<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, 1996
-----------------------------
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
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(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
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(Registrant's telephone number, including area code)
None
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(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 41,566,030 shares of common stock outstanding as of June
30, 1996.
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TUBOSCOPE VETCO INTERNATIONAL CORPORATION
INDEX
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<CAPTION>
Page No.
---------
Part I - FINANCIAL INFORMATION
<S> <C> <C>
Item 1. Financial Statements:
Consolidated Balance Sheets -
June 30, 1996 (unaudited) and December 31, 1995 2
Unaudited Consolidated Statements of Operations -
For the Three and Six Months Ended June 30, 1996 and 1995 3
Unaudited Consolidated Statements of Cash Flows -
For the Six Months Ended June 30, 1996 and 1995 4
Notes to Unaudited Consolidated Financial Statements 5-7
Item 2. Management's Discussion and Analysis of Results
of Operations and Financial Condition 8-10
Part II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders 11
Item 6. Exhibits and Reports on Form 8-K 11
Signature Page 12
Exhibit Index 13-16
Appendix A - Financial Data Schedule 17
</TABLE>
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
1
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TUBOSCOPE VETCO INTERNATIONAL CORPORATION
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
JUNE 30 DECEMBER 31,
1996 1995
----------- -------------
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C>
A S S E T S
-----------
Current assets:
Cash and cash equivalents........................................................................... $ 11,352 $ 9,394
Accounts receivable, net............................................................................ 97,018 52,071
Inventory, net...................................................................................... 41,122 14,364
Deferred federal income taxes....................................................................... 4,689 2,521
Prepaid expenses and other.......................................................................... 10,139 6,403
-------- --------
Total current assets............................................................................ 164,320 84,753
-------- --------
Property and equipment:
Land, buildings and leasehold improvements.......................................................... 75,712 81,557
Operating equipment and equipment leased to customers............................................... 135,329 105,187
Accumulated depreciation and amortization........................................................... (50,820) (46,706)
-------- --------
Net property and equipment...................................................................... 160,221 140,038
Identified intangibles, net............................................................................ 21,388 29,379
Goodwill, net.......................................................................................... 116,944 47,751
Other assets, net...................................................................................... 4,912 4,758
-------- --------
Total assets.................................................................................... $467,785 $306,679
======== ========
L I A B I L I T I E S A N D E Q U I T Y
-----------------------------------------
Current liabilities:
Accounts payable.................................................................................... $ 38,139 $ 14,306
Accrued liabilities................................................................................. 40,087 18,705
Federal and foreign income taxes payable............................................................ 3,006 2,557
Current portion of long-term debt and short-term borrowings......................................... 32,454 4,562
-------- --------
Total current liabilities....................................................................... 113,686 40,130
Long-term debt......................................................................................... 121,092 107,055
Pension liabilities.................................................................................... 9,142 9,869
Deferred taxes payable................................................................................. 15,693 16,411
Other liabilities...................................................................................... 1,289 1,598
Commitments and contingencies..........................................................................
-------- --------
Total liabilities............................................................................... 260,902 175,063
-------- --------
Redeemable Series A Convertible Preferred Stock........................................................ -- 10,175
-------- --------
Common stockholders' equity:
Common stock, $.01 par value, 60,000,000 shares authorized, 41,566,030 shares
issued and outstanding (18,546,075 at December 31, 1995).......................................... 411 185
Paid-in capital...................................................................................... 258,996 116,379
Retained earnings (deficit).......................................................................... (50,126) 6,650
Cumulative translation adjustment.................................................................... (2,398) (1,773)
-------- --------
Total common stockholders' equity............................................................... 206,883 121,441
-------- --------
Total liabilities and equity.................................................................... $467,785 $306,679
======== ========
</TABLE>
See notes to unaudited consolidated financial statements.
2
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TUBOSCOPE VETCO INTERNATIONAL CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
1996 1995 1996 1995
------ ------ ------ ------
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<S> <C> <C> <C> <C>
Revenue............................................ $94,643 $45,652 $141,661 $89,338
Costs and expenses:
Costs of services and products sold.............. 66,144 33,513 101,315 66,115
Goodwill amortization............................ 671 330 863 651
Selling, general, and administration............. 10,784 5,140 15,785 10,337
Research and engineering costs................... 928 885 1,765 1,790
Write-off of long-term assets.................... -- -- 63,061 --
Drexel transaction costs......................... 11,206 -- 11,206 --
----------- ------------ ----------- -----------
89,733 39,868 193,995 78,893
----------- ------------ ----------- -----------
Operating profit................................... 4,910 5,784 (52,334) 10,445
Other expense (income):
Interest expense................................... 3,415 3,166 6,010 6,367
Interest income.................................... (100) (56) (131) (104)
Foreign exchange................................... (190) (349) (345) (945)
Other, net......................................... 314 (97) 824 270
----------- ------------ ----------- -----------
Income before income taxes......................... 1,471 3,120 (58,692) 4,857
----------- ------------ ----------- -----------
Provision (benefit) for income taxes............... 2,658 1,248 (1,916) 1,943
----------- ------------ ----------- -----------
Net income (loss).................................. (1,187) 1,872 (56,776) 2,914
Dividends applicable to redeemable preferred stock. (175) 175 -- 350
----------- ------------ ----------- -----------
Net income (loss) applicable to common stock....... ($1,012) $1,697 ($56,776) $2,564
=========== ============ =========== ===========
Earnings per common share:
Net income (loss)............................... ($0.02) $0.09 ($1.86) $0.14
=========== ============ =========== ===========
Weighted average number of common shares 42,191,793 18,521,966 30,475,362 18,513,116
outstanding........................................ =========== ============ =========== ===========
</TABLE>
See notes to unaudited consolidated financial statements.
3
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TUBOSCOPE VETCO INTERNATIONAL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
1996 1995
---------- --------
(IN THOUSANDS)
<S> <C> <C>
Cash flows from operating activities:
Net income (loss)................................................................ ($56,776) $ 2,914
Adjustments to reconcile net income (loss) to net cash provided by (used in)
operating activities:
Depreciation and amortization................................................. 6,960 7,650
Provision (recovery) for losses on accounts receivable........................ 36 (119)
Benefit for deferred income taxes............................................. (6,578) (523)
Compensation related to employee 401(K) plan.................................. 126 130
Write-off of long term assets................................................ 63,061 --
Changes in current assets and liabilities, net of effects of
acquired companies:
Accounts receivable....................................................... (12,434) 1,441
Inventory................................................................. 485 (1,384)
Prepaid expenses and other assets......................................... (2,119) (1,288)
Accounts payable, accrued liabilities, and other......................... 7,842 (3,541)
Federal and foreign income taxes payable.................................. (1,033) 80
Pension liabilities....................................................... (727) 1,027
--------- -------
Net cash provided by (used in) operating activities.......................... (1,157) 6,387
--------- -------
Cash flows used in investing activities:
Capital expenditures............................................................. (7,771) (3,837)
Net assets of acquired companies, net of cash acquired........................... (19,005) --
Other............................................................................ (1,292) (785)
--------- -------
Net cash used in investing activities......................................... (28,068) (4,622)
--------- -------
Cash flows provided by financing activities:
Borrowings under financing agreements............................................ 4,800 502
Principal payments under financing agreements.................................... (6,152) (2,503)
Foreign currency options......................................................... -- (258)
Dividends paid on Redeemable Series A Convertible Preferred Stock................ (175) (350)
Cash received in Drexel Merger................................................... 2,101 --
Proceeds from sale of Common Stock and warrants................................. 30,609 101
--------- -------
Net cash provided by (used in) financing activities........................... 31,183 (2,508)
--------- -------
Net increase (decrease) in cash and cash equivalents............................... 1,958 (743)
Cash and cash equivalents:
Beginning of period.............................................................. 9,394 8,531
--------- -------
End of period.................................................................... $ 11,352 $ 7,788
========= =======
Supplemental disclosure of cash flow information:
Cash paid during the six month period for:
Interest, net................................................................. $ 5,791 $ 6,798
========= =======
Taxes......................................................................... $ 5,775 $ 1,973
========= =======
Supplementary disclosure of non-cash financing and investing activities:
Acquisitions:
Fair market value of net assets acquired...................................... $ 100,007 $ --
Fair market value of common stock, stock options, and warrants issued........ (100,007) --
--------- -------
$ -- $ --
========= =======
</TABLE>
See notes to unaudited consolidated financial statements.
4
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TUBOSCOPE VETCO INTERNATIONAL CORPORATION
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 1996 AND 1995
AND AS OF DECEMBER 31, 1995
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 of 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 1995 Form 10-K, filed under the Securities
Exchange Act of 1934 (Commission File No. 0-18312).
2. INVENTORY
At June 30, 1996 inventories consist of the following (in thousands):
<TABLE>
<S> <C>
Components, subassemblies, and expendable parts................. $ 32,816
Equipment under production...................................... 8,306
--------
$ 41,122
========
</TABLE>
3. DIVIDEND RESTRICTIONS
In certain situations, Tuboscope Vetco International Inc.'s (TVI's) $75
million Senior Subordinated 10.75% Notes restrict the ability of TVI to
dividend or otherwise make distributions to the Company and prohibit the
Company from paying dividends on its Common Stock. Such restrictions are
permitted restrictions in TVI's Senior Bank Credit Agreement.
4. SUMMARIZED FINANCIAL INFORMATION OF REGISTRANT (TVI)
The following is summarized balance sheet information for TVI as of June
30, 1996 and December 31, 1995 and summarized statements of operations for
the six months ended June 30, 1996 and 1995 (in thousands).
<TABLE>
<CAPTION>
SUMMARIZED BALANCE SHEETS
June 30, December 31,
ASSETS 1996 1995
------ ---- ----
<S> <C> <C>
Current assets............................................ $ 95,209 $ 98,502
Noncurrent assets......................................... 202,672 202,833
-------- --------
Total assets............................................ $297,881 $301,335
======== ========
LIABILITIES AND EQUITY
----------------------
Current liabilities....................................... $ 72,198 $ 38,463
Noncurrent liabilities.................................... 110,630 130,617
Stockholders' equity...................................... 115,053 132,255
-------- --------
Total liabilities and equity............................ $297,881 $301,335
======== ========
</TABLE>
5
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4. SUMMARIZED FINANCIAL INFORMATION OF REGISTRANT (TVI) (CONT'D)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
------------------
1996 1995
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<S> <C> <C>
SUMMARIZED STATEMENTS OF OPERATIONS
Revenue........................................................... $104,536 $88,207
======== =======
Operating profit (loss)........................................... $(52,023) $10,303
======== =======
Income (loss) before income taxes................................. $(49,561) $ 4,454
======== =======
Net income (loss)................................................. $(46,630) $ 2,931
======== =======
</TABLE>
5. MERGER WITH D.O.S LTD.
On April 24, 1996, pursuant to that certain Agreement and Plan of Merger
dated as of January 3, 1996 by and among the Company, Grow Acquisition
Limited, a Bermuda corporation and wholly owned subsidiary of the Company
("Grow"), and D.O.S. Ltd., a Bermuda corporation (Drexel), Grow was merged
with and into Drexel (the "Merger"). Upon consummation of the Merger, all
of the outstanding ordinary shares of Drexel were converted into the right
to receive approximately 16.7 million shares of Company Common Stock.
In connection with the Merger, on April 24, 1996 the Company sold to SCF-
III, L.P., a Delaware limited partnership ("SCF"), 4,200,000 shares of
Company Common Stock and warrants to purchase 2,533,000 shares of Company
Common Stock at an exercise price of $10 per share expiring on December 31,
2000, for an aggregate purchase price of $31,000,000 pursuant to a certain
Subscription Agreement dated as of January 3, 1996 between the Company and
SCF.
Also in connection with the Merger, on April 24, 1996 Baker Hughes
Incorporated ("Baker Hughes") exchanged all of its 100,000 shares of Series
A Convertible Preferred Stock, par value $.01 per share, of the Company for
1,500,000 shares of Company Common Stock and warrants to purchase 1,250,000
shares of Company Common Stock at an exercise price of $10 per share
expiring on December 31, 2000, pursuant to that certain Exchange Agreement
dated as of January 3, 1996 between the Company and Baker Hughes.
6. ACQUISITION OF WADECO
On May 31, 1996, pursuant to that certain Share Purchase Agreement dated as
of May 31, 1996, the Company acquired all of the outstanding shares of
capital stock of Wadeco Oilfield Services Ltd. ("Wadeco") for $16.4 million
(provided from the Company's cash reserves and its existing revolving
credit facility). In addition, the Company assumed $5.2 million of Wadeco
debt.
7. NEW SENIOR CREDIT AGREEMENT
On August 2, 1996, TVI and Drexel Holdings Inc., a wholly owned subsidiary
of the Company, executed a new Senior Credit Agreement (the "Agreement)
which consisted of a $100 million revolving credit facility ("revolving
loans") due in five years and a $130 million advance/term loan facility
("term loans") due over six years. The initial draws were $9 million and
$50 million related to the revolving loans and term loans, respectively,
and was used to retire $59 million of existing outstanding debt of both TVI
and Drexel.
