misleading.
(d) The representations and warranties set forth in
the preceding paragraphs (a)-(c) with respect to the financial
statements and annual reports at and for the period ending
December 31, 1995 shall not be deemed to be made by the Borrower
until such financial statements and annual reports are delivered
to the Lenders. The Borrower hereby agrees to deliver such
financial statements and annual reports no later than February
29, 1996.
(e) The DeepFlex General Partner does not have any
outstanding Indebtedness as of the Closing Date.
3.2 No Change. (a) Since December 31, 1995 and
September 30, 1995 there has been no development or event which
has had or could have a Material Adverse Effect, and (b) during
the period from December 31, 1995 and September 30, 1995 to and
including the date hereof no dividends or other distributions
have been declared, paid or made upon the Capital Stock of the
Borrower nor has any of the Capital Stock of the Borrower been
redeemed, retired, purchased or otherwise acquired for value by
the Borrower or any of its Subsidiaries.
3.3 Corporate Existence; Compliance with Law. Each of
the Borrower and its Subsidiaries (a) is duly organized, validly
existing and, in the case of the Borrower and its corporate
Subsidiaries, in good standing under the laws of the jurisdiction
of its organization, (b) has the power and authority, and the
legal right, to own and operate its property, to lease the
property it operates as lessee and to conduct the business in
which it is currently engaged, (c) is duly qualified as a foreign
corporation and, in the case of the Borrower and its corporate
Subsidiaries, in good standing under the laws of each
jurisdiction wherein the failure to be so qualified and in good
standing could have a Material Adverse Effect and (d) is in
compliance with all Requirements of Law except to the extent that
the failure to comply therewith could not, in the aggregate, have
a Material Adverse Effect.
3.4 Corporate Power; Authorization; Enforceable
Obligations. Each of the Loan Parties has the power and
authority, and the legal right, to make, deliver and perform the
Loan Documents to which it is a party and, in the case of the
Borrower, to borrow hereunder, and has taken all necessary
corporate action to authorize, in the case of the Borrower, the
borrowings on the terms and conditions of this Agreement and any
Notes, and to authorize the execution, delivery and performance
of the Loan Documents to which it is a party. No consent or
authorization of, filing with, notice to or other act by or in
respect of, any Governmental Authority or any other Person is
required in connection with the borrowings hereunder or with the
execution, delivery, performance, validity or enforceability of
the Loan Documents other than filings necessary to record Liens
under the Security Documents or such as have already been
obtained. This Agreement has been, and each other Loan Document
to which it is a party will be, duly executed and delivered on
behalf of each Loan Party thereto. This Agreement constitutes,
and each other Loan Document to which any Loan Party is a party
when executed and delivered will constitute, a legal, valid and
binding obligation of such Loan Party enforceable against such
Loan Party in accordance with its terms, subject to the effects
of bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and other similar laws relating to or affecting
creditors' rights generally, general equitable principles
(whether considered in a proceeding in equity or at law) and an
implied covenant of good faith and fair dealing.
3.5 No Legal Bar. The execution, delivery and
performance of the Loan Documents to which any Loan Party is a
party, the borrowings hereunder and the use of the proceeds
thereof will not violate any Requirement of Law (the violation of
which could reasonably be expected to have a Material Adverse
Effect) or Contractual Obligation of such Loan Party and will not
result in, or require, the creation or imposition of any Lien on
any of its or their respective properties or revenues pursuant to
any such Requirement of Law or Contractual Obligation.
3.6 No Material Litigation. No litigation,
investigation or proceeding of or before any arbitrator or
Governmental Authority is pending or, to the knowledge of the
Borrower, threatened by or against any Loan Party or against any
of its or their respective properties or revenues except as
disclosed in Schedule 3.6, none of which (a) is with respect to
any of the Loan Documents or any of the transactions contemplated
hereby or thereby, or (b) could have a Material Adverse Effect.
3.7 No Default. No Loan Party is in default under or
with respect to any of its Contractual Obligations in any respect
which could have a Material Adverse Effect. No Default or Event
of Default has occurred and is continuing.
3.8 Ownership of Property; Liens. Each of the
Borrower and its Subsidiaries has good record and marketable
title in fee simple to (including, without limitation, the
Pincay), or a valid leasehold interest in, all its real property,
and good title to, or a valid leasehold interest in, all its
other property, and none of such property is subject to any Lien
except as permitted by subsection 6.3.
3.9 Intellectual Property. The Borrower and each of
its Subsidiaries owns, or is licensed to use, all trademarks,
tradenames, copyrights, technology, know-how and processes
necessary for the conduct of its business as currently conducted
except for those the failure to own or license which could not
have a Material Adverse Effect (the "Intellectual Property"). No
claim has been asserted and is pending by any Person challenging
or questioning the use of any such Intellectual Property or the
validity or effectiveness of any such Intellectual Property, nor
does the Borrower know of any valid basis for any such claim.
The use of such Intellectual Property by the Borrower and its
Subsidiaries does not infringe on the rights of any Person,
except for such claims and infringements that, in the aggregate,
do not have a Material Adverse Effect.
3.10 No Burdensome Restrictions. No Requirement of
Law or Contractual Obligation of the Borrower or any of its
Subsidiaries has a Material Adverse Effect.
3.11 Taxes. Each of the Borrower and its Subsidiaries
has filed or caused to be filed all tax returns which, to the
knowledge of the Borrower, are required to be filed and has paid
all taxes shown to be due and payable on said returns or on any
assessments made against it or any of its property and all other
taxes, fees or other charges imposed on it or any of its property
by any Governmental Authority (other than any the amount or
validity of which are currently being contested in good faith by
appropriate proceedings and with respect to which reserves in
conformity with GAAP have been provided on the books of the
Borrower or its Subsidiaries, as the case may be); no tax Lien
has been filed, and, to the knowledge of the Borrower, no claim
is being asserted, with respect to any such tax, fee or other
charge.
3.12 Federal Regulations. No part of the proceeds of
any Loans will be used for "purchasing" or "carrying" any "margin
stock" within the respective meanings of each of the quoted terms
under Regulation G or Regulation U of the Board of Governors of
the Federal Reserve System as now and from time to time hereafter
in effect. If requested by any Lender or the Administrative
Agent, the Borrower will furnish to the Administrative Agent and
each Lender a statement to the foregoing effect in conformity
with the requirements of FR Form G-1 or FR Form U-1 referred to
in said Regulation G or Regulation U, as the case may be.
3.13 ERISA. Neither a Reportable Event nor an
"accumulated funding deficiency" (within the meaning of
Section 412 of the Code or Section 302 of ERISA) has occurred
during the five-year period prior to the date on which this
representation is made or deemed made with respect to any Plan,
and each Plan has complied in all material respects with the
applicable provisions of ERISA and the Code. No termination of a
Single Employer Plan has occurred, and no Lien in favor of the
PBGC or a Plan has arisen, during such five-year period. The
present value of all accrued benefits under each Single Employer
Plan (based on those assumptions used to fund such Plans) did
not, as of the last annual valuation date prior to the date on
which this representation is made or deemed made, exceed the
value of the assets of such Plan allocable to such accrued
benefits. Neither the Borrower nor any Commonly Controlled
Entity has had a complete or partial withdrawal from any
Multiemployer Plan, and neither the Borrower nor any Commonly
Controlled Entity would become subject to any liability under
ERISA if the Borrower or any such Commonly Controlled Entity were
to withdraw completely from all Multiemployer Plans as of the
valuation date most closely preceding the date on which this
representation is made or deemed made. No such Multiemployer
Plan is in Reorganization or Insolvent. None of DeepTech or any
of its Subsidiaries maintains, or is subject to any liabilities
or obligations under, any Plan.
3.14 Investment Company Act; Other Regulations. The
Borrower is not an "investment company", or a company
"controlled" by an "investment company", within the meaning of
the Investment Company Act of 1940, as amended. The Borrower is
not subject to regulation under any Federal or State statute or
regulation (other than Regulation X of the Board of Governors of
the Federal Reserve System) which limits its ability to incur
Indebtedness.
3.15 Subsidiaries. The following constitute all the
Subsidiaries of the Borrower at the date hereof: DeepFlex
Partners, FPS II and FPS III. At the date hereof the Borrower
owns 50% of the Capital Stock of Deepwater Drillers, L.L.C., a
Delaware liability company, free and clear of Liens.
3.16 Purpose of Loans. The proceeds of the Loans
shall be used by the Borrower (i) to refinance up to $5,000,000
the principal of and interest on Indebtedness described on
Schedule 3.16, (ii) to acquire preferred stock of TOFF pursuant
to the TOFF Rights Offering, (iii) to fund the maintenance,
preservation, upgrading and mobilization of the Pincay,
including, without limitation, the payment of $1,000,000 to the
Sedco Forex Division of Schlumberger Technology Corporation on or
before February 29, 1996 as set forth in the cash projections
delivered pursuant to subsection 4.1(i) and (iv) to pay fees and
expenses incurred in connection with the negotiation, preparation
and execution of this Agreement and the other Loan Documents, and
the transactions contemplated hereby and thereby and (v) for
working capital and general corporate purposes in the ordinary
course of business. The Borrower represents that Indebtedness of
the Borrower to DeepTech in an aggregate amount at least equal to
the amount of the Loans applied in accordance with clause (i) of
the preceding sentence was cancelled or deemed repaid, as
evidenced by entries on the books and records of DeepTech and the
Borrower, upon the incurrence or assumption by the Borrower of
the Indebtedness described on Schedule 3.16. At closing
approximately $5,082,093 of the proceeds of the Loans will be
held as cash by the Borrower.
3.17 Environmental Matters. Except as set forth on
Schedule 3.17:
(a) The facilities and properties owned, leased or
operated by the Borrower or any of its Subsidiaries (the
"Properties") do not contain, and have not previously
contained, any Materials of Environmental Concern in amounts
or concentrations which (i) constitute or constituted a
violation of, or (ii) could reasonably be expected to give
rise to liability under, any Environmental Law.
(b) The Properties and all operations at the
Properties are in compliance, and have in the last five
years been in compliance, with all applicable Environmental
Laws, and there is no contamination at, under or about the
Properties or violation of any Environmental Law with
respect to the Properties or the business operated by the
Borrower or any of its Subsidiaries (the "Business") which
could interfere with the continued operation of the
Properties or materially impair the fair saleable value
thereof.
(c) Neither the Borrower nor any of its Subsidiaries
has received any notice of violation, alleged violation, non-
compliance, liability or potential liability regarding
environmental matters or compliance with Environmental Laws
with regard to any of the Properties or the Business, nor
does the Borrower have knowledge or reason to believe that
any such notice will be received or is being threatened.
(d) Materials of Environmental Concern have not been
transported or disposed of from the Properties in violation
of, or in a manner or to a location which could reasonably
be expected to give rise to liability under, any
Environmental Law, nor have any Materials of Environmental
Concern been generated, treated, stored or disposed of at,
on or under any of the Properties in violation of, or in a
manner that could reasonably be expected to give rise to
liability under, any applicable Environmental Law.
(e) No judicial proceeding or governmental or
administrative action is pending or, to the knowledge of the
Borrower, threatened, under any Environmental Law to which
the Borrower or any Subsidiary is or will be named as a
party with respect to the Properties or the Business, nor
are there any consent decrees or other decrees, consent
orders, administrative orders or other orders, or other
administrative or judicial requirements outstanding under
any Environmental Law with respect to the Properties or the
Business.
(f) There has been no release or threat of release of
Materials of Environmental Concern at or from the
Properties, or arising from or related to the operations of
the Borrower or any Subsidiary in connection with the
Properties or otherwise in connection with the Business, in
violation of or in amounts or in a manner that could
reasonably be expected to give rise to liability under
Environmental Laws.
(g) Each of the representations and warranties set
forth in subsections 3.17(a) through (f) is true and correct
with respect to the Pincay.
3.18 Wholly-Owned Subsidiary. The Borrower is a
wholly-owned subsidiary of DeepTech.
3.19 Partnership Interests. The Borrower is a limited
partner in DeepFlex Partners and holds 50% of the total limited
partnership interests therein, free of Liens other than Liens
created under the Pledge Agreement. DeepFlex General Partner is
the general partner of DeepFlex Partners. The Borrower owns a
50% membership interest in DeepFlex General Partner, free of
Liens other than Liens created under the Pledge Agreement.
3.20 Solvency. (a) Immediately following the making
of each Loan made on the Closing Date and after giving effect to
the application of the proceeds thereof, (i) the fair value of
the assets of each of the Borrower and DeepFlex Partners, at a
fair valuation, will exceed the debts and liabilities, direct,
subordinated, contingent or otherwise, of the Borrower and
DeepFlex Partners respectively; (ii) the present fair saleable
value of the property of each of the Borrower will be greater
than the amount that will be required to pay the probable
liability of the Borrower and DeepFlex Partners respectively on
their debts and other liabilities, direct, subordinated,
contingent or otherwise, as such debts and other liabilities
become absolute and matured; (iii) each of the Borrower and
DeepFlex Partners will be able to pay its debts and liabilities,
direct, subordinated, contingent or otherwise, as such debts and
liabilities become absolute and matured; and (iv) each of the
Borrower and DeepFlex Partners will not have unreasonably small
capital with which to conduct the businesses in which they are
engaged as such businesses are now conducted and are proposed to
be conducted following the Closing Date.
(b) Neither the Borrower nor DeepFlex Partners intends
to, or believes that it will, incur debts beyond its ability to
pay such debts as they mature, taking into account the timing and
amounts of cash to be received by it and the timing and amounts
of cash to be payable on or in respect of its Indebtedness.
3.21 Other Indebtedness. The Highwood PIK Notes, the
Highwood Guaranty, the Highwood Loan Agreement (and the notes
delivered pursuant thereto), the Highwood Security Agreement, the
Highwood Master Agreement and the "Warrant Agreement" and any
other "Transaction Documents" (both as defined in the Highwood
Master Agreement) constitute the only agreements and
understandings with respect to all Indebtedness and other
obligations of the Borrower and its Affiliates to Highwood. The
Wilrig Loan Documents constitute the only agreements and
understandings with respect to all Indebtedness and other
obligations of the Borrower and its Affiliates to Wilrig.
SECTION 4. CONDITIONS PRECEDENT
4.1 Conditions to Loans. The agreement of each Lender
to make the Loan requested to be made by it is subject to the
satisfaction, immediately prior to or concurrently with the
making of such Loan on the Closing Date, of the following
conditions precedent:
(a) Loan Documents. The Administrative Agent shall
have received (i) this Agreement, executed and delivered by
a duly authorized officer of Borrower, with a counterpart
for each Lender, (ii) the Pledge Agreement, executed and
delivered by a duly authorized officer of the Borrower, with
a counterpart or a conformed copy for each Lender, (iii) the
Tatham Guarantee, notarized and executed and delivered by
Tatham with a counterpart or a conformed copy for each
Lender, (iv) the Security Agreements, each executed and
delivered by a duly authorized officer of the Loan Party
party thereto, with a counterpart or a conformed copy for
each Lender, (v) the Consent, executed and delivered by a
duly authorized officer of each Loan Party party thereto,
with a counterpart or a conformed copy for each Lender, (vi)
the DeepTech Warrant Agreements, executed and delivered by a
duly authorized officer of the party thereto, with a
counterpart for each Lender, (vii) the Subordination
Agreement, executed and delivered by a duly authorized
officer of each Loan Party party thereto, with a counterpart
or a conformed copy for each Lender, and (viii) the Pledged
Account Agreement, executed and delivered by a duly
authorized officer of each Loan Party party thereto and the
Pledged Account Bank, with a counterpart or conformed copy
for each Lender.
(b) Related Agreements. The Lenders shall have
received true and correct copies, certified as to
authenticity by the Borrower, of the Charter, the
Partnership Agreement, the Limited Liability Company
Agreement of DeepFlex General Partner dated March 24, 1995,
the Highwood Loan Documents and the Wilrig Loan Documents
and the DeepTech Notes, the Guaranteed Notes and the
Subordinated Guarantee (as such terms are defined in the
Subordination Agreement) and such other documents or
instruments as may be reasonably requested by any Lender to
which the Borrower DeepTech or its or their Subsidiaries may
be a party.
(c) Borrowing Certificate. The Administrative Agent
shall have received, with a counterpart for each Lender, a
certificate of the Borrower, dated the Closing Date,
substantially in the form of Exhibit G, with appropriate
insertions and attachments, satisfactory in form and
substance to the Administrative Agent, executed by the
President or any Vice President and the Secretary or any
Assistant Secretary of the Borrower.
(d) Corporate Proceedings of the Borrower. The
Administrative Agent shall have received, with a counterpart
for each Lender, a copy of the resolutions, in form and
substance satisfactory to the Administrative Agent, of the
Board of Directors of the Borrower authorizing (i) the
execution, delivery and performance of this Agreement and
the other Loan Documents to which it is a party, (ii) the
borrowings contemplated hereunder and (iii) the granting by
it of the Liens created pursuant to the Borrower Security
Documents, certified by the Secretary or an Assistant
Secretary of the Borrower as of the Closing Date, which
certificate shall be in form and substance satisfactory to
the Administrative Agent and shall state that the
resolutions thereby certified have not been amended,
modified, revoked or rescinded.
(e) Borrower Incumbency Certificate. The
Administrative Agent shall have received, with a counterpart
for each Lender, a Certificate of the Borrower, dated the
Closing Date, as to the incumbency and signature of the
officers of the Borrower executing any Loan Document
satisfactory in form and substance to the Administrative
Agent, executed by the President or any Vice President and
the Secretary or any Assistant Secretary of the Borrower.
(f) Partnership Proceedings of DeepFlex Partners. The
Administrative Agent shall have received, with a counterpart
for each Lender, a copy of the resolutions, in form and
substance satisfactory to the Administrative Agent, of the
Management Committee of DeepFlex General Partner on behalf
of DeepFlex Partners, authorizing (i) the execution,
delivery and performance of the Loan Documents to which it
is a party and (ii) the granting by it of the Liens created
pursuant to the Loan Documents to which it is a party,
certified by a manager of DeepFlex Partners as of the
Closing Date, which certificate shall be in form and
substance satisfactory to the Administrative Agent and shall
state that the resolutions thereby certified have not been
amended, modified, revoked or rescinded.
(g) DeepFlex Partners Incumbency Certificate. The
Administrative Agent shall have received, with a counterpart
for each Lender, a certificate of DeepFlex Partners, dated
the Closing Date, as to the incumbency and signature of the
managers of DeepFlex General Partner, executing any Loan
Document on behalf of DeepFlex Partners, satisfactory in
form and substance to the Administrative Agent, executed by
two managers of DeepFlex Partners.
(h) Organizational Documents. The Administrative
Agent shall have received, with a counterpart for each
Lender, true and complete copies of the certificate of
incorporation, by-laws, charter, partnership agreement or
limited liability company agreement, as the case may be,
each Loan Party, certified as of the Closing Date as
complete and correct copies thereof by the Secretary or an
Assistant Secretary of such Loan Party.
(i) Projections. The Lenders shall have received cash
projections of each of the Borrower and DeepFlex Partners
for each month from the Closing Date through July 1, 1997,
certified by a Responsible Officer of the Borrower as being
prepared in good faith and using reasonable assumptions,
which projections shall be satisfactory to the Lenders.
(j) Fees; Warrants. (i) The Administrative Agent
shall have received an arrangement fee of $480,000, such fee
to be paid to each Lender on the Closing Date based on its
Commitment Percentage.
(ii) The Administrative Agent shall have received an
agent's fee of $10,000 for its own account, as contemplated
by subsection 2.10.
(iii) DeepTech shall have delivered a DeepTech Warrant
Agreement and the DeepTech Warrants issued thereunder to
each Lender, entitling such Lender to a number of DeepTech
Warrants equal to its Commitment Percentage of 2,666,667.
(k) Legal Opinions. The Administrative Agent shall
have received, with a counterpart for each Lender, the
following executed legal opinions:
(i) the executed legal opinion of
Akin, Gump, Strauss, Hauer & Feld, L.L.P., counsel to
the Borrower and the other Loan Parties, substantially
in the form of Exhibit H-1; and
(ii) the executed legal opinion of
Akin, Gump, Strauss, Hauer & Feld, L.L.P., counsel to
the Borrower and DeepFlex Partners, substantially in
the form of Exhibit H-2.
Each such legal opinion shall cover such other matters
incident to the transactions contemplated by this Agreement
as the Administrative Agent may reasonably require.
(l) Pledged Securities, etc. The Administrative Agent
shall have received (i) the certificates representing the
shares of certificated Capital Stock pledged pursuant to the
Pledge Agreement, together with an undated stock power for
each such certificate executed in blank by a duly authorized
officer of the pledgor thereof, (ii) the existing PIK Notes
to be pledged pursuant to the Pledge Agreement, each
endorsed in blank by a duly authorized officer of the
pledgor thereof and (iii) a Transaction Statement in the
form of Exhibit A to the Pledge Agreement confirming that
each Subsidiary which is a partnership or limited liability
company has registered the pledge of its Capital Stock
effected by the Pledge Agreement on its books.
(m) Actions to Perfect Liens. The Administrative
Agent shall have received evidence in form and substance
satisfactory to it that all filings, recordings,
registrations and other actions, including, without
limitation, the filing of duly executed financing statements
on form UCC-1, necessary or, in the opinion of the
Administrative Agent, desirable to perfect the Liens created
by the Security Documents shall have been completed.
(n) Lien Searches. The Administrative Agent shall
have received the results of a recent search by a Person
satisfactory to the Administrative Agent, of the Uniform
Commercial Code, judgement and tax lien filings which may
have been filed with respect to personal property of the
Borrower, and the results of such search shall be
satisfactory to the Lenders.
(o) Insurance. The Lenders shall have received
evidence in form and substance satisfactory to the Lenders
that all of the requirements of subsection 5.5 and of
Section 4.2 of the Borrower Security Agreement and Section
4.3 of the Owner Security Agreement have been satisfied.
(p) T-75 Litigation. The T-75 Litigation shall have
been finally settled on terms satisfactory to the Lenders.
(q) No Default. No Default or Event of Default shall
have occurred and be continuing on such date or after giving
effect to the Loans requested to be made on the Closing
Date.
(r) TOFF Rights Offering. The TOFF Rights Offering
shall have been fully subscribed; TOFF shall have received
subscriptions for $12,500,000 pursuant to the TOFF Rights
Offering; and the Lenders shall be satisfied that the
approximately $7,500,000 loan owed by TOFF to the Borrower
under the TOFF Bridge Facility shall have been repaid.
(s) Use of Proceeds. The Lenders shall have received
a certificate of the Borrower setting forth the intended use
of proceeds of the Loans, certified by a Responsible Officer
of the Borrower, which statement shall be satisfactory to
the Lenders.
(t) Additional Matters. All corporate and other
proceedings, and all documents, instruments and other legal
matters in connection with the transactions contemplated by
this Agreement and the other Loan Documents shall be
satisfactory in form and substance to the Administrative
Agent, and the Administrative Agent shall have received such
other documents and legal opinions in respect of any aspect
or consequence of the transactions contemplated hereby or
thereby as it shall reasonably request.
Each borrowing by the Borrower hereunder shall constitute a
representation and warranty by the Borrower as of the date
thereof that the conditions contained in this subsection have
been satisfied.
SECTION 5. AFFIRMATIVE COVENANTS
The Borrower hereby agrees that, so long as any amount
is owing to any Lender or the Administrative Agent hereunder or
under any other Loan Document, the Borrower shall:
5.1 Financial Statements of Borrower. Furnish to
each Lender:
(a) as soon as available, but in any event within
90 days after the end of each fiscal year of the Borrower, a
copy of the consolidated balance sheet of the Borrower and
its consolidated Subsidiaries as at the end of such year and
the related consolidated statements of income and retained
earnings and of cash flows for such year, setting forth in
each case in comparative form the figures for the previous
year, certified by a Responsible Officer as being fairly
stated in all material respects;
(b) as soon as available, but in any event not later
than 52 days after the end of each of the first three
quarterly periods of each fiscal year of the Borrower, the
unaudited consolidated balance sheet of the Borrower and its
consolidated Subsidiaries as at the end of such quarter and
the related unaudited consolidated statements of income and
retained earnings and of cash flows of the Borrower and its
consolidated Subsidiaries for such quarter and the portion
of the fiscal year through the end of such quarter, setting
forth in each case in comparative form the figures for the
previous year, certified by a Responsible Officer as being
fairly stated in all material respects (subject to normal
year-end audit adjustments);
(c) as soon as available, but in any event within
90 days after the end of each fiscal year of DeepFlex
Partners, a copy of the balance sheet of DeepFlex Partners
as at the end of such year and the related statements of
income and retained earnings and of cash flows for such
year, setting forth in each case in comparative form the
figures for the previous year, certified by a Responsible
Officer as being fairly stated in all material respects; and
(d) as soon as available, but in any event not later
than 52 days after the end of each of the first three
quarterly periods of each fiscal year of DeepFlex Partners,
the unaudited balance sheet of DeepFlex Partners as at the
end of such quarter and the related unaudited statements of
income and retained earnings and of cash flows of DeepFlex
Partners for such quarter and the portion of the fiscal year
through the end of such quarter, setting forth in each case
in comparative form the figures for the previous year,
certified by a Responsible Officer as being fairly stated in
all material respects (subject to normal year-end audit
adjustments);
(e) when filed, copies of all of DeepTech's annual
reports on Form 10-K, quarterly reports on Form 10-Q and
current reports on Form 8-K.
all such financial statements shall be complete and correct in
all material respects and shall be prepared in reasonable detail
and in accordance with GAAP applied consistently throughout the
periods reflected therein and with prior periods (except as
approved by such accountants or officer, as the case may be, and
disclosed therein).
