<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1994
---------------------------------
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 0-18312
-----------------------------
TUBOSCOPE VETCO INTERNATIONAL CORPORATION
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 76-0252850
- ---------------------------------------- -----------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2835 Holmes Road, Houston, Texas 77051
- ---------------------------------------- -----------------------
(Address of principal executive offices) (Zip Code)
(713) 799-5100
- --------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
None
- --------------------------------------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
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 Registrant had 18,436,628 shares of common stock outstanding as of June
30, 1994.
<PAGE>
TUBOSCOPE VETCO INTERNATIONAL CORPORATION
INDEX
Page No.
--------
Part I - FINANCIAL INFORMATION
Item 1. Financial Statements:
Consolidated Balance Sheets -
June 30, 1994 (unaudited) and December 31, 1993 2
Unaudited Consolidated Statements of Operations -
For the Three and Six Months Ended June 30, 1994 and 1993 3
Unaudited Consolidated Statements of Cash Flows -
For the Six Months Ended June 30, 1994 and 1993 4
Notes to Unaudited Consolidated Financial Statements 5-6
Item 2. Management's Discussion and Analysis of Results
of Operations and Financial Condition 7-9
Part II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders 10
Item 6. Exhibits and Reports on Form 8-K 10
Signature Page 11
Exhibit Index 12-15
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
1
<PAGE>
TUBOSCOPE VETCO INTERNATIONAL CORPORATION
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1994 1993
-------- ------------
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C>
A S S E T S
-----------
Current assets:
Cash and cash equivalents $ 5,200 $ 2,492
Accounts receivable, net 49,901 51,037
Inventory, net 10,471 10,573
Deferred federal income taxes 2,088 2,138
Prepaid expenses and other 7,995 6,075
-------- --------
Total current assets 75,655 72,315
-------- --------
Property and equipment:
Land, buildings and leasehold improvements 89,475 82,938
Operating equipment 94,608 95,292
Equipment leased to customers 2,812 2,346
Accumulated depreciation and amortization (38,591) (32,193)
-------- --------
Net property and equipment 148,304 148,383
Identified intangibles, net 33,218 35,150
Goodwill, net 48,769 49,096
Other assets, net 4,590 5,164
-------- --------
Total assets $310,536 $310,108
======== ========
L I A B I L I T I E S A N D E Q U I T Y
-----------------------------------------
Current liabilities:
Accounts payable $ 16,322 $ 19,219
Accrued liabilities 18,638 19,924
Federal and foreign income taxes payable 2,016 2,966
Current portion of long-term debt and short-term borrowings 5,003 24,927
-------- --------
Total current liabilities 41,979 67,036
Long-term debt 124,496 101,489
Pension liabilities 10,625 9,980
Deferred taxes payable 11,415 12,070
Other liabilities 3,585 4,102
-------- --------
Total liabilities 192,100 194,677
-------- --------
Redeemable Series A Convertible Preferred Stock, $.01 par value, 5,000,000 shares
authorized, 100,000 shares issued and outstanding ($10,175,000 aggregate
liquidation preference at June 30, 1994) 10,175 10,175
-------- --------
Common stockholders' equity:
Common stock, $.01 par value, 35,000,000 shares authorized, 18,436,628 shares
issued and outstanding (18,410,053 at December 31, 1993) 184 184
Paid-in capital 115,743 115,668
Retained deficit (6,806) (8,293)
Cumulative translation adjustment (860) (2,303)
-------- --------
Total common stockholders' equity 108,261 105,256
-------- --------
Commitments and contingencies
-------- --------
Total liabilities and equity $310,536 $310,108
======== ========
</TABLE>
See notes to unaudited consolidated financial statements.
2
<PAGE>
TUBOSCOPE VETCO INTERNATIONAL CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------------- -------------------------
1994 1993 1994 1993
---------- ---------- ---------- ----------
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<S> <C> <C> <C> <C>
Revenue:
Sale of services $ 41,903 $ 43,036 $ 84,084 $ 81,409
Sale of products 2,554 1,401 5,128 1,944
Rental income 782 775 1,558 1,648
---------- ---------- ---------- ----------
45,239 45,212 90,770 85,001
---------- ---------- ---------- ----------
Costs and expenses:
Cost of services sold 31,462 32,891 64,155 62,651
Cost of products sold 1,383 485 2,807 685
Goodwill amortization 300 294 594 588
Selling, administrative and general 5,658 6,121 11,146 11,459
Research and engineering costs 669 988 1,553 1,941
---------- ---------- ---------- ----------
39,472 40,779 80,255 77,324
---------- ---------- ---------- ----------
Operating profit 5,767 4,433 10,515 7,677
Other expense (income):
Interest expense 3,006 3,292 5,823 5,069
Interest income (73) (133) (164) (286)
Foreign exchange 54 112 (16) 83
Other, net 413 362 920 1,022
---------- ---------- ---------- ----------
Income before income taxes and extraordinary item 2,367 800 3,952 1,789
Provision for income taxes 876 280 1,351 626
---------- ---------- ---------- ----------
Net income before extraordinary item 1,491 520 2,601 1,163
Extraordinary item related to early retirement
of debt, net of income tax benefit, of $411,000
in 1994 and $2,421,000 in 1993
(764) (4,497) (764) (4,497)
---------- ---------- ---------- ----------
Net income (loss) 727 (3,977) 1,837 (3,334)
Dividends applicable to redeemable preferred stock 175 175 350 350
---------- ---------- ---------- ----------
Net income (loss) applicable to common stock $ 552 ($4,152) $ 1,487 ($3,684)
========== ========== ========== ==========
Earnings (loss) per common share:
Income before extraordinary item and after
deduction of preferred stock dividends $0.07 $0.02 $0.12 $0.04
Extraordinary item (0.04) (0.25) (0.04) (0.25)
---------- ---------- ---------- ----------
Net income (loss) $0.03 ($0.23) $0.08 ($0.20)
---------- ---------- ---------- ----------
Weighted average number of common shares outstanding 18,436,025 18,351,721 18,429,804 18,287,119
========== ========== ========== ==========
</TABLE>
See notes to unaudited consolidated financial statements
3
<PAGE>
TUBOSCOPE VETCO INTERNATIONAL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
1994 1993
--------- ---------
(IN THOUSANDS)
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 1,837 $ (3,334)
Adjustments to reconcile net income (loss) to net cash provided by
(used in) operating activities:
Depreciation and amortization 7,306 6,871
Provision (recovery) for losses on accounts receivable 68 (241)
Provision for losses on inventory -- 50
Benefit for deferred income taxes (605) (890)
Employee savings plan expense funded by issuance of Common stock 75 --
Write-off of unamortized debt fees 1,176 2,319
Deferred gain on interest swap agreement -- (680)
Changes in current assets and liabilities, net of effects of
acquired companies:
Decrease (increase) in accounts receivable 1,068 (1,086)
Decrease in inventory 102 236
Increase in prepaid expenses and other assets (1,940) (1,927)
Increase (decrease) in accounts payable, and accrued liabilities (4,183) 1,547
Decrease in federal and foreign income taxes payable (950) (4,139)
-------- --------
Net cash provided by (used in) operating activities 3,954 (1,274)
-------- --------
Cash flows used in investing activities:
Capital expenditures (1,574) (2,223)
Net assets of acquired companies, net of cash acquired (185) (1,385)
Payments on Aberdeen facility -- (5,388)
Other liability payments (517) --
Other (1,703) (2,393)
-------- --------
Net cash used in investing activities (3,979) (11,389)
-------- --------
Cash flows provided by financing activities:
Borrowings under financing agreements 69,477 89,402
Principal payments under financing agreements (66,394) (78,091)
S-3 filing cost -- (2,198)
Proceeds from sale of common stock -- 22
Dividends paid on Redeemable Series A Convertible Preferred Stock (350) (350)
-------- --------
Net cash provided by financing activities 2,733 8,785
-------- --------
Net increase (decrease) in cash and cash equivalents 2,708 (3,878)
Cash and cash equivalents:
Beginning of period 2,492 5,313
-------- --------
End of period $ 5,200 $ 1,435
======== ========
Supplemental disclosure of cash flow information:
Cash paid during the six month period for:
Interest, net $ 5,798 $ 4,895
======== ========
Taxes $ 2,316 $ 3,469
======== ========
</TABLE>
See notes to unaudited consolidated financial statements.
4
<PAGE>
TUBOSCOPE VETCO INTERNATIONAL CORPORATION
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 1994 AND 1993
AND AS OF DECEMBER 31, 1993
1. ORGANIZATION AND BASIS OF PRESENTATION OF INTERIM CONSOLIDATED FINANCIAL
STATEMENTS
The accompanying unaudited consolidated financial statements of the Company and
its wholly-owned subsidiaries have been prepared pursuant to the rules and
regulations of the Securities and Exchange Commission. Certain information in
footnote disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been condensed or
omitted pursuant to these rules and regulations. The unaudited consolidated
financial statements included in this report reflect all the adjustments which
the Company considers necessary for a fair presentation of the results of
operations for the interim periods covered and for the financial condition of
the Company at the date of the interim balance sheet. Results for the interim
periods are not necessarily indicative of results for the year.
The financial statements included in this report should be read in conjunction
with the audited financial statements and accompanying notes included in the
Company's 1993 Form 10-K, filed under the Securities Exchange Act of 1934
(Commission File No. 0-18312).
2. INVENTORY
At June 30, 1994 inventories consist of the following (in thousands):
Components, subassemblies, and expendable parts................... $ 7,775
Equipment under production........................................ 2,696
-------
$10,471
=======
3. $75 MILLION 10.75% SENIOR SUBORDINATED NOTES
In April 1993, Tuboscope Vetco International Inc. (TVI), pursuant to a
registration statement on Form S-3 filed with the Securities and Exchange
Commission, sold $75 million of 10.75% Senior Subordinated Notes (Notes). Net
proceeds (after $1.8 million of underwriter fees) of $73.2 million were
received. Substantially all of the net proceeds from the sale of the Notes were
used to redeem all of the outstanding $65.7 million of TVI's 14% Senior
Subordinated Debentures at 107% of their principal amount in May 1993. An
after-tax extraordinary loss of approximately $4.5 million was recognized in the
second quarter of 1993 as a result of this redemption.
The Notes are unconditionally guaranteed by the Company. The Notes are general
unsecured obligations of TVI subordinated to all existing and future senior
indebtedness of TVI.
4. SENIOR CREDIT AGREEMENT
On June 30, 1994, the Company's subsidiaries, TVI, CTI Inspection Services,
Inc. (CTI), and Tuboscope Vetco Capital Corp (TVCC), entered into a new credit
agreement with a group of participating lenders. The agreement included
$23,000,000 in term loan facilities, a $35,000,000 revolving credit facility,
and a $1,000,000 letter of credit facility. These obligations are guaranteed by
the Company and secured by substantially all of the assets of TVI, CTI, TVCC,
Tuboscope Pipeline Services Inc., and Tube-Kote Inc., and the stock of certain
subsidiaries. Proceeds from the new loans were used principally to retire the
debt balances outstanding under the previous senior credit agreement.
The available amount under the revolving credit facility is determined using
the borrowing base, as defined, but not to exceed the maximum commitment of
$35,000,000. The revolving credit agreement expires June 30, 1997. The term
loan facility requires increasing quarterly installments with the initial
payment of $500,000 beginning September 30, 1994 and the final payment due June
30, 2001.
The credit agreement provides for the borrowers to elect interest at a base
rate or a Eurodollar rate, as defined. Interest on the base rate loans accrue at
base rate to base rate plus 1.5%, based on a ratio of total funded debt to
earnings before interest, taxes, extraordinary gains and losses, and
depreciation and amortization. Interest on Eurodollar rate loans accrue at LIBOR
plus 1.0% to LIBOR plus 2.5%, based on a ratio of total funded debt to earnings
before interest, taxes, extraordinary gains and losses, and depreciation and
amortization. Interest is payable on quarterly basis. The credit agreement
requires an interest
5
<PAGE>
rate cap agreement be maintained beginning no later than six months from the
initial borrowing date for at least $15,000,000 of the term loans and to
maintain such protection for a period of not less than three years.
An after-tax extraordinary loss of $764,000 was incurred in the second quarter
of 1994 as a result of the early retirement of debt under the previous senior
credit agreement and related write-off of unamortized debt fees.
5. 1993 ACQUISITIONS
In the first quarter of 1993, the Company acquired the tubular inspection
assets of DJ Inspection Services, Inc. (DJ) headquartered in Houston, Texas for
approximately $600,000 in cash and the assumption of approximately $1,850,000 in
lease obligations payable over five years. In addition, in April 1993 the
Company acquired all of the outstanding capital stock of CTI, an above ground
storage tank inspection business headquartered in Northern California for stock
of the Company worth approximately $1.9 million and $200,000 in cash. Similar
to that used by the Company in its Oilfield Services Inspection Services, CTI
uses electromagnetic flux and ultrasonic technology in its inspection process.
6. DIVIDEND RESTRICTIONS
TVI's senior credit agreement and the Notes restrict the ability of TVI to
dividend or otherwise make distributions to the Company. The terms of the
Company's Series A Convertible Preferred Stock restrict the ability of the
Company to pay dividends on its Common Stock.
7. SUMMARIZED FINANCIAL INFORMATION OF REGISTRANT (TVI)
The following is summarized balance sheet information for TVI as of June 30,
1994 and December 31, 1993 and summarized statements of income for TVI for the
six months ended June 30, 1994 and 1993 (in thousands):
<TABLE>
<CAPTION>
SUMMARIZED BALANCE SHEETS
June 30, December 31,
ASSETS 1994 1993
------ -------- ------------
<S> <C> <C>
Current assets...................................... $ 74,429 $ 77,637
Noncurrent assets................................... 233,400 228,926
-------- --------
Total assets........................................ $307,829 $306,563
======== ========
LIABILITIES AND EQUITY
----------------------
Current liabilities................................. $ 40,998 $ 64,771
Noncurrent liabilities.............................. 149,116 126,046
Stockholders' equity................................ 117,715 115,746
-------- --------
Total liabilities and equity........................ $307,829 $306,563
======== ========
Six Months Ended
SUMMARIZED STATEMENTS OF INCOME (LOSS) June 30,
------------------------
1994 1993
-------- --------
Revenue............................................. $ 89,148 $ 84,284
======== ========
Operating profit.................................... $ 10,835 $ 7,737
======== ========
Income before income taxes and extraordinary item... $ 4,155 $ 1,667
======== ========
Net income (loss)................................... $ 1,969 $ (3,539)
======== ========
</TABLE>
6
<PAGE>
Item 2. Management's Discussion and Analysis of Results of Operations and
Financial Condition.
RESULTS OF OPERATIONS
- ---------------------
REVENUE. Revenue was approximately $45.2 million and $90.8 million for the
second quarter and first half of 1994, respectively, equal to the second quarter
of 1993 and a 7% increase from approximately $85.0 million for the first half of
1993.
Revenue from the Company's Oilfield Services, comprised of Inspection and
Coating, was approximately $33.8 million and $67.4 million for the second
quarter and first half of 1994, respectively. These results represented
increases of $2.2 million (or 7%) and $5.9 million (or 10%) compared to the
second quarter and first half of 1993, respectively. The improvements in second
quarter results were due to a $2.4 million increase in Coating revenue.
International Coating revenue was up $1.5 million (or 65%) in the second quarter
of 1994 as compared to the same period in 1993 as a result of international line
pipe coatings, which were not present in the second quarter of 1993, and a
significant improvement in Far East Coating revenue. North America Coating
revenue was up $911,000 (or 13%) in the second quarter of 1994 compared to the
same period in 1993, as the second quarter North America average rig count was
902, an 18% increase over the second quarter of 1993. Inspection revenue of
$22.0 million for the second quarter of 1994 decreased $276,000 from the same
period of 1993. International Inspection revenue was down $687,000 in the
second quarter of 1994 despite $2.1 million in Algerian equipment sales. The
decrease in International Inspection revenue was mainly due to lower European
and Japan inspection activity, as evidenced by a 5% decrease in the average
international rig count during the second quarter of 1994 compared to the second
quarter of 1993, and lower mill activity. North America Inspection revenue
increased $411,000 (or 4%) in the second quarter of 1994 compared to the second
quarter of 1993 due to increased activity as evidenced by the 18% increase in
the average North America rig count.
Industrial Inspection revenue was $4.3 million and $8.4 million for the second
quarter and first six months of 1994, a decline of $955,000 and $1.4 million,
respectively, compared to the same periods in 1993. The second quarter decline
was primarily due to lower activity in the Middle East associated with reduced
work and delayed projects in Saudi Arabia. The Company expects the decline in
Middle East activity to continue in the third quarter of 1994.
Pipeline Services revenue was $4.5 million and $8.3 million in the second
quarter and first half of 1994, down $408,000 and $351,000 from the second
quarter and first half of 1993, respectively. The second quarter decrease was
mainly due to a decline in U.S. operations as a result of lower average prices
realized on pipeline inspection jobs in 1994 compared to 1993. The lower prices
have been due primarily to a shift in the size of the average job; in 1993
Pipeline Services had more minimum charge jobs (shorter run and higher price per
mile) than in 1994. In addition, greater price competition has resulted in a
lower average price per job.
Mill Systems and Sales revenue was $1.3 million and $4.1 million for the quarter
and six months ended June 30, 1994, respectively, compared to $2.1 million and
$3.5 million in the same periods of 1993. The decline in the second quarter of
1994 was due to greater mill equipment sales to China in the second quarter of
1993, with no corresponding sales in the second quarter of 1994.
Other revenue included $981,000 and $1.6 million from the Company's tank
inspection business for the three and six months ended June 30, 1994 This
revenue resulted from the acquisition of CTI Inspection Services Inc. (CTI),
which occurred in the second quarter of 1993.
GROSS MARGIN AND GROSS PROFIT. Gross profit was approximately $12.1 million
(26.7%) and $23.2 million (or 25.6%) for the second quarter and first half of
1994, respectively, compared to $11.5 million (25.5%) and $21.1 million (or
24.8%) for the second quarter and first half of 1993, respectively. The
increase in gross profit was due to a reduction of fixed costs associated with
the restructuring plan implemented in the third quarter of 1993. Gross margins
(defined as revenue minus variable expense) were 46.9% for the second quarter of
1994 compared to 47.3% for the same period in 1993. The decline in gross margin
percentage was in part due to costs in 1994 (which were absent in 1993) related
to the environmental business, and due to cost increases related to a change in
blasting material used by the Company's coating operations, and new software
which tracks inventory and automates the billing process.
SELLING, GENERAL AND ADMINISTRATIVE COSTS. Selling, general and administrative
expenses were $5.7 million and $11.1 million for the second quarter and first
six months of 1994, respectively, decreases of $463,000 (or 8%) and $313,000 (or
3%) compared to the same periods in 1993. The decreases were primarily due to
cost reductions as a result of the restructuring plan implemented during the
third quarter of 1993. These cost reductions were partially offset by an
increase in legal costs associated with certain plaintiff claims being pursued
by the Company.
7
<PAGE>
RESEARCH AND ENGINEERING COSTS. Research and engineering costs declined
$319,000 in the second quarter of 1994 compared to 1993. The decrease was due
mainly to work performed during the second quarter of 1994 by the Mill
engineering group on manufacturing projects associated with the sale or lease of
the Rotary UT unit as compared to research and engineering expense projects in
the second quarter of 1993, and cost reductions implemented in the third quarter
of 1993.
OPERATING PROFIT. Second quarter 1994 operating profit was $5.8 million, $1.3
million (or 30%) greater than the second quarter of 1993. Operating profit
improvement was mainly related to a decline in fixed costs (both from operations
and selling, general, and administrative costs) associated with the third
quarter 1993 restructuring plan.
INTEREST EXPENSE. Interest expense for the second quarter of 1994 of $3.0
million was down $286,000 compared to the second quarter of 1993. The decrease
was due mainly to the result of negative interest carry due to 19 days of
overlapping subordinated debt issues when the subordinated debt was refinanced
in April 1993.
OTHER EXPENSE (INCOME). Other expense was $394,000 for the second quarter of
1994 compared to $341,000 for the same quarter of 1993.
PROVISION FOR INCOME TAXES. The Company's effective tax rate for the second
quarter of 1994 was 37% compared to 35% in 1993.
EXTRAORDINARY ITEM, NET OF INCOME TAX EFFECT. On June 30, 1994, refinancing of
TVI's senior secured term loan and revolving credit facility was completed. The
refinancing and related early retirement of existing senior debt resulted in an
extraordinary after-tax charge of $764,000 associated with the write-off of
unamortized debt fees in the second quarter of 1994.
On April 16, 1993, TVI completed its registration and sale of $75 million of
10.75% Senior Subordinated Notes (Notes) due 2003. Substantially all of the net
proceeds from the sale of the Notes were used to redeem all of the $65.7 million
of 14% Senior Subordinated Debentures due 1998, which were called at 107% of the
principal balance on May 3, 1993. An extraordinary after tax charge of $4.5
million was recognized in the second quarter of 1993 due to the write-off of
fees and the call premium associated with the retirement of the $65.7 million
14% debentures.
NET INCOME (LOSS). Second quarter 1994 net income was $727,000 compared to a
second quarter 1993 net loss of $4.0 million. The increase is attributable to
the items discussed above.
FINANCIAL CONDITION AND LIQUIDITY
- ---------------------------------
Working capital was approximately $33.7 million at June 30, 1994, an increase of
$28.4 million from $5.3 million at December 31, 1993. The increase in working
capital was mainly due to refinancing of TVI's senior secured term loan and
revolving credit facility in the second quarter of 1994. As a result of the
refinancing, the current portion of long-term debt was reduced by $19.9 million,
from $24.9 million at December 31, 1993 to $5.0 million at June 30, 1994.
Working capital was also up due to a $2.7 million increase in cash, a $1.9
million increase in prepaid expenses, and a $4.2 million decrease in accounts
payable and accrued liabilities. The components of the increase in cash are
detailed in the Consolidated Statements of Cash Flows. The increase in prepaid
expenses was mainly due to an increase in prepaid insurance; the majority of the
Company's policies are renewed annually in the second quarter of each year.
Accounts payable and accrued liability accounts decreased mainly as a result of
restructuring accrual payments in the first six months of 1994. These increases
in working capital accounts were partially offset by a $1.1 million decrease in
accounts receivable. Accounts receivable declined primarily as a result of
lower revenue in the second quarter of 1994 compared to the fourth quarter of
1993.
Current and long-term debt was $129.5 million at June 30, 1994, an increase of
$3.1 million from December 31, 1993. The $3.1 million increase was due
primarily to the financing of the Company's Aberdeen facility with a lender for
$7.5 million payable through February 1, 1999, offset by a net decrease in the
revolving credit line of $3.5 million. The Company's outstanding debt at June
30, 1994 consisted of approximately $75.0 million of 10.75% Subordinated Notes,
$23.0 million of term loans with the senior lenders, $16.5 million due under the
revolving line of credit facility, $2.0 million of industrial revenue bonds,
$3.0 million of notes related to the acquisition of SOS, $1.2 million of
capitalized lease obligations associated with the D J acquisition, $7.1 million
in notes related to the Aberdeen facility, and approximately $1.7 million of
other outstanding debt. There was approximately $14.6 million of funds
available for borrowing at June 30, 1994 under the revolving line of credit
facility. Approximately $3.9 million of this revolving line of credit was used
for outstanding letters of credit at June 30, 1994.
8
<PAGE>
The Company made capital expenditures of $1.6 million for the first half of
1994, compared to $2.2 million in the first half of 1993. The Company's planned
1994 capital spending is expected to approximate $6.0 million.
OTHER. The credit agreement and indenture contain various covenants that limit
the ability of the Company, TVI, and certain subsidiaries to, among other
things, pay dividends, purchase capital stock, incur additional indebtedness,
dispose of assets and transact with affiliates. TVI is also required to
maintain, on a consolidated basis, certain minimum financial ratios, as set
forth in the agreements. In addition to the covenants and financial ratios
mentioned above, the credit agreement contains certain events of default.
Management believes it is in compliance with all covenants in the credit
agreement and indenture.
9
<PAGE>
PART II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
The Annual Meeting of Shareholders was held May 10, 1994 for the following
purposes:
i) To elect a Board of nine (9) directors;
ii) To approve the amendment of the Company's restated Certificate of
Incorporation, increasing the number of authorized shares of Common
Stock from 25,000,000 to 35,000,000; and
iii) To ratify the Company's independent auditors.
The results of the vote were:
1. Election of Directors
Name For Withheld
---- --- --------
Jerome R. Baier 15,636,278 97,927
---------- ------
Martin G. Hubbard 15,635,707 98,498
---------- ------
Robert A. Lahr 15,635,707 98,498
---------- ------
William V. Larkin, Jr. 15,636,278 97,927
---------- ------
Eric L. Mattson 15,636,279 97,926
---------- ------
Timothy M. Pennington, III 15,636,279 97,926
---------- ------
Martin R. Reid 15,636,278 97,279
---------- ------
James J. Shelton 15,636,278 97,927
---------- ------
Frederick J. Warren 15,636,278 97,927
---------- ------
2. Proposal to amend the Restated Certificate of Incorporation, increasing
authorized shares of Common Stock from 25,000,000 to 35,000,000:
For Against Abstain Broker Non-Votes
--- ------- ------- ----------------
15,350,309 351,996 31,900 0
---------- ------- ------ -
3. Ratification of the selection of Ernst & Young as the company's
independent auditors:
For Against Abstain Broker Non-Votes
--- ------- ------- ----------------
13,458,444 109,001 3,600 2,163,160
---------- ------- ----- ---------
Item 6. Exhibits and reports of Form 8-K
(a) Exhibits -- Reference is hereby made to the Exhibit Index commencing
on page 12.
(b) No reports on Form 8-K were filed during the quarter ended June 30,
1994.
10
<PAGE>
SIGNATURES
----------
Pursuant to the requirements 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.
TUBOSCOPE VETCO
INTERNATIONAL CORPORATION
-------------------------
(Registrant)
Date: August 12, 1994 /s/ Ronald L. Koons
--------------- -----------------------------------
Ronald L. Koons
Executive Vice President, Chief
Financial Officer and Treasurer
(Duly Authorized Officer, Principal
Financial and Accounting Officer)
11
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EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION PAGE NO.
- ----------- ------------ --------
<S> <C> <C>
*4(a) Stockholders' Agreement, dated May 13, 1988, between the
Company, Brentwood, Hub, the Management Investors, the Other
Investors, and the Institutional Investors, including the Common
Stock Registration Rights Agreement attached thereto as Exhibit A.
*4(b) Purchase Agreement, dated May 13, 1988, between the Company,
Tuboscope Acquisition Corporation and the purchasers named on
the execution pages thereto.
****4(c) Indenture (including the form of Note), dated as of April 1, 1993,
among Tuboscope Vetco International Inc., the Company and
Norwest Bank Minnesota, National Association, as Trustee,
regarding the 10 3/4% Senior Subordinated Notes due 2003 of
Tuboscope Vetco International Inc.
****4(d) Underwriting Agreement, dated April 8, 1993, among Tuboscope
Vetco International Inc., the Company and the Underwriters.
4(e) Various documentation relating to $1,000,000 Alaska Industrial
Revenue Bond financing. (Not filed herewith pursuant to Item
601(b)(4)(iii) of Regulation S-K. The Company hereby agrees to
furnish copies of relevant documentation to the Securities and
Exchange Commission upon request).
4(f) Various documentation relating to $1,000,000 Wyoming Industrial
Revenue Bond financing. (Not filed herewith pursuant to Item
601(b)(4)(iii) of Regulation S-K. The Company hereby agrees to
furnish copies of relevant documentation to the Securities and
Exchange Commission upon request).
**4(g) Plan of Recapitalization.
4(h) Various promissory notes in the aggregate principal amount of
$4,000,000 relating to the acquisition of Sound Optics Systems,
Inc., dba South Optical Systems, Inc. (Not filed herewith pursuant
to Item 601(b)(4)(iii) of Regulation S-K. The Company hereby
agrees to furnish copies of the relevant documentation to the
Securities and Exchange Commission upon request).
***4(i) Purchase Agreement, dated as of September 30, 1991, between the
Company and BHI Hughes Incorporated relating to Vetco Services
Acquisition.
4(j) Secured Credit Agreement, dated June 30, 1994, between 16
Tuboscope Vetco International Inc., CTI Inspection Services Inc.,
Tuboscope Vetco Capital Corp, Tuboscope Vetco International
Corporation and ABN AMRO Bank, N.V., as Agent.
*10(a) Form of Employment Agreement, dated May 13, 1988, between
Tuboscope Inc., the Company and William V. Larkin and
E. Wayne Overman.
*10(b) Savings Investment Plan, dated May 13, 1988, as amended by
First Amendment to Savings Investment Plan.
****10(c) Second, Third and Fourth Amendments to Savings Investment Plan.
</TABLE>
12
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<CAPTION>
EXHIBIT NO. DESCRIPTION PAGE NO.
- ----------- ----------- --------
<S> <C> <C>
****10(d) Fifth, Sixth and Seventh Amendments to Savings Investment Plan.
****
*10(e) Lease Agreement, dated July 1, 1981, between C.M. Thibodaux
Company, Ltd. and AMF Tuboscope, Inc.
*10(f) Lease Agreement between Sam J. Siracusa, John Siracusa, Jr.,
Elizabeth Ann Siracusa, Louis Anthony Siracusa, Philomena
Siracusa Archer, Catherine Agnes Siracusa, Maria Josette Siracusa,
Julie Ann Siracusa, the Succession of Joseph C. Siracusa and AMF
Tuboscope, Inc., as amended by letter agreement among the same
parties, dated June 14, 1989.
*10(g) Agreement to Purchase, Sell and Sublease, dated June 9, 1980,
between Alaska International Construction, Inc. and AMF
Tuboscope, Inc., as amended by letter agreement, dated June 12,
1980 between the same parties.
*10(h) Lease Agreement, dated June 10, 1977, between Batinorest and
A.M.F. France.
*10(i) Supplementary Agreement Fixed Rental Scheme, dated May 19,
1989, between Jurong Town Corporation and AMF Far East Pte.
Ltd.
*10(j) Lease, dated December 13, 1984, between Barclays Nominees
(KWS) Limited and AMF International Limited, as amended by
Transfer of Whole Agreement, dated November 20, 1987, between
AMF International Limited and Tuboscope Limited.
*10(k) Description of Life Insurance Plan.
*****10(l) Amended and Restated Stock Option Plan for Key Employees of
Tuboscope Vetco International Corporation.
*****10(m) Form of Revised Incentive Stock Option Agreement.
*****10(n) Form of Revised Non-Qualified Stock Option Agreement.
******10(o) Stock Option Plan for Non-Employee Directors of Tuboscope Vetco
International Corporation.
******10(p) Amendment to Stock Option Plan for Non-Employee Directors of
Tuboscope Vetco International Corporation.
******10(q) Form of Non-Qualified Stock Option Agreement.
****10(r) Employee Qualified Stock Purchase Plan.
****
*******10(s) Purchase Agreement, dated as of July 20, 1990, by and among Oil
and Gas Manufacturing Company, Inc., F.T. Glascock, Thomas C.
Glascock, J. David Glascock, Hutchison-Hayes International, Inc.,
John F. Joplin, William F. Joplin, Sound Optics Systems, Inc. dba
Sound Optical Systems, Inc. and Tuboscope Inc.
*******10(t) Form of Employment Agreement, dated July 23, 1990, between
Tuboscope Inc. and Thomas Glascock and William Glascock.
</TABLE>
13
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<CAPTION>
EXHIBIT NO. DESCRIPTION PAGE NO.
- ----------- ----------- --------
<S> <C> <C>
***10(u) Purchase Agreement, dated as of September 30, 1991, between the
Company and BHI relating to the Vetco Services Acquisition.
****10(v) Amended and Restated Employment Agreement dated June 23,
**** 1993, between the Company, Tuboscope Vetco International Inc.,
and Martin R. Reid.
***10(w) Technology Transfer Agreement, dated as of October 29, 1991,
between Tuboscope Inc. and BHI.
***10(x) Sublease, dated December 1, 1987, between McDermott
Incorporated and AMF Tuboscope, Inc. as amended by letter
agreement, dated November 10, 1989, between Tuboscope Inc. and
McDermott Incorporated.
***10(y) Letter agreement, dated March 5, 1990 amending the Agreement to
Purchase, Sell and Sublease dated June 9, 1980 between AMF
Tuboscope Inc. and Alaska International Construction, Inc. as
amended June 12, 1980.
***10(z) Employment Agreement, between Vetco Inspection GmbH an
Gerhard A. Hage.
***10(aa) Lease Agreement with respect to Celle, Germany facility.
***10(bb) Building Agreement for Land at Jurong, dated May 5, 1983,
between Jurong Town Corporation and Vetco International, Inc.
***10(cc) Lease Agreement, dated January 1, 1988, between Mohamed
Alhajri Est. and Vetco Saudi Company.
***10(dd) Lease Agreement, dated November 26, 1989, between
Mohammed F. Al-Hajri Est. and Vetco Saudi Arabia Ltd.
***10(ee) Lease between J.G.B. Properties Limited and Vetco Inspection
GmbH.