The revolving loans may be repaid, in whole or in part, at any time prior
to August 2, 2001. The outstanding principal balance on the term loans
becomes fixed on June 30, 1997, and is thereafter amortized and repaid on a
quarterly basis between September 30, 1997 and August 2, 2002.
Interest rates for the revolving and term loans, at the option of the
Company, are stated in either the lenders announced fluctuating commercial
base rate or a Eurodollar rate plus an applicable margin (determined by
total funded debt to total capital ratio). Commitment fees on the unused
revolving and term loan balances range from 0.175% to 0.375% (determined by
total funded debt to total capital ratio).
6
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7. NEW SENIOR CREDIT AGREEMENT (CONT'D)
The indebtedness under the Agreement is collateralized by the stock of TVI
and Drexel Holdings and a significant portion of the stock of several
foreign subsidiaries, and is guaranteed by the Company. The Agreement
contains financial covenants with respect to interest coverage ratio, total
funded debt to total capital ratio, and a minimum tangible net worth.
The Company is expected to recognize an extraordinary loss, related to the
early retirement of its existing Senior Credit Agreement, of approximately
$700,000 in the third quarter of 1996.
7
<PAGE>
Item 2. Management's Discussion and Analysis of Results of Operations and
Financial Condition.
RESULTS OF OPERATIONS
- ---------------------
REVENUE. Revenue was approximately $94.6 million and $141.7 million for the
second quarter and first six months of 1996, respectively, representing
increases of $48.9 million and $52.4 million from the same periods in 1995,
respectively. The recent merger with Drexel, which was completed effective
April 1, 1996, accounted for $36.5 million of the increases for the second
quarter and first six months of 1996. On a pro forma basis, revenue was up
$19.8 million (26.4%) and $29.3 million (19.8%) for the second quarter and first
half of 1996, respectively, over the second quarter and first half of 1995,
respectively.
Revenue from the Company's Oilfield Services, comprised of Inspection, Coating,
and Solids Control, was approximately $67.3 million and $105.5 million for the
second quarter and six months ending June 30, 1996. These results represented
increases of $32.3 million and $37.2 million over the prior year periods,
respectively. The merger with Drexel added the Solids Control operations to
the Company's Oilfield Services. In addition, the Company completed the
acquisition of Wadeco, a Canadian Solids Control company, effective May 1,
1996. Solids Control operations which includes the rental and sale of equipment
used in the removal of rock cuttings and other solid contaminants from the mud
used in drilling operations, contributed revenue of $22.5 million in the second
quarter of 1996. On a pro forma basis for the Tuboscope/Drexel Merger, Solids
Control revenue was up $4.3 million primarily as a result of increased activity
in Latin America, specifically Venezuela, and revenue earned in Wadeco's
operations. Inspection revenue was up $6.3 million (28.3%) in the second
quarter of 1996 compared to the second quarter of 1995. The increase was mainly
the result of a $4.2 million increase in Latin America Inspection operations
which benefited from the acquisition of an Argentina operation in September 1995
and a large contract in Colombia awarded in the fourth quarter of 1995. In
addition, Europe, Africa, and Middle East (EAME) operations were up $1.5 million
as a result of an increase in Mill surveillance work and the completion of the
majority of an Algerian reclamation project. Coating revenue was up $4.1 million
(34.1%) in the second quarter of 1996, mainly as a result of a $3.2 million
Russian Coating plant sale. Also, North America Coating revenue improved $2.0
million as revenue was up at all North America Coating plants due mainly to
significant increases in Gulf Coast activity and line pipe Coating activity in
Canada.
Coiled Tubing Products, which were also acquired as part of the Drexel Merger,
contributed revenue of $15.7 million in the second quarter of 1996. Coiled
tubing products include the sale of coiled tubing units and blowout preventors
used in oilfield workover, drilling and production operations. On a pro forma
basis, Coiled Tubing Products revenue was up $4.7 million in the second quarter
of 1996 compared to the second quarter of 1995, attributable mainly to the sale
of two large coiled tubing drilling units and high demand for coiled tubing
pressure control equipment.
Pipeline Services revenue was $5.0 million and $8.2 million for the second
quarter and first six months of 1996, respectively, representing increases of
$1.0 million and $1.1 million over the second quarter and first half of 1995,
respectively. The majority of the increase was due to greater activity in the
EAME market with a slight increase in North America.
Industrial Inspection revenue was $3.3 million and $6.7 million for the second
quarter and first six months of 1996, equal to the second quarter of 1995 and
down $319,000 from the first half of 1995. The year-to-date decline was mainly
the result of lower revenue in the Middle East.
Mill Systems and Sales revenue was $2.0 million and $3.6 million for the quarter
and six months ending June 30, 1996, respectively, down $1.0 million and $1.4
million from the same periods in 1995, respectively. The decrease was due to
lower Mill equipment sales in the U.S.
Other revenue was $1.4 million and $1.9 million for the second quarter and first
six months of 1996, respectively, an increase of $454,000 over the second
quarter of 1995 and even with the first half of 1995. The second quarter 1996
improvement was due to a line pipe service job in Ecuador.
GROSS PROFIT. Gross profit was approximately $27.8 million (29.4%) and $39.5
million (27.9%) for the second quarter and first half of 1996, respectively,
compared to $11.8 million (25.9%) and $22.6 million (25.3%) for the second
quarter and first half of 1995, respectively. Drexel and Wadeco operations
accounted for the majority of the second quarter increase ($12.4 million of the
$16.0 million improvement). Gross profit percentages benefited from greater
revenue in high profit margin product lines, including Pipeline, Coating, and
Solids Control. Gross profit also improved due to lower depreciation and
amortization expense associated with the write-off of long-term assets in the
first quarter of 1996.
8
<PAGE>
SELLING, GENERAL AND ADMINISTRATIVE COSTS. Selling, general and administrative
costs were $10.8 million and $15.8 million in the second quarter and first half
of 1996, respectively, increases of $5.6 million and $5.5 million over the same
periods of 1995, respectively. The increase was mainly the result of $5.5
million of overhead costs associated with the Drexel and Wadeco operations.
RESEARCH AND ENGINEERING COSTS. Research and engineering costs were $928,000
and $1.8 million for the second quarter and first half of 1996, respectively,
similar to the amounts recorded in the same periods of 1995, respectively. The
major portion of costs currently being incurred is related to the Company's
TruRes/TM/ "High Resolution" pipeline tools.
WRITE-OFF OF LONG-TERM ASSETS. The first quarter 1996 write-off of long-term
assets of $63.1 million included a writedown of approximately $50.8 million
associated with the Company's adoption of SFAS No. 121 Accounting for the
Impairment of Long-lived Assets and for Long-Lived Assets to Be Disposed Of and
a decision by management to sell certain assets, primarily as a result of the
Drexel Merger, which resulted in additional write-downs of approximately $12.3
million.
In March 1995, the Financial Accounting Standards Board (FASB) issued Statement
No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of. SFAS No. 121 established "accounting standards for the
impairment of the long-lived assets, certain identifiable intangibles, and
goodwill related to those assets to be held and used and for long-lived assets
and certain identifiable intangibles to be disposed of." The new statement
requires the value of long-lived assets, certain identifiable intangibles, and
goodwill to be reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable. If this change in circumstances or other initial indication has
occurred, the next step in determining whether an asset has been impaired is
performed using the expected future undiscounted cash flows of assets, grouped
at the lowest level for which there are identifiable cash flows, compared to the
carrying value of those assets. If the undiscounted cash flow value is less than
the net carrying value, the amount of impairment is then measured by comparing
the discounted cash flows with the corresponding carrying values of the assets
evaluated. The Company's previous policy was to evaluate the realizability of
long-term assets on an aggregate basis based on undiscounted cash flows.
Management accumulated cash flow information at the lowest asset grouping levels
for which there were identifiable cash flows. These levels were represented by
separate product line operations at individual operating locations. Based on the
data, the Company's adoption of SFAS No. 121 resulted in a write-down of long-
lived assets of approximately $50.8 million in the first quarter of 1996.
The majority of the SFAS No. 121 write-down was in international locations such
as Italy, Saudi Arabia, Japan, and Germany which have experienced significant
reductions in rig activity and other business declines since the Company's
acquisition of substantially all the foreign operations of Baker Hughes Tubular
Services, Inc. (Vetco Services) in October 1991. In addition, the analysis of
U.S. locations by identifiable cash flows for individual asset locations
resulted in additional write-downs.
In addition to the write-down of $50.8 million associated with the adoption of
SFAS No. 121, the Company recognized $12.3 million of write-downs associated
with the decision to sell certain assets. A decision was made to sell the
Company's corporate headquarters on Holmes Road in Houston, Texas in the first
quarter of 1996. The decision was made in connection with the Drexel Merger and
the Company recognized a significant write-down represented by the difference
between the facility's net book value and estimated fair value less costs to
sell. A decision has also been made by the Company to sell certain tank
inspection equipment and related operations which are currently performing below
acceptable levels. The sale of this operation is expected to be completed in the
third quarter of 1996.
DREXEL TRANSACTION COSTS. The $11.2 million of Drexel transaction costs include
executive severance costs of $6.4 million associated with former officers of the
Company and consolidation costs of $4.8 million related to Tuboscope personnel
and facilities. The consolidation costs of $4.8 million were related mainly to
the consolidation of overhead facilities and personnel in EAME and the
consolidation of certain operating locations in North America.
OPERATING PROFIT. Operating profit was $4.9 million and operating loss was
$52.3 million for the second quarter and first half of 1996, respectively.
Excluding the write-off of long-term assets and the Drexel transaction costs,
operating profit would have been $16.1 million and $21.9 million, respectively,
for the second quarter and first half of 1996. These results represented a $10.3
million and $11.5 million improvement over the second quarter and first half of
1995, respectively. The stronger operating profit was due mainly to operating
profit contributions from Drexel and Wadeco, and stronger operations in
Inspection, Coating, and Pipeline Services.
INTEREST EXPENSE. Interest expense was $3.4 million and $6.0 million in the
three and six months ended June 30, 1996, respectively, an increase of $249,000
over the second quarter of 1995 and a decrease of $357,000 compared to the first
six months of 1995, respectively. The second quarter 1996 increase was due to
debt associated with the Drexel and Wadeco operations.
9
<PAGE>
OTHER EXPENSE (INCOME). Other expense (income), which includes interest income,
foreign exchange, and other expense (net), resulted in a net expense of $24,000
in the second quarter of 1996 compared to income of $502,000 in the second
quarter of 1995. The 1995 second quarter results included a net gain of $1.7
million from an arbitration award related to the Company's acquisition of Vetco
Services in 1991 and the accrual of $1.0 million of legal and other nonoperating
costs associated with the Company's Italian subsidiary.
PROVISION FOR INCOME TAXES. The effective tax rate on operating profits,
excluding the write-off of long-term assets and the Drexel transaction costs for
the quarter ended June 30, 1996 was 39% compared to 40% for the quarter ended
June 30, 1995. The slight improvement in the rate is due in part to the
elimination of non-deductible goodwill amortization through the SFAS No. 121
write-off. The effective tax rate of the write-off of long-term assets and the
resulting tax consequences was 9%. Included therein is an increase in the
valuation allowance against foreign tax credits and a provision for tax
contingencies in foreign jurisdictions. The effective tax rate on the Drexel
transaction costs was 5.7%. The low effective tax rate benefit on the Drexel
transaction costs was due to $5.4 million of non-deductible executive severance
costs.
NET INCOME. The second quarter 1996 net loss was $1.2 million compared to the
second quarter of 1995 net income of $1.9 million. The decrease was due to the
factors discussed above. Excluding the after-tax impact of the write-off of
long-term assets and the Drexel transaction costs, net income would have been
$7.7 million in the second quarter of 1996.
FINANCIAL CONDITION AND LIQUIDITY
- ---------------------------------
For the six months ended June 30, 1996, the Company used $1.2 million of cash in
operations as compared to $6.4 million in 1995. Cash was used in operations
during the first six months of 1996 principally as a result of a $12.4 million
increase in accounts receivables (net of the effect of acquisitions). The
increase in accounts receivables was due to a $3.2 million Coating plant sale in
Russia late in the second quarter of 1996 and an overall increase in revenue in
several different product lines. In addition, cash from operations was used to
prepay insurance policies, which renew each year in the second quarter, and was
the primary cause in a $2.1 million increase in prepaid expenses. These
increases in current asset accounts were partially offset by a $7.8 million
increase in accounts payable, accrued liabilities, and other. The accounts
payable, accrued liabilities, and other increase was mainly a result of
consolidation accruals related to the Tuboscope/Drexel merger.
