<PAGE> 1
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------
FORM 10-K
[x] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
COMMISSION FILE NUMBER 0-18437
--------------------
POOL ENERGY SERVICES CO.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
TEXAS 76-0263755
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
10375 RICHMOND AVENUE
HOUSTON, TEXAS 77042
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (713) 954-3000
--------------------
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
TITLE OF NAME OF EACH EXCHANGE
EACH CLASS ON WHICH REGISTERED
---------- -------------------
None None
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
Common Stock, no par value
(TITLE OF CLASS)
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes X No
--- ---
The number of shares of the registrant's common stock outstanding on
February 15, 1996 was 14,072,983.
The aggregate market value of the voting stock held by non-affiliates
of the registrant at February 15, 1996 based on the closing price on the NASDAQ
National Market System on that date was approximately $134,703,848.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Proxy Statement with respect to the 1996 Annual
Meeting of Shareholders are incorporated by reference in Part III of this
report.
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<PAGE> 2
FORM 10-K
ANNUAL REPORT
FOR THE YEAR ENDED DECEMBER 31, 1995
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
PART I
<S> <C>
Item 1. Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Item 2. Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Item 3. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Item 4. Submission of Matters to a Vote of Security Holders . . . . . . . . . . . . . . . . . . 12
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters . . . . . . . . . 13
Item 6. Selected Financial Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Item 8. Financial Statements and Supplementary Data . . . . . . . . . . . . . . . . . . . . . . 22
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
PART III
Item 10. Directors and Executive Officers of the Registrant . . . . . . . . . . . . . . . . . . 57
Item 11. Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
Item 12. Security Ownership of Certain Beneficial Owners and Management . . . . . . . . . . . . 57
Item 13. Certain Relationships and Related Transactions . . . . . . . . . . . . . . . . . . . . 57
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K . . . . . . . . . . . 57
</TABLE>
2
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PART I
ITEM 1. BUSINESS
Pool Energy Services Co. (the "Company") is the largest well-servicing and
workover company in the world based on the number of rigs it operates. It
operates onshore and offshore, both domestically and internationally, providing
services for multi-national, foreign national and independent oil and natural
gas producers. The Company performs the routine maintenance and major
overhauls necessary for oil and natural gas wells to function efficiently. The
Company typically provides a well-servicing or workover rig, the crew to
operate the rig and such other specialized equipment as may be needed. The
Company also provides services for the drilling and completion of new oil and
natural gas wells. The Company conducts a significant part of its foreign
operations through unconsolidated affiliates.
The Company was formed in 1988 to acquire Pool Company, the oilfield
services business of ENSERCH Corporation ("ENSERCH"), and that acquisition was
completed on April 24, 1990. Pool Company was established in 1948. As used
in this document, except where the context otherwise requires, the term
"Company" refers to Pool Energy Services Co., its subsidiary corporations and
its unconsolidated affiliates.
BUSINESS STRATEGY
Under the Company's strategic plan that was developed during 1994, key
growth strategies include: seeking expansion opportunities in existing core
market areas, particularly acquisitions which result in consolidation savings;
entering new foreign markets with significant ongoing industry activity;and
offering services complementary to the Company's core businesses through
existing field locations. Notable examples of actions taken in the
implementation of these strategies are as follows:
In September 1994, the Company acquired the 60.7% interest not already
owned by the Company in Pool Arctic Alaska, a partnership, for $12.1 million in
cash. The Company's Alaska operation now includes the three highly specialized
Arctic land drilling rigs and related equipment formerly owned by the
partnership. It provides rig and contract labor services, both onshore and
offshore, in Alaska.
On June 13, 1995, the Company acquired all of the outstanding capital
stock of Golden Pacific Corp. ("GPC"). Prior to the acquisition, GPC had annual
revenues of approximately $50 million and operated a fleet of approximately 155
land well-servicing rigs in California. See Note 3 of Notes to Consolidated
Financial Statements for a discussion of this acquisition.
In the second half of 1995, the Company commenced operations under a term
contract offshore Australia with a newly constructed platform workover rig. In
addition, Antah Drilling Sdn. Bhd., the Company's 49%-owned Malaysia affiliate,
is currently substantially modifying its platform drilling rig for operation
under a term contract offshore Australia which is expected to commence in
mid-1996.
3
<PAGE> 4
TYPES OF SERVICES PROVIDED
WELL-SERVICING/MAINTENANCE SERVICES
The Company provides maintenance services on the mechanical apparatus used
to pump or lift oil and natural gas from producing wells. The Company provides
the rigs, equipment and crews for these tasks, which are performed on both oil
and natural gas wells but which are more commonly required on oil wells.
Well-servicing rigs have the same basic components as drilling rigs (i.e., a
derrick, a hoisting mechanism and an engine). Many of these rigs also have
pumps and tanks that can be used for circulating fluids into and out of the
well. Maintenance jobs typically take less than 48 hours to complete.
WORKOVER SERVICES
In addition to needing periodic maintenance, producing oil and natural gas
wells occasionally require major repairs or modifications, called "workovers."
Workover operations are similar to maintenance operations but differ mainly in
the extent of the repairs or services required. Workovers may be done, for
example, to remedy equipment failures, to deepen a well in order to tap a new
producing reservoir, to plug back the bottom of a well to reduce the amount of
water being produced with the oil and natural gas, to clean out and recomplete
a well if production has declined, to repair leaks or to convert a producing
well to an injection well for secondary or enhanced recovery projects. These
extensive workover operations are normally carried out with a well-servicing
type rig with additional specialized accessory equipment, which may include
rotary drilling equipment, mud pumps, mud tanks and blowout preventers,
depending upon the particular type of workover operation. Most of the
Company's well-servicing rigs are designed and equipped to handle the more
complex workover operations. A workover may last anywhere from a few days to
several weeks.
COMPLETION SERVICES
The kinds of activities necessary to carry out a workover operation are
essentially the same as those that are required to "complete" a well when it is
first drilled. The completion process may involve selectively perforating the
well casing at the depth of discrete producing zones, stimulating and testing
these zones and installing down-hole equipment. Oil companies often find that
it is more efficient to move a larger and more expensive drilling rig off
location after an oil or natural gas well has been drilled and to move in a
specialized well-servicing rig to perform completion operations. The Company's
rigs are often used for this purpose. The completion process may require from
a few days to several weeks.
CONTRACT DRILLING SERVICES
The Company provides contract drilling services to oil and natural gas
operators in all markets it serves except onshore markets in the lower 48
states. The Company's workover rigs can be used for drilling, although the
Company typically uses its specialized drilling rigs for such operations. The
Company also provides specialized accessory equipment, including pumps, rotary
drilling equipment, trucks, camps and cranes. Several of the Company's land
drilling rigs are equipped for self-sustained operations in remote locations in
Alaska and overseas.
PRODUCTION AND OTHER SPECIALIZED SERVICES
The Company provides other specialized services that are required, or can
be used effectively, in conjunction with the previously described basic
services. The main additional services are production
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services, consisting of the provision of onsite temporary fluid-storage
facilities, the provision, removal and disposal of specialized fluids used
during certain completion and workover operations, and the removal and disposal
of salt water that is often produced in conjunction with the production of oil
and natural gas. The Company also provides plugging services for wells from
which the oil or natural gas has been depleted and further production has
become uneconomical.
BUSINESS BY GEOGRAPHIC AREA
Financial data by geographic area for the three years ended December 31,
1995 are presented in Note 10 of Notes to Consolidated Financial Statements.
BUSINESS BY SERVICE LINE
The Company operates in only one business segment - the oilfield services
industry. Within that segment, the Company conducts business in the following
distinct markets or business lines: domestic onshore well-servicing and
production services, Gulf of Mexico offshore workover/drilling, international
workover/drilling and related services and Alaska onshore and offshore
workover/drilling.
DOMESTIC ONSHORE ACTIVITIES
The Company's domestic onshore operation, which provides well-servicing,
workover and production services, has locations in many of the major oil and
natural gas producing fields in the continental United States. This operation
currently provides services in ten states and is divided into two separate
geographic divisions: (i) the Central division (principally Texas and Oklahoma)
and (ii) the California division. The Company's domestic onshore operation has
655 well-servicing rigs, of which 298 are located in Texas, 256 in California,
54 in Oklahoma and 47 in North Dakota, New Mexico, Arkansas, Montana and
Louisiana. In 1995 rig hours were comprised of well-servicing/maintenance
(56%), workover (29%), completion (10%) and plugging operations (5%). The
Company's domestic onshore operation also provides production services
consisting chiefly of fluid hauling and frac tank rental. The production
services assets, located primarily in Texas, consist of 273 fluid hauling
trucks, 682 frac tanks and nine saltwater disposal well facilities.
GULF OF MEXICO OFFSHORE ACTIVITIES
Offshore in the Gulf of Mexico, the Company provides workover,
well-servicing, completion and drilling services with its fleet of thirteen
platform rigs and five jackup rigs. The Company also provides crews to oil and
natural gas well operators under labor contracts. During the year ended
December 31, 1995 approximately 86% of the Company's Gulf of Mexico offshore
rig hours were related to workover, well-servicing and completion operations
with the balance related to contract drilling. Offshore operations are
normally conducted 24 hours a day, seven days a week under a term contract that
is either for a specific period of time or until a program of work is
completed.
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<PAGE> 6
INTERNATIONAL ACTIVITIES
Internationally, the Company provides workover, well-servicing and
drilling services, both onshore and offshore, with specialized rigs designed
and fabricated to meet various types of operating conditions. During 1995, the
Company operated in ten foreign countries. The Company has 39 rigs in foreign
locations of which 22 are located in the Middle East, 12 in South America,
three in Asia, one in Africa and one in Australia. The Company conducts a
significant part of its foreign operations through joint venture companies in
which it has approximately a 50% participation. The principal joint venture
operations are conducted in Saudi Arabia (Pool Arabia, Ltd.), Malaysia (Antah
Drilling Sdn. Bhd.) and Trinidad (Pool Santana, Limited). Beginning in
mid-1996 Antah Drilling Sdn. Bhd. will also operate in Australia. The Company
uses the equity method to account for these unconsolidated affiliates in the
Company's financial statements. See Note 9 of Notes to Consolidated Financial
Statements.
ALASKA ACTIVITIES
In Alaska, the Company provides drilling, workover and well-servicing
with its fleet of three highly specialized Arctic land drilling rigs, two
offshore platform rigs and one multi-purpose rig. The Company also provides
crews to oil and natural gas well operators in Alaska under labor contracts.
The Company's services are principally provided onshore on the North Slope and
offshore in the Cook Inlet. On September 28, 1994, the Company acquired the
60.7% partnership interest not already owned by the Company in Pool Arctic
Alaska for $12.1 million in cash. For further information related to this
acquisition, see Note 3 of Notes to Consolidated Financial Statements.
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<PAGE> 7
FINANCIAL DATA BY SERVICE LINES
The following table presents information by service lines:
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31
-----------------------------------
1995 1994 1993
--------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C>
Revenues:
Domestic onshore well-servicing and production services:
Central division . . . . . . . . . . . . . . . . . . . . . $ 134,423 $ 131,904 $ 133,398
California division . . . . . . . . . . . . . . . . . . . 58,780 26,603 29,781
Gulf of Mexico offshore workover/drilling . . . . . . . . . . 37,415 36,020 38,676
International workover/drilling and related services . . . . 26,260 24,708 28,812
Alaska workover/drilling . . . . . . . . . . . . . . . . . . 20,427 9,940 9,857
--------- --------- ---------
Total . . . . . . . . . . . . . . . . . . . . . . . . . $ 277,305 $ 229,175 $ 240,524
========= ========= =========
Earnings Attributable to Unconsolidated Affiliates (1):
International workover/drilling and related services . . . . $ 2,955 $ 4,495 $ 6,831
Alaska workover/drilling . . . . . . . . . . . . . . . . . . - 521 29
--------- --------- ---------
Total . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,955 $ 5,016 $ 6,860
========= ========= =========
Depreciation and Amortization (2):
Domestic onshore well-servicing and production services:
Central division . . . . . . . . . . . . . . . . . . . . . $ 5,238 $ 6,446 $ 7,611
California division . . . . . . . . . . . . . . . . . . . 2,134 1,052 1,240
Gulf of Mexico offshore workover/drilling . . . . . . . . . . 2,212 2,283 2,310
International workover/drilling and related services . . . . 2,424 2,742 4,415
Alaska workover/drilling . . . . . . . . . . . . . . . . . . 2,845 1,089 601
Corporate . . . . . . . . . . . . . . . . . . . . . . . . . . 149 148 130
--------- --------- ---------
Total . . . . . . . . . . . . . . . . . . . . . . . . . $ 15,002 $ 13,760 $ 16,307
========= ========= =========
Income (Loss) Before Income Taxes (Excluding Provision for
Leasehold Impairment) (3):
Domestic onshore well-servicing and production services:
Central division . . . . . . . . . . . . . . . . . . . . . $ 5,927 $ 2,799 $ 1,449
California division . . . . . . . . . . . . . . . . . . . 3,828 (630) 1,285
Gulf of Mexico offshore workover/drilling . . . . . . . . . . 161 (1,307) 2,744
International workover/drilling and related services . . . . 2,682 4,759 5,756
Alaska workover/drilling . . . . . . . . . . . . . . . . . . (367) 3,247 3,643
Corporate . . . . . . . . . . . . . . . . . . . . . . . . . . (7,118) (6,427) (7,278)
--------- --------- ---------
Total . . . . . . . . . . . . . . . . . . . . . . . . . $ 5,113 $ 2,441 $ 7,599
========= ========= =========
</TABLE>
_____________
(1) A significant part of the operations of the Company is conducted through
its unconsolidated affiliates, which are accounted for using the equity
method. See Note 3 of Notes to Consolidated Financial Statements for
information related to the Pool Arctic Alaska acquisition in 1994.
(2) See Note 1 of Notes to Consolidated Financial Statements for information
related to the revision of estimated remaining depreciable lives of certain
rigs and equipment in October 1994.
(3) See Note 6 of Notes to Consolidated Financial Statements for information
related to the provision for leasehold impairment in 1994.
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EMPLOYEES
At December 31, 1995, the Company had 4,982 employees, of whom 468 were
employed by unconsolidated affiliates. None of the employees at any of the
Company's locations (except Australia) are represented by a collective
bargaining unit. Management believes that the Company's relationship with its
employees is excellent.
OTHER MATTERS
INTERNATIONAL RISKS
The Company's foreign operations are subject to such uncertainties as the
risk of expropriation or forced renegotiation of agreements, adverse tax
policies, instability of foreign economies, foreign exchange restrictions and
the possibility of armed conflict in certain areas. The Company has had no
significant losses from any of the foregoing risks during the last five years
in any country in which the Company presently operates. However, in Colombia
weak demand for the Company's midsize drilling rigs, coupled with the
escalation of drug-related violence during recent years resulted in the
Company's disposing in 1993 of its Colombia assets, which as a result of a
previously established reserve had no significant carrying value. Also in
1993, as a result of civil unrest in Djibouti, the Company wrote off against a
previously established reserve the carrying value of its equipment in that
country. In 1995, proceeds of an insurance settlement were received which
partially offset the 1993 writeoff in Djibouti.
The Company is subject to taxation in many jurisdictions, and the final
determination of its tax liabilities involves the interpretation of the
statutes and requirements of various domestic and foreign taxing authorities.
Foreign income tax returns of foreign subsidiaries, unconsolidated affiliates
and related entities are routinely examined by foreign tax authorities. The
Company maintains reserves for potential tax audit assessments and, in the
opinion of management, any additional provision ultimately determined to be
required as a result of such examinations or assessments will not be material
to the Company's financial position or operations.
ENVIRONMENTAL REGULATION AND CLAIMS
The Company's well-servicing, workover and production services operations
routinely involve the handling of significant amounts of waste materials, some
of which are classified as hazardous substances. The Company's operations and
facilities are subject to numerous state and federal environmental laws, rules
and regulations, including, without limitation, laws concerning the containment
and disposal of hazardous materials, oilfield waste and other waste materials,
the use of underground storage tanks and the use of underground injection
wells. The Company employs personnel responsible for monitoring environmental
compliance and arranging for remedial actions that may be required from time to
time and also uses outside experts to advise on and assist with the Company's
environmental compliance efforts. Costs incurred by the Company to investigate
and remediate contaminated sites are expensed unless the remediation extends
the useful lives of the assets employed at the site. Remediation costs that
extend the useful lives of the assets are capitalized and amortized over the
remaining useful lives of such assets. Liabilities are recorded when the need
for environmental assessments and/or remedial efforts become known or probable
and the cost can be reasonably estimated.
Laws protecting the environment have generally become more stringent than
in the past and are expected to continue to do so. Environmental laws and
regulations typically impose "strict liability," which means that in some
situations the Company could be exposed to liability for cleanup costs and
other damages as a result of conduct of the Company that was lawful at the time
it occurred or conduct of, or conditions caused by, others. Cleanup costs and
other damages arising as a result of environmental laws, and costs associated
with changes in environmental laws and regulations could be substantial and
could have a material adverse effect on the Company's financial condition.
From time to time, claims have been made and litigation has been
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brought against the Company under such laws. However, the costs incurred in
connection with such claims and other costs of environmental compliance have
not had any material adverse effect on the Company's operations, financial
condition or competitive position in the past, and management is not currently
aware of any situation or condition that it believes is likely to have any such
material adverse effect in the future.
Under the Comprehensive Environmental Response, Compensation and
Liability Act, also known as "Superfund," and related state laws and
regulations, liability can be imposed without regard to fault or the legality
of the original conduct on certain classes of persons that contributed to the
release of a "hazardous substance" into the environment. The Company has been
notified of its possible involvement with respect to the cleanup of two
Superfund sites which were formerly operated by parties unrelated to the
Company as oilfield waste disposal facilities, and has been named as a
potentially responsible party with respect to the cleanup of one other
Superfund site which was formerly operated by various parties unrelated to the
Company as an oil refining and reclamation facility. Although at this time
information about these matters has not been fully developed and it is not
feasible to predict their outcome with certainty, management is of the opinion
that their ultimate resolution should not have a material adverse effect on the
Company's financial condition.
Federal and state environmental regulations and changes thereto may also
negatively impact oil and natural gas exploration and production companies,
which in turn could have a material adverse effect on the Company. For
example, legislation has been proposed from time to time in Congress which
would reclassify oil and natural gas production wastes as "hazardous wastes."
If enacted, such legislation could dramatically increase operating costs for
domestic oil and natural gas companies and this could reduce the market for the
Company's services by making many wells and/or oilfields uneconomical to
operate. To date, such legislation has not made significant progress toward
enactment.
PATENTS, TRADEMARKS, LICENSES, FRANCHISES AND CONCESSIONS
The Company owns several U.S. patents on designs for various types of
oilfield equipment and on methods for conducting certain oilfield activities.
The Company uses some of these designs and methods in the conduct of its
business. The patents expire at various times to the year 2014. The Company
also has several trademarks and service marks that it uses in various aspects
of its business. While management believes its patent and trademark rights are
valuable, the expiration or loss thereof would not have a material adverse
effect on the Company's financial condition or results of operations.
COMPETITIVE CONDITIONS
Although the number of available rigs has materially decreased over the
past ten years, the well-servicing, workover and drilling industry remains very
competitive. The number of rigs continues to exceed demand, resulting in
severe price competition. Many of the total available contracts are currently
awarded on a bid basis, which further increases competition based on price. In
all of the Company's market areas, competitive factors also include: the
availability and condition of equipment to meet both special and general
customer needs; the availability of trained personnel possessing the
specialized skills required; and the overall quality of service, measured by
performance and safety records. As an enhancement to its competitive position,
the Company has been able to establish numerous strategic alliances with major
customers in its domestic onshore, international and Alaska markets, including
several alliances in California which were obtained upon the acquisition of
GPC. One customer, Shell Oil Company, accounted for approximately 11% of the
Company's consolidated revenues during 1995.
Certain competitors are present in more than one of the Company's
markets, although no one competitor operates in all of these areas. With 655
rigs, the Company has the most well-servicing rigs of any company in the
domestic onshore market. In this market, the second largest competitor has
approximately 400 rigs, two competitors have 100 to 200 rigs each, and several
hundred competitors have smaller regional or local
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rig operations. In each of its domestic onshore locations, the Company
competes with several firms of varying size. In the Gulf of Mexico, the
Company is among five principal competitors providing workover/maintenance
services. Internationally, the Company competes directly with various
competitors at each location where it operates. In Alaska, the Company has six
major competitors.
EXECUTIVE OFFICERS
Listed below are the names, ages and positions of the Company's executive
officers. Officers are elected annually following the Annual Meeting of
Shareholders and serve one-year terms or until their successors are elected and
qualified to serve.
<TABLE>
<CAPTION>
NAME AGE POSITION
--------------- ------ ----------------------------------------------------------
<S> <C> <C>
James T. Jongebloed 54 Chairman, President and Chief Executive Officer
William J Myers 59 Group Vice President-U.S. Operations
Ronald G. Hale 47 Group Vice President-International Operations
Ernest J. Spillard 56 Senior Vice President, Finance
G. Geoffrey Arms 52 Vice President and General Counsel; Corporate Secretary
Louis E. Dupre 49 Vice President, Human Resources
</TABLE>
Mr. Jongebloed has been President and Chief Executive Officer of the
Company since 1990 and President and Chief Operating Officer since 1989. He
served Pool Company from 1978 to 1989 as Executive Vice President, Western
Hemisphere, President of Pool-Intairdril and Group Vice President-International
Operations.
Mr. Myers has been Group Vice President-U.S. Operations of the Company
since 1988. From 1985 to 1987 he was self employed, and from 1976 to 1985 he
was the President and Chief Executive Officer of Anderson-Myers Drilling
Company in Denver, Colorado.
Mr. Hale has served in various management and executive positions with the
Company for more than the last 15 years. From 1985 to 1989 he served as Vice
President, Mid-East and Africa Region, International Operations. He became
Group Vice President-International Operations in 1989.
Mr. Spillard served from 1979 to 1981 as Controller of Pool Arabia, Ltd.
From 1981 to 1986, he held various executive positions with the Company. He
was Senior Vice President, Corporate Services, from 1986 to 1987 and has been
Senior Vice President, Finance of the Company since 1987.
Mr. Arms has been Vice President and General Counsel of the Company since
1985 and has been Corporate Secretary since 1990. He has served the Company as
an attorney in various other positions since 1978.
Mr. Dupre has been Vice President, Human Resources of the Company since
1994. From 1986 to 1994, he served as the Company's Controller. He has been
an employee of the Company since 1978.
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ITEM 2. PROPERTIES
The following table sets forth the type, number and location of the
domestic onshore equipment operated by the Company as of December 31, 1995:
<TABLE>
<CAPTION>
WELL- FLUID
SERVICING HAULING FRAC DISPOSAL
RIGS TRUCKS TANKS WELLS
--------- ------- -------- --------
<S> <C> <C> <C> <C>
Central Division:
Western District (West Texas and New Mexico) . . . . . . . . 222 141 315 4
Eastern District (Central and East Texas and Louisiana) . . 35 70 235 2
South Texas District . . . . . . . . . . . . . . . . . . . . 43 47 105 1
Rocky Mountain District (North Dakota and Montana) . . . . . 29 2 - -
Oklahoma District (North Texas, Arkansas and Oklahoma) . . . 70 13 27 2
------ ------ ------ -----
399 273 682 9
------ ------ ------ -----
California Division:
Northern District . . . . . . . . . . . . . . . . . . . . . 163 - - -
Southern District . . . . . . . . . . . . . . . . . . . . . 93 - - -
----- ------ ------ -----
256 - - -
----- ------ ------ -----
Total . . . . . . . . . . . . . . . . . . . . . . . . . . 655 273 682 9
===== ====== ====== =====
</TABLE>
The following table sets forth the type, number and location of the
Alaska, Gulf of Mexico and International rigs owned by the Company and its
joint ventures as of December 31, 1995:
<TABLE>
<CAPTION>
LAND PLATFORM JACKUP
----------------------- --------------------- -----------------------
DRILLING WORKOVER DRILLING WORKOVER DRILLING WORKOVER TOTAL
--------- -------- -------- -------- -------- -------- -----
<S> <C> <C> <C> <C> <C> <C> <C>
Alaska . . . . . . . . . . . 3 1 (a) 2 - - - 6
Gulf of Mexico . . . . . . . . . - - 3 10 - 5 18
International:
Saudi Arabia . . . . . . . 6 8 - - 3 - 17
Oman . . . . . . . . . . . 2 3 - - - - 5
Ecuador . . . . . . . . . 5 5 - - - - 10
Trinidad . . . . . . . . . - - - 2 - - 2
Malaysia . . . . . . . . . - - - 1 - - 1
Pakistan . . . . . . . . . 1 1 - - - - 2
Tunisia . . . . . . . . . 1 - - - - - 1
Australia . . . . . . . . . - - - 1 - - 1
------ ------ ------ ------ ------ ------ ------
Total International . . 15 17 - 4 3 - 39
------ ------ ------ ------ ------ ------ ------
Total . . . . . . . . . . . . . . 18 18 5 14 3 5 63
====== ====== ====== ====== ====== ====== ======
</TABLE>
___________
(a) A multi-purpose workover or drilling rig that can be configured for
either onshore or offshore use.
The Company's corporate offices are located in Houston, Texas, where the
Company subleases office space from ENSERCH at market rates under an agreement
that expires in November 1997. The Company also leases from an unrelated party
a 65- acre former rig and equipment manufacturing and storage facility in San
Angelo, Texas, which includes approximately 245,000 square feet of buildings
and other structural facilities. The annual lease payments are approximately
$2.2 million per year through March 1998 and $4.4 million per year thereafter
until expiration of the lease in 2003. Effective October 1, 1994, the Company
vacated this facility and subleased it in its entirety to a third party, under
an operating sublease which expires in September 1997. The sublease provides
for minimum sublease payments of $0.5 million per year for three years. Based
on a conclusion that none of the facility is likely to be used in its future
operations, the Company, in the fourth
11
<PAGE> 12
quarter of 1994, made a provision of $23.6 million to recognize all future
lease expense, net of anticipated sublease income. The Company owns 32 and
leases 50 domestic office and yard locations of which seven locations are not
currently used. Internationally, the Company leases office and yard facilities
at nine locations and owns facilities at five locations. In Alaska, the
Company leases an office and yard facility in Anchorage and a yard facility on
the North Slope.
As partial consideration for the acquisition of GPC, the Company issued
subordinated notes which are collateralized by the well-servicing rigs and
related equipment and certain real property obtained in the GPC acquisition.
The Company's 13 platform rigs located in the Gulf of Mexico and the property
owned by the Company's Alaska subsidiary are pledged as collateral to secure
payment of the Company's syndicated bank revolving line of credit and $10
million term loan (of which $7.4 million was outstanding at December 31, 1995).
Eight domestic well-servicing rigs and related equipment purchased in 1994 are
pledged as security for long-term debt related to the purchase thereof. The
Company's offshore platform workover rig located in Australia was pledged in
January 1996 as security for a four-year loan related to the construction of
such rig.
ITEM 3. LEGAL PROCEEDINGS
The Company from time to time is involved in ordinary and routine
litigation incidental to its business, which often involves claims for
significant monetary amounts, some, but not all, of which would be covered by
insurance. In the opinion of management, none of the existing litigation will
have any material adverse effect on the Company.
See also "Item 1. Business - Other Matters - Environmental Regulation and
Claims."
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
12
<PAGE> 13
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
MARKET PRICES AND COMMON STOCK DATA
The Company's common stock is traded on the NASDAQ National Market System
under the symbol "PESC." At February 15, 1996, the approximate number of
holders of record of the Company's common stock was 3,584. The following
tables set forth the high and low sale prices per share of the Company's common
stock for the periods indicated, as reported by NASDAQ.
<TABLE>
<CAPTION>
PRICE
---------------------
HIGH LOW
-------- ---------
<S> <C> <C>
1995
----
First Quarter . . . . . . . . . . . . . . $ 8 5/8 $ 6 5/8
Second Quarter . . . . . . . . . . . . . 9 3/8 7 1/2
Third Quarter . . . . . . . . . . . . . . 9 7/8 7 7/8
Fourth Quarter . . . . . . . . . . . . . 9 7/8 8 1/2
1994
----
First Quarter . . . . . . . . . . . . . . $ 8 1/2 $ 6 5/8
Second Quarter . . . . . . . . . . . . . 10 1/2 6 3/8
Third Quarter . . . . . . . . . . . . . . 10 3/8 7 7/8
Fourth Quarter . . . . . . . . . . . . . 9 6 1/4
</TABLE>
DIVIDEND POLICY
The Company has not paid dividends on its common stock. The Board of
Directors currently intends to retain any earnings for use in the Company's
business and does not intend to pay dividends in the foreseeable future. In
addition, certain of the Company's credit facilities prohibit the payment of
dividends.
13
<PAGE> 14
ITEM 6. SELECTED FINANCIAL DATA
The following table sets forth certain historical consolidated financial
data of the Company and should be read in conjunction with Management's
Discussion and Analysis of Financial Condition and Results of Operations and
the Consolidated Financial Statements and Notes thereto included elsewhere
herein. The data has been derived from the Company's audited consolidated
financial statements.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
---------------------------------------------------
1995 (1) 1994(2) 1993 1992 1991
-------- ------- ---- ---- ----
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
OPERATING DATA:
Revenues . . . . . . . . . . . . . . . . . $277,305 $229,175 $240,524 $216,512 $225,840
Earnings Attributable to Unconsolidated
Affiliates (3) . . . . . . . . . . . . . . 2,955 5,016 6,860 9,261 5,265
GPC Acquisition Related Costs (4) . . . . . 622 - - - -
Provision for Leasehold Impairment (5) . . . - 23,551 - - -
Writedown of Assets (6) . . . . . . . . . . - - - 4,617 -
Interest Expense . . . . . . . . . . . . . . 1,811 253 508 917 695
Income (Loss) Before Income Taxes . . . . . 5,113 (21,110) 7,599 (6,730) 1,790
Income (Loss) Before Cumulative Effect of
Accounting Change . . . . . . . . . . . . 3,132 (12,729) 6,200 (2,968) 2,543
Per Share of Common Stock . . . . . . . . .23 (.94) .46 (.22) .19
Cumulative Effect on Prior Years of Change in
Accounting for Income Taxes (7) . . . . . - - - 1,159 -
Net Income (Loss) . . . . . . . . . . . . . 3,132 (12,729) 6,200 (1,809) 2,543
Per Share of Common Stock . . . . . . . . .23 (.94) .46 (.13) .19
Depreciation and Amortization (8) . . . . . 15,002 13,760 16,307 18,022 18,337
Property Additions (9) . . . . . . . . . . . 23,436 10,897 14,223 11,581 27,233
BALANCE SHEET DATA (AT PERIOD END):
Property, Plant and Equipment - Net . . . . 124,024 101,536 85,297 97,198 110,437
Total Assets . . . . . . . . . . . . . . . . 248,443 209,818 193,154 196,486 197,878
Long-Term Debt and Notes Payable to
Related Parties (excluding
current maturities) . . . . . . . . . . 15,784 369 - - -
Shareholders' Equity . . . . . . . . . . . . 136,027 128,639 141,345 135,037 136,846
</TABLE>
_________________
(1) Includes the results of GPC since the June 13, 1995 acquisition, which
was accounted for under the purchase method. See Note 3 of Notes to
Consolidated Financial Statements.
(2) Includes the results from Pool Arctic Alaska since the September 28,
1994 acquisition, which was accounted for under the purchase method.
See Note 3 of Notes to Consolidated Financial Statements.
(3) The Company conducts a significant part of its operations through
unconsolidated affiliates. See Note 9 of Notes to Consolidated
Financial Statements.
(4) See Note 3 of Notes to Consolidated Financial Statements for a
discussion of the GPC acquisition related costs of $0.6 million pretax
($0.4 million, or $.03 per share after-tax).
(5) See Note 6 of Notes to Consolidated Financial Statements for a
discussion of the $23.6 million pretax ($15.3 million, or $1.13 per
share, after-tax) provision for leasehold impairment.
(6) In 1992, the Company recorded a $4.6 million pretax ($3.0 million, or
$.23 per share, after-tax) writedown of certain of the Company's
domestic offshore rigs and equipment.
(7) The Company changed its method of accounting for income taxes in 1992.
(8) At the beginning of the fourth quarter of 1994, the Company revised its
estimate of the remaining depreciable lives of certain rigs and
equipment to better reflect the remaining economic lives of the
assets. The effect of this change in accounting estimate was to
increase the 1995 net income by approximately $2.1 million or $.15
per share and to decrease the 1994 net loss by approximately $0.5
million or $.04 per share. At the beginning of the third quarter of
1991, the Company changed the estimated salvage values and remaining
depreciable lives of certain equipment of the Company and its
unconsolidated affiliates to better reflect the remaining economic
lives of the assets and to treat them consistently with similar
assets held by the Company. This change had the effect of decreasing
the net loss for the year ended December 31, 1992 by $2.8 million or
$.21 per share and increasing net income for the year ended December
31, 1991 by $1.2 million or $.09 per share.
(9) Excluding acquisition of businesses.
14
<PAGE> 15
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
GOLDEN PACIFIC CORP. ACQUISITION. On June 13, 1995, the Company
acquired all of the outstanding capital stock of GPC. Prior to the
acquisition, GPC had annual revenues of approximately $50 million and operated
a fleet of approximately 155 land well-servicing rigs in California. See Note
3 of Notes to Consolidated Financial Statements for a discussion of this
acquisition.
1995 COMPARED TO 1994. The Company, on a consolidated basis, had net
income of $3.1 million in 1995, compared with a net loss of $12.7 million in
1994. The 1995 net income included a $0.6 million ($0.4 million after-tax)
charge for costs related to the GPC acquisition. The 1994 results included a
$23.6 million ($15.3 million after-tax) provision for leasehold impairment.
(See "San Angelo Lease Commitment.") The average price per barrel of West
Texas Intermediate crude oil was higher by approximately 7% in 1995 than in
1994. Although average natural gas prices dropped approximately 15% from 1994
to 1995, natural gas prices in December 1995 rose above $2.00 per mcf, the
highest they had been since the first quarter of 1994. Results from the
Company's domestic operations improved primarily because of increased activity
onshore in the lower 48 states, offsetting the effect of reduced operating
results in Alaska. The Company's domestic onshore operation reported rig hours
28% higher for 1995 than in 1994, primarily due to the inclusion of rigs from
the GPC acquisition since June 14, 1995. The Company's offshore operation in
the Gulf of Mexico experienced rig utilization of 65% in 1995, compared to 53%
in 1994; average rig rates, however, were lower, particularly for the jackup
rigs. Earnings from the Company's Alaska operations decreased from 1994 due to
one of its three Arctic land drilling rigs being on standby status during 1995,
whereas it operated for the first four months of 1994 before going on standby
status for the remainder of the year, and due to the completion in late 1994 of
a long-term offshore drilling rig contract. Results from the Company's
international operations decreased primarily due to lower earnings from the
Company's unconsolidated affiliate located in Saudi Arabia, reduced land
drilling activity in Ecuador and the absence of two rig contracts in Kuwait
which were completed in mid-1994.
Revenues. Revenues were $277.3 million in 1995, compared to $229.2
million in 1994. This increase was attributable to the inclusion of revenues
for the entire year of 1995 from rigs and equipment previously owned by the
Pool Arctic Alaska partnership compared to three months of revenues in 1994
(see "Pool Arctic Alaska Acquisition"), revenues from rigs and equipment
acquired in the GPC acquisition (see "Golden Pacific Corp. Acquisition"), a
higher level of activity by the Company's domestic onshore well-servicing rig
fleet, increased rig activity in Tunisia, Oman and Pakistan, revenues
attributable to a new offshore platform workover rig in Australia and increased
domestic production services activity in 1995, offset partly by the absence of
two rig contracts in Kuwait which were completed in mid-1994 and reduced land
drilling activity in Ecuador. Domestic onshore well-servicing and related
services revenues increased $33.5 million or 29% in 1995 from 1994, chiefly as
a result of the GPC acquisition. In addition, domestic production services
revenues increased $1.2 million or 3% in 1995 from 1994. Domestic onshore rig
utilization was 52% in 1995, compared to 48% in 1994. Gulf of Mexico offshore
workover and drilling revenues in 1995 increased $1.4 million or 4% compared to
1994, due to higher rig utilization which was somewhat offset by lower rig
rates. Revenues from international operations increased $1.6 million or 6% in
1995 from 1994, due to increased rig activity in Tunisia, Oman, Pakistan and
Australia, offset partly by the absence of two rig contracts in Kuwait which
were completed in mid-1994 and reduced land drilling activity in Ecuador.
Revenues for international operations do not include revenues from the
Company's foreign joint ventures, which are unconsolidated affiliates.
In September 1994, the Company acquired the 60.7% partnership interest
not already owned by the Company in Pool Arctic Alaska (see "Pool Arctic Alaska
Acquisition"), and, accordingly, revenues generated from Pool Arctic Alaska
rigs and equipment have been included in the Company's consolidated financial
15
<PAGE> 16
statements since the date of such acquisition. Revenues for Alaska operations
included in the Company's consolidated financial statements were $20.4 million
in 1995. Revenues generated by the Company's wholly-owned operations in Alaska
in 1994 were $9.9 million, which included $5.7 million from an offshore rig
operating in the Cook Inlet and $4.2 million generated after the acquisition
date by the acquired Pool Arctic Alaska rigs and equipment. Prior to the date
of such acquisition, the Company's revenues did not include revenues of Pool
Arctic Alaska, which was an unconsolidated affiliate, but did include revenues
from the Company's wholly-owned operations in Alaska.
Earnings Attributable to Unconsolidated Affiliates. Earnings attributable
to unconsolidated affiliates were $3.0 million in 1995, compared to $5.0
million in 1994. Earnings attributable to Pool Arabia, Ltd., the Company's
Saudi Arabia affiliate, decreased $1.3 million from 1994 to $2.3 million in
1995 primarily as a result of the completion in early 1995 of three land
workover rig contracts in Kuwait and the completion in March 1995 of a land
drilling contract in Saudi Arabia. Earnings attributable to Pool Arctic Alaska
in 1994 were $0.5 million through the date of acquisition (see "Pool Arctic
Alaska Acquisition"). Earnings from Pool Arctic Alaska ceased to be included
in earnings attributable to unconsolidated affiliates immediately following the
Company's purchase of its partner's interest in September 1994.
Costs and Expenses. The Company's costs and expenses were $274.6 million
in 1995, compared to $232.7 million in 1994 (excluding the provision for
leasehold impairment). Such increase was attributable to (i) the inclusion,
for the period June 14 through December 31, 1995, of costs and expenses related
to the rigs and equipment obtained in the GPC acquisition, (ii) the inclusion
in 1995 of a full year's costs and expenses related to the rigs and equipment
previously owned by the Pool Arctic Alaska partnership, (iii) $0.6 million of
expenses related to the GPC acquisition, primarily for yard closings, and (iv)
costs associated with higher levels of activity in the Company's domestic
onshore well- servicing line as well as in Tunisia, Oman, Pakistan and
Australia. Partially offsetting these higher costs and expenses were lower
repair and maintenance expenses for the Company's Gulf of Mexico offshore
fleet, lower costs and expenses in Ecuador due to a reduced level of land
drilling activity and a reduction in the accrued liability for workers'
compensation and property damage claims. For a discussion of the $23.6 million
provision for leasehold impairment included in the Company's 1994 costs and
expenses, see "San Angelo Lease Commitment." At the beginning of the fourth
quarter of 1994, the Company revised its estimate of the remaining depreciable
lives of certain rigs and equipment to better reflect the remaining economic
lives of such assets. Such change increased net income for 1995 as compared to
1994 by approximately $1.6 million or $.11 per share.
Other Income - Net. Other income - net in 1994 included a $0.5 million
gain resulting from a settlement related to the sale in 1991 of Libya assets
that had been written off in the mid-1980's when the Company terminated
operations in that country.
Interest Expense. Interest expense was $1.6 million higher in 1995 than
in 1994 due primarily to the $10 million term loan to refinance the acquisition
of the 60.7% partnership interest in Pool Arctic Alaska, the GPC acquisition
debt and higher average borrowings under the Company's syndicated bank
revolving line of credit.
Income Taxes. The Company recorded income tax expense of $2.0 million on
income before income taxes of $5.1 million in 1995, compared to an income tax
benefit of $8.4 million on a loss before income taxes of $21.1 million in 1994.
The Company had income tax expense in 1995, compared to an income tax benefit
in 1994 primarily as a result of the Company's recording in 1994 a provision
for leasehold impairment which generated a deferred income tax benefit of $8.2
million. The 1995 tax expense was due to stronger domestic operating results
in 1995 plus the effect of certain amendments to prior period U.S. federal tax
returns, partly offset by the reversal of no longer needed deferred foreign
taxes for 1990 income tax indemnities and the elimination of the Company's
valuation allowance related to its U.S. federal net operating loss ("NOL")
carryforwards. The 1994 tax benefit also included a net reversal of $0.6
million of previously accrued foreign income taxes. At December 31, 1995, the
Company had recognized $6.7 million of deferred income tax assets, net of
valuation allowance, in excess of deferred income tax liabilities. The net
deferred
16
<PAGE> 17
income tax assets resulted primarily from the 1994 provision for leasehold
impairment and the Company's U.S. federal income tax NOL carryforwards, which
are expected to be realized within the 15-year carryforward periods. The U.S.
NOL carryforwards at December 31, 1995 were $12.0 million from 1991, $18.3
million from 1992, $8.0 million from 1994 and an estimated $5.9 million from
1995; they are available for utilization through the year(s) 2006, 2007, 2009
and 2010, respectively. The NOL carryforwards are expected to be realized
through future increases in taxable income as a result in part of lower tax
depreciation charges due to most existing property becoming fully depreciated
for U.S. tax purposes within the next one to two years and the expected
increase in taxable income resulting from the GPC acquisition. If necessary,
the Company also will consider repatriating future foreign earnings in order to
fully realize the NOL carryforwards before their expiration. See Note 4 of
Notes to Consolidated Financial Statements.
1994 COMPARED TO 1993. The Company, on a consolidated basis, had a net
loss of $12.7 million in 1994 compared with net income of $6.2 million in 1993.
The 1994 results included a $23.6 million ($15.3 million after-tax) provision
for leasehold impairment. (See "San Angelo Lease Commitment.") The 1994
results also reflected weaker market conditions than those prevailing in the
prior year. Natural gas prices and the average price per barrel of West Texas
Intermediate crude oil were both notably lower in 1994 than in 1993. The drop
in the Company's domestic activity levels resulted primarily from the
diminished interest of its customers in investing in U.S. exploration and
production because of the weaker oil and natural gas prices during 1994. The
Company's 1994 domestic onshore well-servicing rig hours were 9% lower than in
1993; however, rig rates increased slightly. Gulf of Mexico offshore rig
utilization was 53% in 1994, compared to 77% in 1993. Despite the decrease in
rig utilization, average rig rates were approximately 8% higher in 1994 than in
1993. Earnings from the Company's international operations decreased primarily
due to the mid-1994 completion of two rig contracts in Kuwait and lower
earnings from the Company's unconsolidated affiliates located in Saudi Arabia
and Malaysia, offset partly by the contribution from increased rig activity in
Ecuador. Earnings from the Company's Alaska operations in 1993 included a $1.1
million net after-tax gain on the sale of an offshore rig, Rig 428, resulting
from the exercise of a purchase option by a customer.
Revenues. Revenues were $229.2 million in 1994, compared to $240.5
million in 1993. The decrease in revenues from 1993 to 1994 was attributable
to lower activity by the Company's domestic onshore well-servicing and Gulf of
Mexico offshore rig fleets, lower rig mobilization revenues in Alaska,
contracts being completed during 1993 in the Adriatic Sea and the Ivory Coast,
and the mid-1994 completion of two rig contracts in Kuwait, offset partly by
higher rig activity in Ecuador, higher domestic production services activity in
1994 and the inclusion since late September 1994 of revenues from rigs
previously owned by Pool Arctic Alaska (see "Pool Arctic Alaska Acquisition").
Domestic onshore well-servicing revenues decreased $8.9 million or 7% in 1994
from 1993; this decrease was offset partly by domestic production services
revenues which increased $4.2 million or 11% in 1994 from 1993. Domestic
onshore rig utilization was 48% in 1994, compared to 51% in 1993. Gulf of
Mexico offshore workover and drilling revenues in 1994 decreased $2.7 million
or 7% compared to 1993, due to lower rig utilization caused by weaker natural
gas prices during 1994. Revenues from international operations decreased $4.1
million or 14% in 1994 from 1993, due primarily to contracts being completed
during 1993 in the Adriatic Sea and the Ivory Coast and the mid-1994 completion
of two rig contracts in Kuwait, offset partly by higher rig activity in
Ecuador. Revenues for international operations do not include revenues from
the Company's foreign unconsolidated affiliates.
Beginning in mid-1992, Alaska operations began operating an offshore rig
in the Cook Inlet which earned revenues of $9.9 million in 1993 and $5.7 million
in 1994, before coming off contract in late 1994. The utilization of this
offshore rig, reassigned from California, marked the first time the Company had
recognized revenues from its Alaska operations, as previous contracts had been
performed by rigs owned or leased by Pool Arctic Alaska, an unconsolidated
affiliate prior to September 1994. In September 1994, the Company acquired the
60.7% partnership interest not already owned by the Company in Pool Arctic
Alaska, (see "Pool Arctic Alaska Acquisition") and accordingly revenues of $4.2
million generated from Pool Arctic Alaska rigs and equipment were included in
the Company's consolidated financial statements from the date of such
acquisition. Prior to the date of such acquisition, the Company's revenues did
not include revenues from Pool
17
<PAGE> 18
Arctic Alaska, which was an unconsolidated affiliate, but did include revenues
from the Company's wholly-owned operations in Alaska.
Earnings Attributable to Unconsolidated Affiliates. Earnings
attributable to unconsolidated affiliates were $5.0 million in 1994, compared
to $6.9 million in 1993. Earnings from Pool Arabia, Ltd., the Company's Saudi
Arabia affiliate, decreased $1.2 million from 1993 to $3.7 million in 1994
primarily as a result of lower management fees paid to the Company in 1994 and
the release of an offshore rig in early 1994. Earnings from Pool Arctic Alaska
in 1994 were $0.5 million through the date of acquisition (see "Pool Arctic
Alaska Acquisition") as compared to breakeven for the year ended December 31,
1993; these 1994 earnings were favorably affected by higher rig activity on the
North Slope and improved results from labor and maintenance contracts in the
Cook Inlet compared to the prior year. Earnings from the Company's Malaysia
affiliate in 1994 decreased $1.3 million from 1993 due to the completion of a
contract for an offshore rig during the first quarter of 1994.
Costs and Expenses. The Company's costs and expenses were $232.7
million in 1994 (excluding the provision for leasehold impairment), compared to
$241.5 million in 1993. The decrease in costs and expenses from 1993 to 1994
was attributable to (i) lower levels of activity for the Company's domestic
onshore well-servicing, Gulf of Mexico offshore and international rig fleets,
(ii) lower rig mobilization expenses in Alaska, (iii) lower depreciation
expense chiefly due to assets becoming fully depreciated and to a revision in
the estimate of remaining depreciable lives of certain rigs and equipment and
(iv) a $1.0 million pretax charge recorded in 1993 against the carrying value
of certain patent rights related to horizontal drilling technology. These cost
reductions were offset partly by 1994 maintenance and lease expenses related to
three Gulf of Mexico jackup workover rigs which were leased in December 1993.
For a discussion of the $23.6 million provision for leasehold impairment
included in the Company's costs and expenses in 1994, see "San Angelo Lease
Commitment." At the beginning of the fourth quarter of 1994, the Company
revised its estimate of the remaining depreciable lives of certain rigs and
equipment to better reflect the remaining economic lives of such assets. Such
change decreased the net loss for the year ended December 31, 1994 by
approximately $0.5 million or $.04 per share.
Other Income-Net. Other income-net in 1994 included a $0.5 million
gain resulting from a settlement related to the sale in 1991 of Libya assets
that had been written off in the mid-1980's when the Company terminated
operations in that country. Other income-net in 1993 included a $1.2 million
pretax gain related to the sale of Rig 428.
Income Taxes. The Company recorded an income tax benefit of $8.4
million on a loss before income taxes of $21.1 million in 1994, compared to
income tax expense of $1.4 million on income before income taxes of $7.6
million in 1993. The Company had an income tax benefit in 1994, compared to
income tax expense in 1993 primarily as a result of the Company recording a
provision for leasehold impairment in 1994 which generated a deferred income
tax benefit of $8.2 million. The 1994 tax benefit also included a net reversal
of $0.6 million of previously accrued foreign income taxes. The Company's U.S.
federal income tax provision for 1993 reflected the effect, which was not
significant, of the Revenue Reconciliation Act of 1993.
FINANCIAL CONDITION AND LIQUIDITY
The Company had cash and cash equivalents of $5.5 million at December
31, 1995 compared to $2.6 million at December 31, 1994. Working capital was
$27.0 million and $33.0 million at December 31, 1995 and 1994, respectively.
18
<PAGE> 19
Cash Flows. For the year ended December 31, 1995, net cash flows
provided by operating activities were $20.6 million, compared with $5.3 million
and $15.3 million in 1994 and 1993, respectively. The Company used a net $21.2
million for investing activities in 1995, primarily for capital expenditures of
$23.4 million, including $6.9 million for the construction of a new offshore
platform workover rig which began earning revenues in Australia in the third
quarter of 1995, and $3.4 million, net of cash acquired, used in connection
with the GPC acquisition and the related direct acquisition costs, partly
offset by $2.4 million of proceeds from dispositions of equipment and $2.9
million of dividends from unconsolidated affiliates. The Company used a net
$9.5 million for investing activities in 1994. This included the purchase of
60.7% of Pool Arctic Alaska for $11.3 million, net of cash acquired, and $11.4
million of other capital expenditures, offset partly by $7.0 million of
proceeds from the sale and leaseback of three offshore jackup rigs, $3.4
million of proceeds from sales of other equipment and the receipt of $2.9
million of dividends from unconsolidated affiliates. The Company used a net
$10.5 million for investing activities in 1993, including $14.2 million of
capital expenditures, $1.4 million placed in escrow as collateral in connection
with a sale and leaseback arrangement, $2.6 million of proceeds, net of related
construction expenditures, from the sale of Alaska Rig 428, $1.7 million of
proceeds from sales of other equipment and $0.7 million of dividends received
from unconsolidated affiliates.
Golden Pacific Corp. Acquisition. On June 13, 1995, the Company
acquired all of the outstanding capital stock of GPC for approximately $18.8
million, consisting of $11.5 million of subordinated long-term notes due in
2005, 493,543 shares of the Company's common stock valued at $4.2 million and
$3.1 million in cash. See Notes 3 and 5 of Notes to Consolidated Financial
Statements for further discussion.
Also in connection with the GPC acquisition the Company assumed a
liability for certain deferred compensation obligations of GPC. To evidence
such obligations, the Company issued notes aggregating $1.5 million in
principal amount to three employees of GPC. See Note 5 of Notes to
Consolidated Financial Statements for further discussion.
As part of the acquisition of GPC, the Company assumed GPC's debt of
$2.0 million, all of which was retired in June 1995.
Pool Arctic Alaska Acquisition. On September 28, 1994, the Company
acquired the 60.7% partnership interest in Pool Arctic Alaska it did not
previously own for $12.1 million in cash. The Company's Alaska operation now
includes the three highly specialized Arctic land drilling rigs and related
equipment formerly owned by the Pool Arctic Alaska partnership, and provides
rig and contract labor services, both onshore and offshore, in Alaska. This
acquisition was accounted for under the purchase method, and was initially
funded from the Company's cash resources and approximately $6.7 million
borrowed under its Line of Credit. In April 1995, the Company obtained a
three-year loan (the "Alaska Loan") to refinance $10 million of the purchase
price. During 1995, the Company made scheduled principal payments of $2.6
million on the Alaska Loan. See Note 5 of Notes to Consolidated Financial
Statements for further discussion.
Credit Facilities and Long-Term Debt. The Company has available a
syndicated bank revolving line of credit (the "Line of Credit") to finance
temporary working capital requirements and to support the issuance of letters
of credit. During 1995 expiration of the Line of Credit was extended from
April 1996 to April 1997, and the maximum availability thereunder was
increased. The maximum availability is the lesser of (i) $35 million
(previously $30 million), or (ii) a calculated amount based upon a percentage
of domestic receivables meeting certain criteria. At February 16, 1996, the
maximum availability was $32.4 million, of which none had been drawn in cash
and $13.4 million was being utilized to support the issuance of letters of
credit. The interest rate is a floating rate which is, at the Company's
option, (i) the lender's prime rate plus 0.25%, or (ii) the London Interbank
Offered Rate (LIBOR) plus 2.625%, with the Company's choice of a one-, two-,
three-, or six-month interest period. There is an approximate 1/2 of 1%
commitment fee on the unutilized portion. The terms of the Line of Credit
include restrictive covenants which, among other things, limit capital
expenditures, prohibit certain liens, prohibit payment of dividends, limit
additional debt and set certain minimum financial requirements. Advances under
the Line of Credit are secured by certain
19
<PAGE> 20
accounts receivable, certain deposit accounts, all of the stock of the
Company's domestic subsidiaries, 66% of the stock of the Company's consolidated
foreign subsidiaries, the property of the Company's Alaska subsidiary and the
Company's 13 platform rigs located in the Gulf of Mexico. See Note 5 of Notes
to Consolidated Financial Statements for a discussion of the credit agreement
and the restrictions it imposes.
In January 1996 the Company received $6.5 million under a four-year
term loan agreement in order to refinance the construction costs incurred
during 1995 to build a new offshore platform workover rig for a contract in
Australia. The rig construction costs were initially funded from the Company's
cash resources and borrowings under its Line of Credit. See Note 5 of Notes to
Consolidated Financial Statements for further discussion of this term loan.
In August 1994 the Company issued a four-year $0.5 million note in
connection with a purchase of eight well- servicing rigs and related equipment.
The note bears interest at 7% and is secured by the eight rigs and equipment
that were purchased.
Modifications to Alaska Rig 428 were funded in 1993 primarily through
approximately $10 million of project financing which was repaid during 1993
from the proceeds from the sale of such rig. In May 1992 the Company had
entered into a $4.4 million term loan and a $0.5 million revolving line of
credit to finance the upgrade of another rig under contract in Alaska, and both
of these loans were repaid in 1993.
There were no long-term financing activities in 1993 except by
unconsolidated affiliates. Two of the Company's unconsolidated affiliates have
entered into loan agreements which impose restrictions on the ability of such
affiliates to distribute dividends to the Company.
Capital Expenditures. During 1996, the Company anticipates capital
expenditures for improvements and upgrades to its existing rig fleet of
approximately $16 million, most of which are not subject to fixed commitments.
It is anticipated that these expenditures will be financed chiefly through
internally generated funds, although the Company may avail itself of borrowings
as needed. Acquisitions of additional assets and businesses are expected to
continue to be an important part of the Company's strategy for growth. The
Company would, under certain circumstances, need to obtain additional debt
and/or equity financing to fund such acquisitions.
OTHER MATTERS
Accounting Standards. The Company adopted Statement of Financial
Accounting Standards No. 106, "Employers' Accounting for Postretirement
Benefits Other than Pensions" ("SFAS 106") on January 1, 1993. SFAS 106
requires the Company to accrue the estimated cost of certain retiree benefits
during the years the employee provides services. The Company previously
expensed the cost of these benefits as they were paid. In accordance with SFAS
106, the Company has elected to recognize the approximately $2.9 million
accumulated benefit obligation at the date of adoption over a period of twenty
years. See Note 7 of Notes to Consolidated Financial Statements.
The Company also adopted Statement of Financial Accounting Standards
No. 112, "Employers' Accounting for Postemployment Benefits," which requires
the accrual of benefits provided after employment but before retirement to
former or inactive employees, their beneficiaries and covered dependents. The
adoption of the statement in 1993 had no significant effect on the Company's
financial condition or results of operations.
The Financial Accounting Standards Board has issued Statement of
Financial Accounting Standards No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of." This statement
requires that long-lived assets and certain identifiable intangibles held and
used by the Company be reviewed for impairment whenever events or changes in
circumstances indicate that the carrying
20
<PAGE> 21
amount of an asset may not be recoverable. The adoption of this statement in
the first quarter of 1996 will not have a material effect on the Company's
financial position or results of operations.
In October 1995, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 123, "Accounting for
Stock-Based Compensation" ("SFAS 123"), which sets forth alternative accounting
and disclosure requirements for stock-based compensation arrangements. SFAS
123 does not rescind the existing accounting for employee stock-based
compensation under APB Opinion No. 25. Companies may continue to follow the
current accounting to measure and recognize employee stock-based compensation;
however, SFAS 123 requires disclosure of pro forma net income and earnings per
share that would have been reported under the "fair value" based recognition
provisions of SFAS 123. The Company has elected to continue to follow the
provisions of APB Opinion No. 25, "Accounting for Stock Issued to Employees"
for employee compensation and will disclose the pro forma information required
under SFAS 123.
Contingent Support Agreement. ENSERCH provides the Company with
certain guarantees relating to (i) debt of the Company's Saudi Arabia affiliate
and (ii) the San Angelo lease (see "San Angelo Lease Commitment"). See also
Note 8 to Notes to Consolidated Financial Statements. As required by such
agreement, the Company in early 1993 replaced guarantees with respect to
certain letters of credit that related principally to the Company's current and
previous insurance programs. The Company in 1993 also satisfied certain other
conditions set forth in the Contingent Support Agreement, enabling it to
repurchase its preferred stock from ENSERCH for $1,000. Also under the
agreement, ENSERCH had prepaid $4.0 million to the Company in 1990 for future
domestic onshore well-servicing and production services to be provided by the
Company to ENSERCH. The prepayment was applied annually against the first $1.0
million of such services provided and as of September 30, 1994 the entire $4.0
million of such prepayment had been applied.
Insurance Obligations. The Company is obligated to pay the uninsured
portion of the costs of personal injury and property damage incidents. For
incidents that occurred prior to 1990, the Company incurred significant
obligations under ENSERCH's insurance programs. The unpaid balance is
estimated to be $2.7 million at December 31, 1995, and has been provided for in
the Consolidated Financial Statements. The Company expects this obligation
will continue to decline as the pre-1990 claims are settled and paid.
Effective January 1, 1990, the Company entered into a new insurance program,
under which the Company's exposure for covered employee injury and third-party
liability claims has been limited to deductibles which are significantly lower
than those under the ENSERCH program.
San Angelo Lease Commitment. The Company has an operating lease,
effective through March 2003, for a 65-acre facility at San Angelo, Texas which
it previously used for rig and equipment manufacturing and storage. Annual
lease payments are $2.2 million through March 1998 and $4.4 million thereafter
for the remaining five years of the lease. Effective October 1, 1994, the
Company vacated this facility and subleased it in its entirety for $0.5 million
per year under an operating sublease which expires in September 1997. Prior to
subleasing and vacating this facility in 1994, the Company beneficially
utilized approximately 12% of the facility and charged to operations a
proportionate share of the cost of the lease. In September 1988, the Company,
anticipating that it would not be able to fully utilize the facility for a
period of years, accrued a $15.9 million liability for the expected
underutilization. Since September 1988, the cost associated with the
unutilized portion of the facility has been charged against this accrued
liability, which as of the fourth quarter of 1994, had substantially been used.
For the remainder of the lease term, the Company does not anticipate utilizing
any of this facility in its future operations nor does it expect to be able to
sublease this facility to third parties for an amount equivalent to the annual
lease payments; therefore, in the fourth quarter of 1994 the Company recorded a
provision for leasehold impairment of $23.6 million. This provision recognizes
all future lease expense, net of anticipated sublease income. Such provision
for leasehold impairment decreased 1994 net income by $15.3 million, or $1.13
per share.
21
<PAGE> 22
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEPENDENT AUDITORS' REPORT
Pool Energy Services Co.:
We have audited the accompanying consolidated balance sheets of Pool
Energy Services Co. and its subsidiaries ( the "Company") as of December 31,
1995 and 1994, and the related statements of consolidated operations and cash
flows for each of the three years in the period ended December 31, 1995. Our
audits also included the financial statement schedule listed in the Index at
Item 14. These financial statements and financial statement schedule are the
responsibility of the Company's management. Our responsibility is to express
an opinion on the financial statements and financial statement schedule based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, such consolidated financial statements present fairly,
in all material respects, the financial position of Pool Energy Services Co.
and its subsidiaries at December 31, 1995 and 1994, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1995 in conformity with generally accepted accounting principles.
Also, in our opinion, such financial statement schedule, when considered in
relation to the basic consolidated financial statements taken as a whole,
presents fairly in all material respects the information set forth therein.
DELOITTE & TOUCHE LLP
Houston, Texas
February 22, 1996
22
<PAGE> 23
POOL ENERGY SERVICES CO.
STATEMENTS OF CONSOLIDATED OPERATIONS
(IN THOUSANDS EXCEPT NUMBER OF SHARES AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
---------------------------------------
1995 1994 1993
----------- ----------- -----------
<S> <C> <C> <C>
Revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 277,305 $ 229,175 $ 240,524
Earnings Attributable to Unconsolidated Affiliates . . . . . . . 2,955 5,016 6,860
----------- ----------- -----------
Total . . . . . . . . . . . . . . . . . . . . . . . . 280,260 234,191 247,384
----------- ----------- -----------
Costs and Expenses:
Operating expenses . . . . . . . . . . . . . . . . . . . 219,074 182,012 187,412
Selling, general and administrative expenses . . . . . . 39,927 36,927 37,797
Depreciation and amortization . . . . . . . . . . . . . . 15,002 13,760 16,307
GPC acquisition related costs . . . . . . . . . . . . . . 622 - -
Provision for leasehold impairment . . . . . . . . . . . - 23,551 -
----------- ----------- -----------
Total . . . . . . . . . . . . . . . . . . . . . . . . 274,625 256,250 241,516
----------- ----------- -----------
Other Income (Expense) - Net . . . . . . . . . . . . . . . . . . 1,289 1,202 2,239
Interest Expense . . . . . . . . . . . . . . . . . . . . . . . . 1,811 253 508
----------- ----------- -----------
Income (Loss) Before Income Taxes . . . . . . . . . . . . . . . . 5,113 (21,110) 7,599
Income Tax Provision (Credit) . . . . . . . . . . . . . . . . . . 1,981 (8,381) 1,399
----------- ----------- -----------
Net Income (Loss) . . . . . . . . . . . . . . . . . . . . . . . . $ 3,132 $ (12,729) $ 6,200
=========== =========== ===========
Earnings (Loss) Per Share of Common Stock . . . . . . . . . . . . $ .23 $ (.94) $ .46
=========== =========== ===========
Average Common Shares Outstanding . . . . . . . . . . . . . . . . 13,840,122 13,559,108 13,526,429
=========== =========== ===========
</TABLE>
See Notes to Consolidated Financial Statements.
23
<PAGE> 24
POOL ENERGY SERVICES CO.
STATEMENTS OF CONSOLIDATED CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
---------------------------------
1995 1994 1993
--------- --------- ---------
<S> <C> <C> <C>
Operating Activities:
Net Income (Loss) . . . . . . . . . . . . . . . . . . . . . . . . $ 3,132 $ (12,729) $ 6,200
Noncash items included above:
Depreciation and amortization . . . . . . . . . . . . . . . . . . 15,002 13,760 16,307
Deferred income taxes (credit) . . . . . . . . . . . . . . . . . 1,261 (9,155) 1,310
Undistributed earnings of unconsolidated affiliates . . . . . . . (2,895) (5,055) (6,778)
Provision for leasehold impairment . . . . . . . . . . . . . . . - 23,551 -
Performance of prepaid rig services . . . . . . . . . . . . . . . - (1,000) (1,000)
Other - net . . . . . . . . . . . . . . . . . . . . . . . . . . . (218) (921) 2,260
Payment of pre-1990 personal injury and property damage claims . . (37) (322) (816)
Payment for lease of manufacturing facility . . . . . . . . . . . (2,148) (2,148) (2,148)
Proceeds from sublease of manufacturing facility . . . . . . . . . 88 544 -
Other - net . . . . . . . . . . . . . . . . . . . . . . . . . . . (786) (964) (341)
Net effect of changes in operating working capital . . . . . . . . 7,209 (224) 325
--------- --------- ---------
Net Cash Flows Provided by Operating Activities . . . . . . . . . 20,608 5,337 15,319
--------- --------- ---------
Investing Activities:
Property additions . . . . . . . . . . . . . . . . . . . . . . . . (23,436) (10,897) (14,223)
Expenditures for the acquisition of GPC, including acquisition
costs, less cash acquired . . . . . . . . . . . . . . . . . . . . (3,431) - -
Payment for purchase of Pool Arctic Alaska, net of cash acquired . - (11,250) -
Proceeds from sale of Alaska Rig 428 . . . . . . . . . . . . . . . - - 16,857
Expenditures for modification of Alaska Rig 428 . . . . . . . . . - (527) (14,304)
(Increase) decrease in restricted cash . . . . . . . . . . . . . . 154 110 (1,400)
Proceeds from disposition of property, plant and equipment . . . . 2,400 3,383 1,681
Proceeds from sale of rigs to leasing company . . . . . . . . . . - 7,000 -
Cash dividends received from unconsolidated affiliates . . . . . 2,885 2,918 683
Other - net . . . . . . . . . . . . . . . . . . . . . . . . . . . 204 (257) 177
--------- --------- ---------
Net Cash Flows Used for Investing Activities . . . . . . . . . . . (21,224) (9,520) (10,529)
--------- --------- ---------
Financing Activities:
Proceeds from exercise of stock options . . . . . . . . . . . . . 61 45 404
Proceeds and repayments of short-term borrowings - net . . . . . . (1,600) 1,600 (2,475)
Retirement of debt assumed in GPC acquisition . . . . . . . . . . (1,962) - -
Proceeds and repayments of project financing - net . . . . . . . . - - (1,298)
Proceeds from long-term debt . . . . . . . . . . . . . . . . . . . 10,000 545 -
Principal payments on long-term debt . . . . . . . . . . . . . . . (2,751) (50) -
Principal payments on notes payable to related parties . . . . . . (200) - -
Repurchase of preferred stock . . . . . . . . . . . . . . . . . . - - (1)
--------- --------- ---------
Net Cash Flows Provided by (Used for) Financing Activities . . . . 3,548 2,140 (3,370)
--------- --------- ---------
Net Increase (Decrease) in Cash and Cash Equivalents . . . . . . . . . . 2,932 (2,043) 1,420
Cash and Cash Equivalents at January 1, . . . . . . . . . . . . . . . . . 2,560 4,603 3,183
--------- --------- ---------
Cash and Cash Equivalents at December 31, . . . . . . . . . . . . . . . . $ 5,492 $ 2,560 $ 4,603
========= ========= =========
</TABLE>
See Notes to Consolidated Financial Statements.
24
<PAGE> 25
POOL ENERGY SERVICES CO.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS EXCEPT NUMBER OF SHARES)
<TABLE>
<CAPTION>
DECEMBER 31
----------------------
1995 1994
--------- ---------
ASSETS
<S> <C> <C>
Current Assets:
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . $ 5,492 $ 2,560
Restricted cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 163 153
Accounts and notes receivable (net of allowance for doubtful accounts of
$1,059 and $1,622) . . . . . . . . . . . . . . . . . . . . . . . . . . 47,941 45,159
Other receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,754 3,177
Accounts receivable from affiliates . . . . . . . . . . . . . . . . . . . 3,289 1,702
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,516 10,571
Deferred income tax asset (net of $407 and $423 allowance) . . . . . . . 3,469 3,275
Other current assets . . . . . . . . . . . . . . . . . . . . . . . . . . 3,525 3,821
--------- ---------
Total current assets . . . . . . . . . . . . . . . . . . . . . . . . 78,149 70,418
Property, Plant and Equipment - Net . . . . . . . . . . . . . . . . . . . . . . . 124,024 101,536
Investment in and Noncurrent Receivables from Unconsolidated Affiliates . . . . . 26,001 26,042
Goodwill, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,174 -
Noncurrent Deferred Income Tax Asset (net of $6,314 and $8,483 allowance) . . . . 5,528 8,713
Noncurrent Receivables (net of allowance for doubtful accounts of $2,824 and
$3,667) and Other Assets . . . . . . . . . . . . . . . . . . . . . . . . 2,594 1,972
Noncurrent Restricted Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . 973 1,137
--------- ---------
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 248,443 $ 209,818
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Short-term bank loans . . . . . . . . . . . . . . . . . . . . . . . . . . $ - $ 1,600
Current portion of long-term debt . . . . . . . . . . . . . . . . . . . . 4,385 126
Current portion of notes payable to related parties . . . . . . . . . . . 400 -
Trade accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . 24,123 16,053
Accrued liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . 19,615 17,200
Accrued taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,647 2,409
--------- ---------
Total current liabilities . . . . . . . . . . . . . . . . . . . . . . 51,170 37,388
Long-Term Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14,859 369
Notes Payable to Related Parties . . . . . . . . . . . . . . . . . . . . . . . . 925 -
Deferred Income Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,323 1,872
Other Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43,139 41,550
Shareholders' Equity:
Common stock, no par value:
25,000,000 shares authorized; 14,063,983 and 13,561,440 shares
issued and outstanding . . . . . . . . . . . . . . . . . . . . . . . 134,438 130,177
Retained earnings (deficit) . . . . . . . . . . . . . . . . . . . . . . . 1,911 (1,221)
Cumulative foreign currency translation adjustments . . . . . . . . . . . (322) (317)
--------- ---------
Total shareholders' equity . . . . . . . . . . . . . . . . . . . . . 136,027 128,639
--------- ---------
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 248,443 $ 209,818
========= =========
</TABLE>
See Notes to Consolidated Financial Statements.
25
<PAGE> 26
POOL ENERGY SERVICES CO.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
All dollar amounts in the tabulations in the notes to the financial
statements are stated in thousands unless otherwise indicated. All dollar
amounts included in the text are in whole dollars, unless otherwise indicated.
Certain reclassifications have been made in the 1993 and 1994 financial
statements to conform with the 1995 presentation.
The Company - Pool Energy Services Co. (the "Company") was formed in
November 1988 to acquire all of the oilfield services business of ENSERCH
Corporation ("ENSERCH"), and that acquisition was consummated on April 24,
1990. As used herein, except where the context otherwise requires, the term
"Company" refers to Pool Energy Services Co., its subsidiary corporations and
its unconsolidated affiliates. The Company operates in only one business
segment - the oilfield services industry. Within the oilfield services
industry, the Company provides services and products to oil and natural gas
well operators for the workover, maintenance and plugging of existing oil and
natural gas wells and for the drilling and completion of new oil and natural
gas wells. The Company operates in the United States, South America, the
Middle East, Asia, Africa and Australia.
Basis of Financial Statements - The consolidated financial statements
include the financial statements of the Company and its wholly owned
subsidiaries, and all significant intercompany accounts and transactions have
been eliminated in consolidation. The Company uses the equity method to
account for affiliates in which it does not have voting control. The
preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Revenue Recognition - The Company generally recognizes revenue when
services are rendered or products are shipped.
Foreign Currency Gains and Losses - The U.S. dollar is the functional
currency for most of the Company's foreign operations, and for those
operations, foreign currency gains and losses are included in the statement of
consolidated operations as incurred. The functional currency of Pool Santana,
Limited, the Company's unconsolidated affiliate in Trinidad, is the Trinidad
and Tobago dollar, and the Company's share of Pool Santana's cumulative
translation gains and losses is carried as an adjustment in the shareholders'
equity section of the consolidated balance sheets.
Property, Plant and Equipment - Depreciation of plant and equipment is
provided on a straight-line basis over the estimated useful lives of the
assets. The components of a rig that generally require replacement during the
rig's life have useful lives that range from three to 12 years. The basic
rigs, excluding such components, have estimated useful lives from date of
original manufacture ranging from 22 to 35 years. Other property and equipment
have useful lives that range from three to seven years. Estimated salvage
values are assigned to the rigs based on an individual assessment of each rig
and generally approximate 15% of cost. The estimated remaining depreciable
lives of certain rigs and equipment were revised in October 1994 to better
reflect their remaining economic lives. The effect of this change in
accounting estimate was to increase 1995 net income by approximately $2.1
million or $.15 per share and to decrease the 1994 net loss by approximately
$0.5 million or $.04 per share.
26
<PAGE> 27
POOL ENERGY SERVICES CO.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
The Financial Accounting Standards Board has issued Statement of
Financial Accounting Standards No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of." This statement
requires that long-lived assets and certain identifiable intangibles held and
used by the Company be reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable. The adoption of this statement in the first quarter of 1996 will
not have a material effect on the Company's financial position or results of
operations.
The Company capitalizes interest applicable to the construction of
significant additions to property and equipment. Interest capitalized for the
year ended December 31, 1995 was $0.1 million. No interest was capitalized in
1994 or 1993.
Goodwill - Goodwill represents the excess of the aggregate price paid
by the Company in the 1995 acquisition of Golden Pacific Corp. ("GPC"),
accounted for as a purchase, over the fair market value of the net assets
acquired. Goodwill is being amortized on a straight-line basis over a period
of 30 years. Management continually evaluates whether events or circumstances
have occurred that indicate the remaining useful life of goodwill may warrant
revision or the remaining balance of goodwill may not be recoverable. Goodwill
amortization expense totaled $0.2 million for the year ended December 31, 1995.
Environmental Remediation and Compliance - Costs incurred to
investigate and remediate contaminated sites are expensed unless the
remediation extends the useful lives of the assets employed at the site.
Remediation costs that extend the useful lives of the assets are capitalized
and amortized over the remaining economic lives of such assets. Liabilities
are recorded when the need for environmental assessments and/or remedial
efforts becomes known or probable and the cost can be reasonably estimated.
Income Taxes - The Company accounts for income taxes based upon
Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes" ("SFAS 109") which requires recognition of deferred income tax
liabilities and assets for the expected future tax consequences of events that
have been recognized in the Company's financial statements or tax returns.
Under this method, deferred income tax liabilities and assets are determined
based on the temporary differences between the financial statement carrying
amounts and the tax bases of existing assets and liabilities and available tax
credit carryforwards.
Inventories - Inventories of spare parts, materials and supplies held
for consumption are stated principally at average cost.
Concentration of Credit Risk - Financial instruments, which
potentially subject the Company to concentrations of credit risk, consist
primarily of temporary cash investments and trade receivables. The Company
restricts investment of temporary cash investments to financial institutions
with high credit standing and by policy limits the amount of credit exposure to
any one financial institution. The Company's customer base consists primarily
of multi-national, foreign national and independent oil and natural gas
producers. During 1995, one customer accounted for approximately 11% of the
Company's consolidated revenues. During 1994 and 1993, no customer accounted
for more than 10% of consolidated revenues. The Company performs ongoing
credit evaluations of its customers and generally does not require collateral
on its trade receivables. Such credit risk is considered by management to be
limited due to the large number of customers comprising the Company's customer
base. The Company maintains reserves for potential credit losses, and such
losses have been within management's expectations.
27
<PAGE> 28
POOL ENERGY SERVICES CO.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Fair Values of Financial Instruments - Except for investments in its
unconsolidated affiliates, which are accounted for under the equity method, the
Company's financial instruments consist primarily of short-term, variable rate
items for which management believes fair value approximates carrying value.
Foreign Exchange Risk Management - The Company operates
internationally, giving rise to exposure to market risks from changes in
foreign exchange rates. The Company uses forward exchange contracts as
economic hedges of exposed net investments in foreign entities in which that
exposure exceeds $0.2 million and in currencies for which such contracts are
available. At December 31, 1995 and 1994, only the Company's exposed net
investment in its Malaysia affiliate was hedged. The Company's foreign
exchange contracts do not subject the Company to the risk of exchange rate
movements because gains and losses on these contracts offset gains and losses
on the exposed investments being hedged. Realized and unrealized gains and
losses on these contracts are recognized currently in the statement of
consolidated operations. The forward exchange contracts generally have
maturities which do not exceed 30 days. The Company had forward exchange
contracts to purchase $3.3 million and $4.8 million in Malaysian ringgits at
December 31, 1995 and 1994, respectively. The Company does not hold or issue
financial instruments for trading purposes.
Stock Incentive Plans - The Company accounts for stock option grants
using the intrinsic value method of accounting prescribed by APB Opinion No.
25, "Accounting for Stock Issued to Employees." Under the Company's stock
incentive plans, the price of the stock on the grant date is the same as the
amount an employee must pay to exercise the option to acquire the stock;
accordingly, the options have no intrinsic value at grant date, and in
accordance with the provisions of APB Opinion No. 25 no compensation cost is
recognized.
In October 1995, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 123, "Accounting for
Stock-Based Compensation" ("SFAS 123"), which sets forth alternative accounting
and disclosure requirements for stock-based compensation arrangements. SFAS
123 does not rescind the existing accounting for employee stock-based
compensation under APB Opinion No. 25. Companies may continue to follow the
current accounting to measure and recognize employee stock-based compensation;
however, SFAS 123 requires disclosure of pro forma net income and earnings per
share that would have been reported under the "fair value" based recognition
provisions of SFAS 123. The Company has elected to continue to follow the
provisions of APB Opinion No. 25 for employee compensation and will disclose
the pro forma information required under SFAS 123.
Cash Flows - For cash flow purposes, the Company considers all
unrestricted highly liquid investments with less than a three-month maturity
when purchased as cash equivalents.
Earnings Per Share of Common Stock - Earnings per share is based on
the average number of common shares and common equivalent shares outstanding
during the year.
28
<PAGE> 29
POOL ENERGY SERVICES CO.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
2. SHAREHOLDERS' EQUITY
The following is a summary of transactions affecting shareholders'
equity for the last three fiscal years:
<TABLE>
<CAPTION>
CUMULATIVE
FOREIGN
RETAINED CURRENCY
COMMON PREFERRED EARNINGS TRANSLATION
STOCK STOCK (DEFICIT) ADJUSTMENTS
--------- ---------- -------------- -------------
<S> <C> <C> <C> <C>
Balance, January 1, 1993 . . . . . . . . . . . . . . $ 129,728 $ 1 $ 5,308 $ -
Net income . . . . . . . . . . . . . . . . . - - 6,200 -
Common stock options exercised . . . . . . . 404 - - -
Repurchase of preferred stock . . . . . . . - (1) - -
Translation adjustment . . . . . . . . . . . - - - (295)
--------- ------ -------- ---------
Balance, December 31, 1993 . . . . . . . . . . . . . 130,132 - 11,508 (295)
Net loss . . . . . . . . . . . . . . . . . . - - (12,729) -
Common stock options exercised . . . . . . . 45 - - -
Translation adjustment . . . . . . . . . . . - - - (22)
--------- ------ -------- ---------
Balance, December 31, 1994 . . . . . . . . . . . . . 130,177 - (1,221) (317)
Net income . . . . . . . . . . . . . . . . . - - 3,132 -
Issuance of common stock for:
Stock options exercised . . . . . . . . 61 - - -
Business acquisition . . . . . . . . . 4,200 - - -
Translation adjustment . . . . . . . . . . . - - - (5)
--------- ------ -------- ---------
Balance, December 31, 1995 . . . . . . . . . . . . . $ 134,438 $ - $ 1,911 $ (322)
========= ====== ======== =========
</TABLE>
Preferred Stock
At the time of the Company's 1990 purchase of ENSERCH's oilfield
services business, ENSERCH acquired 1,000 shares of the Company's preferred
stock, with a total stated value of $1,000. The preferred stock was
repurchased by the Company in October 1993 and is currently held in treasury.
Shareholder Rights Plan
The Company maintains a Shareholder Rights Plan (the "Rights Plan")
that is designed to deter coercive or unfair takeover tactics, to prevent a
person or group from gaining control of the Company without offering fair value
to all shareholders and to deter other abusive takeover tactics which are not
in the best interests of shareholders. The Company's Board of Directors
adopted the Rights Plan on June 7, 1994 and declared a dividend of one right
("Right") for each outstanding share of the Company's common stock to
shareholders of record on June 23, 1994. The Rights only become exercisable,
and transferable apart from the Company's common stock, ten business days
following a public announcement that a person or group ("Acquirer") has
acquired beneficial ownership of, or has commenced a tender or exchange offer
for, 15% or more of the Company's common stock (each a "Triggering Event").
Each Right initially entitles the holder to purchase one-third of one
share of the Company's common stock at a price of $9.00, subject to adjustment.
Upon the occurrence of a Triggering Event, each Right, in the absence of timely
redemption of the Rights by the Company, will entitle the holder thereof (other
than the Acquirer), instead, to receive upon exercise of the Right a number of
the Company's common shares (or,
29
<PAGE> 30
POOL ENERGY SERVICES CO.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
in certain circumstances, cash, property or other securities of the Company)
having a current market price equal to twice the exercise price for a full
share. Following the occurrence of a Triggering Event, if the Company is
acquired in a merger or other business combination, or 50% or more of the
Company's assets or earning power are sold or transferred, each Right, in the
absence of timely redemption of the Rights by the Company, will entitle the
holder thereof (other than the Acquirer) to receive a number of shares of
common stock of the acquiring company having a current market price equal to
twice the exercise price for a full share.
The Rights may be redeemed by the Company in whole, but not in part,
at a redemption price of $.01 per Right at any time prior to the Rights
becoming exercisable. The Rights will expire on June 7, 2004. Until the
Rights become exercisable, they have no dilutive effect on earnings per share.
As of December 31, 1995, a total of 4,413,337 shares of the Company's common
stock were reserved for issuance upon exercise of Rights.
The description and terms of the Rights are set forth in a Rights
Agreement between the Company and the First National Bank of Boston, as Rights
Agent.
Stock Incentive Plans
In December 1993 the Company adopted the 1993 Employee Stock Incentive
Plan for officers and key employees, which plan reserved for issuance up to
600,000 shares of the Company's common stock. The shares may be issued upon
the exercise of non-qualified stock options granted under the plan or may be
granted as restricted stock awards or bonus stock awards. Stock options are
exercisable over a ten-year term and, unless specified otherwise at the time of
the grant, vest at the rate of 25 percent per year of continuous employment
following the grant of the options. Shares of common stock awarded as
restricted stock are subject to restrictions on transfer and subject to risk of
forfeiture until earned by continued employment or the achievement of specific
goals. During the restriction period, holders of restricted stock have the
rights of stockholders, including the right to vote and receive cash dividends,
except for the right to transfer ownership.
In April 1990 the Company adopted the 1990 Employee Stock Option Plan
for key employees, which plan reserved for issuance up to 1,000,000 shares of
the Company's common stock, of which 62,830 had been purchased as of December
31, 1995 through the exercise of options. Options are exercisable over a
ten-year term and, unless specified otherwise at the time of the grant, vest at
the rate of 25 percent per year of continuous employment following the grant of
the options. Since the adoption of the 1993 Employee Stock Incentive Plan no
additional options may be granted under the 1990 Employee Stock Option Plan.
Effective October 1991, the Company adopted the 1991 Directors' Stock
Option Plan for members of its Board of Directors who are not full-time
employees of the Company. The plan provides for the granting of options to
purchase a maximum of 150,000 shares of the Company's common stock, of which
7,000 had been purchased as of December 31, 1995 through the exercise of
options. The plan provides for each eligible director to receive automatically
an initial option for 5,000 shares and to receive automatically an additional
option for 2,000 shares on the date of each Annual Meeting of Shareholders
after the initial grant at which such director is reelected. Options expire
ten years after the date of the grant. Each option becomes exercisable as to
50% of the shares covered thereby at the end of one year from the date of grant
and as to the remaining 50% at the end of two years from the date of grant.
30
<PAGE> 31
POOL ENERGY SERVICES CO.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
The exercise price of options under all plans is the fair market value
per share on the date the option is granted. The following table summarizes
the stock option activity related to the Company's plans:
<TABLE>
<CAPTION>
1995 1994 1993
----------------------- ----------------------- -----------------------
PRICE PRICE PRICE
SHARES PER SHARE SHARES PER SHARE SHARES PER SHARE
------ --------- ------- --------- ------ ---------
(IN THOUSANDS, EXCEPT PRICE PER SHARE)
<S> <C> <C> <C> <C> <C> <C>
Outstanding, January 1 . . . . . 1,000 $6.125-$10.625 901 $6.125-$10.625 928 $6.125-$10.25
Granted . . . . . . . . . . 205 $7.625-$9.25 118 $7.125-$9.625 41 $10.00-$10.625
Cancelled . . . . . . . . . (54) $6.50-$10.25 (12) $6.50-10.625 (27) $6.375-$10.25
Exercised . . . . . . . . . (9) $6.375-$7.125 (7) $6.50 (41) $6.375-$10.25
----- ----- -----
Outstanding, December 31 . . . . 1,142 $6.125-$10.625 1,000 $6.125-$10.625 901 $6.125-$10.625
===== ===== =====
Exercisable, December 31 . . . . 799 $6.125-$10.625 768 $6.125-$10.625 670 $6.125-$10.25
===== ===== =====
</TABLE>
3. BUSINESS ACQUISITIONS
Golden Pacific Corp. Acquisition
On June 13, 1995, the Company acquired all of the outstanding capital
stock of GPC, a privately-owned California well-servicing company with a fleet
of approximately 155 rigs and related equipment, for $18.8 million, consisting
of long-term notes in the amount of $11.5 million, 493,543 shares of the
Company's common stock valued at $4.2 million and $3.1 million in cash. The
cash paid in the transaction was provided by the Company's existing syndicated
bank revolving line of credit.
The acquisition was accounted for under the purchase method, and
accordingly the results of the acquired company have been included in the
accompanying consolidated financial statements since the date of acquisition.
The purchase price was allocated on the basis of the estimated fair market
value of the assets acquired and the liabilities assumed as of the date of
acquisition. This allocation resulted in goodwill of approximately $11.4
million, which is being amortized on a straight-line basis over 30 years. In
connection with the purchase of GPC, the Company recorded acquisition related
costs totaling $0.6 million, primarily for yard closings. The fair values of
the assets acquired and liabilities assumed were as follows:
<TABLE>
<S> <C>
Fair value of assets acquired, including $654 of cash and cash equivalents . . . . . . . $ 37,808
Long-term notes issued for capital stock of GPC . . . . . . . . . . . . . . . . . . . . (11,500)
Company's common stock issued for capital stock of GPC . . . . . . . . . . . . . . . . . (4,200)
Cash paid for capital stock of GPC . . . . . . . . . . . . . . . . . . . . . . . . . . . (3,078)
Acquisition related expenditures . . . . . . . . . . . . . . . . . . . . . . . . . . . . (924)
---------
Liabilities assumed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 18,106
=========
</TABLE>
31
<PAGE> 32
POOL ENERGY SERVICES CO.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
The following unaudited pro forma summary of financial information
presents the Company's consolidated results of operations as if the acquisition
had occurred at the beginning of the periods indicated, after including the
impact of certain adjustments, such as: additional depreciation expense,
amortization of goodwill, increased interest expense on the acquisition debt,
decreased insurance expense, elimination of certain transactions with
affiliates of GPC and related income tax effects.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
---------------------------------
1995 1994
--------- ----------
(In thousands except earnings per share)
<S> <C> <C>
Revenues . . . . . . . . . . . . . . . . . . . . . . . . . . $ 298,325 $ 278,831
========= ==========
Net Income . . . . . . . . . . . . . . . . . . . . . . . . . $ 4,458 $ (10,214)
========= ==========
Earnings Per Share of Common Stock . . . . . . . . . . . . . $ .32 $ (.73)
========= ==========
Average Shares Outstanding . . . . . . . . . . . . . . . . . 14,061 14,053
========= ==========
</TABLE>
The above pro forma financial information is presented for
informational purposes only and is not necessarily indicative of the operating
results that would have occurred if the acquisition had taken place at the
beginning of the periods presented, nor is it necessarily indicative of future
operating results.
Pool Arctic Alaska Acquisition
On September 28, 1994, the Company acquired the 60.7% interest not
already owned by the Company in Pool Arctic Alaska, a partnership, for $12.1
million in cash. The Company's Alaska operation now includes the three highly
specialized Arctic land drilling rigs and related equipment formerly owned by
the partnership. It provides rig and contract labor services, both onshore and
offshore, in Alaska. The acquisition was funded from the Company's existing
syndicated bank revolving line of credit and cash resources. During 1995, the
Company obtained a three-year term loan to refinance $10 million of the
purchase price (see Note 5).
The acquisition has been accounted for under the purchase method and,
accordingly, the results of Pool Arctic Alaska have been included in the
accompanying consolidated financial statements since the date of acquisition.
Prior to the date of acquisition, Pool Arctic Alaska was accounted for under
the equity method based upon the Company's 39.3% partnership interest. The
cost of the acquisition has been allocated on the basis of the estimated fair
market value of the assets acquired and the liabilities assumed. The fair
values of the assets acquired and liabilities assumed were as follows:
<TABLE>
<S> <C>
Fair value of assets acquired, including $890 of cash . . . . $ 13,761
Cash paid . . . . . . . . . . . . . . . . . . . . . . . . . . 12,140
-------------
Liabilities assumed . . . . . . . . . . . . . . . . . . . . . $ 1,621
=============
</TABLE>
The Company also reclassified its investment in Pool Arctic Alaska of
$10.9 million to its related assets and liabilities at the time of the
acquisition.
32
<PAGE> 33
POOL ENERGY SERVICES CO.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
4. INCOME TAXES
Provision (credit) for income taxes is summarized below:
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31
---------------------------------
1995 1994 1993
--------- --------- ---------
<S> <C> <C> <C>
Current:
Federal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ - $ 57 $ 47
State . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 270 380 156
Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 450 337 (114)
--------- --------- ---------
Total current . . . . . . . . . . . . . . . . . . . . . . . . . 720 774 89
--------- --------- ---------
Deferred:
Federal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,564 (8,674) 1,546
State . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 96 -
Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (303) (577) (236)
--------- --------- ---------
Total deferred . . . . . . . . . . . . . . . . . . . . . . . . 1,261 (9,155) 1,310
--------- --------- ---------
Provision (credit) for income taxes . . . . . . . . . . . $ 1,981 $ (8,381) $ 1,399
========= ========= =========
</TABLE>
The 1995 deferred income tax provision resulted primarily from the
effect of certain amendments to prior period U.S. federal tax returns, partly
offset by the reversal of no longer needed deferred foreign taxes for 1990
income tax indemnities and the elimination of the Company's valuation allowance
related to the U.S. federal net operating loss ("NOL") carryforwards. The 1994
deferred income tax benefit resulted primarily as a result of the Company's
recording a provision for leasehold impairment which generated an income tax
benefit of $8.2 million. The 1994 tax benefit also included a net reversal of
$0.6 million of previously accrued foreign income taxes. The 1993 deferred
income tax provision resulted primarily from an increase in deferred tax
liabilities arising from the use of different depreciation methods for book and
tax purposes. It reflects the effect, which was not significant, of the
Revenue Reconciliation Act of 1993.
Temporary differences and carryforwards which gave rise to deferred
tax assets and liabilities as of December 31, 1995 and 1994 were as follows:
<TABLE>
<CAPTION>
1995 1994
------------------------------ ----------------------------
DEFERRED TAX DEFERRED TAX DEFERRED TAX DEFERRED TAX
ASSETS LIABILITIES ASSETS LIABILITIES
------------ -------------- ------------ ------------
<S> <C> <C> <C> <C>
Investment in subsidiaries and affiliates . . $ 2,192 $ 1,821 $ 2,196 $ 1,982
Property . . . . . . . . . . . . . . . . - 27,393 - 21,700
Personal injury and property
damage claims . . . . . . . . . . . . 4,004 - 4,094 -
Leases . . . . . . . . . . . . . . . . 9,574 - 10,989 -
Accrued liabilities . . . . . . . . . . . . . 4,356 - 2,773 -
Inventory valuation . . . . . . . . . . . . . 453 27 449 31
Accounts receivable valuation . . . . . . . . 467 - 956 -
Net operating loss carryforward . . . . . . . 21,448 - 21,369 -
Other . . . . . . . . . . . . . . . . . . 386 244 198 289
---------- ---------- --------- ---------
Subtotal . . . . . . . . . . . . . . 42,880 29,485 43,024 24,002
Valuation allowance . . . . . . . . . . . . . (6,721) - (8,906) -
---------- ---------- --------- ----------
Total . . . . . . . . . . . . . . . . $ 36,159 $ 29,485 $ 34,118 $ 24,002
========== ========== ========= ==========
</TABLE>
33
<PAGE> 34
POOL ENERGY SERVICES CO.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
The total valuation allowance decreased a net $2.2 million in 1995 and
$0.6 million in 1994.
In 1995, the Company eliminated the valuation allowance related to its
U.S. federal NOL carryforwards. Management believes that it is now more likely
than not that the Company will generate taxable income sufficient to realize
the tax benefit of the NOL carryforwards prior to their expiration due to among
other factors, anticipated lower tax depreciation charges within the next one
to two years as a result of most existing property becoming fully depreciated
for U.S. tax purposes, the expected increase in taxable income resulting from
the GPC acquisition and consideration of available tax planning strategies. If
necessary, the Company also will consider repatriating future foreign earnings
in order to fully realize the NOL carryforwards before their expiration.
At December 31, 1995, the Company had $44.2 million of NOL available for
carryforward to reduce U.S. federal income taxes payable in future years. The
U.S. NOL carryforwards were $12.0 million from 1991, $18.3 million from 1992,
$8.0 million from 1994 and an estimated $5.9 million from 1995; they are
available for utilization through the year(s) 2006, 2007, 2009 and 2010,
respectively. State and foreign NOL carryforwards have been fully reserved for
in the Company's consolidated balance sheet.
A reconciliation between income taxes computed at the U.S. federal
statutory rate and the Company's income taxes for financial reporting purposes
is shown below:
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31
-------------------------------
1995 1994 1993
------- ------ -------
<S> <C> <C> <C>
U.S. federal statutory tax rate . . . . . . . . . . . . . . . . . . . . 35% 35% 35%
Provision (credit) for income taxes computed at U.S. federal
statutory tax rate . . . . . . . . . . . . . . . . . . . . . $ 1,790 $(7,389) $ 2,660
Effect of:
Foreign tax rates different than U.S. federal statutory tax rate (132) (1,086) (1,728)
Alternative minimum tax . . . . . . . . . . . . . . . . . . . - 57 47
State income taxes . . . . . . . . . . . . . . . . . . . . . 175 414 101
Other - net . . . . . . . . . . . . . . . . . . . . . . . . . 148 (377) 319
------- ------ -------
Provision (credit) for income taxes . . . . . . . . . . . . . . . . . . $ 1,981 $(8,381) $ 1,399
======= ======= =======
Effective income tax rate . . . . . . . . . . . . . . . . . . . . . . . 38.7% (39.7)% 18.4%
======= ======= =======
</TABLE>
Foreign income before income taxes is defined as income generated from
operations in a foreign country, regardless of whether it is currently
reportable for U.S. tax purposes. Components of income (loss) before income
taxes are as follows:
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31
---------------------------------------
1995 1994 1993
--------- --------- ---------
<S> <C> <C>
Domestic . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 513 $ (27,075) $ (1,003)
Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,600 5,965 8,602
--------- --------- ---------
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 5,113 $ (21,110) $ 7,599
========= ========= =========
</TABLE>
The earnings of the Company's foreign subsidiaries and affiliates are
indefinitely invested outside the United States, and the Company estimates that
no U.S. income taxes would be payable upon distribution of those unremitted
earnings.
34
<PAGE> 35
POOL ENERGY SERVICES CO.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
The Company is subject to taxation in many jurisdictions, and the
final determination of its tax liabilities involves the interpretation of the
statutes and requirements of various domestic and foreign taxing authorities.
At December 31, 1995, foreign income tax returns for prior years of certain
foreign subsidiaries, unconsolidated affiliates and related entities were under
examination and/or tax deficiencies had been assessed. In the opinion of
management, any additional provisions for taxes which may ultimately be
determined to be required as a result of such examinations or assessments will
not be material to the Company's financial position or operations.
5. LONG-TERM DEBT AND LINES OF CREDIT
Lines of Credit
The Company has a syndicated bank revolving line of credit (the "Line
of Credit") to finance temporary working capital requirements and to support
the issuance of letters of credit. During 1995 the expiration date of the Line
of Credit was extended from April 1996 to April 1997, and the maximum
availability thereunder was increased. The maximum availability under the Line
of Credit is the lesser of (i) $35 million (previously $30 million), or (ii) a
calculated amount based upon a percentage of domestic receivables which meet
certain criteria. At December 31, 1995, the Company had $30.0 million
available under the Line of Credit of which none had been drawn in cash and
$13.7 million was being utilized to support the issuance of letters of credit,
including $5.9 million in letters of credit issued in connection with the GPC
acquisition as security for the acquisition debt and for obligations to GPC's
insurers. The Line of Credit provides for certain restrictions on the Company,
including a prohibition against additional debt (excluding $7 million of
overdraft facilities), a prohibition on payment of dividends, a prohibition on
certain liens, a limitation on capital expenditures, and minimum net worth and
working capital covenants. Advances under the Line of Credit are secured by
certain accounts receivable, certain deposit accounts, all of the stock of the
Company's domestic subsidiaries, 66% of the stock of the Company's consolidated
foreign subsidiaries, the property owned by the Company's Alaska subsidiary
(net book value of $26.8 million at December 31, 1995) and the Company's 13
platform rigs located in the Gulf of Mexico (net book value of $6.1 million at
December 31, 1995). The interest rate for the Line of Credit is a floating
rate which is, at the Company's option, (i) the lenders' prime rate plus 0.25%,
or (ii) the London Interbank Offered Rate (LIBOR) plus 2.625%, with the
Company's choice of a one-, two-, three-, or six-month interest period. The
applicable interest rate was 8.75% and 9.625% at December 31, 1995 and 1994,
respectively. There is an approximate 1/2 of 1% commitment fee on the
unutilized portion of the Line of Credit.
At December 31, 1995, the Company's unconsolidated affiliates had $5.2
million of unused short-term lines of credit and overdraft facilities.
Long-Term Debt
Long-term debt consisted of the following at December 31:
<TABLE>
<CAPTION>
1995 1994
-------- --------
<S> <C> <C>
10% Subordinated Notes (GPC) . . . . . . . . . . . . . . $ 11,500 $ -
$10 Million Term Loan (Alaska) . . . . . . . . . . . . . 7,375 -
Other . . . . . . . . . . . . . . . . . . . . . . . . . 369 495
-------- --------
19,244 495
Less current maturities of long-term debt . . . . . . . 4,385 126
-------- --------
$ 14,859 $ 369
======== ========
</TABLE>
35
<PAGE> 36
POOL ENERGY SERVICES CO.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
In June 1995, as partial consideration for the acquisition of GPC, the
Company issued 10% subordinated notes aggregating $11.5 million which are due
in 2005. These notes are subordinate to the Company's Line of Credit and $10
million term loan and are collateralized by (i) the well-servicing rigs and
related equipment of the acquired business which had an aggregate net book
value of $9.3 million at December 31, 1995, (ii) a second priority security
interest in certain real property of the acquired business which had a carrying
value of $1.4 million at December 31, 1995 and (iii) a $5 million letter of
credit. The agreement pertaining to the subordinated notes contains various
restrictive covenants, including covenants pertaining to the creation of
certain encumbrances, the transaction of certain mergers or sales of assets,
the creation of certain additional debt and other matters.
In April 1995, the Company obtained a three-year term loan (the
"Alaska Loan") to refinance $10 million of the purchase price for the 60.7%
partnership interest in Pool Arctic Alaska which was acquired in September
1994. This acquisition was originally funded from the Company's cash resources
and approximately $6.7 million borrowed under the Line of Credit. The Alaska
Loan agreement contains restrictive covenants similar to those pertaining to
the Line of Credit and, in addition, includes a fixed charge coverage ratio
covenant. At the Company's option, interest accrues at a floating rate based
upon (i) the lenders' prime rate plus 0.5%, or (ii) LIBOR plus 2.75%, with the
Company's choice of a one-, two-, three-, or six-month interest period. The
applicable interest rate on amounts outstanding at December 31, 1995 was 8.5%.
The Alaska Loan is cross-collateralized to the Line of Credit.
In August 1994 the Company issued a four-year $0.5 million note in
connection with a purchase of eight rigs and related equipment. The note bears
interest at 7% and is secured by the eight rigs and equipment purchased, which
had an aggregate net book value of $0.6 million at December 31, 1995.
The annual maturities of long-term debt outstanding as of December 31,
1995 (including current portion) are as follows:
<TABLE>
<S> <C>
1996 . . . . . . . . . . . . $ 4,385
1997 . . . . . . . . . . . . 3,270
1998 . . . . . . . . . . . . 2,839
1999 . . . . . . . . . . . . 625
2000 . . . . . . . . . . . . 625
Thereafter . . . . . . . . . 7,500
--------
$ 19,244
========
</TABLE>
Based on rates currently available to the Company for debt with
similar terms and remaining maturities, the Company believes that the recorded
value of long-term debt approximates fair market value at December 31, 1995.
In January 1996 the Company received $6.5 million under a term loan
agreement in order to refinance the construction costs incurred during 1995 to
build a new offshore platform workover rig under contract in Australia. The
rig construction costs were initially funded from the Company's cash resources
and borrowings under its Line of Credit. The loan will be repaid monthly,
beginning in January 1996, from the rig contract proceeds over approximately
four years. At the Company's option, interest accrues at a floating rate based
upon (i) the lenders' prime rate plus 0.5% or (ii) LIBOR plus 2.75%, with the
Company's choice of a one-, two-, three- or six-month interest period. The
loan is collateralized by the offshore platform
36
<PAGE> 37
POOL ENERGY SERVICES CO.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
workover rig (net book value of $6.8 million at December 31, 1995) and all
payments under, and proceeds of, the rig contract.
Notes Payable to Related Parties
In connection with the GPC acquisition in June 1995 the Company issued
notes to three employees related to certain deferred compensation obligations
of GPC. These 10% two-year promissory notes aggregating $1.5 million in
principal amount are secured by a first priority security interest in certain
real property of the acquired business, which had a carrying value of $1.4
million at December 31, 1995.
6. COMMITMENTS AND CONTINGENT LIABILITIES
Legal Proceedings - The Company is routinely involved in litigation
incidental to its business, which often involves claims for significant
monetary amounts, some, but not all, of which would be covered by insurance.
In the opinion of management, none of the existing litigation will have any
material adverse effect on the Company.
Personal Injury and Property Damage Liability Claims - Some of the
operations of the Company are hazardous, and the Company has experienced
personal injury and property damage incidents. For claims prior to 1990, the
Company maintains a reserve for the self-insured portion of its personal injury
and property damage coverage. Periodically, the Company evaluates the adequacy
of this reserve as compared with estimated settlements for filed and
anticipated claims. Estimated settlements for claims are based on the
Company's historical experience, type of claim, knowledge of the specific
circumstances of the claim and judgment of the possible effect that future
economic and legal factors might have on the ultimate settlement of the claim.
The Company believes that for claims prior to 1990, the accrued liability for
personal injury and property damage claims aggregating $2.7 million at December
31, 1995 is adequate.
Beginning in 1990, the Company obtained workers' compensation and
third-party liability insurance under which its exposure to the risks covered
by those policies is significantly lower than under the pre-1990 coverage. The
Company provided $4.0 million, $3.1 million and $2.9 million in 1995, 1994 and
1993, respectively, as estimates of the aggregate uninsured portion of claims
for those years. The accrued liability for the uninsured portion of workers'
compensation and third-party claims incurred after 1989 was $7.4 million at
December 31, 1995, of which $0.9 million was held in a deposit account
accessible by the insurance underwriters. In addition, at December 31, 1995
the Company had a $0.9 million receivable related to claims payments made by
the Company that are reimbursable by insurance.
In connection with the GPC acquisition the Company assumed a liability
for the uninsured portion of workers' compensation and third-party claims
incurred prior to the June 13, 1995 acquisition date. At December 31, 1995,
the accrued liability for such claims was $1.0 million.
Lease Commitments - At December 31, 1995, the Company had a number of
noncancelable long-term operating leases, principally for yards and office
space, rigs, computer equipment, and a manufacturing and storage facility, with
various expiration dates. Future minimum net rentals under such leases
aggregate $6.3 million for 1996; $5.8 million for 1997; $5.6 million for 1998;
$5.9 million for 1999; $5.8 million for 2000; and $10.9 million thereafter.
Rental expense incurred under operating leases aggregated $13.3 million in
1995, $11.2 million in 1994 and $9.4 million in 1993.
37
<PAGE> 38
POOL ENERGY SERVICES CO.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
The Company has an operating lease, effective through March 2003, for
a 65-acre facility at San Angelo, Texas which it previously used for rig and
equipment manufacturing and storage. The annual lease payments, which are
included in future minimum net rentals above, are $2.2 million through March
1998 and $4.4 million thereafter for the remaining five years of the lease.
Effective October 1, 1994, the Company vacated this facility and subleased it
in its entirety under an operating sublease which expires in September 1997.
The sublease provides for minimum sublease payments of $0.5 million per year
for three years. Prior to subleasing and vacating this facility in 1994, the
Company beneficially utilized approximately 12% of the facility and charged to
operations a proportionate share of the cost of the lease. In September 1988,
the Company, anticipating that it would not be able to fully utilize the
facility for a period of years, accrued a $15.9 million liability for the
expected underutilization. Since September 1988, the cost associated with the
unutilized portion of the facility has been charged against this accrued
liability, which as of the fourth quarter of 1994, had substantially been used.
For the remainder of the lease term, the Company does not anticipate utilizing
any of this facility in its future operations nor does it expect to be able to
sublease this facility to third parties for an amount equivalent to the annual
lease payments; therefore, in the fourth quarter of 1994 the Company recorded a
provision for leasehold impairment of $23.6 million (see Note 10). The
provision recognizes all future lease expense, net of anticipated sublease
income. The impact of the provision for leasehold impairment was to decrease
1994 net income by $15.3 million, or $1.13 per share.
In December 1993 the Company entered into sale/leaseback agreements
with a leasing company with respect to three offshore jackup rigs located in
the Gulf of Mexico. The three jackup rigs had been purchased from a third
party for $7.0 million and were sold to the leasing company for $7.0 million in
cash, which was received in early 1994. The leases, classified as operating
leases, have an aggregate annual lease rate of approximately $1 million per
year for seven years and are included in the future minimum net rentals above.
The sale and leaseback agreements required the Company to place cash in a
restricted investment account which serves as collateral for the leases and
will reduce as lease payments are made. As of December 31, 1995, the Company
had $1.1 million of restricted cash of which $1.0 million was classified as
noncurrent.
Employment contracts - In connection with the GPC acquisition, the
Company entered into three-year employment contracts in June 1995 with three
key employees previously employed by GPC. The Company's minimum aggregate
salary and bonus obligation remaining at December 31, 1995 under such contracts
was approximately $1.2 million.
7. PENSION, POSTRETIREMENT AND POSTEMPLOYMENT BENEFITS
Pension Plans
The Pool Company Retirement Income Plan, a defined benefit plan,
covers substantially all of the Company's domestic employees. The Company's
policy is to fund the minimum amount required by the Employee Retirement Income
Security Act of 1974. The benefits are based on years of service and the
average of the highest five consecutive years of compensation during the final
ten years of employment.
Effective January 1, 1993, the Company established a Supplementary
Executive Retirement Plan to provide certain management employees with defined
benefits in excess of those provided by the Retirement Income Plan. The
Company's policy is to fund annually, within 60 days following the end of the
plan year, the amount necessary to make plan assets sufficient to pay each
participant or beneficiary the benefits payable as of the close of that plan
year. The benefits are based on years of service and the average of the five
highest years of compensation during the final ten years of employment.
38
<PAGE> 39
POOL ENERGY SERVICES CO.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
The following is a summary of the components of net pension cost:
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31
------------------------------
1995 1994 1993
------- ------- --------
<S> <C> <C> <C>
Service cost - benefits earned during the period . . . $ 1,580 $ 1,336 $ 1,236
Interest cost on projected benefit obligation . . . . 525 425 292
Actual loss (return) on plan assets . . . . . . . . . (869) 26 (220)
Net amortization and deferral . . . . . . . . . . . . 509 (256) 99
-------- ------- --------
Net pension cost . . . . . . . . . . . . . . . . . $ 1,745 $ 1,531 $ 1,407
======== ======= ========
</TABLE>
The following table sets forth the funded status of the plans and
amounts recognized in the Company's consolidated balance sheets at December 31:
<TABLE>
<CAPTION>
1995 1994
-------- --------
<S> <C> <C>
Actuarial present value of benefit obligation:
Vested benefit obligation . . . . . . . . . . . . . . . . . . . . $ (4,936) $ (3,322)
======== ========
Accumulated benefit obligation . . . . . . . . . . . . . . . . . $ (6,911) $ (3,874)
======== ========
Projected benefit obligation . . . . . . . . . . . . . . . . . . $ (9,285) $ (6,237)
Plan assets at fair value . . . . . . . . . . . . . . . . . . . . . . 5,557 4,509
-------- --------
Projected benefit obligation in excess of plan assets . . . . . . . . (3,728) (1,728)
Unrecognized net loss . . . . . . . . . . . . . . . . . . . . . . . . 1,464 572
Unrecognized prior service cost . . . . . . . . . . . . . . . . . . . 591 704
Adjustment to recognize minimum liability . . . . . . . . . . . . . . (406) (327)
-------- --------
Net pension liability . . . . . . . . . . . . . . . . . . . . . . . . $ (2,079) $ (779)
======== ========
Assumptions used in the accounting at December 31 were:
<CAPTION>
1995 1994
-------- --------
Pool Company Retirement Income Plan:
Weighted average discount rate . . . . . . . . . . . . . . . . . . 7.25% 8.50%
Annual rate of increase in future compensation levels . . . . . . 4.50% 6.00%
Expected long-term rate of return on plan assets . . . . . . . . . 9.00% 8.50%
Supplementary Executive Retirement Plan:
Weighted average discount rate . . . . . . . . . . . . . . . . . . 7.25% 8.50%
Annual rate of increase in future compensation levels . . . . . . 6.00% 6.00%
Expected long-term rate of return on plan assets . . . . . . . . . 9.00% 8.50%
</TABLE>
Postretirement Benefits Other Than Pensions
The Company provides certain health care and life insurance benefits
to all of its retirees who meet eligibility requirements based on age and years
of service. The benefits are paid from the general funds of the Company and,
in the case of the health care benefits, are partially funded by contributions
from the retirees.
39
<PAGE> 40
POOL ENERGY SERVICES CO.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Effective January 1, 1993, the Company adopted Statement of Financial
Accounting Standards No. 106, "Employers' Accounting for Postretirement
Benefits Other Than Pensions" ("SFAS 106"). SFAS 106 requires the Company to
accrue the estimated cost of its retiree health care and life insurance
benefits during the years the employees provide services entitling them to the
benefits. The Company previously expensed the cost of these benefits as they
were paid. In accordance with the provisions of SFAS 106, the Company has
elected to recognize the liability of approximately $2.9 million at the
implementation date over a period of twenty years.
The following table sets forth certain information with respect to the
Company's postretirement benefits obligation at December 31:
<TABLE>
<CAPTION>
1995 1994
-------- -------
<S> <C> <C>
Accumulated postretirement benefit obligation (a):
Retirees . . . . . . . . . . . . . . . . . . . . . . . . $ (1,472) $ (1,730)
Other fully eligible plan participants . . . . . . . . . (1,876) (1,059)
Other active plan participants . . . . . . . . . . . . . (4,708) (2,502)
--------- --------
Total accumulated postretirement benefit obligation . . . . (8,056) (5,291)
Unrecognized transition obligation . . . . . . . . . . . . 2,376 3,019
Unamortized net loss . . . . . . . . . . . . . . . . . . . 2,963 1,178
-------- --------
Accrued postretirement benefit liability . . . . . . . . . $ (2,717) $ (1,094)
========= ========
</TABLE>
_____________
(a) Includes effect of June 13, 1995 GPC acquisition. See Note 3.
Net postretirement benefit cost consisted of the following
components:
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31
------------------------------
1995 1994 1993
------- -------- -------
<S> <C> <C> <C>
Service cost - benefits earned during the year . . . . . . . . $ 750 $ 534 $ 393
Interest cost on accumulated postretirement
benefit obligation . . . . . . . . . . . . . . . . . . . . 461 405 313
Net amortization and deferral . . . . . . . . . . . . . . . . 93 79 -
Amortization of transition obligation . . . . . . . . . . . . 140 168 168
------- -------- -------
Net periodic postretirement benefit cost . . . . . . . . . . . $ 1,444 $ 1,186 $ 874
======= ======== =======
</TABLE>
The assumed health care cost trend rate used to measure the expected
cost of the benefits was 6.5% for 1995 and thereafter. If the assumed health
care cost trend rate were increased by one percent, the accumulated
postretirement benefit obligation as of December 31, 1995 would have increased
by 14%, and the aggregate of service and interest cost components for 1995
would have increased 17%. The assumed discount rate used in determining the
accumulated postretirement benefit obligation was 7.25% in 1995, 8.5% in 1994
and 8% in 1993.
Postemployment Benefits
The Company adopted Statement of Financial Accounting Standards No.
112, "Employers' Accounting for Postemployment Benefits," which requires the
accrual of benefits provided after employment but before
40
<PAGE> 41
POOL ENERGY SERVICES CO.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
retirement to former or inactive employees, their beneficiaries, and covered
dependents. The adoption of this statement in 1993 had no significant effect
on the Company's financial condition or results of operations.
8. TRANSACTIONS WITH ENSERCH
ENSERCH leases office space to the Company and previously provided
claims handling services, both at negotiated rates. Total direct costs charged
by ENSERCH were $0.8 million in 1995, $0.9 million in 1994 and $0.9 million in
1993.
In connection with the Company becoming an independent public company,
ENSERCH and the Company entered into a contingent support agreement (the
"Contingent Support Agreement") by which ENSERCH is providing the Company with
limited financial support, including (a) continuing contingent obligations
under a letter of credit in support of the refinancing of debt of the Company's
Saudi Arabia affiliate, until July 1996, and (b) continuing a guarantee of the
Company's lease obligations with respect to the facility in San Angelo, Texas,
through March 2003. At December 31, 1995, the amounts outstanding under (a)
and (b) were $0.6 million and $26.6 million, respectively. As required by the
Contingent Support Agreement, the Company in early 1993 replaced certain
guarantees provided by ENSERCH with respect to (c) the Company's obligations
with respect to letters of credit, bank guarantees and bid and performance
bonds and (d) standby letters of credit in favor of the Company's insurers.
The Company pays ENSERCH an annual fee under the Contingent Support Agreement
for (a) and paid fees for (c) and (d) through April 1993; such fees are based
upon the amount of ENSERCH's guarantees. These fees approximated $2,000 in
1995, $3,000 in 1994 and $7,000 in 1993. The Company is also obligated to
reimburse ENSERCH for any amounts paid out under the guarantees. The Company
has pledged the stock of Pool International, Inc., the holder of the Company's
interest in Pool Arabia, Ltd., as collateral under the Contingent Support
Agreement.
Under the Contingent Support Agreement, ENSERCH advanced $4.0 million
in cash to the Company in 1990 in payment of future domestic onshore
well-servicing and production services to be applied annually against the first
$1.0 million of such services. During the years 1991 through 1994, the Company
performed $1.0 million of such services in each year and has now fulfilled its
obligation.
Certain oilfield services are performed for various affiliates and
entities managed by affiliates of ENSERCH at prices comparable to those
received from nonaffiliated customers. Revenues from the performance of those
services, including the $1.0 million of prepaid services in both 1994 and 1993,
amounted to $1.8 million in 1995, $2.9 million in 1994 and $3.4 million in
1993.
9. UNCONSOLIDATED AFFILIATES
A significant part of the operations of the Company is conducted
through the following unconsolidated affiliates, in which the Company held the
indicated ownership interest at December 31, 1995: Pool Arabia, Ltd. - 51%;
Intairdril Oman L.L.C. - 49%; Pool Santana, Limited - 49%; and Antah Drilling
Sdn. Bhd. - 49%. The Company charges its unconsolidated affiliates for the
provision of management services and, in some cases, financing and equipment
rental.
41
<PAGE> 42
POOL ENERGY SERVICES CO.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
The following table sets forth certain summarized financial information of
the Company's unconsolidated affiliates as shown by the financial statements of
the affiliates. In September 1994 the Company acquired the 60.7% interest not
already owned by the Company in Pool Arctic Alaska. Prior to the date of
acquisition, Pool Arctic Alaska was accounted for under the equity method based
upon the Company's 39.3% partnership interest (see Note 3). Pool Arctic
Alaska's 1994 net income included a $1.0 million gain on debt restructuring.
Included in Pool Arctic Alaska's net income for 1993 was a $0.4 million gain on
debt restructuring and a $1.4 million loss on disposal of equipment.
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31
--------------------------------------
1995 1994 1993
--------- --------- ---------
<S> <C> <C> <C>
Revenues:
Pool Arabia, Ltd. . . . . . . . . . . . . . . . . . . . . . $ 28,150 $ 36,281 $ 40,129
Pool Arctic Alaska (b) . . . . . . . . . . . . . . . . . . - 20,693 25,590
Antah Drilling Sdn. Bhd. . . . . . . . . . . . . . . . . . 4,218 3,654 7,431
Pool Santana, Limited . . . . . . . . . . . . . . . . . . . 5,785 4,916 4,219
Intairdril Oman L.L.C. . . . . . . . . . . . . . . . . . . 434 856 1,398
--------- --------- ---------
Total . . . . . . . . . . . . . . . . . . . . . . . . . $ 38,587 $ 66,400 $ 78,767
========= ========= =========
Gross profit (a):
Pool Arabia, Ltd. . . . . . . . . . . . . . . . . . . . . . $ 10,106 $ 13,583 $ 15,926
Pool Arctic Alaska (b) . . . . . . . . . . . . . . . . . . - 5,330 5,257
Antah Drilling Sdn. Bhd. . . . . . . . . . . . . . . . . . 2,357 2,570 5,154
Pool Santana, Limited . . . . . . . . . . . . . . . . . . . 2,522 2,183 1,638
Intairdril Oman L.L.C. . . . . . . . . . . . . . . . . . . 223 543 815
--------- --------- ---------
Total . . . . . . . . . . . . . . . . . . . . . . . . . $ 15,208 $ 24,209 $ 28,790
========= ========= =========
Net income (loss):
Pool Arabia, Ltd. . . . . . . . . . . . . . . . . . . . . . $ (536) $ 1,640 $ 3,998
Pool Arctic Alaska (b) . . . . . . . . . . . . . . . . . . - 1,903 (2,125)
Antah Drilling Sdn. Bhd. . . . . . . . . . . . . . . . . . (210) 386 1,144
Pool Santana, Limited . . . . . . . . . . . . . . . . . . . 927 853 486
Intairdril Oman L.L.C. . . . . . . . . . . . . . . . . . . (392) (57) 80
--------- --------- ---------
Total . . . . . . . . . . . . . . . . . . . . . . . . . $ (211) $ 4,725 $ 3,583
========= ========= =========
</TABLE>
__________
(a) Gross profit is computed as revenues less operating expenses (which
exclude depreciation and general and administrative expenses).