10(ff) Eighth and Ninth Amendment to Savings Investment Plan. 94
</TABLE>
- --------------------
* Previously filed by the Registrant in Registration No. 33-31102 and
incorporated by reference herein pursuant to Rule 12b-32 of the Exchange
Act.
** Previously filed by the Registrant in Registration No. 33-33248 and
incorporated by reference herein pursuant to Rule 12b-32 of the Exchange
Act.
*** Previously filed by the Registrant in File No. 33-43525 and incorporated
by reference herein pursuant to Rule 12b-32 of the Exchange Act.
**** Previously filed by the Registrant in Registration No. 33-56182 and
incorporated by reference herein pursuant to Rule 12b-32 of the Exchange
Act.
***** Previously filed by the Registrant in Registration No. 33-72150 and
incorporated by reference herein pursuant to Rule 12b-32 of the Exchange
Act.
****** Previously filed by the Registrant in Registration No. 33-72072 and
incorporated by reference herein pursuant to Rule 12b-
14
<PAGE>
32 of the Exchange Act.
******* Previously filed in the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1990 and incorporated by reference
herein pursuant to Rule 12b-32 of the Exchange Act.
**** Previously filed in the Company's Annual Report on Form 10-K for the
**** fiscal year ended December 31, 1993 and incorporated by reference
herein pursuant to Rule 12b-32 of the Exchange Act.
15
<PAGE>
EXHIBIT 4(j)
================================================================================
SECURED CREDIT AGREEMENT
Dated as of
June 30, 1994
Among
TUBOSCOPE VETCO INTERNATIONAL INC.
CTI INSPECTION SERVICES, INC. AND
TUBOSCOPE VETCO CAPITAL CORP.,
THE GUARANTOR AND LENDERS PARTY HERETO,
AND
ABN AMRO BANK N.V., HOUSTON AGENCY
AS AGENT
================================================================================
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TABLE OF CONTENTS
(THIS TABLE OF CONTENTS IS NOT PART OF THE AGREEMENT)
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SECTION 1. DEFINITIONS; INTERPRETATION................................ 1
Section 1.1. Definitions....................................... 1
Section 1.2. Interpretation 17
SECTION 2. THE CREDIT FACILITIES...................................... 17
Section 2.1. Ratable Borrowings under the Revolving Credit..... 17
Section 2.2. Letters of Credit under the Revolving Credit...... 18
Section 2.3. Borrowings of Term Loans.......................... 21
Section 2.4. Types of Loans and Minimum Borrowing Amounts...... 22
Section 2.5. Manner of Borrowing............................... 22
Section 2.6. Interest Periods.................................. 24
Section 2.7. Maturity of Loans................................. 25
Section 2.8. Applicable Interest Rates......................... 25
Section 2.9. Optional Prepayments.............................. 25
Section 2.10. Mandatory Prepayments of Loans.................... 25
Section 2.11. Default Rate...................................... 26
Section 2.12. The Notes......................................... 28
Section 2.13. Breakage Fees 28
Section 2.14. Commitment Terminations........................... 29
SECTION 3. FEES AND PAYMENTS.......................................... 29
Section 3.1. Fees.............................................. 29
Section 3.2. Place and Application of Payments................. 30
Section 3.3. Withholding Taxes................................. 31
SECTION 4. CONDITIONS PRECEDENT....................................... 32
Section 4.1. Initial Borrowing................................. 32
Section 4.2. All Borrowings.................................... 35
SECTION 5. REPRESENTATIONS AND WARRANTIES............................. 36
Section 5.1. Corporate Organization............................ 36
Section 5.2. Corporate Power and Authority..................... 36
Section 5.3. No Violation...................................... 37
Section 5.4. Litigation........................................ 37
Section 5.5. Use of Proceeds; Margin Regulations............... 37
Section 5.6. Investment Company Act............................ 37
Section 5.7. Public Utility Holding Company Act................ 38
Section 5.8. True and Complete Disclosure...................... 38
Section 5.9. Financial Statements.............................. 38
Section 5.10. No Material Adverse Change........................ 38
Section 5.11. Labor Controversies............................... 38
Section 5.12. Taxes............................................. 38
Section 5.13. ERISA............................................. 39
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Section 5.14. Security Interests................................ 39
Section 5.15. Consents.......................................... 39
Section 5.16. Capitalization.................................... 39
Section 5.17. Intellectual Property............................. 39
Section 5.18. Compliance with Statutes, Etc..................... 39
Section 5.19. Environmental Matters............................. 39
Section 5.20. Properties........................................ 40
Section 5.21. Existing Indebtedness............................. 40
Section 5.22. Subordinated Debt................................. 40
SECTION 6. COVENANTS.................................................. 41
Section 6.1. Corporate Existence............................... 41
Section 6.2. Maintenance....................................... 41
Section 6.3. Taxes............................................. 41
Section 6.4. ERISA............................................. 41
Section 6.5. Insurance......................................... 41
Section 6.6. Financial Reports and Other Information........... 41
Section 6.7. Lender Inspection Rights.......................... 42
Section 6.8. Conduct of Business............................... 42
Section 6.9. Fiscal Years and Quarters......................... 45
Section 6.10. Interest Rate Protection.......................... 45
Section 6.11. Pledge of After Acquired Property................. 45
Section 6.12. New Subsidiaries.................................. 45
Section 6.13. Limitation on Certain Restrictions on Subsidiaries
Dividends; Negative Pledges..................... 46
Section 6.14. Restrictions on Fundamental Changes............... 47
Section 6.15. Use of Property and Facilities; Environmental,
Health and Safety Laws.......................... 48
Section 6.16. Liens............................................. 48
Section 6.17. Indebtedness...................................... 48
Section 6.18. Advances, Investments and Loans................... 51
Section 6.19. Modifications of Corporate Documents.............. 52
Section 6.20. Transfer of Assets................................ 52
Section 6.21. Transactions with Affiliates...................... 53
Section 6.22. Compliance with Laws.............................. 53
Section 6.23. Transfer of Businesses............................ 53
Section 6.24. Interest Coverage Ratio........................... 53
Section 6.25. Fixed Charge Coverage Ratio....................... 54
Section 6.26. Total Funded Debt to Total Capital Ratio.......... 54
Section 6.27. Tangible Net Worth Plus Subordinated Debt......... 54
SECTION 7. EVENTS OF DEFAULT AND REMEDIES............................. 54
Section 7.1. Events of Default................................. 54
Section 7.2. Non-Bankruptcy Defaults........................... 56
Section 7.3. Bankruptcy Defaults............................... 56
Section 7.4. Collateral for Undrawn Letters of Credit.......... 57
Section 7.5. Notice of Default................................. 57
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Section 7.6. Expenses.......................................... 57
Section 7.7. Distribution and Application of Proceeds from
Collateral...................................... 57
SECTION 8. CHANGE IN CIRCUMSTANCES.................................... 58
Section 8.1. Change of Law..................................... 58
Section 8.2. Unavailability of Deposits or Inability to
Ascertain LIBOR................................. 59
Section 8.3. Increased Cost and Reduced Return................. 59
Section 8.4. Lending Offices................................... 60
Section 8.5. Discretion of Lender as to Manner of Funding...... 60
Section 8.6. Substitution of Lender............................ 61
SECTION 9. THE AGENT.................................................. 61
Section 9.1. Appointment and Authorization of Agent............ 61
Section 9.2. Agent and its Affiliates.......................... 61
Section 9.3. Action by Agent................................... 61
Section 9.4. Consultation with Experts......................... 62
Section 9.5. Liability of Agent; Credit Decision............... 62
Section 9.6. Indemnity......................................... 63
Section 9.7. Resignation of Agent and Successor Agent.......... 63
SECTION 10. HOLDINGS' GUARANTY........................................ 63
Section 10.1. Holdings' Guaranty................................ 63
Section 10.2. Guaranty Unconditional............................ 63
Section 10.3. Discharge Only Upon Payment in Full; Reinstatement
in Certain Circumstances........................ 64
Section 10.4. Subrogation....................................... 64
Section 10.5. Waivers........................................... 65
Section 10.6. Stay of Acceleration.............................. 65
Section 10.7. Security.......................................... 65
SECTION 11. MISCELLANEOUS............................................. 65
Section 11.1. No Waiver of Rights............................... 65
Section 11.2. Non-Business Day.................................. 65
Section 11.3. Documentary Taxes................................. 65
Section 11.4. Survival of Representations....................... 65
Section 11.5. Survival of Indemnities........................... 66
Section 11.6. Setoff.......................................... 66
Section 11.7. Notices......................................... 67
Section 11.8. Counterparts...................................... 67
Section 11.9. Successors and Assigns............................ 67
Section 11.10. Sales and Transfers of Borrowings and Notes;
Participations in Borrowings and Notes.......... 67
Section 11.11. Amendments........................................ 70
Section 11.12. Headings.......................................... 70
Section 11.13. Legal Fees, Other Costs and Indemnification....... 60
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Section 11.14. Governing Law; Submission to Jurisdiction; Waiver
of Jury Trial..................................... 70
Section 11.15. Confidentiality..................................... 71
Section 11.16. Effectiveness....................................... 71
Section 11.17. Severability........................................ 71
Section 11.18. Notice.............................................. 71
EXHIBITS
2.12A - Form of Revolving Note
2.12B - Form of Tranche A Term Note
2.12C - Form of Tranche B Term Note
2.12D - Form of Agent L/C Note
2.2A - Form of Borrowing Request
2.2B - Form of Issuance Request
4.1A - Form of Pledge Agreement
4.1B - Form of Security Agreement
4.1C - Form of Note Pledge Agreement
4.1D - Forms of Mortgage
4.1E - Form of Subsidiary Guaranty
4.1F - Forms of Legal Opinions
4.1G - Form of Certificate of Effectiveness
6.6A - Form of Borrowing Base Certificate
6.6B - Form of Compliance Certificate
11.10 - Form of Assignment Agreement
SCHEDULES
2.7 - Repayment Schedule
2.10 - List of Expected Insurance Proceeds
4.1 - List of Stock Pledged
5.1A - List of Subsidiaries
5.1B - List of Material Subsidiaries
5.4 - List of Litigation
5.13 - ERISA Disclosure
5.16 - Stock Disclosure
5.19 - List of Environmental Claims
5.20 - List of Properties
5.21 - List of Existing Indebtedness
6.16 - List of Existing Liens
APPENDICES
I - Form of Application and Agreement for Standby
Letter of Credit
II - Form of Application and Agreement for
Commercial Letter of Credit
</TABLE>
-iv-
<PAGE>
SECURED CREDIT AGREEMENT, dated as of June 30, 1994, among Tuboscope Vetco
International Inc., a Texas corporation, CTI Inspection Services, Inc., a
California corporation, and Tuboscope Vetco Capital Corp., a Nevada corporation
(each a "Borrower" and collectively, the "Borrowers"), Tuboscope Vetco
International Corporation, a Delaware corporation ("Holdings"), the lenders from
time to time party hereto (each a "Lender" and collectively, the "Lenders") and
ABN AMRO Bank N.V. ("ABN AMRO"), a Netherlands chartered bank acting through its
Houston agency, as agent for the Lenders (in such capacity, the "Agent").
WITNESSETH:
WHEREAS, the Borrowers desire to obtain commitments from each of the
Lenders to make loans to the Borrowers and to participate in letters of credit
for the account of the Borrowers and to obtain a commitment from the Agent to
issue certain letters of credit; and
WHEREAS, the Lenders are willing to extend such commitments to the
Borrowers on the terms and subject to the conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants herein contained, the parties hereto agree as follows:
SECTION 1. DEFINITIONS; INTERPRETATION.
Section 1.1. Definitions. Unless otherwise defined herein or in such
-----------
other agreements, as used in this Agreement, the Notes (as hereinafter defined),
or any other agreement, document, statement, instrument or transaction
contemplated thereby or relating thereto, and all amendments, extensions,
modifications, renewals, supplements or waivers thereof or thereto, the
following terms shall have the following meanings, which meanings shall be
equally applicable to both the singular and plural form of such terms:
"Aberdeen Plant" means that certain inspection and coating plant located at
Badentoy Avenue, Badentoy Park, Portlethen, Scotland.
"Affiliate" means for any Person, any other Person that directly or
indirectly through one or more intermediaries controls, or is under common
control with, or is controlled by, such Person. As used in this definition,
"control" means the power, directly or indirectly, to direct or cause the
direction of management or policies of a Person (through ownership of voting
securities, by contract or otherwise).
"Agent" means ABN AMRO Bank N.V., a Netherlands chartered bank acting
through its Houston agency, acting in its capacity as agent for the Lenders and
any successor agent appointed hereunder pursuant to Section 9.7.
"Agent L/C Commitment" means the Agent's obligations to issue letters of
credit pursuant to Section 2.2(b).
1
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"Agent L/C Commitment Amount" means $1,000,000, as such amount may be
reduced from time to time pursuant to the terms of this Agreement.
"Agent Letter of Credit" means any of the letters of credit, each in an
initial face amount of less than $100,000, to be issued by the Agent on its own
behalf for the account of the Borrowers pursuant to Section 2.2(b).
"Agent L/C Note" means that certain promissory note of the Borrowers as
defined in Section 2.12.
"Amortization Date" means a scheduled repayment date of a Term Loan as set
forth in Schedule 2.7.
"Applicable Base Margin" means at such times and from time to time as the
relevant Total Funded Debt to EBITDA Ratio is in one of the following ranges,
the percentage per annum set forth opposite such Total Funded Debt to EBITDA
Ratio:
Total Funded Debt to EBITDA Ratio Percentage
--------------------------------- ----------
Greater than 450% 1.50%
Equal to or less than 450% 0.50%
but equal to or greater than 350%
Less than 350% 0%
"Applicable Eurodollar Margin" means (i) for the Tranche A Term Loan and
all Revolving Loans, at such times and from time to time as the relevant Total
Funded Debt to EBITDA Ratio is in one of the following ranges, the percentage
per annum set forth opposite such Total Funded Debt to EBITDA Ratio:
Total Funded Debt to EBITDA Ratio Percentage
--------------------------------- ----------
Greater than 450% 2.50%
Equal to or less than 450% 2.00%
but equal to or greater than 350%
Less than 350% 1.50%
but equal to or greater than 200%
Less than 200% 1.00%
(ii) for the Tranche B Term Loan, three percent (3.0%) per annum.
"Applicable Margin" means either the Applicable Base Margin or the
Applicable Eurodollar Margin, as the case may be.
"Application" means an application for a Letter of Credit or an Agent
Letter of Credit as defined in Section 2.2(c).
2
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"Assignment Agreement" means an agreement in substantially the form of
Exhibit 11.10 whereby a Lender conveys part or all of its Commitments and Loans
to another Person that thereupon becomes a Lender, or that increases its
Commitments or outstanding Loans, or both, pursuant to Section 11.10.
"Back to Back Letters of Credit" means any Letters of Credit issued by the
Agent, on behalf of the Revolving Lenders, for the account of the Borrowers and
for the benefit of TCB as described in Section 2.2.
"Base Rate" means for any day the greater of:
(i) the fluctuating commercial loan rate announced by the Agent from
time to time at its Chicago, Illinois office as its base rate for U.S.
Dollar loans in the United States of America in effect on such day (which
base rate may not be the lowest rate charged by the Agent on loans to any
of its customers), with any change in the Base Rate resulting from a change
in such established rate to be effective on the date of the relevant
change; and
(ii) the sum of (x) the rate per annum (rounded upwards, if necessary,
to the nearest 1/100th of 1%) equal to the weighted average of the rates on
overnight Federal funds transactions with members of the Federal Reserve
System arranged by Federal funds brokers on such day, as published by the
Federal Reserve Bank of New York on the next Business Day, provided, that
(A) if such day is not a Business Day, the rate on such transactions on the
immediately preceding Business Day as so published on the next Business Day
shall apply, and (B) if no such rate is published on such next Business
Day, the rate for such day shall be the average rate quoted to the Agent by
three (3) members of the Federal Reserve System on such day for such
transactions as determined by the Agent, plus (y) 1/2 of 1% (0.50%) per
annum.
"Base Rate Loan" means a Loan bearing interest prior to maturity at the
rate specified in Section 2.8(a).
"Borrowers" means Tuboscope Vetco International Inc., a Texas corporation,
CTI Inspection Services, Inc., a California corporation, and Tuboscope Vetco
Capital Corp., a Nevada corporation.
"Borrowing" means any extension of credit made by the Lenders by way of
Revolving Loans, Term Loans, Letters of Credit or Agent Letters of Credit,
including any Borrowings advanced, continued or converted. A Borrowing is
"advanced" on the day Lenders advance funds comprising such Borrowing to the
Borrowers, is "continued" (in the case of Eurodollar Loans) on the date a new
Interest Period commences for such Borrowing, and is "converted" when such
Borrowing is changed from one type of Loan to the other, all as requested by the
Borrowers pursuant to Section 2.5(a).
3
<PAGE>
"Borrowing Base" means at any time an amount equal to the sum of (i) eighty
percent (80%) of Eligible Accounts, (ii) thirty percent (30%) of Eligible
Inventory, and (iii) one hundred percent (100%) of Cash Equivalents held at and
pledged to the Agent on behalf of the Lenders. The Borrowing Base shall be
determined monthly and shall be subject to annual field audits and other
verification at the expense of the Borrowers as reasonably requested by the
Agent. In the event the Borrowers use the proceeds of any of the Loans to fund
an acquisition pursuant to the provisions of Section 5.5, the Eligible Accounts,
the Eligible Inventory and the Cash Equivalents of the company whose stock or
assets are to be acquired may be included in the Borrowing Base for purposes of
obtaining such Loan and thereafter so long as the acquisition is closed and
funded substantially contemporaneously with the funding of any such Loan.
"Borrowing Base Certificate" means a certificate in the form of Exhibit
6.6A.
"Business Day" means any day other than a Saturday or Sunday on which banks
are not authorized or required to close in Houston, Texas, or New York, New York
and, if the applicable Business Day relates to the advance or continuation of,
conversion into, or payment on a Eurodollar Borrowing, on which banks are
dealing in United States Dollar deposits in the interbank market in London,
England.
"Capitalized Lease Obligations" means, for any Person, the amount of such
Person's liabilities under all leases of real or personal property (or any
interest therein) which is required to be capitalized on the balance sheet of
the lessee as determined in accordance with GAAP.
"Cash Equivalents" means (i) securities issued or directly and fully
guaranteed or insured by the United States of America or any agency or
instrumentality thereof having maturities of not more than twelve (12) months
from the date of acquisition, (ii) U.S. dollar denominated time deposits,
certificates of deposit and bankers acceptances of any Lender, or of any bank
whose short-term debt rating from S&P is at least A-1 or from Moody's is at
least P-1, with maturities of not more than twelve (12) months from the date of
acquisition, (iii) commercial paper with a rating of at least A-1 by S&P or at
least P-1 by Moody's maturing within twelve (12) months after the date of
acquisition, and (iv) marketable direct obligations issued by any state of the
United States of America or any political subdivision of any such state or any
public instrumentality thereof maturing within twelve (12) months from the date
of acquisition thereof and, at the time of acquisition, having one of the two
highest ratings obtainable from either S&P or Moody's.
"Code" means the Internal Revenue Code of 1986, as amended.
"Collateral" means all property and assets of Holdings, the Borrowers and
the Subsidiary Guarantors in which the Agent is granted a Lien for the benefit
of the Lenders under the terms of a Security Document.
"Collateral Account" means the cash collateral account for outstanding
undrawn Letters of Credit or Agent Letters of Credit defined in Section 7.4(b).
4
<PAGE>
"Commitments" means the Revolving Credit Commitments, the L/C Commitments,
and the Term Loan Commitments.
"Compliance Certificate" means a certificate in the form of Exhibit 6.6B.
"Consolidated Interest Expense" means, for any period, total cash interest
expense of Holdings, the Borrowers and their Subsidiaries on a consolidated
basis in connection with Indebtedness, determined in accordance with GAAP.
"Consolidated Net Income" means, for any period, the net income (or loss),
after provision for taxes, of Holdings, the Borrowers and their Subsidiaries on
a consolidated basis, determined in accordance with GAAP.
"Consolidated Net Worth" means as of any date, the sum of Holdings' common
and preferred stock (excluding treasury stock and any capital stock subject to
mandatory redemption before the Maturity Date of the Tranche B Term Loan, but
including the existing Series A Convertible Preferred Stock of Holdings) and
additional paid-in capital, plus retained earnings (minus accumulated deficit),
all as shown on the consolidated balance sheet of Holdings, the Borrowers and
their Subsidiaries and in accordance with GAAP, such calculation to exclude
currency translation adjustments provided, and only to the extent that, the
amount of such currency translation adjustments as of such date is up to
$5,000,000 greater or less than the amount of the currency translation
adjustment reflected on Holdings' unaudited balance sheet as of June 30, 1994.
"Credit" means either the Revolving Credit, the Term Credit or the Credit
arising from the Agent L/C Commitment.
"Credit Documents" means this Agreement, the Notes, the Applications, the
Letters of Credit, the Agent Letters of Credit, the Security Documents, any
Interest Rate Protection Agreements with any Lender entered into pursuant to
Section 6.10 and any other documents or instruments executed by a Credit Party
in connection with this Agreement.
"Credit Party" means any of Holdings, a Borrower and each Subsidiary
Guarantor which is a party to any Credit Document.
"Default" means any event or condition the occurrence of which would, with
the passage of time or the giving of notice, or both, constitute an Event of
Default.
"EBITDA" means, for any period, (i) Consolidated Net Income before (a)
Consolidated Interest Expense, (b) consolidated interest income, (c) provisions
for taxes based on income, and (d) any extraordinary gains or losses, plus (ii)
the amount of all depreciation and amortization expense deducted in determining
Consolidated Net Income, all as determined, in accordance with GAAP, on a U.S.
Dollar equivalent basis for such period; provided, however, that there shall be
eliminated from such calculation restructure charges of $15,400,000 taken in the
quarter ended September 30, 1993.
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"Effective Date" means the date this Agreement shall become effective as
defined in Section 11.16.
"Eligible Accounts" means, as of the date of the determination thereof, the
then aggregate outstanding (i) unpaid balance of all accounts receivable owed to
the Borrowers and their Subsidiaries arising from the sale by the Borrowers and
their Subsidiaries of finished goods or services to account debtors plus (ii)
accrued receivables attributable to finished goods or services performed and
completed but which cannot yet be invoiced, which meet the Borrowers' or such
Subsidiary's credit standards in effect on such date and which meet all of the
criteria listed below to the extent applicable:
Domestic Receivables:
(a) at least eighty percent (80%) (in dollar amount) of the account
receivable of an account debtor of any of the Borrowers or a domestic
Subsidiary has not been outstanding for more than 90 days after the date of
invoice, and the account debtor of the account receivable or accrued
receivable is not the debtor on any other account owed to Holdings, the
Borrowers or any of their Subsidiaries where twenty percent (20%) or more
of the account has been outstanding for more than 90 days after the date of
invoice; provided, however, that
(i) up to a total of $1,500,000 of the accounts receivable
of the Borrowers and their domestic Subsidiaries outstanding for more
than 90 days after the date of invoice may be included as Eligible
Accounts so long as at least eighty percent (80%) (in dollar amount)
of the account receivable has not been outstanding for more than 120
days after the date of invoice and the account debtor of the account
receivable or accrued receivable is not the debtor on any other
account owed to Holdings, the Borrowers or any of their Subsidiaries
where twenty percent (20%) or more of the account has been outstanding
for more than 120 days after the date of invoice; and
(ii) any account receivable outstanding for more than 90
days after the date of invoice may be included as an Eligible Account
to the extent that the payment of the account receivable by the
account debtor is secured by a letter of credit issued by a financial
institution reasonably acceptable to the Agent with the terms thereof
matching the terms of payment of such invoice by such account debtor.
Foreign Receivables:
(a) at least eighty percent (80%) (in dollar amount) of the account
receivable of a foreign Subsidiary has not been outstanding for more than
120 days after the date of invoice, and the account debtor of the account
receivable or accrued receivable is not the debtor on any other account
owed to Holdings, the Borrowers or any of their Subsidiaries where twenty
percent (20%) or more of the account has been outstanding for more than 120
days after the date of invoice; and
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(b) the account debtor of the account receivable or accrued receivable
is from a list of account debtors approved by the Agent from time to time
or the account receivable or accrued receivable is $4,000 or less.
All Receivables:
(a) the account receivable was invoiced on or within thirty (30) days
after the date of shipment of the finished goods covered thereby or
completion of the services giving rise to such account;
(b) the account receivable constitutes a valid, binding and legally
enforceable obligation of the account debtor to the Borrowers or the
relevant Subsidiary;
(c) the account receivable or accrued receivable has not been sold,
assigned or pledged in whole or in part except under the Security
Documents;
(d) none of the Borrowers or their Subsidiaries has any notice that
the account debtor of any account receivable or accrued receivable is a
debtor under any proceeding under the Bankruptcy Code or any comparable
insolvency law;
(e) the Agent at all times has a perfected first priority security
interest in such account receivable or accrued receivable of any domestic
Subsidiary;
(f) the account debtor of the account receivable or accrued receivable
is not an Affiliate of any of the Borrowers; and
(g) a receivable shall not be included in the calculation of Eligible
Accounts to the extent that (A) such account receivable or accrued
receivable is subject to any claimed offset, counterclaim or other defense,
or the goods, the sale of which gave rise to the account receivable or
accrued receivable, have been returned, rejected, lost or damaged, or (B)
such inclusion would result in the accounts receivable or accrued
receivables in the name of the account debtor constituting more than ten
percent (10%) of all Eligible Accounts (except for receivables in the name
of Aramco or any Affiliate thereof which shall not constitute more than
fifteen percent (15%) of all Eligible Accounts).
"Eligible Inventory" means, as of the date of the determination thereof,
the historical cost (net of any write-downs thereto) of all raw materials, work-
in-process, finished goods and packaging materials owned by the Borrowers or any
Subsidiary located in the United States and in the possession of such Person
and, as to finished goods, in marketable condition for resale in which the Agent
has a perfected first priority security interest and which is subject to no
other Lien.
"Environmental Claims" means any and all administrative, regulatory or
judicial actions, suits, demands, demand letters, claims, liens, notices of non-
compliance or violation, investigations or proceedings relating to any
Environmental Law ("Claims") or any permit issued
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under any Environmental Law, including, without limitation, (a) any and all
Claims by governmental or regulatory authorities for enforcement, cleanup,
removal, response, remedial or other actions or damages pursuant to any
applicable Environmental Law, and (b) any and all Claims by any third party
seeking damages, contribution, indemnification, cost recovery, compensation or
injunctive relief resulting from Hazardous Materials or arising from alleged
injury or threat of injury to health, safety or the environment.
"Environmental Law" means any federal, state or local statute, law, rule,
regulation, ordinance, code, policy or rule of common law now or hereafter in
effect, including any judicial or administrative order, consent, decree or
judgment relating to the environment, health, safety or Hazardous Materials.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Eurodollar Loan" means a Loan bearing interest before maturity at the rate
specified in Section 2.8(b).
"Event of Default" means any of the events or circumstances specified in
Section 7.1.
"Excess Cash Flow" means, without duplication, for any fiscal year, (i) the
sum of (A) Consolidated Net Income for such fiscal year, (B) the amount of all
non-cash charges (including, without limitation, deferred taxes, non-cash
reserves, depreciation, amortization and non-cash interest expense) included in
determining Consolidated Net Income for such fiscal year, and (C) any decrease
in working capital (determined for purposes of this definition as changes to
accounts receivable, inventory, trade payables, and accrued liabilities) from
the first day to the last day of such fiscal year, minus (ii) the sum of (A) all
capital expenditures made in cash during such fiscal year (including scheduled
payments of Capitalized Lease Obligations), (B) the aggregate amount of
principal payments and required or permitted prepayments of Indebtedness for
borrowed money of Holdings, the Borrowers or their Subsidiaries (other than the
portion of any payments made by incurring refinancing Indebtedness or payments
of Indebtedness under lending commitments if there was no corresponding
reduction in the amount of such commitment), (C) permitted dividends, (D) any
increase in working capital from the first day to the last day of such fiscal
year, and (E) any required cash mandatory redemption of the Series A Convertible
Preferred Stock of Holdings pursuant to the existing provisions thereof.
"Fixed Charge Coverage Ratio" shall be calculated for any period on a
historic four-fiscal quarter rolling basis as the ratio of EBITDA minus all cash
income taxes paid (excluding a $500,000 cash income tax overpayment made in
September, 1993) to the sum of, without duplication (i) scheduled principal
amortization of Indebtedness, required prepayments pursuant to Section 2.10(a),
and all Consolidated Interest Expense, (ii) all cash expenditures for fixed or
capital assets which in accordance with GAAP would be classified as capital
expenditures, plus (iii) all cash dividends or payments paid in respect to the
Series A Convertible Preferred Stock of Holdings as permitted herein; provided,
however, that there shall be eliminated from such calculation any capital
expenditures relating to the Aberdeen Plant made prior to January 26, 1994, and
provided, further, that for the fiscal quarter ending June 30, 1994, and the
prior three (3) fiscal quarters, the amount of $500,000 only per fiscal quarter
shall be included as scheduled
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principal amortization of the Indebtedness under the TCB Credit Facility
notwithstanding the amounts actually paid under the TCB Credit Facility.
"GAAP" means generally accepted accounting principles from time to time in
effect, applied in a manner consistent with those used in the preparation of the
audited financial statements for the fiscal year ending December 31, 1993
referred to in Section 5.9.
"Guarantor" means Holdings and each Subsidiary Guarantor.
"Guaranty" by any Person means all obligations (other than endorsements in
the ordinary course of business of negotiable instruments for deposit or
collection) of such Person guaranteeing or in effect guaranteeing any
Indebtedness, dividend or other obligation (including, without limitation,
obligations in connection with sales of any property) of any other Person (the
"primary obligor") in any manner, whether directly or indirectly, including,
without limitation, all obligations incurred through an agreement, contingent or
otherwise, by, such Person: (i) to purchase such Indebtedness or obligation or
any property or assets constituting security therefor, (ii) to advance or supply
funds (x) for the purchase or payment of such Indebtedness or obligation, or (y)
to maintain working capital or other balance sheet condition, or otherwise to
advance or make available funds for the purchase or payment of such Indebtedness
or obligation, or (iii) to lease property or to purchase securities or other
property or services primarily for the purpose of assuring the owner of such
Indebtedness or obligation of the ability of the primary obligor to make payment
of the Indebtedness or obligation, or (iv) otherwise to assure the owner of the
Indebtedness or obligation of the primary obligor against loss in respect
thereof. For the purpose of all computations made under this Agreement, the
amount of a Guaranty in respect of any obligation shall be deemed to be equal to
the maximum aggregate amount of such obligation or, if the Guaranty is limited
to less than the full amount of such obligation, the maximum aggregate potential
liability of such Person under the terms of the Guaranty.
"Hazardous Material" means (a) any asbestos, PCBs or dioxins or insulation
or other material composed of or containing asbestos, PCBs or dioxins and (b)
any petroleum product and any chemical, material or other substance defined as
"hazardous" or "toxic" or words with similar meaning and effect under any
Environmental Law.
"Highest Lawful Rate" shall mean the maximum nonusurious interest rate, if
any, that any time or from time to time may be contracted for, taken, reserved,
charged or received on the Loans, or under laws applicable to any of the Lenders
which are presently in effect or, to the extent allowed by applicable law, under
such laws which may hereafter be in effect and which allow a higher maximum
nonusurious interest rate than applicable laws now allow. Determination of the
rate of interest for the purpose of determining whether the Loans are usurious
under all applicable laws shall be made by amortizing, prorating, allocating,
and spreading, in equal parts during the period of the full stated term of the
Loans, all interest at any time contracted for, taken, reserved, charged or
received from the Borrowers in connection with the Loans.
"Holdings" means Tuboscope Vetco International Corporation, a Delaware
corporation, and the sole shareholder of each of the Borrowers.
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"Indebtedness" means, for any Person, the following obligations of such
Person, without duplication: (i) obligations of such Person for borrowed money;
(ii) obligations of such Person representing the deferred purchase price of
property or services other than accounts payable arising in the ordinary course
of business; (iii) obligations of such Person evidenced by bonds, notes,
acceptances, debentures or other similar instruments of such Person or arising
out of letters of credit issued for such Person's account; (iv) obligations of
other Persons, whether or not assumed, secured by Liens upon property or payable
out of the proceeds or production from property now or hereafter owned or
acquired by such Person, but only to the extent of such property's fair market
value; (v) Capitalized Lease Obligations of such Person; (vi) obligations of
such Person pursuant to a Guaranty; and (vii) obligations under Interest Rate
Protection Agreements, commodity hedge, commodity swap, exchange, forward,
future, collar or cap arrangements, fixed price agreements and all other
agreements or arrangements designed to protect against fluctuations in commodity
prices, and futures agreements, arrangements or options designed to protect
against fluctuations in currency exchange rates.
"Initial Borrowing Date" means the date on which all conditions precedent
set forth herein to the initial Borrowings are satisfied or waived in writing,
which date shall be no later than June 30, 1994.