For the six months ended June 30, 1996, the Company used $28.1 million for
investing activities compared to $4.6 in the same period of 1995. The increase
was due to $7.8 million in capital spending (compared to $3.8 million in 1995)
and acquisitions of $19.0 million. Capital spending was up in 1996 due to the
addition of the Drexel and Wadeco operations. The acquisition cost of $19.0
million consisted of $16.4 million for Wadeco and $2.6 million related to an
acquisition of a Solids Control operation in Venezuela.
For the six months ended June 30, 1996, the Company generated $31.2 million of
cash from financing activities compared to a usage of $2.5 million in 1995. The
cash was generated through the sale of $30.6 million of Common Stock and $2.1
million of cash received in the Drexel Merger. Cash used in financing activities
consisted primarily of principal payments of $6.2 million related mainly to the
Company's senior term debt, offset somewhat by borrowings of $4.8 million mostly
on the Company's revolver.
Current and long-term debt was $153.5 million at June 30, 1996, an increase of
$41.9 million from the $111.6 million outstanding at December 31, 1995. Debt
assumed in the Drexel merger resulted in $38.1 million of this increase. Debt
assumed in the acquisition of Wadeco was $5.2 million. The Company's outstanding
debt at June 30, 1996 consisted of $75 million of 10.75% Senior Subordinated
Notes due 2003, $5.2 million of term loans due under the Company's Senior Credit
Agreement, $24.0 million due under the Company's $35 million revolving credit
facility, $13.5 million of term loans due under Drexel's senior credit
agreement, $16.7 million due under Drexel's revolving credit facility, $5.0
million related to Wadeco's operations, $4.5 million related to the construction
of the Aberdeen, Scotland coating facility, $2.0 million of revenue bonds, $3.8
million of debt related to former owners of SWECO Oilfield Services (which was
acquired by Drexel in November 1995), and 3.8 million of other outstanding debt.
NEW SENIOR CREDIT AGREEMENT
- ---------------------------
As discussed in Note 7 of Notes to the Unaudited Consolidated Financial
Statements, on August 2, 1996 the Company refinanced the existing senior debt
for Tuboscope and Drexel with a new Senior Credit Agreement which allows the
Company to borrow up to $100 million on the revolving credit facility and up to
$130 million on an advance/term loan facility. The initial borrowing was $9
million on the revolving credit facility and $50 million on the term loan
facility, with the proceeds being used to retire $59 million of existing senior
debt of Tuboscope and Drexel.
The revolving loans may be repaid, in whole or in part, at any time prior to
August 2, 2001. The outstanding principal balance on the term loans becomes
fixed on June 30, 1997, and is thereafter amortized and repaid on a quarterly
basis between September 30, 1997 and August 2, 2002.
10
<PAGE>
PART II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
The Annual Meeting of Shareholders was held April 24, 1996 for the following
purposes:
1. PROPOSAL ONE: Approval and adoption of the Agreement and Plan of Merger
dated as of January 3, 1996 (the "Merger Agreement"), between Tuboscope,
Grow Acquisition Limited, a Bermuda corporation and wholly owned subsidiary
of Tuboscope ("Sub"), and D.O.S. Ltd., a Bermuda corporation ("Drexel),
providing for the merger of Sub with and into Drexel.
<TABLE>
<CAPTION>
FOR AGAINST ABSTAIN BROKER NON-VOTES
--- ------- ------- ----------------
<S> <C> <C> <C>
14,042,064 225,251 17,986 3,196,193
</TABLE>
2. PROPOSAL TWO: Approval of the sale of Tuboscope to SCF-III, L.P., a
Delaware limited partnership and an affiliate of a stockholder of Drexel
("SCF"), of 4,200,000 shares of Tuboscope Common Stock and warrants to
purchase, subject to adjustment under certain circumstances, an aggregate
of 2,533,000 shares of Tuboscope Common Stock at an exercise price of $10
per share expiring on December 31, 2000, for an aggregate purchase price of
$31,000,000 pursuant to a Subscription Agreement dated as of January 3,
1996 between Tuboscope and SCF.
<TABLE>
<CAPTION>
FOR AGAINST ABSTAIN BROKER NON-VOTES
--- ------- ------- ----------------
<S> <C> <C> <C>
14,008,356 241,106 35,839 3,196,193
</TABLE>
3. PROPOSAL THREE: Approval of an Amendment to Tuboscope's Certificate of
Incorporation to increase the number of authorized shares of Tuboscope
Common Stock from 35,000,000 to 60,000,000.
<TABLE>
<CAPTION>
FOR AGAINST ABSTAIN BROKER NON-VOTES
--- ------- ------- ----------------
<S> <C> <C> <C>
17,300,903 151,775 27,216 1,600
</TABLE>
4. PROPOSAL FOUR: The election of the members of the Tuboscope Board of
Directors.
<TABLE>
<CAPTION>
NAME FOR AGAINST
---- --- -------
<S> <C> <C>
Jerome R. Baier 17,392,762 88,732
Martin G. Hubbard 17,392,762 88,732
William V. Larkin, Jr. 17,392,467` 89,027
Eric L. Mattson 17,392,762 88,732
Timothy M. Pennington III 17,392,467 89,027
Martin R. Reid 17,392,467 89,027
Patrick T. Seaver 17,392,762 88,732
James J. Shelton 17,392,762 88,732
Frederick J. Warren 17,392,762 88,732
</TABLE>
5. PROPOSAL FIVE: Approval of the 1996 Equity participation Plan of Tuboscope
Vetco International Corporation.
<TABLE>
<CAPTION>
FOR AGAINST ABSTAIN BROKER NON-VOTES
--- ------- ------- ----------------
<S> <C> <C> <C>
12,859,949 3,694,838 54,856 871,851
</TABLE>
Item 6.Exhibits and reports on Form 8-K
(a) Exhibits -- Reference is hereby made to the Exhibit Index
commencing on page 13.
(b) A Report on Form 8-K was filed on June 14,1996 regarding the
acquisition of Wadeco. Amendment No. 1 to this report on Form 8-K
was filed on August 2, 1996.
11
<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 14, 1996 /s/ Joseph C. Winkler
- --------------------------- ---------------------
Joseph C. Winkler
Executive Vice President, Chief
Financial Officer
and Treasurer (Duly Authorized
Officer,
Principal Financial and Accounting
Officer)
12
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION NOTE NO.
- ----------- ----------- --------
<S> <C> <C>
2(a) Agreement and Plan of Merger, dated as of January 3, 1996, among (Note 12)
Tuboscope Vetco International Corporation, Grow Acquisition Limited
and D.O.S. Ltd.
3(a) Restated Certificate of Incorporation, dated March 12, 1990. (Note 7)
3(b) Amended and Restated Bylaws. (Note 2)
3(c) Certificate of Designation of Series A Convertible Preferred Stock, (Note 3)
dated October 22, 1991.
3(d) Certificate of Amendment to Restated Certificate of Incorporation dated (Note 10)
May 12, 1992.
3(e) Certificate of Amendment to Restated Certificate of Incorporation dated (Note 11)
May 10, 1994.
4(a) Stockholders' Agreement, dated May 13, 1988, between the Company, (Note 1)
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, (Note 1)
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 (Note 4)
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(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. (Note 2)
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 (Note 3)
Company and BHI Hughes Incorporated relating to Vetco Services
Acquisition.
</TABLE>
13
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION NOTE NO.
----------- ----------- --------
<S> <C> <C>
4(j) Secured Credit Agreement, dated June 30, 1994, between Tuboscope (Note 9)
Vetco International Inc., CTI Inspection Services Inc., Tuboscope Vetco
Capital Corp, Tuboscope Vetco International Corporation and ABN
AMRO Bank, N.V., as Agent.
4(k) Secured Credit Agreement, dated August 2, 1996, between Tuboscope Exhibit 4(k)
Vetco International Inc., and Drexel Holdings, Inc., and The Chase
Manhattan Bank, N.A., ABN Amro Bank N.V., Houston Agency, and
the other Lenders Party Hereto, and ABN Amro Bank N.V., Houston
Agency as Administrative Agent.
10(a) Form of Employment Agreement, dated May 13, 1988, between (Note 1)
Tuboscope Inc., the Company and William V. Larkin and E. Wayne
Overman.
10(b) Savings Investment Plan, dated May 13, 1988, as amended by (Note 1)
First Amendment to Savings Investment Plan.
10(c) Second, Third and Fourth Amendments to Savings Investment Plan. (Note 4)
10(d) Fifth, Sixth and Seventh Amendments to Savings Investment Plan. (Note 8)
10(e) Lease Agreement, dated July 1, 1981, between C.M. Thibodaux (Note 1)
Company, Ltd. and AMF Tuboscope, Inc.
10(f) Lease Agreement between Sam J. Siracusa, John Siracusa, Jr., Elizabeth (Note 1)
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 (Note 1)
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. (Note 1)
France.
10(i) Supplementary Agreement Fixed Rental Scheme, dated May 19, 1989, (Note 1)
between Jurong Town Corporation and AMF Far East Pte. Ltd.
10(j) Lease, dated December 13, 1984, between Barclays Nominees (KWS) (Note 1)
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. (Note 1)
10(l) Amended and Restated Stock Option Plan for Key Employees of (Note 5)
Tuboscope Vetco International Corporation.
10(m) Form of Revised Incentive Stock Option Agreement. (Note 5)
10(n) Form of Revised Non-Qualified Stock Option Agreement. (Note 5)
10(o) Stock Option Plan for Non-Employee Directors of Tuboscope Vetco (Note 6)
International Corporation.
</TABLE>
14
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION NOTE NO.
----------- ----------- --------
<S> <C> <C>
10(p) Amendment to Stock Option Plan for Non-Employee Directors of (Note 6)
Tuboscope Vetco International Corporation.
10(q) Form of Non-Qualified Stock Option Agreement. (Note 6)
10(r) Employee Qualified Stock Purchase Plan. (Note 8)
10(s) Purchase Agreement, dated as of July 20, 1990, by and among Oil and (Note 7)
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 (Note 7)
Tuboscope Inc. and Thomas Glascock and William Glascock.
10(u) Purchase Agreement, dated as of September 30, 1991, between the (Note 3)
Company and BHI relating to the Vetco Services Acquisition.
10(v) Amended and Restated Employment Agreement dated June 23, 1993, (Note 8)
between the Company, Tuboscope Vetco International Inc., and Martin
R. Reid.
10(w) Technology Transfer Agreement, dated as of October 29, 1991, between (Note 3)
Tuboscope Inc. and BHI.
10(x) Sublease, dated December 1, 1987, between McDermott Incorporated (Note 3)
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 (Note 3)
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 and Gerhard (Note 3)
H. Hage.
10(aa) Lease Agreement with respect to Celle, Germany facility. (Note 3)
10(bb) Building Agreement for Land at Jurong, dated May 5, 1983, between (Note 3)
Jurong Town Corporation and Vetco International, Inc.
10(cc) Lease Agreement, dated January 1, 1988, between Mohamed Alhajri (Note 3)
Est. and Vetco Saudi Company.
10(dd) Lease Agreement, dated November 26, 1989, between Mohammed F. (Note 3)
Al-Hajri Est. and Vetco Saudi Arabia Ltd.
10(ee) Lease between J.G.B. Properties Limited and Vetco Inspection GmbH. (Note 3)
10(ff) Eighth and Ninth Amendment to Savings Investment Plan. (Note 9)
10(gg) Subscription Agreement, dated as of January 3, 1996, by and between (Note 12)
Tuboscope Vetco International Corporation and SCF-III, L.P.
10(hh) Exchange Agreement, dated as of January 3, 1996, among Tuboscope (Note 13)
Vetco International Corporation and Baker Hughes Incorporated.
</TABLE>
15
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION NOTE NO.
----------- ----------- --------
<S> <C> <C>
10(ii) Voting Agreement, dated as of January 3, 1996, among Tuboscope (Note 12)
Vetco International Corporation, D.O.S. Ltd., D.O.S. Partners, L.P.,
Panmell (Holdings), Ltd. And Zink Industries Limited.
10(jj) Voting Agreement, dated as of January 3, 1996, among D.O.S. Ltd., (Note 12)
Brentwood Associates IV, L.P. and Baker Hughes Incorporated.
10(kk) Form of Amended and Restated Executive Agreement. (Note 13)
10(ll) First Amendment to Amended and Restated Employment Agreement (Note 13)
between the Company, Tuboscope Vetco International Inc. and Martin
Reid.
10(mm) Third Amendment to General Manager Employment Agreement (Note 13)
between the Company, Tuboscope Vetco International Inc. and Gerhard
H. Hage.
10(nn) Third Amendment to Employment Agreement between the Company, (Note 13)
Tuboscope Vetco International Inc. and William V. Larkin.
10(oo) Master Lease Agreement, dated December 18, 1995, between the (Note 13)
Company and Heller Financial Leasing, Inc.
27 Financial Data. Exhibit 27
</TABLE>
Note 1 Previously filed by the Registrant in Registration No. 33-31102 and
incorporated by reference herein pursuant to Rule 12b-32 of the
Exchange Act.