(b) On September 28, 1994, the Company acquired the 60.7% interest not already
owned by the Company in Pool Arctic Alaska, a partnership. The results
of Pool Arctic Alaska have been included in the accompanying consolidated
financial statements since the date of such acquisition. See Note 3.
42
<PAGE> 43
POOL ENERGY SERVICES CO.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
The Company's investment in its unconsolidated affiliates differs from its
ownership percentage of the affiliates' equity based on the financial
statements of the affiliates chiefly because of the allocation of the purchase
price for the 1990 purchase of ENSERCH's oilfield services business,
unrecognized gains on asset sales and other transactions as set forth below.
<TABLE>
<CAPTION>
AS OF DECEMBER 31
----------------------
1995 1994
--------- ----------
<S> <C> <C>
Combined Balance Sheet Data of Unconsolidated Affiliates:
Current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 19,229 $ 23,382
Noncurrent assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88,197 81,110
--------- ----------
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 107,426 104,492
--------- ----------
Current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18,046 14,084
Noncurrent liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . 56,876 55,088
--------- ----------
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . 74,922 69,172
--------- ----------
Net assets of unconsolidated affiliates . . . . . . . . . . . . . . . . . . $ 32,504 $ 35,320
========= ==========
Investment in and Noncurrent Receivables from Unconsolidated Affiliates:
The Company's portion of net assets . . . . . . . . . . . . . . . . . . . . $ 16,414 $ 17,847
Writedown of net assets . . . . . . . . . . . . . . . . . . . . . . . . . . (11,347) (12,307)
Deferred gain on sale of assets . . . . . . . . . . . . . . . . . . . . . (3,182) (3,395)
Basis difference in equity contributions . . . . . . . . . . . . . . . . . (1,080) (1,378)
Long-term advances . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19,396 19,453
Other-net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42 64
--------- ----------
Equity in net assets . . . . . . . . . . . . . . . . . . . . . . . . . . . 20,243 20,284
Noncurrent receivables . . . . . . . . . . . . . . . . . . . . . . . . . . 5,758 5,758
--------- ----------
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 26,001 $ 26,042
========= ==========
</TABLE>
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31
-------------------------------
1995 1994 1993
------- ------- -------
<S> <C> <C> <C>
Earnings Attributable to Unconsolidated Affiliates:
The Company's portion of net income (loss) . . . . . . . . . . . $ (114) $ 2,163 $ 2,042
Adjustment to depreciation recorded by affiliates to the
Company's basis . . . . . . . . . . . . . . . . . . . . . . . 1,252 1,466 4,558
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,757 1,426 178
------- ------- -------
Equity in income . . . . . . . . . . . . . . . . . . . . . . . . 2,895 5,055 6,778
Management fee (expense) . . . . . . . . . . . . . . . . . . . . 7 (387) 46
Interest income . . . . . . . . . . . . . . . . . . . . . . . . 50 211 140
Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 137 (104)
------- ------- -------
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,955 $ 5,016 $ 6,860
======= ======= =======
</TABLE>
At December 31, 1995, the Company's investment in unconsolidated
affiliates included $13.2 million of net undistributed earnings of the
affiliates. Antah Drilling Sdn. Bhd. and Pool Arabia, Ltd. are parties to
agreements which contain covenants restricting the ability to distribute, by
dividend or otherwise, their respective earnings to the Company. The Company
received dividends from unconsolidated affiliates of $2.9 million in 1995, $2.9
million in 1994 and $0.7 million in 1993.
43
<PAGE> 44
POOL ENERGY SERVICES CO.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Principal payments required on long-term debt of unconsolidated affiliates
are $12.8 million in 1996 and $1.2 million in 1997.
At December 31, 1995, the Company had agreed to guarantee certain
borrowings of its unconsolidated affiliates up to an aggregate of $0.6 million,
of which all was outstanding.
In management's opinion, the Company has no significant exposure from
currency restrictions on its foreign subsidiaries and affiliates. See Note 1.
10. SUPPLEMENTAL FINANCIAL INFORMATION
<TABLE>
<CAPTION>
AS OF DECEMBER 31
-----------------------
1995 1994
---------- ----------
<S> <C> <C>
BALANCE SHEET ITEMS:
Property, plant and equipment comprised the following:
Rigs and related equipment . . . . . . . . . . . . . . . . . . . . . . . . . $ 180,240 $ 151,050
Transportation equipment . . . . . . . . . . . . . . . . . . . . . . . . . . 4,955 5,129
Other machinery and equipment . . . . . . . . . . . . . . . . . . . . . . . . 4,803 3,246
Land and buildings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,587 4,356
Leasehold improvements . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,300 2,022
Furniture and office equipment . . . . . . . . . . . . . . . . . . . . . . . 2,221 1,829
---------- ----------
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 201,106 167,632
Accumulated depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . 77,082 66,096
---------- ----------
Property, plant and equipment - net . . . . . . . . . . . . . . . . $ 124,024 $ 101,536
========== ==========
Accrued liabilities are summarized below:
Accrued compensation and benefits . . . . . . . . . . . . . . . . . . . . . . $ 10,386 $ 9,431
Personal injury and property damage claims . . . . . . . . . . . . . . . . . 1,648 1,976
Other accruals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,581 5,793
---------- ----------
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 19,615 $ 17,200
========== ==========
Other liabilities (noncurrent) are summarized below:
Accrued rental cost of underutilized facilities . . . . . . . . . . . . . . . $ 25,750 $ 27,774 (a)
Personal injury and property damage claims - noncurrent . . . . . . . . . . . 9,660 9,199
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,729 4,577
---------- ----------
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 43,139 $ 41,550
========== ==========
</TABLE>
_________________
(a) A provision for leasehold impairment of $23.6 million was recorded in
1994 to offset all future lease expense, net of anticipated sublease
income, related to the facility in San Angelo, Texas. See Note 6.
44
<PAGE> 45
POOL ENERGY SERVICES CO.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31
-----------------------------------
1995 1994 1993
---------- ---------- ----------
<S> <C> <C> <C>
INCOME STATEMENT ITEMS:
Revenues:
Domestic onshore
Central division well-servicing . . . . . . . . . . . . . $ 86,880 $ 84,988 $ 90,887
California division well-servicing . . . . . . . . . . . . 52,511 24,471 27,057
Production services . . . . . . . . . . . . . . . . . . . 43,221 42,067 37,853
Gulf of Mexico offshore workover and drilling . . . . . . . . 37,415 36,020 38,676
International workover and drilling . . . . . . . . . . . . . 23,579 19,866 23,644
Alaska workover and drilling . . . . . . . . . . . . . . . . 20,427 9,940 9,857
Other services . . . . . . . . . . . . . . . . . . . . . . . 13,272 11,823 12,550
---------- ---------- ----------
Total . . . . . . . . . . . . . . . . . . . . . . . . $ 277,305 $ 229,175 $ 240,524
========== ========== ==========
Operating expenses included:
Provision (credit) for uncollectible accounts . . . . . . . . $ 765 $ (59) $ 549
Other income (expense) - net:
Interest income . . . . . . . . . . . . . . . . . . . . . . . $ 435 $ 418 $ 529
Gain (loss) on disposal of assets . . . . . . . . . . . . . . 1,164 359 617
Gain on sale of Alaska Rig 428 . . . . . . . . . . . . . . . - - 1,157
Settlement related to sale of Libya assets . . . . . . . . . - 500 -
Foreign currency gain (loss) . . . . . . . . . . . . . . . . (285) (72) (29)
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . (25) (3) (35)
---------- ---------- ----------
Total . . . . . . . . . . . . . . . . . . . . . . . . $ 1,289 $ 1,202 $ 2,239
========== ========== ==========
SUPPLEMENTAL CASH FLOW INFORMATION:
Federal, state and foreign income tax payments (refunds), net . . . . . $ 138 $ 150 $ 299
Interest payments, net of amounts capitalized, to third parties . . . . 1,458 100 641
Net changes in the components of operating working capital were as
follows:
Receivables . . . . . . . . . . . . . . . . . . . . . . . . . $ 5,653 $ (3,080) $ 1,256
Accounts receivable from affiliates . . . . . . . . . . . . . (1,587) (468) (132)
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . (38) (612) 754
Other current assets . . . . . . . . . . . . . . . . . . . . 84 (68) 599
Trade accounts payable and accrued liabilities . . . . . . . 5,295 3,419 (1,815)
Accrued taxes . . . . . . . . . . . . . . . . . . . . . . . . (2,198) 585 (337)
---------- ---------- ----------
Total . . . . . . . . . . . . . . . . . . . . . . . . $ 7,209 $ (224) $ 325
========== ========== ==========
</TABLE>
In December 1993, the Company entered into agreements with a leasing
company to sell for $7.0 million and lease back three offshore jackup rigs
which the Company had recently purchased from a third party; the sales proceeds
were received in January 1994 (see Note 6). See Note 3 for non-cash investment
activity related to the Company's business acquisitions.
45
<PAGE> 46
POOL ENERGY SERVICES CO.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
BUSINESS BY GEOGRAPHIC AREA:
The following table sets forth certain financial data of the Company
by geographic area:
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31
------------------------------------------
1995 1994 1993
---------- ----------- ----------
<S> <C> <C>
Revenues:
United States . . . . . . . . . . . . . . . . . . . . $ 252,056 $ 206,301 $ 213,988
Europe and Africa . . . . . . . . . . . . . . . . . . 1,865 897 6,947
Middle East . . . . . . . . . . . . . . . . . . . . . 4,358 1,827 3,232
Asia . . . . . . . . . . . . . . . . . . . . . . . . 3,515 2,149 3,029
Australia . . . . . . . . . . . . . . . . . . . . . . 2,248 - -
South America . . . . . . . . . . . . . . . . . . . . 13,263 18,001 13,328
---------- ----------- ----------
Total . . . . . . . . . . . . . . . . . . . . . . $ 277,305 $ 229,175 $ 240,524
========== =========== ==========
Earnings Attributable to Unconsolidated Affiliates:
United States . . . . . . . . . . . . . . . . . . . . $ - $ 521 $ 29
Middle East . . . . . . . . . . . . . . . . . . . . . 2,163 3,688 4,928
Asia . . . . . . . . . . . . . . . . . . . . . . . . 271 146 1,438
South America . . . . . . . . . . . . . . . . . . . . 521 661 465
---------- ----------- ----------
Total . . . . . . . . . . . . . . . . . . . . . . $ 2,955 $ 5,016 $ 6,860
========== =========== ==========
Operating Income (Loss) (a):
United States . . . . . . . . . . . . . . . . . . . . $ 1,105 $ (29,347)(b) $ (2,391)
Europe and Africa . . . . . . . . . . . . . . . . . (430) (140) (187)
Middle East . . . . . . . . . . . . . . . . . . . . . 524 870 1,699
Asia . . . . . . . . . . . . . . . . . . . . . . . . 402 374 278
Australia . . . . . . . . . . . . . . . . . . . . . . 902 - -
South America . . . . . . . . . . . . . . . . . . . . 177 1,168 (391)
---------- ----------- ----------
Total . . . . . . . . . . . . . . . . . . . . . . $ 2,680 $ (27,075) $ (992)
========== =========== ==========
Income (Loss) Before Income Taxes:
United States . . . . . . . . . . . . . . . . . . . . $ 513 $ (27,075)(b) $ (1,003)
Europe and Africa . . . . . . . . . . . . . . . . . . (441) (79) (46)
Middle East . . . . . . . . . . . . . . . . . . . . . 2,874 3,681 6,699
Asia . . . . . . . . . . . . . . . . . . . . . . . . 674 518 1,722
Australia . . . . . . . . . . . . . . . . . . . . . . 891 - -
South America . . . . . . . . . . . . . . . . . . . . 602 1,845 227
---------- ----------- ----------
Total . . . . . . . . . . . . . . . . . . . . . . $ 5,113 $ (21,110) $ 7,599
========== =========== ==========
</TABLE>
_____________________
(a) Operating income (loss) is revenues less related costs and expenses; it
excludes earnings attributable to unconsolidated affiliates.
(b) A provision for leasehold impairment of $23.6 million was recorded in 1994
to offset all future lease expense, net of anticipated sublease income,
related to the facility in San Angelo, Texas. See Note 6.
46
<PAGE> 47
POOL ENERGY SERVICES CO.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
<TABLE>
<CAPTION>
AS OF DECEMBER 31
------------------------------------------
1995 1994 1993
---------- ----------- ----------
<S> <C> <C> <C>
Identifiable Assets:
United States . . . . . . . . . . . . . . . . . . . . $ 183,850 $ 149,058 $ 131,603
Europe and Africa . . . . . . . . . . . . . . . . . . 2,003 3,507 7,889
Middle East . . . . . . . . . . . . . . . . . . . . . 23,335 24,978 24,815
Asia . . . . . . . . . . . . . . . . . . . . . . . . 11,355 10,385 9,543
Australia . . . . . . . . . . . . . . . . . . . . . . 8,334 - -
South America . . . . . . . . . . . . . . . . . . . . 19,566 21,890 19,304
---------- ----------- ----------
Total . . . . . . . . . . . . . . . . . . . . . . $ 248,443 $ 209,818 $ 193,154
========== =========== ==========
</TABLE>
11. QUARTERLY FINANCIAL DATA (UNAUDITED)
The following is a summary of unaudited quarterly financial data for 1995 and
1994.
<TABLE>
<CAPTION>
4TH 3RD 2ND 1ST
QUARTER QUARTER QUARTER QUARTER
--------- -------- -------- -------
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
1995:
Revenues . . . . . . . . . . . . . . . . . . . $ 75,131 $ 75,515 $ 63,805 $ 62,854
Earnings Attributable to Unconsolidated
Affiliates . . . . . . . . . . . . . . . . . 785 752 643 775
Gross Profit (a) . . . . . . . . . . . . . . . 17,703 15,963 15,069 12,451
Income Before Income Taxes . . . . . . . . . . 2,746 1,001 1,282(b) 84
Net Income . . . . . . . . . . . . . . . . . . 1,718 644 555(b) 215
Earnings Per Share of Common Stock . . . . . . $ .12 $ .05 $ .04(b) $ .02
1994:
Revenues . . . . . . . . . . . . . . . . . . . $ 62,771 $ 56,167 $ 54,261 $ 55,976
Earnings Attributable to Unconsolidated
Affiliates . . . . . . . . . . . . . . . . . 883 1,038 1,233 1,862
Gross Profit (a) . . . . . . . . . . . . . . . 14,396 11,026 13,262 13,495
Income (Loss) Before Income Taxes . . . . . . . (22,652)(c) (230) 847 925
Net Income (Loss) . . . . . . . . . . . . . . . (14,794)(c) 571 820 674
Earnings (Loss) Per Share of Common Stock . . . $ (1.09)(c) $ .04 $ .06 $ .05
</TABLE>
_________
(a) Gross profit is computed as consolidated revenues plus earnings
attributable to unconsolidated affiliates, less operating expenses (which
excludes selling, general and administrative expenses and depreciation and
amortization).
(b) Includes GPC acquisition related costs of $0.6 million pretax ($0.4
million, or $.03 per share after-tax). See Note 3.
(c) Includes the $23.6 million pretax ($15.3 million, or $1.13 per share
after-tax) provision for leasehold impairment during the fourth quarter of
1994. See Note 6.
47
<PAGE> 48
INDEPENDENT AUDITORS' REPORT
Pool Arabia, Ltd.:
We have audited the accompanying balance sheets of Pool Arabia, Ltd. (the
"Company") as of December 31, 1995 and 1994, and the related statements of
operations and cash flows for each of the three years in the period ended
December 31, 1995. Our audits also included the financial statement schedule
listed in the Index at Item 14. These financial statements and the financial
statement schedule are the responsibility of the Company's management. Our
responsibility is to express an opinion on the financial statements and
financial statement schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the financial position of the Company at December 31, 1995 and 1994,
and the results of its operations and its cash flows for each of the three
years in the period ended December 31, 1995 in conformity with generally
accepted accounting principles. Also, in our opinion, the financial statement
schedule, when considered in relation to the basic financial statements taken
as a whole, presents fairly in all material respects the information set forth
therein.
DELOITTE & TOUCHE LLP
Houston, Texas
January 31, 1996
48
<PAGE> 49
POOL ARABIA, LTD.
STATEMENTS OF OPERATIONS
(In thousands)
<TABLE>
<CAPTION>
Year Ended December 31
----------------------------
1995 1994 1993
------- -------- --------
<S> <C> <C> <C>
Revenues:
Well servicing and drilling fees...................... $28,150 $36,092 $39,676
Other................................................. - 189 453
------- ------- -------
Total revenues........................... 28,150 36,281 40,129
------- ------- -------
Costs and Expenses:
Well servicing and drilling:
Salaries, wages and employee benefits.............. 9,925 11,735 11,112
Depreciation....................................... 6,465 7,372 8,038
Maintenance, repairs and operating supplies........ 4,718 6,105 8,107
Other.............................................. 3,401 4,858 4,984
------- ------- ------
Total well servicing and drilling........ 24,509 30,070 32,241
General and administrative............................ 917 1,185 1,102
------- ------- -------
Total costs and expenses................. 25,426 31,255 33,343
------- ------- -------
Operating Income......................................... 2,724 5,026 6,786
Interest Expense......................................... 3,369 2,693 868
Other Expense (Income) - Net............................. (169) 29 330
------- ------- -------
Income (Loss) Before Zakat and Income Taxes.............. (476) 2,304 5,588
Zakat.................................................... - - 187
Saudi Arabian Income Taxes:
Current provision - net............................. - 442 959
Deferred tax provision.............................. 60 222 444
------- ------- -------
Total.................................. 60 664 1,403
------- ------- -------
Net Income (Loss)........................................ $ (536) $ 1,640 $ 3,998
======= ======= =======
</TABLE>
See Notes to Financial Statements.
49
<PAGE> 50
POOL ARABIA, LTD.
STATEMENTS OF CASH FLOWS
(In thousands)
<TABLE>
<CAPTION>
Year Ended December 31
------------------------------
1995 1994 1993
------- ------- --------
<S> <C> <C> <C>
Operating Activities:
Net Income (Loss).................................... $ (536) $ 1,640 $ 3,998
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Depreciation...................................... 6,465 7,372 8,038
Deferred Saudi Arabian income taxes............... 60 222 444
(Gain) loss on disposal of property and equipment. (152) (90) 96
Changes in:
Accounts receivable............................ 4,087 (487) 962
Inventory...................................... 475 (312) 1,625
Prepayments and other current assets........... (1) 24 133
Retentions receivable - noncurrent............. (1,964) (528) (1,956)
Accounts payable............................... (78) (2) (393)
Accrued salaries and wages..................... (121) (2) -
Saudi Arabian income taxes payable............. (493) (560) 1,039
Other accrued liabilities...................... (289) 44 258
Deferred mobilization fees - net............... - (103) (453)
Other liabilities.............................. 41 67 74
-------- -------- --------
Net Cash Flows Provided by Operating
Activities............................ 7,494 7,285 13,865
-------- -------- --------
Investing Activities:
Purchases of property and equipment.................. (3,428) (1,961) (2,348)
Proceeds from disposal of property and equipment..... 316 221 34
-------- -------- --------
Net Cash Flows Used in Investing Activities..... (3,112) (1,740) (2,314)
-------- -------- --------
Financing Activities:
Repayment of long-term debt.......................... (2,239) (2,239) (2,239)
Note payable......................................... - - 40,000
Repayment of advances from shareholders.............. - - (35,183)
Dividends paid....................................... (2,131) (3,767) (11,902)
-------- -------- --------
Net Cash Flows Used in Financing
Activities........................... (4,370) (6,006) (9,324)
-------- -------- --------
Net Increase (Decrease) in Cash and Cash Equivalents.... 12 (461) 2,227
Cash and Cash Equivalents at January 1,................. 2,900 3,361 1,134
-------- -------- --------
Cash and Cash Equivalents at December 31,............... $ 2,912 $ 2,900 $ 3,361
======== ======== ========
</TABLE>
See Notes to Financial Statements.
50
<PAGE> 51
POOL ARABIA, LTD.
BALANCE SHEETS
(In thousands except number of shares and per share amount)
<TABLE>
<CAPTION>
December 31
-------------------------
ASSETS 1995 1994
-------- --------
<S> <C> <C>
Current Assets:
Cash and cash equivalents......................................... $ 2,912 $ 2,900
Accounts receivable - trade....................................... 4,573 8,660
Inventory - materials and supplies, at average cost............... 5,854 6,329
Prepayments and other current assets.............................. 149 148
-------- --------
Total current assets................................. 13,488 18,037
Property and Equipment - Net......................................... 53,465 56,666
Retentions Receivable - Noncurrent................................... 4,645 2,681
-------- --------
Total................................................................ $ 71,598 $ 77,384
======== =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Current portion of long-term debt................................. $ 1,121 $ 2,239
Accounts payable - principally trade.............................. 733 811
Accrued salaries and wages........................................ 527 648
Saudi Arabian income taxes payable................................ 86 579
Other accrued liabilities......................................... 1,556 1,845
-------- --------
Total current liabilities............................ 4,023 6,122
-------- --------
Other Liabilities:
Note payable...................................................... 40,000 40,000
Long-term debt - net of current portion........................... - 1,121
Deferred Saudi Arabian income taxes............................... 2,606 2,546
Other............................................................. 614 573
-------- --------
Total other liabilities.............................. 43,220 44,240
-------- --------
Shareholders' Equity:
Share capital, par value Saudi riyals 3,000 per share;
1,000 shares authorized, issued and outstanding................ 857 857
Legal reserve..................................................... 429 429
Retained earnings................................................. 23,069 25,736
-------- --------
Total shareholders' equity........................... 24,355 27,022
-------- --------
Total................................................................ $ 71,598 $ 77,384
======== ========
</TABLE>
See Notes to Financial Statements.
51
<PAGE> 52
POOL ARABIA, LTD.
NOTES TO FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
All dollar amounts in the tabulations in the notes to the financial
statements are in thousands unless otherwise indicated. All dollar amounts
included in the text are in whole dollars, unless otherwise indicated. Certain
amounts in the 1994 and 1993 financial statements have been reclassified to
conform with the 1995 presentation.
The Company - Pool Arabia, Ltd. (the "Company") is a limited liability
company formed under the Regulations for Companies in the Kingdom of Saudi
Arabia for the purpose of performing oil and gas production services. The
Company's Commercial Registration No. 2051002523 was issued in Dammam on
September 15, 1976 and the Company commenced operations on May 1, 1977. The
Company is owned 51% by Pool International, Inc. ("Pool"), a U.S. corporation
and wholly owned subsidiary of Pool Energy Services Co., and 49% by Arabian
Petroleum Services ("Petroserv"), a Saudi Arabian company.
The primary business of the Company is operating workover and drilling
rigs (onshore and offshore) under contracts with Saudi Arabian Oil Company
("Saudi Aramco") and with the Joint Operations of Kuwait Oil Company and Saudi
Arabian Texaco, Inc. ("Joint Operations"). During 1995, approximately 98% of
revenues were earned from Saudi Aramco (1994 - 86%; 1993 - 83%) and
approximately 2% were earned from the Joint Operations (1994 - 14%; 1993 -
17%).
Foreign Currency Translation - The Company's functional currency is the
United States dollar. Transactions denominated in foreign currencies are
translated into United States dollars at exchange rates prevailing at the dates
of such transactions. Assets and liabilities denominated in foreign currencies
are translated into United States dollars at exchange rates prevailing on the
balance sheet date. Translation gains (losses) resulting from changes in
exchange rates are credited (charged) to income in the current period. The net
amount of such gains (losses) during each of the three years in the period
ended December 31, 1995 was not significant.
Property and Equipment - Property and equipment are stated at cost,
less a 1985 provision to reduce the carrying value of certain rig equipment to
reflect an impairment in value resulting from the depressed conditions in the
oilfield service industry. Maintenance and repairs are charged to expense as
incurred. Depreciation of rigs and related equipment is computed principally
using a service life method equivalent to straight-line depreciation on a
ten-year service life if the rigs were continuously utilized. The actual
useful lives of such assets extend beyond the nominal service life period
because of anticipated periods of nonutilization and because of maintenance and
rebuilding expenditures during periods of such nonutilization. The carrying
values and service lives of such assets are periodically assessed to assure
that, at the minimum, the cost of assets is depreciated over a period of time
that is not greater than their remaining useful lives. Depreciation of
buildings and certain other equipment (primarily vehicles) is computed using
the straight-line method over the estimated useful lives of the related assets.
See also Note 4.
The Financial Accounting Standards Board has issued Statement of
Financial Accounting Standards No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of." This statement
requires that long- lived assets and certain identifiable intangibles held and
used by the Company be reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of
52
<PAGE> 53
POOL ARABIA, LTD.
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
an asset may not be recoverable. The adoption of this statement in the first
quarter of 1996 will not have a material effect on the Company's financial
position or results of operations.
Revenue Recognition - The Company generally recognizes revenue when
services are rendered. Mobilization fees received from customers net of
mobilization costs are deferred. Deferred mobilization fees - net are
amortized over the terms of the related contracts.
Deferred Saudi Arabian Income Taxes - The Company provides for deferred
Saudi Arabian income taxes on temporary differences which arise principally
from differences in depreciation methods used for financial reporting and tax
purposes. The Company accounts for income taxes based upon Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes" which
requires recognition of deferred income tax liabilities and assets for the
expected future tax consequences of events that have been recognized in the
Company's financial statements or tax returns. Under this method, deferred
income tax liabilities and assets are determined based on the temporary
differences between the financial statement carrying amounts and the tax bases
of existing assets and liabilities and available tax credit carryforwards. See
also Note 7.
Cash Flows - During each of the three years in the period ended
December 31, 1995, the Company paid interest charges and income taxes and zakat
as follows:
<TABLE>
<CAPTION>
Interest Income Taxes
Charges and Zakat
-------- -------------
<S> <C> <C>
1995. . . . . . . . . . . . . . $ 3,613 $ 507
1994. . . . . . . . . . . . . . 2,610 1,068
1993. . . . . . . . . . . . . . 303 152
</TABLE>
Cash Equivalents - Time deposits with less than a three-month maturity
when purchased are considered cash equivalents and are included in cash and
cash equivalents.
Fair Values of Financial Instruments - The Company estimates the fair
values of its financial instruments, which consist of variable rate debt and
short-term items, to approximate the related carrying values.
53
<PAGE> 54
POOL ARABIA, LTD.
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
2. SHAREHOLDERS' EQUITY
The following is a summary of transactions affecting shareholders'
equity for the last three fiscal years.
<TABLE>
<CAPTION>
SHARE LEGAL RETAINED
CAPITAL RESERVE EARNINGS
------- ------- --------
<S> <C> <C> <C>
BALANCE, JANUARY 1, 1993............................... $ 857 $ 429 $ 35,767
Net income............................................. - - 3,998
Dividends.............................................. - - (11,902)
----- ----- --------
BALANCE, DECEMBER 31, 1993............................. 857 429 27,863
Net income............................................. - - 1,640
Dividends.............................................. - - (3,767)
----- ----- --------
BALANCE, DECEMBER 31, 1994............................. 857 429 25,736
Net loss............................................... - - (536)
Dividends.............................................. - - (2,131)
----- ----- --------
BALANCE, DECEMBER 31, 1995............................. $ 857 $ 429 $ 23,069
===== ===== ========
</TABLE>
3. ACCOUNTS RECEIVABLE
Accounts receivable - trade at December 31, 1995 include current
retentions of $1.9 million (1994 - $2.8 million), which represent withholdings
from periodic contract billings.
4. PROPERTY AND EQUIPMENT
Property and equipment - net at December 31 was comprised of:
<TABLE>
<CAPTION>
1995 1994
--------- ---------
<S> <C> <C>
Drilling and workover rigs.................................. $ 136,700 $ 135,944
Buildings, camps and improvements........................... 8,345 8,345
Vehicles.................................................... 9,650 9,595
Furniture and fixtures...................................... 306 287
--------- ---------
Total....................................................... 155,001 154,171
Less accumulated depreciation............................... (101,536) (97,505)
--------- ---------
Property and equipment - net................................ $ 53,465 $ 56,666
========= =========
</TABLE>
As explained in Note 1, rigs and related equipment are depreciated
using a service life method which results in suspension of depreciation on
temporarily idle rigs and related equipment during periods of nonutilization.
During 1993, the Company commenced recording depreciation on temporarily idle
rigs and equipment at the rate of approximately one-quarter of the normal
in-service depreciation rate in order to
54
<PAGE> 55
POOL ARABIA, LTD.
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
recognize an estimated reduction in the remaining useful lives of such assets.
At December 31, 1995, property and equipment includes temporarily idle rigs and
equipment with a cost of $64.8 million (1994 - $50.3 million) and net book
value of $29.2 million (1994 - $27.5 million).
5. SHORT-TERM CREDIT FACILITIES
At December 31, 1995 and 1994 the Company had available a short-term
credit facility of Saudi riyals 19 million (equivalent to $5.1 million) from a
local bank. Borrowings under the facility bear interest principally at the
Saudi Interbank Offer Rate plus 3/8%. No amount was drawn on this facility at
December 31, 1995. The commitment fee payable on the facility is not
significant.
The credit facility agreement with the bank places restrictions on any
dividend distributions and any repayment of advances from the shareholders. In
1995, 1994 and 1993, the Company obtained waivers of these restrictions in
order to repay advances from shareholders and to pay dividends.
6. LONG-TERM DEBT AND NOTE PAYABLE
Long-term debt is collateralized by a standby letter of credit from
Pool and a guarantee by Petroserv in proportions equivalent to their respective
shareholdings. Certain contract revenues are also assigned as collateral for
the loan. Semi-annually, the Company can elect the denomination of the loan as
either United States dollars or Saudi riyals. At December 31, 1995 the Company
had elected Saudi riyals. The outstanding balance of the loan at December 31,
1995 is repayable in 1996. The loan agreement requires interest charges
ranging from 3/16% to 7/8% over the London or Riyadh Interbank Offer Rates
(effective rates from 6.1875% to 6.875% at December 31, 1995).
The loan agreement places restrictions on any dividend distributions
and any repayment of advances from shareholders. In 1995, 1994 and 1993, the
Company obtained waivers of these restrictions in order to repay advances from
shareholders and to pay dividends.
During 1993, the Company borrowed Saudi riyals 150 million ($40
million) from a bank in Bahrain under a demand note. The note bears interest
at a variable rate, which was 7.8125% per annum at December 31, 1995. The
Company does not expect the bank to require repayment within the next year, nor
does the Company intend to repay any of the outstanding principal in 1996. In
addition, the Company's shareholders have agreed that if the bank called the
note, any repayment would be effected through an increase in shareholders'
contributions.
7. SAUDI ARABIAN INCOME TAXES AND ZAKAT
The Company provides for Saudi Arabian income taxes on the portion of
income attributable to Pool and for zakat which is attributable to Petroserv.
For purposes of determining the distributable share of retained earnings, these
amounts are charged against the retained earnings of the individual
shareholders.
During 1994, the Company received assessments from the DZIT totaling
approximately $1.9 million for income tax and zakat related to 1992 and the
Company also received additional inquiries from the DZIT related to the years
1978 through 1990 for which it had previously obtained final tax clearance
certificates. The Company has appealed the assessments which relate primarily
to the timing of the Company's recognition of
55
<PAGE> 56
POOL ARABIA, LTD.
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
tax depreciation and the 1992 tax loss on the sale of an offshore rig.
Management believes that any additional provisions for taxes that may be
required as a result of such assessments will not be material to the Company's
financial position or operations. In late 1995 DZIT issued requests for
documentation related to 1993. The Company continues responding to DZIT with
no further notices regarding any tax year.
8. SHAREHOLDERS' AGREEMENT
Pursuant to a shareholders' agreement between Pool and Petroserv,
Petroserv has the option to acquire additional ownership from Pool, and
ultimately ownership of the Company could change to 65% by Petroserv and 35% by
Pool. The purchase price for Petroserv to acquire additional ownership is to
be determined as provided in the agreement.
The Board of Directors of the Company consists of nine persons: five
named by Pool and four by Petroserv. Decisions affecting, among other things,
capital contributions by the shareholders, capital expenditures, issuance of
indebtedness, and payment of a liquidation dividend must be unanimously
approved by the Board of Directors. Certain specific actions shall be
undertaken by the Company only with the unanimous consent of its shareholders.
9. LEGAL RESERVE
In accordance with the Regulations for Companies in the Kingdom of
Saudi Arabia, the Company maintains a legal reserve equal to one-half of its
share capital. Such reserve currently is not available for distribution to the
shareholders.
10. RELATED PARTY TRANSACTIONS
Significant related party transactions were as follows:
a) $4.0 million of property, equipment and inventory was acquired
in 1995 from affiliates (1994 - $4.2 million; 1993 - 3.5 million).
b) $0.6 million of costs and expenses was charged in 1995 by
affiliates (1994 - $1.7 million; 1993 - $2.1 million).
11. CONTINGENCIES
At December 31, 1995, the Company had outstanding bank guarantees of
$2.0 million issued in connection with its contracts (1994 - $1.5 million).
See also Note 7 related to income tax contingencies.
56
<PAGE> 57
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEMS 10-13.
Pursuant to Instruction G(3) to Form 10-K, the information required in
Items 10-13 is incorporated by reference from the Company's definitive proxy
statement, which will be filed with the Commission pursuant to Regulation 14A
within 120 days of December 31, 1995.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a)-1 FINANCIAL STATEMENTS
Included in Part II of this report:
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Pool Energy Services Co.:
Independent Auditors' Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Statements of Consolidated Operations for Each of the Three Years in the Period Ended December 31, 1995 . 23
Statements of Consolidated Cash Flows for Each of the Three Years in the Period Ended December 31, 1995 . 24
Consolidated Balance Sheets at December 31, 1995 and 1994 . . . . . . . . . . . . . . . . . . . . . . . . 25
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Pool Arabia, Ltd.:
Independent Auditors' Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
Statements of Operations for Each of the Three Years in the Period Ended December 31, 1995 . . . . . . . 49
Statements of Cash Flows for Each of the Three Years in the Period Ended December 31, 1995 . . . . . . . 50
Balance Sheets at December 31, 1995 and 1994 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
Notes to Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
(a)-2 FINANCIAL STATEMENT SCHEDULES
Included in Part IV of this report:
Pool Energy Services Co.:
Consolidated Supplementary Financial Statement Schedules As of and for Each of the Three Years Ended
December 31, 1995:
II- Consolidated Valuation and Qualifying Accounts . . . . . . . . . . . . . . . . . . . . . . 62
</TABLE>
57
<PAGE> 58
(a)-2 FINANCIAL STATEMENT SCHEDULES - (CONTINUED)
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Pool Arabia, Ltd.:
Supplementary Financial Statement Schedules As of and for Each of the Three Years Ended
December 31, 1995:
II- Valuation Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
</TABLE>
The supplemental schedules other than those listed above are omitted
because of the absence of the conditions under which they are required or
because the required information is included in the Financial Statements or
Notes thereto.
(a)-3 EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT NO. DOCUMENT
----------- --------
<S> <C> <C>
3.1 - Articles of Incorporation of the Company, as amended (incorporated by reference to Exhibit 3.1
to the Company's Registration Statement on Form S-1 No. 33-36622)
3.2.1 - Bylaws of the Company as currently in effect (incorporated by reference to Exhibit 3.2.1 to the
Company's Form 10-Q for the quarterly period ended September 30, 1994, Commission File No. 0-
18437)
10.1 - Contingent Support Agreement (incorporated by reference to Exhibit 10.2.1 to the Company's
Registration Statement on Form S-1 No. 33-33726)
10.1.1 - Amendment to Contingent Support Agreement (incorporated by reference to Exhibit 10.2.1 to the
Company's Form 10-K for the year ended December 31, 1990, Commission File No. 0-18437)
10.2 - Sublease Agreement (incorporated by reference to Exhibit 10.3 to the Company's Registration
Statement on Form S-1 No. 33-25535)
10.2.1 - First Amendment to Sublease Agreement (incorporated by reference to Exhibit 10.3.1 to the
Company's Registration Statement on Form S-1 No. 33-36622)
10.2.2 - Second Amendment to Sublease Agreement (incorporated by reference to Exhibit 10.3.2 to the
Company's Form 10-K for the year ended December 31, 1992, Commission File No. 0-18437)
10.3(*) - Pool Energy Services Co. Stock Option Plan (incorporated by reference to Exhibit 10.4.1 to the
Company's Registration Statement on Form S-1 No. 33-36622)
10.4 - Credit Agreement between Pool Company and NCNB Texas National Bank, N.A. (incorporated by
reference to Exhibit 10.7 to the Company's Registration Statement on Form S-1 No. 33-33726)
10.4.1 - First Amendment to Credit Agreement (incorporated by reference to Exhibit 10.6.1 to the
Company's Form 10-K for the year ended December 31, 1990, Commission File No. 0-18437)
10.4.2 - Waiver under Credit Agreement (incorporated by reference to Exhibit 10.6.2 to the Company's
Form 10-K for the year ended December 31, 1990, Commission File No. 0-18437)
10.4.3 - Second Amendment to Credit Agreement (incorporated by reference to Exhibit 10.6.3 to the
Company's Form 10-K for the year ended December 31, 1991, Commission File No. 0-18437)
10.4.4 - Third Amendment to Credit Agreement dated July 31, 1992 (incorporated by reference to Exhibit
10.6.4 to the Company's Registration Statement on Form S-1 No. 33-53860)
</TABLE>
58
<PAGE> 59
(a)-3 EXHIBITS - (CONTINUED)
<TABLE>
<CAPTION>
EXHIBIT NO. DOCUMENT
----------- --------
<S> <C> <C>
10.4.5 - Fourth Amendment to Credit Agreement dated August 4, 1993 (incorporated by reference to Exhibit
10.6.5 to the Company's Form 10-Q for the quarterly period ended June 30,1993, Commission File No. 0-
18437)
10.5 - $30 million Restated Credit Agreement dated as of August 15, 1994 between Pool Company and
NationsBank of Texas, N.A., as Agent (incorporated by reference to Exhibit 10.1 to the Company's Form
10-Q for the quarterly period ended September 30, 1994, Commission File No. 0-18437)
10.5.1 - First Amendment to 1994 Restated Credit Agreement dated February 28, 1995 (incorporated by reference
to Exhibit 10.1 to the Company's Form 10-Q for the quarterly period ended March 31, 1995, Commission
File No. 0-18437)
10.5.2 - Second Amendment to 1994 Restated Credit Agreement dated April 21, 1995 (incorporated by reference to
Exhibit 10.2 to the Company's Form 10-Q for the quarterly period ended March 31, 1995, Commission
File No. 0-18437)
10.5.3 - Third Amendment and Waiver to 1994 Restated Credit Agreement, and First Amendment and Waiver to 1995
Term Loan Agreement (incorporated by reference to Exhibit 10.1 to the Company's Form 10-Q for the
quarterly period ended June 30, 1995, Commission File No. 0-18437)
10.5.4 - Fourth Amendment to 1994 Restated Credit Agreement (incorporated by reference to Exhibit 10.2 to the
Company's Form 10-Q for the quarterly period ended June 30, 1995, Commission File No. 0-18437)
10.6 - Term Loan Agreement among Pool Company, NationsBank of Texas, N.A. and Certain Lenders dated April
21, 1995 (incorporated by reference to Exhibit 10.3 to the Company's Form 10-Q for the quarterly
period ended March 31, 1995, Commission File No. 0-18437)
10.7(*) - Pool Energy Services Co. 1991 Directors Stock Option Plan (incorporated by reference to Exhibit
10.6.2 to the Company's Registration Statement on Form S-8 No. 33-50844)
10.8 - Sublease Agreement dated March 15, 1983 between Pool Company and Sanan Leasing Corporation
(incorporated by reference to Exhibit 19.1 of the Company's Form 10-Q for the quarter ended September
30, 1992, Commission File No. 0-18437)
10.9(*) - Supplemental Executive Retirement Plan of Pool Company, as amended (incorporated by reference to
Exhibit 10.1 to the Company's Form 10-Q for the quarterly period ended June 30, 1993, Commission File
No. 0-18437)
10.10 - Agreement in Relation to Bareboat Charter (Pool Ranger IV) dated December 30, 1993 between Pool
Company and Nationsbanc Leasing Corporation of North Carolina (incorporated by reference to Exhibit
10.13 to the Company's Form 10-K for the year ended December 31, 1993, Commission File No. 0-18437)
10.11 - Agreement in Relation to Bareboat Charter (Pool Ranger V) dated December 30, 1993 between Pool
Company and Nationsbanc Leasing Corporation of North Carolina (incorporated by reference to Exhibit
10.14 to the Company's Form 10-K for the year ended December 31, 1993, Commission File No. 0-18437)
10.12 - Agreement in Relation to Bareboat Charter (Pool Ranger VI) dated December 30, 1993 between Pool
Company and Nationsbanc Leasing Corporation of North Carolina (incorporated by reference to Exhibit
10.15 to the Company's Form 10-K for the year ended December 31, 1993, Commission File No. 0-18437)
10.13(*) - Pool Energy Services Co. 1993 Employee Stock Incentive Plan (incorporated by reference to Exhibit
10.16 to the Company's Form 10-Q for the quarterly period ended March 31, 1994, Commission File No.
0-18437)
</TABLE>
59
<PAGE> 60
(a)-3 EXHIBITS - (CONTINUED)
<TABLE>
<CAPTION>
EXHIBIT NO. DOCUMENT
----------- --------
<S> <C> <C>
10.14(*) - Change in Control Agreement, as amended, between the Company and J. T. Jongebloed (incorporated by
reference to Exhibit 10.1 to the Company's Form 10-Q for the quarterly period ended June 30, 1994,
Commission File No. 0-18437)
10.15(*) - Change in Control Agreement, as amended, between the Company and E. J. Spillard (incorporated by
reference to Exhibit 10.2 to the Company's Form 10-Q for the quarterly period ended June 30, 1994,
Commission File No. 0-18437)
10.16(*) - Change in Control Agreement, as amended, between the Company and W. J Myers (incorporated by
reference to Exhibit 10.3 to the Company's Form 10-Q for the quarterly period ended June 30, 1994,
Commission File No. 0-18437)
10.17(*) - Change in Control Agreement, as amended, between the Company and R. G. Hale (incorporated by
reference to Exhibit 10.4 to the Company's Form 10-Q for the quarterly period ended June 30, 1994,
Commission File No. 0-18437)
10.18(*) - Change in Control Agreement, as amended, between the Company and G. G. Arms (incorporated by
reference to Exhibit 10.5 to the Company's Form 10-Q for the quarterly period ended June 30, 1994,
Commission File No. 0-18437)
10.19(*) - Change in Control Agreement, as amended, between the Company and L. E. Dupre (incorporated by
reference to Exhibit 10.6 to the Company's Form 10-Q for the quarterly period ended June 30, 1994,
Commission File No. 0-18437)
10.20 - Rights Agreement dated as of June 7, 1994 between Pool Energy Services Co. and The First National
Bank of Boston, as Rights Agent, which includes as Exhibit A the form of Right Certificate and as
Exhibit B the form of Summary of Rights to Purchase Shares (incorporated by reference to Exhibit 1 to
the Company's Current Report on Form 8-K dated June 7, 1994, Commission File No. 0-18437)
10.21(*) - Pool Energy Services Co. 1995 Management Bonus Plan - Senior Executive Level (incorporated by
reference to Exhibit 10.23 to the Company's Form 10-K for the year ended December 31, 1994,
Commission File No. 0-18437)
10.22 - Stock Purchase Agreement dated June 13, 1995 by and among Robert D. Hillman, Barbara A. Hillman,
Richard H. Hillman, Robert D. Hillman, Jr., Golden Pacific Corp., Pool Company and Pool Energy
Services Co. (incorporated by reference to Exhibit 2.1 to the Company's Current Report on Form 8-K
(Date of Event: June 13, 1995) dated June 27, 1995, Commission File No. 0-18437)
10.23 - Agreement regarding Deferred Payment of Purchase Price dated June 13, 1995 by and among Robert D.
Hillman, Barbara A. Hillman, Richard H. Hillman, Robert D. Hillman, Jr., Golden Pacific Corp., Pool
Company and Pool Energy Services Co., including Promissory Notes, and Exhibits B, C, D and F to such
agreement (incorporated by reference to Exhibit 2.2 to the Company's Current Report on Form 8-K (Date
of Event: June 13, 1995) dated June 27, 1995, Commission File No. 0-18437)
10.24 - Voting Agreement and Agreement Restricting Transfer dated June 13, 1995 by and among Robert D.
Hillman, Barbara A. Hillman, Richard H. Hillman, Robert D. Hillman, Jr., Golden Pacific Corp., Pool
Company and Pool Energy Services Co. (incorporated by reference to Exhibit 2.3 to the Company's
Current Report on Form 8-K (Date of Event: June 13, 1995) dated June 27, 1995, Commission File No.
018437)
10.25 - Agreement dated September 28, 1994 between Pool Alaska, Inc. and Arctic Alaska Drilling Company, Inc.
(incorporated by reference to Exhibit 10.2 to the Company's Form 10-Q for the quarterly period ended
September 30, 1994, Commission File No. 0-18437)
10.26(**) - $35 million Restated Revolving Credit Agreement dated as of November 30, 1995 between Pool Company
and NationsBank of Texas, N.A., as Agent
10.27(**) - $6.5 million Term Loan Agreement dated as of November 30, 1995 between International Sea Drilling
Ltd. and NationsBank of Texas, N.A., as Agent
</TABLE>
60
<PAGE> 61
(a)-3 EXHIBITS - (CONTINUED)
<TABLE>
<CAPTION>
EXHIBIT NO. DOCUMENT
- ----------- --------
<S> <C> <C>
10.28(**) - $10 million Restated Term Loan Agreement dated as of November 30, 1995 between Pool Company and
NationsBank of Texas, N.A., as Agent
21(**) - List of Subsidiaries
23(**) - Consent of Deloitte & Touche LLP
24(**) - Powers of Attorney
27(**) - Financial Data Schedule
</TABLE>
___________________
(*) Management contract or compensatory plan or arrangement
(**) Filed herewith
The schedules to Exhibits 10.26, 10.27 and 10.28 have been omitted. The
Company hereby agrees to furnish supplementally to the Commission upon request
copies of any such omitted schedules.
(b) REPORTS ON FORM 8-K - There were no reports on Form 8-K filed during the
quarter ended December 31, 1995.
61
<PAGE> 62
SCHEDULE II
POOL ENERGY SERVICES CO.
CONSOLIDATED VALUATION AND QUALIFYING ACCOUNTS
AS OF DECEMBER 31
(IN THOUSANDS)
<TABLE>
<CAPTION>
ADDITIONS
-------------------------
BALANCE AT CHARGED TO CHARGED BALANCE
BEGINNING COSTS AND TO OTHER OTHER AT END
DESCRIPTION OF YEAR EXPENSES ACCOUNTS CHANGES OF YEAR
----------- ----------- ----------- ----------- --------- -----------
<S> <C> <C> <C> <C> <C>
Allowance for Doubtful Accounts:
1995 . . . . . . . . . . . . . . $ 1,622 $ 1,255 $ 191 $ (2,009) (a)(b) $ 1,059
1994 . . . . . . . . . . . . . . 1,952 648 18 (996) (a)(c) 1,622
1993 . . . . . . . . . . . . . . 1,389 549 54 (40) (a) 1,952
Allowance for Inventory Shrinkage:
1995 . . . . . . . . . . . . . . $ 1,432 $ 244 $ - $ (91) $ 1,585
1994 . . . . . . . . . . . . . . 2,996 304 - (1,868) (d) 1,432
1993 . . . . . . . . . . . . . . 5,634 153 - (2,791) (e) 2,996
Allowance for Doubtful Noncurrent
Receivables:
1995 . . . . . . . . . . . . . . $ 3,667 $ - $ - $ (843) (a)(f) $ 2,824
1994 . . . . . . . . . . . . . . 4,153 - - (486) (a)(g) 3,667
1993 . . . . . . . . . . . . . . 5,244 - - (1,091) (a)(h) 4,153
</TABLE>
_________________
(a) Includes amounts reclassified between allowance for doubtful accounts
and allowance for doubtful noncurrent receivables.
(b) Includes a reduction of $490 of allowance related to a revised
estimate of the accounts receivable allowance.
(c) Includes a reduction of $707 of allowance related to a revised
estimate of the accounts receivable allowance.
(d) Includes $1,077 related to inventory written off and $589 related to
inventory sold.
(e) Includes $1,505 related to inventory written off and $1,286 related
to inventory sold.
(f) Includes a reduction of $2,362 of allowance related to accounts
receivable written off.
(g) Includes a reduction of $775 of allowance related to accounts
receivable written off.
(h) Includes a reduction of $1,131 of allowance related to accounts
receivable written off.
62
<PAGE> 63
SCHEDULE II
POOL ARABIA, LTD.
VALUATION ACCOUNTS
As of December 31
(In thousands)
<TABLE>
<CAPTION>
CHARGED
BALANCE AT TO COST BALANCE
BEGINNING AND OTHER AT END
DESCRIPTION OF YEAR EXPENSES DEDUCTIONS(1) CHANGES OF YEAR
- ------------------------------------ ---------- -------- ------------- ------- -------
<S> <C> <C> <C> <C> <C>
Allowance for Inventory Obsolescence:
1995 $ 334 $ - $ - $ - $ 334
===== ===== ===== ===== =====
1994 $ 334 $ - $ - $ - $ 334
===== ===== ===== ===== =====
1993 $ - $ 750 $(416) $ - $ 334
===== ===== ===== ===== =====
</TABLE>
(1) Represents inventory written off by utilizing the allowance.
63
<PAGE> 64
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
By: /S/ J. T. JONGEBLOED
-------------------------------
J. T. Jongebloed
Chairman, President and Chief
Executive Officer
Dated: March 12, 1996
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the date indicated.
<TABLE>
<CAPTION>
NAME AND
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> ___ <C>
/S/ J. T. JONGEBLOED Chairman, President and Chief |
------------------------------------ Executive Officer |
J. T. Jongebloed |
|
/S/ E. J. SPILLARD Senior Vice President, Finance |
------------------------------------ (principal financial officer) |
E. J. Spillard |
|
/S/ B. G. GORDON Controller (principal accounting |
------------------------------------ officer) |
B. G. Gordon |
|
PRESTON M. GEREN, JR. Director* |
|
W. C. McCORD Director* |----- March 12, 1996
|
WILLIAM H. MOBLEY Director* |
|
JOSEPH R. MUSOLINO Director* |
|
JAMES L. PAYNE Director* |
|
DONALD D. SYKORA Director* |
|
|
*By: /S/ J. T. JONGEBLOED |
--------------------------------------- |
(J. T. Jongebloed, as Attorney-In-Fact |
for each of the persons indicated) __|
</TABLE>
64
<PAGE> 65
POOL ENERGY SERVICES CO.
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DOCUMENT
- --------- --------------
<S> <C> <C>
10.26 - $35 million Restated Revolving Credit Agreement dated as of November 30, 1995 between Pool Company
and NationsBank of Texas, N.A., as Agent
10.27 - $6.5 million Term Loan Agreement dated as of November 30, 1995 between International Sea Drilling
Ltd. and NationsBank of Texas, N.A., as Agent
10.28 - $10 million Restated Term Loan Agreement dated as of November 30, 1995 between Pool Company and
NationsBank of Texas, N.A., as Agent
21 - List of Subsidiaries
23 - Consent of Deloitte & Touche LLP
24 - Powers of Attorney
27 - Financial Data Schedule
</TABLE>
65
<PAGE> 1
EXHIBIT 10.26
RESTATED REVOLVING CREDIT AGREEMENT
among
POOL COMPANY,
Borrower,
NATIONSBANK OF TEXAS, N.A.,
Agent,
and
CERTAIN LENDERS,
Lenders
and joined for certain purposes by
CERTAIN OTHER OBLIGORS
$35,000,000 REVOLVING LINE OF CREDIT
November 30, 1995
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
SECTION 1. COMMITMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 2. TERMS OF PAYMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
SECTION 3. FEES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
SECTION 4. SECURITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
SECTION 5. REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
SECTION 6 CONDITIONS PRECEDENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
SECTION 7. COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
SECTION 8. DEFAULT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
SECTION 9. CERTAIN RIGHTS AND REMEDIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
SECTION 10. CERTAIN DEFINITIONS AND TERMS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
SECTION 11 AGREEMENT BETWEEN LENDERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
SECTION 12. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
</TABLE>
<TABLE>
<S> <C>
SCHEDULE 1(a) - Lenders and Commitments
SCHEDULE 5.1 - Corporate Existence and Authority
SCHEDULE 5.2 - Ownership of Subsidiaries/Names
SCHEDULE 5.5 - Noncompliance
SCHEDULE 5.6 - Litigation
SCHEDULE 5.7 - Tax Returns
SCHEDULE 5.11 - Liens/Environmental Matters
SCHEDULE 5.12 - Material Agreements
SCHEDULE 6 - Closing Conditions
SCHEDULE 7.11 - Overdraft Lines/Guarantees/Debt
SCHEDULE 7.16 - Certain Loans and Advances
SCHEDULE 7.19 - Transactions with Affiliates
SCHEDULE 7.20 - Certain Sales
EXHIBIT A - Revolving Credit Note
EXHIBIT B - Request for Advance or LC
EXHIBIT C-1 - Financial - Report Certificate
EXHIBIT C-2 - Borrowing - Base Report
EXHIBIT D - Opinion
EXHIBIT E - Assignment Agreement
EXHIBIT F - Guaranty
EXHIBIT G - Security Agreement
EXHIBIT H - Officers Certificate
EXHIBIT I - Existing Waivers
EXHIBIT J - Conversion Request
</TABLE>
(i)
<PAGE> 3
RESTATED REVOLVING CREDIT AGREEMENT
THIS AGREEMENT is entered into as of November 30, 1995, among POOL
COMPANY, a Texas corporation ("BORROWER"), Lenders (defined below) and
NATIONSBANK OF TEXAS, N.A., a national banking association, as Agent for itself
and the other Lenders ("AGENT"). Borrower, Lenders and Agent agree as follows:
SECTION 10 below contains definitions or references to definitions of
certain terms used in this Agreement.
Borrower, National Bank of Canada and Agent entered into the Restated
Credit Agreement (as amended through the date of this Agreement, the "EXISTING
CREDIT AGREEMENT") dated as of August 15, 1994, which (1) provided credit for
Borrower comprised of revolving advances and letters of credit so long as the
total credit exposure never exceeds $30,000,000, and (2) amended and restated
entirely the Credit Agreement (the "ORIGINAL CREDIT AGREEMENT"), between
Borrower and NationsBank of Texas, N.A. (formerly named NCNB Texas National
Bank, individually "NATIONSBANK"), dated as of April 7, 1990.
Borrower, Lenders and Agent are entering into this Agreement in order
to, among other things (1) add National Bank of Alaska ("NBA") as a Lender
under this Agreement, and revise the Commitment Percentages accordingly, (2)
increase the credit commitment to $35,000,000, and (3) amend and restate
entirely the Existing Credit Agreement as required by that certain Term Loan
Agreement dated as of November 30, 1995 among International Sea Drilling Ltd.
(a Subsidiary of Borrower), Lenders and Agent (the "ISDL AGREEMENT").
Accordingly, for adequate and sufficient consideration, the parties to
this Agreement agree that the Existing Credit Agreement is hereby amended and
entirely restated as follows:
SECTION 1. COMMITMENT.
1.1 Commitment. Subject to the conditions below and only if a
Borrowing Deficiency (for whatever reason) neither exists nor occurs as a
result of the following:
a. On the Closing Date (i) the outstanding amount of
Advances under the Existing Credit Agreement converts to the same
amount of direct Advances by Lenders under this SECTION 1.1, and the
outstanding LCs issued under the Existing Credit Agreement convert to
LC's issued under this SECTION 1.1.
b. Each Lender severally but not jointly agrees to
extend its Commitment Percentage of credit to Borrower, which may be
any combination of Advances or LCs, so long as (i) the Principal Debt
for any Lender never exceeds its Commitment and (ii) the total
Principal Debt never exceeds the total Commitments.
Each LC must expire before the Termination Date. Except under SECTIONS 1.1(A)
and 1.4, each Advance must be a minimum of $200,000 and in an increment of
$100,000.
1.2 Borrowing Base. The Borrowing Base (which may never exceed
the total Commitments, the "BORROWING BASE") shall be determined monthly (or
more frequently at Determining Lenders' request if reasonably possible for
Borrower to do so), and shall equal the sum of the following to the extent the
same are uncontested and undisputed, are subject to first, perfected Lender
Liens, and are not subject to any other Liens except Permitted Liens:
a. 80% of domestic consolidated receivables of the
Material Obligors for inventory sold or services rendered in the
ordinary course of business, payable in cash, and outstanding less
than 121 days after the first invoice date; provided that (i) the
amount, if any, by which the total balance of accounts receivable
(notwithstanding any Charge-Offs) of any customer owing to the
Material Obligors exceeds $150,000 may only be included in the
Borrowing Base if first approved by Determining Lenders in their sole
discretion and in accordance with their respective customary credit
policies and credit procedures, and (ii) receivables owed by any
customer and not paid within 120 days after the first invoice date may
not be included in the calculation of the Borrowing Base, and, if the
current and delinquent receivables owed by that customer (including
Charge-Offs) aggregate:
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(1) $150,000 or more, then the portion of the
receivables owed by that customer which exceeds $150,000,
regardless of aging, must be excluded from the calculation of
the Borrowing Base unless Determining Lenders in their sole
discretion determine that customer to be a reasonably
acceptable credit risk, in which event the receivables owed by
that customer and outstanding less than 121 days after the
first invoice date may be included in the calculation of the
Borrowing Base; or
(2) Less than $150,000, then all receivables owed
by that customer, regardless of aging, shall be excluded from
the calculation of the Borrowing Base unless Borrower's chief
financial officer or treasurer certifies to Lenders the
customer is a reasonably acceptable credit risk, that the
delinquency is not the result of a credit problem, and that
the Material Obligors are continuing to maintain a credit line
(and stipulating that the amount of that credit line equals or
exceeds the amount of that customer's receivables eligible for
inclusion in the calculation of the Borrowing Base) with that
customer, in which event the portion of the receivables owed
by that customer and outstanding less than 121 days after the
first invoice date may be included in the calculation of the
Borrowing Base up to an aggregate amount of receivables for
all such customers equal to the sum of:
(a) $1,250,000 (or such other amount
acceptable to Borrower and Determining Lenders) for
those customers for whom the delinquent (more than
120 days after first invoicing) amount of receivables
(including Charge-Offs) for each such customer equals
less than 10% of that customer's total accounts
receivable obligations to the Material Obligors
(including Charge-Offs); provided, that the maximum
amount for any customer whose delinquent amount of
receivables (including Charge-Offs) represents
between 3% and 10% of that customer's total accounts
receivable obligations to the Material Obligors
(including Charge-Offs) cannot exceed $500,000; plus
(b) $250,000 for those customers for
whom the delinquent (more than 120 days after first
invoicing) amount of receivables (including
Charge-Offs) for each such customer equals 10% or
more of that customer's total accounts receivable
obligations to the Material Obligors (including
Charge-Offs);
b. 60% of charges of the Material Obligors for fully
completed work, which charges have been recorded as revenues but are
not included in the aged trial balance of trade accounts receivable
and which evidence or, when invoiced, will evidence binding
obligations payable in cash; provided that such amounts may not
comprise more than 25% of the aggregate Borrowing Base;
c. 100% of cash accounts of the Material Obligors at
Agent in each case subject to restrictions against withdrawal by the
Material Obligors without Determining Lenders' consent and cash
equivalent instruments (including, without limitation, certificates of
deposit) of the Material Obligors held by Agent (but exclusive of the
cash collateral account under SECTION 4.3); plus
d. Consolidated international trade receivables, for
inventory sold or services rendered in the ordinary course of
business, of the Material Obligors, payable in cash, as Determining
Lenders in their sole discretion approve for inclusion in the
calculation of the Borrowing Base.
e. Accounts receivable attributable to Pool Alaska's
right to payment for goods or services sold by Pool Alaska in the
ordinary course of its business to KUUKPIK/Pool Arctic Alaska, an
Alaska general partnership (the "POOL ALASKA JOINT VENTURE") and
carried on Pool Alaska's books in accordance with generally accepted
accounting principles which meet the criteria of this SECTION 1.2, so
long as (a) the third-party obligations to the Pool Alaska Joint
Venture which give rise to such accounts receivable remain subject to
a first and prior perfected security interest under the Joint Venture
Pledge Agreement dated as of February 28, 1995, from the Pool Alaska
Joint Venture to NationsBank of Texas, N.A., as Agent for the Lenders
and as collection agent for KUUKPIK Corporation (as amended or
modified, the "JV PLEDGE AGREEMENT"), (b) the Consent and
Intercreditor Agreement dated as of February 28, 1995, among KUUKPIK
Corporation, the Lenders, and NationsBank of Texas, N.A., as Agent for
the Lenders and as collection agent for KUUKPIK Corporation (as
amended or modified, the "POOL ALASKA INTERCREDITOR AGREEMENT")
remains in full force and effect; and (c) no default has occurred and
is
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continuing under (i) the KUUKPIK/Pool Arctic Alaska Joint Venture
Agreement dated as of September 24, 1992, (ii) the JV Pledge
Agreement, or (iii) the Pool Alaska Intercreditor Agreement.
1.3 Advance Procedures. No later than 11:00 a.m. on the date
which is three (3) Business Days prior to the date an Advance is requested (if
the Designated Rate for the Advance is a LIBOR Rate), or, otherwise, on the
date an Advance is requested, Borrower shall have faxed or delivered to Agent a
Request for Advance or LC (and Borrower shall deliver an original of such
Request for Advance or LC to Agent no later than the first Business Day
following such Advance). Agent shall promptly notify each Lender of its
receipt of a Request for Advance or LC under SECTION 6.2. Each Lender shall
remit its Commitment Percentage of each requested Advance to Agent's principal
office in Houston, Texas, in funds that are available for immediate use by
Agent by 12:00 Noon on the date the Advance is requested to be made. Subject
to receipt of those funds, Agent shall (unless to its actual knowledge any of
the applicable conditions precedent have not been satisfied by Borrower or
waived by Determining Lenders) make those funds available to Borrower as
directed in the Request for Advance or LC. Absent contrary written notice from
a Lender, Agent may assume that each Lender has made its Commitment Percentage
of the requested Advance available to Agent on the date the Advance is to be
made, and Agent may, in reliance upon that assumption (but is not required to),
make available to Borrower a corresponding amount. If a Lender fails to make
its Commitment Percentage of any requested Advance available to Agent on the
applicable date, Agent may recover the applicable amount on demand (a) from
that Lender, together with interest at the Federal Funds Rate during the period
commencing on the date the amount was made available to Borrower by Agent and
ending on (but excluding) the date Agent recovers the amount from that Lender,
or (b) if that Lender fails to pay its amount upon demand, then from Borrower,
together with interest at an annual interest rate equal to the rate applicable
to the requested Advance during the period commencing on the date the amount
was made available to Borrower by Agent and ending on (but excluding) the date
Agent recovers the amount from Borrower. No Lender is responsible for the
failure of any other Lender to make its Commitment Percentage of any Advance,
but the failure of one Lender to make its Commitment Percentage of an Advance
shall not preclude Borrower from requesting additional Advances from the
remaining Lenders under this SECTION 1.3, so long as the Principal Debt for any
Lender never exceeds its Commitment.
1.4 LC Agreements. Notwithstanding anything to the contrary in
any LC Agreement:
a. The commission and other amounts payable with respect
to each LC are as provided in this Agreement, drafts under any LC are
deemed to be Advances subject to the interest rates and payment terms
of the Notes (and are payable upon demand if Lenders have accelerated
payment of the Obligation), and only the events specified in this
Agreement as Defaults constitute a default thereunder;
b. Issuing Lender shall (i) make payment upon demand
under an LC unless it appears that demand on its face does not comply
with the terms of the LC, regardless of whether any Default has
occurred or whether either contracting party has performed the terms
of any other agreement, and (ii) not be liable for the Company's
obligations under any other agreement, document, or instrument;
c. Neither Agent, Issuing Lender, nor any other Lender
is responsible for (i) the use which may be made of any LC or for any
acts or omissions of any beneficiary, or (ii) any breach of contract
by any beneficiary of any LC; and
d. Although referenced in any LC, terms of any
particular agreement or other obligation to the beneficiary are not in
any manner incorporated herein.
e. Immediately upon Issuing Lender's issuance of an LC,
it is deemed to have sold and transferred to each other Lender -- and
each other Lender is deemed irrevocably and unconditionally to have
purchased and received from Issuing Lender -- without recourse or
warranty, an undivided interest and participation -- to the extent of
each other Lender's Commitment Percentage -- in the LC and all
applicable Rights of Issuing Lender in the LC. Issuing Lender shall
provide a copy of each LC to each other Lender promptly after
issuance.
f. Issuing Lender shall exercise and give the same care
and attention to each LC it issues as it gives to its other letters of
credit it issues. Each Lender and Borrower agree that, in paying any
draft or draw under any LC, Issuing Lender has no responsibility to
obtain any document (other than any documents expressly required by
the respective LC) or to verify the validity of any document or the
authority of any Person delivering it.
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1.5 Reduction or Cancellation. Borrower may, upon five Business
Days prior notice to Agent, effective as of the date specified in that notice
and with no Right of reinstatement, either terminate in whole or reduce in part
the total Commitments. Any partial reduction must be (a) at least $500,000 and
any increment of $100,000 and (b) proportionate for each Lender according to
its Commitment Percentage.
SECTION 2. TERMS OF PAYMENT.
2.1 Notes; Payments. Advances and interest thereon shall be
evidenced by the Notes, one payable to each Lender in the stated principal
amount of its Commitment. Interest accruing at a LIBOR Rate shall be due and
payable on the last day of each Interest Period and, if such Interest Period
exceeds three months, then accrued interest is also due and payable on the date
three months after the commencement of such Interest Period. Interest accruing
at the Floating Rate shall be due and payable on the last Business Day of each
calendar quarter and on the Termination Date. All Principal Debt shall be due
and payable on the Termination Date. Each payment or prepayment of the
Obligation must be paid at Agent's principal office in funds available for
Agent's immediate use by 12:00 Noon on the day due. Borrower may delay any
payment due on a non-Business Day until the next succeeding Business Day, but
interest shall continue to accrue until the payment is made. Agent shall pay
to each Lender any payment or prepayment to which that Lender is entitled on
the same day Agent receives the funds from Borrower if Agent receives the
payment or prepayment before 12:00 Noon, and otherwise before 12:00 Noon on the
following Business Day. If and to the extent that Agent does not make payments
to Lenders when due, unpaid amounts shall accrue interest at the Federal Funds
Rate from the due date until (but not including) the payment date.
2.2 Interest. Advances shall bear interest at an annual rate
equal to the lesser of (a) the Designated Rate, and (b) the Highest Lawful
Rate. The rate shall change, without notice to Borrower, upon the effective
date of each change in the Prime Rate (if a Floating Rate is in effect) or the
Highest Lawful Rate. If at any time the rate is limited to the Highest Lawful
Rate, any subsequent reductions in the Designated Rate shall not reduce the
rate below the Highest Lawful Rate until the total amount of interest paid and
accrued equals the amount of interest which would have accrued if the
Designated Rate had at all times been in effect. In the event that at maturity
(stated or by acceleration), or at final payment of any Note, the total amount
of interest paid and accrued is less than the amount of interest which would
have accrued if the Designated Rate had at all times been in effect, then, at
such time and to the extent permitted by Law, Borrower shall pay to the Lender
holding that Note an amount equal to the difference between (x) the lesser of
either the amount of interest which would have accrued if the Designated Rate
had at all times been in effect or the amount of interest which would have
accrued if the Highest Lawful Rate had at all times been in effect and (y) the
amount of interest actually paid or accrued on that Note. All past-due
principal and accrued interest thereon shall at Determining Lenders' option
bear interest from maturity (stated or by acceleration) until paid at the
Default Rate. Interest calculations may be made ten (or less) days prior to
any due date. If there is an adjustment in the interest rate, in accordance
with the terms hereof during such ten-day period, then Borrower shall, on
demand, pay to Lenders any underpayment or Lenders shall pay to Borrower any
overpayment resulting from any adjustment during such period.
2.3 Mandatory and Voluntary Prepayments. If a Borrowing
Deficiency occurs (a) because of Lenders' exclusion under SECTION 1.2(A)(I) of
any receivables then included in the Borrowing Base, then Borrower shall prepay
such Borrowing Deficiency within 30 days, and (b) for any other reason then
Borrower shall prepay such Borrowing Deficiency on demand. Borrower may
otherwise prepay the Principal Debt from time to time, without penalty, and,
prior to the Termination Date, may reborrow same, subject to the following
conditions:
a. The amount to be re-borrowed, together with the
then-existing Principal Debt, may never exceed the limitations in
SECTION 1.1;
b. Agent must receive Borrower's written payment notice
by 10:00 a.m. on the third Business Day preceding the date of payment
if a LIBOR Rate is in effect with respect to any portion of the amount
to be prepaid, which notice shall specify the payment date and the
amount of the prepayment, and which shall constitute an irrevocable
and binding obligation of Borrower to make such prepayment on the
designated date;
c. each partial prepayment of an Advance bearing
interest at a LIBOR Rate must be in a minimum amount of at least
$500,000 or a greater integral multiple of $500,000;
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d. all accrued interest on an Advance bearing interest
at a LIBOR Rate being prepaid must also be paid in full on the date of
payment; and
e. Borrower shall pay any related Funding Loss upon
demand.
This Agreement shall not be deemed to be terminated or canceled prior to the
Termination Date solely because the Principal Debt may from time to time be
paid in full. Borrower shall immediately prepay all of the Obligation upon the
acquisition by any Person of a beneficial ownership of 50% or more of the
outstanding shares of common stock of PESCO.
2.4 Existing Credit Agreement. On the Closing Date, Borrower
shall pay to Agent -- for the appropriate account of Agent and each Lender --
all accrued and unpaid interest and fees due to Agent or any Lender under or in
connection with the Existing Credit Agreement through the Closing Date. Agent
shall promptly remit to each Lender the amount of those payments due to it.
2.5 Order of Application. Except as otherwise provided in the
Loan Papers, all payments and prepayments of the Obligation -- including,
without limitation, proceeds from the exercise of any Rights under the Loan
Papers or proceeds of any of the Collateral -- shall be applied by Lenders in
such order (a) if no Default or Potential Default has occurred and is
continuing and if Borrower gives written directions regarding application of a
payment or prepayment, then in accordance with such directions, or (b)
otherwise, subject to SECTION 9.1, as Determining Lenders may elect in their
sole discretion.
2.6 Capital Adequacy. If, with respect to any Advance or LC, any
Law, rule, regulation, or treaty now existing or hereafter promulgated
regarding capital adequacy, or any adoption thereof, ruling thereon, change
therein, or interpretation thereof now existing or hereafter made by any
Tribunal or central bank regarding capital adequacy, or compliance by Agent or
any Lender with any request, directive, or requirement now existing or
hereafter imposed by any Tribunal or central bank regarding capital adequacy
(whether or not having the force of Law) shall result in Agent or that Lender
incurring a reduction in the rate of return on its capital as a consequence of
its obligations hereunder to a level below that which it otherwise could have
achieved by an amount deemed by it to be material (and it may, in determining
such amount, utilize such assumptions and allocations of costs and expenses as
it shall deem reasonable and may use any reasonable averaging or attribution
method), then, Agent or that Lender (through Agent) may, from time to time,
notify Borrower and deliver to Borrower a certificate setting forth in
reasonable detail the calculation of the amount necessary to compensate it for
the reductions incurred, which certificate shall be conclusive absent manifest
error. Borrower shall promptly pay such amount to Agent or that Lender upon
demand. If any subsequent revision or amendment of any such Law, rule,
regulation or treaty (or of any adoption thereof, ruling thereon, change
therein, or interpretation thereof) shall result in a reversal of such
reductions, Agent or such Lender (as applicable) shall refund such amounts to
Borrower (to the extent reversed and realized by it).
2.7 Foreign Lenders. Each Lender that is organized under the Laws
of any jurisdiction other than the U.S. or a state thereof (a) represents to
Agent and Borrower that (i) no Taxes are required to be withheld by Agent or
Borrower with respect to any payment to be made to it in respect of the
Obligation and (ii) it has furnished to Agent and Borrower two duly completed
copies of U.S. Internal Revenue Service Form 4224, Form 1001, Form W-8, or any
other Tax form acceptable to Agent (wherein it claims entitlement to complete
exemption from U.S. federal withholding Tax on all interest payments under the
Loan Papers), and (b) covenants to (i) provide Agent and Borrower a new Tax
form upon the expiration or obsolescence of any previously delivered form
according to Law, duly executed and completed by it, and (ii) comply from time
to time with all Laws with regard to the U.S. withholding Tax exemption. If
any of the foregoing is not true or the applicable forms are not provided, then
Borrower and Agent (without duplication) may deduct and withhold from interest
payments under the Loan Papers United States federal income tax at the full
rate applicable under the IRC.
2.8 Sharing of Payments, Etc.. If any Lender obtains any payment
(whether voluntary, involuntary, or otherwise, including, without limitation,
as a result of exercising its Rights under SECTION 2.9) that exceeds its
Commitment Percentage of the total Commitments, then that Lender shall purchase
from the other Lenders participations that will cause the purchasing Lender to
share the excess payment Pro Rata with each other Lender. If all or any
portion of any excess payment is subsequently recovered from the purchasing
Lender, then the purchase shall be rescinded and the purchase price restored to
the extent of the recovery. Borrower agrees that any Lender purchasing a
participation from another Lender under this section may, to the fullest extent
permitted by Law, exercise all of its Rights of payment (including the Right of
offset)
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with respect to that participation as fully as if that Lender were the direct
creditor of Borrower in the amount of that participation.
2.9 Offset. If a Default exists, each Lender is entitled to
exercise (for the benefit of all Lenders in accordance with SECTION 2.8) the
Rights of offset and banker's Lien against each and every account and other
property, or any interest therein, that any Obligor may now or hereafter have
with, or which is now or hereafter in the possession of, that Lender to the
extent of the full amount of the Obligation owed to it.
2.10 Basis Unavailable or Inadequate for Determining LIBOR Rate.
If, on or before any date when a LIBOR Rate is to be determined, Agent or any
Lender determines that the basis for determining the applicable rate is not
available or that the resulting rate does not accurately reflect the cost to
Lenders of funding at that rate, then Agent shall promptly notify Borrower and
Lenders of that determination (which is conclusive and binding on Borrower
absent manifest error) and the Principal Debt shall bear interest at the
Floating Rate. Until Agent notifies Borrower that those circumstances no
longer exist, Lenders' commitments under this Agreement to fund under a LIBOR
Rate will be suspended.
2.11 Additional Costs. If (i) any Law imposes, modifies, or deems
applicable (or if compliance by any Lender with any requirement of any Tribunal
results in) any requirement that any reserves (including, without limitation,
any marginal, emergency, supplemental or special reserves) be maintained, and
(ii) those reserves reduce any sums receivable by that Lender under this
Agreement with respect to any portion of the Principal Debt bearing interest at
a LIBOR Rate or increase the costs incurred by that Lender in advancing or
maintaining any portion of the Principal Debt bearing interest at a LIBOR Rate,
then (unless the effect is already reflected in the rate of interest then
applicable under this Agreement) that Lender (through Agent) shall deliver to
Borrower a certificate setting forth in reasonable detail the calculation of
the amount necessary to compensate it for its reduction or increase (which
certificate is conclusive and binding absent manifest error), and Borrower
shall promptly pay that amount to that Lender upon demand. The provisions of
and undertakings and indemnification set forth in this paragraph shall survive
the satisfaction and payment of the Obligation and termination of this
Agreement.
2.12 Change in Laws. If any Law makes it unlawful for any Lender
to make or maintain any portion of the Principal Debt bearing interest at a
LIBOR Rate, then that Lender shall promptly notify Borrower and Agent, and such
portion of Principal Debt shall be converted to the Floating Rate as of the
date of notice, and Borrower shall pay any related Funding Loss.
2.13 Funding Loss. BORROWER AGREES TO INDEMNIFY EACH LENDER
AGAINST, AND PAY TO IT UPON DEMAND, ANY FUNDING LOSS OF THAT LENDER. When any
Lender demands that Borrower pay any Funding Loss, that Lender shall deliver to
Borrower and Agent a certificate setting forth in reasonable detail the basis
for imposing Funding Loss and the calculation of the amount, which calculation
is conclusive and binding absent manifest error. The provisions of and
undertakings and indemnification set forth in this paragraph shall survive the
satisfaction and payment of the Obligation and termination of this Agreement.
2.14 Interest Periods. When Borrower requests that any Advance
bear interest at a LIBOR Rate, Borrower may elect the applicable interest
period (each an "INTEREST PERIOD"), which may be, at Borrower's option, one,
two, three or six months, subject to the following conditions: (a) the initial
Interest Period commences on the Closing Date or applicable conversion date,
and each subsequent Interest Period commences on the day when the next
preceding applicable Interest Period expires; (b) if any Interest Period begins
on a day for which there exists no numerically corresponding Business Day in
the calendar month at the end of the Interest Period ("Ending Calendar Month"),
then the Interest Period ends on the next succeeding Business Day of the Ending
Calendar Month, unless there is no succeeding Business Day in the Ending
Calendar Month in which case the Interest Period ends on the next preceding
Business Day of the Ending Calendar Month; (c) no Interest Period for any
Advance may extend beyond the Termination Date; (d) there may not be in effect
at any one time more than two Interest Periods; and (e) each Advance bearing
interest at a LIBOR Rate must be at least $500,000 or an integral multiple of
$100,000 in excess thereof.
2.15 Conversions. Borrower may (a) on the last day of the
applicable Interest Period convert an Advance bearing interest at a LIBOR Rate
to the Floating Rate, (b) at any time convert an Advance bearing interest at
the Floating Rate to a LIBOR Rate, and (c) elect a new Interest Period for any
Advance bearing interest at a LIBOR Rate. Any such conversion is subject to
the dollar limits and denominations of SECTION 2.14(E) and may be accomplished
by delivering a
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Conversion Request, in the form of EXHIBIT J hereto, to Agent no later than
10:00 a.m. (i) on the third Business Day before the conversion date for
conversion to a LIBOR Rate and the last day of the Interest Period, for the
election of a new Interest Period, and (ii) one Business Day before the last
day of the Interest Period for conversion to a Floating Rate. Absent
Borrower's notice of conversion or election of a new Interest Period, any
Advance bearing interest at a LIBOR Rate shall be converted to a Floating Rate
when the applicable Interest Period expires.
SECTION 3. FEES. The following fees represent compensation for services
rendered and to be rendered separate and apart from the extension of credit and
do not constitute compensation for the use, detention, or forbearance of money,
and the obligation of Borrower to pay each fee shall be in addition to, and not
in lieu of, the obligation of Borrower to pay interest. All fees shall be
non-refundable when due and shall, to the fullest extent permitted by Law, bear
interest, if not paid when due, at the Default Rate and shall be secured by all
of the Collateral. All payments of fees shall be calculated on the basis of
actual number of days (including the first day but excluding the last day)
elapsed, but computed as if each calendar year consisted of 360 days.
3.1 Agent Fees. Borrower shall pay to Agent, solely for its own
account, the quarterly agent fee described in the letter agreement between
Borrower and Agent dated as of August 15, 1994.
3.2 LC Fees. Upon, and as a condition precedent to, the issuance
of each LC, Borrower shall immediately and without demand pay to Agent an
issuance fee equal to the greater of 1.0% per annum of the face amount of the
LC or $250.
3.3 Commitment Fees. Borrower shall pay to Agent for the Pro Rata
account of Lenders:
a. a fee equal to 0.5% per annum of the excess of the
lesser of the then-current Borrowing Base or Commitment over the
Principal Debt, such fee to be calculated and paid on the last
Business Day of each calendar quarter, beginning June 30, 1994, and
calculated and paid on the Termination Date; and
b. a fee equal to 0.375% per annum of the excess, if
any, of the Commitment over the then-current Borrowing Base, such fee
to be calculated and paid on the last Business Day of each calendar
quarter, beginning June 30, 1994, and calculated and paid on the
Termination Date.
SECTION 4. SECURITY.
4.1 Guaranties. Each Obligor other than Borrower shall have
executed the Guaranty unconditionally guaranteeing to NationsBank and its
successors and assigns full payment and performance of the Obligation under the
Existing Credit Agreement. Upon Agent's demand, Borrower shall cause each
future Obligor to execute and deliver to Agent for the benefit of Lenders a
guaranty -- that unconditionally guarantees the full payment and performance of
the Obligation -- in substantially the form of EXHIBIT F.
4.2 Collateral. NationsBank and each Obligor shall have executed
the Security Agreement creating security interests in favor of NationsBank and
its successors and assigns in, among other things, the present and future items
and types of property described below (whether now or in the future owned by an
Obligor, the "COLLATERAL") to secure full payment and performance of (i) the
Obligation under the Existing Credit Agreement and the Term Loan Agreement, and
(ii) NationsBank's net exposure on all foreign exchange contracts between any
Company and NationsBank. Upon Agent's demand, Borrower shall cause each future
Obligor to execute and deliver to Agent for the benefit of Lenders (x) a
security agreement that creates a security interest in the Collateral to secure
the full payment and performance of the Obligation, in substantially the form
of EXHIBIT G, and (y) all financing statements requested by Agent in connection
with that security agreement. The items and types of property referred to
above include:
a. All present and future accounts of each Obligor,
including, without limitation, all accounts receivable and all other
rights of each Obligor to payment for goods sold or leased or for
services rendered, and all cash and noncash proceeds, increases,
profits, combinations, reclassifications, substitutions, and
replacements of or for all or any part of the foregoing;
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b. All present and future deposit accounts, restricted
and unrestricted cash collateral accounts, and cash equivalent
instruments (including, without limitation, certificates of deposit)
of each Obligor now or hereafter held by or specifically assigned or
granted to Agent or Lenders or Agent on behalf of Lenders (including,
without limitation, the cash collateral account described in SECTION
4.3, together with all present and future funds on deposit therein and
investments therefrom);
c. All present and future Rights, titles, and interests
any Obligor may have or be or become entitled to under or by virtue of
the Contingent Support Agreement and all cash and noncash proceeds,
increases, profits, combinations, reclassifications, substitutions,
and replacements of or for all or any part of the foregoing; and
d. The present and future shares of the capital stock
now or hereafter issued by the following corporations to any Obligor,
up to the percentage set forth below, and the certificates
representing such shares, and all dividends, cash, instruments, and
other property from time to time received, receivable, or otherwise
distributed in respect of or in exchange for any such shares, and
increases, proceeds, combinations, reclassifications, substitutions,
and replacements of or for all or any part of the foregoing:
100% Each Obligor other than PESCO
66% Each consolidated Subsidiary of Borrower
which is not an Obligor.
e. All items or types of property, wherever located,
whether now owned or hereafter acquired by Pool Alaska.
f. Thirteen platform rigs presently operating in the
Gulf of Mexico.
4.3 Cash Collateral Account. Obligors shall maintain a cash
collateral account at NationsBank (which shall not be an operating account of
any Company) and cause all domestic accounts receivable of the Obligors
included in the Borrowing Base to be directly paid to such cash collateral
account. Obligors shall execute such agreements and instructions appropriate
to permit Agent unilaterally to direct all payments on domestic accounts
receivable of the Obligors included in the Borrowing Base to be deposited
directly into such cash collateral account. Obligors hereby grant to Agent, on
behalf of Lenders, a first and prior security interest in such cash collateral
account and all checks, drafts, and other items ever received by NationsBank
for deposit therein. Unless withdrawn as hereinafter permitted, funds
deposited in the cash collateral account in excess of $25,000 will be applied
by Agent as a prepayment of the Obligation. Borrower may withdraw funds from
the cash collateral account, unless either or both of the following shall have
occurred: (a) a Default or Potential Default exists; or (b) Determining Lenders
shall have determined, in their sole judgment, that it is reasonably likely
that a Borrowing Deficiency will occur (in which latter event Obligors may
withdraw from the cash collateral account funds in excess of 125% of the
Borrowing Deficiency Determining Lenders have determined to exist).
Notwithstanding the foregoing, GPC and its Subsidiaries may continue to
maintain bank accounts number 12336-20584 and 14183-50015 with Bank of America,
N.T. and S.A.; provided that all accounts receivable and proceeds therefrom
included in the Borrowing Base are transferred the following Business Day via
an automated clearing house (or other similar transfer method) to the Obligors'
cash collateral account at NationsBank.
4.4 JV Pledge Agreement. The Pool Alaska Joint Venture shall have
executed the JV Pledge Agreement described in SECTION 1.2(E), creating security
interests in favor of the Agent in the "Collateral," as defined in the JV
Pledge Agreement.
SECTION 5. REPRESENTATIONS AND WARRANTIES. Borrower represents and
warrants to Agent and Lenders as follows:
5.1 Corporate Existence and Authority.
a. Each Material Obligor and (except where a failure to
do so would not, individually or in the aggregate, be reasonably
likely to have a Material Adverse Effect) each other Company is a
corporation duly organized, validly existing, and in good standing
under the Laws of its jurisdiction of incorporation, as reflected in
SCHEDULE 5.1; and
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b. PESCO and each of its consolidated Subsidiaries (i)
is duly qualified to transact business and is in good standing as a
foreign corporation in each jurisdiction where the nature and extent
of its business and properties require the same (such jurisdictions
being identified on SCHEDULE 5.1), except for the Liquidating
Companies and except where failure to be qualified or in good standing
would not, individually or in the aggregate, be reasonably likely to
have a Material Adverse Effect, (ii) possesses all requisite
authority, power, licenses, permits, and franchises to conduct its
business as now being conducted (except for the Liquidating Companies
[which it is contemplated will be liquidated and dissolved and none of
which now have or will have any material assets or operations] and
except where failure to so possess would not, individually or in the
aggregate, be reasonably likely to have a Material Adverse Effect),
and (iii) possesses all requisite authority, licenses, power, permits,
and to execute, deliver, and comply with the terms of the Loan Papers
to which it is contemplated in this Agreement to be or to become
party, all which have been duly authorized and approved by all
necessary corporate action and for which no approval or consent of any
Person or Tribunal is required which has not been obtained.
5.2 Ownership of Subsidiaries and Names.
a. All of the outstanding shares of capital stock of
PESCO's consolidated Subsidiaries are duly authorized, validly issued,
fully paid and nonassessable, and none thereof was issued in violation
of any preemptive or preferential Rights of any Person.
b. Each stockholder shown on SCHEDULE 5.2 is the true
and lawful owner, of record and beneficially (other than nominee
shares issued by foreign Subsidiaries in nominal amounts to comply
with the Laws of jurisdictions of incorporation of foreign
Subsidiaries), of the shares shown beside such stockholder's name,
free and clear of any Liens, restrictions, claims, or Rights of
another (except any arising under the Loan Papers or disclosed on
SCHEDULE 5.2), and none of such shares is subject to any warrant,
option, or other Right of any Person to acquire the same or subject to
any restriction on transfer thereof except for restrictions imposed by
securities Laws.
c. Except as disclosed on SCHEDULE 5.2, there are no
authorized or outstanding warrants, options, or other Rights to
acquire from any of PESCO's consolidated Subsidiaries or any
stockholder thereof any shares of capital stock or other investment
securities of PESCO's consolidated Subsidiaries or any securities
convertible into or exchangeable for such shares.
d. To the best knowledge of Borrower's executive
officers, except as disclosed on SCHEDULE 5.2, no Obligor has
transacted business under any other corporate or trade name, nor has
been a party to any merger, combination, or consolidation, or acquired
all or substantially all of the stock or accounts receivable of any
Person in the last five years.
5.3 Relationship with Agent and Lenders. To the best knowledge of
Borrower's executive officers, no director, officer, manager, or employee of
PESCO or any of its consolidated Subsidiaries is a director, officer, or
employee of, or has any substantial interest in, Agent or any Lender. No
Person who may be deemed to have "control" of PESCO or any of its consolidated
Subsidiaries is an "executive officer", "director", or "principal shareholder"
of Agent or any Lender. Terms appearing in quotations in this section are used
as defined in Section 215.2 of Regulation O of the Board of Governors of the
Federal Reserve System, as amended.
5.4 Financial Statements. The Current Financials were prepared in
accordance with GAAP and fairly present the consolidated and consolidating (if
applicable) financial conditions and the results of operations of Borrower and
its consolidated Subsidiaries as of, and for the portion of the fiscal year
ending on, the date or dates thereof. There were no material liabilities,
direct or indirect, fixed or contingent, of Borrower or any of its consolidated
Subsidiaries on the date or dates of the Current Financials which are not
reflected therein or in the notes thereto. Except for transactions directly
related to, or specifically contemplated by, the Loan Papers and transactions
heretofore disclosed in writing to Lenders, there have been no material adverse
changes in the consolidated financial condition of Borrower from those shown in
the Current Financials and the notes thereto between such date or dates and the
date hereof, nor has PESCO or any of its consolidated Subsidiaries incurred any
material liability, direct or indirect, fixed or contingent, except as
disclosed on SCHEDULE 5.12.
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5.5 Compliance with Laws and Documents. Except as disclosed on
SCHEDULE 5.5:
a. Neither PESCO nor any of its consolidated
Subsidiaries is, nor will the execution, delivery, and the performance
of and compliance with the terms of the Loan Papers cause any of them
to be, in violation of any Laws (including, without limitation,
Environmental Laws), other than such violations which would not,
individually or in the aggregate, be reasonably likely to cause a
Material Adverse Effect; and
b. Neither any Material Obligor nor (except where the
same would not, individually or in the aggregate, be reasonably likely
to cause a Material Adverse Effect) any other Company is, nor will the
execution, delivery, and the performance of and compliance with the
terms of the Loan Papers cause any of them to be, in violation of
their respective bylaws or charter.
5.6 Litigation. As of the date of this Agreement, except (i) as
set forth on SCHEDULE 5.6, and (ii) claims or outstanding or unpaid judgments
which do not exceed $500,000 individually (and the estimated maximum individual
exposure under which does not exceed $100,000) or $3,000,000 collectively:
a. No Material Obligor is involved in, nor is any
executive officer of any Material Obligor aware of the threat of, any
Litigation; there are no outstanding or unpaid judgments against any
Material Obligor; and none of the Litigation described on SCHEDULE 5.6
would, individually or in the aggregate, be reasonably likely to have
a Material Adverse Effect; and
b. No other Company (i) is involved in, nor is Borrower
or any such other Company aware of the threat of, any Litigation which
would, individually or in the aggregate, be reasonably likely to have
a Material Adverse Effect, or (ii) has any outstanding or unpaid
judgments against it which would, individually or in the aggregate, be
reasonably likely to cause a Material Adverse Effect.
5.7 Taxes. Except as set forth on SCHEDULE 5.7, all Tax returns
of the Material Obligors and (except where the same would not, individually or
in the aggregate, be reasonably likely to have a Material Adverse Effect) (i)
all Tax returns of the other Companies required to be filed have been filed,
and (ii) all Taxes imposed upon PESCO or any of its consolidated Subsidiaries
have been paid, other than Taxes for which the criteria for Permitted Liens
have been satisfied.
5.8 Government Regulation. Neither PESCO nor any of its
consolidated Subsidiaries nor any Affiliate of the foregoing is subject to
regulation under the Public Utility Holding Company Act of 1935, the Federal
Power Act, the Investment Company Act of 1940 (as any of the preceding acts
have been amended), or any other Law (other than Regulation X of the Board of
Governors of the Federal Reserve System) which regulates the incurrence of
Debt.
5.9 Employee Benefit Plans. No employee benefit plan (as defined
in the IRC and ERISA) of PESCO or any of its consolidated Subsidiaries has
incurred an accumulated funding deficiency in an amount sufficient to be
reasonably likely to have a Material Adverse Effect. No prohibited transaction
or reportable event (as such terms are defined in ERISA) has occurred which
would, individually or in the aggregate, be reasonably likely to have a
Material Adverse Effect. Neither PESCO nor any of its consolidated
Subsidiaries (a) has incurred material liability to the PBGC in connection with
any such plan, or (b) has withdrawn in whole or in part from participation in a
multi-employer pension plan (as defined in ERISA).
5.10 Purpose of Credit. The proceeds of Advances and LCs (a) are
not and will not be used directly or indirectly for the purpose of purchasing
or carrying, or for the purpose of extending credit to others for the purpose
of purchasing or carrying, any "margin stock" as that term is defined in
Regulation U of the Board of Governors of the Federal Reserve System, as
amended, and (b) will be used (i) subject to the restrictions against certain
transactions with Companies that are not Material Obligors, for other temporary
working capital requirements of Borrower's consolidated operations, (ii) to
enable Material Obligors to issue guarantees and bid and performance bonds on
behalf of themselves or PESCO and its consolidated and unconsolidated
Subsidiaries or Joint Ventures in the ordinary course of business, and (iii)
such other purposes as may be approved by Lenders.
5.11 Properties; Liens. Except as disclosed on SCHEDULE 5.11 and
except for Permitted Liens, there is no Lien on any asset of any Material
Obligor or (except where the same would not, individually or in the aggregate,
reasonably be expected to cause a Material Adverse Effect) any other Company.
Except as disclosed on SCHEDULE 5.5, neither PESCO
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nor any of its consolidated Subsidiaries knows of any condition or
circumstance, such as the presence of asbestos or other Hazardous Substances,
that would, individually or in the aggregate, be reasonably likely to have a
Material Adverse Effect.
5.12 Material Agreements. Except for the Loan Papers and the
Material Agreements described on SCHEDULE 5.12 (or as hereafter disclosed to
Lenders in writing), there are no other Material Agreements of PESCO or any of
its consolidated Subsidiaries that would, upon a default thereunder, be
reasonably likely, individually or in the aggregate, to cause a Material
Adverse Effect; neither PESCO nor any of its consolidated Subsidiaries is, nor
will the execution, delivery, and performance of and compliance with the terms
of the Loan Papers cause PESCO or any of its consolidated Subsidiaries to be,
in default (nor has any potential default occurred) under any Material
Agreement described on SCHEDULE 5.12 (or as hereafter disclosed to Lenders in
writing), other than such defaults or potential defaults which would not,
individually or in the aggregate, be reasonably likely to cause a Material
Adverse Effect.
5.13 Solvency. After giving effect to the transactions
contemplated hereunder, each Material Obligor will be Solvent. After giving
effect to the transactions contemplated hereunder, PESCO and all of its
consolidated Subsidiaries collectively will be Solvent.
5.14 Foreign Subsidiaries. As to each Company incorporated,
chartered, organized, or otherwise created under foreign Laws, each such
Company is (a) a "Controlled Foreign Corporation" within the meaning of Section
957 of the IRC, and (b) no material portion of the earnings and profits of such
Company is expected by Borrower to be, prior to the Termination Date,
includable for United States federal income tax purposes in the unconsolidated
or consolidated gross income in an aggregate amount for all such Companies
which would be greater than the tax losses (including net operating loss carry
forward(s)) of PESCO or Borrower during such period (i) by reason of the
receipt of actual distributions made by such Company in the ordinary course of
its business, or (ii) provided such Company is not treated for United States
federal income tax purposes under Section 1.956-2(c) of the United States
Income Tax Regulations as holding Borrower's obligations under any Loan Paper,
by reason of the Subpart F rules contained in Sections 951 through 964 of the
IRC and regulations thereunder.
5.15 General. There are no material facts or conditions relating
to the Loan Papers, any of the Property of PESCO or any of its consolidated
Subsidiaries, or the individual or combined financial conditions and businesses
of PESCO or its consolidated Subsidiaries which would, individually or
collectively, be reasonably likely to cause a Material Adverse Effect, and
which have not been related, in writing, to Agent and Lenders; and the Loan
Papers and all Financial Statements of PESCO or any of its consolidated
Subsidiaries and those writings identified as items 1, 2, 3 and 4 on SCHEDULE
6, which were exhibited or delivered to Agent and Lenders, are genuine and in
all material respects what they purport and appear to be.
SECTION 6 CONDITIONS PRECEDENT.
6.1 Initially. The conversion, amendment and restatement of the
Existing Credit Agreement described in this Agreement's recitals and SECTION
1.1 are not effective until -- and no Lender is obligated to make any Advance
or issue any LC until -- Agent has received each document and other item
described on SCHEDULE 6.
6.2 Each Advance and LC. No Lender is obligated to make any
Advance or issue any LC unless (a) no Borrowing Deficiency exists or will exist
as a result thereof, (b) no later than Noon on the date on which the requested
Advance or LC is to be funded or issued, Borrower shall have faxed to Agent a
copy of a properly completed Request for Advance or LC containing true and
correct certifications (and Borrower shall deliver an original of the Request
for Advance or LC to Agent no later than the first Business Day following
funding or issuance of the requested Advance or LC), (c) in the case of an LC,
Borrower and each other Company for whose account the LC is to be issued
delivers to Agent and the Issuing Lender a properly completed LC Agreement, (d)
the making of that Advance or issuance of that LC is permitted by Law, and (e)
if reasonably requested by Agent, PESCO or any of its appropriate consolidated
Subsidiaries have delivered to Agent evidence substantiating any of the matters
contained in this Agreement which are necessary to enable Borrower to qualify
for that Advance or LC.
6.3 Materiality and Waiver. Each condition precedent in this
Agreement is material to the contemplated transactions, and time is of the
essence. Lenders may make any Advance and/or an Issuing Lender may issue any
LC without all conditions precedent being satisfied, but that is not a waiver
of the requirement that each condition precedent be satisfied
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as a prerequisite for any subsequent Advance or LC, unless Determining Lenders
specifically permanently waive the condition precedent in writing.
SECTION 7. COVENANTS. For as long as any Lender is committed under this
Agreement to make Advances or issue LCs and until the Obligation is fully paid
and performed, -- unless Borrower first obtains a written consent to the
contrary from Agent on behalf of Determining Lenders -- PESCO and each of its
consolidated Subsidiaries jointly and severally covenant and agree with Agent
and Lenders as follows:
7.1 Use of Proceeds. LCs and proceeds of Advances shall be used
only as represented in SECTION 5.10.
7.2 Books and Records. PESCO and each of its consolidated
Subsidiaries shall keep proper and complete books, records, and accounts in
accordance with GAAP and shall permit Agent or any Lender, upon reasonable
prior notice, to inspect the same during regular business hours and make and
(at Lenders' expense in respect of costs paid to third parties during each
calendar year in excess of $1,000 in the aggregate) take away copies.
7.3 Items to be Furnished. Borrower shall cause the following to
be furnished to Agent:
a. Within 120 days after the last day of each fiscal
year of PESCO, Financial Statements showing the consolidated and
consolidating (if applicable) financial conditions and results of
operations of PESCO as of, and for the year ended on, such last day,
accompanied by (i) the opinion, without material qualification, of
Deloitte & Touche or another firm of independent certified public
accountants acceptable to Determining Lenders, based on an audit using
generally accepted auditing standards, that the consolidated portions
of such Financial Statements were prepared in accordance with GAAP and
present fairly, in all material respects, the consolidated financial
condition and results of operations of PESCO, and (ii) a Financial
Report Certificate with respect to such Financial Statements.
b. Within 60 days after the last day of each of the
first three fiscal quarters of each fiscal year (i) unaudited
Financial Statements showing the consolidated and consolidating (if
applicable) financial condition and results of operations of PESCO as
of, and for the period from the beginning of the current fiscal year
to, such last day, and (ii) a Financial Report Certificate with
respect to such Financial Statements.
c. On or before the 15th Business Day (or on such other
day of each month to which Borrower and Agent have agreed in writing)
after closing the accounting books for the previous monthly reporting
period, beginning with the monthly accounting period ending in June
1994, a monthly Borrowing-Base Report effective as of the last day of
the immediately preceding receivables reporting period, together with
information used in calculating the Borrowing Base, provided that a
Borrowing-Base Report (if reasonably possible for Borrower to deliver
same) and such other information concerning the Borrowing Base must be
delivered promptly upon Agent's or Determining Lenders' request, which
may be made at any time.
d. On or before the 15th Business Day of each calendar
month a description of all obligations of PESCO or any of its
consolidated Subsidiaries related to surety bonds outstanding as of
the last day of the immediately preceding calendar month.
e. At Agent's or Determining Lenders' request, a weekly
rig hour status report.
f. To the extent not delivered to Agent under CLAUSES
(A) and (B) preceding, promptly after filing or delivery thereof, true
copies of all SEC Reports furnished by or on behalf of PESCO to its
stockholders.
g. Notice, promptly after PESCO or any of its
consolidated Subsidiaries knows or has reason to know of, (i) the
existence and changes in the status of any Litigation which would,
individually or in the aggregate, be reasonably likely to cause a
Material Adverse Effect, (ii) any change in any material fact or
circumstance represented or warranted in any Loan Paper which would,
individually or in the aggregate, be reasonably likely to cause a
Material Adverse Effect, (iii) a Default or Potential Default,
specifying the nature thereof and what action PESCO or any of its
consolidated Subsidiaries has taken, is taking, or proposes to take
with respect thereto, or (iv) the occurrence of a reportable event (as
defined in ERISA) with respect to any employee benefit plan of
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PESCO or any of its consolidated Subsidiaries subject to ERISA, or the
complete or partial withdrawal from participation in a multi-employer
pension plan (as such terms are defined in ERISA) by PESCO or any of
its consolidated Subsidiaries (or the intention of such entity to do
so), or the initiation (or intent to initiate) by the PBGC or PESCO or
any of its consolidated Subsidiaries of proceedings under ERISA to
terminate any such plan, or the occurrence of any event or condition
which might constitute grounds for termination of any such benefit
plan under ERISA.
h. Promptly upon reasonable request by Agent or
Determining Lenders, such information (not otherwise required to be
furnished under the Loan Papers) respecting the business affairs,
assets, and liabilities of PESCO or any of its consolidated
Subsidiaries, and such opinions, certifications, and documents, in
addition to those mentioned in this Agreement.
i. As soon as practicable after the end of each fiscal
year of Borrower:
(i) Unaudited consolidating Financial Statements
showing (by major management operation category) the financial
condition and results of operations of PESCO; and
(ii) Unaudited or audited (to the extent prepared)
Financial Statements showing the financial conditions and
results of operations of the Borrower's unconsolidated
affiliates, including, but not limited to, Pool Arabia, Ltd.,
Antah Drilling Sdn. Bhd, Pool Santana, Limited, and Intairdril
Oman L.L.C.
7.4 Inspection. PESCO and each of its consolidated Subsidiaries
shall allow any Lender (who shall comply with such entities' safety rules
applicable in the ordinary course of business to each specific location) to
inspect any of their properties, to review reports, files, and other records,
to conduct tests or investigations, and to discuss any of their affairs,
conditions, and finances or with any director, officer, or employee of PESCO or
any of its consolidated Subsidiaries, from time to time, during reasonable
business hours.
7.5 Taxes. Each Material Obligor other than PESCO shall, and
(except where failure to do so would not, individually or in the aggregate, be
reasonably likely to cause a Material Adverse Effect) PESCO and each of its
consolidated Subsidiaries shall, promptly pay all Taxes due, except as set
forth on SCHEDULE 5.7 and except Taxes for which the criteria for Permitted
Liens have been satisfied. Neither PESCO nor any of its consolidated
Subsidiaries may, directly or indirectly, use any portion of the proceeds of
any Advance to pay the wages of employees unless a timely payment to or deposit
with the proper authorities of all amounts of Tax required to be deducted and
withheld from such wages is also made.
7.6 Payment of Obligations. The Material Obligors and (except
where failure to do so would not, individually or in the aggregate, be
reasonably likely to cause a Material Adverse Effect) PESCO and each of its
consolidated Subsidiaries shall promptly pay (or renew and extend) all of its
material obligations as the same become due. Neither PESCO nor any of its
consolidated Subsidiaries may, directly or indirectly, (a) at any time when a
Borrowing Deficiency exists, make any voluntary prepayment of the principal of
any Debt other than the Obligation, whether subordinate to the Obligation or
not, or (b) make any repayment of or credits for services rendered under
Section 6 of the Contingent Support Agreement except as provided therein.
7.7 Expenses of Lenders. The Obligors shall promptly pay (a) upon
Agent's request, estimated filing and recording fees and expenses for the Loan
Papers creating the Lender Liens, and (b) all reasonable costs, fees, and
expenses paid or incurred by Agent or any Lender incident to any of the Loan
Papers (including, but not limited to, any additional filing or recording fees
and the reasonable fees and expenses of counsel to Agent and any Lender in
connection with the negotiation, preparation, and execution of the Loan Papers
and any related amendment, waiver, or consent and in connection with any
proposed Advance or LC, whether any Advance or LC is ever made and, if a
Potential Default or Default exists, Lenders' expenses described in SECTION
11.4(D)) or to the enforcement of the obligations of any of the Obligors or the
exercise of any Rights (including, but not limited to, reasonable attorneys'
fees and court costs), all of which shall be a part of the Obligation.
7.8 Maintenance of Corporate Existence, Assets, Business, and
Insurance. PESCO and each of its consolidated Subsidiaries (other than
Liquidating Companies) shall at all times: Maintain their respective corporate
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existences and authorities to transact business and good standing in their
respective jurisdictions of incorporation and all other jurisdictions where the
failure to so maintain would, individually or in the aggregate, be reasonably
likely to cause a Material Adverse Effect; maintain all licenses, permits, and
franchises necessary for their businesses, where the failure to so maintain
would, individually or in the aggregate, be reasonably likely to cause a
Material Adverse Effect; keep all of their assets which are necessary in their
businesses in good working order and condition (ordinary wear and tear
excepted), and make all necessary repairs and replacements thereto; and
maintain, or cause to be maintained, insurance with such insurers, in such
amounts, and covering such risks, as shall be ordinary and customary in the
industry. Each insurance policy covering any Collateral subject to a Lender
Lien shall provide, by way of endorsements, riders or otherwise, that proceeds
in respect of any property constituting Collateral will be payable to Agent, on
behalf of Lenders, and that such policy may only be cancelled after Agent is
given thirty (30) days written notice of such cancellation (ten (10) days in
the case of non-payment of premium). A certificate of the insurer confirming
such terms and coverage for all renewal and substitute policies of insurance
shall be delivered to Agent. If no Default or Potential Default exists, the
Agent shall assign to the insured Person any and all monies that become payable
under any insurance policies required hereunder, and such insured Person shall
apply said monies to the repair, rebuilding and restoration or replacement of
the lost, destroyed or damaged assets; provided that in the event of a Total
Loss such assignment by the Agent shall not be available.
7.9 Maintenance and Evidence of Priority of Lender Liens. The
Obligors shall perform such acts and duly authorize, execute, acknowledge,
deliver, file, and record any additional agreements, documents, instruments,
and certificates as Agent may reasonably deem necessary or appropriate in order
to perfect and maintain the Lender Liens in favor of Agent for the benefit of
Lenders and preserve and protect the Rights of Agent and Lenders in all present
and future Collateral.
7.10 Employee Benefit Plans. Neither PESCO nor any of its
consolidated Subsidiaries may, directly or indirectly, engage in any prohibited
transaction (as defined in ERISA), permit the funding with respect to any
employee benefit plan established or maintained by any such entity to ever be
less than the minimum required by applicable provisions of ERISA or regulations
thereunder, permit any employee benefit plan established or maintained by any
such entity to ever be subject to involuntary termination proceedings, or fully
or partially withdraw from any multi-employer pension plan (as such terms are
defined in ERISA).
7.11 Debt. Neither PESCO nor any of its consolidated Subsidiaries
may, directly or indirectly, create, incur, or suffer to exist any direct,
indirect, fixed, or contingent liability upon itself for any Debt, other than
(a) the Obligation, (b) overdraft lines of PESCO and its consolidated
Subsidiaries and guarantees by PESCO or its consolidated Subsidiaries of
overdraft lines for Borrower's foreign Subsidiaries and their Joint Ventures
collectively not to exceed $7,000,000, in the aggregate at any time (calculated
so as not to include both the overdraft line and any related guaranty),
including, without limitation, those overdraft lines presently existing and
described on SCHEDULE 7.11, (c) customary trade payables in the ordinary course
of business, (d) Pool International, Inc.'s obligations as set forth in Section
9 of the Contingent Support Agreement, (e) Debt of Obligors arising under the
Contingent Support Agreement, (f) foreign exchange contracts, (g) intercompany
Debt otherwise permitted to be incurred under the Original Credit Agreement
before -- or under this Agreement after -- the date of this Agreement, (h) Debt
relating to purchases of assets not exceeding $200,000 in the aggregate
outstanding at any one time for all of PESCO and its consolidated Subsidiaries,
(i) obligations relating to bid and performance guarantees and surety bonds
required in the ordinary course of business, (j) guarantees and other Debt
disclosed on SCHEDULE 7.11 as renewed or extended (but not increased) from time
to time, (k) Debt pre-approved in writing by Determining Lenders, (l) the
"Obligation" as defined in the Term Loan Agreement and the ISDL Agreement, (m)
$11,500,000 of Borrower's 10% Subordinated Notes issued to the Sellers pursuant
to the Payment Agreement, a guaranty by PESCO of such Notes, and a nonrecourse
guaranty by PCESI of such Notes, (n) notes in respect of deferred compensation
obligations of approximately $1,600,000 to certain key employees of GPC during
the period ending three years after the closing under the Stock Purchase
Agreement, (o) guarantees by PCESI of up to $400,000 (in the aggregate
outstanding at any time) with respect to leases by its employees of light
vehicles, and (p) Debt in the principal amount of $545,000 incurred in
connection with the Purchase Agreement between Borrower's Subsidiary, Pool
Company (Texas) Inc. ("POOL TEXAS") and Elder Well Service, Inc., pursuant to
which Pool Texas purchased eight well servicing rigs for $650,000 (including
the transfer to the seller of certain existing Pool Texas assets).
7.12 Lease Obligations. Neither PESCO nor any of its consolidated
Subsidiaries may, directly or indirectly, enter into, assume, or otherwise
obligate itself for the performance of the obligations of the lessee or tenant
under any lease or sublease of property providing for annual payments in the
aggregate for all such leases of more than $10,000,000. This
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section shall not apply to leases which have initial or remaining cancelable
lease terms of one year or less if similar leases are for one year or less in
accordance with the ordinary course of business and customary industry
standards.
7.13 Capital Expenditures. Neither PESCO nor any of its
consolidated Subsidiaries may, directly or indirectly, make Capital
Expenditures, other than
a. such expenditures which are for or related to assets
or leaseholds used or useful in the normal business operations of such
entity and which do not in the aggregate for PESCO and its
consolidated Subsidiaries exceed (i) the sum of 70% of Borrower's
consolidated net income from January 1, 1990, through April 6, 1990,
plus PESCO's consolidated net income from and after April 7, 1990, in
each case after income taxes, plus noncash charges and before changes
in working capital on a cumulative basis from and after January 1,
1990, less (ii) the aggregate amount of investments and advances
outstanding under SECTION 7.16(B),
b. Capital Expenditures made solely from the net
proceeds of the sale of Oiltools Operations,
c. the PAA Acquisition, and
d. the GPC Acquisition plus a $7,200,000 adjustment
(increase) in the Capital Expenditures therefor.
7.14 Liens. Neither PESCO nor any of its consolidated Subsidiaries
may, directly or indirectly, (a) create, incur, or suffer or permit to be
created or incurred or to exist any Lien upon any of its assets, except
Permitted Liens, or (b) enter into or permit to exist any arrangement or
agreement (other than existing arrangements or agreements, the Loan Papers, the
ISDL Agreement, the Term Loan Agreement, the negative pledge agreement in
Section 3.3 of the Payment Agreement regarding the assets of GPC and PCESI,
including Borrower's California assets that were transferred to PCESI at or
after the closing under the Stock Purchase Agreement and the negative pledge
contained in the Security Agreement between Pool Texas and Elder Well Service,
Inc., related to the purchase by Pool Texas of eight well servicing rigs dated
August 15, 1994) which directly or indirectly prohibits PESCO or any of its
consolidated Subsidiaries from creating or incurring any Lien on any of its
assets.
7.15 Acquisitions, Mergers, and Dissolutions. Neither PESCO nor
any of its consolidated Subsidiaries may, directly or indirectly, acquire all
or any substantial portion of the stock issued by, or interest in, any Person
(including, but not limited to, the formation or acquisition of any new
Subsidiary), dissolve, or merge or consolidate with any Person other than (a)
repurchases of its own securities if permitted under SECTION 7.18, (b) any
merger or consolidation of one Company into another Company or an acquisition
of one Company by another Company so long as (i) Borrower is the surviving
corporation if it is involved, (ii) another Material Obligor is the survivor if
any one or more Material Obligors other than Borrower are involved, and (iii)
the surviving Company's net worth has not decreased as a result of such merger
or consolidation, (c) dissolution of the Liquidating Companies, (d) use of the
net proceeds of the sale of the Oiltools Operations for acquisitions that would
otherwise violate this SECTION 7.15, (e) the PAA Acquisition, and (f) the
acquisition of 100% of the stock of GPC pursuant to the Stock Purchase
Agreement, (g) the merger of GPC with and into PCESI, and (h) the dissolution
of the following PCESI Subsidiaries: Arrow Petroleum Services, Inc., Burk Well
Services, Inc., Snowburst Corporation, and Westex Production Service, Inc.
7.16 Loans, Advances, and Investments. Neither PESCO nor any of
its consolidated Subsidiaries may, directly or indirectly, make any loan,
advance, extension of credit, or capital contribution to, make any investment
in, or purchase or commit to purchase any stock or other securities or
evidences of Debt of, or interests in, any other Person, other than (a)
advances to or investments in any of PESCO's consolidated Subsidiaries,
provided that such advances and investments made after July 1, 1993, by the
Material Obligors to or in Companies that are not Material Obligors may not in
the aggregate for all such Companies at any time outstanding exceed $5,000,000;
(b) advances or investments by Material Obligors to or in PESCO's
unconsolidated Subsidiaries and its or their Joint Ventures which are not
Companies which do not in the aggregate at any time outstanding exceed
$5,000,000, provided that such advances and investments shall for purposes of
this clause be deemed to be capital expenditures and may not in the aggregate
for all such entities exceed 40% of the amount of capital expenditures
permitted under SECTION 7.13; (c) expense accounts for and other advances to
directors, officers, and employees of PESCO or any of its consolidated
Subsidiaries in the ordinary course of business not to exceed $25,000 in the
aggregate outstanding at any time for any one director, officer, or employee;
(d) investments in obligations of the U.S. and agencies
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thereof and obligations guaranteed by the U.S. maturing within one year from
the date of acquisition; (e) certificates of deposit issued by commercial banks
organized under the Laws of the U.S. or any state thereof and having combined
capital, surplus, and undivided profits of not less than $100,000,000, and
which (i) shall have a rating from Moody's or S&P of at least P-1 and A-1,
respectively, or (ii) are insured by the Federal Deposit Insurance Corporation;
(f) commercial paper which shall have a rating from Moody's or S&P of at least
P-1 and A-1, respectively; (g) eurodollar investments with financial
institutions (i) having combined capital, surplus, and undivided profits of not
less than U.S. $100,000,000, and (ii) with commercial paper rated at least P-1
or A-1 by Moody's or S&P, respectively, or, if any institution does not have a
commercial paper rating, a comparable bond rating of at least A or BAA-1 by
Moody's or S&P, respectively; (h) extensions of credit in connection with trade
receivables and overpayments of trade payables, in each case resulting from
transactions in the ordinary course of business; (i) extensions of credit not
exceeding $3,500,000 at any one time in connection with settlement of claims
resulting from transactions in the ordinary course of business; (j) loans or
advances disclosed on SCHEDULE 7.16, excluding any increases thereof and
excluding extensions of credit described in CLAUSE (H) above; (k) other loans,
advances, and investments which never exceed $200,000 in the aggregate at any
time; (l) advances and investments otherwise permitted under the Existing
Credit Agreement before the date of this Agreement; (m) the PAA Acquisition,
(n) the acquisition of 100% of the stock of GPC pursuant to the Stock Purchase
Agreement, (o) the investment by GPC and its Subsidiaries of approximately
$2,700,000 in the aggregate in Horizon Prime Fund during the period ending 30
days after the closing under the Stock Purchase Agreement, (p) the acquisition
by PCESI of the real estate in Ventura, California, previously leased to PCESI
by Plymouth Investment Partnership in return for the forgiveness by PCESI of
its loan to Plymouth Investment Partnership of approximately $200,000, and (q)
the continuation by PCESI of its existing long-term advances associated with
split-dollar life insurance plans for former PCESI employees Jeff Hyatt and Tom
See in the aggregate amount of approximately $345,000.
7.17 Distributions. PESCO may not, directly or indirectly,
declare, make, or pay any Distributions, other than (a) Distributions wholly in
the form of capital stock and (b) advances, investments, and loans otherwise
permitted by this Agreement.
7.18 Issuance of Securities. Neither PESCO Subsidiary nor any of
the Companies, directly or indirectly, may issue, sell, or otherwise dispose of
any of its shares of capital stock or other investment securities of any class,
any securities convertible into or exchangeable for any such shares, or any
carrying Rights, warrants, options, or other Rights to subscribe for or
purchase such shares, other than capital stock of any Company issued to its
corporate parent and subject to Lender Liens and no other Liens except
Permitted Liens.
7.19 Transactions with Affiliates. Except as provided in SCHEDULE
7.19, neither PESCO nor any of its consolidated Subsidiaries may, directly or
indirectly, enter into any material transaction (including, but not limited to,
the sale or exchange of property or the rendering of service but not including
a capital contribution to a Subsidiary otherwise permitted hereunder) with any
Affiliate, other than in the ordinary course of business and upon fair and
reasonable terms not materially less favorable than such entity could obtain or
could become entitled to in an arm's-length transaction with a Person which was
not an Affiliate.
7.20 Sale of Assets. Neither PESCO nor any of its consolidated
Subsidiaries may, directly or indirectly sell, lease, or otherwise dispose of
all or any substantial part of its assets other than (a) sales or leases by a
Material Obligor to another Material Obligor, (b) sales of inventory in the
ordinary course of business, (c) sales or leases of equipment and other assets
to any other Companies, Joint Ventures, or third parties, in each case for a
fair and adequate consideration (provided that if any equipment is sold, and a
replacement is necessary for the proper operation of the seller's business, the
seller will replace the sold equipment with adequate equipment), and (d) sales
or leases disclosed on SCHEDULE 7.20.