"Interest Coverage Ratio" means, for any period, the ratio of EBITDA minus
all cash income taxes paid to Consolidated Interest Expense for such period
calculated on a historic, rolling four-quarter basis.
"Interest Payment Date" means (a) for a Base Rate Loan, the last Business
Day of each calendar quarter such Loan is outstanding commencing September 30,
1994, and (b) for a Eurodollar Loan, the last Business Day of each Interest
Period for such Loan and, during any Interest Period of six (6) months, the next
Business Day occurring three (3) months after the commencement of such Interest
Period.
"Interest Period" means the period commencing on the date that a Borrowing
of Eurodollar Loans is advanced, continued or created by conversion and ending
on the date 1, 2, 3 or 6 months thereafter as selected by the Borrowers pursuant
to the terms of this Agreement.
"Interest Rate Protection Agreement" shall mean any interest rate swap,
interest rate cap, interest rate collar, or other interest rate hedging
agreement or arrangement designed to protect against fluctuations in interest
rates.
"L/C Commitments" means the commitments of the Revolving Lenders to
participate in the Letters of Credit pursuant to Section 2.2 in the percentages
set forth opposite their signatures hereto or pursuant to Section 11.10, as such
commitments may be reduced from time to time pursuant to this Agreement.
"L/C Commitment Amount" means $7,000,000, as such amount may be reduced
from time to time pursuant to the terms of this Agreement.
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"L/C Documents" means the Letters of Credit, the Agent Letters of Credit,
any draft or other document presented in connection with a drawing thereunder,
the Applications and this Agreement.
"L/C Obligations" means the undrawn face amounts of all outstanding Letters
of Credit, all outstanding Agent Letters of Credit and all unpaid Reimbursement
Obligations.
"Lender" means each Revolving Lender, including the Agent as issuer of
Agent Letters of Credit, and each Term Lender.
"Lending Office" means the branch, office or affiliate of a Lender
specified on the appropriate signature page hereof, or designated pursuant to
Section 8.4.
"Letter of Credit" means any of the letters of credit to be issued by the
Agent on behalf of the Revolving Lenders for the account of the Borrowers
pursuant to Section 2.2(a).
"LIBOR" means, for an Interest Period, the rate of interest per annum
(rounded upwards, if necessary, to the nearest whole multiple of 1/16 of 1%),
equal to the arithmetic average of the quotation by each Reference Bank
(notified to the Agent by such Reference Bank) of the rate of interest per annum
at which deposits in U.S. Dollars in immediately available and freely
transferable funds are offered to such Reference Bank two (2) Business Days
before the commencement of such Interest Period by major banks in the London
interbank market as at or about 10:00 a.m. (London, England time) for a period
equal to such Interest Period and in an amount equal or comparable to the
principal amount of the Eurodollar Loan scheduled to be made by such Reference
Bank as part of such Borrowing. If on any occasion any Reference Bank is
unable, or for any reason fails, to so notify the Agent by 11:00 a.m. (London,
England time) two (2) Business Days before the first day of such Interest
Period, the applicable LIBOR rate shall be determined on the basis of each
quotation furnished by those of the Reference Banks which so notify the Agent at
or prior to such time.
"Lien" means any interest in any property or asset securing an obligation
owed to, or a claim by, a Person other than the owner of the property or asset,
whether such interest is based on the common law, statute or contract,
including, but not limited to, the security interest lien arising from a
mortgage, encumbrance, pledge, conditional sale, security agreement or trust
receipt, or a lease, consignment or bailment for security purposes.
"Loan" mean a Base Rate Loan or Eurodollar Loan, each of which is a "type"
of Loan hereunder, outstanding as a Revolving Loan or Term Loan.
"Majority Lenders" means, at any time, Lenders then holding in the
aggregate at least fifty-one percent (51%) of the (a) aggregate outstanding
principal amount of the Term Loans, plus (b) so long as the Revolving Credit
Commitment has not terminated pursuant to the terms hereof, the Revolving Credit
Commitment Amount, or if such Commitment has so terminated, the aggregate
Revolving Obligations (excluding the aggregate L/C Obligations with respect to
Agent Letters of Credit), plus (c) so long as the Agent L/C Commitment has not
terminated pursuant to the terms hereof, the Agent L/C Commitment Amount, or if
such Commitment has
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so terminated, the aggregate L/C Obligations with respect thereto. The overall
percentage set forth opposite each Lender's name on the signature page hereto
reflects the initial voting percentage of each Lender hereunder subsequent to
the Borrowings of the Term Loans on the Initial Borrowing Date.
"Material Adverse Effect" means a material adverse effect on the business,
properties, assets, liabilities or condition (financial or otherwise) of
Holdings, the Borrowers and their Subsidiaries taken as a whole, the Borrowers
and their Subsidiaries taken as a whole, or the Borrowers taken as a whole.
"Material Subsidiary" means each of the Subsidiary Guarantors and each
other Subsidiary of the Borrowers that has assets having a fair market value of
at least $1,000,000 or, if a Subsidiary is acquired after the Initial Borrowing
Date, having an acquisition cost of at least $1,000,000.
"Maturity Date" means (a) in the case of the Tranche A Term Loan, June 30,
1999, (b) in the case of the Tranche B Term Loan, June 30, 2001, and (c) in the
case of the Revolving Loans, June 30, 1997.
"Maximum Revolving Amount" means the limit on Revolving Loans and other
Revolving Obligations as defined in Section 2.1.
"Moody's" means Moody's Investors Services, Inc.
"Mortgages" means all mortgages or deeds of trust granting the Agent a Lien
on Mortgaged Properties in substantially the forms of Exhibit 4.1C.
"Mortgaged Properties" means the real properties described on Schedule 5.20
and all real properties mortgaged in favor of the Agent for the benefit of the
Lenders after the Effective Date pursuant to Section 6.11.
"Net Cash Proceeds" means for any Transfer of an asset (including any sale
and leaseback of assets), the cash proceeds (including any cash payments
actually received as a deferred payment of principal pursuant to a note,
installment receivable, purchase price adjustment receivable or otherwise) of
such Transfer net of (x) all legal fees, accountant fees, investment banking
fees, survey costs, title insurance premiums, required debt payments (other than
pursuant hereto) and other customary fees and expenses actually incurred and
documented in connection therewith, (y) taxes paid or payable as a result
thereof, and (z) purchase price adjustments reasonably expected to be payable in
connection therewith.
"Note" means a Revolving Note, a Term Note or the Agent L/C Note.
"Obligations" means all joint and several obligations of the Borrowers to
pay fees, costs and expenses hereunder, to pay principal or interest on Loans
and Reimbursement Obligations and to pay any other obligations to the Agent or
any Lender arising under or in relation to any Credit Document, and all
obligations of any other Credit Party to make any payment or
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reimburse any fees, costs or expenses to the Agent or any Lender arising under
or in relation to any Credit Document.
"PBGC" means the Pension Benefit Guaranty Corporation.
"Percentage" means for any Lender its Revolver Percentage, Tranche A Term
Percentage or Tranche B Term Percentage.
"Permitted Liens" are the Liens defined in Section 6.16.
"Person" means an individual, partnership, corporation, association, trust,
unincorporated organization or any other entity or organization, including a
government or any agency or political subdivision thereof.
"Plan" means an employee pension benefit plan covered by Title IV of ERISA
or subject to the minimum funding standards under Section 412 of the Code that
is either (i) maintained by Holdings, the Borrowers or any of their
Subsidiaries, or (ii) maintained pursuant to a collective bargaining agreement
or any other arrangement under which more than one employer makes contributions
and to which Holdings, the Borrowers or any of their Subsidiaries is then making
or accruing an obligation to make contributions or has within the preceding five
(5) plan years made or had an obligation to make contributions.
"Pledge Agreements" means, as to domestic Subsidiaries, the Pledge
Agreements in substantially the form of Exhibit 4.1A, and as to direct foreign
Subsidiaries of the Borrowers, in a form reasonably acceptable to the Agent,
executed and delivered by Holdings, Tuboscope Vetco International Inc.,
Tuboscope Vetco Capital Corp., and any other Credit Parties required from time
to time to execute and deliver a Pledge Agreement pursuant to the terms of this
Agreement.
"Pounds Sterling L/C" means the TCB Letter of Credit in the face amount of
750,000 Pounds Sterling with an expiration date of November 25, 1994, as
described in Section 2.1.
"Reference Banks" means ABN AMRO and Bank of America National Trust and
Savings Association.
"Reimbursement Obligation" means the obligations of the Borrowers to
reimburse the Agent for each drawing under a Letter of Credit or an Agent Letter
of Credit as described in Section 2.2(d).
"Revolver Percentage" means, for each Revolving Lender, the percentage of
the Revolving Credit Commitments represented by such Lender's Revolving Credit
Commitment; provided, that, if the Revolving Credit Commitments are terminated,
each Revolving Lender's Revolver Percentage shall be calculated based on its
Revolving Credit Commitment in effect immediately before such termination,
subject to any assignments by such Lender of Revolving Obligations pursuant to
Section 11.10.
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"Revolving Credit" means the credit facility for making Revolving Loans and
issuing Letters of Credit described in Sections 2.1-2.2.
"Revolving Credit Commitment" means, relative to any Lender, such Lender's
obligations to make Revolving Loans pursuant to Section 2.1.
"Revolving Credit Commitment Amount" means an amount equal to $35,000,000,
as such amount may be reduced from time to time pursuant to the terms of this
Agreement.
"Revolving Credit Majority Lenders" means Revolving Lenders then holding in
the aggregate at least fifty-one percent (51%) of the Revolver Percentages.
"Revolving Lender" means each Lender with a Revolving Credit Commitment or
which acquires a Revolving Credit Commitment pursuant to Section 11.10.
"Revolving Loan" means the revolving loans described in Section 2.1.
"Revolving Note" means certain promissory notes of the Borrowers as defined
in Section 2.12.
"Revolving Obligations" means the sum of the principal amount of all
Revolving Loans and L/C Obligations outstanding.
"SEC" means the Securities and Exchange Commission.
"S&P" means Standard & Poor's Corporation.
"Security" has the same meaning as in Section 2(1) of the Securities Act of
1933, as amended.
"Security Agreements" means the Security Agreements in substantially the
form of Exhibit 4.1B executed and delivered to the Agent by each of the
Borrowers and the Subsidiary Guarantors of the Borrowers.
"Security Documents" means the Pledge Agreements, the Security Agreements,
the Mortgages, Section 7.4 of this Agreement and all other security agreements,
mortgages and like agreements or instruments delivered by the Borrowers or any
Guarantor granting a Lien in any of such Person's property to the Agent for the
benefit of the Lenders to secure the Obligations, as any of the same may be
amended, supplemented or otherwise modified from time to time.
"Subordinated Debt" means all Indebtedness of Tuboscope Vetco International
Inc. pursuant to those certain 10 3/4% Senior Subordinated Notes due 2003 in the
original principal amount of $75,000,000 and any amendments to or rearrangements
or refinancings thereof so long as the maturity date thereof is at least thirty
(30) days after the Maturity Date of the Tranche B Term Loan and no principal
payments are required to be made thereon before the Maturity Date of the Tranche
B Term Loan.
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"Subsidiary" means, for Holdings or the Borrowers, any corporation or other
entity of which more than fifty percent (50%) of the outstanding stock or
comparable equity interests having ordinary voting power for the election of the
Board of Directors of such corporation or similar governing body in the case of
a non-corporation (irrespective of whether or not, at the time, stock or other
equity interests of any other class or classes of such corporation or other
entity shall have or might have voting power by reason of the happening of any
contingency) is at the time directly or indirectly owned by Holdings or the
Borrowers, as applicable, or by one or more of their Subsidiaries.
"Subsidiary Guarantor" means Tuboscope Pipeline Services Inc., a Texas
corporation, Tube-Kote Inc. d/b/a Tuboscope Vetco International Oilfield
Services, a Texas corporation, and any other Subsidiary of the Borrowers
required to become a Subsidiary Guarantor hereunder pursuant to Section 6.12.
"TCB" means Texas Commerce Bank National Association, as agent for the
lenders under the TCB Credit Facility.
"TCB Credit Facility" means that certain Credit Agreement dated as of
October 25, 1991, among TCB, the lenders parties thereto, Tuboscope Inc. (now
known as Tuboscope Vetco International Inc.) and Tuboscope Limited (now known as
Tuboscope Pipeline Services Ltd.), as heretofore amended.
"TCB Letters of Credit" means those letters of credit issued by TCB under,
and pursuant to the terms of, the TCB Credit Facility as described in Section
2.2.
"Tangible Net Worth" means Consolidated Net Worth minus net intangible
assets as determined in accordance with GAAP.
"Term Credit" means the credit facility for Term Loans described in Section
2.3.
"Term Loan Commitments" means the Tranche A Term Loan Commitment and the
Tranche B Term Loan Commitment.
"Term Loans" means the Tranche A Term Loan and the Tranche B Term Loan.
"Term Notes" means the Tranche A Term Notes and the Tranche B Term Notes.
"Total Capital" means the sum of Total Funded Debt plus Consolidated Net
Worth.
"Total Funded Debt" means, as of any date, on a consolidated basis for
Holdings, the Borrowers and their Subsidiaries, the sum of (i) indebtedness for
borrowed money, all obligations evidenced by bonds, debentures, notes or similar
instruments, and obligations to pay the deferred purchase price of property
which in accordance with GAAP would be shown on the consolidated balance sheet
as a liability, excluding any overdrafts as provided in Section 6.17(j) and any
obligations arising out of letters of credit until there is a drawing thereon,
and (ii) all obligations as lessee under leases which are required to be
recorded as Capitalized Lease
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Obligations in accordance with GAAP, excluding any obligation to purchase any
asset at the end of a lease term until such asset is so purchased.
"Total Funded Debt to EBITDA Ratio" means the ratio, expressed as a
percentage, of (a) Total Funded Debt to (b) EBITDA calculated on a historic,
rolling full four fiscal-quarter basis. For purposes of determining the
appropriate Total Funded Debt to EBITDA Ratio, figures of one-half of one
percent (.5%) or more shall be rounded upwards to the nearest integral multiple
of one percent (1%) and figures of less than one-half of one percent (.5%) shall
be rounded down to the nearest integral multiple of one percent (1%). The
Borrowers shall give written notice within three (3) Business Days to the Agent
of any changes in the Total Funded Debt to EBITDA Ratio which result in a change
to any Applicable Margin.
"Tranche A Term Lender" means each Lender with a Tranche A Term Loan
Commitment or which acquires a Tranche A Term Loan pursuant to Section 11.10.
"Tranche A Term Loan" means the term loan described in Section 2.3(a).
"Tranche A Term Loan Commitment" means, relative to any Lender, such
Lender's obligations to make a Tranche A Term Loan pursuant to Section 2.3(a).
"Tranche A Term Loan Commitment Amount" means $13,000,000.
"Tranche A Term Notes" means certain promissory notes of the Borrowers as
defined in Section 2.12.
"Tranche A Term Percentage" means, for each Tranche A Term Lender the
percentage of the Tranche A Term Loan Commitments represented by such Lender's
Tranche A Term Loan Commitment and after the Initial Borrowing Date, the
percentage of the aggregate Tranche A Term Loans owed to all Lenders that are
then owed to such Lender.
"Tranche B Term Lender" means each Lender with a Tranche B Term Loan
Commitment or which acquires a Tranche B Term Loan pursuant to Section 11.10.
"Tranche B Term Loan" means the term loan described in Section 2.3(b).
"Tranche B Term Loan Commitment" means, relative to any Lender, such
Lender's obligations to make a Tranche B Term Loan pursuant to Section 2.3(b).
"Tranche B Term Loan Commitment Amount" means $10,000,000.
"Tranche B Term Notes" means certain promissory notes of the Borrowers as
defined in Section 2.12.
"Tranche B Term Percentage" means, for each Tranche B Term Lender the
percentage of the Tranche B Term Loan Commitments represented by such Lender's
Tranche B Term Loan
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Commitment and after the Initial Borrowing Date, the percentage of the aggregate
Tranche B Term Loans owed to all Lenders that are then owed to such Lender.
"Transfer" means a sale, transfer, conveyance, assignment or other
disposition, including, without limitation, any transfer pursuant to an option
to purchase, any sale or assignment (with or without recourse) of any accounts
receivable and any sale and leaseback of assets, of an asset having a fair
market value in excess of $25,000, but excluding any involuntary transfer by
operation of law, damage or destruction.
"TVIES" means Tuboscope Vetco International Environmental Services, Inc.
"Unfunded Vested Liabilities" means, for any Plan at any time, the amount
(if any) by which (i) the present value of all vested nonforfeitable accrued
benefits under such Plan exceeds (ii) the fair market value of all Plan assets
allocable to such benefits, all determined as of the then most recent valuation
date for such Plan, but only to the extent that such excess represents a
potential liability of Holdings, the Borrowers or any of their Subsidiaries to
the PBGC or the Plan.
Section 1.2. Interpretation. The foregoing definitions shall be equally
--------------
applicable to the singular and plural forms of the terms defined. All
references to times of day in this Agreement shall be references to Houston,
Texas time unless otherwise specifically provided. Where the character or
amount of any asset or liability or item of income or expense is required to be
determined or any consolidation or other accounting computation is required to
be made for the purposes of this Agreement, it shall be done in accordance with
GAAP as in effect from time to time; provided, that, if the Borrowers notify the
Agent that the Borrowers wish to amend any provision hereof to eliminate the
effect of any change after the date hereof in GAAP (including its generally
accepted application or interpretation) on the operation of such provision (or
if the Agent notifies the Borrowers that the Majority Lenders wish to amend any
provision for such purpose), then such provision shall be interpreted and the
Borrowers' compliance with such provision shall be determined on the basis of
GAAP in effect immediately before the relevant change in GAAP became effective,
until either such notice is withdrawn or such provision is amended in a manner
satisfactory to the Borrowers and the Majority Lenders.
SECTION 2. THE CREDIT FACILITIES.
Section 2.1. Ratable Borrowings under the Revolving Credit. Subject to
---------------------------------------------
the terms and conditions hereof, each Revolving Lender severally and not jointly
agrees to make one or more loans (each a "Revolving Loan") to the Borrowers from
time to time before the applicable Maturity Date on a revolving basis up to the
amount of its revolving credit commitment set forth on the applicable signature
page hereof or pursuant to Section 11.10 (for each Revolving Lender, its
"Revolving Credit Commitment"), subject to any reductions thereof pursuant to
the terms of this Agreement. The aggregate principal amount of Revolving Loans
and other Revolving Obligations outstanding to the Borrowers shall not at any
time exceed the lesser of: (x) the sum of the Revolving Credit Commitment Amount
and the Agent L/C Commitment Amount and (y) the Borrowing Base in effect at such
time (such lesser amount being the "Maximum Revolving Amount"). Each Borrowing
of Revolving Loans shall be made ratably from the Revolving
17
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Lenders in proportion to their respective Revolver Percentages. Revolving Loans
may be repaid and all or any portion of the principal amount reborrowed before
the applicable Maturity Date, subject to the terms and conditions hereof.
Funding of any Revolving Loans shall be in U.S. Dollars except any Revolving
Loan to fund any draw of a Back to Back Letter of Credit with respect to that
certain TCB Letter of Credit in the face amount of 750,000 Pounds Sterling with
an expiration date of November 25, 1994 (the "Pounds Sterling L/C"), or to fund
any draw with respect to any renewal of such Pounds Sterling L/C by the Agent
hereunder.
Section 2.2. Letters of Credit under the Revolving Credit. (a) Letters of
-------------------------------------------- ----------
Credit. Subject to the terms and conditions hereof, the Agent agrees to issue,
- ------
on behalf of the Revolving Lenders and in reliance on their obligations under
this Section 2.2, one or more letters of credit (each a "Letter of Credit") for
the Borrowers' account in an aggregate undrawn face amount at any time
outstanding not to exceed the L/C Commitment Amount; provided, that the Agent
shall have no obligation to issue a Letter of Credit if (x) the outstanding
Revolving Obligations would thereby exceed the Maximum Revolving Amount then in
effect, (y) the outstanding L/C Obligations would thereby exceed the L/C
Commitment Amount, or (z) the issuance of such Letter of Credit would conflict
with any legal or regulatory restriction then applicable to the Agent or any
other Revolving Lender as notified by such other Revolving Lender to the Agent
before the date of issuance of the Letter of Credit. On the Initial Borrowing
Date, the Agent shall issue, on behalf of the Revolving Lenders and in reliance
on their obligations under this Section 2.2, one or more letters of credit
("Back to Back Letters of Credit") for the Borrowers' account and for the
benefit of TCB in an aggregate amount equal to the outstanding undrawn face
amount of the Letters of Credit (as defined in the TCB Credit Facility) issued
under, and pursuant to the terms of, the TCB Credit Facility (the "TCB Letters
of Credit") any such letters of credit (x) to be in the same amounts, (y) with
an expiration date no later than thirty (30) days after the expiration dates of
such TCB Letters of Credit which in any event shall be no later than one (1)
year after the applicable Maturity Date for Revolving Loans, and (z) to provide
that TCB may make a drawing thereunder in the event and to the extent TCB pays a
drawing under the TCB Letter of Credit. The Back to Back Letters of Credit
shall be included as Letters of Credit for all purposes hereunder, provided,
that the aggregate undrawn face amounts of the TCB Letters of Credit and any
corresponding reimbursement obligation of any of the Borrowers to TCB with
respect thereto shall not be included within the outstanding L/C Obligations
hereunder or be considered Indebtedness hereunder. All Letters of Credit and
Back to Back Letters of Credit, except for the Back to Back Letter of Credit
with respect to the Pounds Sterling L/C and any renewal thereof hereunder, shall
be issued in face amounts of U.S. Dollars.
(b) Agent Letters of Credit. Subject to the terms and conditions hereof,
-----------------------
the Agent agrees to issue, on its behalf only, one or more letters of credit
(each an "Agent Letter of Credit") for the Borrowers' account, each in an
initial face amount of less than $100,000, and in an aggregate undrawn face
amount at any time outstanding not to exceed the Agent L/C Commitment Amount
(the "Agent L/C Commitment"); provided, that the Agent shall have no obligation
to issue an Agent Letter of Credit if (x) the outstanding Revolving Obligations
would thereby exceed the Maximum Revolving Amount then in effect, (y) the
outstanding L/C Obligations would thereby exceed the L/C Commitment Amount, or
(z) the issuance of such Agent Letter of Credit would conflict with any legal or
regulatory restriction then applicable to the Agent. All Agent Letters of
Credit shall be issued in face amounts of U.S. Dollars.
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(c) Issuance Procedure. To request that the Agent issue a Letter of Credit
------------------
or an Agent Letter of Credit, the Borrowers shall deliver to the Agent a duly
executed Borrowing Request in the form of Exhibit 2.2(A) and an Issuance Request
in the form of Exhibit 2.2(B), together with a duly executed application for the
relevant Letter of Credit or Agent Letter of Credit in the form then customarily
used by the Agent for a letter of credit of the type requested, whether standby
or commercial (each an "Application"), completed to the reasonable satisfaction
of the Agent, and such other documentation and information as the Agent may
reasonably request. The current forms of the Agent's Applications are attached
as Appendices I and II hereto. Upon receipt of a properly completed and
executed Application and any other reasonably requested documents or information
at least two (2) Business Days prior to any requested issuance date (except for
Back to Back Letters of Credit which shall be issued on the Initial Borrowing
Date so long as a properly completed Application is received by the Agent at
least five (5) days prior to such date), the Agent will process such Application
in accordance with its customary procedures and issue the requested Letter of
Credit or Agent Letter of Credit on the requested issuance date. The Borrowers
may cancel any requested issuance of a Letter of Credit (except for Back to Back
Letters of Credit) or Agent Letter of Credit prior to the issuance thereof. The
Agent will notify each Revolving Lender of the amount and expiration date of
each Letter of Credit it issues promptly upon issuance thereof and will provide
the Borrowers and each Revolving Lender with a copy of any new form of
Application it adopts. Each Letter of Credit and Agent Letter of Credit shall
have an expiration date no later than one (1) year after the applicable Maturity
Date for Revolving Loans. If the Agent issues any Letters of Credit or Agent
Letters of Credit with expiration dates that automatically extend unless the
Agent gives notice that the expiration date will not so extend, the Agent will
give such notice of non-renewal before the time necessary to prevent such
automatic extension if before such required notice date (x) the expiration date
of such Letter of Credit or Agent Letter of Credit if so extended would be more
than one (1) year after the applicable Maturity Date for Revolving Loans, (y)
the Revolving Credit Commitments or the Agent L/C Commitment have been
terminated, as the case may be, or (z) an Event of Default exists and either the
Revolving Credit Majority Lenders have given the Agent instructions not to so
permit the extension of the expiration date of such Letter of Credit or the
Agent elects in its sole discretion to not permit the extension of the
expiration date of such Agent Letter of Credit, as the case may be. The Agent
agrees to issue amendments to any Letter of Credit or Agent Letter of Credit
increasing its amount, or extending its expiration date, at the request of the
Borrowers subject to the conditions precedent for all Loans of Section 4.2 and
the other terms of this Section 2.2.
(d) The Borrowers' Reimbursement Obligations. The Agent shall give the
----------------------------------------
Borrowers notice of any drawing on a Letter of Credit or Agent Letter of Credit
promptly, and in no event later than one (1) Business Day after such drawing.
The obligation of the Borrowers to reimburse the Agent for each drawing under a
Letter of Credit or an Agent Letter of Credit (a "Reimbursement Obligation")
shall be governed by the Application for such Letter of Credit or such Agent
Letter of Credit, except that (i) reimbursements by the Borrowers of drawings
shall be made in the manner specified in Section 3.2 within two (2) Business
Days from when such drawing is paid, (ii) the Borrowers shall pay fees in
connection with each Letter of Credit or Agent Letter of Credit as set forth in
Section 3.1(b), (iii) the Agent will not call for (A) the funding by the
Borrowers of any amount under a Letter of Credit or Agent Letter of Credit
before being presented with a drawing thereunder or (B) any other additional
collateral security
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for any obligations of the Borrowers under an Application except pursuant to the
cash collateral provisions contained in Section 7.4, and (iv) the Reimbursement
Obligation shall bear interest (which the Borrowers hereby promise to pay) from
and after the date such drawing is paid until the Reimbursement Obligation is
paid at the lesser of (i) the Highest Lawful Rate, or (ii) the Base Rate plus
the Applicable Base Margin so long as the Reimbursement Obligation shall not be
past due, and thereafter at the default rate per annum as set forth in Section
2.11(c), whether or not the applicable Maturity Date for Revolving Loans shall
have occurred. In addition, for the benefit of the Agent and each Revolving
Lender, the Borrowers agree that, notwithstanding any provision of any
Application, the obligations of the Borrowers under this Section 2.2(d) and each
Application shall be absolute, unconditional and irrevocable, and shall be
performed strictly in accordance with the terms of this Agreement and the
Applications, under all circumstances whatsoever, including without limitation
the following circumstances:
(i) any lack of validity or enforceability of any of the L/C
Documents;
(ii) any amendment or waiver of or any consent to depart from all or
any of the provisions of any of the L/C Documents;
(iii) the existence of any claim, set-off, defense or other right the
Borrowers may have at any time against a beneficiary of a Letter of Credit
or of an Agent Letter of Credit (or any Person for whom a beneficiary may
be acting), the Agent, any Lender or any other Person, whether in
connection with this Agreement, another L/C Document or any unrelated
transaction;
(iv) any statement or any other document presented under a Letter of
Credit or an Agent Letter of Credit proving to be forged, fraudulent,
invalid or insufficient in any respect or any statement therein being
untrue or inaccurate in any respect;
(v) payment by the Agent under a Letter of Credit or an Agent Letter
of Credit against presentation to the Agent of a draft or certificate that
does not comply with the terms of the Letter of Credit or the Agent Letter
of Credit, provided, that the Agent's determination that documents
presented under the Letter of Credit or the Agent Letter of Credit comply
with the terms thereof did not constitute gross negligence or willful
misconduct of the Agent; or
(vi) any other act or omission to act or delay of any kind by the
Agent, any Lender or any other Person or any other event or circumstance
whatsoever that might, but for the provisions of this Section 2.2(d),
constitute a legal or equitable discharge of the Borrowers' obligations
hereunder or under an Application.
If there shall be a drawing on a Letter of Credit or an Agent Letter of Credit
before the applicable Maturity Date for the Revolving Loans, the Borrowers shall
pay the Reimbursement Obligation with respect thereto with interest thereon as
provided herein within two (2) Business Days from when such Reimbursement
Obligation becomes due with either funds not borrowed hereunder or with a
Borrowing subject to the terms and conditions hereof and Section 2.5(c). If
there shall be a drawing on a Letter of Credit or an Agent Letter of Credit
after the applicable
20
<PAGE>
Maturity Date for Revolving Loans, the Reimbursement Obligation resulting
therefrom shall be paid by the Borrowers within two (2) Business Days from when
such Reimbursement Obligation becomes due with funds not borrowed hereunder.
(e) The Participating Interests. Each Revolving Lender severally and not
---------------------------
jointly agrees to purchase from the Agent, and the Agent hereby agrees to sell
to each Revolving Lender, an undivided percentage participating interest, to the
extent of its Revolver Percentage, in each Letter of Credit issued by, and
Reimbursement Obligation owed to, the Agent in connection with a Letter of
Credit. Upon any failure by the Borrowers to pay any Reimbursement Obligation
in connection with a Letter of Credit at the time required in Section 2.2(d), or
if the Agent is required at any time to return to any of the Borrowers or to a
trustee, receiver, liquidator, custodian or other Person any portion of any
payment by any of the Borrowers of any Reimbursement Obligation in connection
with a Letter of Credit, the Agent shall promptly give notice of same to each
Revolving Lender, and the Agent shall have the right to require each Revolving
Lender to fund its participation in such Reimbursement Obligation. Each
Revolving Lender (except the Agent to the extent it is also a Revolving Lender)
shall pay to the Agent an amount equal to its Revolver Percentage of such unpaid
or recaptured Reimbursement Obligation not later than the Business Day it
receives notice from the Agent to such effect, if such notice is received before
1:00 p.m. (New York, New York time), or not later than the following Business
Day if such notice is received after such time. If a Revolving Lender fails to
timely pay such amount to the Agent, it shall also pay to the Agent interest on
such amount accrued from the date payment of such amount was made by the Agent
to the date of such payment by the Revolving Lender at a rate per annum equal to
the Base Rate in effect for each such day and only after such payment shall such
Revolving Lender be entitled to receive its Revolver Percentage of each payment
received on the relevant Reimbursement Obligation and of interest paid thereon
and any proceeds of any Collateral with respect thereto. If any such Revolving
Lender fails to pay such amount to the Agent, any payments made by the Borrowers
with respect to the relevant Reimbursement Obligation, or any proceeds of any
Collateral with respect thereto, shall first be applied by the Agent to the
unfunded participation in such Reimbursement Obligation before any other Lenders
receive any payments or proceeds.
The several obligations of the Revolving Lenders to the Agent under this
Section 2.2(e) shall be absolute, irrevocable and unconditional under any and
all circumstances whatsoever and shall not be subject to any set-off,
counterclaim or defense to payment any Revolving Lender may have or have had
against the Borrowers, the Agent, any other Lender or any other Person
whatsoever. Without limiting the generality of the foregoing, such obligations
shall not be affected by any Default or Event of Default or by any subsequent
reduction or termination of any Commitment of a Revolving Lender, and each
payment by a Revolving Lender under Section 2.2 shall be made without any
offset, abatement, withholding or reduction whatsoever.
Section 2.3. Borrowings of Term Loans. (a) Tranche A. Subject to the
------------------------ ---------
terms and conditions hereof, each Tranche A Term Lender agrees to make a loan
(each a "Tranche A Term Loan") to the Borrowers on the Initial Borrowing Date up
to the amount of its Tranche A term loan commitment set forth on the applicable
signature page hereof (its "Tranche A Term Loan Commitment"). The Tranche A
Term Loans shall be made ratably from the Tranche A Term Loan Lenders in
proportion to their respective Tranche A Term Percentages. No Tranche A
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<PAGE>
Term Lender shall be permitted or required to make any Tranche A Term Loan if,
after giving effect thereto, the aggregate principal amount of all Tranche A
Term Loans (i) of all Tranche A Term Lenders would exceed the Tranche A Term
Loan Commitment Amount, or (ii) of such Tranche A Term Lender would exceed its
Tranche A Term Loan Commitment. Any portion of the Tranche A Term Loan
Commitments not borrowed on the Initial Borrowing Date shall terminate and not
be available for borrowing. Funding of the Tranche A Term Loan shall be in U.S.
Dollars.