5.2 Certificates; Other Information. Furnish to each
Lender:
(a) concurrently with the delivery of the financial
statements referred to in subsections 5.1(a), (b), (c) and
(d), a certificate of a Responsible Officer stating that, to
the best of such Officer's knowledge, during such period (i)
no Subsidiary has been formed or acquired (or, if any such
Subsidiary has been formed or acquired, the Borrower has
complied with the requirements of subsection 5.10 with
respect thereto, (ii) neither the Borrower nor any of its
Subsidiaries has changed its name, its principal place of
business, its chief executive office or the location of any
material item of Collateral without complying with the
requirements of this Agreement and the Security Documents
with respect thereto, (iii) the Borrower and each of its
Subsidiaries has observed or performed all of its covenants
and other agreements, and satisfied every condition,
contained in this Agreement and the other Loan Documents to
be observed, performed or satisfied by it, and that such
Officer has obtained no knowledge of any Default or Event of
Default except as specified in such certificate and setting
forth its calculation of the covenants set forth in
subsection 6.1, and (iv) all insurance required to be
maintained pursuant to the Loan Documents (including any
charter or lease of the Pincay) is in full force and effect;
(b) not later than thirty days prior to the end of
each fiscal year of each of the Borrower and DeepFlex
Partners, a copy of the projections by the Borrower or
DeepFlex Partners, as the case may be, of the cash
projections of the Borrower and its Subsidiaries for the
succeeding fiscal year, such projections to be accompanied
by a certificate of a Responsible Officer to the effect that
such projections have been prepared on the basis of sound
financial planning practice and that such Officer has no
reason to believe they are incorrect or misleading in any
material respect;
(c) within five days after the same are sent, copies
of all financial statements and reports which the Borrower
or any of its Subsidiaries sends to holders of its Capital
Stock, and within five days after the same are filed, copies
of all financial statements and reports which the Borrower
may make to, or file with, the Securities and Exchange
Commission or any successor or analogous Governmental
Authority;
(d) not later than the first Business Day of each
fiscal month, commencing November 1, 1996, a statement
setting forth its calculation of Excess Cash Flow for the
preceding fiscal month;
(e) not later than the first Business Day of each
month, a non-default certificate from the chief financial
officer of the Borrower, substantially in the form of
Exhibit G hereto, which certificate shall also set forth the
aggregate amount of unpaid Trade Expenses as of the last day
of the prior month and the Trade Expenses projected to be
incurred or created in the current month;
(f) promptly, notice when the Pincay is not working
for a period of at least 30 consecutive days;
(g) at least three Business Days prior to the exercise
of the TOFF Warrants, notice of the Borrower's intention to
exercise such TOFF Warrants and the sources of funds
therefor; and
(h) promptly, such additional financial and other
information as any Lender may from time to time reasonably
request.
5.3 Payment of Obligations. Pay, discharge or
otherwise satisfy at or before maturity or before they become
delinquent, as the case may be, all its obligations of whatever
nature, except where the amount or validity thereof is currently
being contested in good faith by appropriate proceedings and
reserves in conformity with GAAP with respect thereto have been
provided on the books of the Borrower.
5.4 Conduct of Business and Maintenance of Existence.
Continue to engage in business of the same general type as now
conducted by it and preserve, renew and keep in full force and
effect its corporate existence and take all reasonable action to
maintain all rights, privileges and franchises necessary or
desirable in the normal conduct of its business except as
otherwise permitted pursuant to subsection 6.5; comply with all
Contractual Obligations and Requirements of Law except to the
extent that failure to comply therewith could not, in the
aggregate, have a Material Adverse Effect.
5.5 Maintenance of Property; Insurance. Keep all
property useful and necessary in its business in good working
order and condition; maintain with financially sound and
reputable insurance companies insurance on all its property in at
least such amounts and against at least such risks (but including
in any event public liability, product liability and business
interruption) as are usually insured against in the same general
area by companies engaged in the same or a similar business; and
furnish to each Lender, upon written request, full information as
to the insurance carried.
5.6 Inspection of Property; Books and Records;
Discussions. Keep proper books of records and account in which
full, true and correct entries in conformity with GAAP and all
Requirements of Law shall be made of all dealings and
transactions in relation to its business and activities; and
permit representatives of any Lender to visit and inspect any of
its properties and examine and make abstracts from any of its
books and records at any reasonable time and as often as may
reasonably be desired and to discuss the business, operations,
properties and financial and other condition of the Borrower and
its Subsidiaries with officers and employees of the Borrower and
its Subsidiaries and with its independent certified public
accountants.
5.7 Notices. Promptly give notice to the
Administrative Agent and each Lender of:
(a) the occurrence of any Default or Event of Default;
(b) any (i) default or event of default under any
Contractual Obligation of the Borrower or any of its
Subsidiaries or (ii) litigation, investigation or proceeding
which may exist at any time between the Borrower or any of
its Subsidiaries and any Governmental Authority, which in
either case, if not cured or if adversely determined, as the
case may be, could have a Material Adverse Effect;
(c) any litigation or proceeding affecting the
Borrower or any of its Subsidiaries in which the amount
involved is $250,000 or more and not covered by insurance or
in which injunctive or similar relief is sought;
(d) the following events, as soon as possible and in
any event within 30 days after the Borrower or any of its
Subsidiaries knows or has reason to know thereof: (i) the
occurrence or expected occurrence of any Reportable Event
with respect to any Plan, a failure to make any required
contribution to a Plan, the creation of any Lien in favor of
the PBGC or a Plan or any withdrawal from, or the
termination, Reorganization or Insolvency of, any
Multiemployer Plan or (ii) the institution of proceedings or
the taking of any other action by the PBGC or the Borrower,
any of its Subsidiaries or any Commonly Controlled Entity or
any Multiemployer Plan with respect to the withdrawal from,
or the terminating, Reorganization or Insolvency of, any
Plan; and
(e) any material adverse change in the business,
operations, property, condition (financial or otherwise) or
prospects of the Borrower or of DeepFlex Partners.
Each notice pursuant to this subsection shall be accompanied by a
statement of a Responsible Officer setting forth details of the
occurrence referred to therein and stating what action the
Borrower proposes to take with respect thereto.
5.8 Environmental Laws. (a) Comply with, and ensure
compliance by all tenants and subtenants, if any, with, all
applicable Environmental Laws and obtain and comply with and
maintain, and ensure that all tenants and subtenants obtain and
comply with and maintain, any and all licenses, approvals,
notifications, registrations or permits required by applicable
Environmental Laws, except where the failure to so obtain, comply
or maintain would not have a Material Adverse Effect.
(b) Conduct and complete all investigations, studies,
sampling and testing, and all remedial, removal and other actions
required under Environmental Laws and promptly comply with all
lawful orders and directives of all Governmental Authorities
regarding Environmental Laws.
5.9 Further Assurances. Upon the request of the
Administrative Agent, promptly perform or cause to be performed
any and all acts and execute or cause to be executed any and all
documents (including, without limitation, financing statements
and continuation statements) for filing under the provisions of
the Uniform Commercial Code or any other Requirement of Law which
are necessary or advisable to maintain in favor of the
Administrative Agent, for the benefit of the Lenders, Liens on
the Collateral that are duly perfected in accordance with all
applicable Requirements of Law.
5.10 Additional Collateral. (a) With respect to any
assets acquired after the Closing Date by the Borrower or any of
its Subsidiaries that are intended to be subject to the Lien
created by any of the Security Documents but which are not so
subject (other than (i) any assets described in paragraph (b) of
this subsection or (ii) any assets described in paragraph (f) of
this subsection), promptly (and in any event within 30 days after
the acquisition thereof): (i) execute and deliver to the
Administrative Agent or Collateral Agent, as appropriate, such
amendments to the relevant Security Documents or such other
documents as the Lenders shall deem necessary or advisable to
grant to the Administrative Agent or Collateral Agent a Lien on
such assets, (ii) take all actions necessary or advisable to
cause such Lien to be duly perfected in accordance with all
applicable Requirements of Law, including, without limitation,
the filing of financing statements in such jurisdictions as may
be requested by the Administrative Agent, and (iii) if requested
by the Administrative Agent or Collateral Agent, deliver to the
Administrative Agent or Collateral Agent legal opinions relating
to the matters described in clauses (i) and (ii) immediately
preceding, which opinions shall be in form and substance, and
from counsel, reasonably satisfactory to the Administrative Agent
or Collateral Agent.
(b) With respect to any Capital Stock acquired after
the date hereof (unless doing so would result in a pledge of more
than 65% of the Capital Stock of a Foreign Subsidiary), promptly
upon the request of the Administrative Agent: (i) execute and
deliver to the Administrative Agent, for the benefit of the
Lenders, a new pledge agreement or such amendments to the Pledge
Agreement as the Administrative Agent shall deem necessary or
advisable to grant to the Administrative Agent, for the benefit
of the Lenders, a Lien on such Capital Stock which is owned by
the Borrower or any of its Subsidiaries, (ii) deliver to the
Administrative Agent (A) the certificates representing such
Capital Stock, together with undated stock powers executed and
delivered in blank by a duly authorized officer of the Borrower
or such Subsidiary, as the case may be or (B) if such Capital
Stock is issued by or in respect of a partnership or limited
liability company, a Transaction Statement in the form of Exhibit
A to the Pledge Agreement confirming that such issuer has
registered the pledge of its Capital Stock on its books, (iii) if
the Capital Stock is issued or acquired by a Subsidiary of the
Borrower acquired or created after the Closing Date, cause such
new Subsidiary (A) to execute and deliver to the Administrative
Agent a new security agreement, in each case pursuant to
documentation which is in form and substance satisfactory to the
Administrative Agent, and (B) to take all actions necessary or
advisable to cause the Lien created by such new security
agreement to be duly perfected in accordance with all applicable
Requirements of Law, including, without limitation, the filing of
financing statements in such jurisdictions as may be requested by
the Administrative Agent and (iv) if requested by the
Administrative Agent, deliver to the Administrative Agent legal
opinions relating to the matters described in clauses (i), (ii)
and (iii) immediately preceding, which opinions shall be in form
and substance, and from counsel, reasonably satisfactory to the
Administrative Agent, provided that his paragraph (b) shall not
apply to any Capital Stock or Subsidiary acquired by the Borrower
after the date hereof, the acquisition of which was financed by
DeepTech.
(c) In the event the Borrower receives additional PIK
Notes (i) in lieu of payment of interest on the Pledged PIK
Notes, (ii) as the result of a Permitted Investment (other than a
Permitted Investment financed by DeepTech) or (iii) for any other
reason (other than in lieu of payment of interest on the Highwood
PIK Notes), promptly deliver such additional PIK Notes to the
Administrative Agent for the ratable benefit of the Lenders as
additional collateral under the Pledge Agreement.
(d) In the event that the Borrower purchases or
otherwise acquires any TOFF Capital Stock, deliver the "Non-
DeepTech Portion" of such TOFF Capital Stock to the
Administrative Agent as additional collateral under the Pledge
Agreement which shall constitute part of the Pledged Stock (as
defined therein). As used in this paragraph, the Non-DeepTech
Portion of any TOFF Capital Stock refers to so much of any such
TOFF Capital Stock as is not financed by DeepTech and pledged to
DeepTech to secure such financing.
(e) In the event that the Borrower uses the proceeds
of the Loans to maintain or improve an asset directly owned by
the Borrower on the date of this Agreement, the Borrower shall
take whatever action may be necessary to grant the Administrative
Agent a security interest in such asset.
(f) Notwithstanding the foregoing, the Borrower shall
not be required to pledge as Collateral (i) any Capital Stock or
assets of FPS II or FPS III existing on the Closing Date or (ii)
any Permitted Investment financed by DeepTech to the extent of
such financing; provided that this clause (ii) shall not apply to
any Permitted Investment that would be included within the
definition of "Pincay".
5.11 United States Ship Mortgage. No later than seven
days after the Closing Date, cause DeepFlex Partners to execute
and deliver a ship mortgage under the laws of the United States
to secure the Pledged PIK Notes in favor of the Borrower or the
Collateral Agent, such ship mortgage to be satisfactory in form
and substance to the Lenders.
5.12 Pledged Account Agreement. No later than March
1, 1996, execute and deliver and cause the Pledged Account Bank
to execute and deliver, the Pledged Account Agreement.
SECTION 6. NEGATIVE COVENANTS
The Borrower hereby agrees that, so long as any amount
is owing to any Lender or the Administrative Agent hereunder or
under any other Loan Document, the Borrower shall not directly or
indirectly:
6.1 Financial Condition Covenants.
(a) Maintenance of Working Capital. Permit the
Current Ratio at any time to be less than 3.0 to 1.0.
(b) Maintenance of Net Worth. Permit Net Worth at any
time to be less than $25,000,000 prior to December 31, 1996 and
$23,000,000 thereafter.
(c) Interest Coverage. Permit for any period of three
consecutive fiscal months commencing on or after May 1, 1996 the
ratio of (i) the Borrower's cash receipts (excluding receipts
related to the sale or refinancing of any asset that is not
Collateral) for such period minus the Borrower's cash operating
expenses (before interest expense) for such period to (ii) the
Borrower's cash interest expense for such period, including, for
purposes of this clause (ii), interest paid in cash by the
Borrower on the Wilrig Indebtedness and, at any time prior to the
first day after the date hereof that the Treasure Searcher is
subject to charter, lease or similar hire interest paid in cash
by the Borrower in respect of the Highwood Indebtedness, to be
less than 1.50 to 1.00.
6.2 Limitation on Indebtedness. Create, incur, assume
or suffer to exist any Indebtedness, except:
(a) Indebtedness of the Borrower under this Agreement;
(b) Indebtedness outstanding on the date hereof and
listed on Schedule 6.2 as in effect on the date hereof and
without giving effect to any amendments, refinancings,
refundings, renewals or extensions thereof; and
(c) Indebtedness of the Borrower to DeepTech (i)
arising as a result of intercompany overhead charges not to
exceed $3,500,000 in the aggregate, (ii) arising as a result
of, and as consideration for, a transfer of cash or tangible
assets to the Borrower, (iii) in the form of payment in kind
interest on the DeepTech Note to effect payment of interest
owed to DeepTech and (iv) to acquire Permitted Investments,
provided, however, in the case of clauses (ii) and (iv) such
Indebtedness does not exceed the lesser of fair market value
of such asset and the purchase price of the relevant asset;
and provided, further, that all such Indebtedness matures no
earlier than November 1, 2000, is payable solely in kind and
is subject to the Subordination Agreement.
6.3 Limitation on Liens. Create, incur, assume or
suffer to exist any Lien upon any of its property, assets or
revenues, whether now owned or hereafter acquired, except for:
(a) Liens for taxes not yet due or which are being
contested in good faith by appropriate proceedings, provided
that adequate reserves with respect thereto are maintained
on the books of the Borrower or its Subsidiaries, as the
case may be, in conformity with GAAP;
(b) carriers', warehousemen's, mechanics',
materialmen's, repairmen's or other like Liens arising in
the ordinary course of business which are not overdue for a
period of more than 60 days or which are being contested in
good faith by appropriate proceedings;
(c) pledges or deposits in connection with workers'
compensation, unemployment insurance and other social
security legislation and deposits securing liability to
insurance carriers under insurance or self-insurance
arrangements;
(d) deposits to secure the performance of bids, trade
contracts (other than for borrowed money), leases, statutory
obligations, surety and appeal bonds, performance bonds and
other obligations of a like nature incurred in the ordinary
course of business;
(e) easements, rights-of-way, restrictions and other
similar encumbrances incurred in the ordinary course of
business which, in the aggregate, are not substantial in
amount and which do not in any case materially detract from
the value of the property subject thereto or materially
interfere with the ordinary conduct of the business of the
Borrower or such Subsidiary;
(f) Liens in existence on the date hereof listed on
Schedule 6.3, securing Indebtedness permitted by subsection
6.2(b); provided that no such Lien is spread to cover any
additional property (other than Highwood PIK Notes issued
in lieu of payment of cash interest on Highwood PIK Notes)
after the Closing Date and that the amount of Indebtedness
secured thereby is not increased (except in accordance with
the terms thereof as in effect on the Closing Date);
(g) Liens in favor of DeepTech on assets other than
Collateral which secure Indebtedness permitted by Section
6.2(c) provided that such Liens cover only the assets
acquired by such Indebtedness; and
(h) Liens created pursuant to the Security Documents.
6.4 Limitation on Guarantee Obligations. Create,
incur, assume or suffer to exist any Guarantee Obligation except:
(a) Guarantee Obligations in existence on the date
hereof and listed on Schedule 6.4 but not any amendments,
refinancings, refundings, renewals or extensions thereof;
(b) unsecured Guarantee Obligations of the Borrower in
respect of obligations of a joint venture which is a
Permitted Investment incurred to obtain financing for a
Permitted Investment in such joint venture, provided that
the Borrower may not guarantee more than its ratable share
of the guaranteed obligations, based on its percentage
equity interest in such joint venture;
(c) subordinated Guarantee Obligations of the Borrower
under the Subordinated Guarantees as defined in the
Intercreditor Agreement; and
(d) Guarantee Obligations under the Highwood Guarantee
and the Highwood Master Agreement as in effect on the date
hereof.
6.5 Limitation on Fundamental Changes. Enter into any
merger, consolidation or amalgamation, or liquidate, wind up or
dissolve itself (or suffer any liquidation or dissolution), or
convey, sell, lease, assign, transfer or otherwise dispose of,
all or substantially all of its property, business or assets, or
make any material change in its present method of conducting
business.
6.6 Limitation on Sale of Assets. Convey, sell,
lease, assign, transfer or otherwise dispose of any of its
property, business or assets (including, without limitation,
receivables and leasehold interests), whether now owned or
hereafter acquired, or, in the case of any Subsidiary, issue or
sell any shares of or interests in such Subsidiary's Capital
Stock to any Person other than the Borrower or any wholly owned
Subsidiary, except:
(a) the sale or other disposition of obsolete or worn
out property not constituting Collateral in the ordinary
course of business;
(b) the sale or other disposition of any property
(other than Collateral) for fair market value (as determined
by the Borrower's Board of Directors); provided that the net
proceeds of each such transaction are applied to the
prepayment of the Loans to the extent required under Section
2.4; and
(c) the sale or other disposition of Capital Stock of
any Subsidiary not constituting Collateral for the fair
market value thereof; provided that Borrower maintains at
least a 50% voting interest in such Subsidiary.
6.7 INTENTIONALLY OMITTED.
6.8 Limitation on Dividends. Declare or pay any
dividend on or distribution in respect of, or make any payment on
account of, or set apart assets for a sinking or other analogous
fund for, the purchase, redemption, defeasance, retirement or
other acquisition of, any shares of or any interests in any class
of Capital Stock of the Borrower or any of its Subsidiaries or
any warrants or options to purchase any such Capital Stock,
whether now or hereafter outstanding, either directly or
indirectly, whether in cash or property or in obligations of the
Borrower.
6.9 Limitation on Investments, Loans and Advances.
Make any advance, loan, extension of credit or capital
contribution to, or purchase any Capital Stock, bonds, notes,
debentures or other securities of or any assets constituting a
business unit of, or make any other investment in, any Person, or
create or acquire any Subsidiary, except:
(a) extensions of trade credit in the ordinary course
of business;
(b) investments in Cash Equivalents; and
(c) Permitted Investments;
provided that the Borrower may only make investments in Deepwater
Drillers L.L.C. and Highwood after the date hereof in the form of
senior loans and the Borrower may not exercise any buy/sell
rights with respect to Deepwater Drillers L.L.C. or Highwood.
6.10 Limitation on Optional Payments and Modifications
of Debt Instruments. (a) Make any optional payment or
prepayment on or redemption or purchase of any Indebtedness
(other than the Loans) or Guarantee Obligations, except to the
extent of proceeds from any asset sale, assignment, lease, or
other disposition of any asset (including insurance and
condemnation proceeds) not required to be applied to the Loans
pursuant to subsection 2.4, (b) amend, modify or change, or
consent or agree to any amendment, modification or change to, any
of the terms of any Indebtedness or Guarantee Obligations,
including the Highwood Loan Documents and the Wilrig Loan
Documents (other than any such amendment, modification or change
which would extend the maturity or reduce the amount of any
payment of principal thereof or which would reduce the rate or
extend the date for payment of interest thereon), or (c) amend,
modify or change, or consent or agree to any amendment,
modification or change to, any of the terms of the Charter, the
Partnership Agreement, the Limited Liability Company Agreement of
DeepFlex General Partner dated March 24, 1995, the Wilrig Loan
Documents, the DeepTech Note or any other Loan Document.
6.11 Limitation on Transactions with Affiliates.
Enter into any transaction, including, without limitation, any
purchase, sale, lease or exchange of property or the rendering of
any service, with any Affiliate unless such transaction is
(a) otherwise permitted under this Agreement, (b) in the ordinary
course of the Borrower's or such Subsidiary's business and
(c) upon fair and reasonable terms no less favorable to the
Borrower or such Subsidiary, as the case may be, than it would
obtain in a comparable arm's length transaction with a Person
which is not an Affiliate, provided that (i) this subsection 6.11
shall not prohibit the performance of the transactions described
in Schedule 6.11 and (ii) upon entering into any transaction with
an Affiliate the value of which exceeds $1,000,000, the Borrower
must deliver a certificate to the Administrative Agent certifying
that such transaction complies with this subsection 6.11.
6.12 Limitation on Sales and Leasebacks. Enter into
any arrangement with any Person providing for the leasing by the
Borrower or any Subsidiary of real or personal property which has
been or is to be sold or transferred by the Borrower or such
Subsidiary to such Person or to any other Person to whom funds
have been or are to be advanced by such Person on the security of
such property or rental obligations of the Borrower or such
Subsidiary.
6.13 Limitation on Changes in Fiscal Year. Permit the
fiscal year of the Borrower to end on a day other than June 30.
6.14 Limitation on Negative Pledge Clauses. Enter
into with any Person any agreement, other than this Agreement and
the Highwood Security Agreement permitted by this Agreement (in
which cases, any prohibition or limitation shall only be
effective against the assets financed thereby), which prohibits
or limits the ability of the Borrower or any of its Subsidiaries
to create, incur, assume or suffer to exist any Lien upon any of
its property, assets or revenues, whether now owned or hereafter
acquired.
6.15 Limitation on Lines of Business. Enter into any
business, either directly or through any Subsidiary, except for
those businesses in which the Borrower and its Subsidiaries are
engaged on the date of this Agreement.
6.16 Extension of Charter Condition. (a) Permit the
extension of the date for compliance with the Charter Condition
(as defined in the Partnership Agreement) under Article 9.3 of
the Partnership Agreement beyond December 31, 1996.
(b) In the event the Charter Condition is not
satisfied by December 31, 1996, fail to exercise its option to
dissolve the Partnership pursuant to subsection 9.3 of the
Partnership Agreement and cause the Pincay to be transferred to
the Borrower, subject to the Ship Mortgage, provided, however,
that in lieu of dissolving DeepFlex Partners, with the prior
written consent of each Lender, the Borrower may acquire all of
the direct and indirect general and limited partnership interests
of Coflexip in DeepFlex Partners and all of the Capital Stock of
DeepFlex General Partner owned by Coflexip and grant a first
priority security interest in and pledge of such interests and
Capital Stock to the Administrative Agent and provided, further,
the Borrower will not exercise such option if it has been
directed not to do so by the Lenders. In the event that DeepFlex
Partners is dissolved pursuant to subsection 9.3 of the
Partnership Agreement or otherwise, the Borrower will, prior to
or simultaneously with the transfer of the Pincay to the Borrower
in connection therewith, cause the Pincay to be made subject to a
Ship Mortgage in form and substance satisfactory to the Lenders
executed and delivered by the Borrower to secure payment of the
Obligations. Such Ship Mortgage shall be accompanied by (i) such
legal opinions from counsel and covering topics specified by the
Lenders and shall be satisfactory in form and substance to the
Lenders and (ii) consents, certificates and other documents as
are then requested by the Administrative Agent. In the event of
any such dissolution of the Partnership the Pledged PIK Notes
shall not be deemed to be paid, satisfied or cancelled unless and
until the Pledged PIK Notes (including unpaid accrued interest
thereon) are paid in full in cash. It is the intention of the
Borrower, DeepFlex Partners and the Lenders that the Pincay be
continuously secured by a Ship Mortgage. The Borrower
acknowledges and confirms that any return of the Pincay to it
pursuant to subsection 9.3 of the Partnership Agreement or
otherwise shall constitute a receipt of proceeds of Collateral
under the Borrower Security Documents and that the Administrative
Agent shall have a perfected security interest in and lien on the
Pincay if and when it is so returned to the Borrower.
(c) Waive, defer or fail to enforce the performance of
any obligation under the Partnership Agreement.
6.17 Modification of PIK Notes. Consent or agree to
any amendments, modification or change to any of the terms of, or
cancellation or satisfaction of, any PIK Notes (other than
satisfaction of the PIK notes pursuant to a dissolution of
DeepFlex Partners pursuant to section 9.3 of the Partnership
Agreement in accordance with subsection 6.16(b) hereof).