7.21 Compliance with Laws and Documents. Neither PESCO nor any of
its consolidated Subsidiaries may, directly or indirectly, violate the
provisions of any Laws (including, without limitation, Environmental Laws), its
charter or bylaws, or any Material Agreement of any such entity if such
violation alone, or when aggregated with all other such violations, would be
reasonably likely to cause a Material Adverse Effect.
7.22 New Businesses. Neither PESCO nor any of its consolidated
Subsidiaries may, directly or indirectly, engage in any business other than the
businesses in which it is presently engaged or businesses related thereto.
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7.23 Assignment. Neither PESCO nor any of its consolidated
Subsidiaries may, directly or indirectly, assign or transfer any of its Rights,
duties, or obligations under any of the Loan Papers.
7.24 Fiscal Year and Accounting Methods. Subject to SECTION 10.1,
neither PESCO nor any of its consolidated Subsidiaries may change its fiscal
year or method of accounting (other than immaterial changes in methods) unless
required to do so by Law.
7.25 Minimum Net Worth. During any fiscal year, PESCO's
consolidated shareholders' equity may not be less than the sum of (a)
$116,593,000, (b) 50% of PESCO's consolidated net income for each of the fiscal
years subsequent to 1994, and (c) 50% of the proceeds of any issuances of
securities by PESCO.
7.26 Inventory. PESCO's consolidated inventory for sale and
consumption (inventory, less shrinkage and obsolescence as reflected on PESCO's
consolidated balance sheet) available for sale may never exceed 35% of its
consolidated current assets.
7.27 Consolidated Working Capital. PESCO's consolidated current
assets (less prepaid expenses, other than insurance) shall exceed its
consolidated current liabilities by at least $10,000,000.
Consolidated current liabilities shall include the Principal Debt other than
(a) 95% of the LC Exposure supporting bid, performance, and retention bonds,
(b) LC Exposure supporting other current liabilities already included in the
calculation of consolidated working capital, and (c) the fair value of services
to be performed during the applicable period to which portions of ENSERCH's
$4,000,000 cash advance are subject to credit as described in the Contingent
Support Agreement.
7.28 Borrowing Deficiency. To preclude any occurrence of a
Borrowing Deficiency, Borrower shall manage the consolidated receivables of the
Material Obligors, the proceeds thereof, and the amount of Principal Debt by
periodically reducing outstanding Principal Debt with proceeds of receivables,
or replacing receivables that are paid or otherwise become ineligible for
inclusion in calculating the Borrowing Base with other receivables that are
eligible for inclusion in calculating the Borrowing Base.
7.29 Subsidiaries.
a. If PESCO or its consolidated Subsidiaries are
permitted by Agent and Determining Lenders under SECTIONS 7.15 or 7.16
to form or acquire new consolidated Subsidiaries, PESCO and Borrower
shall cause (i) each such Subsidiary not subject to SECTION 5.14 to
execute and deliver to Agent a guaranty, security agreement and
financing statements (as described in Section 4), and (ii) the parent
corporation of such new consolidated Subsidiary to grant Lender Liens
on and to deliver to Agent on behalf of Lenders 100% of the parent
corporation's interest (or 66% if such new consolidated Subsidiary is
subject to SECTION 5.14) in the capital stock of such new consolidated
Subsidiary, together with stock powers executed in form satisfactory
to Agent.
b. Each consolidated Subsidiary of PESCO which is
subject to SECTION 5.14 shall remain subject thereto.
SECTION 8. DEFAULT. "DEFAULT" means the occurrence of one or more of the
following events (including the passage of time, if any, specified therefor):
8.1 Payment of Obligation. The failure or refusal of Borrower to
pay any portion of the Obligation, as the same becomes due in accordance with
the terms of the Loan Papers, and such failure or refusal continues for a
period of three days after the due date of an interest payment (with no grace
period for failure or refusal to make a principal payment).
8.2 Covenants.
a. The failure or refusal of PESCO or any of its
consolidated Subsidiaries to punctually and properly perform, observe,
and comply with any covenant, agreement, or condition contained in
SECTIONS 7.1 and 7.10 through 7.24.
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b. The failure or refusal of PESCO or any of its
consolidated Subsidiaries to punctually and properly perform, observe,
and comply with any covenant, agreement, or condition contained in
SECTIONS 7.25 through 7.29, and such failure or refusal continues for
a period of 30 days after PESCO or any of its consolidated
Subsidiaries has notice thereof.
c. The failure or refusal of PESCO or any of its
consolidated Subsidiaries to punctually and properly perform, observe,
and comply with any covenant, agreement, or condition contained in any
of the Loan Papers, other than covenants to pay the Obligation and the
covenants listed in clauses (a) and (b) preceding, and such failure or
refusal continues for a period of ten days after PESCO or any of its
consolidated Subsidiaries has notice thereof.
8.3 Debtor Relief. (a) Any Material Obligor is not Solvent, (b)
PESCO and its consolidated Subsidiaries are not Solvent on a consolidated
basis, or (c) PESCO or any of its consolidated Subsidiaries (other than Pool
Alaska, Inc.) (i) fails to pay its debts generally as they become due, (ii)
voluntarily seeks, consents to, or acquiesces in the benefit or benefits of any
Debtor Relief Law, or (iii) becomes a party to (or be made the subject of) any
proceeding provided for by any Debtor Relief Law, other than as a creditor or
claimant, that could suspend or otherwise adversely affect the Rights of Agent
or any Lender granted in the Loan Papers (unless, in the event such proceeding
is involuntary, the petition instituting same is dismissed within 60 days after
its filing).
8.4 Attachment. The failure of any Material Obligor or (where
such failure would, individually or in the aggregate, be reasonably likely to
cause a Material Adverse Effect) any other Company (other than Pool Alaska,
Inc.) to have discharged within a period of 30 days after the commencement any
attachment, sequestration, or similar proceeding against its assets having a
value (individually or in the aggregate) of $250,000 or more.
8.5 Payment of Judgments. Any Material Obligor or (where such
failure would, individually or in the aggregate, be reasonably likely to cause
a Material Adverse Effect) any other Company (other than Pool Alaska, Inc.)
fails to pay any judgment or order for the payment of money in excess of
$250,000 rendered against it or any of its assets and either (a) any
enforcement proceedings shall have been commenced by any creditor upon such
judgment or order, or (b) a stay of enforcement of such judgment or order, by
reason of pending appeal or otherwise, shall not be in effect for any period of
ten or more consecutive days.
8.6 Default on Other Debt or Security.
a. Any Material Obligor or (where such failure would,
individually or in the aggregate, be reasonably likely to cause a
Material Adverse Effect) any other Company (other than Pool Alaska,
Inc.) fails or refuses to make any payment due on any Debt or security
or any event shall occur or any condition shall exist in respect of
any of its Debt or securities or under any agreement securing or
relating to such Debt or securities, the effect of which is (i) to
cause any holder of such Debt or securities or a trustee to cause any
of such Debt or securities to become due prior to the stated maturity
or prior to the regularly scheduled dates of payment, or (ii) to
permit a trustee or the holder of any securities (other than common
stock) to elect (whether or not such trustee or holder does elect) a
majority of the directors on the board of directors of such entity.
"Security" has the meaning given such term in the Securities Act of
1933, as amended.
b. ENSERCH pays amounts under its Pool Arabia Guaranty
as described in Section 9(a) of the Contingent Support Agreement.
c. Borrower fails to pay when due its obligations
arising under the sublease dated as of March 15, 1983, between
Borrower and Sanan Leasing Corp., and such failure continues for ten
days.
d. A "Default" as defined in the Term Loan Agreement or
the ISDL Agreement.
8.7 Material Agreements. The occurrence and continuance of a
default under any Material Agreement of any Material Obligor or (where such
default would, individually or in the aggregate, be reasonably likely to cause
a Material Adverse Effect) any other Company (other than Pool Alaska, Inc.).
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8.8 ENSERCH Agreements. Either (a) an event of default is
declared by ENSERCH under the Contingent Support Agreement or (b) the exercise
of rights or remedies, including, without limitation, rights of acceleration
payments, by ENSERCH under the Continent Support Agreement or any note or
security agreement executed in connection therewith.
8.9 Material Adverse Effect. Agent or any Lender discovers (i)
any event or circumstance that would, individually or in the aggregate with all
other events or circumstances, be reasonably likely to cause a Material Adverse
Effect, (ii) any other information that the prospect of payment or performance
of the Obligation is materially impaired, or (iii) that the value of the
Collateral has or will be materially decreased and the situation giving rise
thereto is not corrected to Agent or Determining Lenders' satisfaction within
20 days after Agent gives notice to Borrower.
8.10 Misrepresentation. Agent or any Lender discovers that any
material statement, representation, or warranty in the Loan Papers or in any
Financial Statement of PESCO or any of its consolidated Subsidiaries or any
writing delivered to Agent or any Lender pursuant to the Loan Papers is false,
misleading, or erroneous when made or delivered in any material respect.
SECTION 9. CERTAIN RIGHTS AND REMEDIES.
9.1 Remedies Upon Default. Upon the occurrence and continuance of
a Default, Agent may (with the consent of, and must, upon the request of
Determining Lenders) do any one or more of the following: (a) Declare all or
part of the unpaid balance of the Obligation then or thereafter outstanding
immediately due and payable, whereupon it shall be due and payable (provided
that, upon the occurrence of a Default under SECTION 8.3, the entire Obligation
shall automatically become due and payable without notice or other action of
any kind whatsoever); (b) terminate the commitments of Lenders to extend credit
under this Agreement; (c) reduce any claim to judgment; (d) in order to
continue to secure the full and complete payment and performance of the
Obligation arising in connection with the LC Exposure, do one or both of the
following: (i) segregate such Collateral or accounts and other property
described in clause (e) following as Agent may in its sole discretion select,
and (ii) retain and deposit into the cash collateral account described in
SECTION 4.3 any proceeds received by Agent from the foreclosure of Collateral,
exercise of Rights of offset or banker's Lien, or exercise of other Rights; (e)
exercise (or request each Lender to, and each Lender is entitled to exercise)
the Rights of offset or banker's Lien against the interest of each Obligor in
and to every account and other property of such entities which are in the
possession of Agent or any Lender to the extent of the full amount of the
Obligation (each Company being deemed directly obligated to Agent and each
Lender in the full amount of the Obligation for such purposes); (f) foreclose
any or all Lender Liens or otherwise realize upon any and all of the Rights
Agent or Lenders may have in and to the Collateral; and (g) exercise any and
all other legal or equitable Rights afforded by the Loan Papers, the Laws of
the State of Texas or any other jurisdiction as Agent or Lenders shall deem
appropriate, or otherwise, including, but not limited to, the Right to bring
suit or other proceedings before any Tribunal either for specific performance
of any covenant or condition contained in any of the Loan Papers or in aid of
the exercise of any Right granted to Agent or Lenders in any of the Loan
Papers.
9.2 WAIVERS BY BORROWER AND OTHERS. BORROWER AND EACH SURETY,
ENDORSER, GUARANTOR, AND OTHER PARTY EVER LIABLE FOR PAYMENT OF ANY OF THE
OBLIGATION JOINTLY AND SEVERALLY WAIVE PRESENTMENT AND DEMAND FOR PAYMENT,
PROTEST, NOTICE OF INTENTION TO ACCELERATE, NOTICE OF ACCELERATION, AND NOTICE
OF PROTEST AND NONPAYMENT, AND AGREE THAT THEIR LIABILITY WITH RESPECT TO THE
OBLIGATION, OR ANY PART THEREOF, SHALL NOT BE AFFECTED BY ANY RENEWAL OR
EXTENSION IN THE TIME OF PAYMENT OF THE OBLIGATION, BY ANY INDULGENCE, OR BY
ANY RELEASE OR CHANGE IN ANY SECURITY FOR THE PAYMENT OF THE OBLIGATION, AND
HEREBY CONSENT TO ANY AND ALL RENEWALS, EXTENSIONS, INDULGENCES, RELEASES, OR
CHANGES, REGARDLESS OF THE NUMBER THEREOF.
9.3 Performance by Agent. If any covenant, duty, or agreement of
PESCO or any of its consolidated Subsidiaries is not performed in accordance
with the terms of the Loan Papers, Agent may, at its option (but subject to the
approval of the Determining Lenders), perform, or attempt to perform, such
covenant, duty, or agreement on behalf of such entity. Any amount reasonably
expended by Agent in such performance or attempted performance shall be payable
by Borrower to Agent on demand, shall become part of the Obligation, and shall
bear interest at the Default Rate from the date of such expenditure by Agent
until paid. Notwithstanding the foregoing, it is expressly understood that
Agent does not assume and shall never have, except by its express written
consent, any liability or responsibility for the performance of such covenant,
duty, or agreement.
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9.4 Delegation of Duties and Rights. Agent and Lenders may
exercise any of their respective duties or exercise any of their respective
Rights under the Loan Papers by or through their respective officers,
directors, employees, attorneys, agents, or other representatives.
9.5 Not in Control. None of the covenants or other provisions
contained in this Agreement shall, or shall be deemed to, give Agent or Lenders
the Right or power to exercise control over the affairs or management of PESCO
or any of its consolidated Subsidiaries, the power of Agent and Lenders being
limited to the Right to exercise the remedies provided in this SECTION 9.
Agent and Lenders have no fiduciary obligation toward PESCO or any of its
consolidated Subsidiaries with respect to any Loan Paper and transactions
contemplated thereby. The relationship pursuant to the Loan Papers between
PESCO and its consolidated Subsidiaries, and Agent and Lenders, is and shall be
that of debtor and creditor, respectively, and no partnership or joint venture
is created by any Loan Paper.
9.6 Waivers by Agent and Lenders. The acceptance by Agent or any
Lender at any time and from time to time of partial payment on the Obligation
shall not be deemed to be a waiver of any Default then existing. No waiver by
Agent or any Lender of any Default shall be deemed to be a waiver of any other
then-existing or subsequent Default. No delay or omission by Agent or any
Lender in exercising any Right under the Loan Papers shall impair such Right or
be construed as a waiver or acquiescence, nor shall any single or partial
exercise of any such Right preclude other or further exercise thereof, or the
exercise of such or any other Right.
9.7 Cumulative Rights. All Rights available to Agent, Determining
Lenders and Lenders under the Loan Papers are cumulative of and in addition to
all other Rights granted to Agent, Determining Lenders and Lenders at law or
in equity, whether or not the Obligation is due and payable and whether or not
Agent, Determining Lenders, or Lenders have instituted any suit for collection
or other action in connection with the Loan Papers.
9.8 Expenditures by Lenders. All court costs, reasonable
attorneys' fees, other costs of collection, and other out-of-pocket sums spent
by Agent or any Lender pursuant to the exercise of any Right (including,
without limitation, any effort to collect or enforce any Note) provided herein
shall be payable to Agent or such Lender on demand, shall become part of the
Obligation, and shall bear interest at the Default Rate from the date spent
until the date repaid by Borrower.
9.9 Diminution in Value of Collateral. Neither Agent nor any
Lender shall have any liability or responsibility whatsoever for any diminution
in or loss of value of any Collateral.
9.10 INDEMNIFICATION. PESCO AND EACH OF ITS CONSOLIDATED
SUBSIDIARIES SHALL INDEMNIFY AGENT AND LENDERS AND HOLD AGENT AND LENDERS
HARMLESS FROM AND AGAINST ANY AND ALL LIABILITIES, OBLIGATIONS, LOSSES,
DAMAGES, PENALTIES, ACTIONS, JUDGMENTS, SUITS, CLAIMS, COSTS, EXPENSES, AND
DISBURSEMENTS OF ANY KIND OR NATURE WHATSOEVER WHICH MAY BE IMPOSED ON,
INCURRED BY, OR ASSERTED AGAINST AGENT OR ANY LENDER, IN ANY WAY RELATING TO OR
ARISING OUT OF THE LOAN PAPERS OR ANY OF THE TRANSACTIONS CONTEMPLATED THEREIN
(INCLUDING, WITHOUT LIMITATION, ANY OF THE FOREGOING IMPOSED ON, INCURRED BY,
OR ASSERTED AGAINST AGENT OR ANY LENDER BY VIRTUE OF OWNERSHIP OR OPERATION OF
ANY COLLATERAL), TO THE EXTENT THAT ANY SUCH INDEMNIFIED LIABILITIES RESULT,
DIRECTLY OR INDIRECTLY, FROM ANY CLAIMS MADE OR ACTIONS, SUITS, OR PROCEEDINGS
COMMENCED BY OR ON BEHALF OF ANY PERSON OTHER THAN AGENT AND ANY LENDER;
PROVIDED THAT AGENT OR ANY LENDER SHALL NOT HAVE THE RIGHT TO BE INDEMNIFIED
HEREUNDER FOR ITS OWN GROSS NEGLIGENCE OR WILLFUL MISCONDUCT. THE FOREGOING
AGREEMENT CONSTITUTES A PART OF THE OBLIGATION, AND SHALL SURVIVE THE EXERCISE
OF ANY RIGHTS OF AGENT OR ANY LENDER WITH RESPECT TO ALL OR ANY PART OF THE
COLLATERAL.
SECTION 10. CERTAIN DEFINITIONS AND TERMS.
10.1 Accounting Terms; Changes in GAAP. As used herein, "GAAP"
means generally accepted accounting principles, applied on a consistent basis,
(a) as set forth in Opinions of the Accounting Principles Board of the American
Institute of Certified Public Accountants ("AICPA") and in statements of the
Financial Accounting Standards Board which are applicable in the circumstances
as of the date in question, and (b) where not inconsistent with such opinions
and statements, as set forth in other AICPA publications and guidelines or
which otherwise arise by custom for the particular industry; and the requisite
that such principles be applied on a consistent basis means that the accounting
principles in a current period are comparable in all material respects to those
applied in a preceding period. All accounting and financial terms used in any
of the Loan Papers and the compliance with each covenant contained in the Loan
Papers which relates to financial matters shall be determined in accordance
with GAAP, except to the extent that a deviation is expressly stated in
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such Loan Papers. If a change in GAAP requires a change in any method of
accounting or if any voluntary change in the accounting methods be permitted
pursuant to SECTION 7, then such change shall not result in a Default if, at
the time of such change, such Default had not occurred and was not then
continuing, based upon the former methods of accounting used by or on behalf of
PESCO and its consolidated Subsidiaries; provided that, after any such change
in accounting methods, only the next set of Financial Statements required to be
delivered to Agent shall be prepared in comparative form, in compliance with
the former methods of accounting used prior to such change, as well as with the
new method or methods of accounting.
10.2 Number and Gender of Words. Whenever in any Loan Paper the
singular number is used, the same shall include the plural where appropriate,
and vice versa.
10.3 Other Definitions. The following terms have the meanings
indicated:
ADVANCE means any amount disbursed (a) by one or more Lenders to or on
behalf of Borrower under the Loan Papers, either as an original disbursement of
funds, the continuation of an amount outstanding, or payment under an LC or (b)
by any Lender in accordance with, and to satisfy the obligations of any Company
under, any Loan Paper.
AFFILIATE means any Person who (a) would be an "affiliate" of PESCO or
any of its consolidated Subsidiaries within the meaning of the regulations
promulgated under the Securities Act of 1933, as such regulations and act are
amended and in effect on the date in question, if such Person were subject to
such act and regulations, or (b) who is a director or officer of PESCO or any
of its Subsidiaries.
AGENT means NationsBank of Texas, N.A., a U.S. national banking
association, and its successor or successors as agent for Lenders under this
Agreement.
AGREEMENT means this Restated Revolving Credit Agreement, including
the Schedules and Exhibits attached hereto, and any and all future renewals and
extensions or restatements of, or amendments or supplements to, all or any part
of the foregoing.
BIG 10 means Big 10 Fishing Tool Company, Inc., a California
corporation and a wholly-owned subsidiary of PCESI.
BORROWER is defined in this Agreement's introductory paragraph.
BORROWING BASE has the meaning set forth in SECTION 1.2.
BORROWING-BASE REPORT means a report substantially in the form of
EXHIBIT C-2, executed by the president, chief financial officer, or treasurer
of Borrower.
BORROWING DEFICIENCY means, at any time, an excess of (a) the total
Principal Debt over (b) the lesser of either the total Commitments or the
Borrowing Base.
BUSINESS DAY means any day on which Agent is open for banking business
in Texas.
CAPITAL EXPENDITURES means expenditures for the acquisition,
construction, improvement, or replacement of land, buildings, equipment, or
other fixed or capital assets or leaseholds (including, without limitation,
expenditures for the acquisition of interests in any Affiliate or any Person
which, as a result of such acquisition, becomes an Affiliate) excluding,
however, (i) expenditures financed by Project Financing, (ii) expenditures to
the extent made with PESCO stock, and (iii) expenditures for working capital
(cash accounts receivable, less accounts payable and current liabilities)
obtained as part of an acquisition, but only if no restrictions exist on the
transfer of Distributions or advances from such acquired Affiliate to Borrower.
CHARGE-OFFS means accounts receivable which have been written off
because they have been determined uncollectible (other than adjustments in the
ordinary course of business) for reasons unrelated to the credit worthiness of
the obligors thereon.
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CLOSING DATE means the date -- which must be a Business Day not later
than 30 days after the date on which all parties have executed this Agreement
- -- on which Borrower, Agent, and Lenders agree that the conversions, renewals,
and extensions under SECTION 1.1(A) occur.
COLLATERAL has the meaning set forth in SECTION 4.2.
COMMITMENT means, for any Lender and at any time, the amount -- which
is subject to reduction and termination in accordance with this Agreement --
stated beside that Lender's name on the attached SCHEDULE 1(A), as most
recently amended in accordance with this Agreement.
COMMITMENT PERCENTAGE means, for any Lender and at any time, the
proportion -- stated as a percentage -- that its Commitment bears to the total
Commitments.
COMPANIES means Borrower and its consolidated Subsidiaries.
CONTINGENT SUPPORT AGREEMENT means the Contingent Support Agreement
dated April 7, 1990, between PESCO and ENSERCH, as renewed, extended, amended,
and supplemented from time to time, subject to Paragraph 5(h) of the Security
Agreement.
CURRENT FINANCIALS means PESCO's Financial Statements included in the
SEC Report on Form 10-K for the year ended December 31, 1994, and Form 10-Q for
the quarter ended September 30, 1995.
DEBT of any Person includes all obligations (contingent or otherwise)
for borrowed money or for the purchase of assets which, in accordance with
GAAP, should be classified upon such Person's balance sheet as liabilities, but
in any event including liabilities secured by any Lien existing on property
owned or acquired by such Person or a Subsidiary thereof (whether or not the
liability secured thereby shall have been assumed), obligations which have been
or under GAAP should be capitalized for financial reporting purposes, and all
guaranties, endorsements, and other contingent obligations with respect to Debt
of others, including, but not limited to, any obligations to acquire any of
such Debt, to purchase, sell, or furnish property or services primarily for the
purpose of enabling such other Person to make payment of any of such Debt, or
to otherwise assure the owner of any of such Debt against loss with respect
thereto, and any obligations of PESCO or any of its consolidated Subsidiaries
arising in connection with such entity's unconsolidated Subsidiaries or joint
venture or partnership interests.
DEBTOR RELIEF LAWS means the Bankruptcy Code of the United States of
America and all other applicable liquidation, conservatorship, bankruptcy,
moratorium, rearrangement, receivership, insolvency, reorganization, suspension
of payments, or similar debtor relief Laws from time to time in effect
affecting the Rights of creditors generally.
DEFAULT is defined in SECTION 8.
DEFAULT RATE means an annual interest rate equal to the lesser of
either (a) the sum of the Designated Rate plus 4% or (b) the Highest Lawful
Rate.
DESIGNATED RATE means either the Floating Rate or a LIBOR Rate as
designated by Borrower pursuant to SECTION 1.3, 2.14, OR 2.15.
DETERMINING LENDERS means, at any time, any combination of Lenders
holding at least 66.7% of the total Commitments and 66.7% of the total
Principal Debt.
DISTRIBUTION by any Person means (a) the retirement, redemption,
purchase, or other acquisition for value of any capital stock or other equity
securities issued by such Person, (b) the declaration or payment of any
dividend on or with respect to any such securities, (c) any loan or advance by
such Person to, or other investment by such Person in, the holder of any of
such securities, and (d) any other payment (other than salaries of employees or
advances made in the ordinary course of business to employees for travel and
other expenses incurred in the ordinary course of business) by such Person with
respect to such securities.
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ENSERCH means ENSERCH Corporation, a Texas corporation.
ENVIRONMENTAL LAW means each Law that relates (a) to the condition of
air, water, land, or other parts of the environment or (b) to the release,
discharge, emission, removal, remediation, clean-up, generation, production,
manufacturing, processing, distribution, use, treatment, storage, disposal,
transportation, or other handling or control of pollutants, contaminants,
wastes, or toxic or other Hazardous Substances.
ERISA means the Employee Retirement Income Security Act of 1974, as
amended, and the regulations, promulgations, and rulings issued thereunder.
EXHIBIT means an exhibit attached to this Agreement unless otherwise
specified.
EXISTING CREDIT AGREEMENT is defined in this Agreement's recitals.
FEDERAL FUNDS RATE means, for any day, the annual rate (rounded
upwards, if necessary, to the nearest 0.01%) determined (which determination is
conclusive and binding, absent manifest error) by Agent to be equal to the
weighted average of the rates on overnight federal funds transactions with
member banks of the Federal Reserve System arranged by federal funds brokers on
that day, as published by the Federal Reserve Bank of New York on the next
Business Day, or, if those rates are not published for any day, the average of
the quotations at approximately 10:00 a.m. received by Agent from three federal
funds brokers of recognized standing selected by Agent in its sole discretion.
FINANCIAL REPORT CERTIFICATE means a certificate, executed by the
president, chief financial officer, or controller of Borrower, substantially in
the form of EXHIBIT C-1 but containing such other certifications, statements,
calculations, explanations, and conclusions as any Lender may reasonably
request with respect to compliance with any or all of the covenants and
conditions contained in the Loan Papers.
FINANCIAL STATEMENTS includes, but is not limited to, balance sheets,
profit and loss statements, reconciliations of capital and surplus, and
statements of cash flows (i) prepared in comparative form with respect to the
corresponding period of the preceding fiscal year, all of the foregoing
prepared in accordance with GAAP, or (ii) included in any SEC Report.
FLOATING RATE means an annual rate equal to the sum of (a) 0.25%, plus
the Prime Rate.
FUNDING LOSS, means, all reasonable costs and reasonable losses
incurred by Lender when (i) Borrower fails or refuses (for any reason other
than such Lender's failure to comply with this Agreement) to borrow on the date
designated by Borrower in its Request for Advance or LC with respect to an
Advance which is to bear interest at a LIBOR Rate, or (ii) Borrower prepays or
converts all or any portion of the Principal Debt bearing interest at a LIBOR
Rate on a day other than the last day of an Interest Period for such portion.
GAAP is defined in SECTION 10.1.
GPC means Golden Pacific Corp., a California corporation.
GPC ACQUISITION means the acquisition by the Borrower of 100% of the
stock of GPC.
GUARANTY means collectively (as renewed, extended, amended and
replaced) (a) the Guaranty Agreement dated as of April 25, 1990; (b) the
amendment contained in the Existing Credit Agreement; (c) the Guaranty
Agreement dated as of April 21, 1995; (d) the Guaranty Agreement dated as of
June 13, 1995; and (e) the Guaranty Agreement dated as of July 13, 1995, each
of which was executed and delivered under this Agreement by, among others, all
Obligors (other than Borrower).
HAZARDOUS SUBSTANCE means (a) any substance that now or hereafter
constitutes a hazardous substance within the meaning of 42 U.S.C. Section
9601(14), as amended, or (b) any other substance identified as a hazardous or
toxic waste, pollutant, contaminant, or substance under any other Environmental
Law.
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HIGHEST LAWFUL RATE means, with respect to each Lender, the maximum
rate of interest (or, if the context so requires, an amount calculated at such
rate) which such Lender is allowed to contract for, charge, take, reserve, or
receive under applicable federal or state (whichever is higher) Law from time
to time in effect after taking into account, to the extent required by
applicable federal or state (whichever is higher) Law from time to time in
effect, any and all relevant payments or charges under the Loan Papers.
INTERCREDITOR AGREEMENT means the Restated Intercreditor Agreement
dated as of November 30, 1995 by NationsBank of Texas, N.A., and consented and
agreed to by National Bank of Canada, National Bank of Alaska and Borrower.
INTEREST PERIOD is defined in SECTION 2.14.
IRC means the Internal Revenue Code of 1986, as amended, and the
regulations, promulgations, and rulings issued thereunder.
ISDL AGREEMENT is defined in the preamble to this Agreement.
ISSUING LENDER means, for any LC, the Lender that issues it under this
Agreement.
JOINT VENTURE means any Person in which less than a majority interest
is owned or controlled by PESCO or any of its consolidated Subsidiaries.
JV PLEDGE AGREEMENT is defined in SECTION 1.2(E).
LAWS means all applicable statutes, laws, ordinances, regulations,
orders, writs, injunctions, or decrees of any state, commonwealth, province,
nation, territory, possession, county, township, parish, municipality, or
Tribunal.
LC means a standby letter of credit issued by Agent under this
Agreement for the account of one or more Companies.
LC AGREEMENT means, for an Issuing Lender, the standby letter of
credit application and agreement then in general use by Issuing Lender for its
customers, which for Agent is, on the date of this Agreement, its Form No.
00-04- 0823 (10/93).
LC EXPOSURE means the aggregate face amount of all undrawn and
uncancelled LCs issued under this Agreement.
LENDER LIENS means Liens in favor of Agent for the benefit of Lenders
securing all or any of the Obligation, including, but not limited to, Rights in
any Collateral created in favor of Lenders whether by mortgage, pledge,
hypothecation, assignment, transfer, or other granting or creation of Liens.
LENDERS means the financial institutions named on the attached
SCHEDULE 1(A) or on the most recently amended SCHEDULE 1(A), if any, delivered
by Agent under this Agreement, and, subject to this Agreement, their respective
successors and assigns (but not any Participant who is not otherwise a party to
this Agreement).
LIBOR means the quotient obtained by dividing (i) the rate that
deposits in United States dollars are offered by Agent to other major banks in
the London interbank market at approximately 11:00 a.m. (London time) two
Business Days before the commencement of the relevant Interest Period in an
amount comparable to the principal amount of the Advance then outstanding and
having a maturity approximately equal to such Interest Period; by (ii) one
minus the Reserve Percentage (expressed as a decimal) applicable to such
Interest Period.
LIBOR RATE means an annual interest rate (rounded upward, if
necessary, to the nearest 0.01%) equal to the sum of 2.625% plus LIBOR .
LIEN means any lien, mortgage, security interest, pledge, charge, or
encumbrance of any kind, including, without limitation, the Rights of a vendor,
lessor, or similar party under any conditional sales agreement (or other title
retention agreement or lease substantially equivalent thereto), other than
those under which PESCO or one of its consolidated
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Subsidiaries is the vendor or lessor, any production payment, and any other
Right of or arrangement with any creditor to have his claim satisfied out of
any property or assets of PESCO or any of its consolidated Subsidiaries, or the
proceeds therefrom, prior to the general creditors of the owner thereof.
LIQUIDATING COMPANIES means Pool Horizontal Drilling Services Co.,
Westex Production Service, Inc. and The International Air Drilling Company.
LITIGATION means any proceeding, claim, lawsuit, or investigation (a)
conducted by or before any Tribunal, or (b) pending before any public or
private arbitration board or panel.
LOAN PAPERS means (a) this Agreement, certificates delivered pursuant
to this Agreement, and Schedules, (b) any and all notes, mortgages, deeds of
trust, security agreements, guaranties, assignments, and other agreements in
favor of Agent or Lenders (or Agent on behalf of Lenders) or between any Lender
and PESCO or any of its consolidated Subsidiaries ever delivered pursuant to
this Agreement, the Existing Credit Agreement, or the Original Credit
Agreement, as any of the same may hereafter be amended, supplemented, or
restated, and (c) any and all future renewals and extensions or restatements
of, or amendments or supplements to, all or any part of the foregoing, provided
that "Loan Papers" shall not include term sheets, commitment letters,
correspondence, and similar documents used in the negotiation of this Agreement
except to the extent the same are specifically referred to in SECTION 5.15.
MATERIAL ADVERSE EFFECT means any material and adverse effect on (a)
the assets, liabilities, financial condition, business, or operations of any
Material Obligor, individually, or of PESCO and its consolidated Subsidiaries,
collectively, or (b) the ability of the Material Obligors, individually, or of
PESCO and its consolidated Subsidiaries, collectively, to carry out their
businesses in effect on the date hereof or as proposed on such date or to
satisfy their payment and performance obligations under any Loan Paper on a
timely basis.
MATERIAL AGREEMENT of any Person means any material written or oral
agreement, contract, commitment, or understanding to which such Person is a
party, by which such Person is directly or indirectly bound, or to which any
assets of such Person may be subject, which is not cancelable by such Person
upon 60 days or less notice without liability for further payment other than
nominal penalty.
MATERIAL OBLIGORS means PESCO, PESCO Subsidiary, Borrower, Pool
Alaska, Pool Texas, Pool Company (Houston) Inc., Associated Petroleum Services,
Inc., Pool Production Services, Inc., PCESI and Big 10.
MOODY'S means Moody's Investors Service, Inc.
NATIONSBANK is defined in this Agreement's recitals.
NBA is defined in this Agreement's recitals.
NOTES means the promissory notes, each substantially in the form of
EXHIBIT A.
OBLIGATION means all present and future indebtedness, obligations, and
liabilities, and all renewals and extensions thereof, or any part thereof, now
or hereafter owed to Agent or any Lender by any Company, arising from, by
virtue of, or pursuant to any Loan Paper, including but not limited to the LC
Exposure, together with all interest accruing thereon and costs, expenses, and
attorneys' fees incurred in the enforcement or collection thereof, whether such
indebtedness, obligations, and liabilities are direct, indirect, fixed,
contingent, liquidated, unliquidated, joint, several, or joint and several.
OBLIGORS means PESCO, PESCO Subsidiary, Borrower, and Borrower's
present and future consolidated Subsidiaries which are incorporated within the
United States of America.
OFFICERS CERTIFICATE means a certificate substantially in the form of
EXHIBIT H.
OILTOOLS OPERATIONS means, collectively, (1) all of the capital stock
of Associated Oiltools, Inc., a Texas corporation, (2) all of the capital stock
of Oiltools Offshore Services Limited, a United Kingdom corporation, and (3)
certain
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other assets covered by the Sale and Purchase Agreement dated as of September
19, 1990 between Borrower and Antah Risjad, Ltd.
ORIGINAL CREDIT AGREEMENT is defined in this Agreement's recitals.
PAA ACQUISITION means an acquisition by Pool Alaska, Inc., of all of
the partnership interest in Pool Arctic Alaska owned by Arctic Alaska Drilling
Company, Inc.
PARTICIPANT is defined in SECTION 12.14(B).
PAYMENT AGREEMENT means the Agreement Regarding Deferred Payment of
Purchase Price dated June 13, 1995, among the Sellers and Borrower.
PBGC means the Pension Benefit Guaranty Corporation, or any successor,
established pursuant to ERISA.
PCESI means Pool California Energy Services, Inc., a California
corporation, formerly named California Production Service, Inc. and a
wholly-owned Subsidiary of Borrower.
PERMITTED LIENS means (a) the Lender Liens, (b) Liens in favor of
ENSERCH on the capital stock of Pool International, Inc., which are superior to
the Lender Liens thereon, (c) Liens in favor of PESCO or any of its
consolidated Subsidiaries if such Lien is a second Lien subordinated to Lender
Liens in a manner satisfactory to Lenders in its sole discretion, (d) the Liens
described in SCHEDULE 5.11 and renewals thereof (provided that upon any such
renewal, such Liens shall not secure any additional Debt), (e) involuntary
Liens on assets of Companies which are not Obligors if such Liens or the
enforcement thereof would not, individually or in the aggregate, be reasonably
likely to have a Material Adverse Effect, (f) pledges or deposits made to
secure payment of workers' compensation, or to participate in any fund in
connection with workers' compensation, unemployment insurance, pensions, or
other social security programs, (g) good-faith pledges or deposits made to
secure performance of bids, tenders, contracts (other than for the repayment of
borrowed money), or leases, or to secure statutory obligations, surety or
appeal bonds, or indemnity, performance, or other similar bonds in each case in
the ordinary course of business, (h) encumbrances consisting of zoning
restrictions, easements, or other restrictions on the use of real property,
none of which, in respect of any Material Obligor or (where the same would,
individually or in the aggregate, be reasonably likely to cause a Material
Adverse Effect) any other Company, materially impair the use of such real
property by the Person in question in the operation of its business, and none
of which is violated by existing or proposed structures or land use, (i) Liens
securing any purchase money obligation if such obligation is permitted Debt
hereunder and if such Liens do not encumber any Property other than the
Property for which such purchase money obligation was incurred, (j) rights
resulting from joint venture or lease arrangements whereby a Person other than
PESCO or any of its consolidated Subsidiaries has rights to receive a portion
of cash flows generated by PESCO or any of its consolidated Subsidiaries
reasonably proportionate to such joint venturer's or lessor's interest, (k) the
following to the extent no Lien has been filed in any jurisdiction or agreed
to: Liens for Taxes not yet due and payable; mechanic's Liens and
materialman's Liens for services or materials for which payment is not yet due;
and landlord's Liens for rental not yet due and payable and which, to the
extent the same encumbers any of the Collateral, is subordinate to the Lender
Liens, (l) the following, if the validity or amount thereof is being contested
in good faith and by appropriate and lawful proceedings and so long as levy and
execution thereon have been stayed and continue to be stayed, and they do not
in the aggregate materially detract from the value of the property of the
Person in question, or materially impair the use thereof in the operation of
its business: Claims and Liens for Taxes due and payable; claims and Liens
upon, and defects of title to, real or personal property (other than any of the
Collateral), including any attachment of personal or real property or other
legal process prior to adjudication of a dispute on the merits; claims and
Liens of mechanics, materialmen, warehousemen, carriers, landlords, operators
and non-operators arising by virtue of operating or joint operating agreements,
or other like Liens; and adverse judgments on appeal, (m) Liens pre-approved in
writing by Determining Lenders, (n) Liens securing the "Obligation" as defined
in the Term Loan Agreement, (o) Liens in favor of the Sellers on the rigs and
equipment described in the PCESI Nonrecourse Guaranty and Security Agreement
attached as Exhibit D to the Payment Agreement and the real property described
in the three PCESI Deeds of Trust attached as Exhibit E to the Payment
Agreement, in each case securing Borrower's obligations under its 10%
Subordinated Notes issued to the Sellers, (p) Liens on the real property of
PCESI securing notes in respect of the deferred compensation obligations
described in SECTION 7.11(N), (q) the installation from time to time of
equipment such as engines, transmissions, handling tools, etc., on rigs subject
to the Liens in favor of the Sellers described in clause (o) above, so long as
the net diminution in value (if any) of the aggregate equipment of the Obligors
subject to this Agreement's restriction on
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Liens is not material in amount, (r) the Lien provided for in the Security
Agreement between Pool Texas and Elder Well Service, Inc. dated August 15,
1994, and (s) Liens securing the "Obligation" as defined in the ISDL Agreement.
PERSON means any individual, firm, corporation, association,
partnership, joint venture, Tribunal, or other entity.
PESCO means Pool Energy Services Co., a Texas corporation which is
PESCO Subsidiary's parent.
PESCO SUBSIDIARY means Pool Energy Holding, Inc., a Delaware
corporation which is Borrower's parent.
POOL ALASKA means Pool Alaska, Inc., a Texas corporation and a
wholly-owned subsidiary of Borrower.
POOL ALASKA INTERCREDITOR AGREEMENT is defined in SECTION 1.2(E).
POOL ALASKA JOINT VENTURE is defined in SECTION 1.2(E).
POOL TEXAS is defined in SECTION 7.11.
POTENTIAL DEFAULT means the occurrence of any event which, with notice
or lapse of time or both, would become a Default.
PRIME RATE means the prime interest rate charged by Agent, as
announced or published by Agent from time to time, and may not necessarily be
the lowest interest rate charged by Agent.
PRINCIPAL DEBT means, at any time, the sum of (a) the total unpaid
principal balance of all Advances plus (b) the total LC Exposure.
PROJECT FINANCING means any financing of an individual project with
repayment of the financing from dedicated funds generated solely from that
project and if such financing is pre-approved in writing by Determining
Lenders.
PROPERTY means any interest in any kind of property or asset, whether
real, personal, tangible, intangible, or mixed.
PRO RATA and PRO RATA PART means, when determined for any Lender, the
proportion (stated as a percentage) that the Principal Debt owed to it bears to
the total Principal Debt owed to all Lenders.
PURCHASER is defined in SECTION 12.14(C).
REQUEST FOR ADVANCE OR LC means a notice of advance substantially in
the form of EXHIBIT B, to be executed by Borrower's chief financial officer or
treasurer.
RESERVE PERCENTAGE means the weighted average of the Reserve
Requirements incurred by each Lender on its Pro Rata Part of the Principal
Debt.
RESERVE REQUIREMENT means the maximum aggregate reserve requirements
(including all basic, supplemental, emergency, special, marginal and other
reserves required by applicable Law) applicable to a member bank of the Federal
Reserve System for eurocurrency fundings or liabilities.
RIGHTS means rights, remedies, powers, privileges, and benefits.
SCHEDULE means a schedule attached to this Agreement unless specified
otherwise.
S&P means Standard & Poor's Ratings Group, a division of McGraw Hill,
Inc.
SEC REPORTS means reports filed with the Securities and Exchange
Commission pursuant to Sections 13 and 15(d) of the Securities Exchange Act of
1934, as amended, and rules and regulations promulgated thereunder, and all
annual reports, proxy statements, and other proxy solicitation materials.
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SECTION means a section or subsection of this Agreement unless
specified otherwise.
SECURITY AGREEMENT means collectively (as renewed, extended, amended,
and replaced) (a) the Security Agreement dated as of April 25, 1990; (b) the
amendment contained in the Existing Credit Agreement; (c) the Amendment to
Security Agreement dated as of April 21, 1995; (d) the Security Agreement dated
as of June 13, 1995; and (e) the Security Agreement dated as of July 13, 1995,
each of which was executed and delivered under this Agreement by, among others,
NationsBank and all Obligors.
SELLERS means the persons from whom Borrower acquired ownership of all
of the issued and outstanding stock of GPC at the time of the closing under the
Stock Purchase Agreement: Robert D. Hillman, Barbara A. Hillman, Richard H.
Hillman, and Robert D. Hillman, Jr.
SOLVENT means, with respect to any Person, that at the time of
determination: (a) The fair value of its assets exceeds the total amount of
its liabilities (including, without limitation, its contingent liabilities
under the Loan Papers); (b) it is currently able, and expects in the future to
be able, to pay its debts as they mature; and (c) it has capital sufficient to
carry on its business as conducted and as proposed to be conducted. Contingent
liabilities shall be computed at the amount which, in light of all existing
facts and circumstances, represent the amount which can reasonably be expected
to become an actual or matured liability.
STOCK PURCHASE AGREEMENT means the Stock Purchase Agreement dated as
of June 13, 1995, among the Sellers, GPC, Borrower, and PESCO.
SUBORDINATION AGREEMENT means the Subordination Agreement dated as of
June 13, 1995, among Borrower, the Sellers, the Lenders, and Agent.
SUBSIDIARY means any Person of which an aggregate of more than 50% of
the stock of any class or classes (or equivalent interests) is owned of record
or beneficially, directly or indirectly, by another Person or any of its
Subsidiaries, if the holders of the stock of such class or classes (or
equivalent interests) (a) are ordinarily, in the absence of contingencies,
entitled to vote for the election of a majority of the directors (or
individuals performing similar functions) of such Person, even though the Right
so to vote has been suspended by the happening of such a contingency, or (b)
are entitled, as such holders, to vote for the election of a majority of the
directors (or individuals performing similar functions) of such Person, whether
or not the Right so to vote exists by reason of the happening of a contingency,
but specifically excluding Associated Oiltools, Inc. (a Texas corporation),
Oiltools Offshore Services Limited (a United Kingdom corporation), and any
subsidiary companies of either of them.
TAXES means all taxes, assessments, fees, levies, imposts, duties,
deductions, withholdings, or other charges of any nature whatsoever from time
to time or at any time imposed by any Law or Tribunal on PESCO or any of its
consolidated Subsidiaries.
TERM LOAN AGREEMENT means that certain Restated Term Loan Agreement
(as renewed, extended, amended, and modified from time to time) dated as of
November 30, 1995 among Pool Company, as Borrower, the Lenders named therein,
and NationsBank of Texas, N.A., as Agent.
TERMINATION DATE means 12:00 Noon on the earlier of either (a) April
7, 1997, or (b) the date Lender's Commitments are terminated in accordance with
this Agreement.
TRIBUNAL means any court or governmental department, commission,
board, bureau, agency, or instrumentality of the U.S. or of any state,
commonwealth, nation, territory, possession, county, parish, or municipality,
whether now or hereafter constituted or existing.
U.S. means the United States of America.
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SECTION 11 AGREEMENT BETWEEN LENDERS.
11.1 Agent.
a. Each Lender appoints Agent (and Agent accepts
appointment) as its nominee and agent, in its name and on its behalf:
(i) to act as its nominee and on its behalf in and under all Loan
Papers; (ii) to arrange the means whereby its funds are to be made
available to Borrower under the Loan Papers; (iii) to take any action
that it properly requests under the Loan Papers (subject to the
concurrence of other Lenders as may be required under the Loan
Papers); (iv) to receive all documents and items to be furnished to it
under the Loan Papers; (v) to be the secured party, mortgagee,
beneficiary, recipient, and similar party in respect of any collateral
for the benefit of Lenders; (vi) to promptly distribute to it all
material information, requests, documents, and items received from
Borrower under the Loan Papers; (vii) to promptly distribute to it its
ratable part of each payment or prepayment (whether voluntary, as
proceeds of collateral upon or after foreclosure, as proceeds of
insurance thereon, or otherwise) in accordance with the terms of the
Loan Papers; and (viii) to deliver to the appropriate Persons
requests, demands, approvals, and consents received from it. However,
Agent may not be required to take any action that exposes it to
personal liability or that is contrary to any Loan Paper or applicable
Law.
b. If the initial or any successor Agent ever ceases to
be a party to this Agreement or if the initial or any successor Agent
ever resigns (whether voluntarily or at the request of Determining
Lenders), then Determining Lenders shall appoint the successor Agent
from among the Lenders (other than the resigning Agent). If
Determining Lenders fail to appoint a successor Agent within 30 days
after the resigning Agent has given notice of resignation or
Determining Lenders have removed the resigning Agent, then the
resigning Agent may, on behalf of Lenders, appoint a successor Agent,
which must be a commercial bank having a combined capital and surplus
of at least $1,000,000,000 (as shown on its most recently published
statement of condition). Upon its acceptance of appointment as
successor Agent, the successor Agent succeeds to and becomes vested
with all of the Rights of the prior Agent, and the prior Agent is
discharged from its duties and obligations of Agent under the Loan
Papers, and each Lender shall execute the documents as any Lender, the
resigning or removed Agent, or the successor Agent reasonably request
to reflect the change. After any Agent's resignation or removal as
Agent under the Loan Papers, the provisions of this SECTION 11 inure
to its benefit as to any actions taken or omitted to be taken by it
while it was Agent under the Loan Papers.
c. Agent, in its capacity as a Lender, has the same
Rights under the Loan Papers as any other Lender and may exercise
those Rights as if it were not acting as Agent; the term "Lender"
shall, unless the context otherwise indicates, include Agent; and
Agent's resignation or removal shall not impair or otherwise affect
any Rights that it has or may have in its capacity as an individual
Lender. Each Lender and Borrower agree that Agent is not a fiduciary
for Lenders or for Borrower but simply is acting in the capacity
described in this Agreement to alleviate administrative burdens for
Borrower and Lenders, that Agent has no duties or responsibilities to
Lenders or Borrower except those expressly set forth in the Loan
Papers, and that Agent in its capacity as a Lender has all Rights of
any other Lender.
d. Agent may now or hereafter be engaged in one or more
loan, letter of credit, leasing, or other financing transactions with
Borrower, act as trustee or depositary for Borrower, or otherwise be
engaged in other transactions with Borrower (collectively, the "other
activities") not the subject of the Loan Papers. Without limiting the
Rights of Lenders specifically set forth in the Loan Papers, Agent is
not responsible to account to Lenders for those other activities, and
no Lender shall have any interest in any other activities, any present
or future guaranties by or for the account of Borrower that are not
contemplated or included in the Loan Papers, any present or future
offset exercised by Agent in respect of those other activities, any
present or future property taken as security for any of those other
activities, or any property now or hereafter in Agent's possession or
control that may be or become security for the obligations of Borrower
arising under the Loan Papers by reason of the general description of
indebtedness secured or of property contained in any other agreements,
documents, or instruments related to any of those other activities
(but, if any payments in respect of those guaranties or that property
or the proceeds thereof is applied by Agent to reduce the Obligation,
then each Lender is entitled to share ratably in the application as
provided in the Loan Papers).
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11.2 Expenses. Each Lender shall pay its Commitment Percentage of
any reasonable expenses (including, without limitation, court costs, reasonable
attorneys' fees and other costs of collection) incurred by Agent (while acting
in such capacity) in connection with any of the Loan Papers if Agent is not
reimbursed from other sources within 30 days after incurrence. Each Lender is
entitled to receive its Commitment Percentage of any reimbursement that it
makes to Agent if Agent is subsequently reimbursed from other sources.
11.3 Proportionate Absorption of Losses. Except as otherwise
provided in the Loan Papers, nothing in the Loan Papers gives any Lender any
advantage over any other Lender insofar as the Obligation is concerned or to
relieve any Lender from ratably absorbing any losses sustained with respect to
the Obligation (except to the extent unilateral actions or inactions by any
Lender result in Borrower or any other obligor on the Obligation having any
credit, allowance, setoff, defense, or counterclaim solely with respect to all
or any part of that Lender's Pro Rata Part of the Obligation).
11.4 Delegation of Duties; Reliance. Lenders may perform any of
their duties or exercise any of their Rights under the Loan Papers by or
through Agent, and Lenders and Agent may perform any of their duties or
exercise any of their Rights under the Loan Papers by or through their
respective representatives. Agent, Lenders, and their respective
representatives (a) are entitled to rely upon (and shall be protected in
relying upon) any written statement believed by it or them to be genuine and
correct and to have been signed or made by the proper Person and, with respect
to legal matters, upon opinion of counsel selected by Agent or that Lender (but
nothing in this clause (a) permits Agent to rely on any other writing if a
specific writing is required by this Agreement), (b) are entitled to deem and
treat each Lender as the owner and holder of its part of the Principal Debt for
all purposes until, subject to SECTION 12.14, written notice of the assignment
or transfer is given to and received by Agent (and any request, authorization,
consent, or approval of any Lender is conclusive and binding on each subsequent
holder, assignee, or transferee of or Participant in that Lender's part of the
Principal Debt until that notice is given and received), (c) are not deemed to
have notice of the occurrence of a Default unless a responsible officer of
Agent, who handles matters associated with the Loan Papers and transactions
thereunder, has actual knowledge or Agent has been notified by a Lender or
Borrower, and (d) are entitled to consult with legal counsel (including counsel
for Borrower), independent accountants, and other experts selected by Agent and
are not liable for any action taken or omitted to be taken in good faith by it
in accordance with the advice of counsel, accountants, or experts.
11.5 Limitation of Agent's Liability.
a. Neither Agent nor any of its representatives will be
liable for any action taken or omitted to be taken by it or them under
the Loan Papers in good faith and believed by it or them to be within
the discretion or power conferred upon it or them by the Loan Papers
or be responsible for the consequences of any error of judgment
(except for fraud, gross negligence, or willful misconduct), and
neither Agent nor any of its representatives has a fiduciary
relationship with any Lender by virtue of the Loan Papers (but nothing
in this Agreement negates the obligation of Agent to account for funds
received by it for the account of any Lender).
b. Unless indemnified to its satisfaction against loss,
cost, liability, and expense, Agent may not be compelled to do any act
under the Loan Papers or to take any action toward the execution or
enforcement of the powers thereby created or to prosecute or defend
any suit in respect of the Loan Papers. If Agent requests instructions
from Lenders, or Determining Lenders, as the case may be, with respect
to any act or action in connection with any Loan Paper, Agent is
entitled to refrain (without incurring any liability to any Person by
so refraining) from that act or action unless and until it has
received instructions. In no event, however, may Agent or any of its
representatives be required to take any action that it or they
determine could incur for it or them criminal or onerous civil
liability. Without limiting the generality of the foregoing, no
Lender has any right of action against Agent as a result of Agent
acting or refraining from acting under this Agreement in accordance
with instructions of Determining Lenders.
c. Agent is not responsible to any Lender or any
Participant for, and each Lender represents and warrants that it has
not relied upon Agent in respect of, (i) the creditworthiness of any
Company and the risks involved to that Lender, (ii) the effectiveness,
enforceability, genuineness, validity, or the due execution of any
Loan Paper (other than by Agent), (iii) any representation, warranty,
document, certificate, report, or statement made therein (other than
by Agent) or furnished thereunder or in connection therewith, (iv) the
adequacy of any collateral now or hereafter securing the Obligation or
the existence, priority, or perfection of any Lien now or hereafter
granted or purported to be granted on the collateral under any Loan
Paper, or (v) observation of or compliance with
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any of the terms, covenants, or conditions of any Loan Paper on the
part of any Company. EACH LENDER AGREES TO INDEMNIFY AGENT AND ITS
REPRESENTATIVES AND HOLD THEM HARMLESS FROM AND AGAINST (BUT LIMITED
TO SUCH LENDER'S COMMITMENT PERCENTAGES OF) ANY AND ALL LIABILITIES,
OBLIGATIONS, LOSSES, DAMAGES, PENALTIES, ACTIONS, JUDGMENTS, SUITS,
COSTS, REASONABLE EXPENSES, AND REASONABLE DISBURSEMENTS OF ANY KIND
OR NATURE WHATSOEVER THAT MAY BE IMPOSED ON, ASSERTED AGAINST, OR
INCURRED BY THEM IN ANY WAY RELATING TO OR ARISING OUT OF THE LOAN
PAPERS OR ANY ACTION TAKEN OR OMITTED BY THEM UNDER THE LOAN PAPERS IF
AGENT AND ITS REPRESENTATIVES ARE NOT REIMBURSED FOR SUCH AMOUNTS BY
ANY COMPANY. ALTHOUGH AGENT AND ITS REPRESENTATIVES HAVE THE RIGHT TO
BE INDEMNIFIED UNDER THIS AGREEMENT FOR ITS OR THEIR OWN ORDINARY
NEGLIGENCE, AGENT AND ITS REPRESENTATIVES DO NOT HAVE THE RIGHT TO BE
INDEMNIFIED UNDER THIS AGREEMENT FOR ITS OR THEIR OWN FRAUD, GROSS
NEGLIGENCE, OR WILLFUL MISCONDUCT.
11.6 Default; Collateral. While a Default exists, Lenders agree to
promptly confer in order that Determining Lenders or Lenders, as the case may
be, may agree upon a course of action for the enforcement of the Rights of
Lenders; and Agent is entitled to refrain from taking any action (without
incurring any liability to any Person for so refraining) unless and until it
has received instructions from Determining Lenders. In actions with respect to
any property of Borrower, Agent is acting for the ratable benefit of each
Lender. Agent shall hold, for the ratable benefit of all Lenders, any security
it receives for the Obligation or any guaranty of the Obligation it receives
upon or in lieu of foreclosure.
11.7 Limitation of Liability. No Lender or any Participant will
incur any liability to any other Lender or Participant except for acts or
omissions in bad faith, and neither Agent nor any Lender or Participant will
incur any liability to any other Person for any act or omission of any other
Lender or any Participant.
11.8 Relationship of Lenders. The Loan Papers do not create a
partnership or joint venture among Agent and Lenders or among Lenders.
11.9 Collateral Matters.
a. Each Lender authorizes and directs Agent to enter
into the Loan Papers for the ratable benefit of Lenders. Each Lender
agrees that any action taken by Agent concerning any Collateral with
the consent of, or at the request of, Determining Lenders in
accordance with the provisions of this Agreement, the Security
Agreement, or the other Loan Papers, and the exercise by Agent (with
the consent of, or at the request of, Determining Lenders) of powers
concerning the Collateral set forth in any Loan Paper, together with
other reasonably incidental powers, shall be authorized and binding
upon all Lenders.
b. Agent is authorized on behalf of all Lenders, without
the necessity of any notice to or further consent from any Lender,
from time to time before a Default or Potential Default, to take any
action with respect to any Collateral or Loan Paper that may be
necessary to perfect and maintain perfected the Lender Liens upon the
Collateral granted by the Loan Papers.
c. Except to use the customary standard of care that it
exercises in respect of collateral for its own account, Agent has no
obligation whatsoever to any Lender or to any other Person to assure
that the Collateral exists or is owned by any Company or is cared for,
protected, or insured or has been encumbered or that the Liens granted
to Agent for the benefit of Lenders under the Loan Papers have been
properly or sufficiently or lawfully created, perfected, protected, or
enforced, or are entitled to any particular priority.
d. Agent shall exercise the same care and prudent
judgment with respect to the Collateral and the Loan Papers as it
normally and customarily exercises in respect of similar collateral
and security documents.
e. Lenders irrevocably authorize Agent, at its option
and in its discretion, to release any Lender Lien upon any Collateral
(i) upon full payment of the Obligation; (ii) constituting property
being sold or disposed of as permitted under SECTION 7.20, if Agent
determines that the property being sold or disposed is being sold or
disposed in accordance with the requirements and limitations of
SECTION 7.20 and Agent concurrently receives all mandatory prepayments
with respect thereto, if any, in accordance with SECTION 7.20; (iii)
constituting property in which no Company owned any interest at the
time the Lender Lien was granted or at any time thereafter; (iv)
constituting property leased to any Company under a lease that has
expired or been terminated in a transaction
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permitted under this Agreement or is about to expire and that has not
been, and is not intended by that Company to be, renewed; (v)
consisting of an instrument evidencing Debt pledged to Agent (for the
benefit of Lenders), if the Debt evidenced thereby has been paid in
full. Lenders further irrevocably authorize Agent to release any
Lender Lien upon any Collateral, if approved, authorized, or ratified
in writing by Determining Lenders. Upon request by Agent at any time,
Lenders will confirm in writing Agent's authority to release
particular types or items of Collateral under this SECTION 11.9(E).
11.10 Benefits of Agreement. None of the provisions of this SECTION
11 inure to the benefit of any Company or any other Person other than Agent and
Lenders; consequently, no Company or any other Person is entitled to rely upon,
or to raise as a defense, in any manner whatsoever, the failure of Agent or any
Lender to comply with these provisions.
SECTION 12. MISCELLANEOUS.
12.1 Headings and Exhibits. Headings and captions may not be
construed in interpreting provisions in any Loan Paper. Any incomplete Exhibit
must be completed correctly and in accordance with the terms and provisions of
this Agreement before or at the time of its execution and delivery.
12.2 Time and Non-Business Days. Time is of the essence in the
Loan Papers. All time references (e.g., 10:00 a.m.) are to time in Houston,
Texas. Any action that is due on a non-Business Day may be delayed until the
next- succeeding Business Day, but interest accrues on any payment until it is
made.
12.3 Communications. Unless otherwise specifically provided,
whenever any Loan Paper requires or permits any consent, approval, notice,
request, or demand from one party to another, such communication must be in
writing (which may be by facsimile transmission) to be effective and shall be
deemed to have been given on the day actually delivered or, if mailed, on the
fifth Business Day after it is enclosed in an envelope, addressed to the party
to be notified at the address stated below, properly stamped, sealed, and
deposited in the appropriate official postal service. Until changed by notice,
the address and facsimile or FAX number for each party is as appears on the
signature page(s) hereto.
12.4 Form and Number of Documents. Each agreement, document,
instrument, or other writing to be furnished to Lenders under any provision of
this Agreement must be in form and substance and in such number of counterparts
as may be satisfactory to Agent and its counsel.
12.5 Exceptions to Covenants. Neither PESCO nor any of its
consolidated Subsidiaries shall take or fail to take any action permitted under
any Loan Paper if such action or omission would result in the breach of any
covenant contained in any Loan Paper.
12.6 Survival. All covenants, agreements, undertakings,
representations, and warranties made in any of the Loan Papers shall survive
all closings under the Loan Papers. Further, Borrower's obligations and
Agent's and each Lender's Rights under the Loan Papers shall continue in full
force and effect until the Obligation is paid and performed in full.
12.7 Governing Law. The Loan Papers are being executed and
delivered, and are intended to be performed, in the State of Texas, and the
Laws (other than conflict of laws provisions thereof) of such State and of the
United States of America shall govern the Rights and duties of the parties and
the validity, construction, enforcement, and interpretation of the Loan Papers,
except to the extent otherwise specified in any of the Loan Papers.
12.8 Venue; Service of Process. Each Obligor, for itself and its
successors and assigns, hereby (a) irrevocably submits to the nonexclusive
jurisdiction of the state and federal courts of the State of Texas and agrees
and consents that service of process may be made upon it in any legal
proceeding arising out of or in connection with the Loan Papers and the
Obligation by service of process as provided by Texas Law, (b) irrevocably
waives, to the fullest extent permitted by Law, any objection which it may now
or hereafter have to the laying of venue of any Litigation arising out of or in
connection with the Loan Papers and the Obligation brought in district courts
of Harris County, Texas, or in the U.S. District Court for the Southern
District of Texas, Houston Division, (c) irrevocably waives any claims that any
Litigation brought in any such court has been brought in an inconvenient forum,
(d) agrees to designate PESCO as its agent for service of process in Houston,
Texas, in connection with any such Litigation and to deliver to Agent evidence
thereof, (e) irrevocably consents to the service of process out of any of the
aforementioned courts in any such Litigation by the mailing of copies thereof
by certified mail,
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return receipt requested, postage prepaid, to such Obligor at its address set
forth herein, and (f) irrevocably agrees that any legal proceeding against
Agent or any Lender arising out of or in connection with the Loan Papers on the
Obligation shall be brought in the district courts of Harris County, Texas, or
in the U.S. District Court for the Southern District of Texas, Houston
Division. Nothing herein shall affect the Right of Agent or any Lender to
commence legal proceedings or otherwise proceed against Borrower in any
jurisdiction or to serve process in any manner permitted by applicable Law.
12.9 Maximum Interest Rate. Regardless of any provision contained
in any of the Loan Papers, no Lender is entitled to contract for, charge, take,
reserve, receive, or apply, as interest on the Obligation, or any part thereof,
any amount in excess of the Highest Lawful Rate, and, in the event Lenders ever
contract for, charge, take, reserve, receive, or apply as interest any such
excess, it shall be deemed a partial prepayment of principal and treated
hereunder as such; and, if the Principal Debt is paid in full, any remaining
excess shall forthwith be paid to Borrower. In determining whether or not the
interest paid or payable, under any specific contingency, exceeds the Highest
Lawful Rate, Borrower and Lenders shall, to the maximum extent permitted under
applicable Law, (a) treat all Advances as but a single extension of credit (and
Lenders and Borrower agree that such is the case and that provision herein for
multiple Advances is for convenience only), (b) characterize any nonprincipal
payment as an expense, fee, or premium rather than as interest, (c) exclude
voluntary prepayments and the effects thereof, and (d) "spread" the total
amount of interest throughout the entire contemplated term of the Obligation;
provided that, if the Obligation is paid and performed in full prior to the end
of the full contemplated term thereof, and if the interest received for the
actual period of existence thereof exceeds the Highest Lawful Rate, Lenders
shall refund such excess, and, in such event, Lenders shall not be subject to
any penalties provided by any Laws for contracting for, charging, taking,
reserving, or receiving interest in excess of the Highest Lawful Rate. To the
extent the Laws of the State of Texas are applicable for purposes of
determining the "Highest Lawful Rate", such term shall mean the "indicated rate
ceiling" from time to time in effect under Article 1.04, Title 79, Revised
Civil Statutes of Texas, as amended, or, if permitted by applicable Law and
effective upon the giving of the notices required by such Article 1.04 (or
effective upon any other date otherwise specified by applicable Law), the
"monthly ceiling", the "quarterly ceiling", or "annualized ceiling" from time
to time in effect under such Article 1.04, whichever Lenders shall elect to
substitute for the "indicated rate ceiling", and vice versa, each such
substitution to have the effect provided in such Article 1.04; and Lenders
shall be entitled to make such election from time to time and one or more times
and, without notice to Borrower, to leave any such substitute rate in effect
for subsequent periods in accordance with subsection (h)(1) of such Article
1.04. Pursuant to Article 15.10(b) of Chapter 15, Subtitle 79, Revised Civil
Statutes of Texas, 1925, as amended (which regulates certain revolving credit
loan accounts and revolving triparty accounts), Borrower agrees that such
Chapter 15 shall not govern or in any manner apply to the Obligation.
12.10 Invalid Provisions. If any provision of any Loan Paper is
held to be illegal, invalid, or unenforceable, such provision shall be fully
severable; the appropriate Loan Paper shall be construed and enforced as if
such provision had never comprised a part thereof; and the remaining provisions
shall remain in full force and effect and shall not be affected by such
provision or by its severance therefrom. Furthermore, in lieu of such
provision there shall be added automatically as a part of such Loan Paper a
provision as similar in terms to such illegal, invalid, or unenforceable
provision as may be possible and be legal, valid, and enforceable.
12.11 Entirety. THIS AGREEMENT AND THE OTHER LOAN PAPERS REPRESENT
THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE
OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS BY THE PARTIES. THERE
ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
12.12 Amendments, Consents, Conflicts, and Waivers.
a. Unless otherwise specifically provided (i) this
Agreement may be amended only by an instrument in writing executed by
Borrower, Agent, and Determining Lenders and supplemented only by
documents delivered or to be delivered in accordance with the express
terms of this Agreement, and (ii) the other Loan Papers may only be
the subject of an amendment, modification, or waiver that has been
approved by Determining Lenders and Borrower.
b. Any amendment to or consent or waiver under this
Agreement or any Loan Paper that purports to accomplish any of the
following must be by an instrument in writing executed by Borrower and
Agent and
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executed (or approved, as the case may be) by each Lender: (i) Extends
the due date or decreases the amount of any scheduled payment of the
Obligation beyond the date specified in the Loan Papers; (ii)
decreases any rate or amount of interest, fees, or other sums payable
to Agent -- except fees payable only to Agent to which it may agree
with Borrower without joinder by any Lender -- or Lenders under this
Agreement (except such reductions as are contemplated by this
Agreement); (iii) changes the definition of "COMMITMENTS",
"DETERMINING LENDERS", or "TERMINATION DATE"; (iv) increases any one
or more Lenders' Commitments; (v) waives compliance with, amends, or
releases (in whole or in part) any guaranty or any Collateral unless
the release is contemplated in any Loan Paper; or (vi) changes this
CLAUSE (B) or any other matter specifically requiring the consent of
all Lenders under this Agreement.
c. ANY CONFLICT OR AMBIGUITY BETWEEN THE TERMS AND
PROVISIONS OF THIS AGREEMENT AND TERMS AND PROVISIONS IN ANY OTHER
LOAN PAPER IS CONTROLLED BY THE TERMS AND PROVISIONS OF THIS AGREEMENT
FOR ALL PURPOSES.
d. No course of dealing or any failure or delay by
Agent, any Lender, or any of their respective representatives with
respect to exercising any Right of Agent or any Lender under this
Agreement operates as a waiver thereof. A waiver must be in writing
and signed by Agent and Lenders (or Determining Lenders, if permitted
under this Agreement) to be effective, and a waiver will be effective
only in the specific instance and for the specific purpose for which
it is given.
e. As stated in the Recitals to this Agreement, Waivers
granted and interpretations issued by NationsBank with respect to the
Original Credit Agreement, copies of which are attached hereto as
EXHIBIT I, shall apply to this Agreement to the same extent as if
granted or issued by Agent and Lenders with reference specifically to
this Agreement.
12.13 Multiple Counterparts. This Agreement has been executed in a
number of identical counterparts, each of which shall be deemed an original for
all purposes and all of which constitute, collectively, one agreement; but, in
making proof of this Agreement, it shall not be necessary to produce or account
for more than one such counterpart. Each Lender need not execute the same
counterpart of this Agreement so long as identical counterparts are executed by
Borrower, each Lender, and Agent. This Agreement shall become effective when
counterparts of this Agreement have been executed and delivered to Agent by
each Lender, Agent, and Borrower, or, in the case only of Lenders, when Agent
has received telecopied, telexed, or other evidence satisfactory to it that
each Lender has executed and is delivering to Agent a counterpart of this
Agreement.
12.14 Successors and Assigns; Participations.
a. Each Loan Paper binds and inures to the benefit of
the parties thereto, any intended beneficiary thereof, and each of
their respective successors and permitted assigns. No Lender may
transfer, pledge, assign, sell any participation in, or otherwise
encumber its portion of the Obligation except as permitted by this
SECTION 12.14.
b. Subject to the provisions of this section and in
accordance with applicable Law, any Lender may, in the ordinary course
of its commercial banking business, at any time sell to one or more
Persons (each a "PARTICIPANT") participating interests in its portion
of the Obligation. The selling Lender shall remain a "LENDER" under
this Agreement (and the Participant shall not constitute a "LENDER"
under this Agreement) and its obligations under this Agreement shall
remain unchanged. The selling Lender shall remain solely responsible
for the performance of its obligations under the Loan Papers and shall
remain the holder of its share of the Principal Debt for all purposes
under this Agreement. Borrower and Agent shall continue to deal
solely and directly with the selling Lender in connection with that
Lender's Rights and obligations under the Loan Papers. Participants
have no Rights under the Loan Papers, other than certain voting Rights
as provided below. Subject to the following, each Lender may obtain
(on behalf of its Participants) the benefits of SECTION 2 with respect
to all participations in its part of the Obligation outstanding from
time to time so long as Borrower is not obligated to pay any amount in
excess of the amount that would be due to that Lender under SECTION 2
calculated as though no participations have been made. No Lender may
sell any participating interest under which the Participant has any
Rights to approve any amendment, modification, or waiver of any Loan
Paper, except to the extent the amendment, modification, or waiver
extends the due date for payment of any principal, interest, or fees
due under the Loan
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Papers, increases that Lender's Commitment, reduces the interest rate
or the amount of principal or fees applicable to the Obligation
(except reductions contemplated by this Agreement), or releases any
guaranty or Collateral unless the release is contemplated in any Loan
Paper. However, if a Participant is entitled to the benefits of
SECTION 2 or a Lender grants Rights to its Participants to approve
amendments to or waivers of the Loan Papers respecting the matters
described in the previous sentence, then that Lender must include a
voting mechanism in the relevant participation agreement whereby a
majority of its portion of the Obligation (whether held by it or
participated) shall control the vote for all of that Lender's portion
of the Obligation. Except in the case of the sale of a participating
interest to another Lender, the relevant participation agreement shall
prohibit the Participant from transferring, pledging, assigning,
selling participations in, or otherwise encumbering its portion of the
Obligation.
c. Subject to the provisions of this section, any Lender
may at any time, in the ordinary course of its commercial banking
business, (i) without the consent of Borrower or Agent, assign all or
any part of its Rights and obligations under the Loan Papers to any of
its Affiliates (each a "PURCHASER") and (ii) if no Default exists,
upon the prior written consent of Borrower (which will not be
unreasonably withheld) and Agent, assign to any other Person that is
not a business competitor of any Company (each of which is also a
"PURCHASER") a proportionate part -- not less than $5,000,000 of that
Lender's Commitment and, if less than all, then the selling Lender
must retain at least $5,000,000 of its Commitment -- under the Loan
Papers, it must retain at least $5,000,000 of all or any part of its
Rights and obligations under the Loan Papers. In each case, the
Purchaser shall assume those Rights and obligations under an
assignment agreement substantially in the form of the attached EXHIBIT
E. Each assignment under this SECTION 12.14(C) shall include a
ratable interest in the assigning Lender's Rights and obligations
under this Agreement. Upon (i) delivery of an executed copy of the
assignment agreement to Borrower and Agent and (ii) payment of a fee
of $2,500.00 from the transferor to Agent, from and after the
assignment's effective date (which shall be after the date of
delivery), the Purchaser shall for all purposes be a Lender party to
this Agreement and shall have all the Rights and obligations of a
Lender under this Agreement to the same extent as if it were an
original party to this Agreement with commitments as set forth in the
assignment agreement, and the transferor Lender shall be released from
its obligations under this Agreement to a corresponding extent, and,
except as provided in the remainder of this clause (c), no further
consent or action by Borrower, Lenders, or Agent shall be required.
Upon the consummation of any transfer to a Purchaser under this clause
(c), the then-existing SCHEDULE 1(B) shall automatically be deemed to
reflect the name, address, and Commitment of such Purchaser, Agent
shall deliver to Borrower and Lenders an amended SCHEDULE 1(B)
reflecting those changes, Borrower shall execute and deliver to each
of the transferor Lender and the Purchaser a Note in the face amount
of its respective Commitment following transfer, and, upon receipt of
its new Note, the transferor Lender shall return to Borrower the Note
previously delivered to it under this Agreement. A Purchaser is
subject to all the provisions in this section as if it were a Lender
signatory to this Agreement as of the date of this Agreement.
d. Any Lender may at any time, without the consent of
Borrower or Agent, assign all or any part of its Rights under the Loan
Papers to a Federal Reserve Bank without releasing the transferor
Lender from its obligations thereunder.
e. Notwithstanding any contrary provision in this
Agreement, a Lender may not sell or participate any of its interests
for a purchase price that, directly or indirectly, reflects a discount
from face value, without first offering the sale or participation to
the other Lenders on a Pro Rata basis (which must be accepted or
rejected within five Business Days after the offer).
12.15 Confidentiality. Agent or any Lender may, without limitation,
(a) disclose any information concerning PESCO or any of its consolidated
Subsidiaries to any Tribunal, or to any prospective or actual Participant or
(subject to SECTION 12.14) any other actual or prospective transferee of any of
Agent's or any Lender's Rights and duties, or to the respective affiliates,
directors, officers, employees, attorneys, and agents of any prospective or
actual Participant or such other transferee of an interest, provided that such
prospective or actual Participant or such other transferee agrees to treat the
information as confidential, and (b) use any information concerning PESCO and
any of its consolidated Subsidiaries (i) to the extent pertinent to an
evaluation of the Obligation, (ii) to enforce compliance with the terms and
conditions of the Loan Papers, or (iii) to take any action when it is entitled
to do so under the Loan Papers which Lenders deem necessary to protect its
interests if a Default has occurred and is continuing.
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12.16 Parties Bound; Assignments. This Agreement is binding upon,
and inures to the benefit of Agent, Determining Lenders, Lenders, each Obligor,
and their respective successors and assigns, provided that no Obligor may,
without the prior written consent of Determining Lenders, assign any Rights,
duties, or obligations hereunder, and any purported assignment in violation of
the foregoing shall be void and ineffective.
[Remainder of page intentionally blank; signature page follows.]
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EXECUTED as of the date first stated above.
<TABLE>
<S> <C>
Pool Company POOL COMPANY, as Borrower
10375 Richmond Avenue
Houston, Texas 77042
Attn: R. A. Johannsen, Treasurer
FAX (713) 954-3244 By /S/ E. J. SPILLARD
-------------------------------------------------
E. J. Spillard, Senior Vice President,
Finance
By /S/ R. A. JOHANNSEN
-------------------------------------------------
R. A. Johannsen, Treasurer
NationsBank of Texas, N.A. NATIONSBANK OF TEXAS, N.A., as Agent, a Lender,
700 Louisiana Street, 8th Floor and NationsBank
Houston, Texas 77002
Attn: James R. Allred, Vice President
FAX (713) 247-6568
By /S/ JAMES R. ALLRED
-------------------------------------------------
James R. Allred, Vice President
National Bank of Canada NATIONAL BANK OF CANADA, as a Lender
2121 San Jacinto, Suite 1850
Dallas, Texas 75201
Attn: Larry L. Sears, Group Vice President
FAX (214) 871-2015 By /S/ LARRY L. SEARS
-------------------------------------------------
Larry L. Sears, Group Vice President
By /S/ DOUGLAS G. CLARK
-------------------------------------------------
Douglas G. Clark, Vice President
National Bank of Alaska NATIONAL BANK OF ALASKA, as a Lender
301 W. Northern Light Blvd.
Anchorage, Alaska 99503
Attn: Patricia Jelley Benz, Vice President
FAX: (907) 265-2141 By /S/ PATRICIA JELLEY BENZ
-------------------------------------------------
Patricia Jelley Benz, Vice President
</TABLE>
37
<PAGE> 40
The Obligors named below are joining this Agreement for the purpose of
(a) ratifying, confirming, and agreeing to each of the matters and undertakings
stated in SECTION 4.4 and (b) agreeing to each of the covenants applicable to
it under SECTION 7.
<TABLE>
<S> <C>
Pool Energy Services Co. POOL ENERGY SERVICES CO.,
10375 Richmond Avenue POOL ENERGY HOLDING, INC.,
Houston, Texas 77042 POOL COMPANY,
Attn: R. A. Johannsen, POOL COMPANY (HOUSTON) INC.,
Treasurer POOL COMPANY (TEXAS) INC.,
FAX (713) 954-3244 ASSOCIATED PETROLEUM SERVICES, INC.,
POOL PRODUCTION SERVICES, INC.,
POOL ALASKA, INC.,
POOL AMERICAS, INC.,
POOL INTERNATIONAL, INC.,
POOL-AUSTRALIA, INC.,
THE INTERNATIONAL AIR DRILLING COMPANY,
POOL HORIZONTAL DRILLING SERVICES CO.,
POOL CALIFORNIA ENERGY SERVICES, INC.,
BIG 10 FISHING TOOL COMPANY, INC.
WESTEX PRODUCTION SERVICE, INC.,
as all of those Companies are Obligors
By /S/ E. J. SPILLARD
---------------------------------------------------------------
E. J. Spillard, Senior Vice President, Finance of each of
the above Obligors
By /S/ R. A. JOHANNSEN
---------------------------------------------------------------
R. A. Johannsen, Treasurer of each of the above Obligors
</TABLE>
38
<PAGE> 41
EXHIBIT A
REVOLVING CREDIT NOTE
$______________ Houston, Texas __________, 1995
FOR VALUE RECEIVED, POOL COMPANY, a Texas corporation ("MAKER"),
hereby promises to pay to the order of ______, ("PAYEE"), the principal amount
of $_______________ or so much thereof as may be disbursed and outstanding
hereunder, together with interest, as hereinafter described.
This promissory note has been executed and delivered under, and is
subject to the terms of, the $35,000,000 Restated Revolving Credit Agreement
(as amended, the "CREDIT AGREEMENT") dated as of November 30, 1995, among
Maker, NationsBank of Texas, N.A., as Agent, and Payee and the other Lenders
referred to therein, and is a "Note" referred to therein. Unless defined
herein or the context otherwise requires, capitalized terms used herein have
the meaning given to such terms in the Credit Agreement. Reference is made to
the Credit Agreement for provisions affecting this promissory note regarding
the place of payment, applicable interest rates, principal and interest payment
dates, final maturity, voluntary and mandatory prepayments, acceleration of
maturity, exercise of Rights, payment of attorneys' fees, court costs, and
other costs of collection, certain waivers by Maker and others now or hereafter
obligated for payment of any sums due hereunder, and security for the payment
hereof.
This promissory note and the similar promissory notes of Maker dated
of even date herewith have been issued under the Credit Agreement in
replacement for, but not as a novation of, those certainpromissory notes of
Maker dated August 15, 1994, which were issued under the Existing Credit
Agreement (as defined in the Credit Agreement).
This promissory note is being executed and delivered, and is intended
to be performed, in the State of Texas, and the Laws of such State and of the
United States of America shall govern the rights and duties of the parties and
the validity, construction, enforcement, and interpretation hereof.
THIS PROMISSORY NOTE, TOGETHER WITH THE OTHER LOAN PAPERS, REPRESENT
THE FINAL AGREEMENTS BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY (I)
EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE
PARTIES, OR (II) ANY COMMITMENT LETTER AMONG THE PARTIES (ALL THE TERMS AND
CONDITIONS OF WHICH ARE SUPERSEDED BY LOAN PAPERS). THERE ARE NO UNWRITTEN
ORAL AGREEMENTS BETWEEN THE PARTIES.
POOL COMPANY
By
-------------------------------------
E.J. Spillard
Senior Vice President, Finance
By
-------------------------------------
R.A. Johannsen
Treasurer
[corporate seal]
<PAGE> 42
EXHIBIT B
REQUEST FOR ADVANCE OR LC
AGENT: NationsBank of Texas, N.A.
BORROWER: Pool Company
RE: $35,000,000 Restated Revolving Credit Agreement
DATE: ___________________, 19__
This Request for Advance or LC is delivered pursuant to the
$35,000,000 Restated Revolving Credit Agreement (as amended, the "CREDIT
AGREEMENT") dated as of November 30, 1995, among Borrower, the Lenders named
therein ("LENDERS") and NationsBank of Texas, N.A., as agent for itself and the
other Lenders ("AGENT"), all the defined terms of which have the same meaning
when used herein.
During normal banking hours on ______________, 199_ (which must be at
least one Business Day after the date hereof):
_____ Borrower shall borrow from Lenders the principal sum of
$__________ (the "Requested Advance," which must be in the
minimum amount of $200,000 and any increment of $100,000
thereof); or
_____ Borrower requests that Issuing Lender issue a standby letter
of credit on the account of ______________ for the benefit of
_________________ in the amount of $_______________ (the
"Requested LC").
A Borrowing Deficiency will not exist if Issuing Lender honors the
above request.
On, and as of, the date hereof, and at the time the above request is
honored, the representations and warranties (unless such representations and
warranties speak to a specific date, or the facts upon which such
representations and warranties are based have been changed by the transactions
contemplated in the Credit Agreement) in the Credit Agreement are and will be
true and correct in all material respects and no material adverse change has or
will have occurred in (a) the consolidated financial condition of PESCO, or (b)
the individual financial condition of any Material Obligor. No Default or
Potential Default has occurred and is continuing on the date hereof.
POOL COMPANY
By ____________________________________
Name __________________________________
Title _________________________________
<PAGE> 43
EXHIBIT C-1
FINANCIAL REPORT CERTIFICATE
FOR _________________ ENDED ______________, 19___
AGENT: NationsBank of Texas, N.A.
BORROWER: Pool Company
RE: $35,000,000 Restated Revolving Credit Agreement
DATE: ___________________, 19__
This certificate is delivered pursuant to the $35,000,000 Restated
Revolving Credit Agreement (as amended, the "CREDIT AGREEMENT") dated as of
November 30, 1995, among Borrower, the Lenders named therein ("LENDERS"), and
NationsBank of Texas, N.A., as agent for itself and the other Lenders
("AGENT"), all defined terms of which have the same meaning when used herein.
I certify to Lenders that I am the _____________________ (president,
chief financial officer, or controller) of PESCO on the date hereof and that:
1. The Financial Statements attached hereto were prepared in
accordance with GAAP, and present fairly the consolidated and consolidating
financial condition and results of operations of PESCO and its Subsidiaries as
of, and for the fiscal [quarter or year] ending on _______________, 19___ (the
"SUBJECT PERIOD").
2. A review of the activities of PESCO, PESCO Subsidiary, and the
Companies during the Subject Period has been made under my supervision with a
view to determining whether, during the Subject Period, each such entity has
kept, observed, performed, and fulfilled all of its obligations under the Loan
Papers, and during the Subject Period, each such entity kept, observed,
performed, and fulfilled each and every covenant and condition of the Loan
Papers (except for any deviations set forth on the attached schedule).
3. During the Subject Period, no Default (nor any Potential
Default) has occurred which has not been cured or waived (except for any
Defaults or Potential Defaults set forth on the attached schedule).
4. The status of compliance by PESCO with Sections 7.25 through
7.27 of the Credit Agreement at the end of the Subject Period is set forth on
the attached schedule.
5. This certificate is being delivered on behalf of PESCO. No
person or entity other than Lenders and the law firm of Porter & Hedges, L.L.P.
(the "SUBJECT RECIPIENTS"), shall be entitled to receive or rely upon this
certificate for any purpose. The Subject Recipients agree by their acceptance
hereof that (a) they shall look solely to PESCO for any loss, cost, damage,
expense, claim, demand, suit, or cause of action arising out of or relating in
any way to this certificate or its preparation and delivery, and (b) the
undersigned shall not under any circumstances have any personal liability
whatsoever for the preparation or execution of this certificate.
_________________________________
Name ____________________________
Title ___________________________
<PAGE> 44
EXHIBIT C-2
BORROWING BASE REPORT
FOR MONTH ENDED ________________, 19__
AGENT: NationsBank of Texas, N.A.
BORROWER: Pool Company
RE: $35,000,000 Restated Revolving Credit Agreement
DATE: _______________, 19__
This certificate is delivered pursuant to the $35,000,000 Restated
Revolving Credit Agreement (as amended, the "CREDIT AGREEMENT") dated as of
November 30, 1995, among Borrower, the Lenders named therein ("LENDERS") and
NationsBank of Texas, N.A., as agent for itself and the other Lenders
("AGENT"). Unless defined herein, capitalized terms have the meanings ascribed
to such terms in the Credit Agreement. Section references in the Borrowing
Base calculation below refer to Sections in the Credit Agreement.
As used herein, the following terms have the meanings indicated:
"CURRENT ACCOUNTS RECEIVABLE" means those domestic consolidated
receivables of the Companies, for inventory sold or services rendered in the
ordinary course of business, payable in cash and the customer's full balance is
outstanding less than 121 days after the first invoice date.
"CURRENT/DELINQUENT ACCOUNTS RECEIVABLE" means those domestic
consolidated receivables of the Companies, for inventory sold or services
rendered in the ordinary course of business, payable in cash and part or all of
the customer's full balance is outstanding 121 days or more after the first
invoice date.
"CURRENT PORTION" means that portion of Current/Delinquent Accounts
Receivable which are outstanding less than 121 days after the first invoice
date.
I certify to Lenders that (a) I am the ____________________ (chief
financial officer or treasurer) of Pool Company on the date hereof, and (b)
based on the aged trial balance of trade accounts receivables of the Material
Obligors for the accounting month set forth on the schedules attached hereto,
the following is a true and correct calculation of the Borrowing Base as
defined in the Credit Agreement:
(1) Current Accounts Receivable $________
(2) Customer balances of Current Accounts
Receivable aggregating at least $100,000,
which Lender has not approved for
inclusion in calculating the Borrowing Base $________
(3) Line 1 minus Line 2 $________
(4) Current Portion of customer balances of
Current/Delinquent Accounts Receivable of
at least $100,000 which Lender has
approved for inclusion in calculating the
Borrowing Base (Section 1.2(a)(ii)(A)) $________
(5) Current Portion of Current/Delinquent
Accounts Receivable which meet the
C-2-1
<PAGE> 45
certification requirements and dollar and
percentage limits of Section 1.2(a)(ii)(B)(1) $________
(6) Current Portion of Current/Delinquent
Accounts Receivable which meet the
certification requirements and dollar and
percentage limits of Section 1.2(a)(ii)(B)(2) $________
(7) Line 3 plus Line 4 plus Line 5 plus Line 6 $________
(8) Line 7 x 80% $________
(9) Amount satisfying requirements of Section 1.2(b) $________
(10) Line 9 x 60% (cannot exceed 25% of Line 13) $________
(11) Amount satisfying requirements of Section 1.2(c) $________
(12) Amounts satisfying requirements of Section 1.2(d)
which Determining Lenders have approved for
inclusion in calculating the Borrowing Base $________
(13) Borrowing Base (Line 8 plus Line 10
plus Line 11 plus Line 12) $________
(14) Commitment $________
(15) Principal Debt $________
(16) Maximum permissible additional borrowings,
if any (the lesser of Line (13) minus
Line (15) or Line (14) minus Line (15)) $________
(17) Borrowing Deficiency, if any
(Line (15) minus the lesser of
Line (13) or Line (14)) $________
The attached schedule of information (such as account obligor, amount,
and date of invoice or billing) is true and correct in all material respects.
This report is being delivered on behalf of Borrower. No person or
entity other than Lenders and the law firm of Porter & Hedges, L.L.P. (the
"SUBJECT RECIPIENTS"), shall be entitled to receive or rely upon this report
for any purpose. The Subject Recipients agree by their acceptance hereof that
(a) they shall look solely to Borrower for any loss, cost, damage, expense,
claim, demand, suit, or cause of action arising out of or relating in any way
to this report or its preparation and delivery, and (b) the undersigned shall
not under any circumstances have any personal liability whatsoever for the
preparation or execution of this certificate.
______________________________________
Name _________________________________
Title ________________________________
C-2-2
<PAGE> 46
EXHIBIT D
OPINION OF COUNSEL TO BORROWER
*
_____________________, 1995
NationsBank of Texas, N.A., as Agent
700 Louisiana Street, 8th Floor
Houston, Texas 77002
Attn: James R. Allred
Vice President
Re: $30,000,000 Restated Revolving Credit Agreement
The undersigned has acted as counsel to Pool Energy Services Co., a
Texas corporation ("PESCO"), Pool Energy Holding, Inc., a Delaware corporation
("PESCO Subsidiary" ), Pool Company, a Texas corporation ("Borrower"), and
Borrower's consolidated subsidiaries in connection with the negotiation,
preparation, and execution of the $35,000,000 Restated Revolving Credit
Agreement (the "Credit Agreement") dated as of November 30, 1995 among
Borrower, the Lenders named therein ("Lenders") and NationsBank of Texas, N.A.,
as agent for itself and the other Lenders ("Agent"). This opinion is delivered
pursuant to Section 6.1 and Schedule 6 of the Credit Agreement. Unless
otherwise defined herein or the context otherwise requires, each capitalized
term has the meaning ascribed to such term in the Credit Agreement.
In reaching the conclusions expressed in this opinion, I have examined
such certificates of public officials and officers of the Obligors as I deemed
necessary or appropriate, and originals or copies of the Credit Agreement,
Note, Guaranty and Security Agreement. I have otherwise made no special
inquiry or investigation but render this opinion on the basis of my knowledge
as General Counsel of the Obligors and an employee of one of the Obligors.
Based upon the foregoing and subject to the limitations,
qualifications and exceptions set forth below, the undersigned is of the
following opinion:
1. The Obligors are corporations duly organized, legally existing
and in good standing under the laws of their respective states of
incorporation.
2. The Obligors have the full corporate power and authority to
enter into the Loan Papers. All corporate action on the part of the Obligors,
requisite for the due execution, delivery, and performance of the Loan Papers
has been duly and effectively taken.
3. Upon the due execution and delivery of the Loan Papers by the
Obligors, I know of no reason why such Loan Papers will not constitute legal,
valid, and binding obligations of the Obligors enforceable against Obligors in
accordance with their terms.
4. The execution and delivery of the Loan Papers do not violate
any provisions of the Articles of Incorporation or Bylaws of Obligors. The
Loan Papers may be performed by Obligors in a manner that does not violate any
provisions of their respective Articles of Incorporation and Bylaws.
5. Neither any Obligor nor any Affiliate (excluding ENSERCH, if
an Affiliate) of any Obligor is subject to regulation under the Public Utility
Holding Company Act of 1935, the Federal Power Act, or the Investment Company
Act of 1940 (as any of the preceding acts have been amended).
D-1
<PAGE> 47
This opinion is subject to and qualified in all respects by the
following:
(a) The enforceability of the Loan Papers may be limited by (i)
bankruptcy, insolvency, reorganization, moratorium, and similar laws from time
to time in effect and affecting creditors' rights or the collection of debtors'
obligations generally (including, without limitation, laws generally defining
and restricting fraudulent conveyances), (ii) principles of equity, (iii)
principles of public policy, and (iv) requirements of commercial reasonableness
and good faith.
(b) No opinion is given as to the availability or enforceability
of certain provisions or remedies set forth in the Loan Papers, including
without limitation, (i) provisions which purport to provide access to or
restrict legal or equitable remedies such as specific performance and the
appointment of a receiver, (ii) provisions that purport to establish
evidentiary standards, (iii) provisions relating to waivers or to delays or
omissions of enforcement of remedies or severance, (iv) provisions that attempt
to appoint Agent or others as any Person's attorney-in-fact, (v) indemnity
provisions, (vi) provisions attempting to prohibit or restrict the transfer,
alienation, mortgaging, encumbering, or hypothecation of the properties covered
by or described in the Loan Papers, (vii) subrogation provisions, and (viii)
provisions attempting to establish proper venue for the filing and maintenance
of any claim, suit, or action with respect to the Loan Papers; provided,
however, that limitations on the availability of remedies under the Loan Papers
or the legality, validity, binding effect or enforceability of the Loan Papers
will not, in the undersigned's opinion, prevent you from recovering for damages
and enforcing any Liens in your favor or substantially interfere with the
practical realization of the benefits express in the Loan Papers except for the
economic consequences of any procedural delay which may result from such laws.
(c) The enforceability of certain provisions of the Loan Papers
may be limited by requirements of due process under the United States
Constitution and other laws generally limiting the rights of creditors to
repossess, foreclose or otherwise realize upon the property of a debtor without
appropriate notice and/or hearing.
(d) No opinion is expressed with respect to usury, nor with
respect to the perfection or priority of any of the liens or security interests
intended to be granted to Agent.
(e) No opinion is expressed as to whether the contemplated loan
transactions comply with any statutory, regulatory or other loan limits
applicable to the Lenders or comply with any other statutes, laws, rules or
regulations which prescribe permissible and lawful investments for the Lenders
(either as to type, amount, percentage of total investments or otherwise).
(f) The knowledge of the undersigned as to any factual matter in
connection with this opinion is limited to the current consciousness of the
undersigned and does not include constructive inquiry or imputed knowledge.
This opinion is limited to United States federal law and laws of the
State of Texas, all as now in effect. No opinion is expressed as to any matter
that may be governed by the laws of any other jurisdiction.
This opinion is solely for the benefit of and may be relied upon only
by Agent and the Lenders, and their respective counsel, and may not be
delivered or disclosed in whole or in part, to any other Person.
Very truly yours,
D-2
<PAGE> 48
EXHIBIT E
ASSIGNMENT AND ACCEPTANCE
Reference is made to the Restated Revolving Credit Agreement dated as
of November 30, 1995 (as renewed, extended, amended or replaced, the "CREDIT
AGREEMENT"), among Pool Company (the "BORROWER"), NationsBank of Texas, N.A.,
as agent (the "AGENT"), and the other financial institutions party thereto from
time to time (collectively, the "LENDERS"). Capitalized terms used herein and
not otherwise defined shall have the meanings given to such terms in the Credit
Agreement.
__________________________ (the "ASSIGNOR"), and ______________________
(the "ASSIGNEE") agree as follows:
1. The Assignor hereby sells and assigns to the Assignee (without
recourse to the Assignor) a __________/__________ interest (the "ASSIGNED
INTEREST") in and to all of the rights of Assignor under the Credit Agreement
and the other Loan Papers (including, without limitation, the Note presently
held by the Assignor and the Guaranty), and the Assignee hereby purchases and
accepts from the Assignor such Assigned Interest and assumes all of the
obligations of the Assignor under the Credit Agreement and the other Loan
Papers (including, without limitation, the Note presently held by the Assignor
and the Guaranty) to the extent of the Assigned Interest, including, without
limitation, (a) all Advances funded by the Assignor and outstanding on the
Effective Date (as defined below), together with interest accruing thereon on
and after the Effective Date, and (b) the commitment fee (as described in
Section 4 of the Credit Agreement) that is earned by Lenders from and after the
Effective Date and paid by Borrower after the Effective Date. From and after
the Effective Date, (x) the Assignee shall be a party to the Credit Agreement
and, to the extent of the Assigned Interest, have the rights and obligations of
a Lender thereunder and under the other Loan Papers and (y) the Assignor shall,
to the extent of the Assigned Interest, relinquish its rights and be released
from its obligations under the Credit Agreement and the other Loan Papers.
2. The Assignor (a) makes no representation or warranty and
assumes no responsibility with respect to any statements, warranties, or
representations made by any Company in or in connection with the Credit
Agreement or any other Loan Paper or the execution, legality, validity,
enforceability, genuineness, sufficiency, collectibility, or value of the
Credit Agreement or any other Loan Paper, other than that it is the sole legal
and beneficial owner of the interest being assigned by it hereunder and that
such interest is free and clear of any claim, encumbrance, or participation;
(b) makes no representation or warranty and assumes no responsibility with
respect to the financial condition of any Company or the performance or
observance by any Company of any of its respective obligations under the Credit
Agreement or any other Loan Paper; (c) represents and warrants that (i) it
possesses all requisite authority and power to execute, deliver, and comply
with the terms of the Loan Papers (including, without limitation, this
Assignment and Acceptance), (ii) the Credit Agreement and the instruments
contemplated therein constitute the entire agreement between Borrower, Agent,
and Lenders, (iii) the Credit Agreement has not been amended, (iv) to its
knowledge, no Default or Potential Default has occurred pursuant to the Loan
Papers, and (v) all of the conditions of Section 6.1 of the Credit Agreement
have been satisfied as of the Effective Date; and (d) attaches the Note held by
it and requests that Agent exchange such Note for new Notes executed by
Borrower and payable to the Assignee in a principal amount equal to $__________
and payable to the Assignor in a principal amount equal to $__________ (less
the principal amount of any other new Note(s) to any other assignee(s) of
Assignor pursuant to other Assignment and Acceptance agreements effective as of
the Effective Date).
3. The Assignee (a) represents and warrants that it is legally
authorized to enter into this Assignment and Acceptance; (b) confirms that it
has received a copy of the Credit Agreement and such other documents and
information as it has deemed appropriate to make its own credit analysis and
decision to enter into this Assignment and Acceptance; (c) agrees that it will,
independently and without reliance upon Agent, the Assignor, or any other
Lender and based on such documents and information as it shall deem appropriate
at the time, continue to make its own credit decisions in taking or not taking
action under the Credit Agreement; (d) appoints and authorizes Agent to take
such action as agent on its behalf and to exercise such powers under the Credit
Agreement as are delegated to Agent by the terms thereof, together with such
E-1
<PAGE> 49
powers as are reasonably incidental thereto; (e) agrees that it will perform in
accordance with their terms all the obligations which by the terms of the
Credit Agreement are required to be performed by it as a Lender; (f) agrees
that it will comply with the confidentiality requirements of Section 12.15 of
the Credit Agreement; (g) represents and warrants that it does not consider any
amount paid by it to the Assignor hereunder a loan by it to the Assignor; and
(h) (i) represents and warrants to the Assignor that under applicable laws and
treaties no taxes will be required to be withheld by Agent, Borrower, or the
Assignor with respect to any payments to be made to the Assignor in respect of
the Obligation, (ii) attaches hereto two duly completed copies of U.S. Internal
Revenue Service Form 4224, Form 1001, Form W-8, or any other tax form
acceptable to Agent (wherein the Assignee claims entitlement to complete
exemption from U.S. federal withholding tax on all interest payments made on
the Obligation), and (iii) agrees to provide to the Assignor, Agent, and
Borrower a new tax form upon the obsolescence of any previously delivered form
and comparable statements in accordance with applicable U.S. laws and
regulations and amendments duly executed and completed by the Assignee, and to
comply from time to time with all applicable U.S. laws and regulations with
regard to such withholding tax exemption.
4. The effective date for this Assignment and Acceptance shall be
________________ (the "EFFECTIVE DATE").
5. From and after the Effective Date, Agent shall make all
payments in respect of the interest assigned hereby (including payments of
principal, interest, fees, and other amounts) to the Assignee. The Assignor
and the Assignee shall make all appropriate adjustments in payments for periods
prior to the Effective Date by Agent or with respect to the making of this
assignment directly between themselves.
6. This Assignment and Acceptance shall be governed by and
construed in accordance with the laws of the State of Texas.
7. This Assignment and Acceptance (a) embodies the entire
agreement between the parties, supersedes all prior agreements and
understandings, if any, relating to the subject matter hereof, and may be
amended only by an instrument in writing executed jointly by an authorized
officer of each party hereto, (b) is not intended to evidence a "purchase" or
"sale" of a "security" within the meaning of any Law, and (c) may be executed
in a number of identical counterparts, each of which shall be deemed an
original for all purposes and all of which shall constitute, collectively, one
agreement; but, in making proof of this Assignment and Acceptance, it shall not
be necessary to reproduce or account for more than one such counterpart.
8. Any amounts due hereunder from the Assignor to the Assignee
shall be wire transferred by the Assignor to Assignee's account at
_________________________________________, ABA #_________, for credit to
________________ account #_____________, Attention: ______________, Reference:
___________. Any amounts due hereunder from the Assignee to the Assignor shall
be wire transferred by the Assignee to the Assignor's account at
___________________________, ABA #_________, Attention: _____________________
(Ref. ______). For purposes of amending Schedule 1(a) to the Credit Agreement,
the Assignee's address, contact person, telephone and facsimile number are as
follows:
___________________________________________
___________________________________________
___________________________________________
Attention: ________________________________
Telephone: ________________________________
FAX: ______________________________________
E-2
<PAGE> 50
EXECUTED as of __________, 199_, with an "Effective Date" of _________,
199_.
ASSIGNOR ASSIGNEE
_______________________________________ ______________________________________
By ____________________________________ By ________________________________
Name: Name:
Title: Title:
CONSENTED TO:
NATIONSBANK OF TEXAS, N.A.
as Agent
By ____________________________________
James R. Allred,
Vice President
POOL COMPANY
By ____________________________________
E.J. Spillard,
Senior Vice President, Finance
By ____________________________________
R.A. Johannsen,
Treasurer
E-3
<PAGE> 51
EXHIBIT F
GUARANTY
THIS GUARANTY is executed as of ________________, 199__, by
________________________ ("GUARANTOR") for the benefit of NATIONSBANK OF TEXAS,
N.A. ("AGENT"), and the Lenders (the "LENDERS") named in the Credit Agreement
and the Term Loan Agreement (as hereinafter defined).
WHEREAS, POOL COMPANY ("BORROWER"), Agent and Lenders have executed
(a) a Restated Revolving Credit Agreement dated as of _____________________,
1995 (as amended, supplemented, or restated, the "CREDIT AGREEMENT"), together
with certain other Loan Papers, and (b) a Restated Term Loan Agreement dated as
of November 30, 1995 (as amended, supplemented or restated, the "TERM LOAN
AGREEMENT", together with certain other Loan Papers; and
WHEREAS, Guarantor is a direct or indirect consolidated Subsidiary of
Borrower incorporated in the United States; and
WHEREAS, it is expressly understood among Borrower, Guarantor, Agent
and each Lender that the execution and delivery of this Guaranty is an integral
part of the transactions contemplated by the Credit Agreement, the Term Loan
Agreement, and the Loan Papers and a condition precedent to Agent's and
Lenders' obligations under the Credit Agreement and the Term Loan Agreement;
NOW, THEREFORE, for valuable consideration, the receipt and adequacy
of which are hereby acknowledged, Guarantor hereby guarantees to Agent and
Lenders the prompt payment at maturity (by acceleration or otherwise), and at
all times thereafter, of the Guaranteed Indebtedness (hereinafter defined),
this Guaranty being upon the following terms and conditions:
1. Unless otherwise defined herein, all capitalized terms have
the meanings given to such terms in the Credit Agreement and the Term Loan
Agreement.
2. The term "BORROWER" shall include, without limitation,
Borrower, Borrower as a debtor-in-possession, and any receiver, trustee,
liquidator, conservator, custodian, or similar party hereafter appointed for
Borrower or all or substantially all of its assets pursuant to any liquidation,
conservatorship, bankruptcy, moratorium, rearrangement, receivership,
insolvency, reorganization, or similar Debtor Relief Law from time to time in
effect affecting the rights of creditors generally.
3. The term "GUARANTEED INDEBTEDNESS" means the Obligation as
defined in the Credit Agreement and the Term Loan Agreement, together with any
and all costs, attorneys' fees, and expenses reasonably incurred by Agent and
Lenders by reason of Borrower's or Guarantor's default in payment of any of the
foregoing indebtedness.
4. This instrument shall be an absolute and continuing guaranty,
and the circumstance that at any time or from time to time the Guaranteed
Indebtedness may be paid in full shall not affect the obligation of Guarantor
with respect to the Guaranteed Indebtedness of Borrower to Agent and Lenders
thereafter incurred; provided that Guarantor may give written notice to Agent
and Lenders that Guarantor will not be liable hereunder for any indebtedness of
Borrower incurred after the giving of such notice (which notice shall not be
deemed to have been given until actually received by Agent and Lenders), and in
such event Guarantor shall remain liable for its obligations hereunder until
the payment in full of (a) the Guaranteed Indebtedness as it exists at the date
of the giving of such notice, and (b) loans made after such notice or pursuant
to any obligation of Agent and Lenders under any other commitment or agreement
made to or with Borrower prior to the giving of such notice.
5. Notwithstanding any contrary provision herein, Guarantor's
aggregate payments in respect of the Guaranteed Indebtedness shall never exceed
the greater of (a) 90% of its net worth (the amount by which the present fair
saleable
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value of its assets exceeds its liabilities on such date, without giving effect
to this Guaranty) or (b) the aggregate value of direct and indirect benefits
received under the Loan Papers.
6. If Guarantor becomes liable for any indebtedness owing by
Borrower to Agent or Lenders, by endorsement or otherwise, other than under
this Guaranty, such liability shall not be in any manner impaired or affected
hereby, and the rights of Agent and Lenders hereunder shall be cumulative of
any and all other rights that Agent and Lenders may ever have against
Guarantor. The exercise by Agent and Lenders of any right or remedy hereunder
or under any other agreement, document, or instrument, or at law or in equity,
shall not preclude the concurrent or subsequent exercise of any other right or
remedy. Guarantor covenants and agrees that it will not assert any rights
arising from payment or other performance hereunder until all of Guarantor's
liability shall have been discharged in full and all of the Guaranteed
Indebtedness existing at the time of discharge shall have been paid and
performed in full.
7. Upon the occurrence and continuance of a Default, Guarantor
shall, on demand and without further notice of dishonor, without any notice
having been given to Guarantor previous to such demand of the acceptance by
Agent and Lenders of this Guaranty, and without any notice having been given to
Guarantor previous to such demand of the creating or incurring of such
indebtedness, pay the amount of the Guaranteed Indebtedness then due and
payable to Agent and Lenders, and it shall not be necessary for Agent and
Lenders, in order to enforce such payment by Guarantor, first or
contemporaneously to institute suit or exhaust remedies against Borrower or
others liable on such indebtedness, or to enforce rights against any security
ever given to secure such indebtedness.
8. All principal of and interest on all indebtedness,
liabilities, and obligations of Borrower to Guarantor (the "SUBORDINATED
DEBT"), whether direct, indirect, fixed, contingent, liquidated, unliquidated,
joint, several, or joint and several, now or hereafter existing, due or to
become due to Guarantor, or held or to be held by Guarantor, whether created
directly or acquired by assignment or otherwise, and whether evidenced by
written instrument or not, shall be expressly subordinated to the final payment
in full of the Guaranteed Indebtedness. Guarantor agrees not to receive or
accept any payment from Borrower with respect to the Subordinated Debt at any
time a Default has occurred and is continuing; and, in the event Guarantor
receives any payment on the Subordinated Debt in violation of the foregoing,
Guarantor will hold any such payment in trust for Agent and Lenders and
forthwith turn it over to Agent and Lenders, in the form received (with any
necessary endorsements), to be applied to the Guaranteed Indebtedness.
9. Guarantor shall not assert, enforce, or otherwise exercise (a)
any right of subrogation to any of the rights or liens of Agent and Lenders or
any other beneficiary against Borrower or any other obligor on the Guaranteed
Indebtedness or any collateral or other security, or (b) any right of recourse,
reimbursement, contribution, indemnification, or similar right against Borrower
or any other obligor on all or any part of the Guaranteed Indebtedness or any
guarantor thereof, and Guarantor hereby irrevocably waives any and all of the
foregoing rights. Guarantor irrevocably waives the benefit of, and any right
to participate in, any collateral or other security given to Agent and Lenders
or any other beneficiary to secure payment of the Guaranteed Indebtedness.
10. Guarantor hereby agrees that its obligations under the terms
of this Guaranty shall not be released, diminished, impaired, reduced, or
affected by the occurrence of any one or more of the following events: (a)
Agent's or any Lender's taking or accepting of any other security or guaranty
for any or all of the Guaranteed Indebtedness; (b) any release, surrender,
exchange, subordination, or loss of any security at any time existing in
connection with any or all of the Guaranteed Indebtedness; (c) any partial
release of the liability of Guarantor (or if there is more than one person or
entity signing this Guaranty, the release of any one or more of them) or the
release of any other obligor on the Obligation; (d) the insolvency, bankruptcy,
or lack of corporate power of Borrower, the undersigned, or any party at any
time liable for the payment of any or all of the Guaranteed Indebtedness,
whether now existing or hereafter occurring; (e) any renewal, extension, or
rearrangement of the payment of any or all of the Guaranteed Indebtedness,
either with or without notice to or consent of Guarantor, or any adjustment,
indulgence, forbearance, or compromise that may be granted or given by Agent or
Lenders to Borrower, Guarantor, or any other obligor on the Obligation; (f) any
neglect, delay, omission, failure, or refusal of Agent or any Lender to take or
prosecute any action for the collection of any or all of the Guaranteed
Indebtedness or to foreclose or take or prosecute any action in connection with
any instrument or agreement evidencing or securing any or all of the Guaranteed
Indebtedness; (g) any failure of Agent or any Lender to notify Guarantor of any
renewal, extension, or
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<PAGE> 53
assignment of any or all of the Guaranteed Indebtedness, or the release of any
security or of any other action taken or refrained from being taken by Agent or
any Lender against Borrower or any new agreement between Agent or any Lender
and Borrower, it being understood that Agent and Lenders shall not be required
to give Guarantor any notice of any kind under any circumstances whatsoever
with respect to or in connection with the Guaranteed Indebtedness, other than
any notice required to be given to Borrower or Guarantor elsewhere herein; (h)
the unenforceability of any part of the Guaranteed Indebtedness against
Borrower by reason of the fact that the Guaranteed Indebtedness exceeds the
amount permitted by law, the act of creating the Guaranteed Indebtedness, or
any part thereof, is ultra vires, or the officers creating same exceeded their
authority or violated their fiduciary duties in connection therewith; or (i)
any payment by Borrower to Agent or Lenders is held to constitute a preference
under the bankruptcy laws or if for any other reason Agent or any Lender is
required to refund such payment or make payment to someone else.
11. Guarantor hereby waives all rights by which it might be
entitled to require suit on an accrued right of action in respect of any of the
Guaranteed Indebtedness or require suit against Borrower or others, whether
arising pursuant to Section 34.02 of the Texas Business and Commerce Code, as
amended (regarding Guarantor's right to require Agent or Lenders to sue
Borrower on accrued right of action following Guarantor's written notice to
Agent or Lenders), Section 17.001 of the Texas Civil Practice and Remedies
Code, as amended (allowing suit against Guarantor without suit against
Borrower, but precluding entry of judgment against Guarantor prior to entry of
judgment against Borrower), Rule 31 of the Texas Rules of Civil Procedure, as
amended (requiring Agent and Lenders to join Borrower in any suit against
Guarantor unless judgment has been previously entered against Borrower), or
otherwise.
12. Guarantor acknowledges that certain representations and
warranties set forth in Sections 5.1 through 5.15 of the Credit Agreement and
the Term Loan Agreement are applicable to Guarantor, and Guarantor reaffirms
that each such representation and warranty is true and correct. Furthermore,
Guarantor represents and warrants to Agent and Lenders that the value of the
consideration received and to be received by Guarantor is reasonably worth at
least as much as the liability and obligation of Guarantor hereunder, and such
liability and obligation may reasonably be expected to benefit Guarantor
directly or indirectly.
13. Guarantor acknowledges that certain covenants set forth in
Sections 7.1, 7.2, 7.4 through 7.29 of the Credit Agreement and the Term Loan
Agreement are applicable to the Guarantor or shall be imposed upon the
Guarantor, and Guarantor covenants and agrees to promptly and properly perform,
observe, and comply with each such covenant.
14. Guarantor expressly assumes all responsibilities to remain
informed of the financial condition of Borrower and any circumstances affecting
(a) Borrower's ability to perform under the Credit Agreement, the Term Loan
Agreement and the other Loan Papers to which it is a party or (b) collateral
securing all or any part of the Guaranteed Indebtedness.
15. The Guaranteed Indebtedness shall not be reduced, discharged,
or released because or by reason of any existing or future offset, claim, or
defense (except for the defense of payment) of Borrower or any other party
against Agent or any Lender or against payment of the Guaranteed Indebtedness,
whether such offset, claim, or defense arises in connection with the Guaranteed
Indebtedness or otherwise. Such claims and defenses include, without
limitation, failure of consideration, breach of warranty, fraud, statute of
frauds, bankruptcy, infancy, statute of limitations, lender liability, accord
and satisfaction, and usury.
16. This Guaranty is for the benefit of Agent and Lenders and
their respective successors and assigns. Guarantor acknowledges that in the
event of an assignment of the Guaranteed Indebtedness, or any part thereof, the
rights and benefits hereunder, to the extent applicable to the indebtedness so
assigned, may be transferred with such indebtedness. This Guaranty is binding
on Guarantor and its successors and assigns.
17. This Guaranty is a Loan Paper and, therefore, this Guaranty is
subject to the applicable provisions of Section 12 of the Credit Agreement and
the Term Loan Agreement, all of which applicable provisions are incorporated
herein by reference the same as if set forth herein verbatim.
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This Guaranty is executed as of the first date set forth herein.
_______________________________________
By ____________________________________
Name: ______________________________
Title: _____________________________
[corporate seal]
By ____________________________________
Name: ______________________________
Title: _____________________________
Address
__________________________________
__________________________________
__________________________________
Attn: ____________________________
Fax No.: _________________________
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<PAGE> 55
EXHIBIT G
SECURITY AGREEMENT
THIS SECURITY AGREEMENT is executed as of _________________, 199___,
by __________________ ("DEBTOR") for the benefit of (i) NationsBank of Texas,
N.A., as Agent ("REVOLVING CREDIT AGENT") and the Lenders ("REVOLVING CREDIT
LENDERS") named in the Revolving Credit Agreement (as hereinafter defined),
(ii) NationsBank of Texas, N.A., as Agent ("TERM LOAN AGENT") and the Lenders
("TERM LOAN LENDERS") named in the Term Loan Agreement (as hereinafter
defined), and (iii) for the benefit of NationsBank of Texas, N.A.
("NATIONSBANK") for its own account with respect to its net exposure on foreign
exchange contracts between it and any Company (as defined in the Revolving
Credit Agreement). NationsBank, Revolving Credit Agent, Revolving Credit
Lenders, Term Loan Agent and Term Loan Lenders are each a SECURED PARTY, and
are collectively referred to herein as "SECURED PARTIES".
WHEREAS, Pool Company, a Texas Corporation ("BORROWER"), and Secured
Parties have entered into (i) a Restated Revolving Credit Agreement dated as of
November 30, 1995 (as renewed, extended or amended from time to time, the
"REVOLVING CREDIT AGREEMENT"), and (ii) a Restated Term Loan Agreement dated as
of November 30, 1995 (as renewed, extended or amended from time to time, the
"TERM LOAN AGREEMENT," and collectively with the Revolving Credit Agreement,
the "CREDIT AGREEMENT"); and
WHEREAS, Debtor is a direct or indirect consolidated Subsidiary of
Borrower incorporated in the United States; and
WHEREAS, in Debtor's judgment, (a) the value of consideration received
and to be received by Debtor in connection with the transaction described above
is reasonably worth at least as much as the liability and obligation of Debtor
hereunder, and (b) such liability and obligation may reasonably be expected to
directly or indirectly benefit Debtor; and
WHEREAS, it is expressly understood among Secured Parties and Debtor
that the contemplated execution and delivery of this agreement is an integral
part of the transactions contemplated by the Loan Papers and a condition
precedent to Secured Parties' obligations to extend credit under the Credit
Agreement;
NOW, THEREFORE, for valuable consideration, the receipt and adequacy
of which are hereby acknowledged, Debtor hereby covenant and agree with Secured
Parties as follows:
1. Certain Definitions. Unless otherwise defined herein, or the
context hereof otherwise requires, (a) capitalized terms have the meaning
ascribed to such terms in the Revolving Credit Agreement, and (b) each term
defined in the UCC is used in this agreement with the same meaning; provided
that if any definition given a term in Chapter 9 of the UCC conflicts with the
definition given that term in any other chapter of the UCC, the Chapter 9
definition shall prevail. As used herein, the following terms have the meanings
indicated:
Collateral has the meaning set forth in Paragraph 3.
Default has the meaning set forth in Paragraph 6.
Equipment means any and all furnishings, machinery, furniture,
fixtures and equipment, wherever located, whether now owned or hereafter
acquired including without limitation, all manufacturing, distribution,
selling, data processing and office equipment and all appliances and trade
fixtures, together with all increases, parts, fittings, accessories, equipment,
and special tools now or hereafter affixed to any part thereof and thereto,
together with all substitutes and replacements thereof, all accessions and
attachments thereto, and all tools, parts and equipment now or hereafter added
to or used in connection with the foregoing.
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Inventory means any and all inventory, including without
limitation any and all goods held for sale or lease or being processed for sale
or lease and all returned, reclaimed, refused or repossessed goods, whether now
owned or hereinafter acquired, including all materials, goods and work in
process, finished goods, and other tangible property held for sale or lease or
furnished or to be furnished under contracts of service or used or consumed in
the owner's business, along with all documents (including documents of title)
covering inventory, all cash and non-cash proceeds from the sale of inventory
including proceeds from insurance and including such property the sale or other
disposition of which has given rise to accounts and which has not been returned
to or repossessed or stopped in transit "Inventory" includes each of the
foregoing items whether they are in the owner's possession or some other person
for sale, storage, transit, processing, use or otherwise.
Obligation means (a) the "Obligation" as defined in the
Restated Agreement and the Term Loan Agreement, (b) NationsBank's net exposure
on all foreign exchange contracts between Debtor and NationsBank, (c) all
indebtedness, liabilities, and obligations of Debtor arising under this
agreement, (d) interest accruing on, and attorneys' fees, court costs, and
other costs of collection reasonably incurred in the collection or enforcement
of, any of the indebtedness, liabilities, or obligations described in clause
(a) above, and (e) any and all renewals and extensions of, or amendments to,
any of the indebtedness, liabilities, and obligations described in clauses (a)
through (d) above. The foregoing includes future advances, it being the
intention and contemplation of Debtor and Secured Parties that future advances
will be made to Borrower under the Credit Agreement for a variety of purposes,
and that payment and repayment of all of the foregoing are intended to and
shall be part of the Obligation secured hereby.