(b) Tranche B. Subject to the terms and conditions hereof, each Tranche B
---------
Term Lender agrees to make a single loan (each a "Tranche B Term Loan") to the
Borrowers on the Initial Borrowing Date up to the amount of its Tranche B term
loan commitment set forth on the applicable signature page hereof (its "Tranche
B Term Loan Commitment"). The Tranche B Term Loans shall be made ratably from
the Tranche B Term Loan Lenders in proportion to their respective Tranche B Term
Percentages. No Tranche B Term Lender shall be permitted or required to make
any Tranche B Term Loan if, after giving effect thereto, the aggregate principal
amount of all Tranche B Term Loans (i) of all Tranche B Term Lenders would
exceed the Tranche B Term Loan Commitment Amount, or (ii) of such Tranche B Term
Lender would exceed its Tranche B Term Loan Commitment. Any portion of the
Tranche B Term Loan Commitments not borrowed on the Initial Borrowing Date shall
terminate and not be available for borrowing. Funding of the Tranche B Term
Loan shall be in U.S. Dollars.
Section 2.4. Types of Loans and Minimum Borrowing Amounts. Borrowings of
--------------------------------------------
both Revolving Loans and Term Loans may be outstanding as either Base Rate Loans
or Eurodollar Loans, as selected by the Borrowers pursuant to Section 2.5. All
Tranche A Term Loan Borrowings and all Tranche B Term Loan and Revolving Loan
Borrowings advanced on the Initial Borrowing Date shall be advanced as Base Rate
Loans. Each Borrowing of Base Rate Loans shall be in an amount of not less than
$300,000 and each Borrowing of (a) a Eurodollar Loan that is a Revolving Loan
shall be in an amount of not less than $2,000,000, and (b) a Eurodollar Loan
that is a Term Loan shall be in an amount of not less than $3,000,000 from the
Initial Borrowing Date through June 30, 1996, and $2,000,000 thereafter through
the Maturity Date of the Tranche B Term Loan.
Section 2.5. Manner of Borrowing. (a) Notice to the Agent. Except as
------------------- -------------------
provided in Section 2.4 prior to the Initial Borrowing Date, the Borrowers shall
give notice to the Agent by no later than 11:00 a.m. (Houston, Texas time) (i)
at least three (3) Business Days before the date on which the Borrowers request
the Lenders to advance a Borrowing of Eurodollar Loans, and (ii) on the date the
Borrowers request the Lenders to advance a Borrowing of Base Rate Loans. The
Loans included in each Borrowing shall bear interest initially at the type of
rate specified in such notice of a new Borrowing. Thereafter, the Borrowers may
from time to time elect to change or continue the type of interest rate borne by
each Borrowing or, subject to Section 2.4's minimum amount requirement for each
outstanding Borrowing, a portion thereof, as follows: (i) if such Borrowing is
of Eurodollar Loans, the Borrowers may continue part or all of such Borrowing as
Eurodollar Loans for an Interest Period specified by the Borrowers or convert
part or all of such Borrowing into Base Rate Loans on the last day of the
Interest Period applicable thereto, or the Borrowers may earlier convert part or
all of such Borrowing into Base Rate Loans so long as they pay the breakage fees
provided in Section 2.13, (ii) if such
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Borrowing is of Base Rate Loans, on any Business Day, the Borrowers may convert
all or part of such Borrowing into Eurodollar Loans for an Interest Period
specified by the Borrowers. Notices of the continuation of a Borrowing of
Eurodollar Loans for an additional Interest Period or of the conversion of part
or all of a Borrowing of Eurodollar Loans into Base Rate Loans or of Base Rate
Loans into Eurodollar Loans must be given by no later than 11:00 a.m. (Houston,
Texas time) at least three (3) Business Days before the date of the requested
continuation or conversion. The Borrowers shall give such notices concerning
the advance, continuation, or conversion of a Borrowing by telephone or
facsimile (which notice shall be irrevocable once given and, if by telephone,
shall be promptly confirmed in writing) pursuant to a Borrowing Request which
shall specify the date of the requested advance, continuation or conversion
(which shall be a Business Day), the amount of the requested Borrowing, whether
any portion the requested Borrowing shall be used for funding any acquisition
pursuant to the provisions of Section 5.5, the Credit under which the Borrowing
is to be advanced, continued, or converted, the type of Loans to comprise such
new, continued or converted Borrowing and, if such Borrowing is to be comprised
of Eurodollar Loans, the Interest Period applicable thereto. The Borrowers
agree that the Agent may rely on any such telephonic or facsimile notice given
by any person it in good faith believes is an authorized representative of the
Borrowers without the necessity of independent investigation and that, if any
such notice by telephone conflicts with any written confirmation, such
telephonic notice shall govern if the Agent has acted in reliance thereon.
(b) Notice to the Lenders. The Agent shall give prompt telephonic, telex
---------------------
or facsimile notice to each Lender under a Credit of any notice received
pursuant to Section 2.5(a) above relating to a Borrowing under such Credit. The
Agent shall give notice to the Borrowers and each Lender under a Credit by like
means of the interest rate applicable to each Borrowing of Eurodollar Loans
under such Credit (but, if such notice is given by telephone, the Agent shall
confirm such rate in writing) promptly after the Agent has made such
determination.
(c) Borrowers' Failure to Notify. If the Borrowers fail to give notice
----------------------------
pursuant to Section 2.5(a) above of the continuation or conversion of any
outstanding principal amount of a Borrowing of Eurodollar Loans or of a
Borrowing of Loans equal to the amount of a Reimbursement Obligation and has not
notified the Agent by 11:00 a.m. (Houston, Texas time) at least three (3)
Business Days before the last day of the Interest Period for such Borrowing of
Eurodollar Loans or the day such Reimbursement Obligation becomes due that it
intends to repay such Borrowing or such Reimbursement Obligation with funds not
borrowed hereunder, the Borrowers shall be deemed to have requested, as
applicable, the conversion of such Borrowing of Eurodollar Loans into a
Borrowing of Base Rate Loans or, subject to all other provisions hereof, the
advance of a new Borrowing of Base Rate Loans under the Revolving Credit on such
day in the amount of the Reimbursement Obligation then due, which Borrowing
shall be applied to pay the Reimbursement Obligation then due. For purposes of
funding any Reimbursement Obligation as a result of any draw on the Back to Back
Letter of Credit with respect to the Pounds Sterling L/C or any renewal thereof,
the Borrowing shall be in U.S. Dollars as converted on the date of such draw.
(d) Disbursement of Loans. Not later than 12:00 p.m. (New York, New York
---------------------
time) on the date of any requested advance of a new Borrowing of Loans, each
Lender under the
23
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relevant Credit, subject to all other provisions hereof, shall make available
its Loan comprising its ratable share of such Borrowing in funds immediately
available in New York, New York for the benefit of the Agent. The Agent shall
make the proceeds of each such Borrowing available in immediately available
funds to the Borrowers on such date. No Lender shall be responsible to the
Borrowers for any failure by another Lender to fund its portion of a Borrowing,
and no such failure by a Lender shall relieve any other Lender from its
obligation, if any, to fund its portion of a Borrowing.
(e) Agent Reliance on Lender Funding. Unless the Agent shall have been
--------------------------------
notified by a Lender before the date on which such Lender is scheduled to make
payment to the Agent of the proceeds of a Loan (which notice shall be effective
upon receipt) that such Lender does not intend to make such payment, the Agent
may assume that such Lender has made such payment when due and in reliance upon
such assumption may (but shall not be required to) make available to the
Borrowers the proceeds of the Loan to be made by such Lender and, if any Lender
has not in fact made such payment to the Agent, such Lender shall, on demand,
pay to the Agent the amount made available to the Borrowers attributable to such
Lender together with interest thereon for each day during the period commencing
on the date such amount was made available to the Borrowers and ending on (but
excluding) the date such Lender pays such amount to the Agent at a rate per
annum equal to the interest rate attributable to the relevant Loan. If such
amount is not received from such Lender by the Agent immediately upon demand,
the Borrowers will, on demand, repay to the Agent the proceeds of the Loan
attributable to such Lender with interest thereon at a rate per annum equal to
the interest rate applicable to the relevant Loan.
Section 2.6. Interest Periods. As provided in Section 2.5(a), at the time
----------------
of each request for the advance or continuation of, or conversion into, a
Borrowing of Eurodollar Loans, the Borrowers shall select an Interest Period
applicable to such Loans from among the available options; provided, however,
that:
(a) the Borrowers may not select an Interest Period for a Borrowing of
Revolving Loans that extends beyond the applicable Maturity Date for Revolving
Loans;
(b) the Borrowers may not select an Interest Period for a Borrowing of Term
Loans that would end after an Amortization Date if, as a result, the aggregate
principal amount of Loans scheduled to be outstanding under the Term Credit with
Interest Periods ending after such Amortization Date would exceed the principal
amount of Term Loans permitted to be outstanding after such Amortization Date
unless the Borrowers confirm their agreement to pay the breakage fees provided
in Section 2.13 at the time of such selection;
(c) whenever the last day of any Interest Period would otherwise be a day
that is not a Business Day, the last day of such Interest Period shall either be
(i) extended to the next succeeding Business Day, or (ii) reduced to the
immediately preceding Business Day if the next succeeding Business Day is in the
next calendar month; and
(d) for purposes of determining an Interest Period, a month means a period
starting on one day in a calendar month and ending on the numerically
corresponding day in the next
24
<PAGE>
calendar month; provided, however, that if there is no such numerically
corresponding day in the month in which an Interest Period is to end or if an
Interest Period begins on the last Business Day of a calendar month, then such
Interest Period shall end on the last Business Day of the calendar month in
which such Interest Period is to end.
Section 2.7. Maturity of Loans. Each Revolving Loan shall mature and
-----------------
become due and payable by the Borrowers on the applicable Maturity Date
therefor. The Borrowers shall repay the Term Loans on the last Business Day of
each calendar quarter, commencing September 30, 1994 (each an "Amortization
Date"), in the quarterly principal amounts set forth opposite such period on
Schedule 2.7 hereto (or, if less, the aggregate principal amount of Term Loans
then outstanding). The Borrowers shall repay in full the unpaid principal
amount of each Term Loan upon the applicable Maturity Date therefor. The
Lenders may elect to extend the Maturity Date of the Revolving Loans in their
sole discretion upon such terms and conditions as may be agreed upon by all of
the Lenders and the Borrowers.
Section 2.8. Applicable Interest Rates. (a) Base Rate Loans. Each Base
------------------------- ---------------
Rate Loan shall bear interest (computed on the basis of a 365 or 366 day year,
as applicable, and actual days elapsed) on the unpaid principal amount thereof
from the date such Loan is made until maturity (whether by acceleration or
otherwise) or conversion to a Eurodollar Loan, at a rate per annum equal to the
lesser of (i) the Highest Lawful Rate, or (ii) the sum of the Base Rate from
time to time in effect plus the Applicable Base Margin, payable on each Interest
Payment Date for such Loan and at maturity (whether by acceleration or
otherwise).
(b) Eurodollar Loans. Each Eurodollar Loan shall bear interest (computed
----------------
on the basis of a 360 day year and actual days elapsed) on the unpaid principal
amount thereof from the date such Loan is made until maturity (whether by
acceleration or otherwise) or conversion to a Base Rate Loan at a rate per annum
equal to the lesser of (i) the Highest Lawful Rate, or (ii) the sum of LIBOR
plus the Applicable Eurodollar Margin applicable to such Loan, payable on each
Interest Payment Date for such Loan and at maturity (whether by acceleration or
otherwise) or conversion to a Eurodollar Loan.
(c) Rate Determinations. The Agent shall determine each interest rate
-------------------
applicable to the Loans and Reimbursement Obligations hereunder and such
determination shall be conclusive and binding except in the case of manifest
error or willful misconduct.
Section 2.9. Optional Prepayments. The Borrowers shall have the privilege
--------------------
of prepaying Base Rate Loans without premium or penalty in whole or in part at
any time (but, if in part, then in an amount which is equal to or greater than
$300,000); provided, however, that the Borrowers shall have given notice of such
prepayment to the Agent no later than 11:00 a.m. (Houston, Texas time) on the
date of such prepayment. The Borrowers shall have the privilege of prepaying
Eurodollar Loans (a) without premium or penalty in whole or in part (but, if in
part, then in an amount which is equal to or greater than $1,000,000) only on
the last Business Day of an Interest Period for such Loan, and (b) at any other
time so long as the breakage fees provided for in Section 2.13 are paid;
provided, however, that the Borrowers shall have given notice of such prepayment
to the Agent no later than 11:00 a.m. (Houston, Texas time) at least three (3)
Business Days before the last Business Day of such Interest Period or the
proposed
25
<PAGE>
prepayment date. Any such prepayments shall be made by the payment of the
principal amount to be prepaid and accrued interest thereon to the date of such
prepayment. Optional prepayments of the Term Loans shall be applied pro rata to
the Tranche A Term Loan and the Tranche B Term Loan according to the respective
principal amounts outstanding thereunder and within each of the Tranche A Term
Loan and the Tranche B Term Loan in inverse order of their maturities. Amounts
prepaid under the Term Loans may not be reborrowed. Optional prepayments of the
Revolving Loans shall be applied to the Revolving Loans, then pro rata to the
Reimbursement Obligations with respect to Letters of Credit and Agent Letters of
Credit. The Borrowers may direct the application of any optional or mandatory
prepayment hereunder to the Base Rate Loans or Eurodollar Loans outstanding of
the type of Loans being prepaid.
Section 2.10. Mandatory Prepayments of Loans. (a) If the aggregate
------------------------------
principal amount of outstanding Revolving Loans and L/C Obligations shall at any
time for any reason exceed the Maximum Revolving Amount then in effect, the
Borrowers shall, immediately and without notice or demand, pay the amount of
such excess to the Agent for the ratable benefit of the Revolving Lenders as a
prepayment of the Revolving Loans and, if all Revolving Loans have been paid, a
prefunding of Letters of Credit. Any mandatory prepayment of Revolving Loans
pursuant hereto shall not be limited by the notice provision for prepayments set
forth in Section 2.9, but immediately upon determining the need to make any such
prepayment, the Borrowers shall notify the Agent of such required prepayment.
Each such prepayment shall be accompanied by a payment of all accrued and unpaid
interest on the Revolving Loans prepaid and any applicable breakage fees
pursuant to Section 2.13.
(b) Within ten (10) Business Days after receipt by Holdings, the Borrowers
or any of their Subsidiaries of cash proceeds from any Transfer of an asset
(except Transfers permitted by Section 6.20 and except as otherwise required by
Section 6.23), the Borrowers shall make a mandatory prepayment of the Term Loans
in an amount equal to the Net Cash Proceeds from such Transfer.
(c) Within three (3) Business Days after receipt by the Borrowers or any of
their Material Subsidiaries of the proceeds of (i) insurance on or condemnation
of any property or (ii) any indemnification agreement with any Person which
provides recovery (but only to the extent of such actual recovery) for any
property which is Collateral or required to be Collateral hereunder or which has
been included in the Borrowing Base, the Borrowers shall make a mandatory
prepayment of the Term Loans unless such proceeds are disclosed in Schedule 2.10
or such proceeds are segregated in a special account denoted as insurance or
indemnification proceeds and used promptly for replacement or reconstruction of
such property.
(d) Within ninety (90) days after the last day of a fiscal year of the
Borrowers, commencing with the fiscal year ending December 31, 1994, the
Borrowers shall make a mandatory prepayment of the Term Loans in an amount equal
to fifty percent (50%) of Excess Cash Flow of Holdings, the Borrowers and their
Subsidiaries for such preceding fiscal year.
(e) After the Term Loans have been paid in full, the Borrowers shall not be
required to make any further mandatory prepayments of Excess Cash Flow or
pursuant to Section 2.10(b) or (c). All mandatory prepayments pursuant to
Section 2.10(b), (c) and (d) shall be applied to the Term Loans as set forth in
Section 2.9.
26
<PAGE>
Section 2.11. Default Rate. If any payment of principal on any Loan is
------------
not made when due (whether by acceleration or otherwise), such Loan shall bear
interest (computed on the basis of a year of 360, 365 or 366 days, as
applicable, and actual days elapsed) from the date such payment was due until
paid in full, payable on demand, at a rate per annum equal to:
(a) for any Base Rate Loan the lesser of (i) the Highest Lawful Rate, or
(ii) the sum of two percent (2%) per annum plus the Base Rate from time to time
in effect (but not less than the Base Rate in effect at maturity) plus the
Applicable Base Margin;
(b) for any Eurodollar Loan the lesser of (i) the Highest Lawful Rate, or
(ii) the sum of two percent (2%) per annum plus the rate of interest in effect
thereon at the time of such default until the end of the Interest Period for
such Loan and, thereafter, at a rate per annum equal to the sum of two percent
(2%) per annum plus the Base Rate from time to time in effect (but not less than
the Base Rate in effect at maturity) plus the Applicable Base Margin; and
(c) for any unpaid Reimbursement Obligations with respect to Letters of
Credit or Agent Letters of Credit, the lesser of (i) the Highest Lawful Rate, or
(ii) the sum of two percent (2%) per annum plus the Base Rate from time to time
in effect (but not less than the Base Rate in effect at maturity) plus the
Applicable Base Margin.
It is the intention of the Agent and the Lenders to conform strictly to usury
laws applicable to them. Accordingly, if the transactions contemplated hereby
or the Loans would be usurious as to any of the Lenders under laws applicable to
it (including the laws of the United States of America and the State of Texas or
any other jurisdiction whose laws may be mandatorily applicable to such Lender
notwithstanding the other provisions of this Agreement, the Notes or any other
Credit Document), then, in that event, notwithstanding anything to the contrary
in this Agreement, the Notes or any other Credit Document, it is agreed as
follows: (i) the aggregate of all consideration which constitutes interest
under laws applicable to the Lender that is contracted for, taken, reserved,
charged or received by the Lender under this Agreement, the Notes or any other
Credit Document or otherwise shall under no circumstances exceed the Highest
Lawful Rate, and any excess shall be credited by such Lender on the principal
amount of the Notes or to the Reimbursement Obligations (or, if the principal
amount of the Notes and all Reimbursement Obligations shall have been paid in
full, refunded by such Lender to the Borrowers); and (ii) in the event that the
maturity of the Notes is accelerated by reason of an election of the holder or
holders thereof resulting from any Event of Default hereunder or otherwise, or
in the event of any required or permitted prepayment, then such consideration
that constitutes interest under laws applicable to the Lender may never include
more than the Highest Lawful Rate, and excess interest, if any, provided for in
this Agreement, the Notes, any other Credit Document or otherwise shall be
automatically canceled by such Lender as of the date of such acceleration or
prepayment and, if theretofore paid, shall be credited by the Lender on the
principal amount of the Notes or to the Reimbursement Obligations (or if the
principal amount of the Notes and all Reimbursement Obligations shall have been
paid in full, refunded by such Lender to the Borrowers). To the extent that
Article 5069-1.04 of the Texas Revised Civil Statutes is relevant to the Agent
and the Lenders for the purpose of determining the Highest Lawful Rate, the
Agent and the Lenders hereby elect to determine the applicable rate ceiling
under such Article by the indicated (Weekly) rate ceiling from time to time in
effect, subject to their right subsequently to change such method in accordance
with applicable law. In the event
27
<PAGE>
the Loans and all Reimbursement Obligations are paid in full by the Borrowers
prior to the full stated term of the Loans and the interest received for the
actual period of the existence of the Loans exceeds the Highest Lawful Rate, the
Lenders shall refund to the Borrowers the amount of the excess or shall credit
the amount of the excess against amounts owing under the Loans and none of the
Agent or the Lenders shall be subject to any of the penalties provided by law
for contracting for, taking, reserving, charging or receiving interest in excess
of the Highest Lawful Rate.
Section 2.12. The Notes. (a) The Revolving Loans outstanding to the
---------
Borrowers from each Revolving Lender shall be evidenced by a single promissory
note of the Borrowers payable to such Revolving Lender in the form of Exhibit
2.12A (each a "Revolving Note"). The Tranche A Term Loans outstanding to the
Borrowers from each Tranche A Term Lender shall be evidenced by a single
promissory note of the Borrowers payable to such Tranche A Term Lender in the
form of Exhibit 2.12B (each a "Tranche A Term Note"). The Tranche B Term Loans
outstanding to the Borrowers from each Tranche B Term Lender shall be evidenced
by a single promissory note of the Borrowers payable to such Tranche B Term
Lender in the form of Exhibit 2.12C, or such greater number of promissory notes
as reasonably requested by such Lender (each a "Tranche B Term Note"). All
Reimbursement Obligations with respect to the Agent Letters of Credit
outstanding of the Borrowers to the Agent shall be evidenced by a single
promissory note of the Borrowers payable to the Agent as a Lender in the form of
Exhibit 2.12D (the "Agent L/C Note").
(b) Each holder of a Note shall record on its books and records or on a
schedule to its appropriate Note the amount of each Loan outstanding from it to
the Borrowers under a Credit, all payments of principal and interest and the
principal balance from time to time outstanding thereon, the type of such Loan
and, if a Eurodollar Loan, the Interest Period and interest rate applicable
thereto. Such record, whether shown on the books and records of a holder of a
Note or on a schedule to its Note, shall be prima facie evidence as to all such
matters; provided, however, that the failure of any holder to record any of the
foregoing or any error in any such record shall not limit or otherwise affect
the obligation of the Borrowers to repay all Loans outstanding to it hereunder
together with accrued interest thereon. At the request of any holder of a Note
and upon such holder tendering to the Borrowers the Note to be replaced, the
Borrowers shall furnish a new Note to such holder to replace any outstanding
Note and at such time the first notation appearing on the schedule on the
reverse side of, or attached to, such new Note shall set forth the aggregate
unpaid principal amount of all Loans, if any, then outstanding thereon.
Section 2.13. Breakage Fees. If any Lender incurs any loss, cost or
-------------
expense (including, without limitation, any loss of profit and any loss, cost,
expense or premium incurred by reason of the liquidation or re-employment of
deposits or other funds acquired by such Lender to fund or maintain any
Eurodollar Loan or the relending or reinvesting of such deposits or amounts paid
or prepaid to such Lender) as a result of any of the following events other than
any such occurrence as a result of a change of circumstance described in
Sections 8.1 or 8.2:
(a) any payment, prepayment or conversion of a Eurodollar Loan on a date
other than the last day of its Interest Period (whether by acceleration,
mandatory prepayment or otherwise);
28
<PAGE>
(b) any failure to make a principal or interest payment of a Eurodollar
Loan on the due date therefor; or
(c) any failure by the Borrowers to borrow, prepay or convert a Eurodollar
Loan on the date specified in a notice given pursuant to Section 2.5(a),
then the Borrowers shall pay to such Lender such amount as will reimburse such
Lender for such loss, cost or expense. If any Lender makes such a claim for
compensation, it shall provide to the Borrowers a certificate executed by an
officer of such Lender setting forth the amount of such loss, cost or expense in
reasonable detail (including an explanation of the basis for and the computation
of such loss, cost or expense), and the amounts shown on such certificate shall
be conclusive and binding absent manifest error. Within ten (10) days of
receipt of such certificate, the Borrowers shall pay directly to such Lender
such amount as will compensate such Lender for such loss, cost or expense as
provided herein.
Section 2.14. Commitment Terminations. The Borrowers shall have the right
-----------------------
at any time and from time to time, upon five (5) Business Days' prior and
irrevocable written notice to the Agent, to terminate or reduce the Revolving
Credit Commitments or L/C Commitments without premium or penalty, in whole or in
part, any partial termination to be (i) in an amount not less than $1,000,000 as
determined by the Borrowers and in integral multiples of $1,000,000, and (ii)
allocated ratably among the Revolving Lenders in proportion to their respective
Revolving Credit Commitments and L/C Commitments, as applicable; provided, that
the Revolving Credit Commitment Amount may not be reduced to an amount less than
the sum of the aggregate principal amount of outstanding Revolving Loans plus
the aggregate undrawn face amount of outstanding Letters of Credit plus any
unpaid Reimbursement Obligations with respect to Letters of Credit, and the L/C
Commitment Amount may not be reduced to an amount less than the aggregate
undrawn face amount of outstanding Letters of Credit plus any unpaid
Reimbursement Obligations with respect to Letters of Credit, in each case after
giving effect to payments on such proposed termination or reduction date, unless
the Borrowers provide to the Agent cash collateral in an amount sufficient to
cover such shortage or back to back letters of credit from a bank(s) or
financial institution(s) satisfactory to the Majority Lenders in an amount equal
to the undrawn face amount of any applicable outstanding Letters of Credit with
an expiration date of at least five (5) days after the expiration date of any
applicable Letter of Credit and which provide that the Agent may make a drawing
thereunder in the event that it pays a drawing under such Letter of Credit. The
Agent shall give prompt notice to each Revolving Lender of any such termination
of Commitments. The Borrowers shall also have the right at any time upon five
(5) Business Days' prior and irrevocable written notice to the Agent, to
terminate the Agent L/C Commitment without premium or penalty in whole;
provided, that no Agent Letters of Credit or any Reimbursement Obligations with
respect thereto are outstanding. Any termination of Commitments pursuant to
this Section 2.14 is permanent and may not be reinstated.
SECTION 3. FEES AND PAYMENTS.
Section 3.1. Fees. (a) Revolving Credit Commitment Fee. For the period
---- -------------------------------
from the Effective Date to and including the applicable Maturity Date for
Revolving Loans, the Borrowers shall pay (i) to the Agent for the ratable
account of the Revolving Lenders, and (ii) to the Agent
29
<PAGE>
for its own account, as the case may be, a commitment fee (computed on a basis
of a 360 day year, and actual days elapsed) on the average daily difference
between (x) the sum of the Revolving Credit Commitment Amount and the Agent L/C
Commitment Amount, and (y) the Revolving Obligations, such fee to be calculated
from time to time at the rate per annum set forth opposite the relevant Total
Funded Debt to EBITDA Ratio set forth below:
Total Funded Debt to EBITDA Ratio Commitment Fee
--------------------------------- --------------
Greater than 450% 0.50%
Equal to or less than 450% 0.50%
but equal to or greater than 350%
Equal to or less than 350% 0.375%
but equal to or greater than 200%
Less than 200% 0.325%
Such fees shall be payable in arrears commencing on September 30, 1994, and on
the last day of each calendar quarter thereafter and on the applicable Maturity
Date for Revolving Loans, unless the Revolving Credit Commitment or the Agent
L/C Commitment, as the case may be, are terminated in whole on an earlier date,
in which event the commitment fee with respect thereto for the period to but not
including the date of such termination shall be paid in whole on the date of
such termination.
(b) Letter of Credit Fees. Commencing upon the date of issuance or
---------------------
extension of any Letter of Credit or Agent Letter of Credit, the Borrowers shall
pay to the Agent quarterly in advance (i) for the ratable account of the
Revolving Lenders a nonrefundable fee equal to one percent (1%) per annum of the
face amount of such Letter of Credit, and (ii) solely for the Agent's account, a
nonrefundable fee equal to one percent (1%) per annum of the face amount of such
Agent Letter of Credit (subject to the Agent's usual and customary minimum fee),
calculated in each case on the basis of a 360 day year and actual days elapsed
and based on the scheduled expiration date of the Letter of Credit or Agent
Letter of Credit, as the case may be. For the Back to Back Letter of Credit
with respect to the Pounds Sterling L/C, or any renewal of such Pounds Sterling
L/C by the Agent hereunder, the fee shall be converted into U.S. Dollars as of
June 27, 1994, with respect to the initial issuance of such Back to Back Letter
of Credit, and thereafter ten (10) days before any fee with respect thereto
shall be due and payable hereunder. Such fees shall be payable by the Borrowers
thereafter in advance on the last day of March, June, September and December of
each year, with the last such payment on the date any such Letter of Credit or
Agent Letter of Credit expires. In addition, the Borrowers shall pay to the
Agent solely for the Agent's account in connection with each Letter of Credit or
Agent Letter of Credit the standard issuance, administrative and amendment fees
and expenses for letters of credit established by the Agent from time to time
and as agreed between the Agent and the Borrowers.
(c) Agent Fees. The Borrowers shall pay to the Agent the fees agreed to
----------
between the Agent and the Borrowers.
Section 3.2. Place and Application of Payments. (a) All payments of
---------------------------------
principal of and interest on the Loans, of Reimbursement Obligations, and of all
other amounts payable by the
30
<PAGE>
Borrowers under the Credit Documents shall be made by the Borrowers to the Agent
by no later than 1:30 p.m. (Houston, Texas time) on the due date thereof at the
office of the Agent in New York, New York (or such other location as the Agent
may designate to the Borrowers) for the benefit of the Lenders entitled to such
payments. Any payments received by the Agent from the Borrowers after 1:30 p.m.
shall be deemed to have been received on the next Business Day. Such payments
shall be made in U.S. Dollars in immediately available funds at the place of
payment without setoff or counterclaim. The Agent will, on the same day each
payment is received or deemed to have been received in accordance with this
Section 3.2, cause to be distributed like funds to each Lender owed an
Obligation for which such payment was received, pro rata based on the respective
amounts of such type of Obligation then owing to each Lender.
(b) If any payment received by the Agent under any Credit Document
(including from the proceeds of Collateral) is insufficient to pay in full all
amounts then due and payable to the Agent and the Lenders under the Credit
Documents, such payment shall be distributed by the Agent and applied by the
Agent and the Lenders in the following order: First, to the payment of fees and
expenses due and payable to the Agent under the Credit Documents; Second, to the
payment of all expenses due and payable under Sections 7.6 and 11.14, ratably
among the Agent and the Lenders in accordance with the aggregate amount of such
Obligations owed to the Agent and each Lender; Third, to the payment of fees due
and payable under Section 3.1, ratably among the Lenders in accordance with the
aggregate amount of such Obligations owed to the Agent and each Lender; Fourth,
to the payment of interest then due and payable on Loans and Reimbursement
Obligations, ratably in accordance with the aggregate amount of interest owed to
each Lender; and Fifth, to the payment of the principal amount of the Loans and
L/C Obligations and all other Obligations then due and payable, ratably among
the Lenders in accordance with the aggregate amount of such Obligations owed to
each such Lender. In calculating the amount of Obligations owing each Lender
other than for principal and interest on Loans and Reimbursement Obligations and
fees under Section 3.1, the Agent shall only be required to include such other
Obligations that Lenders have certified to the Agent in writing are due to such
Lenders.
Section 3.3. Withholding Taxes. (a) Payments Free of Withholding. Except
----------------- ----------------------------
as otherwise required by law and subject to Section 3.3(b), each payment by the
Borrowers or any Guarantor under this Agreement or any other Credit Document
shall be made without withholding for or on account of any present or future
taxes (other than overall net income taxes on the recipient) imposed by or
within the jurisdiction in which such Borrowers or such Guarantor is domiciled,
any jurisdiction from which such Borrowers or Guarantor makes any payment, or
(in each case) any political subdivision or taxing authority thereof or therein.
If any such withholding is so required, such Borrowers or Guarantor, as
applicable, shall make the withholding, pay the amount withheld to the
appropriate governmental authority before penalties attach thereto or interest
accrues thereon and forthwith pay such additional amount as may be necessary to
ensure that the net amount actually received by each Lender and the Agent free
and clear of such taxes (including such taxes on such additional amount) is
equal to the amount that Lender or the Agent (as the case may be) would have
received had such withholding not been made. If the Agent or any Lender pays
any amount in respect of any such taxes, penalties or interest, such Borrowers
or Guarantor, as applicable, shall reimburse the Agent or that Lender for the
payment on demand in the currency in which such payment was made. If such
Borrowers or Guarantor pays any such taxes, penalties or interest, it shall
deliver official tax
31
<PAGE>
receipts evidencing the payment or certified copies thereof, or other
satisfactory evidence of payment if such tax receipts have not yet been received
by the Borrowers or Guarantor (with such tax receipts to be promptly delivered
when actually received), to the Lender or Agent on whose account such
withholding was made (with a copy to the Agent if not the recipient of the
original) within fifteen (15) days of such payment.
(b) U.S. Withholding Tax Exemptions. Each Lender that is not a United
-------------------------------
States person (as such term is defined in Section 7701(a)(30) of the Code) shall
submit to the Borrowers and the Agent on or before the Initial Borrowing Date,
two duly completed and signed copies of either Form 1001 (entitling such Lender
to a complete exemption from withholding under the Code on all amounts to be
received by such Lender, including fees, pursuant to the Credit Documents) or
Form 4224 (relating to all amounts to be received by such Lender, including
fees, pursuant to the Credit Documents) of the United States Internal Revenue
Service. Thereafter and from time to time, each Lender shall submit to the
Borrowers and the Agent such additional duly completed and signed copies of one
or the other of such forms (or such successor forms as shall be adopted from
time to time by the relevant United States taxing authorities) as may be (i)
notified by the Borrowers, directly or through the Agent, to such Lender, and
(ii) required under then-current United States law or regulations to avoid
United States withholding taxes on payments in respect of all amounts to be
received by such Lender, including fees, pursuant to the Credit Documents. Upon
the request of the Borrowers, each Lender that is a United States person shall
submit to the Borrowers a certificate to the effect that it is such a United
States person.
(c) Inability of Lender to Submit Forms. If any Lender determines, as a
-----------------------------------
result of any change in applicable law, regulation or treaty, or in any official
application or interpretation thereof, that it is unable to submit to the
Borrowers or Agent any form or certificate that such Lender is obligated to
submit pursuant to subsection (b) of this Section 3.3 or that such Lender is
required to withdraw or cancel any such form or certificate previously submitted
or any such form or certificate otherwise becomes ineffective or inaccurate,
such Lender shall promptly notify the Borrowers and Agent of such fact and the
Lender shall to that extent not be obligated to provide any such form or
certificate and will be entitled to withdraw or cancel any affected form or
certificate, as applicable.