6.18 Limitations of DeepFlex Partners. Permit
DeepFlex Partners to:
(a) make any investment (including by acquisition of
assets or Capital Stock) except in connection with the
maintenance, preservation, upgrading and mobilizing of the
Pincay;
(b) issue, incur or assume any Indebtedness other than
PIK Notes that are identical to the Pledged PIK Notes except
as to date, payee and amount and except as permitted by
paragraph (c) below; or issue any PIK Notes (other than
Pledged PIK Notes or PIK Notes issued in lieu of payment of
PIK Notes) for other than cash in an amount equal to the
principal amount of such PIK Notes;
(c) issue or become liable in respect of any
Indebtedness which is senior to the PIK Notes unless the
Borrower delivers to the Administrative Agent additional
collateral satisfactory to the Required Lenders;
(d) sell the Pincay or any substantial portion thereof
unless the Obligations are simultaneously repaid in full;
(e) permit the Pincay to be chartered, leased or used
by a third-party unless the in operation day rate thereunder
is at least $50,000 and the in operation net return to
DeepFlex Partners thereunder is at least $20,000 per day;
(f) permit any payments to be made on any of the PIK
Notes (other than the Pledged PIK Notes) except by the
issuance of additional PIK Notes, other than from the
proceeds of a sale of the Pincay, in which case all PIK
Notes (including the Pledged PIK Notes) required to be
repaid from such proceeds shall be repaid ratably based on
the respective principal amounts thereof; fail to remit to
the Borrower, whether as payment of PIK Notes or otherwise,
cash held by or paid to the DeepFlex Partners as frequently
as possible pursuant to the terms of the Partnership
Agreement;
(g) issue, incur or assume any Guarantee Obligations;
(h) create, incur, assume or suffer to exist any Lien
upon its property, assets or revenues, whether now owned or
hereafter acquired, except for:
(i) Liens for taxes not yet due or
which are being contested in good faith by appropriate
proceedings, provided that adequate reserves with
respect thereto are maintained on the books of DeepFlex
Partners in conformity with GAAP;
(ii) carriers', warehousemen's,
mechanics', materialmen's, repairmen's or other like
Liens arising in the ordinary course of business which
are not overdue for a period of more than 60 days or
which are being contested in good faith by appropriate
proceedings;
(iii) pledges or deposits in
connection with workers' compensation, unemployment
insurance and other social security legislation and
deposits securing liability to insurance carriers under
insurance or self-insurance arrangements;
(iv) deposits to secure the
performance of bids, trade contracts (other than for
borrowed money), leases, statutory obligations, surety
and appeal bonds, performance bonds and other
obligations of a like nature incurred in the ordinary
course of business;
(v) Liens created pursuant to the
Security Documents;
(vi) Liens on the Pincay created by a
ship mortgage substantially similar to the Ship
Mortgage securing PIK Notes pledged to Highwood on an
equal and ratable basis with the Ship Mortgage provided
that the Administrative Agent has reviewed such ship
mortgage and determined that such ship mortgage is
substantially similar to the Ship Mortgage prior to the
recording thereof and provided further that the
intercreditor provisions relating to such ship mortgage
are satisfactory to the Administrative Agent;
(i) except for liquidations into the Borrower pursuant
to subsection 6.16, enter into any merger, consolidation or
amalgamation, or liquidate, wind up or dissolve itself (or
suffer any liquidation or dissolution), or convey, sell,
lease, assign, transfer or otherwise dispose of, all or
substantially all of its property, business or assets, or
make any material change in its present method of conducting
business;
(j) except for transfers of assets to the Borrower
pursuant to subsection 6.16, convey, sell, lease, assign,
transfer or otherwise dispose of any of its property,
business or assets (including, without limitation,
receivables and leasehold interests), whether now owned or
hereafter acquired, except the sale or other disposition of
obsolete or worn out property not constituting Collateral in
the ordinary course of business;
(k) declare or pay any dividend on or distribution in
respect of, or make any payment on account of, or set apart
assets for a sinking or other analogous fund for, the
purchase, redemption, defeasance, retirement or other
acquisition of, any shares of or any interests in any class
of Capital Stock of DeepFlex Partners or any warrants or
options to purchase any such Capital Stock, whether now or
hereafter outstanding, either directly or indirectly,
whether in cash or property or in obligations of DeepFlex
Partners;
(l) (i) make any optional payment or prepayment on or
redemption or purchase of any Indebtedness (other than the
Pledged PIK Notes) or Guarantee Obligations, (ii) amend,
modify or change, or consent or agree to any amendment,
modification or change to, any of the terms of any
Indebtedness or Guarantee Obligations, other than the
Pledged PIK Notes (other than any such amendment,
modification or change which would extend the maturity or
reduce the amount of any payment of principal thereof or
which would reduce the rate or extend the date for payment
of interest thereon), or (iii) amend, modify or change, or
consent or agree to any amendment, modification or change
to, any of the terms of the Charter, the Partnership
Agreement, the PIK Notes or any other Loan Document;
(m) enter into any transaction, including, without
limitation, any purchase, sale, lease or exchange of
property or the rendering of any service, with any Affiliate
unless such transaction is (a) otherwise permitted under
this Agreement, (b) in the ordinary course of DeepFlex
Partners' business and (c) upon fair and reasonable terms no
less favorable to DeepFlex Partners than it would obtain in
a comparable arm's length transaction with a Person which is
not an Affiliate, provided that this paragraph (m) shall not
prohibit the performance of the transactions described in
Schedule 6.11; provided DeepFlex Partners may pay the
Highwood PIK Notes in cash on a ratable basis if more than
$10,000,000 of the Pledged PIK Notes are foreclosed on and a
pledgee of the Borrower becomes the owner thereof;
(n) enter into any arrangement with any Person
providing for the leasing by DeepFlex Partners of real or
personal property which has been or is to be sold or
transferred by DeepFlex Partners to such Person or to any
other Person to whom funds have been or are to be advanced
by such Person on the security of such property or rental
obligations of DeepFlex Partners;
(o) permit the fiscal year of DeepFlex Partners to end
on a day other than December 31;
(p) enter into with any Person any agreement, other
than Loan Documents, which prohibits or limits the ability
of DeepFlex Partners to create, incur, assume or suffer to
exist any Lien upon any of its property, assets or revenues,
whether now owned or hereafter acquired;
(q) enter into any business, either directly or
through any Subsidiary, except for those businesses in which
DeepFlex Partners is engaged on the date of this Agreement;
(r) permit the aggregate amount of unpaid Trade
Expenses to exceed $1,500,000 at any time;
(s) permit any change in the structure, operation or
use of the Pincay.
6.19 DeepFlex General Partner. Permit DeepFlex
General Partner to create, incur, assume or suffer to exist any
Indebtedness, Contingent Obligations or Liens or engage in any
business or activity other than acting as sole general partner of
DeepFlex Partners.
SECTION 7. EVENTS OF DEFAULT
If any of the following events shall occur and be
continuing:
(a) The Borrower shall fail to pay any principal of
any Loan when due in accordance with the terms thereof or
hereof; or the Borrower shall fail to pay any interest on
any Loan, or any other amount payable hereunder, within five
days after any such interest or other amount becomes due in
accordance with the terms thereof or hereof; or
(b) Any representation or warranty made or deemed made
by the Borrower or any other Loan Party herein or in any
other Loan Document or which is contained in any
certificate, document or financial or other statement
furnished by it at any time under or in connection with this
Agreement or any such other Loan Document shall prove to
have been incorrect in any material respect on or as of the
date made or deemed made; or
(c) The Borrower or any other Loan Party shall default
in the observance or performance of any agreement contained
in (i) Section 6, Section 9.18, Section 5 of the Pledge
Agreement, Section 4.4, 5.5 or 6.4 of the Security
Agreements or (ii) the Ship Mortgage beyond the grace period
provided therein for such defaults; or
(d) The Borrower or any other Loan Party shall default
in the observance or performance of any other agreement
contained in this Agreement or any other Loan Document
(other than as provided in paragraphs (a) through (c) of
this Section), and such default shall continue unremedied
for a period of 30 days after the Borrower becomes aware
thereof or a Lender notifies the Borrower thereof; or
(e) (i) The Borrower or any of its Subsidiaries or
DeepTech shall (A) default in any payment of principal of or
interest of any Indebtedness (other than the Loans) or in
the payment of any Guarantee Obligation, beyond the period
of grace (not to exceed 30 days), if any, provided in the
instrument or agreement under which such Indebtedness or
Guarantee Obligation was created, having an aggregate
principal amount of more than $100,000; or (B) default in
the observance or performance of any other agreement or
condition relating to any such Indebtedness or Guarantee
Obligation or contained in any instrument or agreement
evidencing, securing or relating thereto, or any other event
shall occur or condition exist, the effect of which default
or other event or condition is to cause, or to permit the
holder or holders of such Indebtedness or beneficiary or
beneficiaries of such Guarantee Obligation (or a trustee or
agent on behalf of such holder or holders or beneficiary or
beneficiaries) to cause, with the giving of notice if
required, such Indebtedness to become due prior to its
stated maturity or such Guarantee Obligation to become
payable; or (ii) any default shall occur with respect to any
of the Highwood Indebtedness or the Wilrig Indebtedness
which entitles the holder to accelerate the maturity
thereof; or
(f) (i) The Borrower or any of its Subsidiaries or the
Charterer or DeepTech shall commence any case, proceeding or
other action (A) under any existing or future law of any
jurisdiction, domestic or foreign, relating to bankruptcy,
insolvency, reorganization or relief of debtors, seeking to
have an order for relief entered with respect to it, or
seeking to adjudicate it a bankrupt or insolvent, or seeking
reorganization, arrangement, adjustment, winding-up,
liquidation, dissolution, composition or other relief with
respect to it or its debts, or (B) seeking appointment of a
receiver, trustee, custodian, conservator or other similar
official for it or for all or any substantial part of its
assets, or the Borrower or any of its Subsidiaries or the
Charterer or DeepTech shall make a general assignment for
the benefit of its creditors; or (ii) there shall be
commenced against the Borrower or any of its Subsidiaries or
the Charterer or DeepTech any case, proceeding or other
action of a nature referred to in clause (i) above which (A)
results in the entry of an order for relief or any such
adjudication or appointment or (B) remains undismissed,
undischarged or unbonded for a period of 60 days; or (iii)
there shall be commenced against the Borrower or any of its
Subsidiaries or the Charterer or DeepTech any case,
proceeding or other action seeking issuance of a warrant of
attachment, execution, distraint or similar process against
all or any substantial part of its assets which results in
the entry of an order for any such relief which shall not
have been vacated, discharged, or stayed or bonded pending
appeal within 60 days from the entry thereof; or (iv) the
Borrower or any of its Subsidiaries or the Charterer or
DeepTech shall take any action in furtherance of, or
indicating its consent to, approval of, or acquiescence in,
any of the acts set forth in clause (i), (ii), or (iii)
above; or (v) the Borrower or any of its Subsidiaries or the
Charterer or DeepTech shall generally not, or shall be
unable to, or shall admit in writing its inability to, pay
its debts as they become due; or
(g) (i) Any Person shall engage in any "prohibited
transaction" (as defined in Section 406 of ERISA or
Section 4975 of the Code) involving any Plan, (ii) any
"accumulated funding deficiency" (as defined in Section 302
of ERISA), whether or not waived, shall exist with respect
to any Plan or any Lien in favor of the PBGC or a Plan shall
arise on the assets of the Borrower or any Commonly
Controlled Entity, (iii) a Reportable Event shall occur with
respect to, or proceedings shall commence to have a trustee
appointed, or a trustee shall be appointed, to administer or
to terminate, any Single Employer Plan, which Reportable
Event or commencement of proceedings or appointment of a
trustee is, in the reasonable opinion of the Required
Lenders, likely to result in the termination of such Plan
for purposes of Title IV of ERISA, (iv) any Single Employer
Plan shall terminate for purposes of Title IV of ERISA,
(v) the Borrower or any Commonly Controlled Entity shall, or
in the reasonable opinion of the Required Lenders is likely
to, incur any liability in connection with a withdrawal
from, or the Insolvency or Reorganization of, a
Multiemployer Plan or (vi) any other event or condition
shall occur or exist with respect to a Plan; and in each
case in clauses (i) through (vi) above, such event or
condition, together with all other such events or
conditions, if any, could have a Material Adverse Effect; or
(h) One or more judgments or decrees shall be entered
against the Borrower or any of its Subsidiaries involving in
the aggregate a liability (not paid or fully covered by
insurance) of $100,000 or more, and all such judgments or
decrees shall not have been vacated, discharged, stayed or
bonded pending appeal within 60 days from the entry thereof;
or
(i) (i) Any of the Security Documents shall cease, for
any reason, to be in full force and effect, or the Borrower
or any other Loan Party which is a party to any of the
Security Documents shall so assert or (ii) the Lien created
by any of the Security Documents shall cease to be
enforceable and of the same effect and priority purported to
be created thereby; or
(j) The Tatham Guarantee shall cease, for any reason,
to be in full force and effect or Tatham shall so assert; or
(k) a Change of Control shall occur; or
(l) the Charterer or DeepFlex Partners shall default
in the performance of any of its material obligations under
the Charter;
(m) Tatham shall (i) default in any payment of
principal of or interest of any Indebtedness or in the
payment of any Guarantee Obligation, beyond the period of
grace (not to exceed 30 days), if any, provided in the
instrument or agreement under which such Indebtedness or
Guarantee Obligation was created, having an aggregate
principal amount of more than $2,000,000; or (ii) default in
the observance or performance of any other agreement or
condition relating to any such Indebtedness or Guarantee
Obligation or contained in any instrument or agreement
evidencing, securing or relating thereto, or any other event
shall occur or condition exist, the effect of which default
or other event or condition is to cause, or to permit the
holder or holders of such Indebtedness or beneficiary or
beneficiaries of such Guarantee Obligation (or a trustee or
agent on behalf of such holder or holders or beneficiary or
beneficiaries) to cause, with the giving of notice if
required, such Indebtedness to become due prior to its
stated maturity or such Guarantee Obligation to become
payable;
(n) An event or condition shall occur which has a
Material Adverse Effect;
then, and in any such event, (A) if such event is an Event of
Default specified in clause (i) or (ii) of paragraph (f) of this
Section with respect to the Borrower, automatically the
Commitments shall immediately terminate and the Loans hereunder
(with accrued interest thereon) and all other amounts owing under
this Agreement shall immediately become due and payable, and (B)
if such event is any other Event of Default, with the consent of
the Required Lenders, the Administrative Agent may, or upon the
request of the Required Lenders, the Administrative Agent shall,
by notice to the Borrower, declare the Loans hereunder (with
accrued interest thereon) and all other amounts owing under this
Agreement to be due and payable forthwith, whereupon the same
shall immediately become due and payable. Except as expressly
provided above in this Section, presentment, demand, protest and
all other notices of any kind are hereby expressly waived.
SECTION 8. THE ADMINISTRATIVE AGENT
8.1 Appointment. Each Lender hereby irrevocably
designates and appoints the Administrative Agent as the agent of
such Lender under this Agreement and the other Loan Documents,
and each such Lender irrevocably authorizes the Administrative
Agent, in such capacity, to take such action on its behalf under
the provisions of this Agreement and the other Loan Documents and
to exercise such powers and perform such duties as are expressly
delegated to the Administrative Agent by the terms of this
Agreement and the other Loan Documents, together with such other
powers as are reasonably incidental thereto. Notwithstanding
any provision to the contrary elsewhere in this Agreement, the
Administrative Agent shall not have any duties or
responsibilities, except those expressly set forth herein, or any
fiduciary relationship with any Lender, and no implied covenants,
functions, responsibilities, duties, obligations or liabilities
shall be read into this Agreement or any other Loan Document or
otherwise exist against the Administrative Agent.
8.2 Delegation of Duties. The Administrative Agent
may execute any of its duties under this Agreement and the other
Loan Documents by or through agents or attorneys-in-fact and
shall be entitled to advice of counsel concerning all matters
pertaining to such duties. The Administrative Agent shall not be
responsible for the negligence or misconduct of any agents or
attorneys in-fact selected by it with reasonable care.
8.3 Exculpatory Provisions. Neither the
Administrative Agent nor any of its officers, directors,
employees, agents, attorneys-in-fact or Affiliates shall be (i)
liable for any action lawfully taken or omitted to be taken by it
or such Person under or in connection with this Agreement or any
other Loan Document (except for its or such Person's own gross
negligence or willful misconduct) or (ii) responsible in any
manner to any of the Lenders for any recitals, statements,
representations or warranties made by any Loan Party or any
officer thereof contained in this Agreement or any other Loan
Document or in any certificate, report, statement or other
document referred to or provided for in, or received by the
Administrative Agent under or in connection with, this Agreement
or any other Loan Document or for the value, validity,
effectiveness, genuineness, enforceability or sufficiency of this
Agreement or any other Loan Document or for any failure of any
Loan Party to perform its obligations hereunder or thereunder.
The Administrative Agent shall not be under any obligation to any
Lender to ascertain or to inquire as to the observance or
performance of any of the agreements contained in, or conditions
of, this Agreement or any other Loan Document, or to inspect the
properties, books or records of any Loan Party.
8.4 Reliance by Administrative Agent. The
Administrative Agent shall be entitled to rely, and shall be
fully protected in relying, upon any Note, writing, resolution,
notice, consent, certificate, affidavit, letter, telecopy, telex
or teletype message, statement, order or other document or
conversation believed by it to be genuine and correct and to have
been signed, sent or made by the proper Person or Persons and
upon advice and statements of legal counsel (including, without
limitation, counsel to the Borrower or any other Loan Party),
independent accountants and other experts selected by the
Administrative Agent. The Administrative Agent may deem and
treat the payee of any Note as the owner thereof for all purposes
unless a written notice of assignment, negotiation or transfer
thereof shall have been filed with the Administrative Agent. The
Administrative Agent shall be fully justified in failing or
refusing to take any action under this Agreement or any other
Loan Document unless it shall first receive such advice or
concurrence of the Required Lenders as it deems appropriate or it
shall first be indemnified to its satisfaction by the Lenders
against any and all liability and expense which may be incurred
by it by reason of taking or continuing to take any such action.
The Administrative Agent shall in all cases be fully protected in
acting, or in refraining from acting, under this Agreement and
the other Loan Documents in accordance with a request of the
Required Lenders, and such request and any action taken or
failure to act pursuant thereto shall be binding upon all the
Lenders and all future holders of the Loans.
8.5 Notice of Default. The Administrative Agent shall
not be deemed to have knowledge or notice of the occurrence of
any Default or Event of Default hereunder unless the
Administrative Agent has received notice from a Lender or the
Borrower referring to this Agreement, describing such Default or
Event of Default and stating that such notice is a "notice of
default". In the event that the Administrative Agent receives
such a notice, the Administrative Agent shall give notice thereof
to the Lenders. The Administrative Agent shall take such action
with respect to such Default or Event of Default as shall be
reasonably directed by the Required Lenders; provided that unless
and until the Administrative Agent shall have received such
directions, the Administrative Agent may (but shall not be
obligated to) take such action, or refrain from taking such
action, with respect to such Default or Event of Default as it
shall deem advisable in the best interests of the Lenders.
8.6 Non-Reliance on Administrative Agent and Other
Lenders. Each Lender expressly acknowledges that neither the
Administrative Agent nor any of its officers, directors,
employees, agents, attorneys-in-fact or Affiliates has made any
representations or warranties to it and that no act by the
Administrative Agent hereafter taken, including any review of the
affairs of the Borrower or any other Loan Party, shall be deemed
to constitute any representation or warranty by the
Administrative Agent to any Lender. Each Lender represents to
the Administrative Agent that it has, independently and without
reliance upon the Administrative Agent or any other Lender, and
based on such documents and information as it has deemed
appropriate, made its own appraisal of and investigation into the
business, operations, property, financial and other condition and
creditworthiness of the Borrower or any other Loan Party and made
its own decision to make its Loans hereunder and enter into this
Agreement. Each Lender also represents that it will,
independently and without reliance upon the Administrative Agent
or any other Lender, and based on such documents and information
as it shall deem appropriate at the time, continue to make its
own credit analysis, appraisals and decisions in taking or not
taking action under this Agreement and the other Loan Documents,
and to make such investigation as it deems necessary to inform
itself as to the business, operations, property, financial and
other condition and creditworthiness of the Borrower and each
other Loan Party. Except for notices, reports and other
documents expressly required to be furnished to the Lenders by
the Administrative Agent hereunder, the Administrative Agent
shall not have any duty or responsibility to provide any Lender
with any credit or other information concerning the business,
operations, property, condition (financial or otherwise),
prospects or creditworthiness of any Loan Party which may come
into the possession of the Administrative Agent or any of its
officers, directors, employees, agents, attorneys-in-fact or
Affiliates.
8.7 Indemnification. The Lenders agree to indemnify
the Administrative Agent in its capacity as such (to the extent
not reimbursed by the Borrower and without limiting the
obligation of the Borrower to do so), ratably according to their
respective Commitment Percentages in effect on the date on which
indemnification is sought, from and against any and all
liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements of any kind
whatsoever which may at any time (including, without limitation,
at any time following the payment of the Loans) be imposed on,
incurred by or asserted against the Administrative Agent in any
way relating to or arising out of, the Commitments, this
Agreement, any of the other Loan Documents or any documents
contemplated by or referred to herein or therein or the
transactions contemplated hereby or thereby or any action taken
or omitted by the Administrative Agent under or in connection
with any of the foregoing; provided that no Lender shall be
liable for the payment of any portion of such liabilities,
obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses or disbursements resulting solely from the
Administrative Agent's gross negligence or willful misconduct.
The agreements in this subsection shall survive the payment of
the Loans and all other amounts payable hereunder.
8.8 Administrative Agent in Its Individual Capacity.
The Administrative Agent and its Affiliates may make loans to,
accept deposits from and generally engage in any kind of business
with the Borrower or any other Loan Party as though the
Administrative Agent were not the Administrative Agent hereunder
and under the other Loan Documents. With respect to the Loans
made by it, the Administrative Agent shall have the same rights
and powers under this Agreement and the other Loan Documents as
any Lender and may exercise the same as though it were not the
Administrative Agent, and the terms "Lender" and "Lenders" shall
include the Administrative Agent in its individual capacity.
8.9 Successor Administrative Agent. The
Administrative Agent may resign as Administrative Agent upon 10
days' notice to the Lenders. If the Administrative Agent shall
resign as Administrative Agent under this Agreement and the other
Loan Documents, then the Required Lenders shall appoint from
among the Lenders a successor agent for the Lenders, which
successor agent (provided that it shall have been approved by the
Borrower), shall succeed to the rights, powers and duties of the
Administrative Agent hereunder. Effective upon such appointment
and approval, the term "Administrative Agent" shall mean such
successor agent, and the former Administrative Agent's rights,
powers and duties as Administrative Agent shall be terminated,
without any other or further act or deed on the part of such
former Administrative Agent or any of the parties to this
Agreement or any holders of the Loans. After any retiring
Administrative Agent's resignation as Administrative Agent, the
provisions of this Section 8 shall inure to its benefit as to any
actions taken or omitted to be taken by it while it was
Administrative Agent under this Agreement and the other Loan
Documents.
8.10 Collateral Agent. The standards of care and
other provisions of this Section 8 shall apply to the Collateral
Agent under the DeepFlex Partners Security Documents, as such
provisions are incorporated thereunder. The Borrower appoints
the Collateral Agent to act on its behalf and as its agent under
the DeepFlex Partners Security Agreement and the Ship Mortgage.
8.11 Conflicting Instructions. In the event that the
Administrative Agent or the Collateral Agent receives conflicting
instructions from two groups of Lenders each of which has
aggregate Commitment Percentages of 50%, the Administrative Agent
or the Collateral Agent, as the case may be, may refuse to act on
the basis of any such instructions until it reasonably believes
that such groups have resolved such conflict, provided that the
Administrative Agent shall accelerate repayment of the Loans in
accordance with Section 7 if instructed to do so by one such
group.
SECTION 9. MISCELLANEOUS
9.1 Amendments and Waivers. Neither this Agreement
nor any other Loan Document (other than the Tatham Guarantee,
which may be amended, modified or supplemented in accordance with
the terms thereof), nor any terms hereof or thereof may be
amended, supplemented or modified except in accordance with the
provisions of this subsection. The Required Lenders may, or, with
the written consent of the Required Lenders, the Administrative
Agent may, from time to time, (a) enter into with the applicable
Loan Parties written amendments, supplements or modifications
hereto and to the other Loan Documents for the purpose of adding
any provisions to this Agreement or the other Loan Documents or
changing in any manner the rights of the Lenders or of such Loan
Parties hereunder or thereunder or (b) waive, on such terms and
conditions as the Required Lenders or the Administrative Agent,
as the case may be, may specify in such instrument, any of the
requirements of this Agreement or the other Loan Documents or any
Default or Event of Default and its consequences; provided,
however, that no such waiver and no such amendment, supplement or
modification shall (i) reduce the amount or extend the scheduled
date of maturity of any Loan or of any scheduled installment
thereof, or reduce the stated rate of any interest or fee payable
hereunder or extend the scheduled date of any payment thereof, in
each case without the consent of each Lender affected thereby, or
(ii) amend, modify or waive any provision of this subsection or
reduce the percentage specified in the definition of Required
Lenders, or consent to the assignment or transfer by the Borrower
of any of its rights and obligations under this Agreement and the
other Loan Documents, in each case without the written consent of
all the Lenders, or (iii) amend, modify or waive any provision of
Section 8 without the written consent of the then Administrative
Agent. Any such waiver and any such amendment, supplement or
modification shall apply equally to each of the Lenders and shall
be binding upon the Borrower, the Lenders, the Administrative
Agent and all future holders of the Loans. In the case of any
waiver, the Borrower, the Lenders and the Administrative Agent
shall be restored to their former positions and rights hereunder
and under the other Loan Documents, and any Default or Event of
Default waived shall be deemed to be cured and not continuing; no
such waiver shall extend to any subsequent or other Default or
Event of Default or impair any right consequent thereon.
9.2 Notices. All notices, requests and demands to or
upon the respective parties hereto to be effective shall be in
writing (including by facsimile transmission) and, unless
otherwise expressly provided herein, shall be deemed to have been
duly given or made (a) in the case of delivery by hand, when
delivered, (b) in the case of delivery by mail, three days after
being deposited in the mails, postage prepaid, or (c) in the case
of delivery by facsimile transmission, when sent and receipt has
been confirmed, addressed as follows in the case of the Borrower
and the Administrative Agent, and as set forth in Schedule I in
the case of the other parties hereto, or to such other address as
may be hereafter notified by the respective parties hereto:
The Borrower or any of its Subsidiaries:
c/o DeepTech International Inc.
7500 Texas Commerce Tower
600 Travis Street
Houston, Texas 77002
Attention: Thomas P. Tatham
and Donald V. Weir
Fax: (713) 224-7574
With a copy to: Akin, Gump, Strauss, Hauer & Feld, L.L.P.
1900 Pennzoil Place - South Tower
711 Louisiana Street
Houston, Texas 77002
Attention: Rick L. Burdick
Fax: (713) 236-0822
The Administrative
Agent: Citicorp USA, Inc.
153 E. 53rd Street
Floor 5, Zone 3
New York, New York 10022
Attention: Vice President
Fax: (212) 793-7964
Lehman Commercial Lehman Commercial Paper Inc.
Paper Inc., as 3 World Financial Center
a Lender 9th Floor
New York, New York 10285
Attention: Michele Swanson
Fax: (212) 528-0819
provided that any notice, request or demand to or upon the
Administrative Agent or the Lenders pursuant to subsection 2.2 or
2.4 shall not be effective until received.
9.3 No Waiver; Cumulative Remedies. No failure to
exercise and no delay in exercising, on the part of the
Administrative Agent or any Lender, any right, remedy, power or
privilege hereunder or under the other Loan Documents shall
operate as a waiver thereof; nor shall any single or partial
exercise of any right, remedy, power or privilege hereunder
preclude any other or further exercise thereof or the exercise of
any other right, remedy, power or privilege. The rights,
remedies, powers and privileges herein provided are cumulative
and not exclusive of any rights, remedies, powers and privileges
provided by law.