Obligor means any person or entity obligated with respect to
any of the Collateral, whether as an account debtor, obligor on an instrument,
issuer of securities, or otherwise.
Pledged Shares means all shares of capital stock now or
hereafter issued to Pool Alaska, Inc. by any Person and the certificate(s)
representing the Pledged Shares and all dividends, cash, instruments and other
property from time-to-time received, receivable or otherwise distributed in
respect of or in exchange of any Pledged Shares.
Related Papers means (a) this agreement, (b) all present and
future agreements, documents, and instruments now or hereafter evidencing any
of the Obligation, or assuring or securing payment thereof, (c) all agreements,
documents, and instruments now or hereafter executed in connection herewith,
including, without limitation, the Loan Papers, and (d) any and all future
renewals and extensions or restatements of, or amendments or supplements to,
all or any part of the foregoing.
Security Interest means the security interest granted and the
pledge and assignment made under Paragraph 2.
Trademarks means, individually and collectively, all
trademarks, trade names and service marks registrations, applications, rights
to use and common law rights therein now or hereafter owned, controlled or
acquired, including, without limitation, all unregistered trademarks,
trademarks and service marks, all trademarks, trade names, service marks
applications, and registrations, and all rights to use listed on Schedule II to
this Agreement and all rights in and to (a) all trade names, service marks and
trademarks in which it has rights, and (b) all renewals thereof, (c) all
income, payments, royalties, damages and payments now and hereafter due or
payable with respect thereto, including, without limitation, damages and
payments for past, present or future infringements thereof, (d) the right to
sue for or bring injunctive proceedings with respect to past, present and
future infringements thereof, (e) goodwill connected with, symbolized by, or in
any way related to any of the Trademarks, (f) all licenses, agreements, and
general intangibles relating to any of the foregoing and (g) all books,
records, computer tapes or disks, instructions, flow diagrams, specification
sheets, source codes, object codes, and any other physical manifestations of or
documentation relating to any of the foregoing.
UCC means the Uniform Commercial Code as enacted in the State
of Texas or other applicable jurisdiction, as amended at the time in question.
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2. Security Interest. In order to secure the full and complete
payment and performance of (a) the Obligation when due, and (b) NationsBank's
net exposure on all foreign exchange contracts between any Company and
NationsBank when due, Debtor hereby grants to Secured Parties a security
interest in the Collateral and pledges and assigns the Collateral to Secured
Parties, all upon and subject to the terms and conditions of this agreement.
Such Security Interest is granted and such pledge and assignment are made as
security only and shall not subject Secured Parties to, or transfer or in any
way affect or modify, any obligation of Debtor with respect to any of the
Collateral or any transaction involving or giving rise thereto. For purposes
of clarification, "net exposure on all foreign exchange contracts" refers to
the amount, if any, by which the purchase or sales prices stipulated in any
foreign exchange contracts on which a Company is in default are (i) less, in
the case of contracts to purchase currencies, or (ii) greater, in the case of
contracts to sell currencies, respectively, than the market prices for such
currencies (as determined on the agreed value date specified in each such
contract).
3. Collateral. As used herein, COLLATERAL includes all of the
following items and types of property now owned or hereafter acquired
(collectively, the "COLLATERAL"):
(a) All present and future accounts of Debtor, including,
without limitation, all accounts receivable and all other rights of Debtor to
payment for goods sold or leased or for services rendered, and all cash and
noncash proceeds, increases, profits, combinations, reclassifications,
substitutions, and replacements of or for all or any part of the foregoing;
(b) All present and future deposit accounts, restricted
and unrestricted cash collateral accounts, and cash equivalent instruments
(including, without limitation, certificates of deposit) of Debtor now or
hereafter held by or specifically assigned or granted to Secured Parties
(including, without limitation, the cash collateral account described in
Section 4.3 of the Revolving Credit Agreement, together with all present and
future funds on deposit therein and investments therefrom);
(c) All present and future Rights, titles, and interests
Debtor may have or be or become entitled to under or by virtue of the
Contingent Support Agreement and all cash and noncash proceeds, increases,
profits, combinations, reclassifications, substitutions, and replacements of or
for all or any part of the foregoing; and
(d) The present and future shares of the capital stock
now or hereafter issued by the following corporations to Debtor, up to the
percentage set forth below, and the certificates representing such shares, and
all dividends, cash, instruments, and other property from time to time
received, receivable, or otherwise distributed in respect of or in exchange for
any such shares, and increases, proceeds, combinations, reclassifications,
substitutions, and replacements of or for all or any part of the foregoing:
100% PESCO Subsidiary, Borrower, and Borrower's
present and future consolidated Subsidiaries
which are incorporated within the United
States of America
66% All present and future consolidated
Subsidiaries of Borrower which are not
incorporated within the United States of
America
(e) All items or types of property, wherever located,
whether now owned or hereafter acquired by Pool Alaska, Inc., including,
without limitation, in addition to the property described in (a) through (d)
above, all Inventory, Equipment, Pledged Shares, Trademarks, and Patents.
The description of Collateral contained in this Paragraph 3 includes after
acquired Collateral and proceeds of the Collateral.
4. Representations and Warranties. Debtor acknowledges that
certain representations and warranties set forth in the Credit Agreement are
applicable to Debtor, and Debtor reaffirms that each such representation and
warranty is true and correct. In addition, Debtor represents and warrants to
Secured Parties that:
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(a) Debtor's chief executive office is where Debtor is
entitled to receive notices hereunder, and the present and foreseeable location
of Debtor's books and records concerning any Collateral that is accounts is as
set forth on Schedule 1 attached hereto.
(b) All Collateral that is securities is duly authorized,
validly issued, fully paid, and non-assessable, and its transfer is not subject
to any restrictions other than restrictions imposed by applicable securities
and corporate Laws.
(c) All Collateral that is accounts included in
calculating the Borrowing Base is free from any claim for credit, deduction, or
allowance of an Obligor (except for credits, deductions, or allowances granted
in the ordinary course of business), and free from any defense, dispute,
setoff, or counterclaim, and there is no extension or indulgence with respect
thereto.
(d) The Contingent Support Agreement is in full force and
effect; there have been no renewals or extensions of, or amendments,
modifications, or supplements to, any thereof about which Secured Parties have
not been advised in writing; and no default or potential default has occurred
and is continuing thereunder.
(e) Debtor owns all presently existing Collateral, and
will keep said Collateral and all hereafter-acquired Collateral, free and clear
of all Liens except Permitted Liens.
The delivery at any time by Debtor to any Secured Party of Collateral or of
additional specific descriptions of certain Collateral shall constitute a
representation and warranty by Debtor to Secured Parties that the
representations and warranties of this Paragraph 4 are true and correct in all
material respects with respect to each item of such Collateral.
(f) To the best of Pool Alaska, Inc.'s knowledge,
Schedule II, constitutes a true and complete list of all Trademarks owned by
Pool Alaska, Inc. To the best of Pool Alaska, Inc.'s knowledge, Pool Alaska,
Inc. has properly completed all required filings, payments, renewals and
obligations in the United States Trademark Offices or the appropriate Foreign
Filing Offices, as the case may be, to maintain Trademarks as fully valid and
enforceable. Pool Alaska, Inc. is the sole and exclusive owner of the right,
title and interest in and to the Trademarks free and clear of any Liens,
registered user agreements, covenants by Pool Alaska, Inc. not to sue third
Persons or, to the best of Pool Alaska, Inc.'s knowledge, licenses, except for
the licenses listed on Schedule III and for Permitted Liens and Pool Alaska,
Inc. has full right to use the Trademarks. To the best of Pool Alaska, Inc.'s
knowledge, all Trademarks owned, controlled or acquired by Pool Alaska, Inc.,
or which Pool Alaska, Inc. has a right to use, (i) are subsisting and have not
been adjudged or claimed to be invalid or unenforceable (either in whole or in
part) and Pool Alaska, Inc. is not aware of any basis for such a claim, (ii)
are valid and enforceable, (iii) are in the name of Pool Alaska, Inc., (iv) are
properly recorded and/or filed in the U.S. Patent and Trademark Office and (v)
Pool Alaska, Inc. has taken all necessary steps to properly record or file
ownership in the name of Pool Alaska, Inc. in the proper foreign filing offices
(the "FOREIGN FILING OFFICES") with respect to foreign Trademarks, as
appropriate.
(g) To Pool Alaska, Inc.'s knowledge, no claim has been
made that the ownership or use of any of the Trademarks, or the manufacture,
use or sale of any product made in accordance therewith or service rendered
thereunder, does or may violate the rights of any third Person, and Pool
Alaska, Inc. has no knowledge of any third party rights which may be infringed
or otherwise violated by the use of any of the Trademarks. To Pool Alaska,
Inc.'s knowledge, Pool Alaska, Inc. does not own any rights in any patents or
patent applications.
5. Certain Covenants. Debtor acknowledges that certain covenants
set forth in the Credit Agreement are applicable to Debtor or shall be imposed
upon Debtor, and Debtor covenants and agrees to promptly and properly perform,
observe, and comply with each such covenant. In addition, Debtor further
covenants and agrees with Secured Parties that Debtor will:
(a) Maintain at one or more of the addresses set forth on
Schedule 1 a current record of where all Collateral is located, permit
representatives of any Secured Party (at such Secured Party's expense to the
extent so provided in the Credit Agreement) at any time during normal business
hours to inspect and make abstracts from such records, and
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furnish to such Secured Party, at such intervals as such Secured Party may
request, such documents, lists, descriptions, certificates, and other
information as may be necessary or proper to keep such Secured Party informed
with respect to the identity, location, status, condition, and value of the
Collateral including, without limitation, (i) amendments to SCHEDULE I, (ii)
the execution and filing of such financing statements as the Secured Party may
reasonably require, and (iii) the execution and the filing of such assignments
and agreements as the Secured Party may require in the United States Patent and
Trademark Office and the Foreign Filing Offices.
(b) Perform in accordance with normal business practices
all of Debtor's duties under and in connection with each transaction to which
any Collateral relates.
(c) Promptly notify Secured Parties of any claim, action,
or proceeding affecting title to all or any of the Collateral or the Security
Interest and, at the request of any Secured Party, appear in and defend, at
Debtor's expense, any such action or proceeding.
(d) From time to time promptly execute and deliver to
Agent all such other assignments, certificates, supplemental documents, and
financing statements, and do all other acts or things as Secured Parties may
reasonably request in order to more fully create, evidence, perfect, continue,
and preserve the priority of the Security Interest.
(e) Not sell, lease, or otherwise dispose of, or permit
the sale, lease, or disposition of, any Collateral except for sales, leases,
and other dispositions permitted by the terms of the Credit Agreement.
(f) Not create, incur, or suffer or permit to be created
or incurred or to exist any Lien upon or against any of the Collateral, except
for Permitted Liens.
(g) Not use, or permit the use of, any of the Collateral
for any unlawful purpose or in any manner inconsistent with the provisions or
requirements of any applicable insurance policy.
(h) Not amend, modify, surrender, cancel, terminate, or
replace, nor permit any such amendment, modification, surrender, cancellation,
termination, or replacement of, (i) the Contingent Support Agreement, without
each Secured Party's written consent, or (ii) other than in the ordinary course
of business, any other material contract to which any of the Collateral
relates.
(i) Not relocate Debtor's principal place of business,
chief executive office, or place where Debtor's books and records related to
accounts are kept, or otherwise relocate any of the other Collateral, to an
address in a Louisiana parish or other state other than to those Louisiana
parishes or other states in which addresses set forth on Schedule 1 are
located, or change Debtor's name or address to which it is entitled to receive
notices hereunder, unless prior thereto Debtor (i) gives Secured Parties 30
days prior written notice of such proposed relocation or change (such notice to
include, without limitation, the name of the Louisiana parish or other state
into which the Collateral is being relocated, and the new name and address of
Debtor) and (ii) (unless the Collateral is being relocated to a jurisdiction in
which existing financing statements or other required filings have previously
been made to perfect the Security Interest in such Collateral) executes and
delivers all such additional documents and performs all additional acts as
Secured Parties in their sole discretion may request in order to continue or
maintain the existence and priority of the Security Interest in such
Collateral.
(j) To the extent necessary for Pool Alaska, Inc. to
conduct its business as then being conducted, (i) prosecute diligently any
trademark or service mark application of the Trademarks now or hereafter
pending, (ii) make federal application on registrable but unregistered
trademarks or service marks, as appropriate, (iii) file and prosecute
opposition and cancellation proceedings with respect to the Trademarks, (iv)
preserve and maintain all of Pool Alaska, Inc.'s rights in trademark or service
mark applications, service marks, trademarks and trademark or service mark
registrations of the Trademarks, (v) with respect to the Trademarks, shall not
abandon any right to file a patent application or trademark or service mark
application, or any pending trademark or service mark application, service mark
or trademark, (vi) make timely application and pay fees for the Trademarks, and
complete the filing of any documents and pay in a timely manner all
maintenance, extension, renewal, incontestable or other fees with respect to
such Trademarks, (vii) do all other things
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necessary to enforce, preserve, renew and maintain the Trademarks and (viii)
appear in and defend any action relating in any manner to any of the
Trademarks. Any expenses incurred in connection with any of the foregoing
shall be born by Pool Alaska, Inc.
(k) Maintain the quality of any and all products or
services on or in connection with which the Trademarks are used, consistent
with the quality of the products or services as of the date of this Agreement.
(l) Pool Alaska, Inc. shall notify Secured Party
immediately if Pool Alaska, Inc. knows that any Trademark may become abandoned
or dedicated, or of any adverse determination or development (including,
without limitation, the institution of, or any such determination or
development in, any proceeding in the United States Trademark Office or any
court or in any of the Foreign Filing Offices) regarding Pool Alaska, Inc.'s
ownership of any such Trademark, its right to register the same, or its right
to keep and maintain the same.
(m) Except for Permitted Liens, not create or permit the
creation of or allow the existence of, any Lien upon or against any of the
Collateral or enter into any licensing agreement prohibited by the Credit
Agreement.
(n) After a Default occurs, take all actions Secured
Party requests to obtain any Tribunal's consent to or approval of Secured
Party's Rights under this Agreement, including, without limitation, the Right
to sell all or any part of the Collateral upon a Default without the Tribunal's
further consent or approval. Debtor agrees that Secured Party's remedies at
law for Debtor's failure to comply with this provision would be inadequate and
that the harm to Secured Party would not be adequately compensable in damages.
Debtor agrees that this provision may be specifically enforced.
(o) Perform all of its obligations under or in connection
with the Collateral in accordance with customary business practices.
6. Default. The term "Default," as used herein, means the
occurrence of any one or more of the events described in Section 8 of the
Credit Agreement.
7. Remedies. Upon the occurrence and continuance of a Default,
Secured Parties may exercise any and all rights and remedies available to a
secured party under the UCC, in addition to any and all other rights and
remedies afforded by the Related Papers, at law, in equity, or otherwise,
including, without limitation, the rights and remedies described in Section 9
of the Credit Agreement. In addition, Secured Party may require requiring Pool
Alaska, Inc. to execute and deliver to Secured Party an assignment,
substantially in the form of Exhibit "A" to this Agreement, of all of its
right, title and interest in and to the Trademarks and require Pool Alaska,
Inc. to take such other action as Secured Party requests to grant, perfect and
protect the assignment of such Trademarks and to exercise Secured Party's
rights and remedies with respect to such assigned Trademarks.
(a) Notice. Reasonable notification of the time and
place of any public sale of the Collateral, or reasonable notification of the
time after which any private sale or other intended disposition of the
Collateral is to be made, shall be sent to the Debtor and to any other Person
entitled to notice under the UCC; provided that if any of the Collateral
threatens to decline speedily in value or is of the type customarily sold on a
recognized market, Secured Parties may sell or otherwise dispose of the
Collateral without notification, advertisement, or other notice of any kind.
It is agreed that (i) notice sent or given not less than five Business Days
prior to the taking of the action to which the notice relates is reasonable
notification and notice for the purposes of this subparagraph, and (ii) any
sale of the Collateral may be conducted with reserve.
(b) Sales of Securities. In connection with the sale of
any Collateral that is securities, Secured Parties are authorized, but not
obligated, to limit prospective purchasers to the extent deemed necessary or
desirable by Secured Parties to render such sale exempt from the registration
requirements of the Securities Exchange Act of 1934 (as amended, the EXCHANGE
ACT) and any applicable state securities Laws, and no sale so made in good
faith by Secured Parties shall be deemed not to be "commercially reasonable"
because so made.
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(c) Application of Proceeds. Secured Parties shall apply
the proceeds or any sale or other disposition of the Collateral under this
Paragraph 7 in the following order: First, to the payment of all its expenses
incurred in retaking, holding, and preparing any of the Collateral for sale(s)
or other disposition, in arranging for such sale(s) or other disposition, and
in actually selling or disposing of the same (all of which are part of the
Obligation); second, toward repayment of amounts expended by Secured Parties
under Paragraph 8; third, subject to Section 9.1 of the Credit Agreement,
toward payment of the balance of the Obligation and NationsBank's net exposure
then existing under all foreign exchange contracts between any Company and
NationsBank in such order and manner as Secured Parties, in their discretion,
may deem advisable. Any surplus remaining shall be delivered to the Debtor or
Borrower or as a court of competent jurisdiction may direct. If the proceeds
are insufficient to pay the Obligation in full, Borrower shall remain liable
for any deficiency.
(d) Pool Alaska, Inc.'s Agent. Secured Party shall be
deemed to be irrevocably appointed as Pool Alaska, Inc.'s agent and
attorney-in-fact with all right and power to enforce all of Pool Alaska, Inc.'s
rights and remedies under or in connection with the Collateral. All reasonable
costs, expenses and liabilities incurred and all payments made by Secured Party
as Pool Alaska, Inc.'s agent and attorney-in-fact, including, without
limitation, reasonable attorney's fees and expenses, shall be considered a loan
by Secured Party to Pool Alaska, Inc. which shall be repayable on demand and
shall accrue interest at the Default Rate and shall be part of the Obligation.
Pool Alaska, Inc. hereby gives Secured Party the power and right on its behalf
and in its own name to do any of the following, without notice to or the
consent of Pool Alaska, Inc.:
(i) endorse Pool Alaska, Inc.'s name on all applications,
assignments (including assignments to Secured Party), licenses,
documents, papers, and instruments necessary or desirable for Pool
Alaska, Inc. in its use of the Trademarks;
(ii) take any other action with respect to the Trademarks
as Secured Party deems in its best interest or in the best interest of
Lenders, including requiring Pool Alaska, Inc. to join in any lawsuit
or other action concerning the Collateral;
(iii) grant or issue any exclusive or non-exclusive license
under the Trademarks; and
(iv) assign, pledge, convey, or otherwise transfer title
in or dispose of any of the Trademarks to anyone.
This power of attorney is a power coupled with an interest and
shall be irrevocable until the Obligation is paid in full. The Secured Party
shall be under no duty to exercise or withhold the exercise of any of the
rights, powers, privileges, and options expressly or implicitly granted to it
in this Agreement, and shall not be liable for any failure to do so or any
delay in doing so. This power of attorney is conferred on Secured Party solely
to protect, preserve, maintain, and realize upon its Security Interest in the
Collateral. Neither Secured Party nor any of the Lenders shall be responsible
for any decline or diminution in the value of any of the Collateral, and
neither Secured Party nor any of the Lenders shall be required to take any
steps to protect or preserve any of the Collateral or any rights against prior
parties or to protect, preserve, or maintain any security interest or Lien
given to secure the Collateral.
8. Other Rights of Secured Parties.
(a) Performance. If any covenant, duty, or agreement of
Debtor is not performed in accordance with its material terms, Secured Parties
may, at their option, perform, or attempt to perform, such covenant, duty, or
agreement on behalf of Debtor. Any amount reasonably expended by Secured
Parties in such performance or attempted performance shall be payable by Debtor
to Secured Parties on demand, shall become part of the Obligation, and shall
bear interest at the Default Rate from the date of such expenditure by Secured
Parties until paid. Notwithstanding the foregoing, it is expressly understood
that no Secured Party shall assume or have, except by express written consent
of such Secured Party, any liability or responsibility for the performance of
any covenant, duty, or agreement of Debtor.
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(b) Collection. Upon notice from any Secured Party, each
Obligor with respect to any payments on any of the Collateral (including,
without limitation, dividends and other distributions with respect to
securities and insurance proceeds payable by reason of loss or damage to any of
the Collateral) is hereby authorized and directed by Debtor to make payment
directly to such Secured Party, regardless of whether Debtor was previously
making collections thereon. Subject to Paragraph 8(e), until such notice is
given, Debtor is authorized to retain and expend all payments made on
Collateral. Each Secured Party shall have the right in its own name or in the
name of Debtor to compromise or extend time of payment with respect to all or
any portion of the Collateral for such amounts and upon such terms as such
Secured Party may determine; to demand, collect, receive, receipt for, sue for,
compound, and give acquittances for any and all amounts due or to become due
with respect to Collateral; to take control of cash and other proceeds of any
Collateral; to endorse the name of Debtor on any notes, acceptances, checks,
drafts, money orders, or other evidences of payment on Collateral that may come
into the possession of such Secured Party; to sign the name of Debtor on any
invoice or bill of lading relating to any Collateral, on any drafts against
Obligors or other persons or entities making payment with respect to
Collateral, on assignments and verifications of accounts or other Collateral
and on notices to Obligors making payment with respect to Collateral; to send
requests for verification of obligations to any Obligor; and to do all other
acts and things necessary to carry out the intent of this agreement. If any
Obligor fails or refuses to make payment on any Collateral when due, each
Secured Party is authorized, in its sole discretion, either in its own name or
in the name of Debtor, to take such action as such Secured Party shall deem
appropriate for the collection of any amounts owed with respect to Collateral
or upon which a delinquency exists. Regardless of any other provision hereof,
however, a Secured Party shall never be liable for its failure to collect, or
for its failure to exercise diligence in the collection of, any amounts owed
with respect to Collateral, nor shall it be under any duty whatever to anyone
except Debtor to account for funds that it shall actually receive hereunder.
Without limiting the generality of the foregoing, no Secured Party shall have
responsibility for ascertaining any maturities, calls, conversions, exchanges,
offers, tenders, or similar matters relating to any Collateral, or for
informing Debtor with respect to any of such matters (irrespective of whether
such Secured Party actually has, or may be deemed to have, knowledge thereof).
The release of any Secured Party to any Obligor shall be a full and complete
release, discharge, and acquittance to such Obligor, to the extent of any
amount so paid to such Secured Party. The rights granted Secured Parties under
this subparagraph may be exercised only upon the occurrence and continuance of
a Default.
(c) Record Ownership of Securities. Upon the occurrence
and continuance of a Default, Secured Parties may have any Collateral that is
securities and that is in the possession of a Secured Party, or its nominee or
nominees, registered in its name, or in the name of its nominee or nominees, as
pledgee; and, as to any securities so registered, Debtor shall execute and
deliver (or cause to be executed and delivered) to such Secured Party all such
proxies, powers of attorney, dividend coupons or orders, and other documents as
such Secured Party may reasonably request for the purpose of enabling such
Secured Party to exercise the voting rights and powers which it is entitled to
exercise under this agreement or to receive the dividends and other payments in
respect of securities which it is authorized to receive and retain under this
agreement.
(d) Voting of Securities. As long as a Default has not
occurred and is not continuing, Debtor shall be entitled to exercise all voting
rights pertaining to any Collateral that is securities. After the occurrence
and during the continuance of a Default, the right to vote any Collateral that
is securities shall be vested exclusively in Secured Parties. To this end,
Debtor hereby irrevocably constitutes and appoints Agent, on behalf of Secured
Parties, the proxy and attorney-in-fact of Debtor, with full power of
substitution, to vote, and to act with respect to, any and all Collateral that
is securities standing in the name of Debtor or with respect to which Debtor is
entitled to vote and act, subject to the understanding that such proxy may not
be exercised unless a Default has occurred and is continuing. The proxy herein
granted is coupled with an interest, is irrevocable, and shall continue until
the Obligation has been paid and performed in full.
(e) Certain Proceeds. Notwithstanding any contrary
provision herein, any and all stock dividends or other non-cash distributions
made on or in respect of any Collateral that is securities, and any proceeds of
any Collateral that is securities, whether such dividends, distributions, or
proceeds result from a subdivision, combination, or reclassification of the
outstanding capital stock of any issuer thereof or as a result of any merger,
consolidation, acquisition, or other exchange of assets to which any issuer may
be a party, or otherwise, shall be part of the Collateral hereunder, shall, if
received by Debtor, be held in trust for the benefit of Secured Parties, and
shall be delivered promptly to Secured Parties or to Agent, on behalf of
Secured Parties, (accompanied by proper instruments of assignment and/or stock
and/or bond
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powers executed by Debtor in accordance with Secured Parties' instructions) to
be held subject to the terms of this agreement. Any cash proceeds of
Collateral which come into the possession of any Secured Party (including,
without limitation, insurance proceeds) may, at such Secured Party's option, be
applied in whole or in part to the Obligation (to the extent then due) and to
NationsBank's net exposure then existing under all foreign exchange contracts
between any Company and NationsBank, be released in whole or in part to or on
the written instructions of Debtor for any general or specific purpose, or be
retained in whole or in part by such Secured Party as additional Collateral.
Any cash Collateral in the possession of any Secured Party may be invested by
such Secured Party in (a) obligations of the United States of America and
agencies thereof and obligations guaranteed by the United States of America
maturing within one year from the date of acquisition, and (b) certificates of
deposit issued by commercial banks organized under the Laws of the United
States of America or any state thereof and having combined capital, surplus,
and undivided profits of not less than $100,000,000, which have a rating from
Moody's Investors Service, Inc., and Standard & Poors Corporation of at least
P-1 and A-1, respectively, or are insured by the Federal Deposit Insurance
Corporation. Secured Parties shall never be obligated to make any such
investment and shall never have any liability to Debtor for any loss which may
result therefrom. All interest and other amounts earned from any investment of
Collateral may be dealt with by Secured Parties in the same manner as other
cash Collateral. The provisions of this subparagraph shall be applicable only
upon the occurrence and continuance of a Default.
(f) Use and Operation of Collateral. Debtor covenants to
promptly reimburse and pay to any Secured Party, at such Secured Party's
request, the amount of all expenses reasonably incurred by such Secured Party
in connection with its custody and preservation of Collateral, and all such
expenses shall bear interest until repaid (i) at the lesser of the Designated
Rate or the Highest Lawful Rate, if no Default has occurred and is continuing,
and (ii) at the lesser of the Default Rate or the Highest Lawful Rate, upon the
occurrence and continuance of a Default. Such expenses, together with such
interest, shall be payable by Debtor to any Secured Party upon demand and shall
become part of the Obligation. However, the risk of accidental loss or damage
to, or diminution in value of, Collateral is on Debtor. With respect to
Collateral that is in the possession of a Secured Party, such Secured Party
shall have no duty to fix or preserve rights against prior parties to such
Collateral and shall never be liable for any failure to use diligence to
collect any amount payable in respect of such Collateral, but shall be liable
only to account to Debtor for what it may actually collect or receive thereon.
The provisions of this subparagraph shall be applicable whether or not a
Default has occurred and is continuing.
(g) INDEMNIFICATION. DEBTOR HEREBY ASSUMES ALL LIABILITY
FOR THE COLLATERAL, FOR THE SECURITY INTEREST, AND FOR ANY USE, POSSESSION,
MAINTENANCE, AND MANAGEMENT OF, ALL OR ANY OF THE COLLATERAL, INCLUDING,
WITHOUT LIMITATION, ANY TAXES ARISING AS A RESULT OF, OR IN CONNECTION WITH,
THE TRANSACTIONS CONTEMPLATED HEREIN, AND AGREES TO ASSUME LIABILITY FOR, AND
TO INDEMNIFY AND HOLD SECURED PARTIES HARMLESS FROM AND AGAINST, ANY AND ALL
CLAIMS, CAUSES OF ACTION, OR LIABILITY, FOR INJURIES TO OR DEATHS OF PERSONS
AND DAMAGE TO PROPERTY, HOWSOEVER ARISING FROM OR INCIDENT TO SUCH USE,
POSSESSION, MAINTENANCE, AND MANAGEMENT, WHETHER SUCH PERSONS BE AGENTS OR
EMPLOYEES OF DEBTOR OR OF THIRD PARTIES, OR SUCH DAMAGE TO PROPERTY OF DEBTOR
OR OF OTHERS. UNLESS EXPRESSLY PROHIBITED BY APPLICABLE LAW, DEBTOR AGREES TO
INDEMNIFY, SAVE, AND HOLD SECURED PARTIES HARMLESS FROM AND AGAINST, AND
COVENANTS TO DEFEND SECURED PARTIES AGAINST, ANY AND ALL LOSSES, DAMAGES,
CLAIMS, COSTS, PENALTIES, LIABILITIES, AND EXPENSES, INCLUDING, WITHOUT
LIMITATION, COURT COSTS AND ATTORNEYS' FEES, HOWSOEVER ARISING OR INCURRED
BECAUSE OF, INCIDENT TO, OR WITH RESPECT TO COLLATERAL OR ANY USE, POSSESSION,
MAINTENANCE, OR MANAGEMENT THEREOF, PROVIDED THAT DEBTOR SHALL NOT BE LIABLE
FOR LOSSES, DAMAGES, CLAIMS, COSTS, PENALTIES, LIABILITIES, AND EXPENSES
RESULTING FROM ANY SECURED PARTY'S GROSS NEGLIGENCE OR WILLFUL MISCONDUCT.
9. Miscellaneous.
(a) Reference to Miscellaneous Provisions. This
agreement is a Loan Paper, and, therefore, this agreement is subject to the
applicable provisions of Section 12 of the Credit Agreement, all of which
applicable provisions are incorporated herein by reference the same as if set
forth herein verbatim. Until changed by notice, the address and facsimile
number for each party hereto for purposes of communications are as appear on
the signature page(s) of this agreement.
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(b) Term. This agreement shall terminate upon full and
final payment and performance of (a) the Obligation, and (b) all foreign
exchange contracts between each Company and NationsBank. No Obligor, if any,
on any of the Collateral shall ever be obligated to make inquiry as to the
termination of this agreement, but shall be fully protected in making payment
directly to Agent, on behalf of Secured Parties.
(c) Actions Not Releases. The Security Interest and
Debtor's obligations and Secured Parties' rights hereunder shall not be
released, diminished, impaired, or adversely affected by the occurrence of any
one or more of the following events: (i) The taking or accepting of any other
security or assurance for any or all of the Obligation; (ii) any release,
surrender, exchange, subordination, or loss of any security or assurance at any
time existing in connection with any or all of the Obligation; (iii) the
modification of, amendment to, or waiver of compliance with any terms of any of
its or any other Related Paper without the notification or consent of Debtor,
except as required therein (the right to such notification and consent being
specifically waived by Debtor); (iv) the insolvency, bankruptcy, or lack of
corporate or trust power of any party at any time liable for the payment of any
or all of the Obligation, whether now existing or hereafter occurring; (v) any
renewal, extension, or rearrangement of the payment of any or all of the
Obligation, either with or without notice to or consent of Debtor, or any
adjustment, indulgence, forbearance, or compromise that may be granted or given
by Secured Parties to Debtor; (vi) any neglect, delay, omission, failure, or
refusal of any Secured Party to take or prosecute any action in connection with
any other agreement, document, guaranty, or instrument evidencing, securing, or
assuring the payment of all or any of the Obligation; (vii) any failure of any
Secured Party to notify Debtor of any renewal, extension, or assignment of the
Obligation or any part thereof, or the release of any security, or of any other
action taken or refrained from being taken by any Secured Party against Debtor
or any new agreement between any Secured Party and Debtor, it being understood
that no Secured Party shall be required to give Debtor (other than Borrower)
any notice of any kind under any circumstances whatsoever with respect to or in
connection with the Obligation, including, without limitation, notice of
acceptance of this security agreement or any Collateral ever delivered to or
for the account of such Secured Party hereunder; (viii) the illegality,
invalidity, or unenforceability of all or any part of the Obligation against
any party obligated with respect thereto by reason of the fact that the
Obligation, or the interest paid or payable with respect thereto, exceeds the
amount permitted by Law, the act of creating the Obligation, or any part
thereof, is ultra vires, or the officers, partners, or trustees creating same
acted in excess of their authority, or for any other reason; or (ix) if any
payment by any party obligated with respect thereto is held to constitute a
preference under applicable Laws or for any other reason any Secured Party is
required to refund such payment or pay the amount thereof to someone else.
(d) Waivers. Unless otherwise expressly provided herein
or in any other Related Paper, Debtor waives (i) any right to require Secured
Parties to proceed against any other Person, to exhaust its rights in
Collateral, or to pursue any other right which Secured Parties may have; (ii)
with respect to the Obligation, presentment and demand for payment, protest,
notice of protest and nonpayment, and notice of the intention to accelerate;
and (iii) all rights of marshaling in respect of any and all of the Collateral.
(e) Financing Statement. Secured Parties may file this
agreement or a carbon, photographic, or other reproduction of this agreement,
as a financing statement, but the failure of Secured Parties to do so shall not
impair the validity or enforceability of this agreement.
(f) Information. Except as otherwise provided by Law,
the charge of Secured Parties for furnishing each statement of account or each
list of Collateral shall be $10.00.
(g) Multiple Counterparts. This agreement has been
executed in a number of identical counterparts, each of which shall be deemed
an original for all purposes and all of which constitute, collectively, one
agreement; but, in making proof of this agreement, it shall not be necessary to
produce or account for more than one such counterpart.
(h) Parties Bound; Assignment. This agreement shall be
binding on and inure to the benefit of Debtor, Secured Parties, and their
respective successors and assigns. Debtor's obligations and agreements
hereunder are joint and several and shall be binding upon their respective
successors and assigns, and delivery or other accounting of Collateral to any
one or more of them shall discharge Secured Parties of all liability therefor.
Debtor may not, without the prior written consent of Secured Parties, assign
any rights, duties, or obligations hereunder. In the event of an assignment
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<PAGE> 65
of all or part of the Obligation, the Security Interest and other rights and
benefits hereunder, to the extent applicable to the part of the Obligation so
assigned, may be transferred therewith.
EXECUTED as of the day and year first herein set forth.
NATIONSBANK OF TEXAS, N.A. NATIONSBANK OF TEXAS, N.A.
700 Louisiana Street, 8th Floor
Houston, Texas 77002
Attn: James R. Allred, By ______________________________________
Vice President James R. Allred
FAX No.: (713) 247-6568 Vice President
The address and fax no. for
each of the undersigned is:
_________________________________________
10375 Richmond Avenue
Houston, Texas 77042 By ______________________________________
Attn: R. A. Johannsen,
Treasurer
FAX No.: (713) 954-3037 Title ___________________________________
By ______________________________________
[corporate seal] Title ___________________________________
G-11
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SCHEDULE 1
Present and foreseeable location of
Debtor's books and records
concerning any Collateral that is accounts
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SCHEDULE II
TRADEMARKS
G-13
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SCHEDULE III
TRADEMARKS LICENSED FOR USE BY OTHERS
G-14
<PAGE> 69
EXHIBIT "A"
TO
SECURITY AGREEMENT
FORM OF ASSIGNMENT
ASSIGNMENT OF TRADEMARKS
THIS ASSIGNMENT OF TRADEMARKS (this "ASSIGNMENT") is made as of *,
199__, by POOL ALASKA, INC., a Texas corporation whose address is 10375
Richmond Avenue, Houston, Texas 77042 ("ASSIGNOR") in favor of NationsBank of
Texas, N.A., as Agent for itself and the other Lenders (as defined in the
Security Agreement [as hereinafter defined]) ("ASSIGNEE").
W I T N E S S E T H
A. Assignee is the beneficiary, for the ratable benefit of
Lenders, of that certain Security Agreement dated as of April 25, 1990 executed
by Assignor (the "SECURITY AGREEMENT"), which Security Agreement provides that
under certain conditions specified therein Assignor shall execute this
Assignment; and
B. The aforementioned conditions have been fulfilled;
NOW THEREFORE, Assignor hereby agrees as follows:
1. Assignment of Trademark. Assignor hereby grants, assigns and
conveys to Assignee, for the ratable benefit of Lenders, its entire right,
title and interest in and to the Trademarks (as each term is defined in the
Security Agreement) including without limitation the trademark and patent
registrations and applications listed in SCHEDULES II AND III to the Security
Agreement and hereto, including, without limitation, all renewals thereof, all
proceeds thereof (including, but not limited to, all license royalties and
proceeds of infringement suits), the right to sue for past, present and future
infringements and the goodwill of the businesses associated with and symbolized
by the Trademarks.
2. Representations and Warranties. Assignor represents and
warrants that it has the full right and power to make the assignment of the
Trademarks made hereby and that it has made no previous assignment, transfer,
agreement in conflict herewith or constituting a present or future assignment
of or encumbrance on any of the Trademarks except the Security Agreement.
3. Modification. This Assignment cannot be altered, amended or
modified in any way, except by a writing signed by Assignor and Assignee.
4. Binding Effect; Governing Law. This Assignment shall be
binding upon Assignor and its respective successors and permitted assigns, and
shall inure to the benefit of Assignee and its successors and assigns. This
Assignment shall, except to the extent that the laws of another state apply to
the Trademarks or any part thereof, be governed by and construed in accordance
with the laws of the State of Texas and the applicable laws of the United
States of America. By receiving this Assignment, Assignee is entitled to
receive all of the benefits and none of the obligations and liabilities which
may arise from the Trademarks.
IN WITNESS WHEREOF, this Assignment has been executed as of the day
and year first written above.
POOL ALASKA, INC.
By: ___________________________________
Name: _________________________________
Title: ________________________________
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<PAGE> 70
STATE OF __________ )
)
COUNTY OF __________ )
On this ___ day of _________, 199___, before me personally appeared
____________________________, known to me and being duly sworn, deposes and
says that he is the _____________________________________ of POOL ALASKA, INC.,
a Texas corporation (the "COMPANY"); that he knows the seal of Company that the
seal so affixed to the foregoing instrument is such corporate seal; that he
signed the foregoing instrument and affixed the seal of Company as such officer
pursuant to the authority vested in him by law; and that the foregoing
instrument is the voluntary act of Company and he desires the same to be
recorded as such.
_______________________________________
NOTARY PUBLIC IN AND FOR THE
STATE OF ___________________
[SEAL]
My Commission Expires: ________________
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<PAGE> 71
EXHIBIT H
OFFICER'S CERTIFICATE
This certificate is delivered under the Restated Revolving Credit
Agreement dated as of November 30, 1995, among Pool Company, a Texas
corporation ("BORROWER"), NationsBank of Texas, N.A., as Agent ("AGENT") and
the Lenders ("LENDERS") named therein. I, the undersigned officer of the
companies listed and attached as Annex A, hereby certify to Agent and the
Lenders that the following are true and correct:
1. Resolutions. Attached as Annex B is a true and correct copy
of resolutions relating to matters described therein, which have been duly and
unanimously adopted at a meeting of, or by the unanimous written consent of,
the board of directors of each such company listed and attached as Annex A.
None of such resolutions have been amended, modified or repealed in any
respect, and all of such resolutions are in full force and effect on the date
hereof.
2. Incumbency. The following individuals are the duly qualified
and acting officers in the position beside their names, of the companies listed
and attached as Annex A. The signatures beside their names are their true
signatures.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------
NAME TITLE SPECIMEN SIGNATURES
- ----------------------------------------------------------------------------------
<S> <C> <C>
J. T. Jongebloed President
- ----------------------------------------------------------------------------------
E. J. Spillard Senior Vice President,
Finance
- ----------------------------------------------------------------------------------
R. A. Johannsen Treasurer
- ----------------------------------------------------------------------------------
</TABLE>
3. Charter. There have been no changes to the Articles or
Certificate of Incorporation of any such company, and there have been no
additional amendments authorized with respect thereto, since April 21, 1995.
4. Bylaws. There have been no changes to the Bylaws of any such
company, and there have been no additional amendments authorized with respect
thereto since April 21, 1995.
EXECUTED as of _______, 1995.
_______________________________________
G. G. Arms
Corporate Secretary
H-1
<PAGE> 72
ANNEX A
POOL COMPANY
POOL ENERGY SERVICES CO.
POOL ENERGY HOLDING, INC.
POOL COMPANY (HOUSTON) INC.
POOL COMPANY (TEXAS) INC.
ASSOCIATED PETROLEUM SERVICES, INC.
POOL PRODUCTION SERVICES, INC.
POOL ALASKA, INC.
POOL AMERICAS, INC.
POOL INTERNATIONAL, INC.
POOL-AUSTRALIA, INC.
THE INTERNATIONAL AIR DRILLING COMPANY
ASSOCIATED OILTOOLS, INC.
POOL HORIZONTAL DRILLING SERVICES CO.
POOL CALIFORNIA ENERGY SERVICES, INC.
BIG 10 FISHING TOOL COMPANY, INC.
WESTEX PRODUCTION SERVICE, INC.
H-2
<PAGE> 73
EXHIBIT J
CONVERSION REQUEST
______________, 19__
NationsBank of Texas, N.A., as Agent
Energy Banking Group
700 Louisiana Street, 8th Floor
Houston, Texas 77002
Attn: James R. Allred, Vice President
Fax: (713) 247-6568
Reference is made to the Restated Revolving Credit Agreement dated as
of November 30, 1995 (as amended, supplemented or restated, the "CREDIT
AGREEMENT"), among the undersigned, the Lenders named therein, and NationsBank
of Texas, N.A., as Agent. Unless otherwise defined herein, all capitalized
terms have the meanings given to such terms in the Credit Agreement.
The undersigned hereby gives you notice pursuant to SECTION 2.15 of
the Credit Agreement that it elects to convert the interest rate applicable to
an Advance under the Credit Agreement or elects a new Interest Period for an
Advance bearing interest at a LIBOR Rate on the following terms:
(A) Date of conversion or last day of
applicable Interest Period (a Business Day) __________________________
(B) Existing Interest Rate** and Principal Amount*
being converted __________________________
(C) New Interest Rate selected** __________________________
(D) For conversion to a LIBOR Rate, the
Interest Period selected and the last
day thereof*** __________________________
(E) For continuation of a LIBOR Rate, the Interest
Period selected and the last day thereof*** __________________________
Very truly yours,
POOL COMPANY
By: ___________________________________
Name: _________________________________
Title: ________________________________
__________________________________
* Not less than $500,000 or a greater integral multiple of $100,000 (if
a LIBOR Rate is selected).
** LIBOR Rate (1, 2, 3 or 6 months), or Floating Rate.
*** 1, 2, 3 or 6 months. The Interest Period may not end after the
Termination Date.
J-1
<PAGE> 74
REVOLVING CREDIT NOTE
$7,000,000 Houston, Texas December 29, 1995
FOR VALUE RECEIVED, POOL COMPANY, a Texas corporation ("MAKER"),
hereby promises to pay to the order of NATIONAL BANK OF ALASKA ("PAYEE"), the
principal amount of $7,000,000 or so much thereof as may be disbursed and
outstanding hereunder, together with interest, as hereinafter described.
This promissory note has been executed and delivered under, and is
subject to the terms of, the $35,000,000 Restated Revolving Credit Agreement
(as amended, the "CREDIT AGREEMENT") dated as of November 30, 1995, among
Maker, NationsBank of Texas, N.A., as Agent, and Payee and the other Lenders
referred to therein, and is a "Note" referred to therein. Unless defined
herein or the context otherwise requires, capitalized terms used herein have
the meaning given to such terms in the Credit Agreement. Reference is made to
the Credit Agreement for provisions affecting this promissory note regarding
the place of payment, applicable interest rates, principal and interest payment
dates, final maturity, voluntary and mandatory prepayments, acceleration of
maturity, exercise of Rights, payment of attorneys' fees, court costs, and
other costs of collection, certain waivers by Maker and others now or hereafter
obligated for payment of any sums due hereunder, and security for the payment
hereof.
This promissory note and the similar promissory notes of Maker dated
of even date herewith have been issued under the Credit Agreement in
replacement for, but not as a novation of, those certainpromissory notes of
Maker dated August 15, 1994, which were issued under the Existing Credit
Agreement (as defined in the Credit Agreement).
This promissory note is being executed and delivered, and is intended
to be performed, in the State of Texas, and the Laws of such State and of the
United States of America shall govern the rights and duties of the parties and
the validity, construction, enforcement, and interpretation hereof.
THIS PROMISSORY NOTE, TOGETHER WITH THE OTHER LOAN PAPERS, REPRESENT
THE FINAL AGREEMENTS BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY (I)
EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE
PARTIES, OR (II) ANY COMMITMENT LETTER AMONG THE PARTIES (ALL THE TERMS AND
CONDITIONS OF WHICH ARE SUPERSEDED BY LOAN PAPERS). THERE ARE NO UNWRITTEN
ORAL AGREEMENTS BETWEEN THE PARTIES.
POOL COMPANY
By /s/ E. J. SPILLARD
___________________________________
E. J. Spillard
Senior Vice President, Finance
By /s/ R. A. JOHANNSEN
___________________________________
R. A. Johannsen
Treasurer
[corporate seal]
<PAGE> 75
REVOLVING CREDIT NOTE
$13,125,000 Houston, Texas December 29, 1995
FOR VALUE RECEIVED, POOL COMPANY, a Texas corporation ("MAKER"),
hereby promises to pay to the order of NATIONAL BANK OF CANADA, a Canadian bank
("PAYEE"), the principal amount of $13,125,000 or so much thereof as may be
disbursed and outstanding hereunder, together with interest, as hereinafter
described.
This promissory note has been executed and delivered under, and is
subject to the terms of, the $35,000,000 Restated Revolving Credit Agreement
(as amended, the "CREDIT AGREEMENT") dated as of November 30, 1995, among
Maker, NationsBank of Texas, N.A., as Agent, and Payee and the other Lenders
referred to therein, and is a "Note" referred to therein. Unless defined
herein or the context otherwise requires, capitalized terms used herein have
the meaning given to such terms in the Credit Agreement. Reference is made to
the Credit Agreement for provisions affecting this promissory note regarding
the place of payment, applicable interest rates, principal and interest payment
dates, final maturity, voluntary and mandatory prepayments, acceleration of
maturity, exercise of Rights, payment of attorneys' fees, court costs, and
other costs of collection, certain waivers by Maker and others now or hereafter
obligated for payment of any sums due hereunder, and security for the payment
hereof.
This promissory note and the similar promissory notes of Maker dated
of even date herewith have been issued under the Credit Agreement in
replacement for, but not as a novation of, those certainpromissory notes of
Maker dated August 15, 1994, which were issued under the Existing Credit
Agreement (as defined in the Credit Agreement).
This promissory note is being executed and delivered, and is intended
to be performed, in the State of Texas, and the Laws of such State and of the
United States of America shall govern the rights and duties of the parties and
the validity, construction, enforcement, and interpretation hereof.
THIS PROMISSORY NOTE, TOGETHER WITH THE OTHER LOAN PAPERS, REPRESENT
THE FINAL AGREEMENTS BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY (I)
EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE
PARTIES, OR (II) ANY COMMITMENT LETTER AMONG THE PARTIES (ALL THE TERMS AND
CONDITIONS OF WHICH ARE SUPERSEDED BY LOAN PAPERS). THERE ARE NO UNWRITTEN
ORAL AGREEMENTS BETWEEN THE PARTIES.
POOL COMPANY
By /s/ E. J. SPILLARD
___________________________________
E. J. Spillard
Senior Vice President, Finance
By /s/ R. A. JOHANNSEN
___________________________________
R. A. Johannsen
Treasurer
[corporate seal]
<PAGE> 76
REVOLVING CREDIT NOTE
$14,875,000 Houston, Texas December 29, 1995
FOR VALUE RECEIVED, POOL COMPANY, a Texas corporation ("MAKER"),
hereby promises to pay to the order of NATIONSBANK OF TEXAS, N.A., a national
banking association ("PAYEE"), the principal amount of $14,875,000 or so much
thereof as may be disbursed and outstanding hereunder, together with interest,
as hereinafter described.
This promissory note has been executed and delivered under, and is
subject to the terms of, the $35,000,000 Restated Revolving Credit Agreement
(as amended, the "CREDIT AGREEMENT") dated as of November 30, 1995, among
Maker, NationsBank of Texas, N.A., as Agent, and Payee and the other Lenders
referred to therein, and is a "Note" referred to therein. Unless defined
herein or the context otherwise requires, capitalized terms used herein have
the meaning given to such terms in the Credit Agreement. Reference is made to
the Credit Agreement for provisions affecting this promissory note regarding
the place of payment, applicable interest rates, principal and interest payment
dates, final maturity, voluntary and mandatory prepayments, acceleration of
maturity, exercise of Rights, payment of attorneys' fees, court costs, and
other costs of collection, certain waivers by Maker and others now or hereafter
obligated for payment of any sums due hereunder, and security for the payment
hereof.
This promissory note and the similar promissory notes of Maker dated
of even date herewith have been issued under the Credit Agreement in
replacement for, but not as a novation of, those certainpromissory notes of
Maker dated August 15, 1994, which were issued under the Existing Credit
Agreement (as defined in the Credit Agreement).
This promissory note is being executed and delivered, and is intended
to be performed, in the State of Texas, and the Laws of such State and of the
United States of America shall govern the rights and duties of the parties and
the validity, construction, enforcement, and interpretation hereof.
THIS PROMISSORY NOTE, TOGETHER WITH THE OTHER LOAN PAPERS, REPRESENT
THE FINAL AGREEMENTS BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY (I)
EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE
PARTIES, OR (II) ANY COMMITMENT LETTER AMONG THE PARTIES (ALL THE TERMS AND
CONDITIONS OF WHICH ARE SUPERSEDED BY LOAN PAPERS). THERE ARE NO UNWRITTEN
ORAL AGREEMENTS BETWEEN THE PARTIES.
POOL COMPANY
By /s/ E. J. SPILLARD
____________________________________
E. J. Spillard
Senior Vice President, Finance
By /s/ R. A. JOHANNSEN
____________________________________
R. A. Johannsen
Treasurer
[corporate seal]
<PAGE> 77
RESTATED INTERCREDITOR AGREEMENT
THIS RESTATED INTERCREDITOR AGREEMENT is entered into as of November
30, 1995 by NATIONSBANK OF TEXAS, N.A., a national banking association
("NATIONSBANK"), and consented and agreed to by National Bank of Canada,
National Bank of Alaska, and Pool Company, a Texas corporation ("BORROWER").
RECITALS:
A. NationsBank entered into that certain Intercreditor Agreement
dated as of April 21, 1995 (the "EXISTING INTERCREDITOR AGREEMENT"), which was
consented and agreed to by National Bank of Canada and Borrower.
B. Borrower, certain Lenders ("REVOLVING CREDIT LENDERS"), and
NationsBank, as Agent for itself and the other Revolving Credit Lenders, are
entering into a Restated Credit Agreement (as renewed, extended, increased,
reduced, amended, or restated, the "REVOLVING CREDIT AGREEMENT") dated as of
November 30, 1995, providing for secured loans to Borrower on a revolving
basis.
C. Borrower, certain Lenders ("TERM LOAN LENDERS"), and
NationsBank, as Agent for itself and the other Term Loan Lenders, are entering
into a Term Loan Agreement (as renewed, extended, increased, reduced, amended,
or restated, the "TERM LOAN AGREEMENT"), dated as of November 30, 1995,
providing for a secured loan to Borrower on a term basis.
D. NationsBank, in its capacity as Agent for itself and the
Revolving Credit Lenders under the Revolving Credit Agreement ("REVOLVING
CREDIT AGENT"), for its own account with respect to its net exposure on foreign
exchange contracts between any Company and NationsBank, and in its capacity as
Agent for itself and the Term Loan Lenders under the Term Loan Agreement ("TERM
LOAN AGENT"), is entering into this agreement to (i) provide for certain mutual
rights between (a) the Term Loan Agent and Term Loan Lenders, (b) the Revolving
Credit Agent and Revolving Credit Lenders, and (c) NationsBank, individually,
(ii) add National Bank of Alaska's consent and agreement, as a new Term Loan
Lender and Revolving Credit Lender, and (iii) amend and restate entirely the
Existing Intercreditor Agreement.
AGREEMENTS:
Therefore, for valuable and adequate consideration, the Term Loan
Agent (on behalf of Term Loan Lenders), the Revolving Credit Agent (on behalf
of Revolving Credit Lenders), and NationsBank, individually, agree as follows:
1. Definitions. As used in this agreement:
"AGENTS" means, collectively, the Revolving Credit Agent and
the Term Loan Agent.
"COLLATERAL" means the collateral pledged by Borrower to
Secured Parties under the Lender Agreements.
"DEFAULT" means any "Default" under a Lender Agreement that
entitles the applicable Secured Party to accelerate the obligations of
Borrower under a Lender Agreement and to take Enforcement Actions.
"ENFORCEMENT ACTION" means any exercise by any Secured Party
or its custodian of rights -- other than giving notice of default and
acceleration -- to foreclose or otherwise realize upon any Collateral.
"LENDER AGREEMENTS" means, collectively, the Revolving Credit
Agreement, the Term Loan Agreement, and all foreign exchange contracts
between any Company and NationsBank.
"SECURED PARTIES" means Agents and NationsBank, for its own
account with respect to its net exposure on foreign exchange contracts
between any Company and NationsBank.
1
<PAGE> 78
2. Notices of Default, Acceleration, and Enforcement Action.
Each Secured Party shall (a) promptly notify the other Secured Parties upon
becoming aware of a Default and (b) use its best efforts to notify the other
Secured Parties before (i) accelerating the obligations of Borrower under the
applicable Lender Agreement or (ii) taking -- or authorizing its custodian to
take -- Enforcement Actions.
3. Sharing of Collateral. Each Secured Party acknowledges that
(i) certain liens or security interests have been granted in the same
Collateral to the other Secured Parties to secure obligations of Borrower; (ii)
such liens or security interests in the Collateral shall be on the same level
of priority with respect to each Secured Party; (iii) the amount of Collateral
attributable to a Secured Party shall be the proportion that the respective
indebtedness owing to such Secured Party by Borrower bears to the aggregate
indebtedness owed by Borrower to all Secured Parties ("PRO RATA SHARE"); (iv)
the Secured Parties shall share in the proceeds of the Collateral according to
their Pro Rata Share; and (v) each Secured Party shall pay its Pro Rata Share
of any expenses (including, without limitation, court costs, attorney's fees
and other costs of collection) incurred in connection with the Collateral.
4. Amendments to Agreements. Any Secured Party and the Lenders
under any Lender Agreement may enter into renewals and extensions of,
amendments to, and waivers under its respective Lender Agreement without the
consent of the other Secured Parties or the Lenders under the other Lender
Agreements, SO LONG AS that renewal, extension, amendment, or waiver does not
diminish the rights granted to the other Secured Parties and the other Lenders
under this agreement.
5. Default; Collateral. Upon the occurrence and continuance of a
Default, Secured Parties agree to promptly confer in order that Secured Parties
may agree upon a course of action for the enforcement of the rights of Secured
Parties; provided that any Secured Party shall be entitled (but not obligated)
to proceed to take any actions necessary in its reasonable judgment to preserve
rights, pending agreement by Secured Parties on the course of action to be
taken. Any and all agreements to subordinate (whether made heretofore or
hereafter) other indebtedness or obligations of Borrower to the indebtedness
under the Lender Agreements shall be construed as being for the benefit of each
Secured Party to the extent of its respective Pro Rata Share. If one Secured
Party acquires any security for the indebtedness under its respective Lender
Agreement upon or in lieu of foreclosure, the same shall be held for the
benefit of all Secured Parties in proportion to their respective Pro Rata
Share.
6. Liability Between Agents. No Secured Party shall incur any
(a) implied duty to the others under this agreement or (b) liability to the
others for its failure to give notice under Paragraph 2 above.
7. Headings. The headings, captions, and arrangements used in
this agreement are for convenience only and shall neither limit, amplify, or
modify the terms of this agreement nor affect the meanings thereof.
8. Notices. All notices, requests, and other communications
required or permitted to be given or made hereunder shall, except as otherwise
expressly provided hereunder, be in writing and shall be delivered in person or
telegraphed or telecopied or mailed, first class, return receipt requested,
postage prepaid, addressed to the respective parties hereto at their respective
addresses hereinafter set forth or, as to any such party, at such other address
as may be designated by it in a notice to the other given in the manner
provided herein. All notices shall be conclusively deemed to have been
properly given or made when duly delivered, in person, or if mailed on the
third business day after being deposited in the mails, or if telegraphed when
delivered to the telegraph company, or if telecopied when transmitted addressed
to the intended recipient at the address specified beside its name on the
signature pages hereof.
9. Waivers and Amendments. This agreement may be amended,
terminated or extended, and the terms and conditions hereof may be waived, but
only in a written instrument signed by each Secured Party or, in the case of a
waiver, by the party waiving compliance. No failure, delay or forbearance on
the part of any party in exercising any right, power or privilege granted
hereunder shall operate as a waiver thereof.
10. Applicable Law. This agreement shall be governed by and
construed in accordance with the laws of the State of Texas and the applicable
laws of the United States of America.
2
<PAGE> 79
11. Severability. Any provision in this agreement held by a court
of competent jurisdiction to be invalid or unenforceable shall not impair or
invalidate the remainder of this agreement and the effect thereof shall be
confined to the provision held to be invalid or illegal.
12. Successors and Assigns. This agreement shall be binding upon
and shall inure to the benefit of the respective successors and assigns of each
of the Secured Parties, but does not otherwise create, and shall not be
construed as creating, any rights or defenses enforceable by Borrower or by any
other person or entity not a party to this agreement.
13. Survival. The provisions contained in Paragraph 6 above shall
survive the termination of this agreement for all purposes.
14. Counterparts. This agreement may be executed in one or more
counterparts, each of which shall be deemed an original, all of which together
shall constitute one and the same instrument and agreement; but in making proof
of this agreement, it shall not be necessary to produce or account for a copy
of any counterpart other than the counterpart signed by the party against whom
this agreement is to be enforced.
EXECUTED as of the date first stated in this agreement.
Address for Notice: NATIONSBANK OF TEXAS, N.A., as
Revolving Credit Agent
700 Louisiana Street, 8th Floor
Houston, Texas 77002
Telecopy No.: 713/247-6568
Telephone No.: 713/247-6327 By /s/ JAMES R. ALLRED
___________________________________
James R. Allred, Vice President
NATIONSBANK OF TEXAS, N.A., as Term
Loan Agent
By /s/ JAMES R. ALLRED
___________________________________
James R. Allred, Vice President
NATIONSBANK OF TEXAS, N.A.,
individually
By /s/ JAMES R. ALLRED
___________________________________
James R. Allred, Vice President
3
<PAGE> 80
Consented and Agreed to:
NATIONAL BANK OF CANADA
By /s/ LARRY L. SEARS
________________________________________
Larry L. Sears, Group Vice President
By /s/ DOUGLAS G. CLARK
________________________________________
Douglas G. Clark, Vice President
NATIONAL BANK OF ALASKA
By /s/ PATRICIA JELLEY BENZ
________________________________________
Patricia Jelley Benz, Vice President
Borrower consents to this agreement and agrees that (a) the execution
and performance of the terms and conditions of this agreement shall not
constitute a violation of either of the Lender Agreements with Borrower, (b) it
shall not pledge Collateral to any Secured Party if such Collateral has not
already been or is simultaneously being pledged to the other Secured Party, and
(c) it shall promptly pay all reasonable costs and expenses incurred by Secured
Parties in preparing and transmitting copies of documents and instruments.
POOL COMPANY
By /s/ E. J. SPILLARD
_________________________________________
E. J. Spillard, Senior Vice President
By /s/ R. A. JOHANNSEN
_________________________________________
R. A. Johannsen, Treasurer
4
<PAGE> 1
EXHIBIT 10.27
TERM LOAN AGREEMENT
AMONG
INTERNATIONAL SEA DRILLING LTD.,
BORROWER,
NATIONSBANK OF TEXAS, N.A.,
AGENT,
AND
CERTAIN LENDERS
$6,500,000 TERM LOAN
RIG 453
NOVEMBER 30, 1995
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C> <C>
SECTION 1. COMMITMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 Commitment . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Loan Procedure . . . . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 2. TERMS OF PAYMENT . . . . . . . . . . . . . . . . . . . . . . . . . 1
2.1 Notes; Payments . . . . . . . . . . . . . . . . . . . . . . . . . 1
2.2 Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.3 Mandatory and Voluntary Prepayments . . . . . . . . . . . . . . . 2
2.4 Order of Application . . . . . . . . . . . . . . . . . . . . . . . 2
2.5 Capital Adequacy . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.6 Foreign Lenders . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.7 Sharing of Payments, Etc. . . . . . . . . . . . . . . . . . . . . 3
2.8 Offset . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.9 Basis Unavailable or Inadequate for Determining LIBOR Rate . . . . 3
2.10 Additional Costs . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.11 Change in Laws . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.12 Funding Loss . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.13 Interest Periods . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.14 Conversions . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
SECTION 3. FEES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
3.1 Agent's Arranging Fee . . . . . . . . . . . . . . . . . . . . . . 4
3.2 Facility Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
SECTION 4. SECURITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
4.1 Guaranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
4.2 Collateral . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
4.3 Cash Collateral Accounts . . . . . . . . . . . . . . . . . . . . . 5
SECTION 5. REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . . 5
5.1 Corporate Existence and Authority . . . . . . . . . . . . . . . . 5
5.2 Ownership and Names . . . . . . . . . . . . . . . . . . . . . . . 5
5.3 Relationship with Agent and Lenders . . . . . . . . . . . . . . . 6
5.4 Financial Statements . . . . . . . . . . . . . . . . . . . . . . . 6
5.5 Compliance with Laws and Documents . . . . . . . . . . . . . . . . 6
5.6 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
5.7 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
5.8 Government Regulation . . . . . . . . . . . . . . . . . . . . . . 6
5.9 Employee Benefit Plans . . . . . . . . . . . . . . . . . . . . . . 6
5.10 Purpose of Credit . . . . . . . . . . . . . . . . . . . . . . . . 6
5.11 Properties; Liens . . . . . . . . . . . . . . . . . . . . . . . . 7
5.12 Material Agreements . . . . . . . . . . . . . . . . . . . . . . . 7
5.13 Solvency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
5.14 General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
SECTION 6. CONDITIONS PRECEDENT . . . . . . . . . . . . . . . . . . . . . . . 7
6.1 Initially . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
6.2 Materiality and Waiver . . . . . . . . . . . . . . . . . . . . . . 7
</TABLE>
(i)
<PAGE> 3
<TABLE>
<CAPTION>
Page
<S> <C> <C>
SECTION 7. COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
7.1 Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
7.2 Books and Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
7.3 Items to be Furnished . . . . . . . . . . . . . . . . . . . . . . . . . . 7
7.4 Inspection . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
7.5 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
7.6 Payment of Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . 9
7.7 Expenses of Lenders . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
7.8 Maintenance of Corporate Existence, Assets, Business, and Insurance . . . 9
7.9 Maintenance and Evidence of Priority of Lender Liens . . . . . . . . . . . 9
7.10 Employee Benefit Plans . . . . . . . . . . . . . . . . . . . . . . . . . . 9
7.11 Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
7.12 Lease Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
7.13 Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
7.14 Acquisitions, Mergers, and Dissolutions . . . . . . . . . . . . . . . . . 10
7.15 Loans, Advances, and Investments . . . . . . . . . . . . . . . . . . . . . 10
7.16 Issuance of Securities . . . . . . . . . . . . . . . . . . . . . . . . . . 10
7.17 Transactions with Affiliates . . . . . . . . . . . . . . . . . . . . . . . 10
7.18 Sale of Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
7.19 Compliance with Laws and Documents . . . . . . . . . . . . . . . . . . . . 10
7.20 New Businesses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
7.21 Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
7.22 Fiscal Year and Accounting Methods . . . . . . . . . . . . . . . . . . . . 10
7.23 ESSO Contract . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
SECTION 8. DEFAULT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
8.1 Payment of Obligation . . . . . . . . . . . . . . . . . . . . . . . . . . 11
8.2 Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
8.3 Debtor Relief . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
8.4 Attachment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
8.5 Payment of Judgments . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
8.6 Default on Other Debt or Security . . . . . . . . . . . . . . . . . . . . 11
8.7 Material Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
8.8 Material Adverse Effect . . . . . . . . . . . . . . . . . . . . . . . . . 11
8.9 Misrepresentation . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
8.10 Ownership . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
SECTION 9. CERTAIN RIGHTS AND REMEDIES . . . . . . . . . . . . . . . . . . . . . . . 12
9.1 Remedies Upon Default . . . . . . . . . . . . . . . . . . . . . . . . . . 12
9.2 Waivers by Borrower and Others . . . . . . . . . . . . . . . . . . . . . . 12
9.3 Performance by Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
9.4 Delegation of Duties and Rights . . . . . . . . . . . . . . . . . . . . . 12
9.5 Not in Control . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
9.6 Waivers by Agent and Lenders . . . . . . . . . . . . . . . . . . . . . . . 13
9.7 Cumulative Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
9.8 Expenditures by Lenders . . . . . . . . . . . . . . . . . . . . . . . . . 13
9.9 Diminution in Value of Collateral . . . . . . . . . . . . . . . . . . . . 13
9.10 Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
</TABLE>
(ii)
<PAGE> 4
<TABLE>
<CAPTION>
Page
<S> <C> <C>
SECTION 10. CERTAIN DEFINITIONS AND TERMS . . . . . . . . . . . . . 13
10.1 Accounting Terms; Changes in GAAP. . . . . . . . . . . . 13
10.2 Number and Gender of Words . . . . . . . . . . . . . . . 13
10.3 Other Definitions . . . . . . . . . . . . . . . . . . . 14
SECTION 11. AGREEMENT AMONG LENDERS . . . . . . . . . . . . . . . . 19
11.1 Agent . . . . . . . . . . . . . . . . . . . . . . . . . 19
11.2 Expenses . . . . . . . . . . . . . . . . . . . . . . . . 20
11.3 Proportionate Absorption of Losses . . . . . . . . . . . 20
11.4 Delegation of Duties; Reliance . . . . . . . . . . . . . 21
11.5 Limitation of Agent's Liability . . . . . . . . . . . . 21
11.6 Default; Collateral . . . . . . . . . . . . . . . . . . 22
11.7 Limitation of Liability . . . . . . . . . . . . . . . . 22
11.8 Relationship of Lenders . . . . . . . . . . . . . . . . 22
11.9 Collateral Matters . . . . . . . . . . . . . . . . . . . 22
11.10 Benefits of Agreement . . . . . . . . . . . . . . . . . 23
SECTION 12. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . 23
12.1 Headings and Exhibits . . . . . . . . . . . . . . . . . 23
12.2 Time and Non-Business Days . . . . . . . . . . . . . . . 23
12.3 Communications . . . . . . . . . . . . . . . . . . . . . 23
12.4 Form and Number of Documents . . . . . . . . . . . . 23
12.5 Exceptions to Covenants . . . . . . . . . . . . . . . . 23
12.6 Survival . . . . . . . . . . . . . . . . . . . . . . . . 23
12.7 Governing Law . . . . . . . . . . . . . . . . . . . . . 23
12.8 Venue; Service of Process . . . . . . . . . . . . . . . 23
12.9 Maximum Interest Rate . . . . . . . . . . . . . . . . . 24
12.10 Invalid Provisions . . . . . . . . . . . . . . . . . . . 24
12.11 Entirety . . . . . . . . . . . . . . . . . . . . . . . . 24
12.12 Amendments, Consents, Conflicts, and Waivers . . . . . . 24
12.13 Multiple Counterparts . . . . . . . . . . . . . . . . . 25
12.14 Successors and Assigns; Participations . . . . . . . . . 25
12.15 Confidentiality . . . . . . . . . . . . . . . . . . . . 26
12.16 Parties Bound; Assignments . . . . . . . . . . . . . . . 26
</TABLE>
SCHEDULE 1 - Lenders and Commitments
SCHEDULE 6 - Closing Conditions
SCHEDULE 10 - Description of Rig
EXHIBIT A - Promissory Note
EXHIBIT B - Financial Report Certificate
EXHIBIT C - Opinion of Counsel to Obligors
EXHIBIT D - Assignment and Acceptance
EXHIBIT E - Officer's Certificate
EXHIBIT F - Conversion Request
EXHIBIT G - Guaranty
(iii)
<PAGE> 5
TERM LOAN AGREEMENT
THIS AGREEMENT is entered into as of November 30, 1995, among
INTERNATIONAL SEA DRILLING LTD., a Cayman Islands corporation ("BORROWER"),
Lenders (defined below), and NATIONSBANK OF TEXAS, N.A., a national banking
association, as Agent for itself and the other Lenders. Borrower, Lenders and
Agent agree as follows:
SECTION 1. COMMITMENT.
1.1 Commitment. Subject to the conditions below, each Lender
severally but not jointly agrees to extend its Commitment Percentage of credit
to Borrower in the form of a single disbursement on the Closing Date in the
aggregate amount for all Lenders of $6,500,000 (the "LOAN").
1.2 Loan Procedure. No later than 11:00 a.m. on the date which is
three (3) Business Days prior to the Closing Date (if the Designated Rates for
the initial Interest Period include a LIBOR Rate), or, otherwise, on the
Closing Date, Borrower shall have faxed or delivered to Agent written notice
requesting disbursement of the Loan and indicating the Designated Rate (and
Borrower shall deliver an original of such written notice to Agent no later
than the first Business Day following funding). Agent shall promptly notify
each Lender of its receipt of such written notice. Each Lender shall remit its
Commitment Percentage of the Loan to Agent's principal office in Houston,
Texas, in funds that are available for immediate use by Agent by 12:00 Noon on
the Closing Date. Subject to receipt of those funds, Agent shall (unless to
its actual knowledge any of the applicable conditions precedent have not been
satisfied by Borrower or waived by Determining Lenders) make those funds
available to Borrower. Absent contrary written notice from a Lender, Agent may
assume that each Lender has made its Commitment Percentage of the Loan
available to Agent on the Closing Date, and Agent may, in reliance upon that
assumption (but is not required to), make available to Borrower a corresponding
amount. If a Lender fails to make its Commitment Percentage of the Loan
available to Agent on the Closing Date, Agent may recover the applicable amount
on demand (a) from that Lender, together with interest at the Federal Funds
Rate during the period commencing on the date the amount was made available to
Borrower by Agent and ending on (but excluding) the date Agent recovers the
amount from that Lender, or (b) if that Lender fails to pay its amount upon
demand, then from Borrower, together with interest at an annual interest rate
equal to the rate applicable to the Loan during the period commencing on the
Closing Date and ending on (but excluding) the date Agent recovers the amount
from Borrower. No Lender is responsible for the failure of any other Lender to
make its Commitment Percentage of the Loan.
SECTION 2. TERMS OF PAYMENT.
2.1 Notes; Payments. The Loan and interest thereon shall be
evidenced by the Notes, one payable to each Lender in the stated principal
amount of its Commitment. Borrower shall bill ESSO Australia monthly for each
Operating Day at the rates specified in the ESSO Contract. Commencing December
29, 1995, and monthly thereafter on the last Business Day of each month, the
Loan shall be repaid in principal installments, each in an amount equal to the
product of $4,547 times the number of Operating Days billed in such month (such
that the monthly principal installments shall range from a minimum of $127,316
for a 28-day month to a maximum of $140,957 for a 31-day month). Interest
accruing at the Floating Rate shall be due and payable on the last Business Day
of each calendar quarter, commencing December 31, 1995. Interest accruing at a
LIBOR Rate shall be due and payable on the last day of each Interest Period
and, if such Interest Period exceeds three months, then accrued interest is
also due and payable on the date three months after the commencement of such
Interest Period. All principal and accrued interest remaining outstanding
shall be due and payable on the Termination Date. Each payment or prepayment
of the Obligation must be paid at Agent's principal office in funds available
for Agent's immediate use by 12:00 Noon on the day due. Borrower may delay any
payment due on a non-Business Day until the next succeeding Business Day, but
interest shall continue to accrue until the payment is made. Agent shall pay
to each Lender any payment or prepayment to which that Lender is entitled on
the same day Agent receives the funds from Borrower if Agent receives the
payment or prepayment before 12:00 Noon, and otherwise before 12:00 Noon on the
following Business Day. If and to the extent that Agent does not make payments
to Lenders when due, unpaid amounts shall accrue interest at the Federal Funds
Rate from the due date until (but not including) the payment date.
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<PAGE> 6
2.2 Interest. The Loan shall bear interest at an annual rate
equal to the lesser of (a) the Designated Rate, and (b) the Highest Lawful
Rate. The rate shall change, without notice to Borrower, upon the effective
date of each change in the Prime Rate (if a Floating Rate is in effect) or the
Highest Lawful Rate. If at any time the rate is limited to the Highest Lawful
Rate, any subsequent reductions in the Designated Rate shall not reduce the
rate below the Highest Lawful Rate until the total amount of interest paid and
accrued equals the amount of interest which would have accrued if the
Designated Rate had at all times been in effect. In the event that at maturity
(stated or by acceleration), or at final payment of any Note, the total amount
of interest paid and accrued is less than the amount of interest which would
have accrued if the Designated Rate had at all times been in effect, then, at
such time and to the extent permitted by Law, Borrower shall pay to the Lender
holding that Note an amount equal to the difference between (x) the lesser of
either the amount of interest which would have accrued if the Designated Rate
had at all times been in effect or the amount of interest which would have
accrued if the Highest Lawful Rate had at all times been in effect and (y) the
amount of interest actually paid or accrued on that Note. All past-due
principal and accrued interest thereon shall at Determining Lenders' option
bear interest from maturity (stated or by acceleration) until paid at the
Default Rate. Interest calculations may be made ten (or less) days prior to
any due date. If there is an adjustment in the interest rate, in accordance
with the terms hereof during such ten-day period, then Borrower shall, on
demand, pay to Lenders any underpayment or Lenders shall pay to Borrower any
overpayment resulting from any adjustment during such period.
2.3 Mandatory and Voluntary Prepayments.
a. Borrower may voluntarily prepay all or any part of
the Loan at any time without premium or penalty, subject to the
following conditions:
(i) Agent must receive Borrower's written payment
notice by 10:00 a.m. on (A) the third Business Day preceding
the date of payment if a LIBOR Rate is in effect and (B) the
Business Day preceding the date of payment if the Floating
Rate is in effect, which notice shall specify the payment date
and the amount of the prepayment, and which shall constitute
an irrevocable and binding obligation of Borrower to make such
prepayment on the designated date;
(ii) each partial prepayment must be in a minimum
amount of $500,000 or a greater integral multiple of $500,000;
(iii) all accrued interest on the portion of the
Obligation being prepaid must also be paid in full on the date
of payment; and
(iv) Borrower shall pay any related Funding Loss
upon demand.
b. Borrower shall immediately prepay all of the
Obligation upon the acquisition by any Person of a beneficial
ownership of 50% or more of the outstanding shares of common stock of
PESCO.
c. Borrower shall immediately prepay $175,000 of the
principal amount of the Loan (or such lesser amount as may then be
outstanding) upon receipt of the Demobilisation Fee.
d. Borrower shall prepay the Obligation (including an
amount equal to the Demobilisation Fee upon its receipt) if the ESSO
Contract is cancelled, terminated (including ESSO's failure to
exercise any of its options to extend the term of the contract under
Clause 3 thereof), or amended in any manner that materially alters the
amount or timing of any payments due Borrower thereunder, or if ESSO
fails to comply in any material respect with the terms of the ESSO
Contract and such failure continues in excess of 60 days.
2.4 Order of Application. Except as otherwise provided in the
Loan Papers, all payments and prepayments of the Obligation -- including,
without limitation, proceeds from the exercise of any Rights under the Loan
Papers or proceeds of any of the Collateral -- shall be applied by Lenders in
such order (a) if no Default or Potential Default has occurred and is
continuing and if Borrower gives written directions regarding application of a
payment or prepayment, then
2
<PAGE> 7
in accordance with such directions, or (b) otherwise, subject to SECTION 9.1,
as Determining Lenders may elect in their sole discretion.
2.5 Capital Adequacy. If any Law, rule, regulation, or treaty now
existing or hereafter promulgated regarding capital adequacy, or any adoption
thereof, ruling thereon, change therein, or interpretation thereof now existing
or hereafter made by any Tribunal or central bank regarding capital adequacy,
or compliance by Agent or any Lender with any request, directive, or
requirement now existing or hereafter imposed by any Tribunal or central bank
regarding capital adequacy (whether or not having the force of Law) shall
result in it incurring a reduction in the rate of return on its capital as a
consequence of its obligations hereunder to a level below that which it
otherwise could have achieved by an amount deemed by it to be material (and it
may, in determining such amount, utilize such assumptions and allocations of
costs and expenses as it shall deem reasonable and may use any reasonable
averaging or attribution method), then, it (through Agent) may, from time to
time, notify Borrower and deliver to Borrower a certificate setting forth in
reasonable detail the calculation of the amount necessary to compensate it for
the reductions incurred, which certificate shall be conclusive absent manifest
error. Borrower shall promptly pay such amount to Agent or that Lender upon
demand. If any subsequent revision or amendment of any such Law, rule,
regulation or treaty (or of any adoption thereof, ruling thereon, change
therein, or interpretation thereof) shall result in a reversal of such
reductions, Agent or such Lender (as applicable) shall refund such amounts to
Borrower (to the extent reversed and realized by it).
2.6 Foreign Lenders. Each Lender that is organized under the Laws
of any jurisdiction, other than the U.S. or a state thereof (a) represents to
Agent and Borrower that it has furnished to Agent and Borrower two duly
completed copies of U.S. Internal Revenue Service Form 4224, Form 1001, Form
W-8, or any other Tax form acceptable to Agent (wherein it claims entitlement
to complete exemption from U.S. federal withholding Tax on all interest
payments under the Loan Papers), and (b) covenants to (i) provide Agent and
Borrower a new Tax form upon the expiration or obsolescence of any previously
delivered form according to Law, duly executed and completed by it, and (ii)
comply from time to time with all Laws with regard to the U.S. withholding Tax
exemption. If any of the foregoing is not true or the applicable forms are not
provided, then Borrower and Agent (without duplication) may deduct and withhold
from interest payments under the Loan Papers U.S. federal income tax at the
full rate applicable under the IRC.
2.7 Sharing of Payments, Etc.. If any Lender obtains any payment
(whether voluntary, involuntary, or otherwise, including, without limitation,
as a result of exercising its Rights under SECTION 2.8) that exceeds its
Commitment Percentage of the total Commitments, then that Lender shall purchase
from the other Lenders participations that will cause the purchasing Lender to
share the excess payment Pro Rata with each other Lender. If all or any
portion of any excess payment is subsequently recovered from the purchasing
Lender, then the purchase shall be rescinded and the purchase price restored to
the extent of the recovery. Borrower agrees that any Lender purchasing a
participation from another Lender under this section may, to the fullest extent
permitted by Law, exercise all of its Rights of payment (including the Right of
offset) with respect to that participation as fully as if that Lender were the
direct creditor of Borrower in the amount of that participation.
2.8 Offset. If a Default exists, each Lender is entitled to
exercise (for the benefit of all Lenders in accordance with SECTION 2.7) the
Rights of offset and banker's Lien against each and every account and other
property, or any interest therein, that Borrower may now or hereafter have
with, or which is now or hereafter in the possession of, that Lender to the
extent of the full amount of the Obligation owed to it.
2.9 Basis Unavailable or Inadequate for Determining LIBOR Rate.
If, on or before any date when a LIBOR Rate is to be determined, Agent or any
Lender determines that the basis for determining the applicable rate is not
available or that the resulting rate does not accurately reflect the cost to
Lenders of funding at that rate, then Agent shall promptly notify Borrower and
Lenders of that determination (which is conclusive and binding on Borrower
absent manifest error) and the Loan shall bear interest at the Floating Rate.
Until Agent notifies Borrower that those circumstances no longer exist,
Lenders' commitments under this Agreement to fund under a LIBOR Rate will be
suspended.
2.10 Additional Costs. If (i) any Law imposes, modifies, or deems
applicable (or if compliance by any Lender with any requirement of any Tribunal
results in) any requirement that any reserves (including, without limitation,
any
3
<PAGE> 8
marginal, emergency, supplemental or special reserves) be maintained, and (ii)
those reserves reduce any sums receivable by that Lender under this Agreement
with respect to any portion of the Loan bearing interest at a LIBOR Rate or
increase the costs incurred by that Lender in advancing or maintaining any
portion of the Loan bearing interest at a LIBOR Rate, then (unless the effect
is already reflected in the rate of interest then applicable under this
Agreement) that Lender (through Agent) shall deliver to Borrower a certificate
setting forth in reasonable detail the calculation of the amount necessary to
compensate it for its reduction or increase (which certificate is conclusive
and binding absent manifest error), and Borrower shall promptly pay that amount
to that Lender upon demand. The provisions of and undertakings and
indemnification set forth in this paragraph shall survive the satisfaction and
payment of the Obligation and termination of this Agreement.
2.11 Change in Laws. If any Law makes it unlawful for any Lender
to make or maintain any portion of the Loan bearing interest at a LIBOR Rate,
then that Lender shall promptly notify Borrower and Agent, and the Loan shall
be converted to the Floating Rate as of the date of notice, and Borrower shall
pay any related Funding Loss.
2.12 Funding Loss. BORROWER AGREES TO INDEMNIFY EACH LENDER
AGAINST, AND PAY TO IT UPON DEMAND, ANY FUNDING LOSS OF THAT LENDER. When any
Lender demands that Borrower pay any Funding Loss, that Lender shall deliver to
Borrower and Agent a certificate setting forth in reasonable detail the basis
for imposing Funding Loss and the calculation of the amount, which calculation
is conclusive and binding absent manifest error. The provisions of and
undertakings and indemnification set forth in this paragraph shall survive the
satisfaction and payment of the Obligation and termination of this Agreement.
2.13 Interest Periods. When Borrower requests that any portion of
the Loan bear interest at a LIBOR Rate, Borrower may elect the applicable
interest period (each an "INTEREST PERIOD"), which may be, at Borrower's
option, one, two, three or six months, subject to the following conditions:
(a) the initial Interest Period commences on the Closing Date or applicable
conversion date, and each subsequent Interest Period commences on the day when
the next preceding applicable Interest Period expires; (b) if any Interest
Period begins on a day for which there exists no numerically corresponding
Business Day in the calendar month at the end of the Interest Period ("ENDING
CALENDAR MONTH"), then the Interest Period ends on the next succeeding Business
Day of the Ending Calendar Month, unless there is no succeeding Business Day in
the Ending Calendar Month in which case the Interest Period ends on the next
preceding Business Day of the Ending Calendar Month; (c) no Interest Period for
any portion of the Loan may extend beyond the scheduled repayment date for that
portion of the Loan; (d) there may not be in effect at any one time more than
three Interest Periods; and (e) each such portion of the Loan bearing interest
at a LIBOR Rate must be at least $500,000 or an integral multiple of $100,000
in excess thereof.
2.14 Conversions. Borrower may (a) on the last day of the
applicable Interest Period convert all or part of the Loan bearing interest at
a LIBOR Rate to the Floating Rate, (b) at any time convert all or part of the
Loan bearing interest at the Floating Rate Borrowing to a LIBOR Rate, and (c)
elect a new Interest Period for all or any part of the Loan bearing interest at
a LIBOR Rate. Any such conversion is subject to the dollar limits and
denominations of SECTION 2.13(e) and may be accomplished by delivering a
Conversion Request, in the form of EXHIBIT F hereto, to Agent no later than
10:00 a.m. (i) on the third Business Day before the conversion date for
conversion to a LIBOR Rate and the last day of the Interest Period, for the
election of a new Interest Period, and (ii) one Business Day before the last
day of the Interest Period for conversion to a Floating Rate. Absent
Borrower's notice of conversion or election of a new Interest Period, any
portion of the Loan bearing interest at a LIBOR Rate shall be converted to a
Floating Rate when the applicable Interest Period expires.
SECTION 3. FEES. The following fees represent compensation for services
rendered and to be rendered separate and apart from the extension of credit and
do not constitute compensation for the use, detention, or forbearance of money,
and the obligation of Borrower to pay each fee shall be in addition to, and not
in lieu of, the obligation of Borrower to pay interest. All fees shall be
non-refundable when due and shall, to the fullest extent permitted by Law, bear
interest, if not paid when due, at the Default Rate and shall be secured by all
of the Collateral.
3.1 Agent's Arranging Fee. Borrower shall pay to Agent, solely
for its own account, the Agent's arranging fee described in the attachment to
the letter agreement between Borrower and Agent dated September 11, 1995, on or
before the Closing Date.
4
<PAGE> 9
3.2 Facility Fee. Borrower shall pay to Agent for the Pro Rata
account of Lenders a facility fee equal to $65,000, payable on the Closing
Date.
SECTION 4. SECURITY.
4.1 Guaranties. Full and complete payment of the Obligation is
guaranteed in accordance with the Guaranty executed by each Obligor, other than
Borrower.
4.2 Collateral. Full and complete payment of the Obligation is
secured by the Collateral.
4.3 Cash Collateral Accounts. Borrower shall maintain Cash
Collateral Accounts, which may be operating accounts, commencing on the Closing
Date and continuing until the Obligation is paid and performed in full.
Borrower shall cause all accounts receivable due under the ESSO Contract and
any insurance proceeds payable in respect of the Rig (unless otherwise payable
only to Agent or Lenders or jointly to Borrower and Agent or Lenders) to be
directly paid to such Cash Collateral Accounts. Borrower hereby grants to
Agent, on behalf of Lenders, a first and prior security interest in such Cash
Collateral Accounts and all checks, drafts, and other items ever received for
deposit therein. Borrower may withdraw the funds from the Cash Collateral
Accounts solely to pay costs and expenditures associated with operation of the
Rig under the ESSO Contract, distributions to Pool Company, and principal,
interest, and fees due under this Agreement, unless a Default or Potential
Default exists.
SECTION 5. REPRESENTATIONS AND WARRANTIES. Borrower represents and
warrants to Agent and Lenders as follows:
5.1 Corporate Existence and Authority.
a. Borrower is a corporation duly organized, validly
existing, and in good standing under the Laws of the Cayman Islands.
b. Borrower (i) is duly qualified to transact business
and is in good standing as a foreign corporation in Australia, (ii)
possesses all requisite authority, power, licenses, permits, and
franchises to conduct its business as now being conducted, except
where failure to so possess would not, individually or in the
aggregate, be reasonably likely to have a Material Adverse Effect, and
(iii) possesses all requisite authority, licenses, power, permits, and
to execute, deliver, and comply with the terms of the Loan Papers to
which it is contemplated in this Agreement to be or to become party,
all which have been duly authorized and approved by all necessary
corporate action and for which no approval or consent of any Person or
Tribunal is required which has not been obtained.
5.2 Ownership and Names.
a. All of the outstanding shares of capital stock of
Borrower are duly authorized, validly issued, fully paid and
nonassessable, and none thereof was issued in violation of any
preemptive or preferential Rights of any Person.
b. Pool Company is the true and lawful owner, of record
and beneficially, of all shares of Borrower's capital stock, free and
clear of any Liens, restrictions, claims, or Rights of another, and
none of such shares is subject to any warrant, option, or other Right
of any Person to acquire the same or subject to any restriction on
transfer thereof, except for restrictions imposed by securities Laws.
c. There are no authorized or outstanding warrants,
options, or other Rights to acquire from Pool Company or Borrower any
shares of capital stock or other investment securities of Borrower or
any securities convertible into or exchangeable for such shares.
5
<PAGE> 10
d. Borrower has not transacted business under any other
corporate or trade name, nor been a party to any merger, combination,
or consolidation, or acquired all or substantially all of the stock or
accounts receivable of any Person in the last five years.
e. Borrower has no Subsidiaries.
5.3 Relationship with Agent and Lenders. To the best knowledge of
Borrower's executive officers, no director, officer, manager, or employee of
any Obligor is a director, officer, or employee of, or has any substantial
interest in, Agent or any Lender. No Person who may be deemed to have
"control" of any Obligor is an "executive officer", "director", or "principal
shareholder" of Agent or any Lender. Terms appearing in quotations in this
section are used as defined in Section 215.2 of Regulation O of the Board of
Governors of the Federal Reserve System, as amended.
5.4 Financial Statements. The Current Financials were prepared in
accordance with GAAP and fairly present the consolidated and consolidating (if
applicable) financial conditions and the results of operations of PESCO and its
consolidated Subsidiaries as of, and for the portion of the fiscal year ending
on, the date or dates thereof. There were no material liabilities, direct or
indirect, fixed or contingent, of PESCO or any of its consolidated Subsidiaries
on the date or dates of the Current Financials which are not reflected therein
or in the notes thereto. Except for transactions directly related to, or
specifically contemplated by, the Loan Papers and transactions heretofore
disclosed in writing to Lenders, there have been no material adverse changes in
the consolidated financial condition of PESCO from those shown in the Current
Financials and the notes thereto between such date or dates and the date
hereof, nor has any Obligor incurred any material liability, direct or
indirect, fixed or contingent.
5.5 Compliance with Laws and Documents.
a. Borrower is not, nor will the execution, delivery,
and the performance of and compliance with the terms of the Loan
Papers cause it to be, in violation of any Laws (including, without
limitation, Environmental Laws), other than such violations which
would not, individually or in the aggregate, be reasonably likely to
cause a Material Adverse Effect.
b. Borrower is not, nor will the execution, delivery,
and the performance of and compliance with the terms of the Loan
Papers cause it to be, in violation of its bylaws or charter.
5.6 Litigation. As of the date of this Agreement, Borrower is not
involved in, nor is any executive officer of Borrower aware of the threat of,
any Litigation, and there are no outstanding or unpaid judgments against
Borrower.
5.7 Taxes. All Tax returns of Borrower required to be filed have
been filed, and all Taxes imposed upon Borrower have been paid, other than
Taxes for which the criteria for Permitted Liens have been satisfied.
5.8 Government Regulation. Neither Borrower nor any Affiliate is
subject to regulation under the Public Utility Holding Company Act of 1935, the
Federal Power Act, the Investment Company Act of 1940 (as any of the preceding
acts have been amended), or any other Law (other than Regulation X of the Board
of Governors of the Federal Reserve System) which regulates the incurrence of
Debt.
5.9 Employee Benefit Plans. No employee benefit plan (as defined
in the IRC and ERISA) of Borrower has incurred an accumulated funding
deficiency in an amount sufficient to be reasonably likely to have a Material
Adverse Effect. No prohibited transaction or reportable event (as such terms
are defined in ERISA) has occurred which would, individually or in the
aggregate, be reasonably likely to have a Material Adverse Effect. Borrower
has not (a) incurred material liability to the PBGC in connection with any such
plan, or (b) withdrawn in whole or in part from participation in a
multi-employer pension plan (as defined in ERISA).
5.10 Purpose of Credit. The proceeds of the Loan (a) will not be
used directly or indirectly for the purpose of purchasing or carrying, or for
the purpose of extending credit to others for the purpose of purchasing or
carrying, any "margin
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stock" as that term is defined in Regulation U of the Board of Governors of the
Federal Reserve System, as amended, or for any other purpose which would
violate the terms of this Agreement or the Revolving Credit Agreement, and (b)
will be used to refinance the construction costs of the Rig.
5.11 Properties; Liens. Except for Permitted Liens, there is no
Lien on any asset of Borrower. Borrower does not know of any condition or
circumstance affecting any of its Properties, such as the presence of asbestos
or other Hazardous Substances, that would, individually or in the aggregate, be
reasonably likely to have a Material Adverse Effect.
5.12 Material Agreements.
a. Except for the Loan Papers and the ESSO Contract,
there are no other agreements of Borrower that would, upon a default
thereunder, be reasonably likely, individually or in the aggregate, to
cause a Material Adverse Effect; Borrower is not, nor will the
execution, delivery, and performance of and compliance with the terms
of the Loan Papers cause it to be, in default (nor has any potential
default occurred) under any Material Agreement.
b. Mobilisation of the Rig in accordance with Clause 4.4
of the ESSO Contract occurred on October 9, 1995, and the Rig is
presently located in the Bass Strait, offshore Victoria, Australia.
5.13 Solvency. After giving effect to the transactions
contemplated hereunder, each Obligor will be Solvent.
5.14 General. There are no material facts or conditions relating
to the Loan Papers, any of the Property of the Obligors, or the individual or
combined financial conditions and businesses of the Obligors which would,
individually or collectively, be reasonably likely to cause a Material Adverse
Effect, and which have not been related, in writing, to Agent and Lenders; and
the Loan Papers, including all Financial Statements and the items on SCHEDULE
6, which were exhibited or delivered to Agent and Lenders, are genuine and in
all material respects what they purport and appear to be.
SECTION 6. CONDITIONS PRECEDENT.
6.1 Initially. Lenders will not be obligated to fund the Loan
until Agent has received each document and other item described on SCHEDULE 6.
6.2 Materiality and Waiver. Each condition precedent in this
Agreement is material to the contemplated transaction, and time is of the
essence. Lenders may fund the Loan without all conditions precedent being
satisfied, but that is not a waiver of the requirement that each condition
precedent be satisfied, unless Determining Lenders specifically permanently
waive the condition precedent in writing.
SECTION 7. COVENANTS. Until the Obligation is fully paid and performed
- -- unless Borrower first obtains a written consent to the contrary from Agent
on behalf of Determining Lenders -- Borrower covenants and agrees with Agent
and Lenders as follows:
7.1 Use of Proceeds. The proceeds of the Loan shall be used only
as represented in SECTION 5.10.
7.2 Books and Records. Borrower shall keep proper and complete
books, records, and accounts in accordance with GAAP and shall permit Agent or
any Lender, upon reasonable prior notice, to inspect the same during regular
business hours and make and (at Lenders' expense in respect of costs paid to
third parties during each calendar year in excess of $1,000 in the aggregate)
take away copies.
7.3 Items to be Furnished. Borrower shall cause the following to
be furnished to Agent:
a. Within 120 days after the last day of each fiscal
year of PESCO, Financial Statements showing the consolidated and
consolidating (if applicable) financial conditions and results of
operations of PESCO as of,
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and for the year ended on, such last day, accompanied by (i) the
opinion, without material qualification, of Deloitte & Touche or
another firm of independent certified public accountants acceptable to
Determining Lenders, based on an audit using generally accepted
auditing standards, that the consolidated portions of such Financial
Statements were prepared in accordance with GAAP and present fairly, in
all material respects, the consolidated financial condition and results
of operations of PESCO, and (ii) a Financial Report Certificate with
respect to such Financial Statements.
b. As soon as practicable after the end of each fiscal
year of Pool Company, unaudited consolidating Financial Statements
showing (by major management operation category) the financial
condition and results of operation of PESCO.
c. Within 120 days after the last day of each fiscal
year of Borrower, unaudited Financial Statements showing the financial
condition and results of operations of Borrower as of, and for the year
ended on, such last day.
d. Within 60 days after the last day of each of the
first three fiscal quarters of each fiscal year of PESCO (i) unaudited
Financial Statements showing the consolidated and consolidating (if
applicable) financial condition and results of operations of PESCO as
of, and for the period from the beginning of the current fiscal year
to, such last day, and (ii) a Financial Report Certificate with
respect to such Financial Statements.
e. Within 60 days after the last day of each of the
first three fiscal quarters of each fiscal year of Borrower, unaudited
Financial Statements showing the financial condition and results of
operations of Borrower as of, and for the period from the beginning of
the current fiscal year to, such last day.
f. Promptly after filing or delivery thereof, true
copies of all SEC Reports furnished by or on behalf of PESCO to its
stockholders.
g. Notice, promptly after Borrower knows or has reason
to know of, (i) the existence and changes in the status of any
Litigation which would, individually or in the aggregate, be
reasonably likely to cause a Material Adverse Effect, (ii) any change
in any material fact or circumstance represented or warranted in any
Loan Paper which would, individually or in the aggregate, be
reasonably likely to cause a Material Adverse Effect, (iii) a Default
or Potential Default, specifying the nature thereof and what action
Borrower has taken, is taking, or proposes to take with respect
thereto, or (iv) the occurrence of a reportable event (as defined in
ERISA) with respect to any employee benefit plan of Borrower subject
to ERISA, or the complete or partial withdrawal from participation in
a multi-employer pension plan (as such terms are defined in ERISA) by
Borrower (or the intention of such entity to do so), or the initiation
(or intent to initiate) by the PBGC or Borrower of proceedings under
ERISA to terminate any such plan, or the occurrence of any event or
condition which might constitute grounds for termination of any such
benefit plan under ERISA.
h. Promptly upon reasonable request by Agent or
Determining Lenders, such information (not otherwise required to be
furnished under the Loan Papers) respecting the business affairs,
assets, and liabilities of any Obligor, and such opinions,
certifications, and documents, in addition to those mentioned in this
Agreement.
7.4 Inspection. Borrower shall allow any Lender (who shall comply
with Borrower's safety rules applicable in the ordinary course of business to
each specific location) to inspect any of its properties, to review reports,
files, and other records, to conduct tests or investigations, and to discuss
any of its affairs, conditions, and finances or with any director, officer, or
employee, from time to time, during reasonable business hours.
7.5 Taxes. Borrower shall promptly pay all Taxes due, except
Taxes for which the criteria for Permitted Liens have been satisfied. Borrower
may not, directly or indirectly, use any portion of the proceeds of the Loan to
pay the wages of employees, unless a timely payment to or deposit with the
proper authorities of all amounts of Tax required to be deducted and withheld
from such wages is also made.
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7.6 Payment of Obligations. Borrower shall promptly pay (or renew
and extend) all of its material obligations as the same become due.
7.7 Expenses of Lenders. Borrower shall promptly pay (a) upon
Agent's request, estimated filing and recording fees and expenses for the Loan
Papers creating the Lender Liens, and (b) all reasonable costs, fees, and
expenses paid or incurred by Agent, Arranger, or any Lender incident to any of
the Loan Papers (including, but not limited to, any additional filing or
recording fees and the reasonable fees and expenses of counsel to Agent and any
Lender in connection with the negotiation, preparation, and execution of the
Loan Papers and any related amendment, waiver, or consent and in connection
with the Loan, whether the Loan is ever made and, if a Potential Default or
Default exists, Lenders' expenses described in SECTION 11.4(D)) or to the
enforcement of the obligations of any of the Obligors or the exercise of any
Rights (including, but not limited to, reasonable attorneys' fees and court
costs), all of which shall be a part of the Obligation.
7.8 Maintenance of Corporate Existence, Assets, Business, and
Insurance. Borrower shall at all times: Maintain its corporate existence and
authority to transact business and good standing in the Cayman Islands and all
other jurisdictions where the failure to so maintain would, individually or in
the aggregate, be reasonably likely to cause a Material Adverse Effect;
maintain all licenses, permits, and franchises necessary for its businesses,
where the failure to so maintain would, individually or in the aggregate, be
reasonably likely to cause a Material Adverse Effect; keep all of its assets
which are necessary in its businesses in good working order and condition
(ordinary wear and tear excepted), and make all necessary repairs and
replacements thereto; and maintain, or cause to be maintained, insurance with
such insurers, in such amounts, and covering such risks, as shall be ordinary
and customary in the industry. Each insurance policy shall provide, by way of
endorsements, riders or otherwise, that proceeds will be payable to Agent, on
behalf of Lenders, and that such policy may only be cancelled after Agent is
given thirty (30) days written notice of such cancellation (ten (10) days in
the case of non-payment of premium). All renewal and substitute policies of
insurance or certified copies thereof shall be delivered to Agent. If no
Default or Potential Default exists, Agent shall assign to the insured Person
any and all monies that become payable under any insurance policies required
hereunder, and such insured Person shall apply said monies to the repair,
rebuilding and restoration or replacement of the lost, destroyed or damaged
assets; provided that in the event of a Total Loss such assignment by the Agent
shall not be available.
7.9 Maintenance and Evidence of Priority of Lender Liens.
Borrower shall perform such acts and duly authorize, execute, acknowledge,
deliver, file, and record any additional agreements, documents, instruments,
and certificates as Agent may reasonably deem necessary or appropriate in order
to perfect and maintain the Lender Liens in favor of Agent for the benefit of
Lenders and preserve and protect the Rights of Agent and Lenders in all present
and future Collateral.
7.10 Employee Benefit Plans. Borrower may not, directly or
indirectly, engage in any prohibited transaction (as defined in ERISA), permit
the funding with respect to any employee benefit plan established or maintained
by Borrower to ever be less than the minimum required by applicable provisions
of ERISA or regulations thereunder, permit any employee benefit plan
established or maintained by Borrower to ever be subject to involuntary
termination proceedings, or fully or partially withdraw from any multi-
employer pension plan (as such terms are defined in ERISA).
7.11 Debt. Borrower may not, directly or indirectly, create,
incur, or suffer to exist any direct, indirect, fixed, or contingent liability
for any Debt, other than (a) the Obligation, (b) customary trade payables in
the ordinary course of business, (c) obligations relating to bid and
performance guarantees and surety bonds required in the ordinary course of
business, (d) capital leases not to exceed $300,000 in the aggregate
outstanding at any one time, and (e) Debt due to any other Obligor.
7.12 Lease Obligations. Borrower may not, directly or indirectly,
enter into, assume, or otherwise obligate itself for the performance of the
obligations of the lessee or tenant under any lease or sublease of property
providing for annual payments in the aggregate for all such leases of more than
$200,000.
7.13 Liens. Borrower may not, directly or indirectly, (a) create,
incur, or suffer or permit to be created or incurred or to exist any Lien upon
any of its assets, except Permitted Liens, or (b) enter into or permit to exist
any
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arrangement or agreement (other than the Loan Papers) which directly or
indirectly prohibits Borrower from creating or incurring any Lien on any of its
assets.
7.14 Acquisitions, Mergers, and Dissolutions. Borrower may not,
directly or indirectly, acquire all or any substantial portion of the stock
issued by, or interest in, any Person (including, but not limited to, the
formation or acquisition of a Subsidiary), or dissolve, or merge or consolidate
with any Person.
7.15 Loans, Advances, and Investments. Borrower may not, directly
or indirectly, make any loan, advance, extension of credit, or capital
contribution to, make any investment in, or purchase or commit to purchase any
stock or other securities or evidences of Debt of, or interests in, any other
Person, other than (a) expense accounts for and other advances to directors,
officers, and employees of the Obligors in the ordinary course of business not
to exceed $25,000 in the aggregate outstanding at any time for any one
director, officer, or employee; (b) investments in obligations of the U.S. and
agencies thereof and obligations guaranteed by the U.S. maturing within one
year from the date of acquisition; (c) certificates of deposit issued by
commercial banks organized under the Laws of the U.S. or any state thereof and
having combined capital, surplus, and undivided profits of not less than
$100,000,000, and which (i) shall have a rating from Moody's or S&P of at least
P-1 and A-1, respectively, or (ii) are insured by the Federal Deposit Insurance
Corporation; (d) commercial paper which shall have a rating from Moody's or S&P
of at least P-1 and A-1, respectively; (e) eurodollar investments with
financial institutions (i) having combined capital, surplus, and undivided
profits of not less than U.S. $100,000,000, and (ii) with commercial paper
rated at least P-1 or A-1 by Moody's or S&P, respectively, or, if any
institution does not have a commercial paper rating, a comparable bond rating
of at least A or BAA-1 by Moody's or S&P, respectively; and (f) extensions of
credit in connection with trade receivables and overpayments of trade payables,
in each case resulting from transactions in the ordinary course of business;
and (g) with any other Obligor.
7.16 Issuance of Securities. Borrower may not, directly or
indirectly, issue, sell, or otherwise dispose of any of its shares of capital
stock or other investment securities of any class, any securities convertible
into or exchangeable for any such shares, or any carrying Rights, warrants,
options, or other Rights to subscribe for or purchase such shares.
7.17 Transactions with Affiliates. Borrower may not, directly or
indirectly, enter into any material transaction (including, but not limited to,
the sale or exchange of property or the rendering of service) with any
Affiliate, other than in the ordinary course of business and upon fair and
reasonable terms not materially less favorable than such entity could obtain or
could become entitled to in an arm's-length transaction with a Person which was
not an Affiliate.
7.18 Sale of Assets. Borrower may not, directly or indirectly,
sell or otherwise dispose of the Rig or any substantial part thereof.
7.19 Compliance with Laws and Documents. Borrower may not,
directly or indirectly, violate the provisions of any Laws (including, without
limitation, Environmental Laws), its charter or bylaws, or any agreement if
such violation alone, or when aggregated with all other such violations, would
be reasonably likely to cause a Material Adverse Effect.
7.20 New Businesses. Borrower may not, directly or indirectly,
engage in any business, other than the businesses in which it is presently
engaged or businesses related thereto.
7.21 Assignment. Borrower may not, directly or indirectly, assign
or transfer any of its Rights, duties, or obligations under any of the Loan
Papers.
7.22 Fiscal Year and Accounting Methods. Subject to SECTION 10.1,
Borrower may not change its fiscal year or method of accounting (other than
immaterial changes in methods), unless required to do so by Law.
7.23 ESSO Contract. Borrower shall cause all payments to Borrower
under the ESSO Contract (excluding the Mobilisation Fee paid prior to the date
hereof) to be deposited into the Cash Collateral Accounts.
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SECTION 8. DEFAULT. "DEFAULT" means the occurrence of one or more of the
following events (including the passage of time, if any, specified therefor):
8.1 Payment of Obligation. The failure or refusal of Borrower to
pay any portion of the Obligation, as the same becomes due in accordance with
the terms of the Loan Papers, and such failure or refusal continues for a
period of three days after the due date of an interest payment (with no grace
period for failure or refusal to make a principal payment).
8.2 Covenants.
a. The failure or refusal of Borrower to punctually and
properly perform, observe, and comply with any covenant, agreement, or
condition contained in SECTIONS 7.1 and 7.10 through 7.22.
b. The failure or refusal of Borrower to punctually and
properly perform, observe, and comply with any covenant, agreement, or
condition contained in any of the Loan Papers, other than covenants to
pay the Obligation and the covenants listed in CLAUSE (A) preceding,
and such failure or refusal continues for a period of ten days after
Borrower has notice thereof.
8.3 Debtor Relief. (a) Any Obligor is not Solvent, or (b) (i)
fails to pay its debts generally as they become due, (ii) voluntarily seeks,
consents to, or acquiesces in the benefit or benefits of any Debtor Relief Law,
or (iii) becomes a party to (or be made the subject of) any proceeding provided
for by any Debtor Relief Law, other than as a creditor or claimant, that could
suspend or otherwise adversely affect the Rights of Agent or any Lender granted
in the Loan Papers (unless, in the event such proceeding is involuntary, the
petition instituting same is dismissed within 60 days after its filing).
8.4 Attachment. The failure of Borrower to have discharged within
a period of 30 days after the commencement any attachment, sequestration, or
similar proceeding against its assets having a value (individually or in the
aggregate) of $250,000 or more.
8.5 Payment of Judgments. Borrower fails to pay any judgment or
order for the payment of money in excess of $250,000 rendered against it or any
of its assets and either (a) any enforcement proceedings shall have been
commenced by any creditor upon such judgment or order, or (b) a stay of
enforcement of such judgment or order, by reason of pending appeal or
otherwise, shall not be in effect for any period of ten or more consecutive
days.
8.6 Default on Other Debt or Security.
a. A "Default" as defined in the Pool Company Term Loan
Agreement or the Pool Company Revolving Credit Agreement.
b. Borrower fails or refuses to make any payment due on
any Debt or security in excess of $1,000,000 or any event shall occur
or any condition shall exist in respect of any of its Debt or
securities in excess of $1,000,000 or under any agreement securing or
relating to such Debt or securities, the effect of which is (i) to
cause any holder of such Debt or securities or a trustee to cause any
of such Debt or securities to become due prior to the stated maturity
or prior to the regularly scheduled dates of payment, or (ii) to
permit a trustee or the holder of any securities (other than common
stock) to elect (whether or not such trustee or holder does elect) a
majority of the directors on the board of directors of such entity.
"Security" has the meaning given such term in the Securities Act of
1933, as amended.
8.7 Material Agreements. The occurrence and continuance of a
default (a) by Borrower under the ESSO Contract, or (b) under any other
agreement that would be reasonably likely to cause a Material Adverse Effect.
8.8 Material Adverse Effect. Agent or any Lender discovers (i)
any event or circumstance that would, individually or in the aggregate with all
other events or circumstances, be reasonably likely to cause a Material Adverse
Effect, (ii) any other information that the prospect of payment or performance
of the Obligation is materially impaired, or
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(iii) that the value of the Collateral has or will be materially decreased and
the situation giving rise thereto is not corrected to Agent's satisfaction
within 20 days after Agent gives notice to Borrower.
8.9 Misrepresentation. Agent or any Lender discovers that any
material statement, representation, or warranty in the Loan Papers or in any
Financial Statement of any Obligor or any writing delivered to either Agent or
any Lender pursuant to the Loan Papers is false, misleading, or erroneous when
made or delivered in any material respect.
8.10 Ownership. Borrower ceases to be a wholly-owned Subsidiary of
Pool Company, or Pool Company ceases to be a wholly- owned Subsidiary of PESCO
Subsidiary, or PESCO Subsidiary ceases to be a wholly-owned Subsidiary of
PESCO.
SECTION 9. CERTAIN RIGHTS AND REMEDIES.
9.1 Remedies Upon Default. Upon the occurrence and continuance of
a Default, Agent may (with the consent of, and must, upon the request of
Determining Lenders) do any one or more of the following: (a) declare all or
part of the unpaid balance of the Obligation then or thereafter outstanding
immediately due and payable, whereupon it shall be due and payable (provided
that, upon the occurrence of a Default under SECTION 8.3, the entire Obligation
shall automatically become due and payable without notice or other action of
any kind whatsoever); (b) terminate the commitments of Lenders to extend credit
under this Agreement; (c) reduce any claim to judgment; (d) exercise (or
request each Lender to, and each Lender is entitled to exercise) the Rights of
offset or banker's Lien against the interest of each Obligor in and to every
account and other property of such entities which are in the possession of
Agent or any Lender; (e) foreclose any or all Lender Liens or otherwise realize
upon any and all of the Rights Agent or Lenders may have in and to the
Collateral; and (f) exercise any and all other legal or equitable Rights
afforded by the Loan Papers, the Laws of the State of Texas or any other
jurisdiction as Agent or Lenders shall deem appropriate, or otherwise,
including, but not limited to, the Right to bring suit or other proceedings
before any Tribunal either for specific performance of any covenant or
condition contained in any of the Loan Papers or in aid of the exercise of any
Right granted to Agent or Lenders in any of the Loan Papers.
9.2 WAIVERS BY BORROWER AND OTHERS. BORROWER AND EACH SURETY,
ENDORSER, GUARANTOR, AND OTHER PARTY EVER LIABLE FOR PAYMENT OF ANY OF THE
OBLIGATION JOINTLY AND SEVERALLY WAIVE PRESENTMENT AND DEMAND FOR PAYMENT,
PROTEST, NOTICE OF INTENTION TO ACCELERATE, NOTICE OF ACCELERATION, AND NOTICE
OF PROTEST AND NONPAYMENT, AND AGREE THAT THEIR LIABILITY WITH RESPECT TO THE
OBLIGATION, OR ANY PART THEREOF, SHALL NOT BE AFFECTED BY ANY RENEWAL OR
EXTENSION IN THE TIME OF PAYMENT OF THE OBLIGATION, BY ANY INDULGENCE, OR BY
ANY RELEASE OR CHANGE IN ANY SECURITY FOR THE PAYMENT OF THE OBLIGATION, AND
HEREBY CONSENT TO ANY AND ALL RENEWALS, EXTENSIONS, INDULGENCES, RELEASES, OR
CHANGES, REGARDLESS OF THE NUMBER THEREOF.
9.3 Performance by Agent. If any covenant, duty, or agreement of
Borrower is not performed in accordance with the terms of the Loan Papers,
Agent may, at its option (but subject to the approval of the Determining
Lenders), perform, or attempt to perform, such covenant, duty, or agreement on
behalf of such entity. Any amount reasonably expended by Agent in such
performance or attempted performance shall be payable by Borrower to Agent on
demand, shall become part of the Obligation, and shall bear interest at the
Default Rate from the date of such expenditure by Agent until paid.
Notwithstanding the foregoing, it is expressly understood that Agent does not
assume and shall never have, except by its express written consent, any
liability or responsibility for the performance of any such covenant, duty, or
agreement.
9.4 Delegation of Duties and Rights. Agent and Lenders may
exercise any of their respective duties or exercise any of their respective
Rights under the Loan Papers by or through their respective officers,
directors, employees, attorneys, agents, or other representatives.
9.5 Not in Control. None of the covenants or other provisions
contained in this Agreement shall, or shall be deemed to, give Agent or Lenders
the Right or power to exercise control over the affairs or management of any
Obligor, the power of Agent and Lenders being limited to the Right to exercise
the remedies provided in this SECTION 9. Agent and Lenders have no fiduciary
obligation toward any Obligor with respect to any Loan Paper and transactions
contemplated thereby. The relationship pursuant to the Loan Papers between the
Obligors, and Agent and Lenders, is and shall be that of debtor and creditor,
respectively, and no partnership or joint venture is created by any Loan Paper.
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9.6 Waivers by Agent and Lenders. The acceptance by Agent or any
Lender at any time and from time to time of partial payment on the Obligation
shall not be deemed to be a waiver of any Default then existing. No waiver by
Agent or any Lender of any Default shall be deemed to be a waiver of any other
then-existing or subsequent Default. No delay or omission by Agent or any
Lender in exercising any Right under the Loan Papers shall impair such Right or
be construed as a waiver or acquiescence, nor shall any single or partial
exercise of any such Right preclude other or further exercise thereof, or the
exercise of such or any other Right.
9.7 Cumulative Rights. All Rights available to Agent, Determining
Lenders and Lenders under the Loan Papers are cumulative of and in addition to
all other Rights granted to Agent, Determining Lenders and Lenders at law or
in equity, whether or not the Obligation is due and payable and whether or not
Agent, Determining Lenders, or Lenders have instituted any suit for collection
or other action in connection with the Loan Papers.
9.8 Expenditures by Lenders. All court costs, reasonable
attorneys' fees, other costs of collection, and other out-of- pocket sums spent
by Agent or any Lender pursuant to the exercise of any Right (including,
without limitation, any effort to collect or enforce any Note) provided herein
shall be payable to Agent or such Lender on demand, shall become part of the
Obligation, and shall bear interest at the Default Rate from the date spent
until the date repaid by Borrower.
9.9 Diminution in Value of Collateral. Neither Agent nor any
Lender shall have any liability or responsibility whatsoever for any diminution
in or loss of value of any Collateral.
9.10 INDEMNIFICATION. BORROWER SHALL INDEMNIFY AGENT, ARRANGER,
AND LENDERS AND HOLD AGENT AND LENDERS HARMLESS FROM AND AGAINST ANY AND ALL
LIABILITIES, OBLIGATIONS, LOSSES, DAMAGES, PENALTIES, ACTIONS, JUDGMENTS,
SUITS, CLAIMS, COSTS, EXPENSES, AND DISBURSEMENTS OF ANY KIND OR NATURE
WHATSOEVER WHICH MAY BE IMPOSED ON, INCURRED BY, OR ASSERTED AGAINST AGENT OR
ANY LENDER, IN ANY WAY RELATING TO OR ARISING OUT OF THE LOAN PAPERS OR ANY OF
THE TRANSACTIONS CONTEMPLATED THEREIN (INCLUDING, WITHOUT LIMITATION, ANY OF
THE FOREGOING IMPOSED ON, INCURRED BY, OR ASSERTED AGAINST AGENT OR ANY LENDER
BY VIRTUE OF OWNERSHIP OR OPERATION OF ANY COLLATERAL), TO THE EXTENT THAT ANY
SUCH INDEMNIFIED LIABILITIES RESULT, DIRECTLY OR INDIRECTLY, FROM ANY CLAIMS
MADE OR ACTIONS, SUITS, OR PROCEEDINGS COMMENCED BY OR ON BEHALF OF ANY PERSON,
OTHER THAN AGENT, ARRANGER, OR ANY LENDER; PROVIDED THAT NEITHER AGENT,
ARRANGER, NOR ANY LENDER SHALL HAVE THE RIGHT TO BE INDEMNIFIED HEREUNDER FOR
ITS OWN GROSS NEGLIGENCE OR WILLFUL MISCONDUCT. THE FOREGOING AGREEMENT
CONSTITUTES A PART OF THE OBLIGATION, AND SHALL SURVIVE THE EXERCISE OF ANY
RIGHTS OF AGENT OR ANY LENDER WITH RESPECT TO ALL OR ANY PART OF THE
COLLATERAL.
SECTION 10. CERTAIN DEFINITIONS AND TERMS.
10.1 Accounting Terms; Changes in GAAP. As used herein, "GAAP"
means generally accepted accounting principles, applied on a consistent basis,
(a) as set forth in Opinions of the Accounting Principles Board of the American
Institute of Certified Public Accountants ("AICPA") and in statements of the
Financial Accounting Standards Board which are applicable in the circumstances
as of the date in question, and (b) where not inconsistent with such opinions
and statements, as set forth in other AICPA publications and guidelines or
which otherwise arise by custom for the particular industry; and the requisite
that such principles be applied on a consistent basis means that the accounting
principles in a current period are comparable in all material respects to those
applied in a preceding period. All accounting and financial terms used in any
of the Loan Papers and the compliance with each covenant contained in the Loan
Papers which relates to financial matters shall be determined in accordance
with GAAP, except to the extent that a deviation is expressly stated in such
Loan Papers. If a change in GAAP requires a change in any method of accounting
or if any voluntary change in the accounting methods be permitted pursuant to
SECTION 7, then such change shall not result in a Default if, at the time of
such change, such Default had not occurred and was not then continuing, based
upon the former methods of accounting used by or on behalf of Borrower;
provided that, after any such change in accounting methods, only the next set
of Financial Statements required to be delivered to Agent shall be prepared in
comparative form, in compliance with the former methods of accounting used
prior to such change, as well as with the new method or methods of accounting.
10.2 Number and Gender of Words. Whenever in any Loan Paper the
singular number is used, the same shall include the plural where appropriate,
and vice versa.
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10.3 Other Definitions. The following terms have the meanings
indicated:
AFFILIATE means any Person who (a) would be an "affiliate" of Borrower
within the meaning of the regulations promulgated under the Securities Act of
1933, as such regulations and act are amended and in effect on the date in
question, if such Person were subject to such act and regulations, or (b) who
is a director or officer of any Obligor.