Note 2 Previously filed by the Registrant in Registration No. 33-33248 and
incorporated by reference herein pursuant to Rule 12b-32 of the
Exchange Act.
Note 3 Previously filed by the Registrant in File No. 33-43525 and
incorporated by reference herein pursuant to Rule 12b-32 of the
Exchange Act.
Note 4 Previously filed by the Registrant in Registration No. 33-56182 and
incorporated by reference herein pursuant to Rule 12b-32 of the
Exchange Act.
Note 5 Previously filed by the Registrant in Registration No. 33-72150 and
incorporated by reference herein pursuant to Rule 12b-32 of the
Exchange Act.
Note 6 Previously filed by the Registrant in Registration No. 33-72072 and
incorporated by reference herein pursuant to Rule 12b-32 of the
Exchange Act.
Note 7 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.
Note 8 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.
Note 9 Previously filed in the Quarterly Report on Form 10Q for the quarter
ended June 30, 1994 and incorporated by reference herein pursuant to
Rule 12b-32 of the Exchange Act.
Note 10 Previously filed in the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1992 and incorporated by reference
herein pursuant to Rule 12b-32 of the Exchange Act.
Note 11 Previously filed in the Company's Proxy Statement for the 1994 Annual
Meeting of Stockholders and incorporated by reference herein pursuant
to Rule 12b-32 of the Exchange Act.
16
<PAGE>
Note 12 Previously filed in the Company's Current Report on Form 8-K filed on
January 16, 1996 and incorporated by reference herein pursuant to Rule
12b-32 of the Exchange Act.
Note 13 Previously filed in the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1995 and incorporated by reference
herein pursant to Rule 12b-32 of the Exchange Act.
17
<PAGE>
Exhibit 4(k)
================================================================================
SECURED CREDIT AGREEMENT
Dated as of
August 6, 1996
Among
TUBOSCOPE VETCO INTERNATIONAL INC.,
AND DREXEL HOLDINGS, INC.,
AND
THE CHASE MANHATTAN BANK,
ABN AMRO BANK N.V., HOUSTON AGENCY,
AND THE OTHER LENDERS PARTY HERETO,
AND
ABN AMRO BANK N.V., HOUSTON AGENCY,
AS ADMINISTRATIVE AGENT
================================================================================
18
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
SECTION 1. DEFINITIONS; INTERPRETATION...................................................... 23
Section 1.1. Definitions.............................................................. 23
Section 1.2. Interpretation........................................................... 39
SECTION 2. THE CREDIT FACILITIES............................................................ 39
Section 2.1. Borrowings of Revolving Loans............................................ 39
Section 2.2. Letters of Credit........................................................ 40
Section 2.3. Borrowings of Term Loans................................................. 44
Section 2.4. Types of Loans and Minimum Borrowing Amounts............................. 44
Section 2.5. Manner of Borrowing...................................................... 44
Section 2.6. Interest Periods......................................................... 47
Section 2.7 Maturity of Loans........................................................ 50
Section 2.8. Applicable Interest Rates................................................ 51
Section 2.9. Default Rate............................................................. 51
Section 2.10. Optional Prepayments..................................................... 53
Section 2.11. Mandatory Prepayments of Loans........................................... 53
Section 2.12. The Notes................................................................ 54
Section 2.13. Breakage Fees............................................................ 55
Section 2.14. Commitment Terminations.................................................. 55
SECTION 3. FEES AND PAYMENTS................................................................ 56
Section 3.1. Fees..................................................................... 56
Section 3.2. Place and Application of Payments........................................ 57
Section 3.3. Withholding Taxes........................................................ 58
SECTION 4. CONDITIONS....................................................................... 60
Section 4.1. Conditions Precedent to Initial Borrowing................................ 60
Section 4.2. Conditions Precedent to all Borrowings................................... 62
Section 4.3. Conditions Subsequent.................................................... 63
SECTION 5. REPRESENTATIONS AND WARRANTIES................................................... 63
Section 5.1. Corporate Organization................................................... 63
Section 5.2. Corporate Power and Authority; Validity.................................. 64
Section 5.3. No Violation............................................................. 64
Section 5.4. Litigation............................................................... 64
Section 5.5. Use of Proceeds; Margin Regulations...................................... 64
Section 5.6. Investment Company Act................................................... 65
Section 5.7. Public Utility Holding Company Act....................................... 65
Section 5.8. True and Complete Disclosure............................................. 65
Section 5.9. Financial Statements..................................................... 65
Section 5.10. No Material Adverse Change............................................... 65
Section 5.11. Labor Controversies...................................................... 66
Section 5.12. Taxes.................................................................... 66
Section 5.13. ERISA.................................................................... 66
Section 5.14. Security Interests....................................................... 66
Section 5.15. Consents................................................................. 66
Section 5.16. Capitalization........................................................... 66
Section 5.17. Intellectual Property.................................................... 67
Section 5.18. Ownership of Property.................................................... 67
Section 5.19. Compliance with Statutes, Etc............................................ 67
Section 5.20. Environmental Matters.................................................... 67
</TABLE>
19
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
(CONTINUED) PAGE
<S> <C>
Section 5.21. Existing Indebtedness.................................................... 68
Section 5.22. Subordinated Debt........................................................ 68
SECTION 6. COVENANTS........................................................................ 68
Section 6.1. Corporate Existence...................................................... 68
Section 6.2. Maintenance.............................................................. 68
Section 6.3. Taxes.................................................................... 69
Section 6.4. ERISA.................................................................... 69
Section 6.5. Burdensome Restrictions, Etc............................................. 69
Section 6.6. Insurance................................................................ 69
Section 6.7. Financial Reports and Other Information.................................. 70
Section 6.8. Lender Inspection Rights................................................. 72
Section 6.9. Conduct of Business...................................................... 72
Section 6.10. Interest Rate Protection................................................. 73
Section 6.11. New Subsidiaries......................................................... 73
Section 6.12. Limitation on Certain Restrictions on Subsidiaries; Dividends; Negative
Pledges.................................................................. 73
Section 6.13. Restrictions on Fundamental Changes...................................... 74
Section 6.14. Environmental Laws....................................................... 76
Section 6.15. Liens.................................................................... 76
Section 6.16. Indebtedness............................................................. 78
Section 6.17. Advances, Investments and Loans.......................................... 79
Section 6.18. Modifications of Corporate Documents..................................... 80
Section 6.19. Transfer of Assets....................................................... 81
Section 6.20. Transactions with Affiliates............................................. 81
Section 6.21. Compliance with Laws..................................................... 82
Section 6.22. Interest Coverage Ratio.................................................. 82
Section 6.23. Total Funded Debt to Total Capital Ratio................................. 82
Section 6.24. Minimum Tangible Net Worth............................................... 82
SECTION 7. EVENTS OF DEFAULT AND REMEDIES................................................... 82
Section 7.1. Events of Default........................................................ 82
Section 7.2. Non-Bankruptcy Defaults.................................................. 84
Section 7.3. Bankruptcy Defaults...................................................... 85
Section 7.4. Collateral for Undrawn Letters of Credit................................. 85
Section 7.5. Notice of Default........................................................ 86
Section 7.6. Expenses................................................................. 86
Section 7.7. Distribution and Application of Proceeds from
Collateral............................................................... 86
SECTION 8. CHANGE IN CIRCUMSTANCES.......................................................... 87
Section 8.1. Change of Law............................................................ 87
Section 8.2. Unavailability of Deposits or Inability to Ascertain
LIBOR Rate............................................................... 87
Section 8.3. Increased Cost and Reduced Return........................................ 88
Section 8.4. Lending Offices.......................................................... 89
Section 8.5. Discretion of Lender as to Manner of Funding............................. 89
Section 8.6. Substitution of Lender................................................... 90
</TABLE>
20
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
(CONTINUED) PAGE
<S> <C>
SECTION 9. THE AGENT........................................................................ 90
Section 9.1. Appointment and Authorization of Agent................................... 90
Section 9.2. Rights and Powers........................................................ 90
Section 9.3. Action by Agent.......................................................... 90
Section 9.4. Consultation with Experts................................................ 91
Section 9.5. Indemnification Provisions............................................... 91
Section 9.6. Indemnity................................................................ 92
Section 9.7. Resignation of Agent and Successor Agent................................. 92
SECTION 10. MISCELLANEOUS.................................................................... 92
Section 10.1. No Waiver of Rights...................................................... 92
Section 10.2. Non-Business Day......................................................... 93
Section 10.3. Documentary Taxes........................................................ 93
Section 10.4. Survival of Representations.............................................. 93
Section 10.5. Survival of Indemnities.................................................. 93
Section 10.6. Setoff................................................................... 93
Section 10.7. Notices.................................................................. 94
Section 10.8. Counterparts............................................................. 95
Section 10.9. Successors and Assigns................................................... 95
Section 10.10. Sales and Transfers of Borrowings and Notes; Participations in
Borrowings and Notes..................................................... 95
Section 10.11. Amendments............................................................... 97
Section 10.12. Headings................................................................. 98
Section 10.13. Legal Fees, Other Costs and Indemnification.............................. 98
Section 10.14. Governing Law; Submission to Jurisdiction; Waiver of
Jury Trial............................................................... 99
Section 10.15. Confidentiality.......................................................... 99
Section 10.16. Effectiveness............................................................ 99
Section 10.17. Severability............................................................. 99
Section 10.18. Currency Conversion...................................................... 100
Section 10.19. Dollar Equivalent Combinations........................................... 100
Section 10.20. Change in Accounting Principles or Tax Laws.............................. 100
Section 10.21. Notice................................................................... 101
</TABLE>
EXHIBITS
2.2A - Form of Issuance Request
2.2B - Form of Application for Letter of Credit
2.5 - Form of Borrowing Request
2.12A - Form of Revolving Note (U.S. Dollars)
2.12B - Form of Revolving Note (British Pounds Sterling)
2.12C - Form of Revolving Note (Canadian Dollars)
2.12D - Form of Term Note
2.12E - Form of Agent Note
4.1A - Form of Stock Pledge Agreement
4.1B - Form of Parent Company Guaranty
4.1C - Form of Subsidiary Guaranty
4.1D - Form of Opinions of Counsel
6.7 - Form of Compliance Certificate
6.13 - Form of Acquisition Report
10.10 - Form of Assignment Agreement
21
<PAGE>
SCHEDULES
2.7 - Term Loan Repayment Schedule
4.1 - List of Stock Pledged
5.1 - List of Subsidiaries
5.4 - List of Litigation
5.13 - ERISA Disclosure
5.16 - Stock Disclosure
5.17 - Intellectual Property
5.20 - List of Environmental Claims
5.21 - List of Existing Indebtedness
6.16 - List of Existing Liens
22
<PAGE>
SECURED CREDIT AGREEMENT, dated as of August 6, 1996, among Tuboscope Vetco
International Inc., a Texas corporation, and Drexel Holdings, Inc., a Delaware
corporation (each a "Borrower" and collectively, the "Borrowers"), The Chase
Manhattan Bank ("Chase"), ABN AMRO Bank N.V. ("ABN AMRO"), a Netherlands
chartered bank acting through its Houston agency, and the other lenders from
time to time parties hereto (each a "Lender" and collectively, the "Lenders"),
and ABN AMRO as administrative agent for the Lenders (in such capacity, the
"Agent").
WITNESSETH:
WHEREAS, the Borrowers, jointly and severally, 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
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, the following
-----------
terms shall have the following meanings, which meanings shall be equally
applicable to both the singular and plural form of such terms:
"ABN AMRO Letters of Credit" means those certain letters of credit issued
by ABN AMRO under and pursuant to the terms of the Prior Tuboscope Credit
Facility as described in Section 2.2.
"Accepting Lenders" shall have the meaning ascribed to such term in Section
2.7(b).
"Acquisition" means a direct or indirect purchase by Holdings, any of the
Borrowers or any of their Subsidiaries after the date hereof for cash, stock or
other securities or other property, whether in one or more related transactions,
of all or substantially all of the assets or voting securities or other equity
interests of a Person or a business unit, division or group of a Person.
"Adjusted LIBOR" means, for any Borrowing of Eurodollar Loans, a rate per
annum determined in accordance with the following formula:
Adjusted LIBOR = LIBOR Rate
----------------------
1.00 - Eurodollar Reserve Percentage
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"Affiliate" means for any Person, (i) 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, and (ii) any other Person owning
beneficially or controlling ten percent (10%) or more of the equity interests in
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 or other equity interests, by
contract or otherwise).
"Agent" means ABN AMRO acting in its capacity as administrative agent for
the Lenders, and any successor agent appointed hereunder pursuant to Section
9.7.
"Agent Commitment Amount" means $5,000,000, as such amount may be reduced
from time to time pursuant to the terms of this Agreement.