9.4 Survival of Representations and Warranties. All
representations and warranties made hereunder, in the other Loan
Documents and in any document, certificate or statement delivered
pursuant hereto or in connection herewith shall survive the
execution and delivery of this Agreement and the making of the
Loans hereunder.
9.5 Payment of Expenses and Taxes. The Borrower
agrees (a) to pay or reimburse the Administrative Agent for all
its out-of-pocket costs and expenses incurred in connection with
the development, preparation and execution of, and any amendment,
supplement or modification to, this Agreement and the other Loan
Documents and any other documents prepared in connection herewith
or therewith, and the consummation and administration of the
transactions contemplated hereby and thereby, including, without
limitation, the reasonable fees and disbursements of counsel to
the Administrative Agent, (b) to pay or reimburse each Lender and
the Administrative Agent for all its costs and expenses incurred
in connection with the enforcement or preservation of any rights
under this Agreement, the other Loan Documents and any such other
documents, including, without limitation, the fees and
disbursements of counsel (including the allocated fees and
expenses of in-house counsel) to each Lender and of counsel to
the Administrative Agent, (c) to pay, indemnify, and hold each
Lender and the Administrative Agent harmless from, any and all
recording and filing fees and any and all liabilities with
respect to, or resulting from any delay in paying, stamp, excise
and other taxes, if any, which may be payable or determined to be
payable in connection with the execution and delivery of, or
consummation or administration of any of the transactions
contemplated by, or any amendment, supplement or modification of,
or any waiver or consent under or in respect of, this Agreement,
the other Loan Documents and any such other documents, and (d) to
pay, indemnify, and hold each Lender and the Administrative Agent
harmless from and against any and all other liabilities,
obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses or disbursements of any kind or nature
whatsoever with respect to the execution, delivery, enforcement,
performance and administration of this Agreement and the other
Loan Documents and any such other documents and the use of the
proceeds of the Loans, including, without limitation, any of the
foregoing relating to the violation of, noncompliance with or
liability under, any Environmental Law applicable to the
operations of the Borrower, any of its Subsidiaries or any of the
Properties (all the foregoing in this clause (d), collectively,
the "indemnified liabilities"), provided that the Borrower shall
have no obligation hereunder to the Administrative Agent or any
Lender with respect to indemnified liabilities arising from the
gross negligence or willful misconduct of the Administrative
Agent or any such Lender. The agreements in this subsection
shall survive repayment of the Loans and all other amounts
payable hereunder.
9.6 Successors and Assigns; Participations and
Assignments. (a) This Agreement shall be binding upon and inure
to the benefit of the Borrower, the Lenders, the Administrative
Agent and their respective successors and assigns, except that
the Borrower may not assign or transfer any of its rights or
obligations under this Agreement without the prior written
consent of each Lender.
(b) Any Lender may, in the ordinary course of its
commercial banking business and in accordance with applicable
law, at any time sell to one or more banks or other entities
("Participants") participating interests in any Loan owing to
such Lender or any other interest of such Lender hereunder and
under the other Loan Documents. In the event of any such sale by
a Lender of a participating interest to a Participant, such
Lender's obligations under this Agreement to the other parties to
this Agreement shall remain unchanged, such Lender shall remain
solely responsible for the performance thereof, such Lender shall
remain the holder of any such Loan for all purposes under this
Agreement and the other Loan Documents, and the Borrower and the
Administrative Agent shall continue to deal solely and directly
with such Lender in connection with such Lender's rights and
obligations under this Agreement and the other Loan Documents.
No Lender shall be entitled to create in favor of any
Participant, in the participation agreement pursuant to which
such Participant's participating interest shall be created or
otherwise, any right to vote on, consent to or approve any matter
relating to this Agreement or any other Loan Document except for
those specified in clauses (i) and (ii) of the proviso to
subsection 9.1. The Borrower agrees that if amounts outstanding
under this Agreement are due or unpaid, or shall have been
declared or shall have become due and payable upon the occurrence
of an Event of Default, each Participant shall, to the maximum
extent permitted by applicable law, be deemed to have the right
of setoff in respect of its participating interest in amounts
owing under this Agreement to the same extent as if the amount of
its participating interest were owing directly to it as a Lender
under this Agreement, provided that, in purchasing such
participating interest, such Participant shall be deemed to have
agreed to share with the Lenders the proceeds thereof as provided
in subsection 9.7(a) as fully as if it were a Lender hereunder.
The Borrower also agrees that each Participant shall be entitled
to the benefits of subsections 2.8, 2.9 and 2.10 with respect to
its participation in the Loans outstanding from time to time as
if it was a Lender; provided that, in the case of subsection 2.9
such Participant shall have complied with the requirements of
said subsection and provided, further, that no Participant shall
be entitled to receive any greater amount pursuant to any such
subsection than the transferor Lender would have been entitled to
receive in respect of the amount of the participation transferred
by such transferor Lender to such Participant had no such
transfer occurred.
(c) Any Lender may, in the ordinary course of its
commercial banking business and in accordance with applicable
law, at any time and from time to time assign to any Lender or
any affiliate thereof or, with the consent of the Administrative
Agent (which shall not be unreasonably withheld), to an
additional bank or financial institution (an "Assignee") all or
any part of its rights and obligations under this Agreement and
the other Loan Documents pursuant to an Assignment and
Acceptance, substantially in the form of Exhibit I, executed by
such Assignee, such assigning Lender (and, in the case of an
Assignee that is not then a Lender or an affiliate thereof, by
the Administrative Agent) and delivered to the Administrative
Agent for its acceptance and recording in the Register, provided
that, in the case of any such assignment to an additional bank or
financial institution, the aggregate principal amount of the
Loans being assigned and, if such assignment is of less than all
of the rights and obligations of the assigning Lender, the
aggregate principal amount of the Loans remaining with the
assigning Lender are each not less than $1,000,000 (or such
lesser amount as may be agreed to by the Borrower and the
Administrative Agent). Upon such execution, delivery, acceptance
and recording, from and after the effective date determined
pursuant to such Assignment and Acceptance, (x) the Assignee
thereunder shall be a party hereto and, to the extent provided in
such Assignment and Acceptance, have the rights and obligations
of a Lender hereunder, and (y) the assigning Lender thereunder
shall, to the extent provided in such Assignment and Acceptance,
be released from its obligations under this Agreement (and, in
the case of an Assignment and Acceptance covering all or the
remaining portion of an assigning Lender's rights and obligations
under this Agreement, such assigning Lender shall cease to be a
party hereto).
(d) The Administrative Agent, on behalf of the
Borrower, shall maintain at the address of the Administrative
Agent referred to in subsection 9.2 a copy of each Assignment and
Acceptance delivered to it and a register (the "Register") for
the recordation of the names and addresses of the Lenders and the
principal amounts of the Loans owing to, each Lender from time to
time. The entries in the Register shall be conclusive, in the
absence of manifest error, and the Borrower, the Administrative
Agent and the Lenders may (and, in the case of any Loan or other
obligation hereunder not evidenced by a Note, shall) treat each
Person whose name is recorded in the Register as the owner of a
Loan or other obligation hereunder as the owner thereof for all
purposes of this Agreement and the other Loan Documents,
notwithstanding any notice to the contrary. Any assignment of
any Loan or other obligation hereunder not evidenced by a Note
shall be effective only upon appropriate entries with respect
thereto being made in the Register. The Register shall be
available for inspection by the Borrower or any Lender 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 Lender and an Assignee (and, in the case
of an Assignee that is not then a Lender or an affiliate thereof,
by the Administrative Agent) together with payment to the
Administrative Agent of a registration and processing fee of
$2,000, the Administrative Agent shall (i) promptly accept such
Assignment and Acceptance and (ii) on the effective date
determined pursuant thereto record the information contained
therein in the Register and give notice of such acceptance and
recordation to the Lenders and the Borrower.
(f) The Borrower authorizes each Lender to disclose to
any Participant or Assignee (each, a "Transferee") and any
prospective Transferee, subject to the provisions of subsection
9.15, any and all financial information in such Lender's
possession concerning the Borrower and its Affiliates which has
been delivered to such Lender by or on behalf of the Borrower
pursuant to this Agreement or which has been delivered to such
Lender by or on behalf of the Borrower in connection with such
Lender's credit evaluation of the Borrower and its Affiliates
prior to becoming a party to this Agreement.
(g) For avoidance of doubt, the parties to this
Agreement acknowledge that the provisions of this subsection
concerning assignments of Loans and Notes relate only to absolute
assignments and that such provisions do not prohibit assignments
creating security interests, including, without limitation, any
pledge or assignment by a Lender of any Loan or Note to any
Federal Reserve Bank in accordance with applicable law.
(h) Notwithstanding the foregoing, a Lender may assign
its Loans to DeepTech as the purchase price for the exercise of
its Warrants pursuant to the Warrant Agreement, provided that no
Loan held by DeepTech or any of its Affiliates shall be deemed to
be outstanding for any voting purposes.
9.7 Adjustments; Set-off. (a) If any Lender (a
"benefitted Lender") shall at any time receive any payment of all
or part of its Loans, or interest thereon, or receive any
collateral in respect thereof (whether voluntarily or
involuntarily, by set-off, pursuant to events or proceedings of
the nature referred to in Section 7(f), or otherwise), in a
greater proportion than any such payment to or collateral
received by any other Lender, if any, in respect of such other
Lender's Loans, or interest thereon (other than as a result of
payments made by Tatham pursuant to the Tatham Guarantee), such
benefitted Lender shall purchase for cash from the other Lenders
a participating interest in such portion of each such other
Lender's Loan, or shall provide such other Lenders with the
benefits of any such collateral, or the proceeds thereof, as
shall be necessary to cause such benefitted Lender to share the
excess payment or benefits of such collateral or proceeds ratably
with each of the Lenders; provided, however, that if all or any
portion of such excess payment or benefits is thereafter
recovered from such benefitted Lender, such purchase shall be
rescinded, and the purchase price and benefits returned, to the
extent of such recovery, but without interest.
(b) In addition to any rights and remedies of the
Lenders provided by law, each Lender shall have the right,
without prior notice to the Borrower, any such notice being
expressly waived by the Borrower to the extent permitted by
applicable law, upon any amount becoming due and payable by the
Borrower hereunder (whether at the stated maturity, by
acceleration or otherwise) to set-off and appropriate and apply
against such amount any and all deposits (general or special,
time or demand, provisional or final), in any currency, and any
other credits, indebtedness or claims, in any currency, in each
case whether direct or indirect, absolute or contingent, matured
or unmatured, at any time held or owing by such Lender or any
branch or agency or Affiliate thereof to or for the credit or the
account of the Borrower. Each Lender agrees promptly to notify
the Borrower and the Administrative Agent after any such set-off
and application made by such Lender, provided that the failure to
give such notice shall not affect the validity of such set-off
and application.
9.8 Counterparts. This Agreement may be executed by
one or more of the parties to this Agreement on any number of
separate counterparts (including by facsimile transmission), and
all of said counterparts taken together shall be deemed to
constitute one and the same instrument. A set of the copies of
this Agreement signed by all the parties shall be lodged with the
Borrower and the Administrative Agent.
9.9 Severability. Any provision of this Agreement
which is prohibited or unenforceable in any jurisdiction shall,
as to such jurisdiction, be ineffective to the extent of such
prohibition or unenforceability without invalidating the
remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction.
9.10 Integration. This Agreement and the other Loan
Documents represent the agreement of the Borrower, the
Administrative Agent and the Lenders with respect to the subject
matter hereof, and there are no promises, undertakings,
representations or warranties by the Administrative Agent or any
Lender relative to subject matter hereof not expressly set forth
or referred to herein or in the other Loan Documents.
9.11 GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND
OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY, AND
CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE
STATE OF NEW YORK.
9.12 Submission To Jurisdiction; Waivers. The
Borrower hereby irrevocably and unconditionally:
(a) submits for itself and its property in any legal
action or proceeding relating to this Agreement and the
other Loan Documents to which it is a party, or for
recognition and enforcement of any judgement in respect
thereof, to the non-exclusive general jurisdiction of the
Courts of the State of New York, the courts of the
United States of America for the Southern District of
New York, and appellate courts from any thereof;
(b) consents that any such action or proceeding may be
brought in such courts and waives any objection that it may
now or hereafter have to the venue of any such action or
proceeding in any such court or that such action or
proceeding was brought in an inconvenient court and agrees
not to plead or claim the same;
(c) agrees that service of process in any such action
or proceeding may be effected by mailing a copy thereof by
registered or certified mail (or any substantially similar
form of mail), postage prepaid, to the Borrower or its
Subsidiaries at its address set forth in subsection 9.2 or
at such other address of which the Administrative Agent
shall have been notified pursuant thereto;
(d) agrees that nothing herein shall affect the right
to effect service of process in any other manner permitted
by law or shall limit the right to sue in any other
jurisdiction; and
(e) waives, to the maximum extent not prohibited by
law, any right it may have to claim or recover in any legal
action or proceeding referred to in this subsection any
special, exemplary, punitive or consequential damages.
9.13 Acknowledgements. The Borrower hereby
acknowledges that:
(a) it has been advised by counsel in the negotiation,
execution and delivery of this Agreement and the other Loan
Documents;
(b) neither the Administrative Agent nor any Lender
has any fiduciary relationship with or duty to the Borrower
or Deepflex Partners arising out of or in connection with
this Agreement or any of the other Loan Documents, and the
relationship between Administrative Agent and Lenders, on
one hand, and the Borrower or Deepflex Partners, on the
other hand, in connection herewith or therewith is solely
that of debtor and creditor; and
(c) no joint venture is created hereby or by the other
Loan Documents or otherwise exists by virtue of the
transactions contemplated hereby among the Lenders or among
the Borrower, Deepflex Partners and the Lenders.
9.14 WAIVERS OF JURY TRIAL. THE BORROWER, THE
ADMINISTRATIVE AGENT AND THE LENDERS HEREBY IRREVOCABLY AND
UNCONDITIONALLY WAIVE TRIAL BY JURY IN ANY LEGAL ACTION OR
PROCEEDING RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT
AND FOR ANY COUNTERCLAIM THEREIN.
9.15 Confidentiality. (a) Each Lender agrees to keep
confidential all non-public information provided to it by the
Borrower pursuant to this Agreement that is designated by the
Borrower in writing as confidential; provided that nothing herein
shall prevent any Lender from disclosing any such information (i)
to the Administrative Agent or any other Lender, (ii) to any
Transferee which receives such information having been made aware
of the confidential nature thereof, (iii) to its employees,
directors, agents, attorneys, accountants and other professional
advisors, (iv) upon the request or demand of any Governmental
Authority having jurisdiction over such Lender, (v) in response
to any order of any court or other Governmental Authority or as
may otherwise be required pursuant to any Requirement of Law,
(vi) which has been publicly disclosed other than in breach of
this Agreement, or (vii) in connection with the exercise of any
remedy hereunder.
(b) The Borrower agrees that, except as the Borrower
may reasonably believe to be prudent to comply with any
Requirement of Law, it will not permit DeepTech or TOFF to
disclose the identity of Lehman Commercial Paper Inc. in any of
its public filings.
9.16 Other Matters Concerning the PIK Notes. It is
expressly agreed and acknowledged that all payments made on the
Pledged PIK Notes shall be deemed to be applied first to unpaid
accrued interest thereon and then to principal thereof.
9.17 Usury Savings Clause. It is the intention of the
parties hereto to comply with applicable usury laws (now or
hereafter enacted); accordingly, notwithstanding any provision to
the contrary in this Agreement, the Notes, any of the other Loan
Documents or any other document related hereto or thereto, in no
event shall this Agreement or any such other document require the
payment or permit the collection of interest in excess of the
maximum amount permitted by such laws. If from any circumstances
whatsoever, fulfillment of any provision of this Agreement, the
Notes, any of the other Loan Documents or of any other document
pertaining hereto or thereto, shall involve transcending the
limit of validity prescribed by applicable law for the collection
or charging of interest, then, ipso facto, the obligation to be
fulfilled shall be reduced to the limit of such validity, and if
form any such circumstances the Administrative Agent and the
Lenders shall ever receive anything of value as interest or
deemed interest by applicable law under this Agreement, the
Notes, any of the other Loan Documents or any other document
pertaining hereto or otherwise an amount that would exceed the
highest lawful rate, such amount that would be excessive interest
shall be applied to the reduction of the principal amount owing
under the Loans or on account of any other indebtedness of the
Borrower, and not to the payment of interest, or if such
excessive interest exceeds the unpaid balance of principal of
such indebtedness, such excess shall be refunded to the Borrower.
In determining whether or not the interest paid or payable with
respect to any indebtedness of the Borrower to the Administrative
Agent and the Lenders, under any specified contingency, exceeds
the Highest Lawful Rate (as hereinafter defined), the Borrower,
the Administrative Agent and the Lenders shall, to the maximum
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, (c) amortize, prorate, allocate and spread the total
amount of interest throughout the full term of such indebtedness
so that interest thereon does not exceed the maximum amount
permitted by applicable law, and/or (d) allocate interest between
portions of such indebtedness, to the end that no such portion
shall bear interest at a rate greater than that permitted by
applicable law.
To the extent that Article 5069-1.04 of the Texas
Revised Civil Statutes is relevant to the Administrative Agent
and the Lenders for the purpose of determining the Highest Lawful
Rate, the Administrative Agent and the Lenders hereby elect to
determine the applicable rate ceiling under such Article by the
indicated (weekly) rate ceiling form time to time in effect.
Nothing set forth in this subsection 9.17 is intended to or shall
limit the effect or operation of subsection 9.11.
For purposes of this subsection 9.17, "Highest Lawful
Rate" shall mean the maximum rate of nonusurious interest that
may be contracted for, taken, reserved or received on the Loans
under laws applicable to the Administrative Agent and the Lender.
9.18 Bahamian Registration. The Borrower and DeepFlex
Partners have requested that the Lenders consent to the
registration and flagging (collectively, "Reregistration") of the
Pincay under the laws of the Bahamas rather than the laws of the
United States. The Lenders hereby consent to the Reregistration
provided that the Borrower agrees, and agrees to cause DeepFlex
Partners to comply, as follows:
(a) The Reregistration shall take place in accordance
with Bahamian law on or before the date which is 45 days
after the Closing Date subject to the following conditions
being met within 30 days:
(i) MARAD issues permission to
reflag the Pincay and copy of the transfer
order evidencing such permission is provided
to the Lenders within three Business Days
after the receipt thereof;
(ii) DeepFlex Partners shall have
applied for a Letter of Convenience from the
United States Coast Guard; and
(iii) (A) an application to
register the Pincay under the laws of the
Bahamas shall have been filed by or on behalf
of DeepFlex Partners and (B) any inspections
required to be completed in order to register
the Pincay under the laws of the Bahamas
shall have been satisfactorily completed.
(b) At the time of the Reregistration, the Borrower
will cause DeepFlex Partners to execute and deliver a Ship
Mortgage covering the Pincay in favor of the Collateral
Agent to secure the Pledged PIK Notes. Such Ship Mortgage
will be satisfactory in form and substance to the
Administrative Agent, will contain covenants,
representations and defaults comparable to those discussed
by the Borrower and the Administrative Agent prior to the
date hereof and will provide, among other things, that
payment of the Pledged PIK Notes may be accelerated if there
is an actual or constructive total loss of the Pincay or if
any Person commences any remedial action against the Pincay.
(c) At the time of the Reregistration, the Ship
Mortgage will be recorded in all appropriate offices, and
all other actions shall have been taken and consents
obtained, in order to create a first priority preferred
mortgage Lien on the Pincay and the proceeds thereof as
security for the Pledged PIK Notes, among other things.
(d) The Pincay shall not be subject to any other Lien
other than that created under the Ship Mortgage.
(e) The Administrative Agent shall have received legal
opinions from Akin, Gump, Strauss, Hauer & Feld, L.L.P.,
United States maritime counsel satisfactory to the Lenders
and Graham, Thompson & Co., which collectively shall
address, any other things: (i) the Pincay is owned by
DeepFlex Partners and is subject to no Liens other than the
Ship Mortgage; (ii) the Ship Mortgage has been duly executed
and delivered by DeepFlex Partners and is a legal, valid,
binding and enforceable obligation of DeepFlex Partners and
the execution, delivery and performance of the Ship Mortgage
do not violate any Contractual Obligations or Requirements
of Law; (iii) the Ship Mortgage has been filed in all
offices, and all other action has been taken and consents
obtained, in order to create a first priority [preferred]
mortgage Lien in favor of the Collateral Agent on the Pincay
and the proceeds thereof as security for the Pledged PIK
Notes; and (iv) the Ship Mortgage constitutes a "foreign
ship mortgage" under the United States Ship Mortgage Act, as
amended.
(f) On or before the date which is 30 days after the
Closing Date the Borrower will execute and deliver a Ship
Mortgage covering the Pincay to secure the Obligations.
Such Ship Mortgage will be satisfactory in form and
substance to the Administrative Agent, will contain
covenants, representations and defaults comparable to those
contained in the Ship Mortgage delivered by DeepFlex
Partners, mutatis mutandis, and will also contain a cross-
default to defaults under this Agreement. Such Ship
Mortgage will be undated and will be in recordable form
under the laws of the Bahamas. Such Ship Mortgage will be
recorded in the appropriate officers of the Bahamas at the
time the Pincay is reconveyed to the Borrower.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed and delivered by their proper and
duly authorized officers as of the day and year first above
written.
DEEPFLEX PRODUCTION SERVICES, INC.
By:
Name:
Title:
CITICORP USA, INC.,
as Administrative Agent and as a
Lender
By:
Name:
Title:
LEHMAN COMMERCIAL PAPER INC.
By:
Name:
Title:
Schedule I
COMMITMENTS AND ADDRESSES OF LENDERS
Lender and Address Term Loan
Citicorp USA, Inc. $6,000,000.00
153 E. 53rd Street
Floor 5, Zone 3
New York, New York 10022
Attention: Vice President
Fax: (212) 793-7964
Lehman Commercial Paper Inc. $6,000,000.00
3 World Financial Center
New York, New York 10285
Attention: Michele Swanson
Fax: (212) 528-0819
Schedule 3.1
MATERIAL TRANSACTIONS SINCE SEPTEMBER 30, 1995
1. The transactions evidenced by the Highwood Loan
Documents, including, the acquisition of Deepwater
Drillers, L.L.C.
2. Advances to TOFF under the TOFF Bridge Facility.
The TOFF Bridge Loan Facility was cancelled, and all
amounts owed thereunder were paid, on February 9, 1996.
Schedule 3.6
LITIGATION
None
Schedule 3.16
INDEBTEDNESS OF THE BORROWER TO BE REFINANCED
1. The principal and accrued interest on that certain
Promissory Note dated January 1, 1996 issued by Borrower
payable to Thomas P. Tatham in the aggregate principal
amount of $6,032,062.50.
2. The principal and accrued interest on that certain
Promissory Note dated January 1, 1996 issued by Borrower
payable to Donald A. Sanders in the aggregate principal
amount of $480,000.
3. The principal and accrued interest on that certain
Promissory Note dated January 1, 1996 issued by Borrower
payable to John Drury in the aggregate principal amount of
$160,000.
Schedule 3.17
ENVIRONMENTAL MATTERS
None
Schedule 6.2
EXISTING INDEBTEDNESS
1. Indebtedness to WilrigAS under the Wilrig Loan Documents as
in effect on the Closing Date in the aggregate principal
amount of $11,000,000 plus interest thereon and expenses and
costs in connection therewith.
2. Senior Promissory Note issued by the Borrower payable to
DeepTech in the aggregate principal amount of up to
$40,000,000.
3. Indebtedness to Highwood arising under the Highwood Loan
Agreement, the Highwood Master Agreement, the Highwood
Guaranty and the Highwood Security Agreement.
Schedule 6.3
EXISTING LIENS
1. Liens on (i) the subordinated Promissory Note dated December
5, 1995 issued by DeepFlex Partners payable to the Borrower
in the aggregate principal amount of $3,087,500 and (ii) the
semi-submersible drilling Rig the Treasure Searcher securing
Indebtedness listed under item 3 of Schedule 6.2 to the
Credit Agreement.
2. Liens on (i) the Highwood PIK Notes and (ii) the shares of
common stock of FPS III, Inc., under the Highwood Security
Agreement.
Schedule 6.4
EXISTING GUARANTEE OBLIGATIONS
1. Guarantee Obligations arising under the Subordinated
Guaranties, described in the Subordination Agreement.
Schedule 6.11
EXISTING AFFILIATE TRANSACTIONS
1. Options to purchase up to an aggregate of 15% of the
outstanding common stock of the Borrower issued to Messrs.
Harvey Fleisher, Micheal Lam and Edward Moses.
2. The transactions contemplated in the Highwood Master
Agreement.