AGENT means NationsBank of Texas, N.A., a U.S. national banking
association, and its successor or successors as agent for itself and the other
Lenders under this Agreement.
AGREEMENT means this Term Loan Agreement, including the Schedules and
Exhibits attached hereto, and any and all future renewals and extensions or
restatements of, or amendments or supplements to, all or any part of the
foregoing.
ARRANGER means NationsBanc Capital Markets, Inc., a North Carolina
corporation.
BORROWER is defined in this Agreement's introductory paragraph.
BUSINESS DAY means any day on which Agent is open for banking business
in Texas.
CASH COLLATERAL ACCOUNT means (a) depository account no. 018-7163942
in Borrower's name at NationsBank of Texas, N.A., in Dallas, Texas, and (b) any
other depository account maintained by Borrower at a commercial bank in
Australia with the prior written consent of Agent, if such account is subject
to a first perfected security interest in favor of Agent on terms satisfactory
to Agent, in each case into which all payments to Borrower under the ESSO
Contract (except the Mobilisation Fee paid prior to the date hereof) shall be
deposited and from which all disbursements of Borrower under the ESSO Contract
shall be made.
CLOSING DATE means the date on which the Loan is funded.
COLLATERAL means all right, title and interest of Borrower in and to
(a) the Rig, (b) all insurance policies and proceeds relating to the Rig, (c)
all payments under, and proceeds of, the ESSO Contract (except the Mobilisation
Fee paid prior to the date hereof), and (d) the Cash Collateral Accounts.
COMMITMENT means, for any Lender, the amount stated beside that
Lender's name on the attached SCHEDULE 1.
COMMITMENT PERCENTAGE means, for any Lender and at any time, the
proportion -- stated as a percentage -- that its Commitment bears to the total
Commitments.
CURRENT FINANCIALS means PESCO's Financial Statements included in the
SEC Report on Form 10-K for the year ended December 31, 1994, and Form 10-Q for
the quarter ended June 30, 1995.
DEBT of any Person includes all obligations (contingent or otherwise)
for borrowed money or for the purchase of assets which, in accordance with
GAAP, should be classified upon such Person's balance sheet as liabilities, but
in any event including liabilities secured by any Lien existing on property
owned or acquired by such Person or a Subsidiary thereof (whether or not the
liability secured thereby shall have been assumed), obligations which have been
or under GAAP should be capitalized for financial reporting purposes, and all
guaranties, endorsements, and other contingent obligations with respect to Debt
of others, including, but not limited to, any obligations to acquire any of
such Debt, to purchase, sell, or furnish property or services primarily for the
purpose of enabling such other Person to make payment of any of such Debt,
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or to otherwise assure the owner of any of such Debt against loss with respect
thereto, and any obligations of an Obligor arising in connection with its
unconsolidated Subsidiaries or joint venture or partnership interests.
DEBTOR RELIEF LAWS means the Bankruptcy Code of the United States of
America and all other applicable liquidation, conservatorship, bankruptcy,
moratorium, rearrangement, receivership, insolvency, reorganization, suspension
of payments, or similar debtor relief Laws from time to time in effect
affecting the Rights of creditors generally.
DEFAULT is defined in SECTION 8.
DEFAULT RATE means an annual interest rate equal to the lesser of
either (a) the sum of the Floating Rate plus 4% or (b) the Highest Lawful Rate.
DEMOBILISATION FEE means the fee payable to Borrower under Clause 5.13
of the ESSO Contract for the removal of the Rig from locations owned or
operated by ESSO and related tasks.
DESIGNATED RATE means either the Floating Rate or a LIBOR Rate as
designated by Borrower pursuant to SECTION 1.2, 2.13, OR 2.14.
DETERMINING LENDERS means, at any time, any combination of Lenders
holding at least 66.7% of the total Commitments and 66.7% of the total
Principal Debt.
ENVIRONMENTAL LAW means each Law that relates (a) to the condition of
air, water, land, or other parts of the environment or (b) to the release,
discharge, emission, removal, remediation, clean-up, generation, production,
manufacturing, processing, distribution, use, treatment, storage, disposal,
transportation, or other handling or control of pollutants, contaminants,
wastes, or toxic or other Hazardous Substances, in any jurisdiction in which
the Rig is operated.
ERISA means the Employee Retirement Income Security Act of 1974, as
amended, and the regulations, promulgations, and rulings issued thereunder.
ESSO means ESSO Australia Ltd., an Australian corporation having its
registered office at ESSO House, 12 Riverside Quay, Southbank, Victoria,
Australia.
ESSO CONTRACT means the Contract for the provision of well workover
services dated as of June 19, 1995, between Borrower and ESSO under the laws of
the State of Victoria, Australia.
EXHIBIT means an exhibit attached to this Agreement, unless otherwise
specified.
FEDERAL FUNDS RATE means, for any day, the annual rate (rounded
upwards, if necessary, to the nearest 0.01%) determined (which determination is
conclusive and binding, absent manifest error) by Agent to be equal to the
weighted average of the rates on overnight federal funds transactions with
member banks of the Federal Reserve System arranged by federal funds brokers on
that day, as published by the Federal Reserve Bank of New York on the next
Business Day, or, if those rates are not published for any day, the average of
the quotations at approximately 10:00 a.m. received by Agent from three federal
funds brokers of recognized standing selected by Agent in its sole discretion.
FINANCIAL REPORT CERTIFICATE means a certificate, executed by the
president, chief financial officer, or controller of Borrower, substantially in
the form of EXHIBIT B but containing such other certifications, statements,
calculations, explanations, and conclusions as any Lender may reasonably
request with respect to compliance with any or all of the covenants and
conditions contained in the Loan Papers.
FINANCIAL STATEMENTS includes, but is not limited to, balance sheets,
profit and loss statements, reconciliations of capital and surplus, and
statements of cash flows (i) prepared in comparative form with respect to the
corresponding period of the preceding fiscal year, all of the foregoing
prepared in accordance with GAAP, or (ii) included in any SEC Report.
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FLOATING RATE means an annual rate equal to Prime Rate + 0.5%.
-----------------
0.9
FUNDING LOSS, means, all reasonable costs and reasonable losses
incurred by Lender when (i) Borrower fails or refuses for any reason (other
than such Lender's failure to comply with this Agreement) to borrow on the date
designated by Borrower any portion of the Loan which is to bear interest at a
LIBOR Rate, or (ii) Borrower prepays or converts all or any portion of the Loan
bearing interest at a LIBOR Rate on a day other than the last day of an
Interest Period for such portion.
GAAP is defined in SECTION 10.1.
GUARANTY means a Guaranty substantially in the form of EXHIBIT G,
executed and delivered by all Obligors (other than Borrower).
HAZARDOUS SUBSTANCE means (a) any substance that now or hereafter
constitutes a hazardous substance within the meaning of 42 U.S.C. Section
9601(14), as amended, or (b) any other substance identified as a hazardous or
toxic waste, pollutant, contaminant, or substance under any other Environmental
Law.
HIGHEST LAWFUL RATE means, with respect to each Lender, the maximum
rate of interest (or, if the context so requires, an amount calculated at such
rate) which such Lender is allowed to contract for, charge, take, reserve, or
receive under applicable federal or state (whichever is higher) Law from time
to time in effect after taking into account, to the extent required by
applicable federal or state (whichever is higher) Law from time to time in
effect, any and all relevant payments or charges under the Loan Papers.
INTEREST PERIOD is defined in SECTION 2.13.
IRC means the Internal Revenue Code of 1986, as amended, and the
regulations, promulgations, and rulings issued thereunder.
LAWS means all applicable statutes, laws, ordinances, regulations,
orders, writs, injunctions, or decrees of any state, commonwealth, province,
nation, territory, possession, county, township, parish, municipality, or
Tribunal.
LENDER LIENS means Liens in favor of Agent for the benefit of Lenders.
LENDERS means the financial institutions named on the attached
SCHEDULE 1 or on the most recently amended SCHEDULE 1, if any, delivered by
Agent under this Agreement, and, subject to this Agreement, their respective
successors and assigns (but not any Participant who is not otherwise a party to
this Agreement).
LIBOR means the quotient obtained by dividing (i) the rate that
deposits in U.S. dollars are offered by Agent to other major banks in the
London interbank market at approximately 11:00 a.m. (London time) two Business
Days before the commencement of the relevant Interest Period in an amount
comparable to the principal amount of the Loan (or portion thereof subject to
the LIBOR Rate), then outstanding and having a maturity approximately equal to
such Interest Period; by (ii) one minus the Reserve Percentage (expressed as a
decimal) applicable to such Interest Period.
LIBOR RATE means an annual interest rate (rounded upward, if
necessary, to the nearest 0.01%) equal to Libor + 2.75%.
-------------
0.9
LIEN means any lien, mortgage, security interest, pledge, charge, or
encumbrance of any kind, including, without limitation, the Rights of a vendor,
lessor, or similar party under any conditional sales agreement (or other title
retention agreement or lease substantially equivalent thereto), other than
those under which Borrower is the vendor or lessor, any production payment, and
any other Right of or arrangement with any creditor to have his claim satisfied
out of any property or assets of Borrower, or the proceeds therefrom, prior to
the general creditors of the owner thereof.
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LITIGATION means any proceeding, claim, lawsuit, or investigation (a)
conducted by or before any Tribunal, or (b) pending before any public or
private arbitration board or panel.
LOAN is defined in SECTION 1.1.
LOAN PAPERS means (a) this Agreement, certificates delivered pursuant
to this Agreement, and Schedules, (b) any and all notes, mortgages, deeds of
trust, security agreements, guaranties, assignments, and other agreements in
favor of Agent or Lenders (or Agent on behalf of Lenders) or between any Lender
and any Obligor, ever delivered pursuant to this Agreement, as any of the same
may hereafter be amended, supplemented, or restated, and (c) any and all future
renewals and extensions or restatements of, or amendments or supplements to,
all or any part of the foregoing, provided that "Loan Papers" shall not include
term sheets, commitment letters, correspondence (other than the letter
agreement between Borrower and Agent described in SECTION 3.1), and similar
documents used in the negotiation of this Agreement.
MATERIAL ADVERSE EFFECT means any material and adverse effect on (a)
the assets, liabilities, financial condition, business, or operations of
Borrower, or (b) the ability of Borrower to carry out its business in effect on
the date hereof or as proposed on such date or to satisfy its payment and
performance obligations under any Loan Paper on a timely basis.
MOBILISATION FEE means the fee payable to Borrower under Clause 5.2 of
the ESSO Contract for providing the Rig at a location owned or operated by
ESSO and related tasks.
MOODY'S means Moody's Investors Service, Inc.
NOTES means the promissory notes, each substantially in the form of
EXHIBIT A.
OBLIGATION means all present and future indebtedness, obligations, and
liabilities, and all renewals and extensions thereof, or any part thereof, now
or hereafter owed to Agent or any Lender by any Obligor, arising from, by
virtue of, or pursuant to any Loan Paper, including but not limited to all
interest accruing thereon and costs, expenses, and attorneys' fees incurred in
the enforcement or collection thereof, whether such indebtedness, obligations,
and liabilities are direct, indirect, fixed, contingent, liquidated,
unliquidated, joint, several, or joint and several.
OBLIGORS means PESCO, PESCO Subsidiary, Pool Company, and Borrower.
OFFICER'S CERTIFICATE means a certificate substantially in the form of
EXHIBIT E.
OPERATING DAY means each calendar day during the period commencing on
the Closing Date and ending on the date the Obligation is paid in full.
PARTICIPANT is defined in SECTION 12.14(B).
PBGC means the Pension Benefit Guaranty Corporation, or any successor,
established pursuant to ERISA.
PERMITTED LIENS means (a) the Lender Liens, (b) pledges or deposits
made to secure payment of workers' compensation, or to participate in any fund
in connection with workers' compensation, unemployment insurance, pensions, or
other social security programs, (c) good-faith pledges or deposits made to
secure performance of bids, tenders, contracts (other than for the repayment of
borrowed money), or leases, or to secure statutory obligations, surety or
appeal bonds, or indemnity, performance, or other similar bonds in each case in
the ordinary course of business, (d) encumbrances consisting of zoning
restrictions, easements, or other restrictions on the use of real property,
none of which materially impair the use of such real property by the Person in
question in the operation of its business, and none of which is violated by
existing or proposed structures or land use, (e) the following, to the extent
no Lien has been filed in any jurisdiction or agreed to: Liens for Taxes not
yet due and payable; mechanic's Liens and materialman's Liens for services or
materials for which payment is not yet due; and landlord's Liens for rental not
yet due and payable and which, to the extent the same encumbers any of the
Collateral, is subordinate to the Lender Liens, and (f) the following, if the
validity or amount thereof is being contested
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<PAGE> 22
in good faith and by appropriate and lawful proceedings and so long as levy and
execution thereon have been stayed and continue to be stayed, and they do not
in the aggregate materially detract from the value of the property of the
Person in question, or materially impair the use thereof in the operation of
its business: Claims and Liens for Taxes due and payable; claims and Liens
upon, and defects of title to, real or personal property (other than any of the
Collateral), including any attachment of personal or real property or other
legal process prior to adjudication of a dispute on the merits; claims and
Liens of mechanics, materialmen, warehousemen, carriers, landlords, operators
and non-operators arising by virtue of operating or joint operating agreements,
or other like Liens; and adverse judgments on appeal.
PERSON means any individual, firm, corporation, association,
partnership, joint venture, Tribunal, or other entity.
PESCO means Pool Energy Services Co., a Texas corporation which is
PESCO Subsidiary's parent.
PESCO SUBSIDIARY means Pool Energy Holding, Inc., a Delaware
corporation which is Pool Company's parent.
POOL COMPANY means Pool Company, a Texas corporation which is
Borrower's parent.
POOL COMPANY REVOLVING CREDIT AGREEMENT means the Restated Credit
Agreement (as renewed, extended, amended, and modified from time to time) dated
as of November 30, 1995, among Pool Company, as borrower, the lenders named
therein, and NationsBank of Texas, N.A., as agent.
POOL COMPANY TERM LOAN AGREEMENT means the Restated Term Loan
Agreement (as renewed, extended, amended, and modified from time to time) dated
as of November 30, 1995, among Pool Company, as borrower, the lenders named
therein, and NationsBank of Texas, N.A., as agent.
POTENTIAL DEFAULT means the occurrence of any event which, with notice
or lapse of time or both, would become a Default.
PRIME RATE means the prime interest rate charged by Agent, as
announced or published by Agent from time to time, and may not necessarily be
the lowest interest rate charged by Agent.
PRINCIPAL DEBT means, at any time, the total unpaid principal balance
of the Loan.
PROPERTY means any interest in any kind of property or asset, whether
real, personal, tangible, intangible, or mixed.
PRO RATA and PRO RATA PART means, when determined for any Lender, the
proportion (stated as a percentage) that the Principal Debt owed to it bears to
the total Principal Debt owed to all Lenders.
PURCHASER is defined in SECTION 12.14(c).
RESERVE PERCENTAGE means the weighted average of the Reserve
Requirements incurred by each Lender on its Pro Rata Part of the Loan.
RESERVE REQUIREMENT means the maximum aggregate reserve requirements
(including all basic, supplemental, emergency, special, marginal and other
reserves required by applicable Law) applicable to a member bank of the Federal
Reserve System for eurocurrency fundings or liabilities.
RIGHTS means rights, remedies, powers, privileges, and benefits.
RIG means Borrower's 1,000 H.P. offshore platform workover/completion
rig No. 453, as more particularly described on SCHEDULE 10.
S&P means Standard & Poor's Ratings Group, a division of McGraw Hill,
Inc.
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SEC REPORTS means reports filed with the Securities and Exchange
Commission pursuant to Sections 13 and 15(d) of the Securities Exchange Act of
1934, as amended, and rules and regulations promulgated thereunder, and all
annual reports, proxy statements, and other proxy solicitation materials.
SCHEDULE means a schedule attached to this Agreement, unless specified
otherwise.
SECTION means a section or subsection of this Agreement, unless
specified otherwise.
SOLVENT means, with respect to any Person, that at the time of
determination: (a) The fair value of its assets exceeds the total amount of
its liabilities (including, without limitation, its contingent liabilities
under the Loan Papers); (b) it is currently able, and expects in the future to
be able, to pay its debts as they mature; and (c) it has capital sufficient to
carry on its business as conducted and as proposed to be conducted. Contingent
liabilities shall be computed at the amount which, in light of all existing
facts and circumstances, represent the amount which can reasonably be expected
to become an actual or matured liability.
SUBSIDIARY means any Person of which an aggregate of more than 50% of
the stock of any class or classes (or equivalent interests) is owned of record
or beneficially, directly or indirectly, by another Person or any of its
Subsidiaries, if the holders of the stock of such class or classes (or
equivalent interests) (a) are ordinarily, in the absence of contingencies,
entitled to vote for the election of a majority of the directors (or
individuals performing similar functions) of such Person, even though the Right
so to vote has been suspended by the happening of such a contingency, or (b)
are entitled, as such holders, to vote for the election of a majority of the
directors (or individuals performing similar functions) of such Person, whether
or not the Right so to vote exists by reason of the happening of a contingency.
TAXES means all taxes, assessments, fees, levies, imposts, duties,
deductions, withholdings, or other charges of any nature whatsoever from time
to time or at any time imposed by any Law or Tribunal.
TERMINATION DATE means 12:00 Noon on the earlier of either (a)
November 30, 1999, or (b) the date Lender's Commitments are terminated in
accordance with this Agreement.
TOTAL LOSS means the occurrence of such substantial damage, loss or
destruction to the Rig, that all monies payable under insurance policies
covering such property are insufficient to completely repair, rebuild and
restore such property to its condition prior to the casualty.
TRIBUNAL means any court or governmental department, commission,
board, bureau, agency, or instrumentality of the U.S., Australia, or the Cayman
Islands or of any state, commonwealth, nation, territory, possession, county,
parish, or municipality, whether now or hereafter constituted or existing.
U.S. means the United States of America.
SECTION 11. AGREEMENT AMONG LENDERS.
11.1 Agent.
a. Each Lender appoints Agent (and Agent accepts
appointment) as its nominee and agent, in its name and on its behalf:
(i) to act as its nominee and on its behalf in and under all Loan
Papers; (ii) to arrange the means whereby its funds are to be made
available to Borrower under the Loan Papers; (iii) to take any action
that it properly requests under the Loan Papers (subject to the
concurrence of other Lenders as may be required under the Loan
Papers); (iv) to receive all documents and items to be furnished to it
under the Loan Papers; (v) to be the secured party, mortgagee,
beneficiary, recipient, and similar party in respect of any collateral
for the benefit of Lenders; (vi) to promptly distribute to it all
material information, requests, documents, and items received from
Borrower under the Loan Papers; (vii) to promptly distribute to it its
ratable part of each payment or prepayment (whether voluntary, as
proceeds of collateral upon or after foreclosure, as proceeds of
insurance thereon, or
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otherwise) in accordance with the terms of the Loan Papers; and (viii)
to deliver to the appropriate Persons requests, demands, approvals,
and consents received from it. However, Agent may not be required to
take any action that exposes them to personal liability or that is
contrary to any Loan Paper or applicable Law.
b. If the initial or any successor Agent ever ceases to
be a party to this Agreement or if the initial or any successor Agent
ever resigns (whether voluntarily or at the request of Determining
Lenders), then Determining Lenders shall appoint the successor Agent
from among the Lenders (other than the resigning Agent). If
Determining Lenders fail to appoint a successor Agent within 30 days
after the resigning Agent has given notice of resignation or
Determining Lenders have removed the resigning Agent, then the
resigning Agent may, on behalf of Lenders, appoint a successor Agent,
which must be a commercial bank having a combined capital and surplus
of at least $1,000,000,000 (as shown on its most recently published
statement of condition). Upon its acceptance of appointment as
successor Agent, the successor Agent succeeds to and becomes vested
with all of the Rights of the prior Agent, and the prior Agent is
discharged from its duties and obligations of Agent under the Loan
Papers, and each Lender shall execute the documents as any Lender, the
resigning or removed Agent, or the successor Agent reasonably request
to reflect the change. After any Agent's resignation or removal as
Agent under the Loan Papers, the provisions of this SECTION 11 inure
to its benefit as to any actions taken or omitted to be taken by it
while it was Agent under the Loan Papers.
c. Agent, in its capacity as a Lender, has the same
Rights under the Loan Papers as any other Lender and may exercise
those Rights as if it were not acting as an Agent; the term "Lender"
shall, unless the context otherwise indicates, include Agent; and
Agent's resignation or removal shall not impair or otherwise affect
any Rights that it has or may have in its capacity as an individual
Lender. Each Lender and Borrower agree that Agent is not a fiduciary
for Lenders or for Borrower but simply is acting in the capacity
described in this Agreement to alleviate administrative burdens for
Borrower and Lenders, that Agent has no duties or responsibilities to
Lenders or Borrower, except those expressly set forth in the Loan
Papers, and that Agent in its capacity as a Lender has all Rights of
any other Lender.
d. Agent may now or hereafter be engaged in one or more
loan, letter of credit, leasing, or other financing transactions with
Borrower, act as trustee or depositary for Borrower, or otherwise be
engaged in other transactions with Borrower (collectively, the "other
activities") not the subject of the Loan Papers. Without limiting the
Rights of Lenders specifically set forth in the Loan Papers, Agent is
not responsible to account to Lenders for those other activities, and
no Lender shall have any interest in any other activities, any present
or future guaranties by or for the account of Borrower that are not
contemplated or included in the Loan Papers, any present or future
offset exercised by Agent in respect of those other activities, any
present or future property taken as security for any of those other
activities, or any property now or hereafter in Agent's possession or
control that may be or become security for the obligations of Borrower
arising under the Loan Papers by reason of the general description of
indebtedness secured or of property contained in any other agreements,
documents, or instruments related to any of those other activities
(but, if any payments in respect of those guaranties or that property
or the proceeds thereof is applied by Agent to reduce the Obligation,
then each Lender is entitled to share ratably in the application as
provided in the Loan Papers).
11.2 Expenses. Each Lender shall pay its Commitment Percentage of
any reasonable expenses (including, without limitation, court costs, reasonable
attorneys' fees and other costs of collection) incurred by Agent (while acting
in such capacity) in connection with any of the Loan Papers if Agent is not
reimbursed from other sources within 30 days after incurrence. Each Lender is
entitled to receive its Commitment Percentage of any reimbursement that it
makes to Agent if Agent is subsequently reimbursed from other sources.
11.3 Proportionate Absorption of Losses. Except as otherwise
provided in the Loan Papers, nothing in the Loan Papers gives any Lender any
advantage over any other Lender insofar as the Obligation is concerned or to
relieve any Lender from ratably absorbing any losses sustained with respect to
the Obligation (except to the extent unilateral actions or inactions by any
Lender result in Borrower or any other obligor on the Obligation having any
credit, allowance, setoff, defense, or counterclaim solely with respect to all
or any part of that Lender's Pro Rata Part of the Obligation).
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<PAGE> 25
11.4 Delegation of Duties; Reliance. Lenders may perform any of
their duties or exercise any of their Rights under the Loan Papers by or
through Agent, and Lenders and Agent may perform any of their duties or
exercise any of their Rights under the Loan Papers by or through their
respective representatives. Agent, Lenders, and their respective
representatives (a) are entitled to rely upon (and shall be protected in
relying upon) any written statement believed by it or them to be genuine and
correct and to have been signed or made by the proper Person and, with respect
to legal matters, upon opinion of counsel selected by Agent or that Lender (but
nothing in this CLAUSE (a) permits Agent to rely on any other writing if a
specific writing is required by this Agreement), (b) are entitled to deem and
treat each Lender as the owner and holder of its part of the Principal Debt for
all purposes until, subject to SECTION 12.14, written notice of the assignment
or transfer is given to and received by Agent (and any request, authorization,
consent, or approval of any Lender is conclusive and binding on each subsequent
holder, assignee, or transferee of or Participant in that Lender's part of the
Principal Debt until that notice is given and received), (c) are not deemed to
have notice of the occurrence of a Default unless a responsible officer of
Agent, who handles matters associated with the Loan Papers and transactions
thereunder, has actual knowledge or Agent has been notified by a Lender or
Borrower, and (d) are entitled to consult with legal counsel (including counsel
for Borrower), independent accountants, and other experts selected by Agent and
are not liable for any action taken or omitted to be taken in good faith by it
in accordance with the advice of counsel, accountants, or experts.
11.5 Limitation of Agent's Liability.
a. Neither Agent nor any of its representatives will be
liable for any action taken or omitted to be taken under the Loan
Papers in good faith and believed by it or them to be within the
discretion or power conferred by the Loan Papers or be responsible for
the consequences of any error of judgment (except for fraud, gross
negligence, or willful misconduct), and neither Agent nor any of its
representatives has a fiduciary relationship with any Lender by virtue
of the Loan Papers (but nothing in this Agreement negates the
obligation of Agent to account for funds received by it for the
account of any Lender).
b. Unless indemnified to its satisfaction against loss,
cost, liability, and expense, Agent may not be compelled to do any act
under the Loan Papers or to take any action toward the execution or
enforcement of the powers thereby created or to prosecute or defend
any suit in respect of the Loan Papers. If Agent requests instructions
from Lenders, or Determining Lenders, as the case may be, with respect
to any act or action in connection with any Loan Paper, Agent is
entitled to refrain (without incurring any liability to any Person by
so refraining) from that act or action, unless and until it has
received instructions. In no event, however, may Agent or any of its
representatives be required to take any action that it or they
determine could incur for it or them criminal or onerous civil
liability. Without limiting the generality of the foregoing, no
Lender has any right of action against Agent as a result of Agent
acting or refraining from acting under this Agreement in accordance
with instructions of Determining Lenders.
c. Agent is not responsible to any Lender or any
Participant for, and each Lender represents and warrants that it has
not relied upon Agent in respect of, (i) the creditworthiness of any
Obligor and the risks involved to that Lender, (ii) the effectiveness,
enforceability, genuineness, validity, or the due execution of any
Loan Paper (other than by Agent), (iii) any representation, warranty,
document, certificate, report, or statement made therein (other than
by Agent) or furnished thereunder or in connection therewith, (iv) the
adequacy of any collateral now or hereafter securing the Obligation or
the existence, priority, or perfection of any Lien now or hereafter
granted or purported to be granted on the collateral under any Loan
Paper, or (v) observation of or compliance with any of the terms,
covenants, or conditions of any Loan Paper on the part of any Obligor.
EACH LENDER AGREES TO INDEMNIFY AGENT AND ITS REPRESENTATIVES AND HOLD
THEM HARMLESS FROM AND AGAINST (BUT LIMITED TO SUCH LENDER'S
COMMITMENT PERCENTAGES OF) ANY AND ALL LIABILITIES, OBLIGATIONS,
LOSSES, DAMAGES, PENALTIES, ACTIONS, JUDGMENTS, SUITS, COSTS,
REASONABLE EXPENSES, AND REASONABLE DISBURSEMENTS OF ANY KIND OR
NATURE WHATSOEVER THAT MAY BE IMPOSED ON, ASSERTED AGAINST, OR
INCURRED BY THEM IN ANY WAY RELATING TO OR ARISING OUT OF THE LOAN
PAPERS OR ANY ACTION TAKEN OR OMITTED BY THEM UNDER THE LOAN PAPERS IF
AGENT AND ITS REPRESENTATIVES ARE NOT REIMBURSED FOR SUCH AMOUNTS BY
ANY OBLIGOR. ALTHOUGH AGENT AND ITS REPRESENTATIVES HAVE THE RIGHT TO
BE INDEMNIFIED UNDER THIS AGREEMENT FOR ITS OR THEIR OWN ORDINARY
21
<PAGE> 26
NEGLIGENCE, THEY DO NOT HAVE THE RIGHT TO BE INDEMNIFIED UNDER THIS
AGREEMENT FOR THEIR OWN FRAUD, GROSS NEGLIGENCE, OR WILLFUL
MISCONDUCT.
11.6 Default; Collateral. While a Default exists, Lenders agree to
promptly confer in order that Determining Lenders or Lenders, as the case may
be, may agree upon a course of action for the enforcement of the Rights of
Lenders; and Agent is entitled to refrain from taking any action (without
incurring any liability to any Person for so refraining), unless and until it
has received instructions from Determining Lenders. In actions with respect to
any property of Borrower, Agent is acting for the ratable benefit of each
Lender. Agent shall hold, for the ratable benefit of all Lenders, any security
it receives for the Obligation or any guaranty of the Obligation it receives
upon or in lieu of foreclosure.
11.7 Limitation of Liability. No Lender or any Participant will
incur any liability to any other Lender or Participant, except for acts or
omissions in bad faith, and neither Agent nor any Lender or Participant will
incur any liability to any other Person for any act or omission of any other
Lender or any Participant.
11.8 Relationship of Lenders. The Loan Papers do not create a
partnership or joint venture among Agent and Lenders or among Lenders.
11.9 Collateral Matters.
a. Each Lender authorizes and directs Agent to enter
into the Loan Papers for the ratable benefit of Lenders. Each Lender
agrees that any action taken by Agent concerning any Collateral with
the consent of, or at the request of, Determining Lenders in
accordance with the provisions of the Loan Papers, and the exercise by
Agent (with the consent of, or at the request of, Determining Lenders)
of powers concerning the Collateral set forth in any Loan Paper,
together with other reasonably incidental powers, shall be authorized
and binding upon all Lenders.
b. Agent is authorized on behalf of all Lenders, without
the necessity of any notice to or further consent from any Lender,
from time to time before a Default or Potential Default, to take any
action with respect to any Collateral or Loan Paper that may be
necessary to perfect and maintain perfected the Lender Liens upon the
Collateral granted by the Loan Papers.
c. Except to use the customary standard of care that it
exercises in respect of collateral for its own account, Agent has no
obligation whatsoever to any Lender or to any other Person to assure
that the Collateral exists or is owned by Borrower or is cared for,
protected, or insured or has been encumbered or that the Liens granted
to Agent for the benefit of Lenders under the Loan Papers have been
properly or sufficiently or lawfully created, perfected, protected, or
enforced, or are entitled to any particular priority.
d. Agent shall exercise the same care and prudent
judgment with respect to the Collateral and the Loan Papers as it
normally and customarily exercises in respect of similar collateral
and security documents.
e. Lenders irrevocably authorize Agent, at its option
and in its discretion, to release any Lender Lien upon any Collateral
(i) upon full payment of the Obligation; (ii) constituting property
being sold or disposed of in accordance with the limitations of
SECTION 7.18; (iii) constituting property in which Borrower did not
own any interest at the time the Lender Lien was granted or at any
time thereafter; (iv) constituting property leased to Borrower under a
lease that has expired or been terminated in a transaction permitted
under this Agreement or is about to expire and that has not been, and
is not intended by Borrower to be, renewed; or (v) consisting of an
instrument evidencing Debt pledged to Agent (for the benefit of
Lenders), if the Debt evidenced thereby has been paid in full.
Lenders further irrevocably authorize Agent to release any Lender Lien
upon any Collateral if approved, authorized, or ratified in writing by
Determining Lenders. Upon request by Agent at any time, Lenders will
confirm in writing Agent's authority to release particular types or
items of Collateral under this SECTION 11.9(e).
22
<PAGE> 27
11.10 Benefits of Agreement. None of the provisions of this SECTION
11 inure to the benefit of any Obligor or any other Person, other than Agent
and Lenders; consequently, no Obligor or any other Person is entitled to rely
upon, or to raise as a defense, in any manner whatsoever, the failure of Agent
or any Lender to comply with these provisions.
SECTION 12. MISCELLANEOUS.
12.1 Headings and Exhibits. Headings and captions may not be
construed in interpreting provisions in any Loan Paper. Any incomplete Exhibit
must be completed correctly and in accordance with the terms and provisions of
this Agreement before or at the time of its execution and delivery.
12.2 Time and Non-Business Days. Time is of the essence in the
Loan Papers. All time references (e.g., 10:00 a.m.) are to time in Houston,
Texas. Any action that is due on a non-Business Day may be delayed until the
next-succeeding Business Day, but interest accrues on any payment until it is
made.
12.3 Communications. Unless otherwise specifically provided,
whenever any Loan Paper requires or permits any consent, approval, notice,
request, or demand from one party to another, such communication must be in
writing (which may be by facsimile transmission) to be effective and shall be
deemed to have been given on the day actually delivered or, if mailed, on the
fifth Business Day after it is enclosed in an envelope, addressed to the party
to be notified at the address stated below, properly stamped, sealed, and
deposited in the appropriate official postal service. Until changed by notice,
the address and facsimile or FAX number for each party is as appears on the
signature page(s) hereto.
12.4 Form and Number of Documents. Each agreement, document,
instrument, or other writing to be furnished to Lenders under any provision of
this Agreement must be in form and substance and in such number of counterparts
as may be satisfactory to Agent and its counsel.
12.5 Exceptions to Covenants. No Obligor shall take or fail to
take any action permitted under any Loan Paper if such action or omission would
result in the breach of any covenant contained in any Loan Paper.
12.6 Survival. All covenants, agreements, undertakings,
representations, and warranties made in any of the Loan Papers shall survive
all closings under the Loan Papers. Further, Borrower's obligations and
Agent's and each Lender's Rights under the Loan Papers shall continue in full
force and effect until the Obligation is paid and performed in full.
12.7 Governing Law. The Loan Papers are being executed and
delivered, and are intended to be performed, in the State of Texas, and the
Laws (other than conflict of laws provisions thereof) of such State and of the
U.S. shall govern the Rights and duties of the parties and the validity,
construction, enforcement, and interpretation of the Loan Papers, except to the
extent otherwise specified in any of the Loan Papers.
12.8 Venue; Service of Process. Each Obligor, for itself and its
successors and assigns, hereby (a) irrevocably submits to the nonexclusive
jurisdiction of the state and federal courts of the State of Texas and agrees
and consents that service of process may be made upon it in any legal
proceeding arising out of or in connection with the Loan Papers and the
Obligation by service of process as provided by Texas Law, (b) irrevocably
waives, to the fullest extent permitted by Law, any objection which it may now
or hereafter have to the laying of venue of any Litigation arising out of or in
connection with the Loan Papers and the Obligation brought in district courts
of Harris County, Texas, or in the U.S. District Court for the Southern
District of Texas, Houston Division, (c) irrevocably waives any claims that any
Litigation brought in any such court has been brought in an inconvenient forum,
(d) hereby designates PESCO as its agent for service of process in Houston,
Texas, in connection with any such Litigation, (e) irrevocably consents to the
service of process out of any of the aforementioned courts in any such
Litigation by the mailing of copies thereof by certified mail, return receipt
requested, postage prepaid, to such Obligor at its address set forth herein,
and (f) irrevocably agrees that any legal proceeding against Agent or any
Lender arising out of or in connection with the Loan Papers on the Obligation
shall be brought in the district courts of Harris County, Texas, or in the U.S.
District Court for the Southern District of Texas, Houston Division. Nothing
herein shall affect the Right of Agent or any Lender to commence legal
proceedings or otherwise proceed against Borrower in any jurisdiction or to
serve process in any manner permitted by applicable Law.
23
<PAGE> 28
12.9 Maximum Interest Rate. Regardless of any provision contained
in any of the Loan Papers, no Lender is entitled to contract for, charge, take,
reserve, receive, or apply, as interest on the Obligation, or any part thereof,
any amount in excess of the Highest Lawful Rate, and, in the event Lenders ever
contract for, charge, take, reserve, receive, or apply as interest any such
excess, it shall be deemed a partial prepayment of principal and treated
hereunder as such; and, if the Principal Debt is paid in full, any remaining
excess shall forthwith be paid to Borrower. In determining whether or not the
interest paid or payable, under any specific contingency, exceeds the Highest
Lawful Rate, Borrower and Lenders shall, to the maximum extent permitted under
applicable Law, (a) characterize any nonprincipal payment as an expense, fee,
or premium rather than as interest, (b) exclude voluntary prepayments and the
effects thereof, and (c) "spread" the total amount of interest throughout the
entire contemplated term of the Obligation; provided that, if the Obligation is
paid and performed in full prior to the end of the full contemplated term
thereof, and if the interest received for the actual period of existence
thereof exceeds the Highest Lawful Rate, Lenders shall refund such excess, and,
in such event, Lenders shall not be subject to any penalties provided by any
Laws for contracting for, charging, taking, reserving, or receiving interest in
excess of the Highest Lawful Rate. To the extent the Laws of the State of
Texas are applicable for purposes of determining the "Highest Lawful Rate",
such term shall mean the "indicated rate ceiling" from time to time in effect
under Article 1.04, Title 79, Revised Civil Statutes of Texas, as amended, or,
if permitted by applicable Law and effective upon the giving of the notices
required by such Article 1.04 (or effective upon any other date otherwise
specified by applicable Law), the "monthly ceiling", the "quarterly ceiling",
or "annualized ceiling" from time to time in effect under such Article 1.04,
whichever Lenders shall elect to substitute for the "indicated rate ceiling",
and vice versa, each such substitution to have the effect provided in such
Article 1.04; and Lenders shall be entitled to make such election from time to
time and one or more times and, without notice to Borrower, to leave any such
substitute rate in effect for subsequent periods in accordance with subsection
(h)(1) of such Article 1.04. Pursuant to Article 15.10(b) of Chapter 15,
Subtitle 79, Revised Civil Statutes of Texas, 1925, as amended (which regulates
certain revolving credit loan accounts and revolving triparty accounts),
Borrower agrees that such Chapter 15 shall not govern or in any manner apply to
the Obligation.
12.10 Invalid Provisions. If any provision of any Loan Paper is
held to be illegal, invalid, or unenforceable, such provision shall be fully
severable; the appropriate Loan Paper shall be construed and enforced as if
such provision had never comprised a part thereof; and the remaining provisions
shall remain in full force and effect and shall not be affected by such
provision or by its severance therefrom. Furthermore, in lieu of such
provision there shall be added automatically as a part of such Loan Paper a
provision as similar in terms to such illegal, invalid, or unenforceable
provision as may be possible and be legal, valid, and enforceable.
12.11 Entirety. THIS AGREEMENT AND THE OTHER LOAN PAPERS REPRESENT
THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE
OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS BY THE PARTIES. THERE
ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
12.12 Amendments, Consents, Conflicts, and Waivers.
a. Unless otherwise specifically provided (i) this
Agreement may be amended only by an instrument in writing executed by
Borrower, Agent, and Determining Lenders and supplemented only by
documents delivered or to be delivered in accordance with the express
terms of this Agreement, and (ii) the other Loan Papers may only be
the subject of an amendment, modification, or waiver that has been
approved by Determining Lenders and Borrower.
b. Any amendment to or consent or waiver under this
Agreement or any Loan Paper that purports to accomplish any of the
following must be by an instrument in writing executed by Borrower and
Agent and executed (or approved, as the case may be) by each Lender:
(i) Extends the due date or decreases the amount of any scheduled
payment of the Obligation beyond the date specified in the Loan
Papers; (ii) decreases any rate or amount of interest, fees, or other
sums payable to Agent -- except fees payable only to Agent to which it
may agree with Borrower without joinder by any Lender -- or Lenders
under this Agreement (except such reductions as are contemplated by
this Agreement); (iii) changes the definition of "COMMITMENT",
"DETERMINING LENDERS", or "TERMINATION DATE"; (iv) increases any one
or more Lenders' Commitments; (v) waives compliance with, amends,
24
<PAGE> 29
or releases (in whole or in part) any guaranty or any Collateral,
unless the release is contemplated in any Loan Paper; or (vi) changes
this CLAUSE (b) or any other matter specifically requiring the consent
of all Lenders under this Agreement.
c. ANY CONFLICT OR AMBIGUITY BETWEEN THE TERMS AND
PROVISIONS OF THIS AGREEMENT AND TERMS AND PROVISIONS IN ANY OTHER
LOAN PAPER IS CONTROLLED BY THE TERMS AND PROVISIONS OF THIS AGREEMENT
FOR ALL PURPOSES.
d. No course of dealing or any failure or delay by
Agent, any Lender, or any of their respective representatives with
respect to exercising any Right of Agent or any Lender under this
Agreement operates as a waiver thereof. A waiver must be in writing
and signed by Agent and Lenders (or Determining Lenders, if permitted
under this Agreement) to be effective, and a waiver will be effective
only in the specific instance and for the specific purpose for which
it is given.
12.13 Multiple Counterparts. This Agreement has been executed in a
number of identical counterparts, each of which shall be deemed an original for
all purposes and all of which constitute, collectively, one agreement; but, in
making proof of this Agreement, it shall not be necessary to produce or account
for more than one such counterpart. Each Lender need not execute the same
counterpart of this Agreement, so long as identical counterparts are executed
by Borrower, each Lender, and Agent. This Agreement shall become effective
when counterparts of this Agreement have been executed and delivered to Agent
by each Lender and Borrower, or, in the case only of Lenders, when Agent has
received telecopied, telexed, or other evidence satisfactory to it that each
Lender has executed and is delivering to Agent a counterpart of this Agreement.
12.14 Successors and Assigns; Participations.
a. Each Loan Paper binds and inures to the benefit of
the parties thereto, any intended beneficiary thereof, and each of
their respective successors and permitted assigns. No Lender may
transfer, pledge, assign, sell any participation in, or otherwise
encumber its portion of the Obligation except as permitted by this
SECTION 12.14.
b. Subject to the provisions of this section and in
accordance with applicable Law, any Lender may, in the ordinary course
of its commercial banking business, at any time sell to one or more
Persons (each a "PARTICIPANT") participating interests in its portion
of the Obligation. The selling Lender shall remain a "LENDER" under
this Agreement (and the Participant shall not constitute a "LENDER"
under this Agreement) and its obligations under this Agreement shall
remain unchanged. The selling Lender shall remain solely responsible
for the performance of its obligations under the Loan Papers and shall
remain the holder of its share of the Principal Debt for all purposes
under this Agreement. Borrower and Agent shall continue to deal
solely and directly with the selling Lender in connection with that
Lender's Rights and obligations under the Loan Papers. Participants
have no Rights under the Loan Papers, other than certain voting Rights
as provided below. Subject to the following, each Lender may obtain
(on behalf of its Participants) the benefits of SECTION 2 with respect
to all participations in its part of the Obligation outstanding from
time to time, so long as Borrower is not obligated to pay any amount
in excess of the amount that would be due to that Lender under SECTION
2 calculated as though no participations have been made. No Lender
may sell any participating interest under which the Participant has
any Rights to approve any amendment, modification, or waiver of any
Loan Paper, except to the extent the amendment, modification, or
waiver extends the due date for payment of any principal, interest, or
fees due under the Loan Papers, increases that Lender's Commitment,
reduces the interest rate or the amount of principal or fees
applicable to the Obligation (except reductions contemplated by this
Agreement), or releases any guaranty or Collateral, unless the release
is contemplated in any Loan Paper. However, if a Participant is
entitled to the benefits of SECTION 2 or a Lender grants Rights to its
Participants to approve amendments to or waivers of the Loan Papers
respecting the matters described in the previous sentence, then that
Lender must include a voting mechanism in the relevant participation
agreement whereby a majority of its portion of the Obligation (whether
held by it or participated) shall control the vote for all of that
Lender's portion of the Obligation. Except in the case of the sale of
a participating
25
<PAGE> 30
interest to another Lender, the relevant participation agreement shall
prohibit the Participant from transferring, pledging, assigning,
selling participations in, or otherwise encumbering its portion of the
Obligation.
c. Subject to the provisions of this section, any Lender
may at any time, in the ordinary course of its commercial banking
business, (i) without the consent of Borrower or Agent, assign all or
any part of its Rights and obligations under the Loan Papers to any of
its Affiliates (each a "PURCHASER") and (ii) if no Default exists,
upon the prior written consent of Borrower (which will not be
unreasonably withheld) and Agent, assign to any other Person that is
not a business competitor of any Obligor (each of which is also a
"PURCHASER") a proportionate part -- not less than $650,000 of that
Lender's Commitment and, if less than all, then the selling Lender
must retain at least $650,000 of its Commitment -- of all or any part
of its Rights and obligations under the Loan Papers. In each case,
the Purchaser shall assume those Rights and obligations under an
assignment agreement substantially in the form of the attached Exhibit
D. Each assignment under this SECTION 12.14(C) shall include a
ratable interest in the assigning Lender's Rights and obligations
under this Agreement. Upon (i) delivery of an executed copy of the
assignment agreement to Borrower and Agent and (ii) payment of a fee
of $2,500 from the transferor to Agent, from and after the
assignment's effective date (which shall be after the date of
delivery), the Purchaser shall for all purposes be a Lender party to
this Agreement and shall have all the Rights and obligations of a
Lender under this Agreement to the same extent as if it were an
original party to this Agreement with commitments as set forth in the
assignment agreement, and the transferor Lender shall be released from
its obligations under this Agreement to a corresponding extent, and,
except as provided in the remainder of this clause (c), no further
consent or action by Borrower, Lenders, or Agent shall be required.
Upon the consummation of any transfer to a Purchaser under this clause
(c), the then-existing SCHEDULE 1 shall automatically be deemed to
reflect the name, address, and Commitment of such Purchaser, Agent
shall deliver to Borrower and Lenders an amended SCHEDULE 1 reflecting
those changes, Borrower shall execute and deliver to each of the
transferor Lender and the Purchaser a Note in the face amount of its
respective Commitment following transfer, and, upon receipt of its new
Note, the transferor Lender shall return to Borrower the Note
previously delivered to it under this Agreement. A Purchaser is
subject to all the provisions in this section as if it were a Lender
signatory to this Agreement as of the date of this Agreement.
d. Any Lender may at any time, without the consent of
Borrower or Agent, assign all or any part of its Rights under the Loan
Papers to a Federal Reserve Bank without releasing the transferor
Lender from its obligations thereunder.
e. Notwithstanding any contrary provision in this
Agreement, a Lender may not sell or participate any of its interests
for a purchase price that, directly or indirectly, reflects a discount
from face value, without first offering the sale or participation to
the other Lenders on a Pro Rata basis (which must be accepted or
rejected within five Business Days after the offer).
12.15 Confidentiality. Agent or any Lender may, without limitation,
(a) disclose any information concerning any Obligor to any Tribunal, or to any
prospective or actual Participant or (subject to SECTION 12.14) any other
actual or prospective transferee of any of Agent's or any Lender's Rights and
duties, or to the respective affiliates, directors, officers, employees,
attorneys, and agents of any prospective or actual Participant or such other
transferee of an interest, provided that such prospective or actual Participant
or such other transferee agrees to treat the information as confidential, and
(b) use any information concerning any Obligor (i) to the extent pertinent to
an evaluation of the Obligation, (ii) to enforce compliance with the terms and
conditions of the Loan Papers, or (iii) to take any action when it is entitled
to do so under the Loan Papers which Lenders deem necessary to protect its
interests if a Default has occurred and is continuing.
12.16 Parties Bound; Assignments. This Agreement is binding upon,
and inures to the benefit of Agent, Determining Lenders, Lenders, each Obligor,
and their respective successors and assigns, provided that no Obligor may,
without the prior written consent of Determining Lenders, assign any Rights,
duties, or obligations hereunder, and any purported assignment in violation of
the foregoing shall be void and ineffective.
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<PAGE> 31
EXECUTED as of the date first stated above.
<TABLE>
<S> <C>
International Sea Drilling Ltd. INTERNATIONAL SEA DRILLING LTD.,
c/o Pool Company as Borrower
10375 Richmond Avenue
Houston, Texas 77042
Attn: R. A. Johannsen, Treasurer By: /s/ E. J. SPILLARD
-------------------------------------------------
FAX (713) 954-3244 E. J. Spillard, Senior Vice President-Finance
By: /s/ R. A. JOHANNSEN
--------------------------------------------------
R. A. Johannsen, Treasurer
NationsBank of Texas, N.A. NATIONSBANK OF TEXAS, N.A., as Agent, and a
700 Louisiana Street, 8th Floor Lender
Houston, Texas 77002
Attn: James R. Allred, Vice President By: /s/ JAMES R. ALLRED
--------------------------------------------------
FAX (713) 247-6568 James R. Allred, Vice President
National Bank of Canada NATIONAL BANK OF CANADA, as a Lender
2121 San Jacinto, Suite 1850
Dallas, Texas 75201 By: /s/ LARRY L. SEARS
--------------------------------------------------
Attn: Larry L. Sears, Group Vice President Larry L. Sears, Group Vice President
FAX (214) 871-2015
By: /s/ DOUGLAS G. CLARK
--------------------------------------------------
Douglas G. Clark, Vice President
National Bank of Alaska NATIONAL BANK OF ALASKA, a Lender
301 W. Northern Light Blvd.
Anchorage, Alaska 99503
Attn: Patricia Jelley Benz, Vice President By: /s/ PATRICIA JELLEY BENZ
--------------------------------------------------
FAX (907) 265-2141 Patricia Jelley Benz
Vice President
</TABLE>
27
<PAGE> 32
EXHIBIT A
PROMISSORY NOTE
$ Houston, Texas , 1995
------------------------ ----------------
FOR VALUE RECEIVED, INTERNATIONAL SEA DRILLING LTD., a Cayman Islands
corporation ("MAKER"), hereby promises to pay to the order of
,__________________________ ("PAYEE"), the principal amount of $_________,
together with interest, as hereinafter described.
This note has been executed and delivered under, and is subject to
the terms of, the $6,500,000 Term Loan Agreement (as amended, the "LOAN
AGREEMENT") dated as of November 30, 1995, among Maker, NationsBank of Texas,
N.A., as Agent, and Payee and the other Lenders referred to therein, and is a
"Note" referred to therein. Unless defined herein or the context otherwise
requires, capitalized terms used herein have the meaning given to such terms in
the Loan Agreement. Reference is made to the Loan Agreement for provisions
affecting this note regarding the place of payment, applicable interest rates,
principal and interest payment dates, final maturity, voluntary prepayments,
acceleration of maturity, exercise of Rights, payment of attorneys' fees, court
costs, and other costs of collection, certain waivers by Maker and others now or
hereafter obligated for payment of any sums due hereunder, and security for the
payment hereof.
This promissory note is being executed and delivered, and is intended
to be performed, in the State of Texas, and the Laws of such State and of the
United States of America shall govern the rights and duties of the parties and
the validity, construction, enforcement, and interpretation hereof.
THIS PROMISSORY NOTE, TOGETHER WITH THE OTHER LOAN PAPERS, REPRESENT
THE FINAL AGREEMENTS BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY (i)
EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE
PARTIES, OR (ii) ANY COMMITMENT LETTER AMONG THE PARTIES (ALL THE TERMS AND
CONDITIONS OF WHICH ARE SUPERSEDED BY LOAN PAPERS). THERE ARE NO UNWRITTEN ORAL
AGREEMENTS BETWEEN THE PARTIES.
INTERNATIONAL SEA DRILLING LTD.
By:
--------------------------------
E. J. Spillard
Senior Vice President, Finance
By:
--------------------------------
R. A. Johannsen
Treasurer
<PAGE> 33
EXHIBIT B
FINANCIAL REPORT CERTIFICATE
FOR _________________ ENDED ______________, 19___
AGENT: NationsBank of Texas, N.A.
BORROWER: International Sea Drilling Ltd.
RE: $6,500,000 Term Loan Agreement
DATE: ______________________, 19___
This certificate is delivered pursuant to the $6,500,000 Term Loan
Agreement (as amended, the "LOAN AGREEMENT") dated as of November 30, 1995,
among Borrower, the Lenders named therein ("LENDERS"), and NationsBank of Texas,
N.A., as agent for itself and the other Lenders ("AGENT"), all defined terms of
which have the same meaning when used herein.
I certify to Lenders that I am the _____________________ (president,
chief financial officer, or controller) of PESCO on the date hereof and that:
1. The Financial Statements attached hereto were prepared in
accordance with GAAP, and present fairly the consolidated and consolidating
financial condition and results of operations of PESCO and its Subsidiaries as
of, and for the fiscal [quarter or year] ending on _______________, 19___ (the
"SUBJECT PERIOD").
2. A review of the activities of PESCO, PESCO Subsidiary, Pool
Company, and Borrower during the Subject Period has been made under my
supervision with a view to determining whether, during the Subject Period, each
such entity has kept, observed, performed, and fulfilled all of its obligations
under the Loan Papers, and during the Subject Period, each such entity kept,
observed, performed, and fulfilled each and every covenant and condition of the
Loan Papers (except for any deviations set forth on the attached schedule).
3. During the Subject Period, no Default (nor any Potential Default)
has occurred which has not been cured or waived (except for any Defaults or
Potential Defaults set forth on the attached schedule).
4. This certificate is being delivered on behalf of PESCO. No person
or entity other than Lenders and the law firm of Porter & Hedges, L.L.P. (the
"SUBJECT RECIPIENTS"), shall be entitled to receive or rely upon this
certificate for any purpose. The Subject Recipients agree by their acceptance
hereof that (a) they shall look solely to PESCO for any loss, cost, damage,
expense, claim, demand, suit, or cause of action arising out of or relating in
any way to this certificate or its preparation and delivery, and (b) the
undersigned shall not under any circumstances have any personal liability
whatsoever for the preparation or execution of this certificate.
------------------------------------------
Name
--------------------------------------
Title
-------------------------------------
<PAGE> 34
EXHIBIT C
OPINION OF COUNSEL TO OBLIGORS
___________________, 1995
NationsBank of Texas, N.A., as Agent
700 Louisiana Street, 8th Floor
Houston, Texas 77002
Attn: James R. Allred
Vice President
Re: $6,500,000 Term Loan Agreement
The undersigned has acted as counsel to Pool Energy Services Co., a
Texas corporation ("PESCO"), Pool Energy Holding, Inc., a Delaware corporation
("PESCO SUBSIDIARY" ), Pool Company, a Texas corporation ("POOL COMPANY"), and
International Sea Drilling Ltd. ("BORROWER") in connection with the negotiation,
preparation, and execution of the $6,500,000 Term Loan Agreement (the "LOAN
AGREEMENT") dated as of November 30, 1995, among Borrower, the Lenders named
therein ("LENDERS") and NationsBank of Texas, N.A., as agent for itself and the
other Lenders ("AGENT"). This opinion is delivered pursuant to Section 6.1 and
Schedule 6 of the Loan Agreement. Unless otherwise defined herein or the context
otherwise requires, each capitalized term has the meaning ascribed to such term
in the Loan Agreement.
In reaching the conclusions expressed in this opinion, I have examined
such certificates of public officials and officers of the Obligors as I deemed
necessary or appropriate, and originals or copies of the Loan Papers. I have
otherwise made no special inquiry or investigation but render this opinion on
the basis of my knowledge as General Counsel of the Obligors and an employee of
one of the Obligors.
Based upon the foregoing and subject to the limitations, qualifications
and exceptions set forth below, the undersigned is of the following opinion:
1. The Obligors other than Borrower are corporations duly organized,
legally existing and in good standing under the laws of their respective states
of incorporation.
2. The Obligors other than Borrower have the full corporate power and
authority to enter into the Loan Papers. All corporate action on the part of the
Obligors other than Borrower, requisite for the due execution, delivery, and
performance of the Loan Papers has been duly and effectively taken.
3. Upon the due execution and delivery of the Loan Papers by the
Obligors, I know of no reason why such Loan Papers will not constitute legal,
valid, and binding obligations of the Obligors enforceable against Obligors in
accordance with their terms.
4. The execution and delivery of the Loan Papers do not violate any
provisions of the Articles of Incorporation or Bylaws of Obligors. The Loan
Papers may be performed by Obligors in a manner that does not violate any
provisions of their respective Articles of Incorporation and Bylaws.
5. Neither any Obligor nor any Affiliate (excluding ENSERCH Corporation
, if an Affiliate) is subject to regulation under the Public Utility Holding
Company Act of 1935, the Federal Power Act, or the Investment Company Act of
1940 (as any of the preceding acts have been amended).
<PAGE> 35
This opinion is subject to and qualified in all respects by the
following:
(a) The enforceability of the Loan Papers may be limited by (i)
bankruptcy, insolvency, reorganization, moratorium, and similar laws from time
to time in effect and affecting creditors' rights or the collection of debtors'
obligations generally (including, without limitation, laws generally defining
and restricting fraudulent conveyances), (ii) principles of equity, (iii)
principles of public policy, and (iv) requirements of commercial reasonableness
and good faith.
(b) No opinion is given as to the availability or enforceability of
certain provisions or remedies set forth in the Loan Papers, including without
limitation, (i) provisions which purport to provide access to or restrict legal
or equitable remedies such as specific performance and the appointment of a
receiver, (ii) provisions that purport to establish evidentiary standards, (iii)
provisions relating to waivers or to delays or omissions of enforcement of
remedies or severance, (iv) provisions that attempt to appoint Agent or others
as any Person's attorney-in-fact, (v) indemnity provisions, (vi) provisions
attempting to prohibit or restrict the transfer, alienation, mortgaging,
encumbering, or hypothecation of the properties covered by or described in the
Loan Papers, (vii) subrogation provisions, and (viii) provisions attempting to
establish proper venue for the filing and maintenance of any claim, suit, or
action with respect to the Loan Papers; provided, however, that limitations on
the availability of remedies under the Loan Papers or the legality, validity,
binding effect or enforceability of the Loan Papers will not, in the
undersigned's opinion, prevent you from recovering for damages and enforcing any
Liens in your favor or substantially interfere with the practical realization of
the benefits express in the Loan Papers except for the economic consequences of
any procedural delay which may result from such laws.
(c) The enforceability of certain provisions of the Loan Papers may
be limited by requirements of due process under the United States Constitution
and other laws generally limiting the rights of creditors to repossess,
foreclose or otherwise realize upon the property of a debtor without appropriate
notice and/or hearing.
(d) No opinion is expressed with respect to usury, nor with respect
to the perfection or priority of any of the liens or security interests intended
to be granted to Agent.
(e) No opinion is expressed as to whether the contemplated loan
transactions comply with any statutory, regulatory or other loan limits
applicable to the Lenders or comply with any other statutes, laws, rules or
regulations which prescribe permissible and lawful investments for the Lenders
(either as to type, amount, percentage of total investments or otherwise).
(f) The knowledge of the undersigned as to any factual matter in
connection with this opinion is limited to the current consciousness of the
undersigned and does not include constructive inquiry or imputed knowledge.
This opinion is limited to United States federal law and laws of the
State of Texas, all as now in effect. No opinion is expressed as to any matter
that may be governed by the laws of any other jurisdiction.
This opinion is solely for the benefit of and may be relied upon only
by Agent and the Lenders, and their respective counsel, and may not be delivered
or disclosed in whole or in part, to any other Person.
Very truly yours,
<PAGE> 36
EXHIBIT D
ASSIGNMENT AND ACCEPTANCE
Reference is made to the Term Loan Agreement dated as of November 30,
1995 (as renewed, extended, amended or replaced, the "LOAN AGREEMENT"), among
International Sea Drilling Ltd. (the "BORROWER"), NationsBank of Texas, N.A., as
agent (the "AGENT"), and the other financial institutions party thereto from
time to time (collectively, the "LENDERS"). Capitalized terms used herein and
not otherwise defined shall have the meanings given to such terms in the Loan
Agreement.
__________________________ (the "ASSIGNOR"), and ________________(the
"ASSIGNEE") agree as follows:
1. The Assignor hereby sells and assigns to the Assignee (without
recourse to the Assignor) a __________/__________ interest (the "ASSIGNED
INTEREST") in and to all of the rights of Assignor under the Loan Agreement and
the other Loan Papers (including, without limitation, the Note presently held by
the Assignor and the Guaranty), and the Assignee hereby purchases and accepts
from the Assignor such Assigned Interest and assumes all of the obligations of
the Assignor under the Loan Agreement and the other Loan Papers (including,
without limitation, the Note presently held by the Assignor and the Guaranty) to
the extent of the Assigned Interest, including, without limitation, all
principal amounts funded by the Assignor and outstanding on the Effective Date
(as defined below), together with interest accruing thereon on and after the
Effective Date. From and after the Effective Date, (x) the Assignee shall be a
party to the Loan Agreement and, to the extent of the Assigned Interest, have
the rights and obligations of a Lender thereunder and under the other Loan
Papers and (y) the Assignor shall, to the extent of the Assigned Interest,
relinquish its rights and be released from its obligations under the Loan
Agreement and the other Loan Papers.
2. The Assignor (a) makes no representation or warranty and assumes
no responsibility with respect to any statements, warranties, or representations
made by any Company in or in connection with the Loan Agreement or any other
Loan Paper or the execution, legality, validity, enforceability, genuineness,
sufficiency, collectibility, or value of the Loan Agreement or any other Loan
Paper, other than that it is the sole legal and beneficial owner of the interest
being assigned by it hereunder and that such interest is free and clear of any
claim, encumbrance, or participation; (b) makes no representation or warranty
and assumes no responsibility with respect to the financial condition of any
Company or the performance or observance by any Company of any of its respective
obligations under the Loan Agreement or any other Loan Paper; (c) represents and
warrants that (i) it possesses all requisite authority and power to execute,
deliver, and comply with the terms of the Loan Papers (including, without
limitation, this Assignment and Acceptance), (ii) the Loan Agreement and the
instruments contemplated therein constitute the entire agreement between
Borrower, Agent, and Lenders, (iii) the Loan Agreement has not been amended,
(iv) to its knowledge, no Default or Potential Default has occurred pursuant to
the Loan Papers, and (v) all of the conditions of SECTION 6.1 of the Loan
Agreement have been satisfied as of the Effective Date; and (d) attaches the
Note held by it and requests that Agent exchange such Note for new Notes
executed by Borrower and payable to the Assignee in a principal amount equal to
$__________ and payable to the Assignor in a principal amount equal to
$__________ (less the principal amount of any other new Note(s) to any other
assignee(s) of Assignor pursuant to other Assignment and Acceptance agreements
effective as of the Effective Date).
3. The Assignee (a) represents and warrants that it is legally
authorized to enter into this Assignment and Acceptance; (b) confirms that it
has received a copy of the Loan Agreement and such other documents and
information as it has deemed appropriate to make its own credit analysis and
decision to enter into this Assignment and Acceptance; (c) agrees that it will,
independently and without reliance upon Agent, the Assignor, or any other Lender
and based on such documents and information as it shall deem appropriate at the
time, continue to make its own credit decisions in taking or not taking action
under the Loan Agreement; (d) appoints and authorizes Agent to take such action
as agent on its behalf and to exercise such powers under the Loan Agreement as
are delegated to Agent by the terms thereof, together with such powers as are
reasonably incidental thereto; (e) agrees that it will perform in accordance
with their terms all the obligations which by the terms of the Loan Agreement
are required to be performed by it as a Lender; (f) agrees that it will comply
with the confidentiality requirements of Section 12.15 of the Loan Agreement;
(g) represents and warrants that it does not consider any amount paid by it to
the Assignor hereunder a loan by it to the Assignor; and (h) (i) represents and
warrants to the
<PAGE> 37
Assignor that under applicable laws and treaties no taxes will be required to be
withheld by Agent, Borrower, or the Assignor with respect to any payments to be
made to the Assignor in respect of the Obligation, (ii) attaches hereto two duly
completed copies of U.S. Internal Revenue Service Form 4224, Form 1001, Form
W-8, or any other tax form acceptable to Agent (wherein the Assignee claims
entitlement to complete exemption from U.S. federal withholding tax on all
interest payments made on the Obligation), and (iii) agrees to provide to the
Assignor, Agent, and Borrower a new tax form upon the obsolescence of any
previously delivered form and comparable statements in accordance with
applicable U.S. laws and regulations and amendments duly executed and completed
by the Assignee, and to comply from time to time with all applicable U.S. laws
and regulations with regard to such withholding tax exemption.
4. The effective date for this Assignment and Acceptance shall be
________________ (the "EFFECTIVE DATE").
5. From and after the Effective Date, Agent shall make all payments
in respect of the interest assigned hereby (including payments of principal,
interest, fees, and other amounts) to the Assignee. The Assignor and the
Assignee shall make all appropriate adjustments in payments for periods prior to
the Effective Date by Agent or with respect to the making of this assignment
directly between themselves.
6. This Assignment and Acceptance shall be governed by and construed
in accordance with the laws of the State of Texas.
7. This Assignment and Acceptance (a) embodies the entire agreement
between the parties, supersedes all prior agreements and understandings, if any,
relating to the subject matter hereof, and may be amended only by an instrument
in writing executed jointly by an authorized officer of each party hereto, (b)
is not intended to evidence a "purchase" or "sale" of a "security" within the
meaning of any Law, and (c) may be executed in a number of identical
counterparts, each of which shall be deemed an original for all purposes and all
of which shall constitute, collectively, one agreement; but, in making proof of
this Assignment and Acceptance, it shall not be necessary to reproduce or
account for more than one such counterpart.
8. Any amounts due hereunder from the Assignor to the Assignee shall
be wire transferred by the Assignor to Assignee's account at
_________________________________________, ABA #_________, for credit to
________________ account #_____________, Attention: ______________, Reference:
___________. Any amounts due hereunder from the Assignee to the Assignor shall
be wire transferred by the Assignee to the Assignor's account at
___________________________, ABA #_________, Attention: _____________________
(Ref. ______). For purposes of amending Schedule 1(a) to the Loan Agreement, the
Assignee's address, contact person, telephone and facsimile number are as
follows:
---------------------------
---------------------------
---------------------------
Attention:
-----------------
Telephone:
-----------------
FAX:
-----------------
<PAGE> 38
EXHIBIT E
OFFICER'S CERTIFICATE
This certificate is delivered under the Term Loan Agreement dated as
of November 30, 1995, among International Sea Drilling Ltd., a Cayman Islands
corporation (the "BORROWER"), NationsBank of Texas, N.A., as Agent ("AGENT"),
and the Lenders ("LENDERS") named therein. As Corporate Secretary of Pool Energy
Services Co., Pool Energy Holding, Inc., Pool Company and the Borrower (the
"OBLIGORS"), I hereby certify to Agent and the Lenders that the following are
true and correct:
1. Resolutions. Attached as Annex A is a true and correct copy of
resolutions relating to matters described therein, which have been duly and
unanimously adopted at a meeting of, or by the unanimous written consent of, the
board of directors of each Obligor. None of such resolutions have been amended,
modified or repealed in any respect, and all of such resolutions are in full
force and effect on the date hereof.
2. Incumbency. The following individuals are the duly qualified and
acting officers in the position beside their names of each Obligor. The
signatures beside their names are their true signatures.
<TABLE>
<CAPTION>
NAME TITLE SPECIMEN SIGNATURE
---- ----- ------------------
<S> <C> <C>
E. J. Spillard Senior Vice President, Finance
R.A. Johannsen Treasurer
</TABLE>
3. Charters. Attached as Annex B is a true and correct copy of the
Articles or Certificates of Incorporation of each Obligor, and there have been
no additional amendments authorized with respect thereto.
4. Bylaws. Attached as Annex C is a true and correct copy of the
Bylaws of each Obligor, and there have been no additional amendments authorized
with respect thereto.
EXECUTED as of___________________, 1995.
--------------------------------
G. G. Arms
Corporate Secretary
<PAGE> 39
EXHIBIT F
CONVERSION REQUEST
______________________, 19__
NationsBank of Texas, N.A., as Agent
Energy Banking Group
700 Louisiana Street, 8th Floor
Houston, Texas 77002
Attn: James R. Allred, Vice President
Fax: (713) 247-6568
Reference is made to the Term Loan Agreement dated as of November 30,
1995 (as amended, supplemented or restated, the "LOAN AGREEMENT"), among the
undersigned, the Lenders named therein, and NationsBank of Texas, N.A., as
Agent. Unless otherwise defined herein, all capitalized terms have the meanings
given to such terms in the Loan Agreement.
The undersigned hereby gives you notice pursuant to SECTION 2.14 of the
Loan Agreement that it elects to convert the interest rate applicable to all or
a portion of the Loan under the Loan Agreement or elects a new Interest Period
for all or a portion of the Loan bearing interest at a LIBOR Rate on the
following terms:
(A) Date of conversion or last day of
applicable Interest Period (a Business Day) ________________
(B) Existing Interest Rate** and Principal Amount*
being converted ________________
(C) New Interest Rate selected** ________________
(D) For conversion to a LIBOR Rate Borrowing, the
Interest Period selected and the last day thereof*** ________________
(E) For continuation of a LIBOR Rate, the Interest
Period selected and the last day thereof*** ________________
Very truly yours,
INTERNATIONAL SEA DRILLING LTD.
By:
--------------------------------------
Name:
------------------------------------
Title:
-----------------------------------
- ----------------------------
* Not less than $500,000 or a greater integral multiple of $1,000,000 (if
a LIBOR Rate is selected).
** LIBOR Rate (1, 2, 3 or 6 months), or Floating Rate.
*** 1, 2, 3 or 6 months. The Interest Period may not end after the
Termination Date.
<PAGE> 40
EXHIBIT G
GUARANTY
THIS GUARANTY (this "Guaranty")is executed as of ___________________,
1995, by the undersigned ("GUARANTORS"), for the benefit of NATIONSBANK OF
TEXAS, N.A. ("AGENT"), and the Lenders (the "LENDERS") named in the Credit
Agreement (as hereinafter defined).
WHEREAS, INTERNATIONAL SEA DRILLING LTD. ("BORROWER"), Agent and
Lenders have executed a Term Loan Agreement dated as of November 30, 1995 (as
amended, supplemented, or restated, the "CREDIT AGREEMENT"), together with
certain other Loan Papers; and
WHEREAS, each Guarantor is an Affiliate of Borrower incorporated in
the United States; and
WHEREAS, it is expressly understood among Borrower, Guarantors, Agent
and each Lender that the execution and delivery of this Guaranty is an integral
part of the transactions contemplated by the Loan Papers and a condition
precedent to Agent's and Lenders' obligations under the Credit Agreement;
NOW, THEREFORE, for valuable consideration, the receipt and adequacy
of which are hereby acknowledged, each Guarantor hereby guarantees to Agent and
Lenders the prompt payment at maturity (by acceleration or otherwise), and at
all times thereafter, of the Guaranteed Indebtedness (hereinafter defined), this
Guaranty being upon the following terms and conditions:
1. Unless otherwise defined herein, all capitalized terms have the
meanings given to such terms in the Credit Agreement.
2. The term "BORROWER" shall include, without limitation, Borrower,
Borrower as a debtor-in-possession, and any receiver, trustee, liquidator,
conservator, custodian, or similar party hereafter appointed for Borrower or all
or substantially all of its assets pursuant to any liquidation, conservatorship,
bankruptcy, moratorium, rearrangement, receivership, insolvency, reorganization,
or similar Debtor Relief Law from time to time in effect affecting the rights of
creditors generally.
3. The term "GUARANTEED INDEBTEDNESS" means the Obligation as
defined in the Credit Agreement, together with any and all costs, attorneys'
fees, and expenses reasonably incurred by Agent and Lenders by reason of
Borrower's or any Guarantor's default in payment of any of the foregoing
indebtedness.
4. This instrument shall be an absolute and continuing guaranty,
and the circumstance that at any time or from time to time the Guaranteed
Indebtedness may be paid in full shall not affect the obligation of Guarantors
with respect to the Guaranteed Indebtedness of Borrower to Agent and Lenders
thereafter incurred.
5. Notwithstanding any contrary provision herein, each Guarantor's
aggregate payments in respect of the Guaranteed Indebtedness shall never exceed
the greater of (a) 90% of its net worth (the amount by which the present fair
saleable value of its assets exceeds its liabilities on such date, without
giving effect to this Guaranty) or (b) the aggregate value of direct and
indirect benefits received under the Loan Papers.
6. If any Guarantor becomes liable for any indebtedness owing by
Borrower to Agent or Lenders, by endorsement or otherwise, other than under this
Guaranty, such liability shall not be in any manner impaired or affected hereby,
and the rights of Agent and Lenders hereunder shall be cumulative of any and all
other rights that Agent and Lenders may ever have against such Guarantor. The
exercise by Agent and Lenders of any right or remedy hereunder or under any
other agreement, document, or instrument, or at law or in equity, shall not
preclude the concurrent or subsequent exercise of any other right or remedy.
<PAGE> 41
7. Upon the occurrence and continuance of a Default, each Guarantor
shall, on demand and without further notice of dishonor, without any notice
having been given to such Guarantor previous to such demand of the acceptance by
Agent and Lenders of this Guaranty, and without any notice having been given to
such Guarantor previous to such demand of the creating or incurring of such
indebtedness, pay the amount of the Guaranteed Indebtedness then due and payable
to Agent and Lenders, and it shall not be necessary for Agent and Lenders, in
order to enforce such payment by such Guarantor, first or contemporaneously to
institute suit or exhaust remedies against Borrower or others liable on such
indebtedness, or to enforce rights against any security ever given to secure
such indebtedness.
8. All principal of and interest on all indebtedness, liabilities,
and obligations of Borrower to any Guarantor (the "SUBORDINATED DEBT"), whether
direct, indirect, fixed, contingent, liquidated, unliquidated, joint, several,
or joint and several, now or hereafter existing, due or to become due to such
Guarantor, or held or to be held by such Guarantor, whether created directly or
acquired by assignment or otherwise, and whether evidenced by written instrument
or not, shall be expressly subordinated to the final payment in full of the
Guaranteed Indebtedness. Each Guarantor agrees not to receive or accept any
payment from Borrower with respect to the Subordinated Debt at any time a
Default has occurred and is continuing; and, in the event any Guarantor receives
any payment on the Subordinated Debt in violation of the foregoing, such
Guarantor will hold any such payment in trust for Agent and Lenders and
forthwith turn it over to Agent and Lenders, in the form received (with any
necessary endorsements), to be applied to the Guaranteed Indebtedness.
9. Until the Obligation is paid and performed in full, no Guarantor
shall assert, enforce, or otherwise exercise (a) any right of subrogation to any
of the rights or liens of Agent and Lenders or any other beneficiary against
Borrower or any other obligor on the Guaranteed Indebtedness or any collateral
or other security, or (b) any right of recourse, reimbursement, contribution,
indemnification, or similar right against Borrower or any other obligor on all
or any part of the Guaranteed Indebtedness or any guarantor thereof. Each
Guarantor irrevocably waives the benefit of, and any right to participate in,
any collateral or other security given to Agent and Lenders or any other
beneficiary to secure payment of the Guaranteed Indebtedness.
10. Each Guarantor hereby agrees that its obligations under the terms
of this Guaranty shall not be released, diminished, impaired, reduced, or
affected by the occurrence of any one or more of the following events: (a)
Agent's or any Lender's taking or accepting of any other security or guaranty
for any or all of the Guaranteed Indebtedness; (b) any release, surrender,
exchange, subordination, or loss of any security at any time existing in
connection with any or all of the Guaranteed Indebtedness; (c) any partial
release of the liability of any Guarantor or the release of any other obligor on
the Obligation; (d) the insolvency, bankruptcy, or lack of corporate power of
Borrower, any Guarantor, or any party at any time liable for the payment of any
or all of the Guaranteed Indebtedness, whether now existing or hereafter
occurring; (e) any renewal, extension, or rearrangement of the payment of any or
all of the Guaranteed Indebtedness, either with or without notice to or consent
of such Guarantor, or any adjustment, indulgence, forbearance, or compromise
that may be granted or given by Agent or Lenders to Borrower, any Guarantor, or
any other obligor on the Obligation; (f) any neglect, delay, omission, failure,
or refusal of Agent or any Lender to take or prosecute any action for the
collection of any or all of the Guaranteed Indebtedness or to foreclose or take
or prosecute any action in connection with any instrument or agreement
evidencing or securing any or all of the Guaranteed Indebtedness; (g) any
failure of Agent or any Lender to notify such Guarantor of any renewal,
extension, or assignment of any or all of the Guaranteed Indebtedness, or the
release of any security or of any other action taken or refrained from being
taken by Agent or any Lender against Borrower or any new agreement between Agent
or any Lender and Borrower, it being understood that Agent and Lenders shall not
be required to give any Guarantor any notice of any kind under any circumstances
whatsoever with respect to or in connection with the Guaranteed Indebtedness,
other than any notice required to be given to Borrower or Guarantors elsewhere
herein; (h) the unenforceability of any part of the Guaranteed Indebtedness
against Borrower by reason of the Income Tax Assessment Act of 1936 (Australia),
as heretofore or hereafter amended, the fact that the Guaranteed Indebtedness
exceeds the amount permitted by law, the act of creating the Guaranteed
Indebtedness, or any part thereof, is ultra vires, or the officers creating same
exceeded their authority or violated their fiduciary duties in connection
therewith; or (i) any payment by Borrower to Agent or Lenders is held to
constitute a preference under the bankruptcy laws or if for any other reason
Agent or any Lender is required to refund such payment or make payment to
someone else.
11. Each Guarantor hereby waives all rights by which it might be
entitled to require suit on an accrued right of action in respect of any of the
Guaranteed Indebtedness or require suit against Borrower or others, whether
arising
<PAGE> 42
pursuant to Section 34.02 of the Texas Business and Commerce Code, as amended
(regarding a Guarantor's right to require Agent or Lenders to sue Borrower on
accrued right of action following a Guarantor's written notice to Agent or
Lenders), Section 17.001 of the Texas Civil Practice and Remedies Code, as
amended (allowing suit against a Guarantor without suit against Borrower, but
precluding entry of judgment against a Guarantor prior to entry of judgment
against Borrower), Rule 31 of the Texas Rules of Civil Procedure, as amended
(requiring Agent and Lenders to join Borrower in any suit against a Guarantor
unless judgment has been previously entered against Borrower), or otherwise.
12. Each Guarantor acknowledges that certain representations and
warranties in the Credit Agreement are applicable to it and confirms that each
such representation and warranty is true and correct. Each Guarantor represents
and warrants to Agent and Lenders that the value of the consideration received
and to be received by it is reasonably worth at least as much as the liability
and obligation of such Guarantor hereunder, and such liability and obligation
may reasonably be expected to benefit such Guarantor directly or indirectly.
13. Each Guarantor acknowledges that certain covenants in the Credit
Agreement are applicable to it and agrees to comply with each such covenant.
14. Each Guarantor expressly assumes all responsibilities to remain
informed of the financial condition of Borrower and any circumstances affecting
(a) Borrower's ability to perform under the Credit Agreement and the other Loan
Papers to which it is a party or (b) collateral securing all or any part of the
Guaranteed Indebtedness.
15. The Guaranteed Indebtedness shall not be reduced, discharged, or
released because or by reason of any existing or future offset, claim, or
defense (except for the defense of payment) of Borrower or any other party
against Agent or any Lender or against payment of the Guaranteed Indebtedness,
whether such offset, claim, or defense arises in connection with the Guaranteed
Indebtedness or otherwise. Such claims and defenses include, without limitation,
failure of consideration, breach of warranty, fraud, statute of frauds,
bankruptcy, infancy, statute of limitations, lender liability, accord and
satisfaction, and usury.
16. This Guaranty is for the benefit of Agent and Lenders and their
respective successors and assigns. Each Guarantor acknowledges that in the event
of an assignment of the Guaranteed Indebtedness, or any part thereof, the rights
and benefits hereunder, to the extent applicable to the indebtedness so
assigned, may be transferred with such indebtedness. This Guaranty is binding on
each Guarantor and its successors and assigns.
17. This Guaranty is a Loan Paper and, therefore, this Guaranty is
subject to the applicable provisions of SECTION 12 of the Credit Agreement, all
of which applicable provisions are incorporated herein by reference the same as
if set forth herein verbatim.
This Guaranty is executed as of the first date set forth herein.
The address and fax no. for POOL ENERGY SERVICES CO.
each of the undersigned is: POOL ENERGY HOLDING, INC.
POOL COMPANY
10375 Richmond Avenue
Houston, Texas 77042
Attn: R. A. Johannsen, Treasurer
FAX No.: (713) 954-3244 By:
---------------------------------------
E. J. Spillard, Senior Vice President,
Finance of each of the above Obligors
By:
---------------------------------------
R. A. Johannsen, Treasurer of each of
the above Obligors
<PAGE> 43
PROMISSORY NOTE
$1,300,000 Houston, Texas December 29, 1995
FOR VALUE RECEIVED, INTERNATIONAL SEA DRILLING LTD., a Cayman Islands
corporation ("MAKER"), hereby promises to pay to the order of NATIONAL BANK OF
ALASKA ("PAYEE"), the principal amount of $1,300,000, together with interest, as
hereinafter described.
This note has been executed and delivered under, and is subject to
the terms of, the $6,500,000 Term Loan Agreement (as amended, the "LOAN
AGREEMENT") dated as of November 30, 1995, among Maker, Nationsbank of Texas,
N.A., As Agent, and Payee and the other Lenders referred to therein, and is a
"note" referred to therein. Unless defined herein or the context otherwise
requires, capitalized terms used herein have the meaning given to such terms in
the Loan Agreement. Reference is made to the Loan Agreement for provisions
affecting this note regarding the place of payment, applicable interest rates,
principal and interest payment dates, final maturity, voluntary prepayments,
acceleration of maturity, exercise of Rights, payment of attorneys' fees, court
costs, and other costs of collection, certain waivers by Maker and others now or
hereafter obligated for payment of any sums due hereunder, and security for the
payment hereof.
This promissory note is being executed and delivered, and is intended
to be performed, in the State of Texas, and the Laws of such State and of the
United States of America shall govern the rights and duties of the parties and
the validity, construction, enforcement, and interpretation hereof.
THIS PROMISSORY NOTE, TOGETHER WITH THE OTHER LOAN PAPERS, REPRESENT
THE FINAL AGREEMENTS BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY
(10) EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF
THE PARTIES, OR (11) ANY COMMITMENT LETTER AMONG THE PARTIES (ALL THE TERMS
AND CONDITIONS OF WHICH ARE SUPERSEDED BY LOAN PAPERS). THERE ARE NO
UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
INTERNATIONAL SEA DRILLING LTD.
BY: /s/ E. J. SPILLARD
--------------------------------
E. J. Spillard
Senior Vice President, Finance
BY: /s/ R. A. JOHANNSEN
--------------------------------
R. A. Johannsen
Treasurer
<PAGE> 44
PROMISSORY NOTE
$2,762,500 Houston, Texas December 29, 1995
FOR VALUE RECEIVED, INTERNATIONAL SEA DRILLING LTD., a Cayman Islands
corporation ("MAKER"), hereby promises to pay to the order of NATIONSBANK OF
TEXAS, N.A., a national banking association ("PAYEE") the principal amount of
$2,762,500, together with interest, as hereinafter described.
This note has been executed and delivered under, and is subject to
the terms of, the $6,500,000 Term Loan Agreement (as amended, the "LOAN
AGREEMENT") dated as of November 30, 1995, among Maker, NationsBank of Texas,
N.A., as Agent, and Payee and the other Lenders referred to therein, and is a
"Note" referred to therein. Unless defined herein or the context otherwise
requires, capitalized terms used herein have the meaning given to such terms in
the Loan Agreement. Reference is made to the Loan Agreement for provisions
affecting this note regarding the place of payment, applicable interest rates,
principal and interest payment dates, final maturity, voluntary prepayments,
acceleration of maturity, exercise of Rights, payment of attorneys' fees, court
costs, and other costs of collection, certain waivers by Maker and others now or
hereafter obligated for payment of any sums due hereunder, and security for the
payment hereof.
This promissory note is being executed and delivered, and is intended
to be performed, in the State of Texas, and the Laws of such State and of the
United States of America shall govern the rights and duties of the parties and
the validity, construction, enforcement, and interpretation hereof.
THIS PROMISSORY NOTE, TOGETHER WITH THE OTHER LOAN PAPERS, REPRESENT
THE FINAL AGREEMENTS BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY (i)
EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE
PARTIES, OR (ii) ANY COMMITMENT LETTER AMONG THE PARTIES (ALL THE TERMS AND
CONDITIONS OF WHICH ARE SUPERSEDED BY LOAN PAPERS). THERE ARE NO UNWRITTEN ORAL
AGREEMENTS BETWEEN THE PARTIES.
INTERNATIONAL SEA DRILLING LTD.
BY: /s/ E. J. SPILLARD
-----------------------------------
E. J. Spillard
Senior Vice President, Finance
BY: /s/ R. A. JOHANNSEN
-----------------------------------
R. A. Johannsen
Treasurer
<PAGE> 45
PROMISSORY NOTE
$2,437,500 Houston, Texas December 29, 1995
FOR VALUE RECEIVED, INTERNATIONAL SEA DRILLING LTD., a Cayman Islands
corporation ("MAKER"), hereby promises to pay to the order of NATIONAL BANK OF
CANADA, a Canadian bank ("PAYEE") the principal amount of $2,437,500, together
with interest, as hereinafter described.
This note has been executed and delivered under, and is subject to
the terms of, the $6,500,000 Term Loan Agreement (as amended, the "LOAN
AGREEMENT") dated as of November 30, 1995, among Maker, NationsBank of Texas,
N.A., as Agent, and Payee and the other Lenders referred to therein, and is a
"Note" referred to therein. Unless defined herein or the context otherwise
requires, capitalized terms used herein have the meaning given to such terms in
the Loan Agreement. Reference is made to the Loan Agreement for provisions
affecting this note regarding the place of payment, applicable interest rates,
principal and interest payment dates, final maturity, voluntary prepayments,
acceleration of maturity, exercise of Rights, payment of attorneys' fees, court
costs, and other costs of collection, certain waivers by Maker and others now or
hereafter obligated for payment of any sums due hereunder, and security for the
payment hereof.
This promissory note is being executed and delivered, and is intended
to be performed, in the State of Texas, and the Laws of such State and of the
United States of America shall govern the rights and duties of the parties and
the validity, construction, enforcement, and interpretation hereof.
THIS PROMISSORY NOTE, TOGETHER WITH THE OTHER LOAN PAPERS, REPRESENT
THE FINAL AGREEMENTS BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY (i)
EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE
PARTIES, OR (ii) ANY COMMITMENT LETTER AMONG THE PARTIES (ALL THE TERMS AND
CONDITIONS OF WHICH ARE SUPERSEDED BY LOAN PAPERS). THERE ARE NO UNWRITTEN ORAL
AGREEMENTS BETWEEN THE PARTIES.
INTERNATIONAL SEA DRILLING LTD.
BY: /s/ E. J. SPILLARD
-----------------------------------
E. J. Spillard
Senior Vice President, Finance
BY: /s/ R. A. JOHANNSEN
-----------------------------------
R.A. Johannsen
Treasurer
<PAGE> 46
GUARANTY
THIS GUARANTY (this "Guaranty")is executed as of December 29, 1995,
by the undersigned ("GUARANTORS"), for the benefit of NATIONSBANK OF TEXAS, N.A.
("AGENT"), and the Lenders (the "LENDERS") named in the Credit Agreement (as
hereinafter defined).
WHEREAS, INTERNATIONAL SEA DRILLING LTD. ("BORROWER"), Agent and
Lenders have executed a Term Loan Agreement dated as of November 30, 1995 (as
amended, supplemented, or restated, the "CREDIT AGREEMENT"), together with
certain other Loan Papers; and
WHEREAS, each Guarantor is an Affiliate of Borrower incorporated in
the United States; and
WHEREAS, it is expressly understood among Borrower, Guarantors, Agent
and each Lender that the execution and delivery of this Guaranty is an integral
part of the transactions contemplated by the Loan Papers and a condition
precedent to Agent's and Lenders' obligations under the Credit Agreement;
NOW, THEREFORE, for valuable consideration, the receipt and adequacy
of which are hereby acknowledged, each Guarantor hereby guarantees to Agent and
Lenders the prompt payment at maturity (by acceleration or otherwise), and at
all times thereafter, of the Guaranteed Indebtedness (hereinafter defined), this
Guaranty being upon the following terms and conditions:
1. Unless otherwise defined herein, all capitalized terms have the
meanings given to such terms in the Credit Agreement.
2. The term "BORROWER" shall include, without limitation, Borrower,
Borrower as a debtor-in-possession, and any receiver, trustee, liquidator,
conservator, custodian, or similar party hereafter appointed for Borrower or all
or substantially all of its assets pursuant to any liquidation, conservatorship,
bankruptcy, moratorium, rearrangement, receivership, insolvency, reorganization,
or similar Debtor Relief Law from time to time in effect affecting the rights of
creditors generally.
3. The term "GUARANTEED INDEBTEDNESS" means the Obligation as
defined in the Credit Agreement, together with any and all costs, attorneys'
fees, and expenses reasonably incurred by Agent and Lenders by reason of
Borrower's or any Guarantor's default in payment of any of the foregoing
indebtedness.
4. This instrument shall be an absolute and continuing guaranty, and
the circumstance that at any time or from time to time the Guaranteed
Indebtedness may be paid in full shall not affect the obligation of Guarantors
with respect to the Guaranteed Indebtedness of Borrower to Agent and Lenders
thereafter incurred.
5. Notwithstanding any contrary provision herein, each Guarantor's
aggregate payments in respect of the Guaranteed Indebtedness shall never exceed
the greater of (a) 90% of its net worth (the amount by which the present fair
saleable value of its assets exceeds its liabilities on such date, without
giving effect to this Guaranty) or (b) the aggregate value of direct and
indirect benefits received under the Loan Papers.
6. If any Guarantor becomes liable for any indebtedness owing by
Borrower to Agent or Lenders, by endorsement or otherwise, other than under this
Guaranty, such liability shall not be in any manner impaired or affected hereby,
and the rights of Agent and Lenders hereunder shall be cumulative of any and all
other rights that Agent and Lenders may ever have against such Guarantor. The
exercise by Agent and Lenders of any right or remedy hereunder or under any
other agreement, document, or instrument, or at law or in equity, shall not
preclude the concurrent or subsequent exercise of any other right or remedy.
7. Upon the occurrence and continuance of a Default, each Guarantor
shall, on demand and without further notice of dishonor, without any notice
having been given to such Guarantor previous to such demand
<PAGE> 47
of the acceptance by Agent and Lenders of this Guaranty, and without any notice
having been given to such Guarantor previous to such demand of the creating or
incurring of such indebtedness, pay the amount of the Guaranteed Indebtedness
then due and payable to Agent and Lenders, and it shall not be necessary for
Agent and Lenders, in order to enforce such payment by such Guarantor, first or
contemporaneously to institute suit or exhaust remedies against Borrower or
others liable on such indebtedness, or to enforce rights against any security
ever given to secure such indebtedness.
8. All principal of and interest on all indebtedness, liabilities,
and obligations of Borrower to any Guarantor (the "SUBORDINATED DEBT"), whether
direct, indirect, fixed, contingent, liquidated, unliquidated, joint, several,
or joint and several, now or hereafter existing, due or to become due to such
Guarantor, or held or to be held by such Guarantor, whether created directly or
acquired by assignment or otherwise, and whether evidenced by written instrument
or not, shall be expressly subordinated to the final payment in full of the
Guaranteed Indebtedness. Each Guarantor agrees not to receive or accept any
payment from Borrower with respect to the Subordinated Debt at any time a
Default has occurred and is continuing; and, in the event any Guarantor receives
any payment on the Subordinated Debt in violation of the foregoing, such
Guarantor will hold any such payment in trust for Agent and Lenders and
forthwith turn it over to Agent and Lenders, in the form received (with any
necessary endorsements), to be applied to the Guaranteed Indebtedness.
9. Until the Obligation is paid and performed in full, no Guarantor
shall assert, enforce, or otherwise exercise (a) any right of subrogation to any
of the rights or liens of Agent and Lenders or any other beneficiary against
Borrower or any other obligor on the Guaranteed Indebtedness or any collateral
or other security, or (b) any right of recourse, reimbursement, contribution,
indemnification, or similar right against Borrower or any other obligor on all
or any part of the Guaranteed Indebtedness or any guarantor thereof. Each
Guarantor irrevocably waives the benefit of, and any right to participate in,
any collateral or other security given to Agent and Lenders or any other
beneficiary to secure payment of the Guaranteed Indebtedness.
10. Each Guarantor hereby agrees that its obligations under the terms
of this Guaranty shall not be released, diminished, impaired, reduced, or
affected by the occurrence of any one or more of the following events: (a)
Agent's or any Lender's taking or accepting of any other security or guaranty
for any or all of the Guaranteed Indebtedness; (b) any release, surrender,
exchange, subordination, or loss of any security at any time existing in
connection with any or all of the Guaranteed Indebtedness; (c) any partial
release of the liability of any Guarantor or the release of any other obligor on
the Obligation; (d) the insolvency, bankruptcy, or lack of corporate power of
Borrower, any Guarantor, or any party at any time liable for the payment of any
or all of the Guaranteed Indebtedness, whether now existing or hereafter
occurring; (e) any renewal, extension, or rearrangement of the payment of any or
all of the Guaranteed Indebtedness, either with or without notice to or consent
of such Guarantor, or any adjustment, indulgence, forbearance, or compromise
that may be granted or given by Agent or Lenders to Borrower, any Guarantor, or
any other obligor on the Obligation; (f) any neglect, delay, omission, failure,
or refusal of Agent or any Lender to take or prosecute any action for the
collection of any or all of the Guaranteed Indebtedness or to foreclose or take
or prosecute any action in connection with any instrument or agreement
evidencing or securing any or all of the Guaranteed Indebtedness; (g) any
failure of Agent or any Lender to notify such Guarantor of any renewal,
extension, or assignment of any or all of the Guaranteed Indebtedness, or the
release of any security or of any other action taken or refrained from being
taken by Agent or any Lender against Borrower or any new agreement between Agent
or any Lender and Borrower, it being understood that Agent and Lenders shall not
be required to give any Guarantor any notice of any kind under any circumstances
whatsoever with respect to or in connection with the Guaranteed Indebtedness,
other than any notice required to be given to Borrower or Guarantors elsewhere
herein; (h) the unenforceability of any part of the Guaranteed Indebtedness
against Borrower by reason of the Income Tax Assessment Act of 1936 (Australia),
as heretofore or hereafter amended, the fact that the Guaranteed Indebtedness
exceeds the amount permitted by law, the act of creating the Guaranteed
Indebtedness, or any part thereof, is ultra vires, or the officers creating same
exceeded their authority or violated their fiduciary duties in connection
therewith; or (i) any payment by Borrower to Agent or Lenders is held to
constitute a preference under the bankruptcy laws or if for any other reason
Agent or any Lender is required to refund such payment or make payment to
someone else.
11. Each Guarantor hereby waives all rights by which it might be
entitled to require suit on an accrued right of action in respect of any of the
Guaranteed Indebtedness or require suit against Borrower or others, whether
arising pursuant to Section 34.02 of the Texas Business and Commerce Code, as
amended (regarding a Guarantor's right to require Agent or Lenders to sue
Borrower on accrued right of action following a Guarantor's written notice to
Agent or Lenders),
2
<PAGE> 48
Section 17.001 of the Texas Civil Practice and Remedies Code, as amended
(allowing suit against a Guarantor without suit against Borrower, but precluding
entry of judgment against a Guarantor prior to entry of judgment against
Borrower), Rule 31 of the Texas Rules of Civil Procedure, as amended (requiring
Agent and Lenders to join Borrower in any suit against a Guarantor unless
judgment has been previously entered against Borrower), or otherwise.
12. Each Guarantor acknowledges that certain representations and
warranties in the Credit Agreement are applicable to it and confirms that each
such representation and warranty is true and correct. Each Guarantor represents
and warrants to Agent and Lenders that the value of the consideration received
and to be received by it is reasonably worth at least as much as the liability
and obligation of such Guarantor hereunder, and such liability and obligation
may reasonably be expected to benefit such Guarantor directly or indirectly.
13. Each Guarantor acknowledges that certain covenants in the Credit
Agreement are applicable to it and agrees to comply with each such covenant.
14. Each Guarantor expressly assumes all responsibilities to remain
informed of the financial condition of Borrower and any circumstances affecting
(a) Borrower's ability to perform under the Credit Agreement and the other Loan
Papers to which it is a party or (b) collateral securing all or any part of the
Guaranteed Indebtedness.
15. The Guaranteed Indebtedness shall not be reduced, discharged, or
released because or by reason of any existing or future offset, claim, or
defense (except for the defense of payment) of Borrower or any other party
against Agent or any Lender or against payment of the Guaranteed Indebtedness,
whether such offset, claim, or defense arises in connection with the Guaranteed
Indebtedness or otherwise. Such claims and defenses include, without limitation,
failure of consideration, breach of warranty, fraud, statute of frauds,
bankruptcy, infancy, statute of limitations, lender liability, accord and
satisfaction, and usury.
16. This Guaranty is for the benefit of Agent and Lenders and their
respective successors and assigns. Each Guarantor acknowledges that in the event
of an assignment of the Guaranteed Indebtedness, or any part thereof, the rights
and benefits hereunder, to the extent applicable to the indebtedness so
assigned, may be transferred with such indebtedness. This Guaranty is binding on
each Guarantor and its successors and assigns.
17. This Guaranty is a Loan Paper and, therefore, this Guaranty is
subject to the applicable provisions of SECTION 12 of the Credit Agreement, all
of which applicable provisions are incorporated herein by reference the same as
if set forth herein verbatim.
This Guaranty is executed as of the first date set forth herein.
The address and fax no. for POOL ENERGY SERVICES CO.
each of the undersigned is: POOL ENERGY HOLDING, INC.
POOL COMPANY
10375 Richmond Avenue
Houston, Texas 77042
Attn: R. A. Johannsen, Treasurer
FAX No.: (713) 954-3244 By: /s/ E. J. SPILLARD
-------------------------------------
E. J. Spillard, Senior Vice President,
Finance of each of the above Obligors
By: /s/ R. A. JOHANNSEN
--------------------------------------
R. A. Johannsen, Treasurer of each of
the above Obligors
3
<PAGE> 49
Solicitors & Notaries
ADDRESS Level 32, 123 Eagle Street STATE Queensland
TELEPHONE 3833-3333
FACSIMILE 3832-4233
DX NUMBER 210 CITY Brisbane
- --------------------------------------------------------------------------------
CHARGE Corporations Law
263,264
- --------------------------------------------------------------------------------
CORPORATION NAME International Sea Drilling Ltd
A.C.N. or A.R.B.N 068 783 264
- --------------------------------------------------------------------------------
THIS DEED is made on January 9, 1996.
BETWEEN:
International Sea Drilling Ltd (ARBN 068 783 264) a foreign company incorporated
in the Cayman Islands and having its registered office in Australia at Level 27,
530 Collins Street, Melbourne, Victoria (the "Mortgagor");
NationsBank of Texas, N.A., as Agent, a national banking association of 700
Louisiana Street, 8th Floor, Houston, Texas (the "Mortgagee");
BACKGROUND
A. The Mortgagor is the proprietor of the workover rig described in the
First Schedule (the "Workover Rig")
B. The Workover Rig is intended to be operated in Bass Strait in Australia
C. The Mortgagor has requested the Banks to make certain financial
accommodation available to the Mortgagor.
D. Banks have agreed to such request, in consideration of this Mortgage
being signed and delivered to the Mortgagee as agent for the Banks.
<PAGE> 50
2
THE PARTIES COVENANT AND AGREE as follows:
1. DEFINITIONS AND INTERPRETATION
1.1 Definitions
When used in this Mortgage, the following terms have the following
meanings, unless the context otherwise requires:
"Agreement" means that certain Term Loan Agreement dated as of
November 30, 1995 among Mortgagor, Mortgagee and the Banks, as
amended, extended or restated;
"Associated Person" means a person associated with a relevant person
or an associate of that person in any of the ways relevant for the
purposes of the Corporations Legislation;
"Australian Dollars" means the lawful currency of Australia;
"Banks" means NationsBank of Texas, N.A. of 700 Louisiana Street,
8th Floor, Houston, Texas, National Bank of Canada of 2121 San
Jacinto, Suite 1850, Dallas, Texas and National Bank of Alaska of
301W. Northern Light Blvd, Anchorage, Alaska severally;
"Collateral Security" means any Encumbrance, guarantee, indemnity,
bond, covenant, negotiable instrument, or other agreement,
arrangement or understanding (whether or not recorded in writing),
under or as a result of which:
(a) the Mortgagee is (or will be or may contingently or
prospectively be) at any time entitled to sue for, recover, set
off or receive payment of the whole or part of the Secured
Moneys or any moneys which the Mortgagee may apply towards the
Secured Moneys;
(b) the Mortgagee is entitled to have performed, observed or
fulfilled any Obligation for payment of the whole or part of
the Secured Moneys; or
(c) the Mortgagee is entitled to retain or withhold possession of
or to exercise any other Right in respect of any form of
property until the whole or part of the Secured Moneys have
been paid;
"Corporations Legislation" means legislation relevant to the
incorporation, regulation and affairs of corporations generally, in
Australia;
"Co-surety" means a person liable at any time to pay to the
Mortgagee part or the whole of the Secured Moneys, (whether jointly
or severally with or independently from the Mortgagor and whether
such liability is secured or unsecured); in respect of one of
several persons comprising the Mortgagor the term includes each
other person being a Mortgagor;
"Encumbrance" means a mortgage, charge, debenture, encumbrance,
assignment by way of security, pledge, deposit of title, lien,
security, option to acquire, Lease, Licence, caveat, preferential
interest, title retention, or other estate, interest, claim or
arrangement relating to property, or an agreement to grant, create,
allow or register any of the foregoing, whether registered or
unregistered and whether statutory, legal or equitable;
"Event of Default" means each of the events or circumstances defined
in this Mortgage as constituting an Event of Default;
<PAGE> 51
3
"Executive Officer" has the same meaning as in the Corporations
Legislation;
"Government Authority" includes the Crown, a minister, a government
department, a corporation or authority constituted for a public
purpose, a holder of an office for a public purpose, a local
authority and any agent or employee of any of the foregoing;
"Lease" means a lease, charter, hire purchase or hiring arrangement
in respect of property, or any other agreement under which property
may be occupied, used, operated or managed by a person other than
the owner of that property; the expression includes an agreement for
a Lease;
"Licence" means a licence, franchise, Right of entry, use or
occupation or other Right or profit-a-prendre in respect of
property; the expression includes an agreement for a Licence;
"Loan Papers" has the same meaning as in the Agreement;
"Mortgage" means the fixed charge created by this deed and the terms
of this deed;
"Mortgaged Property" means:
(a) the Workover Rig;
(b) all components acquired in substitution for the components
comprised in the Workover Rig;
(c) all additions, accessories, modifications, substitutions and
spares from time to time relating to the foregoing;
(d) all permits, licences, registrations, approvals, consents and
other authorisations of any kind and all other Rights and
concessions held in connection with the foregoing; and
(e) proceeds of all policies of insurance in respect of the
Workover Rig;
The expression also means the whole or any part or parts of such
property;
"Mortgagee" means each person named as such in this Mortgage; the
expression includes the executors, administrators, successors and
assigns of each such person and any person whom the Mortgagee may
appoint as the Mortgagee's agent to exercise all or any of the
Mortgagee's Rights; when two or more people are named as or become
the Mortgagee, the expression means each of them severally and any
two or more of them jointly;
"Mortgagor" means each person named as such in this Mortgage; the
expression includes the permitted assigns and the executors,
administrators and successors of each such person; when two or more
people are named as or become a Mortgagor:
(a) "Mortgagor" means each of them severally as well as any two or
more of them jointly; and
(b) the Obligations and agreements on their part bind each of them
severally and every two or more of them jointly;
<PAGE> 52
"Notice" means a notice, demand, request, direction, or other
communication from the Mortgagee to the Mortgagor or from the
Mortgagor to the Mortgagee as provided in Section 12.3 of the
Agreement;
"Obligation" means any legal, equitable, contractual, statutory or
other obligation, commitment, duty, undertaking or liability;
"Officer of the Mortgagee" means at a particular time an attorney of
the Mortgagee appointed to exercise any Rights of the Mortgagee
relevant to this Mortgage, a solicitor acting for the Mortgagee, or
a person authorised by the Mortgagee or such attorney or solicitor
(including by way of ratification) to exercise any relevant Right of
the Mortgagee; where the Mortgagee is a corporation, the expression
also includes each director, secretary, manager or other Executive
Officer of the Mortgagee;
"Premises" means any location in the Bass Strait, Victoria,
Australia at which the Workover Rig is operating or kept from time
to time and includes any off-shore platform or ship where the
Workover Rig is located from time to time;
"Receiver" means any receiver or manager or receiver and manager (as
the case may be) appointed over the Mortgaged Property by or at the
instigation of the Mortgagee; where two or more people are
appointed, the expression means each of them severally as well as
any two or more of them jointly;
"Related Body Corporate" has the same meaning as in the Corporations
Legislation;
"Repair" includes properly maintaining Workover Rig and its
components and (as necessary) painting and repairing them and
keeping them free from damage, structural defects, rust, corrosion,
or any other deterioration whatsoever, normal wear and tear
excepted;
"Right" includes any legal, equitable, contractual, statutory or
other right, power, authority, benefit, privilege, remedy,
discretion, or cause of action;
"Secured Moneys" means all moneys already, now or in the future
advanced or paid by the Banks and all liabilities (direct or
contingent) already, now or in the future incurred by the Banks, to,
for the use of, on behalf of or at the request of, the Mortgagor
(either alone or with any other person) and all moneys otherwise
owing or payable already, now or in the future by the Mortgagor
(either alone or with any other person) to the Banks pursuant to the
Agreement and the Loan Papers; without limiting or being limited by
the foregoing "Secured Moneys" includes:
(a) all moneys already advanced or which the Banks now or in the
future advance or become liable to advance to, for the use of,
or on behalf of, any other person, where those moneys have been
advanced, are advanced or are liable to be advanced on the
order, direction, request, nomination or suggestion (express or
implied) of the Mortgagor (either alone or with any other
person) in connection with the Agreement or the Loan Papers;
(b) all moneys which the Mortgagor (either alone or with any other
person) whether directly or indirectly or contingently or
prospectively, and whether by way of debt, contract, guarantee,
indemnity, restitution, damages, order of a court or otherwise
now or already is or in the future becomes liable to pay to the
Banks under this Mortgage, the Agreement or the Loan Papers;
(c) all moneys which the Banks are liable to pay already, now or in
the future for the accommodation of the Mortgagor (either alone
or with any other person) because of
<PAGE> 53
5
the Banks entering into any engagement, bond, indemnity,
guarantee, letter of credit, letter of comfort, call option,
undertaking or other commitment or by accepting, endorsing,
drawing, paying, discounting or otherwise becoming liable on
any bill of exchange or other negotiable instrument under the
Agreement or the Loan Papers, whether such engagement, bond,
indemnity, guarantee, letter of credit, letter of comfort, call
option, undertaking, or other commitment or negotiable
instrument has matured or not, or whether the liability of the
Banks under it is contingent, prospective or actual;
(d) all moneys which the Banks may debit against the Mortgagor
(either alone or with any other person) on any account under
any present or future judgment, order, understanding,
arrangement, custom, practice of the Banks or Right of the
Banks, or under the terms of this Mortgage, the Agreement, the
Loan Papers or otherwise;
(e) all moneys already now or in the future owed by the Mortgagor
(either alone or with any other person) to the Banks because of
the assignment to or acquisition by the Banks of any debt or
other Obligation of the Mortgagor under the Agreement or the
Loan Papers;;
(f) all loss or damages suffered by the Banks caused or contributed
to by any breach by the Mortgagor of this Mortgage, the
Agreement or the Loan Papers;
(g) all moneys and liabilities defined elsewhere in this Mortgage
as comprising part of the Secured Moneys;
(h) all other moneys intended to be secured under the terms of this
Mortgage; and
(i) interest on all of the above moneys;
irrespective of:
(j) whether the security created by this Mortgage is or remains
valid or is released or discharged;
(k) whether such amounts and liabilities are owing at a particular
time or in the future, or whether they are owing actually,
prospectively, contingently or otherwise;
(l) whether any amount or liability is, at any particular
time, ascertained or unascertained;
References to the "Secured Moneys" include the whole or any
part or parts of such moneys.
"Workover Rig" means the workover rig and its components
described in the First Schedule;
1.2 Interpretation
In the interpretation and implementation of this Mortgage, unless
the context otherwise requires;
(a) singular includes plural and vice versa; any gender includes
every gender;
(b) references to people include corporations, associations,
Government Authorities and all other legal entities;
<PAGE> 54
6
(c) references to writing include printing, typing, telex,
facsimile and other means of reproducing words and/or
figures in a visible, tangible form, in English;
(d) references to signature and signing include due execution
by corporations and other relevant entities;
(e) references such as "now", "hereafter", "presently",
"previously", "already", "in the future", "in the past"
and similar terms refer to the date the Mortgagor signed
this Mortgage; references to months mean calendar months;
(f) references to statutes include statutes amending,
consolidating or replacing the statute referred to and all
regulations, orders in council, rules, by-laws, and
ordinances made under those statutes; references to
sections of statutes refer to corresponding sections in
amended, consolidated or replacement statutes;
(g) references to clauses, sub-clauses, paragraphs and
sub-paragraphs refer to clauses, sub-clauses, paragraphs
and sub-paragraphs of this Mortgage;
(h) headings and the index are for convenience only, and shall
be disregarded;
(i) where any word or phrase is given a defined meaning, any
other grammatical form of that word or phrase has a
corresponding meaning;
(j) each paragraph or sub-paragraph in a list is to be read
independently from the others in the list;
(k) time is of the essence in relation to Obligations of the
Mortgagor under this Mortgage, the Agreement and the Loan
Papers;
(l) the exercise by the Mortgagee, an Officer of the Banks or
a Receiver of any of their respective Rights shall be
deemed to be at its or his complete discretion and (so far
as possible) not to restrict the exercise at any other
time of the same or any other Right;
(m) if any term of this Mortgage is by law unenforceable or
made inapplicable, it shall be severed or read down, but
so as to maintain (as far as possible) all other terms of
this Mortgage;
(n) if any statute requires any notice to be given or the
expiration of any time before the exercise of a particular
Right of a mortgagee, receiver or manager or the incurring
of an Obligation by a mortgagor, such requirement is
excluded to the full extent permitted by law; if any such
requirement cannot legally be excluded, the same is
abridged to the full extent permitted by law or to the
period of twenty-four (24) hours (whichever is the
greater);
(o) all terms of this Mortgage are intended to have full
effect, despite any moratorium legislation, events which
may otherwise amount to a frustration of contract, or
other circumstances which might otherwise terminate,
suspend or modify Obligations;
(p) those Mortgagee's Rights and Mortgagor's Obligations under
this Mortgage that are capable of taking effect after the
release or discharge of this Mortgage shall continue after
the release or discharge of this Mortgage;
(q) all Rights of the Mortgagee and a Receiver are cumulative,
and do not exclude or modify any other Rights relating to
this Mortgage;
<PAGE> 55
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(r) nothing in this Mortgage shall merge, extinguish,
postpone, lessen or otherwise prejudicially affect any
lien or security which the Mortgagee is entitled to
because of the deposit of documents of title relating to
the Mortgaged Property or any other documents or
instruments, or merge any Right of the Mortgagee on any
bill of exchange, promissory note or other instrument;
(s) all Rights, Obligations and other terms implied under the
Bills of Sale and Other Instruments Act 1955 shall apply
to this Mortgage, and shall be deemed to be negatived,
modified or varied only to the extent that the same shall
be inconsistent with the terms of this Mortgage;
(t) unless otherwise specifically stated in this Mortgage or
required by statute, any authority, approval or consent
required from the Mortgagee under the terms of this
Mortgage may be given, withheld, or given on terms and
conditions, without giving any reasons, but the Mortgagee
shall not act arbitrarily or capriciously in that regard;
(u) this Mortgage binds each person signing it to the full
extent provided in this Mortgage, even if one or more of
the persons named as Mortgagor has not signed or never
signs it, or if the signing of this Mortgage by any one or
more of such persons (other than the person sought to be
made liable) is or may become void or voidable.
2. PAYMENT OF MONEY
2.1 Payment of Secured Moneys
The Mortgagor will pay and/or repay (as the case may be) the
Secured Moneys to the Mortgagee in accordance with the
Agreement and the Loan Papers.
2.2 Interest on Secured Moneys
Interest forming part of the Secured Moneys shall be paid by
the Mortgagor at the rate or respective rates agreed between
the Mortgagee and the Mortgagor in the Agreement and the Loan
Papers.
2.3 Unpaid Interest
(a) If any payment of interest required under this Mortgage,
the Agreement or the Loan Papers is not paid in full on
the due date, then interest shall accrue in accordance
with the Agreement and the Loan Papers.
(b) The Rights of the Mortgagee to charge interest on unpaid
interest and/or to capitalise unpaid interest may be
exercised:
(i) without prejudice to the Right of the Mortgagee to
sue for and recover unpaid interest or to the other
Rights of the Mortgagee;
(ii) without Notice to the Mortgagor;
(iii) despite the death, bankruptcy, liquidation,
receivership, assignment for the benefit of
creditors, arrangement with creditors, official
management or other demise of the Mortgagor;
(iv) despite the obtaining of any judgment in relation
to the Secured Moneys; and
<PAGE> 56
8
(v) despite the cessation of a relationship between the
Mortgagee and the Mortgagor of financier and
customer.
2.4 Interest on Judgment
If any judgment or order is obtained by the Mortgagee against
the Mortgagor in respect of the Secured Moneys, the Mortgagor
shall pay interest on the judgment debt or amount ordered to
be paid from the date of judgment until payment of that
amount. Such interest shall be calculated and payable at the
rate (or, if applicable, in accordance with the method of
determining a rate) applicable to such debt immediately before
judgment or at the rate payable under that judgment (whichever
is the higher).
2.5 Manner of Payment
(a) The Secured Moneys will be paid to the Mortgagee at such
place as may be provided in the Agreement or the Loan
Papers.
(b) Any remittance or payment (despite the issue of a receipt)
shall only constitute payment to the extent that, and on
the date when, the same is received by the Mortgagee in
legal tender and shall not then or later be required to be
repaid, disgorged, set off, or the benefit of it lost.
(c) The Mortgagee may require any payment to be made by bank
cheque.
(d) The Mortgagor will (if required by the Mortgagee) sign a
banker's authority directing payments of appropriate
amounts owing to the Mortgagee by debiting of the
Mortgagor's account and crediting to the Mortgagee's
account at a bank nominated by the Mortgagee.
(e) If any part of the Secured Moneys is denominated in a
currency other than Australian Dollars then, except as
provided in the Agreement or any Loan Paper to the
contrary:
(i) the Mortgagor shall (as the Mortgagee requires) pay
to the Mortgagee the Secured Moneys so denominated
which are due from time to time in either that
other currency or the equivalent in Australian
Dollars of those moneys due, adopting an exchange
rate nominated by the Mortgagee and current at the
time of payment or any other relevant time
nominated by the Mortgagee;
(ii) where any payment received in reduction of that
part of the Secured Moneys is in Australian Dollars
(or in any currency other than the currency in
which that part of the Secured Moneys is
denominated) and the Agreement, the Loan Papers or
the terms of this Mortgage require payment in the
currency in which the debt is owed, the amount of
the payment received shall be computed in the
relevant currency in which the relevant debt is
owed, using an exchange rate nominated by the
Mortgagee and current at the time of receipt or
current at any other relevant time nominated by the
Mortgagee;
(iii) if the whole or any part of the Secured Moneys so
denominated is not paid when due, the Mortgagee may
(without Notice to the Mortgagor) purchase with
Australian Dollars (or any other relevant currency)
currency in and equal to the amount due (whether
such purchase is at an official rate of exchange or
at a premium above such official rate) and apply
the currency purchased against the relevant Secured
Moneys; the Mortgagor shall indemnify the Mortgagee
in Australian Dollars (or the other relevant
currency of purchase) for the amount so expended by
the Mortgagee and all other costs incurred in
respect of such purchase.
<PAGE> 57
9
(f) Each person named or identified as Mortgagor irrevocably
appoints each other person named as Mortgagor and (in the
case of corporations) each of their own and such other
persons' respective directors, secretaries, and Executive
Officers, severally to be his attorney to make payments
and to give acknowledgments relating to the Secured
Moneys. Every payment made on account of the Secured
Moneys and every acknowledgment of liability in respect of
the Secured Moneys made or given by such appointee
(whether expressly as attorney or not) shall be binding as
if the appointor under this paragraph had made such
payment or given such acknowledgment personally. This
paragraph does not make inapplicable the definition of
Mortgagor contained elsewhere in this Mortgage.
2.6 Apportionment of Moneys Received
(a) Any money paid to the Mortgagee in respect of the Secured
Moneys (despite any purported appropriation or condition
of payment by the person paying it) may be appropriated by
the Mortgagee to any amount or amounts owing by the
Mortgagor (actually or contingently) and to principal or
interest, as the Mortgagee determines. Such appropriation
may be made at the time of payment or at any later time
(the Mortgagee being entitled to retain amounts in a
suspense account indefinitely).
(b) If the Mortgagee receives money from any source (including
payment by the Mortgagor, a Receiver, a Co-surety,
proceeds from the enforcement of a Right, insurance
proceeds, or compensation, resumption or like payment),
which may be applied in reduction of the Secured Moneys,
but all or part of the Secured Moneys are owing
contingently or prospectively or their amount cannot be
ascertained, then the Mortgagee may, pending the outcome
of the relevant contingency or circumstances or the amount
being determined, deposit all or such part of such moneys
as the Mortgagee sees fit as security for the payment of
the Secured Moneys. Such deposit may be made in an
interest bearing account with any person determined by the
Mortgagee (including the Mortgagee or any Related Body
Corporate of the Mortgagee where the Mortgagee or such
Related Body Corporate customarily accepts deposits). The
Mortgagor waives in favour of the Mortgagee all Rights (if
any) the Mortgagor may have to the benefit of the debt
created by the deposit and any interest payable from time
to time in respect of it.
(c) Where amounts are paid into a running account with the
Mortgagee, the application of the assumption that debits
first incurred are first repaid is to be excluded, if the
effect would be that:
(i) the amount of the Secured Moneys for which the
Mortgagee would be able to claim priority as
against any other Encumbrancee of the Mortgaged
Property would be reduced;
(ii) the amount of the Secured Moneys for which any
Co-surety could be made liable would be reduced;
or
(iii) the Mortgagee would otherwise be prejudiced.
In such cases payments shall be deemed to have been
applied progressively in reduction of later debits,
beginning with the latest debit.
2.7 Combination of Accounts
(a) The Mortgagee may at any time (subject to any contrary
terms of the Agreement), without Notice, combine any two
or more accounts held with the Mortgagee by the Mortgagor.
The Mortgagee may, to the extent to which it would be so
entitled if the combined accounts had at all times been
conducted as a single account, decline to make any
accommodation available to the Mortgagor.
<PAGE> 58
10
(b) Despite the provisions of the preceding paragraph, in
determining any amount owing by the Mortgagor to the
Mortgagee and interest payable, the Mortgagee shall not be
Obliged to give any credit for any credit balances in any
account of the Mortgagor or any other moneys owing by the
Mortgagee to the Mortgagor.