SECTION 4. CONDITIONS PRECEDENT.
The obligation of each Lender to fund or make any Loan hereunder,
including, but not limited to, the advancing, continuation or conversion of any
Loan, and of the Agent to issue, extend (or permit the extension of) the
expiration date of, or to increase the amount of, any Letter of Credit or Agent
Letter of Credit is subject to the following conditions precedent, all in form
and substance satisfactory to the Lenders (and which shall be evidenced by the
making, advancing, continuation or conversion of any Loan or the issuance,
extension, or increase of any Letter of Credit or Agent Letter of Credit, as the
case may be) and in sufficient number of signed counterparts to provide one for
each Lender (except for the Notes, of which only one original shall be signed
for each Lender):
Section 4.1. Initial Borrowing. (a) Before or concurrently with the
-----------------
Initial Borrowing Date the Agent shall have received:
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<PAGE>
(i) Notes. The duly executed Notes of the Borrowers;
-----
(ii) Pledge Agreements. The duly executed Pledge Agreements from each
-----------------
of Holdings, Tuboscope Vetco International Inc., and Tuboscope Vetco
Capital Corp., in substantially the form of Exhibit 4.1A, together with all
of the pledged securities referred to in Schedule 4.1 as required to be
delivered to effectuate and perfect such stock pledge, accompanied by
executed and undated stock powers or such other agreements as may be
required under applicable law to perfect the pledge, as applicable;
(iii) Security Agreements. The duly executed Security Agreements
-------------------
from each of the Borrowers and the Subsidiary Guarantors, in substantially
the form of Exhibit 4.1B and all necessary financing statements relating
thereto;
(iv) Note Pledge Agreement. The duly executed Note Pledge Agreement
---------------------
from Tuboscope Vetco International Inc. in substantially the form of
Exhibit 4.1C, together with the Pledged Notes (as defined therein) duly
endorsed to the Agent;
(v) Mortgages. The duly executed Mortgages for the properties listed
---------
on Schedule 5.20 in substantially the forms of Exhibit 4.1D;
(vi) Guaranties. The duly executed Guaranty of each Subsidiary
----------
Guarantor in substantially the form of Exhibit 4.1E;
(vii) Opinions of Counsel. The opinions of Latham & Watkins; James
-------------------
F. Maroney, III; Kelley & Kelley; Lathrop & Rutledge, P.C. and Lionel
Sawyer & Collins, legal counsel to the Credit Parties, in substantially the
forms attached as Exhibit 4.1F and covering such additional matters as the
Lenders may reasonably require;
(viii) Certificates of Officers of Credit Parties. Certificates of
------------------------------------------
the Secretary or Assistant Secretary and the President, Vice President or
Assistant Treasurer of each Credit Party containing specimen signatures of
the persons authorized to execute Credit Documents on each Credit Party's
behalf, together with (x) copies of resolutions of the Board of Directors
or other appropriate body of each Credit Party authorizing the execution
and delivery of the Credit Documents to which it is a party and of all
other legal documents or proceedings taken by the Credit Parties in
connection with the execution and delivery of the Credit Documents to the
extent the Agent requests, and (y) copies of each Credit Party's
Certificate or Article of Incorporation and bylaws;
(ix) Lien Searches. The results of recent lien searches and Uniform
-------------
Commercial Code searches in each of the jurisdictions listed on the
Schedules of the Security Agreements showing no Liens on any of the
property or assets of any Credit Party other than Permitted Liens, or
evidence that any such Liens other than Permitted Liens have been
terminated or will be terminated concurrently with the Initial Borrowing
Date;
(x) Environmental Audit. An environmental audit from Pilko &
-------------------
Associates, Inc. covering the Mortgaged Properties listed on Schedule 5.20;
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<PAGE>
(xi) Title Insurance. For each Mortgaged Property listed on Schedule
---------------
5.20 a mortgagee's title insurance policy or policies, or unconditional
commitment for such insurance, insuring the Liens of the Mortgages on such
Mortgaged Properties to be valid first priority Liens subject to no Liens
other than Permitted Liens, together with an as-built survey of each such
Mortgaged Property certified to the Agent and the issuer of the relevant
title insurance policy;
(xii) FIRREA Appraisals. A copy of a FIRREA appraisal of each
-----------------
Mortgaged Property listed on Schedule 5.20;
(xiii) Certificate of Financial Condition. A certificate of the
----------------------------------
Chief Financial Officers of the Borrowers documenting the solvency of
Holdings, the Borrowers and their Subsidiaries on a consolidated basis,
after giving effect to the Borrowings on the Initial Borrowing Date
hereunder, and certifying as true, correct and complete the most recent
financial statements described in Section 5.9;
(xiv) Insurance Certificate. An insurance certificate from each of
---------------------
Johnson & Higgins and the Borrowers showing the insurance maintained by
Holdings, the Borrowers and their Subsidiaries as required by the Credit
Documents, together with copies of the insurance policies referenced
therein;
(xv) Fees. Payment of all fees and all expenses incurred through the
----
Effective Date then due and owing to the Agent pursuant to this Agreement;
(xvi) Borrowing Base Certificate. A duly executed Borrowing Base
--------------------------
Certificate as of the last day of the preceding fiscal month of the
Borrowers;
(xvii) Compliance Certificate. A duly executed Compliance
----------------------
Certificate;
(xviii) Foreign Receivables. A list of account debtors of foreign
-------------------
Subsidiaries approved by the Agent as of the initial Borrowing Date
referenced in the definition of Eligible Accounts;
(xix) Consents. Certified copies of all documents evidencing any
--------
necessary corporate action, consents and governmental approvals (if any)
with respect to the Credit Documents or any other document provided herein;
(xx) Field Audit. A field audit from KPMG Peat Marwick;
-----------
(xxi) Certificate of Effectiveness. A certificate of effectiveness
----------------------------
of the Borrowers substantially in the form of Exhibit 4.1G;
(xxii) Other Documents. Such other documents as the Agent may
---------------
reasonably request; and
34
<PAGE>
(xxiii) TCB Releases. Confirmation from TCB that the Notes (as
------------
defined therein) under the TCB Credit Facility have been paid in full and
the release of all Liens to secure the TCB Credit Facility have been
released.
(b) The Initial Borrowing Date shall take place no later than June 30,
1994, and on the Initial Borrowing Date, the Term Loans shall be borrowed and
all legal matters incident to the execution and delivery of the Credit Documents
shall be satisfactory to the Lenders.
Section 4.2. All Borrowings. At the time of each Borrowing hereunder
--------------
(including the issuance of a Letter of Credit or an Agent Letter of Credit):
(a) Notices. In the case of a Borrowing, the Agent shall have received the
-------
Borrowing Request notice required by Section 2.5, in the case of the issuance of
any Letter of Credit or Agent Letter of Credit, the Agent shall have received a
duly completed Application for such Letter of Credit or Agent Letter of Credit
meeting the requirements of Section 2.2(c), and, in the case of an extension or
increase in the amount of a Letter of Credit or an Agent Letter of Credit, the
Agent shall have received a written request therefor in a form acceptable to the
Agent;
(b) Warranties True and Correct. Each of the representations and
---------------------------
warranties of Holdings, the Borrowers and their Subsidiaries set forth herein
and in the Credit Documents shall be true and correct in all material respects
as of the date of such new Borrowing, except as a result of the transactions
expressly permitted hereunder or except to the extent that any such
representation or warranty relates solely to an earlier date, in which case it
shall have been true and correct as of such earlier date or except as previously
disclosed in writing to the Lenders provided that no Default or Event of Default
shall have occurred as a result thereof;
(c) No Default. No Default or Event of Default shall have occurred and be
----------
continuing or would occur as a result of such Borrowing;
(d) New Litigation and Changes in Pending Litigation. Except as set forth
------------------------------------------------
in Schedule 5.4, no litigation (including, without limitation, derivative
actions), arbitration proceedings or governmental proceedings shall be pending
or known to be threatened against the Holdings, the Borrowers or any of their
Subsidiaries, which in the opinion of the Majority Lenders shall be likely to
have a Material Adverse Effect or materially impair the ability of Holdings, the
Borrowers or any of their Subsidiary Guarantors to perform their respective
Obligations under this Agreement, the Notes or the Credit Documents to which
they are a party; and no material development (whether or not disclosed) shall
have occurred in any litigation (including, without limitation, derivative
actions), arbitration proceedings or governmental proceedings so disclosed,
which in the opinion of the Majority Lenders is likely to have a Material
Adverse Effect or materially impair the ability of Holdings, the Borrowers or
any of their Subsidiary Guarantors to perform their Obligations under this
Agreement, the Notes or the Credit Documents to which they are a party;
(e) Regulation U; Other Laws. The Borrowings to be made by the Borrowers
------------------------
shall not result in any of the Borrowers or any Lender being in non-compliance
with or in violation of Regulation U, shall not be prohibited by any other legal
requirement (including Regulations
35
<PAGE>
G, T and X), and shall not otherwise subject the Lenders to a penalty or other
onerous conditions under or pursuant to any legal requirement; and
(f) Material Adverse Change. There shall have been no material adverse
-----------------------
change, in the opinion of the Majority Lenders, (i) in the business, assets,
properties, operations or condition (financial or otherwise) of any of the (a)
the Borrowers, taken as a whole, (b) Holdings, the Borrowers and their
Subsidiaries, taken as a whole, or (c) Holdings; (ii) affecting the rights and
remedies of the Lenders under and in connection with this Agreement, the Notes
and the Credit Documents; or (iii) in the ability of Holdings, the Borrowers or
any of their Subsidiary Guarantors to perform their Obligations under this
Agreement, the Notes or the other Credit Documents to which they are a party.
Each request for a Borrowing and each request for the issuance of, increase in
the amount of, or extension of the expiration date of, a Letter of Credit or
Agent Letter of Credit shall be deemed to be a representation and warranty by
the Borrowers on the date of such Borrowing, issuance of, increase in the amount
of, or extension of the expiration date of, such Letter of Credit or Agent
Letter of Credit as to the facts specified herein.
In the event that any of the conditions specified in Section 4.2(b) through (f)
are not satisfied, in connection with any requested continuance or conversion
into a Eurodollar Loan, the Borrowers may nonetheless convert or continue any
Eurodollar Loan into or as a Base Rate Loan, as applicable, subject to the
applicability of the provisions of Section 2.11 regarding default rates of
interest and so long as no Event of Default shall have occurred and be
continuing.
SECTION 5. REPRESENTATIONS AND WARRANTIES.
Each of the Borrowers and Holdings represents and warrants to each Lender
and the Agent as follows:
Section 5.1. Corporate Organization. (a) Holdings, the Borrowers and each
----------------------
of their Material Subsidiaries: (i) is a duly organized and existing corporation
in good standing under the laws of the jurisdiction of its organization; (ii)
has all necessary corporate power to own the property and assets it uses in its
business and otherwise to carry on its present business and the business it
currently proposes to transact; and (iii) is duly licensed or qualified and in
good standing in each jurisdiction in which the nature of the business
transacted by it or the nature of the property owned or leased by it makes such
licensing or qualification necessary and in which the failure to be so licensed
or qualified would have a Material Adverse Effect.
(b) As of the Initial Borrowing Date, Holdings has no Subsidiaries other
than the Borrowers and their Subsidiaries and the Borrowers have no Subsidiaries
other than those Subsidiaries listed on Schedule 5.1. Schedule 5.1 correctly
sets forth, as of the Initial Borrowing Date, the percentage ownership (direct
and indirect) of Holdings and the Borrowers in each class of capital stock of
each of its Subsidiaries and also identifies the direct owner thereof.
Section 5.2. Corporate Power and Authority. Each Credit Party has the
-----------------------------
corporate power and authority to execute, deliver and carry out the terms and
provisions of the Credit Documents to which it is a party and has taken all
necessary corporate action to authorize the execution,
36
<PAGE>
delivery and performance of such Credit Documents. Each Credit Party has duly
executed and delivered each Credit Document to which it is a party and each such
Credit Document constitutes the legal, valid and binding obligation of such
Credit Party enforceable in accordance with its terms, subject as to enforcement
only to bankruptcy, insolvency, reorganization, moratorium or other similar laws
affecting the enforcement of creditors' rights generally.
Section 5.3. No Violation. Neither the execution, delivery or performance
------------
by any Credit Party of the Credit Documents to which it is a party nor
compliance by it with the terms and provisions thereof, nor the consummation of
the transactions contemplated herein or therein, will (i) contravene any
applicable provision of any law, statute, rule or regulation, or any order,
writ, injunction or decree of any court or governmental instrumentality, (ii)
conflict with or result in any breach of any term, covenant, condition or other
provision of, or constitute a default under, or (other than pursuant to the
Security Documents) result in the creation or imposition of (or the obligation
to create or impose) any Lien other than any Permitted Lien as provided in
Section 6.16 upon any of the property or assets of Holdings, the Borrowers or
any of their Subsidiaries under the terms of any contractual obligation to which
Holdings, the Borrowers or any of their Subsidiaries is a party or by which they
or any of their properties or assets are bound or to which they may be subject
or (iii) violate or conflict with any provision of the certificate or articles
of incorporation or by-laws of Holdings, the Borrowers or any of their
Subsidiaries.
Section 5.4. Litigation. There are no actions, suits or proceedings
----------
pending or, to the knowledge of Holdings, the Borrowers or any of their
Subsidiaries, threatened, involving Holdings, the Borrowers or any of their
Subsidiaries (i) that are likely to have a Material Adverse Effect or (ii) that
could reasonably be expected to have a material adverse effect on the rights or
remedies of the Lenders or on the ability of any Credit Party to perform its
obligations to the Lenders under the Credit Documents except as set forth in
Schedule 5.4.
Section 5.5. Use of Proceeds; Margin Regulations. (a) The proceeds of
-----------------------------------
the Loans shall be used to (i) refinance outstandings under the TCB Credit
Facility, (ii) provide working capital, including the issuance of letters of
credit, and otherwise for general corporate purposes other than acquisitions,
(iii) fund up to $10,000,000 in the aggregate for acquisitions, and (iv) to fund
any required mandatory redemption of the Series A Convertible Preferred Stock of
Holdings pursuant to the existing terms thereof. If the Borrowers intend to use
any of the proceeds of Loans for the purpose described in (iv) above, the
Borrowers must give twenty (20) days' prior written notice thereof to the Agent
and include with such notice a pro forma Compliance Certificate concerning the
Fixed Charge Coverage Ratio, the Total Funded Debt to Total Capital Ratio and
Tangible Net Worth plus Subordinated Debt, all reflecting such anticipated
Borrowing and mandatory redemption.
(b) No proceeds of any Loan will be used to purchase or carry any "margin
stock" (as defined in Regulation U of the Board of Governors of the Federal
Reserve System) or to extend credit for the purpose of purchasing or carrying
any "margin stock."
Section 5.6. Investment Company Act. Neither Holdings, the Borrowers nor
----------------------
any of their Subsidiaries is an "investment company" or a company "controlled"
by an "investment company," within the meaning of the Investment Company Act of
1940, as amended.
37
<PAGE>
Section 5.7. Public Utility Holding Company Act. Neither Holdings, the
----------------------------------
Borrowers nor any of their Subsidiaries is a "holding company," or a "subsidiary
company" of a "holding company," or an "affiliate" of a "holding company" or of
a "subsidiary company" of a "holding company," within the meaning of the Public
Utility Holding Company Act of 1935, as amended.
Section 5.8. True and Complete Disclosure. All factual information
----------------------------
heretofore or contemporaneously furnished by Holdings, the Borrowers or any of
their Material Subsidiaries in writing to the Agent or any Lender in connection
with any Credit Document or any transaction contemplated therein is, and all
other such factual information hereafter furnished by any such Persons in
writing to the Agent or any Lender in connection herewith, any of the other
Credit Documents, the Loans or the Collateral will be, true and accurate in all
material respects on the date of such information and not incomplete by omitting
to state any material fact necessary to make such information not misleading at
such time in light of the circumstances under which such information was
provided.
Section 5.9. Financial Statements. The financial statements heretofore
--------------------
delivered to the Lenders (i) for each of Holdings' and the Borrowers' fiscal
years ending on or before December 31, 1993, have been prepared in accordance
with GAAP applied on a basis consistent, except as otherwise noted therein, with
that of the previous fiscal year, and (ii) for periods ending on or after March
31, 1994, will be prepared in accordance with GAAP applied on a basis consistent
with Holding's and the Borrowers' financial statements for the previous fiscal
quarter or year, as the case may be, except as otherwise noted therein. Each of
such annual and other financial statements fairly presents on a consolidated
basis the financial position of Holdings and the Borrowers, as of the dates
thereof, and the results of operations for the periods covered thereby, subject
in the case of interim financial statements, to normal year-end audit
adjustments and omission of certain footnotes as permitted by the SEC.
Holdings, the Borrowers and their Subsidiaries have no material contingent
liabilities or Indebtedness other than those disclosed in the financial
statements referred to in this Section 5.9.
Section 5.10. No Material Adverse Change. There has been no material
--------------------------
adverse change in the business, assets, properties, operations, or condition
(financial or otherwise) of any of (a) the Borrowers, taken as a whole, (b)
Holdings, the Borrowers and their Subsidiaries, taken as a whole, or (c)
Holdings since the most recent financial reports provided to the Lenders
pursuant to Section 6.6(i), (iii) or (iv), and solely for purposes of the
initial Borrowing hereunder, since March 31, 1994.
Section 5.11. Labor Controversies. There are no labor controversies
-------------------
pending or, to the best knowledge of Holdings or the Borrowers, threatened
against Holdings, the Borrowers or any of their Subsidiaries that could
reasonably be foreseen to have a Material Adverse Effect.
Section 5.12. Taxes. Holdings, the Borrowers and their Subsidiaries have
-----
filed all United States federal tax returns and all other tax returns required
to be filed, whether in the United States or in any foreign jurisdiction, and
have paid all taxes due, except such taxes, if any, as are being contested in
good faith and for which reserves have been provided in accordance with GAAP.
No tax liens have been filed and no claims are being asserted for taxes, which
liens or claims could reasonably be foreseen to have a Material Adverse Effect.
The charges, accruals and reserves on the books of Holdings, the Borrowers and
their Subsidiaries for taxes and other governmental charges have been determined
in accordance with GAAP.
38
<PAGE>
Section 5.13. ERISA. With respect to each Plan, Holdings, the Borrowers
-----
and their Subsidiaries have fulfilled their obligations under the minimum
funding standards of, and are in compliance in all material respects with ERISA,
and with the Code to the extent applicable to it, and have not incurred any
liability to the PBGC or a Plan under Title IV of ERISA other than a liability
to the PBGC for premiums under Section 4007 of ERISA except as described in
reasonable detail in Schedule 5.13. Neither Holdings, the Borrowers nor any of
their Subsidiaries has any contingent liability with respect to any post-
retirement benefits under a welfare plan as defined in ERISA, other than
liability for continuation coverage described in Part 6 of Title I of ERISA.
Section 5.14. Security Interests. On and after the Initial Borrowing
------------------
Date, each of the Security Documents creates, upon the filing of the Mortgages
or properly completed UCC financing statements in the appropriate jurisdictions
or possession of the Collateral by the Agent if necessary to perfect a security
interest in such Collateral, in favor of the Agent as security for the
Obligations, a valid and enforceable perfected security interest in and Lien on
all of the Collateral described therein, prior to the rights of all third
Persons and subject to no other Liens except Permitted Liens.
Section 5.15. Consents. At the time of consummation thereof, all consents
--------
and approvals of, and filings and registrations with, and all other actions of,
all governmental agencies, authorities or instrumentalities required to
consummate the Borrowings hereunder have been obtained or made and are or will
be in full force and effect.
Section 5.16. Capitalization. All outstanding shares of the Borrowers and
--------------
their Material Subsidiaries have been duly and validly issued, are fully paid
and nonassessable, except as disclosed on Schedule 5.16. Neither the Borrowers
nor any Material Subsidiary has outstanding any securities convertible into or
exchangeable for its capital stock or outstanding any rights to subscribe for or
to purchase, or any options for the purchase of, or any agreement providing for
the issuance (contingent or otherwise) of, or any calls, commitments or claims
of any character relating to, its capital stock.
Section 5.17. Intellectual Property. Holdings, the Borrowers and their
---------------------
Material Subsidiaries own or hold valid licenses to use all the material
patents, trademarks, permits, service marks, and trade names free of any
burdensome restrictions, that are necessary to the operation of the business of
Holdings, the Borrowers and their Material Subsidiaries as presently conducted.
Section 5.18. Compliance with Statutes, Etc. Holdings, the Borrowers and
-----------------------------
their Subsidiaries are in compliance with all applicable statutes, regulations
and orders of, and all applicable restrictions imposed by, all governmental
bodies, domestic and foreign, in respect of the conduct of their businesses and
the ownership of their properties, except such non-compliance as could not
reasonably be expected to, individually or in the aggregate, have a Material
Adverse Effect.
Section 5.19. Environmental Matters. Except as set forth in the
---------------------
Environmental Audit of Pilko & Associates, Inc., or as set forth on Schedule
5.19, Holdings, the Borrowers and their Subsidiaries have complied in all
material respects with, and on the date of each Borrowing will be in compliance
in all material respects with, all applicable Environmental Laws and the
requirements of any permits issued under such Environmental Laws. To the best
knowledge of
39
<PAGE>
Holdings and the Borrowers, there are no pending, past or threatened
Environmental Claims against Holdings, the Borrowers or any of their
Subsidiaries or any real property owned or operated by Holdings, the Borrowers
or any of their Subsidiaries except as listed on Schedule 5.19. To the best
knowledge of Holdings and the Borrowers, except as disclosed on Schedule 5.19,
there are no conditions or occurrences on any real property owned or operated by
Holdings, the Borrowers or any of their Subsidiaries or on any property
adjoining or in the vicinity of any such real property that would reasonably be
expected (i) to form the basis of an Environmental Claim against Holdings, the
Borrowers or any of their Subsidiaries or any such real property that
individually or in the aggregate would reasonably be expected to have a Material
Adverse Effect, or (ii) to cause any such real property that is Collateral to be
subject to any material restrictions on the ownership, occupancy, use or
transferability of such real property by Holdings, the Borrowers or any of their
Subsidiaries under any applicable Environmental Law.
(b) Except as disclosed on Schedule 5.19 and except as shall not be likely
to have a Material Adverse Effect or to materially impair the ability of
Holdings, the Borrowers or any of their Subsidiary Guarantors to perform their
respective Obligations under this Agreement, the Notes, or the Credit Documents
to which they are a party, to the best of Holdings' and the Borrowers' knowledge
(i) Hazardous Materials have not at any time been generated, used, treated or
stored on, or transported to or from, any real property owned or operated by
Holdings, the Borrowers or any of their Subsidiaries in a manner that has
violated or would reasonably be expected to violate any Environmental Law, and
(ii) Hazardous Materials have not at any time been released on or from any real
property owned or operated by Holdings, the Borrowers or any of their
Subsidiaries.
Section 5.20. Properties. All real property owned or leased by Holdings,
----------
the Borrowers or any of their Subsidiaries and mortgaged in favor of the Agent
for the benefit of the Lenders as of the Initial Borrowing Date, and the nature
of the interest therein, is correctly set forth in Schedule 5.20. Holdings, the
Borrowers and each of their Material Subsidiaries has good and marketable title
to, or a validly subsisting leasehold interest in, all material real properties
owned or leased by it, free and clear of all Liens other than Permitted Liens.
The locations of all inventory and equipment of Holdings, the Borrowers and the
Subsidiary Guarantors in the United States of America is correctly set forth in
Schedule 5.20.
Section 5.21. Existing Indebtedness. Schedule 5.21 contains a complete
---------------------
list of all Indebtedness (other than the Obligations hereunder and Indebtedness
permitted by Section 6.17(c) through (l)) of Holdings, the Borrowers and their
Subsidiaries on the Initial Borrowing Date after giving effect to the use of the
proceeds of the Loans made on the Initial Borrowing Date, in each case showing
the aggregate principal amount thereof and the name of the respective borrower
and any other entity which directly or indirectly guaranteed such Indebtedness.
Section 5.22. Subordinated Debt. The subordination provisions of the
-----------------
Subordinated Debt are enforceable against Tuboscope Vetco International Inc.,
Holdings and the holders thereof, and all Obligations of Tuboscope Vetco
International Inc. hereunder are within the definition of "Senior Indebtedness"
included in such subordination provisions and are senior in right of payment to
the Subordinated Debt.
40
<PAGE>
SECTION 6. COVENANTS.
Each of the Borrowers and Holdings covenants and agrees that, so long as
any Note, Letter of Credit, Agent Letter of Credit, Reimbursement Obligation or
any other Obligation is outstanding or any Commitment is available to or in use
by the Borrowers hereunder:
Section 6.1. Corporate Existence. Each of Holdings, the Borrowers and
-------------------
their Material Subsidiaries will preserve and maintain its corporate existence
except as otherwise expressly permitted herein and except that any Subsidiary
which is not a Subsidiary Guarantor or a direct foreign Subsidiary of any of the
Borrowers may be dissolved and/or liquidated.
Section 6.2. Maintenance. Each of Holdings, the Borrowers and their
-----------
Material Subsidiaries will maintain, preserve and keep its plants, properties
and equipment necessary to the proper conduct of its business in reasonably good
repair, working order and condition (normal wear and tear excepted) and will
from time to time make all reasonably necessary repairs, renewals, replacements,
additions and betterments thereto so that at all times such plants, properties
and equipment are reasonably preserved and maintained; provided, however, that
nothing in this Section 6.2 shall prevent Holdings, the Borrowers or any
Subsidiary from discontinuing the operation or maintenance of any such plants,
properties or equipment if such discontinuance is, in the judgment of Holdings,
the Borrowers or any Subsidiary, as applicable, desirable in the conduct of
their businesses and not materially disadvantageous to the Lenders.
Section 6.3. Taxes. Each of Holdings, the Borrowers and their Material
-----
Subsidiaries will duly pay and discharge all taxes, rates, assessments, fees and
governmental charges upon or against it or its properties before payment is
delinquent and before penalties accrue thereon, unless and to the extent that
the same is being contested in good faith and by appropriate proceedings and
reserves have been established in conformity with GAAP.
Section 6.4. ERISA. Each of Holdings, the Borrowers and their
-----
Subsidiaries will promptly pay and discharge all obligations and liabilities
arising under ERISA with respect to each Plan of a character which if unpaid or
unperformed might result in the imposition of a material Lien against any of
their properties or assets and will promptly notify the Agent of (i) the
occurrence of any reportable event (as defined in ERISA) relating to a Plan
(other than a multi-employer plan, as defined in ERISA, so long as the event
thereunder cannot reasonably be foreseen to have a material adverse effect on
any of Holdings or any of the Borrowers or their Subsidiaries), other than any
such event with respect to which the PBGC has waived notice by regulation, (ii)
receipt of any notice from PBGC of its intention to seek termination of any Plan
or appointment of a trustee therefor, (iii) its or any of its Subsidiaries'
intention to terminate or withdraw from any Plan, and (iv) the occurrence of any
event that could result in the incurrence of any material liability, fine or
penalty, or any material increase in the contingent liability of Holdings, the
Borrowers or any Subsidiary, in connection with any post-retirement welfare plan
benefit (as defined in ERISA).
Section 6.5. Insurance. Each of Holdings, the Borrowers and their
---------
Material Subsidiaries will insure, and keep insured, with responsible insurance
companies, all insurable property and assets owned by it of a character and to
the extent as is customarily maintained by well-insured companies similarly
situated and operating like property or assets (subject to self-insured
retentions), all of which policies shall name the Agent as loss payee and
provide that no policy
41
<PAGE>
shall terminate without at least thirty (30) days' advance written notice to the
Agent, all as reasonably acceptable to the Agent. Holdings, the Borrowers and
each Material Subsidiary will also insure employers' and public and product
liability risks with responsible insurance companies, all as reasonably
acceptable to the Agent. The Borrowers will on or before March 31st of each
calendar year and upon the request of the Agent, furnish a certificate from an
officer of the Borrowers setting forth the nature and extent of the insurance
maintained pursuant to this Section 6.5.
Section 6.6. Financial Reports and Other Information. (a) Holdings, the
---------------------------------------
Borrowers and their Subsidiaries will maintain a system of accounting in such
manner as will enable preparation of financial statements in accordance with
GAAP and will furnish to the Lenders and their respective authorized
representatives such information about the business and financial condition of
Holdings, the Borrowers and their Subsidiaries as any Lender may reasonably
request; and, without any request, will furnish to the Agent:
(i) on or before the last Business Day of each calendar month, a
monthly operating summary for the preceding calendar month setting forth
(w) a summary of the financial results for such month, including a
comparison to plan and the results for the same period in the prior fiscal
year, (x) a summary by geographic/product line, and (y) a fixed cost
summary, all substantially in the form of the Borrowers' current monthly
operating summary, and (z) a schedule of overdrafts, and including the
unaudited consolidated statement of operations and consolidated balance
sheet of Holdings, the Borrowers and their Subsidiaries as at the end of
such month;
(ii) on the Initial Borrowing Date and on or before the last Business
Day of each calendar month, a Borrowing Base Certificate substantially in
the form of Exhibit 6.6A hereto, completed with the information necessary
(A) to determine the Eligible Accounts, Eligible Inventory and Cash
Equivalents, and (B) to compute the Borrowing Base, all as of the last day
of the immediately preceding calendar month of the Borrowers;
(iii) within forty-five (45) days after the end of each of the first
three (3) fiscal quarters of each fiscal year of Holdings, the consolidated
and consolidating balance sheet of Holdings, the Borrowers and their
Subsidiaries as at the end of such fiscal quarter and the related
consolidated and consolidating statements of income and retained earnings
and of cash flows for such fiscal quarter and for the portion of the fiscal
year ended with the last day of such fiscal quarter, all of which shall be
in reasonable detail, and in the case of consolidated statements, in the
form filed with the SEC, and certified by the chief financial officer of
Holdings and the Borrowers that they fairly present the financial condition
of Holdings, the Borrowers and their Subsidiaries as of the dates indicated
and the results of their operations and changes in their cash flows for the
periods indicated and that they have been prepared in accordance with GAAP,
subject to normal year-end audit adjustments and omission of any footnotes
as permitted by the SEC;
(iv) within ninety (90) days after the end of each fiscal year of
Holdings, the consolidated and consolidating balance sheets of Holdings,
the Borrowers and their Subsidiaries as at the end of such fiscal year and
the related consolidated and consolidating statements of income and
retained earnings and of cash flows for such
42
<PAGE>
fiscal year and setting forth consolidated comparative figures for the
preceding fiscal year and comparable budgeted figures for such fiscal year
and certified in the case of the consolidating statements, by the chief
financial officer of Holdings and the Borrowers, to the effect that such
statements fairly present the financial condition of Holdings, the
Borrowers and their Subsidiaries as of the dates indicated and the results
of their operations and changes in their cash flows, and in the case of the
consolidated statements, audited by an independent nationally recognized
accounting firm and in the form filed with the SEC;
(v) as soon as available, but in no event later than January 15th of
each year, a preliminary projection, and no later than February 15th of
each year, a final projection of Holdings' consolidated balance sheet and
consolidated income, retained earnings and cash flows for its current
fiscal year showing such projected budget for each fiscal month of Holdings
ending during such year and for Holdings' fiscal year-to-date at the end of
each fiscal month; and
(vi) within ten (10) days after the sending or filing thereof, copies
of all financial statements, projections, documents and other
communications that Holdings sends to its stockholders or files with the
SEC or any similar governmental authority.
The Agent will forward promptly to the Lenders the information provided by the
Borrowers pursuant to (i) through (vi) above.
(b) Each financial statement furnished to the Lenders pursuant to
subsections (iii) and (iv) of Section 6.6(a) shall be accompanied by (A) a
written certificate signed by the Holdings' and the Borrowers' chief financial
officer, in his capacity as such, to the effect that (1) no Default or Event of
Default has occurred during the period covered by such statements or, if any
such Default or Event of Default has occurred during such period, setting forth
a description of such Default or Event of Default and specifying the action, if
any, taken by the Borrowers to remedy the same, and (ii) the representations and
warranties contained herein are true and correct in all material respects as
though made on the date of such certificate, except to the extent that any such
representation or warranty relates solely to an earlier date, in which case it
was true and correct as of such earlier date and except as otherwise described
therein, as a result of the transactions expressly permitted hereunder or as
previously disclosed to the Lenders, and (B) a Compliance Certificate in the
form of Exhibit 6.6(B) showing the Borrowers' compliance with the covenants set
forth herein.
(c) Each projection furnished to the Lenders pursuant to subsection (v) of
Section 6.6(a) shall be accompanied by a written certificate signed by Holdings'
and the Borrowers' chief financial officer, in his capacity as such, to the
effect that (A) it has been prepared on the basis of Holdings' and the
Borrowers' historical financial statements and records, and (B) it reflects the
reasonable assumptions of Holdings' and the Borrowers' management as to the
matters set forth therein.