"Agent Commitment Termination Date" means the earliest of (i) August 6,
2001; (ii) the date on which the Agent Credit Commitment is terminated in full
or reduced to zero pursuant to Section 2.14; or (iii) the occurrence of any
Event of Default described in Sections 7.1(g) or (h) with respect to any of the
Borrowers or the occurrence and continuance of any other Event of Default and
either (x) the declaration of the Agent Loans to be due and payable pursuant to
Section 7.2, or (y) in the absence of such declaration, the giving of written
notice by ABN AMRO to the Borrowers pursuant to Section 7.2 that the Agent
Credit Commitment has been terminated.
"Agent Credit Commitment" means the Agent's obligations to make Agent Loans
and issue Agent Letters of Credit pursuant to Sections 2.1(b) and 2.2(b).
"Agent L/C Obligations" means the undrawn face amounts of all outstanding
Agent Letters of Credit and all unpaid Agent Reimbursement Obligations.
"Agent Letter of Credit" means any of the letters of credit, each in an
initial face amount of less than $300,000, to be issued by the Agent on its own
behalf for the account of the Borrowers pursuant to Section 2.2(b).
"Agent Note" means that certain promissory note of the Borrowers as defined
in Section 2.12.
"Agent Reimbursement Obligation" means the obligations of the Borrowers to
reimburse the Agent for each drawing under an Agent Letter of Credit as
described in Section 2.2(d).
"Agent Revolving Loans" means the revolving loans by the Agent described in
Section 2.1(b).
"Agent Revolving Obligations" means the sum of the principal amount of all
Agent Revolving Loans and Agent L/C Obligations outstanding.
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"Agent Swing Line" means the credit facility for making Agent Revolving
Loans and issuing Agent Letters of Credit described in Sections 2.1(b) and
2.2(b).
"Agreement" means this Secured Credit Agreement, as amended, restated or
supplemented from time to time.
"Amortization Date" means a scheduled repayment date of the Term Loans as
set forth in Section 2.7 and Schedule 2.7.
"Applicable Margin" means, for any day, at such times as the relevant Total
Funded Debt to Total Capital Ratio is in one of the following ranges, the
percentage per annum set forth opposite such Total Funded Debt to Total Capital
Ratio:
<TABLE>
<CAPTION>
Total Funded Debt to Total Capital Ratio Percentage
---------------------------------------- ----------
<S> <C>
Less than 30% 0.450%
Equal to or greater than 30% 0.500%
but less than 35%
Equal to or greater than 35% 0.575%
but less than 37.5%
Equal to or greater than 37.5% 0.625%
but less than 40%
Equal to or greater than 40% 0.750%
but less than 45%
Equal to or greater than 45% 0.875%
</TABLE>
For the period from the Effective Date through the date the Borrowers are to
provide the Agent with the financial statements for the fiscal quarter ending
June 30, 1996, as required by Section 6.7(a)(i), the Applicable Margin shall be
0.750% per annum. The Borrowers shall give written notice to the Agent of any
change to the Total Funded Debt to Total Capital Ratio affecting the Applicable
Margin within three (3) Business Days thereof and any change to the Applicable
Margin shall be effective one (1) day thereafter.
"Application" means an application for a Letter of Credit or an Agent
Letter of Credit as defined in Section 2.2(c).
"Assignment Agreement" means an agreement in substantially the form of
Exhibit 10.10 whereby a Lender conveys part or all of its Commitments, Loans and
participations in Letters of Credit to another Person that thereupon becomes a
Lender, or that increases its Commitments, outstanding Loans and outstanding
participations in Letters of Credit pursuant to Section 10.10.
"Base Rate" means, for any day, the greater of:
(i) the fluctuating commercial loan rate announced by the Lender
which is the Agent from time to time at its Chicago, Illinois office as its
base rate for U.S. Dollar
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loans in the United States of America in effect on such day (which base
rate may not be the lowest rate charged by such Lender on loans to any of
its customers), with any change in the Base Rate resulting from a change in
such announced 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 1/16th 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 of the
offered rates quoted to the Agent by two (2) federal funds brokers of
recognized standing on such day for such transactions as selected by the
Agent, plus (y) one-half of one percent (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 each of Tuboscope Vetco International Inc., a Texas
corporation, and Drexel Holdings, Inc., a Delaware corporation, and any
successors thereto permitted under the terms of this Agreement.
"Borrowing" means any extension of credit made by the Lenders by way of
Revolving Loans, Term Loans, Agent Revolving Loans, Letters of Credit or Agent
Letters of Credit, including any Borrowings advanced, continued or converted. A
Borrowing is "advanced" on the day the Lenders or ABN AMRO advance funds
comprising such Borrowing to the Borrowers or a Letter of Credit or Agent Letter
of Credit is issued, 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).
"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 Loan, on which banks are dealing in
Dollar, Pounds or Canadian Dollar deposits, as applicable, in the applicable
interbank eurocurrency market in London, England.
"Canadian Dollar" means lawful money of the Commonwealth of Canada.
"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
such Person as determined in accordance with GAAP.
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<PAGE>
"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 and
certificates of deposit maturing within one (1) year from the date of
acquisition thereof with any Lender, or any other financial institution whose
short-term senior unsecured debt rating is at least A-1 from S&P or P-1 from
Moody's; (iii) LIBOR denominated time deposits and certificates of deposit
maturing within six (6) months from the date of acquisition thereof with any
Lender, or any other financial institution whose short-term senior unsecured
debt rating is at least A-1 from S&P or P-1 from Moody's; (iv) commercial paper
or Eurocommercial paper with a rating of at least A-1 from S&P or P-1 from
Moody's, with maturities of not more than twelve (12) months from the date of
acquisition; (v) repurchase obligations entered into with any Lender or any
other financial institution whose short-term senior unsecured debt rating is at
least A-1 from S&P or P-1 from Moody's, which are secured by a fully perfected
security interest in any obligation of the type described in (i) above and has a
market value of the time such repurchase is entered into of not less than 100%
of the repurchase obligation of such Lender or such other Person thereunder;
(vi) 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 or providing for the resetting of the interest rate
applicable thereto not less often than annually and, at the time of acquisition,
having one of the two highest ratings obtainable from either S&P or Moody's; and
(vii) money market funds which have at least $1,000,000,000 in assets and which
invest primarily in securities of the types described in clauses (i) through
(vi) above.
"Code" means the Internal Revenue Code of 1986, as amended.
"Collateral" means such portion of the stock of any Credit Party 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).
"Collateral Agent" means ABN AMRO acting in its capacity as collateral
agent for the Lenders, and any successor collateral agent appointed hereunder
pursuant to Section 9.7.
"Commitment" means, relative to any Lender, such Lender's obligations to
make Loans pursuant to Sections 2.1 and 2.3 in the percentage set forth opposite
its signature hereto or pursuant to Section 10.10, as such commitment may be
reduced from time to time pursuant to the terms of this Agreement, and each
Lender's L/C Commitment.
"Compliance Certificate" means a certificate in the form of Exhibit 6.7.
"Consolidated Interest Expense" means, for any period, total interest
expense of Holdings and its Subsidiaries on a consolidated basis for such period
in connection with Indebtedness, determined in accordance with GAAP.
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<PAGE>
"Consolidated Interest Income" means, for any period, total interest income
of Holdings and its Subsidiaries on a consolidated basis for such period,
determined in accordance with GAAP.
"Consolidated Net Income" means, for any period, the net income (or loss),
after provision for taxes, of Holdings and its Subsidiaries on a consolidated
basis for such period, determined in accordance with GAAP.
"Consolidated Net Worth" means, (i) as of any date of determination,
Holdings' consolidated stockholders equity determined in accordance with GAAP,
excluding (x) the effects of any Unrestricted Subsidiaries except for the
aggregate equity investments therein, (y) treasury stock and any capital stock
subject to mandatory redemption before the Maturity Date of the Term Loans, or
if the Term Loans are prepaid, the Maturity Date of the Revolving Loans, and (z)
currency translation adjustments provided, and only to the extent that, the
amount of such currency translation adjustments as of such date is up to
$5,000,000 greater or less than the amount of the currency translation
adjustment reflected on Holdings' unaudited balance sheet as of June 30, 1996;
plus (ii) for purposes of Section 6.13(a) and 6.24(iv) and to the extent not
included in (i) above, for any entity acquired in an Acquisition, such entity's
stockholders equity determined in accordance with GAAP.
"Credit" means the credit facilities for making Loans and issuing Letters
of Credit described in Sections 2.1, 2.2 and 2.3.
"Credit Documents" means this Agreement, the Notes, the Subsidiary
Guaranties, the Parent Company Guaranty, the Applications, the Security
Documents and any other documents or instruments executed by a Credit Party in
connection with this Agreement.
"Credit Party" means Holdings, each Borrower, each Subsidiary Guarantor and
any other Person which is a party to any Credit Document.
"Declining Lender" shall have the meaning ascribed to such term in Section
2.7(b).
"Default" means any event or condition the occurrence of which would, with
the passage of time or the giving of notice, or both, constitute an Event of
Default.
"Designated Commitment" means, relative to any Lender, the lesser of (i)
such Lender's Commitment to make Revolving Loans and (ii) from and after the
Election Effective Date, the amount specified by such Lender in the most recent
notice provided by such Lender pursuant to Section 2.7(a) and resulting from the
Borrowers' election in Section 2.7(b).
"Dollar" and "U.S. Dollar" and the sign "$" means lawful money of the
United States of America.
"DOS" means D.O.S. Ltd., a Bermuda corporation.
"Drexel Credit Facility" means that certain Amended and Restated Revolving
and Term Credit Agreement dated as of November 16, 1995, by and among Drexel
Holdings, Inc. and the
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<PAGE>
other borrowers which are a party thereto, the financial institutions from time
to time parties thereto, and TCB, as Agent for such lenders.
"Drexel Letters of Credit" means those letters of credit issued by TCB
under and pursuant to the terms of the Drexel Credit Facility as described in
Section 2.2(a).
"EBITDA" means, for any period, the sum of (i) Consolidated Net Income
before (a) Consolidated Interest Expense, (b) Consolidated Interest Income, (c)
provisions for taxes based on income or revenues, and (d) any extraordinary,
unusual or nonrecurring gains or losses; (ii) the amount of all depreciation,
amortization expense and other non-cash charges deducted in determining
Consolidated Net Income, all calculated on a consolidated basis for Holdings and
its Subsidiaries and as determined in accordance with GAAP; plus (iii) all cash
dividends or distributions paid any Subsidiary of Holdings from any Unrestricted
Subsidiaries.
"Effective Date" means the date this Agreement shall become effective as
defined in Section 10.16.
"Election Effective Date" means the date specified in the Election Notice
as the date on which Commitments of any of the Lenders are to terminate or
reduce as a result of the Borrowers' election in Section 2.7(b).
"Election Notice" shall have the meaning ascribed to such term in Section
2.7(b).
"Environmental Claims" means any and all administrative, regulatory or
judicial actions, suits, demands, demand letters, claims, liens, notices of non-
compliance or violations, investigations or proceedings relating to any
Environmental Law ("Claims") or any permit issued under any Environmental Law,
including, without limitation, (i) 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 (ii)
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
or safety in relation to 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 (i) the environment, (ii) health or safety in relation to
the environment or (iii) 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).
"Eurodollar Reserve Percentage" means, with respect to each Interest Period
for a Eurodollar Loan, a percentage (expressed as a decimal) equal to the daily
average during such Interest Period of the percentages in effect on each day of
such Interest Period, if any, as
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<PAGE>
prescribed by the Board of Governors of the Federal Reserve System (or any
successor thereto), for determining the maximum reserve requirements (including,
without limitation, any supplemental, marginal and emergency reserves)
applicable to "Eurocurrency Liabilities" pursuant to Regulation D of the Board
of Governors of the Federal Reserve System or any other then applicable
regulation of the Board of Governors which prescribes reserve requirements
applicable to "Eurocurrency Liabilities" as presently defined in Regulation D.
"Event of Default" means any of the events or circumstances specified in
Section 7.1.
"Excess Cash Flow" means, without duplication, for any fiscal quarter
beginning September 30, 1997, (i) EBITDA, minus (ii) the sum of (A) all non-
acquisition related capital expenditures made in cash, (B) the aggregate amount
of principal payments (including scheduled payments of Capitalized Lease
Obligations) and required or permitted prepayments of Indebtedness for borrowed
money of Holdings or its 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) cash income taxes paid, (D) any increase in working
capital, and (E) consolidated cash interest expense, all for such fiscal quarter
and calculated on a consolidated basis for Holdings and its Subsidiaries;
provided, however, the aggregate amount of non-acquisition related capital
expenditures plus increases in working capital which may be deducted for
purposes hereof shall not exceed $20,000,000 in any fiscal year.
"Fee Letters" means those certain letter agreements dated July 3, 1996, by
and between the Agent and Holdings and the Syndication Agent and Holdings.
"Foreign Plan" means any pension, profit sharing, deferred compensation, or
other employee benefit plan, program or arrangement maintained by any foreign
Subsidiary of Holdings which, under applicable local law, is required to be
funded through a trust or other funding vehicle, but shall not include any
benefit provided by a foreign government or its agencies.