2.8 No Set Off
The Right to receive amounts under this Mortgage shall be free
from any equity, set off, or cross claim which (except for
this provision) the Mortgagor would be entitled to claim
against the Mortgagee or any intermediate mortgagee or any
assignee.
3. CHARGING PROVISIONS
3.1 Charge
The Mortgagor charges to the Mortgagee all the Mortgagor's
estate and interest in the whole of the Mortgaged Property, to
secure to the Mortgagee the payment in the manner provided in
this Mortgage of the Secured Moneys and the due and punctual
performance of all Obligations of the Mortgagor in this
Mortgage, the Agreement and the Loan Papers.
3.2 Separate Charges: Consents
(a) Notwithstanding the preceding sub-clause or any warranties
given to the Mortgagee under this Mortgage:
(i) the charge under this Mortgage is a separate and
distinct charge of each item comprised in the
Mortgaged Property; each charge is severable from the
others, and the charge shall not extend to property
which by statute is prohibited from being charged
(either in the form of this Mortgage or at all);
(ii) where failure to obtain a consent or approval from a
relevant Government Authority or other person prior
to the charge being given under this Mortgage would,
in respect of a relevant part of the Mortgaged
Property, result in an ineffective charge over, or
forfeiture, revocation, surrender or other loss of,
or (in the opinion of the Mortgagee) other material
prejudice to, that part of the Mortgaged Property,
the charge under this Mortgage shall not extend to
that part of the Mortgaged Property unless and until
such consent or approval is obtained; the charge
shall then operate in respect of that part of the
Mortgaged Property from the time that such consent or
approval is obtained or such earlier time as may be
allowed by or implicit in the terms of such consent
or approval (being not earlier than the date of
signing of this Mortgage).
(b) The Mortgagor shall immediately do all things required on
the Mortgagor's behalf to have any consent or approval
referred to in the preceding paragraph given at the
earliest possible time, and the Mortgagor will at all
times fully inform the Mortgagee as to all matters
concerning application for the same.
3.3 Fixed Charge
The charge created by this Mortgage is intended to operate as
a fixed charge in relation to the Mortgaged Property.
<PAGE> 59
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3.4 No Competing Mortgages
The Mortgagor will not create any mortgage or charge which in
respect of any part of the Mortgaged Property rank in priority
or pari passu with this Mortgage except with the consent in
writing of the Mortgagee first had and obtained.
4. WARRANTIES AND ACKNOWLEDGMENTS
4.1 Indefeasible Title
(a) The Mortgagor warrants that the Mortgagor has (or is
immediately entitled to and able to obtain) and will at
all times in the future have an absolute and indefeasible
title to the Mortgaged Property, and that the Mortgaged
Property is not subject to any:
(i) Encumbrance;
(ii) adverse possession;
(iii) restriction on use;
(iv) notice of pending revocation, compulsory
acquisition or limitation;
(v) litigation, arbitration, administrative proceeding
or threatened litigation, arbitration or
administrative proceeding; or
(vii) other claim or interest having priority over or
competing with or likely to affect this Mortgage,
except as is specifically described in this Mortgage or
has been unequivocally accepted in writing by the
Mortgagee.
(b) The Mortgagor warrants that, to the best of the
Mortgagor's knowledge, no person alleges or makes or will
allege or make any claim to any interest referred to in
the preceding paragraph or intends or has threatened to
commence any proceedings or other action in respect of
such claim.
4.2 Enforceability, Capacity and Disclosure
The Mortgagor acknowledges and re-affirms the representations
and warranties contained in the Agreement and further warrants
that:
(a) the Mortgagor has full power to sign and deliver this
Mortgage and perform the Mortgagor's Obligations under
this Mortgage and to receive accommodation from the
Mortgagee and/or the Banks in the manner contemplated in
this Mortgage, the Agreement and the Loan Papers, and that
any necessary corporate, shareholder and other action has
been taken and any necessary ratifications of
shareholders, beneficiaries and others have been given to
authorise such signature, delivery and performance;
(b) all Obligations of the Mortgagor in this Mortgage are
legally binding and enforceable in accordance with their
terms;
(c) the signing and delivery of and the performance of
Obligations under this Mortgage by the Mortgagor will not:
<PAGE> 60
12
(i) contravene any existing applicable law, statute,
rule or regulation or any judgment, decree or
permit to which the Mortgagor is subject;
(ii) conflict with or constitute a default under any
agreement or arrangement to which the Mortgagor is
a party or is subject or by which it or any of its
property is bound; or
(iii) contravene (if applicable) any provision of the
Mortgagor's memorandum and articles of association
or other constitutional documents or any relevant
trust;
(d) no event or circumstance which constitutes or which (with
the giving of notice or lapse of time or both) would
constitute an Event of Default has occurred and is
continuing;
(e) the Obligations of the Mortgagor under this Mortgage are
direct, general and unconditional Obligations of the
Mortgagor;
(f) the giving of this Mortgage is made in good faith without
any intention to delay or defraud any existing or future
creditor of the Mortgagor; the Mortgagor is presently able
to pay the Mortgagor's debts from the Mortgagor's own
money as such debts fall due;
(g) this Mortgage is not signed or accommodation obtained
relying on any representation, promise or statement by the
Mortgagee and/or the Banks or any person on behalf of the
Mortgagee and/or the Banks (including representations,
promises or statements as to availability of future
accommodation, accommodation charges, financial
conditions, currency fluctuations, business prospects or
such like) other than as is specifically contained in this
Mortgage, the Loan Papers or the Agreement.
4.3 Continuing Warranties
Each of the warranties by the Mortgagor in this Mortgage shall
be deemed to have been re-affirmed to the Mortgagee
immediately prior to each provision of accommodation
comprising part of the Secured Moneys being made available by
the Mortgagee and/or the Banks, except to the extent that the
Mortgagee shall have been specifically notified in writing by
the Mortgagor to the contrary.
5. GENERAL COVENANTS
The Mortgagor acknowledges and re-affirms the covenants
contained in the Agreement and the Loan Papers and further
covenants a follows:
5.1 Maintain and Protect Mortgaged Property
(a) The Mortgagor will throughout the duration of this
Mortgage fully maintain and protect the Mortgaged
Property.
(b) In the case of tangible property, the Mortgagor will keep
the Mortgaged Property in good and substantial Repair and
condition, and Repair the Mortgaged Property immediately,
if requested by the Mortgagee. The Mortgagor will replace
any components of the Workover Rig which are worn out,
stolen, destroyed or lost. Such replacement will be with
items of at least equal value.
(c) In the case of intangible property, the Mortgagor will
keep the Mortgaged Property in good standing and do
everything necessary or desirable to maintain its maximum
value.
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5.2 Renew Permits, Licences Etc.
(a) The Mortgagor will in each year during the continuance of
this Mortgage at least twenty-one (21) days before the
last time prescribed for so doing duly furnish or cause to
be furnished to all relevant Government Authorities such
returns, notices and other forms and declarations or
applications and all fees, imposts, duties, levies and
other payments as may be prescribed or necessary to lead
to the renewal, extending or maintaining of all permits,
licences, registrations, consents, approvals or other
authorisations granted to the Mortgagor in respect of the
Mortgaged Property, if any, and generally to do or cause
to be done everything else necessary for maintaining such
permits, licences, registrations, consents, approvals and
authorisations.
(b) The Mortgagor will immediately on the request of the
Mortgagee sign and deliver or cause to be signed and
delivered to the Mortgagee such applications, forms,
consents or approvals as the Mortgagee shall require for
obtaining, extending or renewing permits, licences,
registrations, approvals, consents or authorisations
relating to the Mortgaged Property in such manner as the
Mortgagee shall think fit or for the obtaining of any
necessary permits, licences, registrations, consents,
approvals or other authorisations to enable the Workover
Rig to be effectively operated. The Mortgagor will also
sign and deliver such transfers, authorities, securities
and other documents as the Mortgagee shall require to
enable the Mortgagee, a Receiver, or an Officer of the
Mortgagee to effect or obtain in their own name or the
name of the Mortgagor all such requisite permits,
licences, consents, registrations, approvals or other
authorisations, if any.
5.3 Observe Terms of Leases
The Mortgagor will duly and punctually pay all rents and
perform and observe all covenants and conditions on the part
of the lessee or licensee contained or implied in any Lease or
Licence for the time being and from time to time held by the
Mortgagor and in any way relating to the Mortgaged Property or
its location, and will immediately upon demand deliver to the
Mortgagee the receipt for every such payment.
5.4 Pay Mortgagee's Outgoings on Demand
(a) The Mortgagor will pay to the Mortgagee on demand all
costs, charges and expenses incurred by the Mortgagee in
connection with the Secured Moneys, this Mortgage, the
Agreement or any Loan Paper, including but not limited to:
(i) costs in respect of the preservation or protection
of the Mortgaged Property or this Mortgage, or
which in the Mortgagee's opinion may be necessary
or desirable to protect or safeguard or in any way
to aid assist or advantage the Rights, title and
interest of the Mortgagee or the Mortgagor in
relation to the Mortgaged Property;
(ii) costs (including legal costs on a full indemnity
(solicitor and own client) basis and reasonable
administration charges imposed by the Mortgagee)
which the Mortgagee incurs in connection with the
negotiation, preparation, signing, stamping,
registration, renewal, release, variation or
transfer of this Mortgage or in connection with any
documentation, advice, requests for consent,
enquiries, mortgages, covenants, contracts, orders,
requirements and other matters of any nature
affecting the Mortgaged Property, the Mortgagor or
any Co-surety, or the transactions secured by this
Mortgage;
(iii) costs (including legal costs on a full indemnity
(solicitor and own client) basis and reasonable
administration charges imposed by the Mortgagee)
incurred:
<PAGE> 62
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(A) in connection with any actual or attempted
exercise of any Right of the Mortgagee or a
Receiver,
(B) as a result of any Event of Default;
(C) in respect of any dispute or proceedings
commenced by any person (including the
Mortgagee) which relate directly or
indirectly to this Mortgage, the Mortgaged
Property, the Mortgagee, the Mortgagor or
any Co-surety or otherwise, and
(D) otherwise arising out of the Mortgagee being
the mortgagee under this Mortgage; and
(v) stamp duty, financial institutions duty, taxes,
registration fees, imposts, fees, fines, penalties,
and charges in connection with this Mortgage, the
Agreement, and the Loan Papers secured by this
Mortgage.
(b) The Mortgagor consents to all orders for costs made by a
court against the Mortgagor in favour of the Mortgagee
being on a full indemnity (solicitor and own client)
basis. The Mortgagor shall indemnify the Mortgagee on such
a basis for all costs incurred by the Mortgagee, even
though a court may only award party and party costs or may
award costs against any person (other than the Mortgagee).
5.5 Insurance
The Mortgagor will insure such of the Mortgaged Property as is
of an insurable nature against risks nominated from time to
time by the Mortgagee pursuant to the terms of the Agreement.
5.6 Not alter, affix etc.
The Mortgagor will not at any time throughout the duration of
this Mortgage without the Mortgagee's prior written consent
alter, modify, demolish, remove or dispose of any part of the
Mortgaged Property or affix it to any land, fixture or fitting
or sell, assign, dispose of, Encumber, demolish or alter any
of the same or any other significant property used or enjoyed
in connection with the Mortgaged Property (whether the same is
legally part of the Mortgaged Property or not) where to do so
would materially diminish the value of the Mortgaged Property.
The Mortgagor will not allow or facilitate any of the
foregoing to occur without such consent.
5.7 No Leases, Sales etc Without Consent
(a) The Mortgagor will not sell, assign, dedicate, dispose of,
abandon, forfeit, render worthless or of a reduced value,
Lease, sub-Lease, grant Licences or other Rights over, or
otherwise Encumber or deal with the Mortgaged Property, or
vary or surrender or consent to any assignment of any
Lease or Licence of the Mortgaged Property, or agree to do
any of the foregoing or allow the same to take place,
without the prior consent of the Mortgagee in writing.
This paragraph is subject to any specific contrary
provision in this Mortgage, the Agreement or the Loan
Papers, and subject to the provisions of any statute
expressly allowing any such dealing with the Mortgaged
Property.
(b) Nothing in this sub-clause prohibits an Encumbrance
created by:
(i) statute in respect of rates or taxes; or
(ii) workmen's liens;
<PAGE> 63
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where such Encumbrance is created on usual commercial
terms in the ordinary course of business and where payment
is not overdue.
(c) If the Mortgagor creates a subsequent mortgage or charge
over the Mortgaged Property ("such security") then prior
to or immediately after creation of such security, before
any request is made to the Mortgagee to produce the
relevant instrument of title for registration of such
security and before any moneys are secured (actually or
contingently) by such security, the Mortgagor will cause
the person entitled to such security to enter into a
priority and subordination agreement with the Mortgagee,
so as to preserve and/or confirm the Mortgagee's position
as mortgagee ranking in priority to the mortgagee under
such security for an amount and on terms wholly
satisfactory to the Mortgagee.
5.8 No Assignment of Income from Mortgaged Property
Except as provided in the Agreement or the Loan Papers, the
Mortgagor will not for the duration of this Mortgage, without
the prior consent in writing of the Mortgagee:
(a) assign or Encumber;
(b) attempt or purport to assign or Encumber; or
(c) cause or permit any other person to have,
any Right to receive any present or future rents, profits or
any other legal or beneficial Rights in the income from time
to time of the Mortgaged Property or income otherwise derived
from the Mortgaged Property from time to time.
5.9 No Removal of Workover Rig from Jurisdiction
The Mortgagor shall not, without the prior consent in writing
of the Mortgagee, remove or suffer or allow the removal of the
Workover Rig from Australia.
5.10 Mortgagor to Give Notice of Certain Events
The Mortgagor shall immediately give Notice to the Mortgagee
if any of the following become known to the Mortgagor:
(a) the occurrence of any Event of Default;
(b) any circumstances where an insurer may be liable to pay
any moneys in relation to the Mortgaged Property;
(c) any event or circumstance where an Encumbrance is granted
or arises in relation to the Mortgaged Property other than
a "Permitted Lien" as defined in the Agreement;
(d) any actual or proposed compulsory acquisition, purchase or
forfeiture of the Mortgaged Property;
(e) any actual or threatened litigation, arbitration or
administrative proceedings relating to the Mortgaged
Property or the Mortgagor which might have a material
adverse effect in relation to the value of the Mortgaged
Property or the ability of the Mortgagor to perform or
observe the Mortgagor's Obligations under this Mortgage or
any Collateral Security;
(f) any circumstances where the value of the Mortgaged
Property is or may be substantially reduced;
<PAGE> 64
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(g) any other circumstances or information that the Mortgagee
may from time to time reasonably specify in respect of the
Mortgagor, this Mortgage or the Mortgaged Property.
5.11 Consent of Lessors and Mortgagees of Premises
Where the Mortgagor is not the registered owner of any
Premises, or where the owner of any Premises (whether or not
the Mortgagor) has mortgaged them to a person, the Mortgagor
shall or at such time as required by the Mortgagee make
reasonable efforts to procure from each relevant owner and
mortgagee in favour of the Mortgagee a consent to this
Mortgage, a permit to enter such Premises, a consent to the
exercise by the Mortgagee or a Receiver of all their
respective Rights under this Mortgage, an acknowledgement that
neither the giving of this Mortgage nor the exercise of Rights
of enforcement shall (as such) breach any relevant Lease or
mortgage, and such other covenants relating to this Mortgage
and such Premises as the Mortgagee requires to assist it in
respect of this Mortgage.
5.12 Further Assurances
The Mortgagor will at all times sign all further documents and
amendments to documents and do other things as may be
reasonably requested by the Mortgagee to enable this Mortgage
to be registered and (if required by the Mortgagee) for
further or better securing the Rights and interests of the
Mortgagee over the Mortgaged Property to secure payment of the
Secured Moneys and performance of all Obligations of the
Mortgagor. In particular, the Mortgagor will sign such legal
mortgages, assignments by way of security, applications,
authorities, assurances and other documents with respect to
the Mortgaged Property as the Mortgagee may reasonably require
to perfect or improve the security afforded by this Mortgage.
The Mortgagor shall pay to the Mortgagee on demand all costs
incurred by the Mortgagee in respect of this sub-clause and
the same shall form part of the Secured Moneys.
6. PRIOR AND SUBSEQUENT MORTGAGES
6.1 Prior and Subsequent Mortgages
The Mortgaged Property is not or shall not become subject to a
prior or subsequent mortgage or charge without the prior
written consent of the Mortgagee.
7. DEFAULT
7.1 Events of Default
An Event of Default for purposes of this Mortgage means the
occurrence of a "Default," as defined in the Agreement. If an
Event of Default occurs and is continuing; THEN, if the
Mortgagee elects,the Secured Moneys shall become immediately
payable to the Mortgagee as if the time for payment or
repayment of the same had arrived. The Mortgagee need not
notify the Mortgagor of such election. If there is any
outstanding Obligation of the Mortgagee and/or the Banks to
the Mortgagor pursuant to the Agreement (including any
commitment to advance any accommodation) the Mortgagee and/or
the Banks may also decline to meet such Obligation.
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8. POWERS OF MORTGAGEE
8.1 Mortgagee May Remedy Default
If the Mortgagor defaults in any Obligation to the Mortgagee,
or if any statement, warranty or representation of the
Mortgagor made or deemed to be made to the Mortgagee is untrue
or misleading, the Mortgagee may (but shall not be Obliged
to), do all acts and things which the Mortgagee considers
necessary to make good such default or rectify the
circumstances stated warranted or represented or deemed so to
be. All expenses incurred by the Mortgagee shall, upon being
incurred, be added to and form part of the Secured Moneys and
bear interest accordingly. Such expenses shall be payable by
the Mortgagor to the Mortgagee on demand. The Mortgagor
indemnifies the Mortgagee against any loss, damage, cost or
expense arising or incurred by the Mortgagee by reason of any
default of the Mortgagor. The Mortgagee shall incur no
liability for failing or declining to exercise any Right under
this sub-clause.
8.2 Statutory Powers on Occurrence of Event of Default
All the Rights of a mortgagee in any statute or at law may be
exercised by the Mortgagee in respect of the Mortgaged
Property at any time an Event of Default occurs and is
continuing, despite any subsequent acceptance of payment of
any part of the Secured Moneys.
8.3 Power of Sale
(a) At any time an Event of Default occurs and is continuing,
the Mortgagee may, provided it does so in a commercially
reasonable manner, sell and assign the Mortgaged Property
free from any equity of redemption or other interest on
the part of the Mortgagor. Such sale may be by public
auction, tender, private contract, transfer without
contract or any combinations of the foregoing. The
Mortgaged Property may be sold as one parcel or (if
applicable) separately or in lots. It may be sold subject
to any special stipulations, for cash, on credit, by way
of set-off or exchange, at a discount or otherwise, or in
any combinations of the foregoing. In the case of credit,
the sale may be made with or without charging interest
(and if with interest, at such rate as the Mortgagee
determines) and with or without taking security for the
purchase money. The Mortgagee may buy in at any auction,
refuse any tenders and rescind or vary any contract of
sale and resell the property, without being liable for any
loss.
(b) The Mortgagee may in its discretion, provided it does so
in a commercially reasonable manner, use any conditions of
auction, tender or sale and exercise all the powers of a
beneficial owner in the same manner as if this Mortgage
had vested the absolute ownership of the Mortgaged
Property in the Mortgagee.
(c) Provided it is done in a commercially reasonable manner,
unless prohibited by statute, the Mortgaged Property need
not in the first instance be submitted for sale at public
auction.
(d) Provided it does so in a commercially reasonable manner,
at any time after the power of sale has become exercisable
by the Mortgagee, the Mortgagee may grant to any person an
option to purchase the Mortgaged Property on any terms. If
the Mortgagor subsequently redeems this Mortgage, the
Mortgagor shall be bound by such option as if the
Mortgagor had granted it. The Mortgagor indemnifies the
Mortgagee for any liability incurred by the Mortgagee as a
result of any failure by the Mortgagor to strictly observe
the terms of any such option.
(e) The preceding provisions of this sub-clause are in
addition to any powers conferred by statute, but are
subject to the giving of any notices required by statute
prior to or after the exercise of any power of sale, to
the extent that such notices cannot be dispensed with by
<PAGE> 66
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consent. To the extent that the requirement for such
notices can be so dispensed with, it is dispensed with.
8.4 Further Powers of Mortgagee After Occurrence of Event of
Default
(a) After the occurrence of an Event of Default which is
continuing, the Mortgagee may also, without making demand
or giving any notice to the Mortgagor (unless compelled by
law to do so), do any of the following in a commercially
reasonable manner:
(i) take possession and control of, and use the
Mortgaged Property;
(ii) enter into receipt of the rents and profits of the
Mortgaged Property;
(iii) grant or accept Leases or Licences relating to the
Mortgaged Property or renew Leases or Licences for
any purposes, for such periods and upon such terms
as the Mortgageee thinks fit (including the
assumption of unusual Obligations); the Mortgagor
shall be bound by and shall, upon any resumption of
possession of the Mortgaged Property by it, observe
as owner all the provisions of any Lease or Licence
entered into by the Mortgagee until the expiration
of the term of such Lease or Licence and any
options of renewal which may be exercised.
(iv) exercise all other Rights vested in the Mortgagee
by this Mortgage, any statute, the common law or
the rules of equity, and deal with the Mortgaged
Property in as full and ample a manner as if it
were the owner of the Mortgaged Property;
(b) A person dealing with the Mortgagee need not enquire
whether any Event of Default or other circumstance has
occurred to authorise the Mortgagee to act, or to see to
the application of any moneys paid to the Mortgagee.
(c) If the Mortgagee gives notice to any person demanding to
enter into receipt of the rents and profits of the
Mortgaged Property, all Rights of the Mortgagor under
Leases and Licences or otherwise with respect to rents and
profits of the Mortgaged Property shall be exercisable by
the Mortgagee to the exclusion of the Mortgagor until the
notice of the Mortgagee is withdrawn or a discharge of
this Mortgage is given.
(d) All costs and expenses incurred by the Mortgagee as a
result of exercising any of the foregoing Rights shall,
immediately upon being incurred, be added to and form part
of the Secured Moneys. They shall bear interest
accordingly and shall be payable to the Mortgagee on
demand.
(e) If any loss is made in the exercise of the Mortgagee's
Rights, other than losses resulting from the gross
negligence or willful misconduct of the Mortgagee, such
loss shall be borne by the Mortgagor. It shall be added to
the Secured Moneys, bear interest accordingly and shall be
payable to the Mortgagee on demand.
8.5 Attorney of the Mortgagor
(a) The Mortgagor irrevocably appoints the Mortgagee, every
Officer of the Mortgagee, every Receiver, and every person
from time to time appointed by the Mortgagee for the
purposes of this sub-clause severally its attorney and the
attorney of its heirs, executors, administrators,
successors and assigns (the "Attorney") for the use and
benefit of the Mortgagee to do:
(i) all acts and things required to be done by the
Mortgagor under this Mortgage, any Loan Paper or the
Agreement; and
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19
(ii) all acts which the Mortgagee is by virtue of this
Mortgage, the Agreement or any Loan Paper authorised
or empowered to do during the continuance of any
Event of Default.
(b) Without limiting the above, an Attorney may:
(i) take steps and proceedings and sign documents for
securing, perfecting or improving (as the Mortgagee
or an Attorney thinks fit) the security constituted
by this Mortgage, and sign in favour of the
Mortgagee all further legal mortgages, transfers,
assignments and other assurances of all or any part
of the Mortgaged Property required to be signed by
the Mortgagor under this Mortgage, the Loan Papers
or the Agreement;
(ii) in the name of and on behalf of the Mortgagor or in
the name of the Mortgagee or an Attorney demand,
sue or institute bankruptcy proceedings for, prove
in estates for, recover, receive, give effectual
receipts for or make compromises in respect of the
Mortgaged Property;
(iii) institute proceedings and do all such other things
as may be necessary to procure the removal of any
adverse interest noted against or registered over
the Mortgaged Property;
(iv) exercise each Right of the Mortgagor under any and
every Lease, Licence, contract, arrangement or
understanding and any guarantees relating to them
which the Mortgagor or any predecessor in title has
entered into in respect of the Mortgaged Property,
and assign to any purchaser of the Mortgaged
Property the benefit of such Leases, Licences,
contracts, arrangements or understandings and any
guarantees relating to them;
(v) make, enforce, settle or compromise any claim, and
demand, sue for, recover, negotiate, receive and
give discharges for all moneys payable under any
insurance policy relating to the Mortgaged
Property, irrespective of whether such policy is in
the name of the Mortgagee or the Mortgagor or both
or any other person and whether or not it covers
any other property;
(vi) make, enforce, settle or compromise any claim and
demand, sue for, recover, receive and give
discharges for all moneys payable in respect of any
compulsory sale or acquisition of the Mortgaged
Property;
(vii) apply for and do all things to expeditiously
obtain any permit, licence, registration, approval,
consent or authority in respect of the Mortgaged
Property or any use or proposed use of the
Mortgaged Property; and
(viii) appoint a substitute or substitutes for all or any
of the above purposes.
(c) The Attorney may register this power of attorney under any
statute and do whatever he considers necessary to give
validity and effect to the same.
(d) Except as the result of the gross negligence or willful
misconduct of the Attorney, the Attorney shall not be
responsible for any loss which may happen in the exercise
of the above powers.
(e) A certificate by the Mortgagee signed by an Officer of the
Mortgagee or a Receiver as to the occurrence of an Event
of Default may be relied on by any person in respect of
this sub-clause without further enquiry.
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20
8.6 Appointment of Receiver
(a) After an Event of Default occurs and is continuing (even
though the power of sale of the Mortgagee may not yet be
exercisable) the Mortgagee may in writing appoint a person
(or two or more persons acting jointly and/or severally)
to be receiver or receiver and manager (the term
"Receiver" including a receiver or a receiver and manager,
as applicable) of the Mortgaged Property or its income. No
prior notice or demand need be given by the Mortgagee
before the Rights in this sub-clause are exercised.
(b) The provisions of any relevant statute dealing with
Receivers shall be varied to the extent provided in this
sub-clause.
(c) The Mortgagee may from time to time revoke any appointment
of a Receiver under this Mortgage and/or appoint another
Receiver.
(d) A Receiver will, in addition to all other Rights elsewhere
in this Mortgage and at law, have power to:
(i) do, carry out and perform all Rights in relation to
the Mortgaged Property as the Mortgagee could
(whether prior to or after the occurrence of an Event
of Default), and receive all like benefits
entitlements and protections conferred on the
Mortgagee in relation to the exercise of such Rights
(but the Receiver shall not be bound by any
requirement as to notice or any other procedure
regulating or restricting the power of a mortgagee
before exercising any Rights of the Mortgagee);
(ii) do, carry out and perform all things in relation to
the Mortgaged Property:
(A) as the Mortgagor could have lawfully done if
this Mortgage had not been signed; and
(B) if the Mortgagor is a corporation, as the
Mortgagor's directors could have lawfully
done if this Mortgage had not been signed.
(e) A person dealing with the Receiver need not enquire as to
the authority of the Receiver to act or to see to the
application of any moneys paid to the Receiver.
(f) If any loss is made in carrying on any business in
connection with the Mortgaged Property or in the exercise
of the Receiver's Rights, such loss shall be borne by the
Mortgagor and be added to the Secured Moneys, bear
interest accordingly and be payable to the Mortgagee on
demand.
(g) The Receiver shall be entitled to such reasonable
remuneration as is specified by or negotiated with the
Mortgagee, which may be on the basis of a percentage of
the gross amount of moneys received or hourly rates plus
disbursements or otherwise.
(h) Subject to any statutory or other Obligations on the part
of the Mortgagee or the Receiver to the contrary, the
Receiver shall apply all moneys received by the Receiver
in the following order:
(i) firstly, in payment of all rates, taxes and
outgoings affecting the Mortgaged Property;
(ii) secondly, in payment of all moneys borrowed or
raised, costs and expenses incurred in the exercise
of any Rights or the performance or attempted
performance of the Receiver's Obligations
(including the discharge of all statutory
Obligations in relation to the Receivership);
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21
(iii) thirdly, in payment to the Receiver of his
remuneration;
(iv) fourthly, in payment of any of the debts of the
Mortgagor which the Receiver is required by law to
pay in priority to the Secured Moneys;
(v) fifthly, in payment to the Mortgagee of the Secured
Moneys; and
(vi) thereafter the surplus (if any) shall be paid to
the person who, but for the exercise of the Rights
conferred on the Receiver, would have been entitled
to receive the income or proceeds of the Mortgaged
Property; alternatively, the same may be paid to
the Mortgagee to be dealt with in accordance with
the Mortgagee's Rights and Obligations as to
distribution of excess proceeds received by it.
(i) Irrespective of the appointment of a Receiver or the
exercise of any Right conferred on a Receiver, the
Mortgagee shall at all times be entitled to exercise its
Rights under this Mortgage.
8.7 Conflicts of Interests, Duties etc.
The Mortgagee, a Receiver and any Officer of the Mortgagee may
exercise Rights under this Mortgage even though such exercise
may involve:
(a) a conflict between any duty owed to the Mortgagor and any
duty owed to any other person;
(b) a conflict between a duty owed to the Mortgagor and any
interests of the Mortgagee, the Receiver or Officer of the
Mortgagee; or
(c) any other conflict of duties or interests or duty and
interest.
No action taken or contract entered into or consequence
otherwise arising because of such exercise of Rights by the
Mortgagee, a Receiver or Officer of the Mortgagee shall be
void, voidable or otherwise unenforceable or able to be
restrained by virtue of any such conflict. Neither the
Mortgagee, a Receiver nor any Officer of the Mortgagee shall
be liable to account to the Mortgagor or any other person for
any benefit or gain arising out of any such conflict.
8.8 Waiver
(a) All Rights of the Mortgagee and a Receiver under this
Mortgage, any Collateral Security, the Agreement, any Loan
Paper, by statute, at law and in equity may be exercised,
despite any forbearance or delay in their enforcement.
(b) No employee or agent of the Mortgagee or a Receiver has
authority to waive any such Right or to represent that
such Right will not be exercised (either temporarily or
permanently) or to give any warranty, consent or promise
or to agree to any variation, except in a document signed
by such employee or agent.
(c) Any waiver, representation, warranty, consent, promise or
agreement duly given shall be effective only in the
specific instance to which it relates and for the specific
purpose for which it is given.
(d) No waiver, representation, warranty, consent, promise or
agreement shall be implied from conduct or failure to act
on the part of the Mortgagee, a Receiver or any Officer of
the Mortgagee.
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9. PROCEEDS ETC
9.1 Mortgagee May Claim Compensation etc.
(a) Any moneys which become payable by way of purchase or
compensation in respect of the Mortgaged Property (as a
result of compulsory acquisition, resumption, requisition,
damages for breaches of contract, tort or other loss or
otherwise payable concerning the Mortgaged Property) shall
be payable to the Mortgagee. Any such moneys received by
the Mortgagor shall be held by the Mortgagor in trust for
the Mortgagee.
(b) The Mortgagee may make claim for all such moneys and
enforce and receive payment of such moneys. The Mortgagee
may also compromise and agree and settle amounts (both for
the Mortgagee and for the Mortgagor) and execute releases
(both in the name of the Mortgagor and the Mortgagee).
(c) The Mortgagor assigns its Rights to claim and negotiate
amounts referred to above, to the Mortgagee.
(d) The provisions of this sub-clause are subject to any
statute which necessarily requires otherwise.
9.2 Proceeds from Sale, Lease, etc.
Subject to any contrary statutory Obligations or other
provisions of this Mortgage or the Agreement, the Mortgagee
shall apply proceeds received by it in respect of the
Mortgaged Property (whether by collection of rents and
profits, sale, compensation or otherwise):
(a) firstly to pay all moneys expended or outstanding in
respect of the Mortgaged Property, including costs charges
and expenses incurred in the exercise of any of the
Mortgagee's Rights;
(b) secondly in payment of the Secured Moneys (to the extent
that the same are not paid under the preceding paragraph)
irrespective of whether they would otherwise be due or
owing at the time of such application, but without
prejudice to the Mortgagee's Right to place moneys
received in a suspense account indefinitely if any of the
Secured Moneys are owing contingently or prospectively, or
otherwise pending apportionment;
(c) thirdly to pay appropriate amounts to subsequent
mortgagees or other persons entitled to amounts, in order
of priority; and
(d) fourthly to pay any surplus to the person entitled to give
receipt for rents and profits or the proceeds of sale of
the Mortgaged Property, upon obtaining a full and final
discharge for such amount to the satisfaction of the
Mortgagee; the Mortgagee shall pay the surplus to an
account specified by the Mortgagor and the Mortgagee shall
then be under no liability in respect of such surplus or
for interest on it.
9.3 Reduction of Secured Moneys on Foreclosure
If the Mortgagee exercises any remedy of foreclosure under
this Mortgage, the exercise of such Right shall not affect any
Right of the Mortgagee to payment of the Secured Moneys under
any Collateral Security, the Agreement, any Loan Paper or this
Mortgage with respect to any part of the Mortgaged Property
not foreclosed.
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10. LIABILITY OF THE MORTGAGEE AND INDEMNITIES
10.1 No Liability for Loss
Neither the Mortgagee nor any Receiver nor any Officer of the
Mortgagee nor their respective employees or agents shall,
except in the case of gross negligence or willful misconduct
of the Mortgagee or any Receiver or Officer of the Mortgagee,
be responsible for any loss which may happen or for any
outstanding moneys following the exercise or attempted
exercise or non-exercise of any Right incidental to this
Mortgage, any Loan Paper or the Agreement. This sub-clause is
subject to any statutory provisions to the contrary.
10.2 No Liability for Inspections, Valuations etc.
All inspections, valuations, reports, opinions or certificates
relating to the Mortgaged Property made or received by the
Mortgagee or a Receiver are for the Mortgagee's purposes. All
such inspections, valuations, reports, opinions or
certificates (other than privileged client communications)
paid for by the Mortgagor shall be required to be disclosed to
the Mortgagor, but shall not be a representation or warranty
by the Mortgagee or a Receiver as to the state or value of the
Mortgaged Property, the financial position of any person, or
any other matter. Neither the Mortgagee nor a Receiver shall
be responsible for any false, negligent, defamatory or
misleading statements in such documents or statements should
the same become known to or relied on by the Mortgagor.
10.3 Indemnities
The Mortgagor, except in the case of gross negligence or
willful misconduct of the Mortgagee, indemnifies the
Mortgagee, every Receiver and every Officer of the Mortgagee
and their respective agents and employees against all
liabilities, claims, actions, suits, costs, losses and
expenses (including claims by the Mortgagor) incurred by or
arising against the Mortgagee or any such person arising out
of:
(a) any act or omission of the Mortgagee or such person
concerning this Mortgage, any Loan Paper or the Agreement;
or
(b) the exercise, attempted exercise or non-exercise of any
Rights in or incidental to this Mortgage, any Loan Paper
or the Agreement.
11. CONTINUING SECURITY: DISCHARGE
11.1 Continuing Security
This Mortgage is a continuing security. It shall not be
completely or partially discharged merely by the payment at
any time of any of the Secured Moneys or by any settlement of
account. This Mortgage shall continue to apply to the present
and any future balance of the Secured Moneys until a final
discharge of this Mortgage has been given to the Mortgagor.
The Mortgagor shall not be entitled to a final discharge of
this Mortgage whilst:
(a) there is any debt or other Obligation of the Mortgagor
(either alone or with any other person) to the Mortgagee
under the Agreement or the Loan Papers, either actual,
contingent, prospective or otherwise reasonably
apprehended by the Mortgagee (even if it cannot be
quantified); or
(b) there is any liability or other Obligation on the part of
the Mortgagee under the Agreement or the Loan Papers, for
or on behalf of or in respect of the Mortgagor (either
alone or with
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any other person) either actual, contingent, prospective
or reasonably apprehended by the Mortgagee (even if it
cannot be quantified).
The Mortgagee shall be deemed to reasonably apprehend a
liability on the part of the Mortgagor in circumstances
(amongst others) where litigation has been threatened or
commenced or a dispute exists which, if resolved or settled in
a particular way, would result in a liability or costs or
expenses being incurred by the Mortgagee or an amount becoming
owing to the Mortgagee, which would be recoverable in whole or
in part from the Mortgagor.
11.2 Premature Discharge of Mortgage
If the Mortgagee, due to a preferential payment subsequently
repaid under any applicable insolvency laws, receives an
amount less than it would have otherwise required in exchange
for a release or partial release of this Mortgage, then the
Rights of the Mortgagee against the Mortgagor in respect of
the Mortgaged Property shall be the same as if this Mortgage
had not been released or partially released (as the case may
be) and as if the Mortgagor had no Right of release. In such
case the Mortgagor will do all things required by the
Mortgagee (including, if necessary, signing a further mortgage
on such terms as the Mortgagee requires over the Mortgaged
Property released or any property nominated by the Mortgagee
of approximately equal value) to restore to the Mortgagee its
full benefits had this Mortgage not been released or partially
released (as the case may be) and had the Mortgagee been under
no Obligation to release it.
11.3 Form of Discharge
Any discharge or release of this Mortgage when given may be in
such form as the Mortgagee reasonably requires (including a
specific provision or excluding optional words, so that the
release of this Mortgage shall operate only as a release of
the security created over the Mortgaged Property, but
reserving all Rights against the Mortgagor on personal
covenants contained or implied in this Mortgage in respect of
the payment of money or otherwise) so as to fully discharge
the Mortgaged Property (or such part of the Mortgaged Property
as is relevant) from this Mortgage. In the absence of anything
express to the contrary in any discharge, partial discharge,
release or partial release of this Mortgage, such discharge,
partial discharge, release or partial release shall be deemed
to have been given so as to effect only a release of the
security over the Mortgaged Property (or such part of the
Mortgaged Property as is relevant) and not so as to (then or
upon registration) release the Mortgagor from the Mortgagor's
Obligations under the personal covenants in this Mortgage.
12. POSSESSION AND PRODUCTION OF TITLE DOCUMENTS, ETC.
12.1 Possession of Title Documents and Leases
(a) The Mortgagor shall deliver to the Mortgagee, and the
Mortgagee shall be entitled to possession of the original
of this Mortgage and all licences, permits, certificates
of registration, approvals and other indicia of title
relating to the Mortgaged Property (except where the same
are required by law to be held by the Mortgagor or at a
particular place). The Mortgagee may keep such indicia of
title at any location within Australia and unless
specifically Obliged by statute, the Mortgagee may refuse
to produce such documents to any person for any reason.
The Mortgagor agrees to make no application to any
official or to a court to compel or to dispense with the
production of such documents.
(b) The Mortgagee shall be entitled to retain and the
Mortgagor shall deliver to the Mortgagee on request the
Mortgagor's copies of all Leases and Licences from time to
time relating to the Mortgaged Property and all guarantees
and other collateral agreements. The Mortgagor will
whenever requested by the Mortgagee, deliver to the
Mortgagee and verify
<PAGE> 73
25
in such manner as the Mortgagee requires, full particulars
of all Leases sub-Leases or Licences relating to the
Mortgaged Property.
12.2 Production of Documents by Mortgagee
If the Mortgagee is bound by statute to produce any document,
the Mortgagee shall do this within a reasonable time after
being requested to do so in writing, upon receiving payment of
its reasonable costs and expenses from the Mortgagor. The
Mortgagee shall be entitled to full particulars of any further
mortgage or other dealing relating to the Mortgaged Property
and any transaction pursuant to which any further mortgage or
dealing is given (including a copy of every document relevant
to such transaction).
13. MISCELLANEOUS
13.1 Mortgage not Affected by Intervening Circumstances
This Mortgage, the Obligations of the Mortgagor under this
Mortgage, the Loan Papers, the Agreement or any other
arrangement, and the Mortgagee's Rights against the Mortgagor
will not be discharged, terminated, reduced, modified or
otherwise affected by any of the following:
(a) the giving by any person of or terms of any Collateral
Security from time to time;
(b) any delay, failure, neglect or refusal by the Mortgagee to
exercise Rights or to recover any of the Secured Moneys
under this Mortgage, any Collateral Security, the
Agreement, any Loan Paper, judgment or specialty;
(c) the failure to obtain, register or perfect, or loss,
inadequacy, invalidity or unenforceability of any
Collateral Security or other Obligation, whether given at
the time of this Mortgage or otherwise;
(d) the granting to the Mortgagor or any Co-surety of any
time, credit, forbearance, indulgence, or other concession
(either for or without consideration or by operation of
law);
(e) any partial or absolute release, discharge, abandonment,
surrender, waiver, variation, transfer, exchange,
relinquishment or renewal (either with or without
consideration) of Rights against a Co-surety;
(f) the Mortgagee becoming party to or bound by any
compromise, assignment of property, scheme of arrangement,
composition of debts, scheme of reconstruction or other
arrangement relating to the Mortgagor, a Co-surety or any
other person;
(g) any variation of this Mortgage or of any Collateral
Security, or any variation of, termination of the
Agreement, any Loan Paper, or any arrangement or
understanding between the Mortgagee, the Mortgagor, or a
Co-surety or any two or more of the foregoing persons
(with or without others), except to the extent that the
same is unequivocally expressed to amend or overrule this
Mortgage;
(h) any acquiescence or delay on the part of the Mortgagee or
the Banks;
(i) any payment to the Mortgagee of, or any Obligation to pay,
the Secured Moneys becoming void, voidable or otherwise
unenforceable;
(j) any Collateral Security becoming void, voidable or
otherwise unenforceable in whole or in part;
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(k) the death, mental incapacity, bankruptcy, assignment for
the benefit of creditors, arrangement with creditors,
winding up, reconstruction, official management,
receivership or other incapacity, insolvency or demise of
the Mortgagor or a Co-surety or (where the Mortgagor is or
becomes a partnership or firm) any change that may be
made, whether by death, winding up, dissolution,
retirement or otherwise in the partnership or firm or any
persons now or in the future constituting or trading under
the name of the firm (but the Mortgagee may at its
discretion discontinue all or any transactions with the
Mortgagor or with the partnership or firm and may decline
to make available any accommodation or to meet any
Obligations to, for or on account of the Mortgagor or of
the partnership or firm without notice to the Mortgagor or
to such partnership or firm upon receipt of notice of any
such change);
(l) the Mortgagor or any Co-surety not being or ceasing to be
authorised or empowered to enter into this Mortgage, the
Agreement, the Loan Papers, a Collateral Security or any
relevant transaction;
(m) the transfer or assignment by the Mortgagee of this
Mortgage or any Collateral Security; subject, however, to
the provisions of Section 13.3;
(n) obtaining judgment against the Mortgagor or a Co-surety;
(o) any check or other instrument issued in payment of the
Secured Moneys, while such check or instrument is
outstanding;
(p) any circumstances which may affect the nature, description
or other characteristics of the Mortgaged Property; or
(q) any variation in or alteration to the status, nature or
composition (including takeover, merger, amalgamation and
reconstruction) of the Mortgagee, the Mortgagor, a
Co-surety or any other person or the memorandum of
association, articles of association, constitution, rules,
trusts or other documents relating to the Mortgagee,
Mortgagor, a Co-surety or any other person.
13.2 Mortgagee May Enter and Inspect
Subject to the terms of the Agreement to the contrary and
subject to the consent of Esso, if applicable, the Mortgagee,
a Receiver or any Officer of the Mortgagee or any person
authorised by them may enter any Premises or any other land or
buildings relevant to the Mortgaged Property upon reasonable
notice at all reasonable times, to inspect the state and
condition of the Mortgaged Property. Pursuant to the terms of
the Agreement, the Mortgagor shall also produce to that person
on demand all books, records and other documents relating in
any way to the Mortgaged Property. The Mortgagor will permit
and assist such inspection.
13.3 Mortgagee May Assign
Subject to the terms of the Agreement to the contrary, the
Mortgagee may assign to any person this Mortgage, the Secured
Moneys, the Rights, title and interest of the Mortgagee to the
Mortgaged Property, the benefit of any term of this Mortgage
(irrespective of whether it touches or concerns the Mortgaged
Property), the benefit of any surety provisions contained in
or relating to this Mortgage or the benefit of any indemnity
under this Mortgage, irrespective of whether all or any of the
foregoing would not otherwise be assignable. The Mortgagor
will (at the expense of any assignee requiring the same) enter
into any further mortgages, deeds or other agreements for
securing or re-affirming to the satisfaction of such assignee
the benefit of this Mortgage and the benefit of and
entitlement to all Rights of the Mortgagee and Obligations of
the Mortgagor under this Mortgage.
<PAGE> 75
27
13.4 Notices
(a) Any Notice required under this Mortgage shall be given or
made pursuant to the terms of Section 12.3 of the
Agreement.
13.5 Court Proceedings
To the extent that the Mortgagor is legally able to do so, the
Mortgagor irrevocably:
(a) submits to the non-exclusive jurisdiction of the Courts of
the State of Victoria in respect to any legal proceedings
in connection with this Mortgage;
(b) consents to the service of process out of any Courts in
such legal proceedings by the mailing, telexing or
facsimile transmission of a copy or notice of the relevant
process to the Mortgagor in the manner provided for in
this Mortgage for service of Notices on the Mortgagor;
(c) waives any objection the Mortgagor may have to the laying
of venue of any such legal proceedings in any of such
Courts and any claim that legal proceedings have been
brought in an inconvenient forum; and
(d) agrees that nothing in this Mortgage shall affect service
of process in any other manner permitted by law or
preclude the Right of the Mortgagee to bring proceedings
in any other court or courts of competent jurisdiction as
the Mortgagee may elect, and that legal proceedings in any
one or more jurisdictions shall not preclude legal
proceedings in any other jurisdiction.
13.6 Governing Law
This Mortgage shall be governed and construed in all respects
in accordance with the law of the State of Victoria.
13.7 Authority to Date and Complete
The Mortgagor irrevocably authorises the Mortgagee and every
Officer of the Mortgagee:
(a) to date this Mortgage and complete any other blanks left
uncompleted pending advancing of accommodation or for any
other reason; and
(b) as irrevocable attorney of the Mortgagor to rectify any
manifest error to this Mortgage in order to procure its
registration.
13.8 Certificate of the Mortgagee is Evidence
A certificate signed by the Mortgagee or any Officer of the
Mortgagee stating the amount of the Secured Moneys at the date
mentioned in any such certificate or any other fact, matter or
circumstance shall be, absent manifest error, prima facie
evidence against the Mortgagor as to the matters certified.
13.9 Limitation of Secured Moneys
Despite any other provision in this Mortgage to the contrary,
the Mortgagee may not recover from the Mortgagor under this
Mortgage in respect of the Secured Moneys an amount in excess
of the Australian Dollar equivalent from time to time of US
$6,500,000.00, together with all interest on the Secured
Moneys and the cost of enforcing this Mortgage or any
Collateral Security.
<PAGE> 76
28
13.10 Conflicts with the Agreement
Any conflict or ambiguity between the terms and provisions of
this Mortgage and the terms and provisions of the Agreement is
controlled by the terms and provisions of the Agreement for
all purposes.
<PAGE> 77
29
IN WITNESS this Mortgage has been signed.
THE COMMON SEAL of ) /s/ E. J. SPILLARD
International Sea Drilling Ltd ) ------------------------------
as Mortgagor was duly affixed ) Director
in accordance with the )
Articles of Association of the ) /s/ G. G. ARMS
Company in the presence of a ) ------------------------------
Director and the Secretary of ) Secretary
the Company signing opposite, )
who certify that they are the ) /s/ R. A. JOHANNSEN
proper officers to affix such ) ------------------------------
seal, and also in the presence ) Treasurer
of:
Independent Witness /s/ SUSAN DOUGHERTY
-------------------
<PAGE> 78
i
THE FIRST SCHEDULE
(Description of Workover Rig comprising part of the Mortgaged Property)
INTERNATIONAL SEA DRILLING LTD.
RIG 453
1,000 H.P. WORKOVER/COMPLETION RIG
- --------------------------------------------------------------------------------
A conventional offshore platform workover/completion rig incorporating
the following structures and equipment:
I. STRUCTURES
A. Mast
DRECO 133' vertically telescoping triple mast designed per API
Spec. 4F Q1 for 428 kip static hook load; racking capacity for
19,530' of 3-1/2" drillpipe and eight stands of 8" collars.
B. Substructure and Skidding System
Two single girder strongback beams spanning dual foundation
boxes, accommodating skid beam centers from 30' to 40'; lift
and roll hydraulic skidding system to skid rig assembly and
integrated rig floor laterally on rig strongback beams.
C. Mud Tanks
505 bbl. total capacity mud tanks, including (i) 465 bbl.
built into foundation boxes consisting of: 25 bbl. sand trap,
two 75 bbl. active tanks, two 20 bbl. trip tanks, and two 125
bbl. reserve tanks with electric mixers and mud guns, and (ii)
two 20 bbl. mixing tanks skid mounted with two 30 h.p. 3 x 4
mixing pumps and one 50 h.p. 5 x 6 charging pump.
D. Pipe Rack
Elevated 40' x 50' pipe rack with 300 kip capacity.
II. EQUIPMENT
A. Drawworks
DRECO Model 1000E drawworks powered by GE 752 traction motor;
right angle rotary drive, Dretech Model 7RD 150 electric brake
and hydraulic makeup and breakout catheads mounted in lower
mast end; twin hydraulic winches mounted on drawworks shelter.
B. Rotary Table
IDECO Model 27.5 rotary table.
C. Mud Pumps
Two DRECO Model 6K-500 triplex pumps, powered by GE 752
traction motors, with 4-1/2" liners, discharge valves,
pulsation dampener and pressure relief valve.
<PAGE> 79
ii
D. Generators/Electrical
Three 545 KW Caterpillar Model 3412 DITA diesel powered
generators; one SCR/MCC generator control building containing
Ross Hill Model 1000 SCR system.
E. Accumulator
Shaffer Koomey six station control system with nine 11-gallon,
3,000 psi separator bladder type accumulators; 25 H.P.
electric triplex pump and dual air pumps.
F. Blowout Preventers
1. One Shaffer 11"5M Annular BOP
2. One Shaffer 11"5M Double BOP
3. One Shaffer 11"5M Single BOP
4. Drilling Spool 11"5M with outlets for choke and kill
valves
G. Drillwater and Fuel Tanks
1. Two 150 bbl drill water tanks
2. One 120 bbl diesel fuel tank
<PAGE> 80
30
TABLE OF CONTENTS
1. DEFINITIONS AND INTERPRETATION................................. 2
1.1 Definitions........................................... 2
1.2 Interpretation........................................ 5
2. PAYMENT OF MONEY............................................... 7
2.1 Payment of Secured Moneys............................. 7
2.2 Interest on Secured Moneys............................ 7
2.3 Unpaid Interest....................................... 7
2.4 Interest on Judgment.................................. 8
2.5 Manner of Payment..................................... 8
2.6 Apportionment of Moneys Received...................... 9
2.7 Combination of Accounts............................... 9
2.8 No Set Off............................................ 10
3. CHARGING PROVISIONS............................................ 10
3.1 Charge................................................ 10
3.2 Separate Charges: Consents........................... 10
3.3 Fixed Charge.......................................... 10
3.4 No Competing Mortgages................................ 11
4. WARRANTIES AND ACKNOWLEDGMENTS................................. 11
4.1 Indefeasible Title.................................... 11
4.2 Enforceability, Capacity and Disclosure............... 11
4.3 Continuing Warranties................................. 12
5. GENERAL COVENANTS.............................................. 12
5.1 Maintain and Protect Mortgaged Property............... 12
5.2 Renew Permits, Licences Etc........................... 13
5.3 Observe Terms of Leases............................... 13
5.4 Pay Mortgagee's Outgoings on Demand................... 13
5.5 Insurance............................................. 14
5.6 Not alter, affix etc.................................. 14
5.7 No Leases, Sales etc Without Consent.................. 14
5.8 No Assignment of Income from Mortgaged Property....... 15
5.9 No Removal of Workover Rig from Jurisdiction.......... 15
5.10 Mortgagor to Give Notice of Certain Events............ 15
5.11 Consent of Lessors and Mortgagees of Premises......... 16
5.12 Further Assurances.................................... 16
6. PRIOR AND SUBSEQUENT MORTGAGES................................. 16
6.1 Prior and Subsequent Mortgages........................ 16
7. DEFAULT........................................................ 16
7.1 Events of Default..................................... 16
8. POWERS OF MORTGAGEE............................................ 17
8.1 Mortgagee May Remedy Default.......................... 17
8.2 Statutory Powers on Occurrence of Event of Default.... 17
8.3 Power of Sale......................................... 17
8.4 Further Powers of Mortgagee After Occurrence of
Event of Default.................................... 18
8.5 Attorney of the Mortgagor............................. 18
<PAGE> 81
31
8.6 Appointment of Receiver............................... 20
8.7 Conflicts of Interests, Duties etc.................... 21
8.8 Waiver................................................ 21
9. PROCEEDS ETC................................................... 22
9.1 Mortgagee May Claim Compensation etc.................. 22
9.2 Proceeds from Sale, Lease, etc........................ 22
9.3 Reduction of Secured Moneys on Foreclosure............ 22
10. LIABILITY OF THE MORTGAGEE AND INDEMNITIES..................... 23
10.1 No Liability for Loss................................. 23
10.2 No Liability for Inspections, Valuations etc.......... 23
10.3 Indemnities........................................... 23
11. CONTINUING SECURITY: DISCHARGE................................ 23
11.1 Continuing Security................................... 23
11.2 Premature Discharge of Mortgage....................... 24
11.3 Form of Discharge..................................... 24
12. POSSESSION AND PRODUCTION OF TITLE DOCUMENTS, ETC.............. 24
12.1 Possession of Title Documents and Leases.............. 24
12.2 Production of Documents by Mortgagee.................. 25
13. MISCELLANEOUS.................................................. 25
13.1 Mortgage not Affected by Intervening Circumstances.... 25
13.2 Mortgagee May Enter and Inspect ...................... 26
13.3 Mortgagee May Assign.................................. 26
13.4 Notices............................................... 27
13.5 Court Proceedings..................................... 27
13.6 Governing Law......................................... 27
13.7 Authority to Date and Complete........................ 27
13.8 Certificate of the Mortgagee is Evidence.............. 27
13.9 Limitation of Secured Moneys.......................... 27
<PAGE> 82
lodging party FEEZ RUTHNING (Ref RJE)
Solicitors & Notaries
address Level 32, 123 Eagle Street state Queensland
telephone 3833-3333
facsimile 3832-4233
DX number 210 city Brisbane
- --------------------------------------------------------------------------------
ASSIGNMENT OF CONTRACT
Corporations Law
263,264
- --------------------------------------------------------------------------------
corporation name International Sea Drilling Ltd
ARBN 068 783 264
- --------------------------------------------------------------------------------
THIS DEED is made on January 9, 1996.
BETWEEN:
International Sea Drilling Ltd (ARBN 068 783 264) a foreign company incorporated
in the Cayman Islands and having its registered office in Australia at Level 27,
530 Collins Street, Melbourne, Victoria (the "Mortgagor")
NationsBank of Texas, N.A., as Agent, a national banking association of 700
Louisiana Street, 8th Floor, Houston, Texas (the "Mortgagee")
BACKGROUND:
A. The Mortgagor has entered into a contract with Esso Australia Limited
(ACN 000 018 566) for the provision of well workover services.
B. The Mortgagor has requested the Banks to provide financial
accommodation to the Mortgagor
C. The Banks have agreed to such request in consideration of this Mortgage
being signed and delivered to the Mortgagee as Agent for the Banks
THE PARTIES AGREE as follows:
<PAGE> 83
2
1. DEFINITIONS AND INTERPRETATION
1.1 Definitions
When used in this Mortgage, the following terms have the following
meanings, unless the context otherwise requires:
"Agreement" means that certain Term Loan Agreement dated as of
November 30, 1995 among Mortgagor, Mortgagee and the Banks, as
amended, extended or restated;
"Associated Person" means a person associated with a relevant
person or an associate of that person in any of the ways
relevant for the purposes of the Corporations Legislation;
"Australian Dollars" means the lawful currency of Australia;
"Banks" means NationsBank of Texas, N.A. of 700 Louisiana
Street, 8th Floor, Houston, Texas, National Bank of Canada of
2121 San Jacinto, Suite 1850, Dallas, Texas and National Bank
of Alaska of 301W. Northern Light Blvd, Anchorage, Alaska
severally;
"Collateral Security" means any Encumbrance, guarantee,
indemnity, bond, covenant, negotiable instrument, or other
agreement, arrangement or understanding (whether or not
recorded in writing), under or as a result of which:
(a) the Mortgagee is (or will be or may contingently or
prospectively be) at any time entitled to sue for,
recover, set off or receive payment of the whole or
part of the Secured Moneys or any moneys which the
Mortgagee may apply towards the Secured Moneys;
(b) the Mortgagee is entitled to have performed, observed
or fulfilled any Obligation for payment of the whole
or part of the Secured Moneys; or
(c) the Mortgagee is entitled to retain or withhold
possession of or to exercise any other Right in
respect of any form of property until the whole or
part of the Secured Moneys have been paid;
"Contract" means the Contract between the Mortgagor and Esso
Australia Limited (ACN 000 018 566) dated 19 June 1995 for the
Provision of Well Workover Services, as the same may be
amended from time to time;
"Corporations Legislation" means legislation relevant to the
incorporation, regulation and affairs of corporations
generally, in Australia;
"Co-surety" means a person liable at any time to pay to the
Mortgagee part or the whole of the Secured Moneys, (whether
jointly or severally with or independently from the Mortgagor,
and whether such liability is secured or unsecured); in
respect of one of several persons comprising the Mortgagor the
term includes each other person being a Mortgagor;
"Encumbrance" means a mortgage, charge, debenture,
encumbrance, assignment by way of security, pledge, deposit of
title, lien, security, option to acquire, lease, licence,
caveat, preferential interest, title retention, or other
estate, interest, claim or arrangement relating to property,
or an agreement to grant, create, allow or register any of the
foregoing, whether registered or unregistered and whether
statutory, legal or equitable;
"Event of Default" means each of the events or circumstances
defined in this Mortgage as constituting an Event of Default;
<PAGE> 84
3
"Executive Officer" has the same meaning as in the
Corporations Legislation;
"Government Authority" includes the Crown, a minister, a
government department, a corporation or authority constituted
for a public purpose, a holder of an office for a public
purpose, a local authority and any agent or employee of any of
the foregoing;
"Loan Papers" has the same meaning as in the Agreement;
"Mortgage" means the mortgage effected by the assignment to
the Mortgagee in this document by way of security, and it also
means (where the context allows) this document;
"Mortgaged Property" means all the Mortgagor's Rights and
interest under the Contract to receive payment of money or any
other benefit including (but not limited to) the rates, fees
and reimbursement charges the Mortgagor is entitled to receive
for the provision of services as specified in clause 5 of the
Contract together with any compensation, proceeds of policies
of insurance and other payments which are or may become due to
the Mortgagor under the Contract;
"Mortgagee" means each person named as such in this Mortgage;
the expression includes the executors, administrators,
successors and assigns of each such person and any person whom
the Mortgagee may appoint as the Mortgagee's agent to exercise
all or any of the Mortgagee's Rights; when two or more people
are named as or become the Mortgagee, the expression means
each of them severally and any two or more of them jointly;
"Mortgagor" means each person named as such in this Mortgage;
the expression includes the permitted assigns and the
executors, administrators and successors of each such person;
when two or more people are named as or become a Mortgagor:
(a) "Mortgagor" means each of them severally as well as
any two or more of them jointly; and
(b) the Obligations and agreements on their part bind
each of them severally and every two or more of them
jointly;
"Notice" means a notice, demand, request, direction, or other
communication from the Mortgagee to the Mortgagor or from the
Mortgagor to the Mortgagee as provided in Section 12.3 of the
Agreement;
"Obligation" means any legal, equitable, contractual,
statutory or other obligation, commitment, duty, undertaking
or liability;
"Officer of the Mortgagee" means at a particular time an
attorney of the Mortgagee appointed to exercise any Rights of
the Mortgagee relevant to this Mortgage, a solicitor acting
for the Mortgagee, or a person authorised by the Mortgagee or
such attorney or solicitor (including by way of ratification)
to exercise any relevant Right of the Mortgagee; where the
Mortgagee is a corporation, the expression also includes each
director, secretary, manager or other Executive Officer of the
Mortgagee;
"Related Body Corporate" has the same meaning as in the
Corporations Legislation;
"Right" includes any legal, equitable, contractual, statutory
or other right, power, authority, benefit, privilege, remedy,
discretion, or cause of action;
"Secured Moneys" means all moneys already, now or in the
future advanced or paid by the Banks and all liabilities
(direct or contingent) already, now or in the future incurred
by the
<PAGE> 85
4
Banks, to, for the use of, on behalf of or at the request of,
the Mortgagor (either alone or with any other person) and all
moneys otherwise owing or payable already, now or in the
future by the Mortgagor (either alone or with any other
person) to the Banks pursuant to the Agreement or the Loan
Papers; without limiting or being limited by the foregoing
"Secured Moneys" includes:
(a) all moneys already advanced or which the Banks now or
in the future advance or become liable to advance to,
for the use of, or on behalf of, any other person,
where those moneys have been advanced, are advanced
or are liable to be advanced on the order, direction,
request, nomination or suggestion (express or
implied) of the Mortgagor (either alone or with any
other person) in connection with the Agreement or the
Loan Papers;
(b) all moneys which the Mortgagor (either alone or with
any other person) whether directly or indirectly or
contingently or prospectively, and whether by way of
debt, contract, guarantee, indemnity, restitution,
damages, order of a court or otherwise now or already
is or in the future becomes liable to pay to the
Banks under this Mortgage, the Agreement or the Loan
Papers;
(c) all moneys which the Banks are liable to pay already,
now or in the future for the accommodation of the
Mortgagor (either alone or with any other person)
because of the Banks entering into any engagement,
bond, indemnity, guarantee, letter of credit, letter
of comfort, call option, undertaking or other
commitment or by accepting, endorsing, drawing,
paying, discounting or otherwise becoming liable on
any bill of exchange or other negotiable instrument
under the Agreement or the Loan Papers, whether such
engagement, bond, indemnity, guarantee, letter of
credit, letter of comfort, call option, undertaking,
or other commitment or negotiable instrument has
matured or not, or whether the liability of the Banks
under it is contingent, prospective or actual;
(d) all moneys which the Banks may debit against the
Mortgagor (either alone or with any other person) on
any account under any present or future judgment,
order, understanding, arrangement, custom, practice
of the Banks or Right of the Banks, or under the
terms of this Mortgage, the Agreement, the Loan
Papers or otherwise;
(e) all moneys already now or in the future owed by the
Mortgagor (either alone or with any other person) to
the Banks because of the assignment to or acquisition
by the Banks of any debt or other Obligation of the
Mortgagor under the Agreement or the Loan Papers;
(f) all loss or damages suffered by the Banks caused or
contributed to by any breach by the Mortgagor of this
Mortgage, the Agreement or the Loan Papers;
(g) all moneys and liabilities defined elsewhere in this
Mortgage as comprising part of the Secured Moneys;
(h) all other moneys intended to be secured under the
terms of this Mortgage; and
(i) interest on all of the above moneys;
irrespective of:
(j) whether the security created by this Mortgage is or
remains valid or is released or discharged;
<PAGE> 86
5
(k) whether such amounts and liabilities are owing at a
particular time or in the future, or whether they are
owing actually, prospectively, contingently or
otherwise;
(l) whether any amount or liability is, at any particular
time, ascertained or unascertained;
References to the "Secured Moneys" include the whole or any
part or parts of such moneys.
1.2 Interpretation
In the interpretation and implementation of this Mortgage, unless the
context otherwise requires;
(a) singular includes plural and vice versa; any gender includes
every gender;
(b) references to people include corporations, associations,
Government Authorities and all other legal entities;
(c) references to writing include printing, typing, telex,
facsimile and other means of reproducing words and/or figures
in a visible, tangible form, in English;
(d) references to signature and signing include due execution by
corporations and other relevant entities;
(e) references to months mean calendar months;
(f) references to statutes include statutes amending,
consolidating or replacing the statute referred to and all
regulations, orders in council, rules, by-laws and ordinances
made under those statutes; references to sections of statutes
refer to corresponding sections in amended, consolidated or
replacement statutes;
(g) references to clauses, sub-clauses, paragraphs and
sub-paragraphs refer to clauses, sub-clauses, paragraphs and
sub-paragraphs of this Mortgage;
(h) headings and the index are for convenience only, and shall be
disregarded;
(i) where any word or phrase is given a defined meaning, any other
grammatical form of that word or phrase has a corresponding
meaning;
(j) each paragraph or sub-paragraph in a list is to be read
independently from the others in the list;
(k) time is of the essence in relation to Obligations of the
Mortgagor under this Mortgage, the Agreement and the Loan
Papers;
(l) the exercise by the Mortgagee or an Officer of the Mortgagee
of any of their respective Rights shall be deemed to be at its
or his complete discretion and (so far as possible) not to
restrict the exercise at any other time of the same or any
other Right;
(m) if any term of this Mortgage is by law unenforceable or made
inapplicable, it shall be severed or read down, but so as to
maintain (as far as possible) all other terms of this
Mortgage;
(n) if any statute requires any notice to be given or the
expiration of any time before the exercise of a particular
Right of a mortgagee or the incurring of an Obligation by a
mortgagor, such requirement is excluded to the full extent
permitted by law; if any such requirement cannot legally be
excluded, the same is abridged to the full extent permitted by
law or to the period of twenty-four (24) hours (whichever is
the greater);
<PAGE> 87
6
(o) all terms of this Mortgage are intended to have full effect,
despite any moratorium legislation, events which may otherwise
amount to a frustration of contract, or other circumstances
which might otherwise terminate, suspend or modify
Obligations;
(p) those Mortgagee's Rights and Mortgagor's Obligations under
this Mortgage that are capable of taking effect after the
release or discharge of this Mortgage shall continue after the
release or discharge of this Mortgage;
(q) all Rights of the Mortgagee are cumulative, and do not exclude
or modify any other Rights relating to this Mortgage;
(r) nothing in this Mortgage shall merge, extinguish, postpone,
lessen or otherwise prejudicially affect any lien or security
which the Mortgagee is entitled to because of the deposit of
documents relating to the Mortgaged Property or any other
documents or instruments, or merge any Right of the Mortgagee
on any bill of exchange, promissory note or other instrument;
(s) unless otherwise specifically stated in this Mortgage or
required by statute, any authority, approval or consent
required from the Mortgagee under the terms of this Mortgage
may be given, withheld, or given on terms and conditions,
without giving any reasons, but the Mortgagee shall not act
arbitrarily or capriciously in that regard;
(t) this Mortgage binds each person signing it to the full extent
provided in this Mortgage, even if one or more of the persons
named as Mortgagor has not signed or never signs it, or if the
signing of this Mortgage by any one or more of such persons
(other than the person sought to be made liable) is or may
become void or voidable;
2. PAYMENT OF MONEY
2.1 Payment of Secured Moneys
The Mortgagor will pay and/or repay (as the case may be) the Secured
Moneys to the Mortgagee in accordance with the Agreement and the Loan
Papers.
2.2 Interest on Secured Moneys
Interest forming part of the Secured Moneys shall be paid by the
Mortgagor at the rate or respective rates agreed between the Mortgagee
and the Mortgagor in the Agreement and the Loan Papers.
2.3 Unpaid Interest
(a) If any payment of interest required under this Mortgage, the
Agreement or the Loan Papers is not paid in full on the due
date, then interest shall accrue in accordance with the
Agreement and the Loan Papers.
(b) The Rights of the Mortgagee to charge interest on unpaid
interest and/or to capitalize unpaid interest may be
exercised:
(i) without prejudice to the Right of the Mortgagee to
sue for and recover unpaid interest or to the other
Rights of the Mortgagee;
(ii) without Notice to the Mortgagor;
<PAGE> 88
7
(iii) despite the death, bankruptcy, liquidation,
receivership, assignment for the benefit of
creditors, arrangement with creditors, official
management or other demise of the Mortgagor;
(iv) despite the obtaining of any judgment in relation to
the Secured Moneys; and
(v) despite the cessation of a relationship between the
Mortgagee and the Mortgagor of financier and
customer.
2.4 Interest on Judgment
If any judgment or order is obtained by the Mortgagee against the
Mortgagor in respect of the Secured Moneys, the Mortgagor shall pay
interest on the judgment debt or amount ordered to be paid from the
date of judgment until payment of that amount. Such interest shall be
calculated and payable at the rate (or, if applicable, in accordance
with the method of determining a rate) applicable to such debt
immediately before judgment or at the rate payable under that judgment
(whichever is the higher).
2.5 Manner of Payment
(a) The Secured Moneys will be paid to the Mortgagee at such place
and at such time as may be provided in the Agreement or the
Loan Papers.
(b) Any remittance or payment (despite the issue of a receipt)
shall only constitute payment to the extent that, and on the
date when, the same is received by the Mortgagee in legal
tender and shall not then or later be required to be repaid,
disgorged, set off, or the benefit of it lost.
(c) The Mortgagee may require any payment to be made by bank
cheque.
(d) The Mortgagor will (if required by the Mortgagee) sign a
banker's authority directing payments of appropriate amounts
owing to the Mortgagee by debiting of the drawer's account and
crediting to the Mortgagee's account at a bank nominated by
the Mortgagee.
(e) If any part of the Secured Moneys is denominated in a currency
other than Australian Dollars then, except as provided in the
Agreement or any Loan Paper to the contrary:
(i) the Mortgagor shall (as the Mortgagee requires) pay
to the Mortgagee the Secured Moneys so denominated
which are due from time to time in either that other
currency or the equivalent in Australian Dollars of
those moneys due, adopting an exchange rate nominated
by the Mortgagee and current at the time of payment
or any other relevant time nominated by the
Mortgagee;
(ii) where any payment received in reduction of that part
of the Secured Moneys is in Australian Dollars (or in
any currency other than the currency in which that
part of the Secured Moneys is denominated) and the
Agreement, the Loan Papers or the terms of this
Mortgage require payment in the currency in which the
debt is owed, the amount of the payment received
shall be computed in the relevant currency in which
the relevant debt is owed, using an exchange rate
nominated by the Mortgagee and current at the time of
receipt or current at any other relevant time
nominated by the Mortgagee;
(iii) if the whole or any part of the Secured Moneys so
denominated is not paid when due, the Mortgagee may
(without Notice to the Mortgagor) purchase with
Australian Dollars (or any other relevant currency)
currency in and equal to the amount due (whether such
purchase is at an official rate of exchange or at a
premium above such official rate) and apply the
currency purchased against the relevant Secured
Moneys; the
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Mortgagor shall indemnify the Mortgagee in Australian
Dollars (or the other relevant currency of purchase)
for the amount so expended by the Mortgagee and all
other costs incurred in respect of such purchase.
(f) Each person named or identified as Mortgagor irrevocably
appoints each other Mortgagor and (in the case of
corporations) each of their own and such other persons'
respective directors, secretaries, and Executive Officers,
severally to be his attorney to make payments and to give
acknowledgements relating to the Secured Moneys. Every
payment made on account of the Secured Moneys and every
acknowledgment of liability in respect of the Secured Moneys
made or given by such appointee (whether expressly as attorney
or not) shall be binding as if the appointor under this
paragraph had made such payment or given such acknowledgment
personally. This paragraph does not make inapplicable the
definition of Mortgagor contained elsewhere in this Mortgage.
2.6 Apportionment of Moneys Received
(a) Any money paid to the Mortgagee in respect of the Secured
Moneys or the Mortgaged Property (despite any purported
appropriation or condition of payment by the person paying it)
may be appropriated by the Mortgagee to any amount or amounts
owing by the Mortgagor (actually or contingently) and to
principal or interest, as the Mortgagee determines. Such
appropriation may be made at the time of payment or at any
later time (the Mortgagee being entitled to retain amounts in
a suspense account indefinitely).
(b) If the Mortgagee receives money from any source (including
payment by the Mortgagor, a Co-surety, proceeds from the
enforcement of a Right, a payment by reason of the Mortgagee
being entitled to proceeds or damages in respect of the
Mortgaged Property or like payment), which may be applied in
reduction of the Secured Moneys, but all or part of the
Secured Moneys are owing contingently or prospectively or
their amount cannot be ascertained, then the Mortgagee may,
pending the outcome of the relevant contingency or
circumstances or the amount being determined, deposit all or
such part of such moneys as the Mortgagee sees fit as security
for the payment of the Secured Moneys. Such deposit may be
made in an interest bearing account with any person determined
by the Mortgagee (including the Mortgagee or any Related Body
Corporate of the Mortgagee where the Mortgagee or such Related
Body Corporate customarily accepts deposits). The Mortgagor
waives in favour of the Mortgagee all Rights (if any) the
Mortgagor may have to the benefit of the debt created by the
deposit and any interest payable from time to time in respect
of it.
(c) Where amounts are paid into a running account with the
Mortgagee, the application of the assumption that debits first
incurred are first repaid is to be excluded, if the effect
would be that:
(i) the amount of the Secured Moneys for which the
Mortgagee would be able to claim priority as against
any other Encumbrancee of the Mortgaged Property
would be reduced;
(ii) the amount of the Secured Moneys for which any
Co-surety could be made liable would be reduced; or
(iii) the Mortgagee would otherwise be prejudiced.
In such cases payments shall be deemed to have been applied
progressively in reduction of later debits, beginning with the
latest debit.
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2.7 Combination of Accounts
(a) The Mortgagee may at any time (subject to any contrary terms
of the Agreement), without Notice, combine any two or more
accounts held with the Mortgagee by the same person or persons
comprising the Mortgagor. The Mortgagee may, to the extent to
which it would be so entitled if the combined accounts had at
all times been conducted as a single account, decline to make
any accommodation available to the Mortgagor (as the case may
be).
(b) Despite the provisions of the preceding paragraph, in
determining any amount owing by the Mortgagor to the Mortgagee
and interest payable, the Mortgagee shall not be Obliged to
give any credit for any credit balances in any account of the
Mortgagor or any other moneys owing by the Mortgagee to the
Mortgagor.
2.8 No Set Off
The Right to receive amounts under this Mortgage shall be free from any
equity, set off, or cross claim which (except for this provision) the
Mortgagor would be entitled to claim against the Mortgagee or any
intermediate mortgagee or any assignee.
2.9 Receipts by Mortgagor
If the Mortgagor receives any payment in respect of the Mortgaged
Property during the term of this Mortgage, the Mortgagor shall be
deemed to have received the same as agent of the Mortgagee, and shall
hold the same in trust for the Mortgagee to the extent the same is due
and payable to the Mortgagee under the Agreement and the Loan Papers.
In such event, the Mortgagor shall immediately after receipt of such
payment account for that payment to the Mortgagee.
3. MORTGAGING PROVISIONS
3.1 Assignment by way of Security
The Mortgagor assigns the Mortgaged Property to the Mortgagee by way of
security to the Mortgagee for the due and punctual payment of the
Secured Moneys and the due and punctual performance of all other
Obligations of the Mortgagor to the Mortgagee in this Mortgage, the
Agreement and the Loan Papers.
3.2 Mortgagee may Act as Absolute Owner of Mortgaged Property
During the continuance of an Event of Default, and except as provided
in the Agreement to the contrary, the Mortgagee may act in all respects
as if it were the absolute owner of the Mortgaged Property, and the
Mortgagee may without restriction exercise all Rights and enjoy all
entitlements of an absolute owner of the Mortgaged Property. Without
limiting the foregoing, the Mortgagee may:
(a) exercise and enforce all Rights in respect of the Mortgaged
Property from time to time as if the Contract had originally
been entered into by the Mortgagee in lieu of the Mortgagor;
(b) make demand for all moneys payable in respect of the Contract,
retain all moneys received in respect of the Contract, and
apply the same in reduction of the Secured Moneys; and
(c) exercise or refrain from exercising or waive any Rights
relating to the Mortgaged Property, institute proceedings in
respect of the Mortgaged Property, make variations to the
Contract, terminate the Contract, or enter into any compromise
or other arrangement with any person relating to the Mortgaged
Property which the Mortgagee considers to be appropriate; the
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Mortgagor shall be bound by such exercise, refrainer, waiver,
arrangement, variation, termination or compromise.
4. WARRANTIES AND ACKNOWLEDGEMENTS
4.1 Indefeasible Title
(a) The Mortgagor warrants that the Mortgagor has an absolute and
indefeasible title to the Mortgaged Property and that the
Mortgaged Property is not subject to any:
(i) Encumbrance;
(ii) restriction, defeasance, liability to be rescinded or
otherwise determined;
(iii) unenforceability in accordance with its terms, for
any reason;
(iv) breach, alleged breach, dispute, litigation,
arbitration, administrative proceeding or threatened
litigation, arbitration or administrative proceeding;
or
(v) other claim or interest having priority over or
competing with or likely to affect this Mortgage,
except as is specifically described in this Mortgage or has
been unequivocally accepted in writing by the Mortgagee.
4.2 Enforceability, Capacity and Disclosure
The Mortgagor acknowledges and re-affirms the representations and
warranties contained in the Agreement and further warrants that:
(a) the Mortgagor has full power to sign and deliver this Mortgage
and perform its Obligations under this Mortgage and to receive
accommodation from the Mortgagee and/or the Banks in the
manner contemplated in this Mortgage, the Agreement, and the
Loan Papers, and that any necessary corporate, shareholder and
other action has been taken and any necessary ratifications of
shareholders, beneficiaries and others have been given to
authorise such signature, delivery and performance;
(b) all Obligations of the Mortgagor in this Mortgage are legally
binding and enforceable in accordance with their terms;
(c) the signing and delivery of and the performance of its
Obligations under this Mortgage will not:
(i) contravene any existing applicable law, statute, rule
or regulation or any judgment, decree or permit to
which the Mortgagor is subject;
(ii) conflict with or constitute a default under the
Contract or any other agreement or arrangement to
which the Mortgagor is a party or is subject or by
which it or any of its property is bound; or
(iii) contravene (if applicable) any provision of the
Mortgagor's memorandum and articles of association or
other constitutional documents or any relevant trust;
(d) no event or circumstance which constitutes or which (with the
giving of notice or lapse of time or both) would constitute an
Event of Default has occurred and is continuing;
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(e) the Obligations of the Mortgagor under this Mortgage are
direct, general and unconditional Obligations of the
Mortgagor;
(f) the giving of this Mortgage is made in good faith without any
intention to delay or defraud any existing or future creditor
of the Mortgagor; the Mortgagor is presently able to pay its
debts from its own money as such debts fall due;
(g) this Mortgage is not signed or accommodation obtained relying
on any representation, promise or statement by the Mortgagee
and/or the Banks or any person on behalf of the Mortgagee
and/or the Banks (including representations, promises or
statements as to availability of future accommodation,
accommodation charges, financial conditions, currency
fluctuations, business prospects or such like) other than as
is specifically contained in this Mortgage, the Agreement or
the Loan Papers.
4.3 Warranties as to Nature of Contract
The Mortgagor warrants that:
(a) the details of the Contract as described in this Mortgage are
at the time of the giving of this Mortgage true and correct;
(b) the full terms of the Contract and of all collateral
arrangements, variations, representations, arrangements,
understandings, warranties and other relevant matters relating
to the Contract have been disclosed to the Mortgagee;
(c) except as otherwise disclosed to the Mortgagee, all conditions
(if any) to which the Contract is subject have been or will be
fully satisfied and complied with as required by the Contract.
4.4 Continuing Warranties
Each of the warranties by the Mortgagor in this Mortgage shall be
deemed to have been re-affirmed to the Mortgagee immediately prior to
each provision of accommodation comprising part of the Secured Moneys
being made available by the Mortgagee and/or the Banks, except to the
extent that the Mortgagee shall have been specifically notified in
writing by the Mortgagor to the contrary.
5. GENERAL COVENANTS
The Mortgagee acknowledges and re-affirms the covenants contained in
the Agreement and the Loan Papers and further covenants as follows:
5.1 Pay Outgoings on Mortgaged Property
The Mortgagor will, throughout the duration of this Mortgage,
punctually pay all amounts required to be or (in the opinion of the
Mortgagee) desirable to be paid or expended in respect of the Mortgaged
Property (including expenditure incurred by the Mortgagee) in order to
maintain its maximum value and to comply with the Mortgagor's
obligations under the Contract. Without limiting the foregoing, the
Mortgagor will expend any amounts necessary to undertake legal
proceedings to enforce the performance of Obligations by other persons
in respect of the Mortgaged Property, and expend such amounts as are
necessary to discharge the Obligations undertaken by the Mortgagor in
respect of the Mortgaged Property. The Mortgagor indemnifies the
Mortgagee against all liability in respect of such amounts and will
immediately produce relevant receipts whenever requested by the
Mortgagee.
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5.2 Pay Mortgagee's Outgoings on Demand
(a) The Mortgagor will pay to the Mortgagee on demand all costs,
charges and expenses incurred by the Mortgagee in connection
with the Secured Moneys, this Mortgage, the Loan Papers or
the Agreement, including but not limited to:
(i) costs in respect of the preservation or protection of
the Mortgaged Property or this Mortgage, or which in
the Mortgagee's opinion may be necessary or desirable
to protect or safeguard or in any way to aid assist
or advantage the Rights, title and interest of the
Mortgagee or the Mortgagor in relation to the
Mortgaged Property;
(ii) costs (including legal costs on a full indemnity
(solicitor and own client) basis and reasonable
administration charges imposed by the Mortgagee)
which the Mortgagee incurs in connection with the
negotiation, preparation, signing, stamping,
registration, release, variation or transfer of this
Mortgage or in connection with any other matters of
any nature affecting the Mortgaged Property, the
Mortgagor and/or any Co-surety, or the transactions
secured by this Mortgage;
(iii) costs (including legal costs on a full indemnity
(solicitor and own client) basis and reasonable
administration charges imposed by the Mortgagee)
incurred:
(A) in connection with any actual or attempted
exercise of any Right of the Mortgagee,
(B) as a result of any Event of Default,
(C) in respect of any dispute or proceedings
commenced by any person (including the
Mortgagee) which relate directly or
indirectly to this Mortgage, the Mortgaged
Property, the Mortgagee, the Mortgagor or
any Co-surety or otherwise, and
(D) otherwise arising out of the Mortgagee being
the assignee of the Mortgaged Property; and
(v) stamp duty, financial institutions duty, taxes,
registration fees, imposts, fees, fines, penalties,
and charges in connection with this Mortgage, the
transactions, the Loan Papers and the Agreement
secured by this Mortgage.
(b) The Mortgagor consents to all orders for costs made by a court
against the Mortgagor in favour of the Mortgagee being on a
full indemnity (solicitor and own client) basis. The Mortgagor
shall indemnify the Mortgagee on such a basis for all costs
incurred by the Mortgagee, even though a court may only award
party and party costs or may award costs against any person
(other than the Mortgagee).
5.3 Mortgagor to Exercise Rights
(a) The Mortgagor will duly and punctually exercise all the
Mortgagor's Rights and discharge all of the Mortgagor's
Obligations in respect of the Mortgaged Property as if it had
not been assigned to the Mortgagee, so as to at all times
maintain the full value and enforceability of the Mortgaged
Property in the best interests of the Mortgagee.
(b) The Mortgagor shall not, in respect of the Contract, without
the prior consent in writing of the Mortgagee:
(i) waive any Rights;
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(ii) enter into any compromise or arrangement;
(iii) terminate or purport to terminate it; or
(iv) vary or purport to vary the terms of it or otherwise
do anything which could prejudice the position of the
Mortgagor or the Mortgagee;
, provided, however, that the Mortgagor may, in respect of the
Contract, waive Rights, enter into any compromise or
arrangement or vary its terms if such action does not
materially alter the amount or timing of any payments due the
Mortgagor thereunder.
(c) The Mortgagor will at all times when required by the Mortgagee
provide to the Mortgagee particulars and any other information
requested by the Mortgagee in relation to the Mortgaged
Property, copies of all correspondence and full details of all
other communications relating to the Mortgaged Property and
the Mortgagor's dealings with it.
5.4 No Dealings Without Consent
(a) The Mortgagor will not assign, dispose of, forfeit, or
otherwise Encumber the Mortgaged Property, or the Mortgagor's
equity of redemption in it, or agree to do any of the
foregoing or allow the same to take place, without the prior
consent of the Mortgagee in writing. This paragraph is
subject to any specific contrary provision in this Mortgage,
the Agreement or the Loan Papers.
(b) If the Mortgagor creates a subsequent mortgage or charge over
the Mortgaged Property ("such security"), then prior to or
immediately after creation of such security, and before any
moneys are secured (actually or contingently) by such
security, the Mortgagor will cause the person entitled to such
security to enter into a priority and subordination agreement
with the Mortgagee, so as to preserve and/or confirm the
Mortgagee's position as mortgagee ranking in priority to the
mortgagee under such security for an amount and on terms
wholly satisfactory to the Mortgagee.
5.5 No Assignment of Payments under Mortgaged Property
The Mortgagor will not for the duration of this Mortgage, without the
prior consent in writing of the Mortgagee:
(a) assign or Encumber;
(b) attempt or purport to assign or Encumber; or
(c) cause or permit any other person to have,
any Right to receive any present or future payments or any other legal
or beneficial Rights from time to time in respect of the Mortgaged
Property.
5.6 Mortgagor to Give Notice of Certain Events
The Mortgagor shall immediately give Notice to the Mortgagee if any of
the following become known to the Mortgagor (as the case may be):
(a) the occurrence of any Event of Default;
(b) any event or circumstance where an Encumbrance is granted or
arises in relation to the Mortgaged Property, other than a
"Permitted Lien" as defined in the Agreement;
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(c) any breach of the Contract by any party to it;
(d) any actual or threatened litigation, arbitration or
administrative proceedings relating to the Mortgaged Property
or the Mortgagor which might have a material adverse effect in
relation to the value of the Mortgaged Property or the ability
of the Mortgagor to perform or observe its Obligations under
this Mortgage or any Collateral Security;
(e) any circumstances where the value of the Mortgaged Property is
or may be substantially reduced; or
(f) any other circumstances or information that the Mortgagee may
from time to time reasonably specify in respect of the
Mortgagor, this Mortgage or the Mortgaged Property.
5.7 Further Assurances
The Mortgagor will at all times sign all further documents and
amendments to documents and do other things as may be reasonably
requested by the Mortgagee for further or better securing the Rights
and interests of the Mortgagee over the Mortgaged Property to secure
payment of the Secured Moneys. The Mortgagor shall pay to the
Mortgagee on demand all costs incurred by the Mortgagee in respect of
this sub-clause and the same shall form part of the Secured Moneys.
6. DEFAULT
6.1 Events of Default
An Event of Default for purposes of this Mortgage means the occurrence
of a "Default", as defined in the Agreement. If an Event of Default
occurs and is continuing; THEN, if the Mortgagee elects, the Secured
Moneys shall become immediately payable to the Mortgagee as if the time
for payment or repayment of the same had arrived. The Mortgagee need
not notify the Mortgagor of such election. If there is any outstanding
Obligation of the Mortgagee and/or the Banks to the Mortgagor pursuant
to the Agreement (including any commitment to advance any
accommodation) the Mortgagee and/or the Banks may also decline to meet
such Obligation.
7. POWERS OF MORTGAGEE
7.1 Mortgagee May Remedy Default
If the Mortgagor defaults in any Obligation to the Mortgagee, or if any
statement, warranty or representation of the Mortgagor made or deemed
to be made to the Mortgagee is untrue or misleading, the Mortgagee may
(but shall not be Obliged to), do all acts and things which the
Mortgagee considers necessary to make good such default or rectify the
circumstances stated warranted or represented or deemed so to be. All
expenses incurred by the Mortgagee shall, upon being incurred, be added
to and form part of the Secured Moneys and bear interest accordingly.
Such expenses shall be payable by the Mortgagor to the Mortgagee on
demand. The Mortgagor indemnifies the Mortgagee against any loss,
damage, cost or expense arising or incurred by the Mortgagee by reason
of any default of the Mortgagor. The Mortgagee shall incur no
liability for failing or declining to exercise any Right under this
sub-clause.
7.2 Statutory Powers on Occurrence of Event of Default
All the Rights of a mortgagee in any statute or at law may be exercised
by the Mortgagee in respect of the Mortgaged Property at any time an
Event of Default occurs and is continuing.
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7.3 Further Powers of Mortgagee After Occurrence of Event of Default
(a) After the occurrence of an Event of Default which is
continuing, the Mortgagee may also, without making demand or
giving any Notice to the Mortgagor (unless compelled by law to
do so):
(i) exercise all other Rights vested in the Mortgagee by
this Mortgage, any statute, the common law or the
rules of equity, and deal with the Mortgaged Property
in as full and ample a manner as if it were the owner
of the Mortgaged Property free from any equity of
redemption;
(ii) apply all proceeds and other amounts received by the
Mortgagee in respect of the Mortgaged Property in the
manner contemplated in this Mortgage;
(iii) delegate to any person as the Mortgagee's agent the
performance or enjoyment of all or any of the
Mortgagee's Rights;
(iv) employ or engage solicitors, accountants, advisers,
managers, workmen, agents or other employees or
agents as the Mortgagee considers necessary in
relation to any of its Rights; and
(v) exercise all the foregoing Rights in conjunction with
the Mortgagee's Rights relating to any other property
mortgaged or charged to or owned by it, and apportion
all costs, expenses, sale moneys, rent, fees and
other outgoings and receipts amongst the properties
so dealt with as the Mortgagee thinks fit.
(b) A person dealing with the Mortgagee need not enquire whether
any Event of Default or other circumstance has occurred to
authorise the Mortgagee to act, or to see to the application
of any moneys paid to the Mortgagee.
(c) All costs and expenses incurred by the Mortgagee as a result
of exercising any of the foregoing Rights shall, immediately
upon being incurred, be added to and form part of the Secured
Moneys. They shall bear interest accordingly and shall be
payable to the Mortgagee on demand.
(d) If any loss is made in the exercise of the Mortgagee's Rights,
other than losses resulting from the gross negligence or
willful misconduct of the Mortgagee, such loss shall be borne
by the Mortgagor. It shall be added to the Secured Moneys,
bear interest accordingly and shall be payable to the
Mortgagee on demand.
7.4 Attorney of the Mortgagor
(a) The Mortgagor irrevocably appoints the Mortgagee, every
Officer of the Mortgagee, and every person from time to time
appointed by the Mortgagee for the purposes of this sub-clause
severally its attorney and the attorney of its heirs,
executors, administrators, successors and assigns (the
"Attorney") for the use and benefit of the Mortgagee to do:
(i) all acts and things required to be done by the
Mortgagor under this Mortgage, any Loan Paper or the
Agreement; and
(ii) all acts which the Mortgagee is by virtue of this
Mortgage, the Agreement or the Loan Papers authorised
or empowered to do during the continuance of any
Event of Default.
(b) Without limiting the above, an Attorney may:
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(i) take steps and proceedings and sign documents for
securing or perfecting (as the Mortgagee or an
Attorney thinks fit) the security constituted by this
Mortgage, and sign in favour of the Mortgagee all
further legal mortgages, transfers, assignments and
other assurances of all or any part of the Mortgaged
Property required to be signed by the Mortgagor under
this Mortgage, the Loan Papers or the Agreement;
(ii) in the name of and on behalf of the Mortgagor or in
the name of the Mortgagee or an Attorney exercise all
Rights of the Mortgagor under or in any way relating
to the Mortgaged Property, sign documents correct for
the purposes of registration, sign declarations and
other documents of any kind, and ask, demand, sue
for, recover and receive of and from any person and
to give effectual receipts in respect of any part of
the Mortgaged Property; and
(iii) appoint a substitute or substitutes for all or any of
the above purposes.
(c) The Attorney may register this power of attorney under any
statute and do whatever he considers necessary to give
validity and effect to the same.
(d) Except as the result of the gross negligence or willful
misconduct of the Attorney, the Attorney shall not be
responsible for any loss which may happen in the exercise of
the above powers.
(e) A certificate by the Mortgagee signed by an Officer of the
Mortgagee as to the occurrence of an Event of Default may be
relied on by any person in respect of this sub-clause without
further enquiry.
7.5 Appointment of Receiver
(a) After an Event of Default occurs and is continuing (even
though the power of sale of the Mortgagee may not yet be
exercisable) the Mortgagee may in writing appoint a person (or
two or more persons acting jointly and/or severally) to be
receiver or receiver and manager (the term "Receiver"
including a receiver or a receiver and manager, as applicable)
of the Mortgaged Property. No prior notice or demand need be
given by the Mortgagee before the Rights in this sub-clause
are exercised.
(b) The provisions of any relevant statute dealing with Receivers
shall be varied to the extent provided in this sub-clause.
(c) The Mortgagee may from time to time revoke any appointment of
a Receiver under this Mortgage and/or appoint another
Receiver.
(d) A Receiver will, in addition to all other Rights elsewhere in
this Mortgage and at law, have power to:
(i) do, carry out and perform all Rights in relation to
the Mortgaged Property as the Mortgagee could
(whether prior to or after the occurrence of an Event
of Default), and receive all like benefits
entitlements and protections conferred on the
Mortgagee in relation to the exercise of such Rights
(but the Receiver shall not be bound by any
requirement as to notice or any other procedure
regulating or restricting the power of a mortgagee
before exercising any Rights of the Mortgagee);
(ii) do, carry out and perform all things in relation to
the Mortgaged Property:
(A) as the Mortgagor could have lawfully done if
this Mortgage had not been signed; and
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(B) if the Mortgagor is a corporation, as the
Mortgagor's directors could have lawfully
done if this Mortgage had not been signed.
(f) A person dealing with the Receiver need not enquire as to the
authority of the Receiver to act or to see to the application
of any moneys paid to the Receiver.
(g) If, other than as a result of the gross negligence or willful
misconduct of the Mortgagee or the Receiver, any loss is made
in carrying on any business in connection with the Mortgaged
Property or in the exercise of the Receiver's Rights, such
loss shall be borne by the Mortgagor and be added to the
Secured Moneys, bear interest accordingly and be payable to
the Mortgagee on demand.
(h) The Receiver shall be entitled to such reasonable remuneration
as is specified by or negotiated with the Mortgagee, which may
be on the basis of a percentage of the gross amount of moneys
received or hourly rates plus disbursements or otherwise.
(i) Subject to any statutory or other Obligations on the part of
the Mortgagee or the Receiver to the contrary, the Receiver
shall apply all moneys received by the Receiver in the
following order:
(i) firstly, in payment of all outgoings affecting the
Mortgaged Property;
(ii) secondly, in payment of all moneys borrowed or
raised, costs and expenses incurred in the exercise
of any Rights or the performance or attempted
performance of the Receiver's Obligations (including
the discharge of all statutory Obligations in
relation to the Receivership);
(iii) thirdly, in payment to the Receiver of his
remuneration;
(iv) fourthly, in payment of any of the debts of the
Mortgagor which the Receiver is required by law to
pay in priority to the Secured Moneys;
(v) fifthly, in payment to the Mortgagee of the Secured
Moneys; and
(vi) thereafter the surplus (if any) shall be paid to the
person who, but for the exercise of the Rights
conferred on the Receiver, would have been entitled
to receive the income or proceeds of the Mortgaged
Property; alternatively, the same may be paid to the
Mortgagee to be dealt with in accordance with the
Mortgagee's Rights and Obligations as to distribution
of excess proceeds received by it.
(j) Irrespective of the appointment of a Receiver or the exercise
of any Right conferred on a Receiver, the Mortgagee shall at
all times be entitled to exercise its Rights under this
Mortgage.
7.6 Conflicts of Interests, Duties etc.
The Mortgagee, a Receiver and any Officer of the Mortgagee may exercise
Rights under this Mortgage even though such exercise may involve:
(a) a conflict between any duty owed to the Mortgagor and any duty
owed to any other person;
(b) a conflict between a duty owed to the Mortgagor and any
interests of the Mortgagee, the Receiver or Officer of the
Mortgagee; or
(c) any other conflict of duties or interests or duty and
interest.
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No action taken or contract entered into or consequence otherwise
arising because of such exercise of Rights by the Mortgagee, a Receiver
or Officer of the Mortgagee shall be void, voidable or otherwise
unenforceable or able to be restrained by virtue of any such conflict.
Neither the Mortgagee, a Receiver nor any Officer of the Mortgagee
shall be liable to account to the Mortgagor or any other person for any
benefit or gain arising out of any such conflict.
7.7 Waiver
(a) All Rights of the Mortgagee and a Receiver under this
Mortgage, any Collateral Security, the Agreement, or any Loan
Paper, by statute, at law and in equity may be exercised,
despite any forbearance or delay in their enforcement.
(b) No employee or agent of the Mortgagee or a Receiver has
authority to waive any such Right or to represent that such
Right will not be exercised (either temporarily or
permanently) or to give any warranty, consent or promise or to
agree to any variation, except in a document signed by such
employee or agent.
(c) Any waiver, representation, warranty, consent, promise or
agreement duly given shall be effective only in the specific
instance to which it relates and for the specific purpose for
which it is given.
(d) No waiver, representation, warranty, consent, promise or
agreement shall be implied from conduct or failure to act on
the part of the Mortgagee, a Receiver or any Officer of the
Mortgagee.
8. PROCEEDS ETC
8.1 Proceeds from Sale, etc.
Subject to any contrary statutory Obligations or other provisions of
this Mortgage or the Agreement, the Mortgagee shall apply proceeds
received by it in respect of the Mortgaged Property:
(a) firstly to pay all moneys expended or outstanding in respect
of the Mortgaged Property, including costs charges and
expenses incurred in the exercise of any of the Mortgagee's
Rights;
(b) secondly in payment of the Secured Moneys (to the extent that
the same are not paid under the preceding paragraph)
irrespective of whether they would otherwise be due or owing
at the time of such application, but without prejudice to the
Mortgagee's Right to place moneys received in a suspense
account indefinitely if any of the Secured Moneys are owing
contingently or prospectively, or otherwise pending
apportionment;
(c) thirdly to pay appropriate amounts to subsequent mortgagees or
other persons entitled to amounts, in order of priority; and
(d) fourthly to pay any surplus to the person entitled to give
receipt for rents and profits or the proceeds of sale of the
Mortgaged Property, upon obtaining a full and final discharge
for such amount to the satisfaction of the Mortgagee; the
Mortgagee shall pay the surplus to an account specified by the
Mortgagor, and the Mortgagee shall then be under no liability
in respect of such surplus or for interest on it.
<PAGE> 100
19
9. LIABILITY OF THE MORTGAGEE AND INDEMNITIES
9.1 No Liability for Loss
Neither the Mortgagee nor any Officer of the Mortgagee nor their
respective employees or agents shall, except in the case of gross
negligence or willful misconduct of the Mortgagee or any Officer of the
Mortgagee, be responsible for any loss which may happen or for any
outstanding moneys following the exercise or attempted exercise or
non-exercise of any Right incidental to this Mortgage, the Loan Papers
or the Agreement.
9.2 Indemnities
The Mortgagor, except in the case of gross negligence or willful
misconduct of the Mortgagee or any Officer of the Mortgagee,
indemnifies the Mortgagee and every Officer of the Mortgagee and their
respective agents and employees against all liabilities, claims,
actions, suits, costs, losses and expenses (including claims by the
Mortgagor) incurred by or arising against the Mortgagee or any such
person arising out of:
(a) any act or omission of the Mortgagee or such person concerning
this Mortgage, any Loan Paper or the Agreement; or
(b) the exercise, attempted exercise or non-exercise of any Rights
in or incidental to this Mortgage, any Loan Paper or the
Agreement.
10. CONTINUING SECURITY: DISCHARGE
10.1 Continuing Security
This Mortgage is a continuing security. It shall not be completely or
partially discharged merely by the payment at any time of any of the
Secured Moneys or by any settlement of account. This Mortgage shall
continue to apply to the present and any future balance of the Secured
Moneys until a final discharge of this Mortgage has been given to the
Mortgagor. The Mortgagor shall not be entitled to a final discharge of
this Mortgage whilst:
(a) there is any debt or other Obligation of the Mortgagor (either
alone or with any other person) to the Mortgagee under this
Mortgage, the Agreement or the Loan Papers, either actual,
contingent, prospective or otherwise reasonably apprehended by
the Mortgagee (even if it cannot be quantified); or
(b) there is any liability or other Obligation on the part of the
Mortgagee under the Agreement or the Loan Papers for or on
behalf of or in respect of the Mortgagor (either alone or with
any other person) either actual, contingent, prospective or
reasonably apprehended by the Mortgagee (even if it cannot be
quantified).
The Mortgagee shall be deemed to reasonably apprehend a liability on
the part of the Mortgagor in circumstances (amongst others) where
litigation has been threatened or commenced or a dispute exists which,
if resolved or settled in a particular way, would result in a liability
or costs or expenses being incurred by the Mortgagee or an amount
becoming owing to the Mortgagee, which would be recoverable in whole or
in part from the Mortgagor.
10.2 Premature Discharge of Mortgage
If the Mortgagee, due to a preferential payment subsequently repaid
under any applicable insolvency laws, receives an amount less than it
would have otherwise required in exchange for a release or
<PAGE> 101
20
partial release of this Mortgage, then the Rights of the Mortgagee
against the Mortgagor in respect of the Mortgaged Property shall be the
same as if this Mortgage had not been released or partially released
(as the case may be) and as if the Mortgagor had no Right of release.
In such case the Mortgagor will do all things required by the Mortgagee
(including, if necessary, signing a further mortgage and consenting to
a caveat on such terms as the Mortgagee requires over the Mortgaged
Property released or any property nominated by the Mortgagee of
approximately equal value) to restore to the Mortgagee its full
benefits had this Mortgage not been released or partially released (as
the case may be) and had the Mortgagee been under no Obligation to
release it.
10.3 Form of Discharge
Any discharge or release of this Mortgage when given may be in such
form as the Mortgagee reasonably requires (including a specific
provision or excluding optional words, so that the release of this
Mortgage shall operate only as a release of the security created over
the Mortgaged Property, but reserving all Rights against the Mortgagor
on personal covenants contained or implied in this Mortgage in respect
of the payment of money or otherwise) so as to fully discharge the
Mortgaged Property (or such part of the Mortgaged Property as is
relevant) from this Mortgage. In the absence of anything express to
the contrary in any discharge, partial discharge, release or partial
release of this Mortgage, such discharge, partial discharge, release or
partial release shall be deemed to have been given so as to effect only
a release of the security over the Mortgaged Property (or such part of
the Mortgaged Property as is relevant) and not so as to (then or upon
registration) release the Mortgagor from its Obligations under the
personal covenants in this Mortgage.
10.4 References to "Discharge"
References in this Mortgage to "discharge" or "release" of this
Mortgage include a re-conveyance to the Mortgagor of the Mortgaged
Property.
11. MISCELLANEOUS
11.1 Mortgage not Affected by Intervening Circumstances
This Mortgage, the Obligations of the Mortgagor under this Mortgage,
the Loan Papers, the Agreement or any other arrangement, and the
Mortgagee's Rights against the Mortgagor will not be discharged,
terminated, reduced, modified or otherwise affected by any of the
following:
(a) the giving by any person of or terms of any Collateral
security from time to time;
(b) any delay, failure, neglect or refusal by the Mortgagee to
exercise Rights or to recover any of the Secured Moneys under
this Mortgage, any Collateral Security, the Agreement, any
Loan Paper, judgment or specialty;
(c) the failure to obtain, register or perfect, or loss,
inadequacy, invalidity or unenforceability of any Collateral
Security or other Obligation, whether given at the time of
this Mortgage or otherwise;
(d) the granting to the Mortgagor or any Co-surety of any time,
credit, forbearance, indulgence, or other concession (either
for or without consideration or by operation of law);
(e) any partial or absolute release, discharge, abandonment,
surrender, waiver, variation, transfer, exchange,
relinquishment or renewal (either with or without
consideration) of Rights against a Co-surety;
<PAGE> 102
21
(f) the Mortgagee becoming party to or bound by any compromise,
assignment of property, scheme of arrangement, composition of
debts, scheme of reconstruction or other arrangement relating
to the Mortgagor, a Co-surety or any other person;
(g) any variation of this Mortgage or of any Collateral Security,
or any variation of, or termination of the Agreement, any Loan
Paper or any arrangement or understanding or any additional
agreement, arrangement or understanding between the Mortgagee,
the Mortgagor, or a Co-surety or any two or more of the
foregoing persons (with or without others), except to the
extent that the same is unequivocally expressed to amend or
overrule this Mortgage;
(h) any acquiescence or delay on the part of the Mortgagee or the
Banks;
(i) any payment to the Mortgagee of, or any Obligation to pay, the
Secured Moneys becoming void, voidable or otherwise
unenforceable;
(j) any Collateral Security becoming void, voidable or otherwise
unenforceable in whole or in part;
(k) the death, mental incapacity, bankruptcy, assignment for the
benefit of creditors, arrangement with creditors, winding up,
reconstruction, official management, receivership or other
incapacity, insolvency or demise of the Mortgagor and/or a
Co-surety or (where the Mortgagor is or becomes a partnership
or firm) any change that may be made, whether by death,
winding up, dissolution, retirement or otherwise in the
partnership or firm or any persons now or in the future
constituting or trading under the name of the firm (but the
Mortgagee may at its discretion discontinue all or any
transactions with the Mortgagor with the partnership or firm
and may decline to make available any accommodation or to meet
any Obligations to, for or on account of the Mortgagor or of
the partnership or firm without notice to the Mortgagor or to
such partnership or firm upon receipt of notice of any such
change);
(l) the Mortgagor or any Co-surety not being or ceasing to be
authorised or empowered to enter into this Mortgage, the
Agreement, any Loan Paper, a Collateral Security or any
relevant transaction;
(m) the transfer or assignment by the Mortgagee of this Mortgage
or any Collateral Security, subject, however, to the
provisions of Section 11.2;
(n) obtaining judgment against the Mortgagor or a Co-surety;
(o) any check or other instrument issued in payment of the Secured
Moneys, while such check or instrument is outstanding;
(p) any circumstances which may affect the nature, description or
other characteristics of the Mortgaged Property; or
(q) any variation in or alteration to the status, nature or
composition (including takeover, merger, amalgamation and
reconstruction) of the Mortgagee, the Mortgagor, a Co-surety
or any other person or the memorandum of association, articles
of association, constitution, rules, trusts or other documents
relating to the Mortgagee, Mortgagor, a Co-surety or any other
person.
11.2 Mortgagee May Assign
Subject to the terms of the Agreement to the contrary, the Mortgagee
may assign to any person this Mortgage (including the Mortgaged
Property, but subject to the Rights of redemption in this Mortgage),
the benefit of any term of this Mortgage (irrespective of whether it
touches or concerns the Mortgaged Property), the benefit of any surety
provisions contained in or relating to this Mortgage or the benefit of
any indemnity under this Mortgage, irrespective of whether all or any
of the foregoing would not
<PAGE> 103
22
otherwise be assignable. The Mortgagor will (at the expense of any
assignee requiring the same) enter into any further mortgages, deeds or
other agreements for securing or re-affirming to the satisfaction of
such assignee the benefit of this Mortgage and the benefit of and
entitlement to all Rights of the Mortgagee and Obligations of the
Mortgagor under this Mortgage.
11.3 Notices
(a) Any Notice required under this Mortgage shall be given or made
pursuant to the terms of Section 12.3 of the Agreement, except
to the extent of statutory requirements to the contrary; and
(b) Any method of service of notice shall be effective even
though, at the date of such service, the Recipient may be
mentally ill or mentally defective, dead, bankrupt or absent
from a relevant state, country or place or (in the case of a
corporation) in the course of liquidation, receivership,
official management, scheme of arrangement, or being wound up
or struck off, and despite any other circumstances.
11.4 Court Proceedings
To the extent that the Mortgagor is legally able to do so, the
Mortgagor irrevocably:
(a) submits to the non-exclusive jurisdiction of the Courts of the
State of Victoria in respect to any legal proceedings in
connection with this Mortgage;
(b) consents to the service of process out of any Courts in such
legal proceedings by the mailing, telexing or facsimile
transmission of a copy or notice of the relevant process to
the Mortgagor in the manner provided for in this Mortgage for
service of Notices on the Mortgagor;
(c) waives any objection the Mortgagor may have to the laying of
venue of any such legal proceedings in any of such Courts and
any claim that they may have that legal proceedings have been
brought in an inconvenient forum; and
(d) agrees that nothing in this Mortgage shall affect service of
process in any other manner permitted by law or preclude the
Right of the Mortgagee to bring proceedings in any other court
or courts of competent jurisdiction as the Mortgagee may
elect, and that legal proceedings in any one or more
jurisdictions shall not preclude legal proceedings in any
other jurisdiction.
11.5 Governing Law
This Mortgage shall be governed and construed in all respects in
accordance with the law of the State of Victoria.
11.6 Authority to Date and Complete
The Mortgagor irrevocably authorises the Mortgagee and every Officer of
the Mortgagee:
(a) to date this Mortgage and complete any blanks left uncompleted
pending advancing of accommodation or for any other reason;
and
(b) as irrevocable attorney of the Mortgagor to rectify any
manifest error in this Mortgage.
<PAGE> 104
23
11.7 Certificate of the Mortgagee is Evidence
A certificate signed by the Mortgagee or any Officer of the Mortgagee
stating the amount of the Secured Moneys at the date mentioned in any
such certificate or any other fact, matter or circumstance shall be,
absent manifest error, prima facie evidence against the Mortgagor as to
the matters certified.
11.8 Limitation of Secured Moneys
Despite any other provision in this Mortgage to the contrary, the
Mortgagee may not recover from the Mortgagor under this Mortgage in
respect of the Secured Moneys an amount in excess of the Australian
Dollar equivalent from time to time of US$6,500,000.00 together with
all interest on the Secured Moneys and the cost of enforcing this
Mortgage and any Collateral Security.
11.9 Conflicts with the Agreement
Any conflict or ambiguity between the terms and provisions of this
Mortgage and the terms and provisions of the Agreement is controlled by
the terms and provisions of the Agreement for all purposes. To the
extent that any provision of this Mortgage is inconsistent with the
Agreement, it shall not be operable.
[Remainder of page intentionally blank; Signature page follows]
<PAGE> 105
24
In Witness this Deed has been signed
THE COMMON SEAL of International Sea ) /S/ E. J. SPILLARD
Drilling Ltd as Mortgagor was duly ) -------------------
affixed in accordance with the Articles ) Director
of Association of the Company in the )
presence of a Director and the Secretary ) /S/ G. G. ARMS
of the Company signing opposite, who ) -------------------
certify that they are the proper ) Secretary
officers to affix such seal, and also in )
the presence of: ) /S/ R. A. JOHANNSEN
) -------------------
) Treasurer
Witness /S/ SUSAN DOUGHERTY
--------------------
(C) Feez Ruthning
<PAGE> 106
25
TABLE OF CONTENTS
<TABLE>
<S> <C>
1. DEFINITIONS AND INTERPRETATION............................................. 2
1.1 Definitions....................................................... 2
1.2 Interpretation.................................................... 5
2. PAYMENT OF MONEY........................................................... 6
2.1 Payment of Secured Moneys......................................... 6
2.2 Interest on Secured Moneys........................................ 6
2.3 Unpaid Interest................................................... 6
2.4 Interest on Judgment.............................................. 7
2.5 Manner of Payment................................................. 7
2.6 Apportionment of Moneys Received.................................. 8
2.7 Combination of Accounts........................................... 9
2.8 No Set Off........................................................ 9
2.9 Receipts by Mortgagor............................................. 9
3. MORTGAGING PROVISIONS...................................................... 9
3.1 Assignment by way of Security..................................... 9
3.2 Mortgagee may Act as Absolute Owner of Mortgaged Property......... 9
4. WARRANTIES AND ACKNOWLEDGEMENTS............................................ 10
4.1 Indefeasible Title................................................ 10
4.2 Enforceability, Capacity and Disclosure........................... 10
4.3 Warranties as to Nature of Contract............................... 11
4.4 Continuing Warranties............................................. 11
5. GENERAL COVENANTS.......................................................... 11
5.1 Pay Outgoings on Mortgaged Property............................... 11
5.2 Pay Mortgagee's Outgoings on Demand............................... 12
5.3 Mortgagor to Exercise Rights...................................... 12
5.4 No Dealings Without Consent....................................... 13
5.5 No Assignment of Payments under Mortgaged Property................ 13
5.6 Mortgagor to Give Notice of Certain Events........................ 13
5.7 Further Assurances................................................ 14
6. DEFAULT.................................................................... 14
6.1 Events of Default................................................. 14
7. POWERS OF MORTGAGEE........................................................ 14
7.1 Mortgagee May Remedy Default...................................... 14
7.2 Statutory Powers on Occurrence of Event of Default................ 14
7.3 Further Powers of Mortgagee After Occurrence of Event of Default.. 15
7.4 Attorney of the Mortgagor......................................... 15
7.5 Appointment of Receiver........................................... 16
7.6 Conflicts of Interests, Duties etc................................ 17
7.7 Waiver............................................................ 18
8. PROCEEDS ETC............................................................... 18
8.1 Proceeds from Sale, etc........................................... 18
</TABLE>
<PAGE> 107
26
<TABLE>
<S> <C>
9. LIABILITY OF THE MORTGAGEE AND INDEMNITIES......................... 19
9.1 No Liability for Loss..................................... 19
9.2 Indemnities............................................... 19
10. CONTINUING SECURITY: DISCHARGE.................................... 19
10.1 Continuing Security....................................... 19
10.2 Premature Discharge of Mortgage........................... 19
10.3 Form of Discharge......................................... 20
10.4 References to "Discharge"................................. 20
11. MISCELLANEOUS...................................................... 20
11.1 Mortgage not Affected by Intervening Circumstances........ 20
11.2 Mortgagee May Assign...................................... 21
11.3 Notices................................................... 22
11.4 Court Proceedings......................................... 22
11.5 Governing Law............................................. 22
11.6 Authority to Date and Complete............................ 22
11.7 Certificate of the Mortgagee is Evidence.................. 23
11.8 Limitation of Secured Moneys.............................. 23
11.9 Conflicts with the Agreement.............................. 23
</TABLE>
<PAGE> 108
<TABLE>
<S> <C> <C>
lodging party FEEZ RUTHNING (Ref RJE)
Solicitors & Notaries
address Level 32, 123 Eagle Street state Queensland
telephone 3833-3333
facsimile 3832-4233
DX number 210 city Brisbane
</TABLE>
================================================================================
ASSIGNMENT OF DEPOSIT
Corporations Law 263,264
================================================================================
corporation name International Sea Drilling Ltd
ARBN 068 783 264
================================================================================
THIS DEED is made on January 9, 1996.
BETWEEN:
International Sea Drilling Ltd (ARBN 068 783 264), a foreign company
incorporated in the Cayman Islands and having its registered office in
Australian at Level 27, 530 Collins Street, Melbourne Victoria (the
"Mortgagor");
NationsBank of Texas, N.A., as Agent, a national banking association of 700
Louisiana Street, 8th Floor, Houston, Texas (the "Mortgagee").
WHEREAS
A. The Mortgagor is the owner of the deposit described in the Schedule.
B. The Mortgagor has requested the Banks to make certain financial
accommodation available to the Mortgagor.
C. The Banks have agreed to such request, subject to this Mortgage being
signed and delivered to the Mortgagee as Agent for the Banks.