Execution Copy
CREDIT AGREEMENT
among
DEEPFLEX PRODUCTION SERVICES, INC.,
The Several Lenders
from Time to Time Parties Hereto
and
CITICORP USA, INC.
as Administrative Agent
Dated as of February 16, 1996
TABLE OF CONTENTS
Page
SECTION 1. DEFINITIONS 1
1.1 Defined Terms 1
1.2 Other Definitional Provisions 13
SECTION 2. AMOUNT AND TERMS OF LOANS 14
2.1 Loans 14
2.2 Procedure for Loan Borrowing 14
2.3 Repayment of Loans; Evidence of Debt 14
2.4 Mandatory Prepayment; Optional Prepayments 15
2.5 Interest Rate and Payment Dates 16
2.6 Computation of Interest and Fees 16
2.7 Pro Rata Treatment and Payments 16
2.8 Requirements of Law 17
2.9 Taxes 18
2.10 Agent's Fee 19
2.11 Value of Warrants 19
SECTION 3. REPRESENTATIONS AND WARRANTIES 19
3.1 Financial Condition 20
3.2 No Change 21
3.3 Corporate Existence; Compliance with Law 21
3.4 Corporate Power; Authorization; Enforceable
Obligations 21
3.5 No Legal Bar 22
3.6 No Material Litigation 22
3.7 No Default 22
3.8 Ownership of Property; Liens 22
3.9 Intellectual Property 22
3.10 No Burdensome Restrictions 23
3.11 Taxes 23
3.12 Federal Regulations 23
3.13 ERISA 23
3.14 Investment Company Act; Other Regulations 23
3.15 Subsidiaries 24
3.16 Purpose of Loans 24
3.17 Environmental Matters 24
3.18 Wholly-Owned Subsidiary 25
3.19 Partnership Interests 25
3.20 Solvency 25
3.21 Other Indebtedness 26
SECTION 4. CONDITIONS PRECEDENT 26
4.1 Conditions to Loans 26
SECTION 5. AFFIRMATIVE COVENANTS 30
5.1 Financial Statements of Borrower 30
5.2 Certificates; Other Information 31
5.3 Payment of Obligations 32
5.4 Conduct of Business and Maintenance of
Existence 32
5.5 Maintenance of Property; Insurance 32
5.6 Inspection of Property; Books and Records;
Discussions 32
5.7 Notices 33
5.8 Environmental Laws 33
5.9 Further Assurances 34
5.10 Additional Collateral 34
SECTION 6. NEGATIVE COVENANTS 35
6.1 Financial Condition Covenants 35
6.2 Limitation on Indebtedness 36
6.3 Limitation on Liens 36
6.4 Limitation on Guarantee Obligations 37
6.5 Limitation on Fundamental Changes 38
6.6 Limitation on Sale of Assets 38
6.7 INTENTIONALLY OMITTED 38
6.8 Limitation on Dividends 38
6.9 Limitation on Investments, Loans and
Advances 38
6.10 Limitation on Optional Payments and
Modifications of Debt Instruments 39
6.11 Limitation on Transactions with Affiliates 39
6.12 Limitation on Sales and Leasebacks 39
6.13 Limitation on Changes in Fiscal Year 39
6.14 Limitation on Negative Pledge Clauses 39
6.15 Limitation on Lines of Business 40
6.16 Extension of Charter Condition 40
6.17 Modification of PIK Notes 40
6.18 Limitations of DeepFlex Partners 41
SECTION 7. EVENTS OF DEFAULT 43
SECTION 8. THE ADMINISTRATIVE AGENT 47
8.1 Appointment 47
8.2 Delegation of Duties 47
8.3 Exculpatory Provisions 47
8.4 Reliance by Administrative Agent 47
8.5 Notice of Default 48
8.6 Non-Reliance on Administrative Agent and
Other Lenders 48
8.7 Indemnification 49
8.8 Administrative Agent in Its Individual
Capacity 49
8.9 Successor Administrative Agent 49
8.10 Collateral Agent 50
8.11 Conflicting Instructions 50
SECTION 9. MISCELLANEOUS 50
9.1 Amendments and Waivers 50
9.2 Notices 51
9.3 No Waiver; Cumulative Remedies 52
9.4 Survival of Representations and Warranties 52
9.5 Payment of Expenses and Taxes 52
9.6 Successors and Assigns; Participations and
Assignments 53
9.7 Adjustments; Set-off 55
9.8 Counterparts 55
9.9 Severability 56
9.10 Integration 56
9.11 GOVERNING LAW 56
9.12 Submission To Jurisdiction; Waivers 56
9.13 Acknowledgements 57
9.14 WAIVERS OF JURY TRIAL 57
9.15 Confidentiality 57
9.16 Other Matters Concerning the PIK Notes 57
9.17 Usury Savings Clause 58
9.18 Bahamian Registration 58
SCHEDULES
Schedule I Commitments and Addresses of Lenders
Schedule 3.1 Material Transactions Since September 30, 1995
Schedule 3.6 Litigation
Schedule 3.16 Indebtedness of the Borrower to be Refinanced
Schedule 3.17 Environmental Matters
Schedule 6.2 Existing Indebtedness
Schedule 6.3 Existing Liens
Schedule 6.4 Existing Guarantee Obligations
Schedule 6.11 Existing Affiliate Transactions
EXHIBITS
A Form of Note
B-1 Form of Borrower Security Agreement
B-2 Form of DeepFlex Partners Security Agreement
C Form of Borrower Pledge Agreement
D Form of DeepTech Warrant Agreement
E Intentionally Omitted
F Form of Tatham Guarantee
G Form of Borrowing/Non-Default Certificate
H-1 Form of Opinion of Counsel to the Borrower
H-2 Form of Opinion of General Counsel to the Borrower
I Form of Assignment and Acceptance
J Form of Consent
K Form of Intercreditor and Subordination Agreement
L Form of Pledged Account Agreement
Exhibit 2
DEEPTECH WARRANT AGREEMENT
WARRANT AGREEMENT, dated as of February 16, 1996 (the
"Agreement"), between DEEPTECH INTERNATIONAL INC., a Delaware
corporation (the "Company"), and Lehman Commercial Paper Inc.
(the "Lender").
W I T N E S S E T H :
WHEREAS, DeepFlex Production Services, Inc. (the
"Borrower"), a wholly-owned subsidiary of the Company, certain
lenders (including the Lender) and Citicorp USA, Inc., as
Administrative Agent, are parties to the Credit Agreement dated
as of February 16, 1996 (as the same may be amended, supplemented
or otherwise modified from time to time, the "Credit Agreement"),
pursuant to which, among other things, such lenders (including
the Lender) made term loans to the Borrower;
WHEREAS, in order to induce the Lender to execute and
deliver the Credit Agreement and to make such term loan to the
Borrower the Company has agreed to execute and deliver this
Agreement and to issue to the Lender the warrants hereinafter
described;
NOW, THEREFORE, in consideration of the premises herein
contained the parties hereto agree as follows:
1. DEFINITIONS
As used in this Agreement the following terms have the
respective meanings set forth below:
"Additional Shares of Common Stock" shall mean all
shares of Common Stock issued by the Company after the Closing
Date, other than Warrant Stock.
"Affiliate" shall mean as to any Person (the "Primary
Person"), any Person which, directly or indirectly, is in control
of, is controlled by, or is under common control with, the
Primary Person. For purposes of this definition, control of a
Person shall mean the power, directly or indirectly, to (i) vote
10% or more of the securities having ordinary voting power for
the election of directors of such Person or (ii) direct or cause
the direction of the management and policies of such Person
whether by contract or otherwise.
"Appraised Value" shall mean, in respect of any share
of Common Stock on any date herein specified, the fair market
value of such share of Common Stock (determined without giving
effect to any discount for (i) a minority interest or (ii) any
lack of liquidity of the Common Stock or to the fact that the
Company may have no class of equity registered under the Exchange
Act) as of the last day of the most recent fiscal month to end
within 60 days prior to such date specified, based on the
quotient obtained by dividing (x) the value of the Company, as
determined by an investment banking firm selected in accordance
with the terms of Section 14, by (y) the number of Fully Diluted
Outstanding shares of Common Stock.
"Book Value" shall mean, in respect of any share of
Common Stock on any date herein specified, the consolidated book
value of the Company applicable to Common Stock as of the last
day of the month immediately preceding such date, divided by the
number of Fully Diluted Outstanding shares of Common Stock as
determined in accordance with GAAP by a firm of independent
certified public accountants of recognized national standing
selected by the Company and reasonably acceptable to the Required
Holders.
"Business Day" shall mean any day that is not a
Saturday or Sunday or a day on which banks are required or
permitted to be closed in the State of New York.
"Closing Date" shall mean the date the Warrants are
initially issued.
"Commission" shall mean the Securities and Exchange
Commission or any other federal agency then administering the
Securities Act and other federal securities laws.
"Common Stock" shall mean the common stock, $.01 par
value per share, of the Company, as constituted on the Closing
Date, and any capital stock into which such Common Stock may
thereafter be changed, and shall also include (i) capital stock
of the Company of any other class (regardless of how denominated)
issued to the holders of shares of Common Stock upon any
reclassification thereof which is also not preferred as to
dividends or assets over any other class of stock of the Company
and which is not subject to redemption and (ii) shares of common
stock of any successor or acquiring corporation (as defined in
Section 4.8) received by or distributed to the holders of Common
Stock of the Company in the circumstances contemplated by Section
4.8.
"Contractual Obligation" shall mean, as to any Person,
any provision of any security issued by such Person or of any
agreement, instrument or other undertaking for which such Person
is a party or by which it or any of its property is bound.
"Convertible Securities" shall mean evidences of
indebtedness, shares of stock or other securities which are
convertible into or exchangeable, with or without payment of
additional consideration in cash or property, for Additional
Shares of Common Stock, either immediately or upon the occurrence
of a specified date or a specified event.
"Current Market Price" shall mean, in respect of any
share of Common Stock on any date herein specified, (a) if there
shall then be a public market for the Common Stock, the average
of the daily market prices for 10 consecutive Business Days
commencing 15 days before such date; the daily market price for
each such Business Day being (i) the last sale price on such day
on the principal stock exchange on which such Common Stock is
then listed or admitted to trading, (ii) if no sale takes place
on such day on any such exchange, the average of the last
reported closing bid and asked prices on such day as officially
quoted on any such exchange, (iii) if the Common Stock is not
then listed or admitted to trading on any stock exchange, the
average of the last reported closing bid and asked prices on such
day in the over-the-counter market, as furnished by the National
Association of Securities Dealers Automated Quotations System or
the National Quotation Bureau, Inc., (iv) if neither such
corporation at the time is engaged in the business of reporting
such prices, as furnished by any similar firm then engaged in
such business, or (v) if there is no such firm, as furnished by
any member of the NASD selected mutually by the Required Holders
and the Company or, if they cannot agree upon such selection, as
selected by two such members of the NASD, one of which shall be
selected by the Required Holders and one of which shall be
selected by the Company; or (b) at any time prior to the time
there is a public market for the Common Stock, the fair market
value per share of Common Stock on such date as mutually
determined in good faith by the Required Holders and the board of
directors of the Company (determined without giving effect to any
discount for a minority interest, any restrictions on
transferability or any lack of liquidity of the Common Stock or
to the fact that the Company has no class of equity registered
under the Exchange Act), such fair market value to be determined
by reference to the cash price that would be paid between a fully
informed buyer and seller under no compulsion to buy or sell,
provided that (i) if Current Market Price is being determined in
connection with an issuance of shares of Common Stock, warrants,
options or Convertible Securities solely to one or more
Affiliates of the Company, then if so requested by the Required
Holders, Current Market Price shall be the Appraised Value; and
(ii) Current Market Price shall never be less than Book Value.
"Current Warrant Price" shall mean, in respect of a
share of Common Stock at any date herein specified, $4.50 (which
is the closing price per share of the Common Stock on January 22,
1996 as reported on the National Association of Securities
Dealers Automated Quotation Systems), as adjusted pursuant to
this Agreement.
"Exchange Act" shall mean the Securities Exchange Act
of 1934, as amended, or any similar federal statute, and the
rules and regulations of the Commission thereunder, all as the
same shall be in effect from time to time.
"Exercise Period" shall mean the period during which
the Warrants are exercisable pursuant to Section 2.2.
"Expiration Date" shall mean July 15, 1997.
"Fully Diluted Outstanding" shall mean, when used with
reference to Common Stock, at any date as of which the number of
shares thereof is to be determined, all shares of Common Stock
Outstanding at such date and all shares of Common Stock issuable
in respect of the Warrants and other options or warrants to
purchase, or securities convertible into, shares of common stock
outstanding on such date which would be deemed outstanding in
accordance with GAAP for purposes of determining book value or
net income per share.
"GAAP" shall mean generally accepted accounting
principles in the United States of America as from time to time
in effect.
"Holder" shall mean each Person in whose name the
Warrants or any Warrant Stock are registered on the books of the
Company maintained for such purpose.
"NASD" shall mean the National Association of
Securities Dealers, Inc., or any successor corporation thereto.
"Other Property" shall have the meaning set forth in
Section 4.8.
"Outstanding" shall mean, when used with reference to
Common Stock, at any date as of which the number of shares
thereof is to be determined, all issued shares of Common Stock,
except shares then owned or held by or for the account of the
Company or any Subsidiary, and shall include all shares issuable
in respect of outstanding scrip or any certificates representing
fractional interests in shares of Common Stock.
"Permitted Issuances" shall mean (i) the issuance of
shares of Common Stock upon exercise of the Warrants, (ii) the
issuance of shares of Common Stock pursuant to the securities
identified on Schedule I hereto, (iii) if there shall then be a
public market for the Common Stock, the issuance of shares of
Common Stock upon receipt by the Company of the Current Market
Price therefor described in clause (a) of the definition of
"Current Market Price", (iv) the issuance of shares relating to
any benefit plan, stock option plan or any other compensation
plan or arrangement offered solely to the officers, directors,
employees and/or consultants of the Company and its Affiliates
which plan or arrangement complies with Rule 16b-3 under the
Exchange Act, and (v) at any time prior to the time there is a
public market for the Common Stock, the issuance of shares of
Common Stock in an arm's length transaction with third Persons
not affiliated with the Company for consideration equal to the
fair value of such shares as determined in good faith by the
Board of Directors of the Company. Any determination by the
Board of Directors of the Company pursuant to the preceding
sentence may be challenged in good faith by Holders of Warrants
exercisable for in excess of 51% of the aggregate number of
shares of Common Stock then purchasable upon exercise of all
Warrants, whether or not then exercisable, and any dispute shall
be resolved by an investment banking firm of reorganized national
standing selected and paid for by the Company and reasonably
acceptable to such Holders or by any other method as is then
agreed to by the Company and such Holders.
"Person" shall mean any individual, sole
proprietorship, partnership, joint venture, trust, incorporated
organization, association, corporation, institution, public
benefit corporation, entity or government (whether federal,
state, county, city, municipal or otherwise, including, without
limitation, any instrumentality, division, agency, body or
department thereof).
"Public Company" shall have the meaning set forth in
Section 13.1.
"Registrable Securities" shall have the meaning set
forth in Section 9.3.
"Required Holders" shall mean the Holders of Warrants
exercisable for in excess of 50% of the aggregate number of
shares of Common Stock then purchasable upon exercise of all
outstanding Warrants, whether or not then exercisable.
"Requirement of Law" shall mean, as to any Person, the
certificate of incorporation and by-laws or other organizational
or governing documents of such Person, and any law, treaty, rule
or regulation or determination of an arbitration or a court or
other governmental authority, in each case applicable to or
binding on such Person or any of the property thereof or to which
such Person or any of its property is subject.
"Restricted Common Stock" shall mean shares of Common
Stock which are, or which upon their issuance on the exercise of
this Warrant would be, evidenced by a certificate bearing the
restrictive legend set forth in Section 9.1.
"Securities Act" shall mean the Securities Act of 1933,
as amended, or any similar federal statute, and the rules and
regulations of the Commission thereunder, all as the same shall
be in effect at the time.
"Subsidiary" shall mean any Person of which an
aggregate of more than 50% of the outstanding stock or other
ownership interests having ordinary voting power to elect a
majority of the board of directors or other managers of such
Person (irrespective of whether, at the time, stock or other
ownership interests of any other class or classes of such Person
shall have or might have voting power by reason of the happening
of any contingency) is at the time, directly or indirectly, owned
legally or beneficially by the Company and/or one or more
Subsidiaries of the Company.
"Transfer Notice" shall have the meaning set forth in
Section 9.2.
"Warrant Certificate" shall mean a certificate
evidencing one or more Warrants, substantially in the form of
Exhibit A hereto, with such changes therein as may be required to
reflect any adjustments made pursuant to Section 4.
"Warrant Price" shall mean an amount equal to (i) the
number of shares of Common Stock being purchased upon exercise of
Warrants pursuant to Section 2.2, multiplied by (ii) the Current
Warrant Price as of the date of such exercise.
"Warrant Stock" shall mean the shares of Common Stock
purchased by the Holders of the Warrants upon the exercise
thereof.
"Warrants" shall mean the warrants issued pursuant to
this Agreement and shall include all warrants issued upon
transfer, division or combination of, or in substitution for, any
thereof. All Warrants shall at all times be identical as to
terms and conditions and date, except as to the number of shares
of Common Stock for which they may be exercised. A Warrant shall
entitle the holder thereof to purchase from the Company one share
of Common Stock (subject to adjustment as provided in Section 4).
2. ISSUANCE; EXERCISE OF WARRANT
2.1. Issuance of Warrants. The Company hereby agrees
to issue in favor of the Lender, on the Closing Date, Warrants in
an amount equal to the number of Warrants listed opposite the
Lender's name on Exhibit B hereto. On the Closing Date the
Company shall deliver to the Lender Warrant Certificates
evidencing the Warrants issued to the Lender. Each Warrant
issued on the Closing Date shall entitle the Holder thereof to
purchase from the Company one share of Common Stock (subject to
adjustment as provided in Section 4).
2.2. Manner of Exercise. The Holder may at any time
and from time to time, from and after the Closing Date and until
5:00 P.M., New York City time, on the Expiration Date, exercise
the Warrants evidenced by a Warrant Certificate, on any Business
Day, for all or any part of the number of shares of Common Stock
purchasable thereunder.
In order to exercise the Warrants, in whole or in part,
a Holder shall deliver to the Company at its principal office at
7400 Texas Commerce Tower, 600 Travis, Houston, Texas 77002,
Attention: Thomas P. Tatham, or at the office or agency
designated by the Company pursuant to Section 12, (i) a written
notice of such Holder's election to exercise the Warrants, which
notice shall specify the number of shares of Common Stock to be
purchased, (ii) payment of the Warrant Price in the manner
provided below, and (iii) the Warrant Certificate or Warrant
Certificates evidencing the Warrants. Such notice shall be
substantially in the form of the form of election to purchase
appearing at the end of the Warrant Certificate as Exhibit A,
duly executed by such Holder or its agent or attorney. Upon
receipt thereof, the Company shall, as promptly as practicable,
and in any event within three (3) Business Days thereafter,
execute or cause to be executed and deliver or cause to be
delivered to such Holder a certificate or certificates
representing the aggregate number of full shares of Common Stock
issuable upon such exercise, together with cash in lieu of any
fraction of a share, as hereinafter provided. The stock
certificate or certificates so delivered shall be, to the extent
possible, in such denomination or denominations as such Holder
shall request in the notice and shall be registered in the name
of Holder or, subject to Section 9, such other name as shall be
designated in the notice. The Warrants shall be deemed to have
been exercised and such certificate or certificates shall be
deemed to have been issued, and such Holder or any other Person
so designated to be named therein shall be deemed to have become
a holder of record of such shares for all purposes, as of the
date the notice, together with the check or checks representing
payment of the Warrant Price and the Warrant Certificate or
Warrant Certificates, is received by the Company as described
above and all taxes required to be paid by such Holder, if any,
pursuant to Section 2.3 prior to the issuance of such shares have
been paid. If the Warrants evidenced by a Warrant Certificate
shall have been exercised, the Company shall, at the time of
delivery of the certificate or certificates representing Warrant
Stock, deliver to Holder a new Warrant Certificate evidencing the
rights of Holder to purchase the unpurchased shares of Common
Stock represented by the old Warrant Certificate, which new
Warrant Certificate shall in all other respects be identical with
the old Warrant Certificate. Notwithstanding any provision
herein to the contrary, the Company shall not be required to
register shares in the name of any Person who acquired any
Warrant or any Warrant Stock otherwise than in accordance with
this Agreement.
Payment of the Warrant Price shall be made at the
option of the Holder (i) by certified or official bank check or
(ii) if such Holder shall then be a lender under the Credit
Agreement, by such Holder's transferring to the Company an amount
of the outstanding term loans of such Holder (including principal
of and accrued and unpaid interest thereon) under the Credit
Agreement equal to the Warrant Price or (iii) in immediately
available funds or (iv) any combination thereof.
2.3. Payment of Taxes. All shares of Common Stock
issuable upon the exercise of Warrants pursuant to the terms
hereof shall be validly issued, fully paid and nonassessable and
without any preemptive rights. The Company shall pay all
expenses in connection with, and all taxes and other governmental
charges that may be imposed with respect to, the issuance or
delivery thereof, unless such tax or charge is imposed by law
upon Holder, in which case such taxes or charges shall be paid by
Holder. The Company shall not be required, however, to pay any
tax or other charge imposed in connection with any transfer
involved in the issue of any certificate for shares of Warrant
Stock issuable upon exercise of Warrants in any name other than
that of Holder, and in such case the Company shall not be
required to issue or deliver any stock certificate until such tax
or other charge has been paid or it has been established to the
satisfaction of the Company that no such tax or other charge is
due.
2.4. Fractional Shares. The Company shall not be
required to issue a fractional share of Common Stock upon the
exercise of Warrants. As to any fraction of a share which the
Holder of Warrants would otherwise be entitled to purchase upon
such exercise, the Company shall pay a cash adjustment in respect
of such final fraction in an amount equal to the same fraction of
the Current Market Price per share of Common Stock on the date of
exercise.
2.5. Continued Validity. A Holder of shares of
Warrant Stock (other than a holder who acquires such shares after
the same have been publicly sold pursuant to a Registration
Statement under the Securities Act) shall continue to be entitled
with respect to such shares to all rights to which it would have
been entitled as Holder under Sections 6, 7, 9, 10, 11, 13 and 16
of this Agreement. The Company will, at the time of each
exercise of Warrants upon the request of the Holder of the shares
of Warrant Stock issued upon the exercise thereof, acknowledge in
writing, in form reasonably satisfactory to such Holder, its
continuing obligation to afford to such Holder all such rights;
provided, however, that if such Holder shall fail to make any
such request, such failure shall not affect the continuing
obligation of the Company to afford to such Holder all such
rights.
3. TRANSFERS, DIVISION AND COMBINATION
3.1. Transfer. Subject to compliance with Section 9,
transfer of Warrants, in whole or in part, shall be registered on
the books of the Company to be maintained for such purpose, upon
surrender of the Warrant Certificate representing such Warrants
at the principal office of the Company referred to in Section 2.2
or the office or agency designated by the Company pursuant to
Section 12, together with a written assignment substantially in
the form of Exhibit B to the Warrant Certificate duly executed by
the Holder or its agent or attorney, an opinion of Holder's
counsel delivered to the Company in connection with such transfer
(which opinion shall be reasonably satisfactory to the Company)
that such transfer is being effected pursuant to an effective
registration statement under the Securities Act or an exemption
from registration thereunder and funds sufficient to pay any
transfer taxes payable by such Holder upon the making of such
transfer. Upon such surrender and, if required, such payment,
the Company shall, subject to Section 9, execute and deliver a
new Warrant Certificate or Warrant Certificates in the name of
the assignee or assignees and in the denomination specified in
such instrument of assignment, and shall issue to the assignor a
new Warrant Certificate or Warrant Certificates evidencing the
portion of the old Warrant Certificate not so assigned, and the
old Warrant Certificate shall promptly be cancelled. A Warrant,
if properly assigned in compliance with Section 9, may be
exercised by a new Holder for the purchase of shares of Warrant
Stock without having a new Warrant Certificate or Warrant
Certificates issued. If requested by the Company, a new Holder
shall acknowledge in writing, in form reasonably satisfactory to
the Company, such Holder's continuing obligation under Section 9.
3.2. Division and Combination. Subject to Section 9,
any Warrant Certificate may be divided or combined with other
Warrant Certificates upon presentation hereof at the aforesaid
office or agency of the Company, together with a written notice
specifying the names and denominations in which new Warrant
Certificates are to be issued, signed by a Holder or its agent or
attorney. Subject to compliance with Section 3.1 as to any
transfer which may be involved in such division or combination,
the Company shall execute and deliver a new Warrant Certificate
or Warrant Certificates in exchange for the Warrant Certificate
or Warrant Certificates to be divided or combined in accordance
with such notice.
3.3. Expenses. The Company shall prepare, issue and
deliver at its own expense (other than transfer taxes) the new
Warrant Certificate or Warrant Certificates under this Section 3.
3.4. Maintenance of Books. The Company agrees to
maintain, at its aforesaid office or agency, books for the
registration and the registration of transfer and exchange of the
Warrants and the Warrant Stock.
4. ADJUSTMENTS
The number of shares of Warrant Stock for which
Warrants are exercisable, and the price at which such shares may
be purchased upon exercise of Warrants, shall be subject to
adjustment from time to time as set forth in this Section 4. The
Company promptly shall give each Holder written notice of any
event described below which requires an adjustment pursuant to
this Section 4 at the time of such event.
4.1. Stock Dividends, Subdivisions and Combinations.
If at any time after January 22, 1996 the Company shall:
(a) take a record of the holders of its Common Stock
for the purpose of entitling them to receive a dividend
payable in, or other distribution of, Additional Shares of
Common Stock,
(b) subdivide its outstanding shares of Common Stock
into a larger number of shares of Common Stock, or
(c) combine its outstanding shares of Common Stock
into a smaller number of shares of Common Stock,
then (i) the number of shares of Common Stock for which a Warrant
is exercisable immediately after the occurrence of any such event
shall be adjusted to equal the number of shares of Common Stock
which a record holder of the same number of shares of Common
Stock for which a Warrant is exercisable immediately prior to the
occurrence of such event would own or be entitled to receive
after the happening of such event, and (ii) the Current Warrant
Price shall be adjusted to equal the Current Warrant Price
multiplied by a fraction, the numerator of which shall be the
number of shares of Common Stock for which a Warrant is
exercisable immediately prior to the adjustment and the
denominator of which shall be the number of shares for which a
Warrant is exercisable immediately after such adjustment.