(d) Promptly upon receipt thereof, Holdings and the Borrowers will provide
the Agent with a copy of each report or "management letter" submitted to
Holdings, the Borrowers or any of their Material Subsidiaries by its independent
accountants in connection with any annual, interim or special audit made by them
of the books and records of Holdings, the Borrowers or any of their Material
Subsidiaries.
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(e) Promptly after obtaining knowledge of any of the following, Holdings
and the Borrowers will provide the Agent with written notice in reasonable
detail of:
(i) any pending or threatened material Environmental Claim against
Holdings, the Borrowers or any of their Subsidiaries or any real property
owned or operated by Holdings, the Borrowers or any of their Subsidiaries;
(ii) any condition or occurrence on any real property owned or
operated by Holdings, the Borrowers or any of their Subsidiaries that
results in material noncompliance by Holdings, the Borrowers or any of
their Subsidiaries with any Environmental Law;
(iii) any condition or occurrence on any real property owned or
operated by Holdings, the Borrowers or any of their Subsidiaries that is
Collateral that could reasonably be anticipated to cause such real property
to be subject to any material restrictions on the ownership, occupancy, use
or transferability by Holdings, the Borrowers or any of their Subsidiaries,
as the case may be, of its interest in such real property under any
Environmental Law; and
(iv) the taking of any material removal or remedial action in response
to the actual or alleged presence of any Hazardous Material on any real
property owned or operated by Holdings, the Borrowers or any of their
Subsidiaries.
In addition, Holdings and the Borrowers shall provide the Agent with copies of
all Environmental Claims and responses thereto by Holdings, the Borrowers or any
of their Subsidiaries and any reports or data submitted to any governmental
agency relating to an Environmental Claim, and such detailed reports of and
material communications with any Person concerning any Environmental Claim as
may reasonably be requested by the Agent.
(f) The Borrowers will promptly (and in any event within five (5) Days
after an officer of either Holdings or the Borrowers has knowledge thereof) give
written notice to the Agent of: (i) the occurrence of any Mandatory Prepayment
event, Default, or Event of Default; (ii) any litigation or governmental
proceeding of the type described in Section 5.4; (iii) any circumstance that has
had or reasonably threatens a Material Adverse Effect; and (iv) any event which
would result in a breach of, or reasonably threatens a breach of, Sections 6.24,
6.25, 6.26 or 6.27.
Section 6.7. Lender Inspection Rights. Upon reasonable notice from the
------------------------
Agent or any Lender, Holdings and the Borrowers will permit the Agent or any
Lender (and such Persons as the Agent or such Lender may designate) during
normal business hours following reasonable notice to visit and inspect any of
the properties of Holdings, the Borrowers or any of their Subsidiaries, to
examine all of their books and records including, but not limited to, conducting
field audits to verify the Borrowing Base, to make copies and extracts
therefrom, and to discuss their respective affairs, finances and accounts with
their respective officers, employees and independent public accountants (and by
this provision Holdings and the Borrowers each authorizes such accountants to
discuss with the Agent and any Lender (and such Persons as the Agent or such
Lender may designate) the affairs, finances and accounts of Holdings, the
Borrowers and their Subsidiaries), all at such reasonable times and as often as
may be reasonably requested.
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Section 6.8. Conduct of Business. Except as expressly permitted herein,
-------------------
the Borrowers and their Material Subsidiaries will not engage in any line of
business other than the businesses they engage in as of the date hereof and
businesses and activities that provide products or services to customers in the
same or related industries as customers of the Borrowers or their Subsidiaries
on the date hereof, or that provide products or services based on technologies,
or improvements thereon used by the Borrowers or their Subsidiaries on the date
hereof. Except as expressly permitted herein, the Borrowers and their Material
Subsidiaries will not abandon any material line of business that they engage in
as of the date hereof. Holdings will engage in no business other than the
ownership of the Borrowers' capital stock.
Section 6.9. Fiscal Years and Quarters. Holdings will, for financial
-------------------------
reporting purposes, maintain for itself, the Borrowers and their Subsidiaries a
fiscal year that ends on December 31 of each year and fiscal quarters that end
on March 31, June 30, September 30 and December 31 of each year.
Section 6.10. Interest Rate Protection. The Borrowers will no later than
------------------------
six (6) months following the Initial Borrowing Date enter into one or more
Interest Rate Protection Agreements providing the Borrowers protection against
increases in interest rates on at least $15,000,000 of the Term Loans and
maintain such protection for a period of not less than three (3) years. All of
the Borrowers' rights under all Interest Rate Protection Agreements shall be
pledged to the Lenders under the Security Agreements delivered by the Borrowers.
The Borrowers shall notify the Agent in writing of the proposed terms and
conditions and proposed counterparty of any such Interest Rate Protection
Agreement, and the Agent shall have the right of last refusal to elect to enter
into an Interest Rate Protection Agreement on the same terms and conditions and
shall notify the Borrowers in writing within one (1) Business Day of any such
election by it. If the Agent or a Lender is the counterparty to an Interest
Rate Protection Agreement, any obligations of the Borrowers thereunder shall be
secured pari passu by the Collateral and cross defaulted.
Section 6.11. Pledge of After Acquired Real Property. If at any time
--------------------------------------
following the Effective Date, (a) the Borrowers or any of their domestic
Subsidiaries acquire fee simple title to any real property of any nature
whatsoever located in the United States of America having a value in excess of
$1,000,000 not pledged to the Agent under any Security Document, the Borrowers
or such Subsidiary shall give written notice of such acquisition to the Agent
within ten (10) days thereof and, upon the request of the Agent, promptly grant
to the Agent for the ratable benefit of the Lenders a first priority Lien,
subject to Permitted Liens, in such property as Collateral for the Obligations
pursuant to documentation reasonably satisfactory to the Agent and take any
other actions the Agent may reasonably require to ensure the priority and
perfection of such Lien.
Section 6.12. New Subsidiaries. Holdings and the Borrowers shall cause
----------------
any direct or indirect domestic Subsidiary of either Holdings or any of the
Borrowers (i) which Subsidiary is formed or acquired after the Effective Date
and which is a Material Subsidiary, or (ii) which Subsidiary becomes a Material
Subsidiary after the Effective Date to become a Subsidiary Guarantor with
respect to, and jointly and severally liable with all other Guarantors for, all
the obligations under this Agreement and the Notes within thirty (30) days
following such formation or acquisition. Holdings or the Borrowers, as the case
may be, shall pledge (i) all of the capital stock of any such new domestic
Material Subsidiary or (ii) sixty-six percent (66%) of any direct
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foreign Subsidiary of Holdings or any of the Borrowers which is formed or
acquired after the Effective Date and which is a direct Material Subsidiary or
which becomes a direct Material Subsidiary after the Effective Date pursuant to
a pledge agreement substantially in the form of the applicable Pledge Agreement,
and any certificates representing such stock, together with stock powers duly
executed in blank, or such other documentation as necessary to perfect the
pledge of such stock shall be delivered to the Agent. In addition, each such
new domestic Material Subsidiary shall execute and deliver documentation of the
type described in Section 4.1 (ii), (iii) and (iv), as applicable, within thirty
(30) days following such formation or acquisition.
Section 6.13. Limitation on Certain Restrictions on Subsidiaries;
---------------------------------------------------
Dividends; Negative Pledges. (a) Holdings, the Borrowers and their Subsidiaries
- ---------------------------
will not directly or indirectly, create or otherwise permit to exist or become
effective any restriction on the ability of any Subsidiaries of the Borrowers to
(i) pay dividends or make any other distributions on its capital stock or any
other interest or participation in its profits owned by the Borrowers or pay any
Indebtedness owed to the Borrowers, or (ii) make loans or advances to the
Borrowers or any of their Subsidiaries, except for restrictions existing under
or by reason of applicable law or this Agreement and the other Credit Documents
and except for any restrictions existing in connection with any Subsidiary
acquired by any of Holdings or the Borrowers after the Initial Borrowing Date,
in which case Holdings or the Borrowers, as the case may be, shall either
promptly cause the removal or release of any such restrictions or not advance
the proceeds of any Revolving Loan to such Subsidiary.
(b) None of Holdings or the Borrowers shall redeem, purchase or otherwise
acquire any shares of its capital stock other than as permitted herein, or
declare or pay any dividends on its capital stock, make any distribution or
payment to stockholders, or set aside any funds for such purpose, and not
prepay, pay, purchase or redeem, and not permit any of its Subsidiaries to
prepay, pay, purchase or redeem, any of the Subordinated Debt or set-off any
amounts against any of the Subordinated Debt except: (i) the Borrowers may
make, declare and pay dividends to Holdings, in such amounts and at such times
as required to pay the presently provided for dividends on the issued and
outstanding Series A Convertible Preferred Stock of Holdings, and to redeem such
preferred stock if necessary under the presently existing mandatory redemption
provisions thereof, so long as no Default or Event of Default shall have
occurred and be continuing or would occur as a result of such payment, and
Holdings may in turn pay such dividends to the holder thereof; (ii) any
Subsidiary of the Borrowers may declare and pay dividends or make distributions
to the Borrowers and make payments to the Borrowers on any obligations or
liabilities, including Indebtedness, owing to the Borrowers; (iii) scheduled
interest payments may be made on the Subordinated Debt and the Subordinated Debt
may be prepaid as provided in Section 6.23 so long as no Default or Event of
Default shall have occurred and be continuing or would occur as a result of such
payment; (iv) the Borrowers may make payments to Holdings for all reasonable
amounts owing to Holdings in the ordinary course of business for the Borrowers'
and their Subsidiaries' pro rata share of such ordinary course items as
insurance, taxes and professional fees and expenses; provided, that such
ordinary course items are incurred in compliance with the arm's-length
requirements of Section 6.21 and upon the reasonable request of the Agent, the
Borrowers shall provide calculations in reasonable detail setting forth such
ordinary course items; (v) capital stock of Holdings may be purchased (or the
purchase thereof funded) or otherwise acquired by any of Holdings, the Borrowers
or their Subsidiaries for any Code Section 401(K) plan, Code Section 423 plan or
Plan of Holdings, the Borrowers or any of their Subsidiaries so long as no
Default or Event of Default shall have occurred and be continuing or would occur
as a result of such payment; and (vi) Holdings may redeem,
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purchase or otherwise acquire shares of its capital stock, or set aside funds
for such purpose, so long as the funds used are generated from a source other
than the Borrowers and their Subsidiaries.
(c) Holdings, the Borrowers and their Subsidiaries shall not enter into any
agreement other than this Agreement and the Credit Documents prohibiting the
creation or assumption of any Lien upon its properties, revenues or assets,
whether now owned or hereafter acquired (except in connection with any Permitted
Liens described in Section 6.16(e), (f), (g) or (j)), or prohibiting or
restricting the ability of Holdings, the Borrowers or any Subsidiary to amend or
otherwise modify this Agreement or any Credit Document.
Section 6.14. Restrictions on Fundamental Changes. Neither Holdings, the
-----------------------------------
Borrowers nor any of their Subsidiaries shall be a party to any merger into or
consolidation with, or purchase or otherwise acquire all or substantially all of
the assets or stock of, any other Person, or sell all or substantially all of
its assets or stock, except:
(a) Holdings, the Borrowers or any of their Subsidiaries may merge into, or
consolidate with, or purchase or otherwise acquire all or substantially all of
the assets or stock of any other Person or sell all or substantially all of
their assets or stock with the prior written consent of the Majority Lenders;
(b) Holdings, the Borrowers or any of their Subsidiaries may merge into, or
consolidate with, or purchase or otherwise acquire all or substantially all of
the assets or stock of any other Person if upon the consummation of any such
merger, consolidation, purchase or acquisition, (i) Holdings, such Borrower or
such Subsidiary is the surviving corporation to any such merger or
consolidation, (ii) Holdings, such Borrower or any such domestic Subsidiary
complies with Sections 6.11 and 6.12 to the extent applicable, and (iii) no
Default or Event of Default shall have occurred and be continuing or would
otherwise be existing as a result of such merger, consolidation, purchase or
acquisition;
(c) any of the Borrowers may merge into, or consolidate with, or purchase
or otherwise acquire all or substantially all of the assets or stock of or sell
all or substantially all of their assets or stock to, any other Borrower; any of
the Borrowers may purchase or otherwise acquire all or substantially all of the
stock or assets of, or otherwise acquire by merger or consolidation, any
Subsidiary; and any of the Borrowers' Subsidiaries may merge into, or
consolidate with, or purchase or otherwise acquire all or substantially all of
the assets or stock of or sell all or substantially all of their assets or stock
to, any other Subsidiary so long as (i) Sections 6.11 and 6.12 are complied with
to the extent applicable and (ii) no Default or Event of Default shall have
occurred and be continuing or would otherwise be existing after or result from
such merger, consolidation, purchase or acquisition; provided, that, (x) no
indirect foreign Subsidiary may purchase or otherwise acquire all or
substantially all of the assets or stock of any Subsidiary other than another
indirect foreign Subsidiary, or otherwise be the surviving corporation of a
merger or consolidation with any other Subsidiary unless the merger or
consolidation is with another indirect foreign Subsidiary; and (y) no domestic
Material Subsidiary may sell all or substantially all of its assets to a foreign
Subsidiary, or merge into or consolidate with any foreign Subsidiary unless the
domestic Material Subsidiary shall be the surviving corporation;
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(d) Holdings or any Borrower may merge into or consolidate with or purchase
or otherwise acquire all or substantially all of the assets or stock of any
other Person (i) if the surviving entity has a rating of at least BBB+ by S&P
and at least Baal by Moody's and not be under a credit watch for a downgrade to
a lower rating than such rating, (ii) if the surviving entity assumes all
Obligations of Holdings or the Borrower, as applicable, under this Agreement and
the relevant Credit Documents and the Agent shall have received documentation
evidencing such assumption duly executed by the surviving entity in form and
substance reasonably satisfactory to the Agent, and (iii) no Default or Event of
Default shall have occurred and be continuing or would otherwise be existing as
a result of such transaction;
(e) any majority ownership of the Borrowers or any Subsidiary in a foreign
joint venture or foreign Subsidiary may decrease to a minority ownership as
necessary to comply with any foreign law or other requirements to doing business
in such foreign jurisdiction;
(f) acquisitions permitted in Section 6.18(i); and
(g) the Transfer of the stock or assets of TVIES and any other Transfers
permitted hereunder.
Except as otherwise permitted in this Section 6.14, (i) Holdings shall not
issue, sell or dispose of any capital stock of the Borrowers and (ii) the
Borrowers and their Subsidiaries shall not issue, sell or dispose of any capital
stock of any Subsidiary unless the Net Cash Proceeds are made as a prepayment of
the Term Loans pursuant to Section 2.10. Holdings may issue additional capital
stock so long as no dividends are required to be paid on such capital stock and
so long as there is no mandatory redemption of any such stock before the
Maturity Date of the Tranche B Term Loan.
Section 6.15. Use of Property and Facilities; Environmental, Health and
---------------------------------------------------------
Safety Laws. Holdings, the Borrowers and their Subsidiaries shall comply in all
- -----------
material respects with all Environmental Laws applicable to or affecting the
properties or business operations of Holdings, the Borrowers or any Subsidiary.
Section 6.16. Liens. Holdings, the Borrowers and their Subsidiaries shall
-----
not create, incur, assume or suffer to exist any Lien of any kind on any
property or asset of any kind of Holdings, any of the Borrowers or any
Subsidiary, except the following (collectively, the "Permitted Liens"):
(a) Liens arising in the ordinary course of business by operation of law in
connection with worker's compensation, unemployment insurance, old age benefits,
social security obligations, taxes, assessments, statutory obligations or other
similar charges, good faith deposits, pledges or other Liens in connection with
bids, performance bonds, contracts or leases to which Holdings, the Borrowers or
the Subsidiary is a party or other deposits required to be made in the ordinary
course of business; provided, that in each case the obligation secured is not
for Indebtedness and is not overdue or, if overdue, is being contested in good
faith by appropriate proceedings and reserves in conformity with GAAP have been
provided therefor;
(b) mechanics', workmen's, materialmen's, landlords', carriers' or other
similar Liens arising in the ordinary course of business (or deposits to obtain
the release of such Liens) related to obligations not due or, if due, that are
being contested in good faith by appropriate proceedings and reserves in
conformity with GAAP have been provided therefor;
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(c) Liens for taxes or assessments or other government charges or levies
not yet due or which are being contested in good faith by appropriate
proceedings and reserves in conformity with GAAP have been provided therefor;
(d) Liens arising out of judgments or awards against Holdings, the
Borrowers or any of their Subsidiaries, or in connection with surety or appeal
bonds or the like in connection with bonding such judgments or awards, the time
for appeal from which or petition for rehearing of which shall not have expired
or which Holdings, the Borrowers or such Subsidiary shall be prosecuting on
appeal or proceeding for review, and for which it shall have obtained a stay of
execution or the like pending such appeal or proceeding for review; provided,
that the aggregate amount of uninsured or underinsured liabilities (including
interest, fees and penalties, if any) of Holdings, the Borrowers and the
Subsidiaries secured by such Liens shall not exceed $1,000,000 at any one time
outstanding and provided further that there is adequate assurance, in the sole
discretion of the Majority Lenders that the insurance proceeds attributable
thereto shall be paid promptly upon the expiration of such time period or
resolution of such proceeding if necessary to remove such Liens;
(e) Liens securing Indebtedness permitted by Sections 6.17(g) or (l);
(f) Liens on property existing at the time such property is acquired by
Holdings, the Borrowers or any Subsidiary and not created in contemplation of
such acquisition;
(g) Liens existing on the date hereof and listed on Schedule 6.16;
(h) any extension, renewal or replacement (or successive extensions,
renewals or replacements) in whole or in part of any Lien referred to in the
foregoing subsections (a) through (g), provided, however, that the principal
amount of Indebtedness secured thereby does not exceed the principal amount
secured at the time of such extension, renewal or replacement, and that such
extension, renewal or replacement is limited to the property already subject to
the Lien so extended, renewed or replaced;
(i) Liens on property securing Indebtedness aggregating no greater than
$100,000, with no one Lien securing Indebtedness in an amount of greater than
$50,000, provided the Borrowers cause the release or bonding around of any such
Liens within thirty (30) days of the attachment of any such Lien;
(j) Liens created by the Security Documents;
(k) rights reserved to or vested in any municipality or governmental,
statutory or public authority by the terms of any right, power, franchise,
grant, license or permit, or by any provision of law, to terminate such right,
power, franchise, grant, license or permit or to purchase, condemn, expropriate
or recapture or to designate a purchaser of any of the property of a Person;
(l) rights reserved to or vested in any municipality or governmental,
statutory or public authority to control, regulate or use any property of a
Person;
(m) rights of a common owner of any interest in property held by a Person
and such common owner as tenants in common or through other common ownership;
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(n) encumbrances (other than to secure the payment of Indebtedness),
easements, restrictions, servitudes, permits, conditions, covenants, exceptions
or reservations in any property or rights-of-way of a Person for the purpose of
roads, pipelines, transmission lines, transportation lines, distribution lines,
removal of gas, oil, coal, metals, steam, minerals, timber or other natural
resources, and other like purposes, or for the joint or common use of real
property, rights-of-way, facilities or equipment, or defects, irregularity and
deficiencies in title of any property or rights-of-way;
(o) zoning, planning and environmental laws and ordinances and municipal
regulations;
(p) financing statements filed by lessors of Property (but only with
respect to the Property so leased);
(q) Liens of no greater than $25,000 in the aggregate on the assets (other
than Collateral) of any Subsidiary; and
(r) rights of lessees of equipment owned by Holdings, any of the Borrowers
or any of their Subsidiaries.
Section 6.17. Indebtedness. Holdings, the Borrowers and their
------------
Subsidiaries shall not contract, assume or suffer to exist any Indebtedness,
except:
(a) Indebtedness under the Credit Documents;
(b) existing Indebtedness outstanding on the Initial Borrowing Date and
listed on Schedule 5.21, and any subsequent extensions, renewals or refinancings
thereof so long as such Indebtedness is not increased in amount, the maturity
date thereof is not made earlier in time, the interest rate per annum applicable
thereto is not increased, any amortization of principal thereunder is not
shortened and the payments thereunder are not increased;
(c) the Subordinated Debt and any guaranty of Holdings of the Subordinated
Debt so long as any such guaranty shall be unsecured;
(d) Indebtedness under any Interest Rate Protection Agreements entered into
to protect the Borrowers against fluctuations in interest rates on Obligations
under the Loans;
(e) Indebtedness incurred in connection with the Liens permitted by Section
6.16;
(f) Capitalized Lease Obligations;
(g) purchase money Indebtedness on assets acquired, but only if such
Indebtedness does not exceed eighty percent (80%) of the purchase price of such
assets and the aggregate amount of such Indebtedness does not exceed $200,000 at
any one time outstanding;
(h) unsecured intercompany loans and advances to any of the Borrowers or
their Subsidiaries, and unsecured intercompany loans from any of such
Subsidiaries to any of the Borrowers or any other Subsidiaries except as
expressly restricted hereunder;
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(i) Indebtedness under unsecured foreign exchange futures agreements,
arrangements or options designed to protect against fluctuations in currency
exchange rates from time to time entered into in accordance with customary
industry practice;
(j) Indebtedness under unsecured overdraft facilities; provided, that the
total amount of such Indebtedness shall not exceed $8,000,000 at any time
outstanding, and provided further that the amount of such Indebtedness under all
facilities other than the Saudi Arabian facility shall not exceed $5,000,000 at
any time outstanding;
(k) other unsecured Indebtedness not otherwise covered by this Section 6.17
not to exceed $10,000,000 at any time outstanding; provided, that the amount of
such Indebtedness incurred by the Borrowers and their domestic Subsidiaries
shall not exceed the total amount of $3,000,000 at any time outstanding and the
amount of such Indebtedness incurred by the foreign Subsidiaries of the
Borrowers shall not exceed the total amount of $7,000,000 at any time
outstanding; and
(l) Indebtedness not to exceed the total aggregate amount of $5,000,000
during the period any of the Loans are outstanding incurred to effectuate one or
more acquisitions by any of the Borrowers or their Subsidiaries, which
Indebtedness shall be unsecured except for any Liens on real property owned by
any foreign Subsidiary.
Section 6.18. Advances, Investments and Loans. Holdings, the Borrowers
-------------------------------
and their Subsidiaries shall not lend money or make advances to any Person, or
purchase or acquire any stock, obligations or securities of, or any other
interest in, or make any capital contribution to, any Person except:
(a) investments in Cash Equivalents and deposit accounts;
(b) receivables owing to Holdings, the Borrowers or a Subsidiary created or
acquired in the ordinary course of business and payable on customary trade terms
of the Borrowers or such Subsidiary and in compliance with the arm's-length
requirements of Section 6.21;
(c) investments (including debt obligations) received in connection with
the bankruptcy or reorganization of suppliers and customers and in settlement of
delinquent obligations of, and other disputes with, customers and suppliers
arising in the ordinary course of business;
(d) Interest Rate Protection Agreements entered into in compliance with
Section 6.17(d);
(e) deposits made in the ordinary course of business consistent with past
practices to secure the performance of leases;
(f) unsecured intercompany loans and advances to any of the Borrowers or
their Subsidiaries, and unsecured intercompany loans from any of such
Subsidiaries to any of the Borrowers or their Subsidiaries except as expressly
restricted hereunder;
(g) loans and advances by the Borrowers and their Subsidiaries to employees
of Holdings, the Borrowers and their Subsidiaries for (i) short term loans in an
aggregate amount
51
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of no greater than $100,000 at any one time outstanding and in an amount no
greater than $5,000 for any Person, and (ii) moving and travel expenses and
other similar expenses, in each case incurred in the ordinary course of
business;
(h) advances and investments in an aggregate sum of up to $10,000,000 for
acquisitions provided in Section 5.5 (iii) by any of the Borrowers or any of the
Subsidiary Guarantors or any of the direct foreign Subsidiaries of Holdings or
any of the Borrowers; and advances and investments in an aggregate sum of up to
$5,000,000 for any other acquisitions with Indebtedness incurred pursuant to
Section 6.17(l);
(i) joint ventures between any foreign Subsidiary of the Borrowers and any
other Person;
(j) the purchase of stock in, or an investment by a foreign Subsidiary of
the Borrowers in, an insurance company for the purpose of obtaining credit and
political risk insurance for export sales;
(k) the purchase or acquisition of stock in Holdings for a Code Section
401K plan, Code Section 423 plan or Plan of Holdings, any of the Borrowers or
any of their Subsidiaries; and
(l) as permitted by Section 6.13 or 6.14.
Section 6.19. Modifications of Corporate Documents. Neither Holdings, the
------------------------------------
Borrowers nor any of their Subsidiaries shall amend, modify or change in any way
materially adverse to the interests of the Lenders, its Certificate or Articles
of Incorporation or by-laws, or any agreement entered into by it related to its
capital stock (including any shareholders' agreement), or enter into any new
agreement related to its capital stock; provided, that Holdings may adopt poison
pill provisions in the exercise of its business judgment. Neither Holdings or
the Borrowers shall amend or modify, or permit the amendment or modification of,
any provision of the Subordinated Debt or Holdings' guaranty of the Subordinated
Debt in any way adverse to the interests of the Lenders.
Section 6.20. Transfer of Assets. Holdings, the Borrowers and their
------------------
Subsidiaries shall not permit any Transfer of an asset except:
(a) the Transfer of inventory and mill equipment in the ordinary course of
business;
(b) the discounting and sale of trade accounts receivable of foreign
account debtors of the Borrowers and their Subsidiaries consistent with the
Borrowers' and their Subsidiaries' past practice and in the ordinary course of
their businesses;
(c) the retirement or replacement of assets in the ordinary course of
business;
(d) the Transfer of any assets among Holdings, any of the Borrowers or any
Subsidiary of the Borrowers, provided, that, except as otherwise permitted
hereunder (i) a domestic Subsidiary may not Transfer any assets to a foreign
Subsidiary, except for any obsolete assets or assets not used by such domestic
Subsidiary and which assets shall be used by the foreign Subsidiary in the
ordinary course of its business; and (ii) a direct Material Subsidiary
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of any of the Borrowers may not Transfer any assets to a foreign Subsidiary
which is not a direct Material Subsidiary of any of the Borrowers, except for
any assets to be used by such indirect foreign Subsidiary in the ordinary course
of its business and as advisable to perform a contract or services in a
particular geographical area;
(e) the Transfer of the stock or assets of TVIES;
(f) any Transfer permitted by Section 6.14 or 6.23;
(g) the Transfers of any assets not otherwise covered by this Section 6.20
generating Net Cash Proceeds of up to an aggregate of $1,000,000 per fiscal
year; provided, that Transfers of assets generating Net Cash Proceeds of an
aggregate amount greater than $1,000,000 per fiscal year may be made so long as
a mandatory prepayment of such Net Cash Proceeds is made pursuant to the
provisions of Section 2.10;
(h) the sale and license back of licenses, patents or other intellectual
property; and
(i) the Liens permitted by Section 6.16.
Section 6.21. Transactions with Affiliates. Except as otherwise
----------------------------
specifically permitted herein, Holdings, the Borrowers and their Subsidiaries
shall not enter into or be a party to any material transaction or arrangement
with any Affiliate of such Person, including without limitation, the purchase
from, sale to or exchange of property with, any merger or consolidation with or
into, or the rendering of any service by or for, any Affiliate, except pursuant
to the reasonable requirements of the Borrowers' or such Subsidiary's business
and upon fair and reasonable terms no less favorable to the Borrowers or such
Subsidiary than would be able to be obtained in a comparable arm's-length
transaction with a Person other than an Affiliate.
Section 6.22. Compliance with Laws. Without limiting any of the other
--------------------
covenants of Holdings or the Borrowers in this Section 6, Holdings, the
Borrowers and their Subsidiaries shall conduct their business and otherwise be,
in compliance with all applicable laws, regulations, ordinances and orders of
any governmental or judicial authorities; provided, however, that this Section
6.22 shall not require Holdings, the Borrowers or any Subsidiary to comply with
any such law, regulation, ordinance or order if (x) it shall be contesting such
law, regulation, ordinance or order in good faith by appropriate proceedings and
reserves in conformity with GAAP have been provided therefor, or (y) the failure
to comply therewith would not, in the aggregate, have a Material Adverse Effect.
Section 6.23. Transfer of Businesses. Notwithstanding anything herein to
----------------------
the contrary, Holdings, the Borrowers and their Subsidiaries, as the case may
be, may Transfer any segment of their businesses generating Net Cash Proceeds in
excess of $100,000,000; provided, however, (a) the Net Cash Proceeds are in an
amount sufficient (i) to pay in full the then outstanding amounts under the Term
Loans and the Subordinated Debt, and (ii) pay any outstandings under the
Revolving Loan in an amount greater than $15,000,000; and (b) the Borrowing Base
at such time and thereafter shall be in an amount sufficient to support any
remaining outstanding Revolving Obligations.
Section 6.24. Interest Coverage Ratio. The Borrowers will not permit the
-----------------------
Interest Coverage Ratio as of the end of any fiscal quarter to be less than 2:00
to 1:00.
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Section 6.25. Fixed Charge Coverage Ratio. The Borrowers will not permit
---------------------------
the Fixed Charge Coverage Ratio as of the end of any fiscal quarter to be less
than 1:25 to 1:00.
Section 6.26. Total Funded Debt to Total Capital Ratio. The Borrowers
----------------------------------------
will as of the end of each calendar month during each of the periods set forth
below maintain a ratio, expressed as a percentage, of Total Funded Debt to Total
Capital of no greater than the ratio set forth opposite each such period:
Period Ratio
------ -----
From Initial Borrowing Date to and including March 30, 1995 55%
From March 31, 1995 to and including June 29, 1995 53%
From June 30, 1995 to and including September 29, 1995 52%
From September 30, 1995 to and including December 30, 1995 51%
From December 31, 1995 to and including March 30, 1996 50%
Remainder of 1996 46%
1997 43%
1998 40%
1999 40%
Section 6.27. Tangible Net Worth Plus Subordinated Debt. The Borrowers
-----------------------------------------
will as of the end of each calendar month maintain a Tangible Net Worth plus
Subordinated Debt of not less than $80,000,000, as adjusted each year beginning
January 1, 1995, by adding fifty percent (50%) of the cumulative positive
Consolidated Net Income, if any, of Holdings, the Borrowers and their
Subsidiaries from January 1, 1994 to December 31, 1994, and for each year
thereafter.
SECTION 7. EVENTS OF DEFAULT AND REMEDIES.
Section 7.1. Events of Default. Any one or more of the following shall
-----------------
constitute an Event of Default:
(a) default in the payment of the principal amount of any Loan, any
Reimbursement Obligation, any interest thereon or any fees payable hereunder
within five (5) days following the date when due;
(b) default in the observance or performance of any covenant set forth in
Sections 6.13, 6.14, 6.20, and 6.24-6.27;
(c) any event of default or default described in a Security Document other
than any Events of Default specifically provided in this Section 7.1 shall occur
and remain unremedied after any applicable grace period therefor, or if no grace
period is provided therein, the applicable grace period for purposes hereof
shall be thirty (30) days following notice to the Borrowers by the Agent of the
occurrence of such event of default or default;
(d) default in the observance or performance of any provision hereof or of
any other Credit Document not mentioned in (a), (b) or (c) above, which is not
remedied within thirty (30) days after notice thereof to the Borrowers by the
Agent;
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(e) any representation or warranty made herein or in any other Credit
Document by Holdings, any of the Borrowers or any Subsidiary proves untrue in
any material respect as of the date of the issuance or making, or deemed making
or issuance, thereof;
(f) default occurs in the payment when due of Indebtedness in an aggregate
principal amount of $1,000,000 or more of Holdings, the Borrowers or any
Subsidiary after any applicable grace period therefor, and such default
continues for a period of time sufficient to permit the holder or beneficiary of
such Indebtedness, or a trustee therefor, to cause the acceleration of the
maturity of any such Indebtedness or any mandatory unscheduled prepayment,
purchase, or other early funding thereof;
(g) Holdings, any of the Borrowers or any Material Subsidiary (i) has
entered involuntarily against it an order for relief under the United States
Bankruptcy Code or a comparable action is taken under any bankruptcy or
insolvency law of another country or political subdivision of such country, (ii)
does not pay, or admits its inability to pay, its debts generally as they become
due, (iii) makes an assignment for the benefit of creditors, (iv) applies for,
seeks, consents to, or acquiesces in, the appointment of a receiver, custodian,
trustee, examiner, liquidator or similar official for it or any substantial part
of its property, (v) institutes any proceeding seeking to have entered against
it an order for relief under the United States Bankruptcy Code or any comparable
law, to adjudicate it insolvent, or seeking dissolution, winding up,
liquidation, reorganization, arrangement, adjustment or composition of it or its
debts under any law relating to bankruptcy, insolvency or reorganization or
relief of debtors or fails to file an answer or other pleading denying the
material allegations of any such proceeding filed against it, (vi) makes any
board of directors resolution in direct furtherance of any matter described in
clauses (i)-(v) above, or (vii) fails to contest in good faith any appointment
or proceeding described in Section 6.1(g);
(h) a custodian, receiver, trustee, examiner, liquidator or similar
official is appointed for Holdings, any of the Borrowers or any Material
Subsidiary or any substantial part of its property, or a proceeding described in
Section 6.1(f)(v) is instituted against Holdings, any of the Borrowers or any
Material Subsidiary, and such appointment continues undischarged or such
proceeding continues undismissed or unstayed for a period of sixty (60) days;
(i) Holdings, any of the Borrowers or any Subsidiary fails within sixty
(60) days (or such earlier date as any steps to execute on such judgment or
order take place) to pay, bond or otherwise discharge any judgment or order for
the payment of money in excess of $1,000,000, which is not stayed on appeal or
otherwise being appropriately contested in good faith in a manner that stays
execution;
(j) Holdings, any of the Borrowers or any Subsidiary fails to pay when due
an amount aggregating in excess of $1,000,000 that it is liable to pay to the
PBGC or to a Plan under Title IV of ERISA; or a notice of intent to terminate a
Plan having Unfunded Vested Liabilities of any of Holdings, any of the Borrowers
or any of their Subsidiaries in excess of $1,000,000 (a "Material Plan") is
filed under Title IV of ERISA; or the PBGC institutes proceedings under Title IV
of ERISA to terminate or to cause a trustee to be appointed to administer any
Material Plan or a proceeding is instituted by a fiduciary of any Material Plan
against any of Holdings, any Borrower or any Subsidiary to collect any liability
under Section 515 or 4219(c)(5) of ERISA and such proceeding is not dismissed
within thirty (30) days
55
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thereafter; or a condition exists by reason of which the PBGC would be entitled
to obtain a decree adjudicating that any Material Plan must be terminated;
(k) any Credit Party, any Person acting on behalf of a Credit Party, or any
governmental authority challenges the validity of any Credit Document or such
Credit Party's obligations thereunder or any Credit Document ceases to be in
full force and effect or ceases to give to the Agent and the Lenders the Liens,
rights, and powers purported to be granted in their favor thereby; or
(l) any event of default or default described in any Interest Rate
Protection Agreement or futures agreement permitted pursuant to Section 6.17(j)
with any Lender shall occur after any applicable grace period therefor.