"GAAP" means generally accepted accounting principles from time to time in
effect as set forth in the opinions and pronouncements of the Accounting
Principles Board of the American Institute of Certified Public Accountants and
the statements and pronouncements of the Financial Accounting Standards Board or
in such other statements, opinions and pronouncements by such other entity as
may be approved by a significant segment of the U.S. accounting profession.
"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 guarantying or in effect guarantying 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
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<PAGE>
purchase such Indebtedness or obligation, or to purchase any property or assets
constituting security therefor, primarily for the purpose of assuring the owner
of such Indebtedness or obligations of the ability of the primary obligor to
make payment of the Indebtedness or obligation; or (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, in each case 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 (iii) to lease property or to
purchase securities or other property or services of the primary obligor
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 amount that would apply if such obligation were the direct obligation of
such Person rather than the primary obligor or, if less, the maximum aggregate
potential liability of such Person under the terms of the Guaranty.
"Hazardous Material" shall have the meaning assigned to that term in the
Comprehensive Environmental Response Compensation and Liability Act of 1980, as
amended by the Superfund Amendments and Reauthorization Acts of 1986, and shall
also include petroleum, including crude oil or any fraction thereof, or any
other substance defined as "hazardous" or "toxic" or words used in place thereof
under any Environmental Law applicable to Holdings or any of its Subsidiaries.
"Highest Lawful Rate" means 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, the Agent Loans, the Reimbursement Obligations
or the Agent Reimbursement Obligations, or under laws applicable to any of the
Lenders or ABN AMRO, as applicable, 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 or Reimbursement Obligations 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, the Agent
Loans, the Reimbursement Obligations or the Agent Reimbursement Obligations, as
applicable.
"Holdings" means Tuboscope Vetco International Corporation, a Delaware
corporation, and the sole shareholder of each of the Borrowers, and any
successor thereto permitted under the terms of this Agreement.
"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 and other than amounts which are being contested in
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good faith and for which reserves in conformity with GAAP have been provided;
(iii) obligations of such Person evidenced by bonds, notes, bankers acceptances,
debentures or other similar instruments of such Person or reimbursement
obligations or other obligations with respect to letters of credit issued for
such Person's account or letters of credit issued pursuant to such Person's
application therefor; (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 under (x) Interest Rate Protection Agreements,
(y) commodity hedge, 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 (z) futures
agreements, arrangements or options designed to protect against fluctuations in
currency exchange rates; and (vii) obligations of such Person pursuant to a
Guaranty of any of the foregoing of another Person. For purposes of this
Agreement, the Indebtedness of any Person shall include the Indebtedness of any
partnership or joint venture to the extent such Indebtedness has recourse to
such Person.
"Indemnified Taxes" shall have the meaning ascribed to such term in Section
3.3.
"Initial Borrowing Date" means the date on which all conditions precedent
set forth herein to the initial Borrowings are satisfied or waived in writing
and the initial Borrowing hereunder occurs, which date shall be no later than
October 2, 1996.
"Intangible Assets" means patents, patent applications, copyrights,
trademarks, trade names, service marks, brand names, franchises, goodwill,
experimental expenses and other similar intangibles, and all other property
which would be considered to be intangible under GAAP, all calculated on a
consolidated basis for Holdings and its Subsidiaries, or calculated for the
Acquisition entity, as applicable.
"Interest Coverage Ratio" means, as of the end of any fiscal quarter, the
ratio of (i) EBITDA for the four fiscal quarter period then ended, minus all
non-acquisition related capital expenditures and all cash income taxes paid
during such four fiscal quarter period by Holdings and its Subsidiaries, to (ii)
Consolidated Interest Expense plus all dividends paid by Holdings as permitted
by Section 6.12(b) for the four fiscal quarter period then ended.
"Interest Payment Date" means (i) for a Base Rate Loan, the last Business
Day of each calendar quarter such Loan is outstanding commencing September 30,
1996, and (ii) 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, subject
to Section 2.6, ending on the date 1, 2, 3 or 6 months thereafter as selected by
the Borrowers pursuant to the terms of this Agreement.
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<PAGE>
"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.
"Investments" shall have the meaning ascribed to such term in Section 6.17.
"L/C Commitments" means, relative to any Lender, such Lender's obligation
to participate in Letters of Credit pursuant to Section 2.2 in the percentage
set forth opposite its signature hereto or pursuant to Section 10.10, as such
commitments may be reduced from time to time pursuant to the terms of this
Agreement.
"L/C Commitment Amount" means $20,000,000, as such amount may be reduced
from time to time pursuant to the terms of this Agreement.
"L/C Documents" means this Agreement, the Letters of Credit, the Agent
Letters of Credit, any Issuance Requests and Applications with respect thereto
and any draft or other document presented in connection with a drawing
thereunder.
"L/C Obligations" means the undrawn face amounts of all outstanding Letters
of Credit and all unpaid Reimbursement Obligations with respect to Letters of
Credit.
"Lender" is defined in the preamble.
"Lending Office" means the branch, office or affiliate of a Lender
specified on the appropriate signature page hereof or designated pursuant to
Sections 8.4 or 10.10.
"Letter of Credit" means any of the letters of credit issued by the Agent
on behalf of the Lenders for the account of the Borrowers pursuant to Section
2.2(a).
"LIBOR Rate" means, relative to any Interest Period for each Eurodollar
Loan comprising part of the same Borrowing, a 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 of the Reference Banks
(notified to the Agent by such Reference Bank) of the rate of interest per annum
at which deposits in U.S. Dollars, Canadian Dollars or Pounds, as the case may
be, 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.
(New York, New York time) for a period approximately equal to such Interest
Period and in an amount equal or comparable to the aggregate principal amount of
the Eurodollar Loan to which such Interest Period relates scheduled to be made,
continued or converted pursuant to the terms hereof, as applicable, 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 10:00 a.m. (New
York, New York 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.
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"Lien" means any interest in any property or asset in favor of a Person
other than the owner of the property or asset and securing an obligation owed to
such Person, 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.
"Limited Subsidiary Guaranty" means the Guaranty by any Subsidiary
delivered pursuant to the terms of this Agreement. Each Limited Subsidiary
Guaranty shall contain a provision that the amount guaranteed thereunder shall
be limited to an amount that would not cause a violation of the Subordinated
Indenture.
"Loan" mean a Base Rate Loan or Eurodollar Loan, each of which is a "type"
of Loan hereunder, outstanding as a Revolving Loan, a Term Loan or an Agent
Loan.
"Majority Lenders" means, at any time, the Lenders then holding in the
aggregate at least sixty-six and two-thirds percent (66 2/3%) of the aggregate
of the Commitments and the Agent Credit Commitment, or if any such commitments
have terminated pursuant to the terms hereof, the aggregate Revolving
Obligations or Agent Revolving Obligations with respect thereto. The percentage
set forth opposite each Lender's name and the line "Voting Percentage" on the
signature page hereto reflects the initial voting percentage of each Lender
hereunder on the Effective Date.
"Material Adverse Effect" means an effect that results in a material
adverse change since April 24, 1996, in (i) the business, properties, assets or
financial condition of any of the Borrowers or of Holdings and its Subsidiaries
taken as a whole, or (ii) in the ability of any of the Borrowers or the
Borrowers and the other Credit Parties taken as a whole to perform their
Obligations under this Agreement, the Notes or the other Credit Documents to
which they are a party.
"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 $10,000,000 or, if a Subsidiary is acquired after the Initial Borrowing
Date, having an acquisition cost of at least $10,000,000.
"Maturity Date" means (i) in the case of the Revolving Loans, August 6,
2001, or such later date as the Maturity Date is extended pursuant to the terms
of Section 2.7(a), (ii) in the case of the Agent Loans, August 6, 2001, and
(iii) in the case of the Term Loans, August 6, 2002, or such earlier date as a
result of any prepayment of the Term Loans pursuant to the terms of Sections
2.10 or 2.11.
"Moody's" means Moody's Investors Service, Inc., or any successor thereto.
"Multicurrency Funding Limit" means $40,000,000, as such amount may be
reduced pursuant to the terms of this Agreement.
"Net Cash Proceeds" means, for any Transfer, the cash proceeds (including
any cash payments actually received as a deferred payment of principal pursuant
to a note, installment
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receivable, purchase price adjustment receivable or otherwise) of such Transfer
net of (x) all legal fees, accountant fees, investment banking fees, brokerage
fees, finders fees, survey costs, title insurance premiums, required debt
payments (other than of Obligations) and other customary fees, costs and
expenses actually incurred or paid in connection therewith, and (y) taxes or
other governmental fees or charges paid or payable as a result thereof.
"Note" means any of the promissory notes of the Borrowers defined in
Section 2.12.
"Obligations" means all joint and several obligations of the Borrowers and
any other Credit Parties to pay fees, costs and expenses hereunder, to pay
principal or interest on Loans and Reimbursement Obligations, to pay fees, costs
and expenses pursuant to the terms of the Fee Letters and to pay any other
obligations to the Agent or any Lender arising under or in relation to any
Credit Document.
"Original Commitment Amount" means the sum of the Revolving Credit
Commitment Amount and the Term Credit Commitment Amount.
"Parent Company Guaranty" means the Guaranty by Holdings of the
Obligations.
"PBGC" means the Pension Benefit Guaranty Corporation or any successor
thereto.
"Percentage" means, for each Lender, the percentage of the Commitments
represented by such Lender's Commitment; provided that, if the Commitments are
terminated, each Lender's Percentage shall be calculated based on its Commitment
in effect immediately before such termination, subject to any assignments by
such Lender of Obligations pursuant to Section 10.10.
"Permitted Business" means any business described in Section 6.9.
"Permitted Liens" means the Liens described in Section 6.15.
"Person" means an individual, partnership, corporation, limited liability
company, 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.
"Pounds" means British Pounds Sterling.
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"Prior Tuboscope Credit Facility" means that certain Secured Credit
Agreement dated as of June 30, 1994, by and among Tuboscope Vetco International
Inc., CTI Inspection Services, Inc. and Tuboscope Vetco Capital Corp., as
borrowers, Holdings, as guarantor, the lenders from time to time parties
thereto, and ABN AMRO, as agent for such lenders, as heretofore amended.
"Reduced Declining Lender" shall have the meaning ascribed to such term in
Section 2.7(a).
"Reference Banks" means ABN AMRO, Chase and the Arab Banking Corporation
(B.S.C.).
"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).
"Revolving Commitment Termination Date" means the earliest of (i) August 6,
2001, or such date as the Revolving Commitment Termination Date is extended
pursuant to the terms of Section 2.7; (ii) the date on which the Revolving
Credit Commitments are terminated in full or reduced to zero pursuant to Section
2.14; or (iii) the occurrence of any Event of Default described in Sections
7.1(g) or (h) with respect to any of the Borrowers or the occurrence and
continuance of any other Event of Default and either (x) the declaration of the
Loans to be due and payable pursuant to Section 7.2, or (y) in the absence of
such declaration, the giving of written notice by the Agent, acting at the
direction of the Majority Lenders, to the Borrowers pursuant to Section 7.2 that
the Revolving Credit Commitments have been terminated.
"Revolving Credit" means the credit facility for making Revolving Loans and
issuing Letters of Credit described in Sections 2.1 and 2.2.
"Revolving Credit Commitment" means, relative to any Lender, such Lender's
obligations to make Revolving Loans and participate in Letters of Credit
pursuant to Sections 2.1 and 2.2.
"Revolving Credit Commitment Amount" means an amount equal to $100,000,000,
as such amount may be reduced from time to time pursuant to the terms of this
Agreement.
"Revolving Loans" means the revolving loans by the Lenders defined in
Section 2.1(a).
"Revolving Notes" means the revolving 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 Rating Group or any successor thereto.
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"Security Documents" means the Stock Pledge Agreements, the Parent Company
Guaranty, the Limited Subsidiary Guaranties, this Agreement and all other
security agreements 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 and ABN AMRO to secure the Obligations,
as any of the same may be amended, supplemented or otherwise modified from time
to time.
"Stock Pledge Agreements" means the Stock Pledge Agreements in
substantially the form of Exhibit 4.1A executed and delivered by any of
Holdings, the Borrowers and any other Credit Parties required from time to time
to execute and deliver a Stock Pledge Agreement pursuant to the terms of this
Agreement, as any of same may be amended, supplemented or otherwise modified
from time to time.
"Subordinated Debt" means the 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.
"Subordinated Indenture" means that certain Indenture dated as of April 1,
1993, with respect to the Subordinated Debt.
"Subsidiary" means, for any Person, any corporation or other entity
(excluding Unrestricted Subsidiaries) 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, any
managers of such limited liability company or similar governing body
(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 such Person, as applicable, or by one or
more of its Subsidiaries.
"Subsidiary Guarantor" means each of Drexel Oilfield Services, Inc., Hydra-
Rig, Inc., Environmental Procedures, Inc., Tuboscope Pipeline Services Inc. and
any other Subsidiary required to become a Subsidiary Guarantor pursuant to
Section 6.11.