4.2. Certain Other Distributions. If at any time
after January 22, 1996 the Company shall take a record of the
holders of its Common Stock for the purpose of entitling them to
receive any dividend or other distribution of:
(a) cash;
(b) any evidences of its indebtedness (other than
Convertible Securities), any shares of its stock (other than
Additional Shares of Common Stock or Convertible Securities)
or any other securities or property of any nature whatsoever
(other than cash); or
(c) any warrants or other rights to subscribe for or
purchase any evidences of its indebtedness (other than
Convertible Securities), any shares of its stock (other than
Additional Shares of Common Stock or Convertible Securities)
or any other securities or property of any nature
whatsoever;
then (i) the number of shares of Common Stock for which a Warrant
is exercisable shall be adjusted to equal the product obtained by
multiplying the number of shares of Common Stock for which a
Warrant is exercisable immediately prior to such adjustment by a
fraction (A) the numerator of which shall be the Current Market
Price per share of Common Stock at the date of taking such record
and (B) the denominator of which shall be such Current Market
Price per share of Common Stock, minus the amount allocable to
one share of Common Stock of any such cash so distributable and
of the fair value (as determined in good faith by the Board of
Directors of the Company and supported by an opinion from an
investment banking firm of recognized national standing
acceptable to the Required Holders) of any and all such evidences
of indebtedness, shares of stock, other securities or property or
warrants or other subscription or purchase rights so
distributable, and (ii) the Current Warrant Price shall be
adjusted to equal (A) the Current Warrant Price multiplied by the
number of shares of Common Stock for which a Warrant is
exercisable immediately prior to the adjustment divided by (B)
the number of shares for which a Warrant is exercisable
immediately after such adjustment. A reclassification of the
Common Stock (other than a change in par value, or from par value
to no par value or from no par value to par value) into shares of
Common Stock and shares of any other class of stock shall be
deemed a distribution by the Company to the holders of its Common
Stock of such shares of such other class of stock within the
meaning of this Section 4.2 and, if the outstanding shares of
Common Stock shall be changed into a larger or smaller number of
shares of Common Stock as a part of such reclassification, such
change shall be deemed a subdivision or combination, as the case
may be, of the outstanding shares of Common Stock within the
meaning of Section 4.1.
4.3. Issuance of Additional Shares of Common Stock.
(a) (i) If at any time after January 22, 1996 the Company shall
(except as hereinafter provided) issue or sell any Additional
Shares of Common Stock, other than Permitted Issuances, for
consideration in an amount per Additional Share of Common Stock
less than
the Current Market Price, then the Current Warrant Price shall be
reduced to a price determined by dividing (A) an amount equal to
the sum of (X) the number of shares of Common Stock Outstanding
immediately prior to such issuance or sale multiplied by the then
existing Current Warrant Price, plus (Y) the consideration, if
any, received by the Company upon such issuance or sale, by (B)
the total number of shares of Common Stock Outstanding
immediately after such issuance or sale and (ii) upon each
adjustment of the Current Warrant Price as a result of the
calculations made pursuant to this Section 4, each Warrant
outstanding prior to the making of the adjustment in the Current
Warrant Price shall thereafter be treated as that number of
Warrants, and shall evidence the right to purchase, at the
adjusted Current Warrant Price, that number of shares of Common
Stock outstanding, obtained by (i) multiplying the number of
shares of Common Stock for which a Warrant is exercisable
immediately prior to the adjustment by the Current Warrant Price
in effect immediately prior to the adjustment, and (ii) dividing
the product so obtained by the Current Warrant Price obtained
immediately after such adjustment of the Current Warrant Price.
(b) The provisions of paragraph (a) of Section 4.3
shall not apply to any issuance of Additional Shares of Common
Stock for which an adjustment is provided under Section 4.1 or
4.2. No adjustment of the number of shares of Common Stock for
which a Warrant shall be exercisable shall be made under
paragraph (a) of Section 4.3 upon the issuance of any Additional
Shares of Common Stock which are issued pursuant to the exercise
of any warrants or other subscription or purchase rights or
pursuant to the exercise of any conversion or exchange rights in
any Convertible Securities, if any such adjustment shall
previously have been made upon the issuance of such warrants or
other rights or upon the issuance of such Convertible Securities
(or upon the issuance of any warrant or other rights therefor)
pursuant to Section 4.4 or Section 4.5.
4.4. Issuance of Warrants or Other Rights. (a) If at
any time after January 22, 1996 the Company shall take a record
of the holders of its Common Stock for the purpose of entitling
them to receive a dividend or distribution of, or shall in any
manner (whether directly or by assumption in a merger in which
the Company is the surviving corporation) issue or sell, any
warrants or other rights to subscribe for or purchase any
Additional Shares of Common Stock or any Convertible Securities,
whether or not the rights to exchange or convert thereunder are
immediately exercisable, and if the price per share for which
Common Stock is issuable upon the exercise of such warrants or
other rights or upon conversion or exchange of such Convertible
Securities shall be less than the Current Market Price in effect
immediately prior to the time of such distribution, issue or
sale, then: (i) the number of shares of Common Stock for which a
Warrant is exercisable shall be adjusted to equal the product
obtained by multiplying the number of shares of Common Stock for
which a Warrant is exercisable immediately prior to the taking of
such record or such issuance or sale by a fraction (A) the
numerator of which is the number of shares of Common Stock which
would be Outstanding immediately after the issuance or sale of
the maximum number of Additional Shares of Common Stock issuable
pursuant to all such warrants or other rights or necessary to
effect the conversion or exchange of all such Convertible
Securities, and (B) the denominator of which is the number of
shares of Common Stock Outstanding immediately prior to the
taking of such record or the issuance or sale of such warrants or
other rights; and (ii) the Current Warrant Price shall be
adjusted as provided in Section 4.3(a) on the basis that (A) the
maximum number of Additional Shares of Common Stock issuable
pursuant to all such warrants or other rights or necessary to
effect the conversion or exchange of all such Convertible
Securities shall be deemed to have been issued and outstanding,
(B) the price per share for such Additional Shares of Common
Stock shall be deemed to be the lowest possible price per share
in any range of prices per share at which such Additional Shares
of Common Stock are available to such holders, and (C) the
Company shall be deemed to have received all of the consideration
payable therefor, if any, as of the date of the actual issuance
of such warrants or other rights. No further adjustments of the
Current Warrant Price or number of Warrants shall be made upon
the actual issuance of such Common Stock or of such Convertible
Securities upon exercise of such warrants or other rights or upon
the actual issuance of such Common Stock upon such conversion or
exchange of such Convertible Securities.
(b) If any Additional Share of Common Stock issuable
pursuant to all such warrants or other rights or necessary to
effect the conversion or exchange of all such Convertible
Securities is issuable in exchange for consideration in an amount
per such Additional Share of Common Stock equal to or more than
the greater of the Current Warrant Price and the Current Market
Price at the time such record is taken or such warrants or other
rights are issued or sold, then the Current Warrant Price as to
the number of shares of Common Stock for which a Warrant is
exercisable prior to the adjustment under Section 4.4(a)(i) shall
not change, and the Current Warrant Price for each of the
incremental number of shares of Common Stock for which this
Warrant becomes exercisable after such adjustment shall be equal
to the fair value of such consideration per Additional Share of
Common Stock.
4.5. Issuance of Convertible Securities. (a) If at
any time the Company shall take a record of the holders of its
Common Stock for the purpose of entitling them to receive a
distribution of, or shall in any manner (whether directly or by
assumption in a merger in which the Company is the surviving
corporation) issue or sell, any Convertible Securities, whether
or not the rights to exchange or convert thereunder are
immediately exercisable, and if the price per share for which
Common Stock is issuable upon such conversion or exchange shall
be less than the Current Market Price in effect immediately prior
to the time of such issue or sale of Convertible Securities,
then: (i) the number of shares of Common Stock for which a
Warrant is exercisable shall be adjusted to equal the product
obtained by multiplying the number of shares of Common Stock for
which a Warrant is exercisable immediately prior to the taking of
such record or such issuance or sale by a fraction (A) the
numerator of which is the number of shares of Common Stock which
would be Outstanding immediately after the issuance or sale of
the maximum number of Additional Shares of Common Stock necessary
to effect the conversion or exchange of all such Convertible
Securities, and (B) the denominator of which is the number of
shares of Common Stock Outstanding immediately prior to the
taking of such record or the issuance or sale of such Convertible
Securities; and (ii) the Current Warrant Price shall be adjusted
as provided in Section 4.3(a) on the basis that (A) the maximum
number of Additional Shares of Common Stock necessary to effect
the conversion or exchange of all such Convertible Securities
shall be deemed to have been issued and outstanding, (B) the
price per share of such Additional Shares of Common Stock shall
be deemed to be the lowest possible price in any range of prices
at which such Additional Shares of Common Stock are available to
such holders, and (C) the Company shall be deemed to have
received all of the consideration payable therefor, if any, as of
the date of actual issuance of such Convertible Securities. No
adjustment of the Current Warrant Price shall be made under this
Section 4.5 upon the issuance of any Convertible Securities which
are issued pursuant to the exercise of any warrants or other
subscription or purchase rights therefor, if any such adjustment
shall previously have been made upon the issuance of such
warrants or other rights pursuant to Section 4.4. No further
adjustments of the Current Warrant Price shall be made upon the
actual issue of such Common Stock upon conversion or exchange of
such Convertible Securities and, if any issue or sale of such
Convertible Securities is made upon exercise of any warrant or
other right to subscribe for or to purchase or any warrant or
other right to purchase any such Convertible Securities for which
adjustments of the Current Warrant Price have been or are to be
made pursuant to other provisions of this Section 4, no further
adjustments of the Current Warrant Price or number of Warrants
shall be made by reason of such issue or sale.
(b) If any Additional Share of Common Stock issuable
upon conversion or exchange of all such Convertible Securities is
issuable in exchange for consideration in an amount per such
Additional Share of Common Stock equal to the Current Market
Price at the time such record is taken or such Convertible
Securities are issued or sold, then the Current Warrant Price as
to the number of shares of Common Stock for which this Warrant is
exercisable prior to the adjustment under Section 4.5(a)(i) shall
not change, but the Current Warrant Price for each of the
incremental number of shares of Common Stock for which a Warrant
becomes exercisable after such adjustment shall be equal to the
fair value of such consideration per Additional Share of Common
Stock.
4.6. Superseding Adjustment. If, at any time after
any adjustment of the number of shares of Common Stock for which
a Warrant is exercisable shall have been made pursuant to Section
4.4 or Section 4.5 as the result of any issuance of warrants,
options, rights or Convertible Securities, and such warrants,
options or rights, or the right of conversion or exchange in such
other Convertible Securities, shall expire, and all or a portion
of such warrants, options or rights, or the right of conversion
or exchange with respect to all or a portion of such other
Convertible Securities, as the case may be, shall not have been
exercised, then such previous adjustment shall be rescinded and
annulled and the Additional Shares of Common Stock which were
deemed to have been issued by virtue of the computation made in
connection with the adjustment so rescinded and annulled shall no
longer be deemed to have been issued by virtue of such
computation. Thereupon, a recomputation shall be made of the
effect of such warrants, rights or options or other Convertible
Securities on the then outstanding Warrants, but not on any then
outstanding Warrant Stock, on the basis of treating the number of
Additional Shares of Common Stock or other property, if any,
theretofore actually issued or issuable pursuant to the previous
exercise of any such warrants, rights or options or any such
right of conversion or exchange, as having been issued on the
date or dates of any such exercise and for the consideration
actually received and receivable therefor.
4.7. Other Provisions Applicable to Adjustments under
this Section. The following provisions shall be applicable to
the making of adjustments of the number of shares of Common Stock
for which a Warrant is exercisable provided for in this Section
4:
(a) Computation of Consideration. To the extent that
any Additional Shares of Common Stock or any Convertible
Securities or any warrants, options or other rights to
subscribe for or purchase any Additional Shares of Common
Stock or any Convertible Securities shall be issued for cash
consideration, the consideration received by the Company
therefor shall be the amount of the cash received by the
Company therefor, or, if such Additional Shares of Common
Stock or Convertible Securities are offered by the Company
for subscription, the subscription price, or, if such
Additional Shares of Common Stock or Convertible Securities
are sold to underwriters or dealers for public offering
without a subscription offering, the initial public offering
price (in any such case subtracting any amounts paid or
receivable for accrued interest or accrued dividends, but
not subtracting any compensation, discounts or expenses paid
or incurred by the Company for and in the underwriting of,
or otherwise in connection with, the issuance thereof). To
the extent that such issuance shall be for a consideration
other than cash, then, except as herein otherwise expressly
provided, the amount of such consideration shall be deemed
to be the fair value of such consideration at the time of
such issuance as mutually determined in good faith by the
Required Holders and the Board of Directors of the Company.
In case any Additional Shares of Common Stock or any
Convertible Securities or any warrants or other rights to
subscribe for or purchase such Additional Shares of Common
Stock or Convertible Securities shall be issued in
connection with any merger in which the Company issues any
securities, the amount of consideration therefor shall be
deemed to be the fair value, as mutually determined in good
faith by the Required Holders and the Board of Directors of
the Company, of such portion of the assets and business of
the nonsurviving corporation as the Required Holders and
such Board in good faith shall mutually determine to be
attributable to such Additional Shares of Common Stock,
Convertible Securities, warrants or other rights, as the
case may be. The consideration for any Additional Shares of
Common Stock issuable pursuant to any warrants, options or
other rights to subscribe for or purchase the same shall be
the consideration received by the Company for issuing such
warrants or other rights plus the additional consideration
payable to the Company upon exercise of such warrants or
other rights. The consideration for any Additional Shares
of Common Stock issuable pursuant to the terms of any
Convertible Securities shall be the consideration, if any,
received by the Company for issuing warrants or other rights
to subscribe for or purchase such Convertible Securities,
plus the consideration paid or payable to the Company in
respect of the subscription for or purchase of such
Convertible Securities, plus the additional consideration,
if any, payable to the Company upon the exercise of the
right of conversion or exchange in such Convertible
Securities. In case of the issuance at any time of any
Additional Shares of Common Stock or Convertible Securities
in payment or satisfaction of any dividends upon any class
of stock other than Common Stock, the Company shall be
deemed to have received for such Additional Shares of Common
Stock or Convertible Securities a consideration equal to the
amount of such dividend so paid or satisfied.
(b) When Adjustments to Be Made. The adjustments
required by this Section 4 shall be made whenever and as
often as any specified event requiring an adjustment shall
occur, except that any adjustment that would otherwise be
required may be postponed (except in the case of a
subdivision or combination of shares of the Common Stock, as
provided for in Section 4.1) up to, but not beyond, the date
of exercise of any Warrants if such adjustment either by
itself or with other adjustments not previously made adds or
subtracts less than 1% to the number of shares of Common
Stock for which the Warrants initially issued pursuant to
this Agreement are exercisable immediately prior to the
making of such adjustment. Any adjustment representing a
change of less than such minimum amount (except as
aforesaid) which is postponed shall be carried forward and
made as soon as such adjustment, together with other
adjustments required by this Section 4 and not previously
made, would result in a minimum adjustment or on the date of
exercise. For the purpose of any adjustment, any specified
event shall be deemed to have occurred at the close of
business on the date of its occurrence.
(c) Fractional Interests. In computing adjustments
under this Section 4, fractional interests in Common Stock
resulting from an issuance of additional Warrants to any
Holder pursuant to this Section 4 shall be taken into
account to the nearest 1/10th of a share.
(d) When Adjustment Not Required. If the Company
shall take a record of the holders of its Common Stock for
the purpose of entitling them to receive a dividend or
distribution or subscription or purchase rights and shall,
thereafter and before the distribution to stockholders
thereof, legally abandon its plan to pay or deliver such
dividend, distribution, subscription or purchase rights,
then thereafter no adjustment shall be required by reason of
the taking of such record and any such adjustment previously
made in respect thereof shall be rescinded and annulled.
(e) Escrow of Warrant Stock. If after any property
becomes distributable pursuant to this Section 4 by reason
of taking of any record of the holders of Common Stock, but
prior to the occurrence of the event for which such record
is taken, any Holder exercises Warrants, any Additional
Shares of Common Stock issuable upon exercise by reason of
such adjustment shall be deemed the last shares of Common
Stock for which this Warrant is exercised (notwithstanding
any other provision to the contrary herein) and such shares
or other property shall be held in escrow for Holder by the
Company to be issued to Holder upon and to the extent that
the event actually takes place, upon payment of the then
Current Warrant Price. Notwithstanding any other provision
to the contrary herein, if the event for which such record
was taken fails to occur or is rescinded, then such escrowed
shares shall be cancelled by the Company and escrowed
property returned.
(f) Challenge to Good Faith Determination. Whenever
the Board of Directors of the Company shall be required to
make a determination in good faith of the fair value of any
item under this Section 4, such determination may be
challenged in good faith by the Required Holders, and any
dispute shall be resolved by an investment banking firm of
recognized national standing selected and paid for by the
Company and reasonably acceptable to such Holders.
4.8. Reorganization, Reclassification, Merger,
Consolidation or Disposition of Assets. In case the Company
shall reorganize its capital, reclassify its capital stock,
consolidate or merge with and into another corporation (where the
Company is not the surviving corporation or where there is a
change in or distribution with respect to the Common Stock of the
Company), or sell, transfer or otherwise dispose of all or
substantially all its property, assets or business to another
corporation and, pursuant to the terms of such reorganization,
reclassification, merger, consolidation or disposition of assets,
shares of common stock of the successor or acquiring corporation,
or any cash, shares of stock or other securities or property of
any nature whatsoever (including warrants or other subscription
or purchase rights) in addition to or in lieu of common stock of
the successor or acquiring corporation ("Other Property"), are to
be received by or distributed to the holders of Common Stock of
the Company, then each Holder shall have the right thereafter to
receive, upon exercise of a Warrant, solely the number of shares
of common stock of the successor or acquiring corporation or of
the Company, if it is the surviving corporation, and Other
Property receivable upon or as a result of such reorganization,
reclassification, merger, consolidation, sale, transfer or
disposition by a holder of the number of shares of Common Stock
for which a Warrant is exercisable immediately prior to such
event. In case of any such reorganization, reclassification,
merger, consolidation, sale, transfer or disposition, the
successor or acquiring corporation (if other than the Company)
shall expressly assume the due and punctual observance and
performance of each and every covenant and condition of this
Agreement to be performed and observed by the Company and all the
obligations and liabilities hereunder, subject to such
modifications as may be deemed appropriate (as determined by
resolution of the Board of Directors of the Company) in order to
provide for adjustments of shares of the Common Stock for which a
Warrant is exercisable which shall be as nearly equivalent as
practicable to the adjustments provided for in this Section 4.
For purposes of this Section 4.8 "common stock of the successor
or acquiring corporation" shall include stock of such corporation
of any class which is not preferred as to dividends or assets
over any other class of stock of such corporation and which is
not subject to redemption and shall also include any evidences of
indebtedness, shares of stock or other securities which are
convertible into or exchangeable for any such stock, either
immediately or upon the arrival of a specified date or the
happening of a specified event and any warrants or other rights
to subscribe for or purchase any such stock. The foregoing
provisions of this Section 4.8 shall similarly apply to
successive reorganizations, reclassifications, mergers,
consolidations, sales, transfers or dispositions.
5. NOTICES TO WARRANT HOLDERS
5.1. Notice of Adjustments. Whenever the number of
shares of Common Stock for which a Warrant is exercisable, or
whenever the price at which a share of such Common Stock may be
purchased upon exercise of the Warrants, shall be adjusted
pursuant to Section 4, the Company shall forthwith prepare a
certificate to be executed by the chief financial officer of the
Company setting forth, in reasonable detail, the event requiring
the adjustment and the method by which such adjustment was
calculated (including a description of the basis on which the
Board of Directors of the Company determined the fair value of
any evidences of indebtedness, shares of stock, other securities
or property or warrants or other subscription or purchase rights
referred to in Section 4), specifying the number of shares of
Common Stock for which a Warrant is exercisable and (if such
adjustment was made pursuant to Section 4.8) describing the
number and kind of any other shares of stock or Other Property
for which a Warrant is exercisable, and any change in the
purchase price or prices thereof, after giving effect to such
adjustment or change. As of the date of this Agreement, no such
certificate is required to be delivered. The Company shall
promptly cause a signed copy of such certificate to be delivered
to each Holder in accordance with Section 16.2. The Company
shall keep at its office or agency designated pursuant to Section
12 copies of all such certificates and cause the same to be
available for inspection at said office during normal business
hours by any Holder or any prospective purchaser of a Warrant
designated by a Holder thereof.
5.2. Notice of Certain Corporate Action. Each Holder
shall be entitled to the same rights to receive notice of
corporate action as any holder of Common Stock.
6. REPRESENTATIONS AND WARRANTIES
The Company hereby represents and warrants as follows:
(a) The Company is a corporation duly organized and
validly existing under the laws of the State of Delaware,
has the power and authority to execute and deliver this
Agreement and the Warrant Certificates, to issue the
Warrants and to perform its obligations under this Agreement
and the Warrant Certificates.
(b) The execution, delivery and performance by the
Company of this Agreement and the Warrant Certificates, the
issuance of the Warrants and the issuance of the Warrant
Stock upon exercise of the Warrants have been duly
authorized by all necessary corporate action and do not and
will not violate, or result in a breach of, or constitute a
default under or require any consent under, or result in the
creation of any lien or security interest upon the assets of
the Company pursuant to, any Requirement of Law or any
Contractual Obligation binding upon the Company.
(c) This Agreement has been duly executed and
delivered by the Company and constitutes a legal, valid,
binding and enforceable obligation of the Company. When the
Warrants and the Warrant Certificates have been issued as
contemplated hereby, (i) the Warrants and the Warrant
Certificates will constitute legal, valid, binding and
enforceable obligations of the Company and (ii) the Warrant
Stock, when issued upon exercise of the Warrants in
accordance with the terms hereof, will be duly authorized,
validly issued, fully paid and nonassessable shares of
Common Stock with no personal liability attaching to the
ownership thereof.
(d) (i) The total number of shares of all classes of
stock that the Company shall on the Closing Date have
authority to issue is 110,000,000 shares, consisting solely
of (i) 100,000,000 shares of Common Stock, par value $.01
per share, of which, after giving effect to the transactions
contemplated herein and all other issuances of capital stock
of the Company on or prior to the Closing Date, 16,614,918
shares of Common Stock will be issued and outstanding and
7,689,528 shares of Common Stock will be reserved for future
issuance for the purposes described in Schedule I, and (ii)
10,000,000 shares of preferred stock par value $.01 per
share, none of which were issued and outstanding on the
Closing Date. The delivery hereunder by the Company to the
Lender of the Warrants issued on the Closing Date will
transfer and convey to the Lender good and marketable title
to such Warrants and, upon exercise of such Warrants in
accordance with this Agreement, good and marketable title to
the Common Stock purchased upon such exercise, free and
clear of all preemptive rights, liens, charges and
encumbrances, except for restrictions on transfer set forth
in this Agreement or arising under the Federal and state
securities laws. Except as set forth in this paragraph (d),
the Company does not have outstanding any stock or
securities convertible into or exchangeable for any shares
of its stock, nor, except as so set forth, does it have
outstanding any agreements, rights or options entitling any
person to subscribe for or to purchase any capital stock or
securities convertible into or exchangeable for any of its
shares of stock. The Company is not subject to any
obligation (contingent or otherwise) to repurchase or
otherwise acquire or retire any shares of its capital stock.
(e) The Company has provided to the Holder a copy of
the Company's most recent Annual Report on Form 10-K and
Quarterly Reports on Form 10-Q filed since the date of the
most recent Annual Report on Form 10-K. The information
contained in such disclosure documents, as of the date
thereof, does not contain any untrue statement of a material
fact and does not omit to state a material fact necessary in
order to make the statements made, in light of the
circumstances under which they were made, not misleading.
6.2. Warrant Holders. Each Holder hereby represents and
warrants as follows:
(a) It is acquiring the Warrants for its own account,
as principal, for the purpose of investment and not with a
view to or for sale in connection with any distribution
thereof. Each Holder hereby represents that it will not
offer to sell, sell or otherwise dispose of any of the
Warrants or any Warrant Stock in violation of the Securities
Act or any other applicable state or federal securities
laws.
(b) It has to its satisfaction reviewed the business
and affairs of the Company and understands the risks of, and
other considerations relating to, its receipt of the Warrant
Stock. Such Holder has been furnished a copy of the
Company's most recent Annual Report on Form 10-K and
Quarterly Reports on Form 10-Q filed since the date of the
most recent Annual Report on Form 10-K, and all other public
information requested by it relating to the Company and its
activities and proposed activities.
(c) It has sufficient knowledge and experience in
business and financial matters to be capable of utilizing
the information made available to it to fully and completely
evaluate the merits and risks of owning the Warrant Stock.
(d) it has been furnished with or given adequate
access to such information about the Company and the
Warrants as it has requested, (ii) it has made its own
independent inquiry and investigation into, and based
thereon has formed an independent judgment concerning, the
Company, (iii) it is able to bear the economic risks of the
investment in the Common Stock upon exercise of the
Warrants, (iv) it has such knowledge and experience in
financial and business matters as to be capable of
evaluating the merits and risks of an investment in the
Company and (v) it is an "accredited investor" within the
meaning of "accredited investor" under Regulation D of the
Securities Act of 1933, as amended.
7. CERTAIN COVENANTS
7.1. No Impairment. The Company shall not by any
action including, without limitation, amending its certificate of
incorporation or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities
or any other voluntary action, avoid or seek to avoid the
observance or performance of any of the terms of this Agreement,
but will at all times in good faith assist in the carrying out of
all such terms and in the taking of all such actions as may be
necessary or appropriate to protect the rights of each Holder
against impairment. Without limiting the generality of the
foregoing, the Company will use reasonable good faith efforts to
obtain all such authorizations, exemptions or consents from any
public regulatory body having jurisdiction thereof as may be
necessary to enable the Company to perform its obligations under
this Agreement.
Upon the request of a Holder, the Company will at any
time during the period this Agreement is in effect acknowledge in
writing, in form satisfactory to such Holder, the continuing
validity of this Agreement and the obligations of the Company
hereunder.
7.2. Reservation and Authorization of Common Stock;
Registration with or Approval of any Governmental Authority. From
and after the Closing Date, the Company shall at all times
reserve and keep available for issue upon the exercise of
Warrants such number of its authorized but unissued shares of
Common Stock as will be sufficient to permit the exercise in full
of all outstanding Warrants. All shares of Common Stock which
shall be so issuable, when issued upon exercise of any Warrants
and payment therefor in accordance with the terms of this
Agreement, shall be duly and validly issued and fully paid and
nonassessable, and not subject to preemptive rights.
Before taking any action which would cause an
adjustment reducing the Current Warrant Price below the then par
value, if any, of the shares of Common Stock issuable upon
exercise of the Warrants, the Company shall take any corporate
action which may be necessary in order that the Company may
validly and legally issue fully paid and nonassessable shares of
such Common Stock at such adjusted Current Warrant Price.
Before taking any action which would result in an
adjustment in the number of shares of Common Stock for which a
Warrant is exercisable or in the Current Warrant Price, the
Company shall obtain all such authorizations or exemptions
thereof, or consents thereto, as may be necessary from its
stockholders, any public regulatory body or bodies having
jurisdiction thereof.