Section 7.2. Non-Bankruptcy Defaults. When any Event of Default other
-----------------------
than those described in subsections (f) or (g) of Section 7.1 has occurred and
is continuing, the Agent shall, by notice to the Borrowers: (a) if so directed
by the Majority Lenders, terminate the remaining Commitments and all other
obligations of the Lenders hereunder on the date stated in such notice (which
may be the date thereof); (b) if so directed by the Majority Lenders, declare
the principal of and the accrued interest on all outstanding Notes to be
forthwith due and payable and thereupon all outstanding Notes, including both
principal and interest thereon, shall be and become immediately due and payable
together with all other amounts payable under the Credit Documents without
further demand, presentment, protest or notice of any kind, including, but not
limited to, notice of intent to accelerate and notice of acceleration, each of
which is expressly waived by the Borrowers; (c) if so directed by the Revolving
Credit Majority Lenders, demand that the Borrowers immediately pay to the Agent
(to be held by the Agent pursuant to Section 7.4) the full amount then available
for drawing under each or any outstanding Letter of Credit, and the Borrowers
agree to immediately make such payment and acknowledge and agree that the
Revolving Lenders would not have an adequate remedy at law for failure by the
Borrowers to honor any such demand and that the Agent, for the benefit of the
Revolving Lenders, shall have the right to require the Borrowers to specifically
perform such undertaking whether or not any drawings or other demands for
payment have been made under any Letter of Credit; and (d) if so elected by the
Agent, demand that the Borrowers immediately pay to the Agent the full amount
then available for drawing under each or any outstanding Agent Letter of Credit,
and the Borrowers agree to immediately make such payment and acknowledge and
agree that the Agent would not have an adequate remedy at law for failure by the
Borrowers to honor any such demand and that the Agent shall have the right to
require the Borrowers to specifically perform such undertaking whether or not
any drawing or other demands for payment have been made under any Agent Letter
of Credit. The Agent, after giving notice to the Borrowers pursuant to Section
7.1(c) or this Section 7.2, shall also promptly send a copy of such notice to
the other Lenders, but the failure to do so shall not impair or annul the effect
of such notice.
Section 7.3. Bankruptcy Defaults. When any Event of Default described in
-------------------
subsections (g) or (h) of Section 7.1 has occurred and is continuing, then all
outstanding Notes shall immediately become due and payable together with all
other amounts payable under the Credit Documents without presentment, demand,
protest or notice of any kind, each of which is expressly waived by the
Borrowers; and all obligations of the Lenders to extend further Credit pursuant
to any of the terms hereof shall immediately terminate and the Borrowers shall
immediately pay to the Agent (to be held by the Agent pursuant to Section 7.4)
the full amount then available for drawing under all outstanding Letters of
Credit and Agent Letters of Credit,
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<PAGE>
the Borrowers acknowledging that the Revolving Lenders and the Agent would not
have an adequate remedy at law for failure by the Borrowers to honor any such
demand and that the Revolving Lenders and the Agent shall have the right to
require the Borrowers to specifically perform such undertaking whether or not
any drawings or other demands for payment have been made under any of the
Letters of Credit or Agent Letters of Credit.
Section 7.4. Collateral for Undrawn Letters of Credit. (a) If the
----------------------------------------
prepayment of the amount available for drawing under any or all outstanding
Letters of Credit or Agent Letters of Credit is required under Section 7.2 or
7.3, the Borrowers shall forthwith pay the amount required to be so prepaid, to
be held by the Agent as provided in subsection (b) below.
(b) All amounts prepaid pursuant to subsection (a) above shall be held by
the Agent in a separate collateral account (such account, and the credit
balances, properties and any investments from time to time held therein, and any
substitutions for such account, any certificate of deposit or other instrument
evidencing any of the foregoing and all proceeds of and earnings on any of the
foregoing being collectively called the "Collateral Account") as security for,
and for application by the Agent (to the extent available) to, the reimbursement
of any drawing under any Letter of Credit and Agent Letter of Credit then or
thereafter made by the Agent, and to the payment of the unpaid balance of any
Loans and all other Obligations. The Collateral Account shall be held in the
name of and subject to the exclusive dominion and control of the Agent for the
benefit of the Agent and the Lenders. If and when requested by the Borrowers,
the Agent shall invest funds held in the Collateral Account from time to time in
direct obligations of, or obligations the principal of and interest on which are
unconditionally guaranteed by, the United States of America with a remaining
maturity of six (6) months or less, provided, that the Agent is irrevocably
authorized to sell investments held in the Collateral Account when and as
required to make payments out of the Collateral Account for application to
amounts due and owing from the Borrowers to the Agent or Lenders. When and if
(i) the Borrowers shall have made payment of all such obligations referred to in
subsection (a) above, (ii) all relevant preference or other disgorgement periods
relating to the receipt of such payments have passed, and (iii) no Letters of
Credit, Agent Letters of Credit, Commitments, Loans, Reimbursement Obligations
or other Obligations remain outstanding hereunder, the Agent shall repay to the
Borrowers any remaining amounts held in the Collateral Account.
Section 7.5. Notice of Default. The Agent shall give notice to the
-----------------
Borrowers under Section 7.1(c) and (d) promptly upon being requested to do so by
the Majority Lenders and shall thereupon notify all the Lenders thereof.
Section 7.6. Expenses. The Borrowers agree to pay to the Agent and each
--------
Lender all reasonable expenses incurred or paid by the Agent or such Lender,
including reasonable attorneys' fees and court costs (including the allocated
cost of in-house staff counsel to any of the Lenders provided that any such
attorneys' fees shall not be duplicative to outside counsel and such allocation
of costs shall be reasonable), in connection with any Default or Event of
Default by the Borrowers hereunder or in connection with the enforcement of any
of the Credit Documents.
Section 7.7. Distribution and Application of Proceeds from Collateral.
--------------------------------------------------------
After an Event of Default, any payment to the Agent or any Lender under the
Holdings' Guaranty, any Subsidiary Guaranty or from proceeds of any Collateral
or any cash Collateral such payment
57
<PAGE>
shall be paid to the Agent to be distributed and applied as follows (unless
otherwise agreed by the Agent and all Lenders):
(a) First, to the payment of any and all reasonable costs and expenses of
the Agent or any Lender, including without limitation, reasonable attorneys'
fees and out-of-pocket costs and expenses as provided by this Agreement or by
any other Credit Document, incurred in connection with the collection of such
payment or in respect of the enforcement of any rights of the Agent or the
Lenders under this Agreement or any other Credit Document, pro rata in the
--- ----
proportion in which the amount of such costs and expenses unpaid to the Agent
and each such Lender bears to the aggregate amount of the costs and expenses
unpaid to the Agent and all Lenders, collectively, until all such fees, costs
and expenses have been paid in full;
(b) Second, to the payment of any unpaid fees to the Agent or any Lender as
provided by this Agreement or any other Credit Document, pro rata in the
--- ----
proportion in which the amount of such fees unpaid to the Agent and each such
Lender bears to the aggregate amount of the fees unpaid to the Agent and all
Lenders collectively, until all such fees have been paid in full;
(c) Third, to the payment of accrued and unpaid interest on the Notes or
the Reimbursement Obligations to the date of such application, pro rata in the
--- ----
proportion in which the amount of such interest, accrued and unpaid to each such
Lender bears to the aggregate amount of such interest accrued and unpaid to all
Lenders collectively, until all such accrued and unpaid interest has been paid
in full;
(d) Fourth, to the payment of the outstanding principal amount of each of
the Notes and the amount of the outstanding Reimbursement Obligations (reserving
cash collateral for all undrawn face amounts of any outstanding Letters of
Credit or Agent Letters of Credit), pro rata in the proportion in which the
--- ----
outstanding principal amount of such Notes and the amount of such outstanding
Reimbursement Obligations owing to each such Lender, together with the undrawn
face amounts of such outstanding Letters of Credit or Agent Letters of Credit,
bears to the aggregate amount of all outstanding Notes, outstanding
Reimbursement Obligations and the undrawn face amounts of all outstanding
Letters of Credit or Agent Letters of Credit. In the event that any such
Letters of Credit or Agent Letters of Credit, or any portions thereof, expire
without being drawn, any cash collateral therefore shall be distributed pro rata
--- ----
by the Agent until the principal amount of all Notes and Reimbursement
Obligations shall have been paid in full; and
(e) Fifth, to the payment of any other outstanding Obligations, pro rata in
--- ----
the proportion in which the outstanding Obligations owing to each such Lenders
bear to the aggregate amount of such Obligations until all Obligations have been
paid in full.
SECTION 8. CHANGE IN CIRCUMSTANCES.
Section 8.1. Change of Law. Notwithstanding any other provisions of this
-------------
Agreement or any Note, if at any time any change in applicable law or regulation
or in the interpretation thereof makes it unlawful for any Lender to make or
continue to maintain Eurodollar Loans or to give effect to its obligations as
contemplated hereby, such Lender shall promptly give notice thereof to the
Borrowers and such Lender's obligations to make or maintain Eurodollar Loans
under this Agreement shall terminate until it is no longer unlawful for such
Lender to make or maintain Eurodollar Loans. The Borrowers shall prepay on
demand the outstanding principal
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<PAGE>
amount of any such affected Eurodollar Loans, together with all interest accrued
thereon and all other amounts then due and payable to such Lender under this
Agreement; provided, however, subject to all of the terms and conditions of this
Agreement, the Borrowers may then elect to borrow the principal amount of the
affected Eurodollar Loans from such Lender by means of Base Rate Loans from such
Lender that shall not be made ratably by the Lenders but only by such affected
Lender.
Section 8.2. Unavailability of Deposits or Inability to Ascertain LIBOR.
----------------------------------------------------------
If on or before the first day of any Interest Period for any Borrowing of
Eurodollar Loans the Agent determines (after consultation with other Lenders)
that, due to changes in circumstances since the date hereof, adequate and fair
means do not exist for determining LIBOR or such rate will not accurately
reflect the cost to the Majority Lenders of funding Eurodollar Loans for such
Interest Period, the Agent shall give notice of such determination to the
Borrowers and the Lenders, whereupon until the Agent notifies the Borrowers and
Lenders that the circumstances giving rise to such suspension no longer exist,
the obligations of the Lenders to make Eurodollar Loans shall be suspended.
Section 8.3. Increased Cost and Reduced Return. (a) If, on or after the
---------------------------------
date hereof, the adoption of or any change in any applicable law, rule or
regulation, or any change in the interpretation or administration thereof by any
governmental authority, central bank or comparable agency charged with the
interpretation or administration thereof, or compliance by any Lender (or its
Lending Office), including the Agent in its capacity as the issuer of Letters of
Credit and Agent Letters of Credit, with any request or directive (whether or
not having the force of law) of any such authority, central bank or comparable
agency:
(i) subjects any Lender (or its Lending Office) to any tax, duty or
other charge related to any Eurodollar Loan, Letter of Credit, Agent Letter
of Credit, or Reimbursement Obligation, or its participation in any
thereof, or its obligation to advance or maintain Eurodollar Loans, issue
Letters of Credit, or to participate therein, or shall change the basis of
taxation of payments to any Lender (or its Lending Office) of the principal
of or interest on its Eurodollar Loans, Letters of Credit, or
participations therein, Agent Letters of Credit or any other amounts due
under this Agreement related to its Eurodollar Loans, Letters of Credit,
Agent Letters of Credit, Reimbursement Obligations, or participations
therein, or its obligation to make Eurodollar Loans, issue Letters of
Credit, issue Agent Letters of Credit, or acquire participations therein
(except for changes in the rate of tax on the overall net income of such
Lender or its Lending Office imposed by the jurisdiction in which such
Lender's principal executive office or Lending Office is located); or
(ii) imposes, modifies or deems applicable any reserve, special deposit
or similar requirement (including, without limitation, any such requirement
imposed by the Board of Governors of the Federal Reserve System) against
assets of, deposits with or for the account of, or credit extended by, any
Lender (or its Lending Office) or imposes on any Lender (or its Lending
Office) or on the interbank market any other condition affecting its
Eurodollar Loans, its Letters of Credit, the Agent Letters of Credit, any
Reimbursement Obligation owed to it, or its participation in any thereof,
or its obligation to advance or maintain Eurodollar Loans, issue Letters of
Credit, or to participate in any thereof, or to issue Agent Letters of
Credit;
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<PAGE>
and the result of any of the foregoing is to increase the cost to such Lender
(or its Lending Office) of advancing or maintaining any Eurodollar Loan, issuing
or maintaining a Letter of Credit, issuing or maintaining an Agent Letter of
Credit, or participating therein, or to reduce the amount of any sum received or
receivable by such Lender (or its Lending Office) in connection therewith under
this Agreement or its Note(s), by an amount deemed by such Lender to be
material, then, within fifteen (15) days after demand in reasonable detail by
such Lender (with a copy to the Agent), the Borrowers shall be obligated to pay
to such Lender such additional amount or amounts as will compensate such Lender
for such increased cost or reduction.
(b) If, after the date hereof, the Agent or any Lender shall have
determined that the adoption after the date hereof of any applicable law, rule
or regulation regarding capital adequacy, or any change therein (including,
without limitation, any revision in the Final Risk-Based Capital Guidelines of
the Board of Governors of the Federal Reserve System (12 CFR Part 208, Appendix
A; 12 CFR Part 225, Appendix A) or of the Office of the Comptroller of the
Currency (12 CFR Part 3, Appendix A), or in any other applicable capital rules
heretofore adopted and issued by any governmental authority), or any change in
the interpretation or administration thereof by any governmental authority,
central bank or comparable agency charged with the interpretation or
administration thereof, or compliance by the Agent or any Lender (or its Lending
Office) with any request or directive regarding capital adequacy (whether or not
having the force of law) of any such authority, central bank or comparable
agency, has or would have the effect of reducing the rate of return on the
Agent's or such Lender's capital, or on the capital of any corporation
controlling the Agent or such Lender, as a consequence of its obligations
hereunder to a level below that which the Agent or such Lender could have
achieved but for such adoption, change or compliance (taking into consideration
the Agent's or such Lender's policies with respect to capital adequacy) by an
amount deemed by the Agent or such Lender to be material, then from time to
time, within fifteen (15) days after demand in reasonable detail by the Agent or
such Lender (with a copy to the Agent), the Borrowers shall pay to the Agent or
such Lender such additional amount or amounts as will compensate the Agent or
such Lender for such reduction.
(c) The Agent and each Lender that determines to seek compensation under
this Section 8.3 shall notify the Borrowers and, in the case of a Lender other
than the Agent, the Agent of the circumstances that entitle the Agent or Lender
to such compensation and will designate a different Lending Office if such
designation will avoid the need for, or reduce the amount of, such compensation
and will not, in the judgment of the Agent or such Lender, be otherwise
disadvantageous to it. A certificate of the Agent or any Lender claiming
compensation under this Section 8.3 and setting forth the additional amount or
amounts to be paid to it hereunder shall be conclusive in the absence of
manifest error. In determining such amount, such Lender may use any reasonable
averaging and attribution methods.
Section 8.4. Lending Offices. The Agent and each Lender may, at its
---------------
option, elect to make its Loans hereunder at the Lending Office for each type of
Loan available hereunder or at such other of its branches, offices or affiliates
as it may from time to time elect and designate in a written notice to the
Borrowers and the Agent subject to Section 8.3(c).
Section 8.5. Discretion of Lender as to Manner of Funding.
--------------------------------------------
Notwithstanding any other provision of this Agreement, each Lender shall be
entitled to fund and maintain its funding of all or any part of its Loans in any
manner it sees fit, it being understood, however, that for the
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<PAGE>
purposes of this Agreement all determinations hereunder shall be made as if each
Lender had actually funded and maintained each Eurodollar Loan through the
purchase of deposits in the eurodollar interbank market having a maturity
corresponding to such Loan's Interest Period and bearing an interest rate equal
to LIBOR for such Interest Period.
Section 8.6. Substitution of Lender. If (a) any Lender has demanded
----------------------
compensation or given notice of its intention to demand compensation under
Section 8.3, or (b) the Borrowers are required to pay any additional amount to
any Lender under Section 2.13, the Borrowers shall have the right, with the
assistance of the Agent, to seek a substitute lender or lenders reasonably
satisfactory to the Agent (which may be one or more of the Lenders) to replace
such Lender under this Agreement. The Lender to be so replaced shall cooperate
with the Borrowers and substitute lender to accomplish such substitution on the
terms of Section 11.10, as applicable, provided, that all such Lender's
Commitments are replaced.
SECTION 9. THE AGENT.
Section 9.1. Appointment and Authorization of Agent. Each Lender hereby
--------------------------------------
appoints ABN AMRO Bank N.V. as the Agent under the Credit Documents and hereby
authorizes the Agent to take such action as Agent on its behalf and to exercise
such powers under the Credit Documents as are delegated to the Agent by the
terms thereof, together with such powers as are reasonably incidental thereto.
Section 9.2. Agent and its Affiliates. The Agent shall have the same
------------------------
rights and powers under the Credit Documents as any other Lender and may
exercise or refrain from exercising such rights and power as though it were not
the Agent, and the Agent and its Affiliates may accept deposits from, lend money
to, and generally engage in any kind of business with Holdings, any of the
Borrowers or any of their Subsidiaries or Affiliates as if it were not the Agent
under the Credit Documents. The term Lender as used in all Credit Documents,
unless the context otherwise clearly requires, includes the Agent in its
individual capacity as a Lender. References herein to the Agent's Loans, or to
the amount owing to the Agent for which an interest rate is being determined,
refer to the Agent in its individual capacity as a Lender.
Section 9.3. Action by Agent. The obligations of the Agent under the
---------------
Credit Documents are only those expressly set forth therein. Without limiting
the generality of the foregoing, the Agent shall not be required to take any
action concerning any Default or Event of Default, except as expressly provided
in Sections 7.2 and 7.5. Upon the occurrence of an Event of Default, the Agent
shall take such action to enforce its Lien on the Collateral and to preserve and
protect the Collateral as may be directed by the Majority Lenders. Unless and
until the Majority Lenders give such direction the Agent may take or refrain
from taking such actions as it deems appropriate and in the best interest of all
the Lenders. In no event, however, shall the Agent be required to take any
action in violation of applicable law or of any provision of any Credit
Document, and the Agent shall in all cases be fully justified in failing or
refusing to act hereunder or under any other Credit Document unless it first
receives any further assurances of its indemnification from the Lenders that it
may require, including prepayment of any related expenses and any other
protection it requires against any and all costs, expenses, and liabilities it
may incur in taking or continuing to take any such action. The Agent shall be
entitled to assume that no Default or Event of Default exists unless notified in
writing to the contrary by a Lender or the Borrowers. In all cases in which the
Credit Documents do not require the Agent to take specific action, the Agent
shall be fully justified in using its discretion in failing to take
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<PAGE>
or in taking any action thereunder. Any instructions of the Majority Lenders,
or of any other group of Lenders called for under specific provisions of the
Credit Documents, shall be binding on all the Lenders and holders of Notes.
Section 9.4. Consultation with Experts. The Agent may consult with legal
-------------------------
counsel, independent public accountants and other experts selected by it and
shall not be liable for any action taken or omitted to be taken by it in good
faith in accordance with the advice of such counsel, accountants or experts.
Section 9.5. Liability of Agent; Credit Decision. Neither the Agent nor
-----------------------------------
any of its directors, officers, agents, or employees shall be liable for any
action taken or not taken by it in connection with the Credit Documents (i) with
the consent or at the request of the Majority Lenders or (ii) in the absence of
its own gross negligence or willful misconduct. Neither the Agent nor any of
its directors, officers, agents or employees shall be responsible for or have
any duty to ascertain, inquire into or verify (i) any statement, warranty or
representation made in connection with this Agreement, any other Credit Document
or any Borrowing; (ii) the performance or observance of any of the covenants or
agreements of Holdings, any of the Borrowers or any Subsidiary contained herein
or in any other Credit Document; (iii) the satisfaction of any condition
specified in Section 4 hereof, except receipt of items required to be delivered
to the Agent; or (iv) the validity, effectiveness, genuineness, enforceability,
perfection, value, worth or collectability hereof or of any other Credit
Document or of the Liens provided for by the Security Documents or of any other
documents or writing furnished in connection with any Credit Document or of the
Collateral; and the Agent makes no representation of any kind or character with
respect to any such matters mentioned in this sentence. The Agent may execute
any of its duties under any of the Credit Documents by or through employees,
agents, and attorneys-in-fact and shall not be answerable to the Lenders or any
other Person for the default or misconduct of any such agents or attorneys-in-
fact selected with reasonable care. The Agent shall not incur any liability by
acting in reliance upon any notice, consent, certificate, other document or
statement (whether written or oral) believed by it to be genuine or to be sent
by the proper party or parties. In particular and without limiting any of the
foregoing, the Agent shall have no responsibility for confirming the existence
or worth of any Collateral or the accuracy of any Borrowing Base Certificate,
Compliance Certificate or other document or instrument received by it under the
Credit Documents and shall be entitled to rely exclusively on Borrowing Base
Certificates prepared by the Borrowers in computing the Borrowing Base. The
Agent may treat the payee of any Note as the holder thereof until written notice
of transfer shall have been filed with the Agent signed by such owner in form
satisfactory to the Agent. Each Lender acknowledges that it has independently
and without reliance on the Agent or any other Lender, and based upon such
information, investigations and inquiries as it deems appropriate, made its own
credit analysis and decision to extend credit to the Borrowers in the manner set
forth in the Credit Documents. It shall be the responsibility of each Lender to
keep itself informed about the creditworthiness and business properties, assets,
liabilities, condition (financial or otherwise) and prospects of Holdings, the
Borrowers and the Subsidiaries, the creditworthiness of all account debtors of
Holdings, the Borrowers and their Subsidiaries, and the list of foreign account
debtors approved from time to time by the Agent as provided in the definition of
Eligible Accounts herein and the Agent shall have no liability whatsoever to any
Lender for such matters. The Agent shall have no duty to disclose to the
Lenders information that is not required by any Credit Document to be furnished
by Holdings, the Borrowers or any Subsidiaries to the Agent at such time, but is
voluntarily furnished to the Agent (either in its capacity as Agent or in its
individual capacity).
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Section 9.6. Indemnity. The Lenders shall ratably, in accordance with
---------
their Percentages, indemnify and hold the Agent, and its directors, officers,
employees, agents and representatives harmless from and against any liabilities,
losses, costs or expenses suffered or incurred by it or by any security trustee
under any Credit Document or in connection with the transactions contemplated
thereby, regardless of when asserted or arising, except to the extent they are
promptly reimbursed for the same by the Borrowers or out of the proceeds of the
Collateral and except to the extent that any event giving rise to a claim was
caused by the gross negligence or willful misconduct of the party seeking to be
indemnified. The obligations of the Lenders under this Section 9.6 shall
survive termination of this Agreement.
Section 9.7. Resignation of Agent and Successor Agent. The Agent may
----------------------------------------
resign at any time upon at least thirty (30) days' prior written notice to the
Lenders and the Borrowers. Upon any such resignation of the Agent, the Majority
Lenders, with the consent of the Borrowers, which consent shall not be
unreasonably withheld, shall have the right to appoint a successor Agent. If no
successor Agent shall have been so appointed by the Majority Lenders and shall
have accepted such appointment within thirty (30) days after the retiring
Agent's giving of notice of resignation, then the retiring Agent may, on behalf
of the Lenders, appoint a successor Agent, which shall be any Lender hereunder
or any commercial bank organized under the laws of the United States of America
or of any State thereof and having a combined capital and surplus of at least
$200,000,000. Upon the acceptance of its appointment as the Agent hereunder,
such successor Agent shall thereupon succeed to and become vested with all the
rights and duties of the retiring Agent under the Credit Documents, and the
retiring Agent shall be discharged from its duties and obligations thereunder.
After any retiring Agent's resignation hereunder as Agent, the provisions of
this Section 9 and all protective provisions of the other Credit Documents shall
inure to its benefit as to any actions taken or omitted to be taken by it while
it was Agent.
SECTION 10. HOLDINGS' GUARANTY.
Section 10.1. Holdings' Guaranty. To induce the Lenders to provide the
------------------
credits described herein and in consideration of benefits expected to accrue to
Holdings by reason of the Commitments and for other good and valuable
consideration, receipt of which is hereby acknowledged, Holdings hereby
unconditionally and irrevocably guaranties to the Lenders, to the Agent, and to
each of them, the due and punctual payment of all present and future
indebtedness of each of the Borrowers evidenced by or arising out of the Credit
Documents, including, but not limited to, the due and punctual payment of
principal of and interest on the Notes and the due and punctual payment of all
other Obligations now or hereafter owed by each of the Borrowers under the
Credit Documents as and when the same shall become due and payable, whether at
stated maturity, by acceleration or otherwise, according to the terms hereof and
thereof. In case of failure by the Borrowers punctually to pay any indebtedness
guaranteed hereby, Holdings hereby unconditionally agrees jointly and severally
to make such payment or to cause such payment to be made punctually as and when
the same shall become due and payable, whether at stated maturity, by
acceleration or otherwise, and as if such payment were made by the Borrowers.
Section 10.2. Guaranty Unconditional. The Obligations of Holdings as a
----------------------
guarantor under this Section 10 shall be unconditional and absolute and, without
limiting the generality of the foregoing, shall not be released, discharged or
otherwise affected (except to the extent, and only to the extent, the Lenders
shall have received payment of the Obligations and no reinstatement shall have
occurred as described in Section 10.3) by:
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(a) any extension, renewal, settlement, compromise, waiver or release in
respect of any obligation of any of the Borrowers or of any other Guarantor
under this Agreement or any other Credit Document or by operation of law or
otherwise;
(b) any modification or amendment of or supplement to this Agreement or any
other Credit Document;
(c) any change in the corporate existence, structure or ownership of, or
any insolvency, bankruptcy, reorganization or other similar proceeding
affecting, any of the Borrowers, any other Guarantor, or any of their respective
assets, or any resulting release or discharge of any obligation of any of the
Borrowers or of any other Guarantor contained in any Credit Document;
(d) the existence of any claim, set-off or other rights which Holdings or
any other Guarantor may have at any time against the Agent, any Lender or any
other Person, whether or not arising in connection herewith;
(e) any failure to assert, or any assertion of, any claim or demand or any
exercise of, or failure to exercise, any rights or remedies against any of the
Borrowers, any other Guarantor or any Collateral;
(f) any application of any sums by whomsoever paid or howsoever realized to
any obligation of any of the Borrowers, regardless of what obligations of any of
the Borrowers remain unpaid,
(g) any invalidity or unenforceability relating to or against any of the
Borrowers or any other Guarantor for any reason of this Agreement or of any
other Credit Document or any provision of applicable law or regulation
purporting to prohibit the payment by any of the Borrowers of the principal of
or interest on any Note or any other amount payable by it under the Credit
Documents; or
(h) any other act or omission to act or delay of any kind by the Agent, any
Lender or any other Person or any other circumstance whatsoever that might, but
for the provisions of this paragraph, constitute a legal or equitable discharge
of the obligations of Holdings under this Section 10.
Section 10.3. Discharge Only Upon Payment in Full; Reinstatement in
-----------------------------------------------------
Certain Circumstances. Holdings' obligations under this Section 10 shall remain
- ---------------------
in full force and effect until the Commitments are terminated and the principal
of and interest on the Notes and all other amounts payable by each of the
Borrowers under this Agreement and all other Credit Documents shall have been
paid in full. If at any time any payment of the principal of or interest on any
Note or any other amount payable by any of the Borrowers under the Credit
Documents is rescinded or must be otherwise restored or returned upon the
insolvency, bankruptcy or reorganization of any of the Borrowers, of itself, or
of any other Guarantor, or otherwise, Holdings' obligations under this Section
10 with respect to such payment shall be reinstated at such time as though such
payment had become due but had not been made at such time.
Section 10.4. Subrogation. Holdings waives any rights which it may have
-----------
or acquire by way of subrogation by any payment made hereunder, or otherwise.
If any amount shall be
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paid to Holdings on account of any subrogation rights despite the above waiver
at any time prior to the later of (x) the payment in full of the Obligations and
all other amounts payable by Holdings hereunder and (y) the termination of all
the Commitments, such amount shall be held in trust for the benefit of the Agent
and the Lenders and shall forthwith be paid to the Agent or be credited and
applied upon the Obligations, whether matured or unmatured, in accordance with
the terms of this Agreement.
Section 10.5. Waivers. Holdings irrevocably waives acceptance hereof,
-------
presentment, demand, protest and any notice not provided for herein, as well as
any requirement that at any time any action be taken by the Agent, any Lender or
any other Person against any of the Borrowers, another Guarantor or any other
Person.
Section 10.6. Stay of Acceleration. If acceleration of the time for
--------------------
payment of any amount payable by any of the Borrowers under this Agreement or
any other Credit Document is stayed upon the insolvency, bankruptcy or
reorganization of any of the Borrowers, all such amounts otherwise subject to
acceleration under the terms of this Agreement or the other Credit Documents
shall nonetheless be payable by Holdings hereunder forthwith on demand by the
Agent made at the request of the Majority Lenders.
Section 10.7. Security. The Obligations of Holdings under this Agreement,
--------
including this Section 10, shall be secured by a Pledge Agreement wherein
Holdings pledges its interest in all the capital stock of each of the Borrowers,
together with all increases therein and dividends and proceeds therefrom.
SECTION 11. MISCELLANEOUS.
Section 11.1. No Waiver of Rights. No delay or failure on the part of the
-------------------
Agent or any Lender, or on the part of the holder or holders of any Notes, in
the exercise of any power or right under any Credit Document shall operate as a
waiver thereof or as an acquiescence in any default, nor shall any single or
partial exercise thereof preclude any other or further exercise of any other
power or right. The rights and remedies under the Credit Documents of the
Agent, the Lenders and the holder or holders of any Notes are cumulative to, and
not exclusive of, any rights or remedies any of them would otherwise have.
Section 11.2. Non-Business Day. If any payment of principal or interest
----------------
on any Loan or of any other Obligation shall fall due on a day which is not a
Business Day, interest or fees (as applicable) at the rate, if any, such Loan or
other Obligation bears for the period prior to maturity shall continue to accrue
on such Obligation from the stated due date thereof to and including the next
succeeding Business Day, on which the same shall be payable.
Section 11.3. Documentary Taxes. The Borrowers agree that they will pay
-----------------
any documentary, stamp or similar taxes payable in respect to any Credit
Document, including interest and penalties, in the event any such taxes are
assessed irrespective of when such assessment is made and regardless whether any
credit is then in use or available hereunder.
Section 11.4. Survival of Representations. All representations and
---------------------------
warranties made herein or in certificates given pursuant hereto shall survive
the execution and delivery of this Agreement and the other Credit Documents, and
shall continue in full force and effect with
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respect to the date as of which they were made as long as any Credit is in use
or available hereunder.