<PAGE> 109
2
The Mortgagee and the Mortgagor agree as follows:
1. DEFINITIONS AND INTERPRETATION
1.1 Definitions
When used in this Mortgage, the following terms have the following
meanings, unless the context otherwise requires:
1.2 "Agreement" means that certain Term Loan Agreement dated as of
November 30, 1995 among Mortgagor, Mortgagee and the Banks, as
amended, extended or restated;
"Associated Person" means a person associated with a relevant
person or an associate of that person in any of the ways
relevant for the purposes of the Corporations Legislation;
"Australian Dollars" means the lawful currency of Australia;
"Banks" means NationsBank of Texas, N.A. of 700 Louisiana
Street, 8th Floor, Houston, Texas, National Bank of Canada of
2121 San Jacinto, Suite 1850, Dallas, Texas and National Bank
of Alaska of 301W. Northern Light Blvd, Anchorage, Alaska
severally;
"Collateral Security" means any Encumbrance, guarantee,
indemnity, bond, covenant, negotiable instrument, or other
agreement, arrangement or understanding (whether or not
recorded in writing), under or as a result of which:
(a) the Mortgagee is (or will be or may contingently or
prospectively be) at any time entitled to sue for,
recover, set off or receive payment of the whole or
part of the Secured Moneys or any moneys which the
Mortgagee may apply towards the Secured Moneys;
(b) the Mortgagee is entitled to have performed, observed
or fulfilled any Obligation for payment of the whole
or part of the Secured Moneys; or
(c) the Mortgagee is entitled to retain or withhold
possession of or to exercise any other Right in
respect of any form of property until the whole or
part of the Secured Moneys have been paid;
"Corporations Legislation" means legislation relevant to the
incorporation, regulation and affairs of corporations
generally, in Australia;
"Co-surety" means a person liable at any time to pay to the
Mortgagee part or the whole of the Secured Moneys, (whether
jointly or severally with or independently from the Mortgagor
and whether such liability is secured or unsecured); in
respect of one of several persons comprising the Mortgagor the
term includes each other person being a Mortgagor;
"Deposit" means the deposit or deposits described in the
Schedule to this Mortgage, and any deposit or other investment
in renewal of or substitution for such deposit or deposits
(including reinvestment together with accrued interest);
"Encumbrance" means a mortgage, charge, debenture,
encumbrance, assignment by way of security, pledge, deposit of
title, lien, security, option to acquire, caveat, preferential
interest, title retention, liability to forfeiture or other
estate, interest, claim or arrangement relating to
<PAGE> 110
3
property, or an agreement to grant, create, allow or register
any of the foregoing, whether registered or unregistered and
whether statutory, legal or equitable;
"Event of Default" means each of the events or circumstances
defined in this Mortgage as constituting an Event of Default;
"Executive Officer" has the same meaning as in the
Corporations Legislation;
"Loan Papers" has the same meaning as in the Agreement;
"Mortgage" or "this Mortgage" means the mortgage created by
this deed and the terms of this deed;
"Mortgaged Property" means:
(a) the Deposit;
(b) interest and other benefits accruing in respect of
the Deposit;
(c) all Rights arising out of or associated with the
foregoing;
(d) all certificates of deposit, passbooks or other
evidence of title relating to the foregoing; and
(e) where the context permits, any part of the foregoing;
"Mortgagee" means each person named as such in this Mortgage;
the expression includes the executors, administrators,
successors and assigns of each such person and any person whom
the Mortgagee may appoint as the Mortgagee's agent to exercise
all or any of the Mortgagee's Rights; when two or more people
are named as or become the Mortgagee, the expression means
each of them severally and any two or more of them jointly;
"Mortgagor" means each person named as such in this Mortgage;
the expression includes the permitted assigns and the
executors, administrators and successors of each such person;
when two or more people are named as or become a Mortgagor:
(a) "Mortgagor" means each of them severally as well as
any two or more of them jointly; and
(b) the Obligations and agreements on their part bind
each of them severally and every two or more of them
jointly;
"Notice" means a notice, demand, request, direction, or other
communication from the Mortgagee to the Mortgagor or from the
Mortgagor to the Mortgagee as provided in Section 12.3 of the
Agreement;
"Obligation" means any legal, equitable, contractual,
statutory or other obligation, commitment, duty, undertaking
or liability;
"Officer of the Mortgagee" means at a particular time an
attorney of the Mortgagee appointed to exercise any Rights of
the Mortgagee relevant to this Mortgage, a solicitor acting
for the Mortgagee, or a person authorised by the Mortgagee or
such attorney or solicitor (including by way of ratification)
to exercise any relevant Right of the Mortgagee; where the
Mortgagee is a corporation, the expression also includes each
director, secretary, manager or other Executive Officer of the
Mortgagee;
"Related Body Corporate" has the same meaning as in the
Corporations Legislation;
<PAGE> 111
4
"Right" includes any legal, equitable, contractual, statutory
or other right, power, authority, benefit, privilege, remedy,
discretion, or cause of action;
"Secured Moneys" means all moneys already, now or in the
future advanced or paid by the Banks and all liabilities
(direct or contingent) already, now or in the future incurred
by the Banks, to, for the use of, on behalf of or at the
request of, the Mortgagor (either alone or with any other
person) and all moneys otherwise owing or payable already, now
or in the future by the Mortgagor (either alone or with any
other person) to the Banks pursuant to the Agreement or the
Loan Papers; without limiting or being limited by the
foregoing "Secured Moneys" includes:
(a) all moneys already advanced or which the Banks now or
in the future advance or become liable to advance to,
for the use of, or on behalf of, any other person,
where those moneys have been advanced, are advanced
or are liable to be advanced on the order, direction,
request, nomination or suggestion (express or
implied) of the Mortgagor (either alone or with any
other person) in connection with the Agreement or the
Loan Papers;
(b) all moneys which the Mortgagor (either alone or with
any other person) whether directly or indirectly or
contingently or prospectively, and whether by way of
debt, contract, guarantee, indemnity, restitution,
damages, order of a court or otherwise now or already
is or in the future becomes liable to pay to the
Banks under this Mortgage, the Agreement or the Loan
Papers;
(c) all moneys which the Banks are liable to pay already,
now or in the future for the accommodation of the
Mortgagor (either alone or with any other person)
because of the Banks entering into any engagement,
bond, indemnity, guarantee, letter of credit, letter
of comfort, call option, undertaking or other
commitment or by accepting, endorsing, drawing,
paying, discounting or otherwise becoming liable on
any bill of exchange or other negotiable instrument
under the Agreement or the Loan Papers, whether such
engagement, bond, indemnity, guarantee, letter of
credit, letter of comfort, call option, undertaking,
or other commitment or negotiable instrument has
matured or not, or whether the liability of the Banks
under it is contingent, prospective or actual;
(d) all moneys which the Banks may debit against the
Mortgagor (either alone or with any other person) on
any account under any present or future judgment,
order, understanding, arrangement, custom, practice
of the Banks or Right of the Banks, or under the
terms of this Mortgage, the Agreement, the Loan
Papers or otherwise;
(e) all moneys already now or in the future owed by the
Mortgagor (either alone or with any other person) to
the Banks because of the assignment to or acquisition
by the Banks of any debt or other Obligation of the
Mortgagor under the Agreement or the Loan Papers;
(f) all loss or damages suffered by the Banks caused or
contributed to by any breach by the Mortgagor of this
Mortgage, the Agreement or the Loan Papers;
(g) all moneys and liabilities defined elsewhere in this
Mortgage as comprising part of the Secured Moneys;
(h) all other moneys intended to be secured under the
terms of this Mortgage; and
(i) interest on all of the above moneys;
irrespective of:
<PAGE> 112
5
(j) whether the security created by this Mortgage is or
remains valid or is released or discharged;
(k) whether such amounts and liabilities are owing at a
particular time or in the future, or whether they are
owing actually, prospectively, contingently or
otherwise;
(l) whether any amount or liability is, at any particular
time, ascertained or unascertained;
References to the "Secured Moneys" include the whole or any
part or parts of such moneys.
1.3 Interpretation
In the interpretation and implementation of this Mortgage, unless the
context otherwise requires;
(a) singular includes plural and vice versa; any gender includes
every gender;
(b) references to people include corporations, associations and
all other legal entities;
(c) references to writing include printing, typing, telex,
facsimile and other means of reproducing words and/or figures
in a visible, tangible form, in English;
(d) references to statutes include statutes amending,
consolidating or replacing the statute referred to and all
regulations, orders in council, rules, by-laws and ordinances
made under those statutes; references to sections of statutes
refer to corresponding sections in amended, consolidated or
replacement statutes;
(e) references to clauses, sub-clauses, paragraphs and
sub-paragraphs refer to clauses, sub-clauses, paragraphs and
sub-paragraphs of this Mortgage;
(f) headings and the index are for convenience only, and shall be
disregarded;
(g) where any word or phrase is given a defined meaning, any other
grammatical form of that word or phrase has a corresponding
meaning;
(h) each paragraph or sub-paragraph in a list is to be read
independently from the others in the list;
(i) time is of the essence in relation to Obligations of the
Mortgagor under this Mortgage, the Agreement and the Loan
Papers;
(j) the exercise by the Mortgagee or an Officer of the Mortgagee
of any of their respective Rights shall be deemed to be at its
or his complete discretion and (so far as possible) not to
restrict the exercise at any other time of the same or any
other Right;
(k) if any term of this Mortgage is by law unenforceable or made
inapplicable, it shall be severed or read down, but so as to
maintain (as far as possible) all other terms of this
Mortgage;
(l) if any statute requires any notice to be given or the
expiration of any time before the exercise of a particular
Right of a mortgagee, receiver or manager or the incurring of
an Obligation by a mortgagor, such requirement is excluded to
the full extent permitted by law; if any such requirement
cannot legally be excluded, the same is abridged to the full
extent permitted by law or to the period of twenty-four (24)
hours (whichever is the greater);
(m) all terms of this Mortgage are intended to have full effect,
despite any moratorium legislation, events which may otherwise
amount to a frustration of contract, or other circumstances
which might otherwise terminate, suspend or modify
Obligations;
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(n) those Mortgagee's Rights and Mortgagor's Obligations under
this Mortgage that are capable of taking effect after the
release or discharge of this Mortgage shall continue after the
release or discharge of this Mortgage;
(o) all Rights of the Mortgagee are cumulative, and do not exclude
or modify any other Rights relating to this Mortgage;
(p) nothing in this Mortgage shall merge, extinguish, postpone,
lessen or otherwise prejudicially affect any lien or security
which the Mortgagee is entitled to because of the deposit of
documents of title relating to the Mortgaged Property or any
other documents or instruments, or merge any Right of the
Mortgagee on any bill of exchange, promissory note or other
instrument;
(q) unless otherwise specifically stated in this Mortgage or
required by statute, any authority, approval or consent
required from the Mortgagee under the terms of this Mortgage
may be given, withheld, or given on terms and conditions,
without giving any reasons, but the Mortgagee shall not act
arbitrarily or capriciously in that regard;
(r) this Mortgage binds each person signing it to the full extent
provided in this Mortgage, even if one or more of the persons
named as Mortgagor has not signed or never signs it, or if the
signing of this Mortgage by any one or more of such persons
(other than the person sought to be made liable) is or may
become void or voidable;
2. PAYMENT OF MONEY
2.1 Payment of Secured Moneys
The Mortgagor will pay and/or repay (as the case may be) the Secured
Moneys to the Mortgagee in accordance with the Agreement and the Loan
Papers.
2.2 Interest on Secured Moneys
Interest forming part of the Secured Moneys shall be paid by the
Mortgagor at the rate or respective rates agreed between the Mortgagee
and the Mortgagor in the Agreement and the Loan Papers.
2.3 Unpaid Interest
(a) If any payment of interest required under this Mortgage, the
Agreement or the Loan Papers is not paid in full on the due
date, then interest shall accrue in accordance with the
Agreement and the Loan Papers.
(b) The Rights of the Mortgagee to charge interest on unpaid
interest and/or to capitalise unpaid interest may be
exercised:
(i) without prejudice to the Right of the Mortgagee to
sue for and recover unpaid interest or to the other
Rights of the Mortgagee;
(ii) without Notice to the Mortgagor;
(iii) despite the death, bankruptcy, liquidation,
receivership, assignment for the benefit of
creditors, arrangement with creditors, official
management or other demise of the Mortgagor;
(iv) despite the obtaining of any judgment in relation to
the Secured Moneys; and
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(v) despite the cessation of a relationship between the
Mortgagee and the Mortgagor of financier and customer.
2.4 Interest on Judgment
If any judgment or order is obtained by the Mortgagee against the
Mortgagor in respect of the Secured Moneys, the Mortgagor shall pay
interest on the judgment debt or amount ordered to be paid from the
date of judgment until payment of that amount. Such interest shall be
calculated and payable at the rate (or, if applicable, in accordance
with the method of determining a rate) applicable to such debt
immediately before judgment or at the rate payable under that judgment
(whichever is the higher).
2.5 Manner of Payment
(a) The Secured Moneys will be paid to the Mortgagee at such place
and at such time as may be provided in the Agreement or the
Loan Papers.
(b) Any remittance or payment (despite the issue of a receipt)
shall only constitute payment to the extent that, and on the
date when, the same is received by the Mortgagee in legal
tender and shall not then or later be required to be repaid,
disgorged, set off, or the benefit of it lost.
(c) The Mortgagee may require any payment to be made by bank
cheque.
(d) The Mortgagor will (if required by the Mortgagee) sign a
banker's authority directing payments of appropriate amounts
owing to the Mortgagee by debiting of the Mortgagor's account
and crediting to the Mortgagee's account at a bank nominated
by the Mortgagee.
(e) If any part of the Secured Moneys is denominated in a currency
other than Australian Dollars then, except as provided in the
Agreement or any Loan Paper to the contrary:
(i) the Mortgagor shall (as the Mortgagee requires) pay
to the Mortgagee the Secured Moneys so denominated
which are due from time to time in either that other
currency or the equivalent in Australian Dollars of
those moneys due, adopting an exchange rate nominated
by the Mortgagee and current at the time of payment
or any other relevant time nominated by the
Mortgagee;
(ii) where any payment received in reduction of that part
of the Secured Moneys is in Australian Dollars (or in
any currency other than the currency in which that
part of the Secured Moneys is denominated) and the
Agreement, the Loan Papers or the terms of this
Mortgage require payment in the currency in which the
debt is owed, the amount of the payment received
shall be computed in the relevant currency in which
the relevant debt is owed, using an exchange rate
nominated by the Mortgagee and current at the time of
receipt or current at any other relevant time
nominated by the Mortgagee;
(iii) if the whole or any part of the Secured Moneys so
denominated is not paid when due, the Mortgagee may
(without Notice to the Mortgagor) purchase with
Australian Dollars (or any other relevant currency)
currency in and equal to the amount due (whether such
purchase is at an official rate of exchange or at a
premium above such official rate) and apply the
currency purchased against the relevant Secured
Moneys; the Mortgagor shall indemnify the Mortgagee
in Australian Dollars (or the other relevant currency
of purchase) for the amount so expended by the
Mortgagee and all other costs incurred in respect of
such purchase.
(f) Each person named or identified as Mortgagor irrevocably
appoints each other person named as Mortgagor and (in the case
of corporations) each of their own and such other persons'
respective directors, secretaries, and Executive Officers,
severally to be his attorney to make payments and to give
acknowledgments relating to the Secured Moneys. Every payment
<PAGE> 115
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made on account of the Secured Moneys and every acknowledgment
of liability in respect of the Secured Moneys made or given by
such appointee (whether expressly as attorney or not) shall be
binding as if the appointor under this paragraph had made such
payment or given such acknowledgment personally. This
paragraph does not make inapplicable the definition of
Mortgagor contained elsewhere in this Mortgage.
2.6 Apportionment of Moneys Received
(a) Any money paid to the Mortgagee in respect of the Secured
Moneys (despite any purported appropriation or condition of
payment by the person paying it) may be appropriated by the
Mortgagee to any amount or amounts owing by the Mortgagor
(actually or contingently) and to principal or interest, as
the Mortgagee determines. Such appropriation may be made at
the time of payment or at any later time (the Mortgagee being
entitled to retain amounts in a suspense account
indefinitely).
(b) If the Mortgagee receives money from any source (including
payment by the Mortgagor or a Co-surety, or proceeds from the
enforcement of a Right which may be applied in reduction of
the Secured Moneys, but all or part of the Secured Moneys are
owing contingently or prospectively or their amount cannot be
ascertained, then the Mortgagee may, pending the outcome of
the relevant contingency or circumstances or the amount being
determined, deposit all or such part of such moneys as the
Mortgagee sees fit as security for the payment of the Secured
Moneys. Such deposit may be made in an interest bearing
account with any person determined by the Mortgagee (including
the Mortgagee or any Related Body Corporate of the Mortgagee
where the Mortgagee or such Related Body Corporate customarily
accepts deposits). The Mortgagor waives in favour of the
Mortgagee all Rights (if any) the Mortgagor may have to the
benefit of the debt created by the deposit and any interest
payable from time to time in respect of it.
(c) Where amounts are paid into a running account with
the Mortgagee, the application of the assumption that
debits first incurred are first repaid is to be
excluded, if the effect would be that:
(i) the amount of the Secured Moneys for which the
Mortgagee would be able to claim priority as against
any other Encumbrancee of the Mortgaged Property
would be reduced;
(ii) the amount of the Secured Moneys for which any
Co-surety could be made liable would be reduced; or
(iii) the Mortgagee would otherwise be prejudiced.
In such cases payments shall be deemed to have been applied
progressively in reduction of later debits, beginning with the
latest debit.
2.7 Combination of Accounts
(a) The Mortgagee may at any time (subject to any contrary terms
of the Agreement), without Notice, combine any two or more
accounts held with the Mortgagee by the Mortgagor. The
Mortgagee may, to the extent to which it would be so entitled
if the combined accounts had at all times been conducted as a
single account, decline to make any accommodation available to
the Mortgagor.
(b) Despite the provisions of the preceding paragraph, in
determining any amount owing by the Mortgagor to the Mortgagee
and interest payable, the Mortgagee shall not be Obliged to
give any credit for any credit balances in any account of the
Mortgagor or any other moneys owing by the Mortgagee to the
Mortgagor.
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2.8 No Set Off
The Right to receive amounts under this Mortgage shall be free from
any equity, set off, or cross claim which (except for this provision)
the Mortgagor would be entitled to claim against the Mortgagee or any
intermediate mortgagee or any assignee.
3. MORTGAGING PROVISIONS
3.1 Mortgage
The Mortgagor assigns to the Mortgagee all the Mortgagor's estate and
interest in the Mortgaged Property to secure to the Mortgagee the due
and punctual payment of the Secured Moneys and the due and punctual
performance of all other Obligations of the Mortgagor in this
Mortgage, the Agreement and the Loan Papers.
3.2 Registration and Priority of Mortgage
This Mortgage is signed with the intention that it shall be registered
as soon as practicable, and shall have priority over all other
Encumbrances affecting the Mortgaged Property (other than any
Encumbrance to which this Mortgage is expressly made subject). The
Mortgagor will promptly sign all such further amendments to this
Mortgage, forms, undertakings, notifications, declarations, and other
documents and do all things the Mortgagee reasonably requires in order
to effect the registration of this Mortgage as expeditiously as
possible and to ensure and maintain such priority.
3.3 Transfer Mortgaged Property to Mortgagee if Required
At any time following an Event of Default which is continuing:
(a) If the Mortgagee elects, the Mortgagee shall be entitled to
have the Mortgaged Property transferred to the Mortgagee or a
nominee of the Mortgagee.
(b) Upon request by the Mortgagee, the Mortgagor will immediately
sign and deliver to the Mortgagee such transfers and other
documents and do all other things necessary to effect a
transfer of the Mortgaged Property to the Mortgagee (or the
nominee of the Mortgagee) as soon as practicable.
(c) After such a request has been made and prior to the completion
of a transfer of the Mortgaged Property, the Mortgagor shall
stand possessed of the Mortgaged Property in trust for the
Mortgagee (subject to such equity of redemption as shall from
time to time subsist under the terms of this Mortgage).
(d) Any transfer to the Mortgagee or a nominee of the Mortgagee
pursuant to this sub-clause shall be by way of Mortgage only,
and the Mortgagor shall be entitled to a retransfer of the
Mortgaged Property upon becoming entitled to a discharge of
this Mortgage.
4. WARRANTIES AND ACKNOWLEDGMENTS
4.1 Indefeasible Title and Status
(a) The Mortgagor warrants that the Mortgagor has (or is
immediately entitled to and able to obtain) an indefeasible
title to the Mortgaged Property and that the Mortgaged
Property is not subject to any:
(i) Encumbrance, or Right of set off, amalgamation with a
debit account or like Right;
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(ii) liability to be forfeited, surrendered, or have
Rights suspended or affected in any way;
(iii) postponement or deferment of Rights to receive
interest;
(iv) litigation, arbitration, administrative proceeding or
threatened litigation, arbitration or administrative
proceeding; or
(v) other claim or interest having priority over or
competing with or likely to affect this Mortgage,
except as is specifically described in this Mortgage or has
been unequivocally accepted in writing by the Mortgagee.
(b) The Mortgagor warrants that, to the best of the Mortgagor's
knowledge, no person alleges or makes or will allege or make
any claim contrary to the warranties referred to in the
preceding paragraph or intends or has threatened to commence
any proceedings in respect of such claim.
4.2 Enforceability, Capacity and Disclosure
The Mortgagor acknowledges and re-affirms the representations and
warranties contained in the Agreement and further warrants that:
(a) the Mortgagor has full power to sign and deliver this Mortgage
and perform the Mortgagor's Obligations under this Mortgage
and to receive accommodation from the Mortgagee and/or the
Banks in the manner contemplated in this Mortgage, the
Agreement and the Loan Papers, and that any necessary
corporate, shareholder and other action has been taken and any
necessary ratifications of shareholders, beneficiaries and
others have been given to authorise such signature, delivery
and performance;
(b) all Obligations of the Mortgagor in this Mortgage are legally
binding and enforceable in accordance with their terms;
(c) the signing and delivery of and the performance of Obligations
under this Mortgage by the Mortgagor will not:
(i) contravene any existing applicable law, statute, rule
or regulation or any judgment, decree or permit to
which the Mortgagor is subject;
(ii) conflict with or constitute a default under any
agreement or arrangement to which the Mortgagor is a
party or is subject or by which it or any of its
property is bound;
(iii) contravene (if applicable) any provision of the
Mortgagor's memorandum and articles of association or
other constitutional documents or any relevant trust;
or
(iv) result in the creation or imposition of or Obligation
to create any Encumbrance;
(d) no event or circumstance which constitutes or which (with the
giving of notice or lapse of time or both) would constitute an
Event of Default has occurred and is continuing;
(e) the Obligations of the Mortgagor under this Mortgage are
direct, general and unconditional Obligations of the
Mortgagor;
(f) the giving of this Mortgage is made in good faith without any
intention to delay or defraud any existing or future creditor
of the Mortgagor; the Mortgagor is presently able to pay the
Mortgagor's debts from the Mortgagor's own money as such debts
fall due;
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(g) this Mortgage is not signed or accommodation obtained relying
on any representation, promise or statement by the Mortgagee
and/or the Banks or any person on behalf of the Mortgagee
and/or the Banks (including representations, promises or
statements as to availability of future accommodation,
accommodation charges, financial conditions, currency
fluctuations, business prospects or such like) other than as
is specifically contained in this Mortgage, the Loan Papers or
the Agreement.
4.3 Continuing Warranties
Each of the warranties by the Mortgagor in this Mortgage shall be
deemed to have been re-affirmed to the Mortgagee immediately prior to
each provision of accommodation comprising part of the Secured Moneys
being made available by the Mortgagee and/or the Banks, except to the
extent that the Mortgagee shall have been specifically notified in
writing by the Mortgagor to the contrary.
5. GENERAL COVENANTS
The Mortgagor acknowledges and re-affirms the covenants contained in
the Agreement and the Loan Papers and further covenants as follows:
5.1 Mortgagor to Protect Mortgaged Property
Except as provided in the Agreement or the Loan Papers, the Mortgagor
will not commit, participate in, permit or omit to do any act, matter
or thing which will or may:
(a) decrease the value of the Mortgaged Property;
(b) cause the Mortgaged Property to be liable to forfeiture, set
off, amalgamation with a debit account, reduction on any other
basis, or other adverse circumstances (except to the extent
that such Rights are exercisable by the Mortgagee under this
Mortgage or on any other basis); or
(c) postpone the payment of any interest or other amount in
respect of the Mortgaged Property.
5.2 Receipt of Interest
Unless and until any Event of Default occurs and is continuing, and
the Mortgagee elects to exercise its Right to apply interest in
reduction of the Secured Moneys and subject to any specific contrary
provision in the Agreement and the Loan Papers, all interest actually
paid in respect of the Mortgaged Property shall belong to the
Mortgagor.
5.3 Pay Mortgagee's Outgoings on Demand
(a) The Mortgagor will pay to the Mortgagee on demand all costs,
charges and expenses incurred by the Mortgagee in connection
with the Secured Moneys, this Mortgage, the Loan Papers or the
Agreement, including but not limited to:
(i) costs in respect of the preservation or protection of
the Mortgaged Property or this Mortgage, or which in
the Mortgagee's opinion may be necessary or desirable
to protect or safeguard or in any way to aid assist
or advantage the Rights, title and interest of the
Mortgagee or the Mortgagor in relation to the
Mortgaged Property;
(ii) costs (including legal costs on a full indemnity
(solicitor and own client) basis and reasonable
administration charges imposed by the Mortgagee)
which the Mortgagee incurs in connection with the
negotiation, preparation, signing, stamping,
registration, release, variation or transfer of this
Mortgage or in connection with any documentation,
advice, requests for consent, enquiries and other
matters of any
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nature affecting the Mortgaged Property, the
Mortgagor or the transactions secured by this
Mortgage;
(iii) costs (including legal costs on a full indemnity
(solicitor and own client) basis and reasonable
administration charges imposed by the Mortgagee)
incurred:
(A) in connection with any actual or attempted
exercise of any Right of the Mortgagee,
(B) as a result of any Event of Default;
(C) in respect of any dispute or proceedings
commenced by any person (including the
Mortgagee) which relate directly or
indirectly to this Mortgage, the Mortgaged
Property, the Mortgagee, the Mortgagor or any
Co-surety or otherwise, and
(D) otherwise arising out of the Mortgagee being
the mortgagee under this Mortgage; and
(v) stamp duty, financial institutions duty, taxes,
registration fees, imposts, fees, fines, penalties,
and charges in connection with this Mortgage, the
Agreement and the Loan Papers secured by this
Mortgage.
(b) The Mortgagor consents to all orders for costs made by a court
against the Mortgagor in favour of the Mortgagee being on a
full indemnity (solicitor and own client) basis. The
Mortgagor shall indemnify the Mortgagee on such a basis for
all costs incurred by the Mortgagee, even though a court may
only award party and party costs or may award costs against
any person (other than the Mortgagee).
5.4 No Assignment etc Without Consent
(a) The Mortgagor will not assign, dispose of, forfeit, or
otherwise Encumber the Mortgaged Property, or agree to do any
of the foregoing or allow the same to take place, without the
prior consent of the Mortgagee in writing. This paragraph is
subject to any specific contrary provision in this Mortgage or
in the Agreement.
(b) If the Mortgagor creates a subsequent mortgage or charge over
the Mortgaged Property ("such security") then prior to or
immediately after creation of such security, and before any
moneys are secured (actually or contingently) by such
security, the Mortgagor will cause the person entitled to such
security to enter into a priority and subordination agreement
with the Mortgagee, so as to preserve and/or confirm the
Mortgagee's position as mortgagee ranking in priority to the
mortgagee under such security for an amount and on terms
wholly satisfactory to the Mortgagee.
5.5 Mortgagor to Give Notice of Certain Events
The Mortgagor shall immediately give Notice to the Mortgagee if any of
the following become known to the Mortgagor:
(a) the occurrence of any Event of Default;
(b) any event or circumstance where an Encumbrance is granted or
arises in relation to the Mortgaged Property, other than a
"Permitted Lien," as defined in the Agreement;
(c) any actual or threatened litigation, arbitration or
administrative proceedings relating to the Mortgaged Property
or the Mortgagor which might have a material adverse effect in
relation
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to the value of the Mortgaged Property or the ability of the
Mortgagor to perform or observe the Mortgagor's Obligations
under this Mortgage or any Collateral Security;
(d) any circumstances where the value of the Mortgaged Property is
or may be substantially reduced; or
(e) any other circumstances or information that the Mortgagee may
from time to time reasonably specify in respect of the
Mortgagor, this Mortgage or the Mortgaged Property.
5.6 Further Assurances
The Mortgagor will at all times sign all further transfers, requests,
other documents and amendments to documents and do other things as may
be reasonably requested by the Mortgagee to enable this Mortgage to be
registered (if applicable), or for further or better securing the
Rights and interests of the Mortgagee over the Mortgaged Property to
secure payment of the Secured Moneys. The Mortgagor shall pay to the
Mortgagee on demand all costs incurred by the Mortgagee in respect of
this sub-clause and the same shall form part of the Secured Moneys.
6. PRIOR AND SUBSEQUENT MORTGAGES
6.1 Prior and Subsequent Mortgages
The Mortgaged Property is not or shall not become subject to a prior
or subsequent mortgage or charge without the prior written consent of
the Mortgagee.
7. DEFAULT
7.1 Events of Default
An Event of Default for purposes of this Mortgage means the occurrence
of a "Default," as defined in the Agreement. If an Event of Default
occurs and is continuing; THEN, if the Mortgagee elects, the Secured
Moneys shall become immediately payable to the Mortgagee as if the
time for payment or repayment of the same had arrived. The Mortgagee
need not notify the Mortgagor of such election. If there is any
outstanding Obligation of the Mortgagee and/or the Banks to the
Mortgagor pursuant to the Agreement (including any commitment to
advance any accommodation) the Mortgagee and/or the Banks may also
decline to meet such Obligation.
8. POWERS OF MORTGAGEE
8.1 Mortgagee May Remedy Default
If the Mortgagor defaults in any Obligation to the Mortgagee, or if
any statement, warranty or representation of the Mortgagor made or
deemed to be made to the Mortgagee is untrue or misleading, the
Mortgagee may (but shall not be Obliged to), do all acts and things
which the Mortgagee considers necessary to make good such default or
rectify the circumstances stated warranted or represented or deemed so
to be. All expenses incurred by the Mortgagee shall, upon being
incurred, be added to and form part of the Secured Moneys and bear
interest accordingly. Such expenses shall be payable by the Mortgagor
to the Mortgagee on demand. The Mortgagor indemnifies the Mortgagee
against any loss, damage, cost or expense arising or incurred by the
Mortgagee by reason of any default of the Mortgagor. The Mortgagee
shall incur no liability for failing or declining to exercise any
Right under this sub-clause.
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8.2 Statutory Powers on Occurrence of Event of Default
All the Rights of a mortgagee in any statute or at law may be
exercised by the Mortgagee in respect of the Mortgaged Property at any
time an Event of Default occurs and is continuing.
8.3 Power of Sale
At any time an Event of Default occurs and is continuing, the
Mortgagee may sell and assign the Mortgaged Property to any person
free from any equity of redemption or other interest on the part of
the Mortgagor, subject to the giving of any notices required by
statute prior to or after the exercise of any power of sale.
8.4 Further Powers of Mortgagee After Occurrence of Event of Default
(a) After the occurrence of an Event of Default which is
continuing, the Mortgagee may also, without making demand or
giving any notice to the Mortgagor (unless compelled by law to
do so), do any of the following:
(i) receive and apply to itself (free from any equity of
redemption or other interest on the part of the
Mortgagor) the capital and all interest and other
moneys of any kind comprised in or arising out of the
Mortgaged Property;
(ii) exercise all Rights attaching to or arising out of
the Mortgaged Property;
(iii) institute proceedings against, bankrupt, attend
meetings of creditors of or make any arrangement or
compromise or concession with any person which
relates in any way to the Mortgaged Property;
(iv) institute, prosecute or defend any proceedings
(either in the name of the Mortgagor or the
Mortgagee) in any court or tribunal in respect of any
thing referred to in this sub-clause;
(v) carry out and enforce in the name of and as attorney
or agent of the Mortgagor specific performance of or
otherwise obtain the benefit of all contracts,
arrangements and understandings entered into or held
by the Mortgagor relating to or affecting the
Mortgaged Property;
(vi) compel the signing by the Mortgagor or its trustee,
liquidator or receiver of any documents which the
Mortgagee considers desirable for the purpose of
achieving any sale, disposition or agreement made by
the Mortgagee in accordance with the Rights of the
Mortgagee;
(vii) delegate to any person as the Mortgagee's agent the
performance or enjoyment of all or any of the
Mortgagee's Rights;
(viii) employ or engage solicitors, accountants, employees
or agents as the Mortgagee considers necessary in
relation to any of its Rights; and
(ix) exercise all the foregoing Rights in conjunction with
the Mortgagee's Rights relating to any other property
mortgaged or charged to or owned by it, and apportion
all costs, expenses, sale moneys, fees and other
outgoings and receipts amongst the properties so
dealt with as the Mortgagee thinks fit.
(b) A person dealing with the Mortgagee need not enquire whether
any Event of Default or other circumstance has occurred to
authorise the Mortgagee to act, or to see to the application
of any moneys paid to the Mortgagee.
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(c) All costs and expenses incurred by the Mortgagee as a result
of exercising any of the foregoing Rights shall, immediately
upon being incurred, be added to and form part of the Secured
Moneys. They shall bear interest accordingly and shall be
payable to the Mortgagee on demand.
8.5 Attorney of the Mortgagor
(a) The Mortgagor irrevocably appoints the Mortgagee, every
Officer of the Mortgagee, and every person from time to time
appointed by the Mortgagee for the purposes of this sub-clause
severally the Mortgagor's attorney and the attorney of the
Mortgagor's heirs, executors, administrators, successors and
assigns (the "Attorney") for the use and benefit of the
Mortgagee to do:
(i) all acts and things required to be done by the
Mortgagor under this Mortgage, any Loan Paper or the
Agreement; and
(ii) all acts which the Mortgagee is by virtue of this
Mortgage, the Agreement or the Loan Papers authorised
or empowered to do during the continuance of any
Event of Default.
(b) Without limiting the above, an Attorney may:
(i) take steps and proceedings and sign documents for
securing or perfecting (as the Mortgagee or an
Attorney thinks fit) the security constituted by this
Mortgage, and sign in favour of the Mortgagee all
further legal mortgages, transfers, assignments and
other assurances of all or any part of the Mortgaged
Property required to be signed by the Mortgagor under
this Mortgage, the Loan Papers or the Agreement;
(ii) in the name of and on behalf of the Mortgagor or in
the name of the Mortgagee or an Attorney demand, sue
or institute bankruptcy proceedings for, prove in
estates for, recover, receive, give effectual
receipts for or make compromises in respect of the
Mortgaged Property;
(iii) make, enforce, settle or compromise any claim, and
demand, sue for, recover, receive and give discharges
for moneys payable in respect of the Mortgaged
Property; and
(iv) appoint a substitute or substitutes for all or any of
the above purposes.
(c) The Attorney may register this power of attorney under any
statute and do whatever he considers necessary to give
validity and effect to the same.
(d) Except as the result of the gross negligence or willful
misconduct of the Attorney, the Attorney shall not be
responsible for any loss which may happen in the exercise of
the above powers.
(e) A certificate by the Mortgagee signed by an Officer of the
Mortgagee as to the occurrence of an Event of Default may be
relied on by any person in respect of this sub-clause without
further enquiry.
8.6 Conflicts of Interests, Duties etc.
The Mortgagee and any Officer of the Mortgagee may exercise Rights
under this Mortgage even though such exercise may involve:
(a) a conflict between any duty owed to the Mortgagor and any duty
owed to any other person;
<PAGE> 123
16
(b) a conflict between a duty owed to the Mortgagor and any
interests of the Mortgagee or Officer of the Mortgagee; or
(c) any other conflict of duties or interests or duty and
interest.
No action taken or contract entered into or consequence otherwise
arising because of such exercise of Rights by the Mortgagee or Officer
of the Mortgagee shall be void, voidable or otherwise unenforceable or
able to be restrained by virtue of any such conflict. Neither the
Mortgagee nor any Officer of the Mortgagee shall be liable to account
to the Mortgagor or any other person for any benefit or gain arising
out of any such conflict.
8.7 Waiver
(a) All Rights of the Mortgagee under this Mortgage, any
Collateral Security, the Agreement, the Loan Papers, by
statute, at law and in equity may be exercised, despite any
forbearance or delay in their enforcement.
(b) No employee or agent of the Mortgagee has authority to waive
any such Right or to represent that such Right will not be
exercised (either temporarily or permanently) or to give any
warranty, consent or promise or to agree to any variation,
except in a document signed by such employee or agent.
(c) Any waiver, representation, warranty, consent, promise or
agreement duly given shall be effective only in the specific
instance to which it relates and for the specific purpose for
which it is given.
(d) No waiver, representation, warranty, consent, promise or
agreement shall be implied from conduct or failure to act on
the part of the Mortgagee or any Officer of the Mortgagee.
9. PROCEEDS OF SALE ETC
9.1 Application for Proceeds etc.
Subject to any contrary statutory Obligations or other provisions of
this Mortgage or the Agreement, the Mortgagee shall apply proceeds
received by it in respect of the Mortgaged Property (whether by way of
sale, appropriation, set off or receipt or application in any other
way):
(a) firstly to pay all moneys expended or outstanding in respect
of the Mortgaged Property, including costs charges and
expenses incurred in the exercise of any of the Mortgagee's
Rights;
(b) secondly in payment of the Secured Moneys (to the extent that
the same are not paid under the preceding paragraph)
irrespective of whether they would otherwise be due or owing
at the time of such application, but without prejudice to the
Mortgagee's Right to place moneys received in a suspense
account indefinitely if any of the Secured Moneys are owing
contingently or prospectively, or otherwise pending
apportionment;
(c) thirdly to pay appropriate amounts to subsequent mortgagees or
other persons entitled to amounts, in order of priority; and
(d) fourthly to pay any surplus to the person entitled to give
receipt for the proceeds of sale or appropriation of the
Mortgaged Property, upon obtaining a full and final discharge
for such amount to the satisfaction of the Mortgagee; the
Mortgagee shall pay the surplus to an account specified by the
Mortgagor and the Mortgagee shall then be under no liability
in respect of such surplus or for interest on it.
<PAGE> 124
17
10. LIABILITY OF THE MORTGAGEE AND INDEMNITIES
10.1 No Liability for Loss
Neither the Mortgagee nor any Officer of the Mortgagee nor their
respective employees or agents shall, except in the case of gross
negligence or willful misconduct of the Mortgagee or any Officer of
the Mortgagee, be responsible for any loss which may happen or for any
outstanding moneys following the exercise or attempted exercise or
non-exercise of any Right incidental to this Mortgage, the Loan Papers
or the Agreement.
10.2 Indemnities
The Mortgagor, except in the case of gross negligence or willful
misconduct of the Mortgagee or any Officer of the Mortgagee,
indemnifies the Mortgagee and every Officer of the Mortgagee and their
respective agents and employees against all liabilities, claims,
actions, suits, costs, losses and expenses (including claims by the
Mortgagor) incurred by or arising against the Mortgagee or any such
person arising out of:
(a) any act or omission of the Mortgagee or such person concerning
this Mortgage, any Loan Paper or the Agreement; or
(b) the exercise, attempted exercise or non-exercise of any Rights
in or incidental to this Mortgage, any Loan Paper or the
Agreement.
11. CONTINUING SECURITY: DISCHARGE
11.1 Continuing Security
This Mortgage is a continuing security. It shall not be completely or
partially discharged merely by the payment at any time of any of the
Secured Moneys or by any settlement of account. This Mortgage shall
continue to apply to the present and any future balance of the Secured
Moneys until a final discharge of this Mortgage has been given to the
Mortgagor. The Mortgagor shall not be entitled to a final discharge
of this Mortgage whilst:
(a) there is any debt or other Obligation of the Mortgagor (either
alone or with any other person) to the Mortgagee under the
Agreement or the Loan Papers, either actual, contingent,
prospective or otherwise reasonably apprehended by the
Mortgagee (even if it cannot be quantified); or
(b) there is any liability or other Obligation on the part of the
Mortgagee under the Agreement or the Loan Papers, for or on
behalf of or in respect of the Mortgagor (either alone or with
any other person) either actual, contingent, prospective or
reasonably apprehended by the Mortgagee (even if it cannot be
quantified).
The Mortgagee shall be deemed to reasonably apprehend a liability on
the part of the Mortgagor in circumstances (amongst others) where
litigation has been threatened or commenced or a dispute exists which,
if resolved or settled in a particular way, would result in a
liability or costs or expenses being incurred by the Mortgagee or an
amount becoming owing to the Mortgagee, which would be recoverable in
whole or in part from the Mortgagor.
11.2 Premature Discharge of Mortgage
If the Mortgagee, due to a preferential payment subsequently repaid
under any applicable insolvency laws, receives an amount less than it
would have otherwise required in exchange for a release or partial
release of this Mortgage, then the Rights of the Mortgagee against the
Mortgagor in respect of the Mortgaged Property shall be the same as if
this Mortgage had not been released or partially
<PAGE> 125
18
released (as the case may be) and as if the Mortgagor had no Right of
release. In such case the Mortgagor will do all things required by
the Mortgagee (including, if necessary, signing a further mortgage on
such terms as the Mortgagee requires over the Mortgaged Property
released or any property nominated by the Mortgagee of approximately
equal value) to restore to the Mortgagee its full benefits had this
Mortgage not been released or partially released (as the case may be)
and had the Mortgagee been under no Obligation to release it.
11.3 Form of Discharge
Any discharge or release of this Mortgage when given may be in such
form as the Mortgagee reasonably requires (including a specific
provision or excluding optional words, so that the release of this
Mortgage shall operate only as a release of the mortgage over the
Mortgaged Property, but reserving all Rights against the Mortgagor on
personal covenants contained or implied in this Mortgage in respect of
the payment of money or otherwise) so as to fully discharge the
Mortgaged Property (or such part of the Mortgaged Property as is
relevant) from this Mortgage. In the absence of anything express to
the contrary in any discharge, partial discharge, release or partial
release of this Mortgage, such discharge, partial discharge, release
or partial release shall be deemed to have been given so as to effect
only a release of the mortgage over the Mortgaged Property (or such
part of the Mortgaged Property as is relevant) and not so as to (then
or upon registration) release the Mortgagor from the Mortgagor's
Obligations under the personal covenants in this Mortgage.
12. POSSESSION AND PRODUCTION OF CERTIFICATES OF DEPOSIT ETC.
12.1 Possession of Certificates etc.
The Mortgagor shall deliver to the Mortgagee, and the Mortgagee shall
be entitled to possession of certificates of deposit, passbooks and
other indicia of title relating to the Mortgaged Property.
12.2 Production of Certificates etc on Redemption of Deposit
In the event of the loss of any certificate of deposit, passbook or
other relevant document, the Mortgagor will accept from the Mortgagee
in lieu of such document such evidence as will customarily be accepted
in order to dispense with production of that document when production
would otherwise be required in respect of the redemption of the
Deposit.
13. MISCELLANEOUS
13.1 Mortgage not Affected by Intervening Circumstances
This Mortgage, the Obligations of the Mortgagor under this Mortgage,
the Loan Papers, the Agreement or any other arrangement, and the
Mortgagee's Rights against the Mortgagor will not be discharged,
terminated, reduced, modified or otherwise affected by any of the
following:
(a) the giving by any person of or terms of any Collateral
Security from time to time;
(b) any delay, failure, neglect or refusal by the Mortgagee to
exercise Rights or to recover any of the Secured Moneys under
this Mortgage, any Collateral Security, the Agreement, any
Loan Paper, judgment or specialty;
(c) the failure to obtain, register or perfect, or loss,
inadequacy, invalidity or unenforceability of any Collateral
Security or other Obligation, whether given at the time of
this Mortgage or otherwise;
(d) the granting to the Mortgagor or any Co-surety of any time,
credit, forbearance, indulgence, or other concession (either
for or without consideration or by operation of law);
<PAGE> 126
19
(e) any partial or absolute release, discharge, abandonment,
surrender, waiver, variation, transfer, exchange,
relinquishment or renewal (either with or without
consideration) of Rights against a Co-surety;
(f) the Mortgagee becoming party to or bound by any compromise,
assignment of property, scheme of arrangement, composition of
debts, scheme of reconstruction or other arrangement relating
to the Mortgagor, a Co-surety or any other person;
(g) any variation of this Mortgage or of any Collateral Security,
or any variation of, termination of the Agreement, any Loan
Paper, or any arrangement or understanding between the
Mortgagee, the Mortgagor, or a Co-surety or any two or more of
the foregoing persons (with or without others), except to the
extent that the same is unequivocally expressed to amend or
overrule this Mortgage;
(h) any acquiescence or delay on the part of the Mortgagee or the
Banks;
(i) any payment to the Mortgagee of, or any Obligation to pay, the
Secured Moneys becoming void, voidable or otherwise
unenforceable;
(j) any Collateral Security becoming void, voidable or otherwise
unenforceable in whole or in part;
(k) the death, mental incapacity, bankruptcy, assignment for the
benefit of creditors, arrangement with creditors, winding up,
reconstruction, official management, receivership or other
incapacity, insolvency or demise of the Mortgagor or a
Co-surety or (where the Mortgagor is or becomes a partnership
or firm) any change that may be made, whether by death,
winding up, dissolution, retirement or otherwise in the
partnership or firm or any persons now or in the future
constituting or trading under the name of the firm (but the
Mortgagee may at its discretion discontinue all or any
transactions with the Mortgagor or with the partnership or
firm and may decline to make available any accommodation or to
meet any Obligations to, for or on account of the Mortgagor or
of the partnership or firm without notice to the Mortgagor or
to such partnership or firm upon receipt of notice of any such
change);
(l) the Mortgagor or any Co-surety not being or ceasing to be
authorised or empowered to enter into this Mortgage, the
Agreement, the Loan Papers, a Collateral Security or any
relevant transaction;
(m) the transfer or assignment by the Mortgagee of this Mortgage
or any Collateral Security subject, however, to the provisions
of Section 13.2;
(n) obtaining judgment against the Mortgagor or a Co-surety;
(o) any check or other instrument issued in payment of the Secured
Moneys, while such check or instrument is outstanding;
(p) any variation in or alteration to the status, nature or
composition (including takeover, merger, amalgamation and
reconstruction) of the Mortgagee, the Mortgagor, a Co-surety
or any other person or the memorandum of association, articles
of association, constitution, rules, trusts or other documents
relating to the Mortgagee, Mortgagor, a Co-surety or any other
person.
13.2 Mortgagee May Assign
Subject to the terms of the Agreement to the contrary, the Mortgagee
may assign to any person this Mortgage, the Secured Moneys, the
Rights, title and interest of the Mortgagee to the Mortgaged Property,
the benefit of any term of this Mortgage, the benefit of any surety
provisions contained in or relating to this Mortgage or the benefit of
any indemnity under this Mortgage, irrespective of whether all or any
of the foregoing would not otherwise be assignable. The Mortgagor
will (at the expense of any assignee requiring the same) enter into
any further mortgages, deeds or other agreements for
<PAGE> 127
20
securing or re-affirming to the satisfaction of such assignee the
benefit of this Mortgage and the benefit of and entitlement to all
Rights of the Mortgagee and Obligations of the Mortgagor under this
Mortgage.
13.3 Notices
Any Notice required under this Mortgage shall be given or made
pursuant to the terms of Section 12.3 of the Agreement.
13.4 Court Proceedings
To the extent that the Mortgagor is legally able to do so, the
Mortgagor irrevocably:
(a) submits to the non-exclusive jurisdiction of the Courts of the
State of Victoria in respect to any legal proceedings in
connection with this Mortgage;
(b) consents to the service of process out of any Courts in such
legal proceedings by the mailing, telexing or facsimile
transmission of a copy or notice of the relevant process to
the Mortgagor in the manner provided for in this Mortgage for
service of Notices on the Mortgagor;
(c) waives any objection the Mortgagor may have to the laying of
venue of any such legal proceedings in any of such Courts and
any claim that legal proceedings have been brought in an
inconvenient forum; and
(d) agrees that nothing in this Mortgage shall affect service of
process in any other manner permitted by law or preclude the
Right of the Mortgagee to bring proceedings in any other court
or courts of competent jurisdiction as the Mortgagee may
elect, and that legal proceedings in any one or more
jurisdictions shall not preclude legal proceedings in any
other jurisdiction.
13.5 Governing Law
This Mortgage shall be governed and construed in all respects in
accordance with the law of the State of Victoria.
13.6 Authority to Date and Complete
The Mortgagor irrevocably authorises the Mortgagee and every Officer
of the Mortgagee:
(a) to date this Mortgage and complete and any other blanks left
uncompleted pending advancing of accommodation or for any
other reason; and
(b) as irrevocable attorney of the Mortgagor to rectify any
manifest error, and to complete any forms in order to procure
its registration (in the case of the Mortgagor being a
company).
13.7 Certificate of the Mortgagee is Evidence
A certificate signed by the Mortgagee or any Officer of the Mortgagee
stating the amount of the Secured Moneys at the date mentioned in any
such certificate or any other fact, matter or circumstance shall be,
absent manifest error, prima facie evidence against the Mortgagor as
to the matters certified.
13.8 Limitation of Secured Moneys
Despite any other provision in this Mortgage to the contrary, the
Mortgagee may not recover from the Mortgagor under this Mortgage in
respect of the Secured Moneys an amount in excess of the Australian
Dollar equivalent from time to time of US $6,500,000.00, together with
all interest on the Secured Moneys and the cost of enforcing this
Mortgage or any Collateral Security.
<PAGE> 128
21
13.9 Conflicts with the Agreement
Any conflict or ambiguity between the terms or provisions of this
Mortgage and the terms and provisions of the Agreement is controlled
by the terms and provisions of the Agreement for all purposes.
THE SCHEDULE
(Deposit)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------
Type of Deposit or Account Deposit or Account Number Institution with whom
Deposit is Made
- --------------------------------------------------------------------------------------------
<S> <C> <C>
Operating Account 2607-49229 Australian and New
Zealand Banking Group
Limited
</TABLE>
[Remainder of page intentionally blank; signature page follows]
<PAGE> 129
22
IN WITNESS this Deed has been signed.
<TABLE>
<S> <C>
THE COMMON SEAL of International Sea Drilling Ltd as ) /s/ E. J. SPILLARD
Mortgagor was duly affixed in accordance with the Articles ) . . . . . . . . . . . . . .
of Association of the Company in the presence of a Director ) Director
and the Secretary of the Company signing opposite, who )
certify that they are the proper officers to affix such ) /s/ G. G. ARMS
seal, and also in the presence of: ) . . . . . . . . . . . . . .
) Secretary
Witness /s/ SUSAN DOUGHERTY
/s/ R. A. JOHANNSEN
. . . . . . . . . . . . . .
Treasurer
</TABLE>
(C) Feez Ruthning
<PAGE> 130
23
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
1. DEFINITIONS AND INTERPRETATION . . . . . . . . . . . . . . . . . . . . . . . 2
1.1 Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.3 Interpretation . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2. PAYMENT OF MONEY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.1 Payment of Secured Moneys . . . . . . . . . . . . . . . . . . . . . 6
2.2 Interest on Secured Moneys . . . . . . . . . . . . . . . . . . . . . 6
2.3 Unpaid Interest . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.4 Interest on Judgment . . . . . . . . . . . . . . . . . . . . . . . . 7
2.5 Manner of Payment . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.6 Apportionment of Moneys Received . . . . . . . . . . . . . . . . . . 8
2.7 Combination of Accounts . . . . . . . . . . . . . . . . . . . . . . 8
2.8 No Set Off . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
3. MORTGAGING PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
3.1 Mortgage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
3.2 Registration and Priority of Mortgage . . . . . . . . . . . . . . . 9
3.3 Transfer Mortgaged Property to Mortgagee if Required . . . . . . . . 9
4. WARRANTIES AND ACKNOWLEDGMENTS . . . . . . . . . . . . . . . . . . . . . . . 9
4.1 Indefeasible Title and Status . . . . . . . . . . . . . . . . . . . 9
4.2 Enforceability, Capacity and Disclosure . . . . . . . . . . . . . . 10
4.3 Continuing Warranties . . . . . . . . . . . . . . . . . . . . . . . 11
5. GENERAL COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
5.1 Mortgagor to Protect Mortgaged Property . . . . . . . . . . . . . . 11
5.2 Receipt of Interest . . . . . . . . . . . . . . . . . . . . . . . . 11
5.3 Pay Mortgagee's Outgoings on Demand . . . . . . . . . . . . . . . . 11
5.4 No Assignment etc Without Consent . . . . . . . . . . . . . . . . . 12
5.5 Mortgagor to Give Notice of Certain Events . . . . . . . . . . . . . 12
5.6 Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . 13
6. PRIOR AND SUBSEQUENT MORTGAGES . . . . . . . . . . . . . . . . . . . . . . . 13
6.1 Prior and Subsequent Mortgages . . . . . . . . . . . . . . . . . . . 13
7. DEFAULT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
7.1 Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . 13
8. POWERS OF MORTGAGEE . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
8.1 Mortgagee May Remedy Default . . . . . . . . . . . . . . . . . . . . 13
8.2 Statutory Powers on Occurrence of Event of Default . . . . . . . . . 14
8.3 Power of Sale . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
8.4 Further Powers of Mortgagee After Occurrence of Event of Default . . 14
8.5 Attorney of the Mortgagor . . . . . . . . . . . . . . . . . . . . . 15
8.6 Conflicts of Interests, Duties etc. . . . . . . . . . . . . . . . . 15
8.7 Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
9. PROCEEDS OF SALE ETC . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
9.1 Application for Proceeds etc. . . . . . . . . . . . . . . . . . . . 16
10. LIABILITY OF THE MORTGAGEE AND INDEMNITIES . . . . . . . . . . . . . 17
10.1 No Liability for Loss . . . . . . . . . . . . . . . . . . . . . . . 17
</TABLE>
<PAGE> 131
24
<TABLE>
<S> <C> <C>
10.2 Indemnities . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
11. CONTINUING SECURITY: DISCHARGE . . . . . . . . . . . . . . . . . . . . . . 17
11.1 Continuing Security . . . . . . . . . . . . . . . . . . . . . . . . 17
11.2 Premature Discharge of Mortgage . . . . . . . . . . . . . . . . . . 17
11.3 Form of Discharge . . . . . . . . . . . . . . . . . . . . . . . . . 18
12. POSSESSION AND PRODUCTION OF CERTIFICATES OF DEPOSIT ETC. . . . . . . . . . 18
12.1 Possession of Certificates etc. . . . . . . . . . . . . . . . . . . 18
12.2 Production of Certificates etc on Redemption of Deposit . . . . . . 18
13. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
13.1 Mortgage not Affected by Intervening Circumstances . . . . . . . . . 18
13.2 Mortgagee May Assign . . . . . . . . . . . . . . . . . . . . . . . . 19
13.3 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
13.4 Court Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . 20
13.5 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
13.6 Authority to Date and Complete . . . . . . . . . . . . . . . . . . . 20
13.7 Certificate of the Mortgagee is Evidence . . . . . . . . . . . . . . 20
13.8 Limitation of Secured Moneys . . . . . . . . . . . . . . . . . . . . 20
13.9 Conflicts with the Agreement . . . . . . . . . . . . . . . . . . . . 21
</TABLE>
<PAGE> 132
As of November 30, 1995
To the Agent and each of the Lenders party
to the Term Loan Agreement referred to below
c/o NationsBank of Texas, N.A., as Agent
700 Louisiana, 8th Floor
Houston, Texas 77002
Ladies & Gentlemen:
Reference is made to that certain Term Loan Agreement dated as of
November 30, 1995 (as amended, extended or restated, the "TERM LOAN AGREEMENT")
among International Sea Drilling Ltd. ("BORROWER"), NationsBank of Texas, N.A.
("AGENT"), as agent for the financial institutions named on Schedule 1 to the
Term Loan Agreement ("LENDERS"), and the Lenders.
Pursuant to the terms and conditions of the Term Loan Agreement, we
hereby agree with you as follows:
1. Capitalized terms used herein and not otherwise defined herein
shall have the meaning given to such terms in the Term Loan Agreement.
2. The value of the consideration received and to be received by
Borrower under the Term Loan Agreement is reasonably worth at least as much as
the liability and obligation of Borrower under this letter agreement, and such
liability and obligation may reasonably be expected to benefit Borrower
directly or indirectly.
3. In the event that any Tax (other than a Tax based upon income
which is imposed on Agent or any Lender by its jurisdiction of incorporation or
where it has its principal place of business or lending office) is required to
be withheld from any interest payment amount payable to Agent or any Lender
under the Term Loan Agreement, the amount of such interest payment shall be
supplemented by Borrower to the extent necessary to yield (after payment or
withholding of all such Taxes) the following:
(a) if the Designated Rate is a Floating Rate, an amount equal to
Prime Rate plus 0.50%; and
(b) if the Designated Rate is a LIBOR Rate, an amount equal to
LIBOR plus 2.75%.
It is provided, however, that Borrower shall not be required to supplement any
such amounts for any Lender that is not organized under the laws of the U.S. or
a state thereof if such Lender fails to comply with the requirements of Section
2.6(b) of the Term Loan Agreement. Whenever any such Taxes are paid by
Borrower, Borrower shall promptly send to Agent a certified copy of the
official receipt showing payment thereof. If Borrower fails to pay any such
Taxes when due or fails to remit to Agent the required receipt, Borrower shall
indemnify Agent and Lenders for any incremental Taxes, interest or penalties
that become payable by Agent or any Lender as a result of any such failure.
4. In the event that a Lender determines that it or its
Subsidiaries or affiliates utilized the payment of such withholding Tax to
reduce any other Tax liability, then such Lender shall refund to Borrower the
withholding Taxes and supplemental payments made by Borrower to or for the
account of such Lender in an amount equal to the amount of such tax liability
reduction (net of any additional Tax imposed on such Lender as a result of such
withholding Tax and supplemental payments). Such Lender's determination
pursuant to this paragraph shall be conclusive.
5. This letter agreement is a Loan Paper and, therefore, is
subject to the applicable provisions of Section 12 of the Term Loan Agreement,
all of which applicable provisions are incorporated herein by reference the
same as if set forth herein.
<PAGE> 133
To the Agent and each of the Lenders party
to the Term Loan Agreement referred to below
c/o NationsBank of Texas, N.A., as Agent
700 Louisiana, 8th Floor
Houston, Texas 77002
as of November 30, 1995
Page 2
6. Any failure or refusal of Borrower to punctually perform,
observe, and comply with each of the foregoing covenants shall constitute a
"Default" under Section 8 of the Term Loan Agreement.
7. The agreements and obligations of the Borrower hereunder shall
remain in full force and effect until the Obligation is satisfied and paid in
full and the Term Loan Agreement is terminated.
If you are in agreement with the foregoing, please so indicate by
executing the enclosed counterparts of this letter in the space provided below
and returning them to us.
Very truly yours,
BORROWER:
INTERNATIONAL SEA DRILLING LTD.
By: /s/ E. J. SPILLARD
--------------------------------------
E. J. Spillard,
Senior Vice-President - Finance
By: /s/ R. A. JOHANNSEN
--------------------------------------
R. A. Johannsen, Treasurer
AGREED AND ACCEPTED:
NATIONSBANK OF TEXAS, N.A., as Agent and as a Lender
By: /s/ JAMES R. ALLRED
------------------------------------------
James R. Allred, Vice President
NATIONAL BANK OF CANADA, as a Lender
By: /s/ LARRY L. SEARS
------------------------------------------
Larry L. Sears, Group Vice President
By: /s/ DOUGLAS G. CLARK
------------------------------------------
Douglas G. Clark, Vice President
NATIONAL BANK OF ALASKA, as a Lender
By: /s/ PATRICIA JELLEY BENZ
------------------------------------------
Patricia Jelley Benz, Vice President
<PAGE> 1
EXHIBIT 10.28
RESTATED TERM LOAN AGREEMENT
among
POOL COMPANY,
Borrower,
NATIONSBANK OF TEXAS, N.A.,
Agent,
and
CERTAIN LENDERS,
Lenders
$10,000,000 TERM LOAN
RIGS 4, 6, 7, 422 & 429
NOVEMBER 30, 1995
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
SECTION 1. COMMITMENT . . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 2. TERMS OF PAYMENT . . . . . . . . . . . . . . . . . . . . . 1
SECTION 3. FEES. . . . . . . . . . . . . . . . . . . . . . . . . . . 4
SECTION 4. SECURITY . . . . . . . . . . . . . . . . . . . . . . . . . 4
SECTION 5. REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . 5
SECTION 6. CONDITIONS PRECEDENT . . . . . . . . . . . . . . . . . . . 7
SECTION 7. COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . 8
SECTION 8. DEFAULT . . . . . . . . . . . . . . . . . . . . . . . . . 13
SECTION 9. CERTAIN RIGHTS AND REMEDIES . . . . . . . . . . . . . . . 14
SECTION 10. CERTAIN DEFINITIONS AND TERMS . . . . . . . . . . . . . . 16
SECTION 11. AGREEMENT BETWEEN LENDERS . . . . . . . . . . . . . . . . 24
SECTION 12. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . 27
</TABLE>
SCHEDULE 1 - Lenders and Commitments
SCHEDULE 5.1 - Corporate Existence and Authority
SCHEDULE 5.2 - Ownership of Subsidiaries/Names
SCHEDULE 5.5 - Noncompliance
SCHEDULE 5.6 - Litigation
SCHEDULE 5.7 - Tax Returns
SCHEDULE 5.11 - Liens/Environmental Matters
SCHEDULE 5.12 - Material Agreements
SCHEDULE 6 - Closing Conditions
SCHEDULE 7.11 - Overdraft Lines/Guarantees/Debt
SCHEDULE 7.16 - Certain Loans and Advances
SCHEDULE 7.19 - Transactions with Affiliates
SCHEDULE 7.20 - Certain Sales
EXHIBIT A - Promissory Note
EXHIBIT B - Financial Report Certificate
EXHIBIT C - Opinion
EXHIBIT D - Assignment Agreement
EXHIBIT E - Officer's Certificate
EXHIBIT F - Conversion Request
EXHIBIT G - Fixed Charge Coverage Ratio calculation
(i)
<PAGE> 3
RESTATED TERM LOAN AGREEMENT
THIS AGREEMENT is entered into as of November 30, 1995, among POOL
COMPANY, a Texas corporation ("BORROWER"), Lenders (defined below) and
NATIONSBANK OF TEXAS, N.A., a national banking association, as Agent for itself
and the other Lenders ("AGENT"). Borrower, Lenders and Agent agree as follows:
SECTION 10 below contains definitions or references to definitions of
certain terms used in this Agreement.
Borrower, National Bank of Canada and Agent entered into the Term Loan
Agreement (as amended through the date of this Agreement, the "EXISTING TERM
LOAN AGREEMENT") dated as of April 21, 1995, providing for credit to Borrower
in the form of a single disbursement in the aggregate amount for all Lenders of
$10,000,000 (the "LOAN").
Borrower, Lenders and Agent are entering into this Agreement in order
to, among other things (1) add National Bank of Alaska ("NBA") as a Lender
under this Agreement, and revise the Commitment Percentages accordingly, and
(2) amend and restate entirely the Existing Term Loan Agreement as required by
that certain Term Loan Agreement dated as of November 30, 1995 among
International Sea Drilling Ltd. (a Subsidiary of Borrower), Lenders and Agent
(the "ISDL AGREEMENT").
Accordingly, for adequate and sufficient consideration, the parties to
this Agreement agree that the Existing Term Loan Agreement is hereby amended
and entirely restated as follows:
SECTION 1. COMMITMENT.
1.1 Commitment. Subject to the conditions below, on the Closing
Date, the Commitment Percentages of the Principal Debt under the Existing Term
Loan Agreement shall be converted to the Commitment Percentages and
corresponding Commitments under this Agreement.
1.2 Procedure among Lenders. NBA shall remit its Commitment
Percentage of the Loan to Agent's principal office in Houston, Texas, in funds
that are available for immediate use by Agent by 12:00 Noon on the Closing
Date. If NBA fails to make its Commitment Percentage of the Loan available to
Agent on the Closing Date, Agent may recover the applicable amount on demand
(a) from NBA together with interest at the Federal Funds Rate during the period
commencing on the date the amount was made available to Borrower by Agent and
ending on (but excluding) the date Agent recovers the amount from NBA, or (b)
if NBA fails to pay its amount upon demand, then from Borrower, together with
interest at an annual interest rate equal to the rate applicable to the Loan
during the period commencing on the Closing Date and ending on (but excluding)
the date Agent recovers the amount from Borrower. No Lender is responsible for
the failure of any other Lender to make its Commitment Percentage of the Loan.
Upon receipt of NBA's Commitment Percentage by Agent, Agent shall refund to the
other Lenders whatever amount is necessary to convert the Commitment
Percentages under the Existing Term Loan Agreement to the Commitment
Percentages and corresponding Commitments under this Agreement.
SECTION 2. TERMS OF PAYMENT.
2.1 Notes; Payments. The Loan and interest thereon shall be
evidenced by the Notes, one payable to each Lender in the stated principal
amount of its Commitment. On December 31, 1995 and on March 31, 1996, the Loan
shall be repaid in principal installments in the amount of $875,000 each.
Thereafter, the Loan shall be repaid in principal installments in the amount of
$625,000 each, due and payable on the last Business Day of each calendar
quarter, commencing June 30, 1996, and continuing through the Termination Date.
Interest accruing at the Floating Rate shall be due and payable on the last
Business Day of each calendar quarter, commencing December 31, 1995. Interest
accruing at a LIBOR Rate shall be due and payable on the last day of each
Interest Period and, if such Interest Period exceeds three months, then accrued
interest is also due and payable on the date three months after the
commencement of such Interest Period. All principal and accrued interest
remaining outstanding shall be due and payable on the Termination Date. Each
payment or prepayment of the Obligation must be paid at Agent's principal
office in funds available for Agent's immediate use by 12:00 Noon on the day
due. Borrower may delay any payment due on a non-Business Day until the next
succeeding Business Day, but interest shall continue to accrue until the
payment is made. Agent shall pay to each Lender any payment or prepayment to
which that Lender is entitled on the same day Agent receives the funds from
Borrower if Agent receives
1
<PAGE> 4
the payment or prepayment before 12:00 Noon, and otherwise before 12:00 Noon on
the following Business Day. If and to the extent that Agent does not make
payments to Lenders when due, unpaid amounts shall accrue interest at the
Federal Funds Rate from the due date until (but not including) the payment
date.
2.2 Interest. The Loan shall bear interest at an annual rate
equal to the lesser of (a) the Designated Rate, and (b) the Highest Lawful
Rate. The rate shall change, without notice to Borrower, upon the effective
date of each change in the Prime Rate (if a Floating Rate is in effect) or the
Highest Lawful Rate. If at any time the rate is limited to the Highest Lawful
Rate, any subsequent reductions in the Designated Rate shall not reduce the
rate below the Highest Lawful Rate until the total amount of interest paid and
accrued equals the amount of interest which would have accrued if the
Designated Rate had at all times been in effect. In the event that at maturity
(stated or by acceleration), or at final payment of any Note, the total amount
of interest paid and accrued is less than the amount of interest which would
have accrued if the Designated Rate had at all times been in effect, then, at
such time and to the extent permitted by Law, Borrower shall pay to the Lender
holding that Note an amount equal to the difference between (x) the lesser of
either the amount of interest which would have accrued if the Designated Rate
had at all times been in effect or the amount of interest which would have
accrued if the Highest Lawful Rate had at all times been in effect and (y) the
amount of interest actually paid or accrued on that Note. All past-due
principal and accrued interest thereon shall at Determining Lenders' option
bear interest from maturity (stated or by acceleration) until paid at the
Default Rate. Interest calculations may be made ten (or less) days prior to
any due date. If there is an adjustment in the interest rate, in accordance
with the terms hereof during such ten-day period, then Borrower shall, on
demand, pay to Lenders any underpayment or Lenders shall pay to Borrower any
overpayment resulting from any adjustment during such period.
2.3 Mandatory and Voluntary Prepayments.
a. Borrower may voluntarily prepay all or any part of
the Loan at any time without premium or penalty, subject to the
following conditions:
(i) Agent must receive Borrower's written payment
notice by 10:00 a.m. on (A) the third Business Day preceding
the date of payment if a LIBOR Rate is in effect and (B) the
Business Day preceding the date of payment if the Floating
Rate is in effect, which notice shall specify the payment date
and the amount of the prepayment, and which shall constitute
an irrevocable and binding obligation of Borrower to make such
prepayment on the designated date;
(ii) each partial prepayment must be in a minimum
amount of $500,000 or a greater integral multiple of $500,000;
(iii) all accrued interest on the portion of the
Obligation being prepaid must also be paid in full on the date
of payment; and
(iv) Borrower shall pay any related Funding Loss
upon demand.
b. Borrower shall immediately prepay all of the
Obligation upon the acquisition by any Person of a beneficial
ownership of 50% or more of the outstanding shares of common stock of
PESCO.
2.4 Order of Application. Except as otherwise provided in the
Loan Papers, all payments and prepayments of the Obligation -- including,
without limitation, proceeds from the exercise of any Rights under the Loan
Papers or proceeds of any of the Collateral -- shall be applied by Lenders in
such order (a) if no Default or Potential Default has occurred and is
continuing and if Borrower gives written directions regarding application of a
payment or prepayment, then in accordance with such directions, or (b)
otherwise, subject to SECTION 9.1, as Determining Lenders may elect in their
sole discretion.
2.5 Capital Adequacy. If any Law, rule, regulation, or treaty now
existing or hereafter promulgated regarding capital adequacy, or any adoption
thereof, ruling thereon, change therein, or interpretation thereof now existing
or hereafter made by any Tribunal or central bank regarding capital adequacy,
or compliance by Agent or any Lender with any request, directive, or
requirement now existing or hereafter imposed by any Tribunal or central bank
regarding capital adequacy (whether or not having the force of Law) shall
result in Agent or that Lender incurring a reduction in the rate of return on
2
<PAGE> 5
its capital as a consequence of its obligations hereunder to a level below that
which it otherwise could have achieved by an amount deemed by it to be material
(and it may, in determining such amount, utilize such assumptions and
allocations of costs and expenses as it shall deem reasonable and may use any
reasonable averaging or attribution method), then, Agent or that Lender
(through Agent) may, from time to time, notify Borrower and deliver to Borrower
a certificate setting forth in reasonable detail the calculation of the amount
necessary to compensate it for the reductions incurred, which certificate shall
be conclusive absent manifest error. Borrower shall promptly pay such amount
to Agent or that Lender upon demand. If any subsequent revision or amendment
of any such Law, rule, regulation or treaty (or of any adoption thereof, ruling
thereon, change therein, or interpretation thereof) shall result in a reversal
of such reductions, Agent or such Lender (as applicable) shall refund such
amounts to Borrower (to the extent reversed and realized by it).
2.6 Foreign Lenders. Each Lender that is organized under the Laws
of any jurisdiction other than the U.S. or a state thereof (a) represents to
Agent and Borrower that (i) no Taxes are required to be withheld by Agent or
Borrower with respect to any payment to be made to it in respect of the
Obligation and (ii) it has furnished to Agent and Borrower two duly completed
copies of U.S. Internal Revenue Service Form 4224, Form 1001, Form W-8, or any
other Tax form acceptable to Agent (wherein it claims entitlement to complete
exemption from U.S. federal withholding Tax on all interest payments under the
Loan Papers), and (b) covenants to (i) provide Agent and Borrower a new Tax
form upon the expiration or obsolescence of any previously delivered form
according to Law, duly executed and completed by it, and (ii) comply from time
to time with all Laws with regard to the U.S. withholding Tax exemption. If
any of the foregoing is not true or the applicable forms are not provided, then
Borrower and Agent (without duplication) may deduct and withhold from interest
payments under the Loan Papers United States federal income tax at the full
rate applicable under the IRC.
2.7 Sharing of Payments, Etc.. If any Lender obtains any payment
(whether voluntary, involuntary, or otherwise, including, without limitation,
as a result of exercising its Rights under SECTION 2.8) that exceeds its
Commitment Percentage of the total Commitments, then that Lender shall purchase
from the other Lenders participations that will cause the purchasing Lender to
share the excess payment Pro Rata with each other Lender. If all or any
portion of any excess payment is subsequently recovered from the purchasing
Lender, then the purchase shall be rescinded and the purchase price restored to
the extent of the recovery. Borrower agrees that any Lender purchasing a
participation from another Lender under this section may, to the fullest extent
permitted by Law, exercise all of its Rights of payment (including the Right of
offset) with respect to that participation as fully as if that Lender were the
direct creditor of Borrower in the amount of that participation.
2.8 Offset. If a Default exists, each Lender is entitled to
exercise (for the benefit of all Lenders in accordance with SECTION 2.7) the
Rights of offset and banker's Lien against each and every account and other
property, or any interest therein, that any Obligor may now or hereafter have
with, or which is now or hereafter in the possession of, that Lender to the
extent of the full amount of the Obligation owed to it.
2.9 Basis Unavailable or Inadequate for Determining LIBOR Rate.
If, on or before any date when a LIBOR Rate is to be determined, Agent or any
Lender determines that the basis for determining the applicable rate is not
available or that the resulting rate does not accurately reflect the cost to
Lenders of funding at that rate, then Agent shall promptly notify Borrower and
Lenders of that determination (which is conclusive and binding on Borrower
absent manifest error) and the Loan shall bear interest at the Floating Rate.
Until Agent notifies Borrower that those circumstances no longer exist,
Lenders' commitments under this Agreement to fund under a LIBOR Rate will be
suspended.
2.10 Additional Costs. If (i) any Law imposes, modifies, or deems
applicable (or if compliance by any Lender with any requirement of any Tribunal
results in) any requirement that any reserves (including, without limitation,
any marginal, emergency, supplemental or special reserves) be maintained, and
(ii) those reserves reduce any sums receivable by that Lender under this
Agreement with respect to any portion of the Loan bearing interest at a LIBOR
Rate or increase the costs incurred by that Lender in advancing or maintaining
any portion of the Loan bearing interest at a LIBOR Rate, then (unless the
effect is already reflected in the rate of interest then applicable under this
Agreement) that Lender (through Agent) shall deliver to Borrower a certificate
setting forth in reasonable detail the calculation of the amount necessary to
compensate it for its reduction or increase (which certificate is conclusive
and binding absent manifest error), and Borrower shall promptly pay that amount
to that Lender upon demand. The provisions of and undertakings and
indemnification set forth in this paragraph shall survive the satisfaction and
payment of the Obligation and termination of this Agreement.
3
<PAGE> 6
2.11 Change in Laws. If any Law makes it unlawful for any Lender
to make or maintain any portion of the Loan bearing interest at a LIBOR Rate,
then that Lender shall promptly notify Borrower and Agent, and the Loan shall
be converted to the Floating Rate as of the date of notice, and Borrower shall
pay any related Funding Loss.
2.12 Funding Loss. BORROWER AGREES TO INDEMNIFY EACH LENDER
AGAINST, AND PAY TO IT UPON DEMAND, ANY FUNDING LOSS OF THAT LENDER. When any
Lender demands that Borrower pay any Funding Loss, that Lender shall deliver to
Borrower and Agent a certificate setting forth in reasonable detail the basis
for imposing Funding Loss and the calculation of the amount, which calculation
is conclusive and binding absent manifest error. The provisions of and
undertakings and indemnification set forth in this paragraph shall survive the
satisfaction and payment of the Obligation and termination of this Agreement.
2.13 Interest Periods. When Borrower requests that any portion of
the Loan bear interest at a LIBOR Rate, Borrower may elect the applicable
interest period (each an "INTEREST PERIOD"), which may be, at Borrower's
option, one, two, three or six months, subject to the following conditions:
(a) the initial Interest Period commences on the Closing Date or applicable
conversion date, and each subsequent Interest Period commences on the day when
the next preceding applicable Interest Period expires; (b) if any Interest
Period begins on a day for which there exists no numerically corresponding
Business Day in the calendar month at the end of the Interest Period ("Ending
Calendar Month"), then the Interest Period ends on the next succeeding Business
Day of the Ending Calendar Month, unless there is no succeeding Business Day in
the Ending Calendar Month in which case the Interest Period ends on the next
preceding Business Day of the Ending Calendar Month; (c) no Interest Period for
any portion of the Loan may extend beyond the scheduled repayment date for that
portion of the Loan; (d) there may not be in effect at any one time more than
(i) three Interest Periods; and (e) each such portion of the Loan bearing
interest at a LIBOR Rate must be at least $500,000 or an integral multiple of
$100,000 in excess thereof.
2.14 Conversions. Borrower may (a) on the last day of the
applicable Interest Period convert all or part of the Loan bearing interest at
a LIBOR Rate to the Floating Rate, (b) at any time convert all or part of the
Loan bearing interest at the Floating Rate Borrowing to a LIBOR Rate, and (c)
elect a new Interest Period for all or any part of the Loan bearing interest at
a LIBOR Rate. Any such conversion is subject to the dollar limits and
denominations of SECTION 2.13(e) and may be accomplished by delivering a
Conversion Request, in the form of EXHIBIT F hereto, to Agent no later than
10:00 a.m. (i) on the third Business Day before the conversion date for
conversion to a LIBOR Rate and the last day of the Interest Period, for the
election of a new Interest Period, and (ii) one Business Day before the last
day of the Interest Period for conversion to a Floating Rate. Absent
Borrower's notice of conversion or election of a new Interest Period, any
portion of the Loan bearing interest at a LIBOR Rate shall be converted to a
Floating Rate when the applicable Interest Period expires.
SECTION 3. FEES. The following fees represent compensation for services
rendered and to be rendered separate and apart from the extension of credit and
do not constitute compensation for the use, detention, or forbearance of money,
and the obligation of Borrower to pay each fee shall be in addition to, and not
in lieu of, the obligation of Borrower to pay interest. All fees shall be
non-refundable when due and shall, to the fullest extent permitted by Law, bear
interest, if not paid when due, at the Default Rate and shall be secured by all
of the Collateral. All payments of fees shall be calculated on the basis of
actual number of days (including the first day but excluding the last day)
elapsed, but computed as if each calendar year consisted of 360 days.
3.1 Agent's Arranging Fee. Borrower paid to Agent, solely for its
own account, the Agent's arranging fee described in the letter agreement
between Borrower and Agent dated April 21, 1995.
SECTION 4. SECURITY.
4.1 Guaranties. Full and complete payment of the Obligation is
guaranteed in accordance with the Guaranty executed by each Obligor other than
Borrower. Upon Agent's demand, Borrower shall cause each future Obligor to
execute and deliver to Agent for the benefit of Lenders a guaranty -- that
unconditionally guarantees the full payment and performance of the Obligation
- -- in substantially the form of EXHIBIT F to the Revolving Credit Agreement.
4.2 Collateral. Full and complete payment of the Obligation is
secured by the Collateral. Upon Agent's demand, Borrower shall cause each
future Obligor to execute and deliver to Agent for the benefit of Lenders (x) a
security agreement -- that creates a security interest in the Collateral to
secure the full payment and performance of the Obligation --
4
<PAGE> 7
in substantially the form of EXHIBIT G to the Revolving Credit Agreement, and
(y) all financing statements requested by Agent in connection with that
security agreement.
SECTION 5. REPRESENTATIONS AND WARRANTIES. Borrower represents and
warrants to Agent and Lenders as follows:
5.1 Corporate Existence and Authority.
a. Each Material Obligor and (except where a failure to
do so would not, individually or in the aggregate, be reasonably
likely to have a Material Adverse Effect) each other Company is a
corporation duly organized, validly existing, and in good standing
under the Laws of its jurisdiction of incorporation, as reflected in
SCHEDULE 5.1; and
b. PESCO and each of its consolidated Subsidiaries (i)
is duly qualified to transact business and is in good standing as a
foreign corporation in each jurisdiction where the nature and extent
of its business and properties require the same (such jurisdictions
being identified on SCHEDULE 5.1), except for the Liquidating
Companies and except where failure to be qualified or in good standing
would not, individually or in the aggregate, be reasonably likely to
have a Material Adverse Effect, (ii) possesses all requisite
authority, power, licenses, permits, and franchises to conduct its
business as now being conducted (except for the Liquidating Companies
[which it is contemplated will be liquidated and dissolved and none
of which now have or will have any material assets or operations] and
except where failure to so possess would not, individually or in the
aggregate, be reasonably likely to have a Material Adverse Effect),
and (iii) possesses all requisite authority, licenses, power, permits,
and to execute, deliver, and comply with the terms of the Loan Papers
to which it is contemplated in this Agreement to be or to become
party, all which have been duly authorized and approved by all
necessary corporate action and for which no approval or consent of any
Person or Tribunal is required which has not been obtained.
5.2 Ownership of Subsidiaries and Names.
a. All of the outstanding shares of capital stock of
PESCO's consolidated Subsidiaries are duly authorized, validly issued,
fully paid and nonassessable, and none thereof was issued in violation
of any preemptive or preferential Rights of any Person.
b. Each stockholder shown on SCHEDULE 5.2 is the true
and lawful owner, of record and beneficially (other than nominee
shares issued by foreign Subsidiaries in nominal amounts to comply
with the Laws of jurisdictions of incorporation of foreign
Subsidiaries), of the shares shown beside such stockholder's name,
free and clear of any Liens, restrictions, claims, or Rights of
another (except any arising under the Loan Papers or disclosed on
SCHEDULE 5.2), and none of such shares is subject to any warrant,
option, or other Right of any Person to acquire the same or subject to
any restriction on transfer thereof except for restrictions imposed by
securities Laws.
c. Except as disclosed on SCHEDULE 5.2, there are no
authorized or outstanding warrants, options, or other Rights to
acquire from any of PESCO's consolidated Subsidiaries or any
stockholder thereof any shares of capital stock or other investment
securities of PESCO's consolidated Subsidiaries or any securities
convertible into or exchangeable for such shares.
d. To the best knowledge of Borrower's executive
officers, except as disclosed on SCHEDULE 5.2, no Obligor has
transacted business under any other corporate or trade name, nor has
been a party to any merger, combination, or consolidation, or acquired
all or substantially all of the stock or accounts receivable of any
Person in the last five years.
5.3 Relationship with Agent and Lenders. To the best knowledge of
Borrower's executive officers, no director, officer, manager, or employee of
PESCO or any of its consolidated Subsidiaries is a director, officer, or
employee of, or has any substantial interest in, Agent or any Lender. No
Person who may be deemed to have "control" of PESCO or any of its consolidated
Subsidiaries is an "executive officer", "director", or "principal shareholder"
of Agent or any Lender.
5
<PAGE> 8
Terms appearing in quotations in this section are used as defined in Section
215.2 of Regulation O of the Board of Governors of the Federal Reserve System,
as amended.
5.4 Financial Statements. The Current Financials were prepared in
accordance with GAAP and fairly present the consolidated and consolidating (if
applicable) financial conditions and the results of operations of Borrower and
its consolidated Subsidiaries as of, and for the portion of the fiscal year
ending on, the date or dates thereof. There were no material liabilities,
direct or indirect, fixed or contingent, of Borrower or any of its consolidated
Subsidiaries on the date or dates of the Current Financials which are not
reflected therein or in the notes thereto. Except for transactions directly
related to, or specifically contemplated by, the Loan Papers and transactions
heretofore disclosed in writing to Lenders, there have been no material adverse
changes in the consolidated financial condition of Borrower from those shown in
the Current Financials and the notes thereto between such date or dates and the
date hereof, nor has PESCO or any of its consolidated Subsidiaries incurred any
material liability, direct or indirect, fixed or contingent, except as
disclosed on SCHEDULE 5.12.
5.5 Compliance with Laws and Documents. Except as disclosed on
SCHEDULE 5.5:
a. Neither PESCO nor any of its consolidated
Subsidiaries is, nor will the execution, delivery, and the performance
of and compliance with the terms of the Loan Papers cause any of them
to be, in violation of any Laws (including, without limitation,
Environmental Laws), other than such violations which would not,
individually or in the aggregate, be reasonably likely to cause a
Material Adverse Effect; and
b. Neither any Material Obligor nor (except where the
same would not, individually or in the aggregate, be reasonably likely
to cause a Material Adverse Effect) any other Company is, nor will the
execution, delivery, and the performance of and compliance with the
terms of the Loan Papers cause any of them to be, in violation of
their respective bylaws or charter.
5.6 Litigation. As of the date of this Agreement, except (i) as
set forth on SCHEDULE 5.6, and (ii) claims or outstanding or unpaid judgments
which do not exceed $500,000 individually (and the estimated maximum individual
exposure under which does not exceed $100,000) or $3,000,000 collectively:
a. No Material Obligor is involved in, nor is any
executive officer of any Material Obligor aware of the threat of, any
Litigation; there are no outstanding or unpaid judgments against any
Material Obligor; and none of the Litigation described on SCHEDULE 5.6
would, individually or in the aggregate, be reasonably likely to have
a Material Adverse Effect; and
b. No other Company (i) is involved in, nor is Borrower
or any such other Company aware of the threat of, any Litigation which
would, individually or in the aggregate, be reasonably likely to have
a Material Adverse Effect, or (ii) has any outstanding or unpaid
judgments against it which would, individually or in the aggregate, be
reasonably likely to cause a Material Adverse Effect.
5.7 Taxes. Except as set forth on SCHEDULE 5.7, all Tax returns
of the Material Obligors and (except where the same would not, individually or
in the aggregate, be reasonably likely to have a Material Adverse Effect) (i)
all Tax returns of the other Companies required to be filed have been filed,
and (ii) all Taxes imposed upon PESCO or any of its consolidated Subsidiaries
have been paid, other than Taxes for which the criteria for Permitted Liens
have been satisfied.
5.8 Government Regulation. Neither PESCO nor any of its
consolidated Subsidiaries nor any Affiliate of the foregoing is subject to
regulation under the Public Utility Holding Company Act of 1935, the Federal
Power Act, the Investment Company Act of 1940 (as any of the preceding acts
have been amended), or any other Law (other than Regulation X of the Board of
Governors of the Federal Reserve System) which regulates the incurrence of
Debt.
5.9 Employee Benefit Plans. No employee benefit plan (as defined
in the IRC and ERISA) of PESCO or any of its consolidated Subsidiaries has
incurred an accumulated funding deficiency in an amount sufficient to be
reasonably likely to have a Material Adverse Effect. No prohibited transaction
or reportable event (as such terms are defined in ERISA) has occurred which
would, individually or in the aggregate, be reasonably likely to have a
Material Adverse Effect. Neither PESCO nor any of its consolidated
Subsidiaries (a) has incurred material liability to the PBGC in connection with
any such plan, or (b) has withdrawn in whole or in part from participation in a
multi-employer pension plan (as defined in ERISA).
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5.10 Purpose of Credit. The proceeds of the Loan (a) were not and
will not be used directly or indirectly for the purpose of purchasing or
carrying, or for the purpose of extending credit to others for the purpose of
purchasing or carrying, any "margin stock" as that term is defined in
Regulation U of the Board of Governors of the Federal Reserve System, as
amended, or for any other purpose which would violate the terms of this
Agreement or the Revolving Credit Agreement, and (b) were used to finance the
partial replenishment of funds which Pool advanced to PAI and which in turn
were used to make the PAA Acquisition.
5.11 Properties; Liens. Except as disclosed on SCHEDULE 5.11 and
except for Permitted Liens, there is no Lien on any asset of any Material
Obligor or (except where the same would not, individually or in the aggregate,
reasonably be expected to cause a Material Adverse Effect) any other Company.
Except as disclosed on SCHEDULE 5.5, neither PESCO nor any of its consolidated
Subsidiaries knows of any condition or circumstance affecting any of their
Properties, such as the presence of asbestos or other Hazardous Substances,
that would, individually or in the aggregate, be reasonably likely to have a
Material Adverse Effect.
5.12 Material Agreements. Except for the Loan Papers and the
Material Agreements described on SCHEDULE 5.12 (or as hereafter disclosed to
Lenders in writing), there are no other Material Agreements of PESCO or any of
its consolidated Subsidiaries that would, upon a default thereunder, be
reasonably likely, individually or in the aggregate, to cause a Material
Adverse Effect; neither PESCO nor any of its consolidated Subsidiaries is, nor
will the execution, delivery, and performance of and compliance with the terms
of the Loan Papers cause PESCO or any of its consolidated Subsidiaries to be,
in default (nor has any potential default occurred) under any Material
Agreement described on SCHEDULE 5.12 (or as hereafter disclosed to Lenders in
writing), other than such defaults or potential defaults which would not,
individually or in the aggregate, be reasonably likely to cause a Material
Adverse Effect.
5.13 Solvency. After giving effect to the transactions
contemplated hereunder, each Material Obligor will be Solvent. After giving
effect to the transactions contemplated hereunder, PESCO and all of its
consolidated Subsidiaries collectively will be Solvent.
5.14 Foreign Subsidiaries. As to each Company incorporated,
chartered, organized, or otherwise created under foreign Laws, each such
Company is (a) a "Controlled Foreign Corporation" within the meaning of Section
957 of the IRC, and (b) no material portion of the earnings and profits of such
Company is expected by Borrower to be, prior to the Termination Date,
includable for United States federal income tax purposes in the unconsolidated
or consolidated gross income in an aggregate amount for all such Companies
which would be greater than the tax losses (including net operating loss carry
forward(s)) of PESCO or Borrower during such period (i) by reason of the
receipt of actual distributions made by such Company in the ordinary course of
its business, or (ii) provided such Company is not treated for United States
federal income tax purposes under Section 1.956-2(c) of the United States
Income Tax Regulations as holding Borrower's obligations under any Loan Paper,
by reason of the Subpart F rules contained in Sections 951 through 964 of the
IRC and regulations thereunder.
5.15 General. There are no material facts or conditions relating
to the Loan Papers, any of the Property of PESCO or any of its consolidated
Subsidiaries, or the individual or combined financial conditions and businesses
of PESCO or its consolidated Subsidiaries which would, individually or
collectively, be reasonably likely to cause a Material Adverse Effect, and
which have not been related, in writing, to Agent and Lenders; and the Loan
Papers and all Financial Statements of PESCO or any of its consolidated
Subsidiaries and those writings identified as items 1, 2, 3 and 4 on SCHEDULE
6, which were exhibited or delivered to Agent and Lenders, are genuine and in
all material respects what they purport and appear to be.
SECTION 6. CONDITIONS PRECEDENT.
6.1 Initially. The amendment and restatement of the Existing Term
Loan Agreement described in this Agreement's recitals and SECTION 1.1 are not
effective until Agent has received each document and other item described on
SCHEDULE 6.
6.2 Materiality and Waiver. Each condition precedent in this
Agreement is material to the contemplated transaction, and time is of the
essence. Each condition precedent must be satisfied, unless Determining
Lenders specifically permanently waive the condition precedent in writing.
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SECTION 7. COVENANTS. Until the Obligation is fully paid and performed
- -- unless Borrower first obtains a written consent to the contrary from Agent
on behalf of Determining Lenders -- PESCO and each of its consolidated
Subsidiaries jointly and severally covenant and agree with Agent and Lenders as
follows:
7.1 Use of Proceeds. The proceeds of the Loan shall be used only
as represented in SECTION 5.10.
7.2 Books and Records. PESCO and each of its consolidated
Subsidiaries shall keep proper and complete books, records, and accounts in
accordance with GAAP and shall permit Agent or any Lender, upon reasonable
prior notice, to inspect the same during regular business hours and make and
(at Lenders' expense in respect of costs paid to third parties during each
calendar year in excess of $1,000 in the aggregate) take away copies.
7.3 Items to be Furnished. Borrower shall cause the following to
be furnished to Agent:
a. Within 120 days after the last day of each fiscal
year of PESCO, Financial Statements showing the consolidated and
consolidating (if applicable) financial conditions and results of
operations of PESCO as of, and for the year ended on, such last day,
accompanied by (i) the opinion, without material qualification, of
Deloitte & Touche or another firm of independent certified public
accountants acceptable to Determining Lenders, based on an audit using
generally accepted auditing standards, that the consolidated portions
of such Financial Statements were prepared in accordance with GAAP and
present fairly, in all material respects, the consolidated financial
condition and results of operations of PESCO, (ii) a Financial Report
Certificate with respect to such Financial Statements, and (iii) the
Fixed Charge Coverage Ratio calculation in the form of EXHIBIT G.
b. As soon as practicable after the end of each fiscal
year of Borrower:
(i) Unaudited consolidating Financial Statements
showing (by major management operation category) the financial
condition and results of operations of PESCO; and
(ii) Unaudited or audited (to the extent prepared)
Financial Statements showing the financial conditions and
results of operations of the Borrower's unconsolidated
affiliates, including, but not limited to, Pool Arabia, Ltd.,
Antah Drilling Sdn. Bhd, Pool Santana, Limited, and Intairdril
Oman L.L.C.
c. Within 60 days after the last day of each of the
first three fiscal quarters of each fiscal year (i) unaudited
Financial Statements showing the consolidated and consolidating (if
applicable) financial condition and results of operations of PESCO as
of, and for the period from the beginning of the current fiscal year
to, such last day, (ii) a Financial Report Certificate with respect to
such Financial Statements, and (iii) the Fixed Charge Coverage Ratio
calculation in the form of EXHIBIT G.
d. On or before the 15th Business Day of each calendar
month a description of all obligations of PESCO or any of its
consolidated Subsidiaries related to surety bonds outstanding as of
the last day of the immediately preceding calendar month.
e. At Agent's or Determining Lenders' request, a weekly
rig hour status report.
f. To the extent not delivered to Agent under CLAUSES
(a) and (b) preceding, promptly after filing or delivery thereof, true
copies of all SEC Reports furnished by or on behalf of PESCO to its
stockholders.
g. Notice, promptly after PESCO or any of its
consolidated Subsidiaries knows or has reason to know of, (i) the
existence and changes in the status of any Litigation which would,
individually or in the aggregate, be reasonably likely to cause a
Material Adverse Effect, (ii) any change in any material fact or
circumstance represented or warranted in any Loan Paper which would,
individually or in the aggregate, be reasonably likely to cause a
Material Adverse Effect, (iii) a Default or Potential Default,
specifying the nature thereof and what action PESCO or any of its
consolidated Subsidiaries has taken, is taking, or proposes to take
with respect thereto, or (iv) the occurrence of a reportable event (as
defined in ERISA) with respect to any employee benefit plan of PESCO
or any of its consolidated Subsidiaries subject to ERISA, or the
complete or partial withdrawal from
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participation in a multi-employer pension plan (as such terms are
defined in ERISA) by PESCO or any of its consolidated Subsidiaries (or
the intention of such entity to do so), or the initiation (or intent
to initiate) by the PBGC or PESCO or any of its consolidated
Subsidiaries of proceedings under ERISA to terminate any such plan, or
the occurrence of any event or condition which might constitute
grounds for termination of any such benefit plan under ERISA.
h. Promptly upon reasonable request by Agent or
Determining Lenders, such information (not otherwise required to be
furnished under the Loan Papers) respecting the business affairs,
assets, and liabilities of PESCO or any of its consolidated
Subsidiaries, and such opinions, certifications, and documents, in
addition to those mentioned in this Agreement.
7.4 Inspection. PESCO and each of its consolidated Subsidiaries
shall allow any Lender (who shall comply with such entities' safety rules
applicable in the ordinary course of business to each specific location) to
inspect any of their properties, to review reports, files, and other records,
to conduct tests or investigations, and to discuss any of their affairs,
conditions, and finances or with any director, officer, or employee of PESCO or
any of its consolidated Subsidiaries, from time to time, during reasonable
business hours.
7.5 Taxes. Each Material Obligor other than PESCO shall, and
(except where failure to do so would not, individually or in the aggregate, be
reasonably likely to cause a Material Adverse Effect) PESCO and each of its
consolidated Subsidiaries shall, promptly pay all Taxes due, except as set
forth on SCHEDULE 5.7 and except Taxes for which the criteria for Permitted
Liens have been satisfied. Neither PESCO nor any of its consolidated
Subsidiaries may, directly or indirectly, use any portion of the proceeds of
the Loan to pay the wages of employees unless a timely payment to or deposit
with the proper authorities of all amounts of Tax required to be deducted and
withheld from such wages is also made.
7.6 Payment of Obligations. The Material Obligors and (except
where failure to do so would not, individually or in the aggregate, be
reasonably likely to cause a Material Adverse Effect) PESCO and each of its
consolidated Subsidiaries shall promptly pay (or renew and extend) all of its
material obligations as the same become due.
7.7 Expenses of Lenders. The Obligors shall promptly pay (a) upon
Agent's request, estimated filing and recording fees and expenses for the Loan
Papers creating the Lender Liens, and (b) all reasonable costs, fees, and
expenses paid or incurred by Agent or any Lender incident to any of the Loan
Papers (including, but not limited to, any additional filing or recording fees
and the reasonable fees and expenses of counsel to Agent and any Lender in
connection with the negotiation, preparation, and execution of the Loan Papers
and any related amendment, waiver, or consent and in connection with the Loan,
and, if a Potential Default or Default exists, Lenders' expenses described in
SECTION 11.4(d)) or to the enforcement of the obligations of any of the
Obligors or the exercise of any Rights (including, but not limited to,
reasonable attorneys' fees and court costs), all of which shall be a part of
the Obligation.
7.8 Maintenance of Corporate Existence, Assets, Business, and
Insurance. PESCO and each of its consolidated Subsidiaries (other than
Liquidating Companies) shall at all times: Maintain their respective corporate
existences and authorities to transact business and good standing in their
respective jurisdictions of incorporation and all other jurisdictions where the
failure to so maintain would, individually or in the aggregate, be reasonably
likely to cause a Material Adverse Effect; maintain all licenses, permits, and
franchises necessary for their businesses, where the failure to so maintain
would, individually or in the aggregate, be reasonably likely to cause a
Material Adverse Effect; keep all of their assets which are necessary in their
businesses in good working order and condition (ordinary wear and tear
excepted), and make all necessary repairs and replacements thereto; and
maintain, or cause to be maintained, insurance with such insurers, in such
amounts, and covering such risks, as shall be ordinary and customary in the
industry. Each insurance policy covering any Collateral subject to a Lender
Lien shall provide, by way of endorsements, riders or otherwise, that proceeds
in respect of any property constituting Collateral will be payable to Agent, on
behalf of Lenders, and that such policy may only be cancelled after Agent is
given thirty (30) days written notice of such cancellation (ten (10) days in
the case of non-payment of premium). A certificate of the insurer confirming
such terms and coverage for all renewal and substitute policies of insurance
shall be delivered to Agent. If no Default or Potential Default exists, the
Agent shall assign to the insured Person any and all monies that become payable
under any insurance policies required hereunder, and such insured Person shall
apply said monies to the repair, rebuilding and restoration or replacement of
the lost, destroyed or damaged assets; provided that in the event of a Total
Loss such assignment by the Agent shall not be available.
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7.9 Maintenance and Evidence of Priority of Lender Liens. The
Obligors shall perform such acts and duly authorize, execute, acknowledge,
deliver, file, and record any additional agreements, documents, instruments,
and certificates as Agent may reasonably deem necessary or appropriate in order
to perfect and maintain the Lender Liens in favor of Agent for the benefit of
Lenders and preserve and protect the Rights of Agent and Lenders in all present
and future Collateral.
7.10 Employee Benefit Plans. Neither PESCO nor any of its
consolidated Subsidiaries may, directly or indirectly, engage in any prohibited
transaction (as defined in ERISA), permit the funding with respect to any
employee benefit plan established or maintained by any such entity to ever be
less than the minimum required by applicable provisions of ERISA or regulations
thereunder, permit any employee benefit plan established or maintained by any
such entity to ever be subject to involuntary termination proceedings, or fully
or partially withdraw from any multi-employer pension plan (as such terms are
defined in ERISA).
7.11 Debt. Neither PESCO nor any of its consolidated Subsidiaries
may, directly or indirectly, create, incur, or suffer to exist any direct,
indirect, fixed, or contingent liability upon itself for any Debt, other than
(a) the Obligation, (b) overdraft lines of PESCO and its consolidated
Subsidiaries and guarantees by PESCO or its consolidated Subsidiaries of
overdraft lines for Borrower's foreign Subsidiaries and their Joint Ventures
collectively not to exceed $7,000,000, in the aggregate at any time (calculated
so as not to include both the overdraft line and any related guaranty),
including, without limitation, those overdraft lines presently existing and
described on SCHEDULE 7.11, (c) customary trade payables in the ordinary course
of business, (d) Pool International, Inc.'s obligations as set forth in Section
9 of the Contingent Support Agreement, (e) Debt of Obligors arising under the
Contingent Support Agreement, (f) foreign exchange contracts, (g) intercompany
Debt otherwise permitted to be incurred under the Original Credit Agreement (as
defined in the Revolving Credit Agreement) before the date of the Revolving
Credit Agreement, or permitted to be incurred under the Revolving Credit
Agreement, (h) Debt relating to purchases of assets not exceeding $200,000 in
the aggregate outstanding at any one time for all of PESCO and its consolidated
Subsidiaries, (i) obligations relating to bid and performance guarantees and
surety bonds required in the ordinary course of business, (j) guarantees and
other Debt disclosed on SCHEDULE 7.11 as renewed or extended (but not
increased) from time to time, (k) Debt pre-approved in writing by Determining
Lenders, (l) the "Obligation" as defined in the Revolving Credit Agreement and
the ISDL Agreement, (m) $11,500,000 of Borrower's 10% Subordinated Notes issued
to the Sellers pursuant to the Payment Agreement, a guaranty by PESCO of such
Notes, and a nonrecourse guaranty by PCESI of such Notes, (n) notes in respect
of deferred compensation obligations of approximately $1,600,000 to certain key
employees of GPC during the period ending three years after the closing under
the Stock Purchase Agreement, (o) guarantees by PCESI of up to $400,000 (in the
aggregate outstanding at any time) with respect to leases by its employees of
light vehicles, and (p) Debt in the principal amount of $545,000 incurred in
connection with the Purchase Agreement between Borrower's Subsidiary, Pool
Company (Texas) Inc. ("POOL TEXAS") and Elder Well Service, Inc. pursuant to
which Pool Texas purchased eight well servicing rigs for $650,000 (including
the transfer to the Seller of certain existing Pool Texas assets).
7.12 Lease Obligations. Neither PESCO nor any of its consolidated
Subsidiaries may, directly or indirectly, enter into, assume, or otherwise
obligate itself for the performance of the obligations of the lessee or tenant
under any lease or sublease of property providing for annual payments in the
aggregate for all such leases of more than $10,000,000. This section shall not
apply to leases which have initial or remaining cancelable lease terms of one
year or less if similar leases are for one year or less in accordance with the
ordinary course of business and customary industry standards.
7.13 Capital Expenditures. Neither PESCO nor any of its
consolidated Subsidiaries may, directly or indirectly, make Capital
Expenditures, other than
a. such expenditures which are for or related to assets
or leaseholds used or useful in the normal business operations of such
entity and which do not in the aggregate for PESCO and its
consolidated Subsidiaries exceed (i) the sum of 70% of Borrower's
consolidated net income from January 1, 1990, through April 6, 1990,
plus PESCO's consolidated net income from and after April 7, 1990, in
each case after income taxes, plus noncash charges and before changes
in working capital on a cumulative basis from and after January 1,
1990, less (ii) the aggregate amount of investments and advances
outstanding under SECTION 7.16(b),
b. Capital Expenditures made solely from the net
proceeds of the sale of Oiltools Operations,
c. the PAA Acquisition, and
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d. the GPC Acquisition plus a $7,200,000 adjustment
(increase) in the Capital Expenditures therefor.
7.14 Liens. Neither PESCO nor any of its consolidated Subsidiaries
may, directly or indirectly, (a) create, incur, or suffer or permit to be
created or incurred or to exist any Lien upon any of its assets, except
Permitted Liens, or (b) enter into or permit to exist any arrangement or
agreement (other than existing arrangements or agreements, the Loan Papers, the
Revolving Credit Agreement and the ISDL Agreement, and the negative pledge
agreement in Section 3.3 of the Payment Agreement regarding the assets of GPC
and PCESI, including Borrower's California assets that were transferred to
PCESI at or after the closing under the Stock Purchase Agreement, and the
negative pledge contained in the Security Agreement dated August 15, 1994
between Pool Texas and Elder Well Service, Inc. related to the purchase by Pool
Texas of eight well servicing rigs) which directly or indirectly prohibits
PESCO or any of its consolidated Subsidiaries from creating or incurring any
Lien on any of its assets.
7.15 Acquisitions, Mergers, and Dissolutions. Neither PESCO nor
any of its consolidated Subsidiaries may, directly or indirectly, acquire all
or any substantial portion of the stock issued by, or interest in, any Person
(including, but not limited to, the formation or acquisition of any new
Subsidiary), dissolve, or merge or consolidate with any Person other than (a)
repurchases of its own securities if permitted under SECTION 7.18, (b) any
merger or consolidation of one Company into another Company or an acquisition
of one Company by another Company so long as (i) Borrower is the surviving
corporation if it is involved, (ii) another Material Obligor is the survivor if
any one or more Material Obligors other than Borrower are involved, and (iii)
the surviving Company's net worth has not decreased as a result of such merger
or consolidation, (c) dissolution of the Liquidating Companies, (d) use of the
net proceeds of the sale of the Oiltools Operations for acquisitions that would
otherwise violate this SECTION 7.15, (e) the PAA Acquisition, (f) the
acquisition of 100% of the stock of GPC pursuant to the Stock Purchase
Agreement, (g) the merger of GPC with and into PCESI, and (h) the dissolution
of Westex Production Service, Inc.
7.16 Loans, Advances, and Investments. Neither PESCO nor any of
its consolidated Subsidiaries may, directly or indirectly, make any loan,
advance, extension of credit, or capital contribution to, make any investment
in, or purchase or commit to purchase any stock or other securities or
evidences of Debt of, or interests in, any other Person, other than (a)
advances to or investments in any of PESCO's consolidated Subsidiaries,
provided that such advances and investments made after July 1, 1993, by the
Material Obligors to or in Companies that are not Material Obligors may not in
the aggregate for all such Companies at any time outstanding exceed $5,000,000;
(b) advances or investments by Material Obligors to or in PESCO's
unconsolidated Subsidiaries and its or their Joint Ventures which are not
Companies which do not in the aggregate at any time outstanding exceed
$5,000,000, provided that such advances and investments shall for purposes of
this clause be deemed to be capital expenditures and may not in the aggregate
for all such entities exceed 40% of the amount of capital expenditures
permitted under SECTION 7.13; (c) expense accounts for and other advances to
directors, officers, and employees of PESCO or any of its consolidated
Subsidiaries in the ordinary course of business not to exceed $25,000 in the
aggregate outstanding at any time for any one director, officer, or employee;
(d) investments in obligations of the U.S. and agencies thereof and obligations
guaranteed by the U.S. maturing within one year from the date of acquisition;
(e) certificates of deposit issued by commercial banks organized under the Laws
of the U.S. or any state thereof and having combined capital, surplus, and
undivided profits of not less than $100,000,000, and which (i) shall have a
rating from Moody's or S&P of at least P-1 and A-1, respectively, or (ii) are
insured by the Federal Deposit Insurance Corporation; (f) commercial paper
which shall have a rating from Moody's or S&P of at least P-1 and A-1,
respectively; (g) eurodollar investments with financial institutions (i) having
combined capital, surplus, and undivided profits of not less than U.S.
$100,000,000, and (ii) with commercial paper rated at least P-1 or A-1 by
Moody's or S&P, respectively, or, if any institution does not have a commercial
paper rating, a comparable bond rating of at least A or BAA-1 by Moody's or
S&P, respectively; (h) extensions of credit in connection with trade
receivables and overpayments of trade payables, in each case resulting from
transactions in the ordinary course of business; (i) extensions of credit not
exceeding $3,500,000 at any one time in connection with settlement of claims
resulting from transactions in the ordinary course of business; (j) loans or
advances disclosed on SCHEDULE 7.16, excluding any increases thereof and
excluding extensions of credit described in CLAUSE (H) above; (k) other loans,
advances, and investments which never exceed $200,000 in the aggregate at any
time; (l) advances and investments otherwise permitted under the Existing
Credit Agreement before the date of the Revolving Credit Agreement; (m) the PAA
Acquisition; (n) the acquisition of 100% of the stock of GPC pursuant to the
Stock Purchase Agreement, (o) continuation of the investment by GPC and its
Subsidiaries of approximately $2,700,000 in the aggregate in Horizon Prime Fund
during the period ending 30 days after the closing under the Stock Purchase
Agreement, (p) the acquisition by PCESI of the real estate in Ventura,
California, previously leased to PCESI by Plymouth Investment Partnership in
return for the forgiveness by
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PCESI of its loan to Plymouth Investment Partnership of approximately $200,000,
and (q) the continuation by PCESI of its existing long-term advances associated
with split-dollar life insurance plans for former PCESI employees Jeff Hyatt
and Tom See in the aggregate amount of approximately $345,000.
7.17 Distributions. PESCO may not, directly or indirectly,
declare, make, or pay any Distributions, other than (a) Distributions wholly in
the form of capital stock and (b) advances, investments, and loans otherwise
permitted by this Agreement.
7.18 Issuance of Securities. Neither PESCO Subsidiary nor any of
the Companies, directly or indirectly, may issue, sell, or otherwise dispose of
any of its shares of capital stock or other investment securities of any class,
any securities convertible into or exchangeable for any such shares, or any
carrying Rights, warrants, options, or other Rights to subscribe for or
purchase such shares, other than capital stock of any Company issued to its
corporate parent and subject to Lender Liens and no other Liens except
Permitted Liens.
7.19 Transactions with Affiliates. Except as provided in SCHEDULE
7.19, neither PESCO nor any of its consolidated Subsidiaries may, directly or
indirectly, enter into any material transaction (including, but not limited to,
the sale or exchange of property or the rendering of service but not including
a capital contribution to a Subsidiary otherwise permitted hereunder) with any
Affiliate, other than in the ordinary course of business and upon fair and
reasonable terms not materially less favorable than such entity could obtain or
could become entitled to in an arm's-length transaction with a Person which was
not an Affiliate.
7.20 Sale of Assets. Neither PESCO nor any of its consolidated
Subsidiaries may, directly or indirectly sell, lease, or otherwise dispose of
all or any substantial part of its assets other than (a) sales or leases by a
Material Obligor to another Material Obligor, (b) sales of inventory in the
ordinary course of business, (c) sales or leases of equipment and other assets
to any other Companies, Joint Ventures, or third parties, in each case for a
fair and adequate consideration (provided that if any equipment is sold, and a
replacement is necessary for the proper operation of the seller's business, the
seller will replace the sold equipment with adequate equipment), and (d) sales
or leases disclosed on SCHEDULE 7.20.
7.21 Compliance with Laws and Documents. Neither PESCO nor any of
its consolidated Subsidiaries may, directly or indirectly, violate the
provisions of any Laws (including, without limitation, Environmental Laws), its
charter or bylaws, or any Material Agreement of any such entity if such
violation alone, or when aggregated with all other such violations, would be
reasonably likely to cause a Material Adverse Effect.
7.22 New Businesses. Neither PESCO nor any of its consolidated
Subsidiaries may, directly or indirectly, engage in any business other than the
businesses in which it is presently engaged or businesses related thereto.
7.23 Assignment. Neither PESCO nor any of its consolidated
Subsidiaries may, directly or indirectly, assign or transfer any of its Rights,
duties, or obligations under any of the Loan Papers.
7.24 Fiscal Year and Accounting Methods. Subject to SECTION 10.1,
neither PESCO nor any of its consolidated Subsidiaries may change its fiscal
year or method of accounting (other than immaterial changes in methods) unless
required to do so by Law.
7.25 Minimum Net Worth. During any fiscal year, PESCO's
consolidated shareholders' equity may not be less than the sum of (a)
$116,593,000, (b) 50% of PESCO's consolidated net income for each of the fiscal
years subsequent to 1994, and (c) 50% of the proceeds of any issuances of
securities by PESCO.
7.26 Inventory. PESCO's consolidated inventory for sale and
consumption (inventory, less shrinkage and obsolescence as reflected on PESCO's
consolidated balance sheet) available for sale may never exceed 35% of its
consolidated current assets.
7.27 Consolidated Working Capital. PESCO's consolidated current
assets (less prepaid expenses, other than insurance) shall exceed its
consolidated current liabilities by at least $10,000,000. Consolidated current
liabilities shall be calculated in accordance with the terms of the Revolving
Credit Agreement.
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7.28 Subsidiaries.
a. If PESCO or its consolidated Subsidiaries are
permitted by Agent and Determining Lenders under SECTIONS 7.15 or 7.16
to form or acquire new consolidated Subsidiaries, PESCO and Borrower
shall cause (i) each such Subsidiary not subject to SECTION 5.14 to
execute and deliver to Agent a guaranty, security agreement and
financing statements (as described in SECTION 4) and (ii) the parent
corporation of such new consolidated Subsidiary to grant Lender Liens
on and to deliver to Agent on behalf of Lenders 100% of the parent
corporation's interest (or 66% if such new consolidated Subsidiary is
subject to SECTION 5.14) in the capital stock of such new consolidated
Subsidiary, together with stock powers executed in form satisfactory
to Agent.
b. Each consolidated Subsidiary of PESCO which is
subject to SECTION 5.14 shall remain subject thereto.
7.29 Fixed Charge Coverage Ratio. During any calendar quarter, the
Fixed Charge Coverage Ratio furnished in accordance with SECTION 7.3(A) and (C)
may not be less than:
a. 1.10 to 1 through April 21, 1996;
b. 1.25 to 1 from April 22, 1996 through April 21, 1997;
and
c. 1.40 to 1 thereafter.
SECTION 8. DEFAULT. "DEFAULT" means the occurrence of one or more of the
following events (including the passage of time, if any, specified therefor):
8.1 Payment of Obligation. The failure or refusal of Borrower to
pay any portion of the Obligation, as the same becomes due in accordance with
the terms of the Loan Papers, and such failure or refusal continues for a
period of three days after the due date of an interest payment (with no grace
period for failure or refusal to make a principal payment).
8.2 Covenants.
a. The failure or refusal of PESCO or any of its
consolidated Subsidiaries to punctually and properly perform, observe,
and comply with any covenant, agreement, or condition contained in
SECTIONS 7.1 and 7.10 through 7.24.
b. The failure or refusal of PESCO or any of its
consolidated Subsidiaries to punctually and properly perform, observe,
and comply with any covenant, agreement, or condition contained in
SECTIONS 7.25 through 7.29, and such failure or refusal continues for
a period of 30 days after PESCO or any of its consolidated
Subsidiaries has notice thereof.
c. The failure or refusal of PESCO or any of its
consolidated Subsidiaries to punctually and properly perform, observe,
and comply with any covenant, agreement, or condition contained in any
of the Loan Papers, other than covenants to pay the Obligation and the
covenants listed in clauses (a) and (b) preceding, and such failure or
refusal continues for a period of ten days after PESCO or any of its
consolidated Subsidiaries has notice thereof.
8.3 Debtor Relief. (a) Any Material Obligor is not Solvent, (b)
PESCO and its consolidated Subsidiaries are not Solvent on a consolidated
basis, or (c) PESCO or any of its consolidated Subsidiaries (i) fails to pay
its debts generally as they become due, (ii) voluntarily seeks, consents to, or
acquiesces in the benefit or benefits of any Debtor Relief Law, or (iii)
becomes a party to (or be made the subject of) any proceeding provided for by
any Debtor Relief Law, other than as a creditor or claimant, that could suspend
or otherwise adversely affect the Rights of Agent or any Lender granted in the
Loan Papers (unless, in the event such proceeding is involuntary, the petition
instituting same is dismissed within 60 days after its filing).
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8.4 Attachment. The failure of any Material Obligor or (where
such failure would, individually or in the aggregate, be reasonably likely to
cause a Material Adverse Effect) any other Company to have discharged within a
period of 30 days after the commencement any attachment, sequestration, or
similar proceeding against its assets having a value (individually or in the
aggregate) of $250,000 or more.
8.5 Payment of Judgments. Any Material Obligor or (where such
failure would, individually or in the aggregate, be reasonably likely to cause
a Material Adverse Effect) any other Company fails to pay any judgment or order
for the payment of money in excess of $250,000 rendered against it or any of
its assets and either (a) any enforcement proceedings shall have been commenced
by any creditor upon such judgment or order, or (b) a stay of enforcement of
such judgment or order, by reason of pending appeal or otherwise, shall not be
in effect for any period of ten or more consecutive days.
8.6 Default on Other Debt or Security.
a. A "Default" as defined in the Revolving Credit
Agreement or the ISDL Agreement.
b. Any Material Obligor or (where such failure would,
individually or in the aggregate, be reasonably likely to cause a
Material Adverse Effect) any other Company fails or refuses to make
any payment due on any Debt or security or any event shall occur or
any condition shall exist in respect of any of its Debt or securities
or under any agreement securing or relating to such Debt or
securities, the effect of which is (i) to cause any holder of such
Debt or securities or a trustee to cause any of such Debt or
securities to become due prior to the stated maturity or prior to the
regularly scheduled dates of payment, or (ii) to permit a trustee or
the holder of any securities (other than common stock) to elect
(whether or not such trustee or holder does elect) a majority of the
directors on the board of directors of such entity. "Security" has
the meaning given such term in the Securities Act of 1933, as amended.
c. ENSERCH pays amounts under its Pool Arabia Guaranty
as described in Section 9(a) of the Contingent Support Agreement.
d. Borrower fails to pay when due its obligations
arising under the sublease dated as of March 15, 1983, between
Borrower and Sanan Leasing Corp., and such failure continues for ten
days.
8.7 Material Agreements. The occurrence and continuance of a
default under any Material Agreement of any Material Obligor or (where such
default would, individually or in the aggregate, be reasonably likely to cause
a Material Adverse Effect) any other Company.
8.8 ENSERCH Agreements. Either (a) an event of default is
declared by ENSERCH under the Contingent Support Agreement or (b) the exercise
of rights or remedies, including, without limitation, rights of acceleration
payments, by ENSERCH under the Continent Support Agreement or any note or
security agreement executed in connection therewith.
8.9 Material Adverse Effect. Agent or any Lender discovers (i)
any event or circumstance that would, individually or in the aggregate with all
other events or circumstances, be reasonably likely to cause a Material Adverse
Effect, (ii) any other information that the prospect of payment or performance
of the Obligation is materially impaired, or (iii) that the value of the
Collateral has or will be materially decreased and the situation giving rise
thereto is not corrected to Agent or Determining Lenders' satisfaction within
20 days after Agent gives notice to Borrower.
8.10 Misrepresentation. Agent or any Lender discovers that any
material statement, representation, or warranty in the Loan Papers or in any
Financial Statement of PESCO or any of its consolidated Subsidiaries or any
writing delivered to Agent or any Lender pursuant to the Loan Papers is false,
misleading, or erroneous when made or delivered in any material respect.
SECTION 9. CERTAIN RIGHTS AND REMEDIES.
9.1 Remedies Upon Default. Upon the occurrence and continuance of
a Default, Agent may (with the consent of, and must, upon the request of
Determining Lenders) do any one or more of the following: (a) declare all or
part of the
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unpaid balance of the Obligation then or thereafter outstanding immediately due
and payable, whereupon it shall be due and payable (provided that, upon the
occurrence of a Default under SECTION 8.3, the entire Obligation shall
automatically become due and payable without notice or other action of any kind
whatsoever); (b) terminate the commitments of Lenders to extend credit under
this Agreement; (c) reduce any claim to judgment; (d) exercise (or request each
Lender to, and each Lender is entitled to exercise) the Rights of offset or
banker's Lien against the interest of each Obligor in and to every account and
other property of such entities which are in the possession of Agent or any
Lender to the extent of the full amount of the Obligation (each Company being
deemed directly obligated to Agent and each Lender in the full amount of the
Obligation for such purposes); (e) foreclose any or all Lender Liens or
otherwise realize upon any and all of the Rights Agent or Lenders may have in
and to the Collateral; and (f) exercise any and all other legal or equitable
Rights afforded by the Loan Papers, the Laws of the State of Texas or any other
jurisdiction as Agent or Lenders shall deem appropriate, or otherwise,
including, but not limited to, the Right to bring suit or other proceedings
before any Tribunal either for specific performance of any covenant or
condition contained in any of the Loan Papers or in aid of the exercise of any
Right granted to Agent or Lenders in any of the Loan Papers.
9.2 WAIVERS BY BORROWER AND OTHERS. BORROWER AND EACH SURETY,
ENDORSER, GUARANTOR, AND OTHER PARTY EVER LIABLE FOR PAYMENT OF ANY OF THE
OBLIGATION JOINTLY AND SEVERALLY WAIVE PRESENTMENT AND DEMAND FOR PAYMENT,
PROTEST, NOTICE OF INTENTION TO ACCELERATE, NOTICE OF ACCELERATION, AND NOTICE
OF PROTEST AND NONPAYMENT, AND AGREE THAT THEIR LIABILITY WITH RESPECT TO THE
OBLIGATION, OR ANY PART THEREOF, SHALL NOT BE AFFECTED BY ANY RENEWAL OR
EXTENSION IN THE TIME OF PAYMENT OF THE OBLIGATION, BY ANY INDULGENCE, OR BY
ANY RELEASE OR CHANGE IN ANY SECURITY FOR THE PAYMENT OF THE OBLIGATION, AND
HEREBY CONSENT TO ANY AND ALL RENEWALS, EXTENSIONS, INDULGENCES, RELEASES, OR
CHANGES, REGARDLESS OF THE NUMBER THEREOF.
9.3 Performance by Agent. If any covenant, duty, or agreement of
PESCO or any of its consolidated Subsidiaries is not performed in accordance
with the terms of the Loan Papers, Agent may, at its option (but subject to the
approval of the Determining Lenders), perform, or attempt to perform, such
covenant, duty, or agreement on behalf of such entity. Any amount reasonably
expended by Agent in such performance or attempted performance shall be payable
by Borrower to Agent on demand, shall become part of the Obligation, and shall
bear interest at the Default Rate from the date of such expenditure by Agent
until paid. Notwithstanding the foregoing, it is expressly understood that
Agent does not assume and shall never have, except by its express written
consent, any liability or responsibility for the performance of any such
covenant, duty, or agreement.