If any shares of Common Stock required to be reserved
for issuance upon exercise of Warrants require registration or
qualification with any governmental authority under any federal
or state law (otherwise than as provided in Section 9) before
such shares may be so issued, the Company will in good faith and
as expeditiously as possible and at its expense endeavor to cause
such shares to be duly registered.
8. TAKING OF RECORD; STOCK AND WARRANT TRANSFER BOOKS
In the case of all dividends or other distributions by
the Company to the holders of its Common Stock with respect to
which any provision of Section 4 refers to the taking of a record
of such holders, the Company will in each such case take such a
record and will take such record as of the close of business on a
Business Day. The Company will not at any time, except upon
dissolution, liquidation or winding up of the Company, close its
stock transfer books or Warrant transfer books so as to result in
preventing or delaying the exercise or transfer of any Warrants
or any Warrant Stock.
9. RESTRICTIONS ON TRANSFERABILITY
The Warrants and the Warrant Stock shall not be
transferred before satisfaction of the conditions specified in
this Section 9, which conditions are intended to ensure
compliance with the provisions of the Securities Act with respect
to the transfer of any Warrant or any Warrant Stock. Each
Holder, by entering into this Agreement and accepting the
Warrants, agrees to be bound by the provisions of this Section 9.
9.1. Restrictive Legend. Except as otherwise provided
in this Section 9, each certificate representing Warrants or
Warrant Stock, shall be stamped or otherwise imprinted with a
legend in substantially the following form:
"The securities represented by this certificate have
not been registered under the Securities Act of 1933, as
amended, or any applicable state securities laws, and may
not be sold or transferred in the absence of such
registration or an exemption therefrom. Such securities are
subject to the restrictions and privileges specified in a
Warrant Agreement, dated as of February 16, 1996, between
the Company and the initial holders of securities named
therein, a copy of which is on file with the Secretary of
the Company and will be furnished without charge to the
holder hereof upon written request, and the holder of this
certificate agrees to be bound thereby."
9.2. Notice of Proposed Transfers; Requests for
Registration. Prior to any transfer of any Warrants or any
shares of Restricted Common Stock, the Holder of such Warrants or
Restricted Common Stock shall give five days' prior written
notice to the Company of such Holder's intention to effect such
transfer (a "Transfer Notice"). Holder agrees that it will not
sell, transfer or otherwise dispose of Warrants or any shares of
Restricted Common Stock, in whole or in part, except pursuant to
an effective registration statement under the Securities Act or
an exemption from registration thereunder. Each certificate, if
any, evidencing such shares of Restricted Common Stock issued
upon such transfer shall bear the restrictive legend set forth in
Section 9.1, and each Warrant Certificate issued upon such
transfer shall bear the restrictive legend set forth in Section
9.1, unless in either case such transfer is pursuant to an
effective registration statement under the Securities Act or in
the opinion of the transferee's or Holder's counsel delivered to
the Company in connection with such transfer (which opinion shall
be reasonably satisfactory to the Company) such legend is not
required in order to ensure compliance with the Securities Act.
The Holders of Warrants and Warrant Stock shall have
the right to require registration of such Warrants or Warrant
Stock pursuant to Sections 9.3 and 9.4.
9.3. Required Registration. (a) After receipt of a
written request from the Holders of Warrants and/or Warrant Stock
representing at least 50% of the total of (i) all shares of
Warrant Stock then subject to purchase upon exercise of all
Warrants and (ii) all shares of Warrant Stock then outstanding,
requesting that the Company effect the registration of the
Warrants, the shares of Common Stock issuable upon the exercise
of such Holders' Warrants or of any of such Holders' Warrant
Stock under the Securities Act (all such securities collectively
referred to as the "Registrable Securities") and specifying the
intended method or methods of disposition thereof, the Company
shall promptly notify all Holders of Warrants and Warrant Stock
in writing of the receipt of such request and each Holder, in
lieu of exercising its rights under Section 9.4, may elect (by
written notice sent to the Company within ten Business Days from
the date of such Holder's receipt of the aforementioned Company's
notice) to have its Registrable Securities included in such
registration thereof pursuant to this Section 9.3(a). Thereupon
the Company shall, as expeditiously as is possible (and, in any
event, within 60 days after the request for registration), effect
the registration under the Securities Act of all Registrable
Securities which the Company has been so requested to register by
such Holders for sale, subject to the next sentence, all to the
extent required to permit the disposition (in accordance with the
intended method or methods thereof, as aforesaid) of the
Registrable Securities so registered. If the managing
underwriter of a proposed public offering shall advise the
Company in writing that, in its opinion, the distribution of the
Registrable Securities requested to be included in the
registration by the Holders would materially and adversely affect
the distribution of such securities, then all Holders selling
Registrable Securities shall reduce the amount of Registrable
Securities each intended to distribute through such offering on a
pro rata basis. The Company shall not be required to effect a
registration hereunder if the Board of Directors of the Company
determines in the exercise of its reasonable judgment that, due
to a pending or contemplated acquisition or disposition, to
effect any such registration at such time would have a material
adverse effect on the Company, in which case such registration
may be deferred for a single period not to exceed ninety (90)
days, provided the Company shall not register any of its equity
securities prior to the registration deferred under this sentence
except for registrations on Form S-4 and Form S-8; and in any
event, the Company shall not be required to effect more than two
registrations of any Registrable Securities pursuant to this
Section 9.3(a). If the Company shall defer a registration as set
forth above, the Required Holders shall have the right to
withdraw the registration request by giving written notice to the
Company within 30 days after the receipt of the notice of
deferral and, in the event of such withdrawal, such registration
request shall not be counted for purposes of the number of
registrations to which Holder is entitled pursuant to this
Section 9.3(a).
(b) Lockup.
(i) Subject to clause (ii) below, the Company
agrees not to effect any public sale or distribution of any
Registrable Securities or any similar securities, or any
securities convertible into or exchangeable or exercisable
for Registrable Securities or such similar securities (other
than any such sale or distribution pursuant to registrations
on Form S-4 and Form S-8), commencing on the date the
Company receives a request from any Holder under Section
9.3(a) and continuing until 120 days after the commencement
of the related underwritten offering under Section 9.3(a)
(the "Lockup Period"), where the managing underwriter so
requests.
(ii) Notwithstanding anything to the contrary in
clause (i) above, (A) nothing in this Section 9.3(b) shall
prevent or impair the ability of other security holders of
the Company holding securities of the Company that give
them, as of the date of this Agreement, demand registration
rights with respect to Registrable Securities from
exercising their demand registration rights at any time
during the Lockup Period and (B) if at any time during the
Lockup Period the Company proposes to file on its behalf
and/or on behalf of any of its security holders a
Registration Statement under the Securities Act on any form
(other than a Form S-4 or S-8 or any similar successor form
or any other registration statement relating to an exchange
offer or offering of securities solely to the Company's
existing security holders or employees), then the
registration request of the Holder requesting registration
pursuant to Section 9.3(a) shall be deemed to be an
incidental registration in accordance with Section 9.4 and
(x) such registration shall not count as one of the two
registration requests available to such Holder pursuant to
Section 9.3(a) and (y) if the offering resulting from such
registration shall be reduced in size for any reason, such
reduction shall not be made from the Registrable Securities
of any Holders entitled to register securities pursuant to
Section 9.3(a), but shall be made from the allocations of
all other parties (including the Company) registering their
securities.
9.4. Incidental Registration. If the Company at any
time proposes to file on its behalf and/or on behalf of any of
its security holders ("the demanding security holders") a
Registration Statement under the Securities Act on any form
(other than a Registration Statement on Form S-4 or S-8 or any
similar or successor form or any other registration statement
relating to an exchange offer or offering of securities solely to
the Company's existing security holders or employees), it will
give written notice to all Holders of Warrants or Warrant Stock
at least twenty (20) days before the anticipated date of initial
filing with the Commission of such Registration Statement, which
notice shall set forth the Company's intention to effect such a
registration, the class or series and number of equity securities
proposed to be registered and the intended method of disposition
of the securities proposed to be registered by the Company. The
notice shall offer to include in such filing the aggregate number
of shares of Registrable Securities, as such Holders may request.
Nothing in this Section 9.4 shall preclude the Company from
discontinuing the registration of its securities being effected
on its behalf under this Section 9.4 at any time prior to the
effective date of the registration relating thereto.
Each Holder desiring to have Registrable Securities
registered under this Section 9.4 shall advise the Company in
writing within fifteen (15) days after the date of receipt of
such offer from the Company, setting forth the amount of such
Registrable Securities for which registration is requested. The
Company shall thereupon include in such filing the number of
shares of Registrable Securities for which registration is so
requested, subject to the next sentence, and shall use its best
efforts to effect registration under the Securities Act of such
securities. If the managing underwriter of a proposed public
offering shall advise the Company in writing that, in its
opinion, the distribution of the Registrable Securities requested
to be included in the registration concurrently with the
securities being registered by the Company or any demanding
security holder would materially and adversely affect the
distribution of such securities by the Company or such demanding
security holders, then all selling security holders shall reduce
the amount of securities each intended to distribute through such
offering on a pro rata basis.
9.5. Registration Procedures. If the Company is
required by the provisions of this Section 9 to use its best
efforts to effect the registration of any of its securities under
the Securities Act, the Company will, as expeditiously as
possible:
(a) prepare and file with the Commission a
Registration Statement with respect to such securities and
use its best efforts to cause such Registration Statement to
become and remain effective for the period described in
paragraph (b) below;
(b) prepare and file with the Commission such
amendments and supplements to such Registration Statement
and the prospectus used in connection therewith as may be
necessary to keep such Registration Statement effective and
to comply with the provisions of the Securities Act with
respect to the sale or other disposition of all securities
covered by such Registration Statement until the earlier of
such time as all of such securities have been disposed of in
a public offering and the expiration of 180 days;
(c) furnish to such selling security holders or
underwriter such number of copies of a summary prospectus or
other prospectus, including a preliminary prospectus, in
conformity with the requirements of the Securities Act, and
such other documents, as such selling security holders or
underwriters may reasonably request;
(d) use its best efforts to register or qualify the
securities covered by such Registration Statement under such
other securities or blue sky laws of such jurisdictions
within the United States as each holder of such securities
shall request (provided, however, the Company shall not be
obligated to qualify as a foreign corporation to do business
under the laws of any jurisdiction in which it is not then
qualified or to file any general consent to service or
process), and do such other reasonable acts and things as
may be required of it to enable such holder to consummate
the disposition in such jurisdiction of the securities
covered by such Registration Statement;
(e) unless waived in writing by each Holder of
Registrable Securities being included in such registration
pursuant to Section 9.3, use its best efforts to obtain from
either a nationally recognized underwriter or investment
banker or an underwriter or investment banker reasonably
acceptable to such Holder a firm commitment (pursuant to an
underwriting agreement in customary form) to underwrite the
public offering of the securities covered by such
Registration Statement;
(f) furnish, at the request of any Holder requiring or
requesting registration of Registrable Securities pursuant
to Section 9.3 or 9.4, on the date that such Registrable
Securities are delivered to the underwriters for sale
pursuant to such registration or, if such Registrable
Securities are not being sold through underwriters, on the
date that the Registration Statement with respect to such
Registrable Securities becomes effective, (1) an opinion,
dated such date, of the independent counsel representing the
Company for the purposes of such registration, addressed to
the underwriters, or if such Registrable Securities are not
being sold through underwriters, then to the Holders making
such request, stating that such Registration Statement has
become effective under the Securities Act and that (i) to
the best knowledge of such counsel, no stop order suspending
the effectiveness thereof has been issued and no proceedings
for that purpose have been instituted or are pending before
or contemplated by the Commission, (ii) the Registration
Statement, the related prospectus, and each amendment or
supplement thereto, comply as to form in all material
respects with the requirements of the Securities Act and the
applicable rules and regulations of the Commission
thereunder (except no opinion need be expressed with respect
to the inclusion and content of the financial statements and
notes thereto and related schedules and other financial,
statistical or expertized information), (iii) to the best
knowledge of such counsel, the descriptions in the
Registration Statement or the prospectus, or any amendment
or supplement thereto, of all legal matters and contracts
and other legal documents or instruments known to such
counsel, insofar as such statements constitute a summary of
legal matters, documents and proceedings, are accurate and
fairly present in all material respects the information
required to be shown, and (iv) to the best knowledge of such
counsel, such counsel does not know of any legal or
governmental proceedings, pending or contemplated, required
to be described in the Registration Statement or prospectus,
or any amendment or supplement thereto, which are not
described as required, nor of any contracts or documents or
instruments of a character required to be described in the
Registration Statement or prospectus, or any amendment or
supplement thereto, or to be filed as exhibits to the
Registration Statement which are not described and filed or
incorporated by reference as required; such counsel shall
also confirm that it has no reason to believe that either
the Registration Statement or the prospectus, or any
amendment or supplement thereto contains any untrue
statement of a material fact or omits to state a material
fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances in which
made, not misleading; and (2) a letter dated such date, from
the independent certified public accountants of the Company,
addressed to the underwriters, or if such Registrable
Securities are not being sold through underwriters, then to
the Holder making such request and, if such accountants
refuse to deliver such letter to such Holder, then to the
Company stating that they are independent certified public
accountants within the meaning of the Securities Act and
that, in the opinion of such accountants, the financial
statements and other financial data of the Company included
in the Registration Statement or the prospectus, or any
amendment or supplement thereto, comply as to form in all
material respects with the applicable accounting
requirements of the Securities Act. Such opinion of counsel
shall additionally cover such other legal matters with
respect to the registration in respect of which such opinion
is being given as such Holders of Registrable Securities may
reasonably request. Such letter from the independent
certified public accountants shall additionally cover such
other financial matters (including information as to the
period ending not more than five (5) Business Days prior to
the date of such letter) with respect to the registration in
respect of which such letter is being given as such Holders
of Registrable Securities may reasonably request;
(g) enter into customary agreements (including an
underwriting agreement in customary form) and take such
other actions as are reasonably required in order to
expedite or facilitate the disposition of such Registrable
Securities; and
(h) otherwise use its best efforts to comply with all
applicable rules and regulations of the Commission, and make
available to its security holders, as soon as reasonably
practicable, but not later than 18 months after the
effective date of the Registration Statement, an earnings
statement covering the period of at least 12 months
beginning with the first full month after the effective date
of such Registration Statement, which earnings statements
shall satisfy the provisions of Section 11(a) of the
Securities Act.
It shall be a condition precedent to the obligation of
the Company to take any action pursuant to this Section 9 in
respect of the securities which are to be registered at the
request of any Holder of Registrable Securities that such Holder
shall furnish to the Company such information regarding the
securities held by such Holder and the intended method of
disposition thereof as the Company shall reasonably request and
as shall be required in connection with the action taken by the
Company.
9.6. Expenses. All expenses incurred in complying
with Section 9, including, without limitation, all registration
and filing fees (including all expenses incident to filing with
the NASD), printing expenses, fees and disbursements of counsel
for the Company, the reasonable fees and expenses of one counsel
for the selling security holders (selected by the Person holding
a majority of the securities being registered), expenses of any
special audits incident to or required by any such registration
and expenses of complying with the securities or blue sky laws of
any jurisdictions pursuant to Section 9.5(d), shall be paid by
the Company, except that (a) the Company shall not be liable for
any discount or commission to any underwriter in respect of the
securities sold by such Holder of Registrable Securities and (b)
the Company shall not be obligated to pay more than $200,000 in
connection with registration made pursuant to Section 9.3.
9.7. Indemnification and Contribution. (a) In the
event of any registration of any of the Registrable Securities
under the Securities Act pursuant to this Section 9, the Company
shall indemnify and hold harmless the Holder of such Registrable
Securities, such Holder's directors, officers, employees, agents
and attorneys and each other Person (including each underwriter)
who participated in the offering of such Registrable Securities
and each other Person, if any, who controls such Holder or such
participating Person within the meaning of the Securities Act,
against any losses, claims, damages, liabilities or expenses,
joint or several (including, without limiting the foregoing, the
legal expenses incurred in connection with any such action, suit
or proceeding), to which such Holder or any such director,
officer, employee, agent, attorney or participating Person or
controlling Person may become subject under the Securities Act or
any other statute or at common law, insofar as such losses,
claims, damages, liabilities or expenses (or actions in respect
thereof) arise out of or are based upon (i) any alleged untrue
statement of any material fact contained in any Registration
Statement under which such securities were registered under the
Securities Act, any preliminary prospectus or final prospectus
contained therein, or any amendment or supplement thereto, or
(ii) any alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements
therein not misleading, and shall reimburse such Holder or such
director, officer, employee, agent, attorney or participating
Person or controlling Person for any legal or any other expenses
incurred by such Holder or such director, officer, employee,
agent, attorney or participating Person or controlling Person in
connection with investigating or defending any such loss, claim,
damage, liability, expense or action; provided, however, that the
Company shall not be liable in any such case to the extent that
any such loss, claim, damage, liability or expense arises out of
or is based upon any alleged untrue statement or alleged omission
made in such Registration Statement, preliminary prospectus,
prospectus or amendment or supplement in reliance upon and in
conformity with written information furnished to the Company by
such Holder specifically for use therein and in the case of any
non-underwritten offering, to the extent that any such losses,
claims, damages, liabilities or expenses result from the fact
that a current copy of the prospectus was not sent or given to
the person asserting any such losses, claims, damages,
liabilities or expenses at or prior to the written confirmation
of the sale of the securities concerned to such person if it is
determined that it was the responsibility of such Holder to
provide such person with a current copy of the prospectus and
such current copy of the prospectus would have cured the defect
giving rise to such losses, claims, damages, liabilities or
expenses. Such indemnity shall remain in full force and effect
regardless of any investigation made by or on behalf of such
Holder or such director, officer or participating Person or
controlling Person, and shall survive the transfer of such
securities by such Holder.
(b) Each Holder of any Registrable Securities, by
acceptance thereof, agrees to indemnify and hold harmless the
Company, its directors, officers, employees, agents and attorneys
and each other Person, if any, who controls the Company within
the meaning of the Securities Act against any losses, claims,
damages, liabilities or expenses, joint or several, to which the
Company or any such director or officer or any such Person may
become subject under the Securities Act or any other statute or
at common law, insofar as such losses, claims, damages,
liabilities or expenses (or actions in respect thereof) arise out
of or are based upon information in writing provided to the
Company by such Holder of such Registrable Securities contained,
on the effective date thereof, in any Registration Statement
under which securities were registered under the Securities Act
at the request of such Holder, any preliminary prospectus or
final prospectus contained therein, or any amendment or
supplement thereto or the fact that in the case of any non-
underwritten offering, a current copy of the prospectus was not
sent to the Person asserting such losses, claims, damages,
liabilities or expenses at or prior to the written confirmation
of the sale of the securities with respect to such Person if it
is determined that it was the responsibility of such Holder to
provide such Person with a current copy of the prospectus and
such current copy would have cured the defect giving rise to such
losses, claims, damages, liabilities or expenses; provided,
however, that such Warrant Holder's obligation under this Section
9.7(b) to indemnify and hold harmless the Company shall in no
event exceed the lesser of (A) damage attributable solely to the
inclusion of such written information in such Registration
Statement, preliminary prospectus, final prospectus, or amendment
or supplement suffered by the Person or Persons whose claims gave
rise to such losses, claims, damages or liabilities and (B) the
net proceeds received by such Holder from the sale of its
Registerable Securities.
(c) If the indemnification provided for in this
Section 9 from the indemnifying party is unavailable to an
indemnified party hereunder in respect of any losses, claims,
damages, liabilities or expenses referred to herein, then the
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, claims, damages,
liabilities or expenses in such proportion as is appropriate to
reflect the relative fault of the indemnifying party and
indemnified parties in connection with the actions which resulted
in such losses, claims, damages, liabilities or expenses, as well
as any other relevant equitable considerations. The relative
fault of such indemnifying party and indemnified parties shall be
determined by reference to, among other things, whether any
action in question, including any untrue or alleged untrue
statement of a material fact or omission or alleged omission to
state a material fact, has been made by, or relates to
information supplied by, such indemnifying party or indemnified
parties, and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such action.
The amount paid or payable by a party under this Section 9 as a
result of the losses, claims, damages, liabilities and expenses
referred to above shall be deemed to include any legal or other
fees or expenses reasonably incurred by such party in connection
with any investigation or proceeding.
The parties hereto agree that it would not be just and
equitable if contribution pursuant to this Section 9.7(c) were
determined by pro rata allocation or by any other method of
allocation which does not take account of the equitable
considerations referred to in the immediately preceding
paragraph. Notwithstanding the provisions of this subsection
(c), no Holder shall be required to contribute any amount in
excess of the net proceeds received by it upon the sale of its
securities pursuant to the Registration Statement to which the
losses, claims, damages, liabilities and expenses referred to
above relate. No Person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act) shall
be entitled to contribution from any Person who was not guilty of
such fraudulent misrepresentation. The obligations of each of
the Holders under this subsection (c) to contribute are several
and not joint.
(d) Conduct of Indemnification Proceedings. Any
person or entity entitled to indemnification hereunder shall (i)
give prompt written notice to the indemnifying party after the
receipt by the indemnified party of a written notice of the
commencement of any action, suit, proceeding or investigation or
threat thereof made in writing for which such indemnified party
will claim indemnification or contribution pursuant to this
Agreement; provided, however, that the failure of any indemnified
party to give notice as provided herein shall not relieve the
indemnifying party of its obligations under Section 9.7 hereof,
except to the extent that the indemnifying party is actually
prejudiced by such failure to give notice, and (ii) unless in
such indemnified party's reasonable judgment a conflict of
interest may exist between such indemnified and indemnifying
parties with respect to such claim, permit such indemnifying
party to assume the defense of such claim with counsel reasonably
satisfactory to the indemnified party. If the indemnifying party
is entitled to, and does, assume the defense of such claim, the
indemnified party shall have the right to employ separate counsel
and to participate in the defense thereof, but the fees and
expenses of such counsel shall be borne by the indemnified party.
Whether or not such defense is assumed by the indemnifying party,
the indemnifying party shall not be subject to any liability for
any settlement made without its consent (but such consent will
not be unreasonably withheld). No indemnifying party shall be
permitted to consent to the entry of any judgment or to enter
into any settlement that does not include as an unconditional
term thereof the giving by the claimant or plaintiff to such
indemnified party of a release from all liability in respect of
such claim or litigation. An indemnifying party who is not
entitled to, or elects not to, assume the defense of a claim
shall not be obligated to pay the fees and expenses of more than
one counsel in any one jurisdiction for all parties indemnified
by such indemnifying party with respect to such claim, unless in
the reasonable judgment of any indemnified party a conflict of
interest may exist between such indemnified party and any other
of such indemnified parties with respect to such claim, in which
event the indemnifying party shall be obligated to pay the fees
and expenses of such additional counsel or counsels.
9.8. Termination of Restrictions. Notwithstanding the
foregoing provisions of Section 9, the restrictions imposed by
this Section upon the transferability of the Warrants, the
Warrant Stock and the Restricted Common Stock (or Common Stock
issuable upon the exercise of the Warrants) and the legend
requirement of Section 9.1 shall terminate as to any particular
Warrant or share of Warrant Stock or Restricted Common Stock (or
Common Stock issuable upon the exercise of the Warrants) (i) when
and so long as such security shall have been effectively
registered under the Securities Act and disposed of pursuant
thereto, or (ii) when the holder thereof shall have delivered to
the Company the written opinion of counsel to such holder, which
opinion shall be reasonably satisfactory to the Company, stating
that such legend is not required in order to ensure compliance
with the Securities Act. Whenever the restrictions imposed by
Section 9 shall terminate as to any Warrants or any Restricted
Common Stock, as hereinabove provided, the Holder thereof shall
be entitled to receive from the Company, at the expense of the
Company, a new Warrant Certificate or a new certificate
representing such Common Stock, as the case may be, not bearing
the restrictive legend set forth in Section 9.1.
9.9. Listing on Securities Exchange. If the Company
shall list any shares of Common Stock on any securities exchange,
it will, at its expense, use its best efforts to list thereon,
maintain and, when necessary, increase such listing of, all
shares of Common Stock issued or, to the extent permissible under
the applicable securities exchange rules, issuable upon the
exercise of the Warrants so long as any shares of Common Stock
shall be so listed during any such Exercise Period.
9.10. Selection of Managing Underwriters. The
managing underwriter or underwriters for any offering of
Registrable Securities to be registered pursuant to Section 9.3
shall be an underwriter or underwriters of nationally recognized
standing selected by the Company.
10. SUPPLYING INFORMATION
The Company shall cooperate with each Holder of a
Warrant and each Holder of Restricted Common Stock in supplying
such information as may be reasonably necessary for such Holder
to complete and file any information reporting forms presently or
hereafter required by the Commission as a condition to the
availability of an exemption from the Securities Act for the sale
of any Warrant or Restricted Common Stock.
11. LOSS OR MUTILATION
Upon receipt by the Company from any Holder of evidence
reasonably satisfactory to it of the ownership of and the loss,
theft, destruction or mutilation of a certificate representing
Warrants or Warrant Stock and indemnity reasonably satisfactory
to it (it being understood that the written agreement of the
Lender or an Affiliate thereof shall be sufficient indemnity) and
in case of mutilation upon surrender and cancellation hereof or
thereof, the Company will execute and deliver in lieu hereof or
thereof a new Warrant or new stock certificate as the case may
be, of like tenor to such Holder; provided, in the case of
mutilation, no indemnity shall be required if the certificate
representing Warrants or Warrant Stock in identifiable form is
surrendered to the Company for cancellation.
12. OFFICE OF THE COMPANY
As long as any of the Warrants remain outstanding, the
Company shall maintain an office or agency (which may be the
principal executive offices of the Company) where the Warrants
may be presented for exercise, registration or transfer, division
or combination as provided herein.