Section 11.5. Survival of Indemnities. All indemnities and all other
-----------------------
provisions relative to reimbursement to the Lenders of amounts sufficient to
protect the yield of the Lenders with respect to the Loans, including, but not
limited to, Section 2.13, Section 8.3 and Section 11.14 hereof, shall survive
the termination of this Agreement and the other Credit Documents and the payment
of the Loans and all other Obligations for a period of one (1) year.
Section 11.6. Setoff. In addition to any rights now or hereafter granted
------
under applicable law and not by way of limitation of any such rights, upon the
occurrence of, and throughout the continuance of, any Default or Event of
Default, each Lender and each subsequent holder of any Note is hereby authorized
by the Borrowers and each Guarantor at any time or from time to time, without
notice to the Borrowers, to the Guarantor or to any other Person, any such
notice being hereby expressly waived, to set off and to appropriate and to apply
any and all deposits (general or special, including, but not limited to,
Indebtedness evidenced by certificates of deposit, whether matured or unmatured,
but not including trust accounts, and in whatever currency denominated) and any
other Indebtedness at any time held or owing by that Lender or that subsequent
holder to or for the credit or the account of any of the Borrowers or any
Guarantor, whether or not matured, against and on account of the obligations and
liabilities of any of the Borrowers or any Guarantor to that Lender or that
subsequent holder under the Credit Documents, including, but not limited to, all
claims of any nature or description arising out of or connected with the Credit
Documents, irrespective of whether or not (a) that Lender or that subsequent
holder shall have made any demand hereunder or (b) the principal of or the
interest on the Loans or Notes and other amounts due hereunder shall have become
due and payable hereunder and although said obligations and liabilities, or any
of them, may be contingent or unmatured. Each Lender agrees with each other
Lender a party hereto that if such Lender receives and retains any payment,
whether by setoff or application of deposit balances or otherwise, on any of the
Loans or L/C Obligations in excess of its ratable share of payments on all such
Obligations then owed to the Lenders under the relevant Credit, then such Lender
shall purchase for cash at face value, but without recourse, ratably from each
of the other Lenders such amount of the Loans or L/C Obligations, or
participations therein, held by each such other Lenders (or interest therein) as
shall be necessary to cause such Lender to share such excess payment ratably
with all the other Lenders; provided, however, that if any such purchase is made
by any Lender, and if such excess payment or part thereof is thereafter
recovered from such purchasing Lender, the related purchases from the other
Lenders shall be rescinded ratably and the purchase price restored as to the
portion of such excess payment so recovered, but without interest.
Section 11.7. Notices. Except as otherwise specified herein, all notices
-------
under the Credit Documents shall be in writing (including cable, telecopy or
telex) and shall be given to a party hereunder at its address, telecopier number
or telex numbers set forth below or such other address, telecopier number or
telex as such party may hereafter specify by notice to the Agent and the
Borrowers, given by courier, by United States certified or registered mail, by
telegram or by other telecommunication device capable of creating a written
record of such notice and its receipt. Notices under the Credit Documents to
the Lenders and the Agent shall be addressed to their respective addresses,
telecopier, telex, or telephone numbers set forth on the signature pages hereof,
and to Holdings and the Borrowers (duplicate copies) to:
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Tuboscope Vetco International Inc.
CTI Inspection Services, Inc.
Tuboscope Vetco Capital Corp.
Tuboscope Vetco International Corp.
2835 Holmes Road
P.O. Box 808 (77001)
Houston, TX 77051
Attention: Chief Financial Officer
and
Attention: General Counsel
Telephone: (713) 799-5100
Fax No. (713) 799-5183
Each such notice, request or other communication shall be effective (i) if
given by telecopier, when such telecopy is transmitted to the telecopier number
specified in this Section 11.7, on the signature pages hereof or pursuant to
Section 11.10 and a confirmation of receipt of such telecopy has been received
by the sender, (ii) if given by telex, when such telex is transmitted to the
telex number specified in this Section 11.7, on the signature pages hereof or
pursuant to Section 11.10 and the answerback is received by sender, (iii) if
given by courier, when delivered, (iv) if given by mail, five (5) days after
such communication is deposited in the mail, registered with return receipt
requested, addressed as aforesaid or (v) if given by any other means, when
delivered at the addresses specified in this Section 11.7, on the signature
pages hereof or pursuant to Section 11.10; provided, that any notice given
pursuant to Section 2 shall be effective only upon receipt.
Section 11.8. Counterparts. This Agreement may be executed in any number
------------
of counterpart signature pages, and by the different parties on different
counterpart signature pages, each of which when executed shall be deemed an
original but all such counterparts taken together shall constitute one and the
same instrument.
Section 11.9. Successors and Assigns. This Agreement shall be binding
----------------------
upon the Borrowers and Holdings and their respective successors and assigns, and
shall inure to the benefit of each of the Lenders and the benefit of their
respective successors and assigns, including any subsequent holder of any Note.
Except as expressly permitted in Section 6.14, none of Holdings, the Borrowers
or any Guarantor may assign any of its rights or obligations under any Credit
Document without the written consent of all of the Lenders.
Section 11.10. Sales and Transfers of Borrowings and Notes; Participations
-----------------------------------------------------------
in Borrowings and Notes.
- -----------------------
(a) Any Lender may at any time sell to one or more banks or financial
institutions, including, but not limited to, insurance companies, investment
companies and mutual funds ("Participants"), participating interests in any
Borrowing owing to such Lender, any Note held by such Lender, any Commitment of
such Lender or any other interest of such Lender hereunder, provided that no
Lender may sell any participating interests in any such Borrowing, Note,
Commitment or other interest hereunder without also selling to such Participant
the appropriate pro rata share of its Borrowings, Notes, Commitments and other
interests hereunder, and provided further that no Lender shall transfer, grant
or assign any participation under which the Participant shall have rights to
approve any amendment to or waiver of this Agreement
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except to the extent such amendment or waiver would (i) increase the amount of
such Lender's Commitment and such increase would affect such Participant, (ii)
reduce the principal of, or interest on, any of such Lender's Borrowings, or any
fees or other amounts payable to such Lender hereunder and such reduction would
affect such Participant, (iii) postpone any date fixed for any scheduled payment
of principal of, or interest on, any of such Lender's Borrowings, or any fees or
other amounts payable to such Lender hereunder, or (iv) release all or
substantially all collateral security for any Obligation (including, without
limitation, any Guaranty), except as otherwise specifically provided in any
Credit Document. In the event of any such sale by a Lender of participating
interests to a Participant, such Lender's obligations under this Agreement to
the other parties to this Agreement shall remain unchanged, such Lender shall
remain solely responsible for the performance thereof, such Lender shall remain
the holder of any such Note for all purposes under this Agreement and the
Borrowers and the Agent shall continue to deal solely and directly with such
Lender in connection with such Lender's rights and obligations under this
Agreement. The Borrowers agree that if amounts outstanding under this Agreement
and the Notes are due and unpaid, or shall have been declared or shall have
become due and payable upon the occurrence of an Event of Default, each
Participant shall be deemed to have the right of setoff in respect of its
participating interest in amounts owing under this Agreement and any Note to the
same extent as if the amount of its participating interest were owing directly
to it as a Lender under this Agreement or any Note, provided, that such right of
setoff shall be subject to the obligation of such Participant to share with the
Lenders, and the Lenders agree to share with such Participant, as provided in
Section 11.16. The Borrowers also agree that each Participant shall be entitled
to the benefits of Sections 2.13 and 8.3 with respect to its participation in
the Commitments and the Borrowings outstanding from time to time, provided that
no Participant shall be entitled to receive any greater amount pursuant to such
Sections than the transferor Lender would have been entitled to receive in
respect of the amount of the participation transferred.
(b) Any Lender may at any time sell to any Lender or any affiliate thereof,
and, with the consent of the Agent and the Borrowers (which shall not be
unreasonably withheld or delayed), to one or more banks or financial
institutions, including, but not limited to, insurance companies, investment
companies and mutual funds ("Purchasing Lenders"), all or any part of its rights
and obligations under this Agreement and the Notes, pursuant to an Assignment
Agreement in the form attached as Exhibit 11.10 hereto, executed by such
Purchasing Lender and such transferor Lender (and, in the case of a Purchasing
Lender which is not then a Lender or an affiliate thereof, by the Borrowers and
the Agent) and delivered to the Agent; provided, that, each such sale to a
Purchasing Lender shall be in an amount of $10,000,000 or more, or if in a
lesser amount, such sale shall be of all of the Lender's rights and obligations
under this Agreement and all of the Notes payable to it to one bank or financial
institution, including, but not limited to, insurance companies, investment
companies and mutual funds. Notwithstanding the above, any Lender may sell to
one or more banks or financial institutions, including, but not limited to,
insurance companies, investment companies and mutual funds all or any part of
their rights and obligations under this Agreement and the Notes with only the
consent of the Agent (which shall not be unreasonably withheld) if an Event of
Default shall have occurred and be continuing. No Lender may sell any Loans to
a Purchasing Lender without also selling to such Purchasing Lender the
appropriate pro rata share of its Borrowings, Notes, Commitments and other
interests hereunder, including participations in Letters of Credit hereunder.
Upon such execution, delivery, acceptance and recording, from and after the
effective date of the transfer determined pursuant to such Assignment Agreement
(x) the Purchasing Lender thereunder shall be a party hereto and, to the extent
provided in such Assignment Agreement, have the rights and
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obligations of a Lender hereunder with a Commitment as set forth therein and (y)
the transferor Lender thereunder shall, to the extent provided in such
Assignment Agreement, be released from its obligations under this Agreement
(and, in the case of an Assignment Agreement covering all or the remaining
portion of a transferor Lender's rights and obligations under this Agreement,
such transferor Lender shall cease to be a party hereto). Such Assignment
Agreement shall be deemed to amend this Agreement to the extent, and only to the
extent, necessary to reflect the addition of such Purchasing Lender and the
resulting adjustment of Commitments and Percentages arising from the purchase by
such Purchasing Lender of all or a portion of the rights and obligations of such
transferor Lender under this Agreement and the Notes. On or prior to the
effective date of the transfer determined pursuant to such Assignment Agreement,
the Borrowers, at their own expense, shall execute and deliver to the Agent in
exchange for any surrendered Notes, new Notes as appropriate to the order of
such Purchasing Lender in an amount equal to the Commitments assumed by it
pursuant to such Assignment Agreement, and, if the transferor Lender has
retained a Commitment or Borrowing hereunder, new Notes to the order of the
transferor Lender in an amount equal to the Commitments or Borrowings retained
by it hereunder. Such new Notes shall be dated the Initial Borrowing Date and
shall otherwise be in the form of the Notes replaced thereby. The Notes
surrendered by the transferor Lender shall be returned by the Agent to the
Borrowers marked "cancelled."
(c) Upon its receipt of an Assignment Agreement executed by a transferor
Lender, a Purchasing Lender and the Agent (and, in the case of a Purchasing
Lender that is not then a Lender or an affiliate thereof, by the Borrowers),
together with payment to the Agent hereunder of a registration and processing
fee of $2,500, the Agent shall (i) promptly accept such Assignment Agreement,
and (ii) on the effective date of the transfer determined pursuant thereto give
notice of such acceptance and recordation to the Lenders and the Borrowers.
(d) The provisions of the foregoing clauses (b) and (c) shall not apply to
or restrict, or require the consent of or any notice to any Person to
effectuate, the pledge or assignment by any Lender of its rights under this
Agreement and its Notes to any Federal Reserve Bank.
(e) If, pursuant to this Section 11.10 any interest in this Agreement or
any Note is transferred to any transferee which is organized under the laws of
any jurisdiction other than the United States of America or any State thereof,
the transferor Lender shall cause such transferee, concurrently with the
effectiveness of such transfer, (i) to represent to the transferor Lender (for
the benefit of the transferor Lender, the Agent and the Borrowers) that under
applicable law and treaties no taxes will be required to be withheld by the
Agent, the Borrowers or the transferor Lender with respect to any payments to be
made to such transferee in respect of the Loans or the Letters of Credit, (ii)
to furnish to the transferor Lender (and, in the case of any Purchasing Lender,
the Agent and the Borrowers) either U.S. Internal Revenue Service Form 4224 or
U.S. Internal Revenue Service Form 1001 (wherein such transferee claims
entitlement to complete exemption from U.S. federal withholding tax on all
interest payments hereunder), and (iii) to agree (for the benefit of the
transferor Lender, the Agent and the Borrowers) to provide the transferor Lender
(and, in the case of any Purchasing Lender, the Agent and the Borrowers) a new
Form 4224 or Form 1001 upon the expiration or obsolescence of any previously
delivered form and comparable statements in accordance with applicable U.S. laws
and regulations and amendments dully executed and completed by such Transferee,
and to comply from time to time with all applicable U.S. laws and regulations
with regard to such withholding tax exemption.
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Section 11.11. Amendments. Any provision of the Credit Documents may be
----------
amended or waived if, but only if, such amendment or waiver is in writing and is
signed by (a) the Borrowers, (b) the Majority Lenders, and (c) if the rights or
duties of the Agent are affected thereby, the Agent; provided, that:
(i) no amendment or waiver shall (A) increase any Commitment of any Lender
without the consent of such Lender, (B) reduce the amount of or postpone the
date for any scheduled payment of any principal of or interest on any Loan or
Reimbursement Obligation or of any fee payable hereunder without the consent of
each Lender owed such Obligation or (C) release any of the Collateral without
the consent of all the Lenders;
(ii) no amendment or waiver shall, unless signed by each Lender, change the
provisions of this Section 11.11 or the definitions of Majority Lenders or
Revolving Credit Majority Lenders or affect the number of Lenders required to
take any action under any other provision of the Credit Documents; and
(iii) no amendment shall change any provision of Section 10 without the
consent of Holdings.
Section 11.12. Headings. Section headings used in this Agreement are for
--------
reference only and shall not affect the construction of this Agreement.
Section 11.13. Legal Fees, Other Costs and Indemnification. The Borrowers
-------------------------------------------
agree to pay the reasonable fees and disbursements of legal counsel to the Agent
in connection with the preparation and execution of the Credit Documents, and
any amendment, waiver or consent related hereto, whether or not the transactions
contemplated herein are consummated, and all reasonable recording, filing, title
insurance or other fees, costs and taxes incident to perfecting a lien upon the
Collateral described in the Security Documents. The Borrowers further agree to
indemnify each Lender, the Agent, and any security trustee and their respective
directors, officers and employees, against all losses, claims, damages,
penalties, judgments, liabilities and expenses (including, without limitation,
all reasonable attorneys' fees and other reasonable expenses of litigation or
preparation therefor, including the allocated cost of in-house staff counsel to
any of the Lenders, provided that any such attorneys' fees shall not be
duplicative to outside counsel and such allocation of costs shall be reasonable,
whether or not the indemnified Person is a party thereto) which any of them may
pay or incur arising out of or relating to any Credit Document, the Loans or the
application or proposed application by any of the Borrowers of the proceeds of
any Loan, regardless of whether such claims or actions are founded in whole or
in part upon the alleged negligence of any of the Lenders, the Agent, any
security trustee and/or any of their respective directors, officers and
employees, other than those which arise from the gross negligence or willful
misconduct of the party claiming indemnification or which arise directly from
such indemnified party's own unexcused breach of any provision of any Credit
Document. The Borrowers, upon demand by the Agent or a Lender at any time,
shall reimburse the Agent or Lender for any legal or other expenses incurred in
connection with investigating or defending against any of the foregoing except
if the same is directly due to the gross negligence or willful misconduct of the
party to be indemnified.
Section 11.14. Governing Law; Submission to Jurisdiction; Waiver of Jury
---------------------------------------------------------
Trial. This Agreement and the other Credit Documents, and the rights and duties
- -----
of the parties thereto, shall be construed in accordance with and governed by
the internal laws of the State of Texas. Each
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Credit Party hereby submits to the nonexclusive jurisdiction of the United
States District Court for the Southern District of Texas and of any Texas State
court sitting in the City of Houston for purposes of all legal proceedings
arising out of or relating to this Agreement, any other Credit Document or the
transactions contemplated thereby. Each Credit Party irrevocably waives, to the
fullest extent permitted by law, any objection it may now or hereafter have to
the laying of the venue of any such proceeding brought in such a court and any
claim that any such proceeding brought in such a court has been brought in an
inconvenient forum. EACH PARTY TO THIS AGREEMENT HEREBY IRREVOCABLY WAIVES ALL
RIGHT TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT
OF OR RELATING TO ANY CREDIT DOCUMENT OR THE TRANSACTIONS CONTEMPLATED THEREBY.
Section 11.15. Confidentiality. Each Lender agrees it will not disclose
---------------
without the Borrowers' consent (other than to its employees, auditors, counsel
or other professional advisors, to its Affiliates or to another Lender) any
information concerning Holdings, the Borrowers or any of its Subsidiaries
furnished pursuant to any of the Credit Documents; provided, that any Lender may
disclose any such information (a) that has become generally available to the
public, (b) if required or appropriate in any report, statement or testimony
submitted to any federal or state regulatory body having or claiming to have
jurisdiction over such Lender, including, but not limited, the National
Association of Insurance Commissioners or any similar organization, (c) if
required or appropriate in response to any summons or subpoena or in connection
with any litigation, (d) in order to comply with any law, order, regulation or
ruling applicable to such Lender, (e) to any prospective or actual permitted
transferee in connection with any contemplated or actual permitted transfer of
any of the Notes or any interest therein by such Lender, and (f) in connection
with the exercise of any remedies by the Agent or any Lender; provided, that
such actual or prospective transferee executes an agreement with such Lender
containing provisions substantially identical to those contained in this Section
11.15 prior to such transferee's receipt of any such information.
Section 11.16. Effectiveness. This Agreement shall become effective on the
-------------
date (the "Effective Date") on which each Credit Party, the Agent, and each
Lender has signed and delivered to the Agent a counterparty signature page
hereto or, in the case of a Lender, the Agent has received telex or facsimile
notice that such a counterpart has been signed and mailed to the Agent, and the
Borrowers have executed and delivered a Certificate of Effectiveness. The Agent
will give Holdings, the Borrowers and each Lender prompt written notice of the
occurrence of the Effective Date.
Section 11.17. Severability. Any provision of this Agreement that is
------------
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
Section 11.18. Notice. The Credit Documents constitute the entire
------
understanding among the Credit Parties, the Lenders, and the Agent and supersede
all earlier or contemporaneous agreements, whether written or oral, concerning
the subject matter of the Credit Documents. THIS WRITTEN AGREEMENT TOGETHER
WITH THE OTHER CREDIT DOCUMENTS REPRESENTS THE FINAL AGREEMENT BETWEEN THE
PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
71
<PAGE>
CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO
UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered in Houston, Texas by their duly authorized officers
as of the day and year first above written.
BORROWERS:
---------
TUBOSCOPE VETCO INTERNATIONAL INC.
By:______________________________________
Name: James F. Maroney, III
Title: Vice President
CTI INSPECTION SERVICES, INC.
By:_______________________________________
Name: James F. Maroney, III
Title: Vice President
TUBOSCOPE VETCO CAPITAL CORP.
By:_______________________________________
Name: James F. Maroney, III
Title: Vice President
GUARANTOR:
---------
TUBOSCOPE VETCO INTERNATIONAL
CORPORATION
By:_______________________________________
Name: James F. Maroney, III
Title: Vice President
72
<PAGE>
LENDERS:
-------
Percentages: ABN AMRO BANK N.V., Houston Agency, as
- ----------- Agent and as a Lender
Tranche A Term
and Revolver Percentages-37.50000%
Tranche B Term Percentage-0%
By:___________________________________________________________
Overall Percentage-32.203388% Name: Cheryl I. Lipshutz
Title: Vice President
Address:
- -------
ABN AMRO Bank N.V.,
By:___________________________________________________________
Houston Agency Name: Charles W. Randall
Three Riverway, Suite 1600 Title: Group Vice President
Houston, TX 77056
Telephone: (713) 964-3351
Fax No.: (713) 629-7533
73
<PAGE>
Percentages: ARAB BANKING CORPORATION (B.S.C.)
- -----------
Tranche A Term
and Revolver Percentages-20.833334%
Tranche B Term Percentage-0%
By:___________________________________________________________
Overall Percentage-16.949153% Name: Stephen A. Plauche
Title: Vice President
Address:
- -------
Arab Banking Corporation (B.S.C.)
245 Park Avenue
New York, New York 10167
with a copy to:
Arab Banking Corporation (B.S.C.)
600 Travis, Suite 1900
Houston, TX 77002
Telephone: (713) 227-8444
Fax No.: (713) 227-6507
74
<PAGE>
Percentages: BANK OF AMERICA TEXAS, N.A.
- -----------
Tranche A Term
and Revolver Percentages-20.833333%
Tranche B Term Percentage-0%
By:___________________________________________________________
Overall Percentage-16.949153%
Name:_______________________________________________________
Title:______________________________________________________
Address:
- -------
Bank of America Texas, N.A.
Three Allen Center
333 Clay, Suite 3600
Houston, TX 77002
Telephone: (713) 652-3612
Fax No.: (713) 652-3619
75
<PAGE>
Percentages: THE BANK OF NOVA SCOTIA, Atlanta Agency
- -----------
Tranche A Term
and Revolver Percentages-20.833333%
Tranche B Term Percentage-0%
By:___________________________________________________________
Overall Percentage-16.949153%
Name:_______________________________________________________
Title:______________________________________________________
Address:
- -------
The Bank of Nova Scotia,
Atlanta Agency
600 Peachtree Street NE, Suite 2700
Atlanta, GA 30308
Telephone: (404) 877-1500
Fax No.: (404) 888-8998
76
<PAGE>
Percentages: MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY
Tranche A Term
and Revolver Percentages-0%
Tranche B Term Percentage-100%
By:___________________________________________________________
Overall Percentage-16.949153%
Name:_______________________________________________________
Title:______________________________________________________
Address:
- -------
Massachusetts Mutual Life
Insurance Company
Securities Investment Division
1295 State Street
Springfield, MA
Telephone: (413) 744-6089
Fax No.: (413) 744-6127
77
<PAGE>
EXHIBIT 10(ff)
TUBOSCOPE VETCO INTERNATIONAL INC. 401(K) THRIFT SAVINGS PLAN
(As Established Effective May 13, 1988)
Eighth Amendment
----------------
Tuboscope Vetco International Inc., a Texas corporation (the "Company"),
having established the Tuboscope Vetco International Inc. 401(k) Thrift Savings
Plan, established effective May 13, 1988 (the "Plan"), and having reserved the
right under Section 15.2 thereof to amend the Plan, does hereby amend the Plan,
effective as of October 1, 1993, as follows:
Sections 5.1(b)(i) and (ii) of the Plan shall be amended in their entirety
to read as follows:
"(i) One-fourth (1/4) of his Deferred Compensation for each Payday
under Section 3.1 or 3.3 and one-fourth (1/4) of his voluntary
contributions for such Payday under Section 4.1 or 4.2, or
(ii) One and one-half percent (1 1/2%) of his Compensation for such
Payday."
IN WITNESS WHEREOF, the Company has caused these presents to be
executed by its duly authorized officers in a number of copies, all of which
shall constitute one and the same instrument, which may be sufficiently
evidenced by any such executed copy hereof, this _____ day of _______________,
1993 but effective as of the date specified herein.
TUBOSCOPE VETCO INTERNATIONAL INC.
By
------------------------------------
William Larkin, Jr.
President
ATTEST:
- ------------------------------
James F. Maroney, III
Secretary
<PAGE>
TUBOSCOPE VETCO INTERNATIONAL 401(K)
THRIFT SAVINGS PLAN
(AS ESTABLISHED MAY 13, 1988)
NINTH AMENDMENT
---------------
Tuboscope Vetco International Inc., a Texas corporation (the "Company"), having
established the Tuboscope Vetco International Inc. 401(k) Thrift Savings Plan,
established effective May 13, 1988 (the "Plan"), and having reserved the right
under Section 15.2 thereof to amend the Plan, does hereby amend the Plan,
effective as of January 1, 1994, as follows:
Sections 2.3(c) and (d) of the Plan shall be amended in their entirety as
follows:
"(c) his statement to whether he elects to defer compensation within the
limits of Section 3.1, his selection of the amount of his deferral
within the limits of Section 3.1, his selection of Investment Funds
in accordance with Article XVII, and his authorization for the
Company to pay the same to the Trust Fund in accordance with Section
5.1; and
(d) his statement as to whether he elects to make contributions to his
Personal Contributions Account in accordance with Section 4.1, his
selection of the amount of his contributions within the limits of
Section 4.1, his selection of Investment Funds in accordance with
Article XVII and, in such case, his authorization to the Company to
withhold such amounts from his compensation and to pay the same to
the Trust Fund in accordance with Sections 4.3 and 4.5".
Section 5.1(B) of the Plan shall be amended in its entirety as follows:
"B. Prior to October 1, 1993, subject to Section 16.4 for each Payday,
the Company shall contribute to the Plan for each Participant who
elected to defer Compensation under Section 3.1 or 3.3 or who
elected to contribute under Section 4.1 or 4.2 an amount of his
Company Contributions Account which is equal to the lesser of:
(i) 1/2 of his Deferred Compensation for such Payday under Section
3.1 or 3.3 and 1/2 of his voluntary contributions for such
Payday under Section 4.1 or 4.2; or
(ii) 3% of his Compensation for such Payday.
From and after October 1, 1993, subject to Section 16.4 for each
Payday, the Company shall contribute to the Plan for each Participant
who elected to defer Compensation under Section 3.1 or 3.3 or who
elected to contribute under Section 4.1 or 4.2 to such Participant's
Company Contributions Account an amount equal to
<PAGE>
the lesser of:
(i) 1/4 of his Deferred Compensation for each payday under Section
3.1 or 3.3 and 1/4 of his voluntary contributions for such Payday
under Section 4.1 or 4.2; or
(ii) 1 1/2% of his Compensation for such Payday.
From and after January 1, 1994, the contributions by the Company to a
Participant's Company Contributions Account shall be made in the form
of "Common Stock" in accordance with Section 5.1(B). Common Stock
shall mean the Common Stock of Tuboscope Vetco International Corp.,
par value $.01".
Section 7.1 of the Plan shall be amended in its entirety as follows:
"7.1 Determination of Values: As of the end of the Plan Year and as of the
------------------------
end of each quarter thereof or any other date deemed by the
Administrative Committee to be advisable the Administrative Committee
shall determine the fair market value of each asset in the Trust Fund
in compliance with the principles of Section 3(26) of ERISA and
regulations issued pursuant thereto, based upon information reasonably
available to it including data from, but not limited to, newspapers
and financial publications of general circulation, statistical and
valuation services, records of securities exchanges, appraisals by
qualified persons, transactions and bona fide offers in assets of the
type in question and other information customarily used in the
valuation of property for purposes of the Code. The value of any real
property held in the Trust Fund determined as of the end of the fourth
quarter of any Plan Year shall be considered to remain unchanged until
the end of the fourth quarter of the following Plan Year. With
respect to securities for which there is a generally recognized
market, the published selling prices on or nearest to such valuation
date shall establish the fair market value of such security. Fair
market value so determined shall be conclusive for all purposes of the
Plan and Trust".
Section 10.3(A) of the Plan shall be amended in its entirety as follows:
"A. A Participant shall be entitled to receive the entire amount credited
to his Accounts, to the extent Vested, in cash in one lump sum;
provided, however, that a Participant may elect to receive the portion
of his Company Contributions Account invested in Common Stock in the
form of Common Stock, except that cash shall be paid in lieu of
fractional shares".
Section 11.2(A) of the Plan shall be amended in its entirety as follows:
"A. Upon the death of a Participant or former Participant, the Vested
amount credited to his Accounts (as amended under Section 8.2) shall
be paid in cash in one lump sum provided, however, that a Participant
may elect to receive the portion of his Company Contributions Account
invested in Common Stock in the form of Common Stock, except that cash
shall be paid in lieu of fractional shares not later than the first
anniversary of the Participant's death to his then Surviving Spouse,
if any, and
<PAGE>
otherwise to the person or persons of highest priority who survives
the participant by at least 30 days determined as follows:
(i) First to his then surviving highest priority Beneficiary or
Beneficiaries, if any.
(ii) Second, to his then surviving heirs at law, if any, as
determined in the reasonable judgment of the Administrative
Committee under the applicable law governing succession to
personal property.
(iii) Third, to the Plan to be applied to reduce the Company's
contribution under Section 5.1(A) and 5.1(B)".
Sections 12.1(a) and (b) of the Plan shall be amended in their entirety as
follows:
(a) If the Vested amount credited to his Accounts does not exceed $3,500,
such amount in cash in one lump sum provided, however, that a
participant may elect to receive the portion of his Company
Contributions Account invested in Common Stock in the form of Common
Stock, except that cash shall be paid in lieu of fractional shares not
later than six months after the end of the Plan Year in which such
Separation from the Service occurs, or, if earlier, within 60 days
after the end of the Plan Year in which his 60th birthday occurs; or
(b) If the Vested amount credited to his Accounts exceeds $3,500, such
amount in cash in one lump sum provided, however, that a Participant
may elect to receive the portion of his Company Contributions Account
invested in Common Stock in the form of Common Stock, except that cash
shall be paid in lieu of fractional shares payable on such date as he
shall elect in writing in accordance with Code Section 411(a)(11), but
not earlier than the earliest date described in subsection (a) and not
later than his attainment of age 70-1/2".
Section 16.5 of the Plan shall be amended in its entirety as follows:
"16.5 Governing Law: The Plan and Trust shall be interpreted, administered
and enforced in accordance with the Code and ERISA, and the rights of
Participants, former Participants, Beneficiaries and all other persons
shall be determined in accordance therewith; provided, however, that,
to the extent that state law is applicable, the laws of the State
California shall apply".
Sections 17.1, 17.2 and 17.3 of the Plan shall be amended in their entirety as
follows:
"17.1 Trust Agreement: The Company has entered into a Trust Agreement
----------------
governing the administration of the Trust established as of April 1,
1993, 1992, under which Merrill Lynch Trust Company of Texas, with its
principal place of business in Texas, serves as Trustee, and, as
amended, the provisions of which are herein incorporated by reference
as fully as if set out herein. Subject to the provisions of Section
17.2, and not by way of limitation of the provisions of the Trust
Agreement, the Trustee may invest a portion of the Trust Fund in
Common Stock or any other "qualifying
<PAGE>
employer security" within the meaning of ERISA Section 407(d)(5).
17.2 Investment Funds: The Trustee shall divide the Trust Fund into the
-----------------
Investment Funds as the Administrative Committee designates as
available for Participant's selection set forth on Appendix A attached
hereto. From and after April 1, 1991, no further contributions to any
Account of any Participant may be invested in the frozen Investment
Fund established effective as of April 1, 1991, consisting solely of
amounts attributable to Plan contributions in one or more insurance
annuity contracts purchased through Executive Life Insurance Company
(the "Executive Life GIC Fund"). Furthermore, from and after April 1,
1991, no transfers, withdrawals, loans or any other type of
disbursements or distributions from that portion of any Account of any
Participant invested in the Executive Life GIC Fund will be allowed
under this Plan. Only amounts constituting income of the Executive
Life GIC Fund may be reinvested in this Investment Fund.
Contributions shall be paid into the Investment Funds in accordance
with the provisions of Sections 17.3 and 17.4 as certified to the
Trustee by the Administrative Committee. Except as otherwise provided
herein, interest, dividends and other income and all profits and gains
produced by each such Investment Fund shall be paid into such
Investment Fund, and such interest, dividends and other income or
profits and gains, without distinction between principal and income,
may be invested and reinvested but only in the property hereinabove
specified for the particular Investment Fund. Notwithstanding any
provision in this Section to the contrary, the Administrative
Committee may direct the Trustee (i) to invest any Participant and/or
Company contributions to a Participant's Account in short-term fixed
income investments which are acceptable to the Trustee or in the
suspense account to be maintained in each Investment Fund during the
period from the date of any such contribution until the next valuation
date or (ii) to invest all or any portion of the trust Fund
attributable to any terminated or retired Participant or attributable
to any Participant who is expected to retire or to terminate his
service within one year, in one or more fixed income investments which
are acceptable to the trustee. The fixed income investments
authorized by this Section shall include, but not be limited to,
certificates of deposit, savings accounts, or U.S. Treasury bills or
notes.
17.3 Investment Directions of Participants: Each participant may, by
--------------------------------------
written notice to the Administrative Committee in the manner
prescribed by it, direct that the total of the contributions allocable
to his Deferred Compensation Account, Personal Contributions Account,
and Company Contributions Account, and the earnings and accretions
thereon, be invested in such percentages (in increments of 10% of the
total of such Accounts) as he may designate among the Investment
Funds.
In the event a Participant fails to direct the manner of investing his
Accounts as provided herein, such Account shall be invested only in
the Preservation Fund.
<PAGE>
IN WITNESS WHEREOF, the Company has caused these presents to be executed by
its duly authorized Officers in a number of copies, all of which shall
constitute one and the same instrument, which may be sufficiently evidenced
by any such executed copy hereof, this ___day of January, 1994, but
effective as of the date specified herein.
TUBOSCOPE VETCO INTERNATIONAL INC.
BY:________________________________
William V. Larkin, Jr.
ATTEST:
_____________________________
James F. Maroney, III
Secretary