9.4 Delegation of Duties and Rights. Agent and Lenders may
exercise any of their respective duties or exercise any of their respective
Rights under the Loan Papers by or through their respective officers,
directors, employees, attorneys, agents, or other representatives.
9.5 Not in Control. None of the covenants or other provisions
contained in this Agreement shall, or shall be deemed to, give Agent or Lenders
the Right or power to exercise control over the affairs or management of PESCO
or any of its consolidated Subsidiaries, the power of Agent and Lenders being
limited to the Right to exercise the remedies provided in this SECTION 9.
Agent and Lenders have no fiduciary obligation toward PESCO or any of its
consolidated Subsidiaries with respect to any Loan Paper and transactions
contemplated thereby. The relationship pursuant to the Loan Papers between
PESCO and its consolidated Subsidiaries, and Agent and Lenders, is and shall be
that of debtor and creditor, respectively, and no partnership or joint venture
is created by any Loan Paper.
9.6 Waivers by Agent and Lenders. The acceptance by Agent or any
Lender at any time and from time to time of partial payment on the Obligation
shall not be deemed to be a waiver of any Default then existing. No waiver by
Agent or any Lender of any Default shall be deemed to be a waiver of any other
then-existing or subsequent Default. No delay or omission by Agent or any
Lender in exercising any Right under the Loan Papers shall impair such Right or
be construed as a waiver or acquiescence, nor shall any single or partial
exercise of any such Right preclude other or further exercise thereof, or the
exercise of such or any other Right.
9.7 Cumulative Rights. All Rights available to Agent, Determining
Lenders and Lenders under the Loan Papers are cumulative of and in addition to
all other Rights granted to Agent, Determining Lenders and Lenders at law or
in equity, whether or not the Obligation is due and payable and whether or not
Agent, Determining Lenders, or Lenders have instituted any suit for collection
or other action in connection with the Loan Papers.
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9.8 Expenditures by Lenders. All court costs, reasonable
attorneys' fees, other costs of collection, and other out-of- pocket sums spent
by Agent or any Lender pursuant to the exercise of any Right (including,
without limitation, any effort to collect or enforce any Note) provided herein
shall be payable to Agent or such Lender on demand, shall become part of the
Obligation, and shall bear interest at the Default Rate from the date spent
until the date repaid by Borrower.
9.9 Diminution in Value of Collateral. Neither Agent nor any
Lender shall have any liability or responsibility whatsoever for any diminution
in or loss of value of any Collateral.
9.10 INDEMNIFICATION. PESCO AND EACH OF ITS CONSOLIDATED
SUBSIDIARIES SHALL INDEMNIFY AGENT AND LENDERS AND HOLD AGENT AND LENDERS
HARMLESS FROM AND AGAINST ANY AND ALL LIABILITIES, OBLIGATIONS, LOSSES,
DAMAGES, PENALTIES, ACTIONS, JUDGMENTS, SUITS, CLAIMS, COSTS, EXPENSES, AND
DISBURSEMENTS OF ANY KIND OR NATURE WHATSOEVER WHICH MAY BE IMPOSED ON,
INCURRED BY, OR ASSERTED AGAINST AGENT OR ANY LENDER, IN ANY WAY RELATING TO OR
ARISING OUT OF THE LOAN PAPERS OR ANY OF THE TRANSACTIONS CONTEMPLATED THEREIN
(INCLUDING, WITHOUT LIMITATION, ANY OF THE FOREGOING IMPOSED ON, INCURRED BY,
OR ASSERTED AGAINST AGENT OR ANY LENDER BY VIRTUE OF OWNERSHIP OR OPERATION OF
ANY COLLATERAL), TO THE EXTENT THAT ANY SUCH INDEMNIFIED LIABILITIES RESULT,
DIRECTLY OR INDIRECTLY, FROM ANY CLAIMS MADE OR ACTIONS, SUITS, OR PROCEEDINGS
COMMENCED BY OR ON BEHALF OF ANY PERSON OTHER THAN AGENT AND ANY LENDER;
PROVIDED THAT AGENT OR ANY LENDER SHALL NOT HAVE THE RIGHT TO BE INDEMNIFIED
HEREUNDER FOR ITS OWN GROSS NEGLIGENCE OR WILLFUL MISCONDUCT. THE FOREGOING
AGREEMENT CONSTITUTES A PART OF THE OBLIGATION, AND SHALL SURVIVE THE EXERCISE
OF ANY RIGHTS OF AGENT OR ANY LENDER WITH RESPECT TO ALL OR ANY PART OF THE
COLLATERAL.
SECTION 10. CERTAIN DEFINITIONS AND TERMS.
10.1 Accounting Terms; Changes in GAAP. As used herein, "GAAP"
means generally accepted accounting principles, applied on a consistent basis,
(a) as set forth in Opinions of the Accounting Principles Board of the American
Institute of Certified Public Accountants ("AICPA") and in statements of the
Financial Accounting Standards Board which are applicable in the circumstances
as of the date in question, and (b) where not inconsistent with such opinions
and statements, as set forth in other AICPA publications and guidelines or
which otherwise arise by custom for the particular industry; and the requisite
that such principles be applied on a consistent basis means that the accounting
principles in a current period are comparable in all material respects to those
applied in a preceding period. All accounting and financial terms used in any
of the Loan Papers and the compliance with each covenant contained in the Loan
Papers which relates to financial matters shall be determined in accordance
with GAAP, except to the extent that a deviation is expressly stated in such
Loan Papers. If a change in GAAP requires a change in any method of accounting
or if any voluntary change in the accounting methods be permitted pursuant to
SECTION 7, then such change shall not result in a Default if, at the time of
such change, such Default had not occurred and was not then continuing, based
upon the former methods of accounting used by or on behalf of PESCO and its
consolidated Subsidiaries; provided that, after any such change in accounting
methods, only the next set of Financial Statements required to be delivered to
Agent shall be prepared in comparative form, in compliance with the former
methods of accounting used prior to such change, as well as with the new method
or methods of accounting.
10.2 Number and Gender of Words. Whenever in any Loan Paper the
singular number is used, the same shall include the plural where appropriate,
and vice versa.
10.3 Other Definitions. The following terms have the meanings
indicated:
AFFILIATE means any Person who (a) would be an "affiliate" of PESCO or
any of its consolidated Subsidiaries within the meaning of the regulations
promulgated under the Securities Act of 1933, as such regulations and act are
amended and in effect on the date in question, if such Person were subject to
such act and regulations, or (b) who is a director or officer of PESCO or any
of its Subsidiaries.
AGENT means NationsBank of Texas, N.A., a U.S. national banking
association, and its successor or successors as agent for itself and the other
Lenders under this Agreement.
AGREEMENT means this Restated Term Loan Agreement, including the
Schedules and Exhibits attached hereto, and any and all future renewals and
extensions or restatements of, or amendments or supplements to, all or any part
of the foregoing.
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BIG 10 means Big 10 Fishing Tool Company, Inc., a California
corporation and a wholly-owned subsidiary of PCESI.
BORROWER is defined in this Agreement's introductory paragraph.
BUSINESS DAY means any day on which Agent is open for banking business
in Texas.
CAPITAL EXPENDITURES means expenditures for the acquisition,
construction, improvement, or replacement of land, buildings, equipment, or
other fixed or capital assets or leaseholds (including, without limitation,
expenditures for the acquisition of interests in any Affiliate or any Person
which, as a result of such acquisition, becomes an Affiliate) excluding,
however, (i) expenditures financed by Project Financing, (ii) expenditures to
the extent made with PESCO stock, and (iii) expenditures for working capital
(cash accounts receivable, less accounts payable and current liabilities)
obtained as part of an acquisition, but only if no restrictions exist on the
transfer of Distributions or advances from such acquired Affiliate to Borrower.
CLOSING DATE means the date on which the Loan is funded.
COLLATERAL has the meaning set forth in the Revolving Credit
Agreement.
COMMITMENT means, for any Lender, the amount stated beside that
Lender's name on the attached SCHEDULE 1.
COMMITMENT PERCENTAGE means, for any Lender and at any time, the
proportion -- stated as a percentage -- that its Commitment bears to the total
Commitments.
COMPANIES means Borrower and its consolidated Subsidiaries.
CONTINGENT SUPPORT AGREEMENT means the Contingent Support Agreement
dated April 7, 1990, between PESCO and ENSERCH, as renewed, extended, amended,
and supplemented from time to time, subject to Paragraph 5(h) of the Security
Agreement.
CURRENT FINANCIALS means PESCO's Financial Statements included in the
SEC Report on Form 10-K for the year ended December 31, 1994, and Form 10-Q for
the quarter ended September 30, 1995.
DEBT of any Person includes all obligations (contingent or otherwise)
for borrowed money or for the purchase of assets which, in accordance with
GAAP, should be classified upon such Person's balance sheet as liabilities, but
in any event including liabilities secured by any Lien existing on property
owned or acquired by such Person or a Subsidiary thereof (whether or not the
liability secured thereby shall have been assumed), obligations which have been
or under GAAP should be capitalized for financial reporting purposes, and all
guaranties, endorsements, and other contingent obligations with respect to Debt
of others, including, but not limited to, any obligations to acquire any of
such Debt, to purchase, sell, or furnish property or services primarily for the
purpose of enabling such other Person to make payment of any of such Debt, or
to otherwise assure the owner of any of such Debt against loss with respect
thereto, and any obligations of PESCO or any of its consolidated Subsidiaries
arising in connection with such entity's unconsolidated Subsidiaries or joint
venture or partnership interests.
DEBTOR RELIEF LAWS means the Bankruptcy Code of the United States of
America and all other applicable liquidation, conservatorship, bankruptcy,
moratorium, rearrangement, receivership, insolvency, reorganization, suspension
of payments, or similar debtor relief Laws from time to time in effect
affecting the Rights of creditors generally.
DEFAULT is defined in SECTION 8.
DEFAULT RATE means an annual interest rate equal to the lesser of
either (a) the sum of the Designated Rate plus 4% or (b) the Highest Lawful
Rate.
DESIGNATED RATE means either the Floating Rate or a LIBOR Rate as
designated by Borrower pursuant to SECTION 1.2, 2.13, OR 2.14.
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DETERMINING LENDERS means, at any time, any combination of Lenders
holding at least 66.7% of the total Commitments and 66.7% of the total
Principal Debt.
DISTRIBUTION by any Person means (a) the retirement, redemption,
purchase, or other acquisition for value of any capital stock or other equity
securities issued by such Person, (b) the declaration or payment of any
dividend on or with respect to any such securities, (c) any loan or advance by
such Person to, or other investment by such Person in, the holder of any of
such securities, and (d) any other payment (other than salaries of employees or
advances made in the ordinary course of business to employees for travel and
other expenses incurred in the ordinary course of business) by such Person with
respect to such securities.
ENSERCH means ENSERCH Corporation, a Texas corporation.
ENVIRONMENTAL LAW means each Law that relates (a) to the condition of
air, water, land, or other parts of the environment or (b) to the release,
discharge, emission, removal, remediation, clean-up, generation, production,
manufacturing, processing, distribution, use, treatment, storage, disposal,
transportation, or other handling or control of pollutants, contaminants,
wastes, or toxic or other Hazardous Substances.
ERISA means the Employee Retirement Income Security Act of 1974, as
amended, and the regulations, promulgations, and rulings issued thereunder.
EXHIBIT means an exhibit attached to this Agreement unless otherwise
specified.
EXISTING CREDIT AGREEMENT has the meaning given to such term in the
Revolving Credit Agreement.
EXISTING TERM LOAN AGREEMENT is defined in the preamble to this
Agreement.
FEDERAL FUNDS RATE means, for any day, the annual rate (rounded
upwards, if necessary, to the nearest 0.01%) determined (which determination is
conclusive and binding, absent manifest error) by Agent to be equal to the
weighted average of the rates on overnight federal funds transactions with
member banks of the Federal Reserve System arranged by federal funds brokers on
that day, as published by the Federal Reserve Bank of New York on the next
Business Day, or, if those rates are not published for any day, the average of
the quotations at approximately 10:00 a.m. received by Agent from three federal
funds brokers of recognized standing selected by Agent in its sole discretion.
FINANCIAL REPORT CERTIFICATE means a certificate, executed by the
president, chief financial officer, or controller of Borrower, substantially in
the form of EXHIBIT B but containing such other certifications, statements,
calculations, explanations, and conclusions as any Lender may reasonably
request with respect to compliance with any or all of the covenants and
conditions contained in the Loan Papers.
FINANCIAL STATEMENTS includes, but is not limited to, balance sheets,
profit and loss statements, reconciliations of capital and surplus, and
statements of cash flows (i) prepared in comparative form with respect to the
corresponding period of the preceding fiscal year, all of the foregoing
prepared in accordance with GAAP, or (ii) included in any SEC Report.
FIXED CHARGE COVERAGE RATIO means, as of any point in time (the
"Measurement Point"), the ratio of (a) the sum (without duplication) of (i)
PESCO's Operating Cash Flow and (ii) PESCO's interest expense (including
capitalized interest), in each case for the 12 months ended as of such
Measurement Point, plus (iii) the historic adjusted Operating Cash Flow from
all acquisitions occurring within such 12 month period calculated as if such
acquisitions had occurred prior thereto, but eliminating unusual and
nonrepetitive acquisition costs contained therein, divided by (b) the sum of
(i) Funded Debt due within the next 12 months, and (ii) PESCO's interest
expense (including capitalized interest) for the 12 months ended as of such
Measurement Point.
FLOATING RATE means an annual rate equal to the sum of 0.50%, plus the
Prime Rate.
FUNDED DEBT of any Person, means, as of any point in time (the
"Measurement Point"), (a) the sum of all obligations for borrowed money or for
the purchase of assets, where such obligations are required, according to GAAP,
to be shown in the liabilities section of the balance sheet as debt, coming due
within the 12 months next following such
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Measurement Point, plus (b) to the extent not duplicative of any of the
foregoing, lease payment obligations (for the calendar year in which the
Measurement Point falls) with respect to leases which are permitted by SECTION
7.12, as reflected in the footnotes to PESCO's most recent prior year-end
audited financial statements, but excluding (c)(i) payment obligations with
respect to Project Financing, (ii) the final payment of principal and interest
under this Agreement, and (iii) balances payable under the Revolving Credit
Agreement.
FUNDING LOSS, means, all reasonable costs and reasonable losses
incurred by Lender when (i) Borrower fails or refuses for any reason (other
than such Lender's failure to comply with this Agreement) to borrow on the date
designated by Borrower any portion of the Loan which is to bear interest at a
LIBOR Rate, or (ii) Borrower prepays or converts all or any portion of the Loan
bearing interest at a LIBOR Rate on a day other than the last day of an
Interest Period for such portion.
GAAP is defined in SECTION 10.1.
GPC means Golden Pacific Corp., a California corporation.
GPC ACQUISITION means the acquisition by the Borrower of 100% of the
stock of GPC.
GUARANTY means collectively (as renewed, extended, amended and
replaced) (a) the Guaranty Agreement dated as of April 25, 1990; (b) the
amendment contained in the Existing Credit Agreement; (c) the Guaranty
Agreement dated as of April 21, 1995; (d) the Guaranty Agreement dated as of
June 13, 1995; and (e) the Guaranty Agreement dated as of July 13, 1995, each
of which was executed and delivered by, among others, all Obligors (other than
Borrower).
HAZARDOUS SUBSTANCE means (a) any substance that now or hereafter
constitutes a hazardous substance within the meaning of 42 U.S.C. Section
9601(14), as amended, or (b) any other substance identified as a hazardous or
toxic waste, pollutant, contaminant, or substance under any other Environmental
Law.
HIGHEST LAWFUL RATE means, with respect to each Lender, the maximum
rate of interest (or, if the context so requires, an amount calculated at such
rate) which such Lender is allowed to contract for, charge, take, reserve, or
receive under applicable federal or state (whichever is higher) Law from time
to time in effect after taking into account, to the extent required by
applicable federal or state (whichever is higher) Law from time to time in
effect, any and all relevant payments or charges under the Loan Papers.
INTEREST PERIOD is defined in SECTION 2.13.
IRC means the Internal Revenue Code of 1986, as amended, and the
regulations, promulgations, and rulings issued thereunder.
ISDL AGREEMENT is defined in the preamble to this Agreement.
JOINT VENTURE means any Person in which less than a majority interest
is owned or controlled by PESCO or any of its consolidated Subsidiaries.
LAWS means all applicable statutes, laws, ordinances, regulations,
orders, writs, injunctions, or decrees of any state, commonwealth, province,
nation, territory, possession, county, township, parish, municipality, or
Tribunal.
LENDER LIENS means Liens in favor of Agent for the benefit of Lenders
securing all or any of the Obligation, including, but not limited to, Rights in
any Collateral created in favor of Lenders whether by mortgage, pledge,
hypothecation, assignment, transfer, or other granting or creation of Liens.
LENDERS means the financial institutions named on the attached
SCHEDULE 1 or on the most recently amended SCHEDULE 1, if any, delivered by
Agent under this Agreement, and, subject to this Agreement, their respective
successors and assigns (but not any Participant who is not otherwise a party to
this Agreement).
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LIBOR means the quotient obtained by dividing (i) the rate that
deposits in U.S. dollars are offered by Agent to other major banks in the
London interbank market at approximately 11:00 a.m. (London time) two Business
Days before the commencement of the relevant Interest Period in an amount
comparable to the principal amount of the Loan (or portion thereof subject to
the LIBOR Rate), then outstanding and having a maturity approximately equal to
such Interest Period; by (ii) one minus the Reserve Percentage (expressed as a
decimal) applicable to such Interest Period.
LIBOR RATE means an annual interest rate (rounded upward, if
necessary, to the nearest 0.01%) equal to the sum of 2.75% plus LIBOR.
LIEN means any lien, mortgage, security interest, pledge, charge, or
encumbrance of any kind, including, without limitation, the Rights of a vendor,
lessor, or similar party under any conditional sales agreement (or other title
retention agreement or lease substantially equivalent thereto), other than
those under which PESCO or one of its consolidated Subsidiaries is the vendor
or lessor, any production payment, and any other Right of or arrangement with
any creditor to have his claim satisfied out of any property or assets of PESCO
or any of its consolidated Subsidiaries, or the proceeds therefrom, prior to
the general creditors of the owner thereof.
LIQUIDATING COMPANIES means Pool Horizontal Drilling Services Co.,
Westex Production Service, Inc. and The International Air Drilling Company.
LITIGATION means any proceeding, claim, lawsuit, or investigation (a)
conducted by or before any Tribunal, or (b) pending before any public or
private arbitration board or panel.
LOAN is defined in the preamble to this Agreement.
LOAN PAPERS means (a) this Agreement, certificates delivered pursuant
to this Agreement, and Schedules, (b) any and all notes, mortgages, deeds of
trust, security agreements, guaranties, assignments, and other agreements in
favor of Agent or Lenders (or Agent on behalf of Lenders) or between any Lender
and PESCO or any of its consolidated Subsidiaries ever delivered pursuant to
this Agreement or the Existing Term Loan Agreement, as any of the same may
hereafter be amended, supplemented, or restated, and (c) any and all future
renewals and extensions or restatements of, or amendments or supplements to,
all or any part of the foregoing, provided that "Loan Papers" shall not include
term sheets, commitment letters, correspondence, and similar documents used in
the negotiation of this Agreement except to the extent the same are
specifically referred to in SECTION 5.15.
MATERIAL ADVERSE EFFECT means any material and adverse effect on (a)
the assets, liabilities, financial condition, business, or operations of any
Material Obligor, individually, or of PESCO and its consolidated Subsidiaries,
collectively, or (b) the ability of the Material Obligors, individually, or of
PESCO and its consolidated Subsidiaries, collectively, to carry out their
businesses in effect on the date hereof or as proposed on such date or to
satisfy their payment and performance obligations under any Loan Paper on a
timely basis.
MATERIAL AGREEMENT of any Person means any material written or oral
agreement, contract, commitment, or understanding to which such Person is a
party, by which such Person is directly or indirectly bound, or to which any
assets of such Person may be subject, which is not cancelable by such Person
upon 60 days or less notice without liability for further payment other than
nominal penalty.
MATERIAL OBLIGORS means PESCO, PESCO Subsidiary, Borrower, PAI, Pool
Company (Texas) Inc., Pool Company (Houston) Inc., Associated Petroleum
Services, Inc., Pool Production Services, Inc., PCESI and Big 10.
MOODY'S means Moody's Investors Service, Inc.
NBA is defined in the preamble to this Agreement.
NOTES means the promissory notes, each substantially in the form of
EXHIBIT A.
OBLIGATION means all present and future indebtedness, obligations, and
liabilities, and all renewals and extensions thereof, or any part thereof, now
or hereafter owed to Agent or any Lender by any Company, arising from, by
virtue of, or
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pursuant to any Loan Paper, including but not limited to all interest accruing
thereon and costs, expenses, and attorneys' fees incurred in the enforcement or
collection thereof, whether such indebtedness, obligations, and liabilities are
direct, indirect, fixed, contingent, liquidated, unliquidated, joint, several,
or joint and several.
OBLIGORS means PESCO, PESCO Subsidiary, Borrower, and Borrower's
present and future consolidated Subsidiaries which are incorporated within the
United States of America.
OFFICER'S CERTIFICATE means a certificate substantially in the form of
EXHIBIT E.
OILTOOLS OPERATIONS means, collectively, (1) all of the capital stock
of Associated Oiltools, Inc., a Texas corporation, (2) all of the capital stock
of Oiltools Offshore Services Limited, a United Kingdom corporation, and (3)
certain other assets covered by the Sale and Purchase Agreement dated as of
September 19, 1990 between Borrower and Antah Risjad, Ltd.
OPERATING CASH FLOW means, as of any point in time (the "Measurement
Point"), (a) the sum of (i) net income, (ii) depreciation and amortization, and
(iii) deferred taxes, in each case for the 12 months ended as of such
Measurement Point, plus (b) lease payment obligations (for the calendar year in
which the Measurement Point falls) with respect to leases which are permitted
by SECTION 7.12, as reflected in the footnotes to PESCO's most recent year-end
audited financial statements, plus (c) costs attributable to the performance of
prepaid rig services provided to ENSERCH, minus (d) the sum of (i)
undistributed earnings of unconsolidated affiliates (net of any dividends or
shareholder loans and advances received), (ii) cash payments made with respect
to pre-1990 personal injury and property damage claims, except to the extent
reimbursable by insurance or state guaranty funds, and (iii) PESCO
Distributions, in each case for the 12 months ended as of such Measurement
Point, and plus or minus, as appropriate, (e) all other cash items included in
the operating activity section of the statement of consolidated cash flows for
the 12 months ended as of such Measurement Point, prepared in accordance with
GAAP, but excluding changes in working capital. It is the intention of the
parties hereto that the Operating Cash Flow amount will be equal to the amount
shown as operating cash flow on PESCO's statement of cash flow prior to any
adjustment for changes in working capital, except for the adjustments made
above.
PAA ACQUISITION means the acquisition by PAI, completed in September
1994, of all of the partnership interest in Pool Arctic Alaska owned by Arctic
Alaska Drilling Company, Inc.
PAI means Pool Alaska, Inc., a Texas Corporation.
PARTICIPANT is defined in SECTION 12.14(b).
PAYMENT AGREEMENT means the Agreement Regarding Deferred Payment of
Purchase Price dated June 13, 1995, among the Sellers and Borrower.
PBGC means the Pension Benefit Guaranty Corporation, or any successor,
established pursuant to ERISA.
PCESI means Pool California Energy Services, Inc., a California
corporation, formerly named California Production Service, Inc. and a
wholly-owned Subsidiary of Borrower.
PERMITTED LIENS means (a) the Lender Liens, (b) Liens securing the
"Obligation" as defined in the Revolving Credit Agreement, (c) Liens in favor
of ENSERCH on the capital stock of Pool International, Inc., which are superior
to the Lender Liens thereon, (d) Liens in favor of PESCO or any of its
consolidated Subsidiaries if such Lien is a second Lien subordinated to Lender
Liens in a manner satisfactory to Lenders in its sole discretion, (e) the Liens
described in SCHEDULE 5.11 and renewals thereof (provided that upon any such
renewal, such Liens shall not secure any additional Debt), (f) involuntary
Liens on assets of Companies which are not Obligors if such Liens or the
enforcement thereof would not, individually or in the aggregate, be reasonably
likely to have a Material Adverse Effect, (g) pledges or deposits made to
secure payment of workers' compensation, or to participate in any fund in
connection with workers' compensation, unemployment insurance, pensions, or
other social security programs, (h) good-faith pledges or deposits made to
secure performance of bids, tenders, contracts (other than for the repayment of
borrowed money), or leases, or to secure statutory obligations, surety or
appeal bonds, or indemnity, performance, or other similar bonds in each case in
the ordinary course of business, (i) encumbrances consisting of zoning
restrictions, easements, or other restrictions on the use of real property,
none of which, in respect of any
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Material Obligor or (where the same would, individually or in the aggregate, be
reasonably likely to cause a Material Adverse Effect) any other Company,
materially impair the use of such real property by the Person in question in
the operation of its business, and none of which is violated by existing or
proposed structures or land use, (j) Liens securing any purchase money
obligation if such obligation is permitted Debt hereunder and if such Liens do
not encumber any Property other than the Property for which such purchase money
obligation was incurred, (k) rights resulting from joint venture or lease
arrangements whereby a Person other than PESCO or any of its consolidated
Subsidiaries has rights to receive a portion of cash flows generated by PESCO
or any of its consolidated Subsidiaries reasonably proportionate to such joint
venturer's or lessor's interest, (l) the following to the extent no Lien has
been filed in any jurisdiction or agreed to: Liens for Taxes not yet due and
payable; mechanic's Liens and materialman's Liens for services or materials for
which payment is not yet due; and landlord's Liens for rental not yet due and
payable and which, to the extent the same encumbers any of the Collateral, is
subordinate to the Lender Liens, (m) the following, if the validity or amount
thereof is being contested in good faith and by appropriate and lawful
proceedings and so long as levy and execution thereon have been stayed and
continue to be stayed, and they do not in the aggregate materially detract from
the value of the property of the Person in question, or materially impair the
use thereof in the operation of its business: Claims and Liens for Taxes due
and payable; claims and Liens upon, and defects of title to, real or personal
property (other than any of the Collateral), including any attachment of
personal or real property or other legal process prior to adjudication of a
dispute on the merits; claims and Liens of mechanics, materialmen,
warehousemen, carriers, landlords, operators and non-operators arising by
virtue of operating or joint operating agreements, or other like Liens; and
adverse judgments on appeal,(n) Liens pre-approved in writing by Determining
Lenders, (o) Liens in favor of the Sellers on the rigs and equipment described
in the PCESI Nonrecourse Guaranty and Security Agreement attached as Exhibit D
to the Payment Agreement and the real property described in the three PCESI
Deeds of Trust attached as Exhibit E to the Payment Agreement, in each case
securing Borrower's obligations under its 10% Subordinated Notes issued to the
Sellers, (p) Liens on the real property of PCESI securing notes in respect of
the deferred compensation obligations described in SECTION 7.11(n), (q) the
installation from time to time of equipment such as engines, transmissions,
handling tools, etc., on rigs subject to the Liens in favor of the Sellers
described in clause (o) above, so long as the net diminution in value (if any)
of the aggregate equipment of the Obligors subject to this Agreement's
restriction on Liens is not material in amount, (r) the Lien provided for in
the Security Agreement between Pool Texas and Elder Well Service, Inc. dated
August 15, 1994, and (s) Liens securing the "Obligation" as defined in the ISDL
Agreement.
PERSON means any individual, firm, corporation, association,
partnership, joint venture, Tribunal, or other entity.
PESCO means Pool Energy Services Co., a Texas corporation which is
PESCO Subsidiary's parent.
PESCO SUBSIDIARY means Pool Energy Holding, Inc., a Delaware
corporation which is Borrower's parent.
POOL TEXAS is defined in SECTION 7.11.
POTENTIAL DEFAULT means the occurrence of any event which, with notice
or lapse of time or both, would become a Default.
PRIME RATE means the prime interest rate charged by Agent, as
announced or published by Agent from time to time, and may not necessarily be
the lowest interest rate charged by Agent.
PRINCIPAL DEBT means, at any time, the total unpaid principal balance
of the Loan.
PROJECT FINANCING means any financing of an individual project with
repayment of the financing from dedicated funds generated solely from that
project and if such financing is pre-approved in writing by Determining
Lenders.
PROPERTY means any interest in any kind of property or asset, whether
real, personal, tangible, intangible, or mixed.
PRO RATA and PRO RATA PART means, when determined for any Lender, the
proportion (stated as a percentage) that the Principal Debt owed to it bears to
the total Principal Debt owed to all Lenders.
PURCHASE AND SALE AGREEMENT means that certain Purchase and Sale
Agreement dated September 28, 1994 between PAI, as Purchaser, and Arctic Alaska
Drilling Company, Inc., as Seller.
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PURCHASER is defined in SECTION 12.14(c).
RESERVE PERCENTAGE means the weighted average of the Reserve
Requirements incurred by each Lender on its Pro Rata Part of the Loan.
RESERVE REQUIREMENT means the maximum aggregate reserve requirements
(including all basic, supplemental, emergency, special, marginal and other
reserves required by applicable Law) applicable to a member bank of the Federal
Reserve System for eurocurrency fundings or liabilities.
REVOLVING CREDIT AGREEMENT means that certain Restated Revolving
Credit Agreement (as renewed, extended, amended, and modified from time to
time) dated as of November 30, 1995 among Pool Company, as Borrower, the
Lenders named therein, and NationsBank of Texas, N.A., as Agent.
RIGHTS means rights, remedies, powers, privileges, and benefits.
RIGS means rigs 4, 6, 7, 422, and 429 owned and operated by PAI
together with such other drilling or workover rigs as are hereafter owned by
PAI.
S&P means Standard & Poor's Ratings Group, a division of McGraw Hill,
Inc.
SEC REPORTS means reports filed with the Securities and Exchange
Commission pursuant to Sections 13 and 15(d) of the Securities Exchange Act of
1934, as amended, and rules and regulations promulgated thereunder, and all
annual reports, proxy statements, and other proxy solicitation materials.
SCHEDULE means a schedule attached to this Agreement unless specified
otherwise.
SECTION means a section or subsection of this Agreement unless
specified otherwise.
SECURITY AGREEMENT means collectively (as renewed, extended, amended,
and replaced), (a) the Security Agreement dated as of April 25, 1990; (b) the
amendment contained in the Existing Credit Agreement; (c) the Amendment to
Security Agreement dated as of April 21, 1995; (d) the Security Agreement dated
as of June 13, 1995; and (e) the Security Agreement dated as of July 13, 1995,
each of which was executed and delivered under this Agreement by, among others,
NationsBank and all Obligors.
SELLERS means the persons from whom Borrower acquired all of the
issued and outstanding stock of GPC at the time of the closing under the Stock
Purchase Agreement: Robert D. Hillman, Barbara A. Hillman, Richard H. Hillman,
and Robert D. Hillman, Jr.
SOLVENT means, with respect to any Person, that at the time of
determination: (a) The fair value of its assets exceeds the total amount of
its liabilities (including, without limitation, its contingent liabilities
under the Loan Papers); (b) it is currently able, and expects in the future to
be able, to pay its debts as they mature; and (c) it has capital sufficient to
carry on its business as conducted and as proposed to be conducted. Contingent
liabilities shall be computed at the amount which, in light of all existing
facts and circumstances, represent the amount which can reasonably be expected
to become an actual or matured liability.
STOCK PURCHASE AGREEMENT means the Stock Purchase Agreement dated as
of June 13, 1995, among the Sellers, GPC, Borrower, and PESCO.
SUBORDINATION AGREEMENT means the Subordination Agreement dated as of
June 13, 1995, among Borrower, the Sellers, the Lenders, and Agent.
SUBSIDIARY means any Person of which an aggregate of more than 50% of
the stock of any class or classes (or equivalent interests) is owned of record
or beneficially, directly or indirectly, by another Person or any of its
Subsidiaries, if the holders of the stock of such class or classes (or
equivalent interests) (a) are ordinarily, in the absence of contingencies,
entitled to vote for the election of a majority of the directors (or
individuals performing similar functions) of such Person,
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even though the Right so to vote has been suspended by the happening of such a
contingency, or (b) are entitled, as such holders, to vote for the election of
a majority of the directors (or individuals performing similar functions) of
such Person, whether or not the Right so to vote exists by reason of the
happening of a contingency, but specifically excluding Associated Oiltools,
Inc. (a Texas corporation), Oiltools Offshore Services Limited (a United
Kingdom corporation), and any subsidiary companies of either of them.
TAXES means all taxes, assessments, fees, levies, imposts, duties,
deductions, withholdings, or other charges of any nature whatsoever from time
to time or at any time imposed by any Law or Tribunal on PESCO or any of its
consolidated Subsidiaries.
TERMINATION DATE means 12:00 Noon on the earlier of either (a) March
31, 1998, or (b) the date Lender's Commitments are terminated in accordance
with this Agreement.
TOTAL LOSS means the occurrence of such substantial damage, loss or
destruction to any Rig, that all monies payable under insurance policies
covering such property are insufficient to completely repair, rebuild and
restore such property to its condition prior to the casualty.
TRIBUNAL means any court or governmental department, commission,
board, bureau, agency, or instrumentality of the U.S. or of any state,
commonwealth, nation, territory, possession, county, parish, or municipality,
whether now or hereafter constituted or existing.
U.S. means the United States of America.
SECTION 11. AGREEMENT BETWEEN LENDERS.
11.1 Agent.
a. Each Lender appoints Agent (and Agent accepts
appointment) as its nominee and agent, in its name and on its behalf:
(i) to act as its nominee and on its behalf in and under all Loan
Papers; (ii) to arrange the means whereby its funds are to be made
available to Borrower under the Loan Papers; (iii) to take any action
that it properly requests under the Loan Papers (subject to the
concurrence of other Lenders as may be required under the Loan
Papers); (iv) to receive all documents and items to be furnished to it
under the Loan Papers; (v) to be the secured party, mortgagee,
beneficiary, recipient, and similar party in respect of any collateral
for the benefit of Lenders; (vi) to promptly distribute to it all
material information, requests, documents, and items received from
Borrower under the Loan Papers; (vii) to promptly distribute to it its
ratable part of each payment or prepayment (whether voluntary, as
proceeds of collateral upon or after foreclosure, as proceeds of
insurance thereon, or otherwise) in accordance with the terms of the
Loan Papers; and (viii) to deliver to the appropriate Persons
requests, demands, approvals, and consents received from it. However,
Agent may not be required to take any action that exposes it to
personal liability or that is contrary to any Loan Paper or applicable
Law.
b. If the initial or any successor Agent ever ceases to
be a party to this Agreement or if the initial or any successor Agent
ever resigns (whether voluntarily or at the request of Determining
Lenders), then Determining Lenders shall appoint the successor Agent
from among the Lenders (other than the resigning Agent). If
Determining Lenders fail to appoint a successor Agent within 30 days
after the resigning Agent has given notice of resignation or
Determining Lenders have removed the resigning Agent, then the
resigning Agent may, on behalf of Lenders, appoint a successor Agent,
which must be a commercial bank having a combined capital and surplus
of at least $1,000,000,000 (as shown on its most recently published
statement of condition). Upon its acceptance of appointment as
successor Agent, the successor Agent succeeds to and becomes vested
with all of the Rights of the prior Agent, and the prior Agent is
discharged from its duties and obligations of Agent under the Loan
Papers, and each Lender shall execute the documents as any Lender, the
resigning or removed Agent, or the successor Agent reasonably request
to reflect the change. After any Agent's resignation or removal as
Agent under the Loan Papers, the provisions of this SECTION 11 inure
to its benefit as to any actions taken or omitted to be taken by it
while it was Agent under the Loan Papers.
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c. Agent, in its capacity as a Lender, has the same
Rights under the Loan Papers as any other Lender and may exercise
those Rights as if it were not acting as an Agent; the term "Lender"
shall, unless the context otherwise indicates, include Agent; and
Agent's resignation or removal shall not impair or otherwise affect
any Rights that it has or may have in its capacity as an individual
Lender. Each Lender and Borrower agree that Agent is not a fiduciary
for Lenders or for Borrower but simply is acting in the capacity
described in this Agreement to alleviate administrative burdens for
Borrower and Lenders, that Agent has no duties or responsibilities to
Lenders or Borrower except those expressly set forth in the Loan
Papers, and that Agent in its capacity as a Lender has all Rights of
any other Lender.
d. Agent may now or hereafter be engaged in one or more
loan, letter of credit, leasing, or other financing transactions with
Borrower, act as trustee or depositary for Borrower, or otherwise be
engaged in other transactions with Borrower (collectively, the "other
activities") not the subject of the Loan Papers. Without limiting the
Rights of Lenders specifically set forth in the Loan Papers, Agent is
not responsible to account to Lenders for those other activities, and
no Lender shall have any interest in any other activities, any present
or future guaranties by or for the account of Borrower that are not
contemplated or included in the Loan Papers, any present or future
offset exercised by Agent in respect of those other activities, any
present or future property taken as security for any of those other
activities, or any property now or hereafter in Agent's possession or
control that may be or become security for the obligations of Borrower
arising under the Loan Papers by reason of the general description of
indebtedness secured or of property contained in any other agreements,
documents, or instruments related to any of those other activities
(but, if any payments in respect of those guaranties or that property
or the proceeds thereof is applied by Agent to reduce the Obligation,
then each Lender is entitled to share ratably in the application as
provided in the Loan Papers).
11.2 Expenses. Each Lender shall pay its Commitment Percentage of
any reasonable expenses (including, without limitation, court costs, reasonable
attorneys' fees and other costs of collection) incurred by Agent (while acting
in such capacity) in connection with any of the Loan Papers if Agent is not
reimbursed from other sources within 30 days after incurrence. Each Lender is
entitled to receive its Commitment Percentage of any reimbursement that it
makes to Agent if Agent is subsequently reimbursed from other sources.
11.3 Proportionate Absorption of Losses. Except as otherwise
provided in the Loan Papers, nothing in the Loan Papers gives any Lender any
advantage over any other Lender insofar as the Obligation is concerned or to
relieve any Lender from ratably absorbing any losses sustained with respect to
the Obligation (except to the extent unilateral actions or inactions by any
Lender result in Borrower or any other obligor on the Obligation having any
credit, allowance, setoff, defense, or counterclaim solely with respect to all
or any part of that Lender's Pro Rata Part of the Obligation).
11.4 Delegation of Duties; Reliance. Lenders may perform any of
their duties or exercise any of their Rights under the Loan Papers by or
through Agent, and Lenders and Agent may perform any of their duties or
exercise any of their Rights under the Loan Papers by or through their
respective representatives. Agent, Lenders, and their respective
representatives (a) are entitled to rely upon (and shall be protected in
relying upon) any written statement believed by it or them to be genuine and
correct and to have been signed or made by the proper Person and, with respect
to legal matters, upon opinion of counsel selected by Agent or that Lender (but
nothing in this clause (a) permits Agent to rely on any other writing if a
specific writing is required by this Agreement), (b) are entitled to deem and
treat each Lender as the owner and holder of its part of the Principal Debt for
all purposes until, subject to SECTION 12.14, written notice of the assignment
or transfer is given to and received by Agent (and any request, authorization,
consent, or approval of any Lender is conclusive and binding on each subsequent
holder, assignee, or transferee of or Participant in that Lender's part of the
Principal Debt until that notice is given and received), (c) are not deemed to
have notice of the occurrence of a Default unless a responsible officer of
Agent, who handles matters associated with the Loan Papers and transactions
thereunder, has actual knowledge or Agent has been notified by a Lender or
Borrower, and (d) are entitled to consult with legal counsel (including counsel
for Borrower), independent accountants, and other experts selected by Agent and
are not liable for any action taken or omitted to be taken in good faith by it
in accordance with the advice of counsel, accountants, or experts.
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11.5 Limitation of Agent's Liability.
a. Neither Agent nor any of its representatives will be
liable for any action taken or omitted to be taken by it or them under
the Loan Papers in good faith and believed by it or them to be within
the discretion or power conferred upon it or them by the Loan Papers
or be responsible for the consequences of any error of judgment
(except for fraud, gross negligence, or willful misconduct), and
neither Agent nor any of its representatives has a fiduciary
relationship with any Lender by virtue of the Loan Papers (but nothing
in this Agreement negates the obligation of Agent to account for funds
received by it for the account of any Lender).
b. Unless indemnified to its satisfaction against loss,
cost, liability, and expense, Agent may not be compelled to do any act
under the Loan Papers or to take any action toward the execution or
enforcement of the powers thereby created or to prosecute or defend
any suit in respect of the Loan Papers. If Agent requests instructions
from Lenders, or Determining Lenders, as the case may be, with respect
to any act or action in connection with any Loan Paper, Agent is
entitled to refrain (without incurring any liability to any Person by
so refraining) from that act or action unless and until it has
received instructions. In no event, however, may Agent or any of its
representatives be required to take any action that it or they
determine could incur for it or them criminal or onerous civil
liability. Without limiting the generality of the foregoing, no
Lender has any right of action against Agent as a result of Agent
acting or refraining from acting under this Agreement in accordance
with instructions of Determining Lenders.
c. Agent is not responsible to any Lender or any
Participant for, and each Lender represents and warrants that it has
not relied upon Agent in respect of, (i) the creditworthiness of any
Company and the risks involved to that Lender, (ii) the effectiveness,
enforceability, genuineness, validity, or the due execution of any
Loan Paper (other than by Agent), (iii) any representation, warranty,
document, certificate, report, or statement made therein (other than
by Agent) or furnished thereunder or in connection therewith, (iv) the
adequacy of any collateral now or hereafter securing the Obligation or
the existence, priority, or perfection of any Lien now or hereafter
granted or purported to be granted on the collateral under any Loan
Paper, or (v) observation of or compliance with any of the terms,
covenants, or conditions of any Loan Paper on the part of any Company.
EACH LENDER AGREES TO INDEMNIFY AGENT AND ITS REPRESENTATIVES AND HOLD
THEM HARMLESS FROM AND AGAINST (BUT LIMITED TO SUCH LENDER'S
COMMITMENT PERCENTAGES OF) ANY AND ALL LIABILITIES, OBLIGATIONS,
LOSSES, DAMAGES, PENALTIES, ACTIONS, JUDGMENTS, SUITS, COSTS,
REASONABLE EXPENSES, AND REASONABLE DISBURSEMENTS OF ANY KIND OR
NATURE WHATSOEVER THAT MAY BE IMPOSED ON, ASSERTED AGAINST, OR
INCURRED BY THEM IN ANY WAY RELATING TO OR ARISING OUT OF THE LOAN
PAPERS OR ANY ACTION TAKEN OR OMITTED BY THEM UNDER THE LOAN PAPERS IF
AGENT AND ITS REPRESENTATIVES ARE NOT REIMBURSED FOR SUCH AMOUNTS BY
ANY COMPANY. ALTHOUGH AGENT AND ITS REPRESENTATIVES HAVE THE RIGHT TO
BE INDEMNIFIED UNDER THIS AGREEMENT FOR ITS OR THEIR OWN ORDINARY
NEGLIGENCE, AGENT AND ITS REPRESENTATIVES DO NOT HAVE THE RIGHT TO BE
INDEMNIFIED UNDER THIS AGREEMENT FOR ITS OR THEIR OWN FRAUD, GROSS
NEGLIGENCE, OR WILLFUL MISCONDUCT.
11.6 Default; Collateral. While a Default exists, Lenders agree to
promptly confer in order that Determining Lenders or Lenders, as the case may
be, may agree upon a course of action for the enforcement of the Rights of
Lenders; and Agent is entitled to refrain from taking any action (without
incurring any liability to any Person for so refraining) unless and until it
has received instructions from Determining Lenders. In actions with respect to
any property of Borrower, Agent is acting for the ratable benefit of each
Lender. Agent shall hold, for the ratable benefit of all Lenders, any security
it receives for the Obligation or any guaranty of the Obligation it receives
upon or in lieu of foreclosure.
11.7 Limitation of Liability. No Lender or any Participant will
incur any liability to any other Lender or Participant except for acts or
omissions in bad faith, and neither Agent nor any Lender or Participant will
incur any liability to any other Person for any act or omission of any other
Lender or any Participant.
11.8 Relationship of Lenders. The Loan Papers do not create a
partnership or joint venture among Agent and Lenders or among Lenders.
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11.9 Collateral Matters.
a. Each Lender authorizes and directs Agent to enter
into the Loan Papers for the ratable benefit of Lenders. Each Lender
agrees that any action taken by Agent concerning any Collateral with
the consent of, or at the request of, Determining Lenders in
accordance with the provisions of this Agreement, the Security
Agreement, or the other Loan Papers, and the exercise by Agent (with
the consent of, or at the request of, Determining Lenders) of powers
concerning the Collateral set forth in any Loan Paper, together with
other reasonably incidental powers, shall be authorized and binding
upon all Lenders.
b. Agent is authorized on behalf of all Lenders, without
the necessity of any notice to or further consent from any Lender,
from time to time before a Default or Potential Default, to take any
action with respect to any Collateral or Loan Paper that may be
necessary to perfect and maintain perfected the Lender Liens upon the
Collateral granted by the Loan Papers.
c. Except to use the customary standard of care that it
exercises in respect of collateral for its own account, Agent has no
obligation whatsoever to any Lender or to any other Person to assure
that the Collateral exists or is owned by any Company or is cared for,
protected, or insured or has been encumbered or that the Liens granted
to Agent for the benefit of Lenders under the Loan Papers have been
properly or sufficiently or lawfully created, perfected, protected, or
enforced, or are entitled to any particular priority.
d. Agent shall exercise the same care and prudent
judgment with respect to the Collateral and the Loan Papers as it
normally and customarily exercises in respect of similar collateral
and security documents.
e. Lenders irrevocably authorize Agent, at its option
and in its discretion, to release any Lender Lien upon any Collateral
(i) upon full payment of the Obligation; (ii) constituting property
being sold or disposed of as permitted under SECTION 7.20, if Agent
determines that the property being sold or disposed is being sold or
disposed in accordance with the requirements and limitations of
SECTION 7.20 and Agent concurrently receives all mandatory prepayments
with respect thereto, if any, in accordance with SECTION 7.20; (iii)
constituting property in which no Company owned any interest at the
time the Lender Lien was granted or at any time thereafter; (iv)
constituting property leased to any Company under a lease that has
expired or been terminated in a transaction permitted under this
Agreement or is about to expire and that has not been, and is not
intended by that Company to be, renewed; (v) consisting of an
instrument evidencing Debt pledged to Agent (for the benefit of
Lenders), if the Debt evidenced thereby has been paid in full.
Lenders further irrevocably authorize Agent to release any Lender Lien
upon any Collateral, if approved, authorized, or ratified in writing
by Determining Lenders. Upon request by Agent at any time, Lenders
will confirm in writing Agent's authority to release particular types
or items of Collateral under this SECTION 11.9(e).
11.10 Benefits of Agreement. None of the provisions of this SECTION
11 inure to the benefit of any Company or any other Person other than Agent and
Lenders; consequently, no Company or any other Person is entitled to rely upon,
or to raise as a defense, in any manner whatsoever, the failure of Agent or any
Lender to comply with these provisions.
SECTION 12. MISCELLANEOUS.
12.1 Headings and Exhibits. Headings and captions may not be
construed in interpreting provisions in any Loan Paper. Any incomplete Exhibit
must be completed correctly and in accordance with the terms and provisions of
this Agreement before or at the time of its execution and delivery.
12.2 Time and Non-Business Days. Time is of the essence in the
Loan Papers. All time references (e.g., 10:00 a.m.) are to time in Houston,
Texas. Any action that is due on a non-Business Day may be delayed until the
next-succeeding Business Day, but interest accrues on any payment until it is
made.
12.3 Communications. Unless otherwise specifically provided,
whenever any Loan Paper requires or permits any consent, approval, notice,
request, or demand from one party to another, such communication must be in
writing (which may be by facsimile transmission) to be effective and shall be
deemed to have been given on the day actually delivered or, if mailed, on the
fifth Business Day after it is enclosed in an envelope, addressed to the party
to be notified at the address
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stated below, properly stamped, sealed, and deposited in the appropriate
official postal service. Until changed by notice, the address and facsimile or
FAX number for each party is as appears on the signature page(s) hereto.
12.4 Form and Number of Documents. Each agreement, document,
instrument, or other writing to be furnished to Lenders under any provision of
this Agreement must be in form and substance and in such number of counterparts
as may be satisfactory to Agent and its counsel.
12.5 Exceptions to Covenants. Neither PESCO nor any of its
consolidated Subsidiaries shall take or fail to take any action permitted under
any Loan Paper if such action or omission would result in the breach of any
covenant contained in any Loan Paper.
12.6 Survival. All covenants, agreements, undertakings,
representations, and warranties made in any of the Loan Papers shall survive
all closings under the Loan Papers. Further, Borrower's obligations and
Agent's and each Lender's Rights under the Loan Papers shall continue in full
force and effect until the Obligation is paid and performed in full.
12.7 Governing Law. The Loan Papers are being executed and
delivered, and are intended to be performed, in the State of Texas, and the
Laws (other than conflict of laws provisions thereof) of such State and of the
United States of America shall govern the Rights and duties of the parties and
the validity, construction, enforcement, and interpretation of the Loan Papers,
except to the extent otherwise specified in any of the Loan Papers.
12.8 Venue; Service of Process. Each Obligor, for itself and its
successors and assigns, hereby (a) irrevocably submits to the nonexclusive
jurisdiction of the state and federal courts of the State of Texas and agrees
and consents that service of process may be made upon it in any legal
proceeding arising out of or in connection with the Loan Papers and the
Obligation by service of process as provided by Texas Law, (b) irrevocably
waives, to the fullest extent permitted by Law, any objection which it may now
or hereafter have to the laying of venue of any Litigation arising out of or in
connection with the Loan Papers and the Obligation brought in district courts
of Harris County, Texas, or in the U.S. District Court for the Southern
District of Texas, Houston Division, (c) irrevocably waives any claims that any
Litigation brought in any such court has been brought in an inconvenient forum,
(d) agrees to designate PESCO as its agent for service of process in Houston,
Texas, in connection with any such Litigation and to deliver to Agent evidence
thereof, (e) irrevocably consents to the service of process out of any of the
aforementioned courts in any such Litigation by the mailing of copies thereof
by certified mail, return receipt requested, postage prepaid, to such Obligor
at its address set forth herein, and (f) irrevocably agrees that any legal
proceeding against Agent or any Lender arising out of or in connection with the
Loan Papers on the Obligation shall be brought in the district courts of Harris
County, Texas, or in the U.S. District Court for the Southern District of
Texas, Houston Division. Nothing herein shall affect the Right of Agent or any
Lender to commence legal proceedings or otherwise proceed against Borrower in
any jurisdiction or to serve process in any manner permitted by applicable Law.
12.9 Maximum Interest Rate. Regardless of any provision contained
in any of the Loan Papers, no Lender is entitled to contract for, charge, take,
reserve, receive, or apply, as interest on the Obligation, or any part thereof,
any amount in excess of the Highest Lawful Rate, and, in the event Lenders ever
contract for, charge, take, reserve, receive, or apply as interest any such
excess, it shall be deemed a partial prepayment of principal and treated
hereunder as such; and, if the Principal Debt is paid in full, any remaining
excess shall forthwith be paid to Borrower. In determining whether or not the
interest paid or payable, under any specific contingency, exceeds the Highest
Lawful Rate, Borrower and Lenders shall, to the maximum extent permitted under
applicable Law, (a) characterize any nonprincipal payment as an expense, fee,
or premium rather than as interest, (b) exclude voluntary prepayments and the
effects thereof, and (c) "spread" the total amount of interest throughout the
entire contemplated term of the Obligation; provided that, if the Obligation is
paid and performed in full prior to the end of the full contemplated term
thereof, and if the interest received for the actual period of existence
thereof exceeds the Highest Lawful Rate, Lenders shall refund such excess, and,
in such event, Lenders shall not be subject to any penalties provided by any
Laws for contracting for, charging, taking, reserving, or receiving interest in
excess of the Highest Lawful Rate. To the extent the Laws of the State of
Texas are applicable for purposes of determining the "Highest Lawful Rate",
such term shall mean the "indicated rate ceiling" from time to time in effect
under Article 1.04, Title 79, Revised Civil Statutes of Texas, as amended, or,
if permitted by applicable Law and effective upon the giving of the notices
required by such Article 1.04 (or effective upon any other date otherwise
specified by applicable Law), the "monthly ceiling", the "quarterly ceiling",
or "annualized ceiling" from time to time in effect under such Article 1.04,
whichever Lenders shall elect to substitute for the "indicated rate ceiling",
and vice versa, each such substitution to have the effect provided in such
Article 1.04; and Lenders shall be entitled to make such election from time to
time and one or more times and, without notice
28
<PAGE> 31
to Borrower, to leave any such substitute rate in effect for subsequent periods
in accordance with subsection (h)(1) of such Article 1.04. Pursuant to Article
15.10(b) of Chapter 15, Subtitle 79, Revised Civil Statutes of Texas, 1925, as
amended (which regulates certain revolving credit loan accounts and revolving
triparty accounts), Borrower agrees that such Chapter 15 shall not govern or in
any manner apply to the Obligation.
12.10 Invalid Provisions. If any provision of any Loan Paper is
held to be illegal, invalid, or unenforceable, such provision shall be fully
severable; the appropriate Loan Paper shall be construed and enforced as if
such provision had never comprised a part thereof; and the remaining provisions
shall remain in full force and effect and shall not be affected by such
provision or by its severance therefrom. Furthermore, in lieu of such
provision there shall be added automatically as a part of such Loan Paper a
provision as similar in terms to such illegal, invalid, or unenforceable
provision as may be possible and be legal, valid, and enforceable.
12.11 Entirety. THIS AGREEMENT AND THE OTHER LOAN PAPERS REPRESENT
THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE
OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS BY THE PARTIES. THERE
ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
12.12 Amendments, Consents, Conflicts, and Waivers.
a. Unless otherwise specifically provided (i) this
Agreement may be amended only by an instrument in writing executed by
Borrower, Agent, and Determining Lenders and supplemented only by
documents delivered or to be delivered in accordance with the express
terms of this Agreement, and (ii) the other Loan Papers may only be
the subject of an amendment, modification, or waiver that has been
approved by Determining Lenders and Borrower.
b. Any amendment to or consent or waiver under this
Agreement or any Loan Paper that purports to accomplish any of the
following must be by an instrument in writing executed by Borrower and
Agent and executed (or approved, as the case may be) by each Lender:
(i) Extends the due date or decreases the amount of any scheduled
payment of the Obligation beyond the date specified in the Loan
Papers; (ii) decreases any rate or amount of interest, fees, or other
sums payable to Agent -- except fees payable only to Agent to which it
may agree with Borrower without joinder by any Lender -- or Lenders
under this Agreement (except such reductions as are contemplated by
this Agreement); (iii) changes the definition of "COMMITMENTS",
"DETERMINING LENDERS", or "TERMINATION DATE"; (iv) increases any one
or more Lenders' Commitments; (v) waives compliance with, amends, or
releases (in whole or in part) any guaranty or any Collateral unless
the release is contemplated in any Loan Paper; or (vi) changes this
CLAUSE (B) or any other matter specifically requiring the consent of
all Lenders under this Agreement.
c. ANY CONFLICT OR AMBIGUITY BETWEEN THE TERMS AND
PROVISIONS OF THIS AGREEMENT AND TERMS AND PROVISIONS IN ANY OTHER
LOAN PAPER IS CONTROLLED BY THE TERMS AND PROVISIONS OF THIS AGREEMENT
FOR ALL PURPOSES.
d. No course of dealing or any failure or delay by
Agent, any Lender, or any of their respective representatives with
respect to exercising any Right of Agent or any Lender under this
Agreement operates as a waiver thereof. A waiver must be in writing
and signed by Agent and Lenders (or Determining Lenders, if permitted
under this Agreement) to be effective, and a waiver will be effective
only in the specific instance and for the specific purpose for which
it is given.
e. As stated in the recitals to the Revolving Credit
Agreement, waivers granted and interpretations issued by NationsBank
with respect to the Existing Credit Agreement, copies of which are
attached to the Revolving Credit Agreement as EXHIBIT I, shall apply
to this Agreement to the same extent as if granted or issued by Agent
and Lenders with reference specifically to this Agreement.
12.13 Multiple Counterparts. This Agreement has been executed in a
number of identical counterparts, each of which shall be deemed an original for
all purposes and all of which constitute, collectively, one agreement; but, in
making proof of this Agreement, it shall not be necessary to produce or account
for more than one such counterpart. Each Lender
29
<PAGE> 32
need not execute the same counterpart of this Agreement so long as identical
counterparts are executed by Borrower, each Lender, and Agent. This Agreement
shall become effective when counterparts of this Agreement have been executed
and delivered to Agent by each Lender, Agent, and Borrower, or, in the case
only of Lenders, when Agent has received telecopied, telexed, or other evidence
satisfactory to it that each Lender has executed and is delivering to Agent a
counterpart of this Agreement.
12.14 Successors and Assigns; Participations.
a. Each Loan Paper binds and inures to the benefit of
the parties thereto, any intended beneficiary thereof, and each of
their respective successors and permitted assigns. No Lender may
transfer, pledge, assign, sell any participation in, or otherwise
encumber its portion of the Obligation except as permitted by this
SECTION 12.14.
b. Subject to the provisions of this section and in
accordance with applicable Law, any Lender may, in the ordinary course
of its commercial banking business, at any time sell to one or more
Persons (each a "PARTICIPANT") participating interests in its portion
of the Obligation. The selling Lender shall remain a "LENDER" under
this Agreement (and the Participant shall not constitute a "LENDER"
under this Agreement) and its obligations under this Agreement shall
remain unchanged. The selling Lender shall remain solely responsible
for the performance of its obligations under the Loan Papers and shall
remain the holder of its share of the Principal Debt for all purposes
under this Agreement. Borrower and Agent shall continue to deal
solely and directly with the selling Lender in connection with that
Lender's Rights and obligations under the Loan Papers. Participants
have no Rights under the Loan Papers, other than certain voting Rights
as provided below. Subject to the following, each Lender may obtain
(on behalf of its Participants) the benefits of SECTION 2 with respect
to all participations in its part of the Obligation outstanding from
time to time so long as Borrower is not obligated to pay any amount in
excess of the amount that would be due to that Lender under SECTION 2
calculated as though no participations have been made. No Lender may
sell any participating interest under which the Participant has any
Rights to approve any amendment, modification, or waiver of any Loan
Paper, except to the extent the amendment, modification, or waiver
extends the due date for payment of any principal, interest, or fees
due under the Loan Papers, increases that Lender's Commitment, reduces
the interest rate or the amount of principal or fees applicable to the
Obligation (except reductions contemplated by this Agreement), or
releases any guaranty or Collateral unless the release is contemplated
in any Loan Paper. However, if a Participant is entitled to the
benefits of SECTION 2 or a Lender grants Rights to its Participants to
approve amendments to or waivers of the Loan Papers respecting the
matters described in the previous sentence, then that Lender must
include a voting mechanism in the relevant participation agreement
whereby a majority of its portion of the Obligation (whether held by
it or participated) shall control the vote for all of that Lender's
portion of the Obligation. Except in the case of the sale of a
participating interest to another Lender, the relevant participation
agreement shall prohibit the Participant from transferring, pledging,
assigning, selling participations in, or otherwise encumbering its
portion of the Obligation.
c. Subject to the provisions of this section, any Lender
may at any time, in the ordinary course of its commercial banking
business, (i) without the consent of Borrower or Agent, assign all or
any part of its Rights and obligations under the Loan Papers to any of
its Affiliates (each a "PURCHASER") and (ii) if no Default exists,
upon the prior written consent of Borrower (which will not be
unreasonably withheld) and Agent, assign to any other Person that is
not a business competitor of any Company (each of which is also a
"PURCHASER") a proportionate part -- not less than $2,000,000 of that
Lender's Commitment and, if less than all, then the selling Lender
must retain at least $2,000,000 of its Commitment -- under the Loan
Papers, it must retain at least $2,000,000 of all or any part of its
Rights and obligations under the Loan Papers. In each case, the
Purchaser shall assume those Rights and obligations under an
assignment agreement substantially in the form of the attached EXHIBIT
E. Each assignment under this SECTION 12.14(c) shall include a
ratable interest in the assigning Lender's Rights and obligations
under this Agreement. Upon (i) delivery of an executed copy of the
assignment agreement to Borrower and Agent and (ii) payment of a fee
of $2,500.00 from the transferor to Agent, from and after the
assignment's effective date (which shall be after the date of
delivery), the Purchaser shall for all purposes be a Lender party to
this Agreement and shall have all the Rights and obligations of a
Lender under this Agreement to the same extent as if it were an
original party to this Agreement with commitments as set forth in the
assignment agreement, and the transferor Lender shall be released from
its obligations under this Agreement to a corresponding extent, and,
except as provided in the remainder of this clause (c), no further
consent or action by Borrower, Lenders, or Agent shall be required.
Upon the consummation of any transfer to a Purchaser under this clause
(c),
30
<PAGE> 33
the then-existing SCHEDULE 1(b) shall automatically be deemed to
reflect the name, address, and Commitment of such Purchaser, Agent
shall deliver to Borrower and Lenders an amended SCHEDULE 1(b)
reflecting those changes, Borrower shall execute and deliver to each
of the transferor Lender and the Purchaser a Note in the face amount
of its respective Commitment following transfer, and, upon receipt of
its new Note, the transferor Lender shall return to Borrower the Note
previously delivered to it under this Agreement. A Purchaser is
subject to all the provisions in this section as if it were a Lender
signatory to this Agreement as of the date of this Agreement.
d. Any Lender may at any time, without the consent of
Borrower or Agent, assign all or any part of its Rights under the Loan
Papers to a Federal Reserve Bank without releasing the transferor
Lender from its obligations thereunder.
e. Notwithstanding any contrary provision in this
Agreement, a Lender may not sell or participate any of its interests
for a purchase price that, directly or indirectly, reflects a discount
from face value, without first offering the sale or participation to
the other Lenders on a Pro Rata basis (which must be accepted or
rejected within five Business Days after the offer).
12.15 Confidentiality. Agent or any Lender may, without limitation,
(a) disclose any information concerning PESCO or any of its consolidated
Subsidiaries to any Tribunal, or to any prospective or actual Participant or
(subject to SECTION 12.14) any other actual or prospective transferee of any of
Agent's or any Lender's Rights and duties, or to the respective affiliates,
directors, officers, employees, attorneys, and agents of any prospective or
actual Participant or such other transferee of an interest, provided that such
prospective or actual Participant or such other transferee agrees to treat the
information as confidential, and (b) use any information concerning PESCO and
any of its consolidated Subsidiaries (i) to the extent pertinent to an
evaluation of the Obligation, (ii) to enforce compliance with the terms and
conditions of the Loan Papers, or (iii) to take any action when it is entitled
to do so under the Loan Papers which Lenders deem necessary to protect its
interests if a Default has occurred and is continuing.
12.16 Parties Bound; Assignments. This Agreement is binding upon,
and inures to the benefit of Agent, Determining Lenders, Lenders, each Obligor,
and their respective successors and assigns, provided that no Obligor may,
without the prior written consent of Determining Lenders, assign any Rights,
duties, or obligations hereunder, and any purported assignment in violation of
the foregoing shall be void and ineffective.
[Remainder of page intentionally blank; signature page follows.]
31
<PAGE> 34
EXECUTED as of the date first stated above.
<TABLE>
<S> <C>
Pool Company POOL COMPANY, as Borrower
10375 Richmond Avenue
Houston, Texas 77042
Attn: R. A. Johannsen, Treasurer
FAX (713) 954-3244 By /S/ E. J. SPILLARD
-----------------------------------------------
E. J. Spillard, Senior Vice President - Finance
By /S/ R. A. JOHANNSEN
-----------------------------------------------
R. A. Johannsen, Treasurer
NationsBank of Texas, N.A. NATIONSBANK OF TEXAS, N.A., as Agent, and a Lender
700 Louisiana Street, 8th Floor
Houston, Texas 77002
Attn: James R. Allred, Vice President
FAX (713) 247-6568 By /S/ JAMES R. ALLRED
-----------------------------------------------
James R. Allred, Vice President
National Bank of Canada NATIONAL BANK OF CANADA, as a Lender
2121 San Jacinto, Suite 1850
Dallas, Texas 75201
Attn: Larry L. Sears, Group Vice President
FAX (214) 871-2015 By /S/ LARRY L. SEARS
-----------------------------------------------
Larry L. Sears, Group Vice President
By /S/ DOUGLAS G. CLARK
-----------------------------------------------
Douglas G. Clark, Vice President
National Bank of Alaska NATIONAL BANK OF ALASKA, as a Lender
301 W. Northern Light Blvd.
Anchorage, Alaska 99503
Attn: Patricia Jelley Benz, Vice President
FAX: (907) 265-2141 By /S/ PATRICIA JELLEY BENZ
-----------------------------------------------
Patricia Jelley Benz, Vice President
</TABLE>
32
<PAGE> 35
The Obligors named below are joining this Agreement for the purpose of
(a) ratifying, confirming, and agreeing to each of the matters and undertakings
stated in SECTION 4 and (b) agreeing to each of the covenants applicable to it
under SECTION 7.
<TABLE>
<S> <C>
c/o Pool Energy Services Co. POOL ENERGY SERVICES CO.
10375 Richmond Avenue POOL ENERGY HOLDING, INC.
Houston, Texas 77042 POOL COMPANY (HOUSTON) INC.
Attn: R. A. Johannsen, POOL COMPANY (TEXAS) INC.
Treasurer
ASSOCIATED PETROLEUM SERVICES, INC.
FAX (713) 954-3244 POOL PRODUCTION SERVICES, INC.
POOL ALASKA, INC.
POOL AMERICAS, INC.
POOL INTERNATIONAL, INC.
POOL-AUSTRALIA, INC.
THE INTERNATIONAL AIR DRILLING COMPANY
POOL HORIZONTAL DRILLING SERVICES CO.
POOL CALIFORNIA ENERGY SERVICES, INC.
BIG 10 FISHING TOOL COMPANY, INC.
WESTEX PRODUCTION SERVICE, INC.,
as all of those Companies are Obligors
By /S/ E. J. SPILLARD
--------------------------------------------------------
E. J. Spillard, Senior Vice President - Finance
By /S/ R. A. JOHANNSEN
--------------------------------------------------------
R. A. Johannsen, Treasurer of each of the above Obligors
</TABLE>
33
<PAGE> 36
EXHIBIT A
PROMISSORY NOTE
$______________ Houston, Texas __________, 1995
FOR VALUE RECEIVED, POOL COMPANY, a Texas corporation ("MAKER"),
hereby promises to pay to the order of _______________, ("PAYEE"), the
principal amount of $_________________________, together with interest, as
hereinafter described.
This promissory note has been executed and delivered under, and is
subject to the terms of, the $10,000,000 Restated Term Loan Agreement (as
amended, the "LOAN AGREEMENT") dated as of November 30, 1995, among Maker,
NationsBank of Texas, N.A., as Agent, and Payee and the other Lenders referred
to therein, and is a "Note" referred to therein. Unless defined herein or the
context otherwise requires, capitalized terms used herein have the meaning
given to such terms in the Loan Agreement. Reference is made to the Loan
Agreement for provisions affecting this promissory note regarding the place of
payment, applicable interest rates, principal and interest payment dates, final
maturity, voluntary prepayments, acceleration of maturity, exercise of Rights,
payment of attorneys' fees, court costs, and other costs of collection, certain
waivers by Maker and others now or hereafter obligated for payment of any sums
due hereunder, and security for the payment hereof.
This promissory note and the similar promissory notes of Maker dated
of even date herewith have been issued under the Loan Agreement in replacement
for, but not as a novation of, those certain promissory notes of Maker dated
April 21, 1995, which were issued under the Existing Term Loan Agreement (as
defined in the Loan Agreement).
This promissory note is being executed and delivered, and is intended
to be performed, in the State of Texas, and the Laws of such State and of the
United States of America shall govern the rights and duties of the parties and
the validity, construction, enforcement, and interpretation hereof.
THIS PROMISSORY NOTE, TOGETHER WITH THE OTHER LOAN PAPERS, REPRESENT
THE FINAL AGREEMENTS BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY (i)
EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE
PARTIES, OR (ii) ANY COMMITMENT LETTER AMONG THE PARTIES (ALL THE TERMS AND
CONDITIONS OF WHICH ARE SUPERSEDED BY LOAN PAPERS). THERE ARE NO UNWRITTEN
ORAL AGREEMENTS BETWEEN THE PARTIES.
POOL COMPANY
By:
------------------------------------------
E.J. Spillard
Senior Vice President, Finance
By:
------------------------------------------
R.A. Johannsen
Treasurer
[corporate seal]
<PAGE> 37
EXHIBIT B
FINANCIAL REPORT CERTIFICATE
FOR ENDED , 19
----------------- -------------- ---
AGENT: NationsBank of Texas, N.A.
BORROWER: Pool Company
RE: $10,000,000 Restated Term Loan Agreement
DATE: , 19
------------------ --
This certificate is delivered pursuant to the $10,000,000 Restated
Term Loan Agreement (as amended, the "LOAN AGREEMENT") dated as of November 30,
1995, among Borrower, the Lenders named therein ("LENDERS"), and NationsBank of
Texas, N.A., as agent for itself and the other Lenders ("AGENT"), all defined
terms of which have the same meaning when used herein.
I certify to Lenders that I am the _____________________ (president,
chief financial officer, or controller) of PESCO on the date hereof and that:
1. The Financial Statements attached hereto were prepared in
accordance with GAAP, and present fairly the consolidated and consolidating
financial condition and results of operations of PESCO and its Subsidiaries as
of, and for the fiscal [quarter or year] ending on _______________, 19___ (the
"SUBJECT PERIOD").
2. A review of the activities of PESCO, PESCO Subsidiary, and the
Companies during the Subject Period has been made under my supervision with a
view to determining whether, during the Subject Period, each such entity has
kept, observed, performed, and fulfilled all of its obligations under the Loan
Papers, and during the Subject Period, each such entity kept, observed,
performed, and fulfilled each and every covenant and condition of the Loan
Papers (except for any deviations set forth on the attached schedule).
3. During the Subject Period, no Default (nor any Potential
Default) has occurred which has not been cured or waived (except for any
Defaults or Potential Defaults set forth on the attached schedule).
4. The status of compliance by PESCO with Sections 7.25 through
7.27, and 7.29 of the Loan Agreement at the end of the Subject Period is set
forth on the attached schedule.
5. This certificate is being delivered on behalf of PESCO. No
person or entity other than Lenders and the law firm of Porter & Hedges, L.L.P.
(the "SUBJECT RECIPIENTS"), shall be entitled to receive or rely upon this
certificate for any purpose. The Subject Recipients agree by their acceptance
hereof that (a) they shall look solely to PESCO for any loss, cost, damage,
expense, claim, demand, suit, or cause of action arising out of or relating in
any way to this certificate or its preparation and delivery, and (b) the
undersigned shall not under any circumstances have any personal liability
whatsoever for the preparation or execution of this certificate.
------------------------------------
Name
--------------------------------
Title
-------------------------------
<PAGE> 38
EXHIBIT C
OPINION OF COUNSEL TO BORROWER
* , 1995
---------------------
NationsBank of Texas, N.A., as Agent
700 Louisiana Street, 8th Floor
Houston, Texas 77002
Attn: James R. Allred
Vice President
Re: $10,000,000 Restated Term Loan Agreement
The undersigned has acted as counsel to Pool Energy Services Co., a
Texas corporation ("PESCO"), Pool Energy Holding, Inc., a Delaware corporation
("PESCO Subsidiary" ), Pool Company, a Texas corporation ("Borrower"), and
Borrower's consolidated subsidiaries in connection with the negotiation,
preparation, and execution of the $10,000,000 Restated Term Loan Agreement (the
"Loan Agreement") dated as of November 30, 1995, among Borrower, the Lenders
named therein ("Lenders") and NationsBank of Texas, N.A., as agent for itself
and the other Lenders ("Agent"). This opinion is delivered pursuant to Section
6.1 and Schedule 6 of the Loan Agreement. Unless otherwise defined herein or
the context otherwise requires, each capitalized term has the meaning ascribed
to such term in the Loan Agreement.
In reaching the conclusions expressed in this opinion, I have examined
such certificates of public officials and officers of the Obligors as I deemed
necessary or appropriate, and originals or copies of the Loan Agreement, Notes,
Guaranty and Security Agreement. I have otherwise made no special inquiry or
investigation but render this opinion on the basis of my knowledge as General
Counsel of the Obligors and an employee of one of the Obligors.
Based upon the foregoing and subject to the limitations,
qualifications and exceptions set forth below, the undersigned is of the
following opinion:
1. The Obligors are corporations duly organized, legally existing
and in good standing under the laws of their respective states of
incorporation.
2. The Obligors have the full corporate power and authority to
enter into the Loan Papers. All corporate action on the part of the Obligors,
requisite for the due execution, delivery, and performance of the Loan Papers
has been duly and effectively taken.
3. Upon the due execution and delivery of the Loan Papers by the
Obligors, I know of no reason why such Loan Papers will not constitute legal,
valid, and binding obligations of the Obligors enforceable against Obligors in
accordance with their terms.
4. The execution and delivery of the Loan Papers do not violate
any provisions of the Articles of Incorporation or Bylaws of Obligors. The
Loan Papers may be performed by Obligors in a manner that does not violate any
provisions of their respective Articles of Incorporation and Bylaws.
5. Neither any Obligor nor any Affiliate (excluding ENSERCH, if
an Affiliate) of any Obligor is subject to regulation under the Public Utility
Holding Company Act of 1935, the Federal Power Act, or the Investment Company
Act of 1940 (as any of the preceding acts have been amended).
<PAGE> 39
This opinion is subject to and qualified in all respects by the
following:
(a) The enforceability of the Loan Papers may be limited by (i)
bankruptcy, insolvency, reorganization, moratorium, and similar laws from time
to time in effect and affecting creditors' rights or the collection of debtors'
obligations generally (including, without limitation, laws generally defining
and restricting fraudulent conveyances), (ii) principles of equity, (iii)
principles of public policy, and (iv) requirements of commercial reasonableness
and good faith.
(b) No opinion is given as to the availability or enforceability
of certain provisions or remedies set forth in the Loan Papers, including
without limitation, (i) provisions which purport to provide access to or
restrict legal or equitable remedies such as specific performance and the
appointment of a receiver, (ii) provisions that purport to establish
evidentiary standards, (iii) provisions relating to waivers or to delays or
omissions of enforcement of remedies or severance, (iv) provisions that attempt
to appoint Agent or others as any Person's attorney-in-fact, (v) indemnity
provisions, (vi) provisions attempting to prohibit or restrict the transfer,
alienation, mortgaging, encumbering, or hypothecation of the properties covered
by or described in the Loan Papers, (vii) subrogation provisions, and (viii)
provisions attempting to establish proper venue for the filing and maintenance
of any claim, suit, or action with respect to the Loan Papers; provided,
however, that limitations on the availability of remedies under the Loan Papers
or the legality, validity, binding effect or enforceability of the Loan Papers
will not, in the undersigned's opinion, prevent you from recovering for damages
and enforcing any Liens in your favor or substantially interfere with the
practical realization of the benefits express in the Loan Papers except for the
economic consequences of any procedural delay which may result from such laws.
(c) The enforceability of certain provisions of the Loan Papers
may be limited by requirements of due process under the United States
Constitution and other laws generally limiting the rights of creditors to
repossess, foreclose or otherwise realize upon the property of a debtor without
appropriate notice and/or hearing.
(d) No opinion is expressed with respect to usury, nor with
respect to the perfection or priority of any of the liens or security interests
intended to be granted to Agent.
(e) No opinion is expressed as to whether the contemplated loan
transactions comply with any statutory, regulatory or other loan limits
applicable to the Lenders or comply with any other statutes, laws, rules or
regulations which prescribe permissible and lawful investments for the Lenders
(either as to type, amount, percentage of total investments or otherwise).
(f) The knowledge of the undersigned as to any factual matter in
connection with this opinion is limited to the current consciousness of the
undersigned and does not include constructive inquiry or imputed knowledge.
This opinion is limited to United States federal law and laws of the
State of Texas, all as now in effect. No opinion is expressed as to any matter
that may be governed by the laws of any other jurisdiction.
This opinion is solely for the benefit of and may be relied upon only
by Agent and the Lenders, and their respective counsel, and may not be
delivered or disclosed in whole or in part, to any other Person.
Very truly yours,
<PAGE> 40
EXHIBIT D
ASSIGNMENT AND ACCEPTANCE
Reference is made to the Restated Term Loan Agreement dated as of
November 30, 1995 (as renewed, extended, amended or replaced, the "LOAN
AGREEMENT"), among Pool Company (the "BORROWER"), NationsBank of Texas, N.A.,
as agent (the "AGENT"), and the other financial institutions party thereto from
time to time (collectively, the "LENDERS"). Capitalized terms used herein and
not otherwise defined shall have the meanings given to such terms in the Loan
Agreement.
_____________________________________ (the "ASSIGNOR"), and __________
____________________________________ (the "ASSIGNEE") agree as follows:
1. The Assignor hereby sells and assigns to the Assignee (without
recourse to the Assignor) a __________/__________ interest (the "ASSIGNED
INTEREST") in and to all of the rights of Assignor under the Loan Agreement and
the other Loan Papers (including, without limitation, the Note presently held
by the Assignor and the Guaranty), and the Assignee hereby purchases and
accepts from the Assignor such Assigned Interest and assumes all of the
obligations of the Assignor under the Loan Agreement and the other Loan Papers
(including, without limitation, the Note presently held by the Assignor and the
Guaranty) to the extent of the Assigned Interest, including, without
limitation, all principal amounts funded by the Assignor and outstanding on the
Effective Date (as defined below), together with interest accruing thereon on
and after the Effective Date. From and after the Effective Date, (x) the
Assignee shall be a party to the Loan Agreement and, to the extent of the
Assigned Interest, have the rights and obligations of a Lender thereunder and
under the other Loan Papers and (y) the Assignor shall, to the extent of the
Assigned Interest, relinquish its rights and be released from its obligations
under the Loan Agreement and the other Loan Papers.
2. The Assignor (a) makes no representation or warranty and
assumes no responsibility with respect to any statements, warranties, or
representations made by any Company in or in connection with the Loan Agreement
or any other Loan Paper or the execution, legality, validity, enforceability,
genuineness, sufficiency, collectibility, or value of the Loan Agreement or any
other Loan Paper, other than that it is the sole legal and beneficial owner of
the interest being assigned by it hereunder and that such interest is free and
clear of any claim, encumbrance, or participation; (b) makes no representation
or warranty and assumes no responsibility with respect to the financial
condition of any Company or the performance or observance by any Company of any
of its respective obligations under the Loan Agreement or any other Loan Paper;
(c) represents and warrants that (i) it possesses all requisite authority and
power to execute, deliver, and comply with the terms of the Loan Papers
(including, without limitation, this Assignment and Acceptance), (ii) the Loan
Agreement and the instruments contemplated therein constitute the entire
agreement between Borrower, Agent, and Lenders, (iii) the Loan Agreement has
not been amended, (iv) to its knowledge, no Default or Potential Default has
occurred pursuant to the Loan Papers, and (v) all of the conditions of Section
6.1 of the Loan Agreement have been satisfied as of the Effective Date; and (d)
attaches the Note held by it and requests that Agent exchange such Note for new
Notes executed by Borrower and payable to the Assignee in a principal amount
equal to $__________ and payable to the Assignor in a principal amount equal to
$__________ (less the principal amount of any other new Note(s) to any other
assignee(s) of Assignor pursuant to other Assignment and Acceptance agreements
effective as of the Effective Date).
3. The Assignee (a) represents and warrants that it is legally
authorized to enter into this Assignment and Acceptance; (b) confirms that it
has received a copy of the Loan Agreement and such other documents and
information as it has deemed appropriate to make its own credit analysis and
decision to enter into this Assignment and Acceptance; (c) agrees that it will,
independently and without reliance upon Agent, the Assignor, or any other
Lender and based on such documents and information as it shall deem appropriate
at the time, continue to make its own credit decisions in taking or not taking
action under the Loan Agreement; (d) appoints and authorizes Agent to take such
action as agent on its behalf and to exercise such powers under the Loan
Agreement as are delegated to Agent by the terms thereof, together with such
powers as are reasonably incidental thereto; (e) agrees that it will perform in
accordance with their terms all the obligations which by the terms of the Loan
Agreement are required to be performed by it as a Lender; (f) agrees that it
will comply with the confidentiality requirements of Section 12.15 of the Loan
Agreement; (g) represents and warrants that it does not consider
<PAGE> 41
any amount paid by it to the Assignor hereunder a loan by it to the Assignor;
and (h) (i) represents and warrants to the Assignor that under applicable laws
and treaties no taxes will be required to be withheld by Agent, Borrower, or
the Assignor with respect to any payments to be made to the Assignor in respect
of the Obligation, (ii) attaches hereto two duly completed copies of U.S.
Internal Revenue Service Form 4224, Form 1001, Form W-8, or any other tax form
acceptable to Agent (wherein the Assignee claims entitlement to complete
exemption from U.S. federal withholding tax on all interest payments made on
the Obligation), and (iii) agrees to provide to the Assignor, Agent, and
Borrower a new tax form upon the obsolescence of any previously delivered form
and comparable statements in accordance with applicable U.S. laws and
regulations and amendments duly executed and completed by the Assignee, and to
comply from time to time with all applicable U.S. laws and regulations with
regard to such withholding tax exemption.
4. The effective date for this Assignment and Acceptance shall be
________________ (the "EFFECTIVE DATE").
5. From and after the Effective Date, Agent shall make all
payments in respect of the interest assigned hereby (including payments of
principal, interest, fees, and other amounts) to the Assignee. The Assignor
and the Assignee shall make all appropriate adjustments in payments for periods
prior to the Effective Date by Agent or with respect to the making of this
assignment directly between themselves.
6. This Assignment and Acceptance shall be governed by and
construed in accordance with the laws of the State of Texas.
7. This Assignment and Acceptance (a) embodies the entire
agreement between the parties, supersedes all prior agreements and
understandings, if any, relating to the subject matter hereof, and may be
amended only by an instrument in writing executed jointly by an authorized
officer of each party hereto, (b) is not intended to evidence a "purchase" or
"sale" of a "security" within the meaning of any Law, and (c) may be executed
in a number of identical counterparts, each of which shall be deemed an
original for all purposes and all of which shall constitute, collectively, one
agreement; but, in making proof of this Assignment and Acceptance, it shall not
be necessary to reproduce or account for more than one such counterpart.
8. Any amounts due hereunder from the Assignor to the Assignee
shall be wire transferred by the Assignor to Assignee's account at
_________________________________________, ABA #_________, for credit to
________________ account #_____________, Attention: ______________, Reference:
___________. Any amounts due hereunder from the Assignee to the Assignor shall
be wire transferred by the Assignee to the Assignor's account at
___________________________, ABA #_________, Attention: _____________________
(Ref. ______). For purposes of amending Schedule 1(a) to the Loan Agreement,
the Assignee's address, contact person, telephone and facsimile number are as
follows:
----------------------------------------------
----------------------------------------------
----------------------------------------------
Attention:
-----------------------------------
Telephone:
-----------------------------------
FAX:
-----------------------------------------
EXECUTED as of ____________, 199_, with an "Effective Date" of __________, 199_.
<PAGE> 42
<TABLE>
<CAPTION>
ASSIGNOR ASSIGNEE
<S> <C>
- --------------------------------------- -------------------------------------
By: By:
----------------------------------- -------------------------------------
Name: Name:
Title: Title:
CONSENTED TO:
NATIONSBANK OF TEXAS, N.A.
as Agent
By
------------------------------------
James R. Allred
Vice President
POOL COMPANY
By
------------------------------------
E. J. Spillard,
Senior Vice President, Finance
By
------------------------------------
R. A. Johannsen,
Treasurer
</TABLE>
<PAGE> 43
EXHIBIT E
OFFICER'S CERTIFICATE
This certificate is delivered under the Restated Term Loan Agreement
dated as of November 30, 1995, among Pool Company, a Texas corporation (the
"BORROWER"), NationsBank of Texas, N.A., as Agent ("AGENT"), and the Lenders
("LENDERS") named therein. I, the undersigned officer of the companies listed
and attached as Annex A, hereby certify to Agent and the Lenders that the
following are true and correct:
1. Resolutions. Attached as Annex B is a true and correct copy
of resolutions relating to matters described therein, which have been duly and
unanimously adopted at a meeting of, or by the unanimous written consent of,
the board of directors of each such company listed and attached as Annex A.
None of such resolutions have been amended, modified or repealed in any
respect, and all of such resolutions are in full force and effect on the date
hereof.
2. Incumbency. The following individuals are the duly qualified
and acting officers in the position beside their names of the companies listed
and attached as Annex A. The signatures beside their names are their true
signatures.
<TABLE>
<CAPTION>
================================================================================
NAME TITLE SPECIMEN SIGNATURE
- --------------------------------------------------------------------------------
<S> <C> <C>
J. T. Jongebloed President
- --------------------------------------------------------------------------------
E.J. Spillard Senior Vice President,
Finance
- --------------------------------------------------------------------------------
R.A. Johannsen Treasurer
================================================================================
</TABLE>
3 Charter. There have been no changes to the Articles or
Certificates of Incorporation of any company, and there have been no additional
amendments authorized with respect thereto, since April 21, 1995.
4. Bylaws. There have been no changes to the Bylaws of any such
company, and there have been no additional amendments authorized with respect
thereto, since April 21, 1995.
EXECUTED as of , 1995.
------------------
------------------------------------
G. G. Arms
Corporate Secretary
<PAGE> 44
ANNEX A
POOL COMPANY
POOL ENERGY SERVICES CO.
POOL ENERGY HOLDING, INC.
POOL COMPANY (HOUSTON) INC.
POOL COMPANY (TEXAS) INC.
ASSOCIATED PETROLEUM SERVICES, INC.
POOL PRODUCTION SERVICES, INC.
POOL ALASKA, INC.
POOL AMERICAS, INC.
POOL INTERNATIONAL, INC.
POOL-AUSTRALIA, INC.
THE INTERNATIONAL AIR DRILLING COMPANY
POOL HORIZONTAL DRILLING SERVICES CO.
POOL CALIFORNIA ENERGY SERVICES, INC.
BIG 10 FISHING TOOL COMPANY, INC.
WESTEX PRODUCTION SERVICE, INC.
<PAGE> 45
EXHIBIT F
CONVERSION REQUEST
, 19
-------------- --
NationsBank of Texas, N.A., as Agent
Energy Banking Group
700 Louisiana Street, 8th Floor
Houston, Texas 77002
Attn: James R. Allred, Vice President
Fax: (713) 247-6568
Reference is made to the Restated Term Loan Agreement dated as of
November 30, 1995 (as amended, supplemented or restated, the "LOAN AGREEMENT"),
among the undersigned, the Lenders named therein, and NationsBank of Texas,
N.A., as Agent. Unless otherwise defined herein, all capitalized terms have
the meanings given to such terms in the Loan Agreement.
The undersigned hereby gives you notice pursuant to SECTION 2.14 of
the Loan Agreement that it elects to convert the interest rate applicable to
all or a portion of the Loan under the Loan Agreement or elects a new Interest
Period for all or a portion of the Loan bearing interest at a LIBOR Rate on the
following terms:
<TABLE>
<S> <C> <C>
(A) Date of conversion or last day of
applicable Interest Period (a Business Day)
----------------------------------
(B) Existing Interest Rate** and Principal Amount*
being converted
----------------------------------
(C) New Interest Rate selected**
----------------------------------
(D) For conversion to a LIBOR Rate Borrowing, the
Interest Period selected and the last day thereof***
----------------------------------
(E) For continuation of a LIBOR Rate, the Interest
Period selected and the last day thereof***
----------------------------------
</TABLE>
Very truly yours,
POOL COMPANY
By:
--------------------------------------
Name:
------------------------------------
Title:
-----------------------------------
- ------------------------
* Not less than $500,000 or a greater integral multiple of $1,000,000 (if
a LIBOR Rate is selected).
** LIBOR Rate (1, 2, 3 or 6 months), or Floating Rate.
*** 1, 2, 3 or 6 months. The Interest Period may not end after the
Termination Date.
<PAGE> 46
EXHIBIT G
FIXED CHARGE COVERAGE RATIO CALCULATION
(Calculated in accordance with Section 7.29 and the definitions
of "Operating Cash Flow," "Fixed Charge Coverage Ratio"
and "Funded Debt" in the Loan Agreement)
I. PESCO's "Operating Cash Flow" for the 12 months ending , 19 :
------------ --
<TABLE>
<S> <C> <C> <C>
(a) (i) Net income $
------------------------
(ii) Depreciation and amortization $
------------------------
(iii) Deferred taxes $
------------------------
plus
(b) Lease payment obligations $
------------------------
plus
(c) Prepaid rig services provided to ENSERCH $
---------------------------------
minus
(d) (i) Undistributed earnings of unconsolidated affiliates $
------------------------
(ii) Cash payments regarding pre-1990 personal injury
and property claims $
-----------------------------
(iii) PESCO "Distributions" $
-----------------------------
plus or minus
(e) All other cash and non-cash items included in the operating
activity section of the statement of cash flows (excluding
working capital) $
------------------------
TOTAL $
---------------------------------
II. PESCO's interest expense (including capitalized interest) for the
12 months ended , 19 : $
--------------- ---- ---------------------------------
III. Historic adjusted "Operating Cash Flow" from acquisitions occurring within
such 12-month period: $
------------------------
IV. Sum of I, II and III: $
------------------------
V. "Funded Debt" due within next 12 months: $
---------------------------------
VI. PESCO's interest expense (including capitalized interest) for the
12 months ended as of , 19 : $
--------------- ---- ------------------------
VII. Sum of V and VI: $
------------------------
IV divided by VII:
$ / $ = (x)
------------ ------------ ---
"Fixed Charge Coverage Ratio" = (x) to 1
---
</TABLE>
<PAGE> 47
PROMISSORY NOTE
$3,093,750 Houston, Texas December 29, 1995
FOR VALUE RECEIVED, POOL COMPANY, a Texas corporation ("MAKER"), hereby
promises to pay to the order of NATIONAL BANK OF CANADA, a Canadian bank
("PAYEE"), the principal amount of $3,093,750, together with interest, as
hereinafter described.
This promissory note has been executed and delivered under, and is
subject to the terms of, the $10,000,000 Restated Term Loan Agreement (as
amended, the "LOAN AGREEMENT") dated as of November 30, 1995, among Maker,
NationsBank of Texas, N.A., as Agent, and Payee and the other Lenders referred
to therein, and is a "Note" referred to therein. Unless defined herein or the
context otherwise requires, capitalized terms used herein have the meaning given
to such terms in the Loan Agreement. Reference is made to the Loan Agreement
for provisions affecting this promissory note regarding the place of payment,
applicable interest rates, principal and interest payment dates, final maturity,
voluntary prepayments, acceleration of maturity, exercise of Rights, payment of
attorneys' fees, court costs, and other costs of collection, certain waivers by
Maker and others now or hereafter obligated for payment of any sums due
hereunder, and security for the payment hereof.
This promissory note and the similar promissory notes of Maker dated of
even date herewith have been issued under the Loan Agreement in replacement for,
but not as a novation of, those certain promissory notes of Maker dated April
21, 1995, which were issued under the Existing Term Loan Agreement (as defined
in the Loan Agreement).
This promissory note is being executed and delivered, and is intended
to be performed, in the State of Texas, and the Laws of such State and of the
United States of America shall govern the rights and duties of the parties and
the validity, construction, enforcement, and interpretation hereof.
THIS PROMISSORY NOTE, TOGETHER WITH THE OTHER LOAN PAPERS, REPRESENT
THE FINAL AGREEMENTS BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY (i)
EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE
PARTIES, OR (ii) ANY COMMITMENT LETTER AMONG THE PARTIES (ALL THE TERMS AND
CONDITIONS OF WHICH ARE SUPERSEDED BY LOAN PAPERS). THERE ARE NO UNWRITTEN ORAL
AGREEMENTS BETWEEN THE PARTIES.
POOL COMPANY
By: /S/ E. J. SPILLARD
----------------------------------
E.J. Spillard
Senior Vice President, Finance
By: /S/ R. A. JOHANNSEN
----------------------------------
R.A. Johannsen
Treasurer
[corporate seal]
<PAGE> 48
PROMISSORY NOTE
$3,506,250 Houston, Texas December 29, 1995
FOR VALUE RECEIVED, POOL COMPANY, a Texas corporation ("MAKER"), hereby
promises to pay to the order of NATIONSBANK OF TEXAS, N.A., a national banking
association ("PAYEE"), the principal amount of $3,506,250, together with
interest, as hereinafter described.
This promissory note has been executed and delivered under, and is
subject to the terms of, the $10,000,000 Restated Term Loan Agreement (as
amended, the "LOAN AGREEMENT") dated as of November 30, 1995, among Maker,
NationsBank of Texas, N.A., as Agent, and Payee and the other Lenders referred
to therein, and is a "Note" referred to therein. Unless defined herein or the
context otherwise requires, capitalized terms used herein have the meaning given
to such terms in the Loan Agreement. Reference is made to the Loan Agreement
for provisions affecting this promissory note regarding the place of payment,
applicable interest rates, principal and interest payment dates, final maturity,
voluntary prepayments, acceleration of maturity, exercise of Rights, payment of
attorneys' fees, court costs, and other costs of collection, certain waivers by
Maker and others now or hereafter obligated for payment of any sums due
hereunder, and security for the payment hereof.
This promissory note and the similar promissory notes of Maker dated of
even date herewith have been issued under the Loan Agreement in replacement for,
but not as a novation of, those certain promissory notes of Maker dated April
21, 1995, which were issued under the Existing Term Loan Agreement (as defined
in the Loan Agreement).
This promissory note is being executed and delivered, and is intended
to be performed, in the State of Texas, and the Laws of such State and of the
United States of America shall govern the rights and duties of the parties and
the validity, construction, enforcement, and interpretation hereof.
THIS PROMISSORY NOTE, TOGETHER WITH THE OTHER LOAN PAPERS, REPRESENT
THE FINAL AGREEMENTS BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY (i)
EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE
PARTIES, OR (ii) ANY COMMITMENT LETTER AMONG THE PARTIES (ALL THE TERMS AND
CONDITIONS OF WHICH ARE SUPERSEDED BY LOAN PAPERS). THERE ARE NO UNWRITTEN ORAL
AGREEMENTS BETWEEN THE PARTIES.
POOL COMPANY
By: /S/ E. J. SPILLARD
----------------------------------
E.J. Spillard
Senior Vice President, Finance
By: /S/ R. A. JOHANNSEN
----------------------------------
R.A. Johannsen
Treasurer
[corporate seal]
<PAGE> 49
PROMISSORY NOTE
$1,650,000 Houston, Texas December 29, 1995
FOR VALUE RECEIVED, POOL COMPANY, a Texas corporation ("MAKER"), hereby
promises to pay to the order of NATIONAL BANK OF ALASKA ("PAYEE"), the
principal amount of $1,650,000, together with interest, as hereinafter
described.
This promissory note has been executed and delivered under, and is
subject to the terms of, the $10,000,000 Restated Term Loan Agreement (as
amended, the "LOAN AGREEMENT") dated as of November 30, 1995, among Maker,
NationsBank of Texas, N.A., as Agent, and Payee and the other Lenders referred
to therein, and is a "Note" referred to therein. Unless defined herein or the
context otherwise requires, capitalized terms used herein have the meaning given
to such terms in the Loan Agreement. Reference is made to the Loan Agreement
for provisions affecting this promissory note regarding the place of payment,
applicable interest rates, principal and interest payment dates, final maturity,
voluntary prepayments, acceleration of maturity, exercise of Rights, payment of
attorneys' fees, court costs, and other costs of collection, certain waivers by
Maker and others now or hereafter obligated for payment of any sums due
hereunder, and security for the payment hereof.
This promissory note and the similar promissory notes of Maker dated of
even date herewith have been issued under the Loan Agreement in replacement for,
but not as a novation of, those certain promissory notes of Maker dated April
21, 1995, which were issued under the Existing Term Loan Agreement (as defined
in the Loan Agreement).
This promissory note is being executed and delivered, and is intended
to be performed, in the State of Texas, and the Laws of such State and of the
United States of America shall govern the rights and duties of the parties and
the validity, construction, enforcement, and interpretation hereof.
THIS PROMISSORY NOTE, TOGETHER WITH THE OTHER LOAN PAPERS, REPRESENT
THE FINAL AGREEMENTS BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY (i)
EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE
PARTIES, OR (ii) ANY COMMITMENT LETTER AMONG THE PARTIES (ALL THE TERMS AND
CONDITIONS OF WHICH ARE SUPERSEDED BY LOAN PAPERS). THERE ARE NO UNWRITTEN
ORAL AGREEMENTS BETWEEN THE PARTIES.
POOL COMPANY
By: /S/ E. J. SPILLARD
----------------------------------
E.J. Spillard
Senior Vice President, Finance
By: /S/ R. A. JOHANNSEN
----------------------------------
R.A. Johannsen
Treasurer
[corporate seal]
<PAGE> 50
RESTATED INTERCREDITOR AGREEMENT
THIS RESTATED INTERCREDITOR AGREEMENT is entered into as of November
30, 1995 by NATIONSBANK OF TEXAS, N.A., a national banking association
("NATIONSBANK"), and consented and agreed to by National Bank of Canada,
National Bank of Alaska, and Pool Company, a Texas corporation ("BORROWER").
RECITALS:
A. NationsBank entered into that certain Intercreditor Agreement dated
as of April 21, 1995 (the "EXISTING INTERCREDITOR AGREEMENT"), which was
consented and agreed to by National Bank of Canada and Borrower.
B. Borrower, certain Lenders ("REVOLVING CREDIT LENDERS"), and
NationsBank, as Agent for itself and the other Revolving Credit Lenders, are
entering into a Restated Credit Agreement (as renewed, extended, increased,
reduced, amended, or restated, the "REVOLVING CREDIT AGREEMENT") dated as of
November 30, 1995, providing for secured loans to Borrower on a revolving basis.
C. Borrower, certain Lenders ("TERM LOAN LENDERS"), and NationsBank, as
Agent for itself and the other Term Loan Lenders, are entering into a Term Loan
Agreement (as renewed, extended, increased, reduced, amended, or restated, the
"TERM LOAN AGREEMENT"), dated as of November 30, 1995, providing for a secured
loan to Borrower on a term basis.
D. NationsBank, in its capacity as Agent for itself and the Revolving
Credit Lenders under the Revolving Credit Agreement ("REVOLVING CREDIT AGENT"),
for its own account with respect to its net exposure on foreign exchange
contracts between any Company and NationsBank, and in its capacity as Agent for
itself and the Term Loan Lenders under the Term Loan Agreement ("TERM LOAN
AGENT"), is entering into this agreement to (i) provide for certain mutual
rights between (a) the Term Loan Agent and Term Loan Lenders, (b) the Revolving
Credit Agent and Revolving Credit Lenders, and (c) NationsBank, individually,
(ii) add National Bank of Alaska's consent and agreement, as a new Term Loan
Lender and Revolving Credit Lender, and (iii) amend and restate entirely the
Existing Intercreditor Agreement.
AGREEMENTS:
Therefore, for valuable and adequate consideration, the Term Loan Agent
(on behalf of Term Loan Lenders), the Revolving Credit Agent (on behalf of
Revolving Credit Lenders), and NationsBank, individually, agree as follows:
1. Definitions. As used in this agreement:
"AGENTS" means, collectively, the Revolving Credit Agent and
the Term Loan Agent.
"COLLATERAL" means the collateral pledged by Borrower to
Secured Parties under the Lender Agreements.
"DEFAULT" means any "Default" under a Lender Agreement that
entitles the applicable Secured Party to accelerate the obligations of
Borrower under a Lender Agreement and to take Enforcement Actions.
"ENFORCEMENT ACTION" means any exercise by any Secured Party
or its custodian of rights -- other than giving notice of default and
acceleration -- to foreclose or otherwise realize upon any Collateral.
"LENDER AGREEMENTS" means, collectively, the Revolving Credit
Agreement, the Term Loan Agreement, and all foreign exchange contracts
between any Company and NationsBank.
"SECURED PARTIES" means Agents and NationsBank, for its own
account with respect to its net exposure on foreign exchange contracts between
any Company and NationsBank.
1
<PAGE> 51
2. Notices of Default, Acceleration, and Enforcement Action. Each
Secured Party shall (a) promptly notify the other Secured Parties upon becoming
aware of a Default and (b) use its best efforts to notify the other Secured
Parties before (i) accelerating the obligations of Borrower under the applicable
Lender Agreement or (ii) taking -- or authorizing its custodian to take --
Enforcement Actions.
3. Sharing of Collateral. Each Secured Party acknowledges that
(i) certain liens or security interests have been granted in the same Collateral
to the other Secured Parties to secure obligations of Borrower; (ii) such liens
or security interests in the Collateral shall be on the same level of priority
with respect to each Secured Party; (iii) the amount of Collateral attributable
to a Secured Party shall be the proportion that the respective indebtedness
owing to such Secured Party by Borrower bears to the aggregate indebtedness owed
by Borrower to all Secured Parties ("PRO RATA SHARE"); (iv) the Secured Parties
shall share in the proceeds of the Collateral according to their Pro Rata Share;
and (v) each Secured Party shall pay its Pro Rata Share of any expenses
(including, without limitation, court costs, attorney's fees and other costs of
collection) incurred in connection with the Collateral.
4. Amendments to Agreements. Any Secured Party and the Lenders
under any Lender Agreement may enter into renewals and extensions of, amendments
to, and waivers under its respective Lender Agreement without the consent of the
other Secured Parties or the Lenders under the other Lender Agreements, SO LONG
AS that renewal, extension, amendment, or waiver does not diminish the rights
granted to the other Secured Parties and the other Lenders under this agreement.
5. Default; Collateral. Upon the occurrence and continuance of a
Default, Secured Parties agree to promptly confer in order that Secured Parties
may agree upon a course of action for the enforcement of the rights of Secured
Parties; provided that any Secured Party shall be entitled (but not obligated)
to proceed to take any actions necessary in its reasonable judgment to preserve
rights, pending agreement by Secured Parties on the course of action to be
taken. Any and all agreements to subordinate (whether made heretofore or
hereafter) other indebtedness or obligations of Borrower to the indebtedness
under the Lender Agreements shall be construed as being for the benefit of each
Secured Party to the extent of its respective Pro Rata Share. If one Secured
Party acquires any security for the indebtedness under its respective Lender
Agreement upon or in lieu of foreclosure, the same shall be held for the benefit
of all Secured Parties in proportion to their respective Pro Rata Share.
6. Liability Between Agents. No Secured Party shall incur any (a)
implied duty to the others under this agreement or (b) liability to the others
for its failure to give notice under Paragraph 2 above.
7. Headings. The headings, captions, and arrangements used in
this agreement are for convenience only and shall neither limit, amplify, or
modify the terms of this agreement nor affect the meanings thereof.
8. Notices. All notices, requests, and other communications
required or permitted to be given or made hereunder shall, except as otherwise
expressly provided hereunder, be in writing and shall be delivered in person or
telegraphed or telecopied or mailed, first class, return receipt requested,
postage prepaid, addressed to the respective parties hereto at their respective
addresses hereinafter set forth or, as to any such party, at such other address
as may be designated by it in a notice to the other given in the manner provided
herein. All notices shall be conclusively deemed to have been properly given or
made when duly delivered, in person, or if mailed on the third business day
after being deposited in the mails, or if telegraphed when delivered to the
telegraph company, or if telecopied when transmitted addressed to the intended
recipient at the address specified beside its name on the signature pages
hereof.
9. Waivers and Amendments. This agreement may be amended,
terminated or extended, and the terms and conditions hereof may be waived, but
only in a written instrument signed by each Secured Party or, in the case of a
waiver, by the party waiving compliance. No failure, delay or forbearance on the
part of any party in exercising any right, power or privilege granted hereunder
shall operate as a waiver thereof.
10. Applicable Law. This agreement shall be governed by and
construed in accordance with the laws of the State of Texas and the applicable
laws of the United States of America.
2
<PAGE> 52
11. Severability. Any provision in this agreement held by a court
of competent jurisdiction to be invalid or unenforceable shall not impair or
invalidate the remainder of this agreement and the effect thereof shall be
confined to the provision held to be invalid or illegal.
12. Successors and Assigns. This agreement shall be binding upon
and shall inure to the benefit of the respective successors and assigns of each
of the Secured Parties, but does not otherwise create, and shall not be
construed as creating, any rights or defenses enforceable by Borrower or by any
other person or entity not a party to this agreement.
13. Survival. The provisions contained in Paragraph 6 above shall
survive the termination of this agreement for all purposes.
14. Counterparts. This agreement may be executed in one or more
counterparts, each of which shall be deemed an original, all of which together
shall constitute one and the same instrument and agreement; but in making proof
of this agreement, it shall not be necessary to produce or account for a copy of
any counterpart other than the counterpart signed by the party against whom this
agreement is to be enforced.
EXECUTED as of the date first stated in this agreement.
Address for Notice: NATIONSBANK OF TEXAS, N.A., as Revolving
Credit Agent
700 Louisiana Street, 8th Floor
Houston, Texas 77002
Telecopy No.: 713/247-6568
Telephone No.: 713/247-6327 By /S/ JAMES R. ALLRED
-------------------------------------
James R. Allred, Vice President
NATIONSBANK OF TEXAS, N.A., as Term Loan
Agent
By /S/ JAMES R. ALLRED
-------------------------------------
James R. Allred, Vice President
NATIONSBANK OF TEXAS, N.A., individually
By /S/ JAMES R. ALLRED
-------------------------------------
James R. Allred, Vice President
3
<PAGE> 53
Consented and Agreed to:
NATIONAL BANK OF CANADA
By /S/ LARRY L. SEARS
----------------------------------------
Larry L. Sears, Group Vice President
By /S/ DOUGLAS G. CLARK
----------------------------------------
Douglas G. Clark, Vice President
NATIONAL BANK OF ALASKA
By /S/ PATRICIA JELLEY BENZ
----------------------------------------
Patricia Jelley Benz, Vice President
Borrower consents to this agreement and agrees that (a) the execution
and performance of the terms and conditions of this agreement shall not
constitute a violation of either of the Lender Agreements with Borrower, (b) it
shall not pledge Collateral to any Secured Party if such Collateral has not
already been or is simultaneously being pledged to the other Secured Party, and
(c) it shall promptly pay all reasonable costs and expenses incurred by Secured
Parties in preparing and transmitting copies of documents and instruments.
POOL COMPANY
By /S/ E. J. SILLARD
----------------------------------------
E.J. Spillard, Senior Vice President
By /S/ R. A. JOHANNSEN
----------------------------------------
R.A. Johannsen, Treasurer
4
<PAGE> 1
EXHIBIT 21
LIST OF SUBSIDIARIES*
I. MAJORITY OWNED SUBSIDIARIES**
<TABLE>
<CAPTION>
STATE OR COUNTRY OF
INCORPORATION OR
NAME OF COMPANY ORGANIZATION
--------------- ------------
<S> <C>
Pool Energy Holding, Inc.............................. Delaware
Pool Company.......................................... Texas
Pool International Ltd................................ Cayman Islands
Pool California Energy Services, Inc.................. California
Pool Company (Texas) Inc.............................. Texas
Pool Company (Houston) Inc............................ Texas
Associated Petroleum Services, Inc.................... Texas
Pool Alaska, Inc (dba Pool Arctic Alaska)............. Texas
Pool Production Services, Inc......................... Oklahoma
Pool International, Inc............................... Texas
Pool Arabia, Ltd. (51% ownership interest)............ Saudi Arabia
International Sea Drilling Ltd........................ Cayman Islands
Pool Horizontal Drilling Services Co.................. Texas
</TABLE>
II. MINORITY OWNED SUBSIDIARIES
<TABLE>
<CAPTION>
STATE OR COUNTRY OF
PERCENTAGE INCORPORATION OR
NAME OF COMPANY OWNED ORGANIZATION
--------------- ----- ------------
<S> <C> <C>
Intairdril Oman L.L.C............................... 49% Oman
Pool Santana, Limited............................... 49% Trinidad & Tobago
Antah Drilling Sdn. Bhd............................. 49% Malaysia
</TABLE>
- ----------------
* Certain subsidiaries and affiliates which would not individually or in
the aggregate constitute a significant subsidiary have been omitted.
** Ownership is 100% unless otherwise indicated.
<PAGE> 1
Exhibit 23
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Registration Statement No.
33-37229 and Registration Statement No. 33-42194 of Pool Energy Services Co.,
each on Form S-8, of our reports dated February 22, 1996, for Pool Energy
Services Co. and January 31, 1996 for Pool Arabia, Ltd. appearing in this Annual
Report on Form 10-K of Pool Energy Services Co. for the year ended December 31,
1995.
DELOITTE & TOUCHE LLP
Houston, Texas
March 12, 1996
<PAGE> 1
EXHIBIT 24
POWER OF ATTORNEY
WHEREAS, Pool Energy Services Co., a Texas corporation (the "Company"),
intends to file with the Securities and Exchange Commission (the "Commission")
under the Securities Exchange Act of 1934, as amended (the "Act"), an Annual
Report on Form 10-K for the year ended December 31, 1995, with such amendment or
amendments thereto in each case as may be necessary or appropriate, together
with any and all exhibits and other documents having relation to said Annual
Report (the "Annual Report");
NOW, THEREFORE, the undersigned, in his capacity as a Director of the
Company, does hereby appoint J. T. Jongebloed and E. J. Spillard, and each of
them severally, his true and lawful attorney or attorneys with power to act with
or without the other and with full power of substitution and resubstitution, to
execute in his name, place and stead in his capacity as a Director of the
Company said Annual Report and any and all amendments thereto and all
instruments necessary or incidental in connection therewith and to file the same
with the Commission. Each of said attorneys shall have full power and authority
to do and perform in the name and on behalf of the undersigned in the aforesaid
capacity every act whatsoever necessary or desirable to be done in the premises
as fully and to all intents and purposes as the undersigned might or could do in
person, the undersigned hereby ratifying and approving the acts of said
attorneys and each of them pursuant to this Power of Attorney.
IN WITNESS WHEREOF, the undersigned has executed this instrument on
this 23rd day of February, 1996.
/s/ PRESTON M. GEREN JR.
------------------------
Preston M. Geren, Jr.
<PAGE> 2
POWER OF ATTORNEY
WHEREAS, Pool Energy Services Co., a Texas corporation (the "Company"),
intends to file with the Securities and Exchange Commission (the "Commission")
under the Securities Exchange Act of 1934, as amended (the "Act"), an Annual
Report on Form 10-K for the year ended December 31, 1995, with such amendment or
amendments thereto in each case as may be necessary or appropriate, together
with any and all exhibits and other documents having relation to said Annual
Report (the "Annual Report");
NOW, THEREFORE, the undersigned, in his capacity as a Director of the
Company, does hereby appoint J. T. Jongebloed and E. J. Spillard, and each of
them severally, his true and lawful attorney or attorneys with power to act with
or without the other and with full power of substitution and resubstitution, to
execute in his name, place and stead in his capacity as a Director of the
Company said Annual Report and any and all amendments thereto and all
instruments necessary or incidental in connection therewith and to file the same
with the Commission. Each of said attorneys shall have full power and authority
to do and perform in the name and on behalf of the undersigned in the aforesaid
capacity every act whatsoever necessary or desirable to be done in the premises
as fully and to all intents and purposes as the undersigned might or could do in
person, the undersigned hereby ratifying and approving the acts of said
attorneys and each of them pursuant to this Power of Attorney.
IN WITNESS WHEREOF, the undersigned has executed this instrument on
this 23rd day of February, 1996.
/s/ W. C. MCCORD
--------------------
W. C. McCord
<PAGE> 3
POWER OF ATTORNEY
WHEREAS, Pool Energy Services Co., a Texas corporation (the "Company"),
intends to file with the Securities and Exchange Commission (the "Commission")
under the Securities Exchange Act of 1934, as amended (the "Act"), an Annual
Report on Form 10-K for the year ended December 31, 1995, with such amendment or
amendments thereto in each case as may be necessary or appropriate, together
with any and all exhibits and other documents having relation to said Annual
Report (the "Annual Report");
NOW, THEREFORE, the undersigned, in his capacity as a Director of the
Company, does hereby appoint J. T. Jongebloed and E. J. Spillard, and each of
them severally, his true and lawful attorney or attorneys with power to act with
or without the other and with full power of substitution and resubstitution, to
execute in his name, place and stead in his capacity as a Director of the
Company said Annual Report and any and all amendments thereto and all
instruments necessary or incidental in connection therewith and to file the same
with the Commission. Each of said attorneys shall have full power and authority
to do and perform in the name and on behalf of the undersigned in the aforesaid
capacity every act whatsoever necessary or desirable to be done in the premises
as fully and to all intents and purposes as the undersigned might or could do in
person, the undersigned hereby ratifying and approving the acts of said
attorneys and each of them pursuant to this Power of Attorney.
IN WITNESS WHEREOF, the undersigned has executed this instrument on
this 23rd day of February, 1996.
/s/ WILLIAM H. MOBLEY
-------------------------
William H. Mobley
<PAGE> 4
POWER OF ATTORNEY
WHEREAS, Pool Energy Services Co., a Texas corporation (the "Company"),
intends to file with the Securities and Exchange Commission (the "Commission")
under the Securities Exchange Act of 1934, as amended (the "Act"), an Annual
Report on Form 10-K for the year ended December 31, 1995, with such amendment or
amendments thereto in each case as may be necessary or appropriate, together
with any and all exhibits and other documents having relation to said Annual
Report (the "Annual Report");
NOW, THEREFORE, the undersigned, in his capacity as a Director of the
Company, does hereby appoint J. T. Jongebloed and E. J. Spillard, and each of
them severally, his true and lawful attorney or attorneys with power to act with
or without the other and with full power of substitution and resubstitution, to
execute in his name, place and stead in his capacity as a Director of the
Company said Annual Report and any and all amendments thereto and all
instruments necessary or incidental in connection therewith and to file the same
with the Commission. Each of said attorneys shall have full power and authority
to do and perform in the name and on behalf of the undersigned in the aforesaid
capacity every act whatsoever necessary or desirable to be done in the premises
as fully and to all intents and purposes as the undersigned might or could do in
person, the undersigned hereby ratifying and approving the acts of said
attorneys and each of them pursuant to this Power of Attorney.
IN WITNESS WHEREOF, the undersigned has executed this instrument on
this 23rd day of February, 1996.
/s/ JOSEPH R. MUSOLINO
------------------------
Joseph R. Musolino
<PAGE> 5
POWER OF ATTORNEY
WHEREAS, Pool Energy Services Co., a Texas corporation (the "Company"),
intends to file with the Securities and Exchange Commission (the "Commission")
under the Securities Exchange Act of 1934, as amended (the "Act"), an Annual
Report on Form 10-K for the year ended December 31, 1995, with such amendment or
amendments thereto in each case as may be necessary or appropriate, together
with any and all exhibits and other documents having relation to said Annual
Report (the "Annual Report");
NOW, THEREFORE, the undersigned, in his capacity as a Director of the
Company, does hereby appoint J. T. Jongebloed and E. J. Spillard, and each of
them severally, his true and lawful attorney or attorneys with power to act with
or without the other and with full power of substitution and resubstitution, to
execute in his name, place and stead in his capacity as a Director of the
Company said Annual Report and any and all amendments thereto and all
instruments necessary or incidental in connection therewith and to file the same
with the Commission. Each of said attorneys shall have full power and authority
to do and perform in the name and on behalf of the undersigned in the aforesaid
capacity every act whatsoever necessary or desirable to be done in the premises
as fully and to all intents and purposes as the undersigned might or could do in
person, the undersigned hereby ratifying and approving the acts of said
attorneys and each of them pursuant to this Power of Attorney.
IN WITNESS WHEREOF, the undersigned has executed this instrument on
this 23rd day of February, 1996.
/s/ JAMES L. PAYNE
------------------------
James L. Payne
<PAGE> 6
POWER OF ATTORNEY
WHEREAS, Pool Energy Services Co., a Texas corporation (the "Company"),
intends to file with the Securities and Exchange Commission (the "Commission")
under the Securities Exchange Act of 1934, as amended (the "Act"), an Annual
Report on Form 10-K for the year ended December 31, 1995, with such amendment or
amendments thereto in each case as may be necessary or appropriate, together
with any and all exhibits and other documents having relation to said Annual
Report (the "Annual Report");
NOW, THEREFORE, the undersigned, in his capacity as a Director of the
Company, does hereby appoint J. T. Jongebloed and E. J. Spillard, and each of
them severally, his true and lawful attorney or attorneys with power to act with
or without the other and with full power of substitution and resubstitution, to
execute in his name, place and stead in his capacity as a Director of the
Company said Annual Report and any and all amendments thereto and all
instruments necessary or incidental in connection therewith and to file the same
with the Commission. Each of said attorneys shall have full power and authority
to do and perform in the name and on behalf of the undersigned in the aforesaid
capacity every act whatsoever necessary or desirable to be done in the premises
as fully and to all intents and purposes as the undersigned might or could do in
person, the undersigned hereby ratifying and approving the acts of said
attorneys and each of them pursuant to this Power of Attorney.
IN WITNESS WHEREOF, the undersigned has executed this instrument on
this 23rd day of February, 1996.
/s/ DONALD D. SYKORA
------------------------
Donald D. Sykora
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<CASH> 5,492
<SECURITIES> 0
<RECEIVABLES> 48,746
<ALLOWANCES> 1,059
<INVENTORY> 10,516
<CURRENT-ASSETS> 78,149
<PP&E> 201,106
<DEPRECIATION> 77,082
<TOTAL-ASSETS> 248,443
<CURRENT-LIABILITIES> 51,170
<BONDS> 14,859
0
0
<COMMON> 134,438
<OTHER-SE> 1,589
<TOTAL-LIABILITY-AND-EQUITY> 248,443
<SALES> 0
<TOTAL-REVENUES> 277,305
<CGS> 0
<TOTAL-COSTS> 219,074
<OTHER-EXPENSES> 622
<LOSS-PROVISION> 765
<INTEREST-EXPENSE> 1,811
<INCOME-PRETAX> 5,113
<INCOME-TAX> 1,981
<INCOME-CONTINUING> 3,132
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,132
<EPS-PRIMARY> .23
<EPS-DILUTED> .23
</TABLE>