"Syndication Agent" means Chase Securities Inc.
"Tangible Net Worth" means Consolidated Net Worth minus Intangible Assets,
determined in accordance with GAAP.
"Taxes" shall have the meaning ascribed to such term in Section 5.12.
"TCB" means Texas Commerce Bank National Association.
"Term Commitment Termination Date" means the earliest of (i) June 30, 1997;
(ii) the date on which the Term Credit Commitments are terminated in full or
reduced to zero pursuant to Section 2.14, or (iii) the occurrence of any Event
of Default described in Sections 7.1(g) or (h) with respect to the Borrowers or
the occurrence or continuance of any other Event of Default
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and either (x) the declaration of the Loans to be due and payable pursuant to
Section 7.2, or (y) in the absence of such declaration, the giving of written
notice by the Agent, acting at the direction of the Majority Lenders, to the
Borrowers pursuant to Section 7.2 that the Term Credit Commitments have been
terminated.
"Term Credit Commitment" means, relative to any Lender, such Lender's
obligations to make a Term Loan pursuant to Section 2.3.
"Term Credit Commitment Amount" means $130,000,000, as such amount may be
reduced pursuant to the terms of this Agreement.
"Term Loans" means the term loans defined in Section 2.3.
"Term Notes" means the term promissory notes of the Borrowers as defined in
Section 2.12.
"Total Capital" means, as of any date of determination, the sum of Total
Funded Debt plus Consolidated Net Worth as of such date.
"Total Commitment Amount" means the lesser of (i) the Original Commitment
Amount, and (ii) the aggregate of the Designated Commitments.
"Total Funded Debt" means, as of any date of determination, 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 a consolidated
balance sheet as a liability, (ii) all reimbursement obligations or other
obligations due and payable with respect to letters of credit and bankers
acceptances issued and outstanding and (iii) all obligations as lessee under
Capitalized Lease Obligations (excluding any obligation to purchase any asset at
the end of a lease term until such asset is so purchased), all calculated on a
consolidated basis for Holdings and its Subsidiaries.
"Total Funded Debt to Total Capital Ratio" means, as of any date, the
ratio, expressed as a percentage, of Total Funded Debt to Total Capital. For
purposes of this ratio, each of Consolidated Net Worth and the aggregate amount
of overdrafts permitted pursuant to Section 6.16(j) shall be fixed for each
fiscal quarter on the date of the delivery of the relevant financial statement
pursuant to Section 6.7 based on the determination of Consolidated Net Worth and
the aggregate amount of such overdrafts as of the end of the preceding fiscal
quarter.
"Transfer" means a sale, transfer, conveyance, assignment or other
disposition (or a series of related dispositions), 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 net book value as established in
accordance with GAAP in excess of $500,000, but excluding any involuntary
transfer by operation of law and any transfers of an asset pursuant to any
casualty or theft with respect to such asset.
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"Unfunded Vested Liabilities" means, for any Plan at any time, the amount
(if any) by which the present value of all vested nonforfeitable accrued
benefits under such Plan exceeds the fair market value of all Plan assets
allocable to such benefits, 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
such Plan.
"Unrestricted Subsidiary" means any Subsidiary that is not a Guarantor that
is designated by the Borrowers as an Unrestricted Subsidiary with the consent of
the Agent (which consent shall not be unreasonably withheld), except that the
Borrowers may designate up to one (1) such Person that but for such designation
would have been required to become a Guarantor pursuant to the terms of Section
6.11 and that is not a Guarantor on the Effective Date, and provided that the
Borrowers shall not designate as an Unrestricted Subsidiary any Person that but
for its designation as an Unrestricted Subsidiary would be a Subsidiary that
owns, directly or indirectly, any Material Subsidiary or Guarantor or any direct
Subsidiary of Holdings. The Borrowers may elect to treat any Subsidiary as an
Unrestricted Subsidiary, and may rescind any such prior election, so long as no
Default or Event of Default shall have occurred and be continuing, by giving
written notice thereof to the Agent specifying the name of such Subsidiary and
the effective date of such election, which shall be a date within sixty (60)
days after the date such notice is given, and obtaining the consent of the Agent
as provided herein. The election to treat a particular Subsidiary as an
Unrestricted Subsidiary may only be made once.
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 New York,
New York time unless otherwise specifically provided.
SECTION 2. THE CREDIT FACILITIES.
Section 2.1. Borrowings of Revolving Loans. (a) Syndicated Revolving
----------------------------- --------------------
Loans. Subject to the terms and conditions hereof, each Lender severally and
- -----
not jointly agrees to make one or more loans (each a "Revolving Loan") to the
Borrowers, jointly and severally, from time to time before the Revolving
Commitment Termination Date on a revolving basis in an aggregate amount not to
exceed at any time outstanding an amount equal to its Percentage of the
Revolving Credit Commitment Amount (for each Lender, its "Revolving Credit
Commitment"), subject to any reductions thereof pursuant to the terms of this
Agreement. No Lender shall be permitted or required to make any Revolving Loan
if, after giving effect thereto, (i) the aggregate principal amount of the
Revolving Loans of all Lenders and other Revolving Obligations outstanding of
the Borrowers would thereby exceed the Revolving Credit Commitment Amount then
in effect; or (ii) all Revolving Loans of such Lender and its participating
interest in all Letters of Credit would thereby exceed the Percentage of such
Lender of the Revolving Credit Commitment Amount then in effect. Each Borrowing
of Revolving Loans shall be made ratably from the Lenders in proportion to their
respective Percentages. Revolving Loans may be repaid, in whole or in part, and
all or any portion of the principal amount thereof reborrowed, before the
Revolving Commitment Termination Date, subject to the terms and conditions
hereof. Funding of any Revolving Loans shall be in any combination of Dollars,
Pounds or Canadian Dollars as specified by the Borrowers as set forth in Section
2.2(c) or 2.5, as applicable; provided that the Dollar equivalent amount of
outstanding Revolving Loans funded and Letters of Credit issued
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in Pounds and Canadian Dollars, determined on the date each such Revolving Loan
is advanced, continued or converted or such Letter of Credit is so issued in
accordance with Section 10.19, as applicable, shall not exceed the Multicurrency
Funding Limit.
(b) Agent Revolving Loans. Subject to the terms and conditions hereof,
---------------------
the Agent agrees to make one or more loans (each an "Agent Revolving Loan") to
the Borrowers, jointly and severally, from time to time before the Agent
Commitment Termination Date on a revolving basis in an aggregate amount not to
exceed at any time outstanding the Agent Commitment Amount, subject to any
reductions thereof pursuant to the terms of this Agreement. The Agent shall not
be permitted or required to make any Agent Revolving Loan if, after giving
effect thereto, the aggregate principal amount of the Agent Revolving Loans and
other Agent Revolving Obligations outstanding of the Borrowers would thereby
exceed the Agent Commitment Amount then in effect. Agent Revolving Loans may be
repaid, in whole or in part, and all or any portion of the principal amount
thereof reborrowed, before the Revolving Commitment Termination Date, subject to
the terms and conditions hereof. Funding of the Agent Loans shall be in Dollars.
Section 2.2. Letters of Credit. (a) Syndicated Letters of Credit.
----------------- ----------------------------
Subject to the terms and conditions hereof, the Agent agrees to issue, from time
to time prior to the Revolving Commitment Termination Date, at the request of
the Borrowers, jointly and severally, and on behalf of the Lenders and in
reliance on their obligations under this Section 2.2, one or more letters of
credit (each a "Letter of Credit") for any of the Borrowers' account in a face
amount of at least $300,000 and 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, after the issuance
thereof, (i) the outstanding Revolving Obligations would thereby exceed the
Revolving Credit Commitment Amount then in effect, (ii) the outstanding L/C
Obligations would thereby exceed the L/C Commitment Amount then in effect, or
(z) the issuance of such Letter of Credit would violate any legal or regulatory
restriction then applicable to the Agent or any Lender as notified by such
Lender to the Agent before the date of issuance of such Letter of Credit.
Letters of Credit and any renewals thereof hereunder, may be issued in face
amounts of either Dollars, Pounds or Canadian Dollars; provided further that the
Dollar equivalent amount of outstanding Revolving Loans funded and Letters of
Credit issued in Pounds and Canadian Dollars, determined on the date each such
Revolving Loan is advanced, continued or converted or such Letter of Credit is
so issued in accordance with Section 10.19, as applicable, shall not exceed the
Multicurrency Funding Limit. On the Initial Borrowing Date, the Agent shall
issue, (i) on behalf of the Lenders and in reliance on their obligations under
this Section 2.2, one or more Letters of Credit for the Borrowers' account and
for the benefit of ABN AMRO in an aggregate amount equal to the outstanding
undrawn face amount of the Letters of Credit (as defined in the Prior Tuboscope
Credit Facility) issued under, and pursuant to the terms of, the Prior Tuboscope
Credit Facility (the "ABN AMRO Letters of Credit"), any such Letters of Credit
(x) to be in the same amounts and in Dollars, (y) with an expiration date no
later than thirty (30) days after the expiration dates of such ABN AMRO Letters
of Credit, and (z) to provide that ABN AMRO may make a drawing thereunder in the
event and to the extent it pays a drawing under the ABN AMRO Letters of Credit;
(ii) on its own behalf under the Agent Swing Line, one or more Agent 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
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Letters of Credit (as defined in the Drexel Credit Facility) issued under, and
pursuant to the terms of, the Drexel Credit Facility (the "TCB Letters of
Credit"), any such Letters of Credit (x) to be in the same amounts and in
Dollars, (y) with an expiration date no later than thirty (30) days after the
expiration dates of such TCB Letters of Credit, 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 Letters of Credit (all such Letters of Credit, the "Back to Back
Letters 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 the ABN AMRO Letters of
Credit and any corresponding reimbursement obligation of any of the Borrowers to
TCB or ABN AMRO with respect thereto shall not be included within the
outstanding L/C Obligations or Agent L/C Obligations hereunder or be considered
Indebtedness hereunder. Funding of the Agent Loans shall be in 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, jointly and
severally, each in an initial face amount of less than $300,000 and in an
aggregate undrawn face amount at any time outstanding not to exceed the Agent
Commitment Amount; provided, that the Agent shall have no obligation to issue an
Agent Letter of Credit if (i) the outstanding Agent Revolving Obligations would
thereby exceed the Agent Commitment Amount then in effect, or (ii) 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 Dollars.
(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
(with a duplicate copy to an operations employee of the Agent as designated by
the Agent from time to time) a duly executed Issuance Request in the form of
Exhibit 2.2A (each an "Issuance Request"), together with a duly executed
application for the relevant Letter of Credit or Agent Letter of Credit
substantially in the form of Exhibit 2.2B (each an "Application"), or such other
computerized issuance or application procedure, instituted from time to time by
the Agent and agreed to by the Borrowers, completed to the reasonable
satisfaction of the Agent, and such other documentation and information as the
Agent may reasonably request. In the event of any irreconcilable difference or
inconsistency between this Agreement and an Application, the provisions of this
Agreement shall govern. Upon receipt of a properly completed and executed
Application and any other reasonably requested documents or information at least
three (3) Business Days prior to any requested issuance 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 or Agent Letter of Credit prior to the issuance thereof. The Agent will
notify each Lender of the amount and expiration date of each Letter of Credit it
issues promptly upon issuance thereof. Each Letter of Credit and Agent Letter of
Credit shall have an expiration date no later than four (4) Business Days before
the Maturity Date for Revolving Loans or Agent Loans, as applicable. 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 (w) the expiration date of such Letter of
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Credit or Agent Letter of Credit if so extended would be later than four (4)
Business Days before the Maturity Date for Revolving Loans or Agent Loans, as
applicable, (x) the Revolving Commitment Termination Date or the Agent
Commitment Termination Date, as applicable, shall have occurred, (y) an Event of
Default has occurred and is continuing, or (z) the Agent is so directed by the
Borrowers. 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 and conditions of this Section 2.2.
(d) The Borrowers' Reimbursement Obligations.
----------------------------------------
(i) The Borrowers hereby, jointly and severally, irrevocably and
unconditionally agree to reimburse the Agent for each payment or disbursement
made by the Agent to settle its obligations under any draft drawn under a Letter
of Credit or an Agent Letter of Credit (each, a "Reimbursement Obligation")
within two (2) Business Days from when such draft is paid with either funds not
borrowed hereunder or with a Borrowing subject to Section 2.5 and the other
terms and conditions contained in this Agreement. The Reimbursement Obligation
shall bear interest (which the Borrowers hereby promise to pay) from and after
the date such draft is paid until (but excluding the date) the Reimbursement
Obligation is paid at the lesser of the Highest Lawful Rate or the Base Rate so
long as the Reimbursement Obligation shall not be past due, and thereafter at
the default rate per annum as set forth in Section 2.9(c), whether or not the
Maturity Date for the Revolving Credit or the Agent Swing Line, as applicable,
shall have occurred. If any such payment or disbursement is reimbursed to the
Agent on the date such payment or disbursement is made by the Agent, interest
shall be paid on the reimbursable amount for one (1) day. The Agent shall give
the Borrowers notice of any drawing on a Letter of Credit or an Agent Letter of
Credit within one (1) Business Day after such drawing is paid.