13. FINANCIAL AND BUSINESS INFORMATION
13.1. Quarterly Information. Except during any period
when the Company either (i) is subject to the reporting
requirements of Section 15(d) of the Exchange Act, or (ii) has
securities registered under Section 12(b) or 12(g) of the
Exchange Act (such status being referred to as being a "Public
Company"), the Company will deliver to each Holder, as soon as
practicable after the end of each quarterly fiscal period in each
fiscal year of the Company, and in any event within 45 days
thereafter, a copy of the unaudited consolidated balance sheet as
at the close of such quarter, and the related unaudited
consolidated statements of income, shareholders' equity and cash
flow of the Company and its Subsidiaries for that portion of the
fiscal year ending as of the close of such quarter. Such
financial statements shall be prepared by the Company in
accordance with GAAP (subject to normal year end adjustments and
the inclusion of footnotes) and accompanied by the certification
of the Company's chief executive officer or chief financial
officer that, to the best of his knowledge, such financial
statements are complete and correct in all material respects and
fairly present in accordance with GAAP (subject to normal year
end adjustments and the inclusions of footnotes) the consolidated
financial position, the consolidated statements of income,
shareholder equity and cash flow of the Company and its
Subsidiaries as at the end of such quarter and for such year-to-
date period, as the case may be.
13.2. Annual Information. Except during any period
when the Company is a Public Company, the Company will deliver to
each Holder as soon as practicable after the end of each fiscal
year of the Company, and in any event within 90 days thereafter,
one copy of:
(i) an audited consolidated balance sheet of the
Company and its Subsidiaries as at the end of such year, and
(ii) audited consolidated statements of income,
shareholders' equity and cash flow of the Company and its
Subsidiaries for such year;
setting forth in each case in comparative form the figures for
the corresponding periods in the previous fiscal year; all
prepared in accordance with GAAP, and which audited financial
statements shall be accompanied by (i) a certification of the
chief executive officer or chief financial officer of the Company
that, to the best of his knowledge, all such financial statements
are complete and correct in all material respects and present
fairly in accordance with GAAP the consolidated financial
position of the Company and its Subsidiaries as at the end of
such fiscal year and for the period then ended, (ii) an opinion
thereon of the independent certified public accountants regularly
retained by the Company, or any other firm of independent
certified public accountants of recognized national standing
selected by the Company, and (iii) a report of such independent
certified public accountants confirming any adjustment made
pursuant to Section 4 during such year.
13.3. Filings. The Company will file on or before the
required date all required regular or periodic reports (pursuant
to the Exchange Act) with the Commission and will deliver to each
Holder promptly upon their becoming available one copy of each
report, notice or proxy statement sent by the Company to its
stockholders generally, and of each regular or periodic report
(pursuant to the Exchange Act) and any Registration Statement,
prospectus or written communication (other than transmittal
letters) (pursuant to the Securities Act), filed by the Company
with (i) the Commission or (ii) any securities exchange on which
shares of Common Stock are listed.
14. APPRAISAL
The determination of the Appraised Value per share of
Common Stock shall be made by an investment banking firm of
nationally recognized standing selected by the Company and
acceptable to the Required Holders. If the investment banking
firm selected by the Company is not acceptable to the Required
Holders and the Company and the Required Holders cannot agree on
a mutually acceptable investment banking firm, then the Required
Holders and the Company shall each choose one such investment
banking firm and the respective chosen firms shall agree on
another investment banking firm which shall make the
determination. The Company shall retain, at its sole cost, such
investment banking firm as may be necessary for the determination
of Appraised Value required by the terms of this Agreement.
15. LIMITATION OF LIABILITY; NO RIGHTS AS STOCKHOLDER
No provision hereof, in the absence of affirmative
action by any Holder to purchase shares of Common Stock, and no
enumeration herein of the rights or privileges of any Holder,
shall give rise to any liability of such Holder for the purchase
price of any Common Stock or as a stockholder of the Company,
whether such liability is asserted by the Company or by creditors
of the Company. Except as may otherwise be provided by law or by
separate agreement between a Holder and the Company, no Holder,
as such, shall be entitled to vote or be deemed the holder of
Common Stock or any other securities (other than Warrants) of the
Company which may at any time be issuable on the exercise hereof,
nor shall anything contained herein be construed to confer upon
any Holder the rights of a stockholder of the Company or the
right to vote for the election of directors or upon any matters
submitted to stockholders at any meeting thereof, or to give or
withhold consent to any corporate action or to receive notice of
meetings or other actions affecting stockholders (except as
provided herein), or to receive dividends or otherwise, until the
Warrants shall have been exercised in accordance with the terms
and conditions hereof.
16. MISCELLANEOUS
16.1. Nonwaiver and Expenses. No course of dealing or
any delay or failure to exercise any right hereunder on the part
of any Holder shall operate as a waiver of such right or
otherwise prejudice such Holder's rights, powers or remedies. If
the Company fails to make, when due, any payments provided for
hereunder, or fails to comply with any other provision of this
Agreement, the Company shall pay to the applicable Holders such
amounts as shall be sufficient to cover any costs and expenses
including, but not limited to, reasonable attorneys' fees,
including those of appellate proceedings, incurred by the Holders
in collecting any amounts due pursuant hereto or in otherwise
enforcing any of its rights, powers or remedies hereunder.
16.2. Notice Generally. Any notice, demand, request,
consent, approval, declaration, delivery or other communication
hereunder to be made pursuant to the provisions of this Agreement
shall be sufficiently given or made if in writing and either
delivered in person with receipt acknowledged or sent by
registered or certified mail, return receipt requested, postage
prepaid, telex, telecopier or overnight air courier guaranteeing
next day delivery, addressed as follows:
(a) If to any Holder, at its last known address
appearing on the books of the Company maintained for such
purpose.
(b) If to the Company at:
Deeptech International, Inc.
7400 Texas Commerce Tower
600 Travis
Houston, Texas 77002
Attention: Thomas P. Tatham
Telecopy No.: (713) 224-7574
with a copy to:
Akin, Gump, Strauss, Hauer & Feld, L.L.P.,
1900 Pennzoil Place - South Tower
711 Louisiana Street
Houston, Texas 77002
Attention: Rick L. Burdick
Telecopy No.: (713) 236-0822
or at such other address as may be substituted by notice given as
herein provided. The giving of any notice required hereunder may be
waived in writing by the party entitled to receive such notice.
Every notice, demand, request, consent, approval, declaration,
delivery or other communication hereunder shall be deemed to have
been duly given or served on the date on which personally delivered,
with receipt acknowledged, or three (3) Business Days after the same
shall have been deposited in the United States mail.
16.3. Indemnification. Except to the extent otherwise
provided in Section 9.7 the Company agrees to indemnify and hold
harmless each Holder, its officers, directors, employees, agents, and
attorneys from and against any liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, claims, costs,
attorneys' fees, expenses and disbursements of any kind which may be
imposed upon, incurred by or asserted against such Holder relating to
or arising out of (i) such Holder's exercise of the Warrants and/or
ownership of any shares of Warrant Stock issued in consequence
thereof, or (ii) any litigation to which such Holder is made a party
in its capacity as a stockholder or warrantholder of the Company;
provided, however, that the Company will not be liable hereunder to
the extent that any liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, claims, costs, attorneys' fees,
expenses or disbursements (A) arise from or relate to any material
violation by such Holder of any law or regulation applicable to it or
(B) are found in a final non-appealable judgment by a court to have
resulted from such Holder's gross negligence, bad faith or willful
misconduct or material violation of law. The procedures to be
followed for claims of indemnification under this Section 16.3 shall
be as set forth in Section 9.7(d).
16.4. Remedies. Each Holder of Warrants and Warrant
Stock, in addition to being entitled to exercise all rights granted
by law, including recovery of damages, will be entitled to specific
performance of its rights under Section 9 of this Agreement. The
Company agrees that monetary damages would not be adequate
compensation for any loss incurred by reason of a breach by it of the
provisions of Section 9 of this Agreement and hereby agrees to waive
the defense in any action for specific performance that a remedy at
law would be adequate.
16.5. Successors and Assigns. Subject to the provisions
of Section 3.1 and 9, this Agreement and the rights evidenced hereby
shall inure to the benefit of and be binding upon the successor of
the Company and the successors and assigns of any Holder. The
provisions of this Agreement are intended to be for the benefit of
all Holders from time to time of the Warrants and Warrant Stock, and
shall be enforceable by any such Holder.
16.6. Amendment. This Agreement may be modified or
amended or the provisions hereof waived with the written consent of
the Company and the Required Holders, provided that no Warrant may be
modified or amended to reduce the number of shares of Common Stock
for which such Warrant is exercisable or to increase the price at
which such shares may be purchased upon exercise of such Warrant
(before giving effect to any adjustment as provided therein) without
the prior written consent of the Holder thereof.
16.7. Severability. Wherever possible, each provision of
this Agreement shall be interpreted in such manner as to be effective
and valid under applicable law, but if any provision of this
Agreement shall be prohibited by or invalid under applicable law,
such provision shall be ineffective to the extent of such prohibition
or invalidity, without invalidating the remainder of such provision
or the remaining provisions of this Agreement.
16.8. Headings. The headings used in this Agreement are
for the convenience of reference only and shall not, for any purpose,
be deemed a part of this Agreement.
16.9. Governing Law; Consent to Jurisdiction and Venue.
In all respects, including all matters of construction, validity and
performance, this Agreement and the obligations arising hereunder
shall be governed by, and construed and enforced in accordance with,
the laws of the State of New York applicable to contracts made and
performed in such state, without regard to the principles thereof
regarding conflict of laws, and any applicable laws of the United
States of America. THE COMPANY CONSENTS TO PERSONAL JURISDICTION,
WAIVES ANY OBJECTION AS TO JURISDICTION OR VENUE, AND AGREES NOT TO
ASSERT ANY DEFENSE BASED ON LACK OF JURISDICTION OR VENUE, IN THE
COUNTY OF NEW YORK, STATE OF NEW YORK. Service of process on the
Company or any Holder in any action arising out of or relating to
this Agreement shall be effective if mailed to such party in
accordance with the procedures and requirements set forth in Section
16.2. Nothing herein shall preclude any Holder or the Company from
bringing suit or taking other legal action in any other jurisdiction.
16.10. MUTUAL WAIVER OF JURY TRIAL. BECAUSE DISPUTES
ARISING IN CONNECTION WITH COMPLEX FINANCIAL TRANSACTIONS ARE MOST
QUICKLY AND ECONOMICALLY RESOLVED BY AN EXPERIENCED AND EXPERT PERSON
AND THE PARTIES WISH APPLICABLE STATE AND FEDERAL LAWS TO APPLY
(RATHER THAN ARBITRATION RULES), THE PARTIES DESIRE THAT THEIR
DISPUTES BE RESOLVED BY A JUDGE APPLYING SUCH APPLICABLE LAWS.
THEREFORE, TO ACHIEVE THE BEST COMBINATION OF THE BENEFITS OF THE
JUDICIAL SYSTEM AND OF ARBITRATION, THE PARTIES HERETO WAIVE ALL
RIGHT TO TRIAL BY JURY IN ANY ACTION, SUIT OR PROCEEDING BROUGHT TO
ENFORCE OR DEFEND ANY RIGHTS OR REMEDIES UNDER THIS AGREEMENT.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed as of the date first above written.
DEEPTECH INTERNATIONAL INC.
By_______________________________
Name:
Title:
LEHMAN COMMERCIAL PAPER INC.
By_______________________________
Name:
Title:
EXHIBIT A
To Warrant
Agreement
[FORM OF WARRANT CERTIFICATE]
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY
APPLICABLE STATE SECURITIES LAWS, AND MAY NOT BE SOLD OR
TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION
THEREFROM. SUCH SECURITIES ARE SUBJECT TO THE RESTRICTIONS AND
PRIVILEGES SPECIFIED IN THE WARRANT AGREEMENT, DATED AS OF FEBRUARY
16, 1996, BETWEEN DEEPTECH INTERNATIONAL INC. AND THE INITIAL
HOLDER OF SECURITIES NAMED THEREIN, A COPY OF WHICH IS ON FILE WITH
THE SECRETARY OF THE COMPANY AND WILL BE FURNISHED WITHOUT CHARGE
TO THE HOLDER HEREOF UPON WRITTEN REQUEST, AND THE HOLDER OF THIS
CERTIFICATE AGREES TO BE BOUND THEREBY.
No. __-__
WARRANT CERTIFICATE
DEEPTECH INTERNATIONAL INC.
This Warrant Certificate certifies that Lehman Commercial
Paper Inc., or registered assigns, is the registered holder of
1,333,333.5 Warrants (the "Warrants") to purchase shares of common
stock of Deeptech International Inc. (the "Company"). Each Warrant
entitles the holder, but only subject to the conditions set forth
herein and in the Warrant Agreement referred to below, to purchase
from the Company before 5:00 p.m., New York City time, on the
Expiration Date, as such term is defined in the Warrant Agreement,
one fully paid and nonassessable share of common stock of the
Company (a "Warrant Share") at a price (the "Exercise Price") of
$4.50 per Warrant Share payable in lawful money of the United
States of America (subject to adjustment as provided in Section 4
of the Warrant Agreement), or, as provided in Section 2.2 of the
Warrant Agreement, by the transfer of certain debt to the Company,
upon surrender of this Warrant Certificate, execution of the
annexed Election to Purchase Form and payment of the Exercise Price
at the office of the Company at 7400 Texas Commerce Tower, 600
Travis, Houston, Texas 77002 or such other address as the Company
may specify in writing to the registered holder of the Warrants
evidenced hereby. The Exercise Price is subject to adjustment
prior to the Expiration Date upon the occurrence of certain events
as set forth in the Warrant Agreement. The Company may deem and
treat the registered holders of the Warrants evidenced hereby as
the absolute owner thereof (notwithstanding any notation of
ownership or other writing hereon made by anyone), for the purpose
of any exercise hereof and of any distribution to the holders
hereof, and for all other purposes.
Warrant Certificates, when surrendered at the office of
the Company at the above-mentioned office address or at the
Company's headquarters by the registered holder hereof in person or
by a legal representative duly authorized in writing, may be
exchanged, in the manner and subject to the limitations provided in
the Warrant Agreement, but without payment of any service charge,
for another Warrant Certificate or Warrant Certificates of like
tenor evidencing in the aggregate a like number of Warrants.
Upon due presentment for registration of transfer of this
Warrant Certificate at the office of the Company at the above-
mentioned address, a new Warrant Certificate or Warrant
Certificates of like tenor and evidencing in the aggregate a like
number of Warrants shall be issued to the transferee in exchange
for this Warrant Certificate to the transferee(s) and, if less than
all the Warrants evidenced hereby are to be transferred, the
registered holder hereof, subject to the limitations provided in
the Warrant Agreement, without charge except for any tax or other
governmental charge imposed in connection therewith.
This Warrant Certificate is one of the Warrant
Certificates referred to in the Warrant Agreement, dated as of
February 16, 1996, between the Company and the initial holder of
Warrants party thereto (the "Warrant Agreement"). Said Warrant
Agreement is hereby incorporated by reference in and made a part of
this instrument and is hereby referred to for a description of the
rights, limitation of rights, obligations, duties and immunities
thereunder of the Company and the holders, and in the event of any
conflict between the terms of this Warrant Certificate and the
provisions of the Warrant Agreement, the provisions of the Warrant
Agreement shall control.
IN WITNESS WHEREOF, the Company has caused this
Warrant Certificate to be duly executed and its corporate seal to
be impressed hereon and attached by its Secretary.
Dated: February 16, 1996
DEEPTECH INTERNATIONAL INC.
By_________________________________
Title:
(CORPORATE SEAL)
ATTEST:
Secretary
EXHIBIT A TO
WARRANT CERTIFICATE
ELECTION TO PURCHASE FORM
[To be executed only upon exercise of Warrants]
The undersigned registered owner of this Warrant
Certificate irrevocably exercises _____ Warrants for the purchase
of ______ Shares of Common Stock of Deeptech International Inc.
and herewith makes payment therefor, all at the price and on the
terms and conditions specified in this Warrant Certificate and
the Warrant Agreement and requests that certificates for the
shares of Common Stock hereby purchased (and any securities or
other property issuable upon such exercise) be issued in the name
of and delivered to ________________ whose address is
___________________ and, if such shares of Common Stock shall not
include all of the shares of Common Stock issuable as provided in
this Warrant Certificate, that a new Warrant Certificate of like
tenor and date for the balance of the shares of Common Stock
issuable hereunder be delivered to the undersigned.
______________________________
(Name of Registered Owner)
______________________________
(Signature of Registered Owner)
______________________________
(Street Address)
______________________________
(City) (State) (Zip Code)
EXHIBIT B TO
WARRANT CERTIFICATE
ASSIGNMENT FORM
FOR VALUE RECEIVED the undersigned registered owner of
this Warrant Certificate hereby sells, assigns and transfers unto
the assignee named below all of the rights of the undersigned
under this Warrant Certificate, with respect to the number of
shares of Common Stock set forth below:
Name and Address of Assignee No. of Shares of Common Stock
and does hereby irrevocably constitute and appoint
________________ attorney-in-fact to register such transfer on
the books of Deeptech International Inc. maintained for the
purpose, with full power of substitution in the premises.
Dated:_________________________
Name:__________________________
Signature:_____________________
Witness:_______________________
The assignee named above hereby agrees to purchase and
take the Warrant Certificate pursuant to and in accordance with
the terms and conditions of the Warrant Agreement, dated as of
February 16, 1996, between Deeptech International Inc. and the
initial holder named therein and agrees to be bound thereby.
Dated:
Name:
Signature:
EXHIBIT B
To Warrant
Agreement
WARRANT REGISTER
See Schedule I attached hereto.
Schedule I
To Warrant
Agreement
Option Holder Date of Number Exercise
Warrant of Price
Warrants
DTI Funding, Inc. & Assignees 12/14/93 137,079 $13.50
DTI Funding, Inc. & Assignees 12/14/93 33,460 $13.50
Wilrig 11/8/94 1,100,000 $10.00
Highwood Partners, L.P. 12/5/95 372,973 $5.00
Highwood Partners, L.P. - 12/5/95 100,000 $5.00
Contingent
DLJ & Assignees 2/19/93 1,182,872 $4.25
DLJ & Assignees 2/19/93 178,575 $4.25
Citicorp USA, Inc. 12/15/92 437,500 $4.00
Citicorp USA, Inc. 2/16/96 1,000,000 $4.50
Chemical Bank 7/20/92 250,000 $4.00
Lehman Commercial Paper Inc. 2/16/96 1,333,333.5 $4.50
Sandpiper & Co. 12/15/92 200,000 $4.00
Donald A. Sanders 12/15/92 60,000 $4.00
Katherine U. Sanders 12/15/92 60,000 $4.00
Del. Chtr. Guar. & Trust FBO 12/15/92 33,482 $4.00
R.B. Vincent IRA
Anatar Investments Defined 12/15/92 25,112 $4.00
Benefit Plan
Maged F. Riad and John C. 12/15/92 10,000 $4.00
Oran, Trustees
Under Whitman & Ranson Ret.
Savings
Plan FBO William R. Ziegler
Steven A. Webster 12/15/92 8,371 $4.00
Susan K. Stickney 12/15/92 7,000 $4.00
William R. Ziegler 12/15/92 6,741 $4.00
Chris M. Sanders 12/15/92 5,000 $4.00
Roberto Marsella 12/15/92 4,185 $4.00
David N. King 12/15/92 4,000 $4.00
Alfred King III 12/15/92 4,000 $4.00
Albert Stickney III 12/15/92 2,109 $4.00
Jansen Noyes, Jr. & Alfred 12/15/92 2,000 $4.00
King, Jr.
TTEE U/W Nancy Noyes King FBO
David N. King
Jansen Noyes, Jr. & Alfred 12/15/92 2,000 $4.00
King, Jr.
TTEE U/W Nancy Noyes King FBO
Alfred King III
Jansen Noyes, Jr. & Alfred 12/15/92 2,000 $4.00
King, Jr.
TTEE U/W Nancy Noyes King
FBO Susan K. Stickney
Jansen Noyes, Jr. 12/15/92 1,500 $4.00
Mike Willis 6/11/90 87,938 $3.41
Total per Option Exhibit 6,651,230.5
Schedule
Other Options issued to
employees/directors:
Gary Coburn 5/12/94 5,000 $13.50
Gary Huxford 5/12/94 1,000 $13.50
Thomas P. Tatham 12/1/94 100,000 $10.15
Thomas P. Tatham 2/16/96 333,333.5 $4.50
Grant E. Sims 12/1/94 50,000 $10.15
Donald V. Weir 12/1/94 50,000 $10.15
Donald S. Taylor 12/1/94 50,000 $10.15
Harry J. Briscoe 12/1/94 50,000 $10.15
Robert H. Williams 12/1/94 50,000 $10.15
John H. Gray 12/1/94 50,000 $10.15
Thomas P. Tatham 9/8/95 300,000 $5.00
Grant E. Sims 12/1/92 75,000 $4.25
Grant E. Sims 12/1/92 75,000 $4.25
Grant E. Sims 12/1/92 75,000 $4.25
Harvey Fleisher 11/14/95 150,000 $4.00
Ben T. Morris 10/26/95 150,000 $4.00
Paul Thompson, III 10/26/95 150,000 $4.00
Laney Chouest/Alpha Marine 10/26/95 150,000 $4.00
Services
Nancy Quinn 10/26/95 150,000 $4.00
Robert Fox 10/26/95 150,000 $4.00
Phil Clarke 10/26/95 150,000 $4.00
Mike Lam 10/26/95 150,000 $4.00
Donald V. Weir 11/14/95 125,000 $4.00
Grant Sims 11/14/95 100,000 $4.00
John Gray 11/14/95 100,000 $4.00
Keith Forman 11/14/95 50,000 $4.00
Antoine Gautreaux 11/14/95 75,000 $4.00
Eddie Moses 11/14/95 75,000 $4.00
Janet E. Sikes 11/14/95 75,000 $4.00
Kenneth E. Beeney 11/14/95 75,000 $4.00
Diana Walters 11/14/95 75,000 $4.00
James Lytal 11/14/95 50,000 $4.00
Jeff Lucas 11/14/95 50,000 $4.00
John Pike 11/14/95 50,000 $4.00
Ed Gibbon 11/14/95 50,000 $4.00
Dennis A. Kunetka 11/14/95 30,000 $4.00
Clyde Nath 10/25/95 30,000 $4.00
Lari Paradee 11/14/95 25,000 $4.00
Gary Hobbs 11/14/95 25,000 $4.00
Steve Noe 11/14/95 20,000 $4.00
Bill Moss 11/14/95 20,000 $4.00
Eddie Mitchell 11/14/95 20,000 $4.00
Wayne Lammert 11/14/95 10,000 $4.00
Ken Bass 11/14/95 10,000 $4.00
Director deferred comp - 9/30/95 7,690 $4.00
September
Deferred Comp Plan - July 11/14/95 7,188 $4.00
Deferred Comp Plan - August 11/14/95 7,188 $4.00
Deferred Comp Plan - September 11/14/95 7,188 $4.00
Deferred Comp Plan - November 11/30/95 7,188 $4.00
Deferred Comp Plan - December 12/31/95 7,188 $4.00
Deferred Comp Plan - February 1/31/96 7,188 $4.00
Director deferred comp - July 7/31/95 4,690 $4.00
Director deferred comp - 8/31/95 4,690 $4.00
August
Director deferred comp - 11/30/95 7,504 $4.00
November
Director deferred comp - 12/31/95 7,504 $4.00
December
Director deferred comp - 1/31/96 7,504 $4.00
February
Director deferred comp - 10/31/95 10,716 $3.99
October
Deferred Comp Plan - October 11/14/95 7,205 $3.99
Total options issued to 3,704,964
employees/directors
Total options outstanding at 10,356,914.5
1/31/96
WARRANT AGREEMENT
To Purchase Common Stock of
Deeptech International, Inc.
TABLE OF CONTENTS
Page
1. DEFINITIONS 1
2. ISSUANCE; EXERCISE OF WARRANT 6
2.1. Issuance of Warrants 6
2.2. Manner of Exercise 6
2.3. Payment of Taxes 7
2.4. Fractional Shares 7
2.5. Continued Validity 8
3. TRANSFERS, DIVISION AND COMBINATION 8
3.1. Transfer 8
3.2. Division and Combination 8
3.3. Expenses 9
3.4. Maintenance of Books 9
4. ADJUSTMENTS 9
4.1. Stock Dividends, Subdivisions and Combinations 9
4.2. Certain Other Distributions 10
4.3. Issuance of Additional Shares of Common Stock 10
4.4. Issuance of Warrants or Other Rights 11
4.5. Issuance of Convertible Securities 12
4.6. Superseding Adjustment 13
4.7. Other Provisions Applicable to Adjustments
under this Section 14
4.8. Reorganization, Reclassification, Merger,
Consolidation or Disposition of Assets 16
5. NOTICES TO WARRANT HOLDERS 17
5.1. Notice of Adjustments 17
5.2. Notice of Certain Corporate Action 17
6. REPRESENTATIONS AND WARRANTIES 17
6.2. Warrant Holders 19
7. CERTAIN COVENANTS 19
7.1. No Impairment 19
7.2. Reservation and Authorization of Common Stock;
Registration with or Approval of any Governmental
Authority 20
8. TAKING OF RECORD; STOCK AND WARRANT TRANSFER BOOKS 20
9. RESTRICTIONS ON TRANSFERABILITY 21
9.1. Restrictive Legend 21
9.2. Notice of Proposed Transfers; Requests for
Registration 21
9.3. Required Registration 22
9.4. Incidental Registration 23
9.5. Registration Procedures 24
9.6. Expenses 26
9.7. Indemnification and Contribution 27
9.8. Termination of Restrictions 30
9.9. Listing on Securities Exchange 30
9.10. Selection of Managing Underwriters 30
10.SUPPLYING INFORMATION 30
11.LOSS OR MUTILATION 31
12.OFFICE OF THE COMPANY 31
13.FINANCIAL AND BUSINESS INFORMATION 31
13.1. Quarterly Information 31
13.2. Annual Information 31
13.3. Filings 32
14.APPRAISAL 32
15.LIMITATION OF LIABILITY; NO RIGHTS AS STOCKHOLDER 33
16.MISCELLANEOUS 33
16.1. Nonwaiver and Expenses 33
16.2. Notice Generally 33
16.3. Indemnification 34
16.4. Remedies 34
16.5. Successors and Assigns 35
16.6. Amendment 35
16.7. Severability 35
16.8. Headings 35
16.9. Governing Law; Consent to Jurisdiction and
Venue 35
16.10. MUTUAL WAIVER OF JURY TRIAL 35