(ii) The Borrowers agree for the benefit of the Agent and each Lender
that, notwithstanding any provision of any Application, the obligations of the
Borrowers under this Section 2.2(d) and each applicable Application shall be
absolute, unconditional and irrevocable (subject to Section 2.2(c)) and shall be
performed strictly in accordance with the terms of this Agreement and each
applicable Application under all circumstances whatsoever (other than the
defense of payment in accordance with this Agreement or a defense based on the
gross negligence or willful misconduct of the Agent or any Lender), including,
without limitation, the following circumstances (subject in all cases to the
defense of payment in accordance with this Agreement or a defense based on the
gross negligence or willful misconduct of the Agent or any Lender):
(1) any lack of validity or enforceability of any of the L/C
Documents;
(2) any amendment or waiver of or any consent to depart from
all or any of the provisions of any of the L/C Documents;
(3) the existence of any claim, setoff, defense or other right
the Borrowers may have at any time against a beneficiary of a Letter
of Credit or an Agent Letter of Credit (or any Person for whom a
beneficiary may be acting), the
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Agent, any Lender or any other Person, whether in connection with this
Agreement, another L/C Document or any unrelated transaction;
(4) 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;
(5) 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
(6) 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 any L/C Document, provided
that such act or omission of the Agent did not constitute gross
negligence or willful misconduct of the Agent.
(d) The Participating Interests. Each Lender severally and not jointly
---------------------------
agrees to purchase from the Agent, and the Agent hereby agrees to sell to each
Lender, an undivided percentage participating interest, to the extent of its
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 Sections 2.2(d) and 2.5(b), or if the Agent is
required at any time to return to the Borrowers or to a trustee, receiver,
liquidator, custodian or other Person any portion of any payment by the
Borrowers of any Reimbursement Obligation in connection with a Letter of Credit,
the Agent shall promptly give notice of same to each Lender, and the Agent shall
have the right to require each Lender to fund its participation in such
Reimbursement Obligation. Each Lender (except the Agent to the extent it is
also a Lender) shall pay to the Agent an amount equal to each Lender's
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 2:00 p.m., or not later than the following Business
Day if such notice is received after such time. If a Lender fails to pay timely
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 Lender at a rate per annum equal to the Base Rate in
effect for each such day, and only after such payment shall such Lender be
entitled to receive its Percentage of each payment received on the relevant
Reimbursement Obligation and of interest paid thereon. If any such Lender fails
to pay such amount to the Agent, any payments made by the Borrowers with respect
to the relevant Reimbursement Obligation 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
Lenders to the Agent under this Section 2.2(d) shall be absolute,
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irrevocable and unconditional under any and all circumstances whatsoever and
shall not be subject to any setoff, counterclaim or defense to payment any
Lender may have or have had against the Borrowers, the Agent, any other Lender
or any other Person whatsoever including, but not limited to, any defense based
on the failure of the demand for payment under the Letter of Credit to conform
to the terms of such Letter of Credit or the legality, validity, regularity or
enforceability of such Letter of Credit and INCLUDING, BUT NOT LIMITED TO, THOSE
RESULTING FROM THE AGENT'S OWN SIMPLE OR CONTRIBUTORY NEGLIGENCE. 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 Lender, and each payment by a Lender under Section 2.2
shall be made without any offset, abatement, withholding or reduction
whatsoever.
Section 2.3. Borrowings of Term Loans. Subject to the terms and
------------------------
conditions hereof, each Lender severally and not jointly agrees to make one or
more loans (each a "Term Loan") to the Borrowers from time to time before the
Term Commitment Termination Date in an aggregate amount not to exceed at any
time outstanding an amount equal to its Percentage of the Term Credit Commitment
Amount (for each Lender, its "Term Credit Commitment"), subject to any
reductions thereof pursuant to the terms of this Agreement. The Term Loans
shall be made ratably from the Lenders in proportion to their respective
Percentages. No Lender shall be permitted or required to make any Term Loan if,
after giving effect thereto, the aggregate principal amount of all Term Loans
(i) of all Lenders would exceed the Term Credit Commitment Amount, or (ii) of
such Lender would exceed the Percentage of such Lender of the Term Credit
Commitment Amount. Any portion of the Term Credit Commitments not borrowed on
or before the Term Commitment Termination Date shall terminate and not be
available for borrowing. Funding of the Term Loans shall be in Dollars.
Section 2.4. Types of Loans and Minimum Borrowing Amounts. Borrowings of
--------------------------------------------
both Revolving Loans, Term Loans and Agent Loans may be outstanding as either
Base Rate Loans or Eurodollar Loans, as selected by the Borrowers pursuant to
Section 2.5; provided, however, that any Revolving Loans funded in Pounds or
Canadian Dollars may only be outstanding as Eurodollar Loans. All Borrowings
advanced on the Initial Borrowing Date shall be advanced in Dollars and as Base
Rate Loans. Each Borrowing of Base Rate Loans shall be in an amount of not less
than $300,000 (except with respect to Agent Loans) and each Borrowing of
Eurodollar Loans shall be in an amount of not less than $3,000,000 (except with
respect to Agent Loans) (or the equivalent thereof in Pounds or Canadian Dollars
as applicable and as determined in accordance with Section 10.19). Each
Borrowing of an Agent Loan as a Base Rate Loan shall be in an amount of less
than $300,000, and each Borrowing of an Agent Loan as a Eurodollar Loan shall be
in an amount of less than $3,000,000.
Section 2.5. Manner of Borrowing. (a) Notice to the Agent. The Borrowers
------------------- -------------------
shall give notice to the Agent by no later than 12:00 p.m. (i) at least three
(3) Business Days before the date on which the Borrowers request the Lenders to
advance a Borrowing of Eurodollar Loans to be funded in Dollars and at least
four (4) Business Days before the date on which the Borrowers request the
Lenders to advance a Borrowing of Eurodollar Loans in Canadian Dollars or
Pounds, and (ii) on the date the Borrowers request the Lenders to advance a
Borrowing of Base Rate Loans pursuant to a duly executed Borrowing Request in
the form of Exhibit 2.5 (each
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a "Borrowing Request"). The Borrowers may select multiple Interest Periods for
the Term Loans, for the Agent Loans and for the Revolving Loans constituting any
particular Borrowing, provided that at no time shall the number of different
Interest Periods for outstanding Eurodollar Loans exceed eight (8) (it being
understood for such purposes that (x) Interest Periods of the same duration, but
commencing on different dates, shall be counted as different Interest Periods
and (y) all Interest Periods commencing on the same date and of the same
duration shall be counted as different Interest Periods if Revolving Loans,
Agent Loans and Term Loans are involved. The Loans included in each Borrowing
shall bear interest initially at the type of rate specified in such new
Borrowing Request with respect to such 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
and funding losses provided in Section 2.13, and (ii) if such Borrowing is of
Base Rate Loans, the Borrowers may convert all or part of such Borrowing into
Eurodollar Loans for an Interest Period specified by the Borrowers on any
Business Day. 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 12:00 p.m. at least three (3) Business Days
with respect to Eurodollar Loans funded in Dollars and four (4) Business Days
before such Borrowing with respect to Eurodollar Loans funded in Canadian
Dollars or Pounds, 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 and currency of the requested Borrowing, whether any portion the
requested Borrowing shall be used for funding any acquisition pursuant to the
provisions of Sections 5.5 and 6.13, 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. The
Agent shall give prompt telephonic, telex or facsimile notice to each Lender of
any notice received pursuant to Section 2.5(a) relating to a Borrowing under
such Credit.
(b) Borrowers' Failure to Notify. If the Borrowers fail to give notice
----------------------------
pursuant to Section 2.5(a) of (i) the continuation or conversion of any
outstanding principal amount of a Borrowing of Eurodollar Loans or of (ii) a
Borrowing of Loans to pay outstanding Reimbursement Obligations, and has not
notified the Agent by 12:00 p.m. at least three (3) Business Days before the
last day of the Interest Period for such Borrowing of Eurodollar Loans
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funded in Dollars or at least four (4) Business Days before the last day of the
Interest Period for such Borrowing of Eurodollar Loans funded in Canadian
Dollars or Pounds 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, (x) the continuation of such Borrowing as a Eurodollar Loan with an
Interest Period of one (1) month, (y) the advance of a new Borrowing of Base
Rate Loans under the Revolving Credit (after converting, if necessary, the
Reimbursement Obligation into Dollars as provided in Section 10.19) on such day
in the amount of the Reimbursement Obligation then due, or (z) with respect to
Agent Loans or Agent Letters of Credit, the advance of a new Borrowing of an
Agent Loan as a Base Rate Loan under the Agent Swing Line on such day in the
amount of the Agent Reimbursement Obligation then due, which Borrowing shall be
deemed to have been funded on such day to pay the Reimbursement Obligation or
Agent Reimbursement Obligation, as the case may be, then due, in each case so
long as no Default or Event of Default shall have occurred and be continuing or
would occur as a result of such Borrowing but otherwise disregarding the
conditions to Borrowing set forth in Section 4.2. Upon the occurrence and
during the continuance of any Event of Default, (i) each Eurodollar Loan will
automatically, on the last day of the then existing Interest Period therefor,
convert into a Base Rate Loan and (ii) the obligation of the Lenders to fund
loans in Canadian Dollars or Pounds and make, continue or convert Loans into
Eurodollar Loans shall be suspended.
(c) Disbursement of Loans. Not later than 12:00 p.m. on the date of any
---------------------
requested advance of a new Borrowing of Loans, each Lender under the 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 and according to the
disbursement instructions 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.
(d) 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
corresponding amount is not in fact made available to the Agent by such Lender
on the date of the Borrowing, the Agent shall be entitled to recover such
corresponding amount on demand from such Lender, together with interest at its
cost of funds. If such amount is not received from such Lender by the Agent
immediately upon demand, the Borrowers will, on demand,
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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 subject to the
limitations in Section 2.5(a); provided, however, that:
(i) the Borrowers may not select an Interest Period for a Borrowing
of Revolving Loans or Agent Loans that extend beyond the applicable
Maturity Date for Revolving Loans or Agent Loans, as the case may be;
(ii) 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 Term Loans scheduled to be outstanding
with Interest Periods ending after such Amortization Date would exceed the
principal amount of Term Loans permitted to be outstanding after such
Amortization Date;
(iii) 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
(iv) 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 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. (a) Revolving Loans. Each Revolving Loan
----------------- ---------------
shall mature and become due and payable by the Borrowers on the applicable
Maturity Date for Revolving Loans. Each Agent Loan shall mature and become due
and payable by the Borrowers on the applicable Maturity Date for the Agent
Loans. At least ninety (90) days prior to the fourth anniversary of the
Effective Date, the Borrowers may provide the Agent with a written notice
requesting the Lenders to extend the Revolving Commitment Termination Date and
the Maturity Date for Revolving Loans for an additional one (1) year period. If
the Borrowers shall request the Revolving Commitment Termination Date and the
Maturity Date for Revolving Loans to be extended for an additional one (1) year
period, then the Agent shall promptly notify each Lender of such request and
each Lender shall notify the Agent, not fewer than thirty (30) days prior to the
Revolving Commitment Termination Date and the Maturity Date for the Revolving
Loans, whether, in the exercise of its sole discretion, it will extend the
Revolving Commitment Termination Date and the Maturity Date for Revolving Loans
for an additional one (1) year period and, in the event such Lender commits to
such extensions but only at a lower Commitment (each such Lender, a "Reduced
Declining Lender"), such notice will specify a
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<PAGE>
proposed Total Commitment Amount and its proposed Designated Commitment. Any
Lender which shall not timely notify the Agent whether it will extend the
Revolving Commitment Termination Date and the Maturity Date for Revolving Loans
shall be deemed to not have agreed to such extensions. No Lender shall have any
obligation whatsoever to extend the Revolving Commitment Termination Date and
the Maturity Date for Revolving Loans.
(b) Extension of Maturity Date for Revolving Loans. If the Lenders notify
----------------------------------------------
the Agent pursuant to Section 2.7(a) of their agreement to extend the Revolving
Commitment Termination Date and the Maturity Date for Revolving Loans (each such
Lender, an "Accepting Lender"), then the Agent shall so notify each Lender and
the Borrowers, and such extensions shall be effective without other or further
action by any party hereto for such additional one-year period. If any one or
more of the Lenders shall notify or be deemed to have notified the Agent that it
will not extend the Revolving Commitment Termination Date and the Maturity Date
for Revolving Loans at the then current Total Commitment Amount (each such
Lender, a "Declining Lender"), then (i) the Agent shall promptly so notify the
Borrowers and the Accepting Lenders; (ii) the Accepting Lenders shall, upon the
Borrowers' election to extend the Revolving Commitment Termination Date and the
Maturity Date for Revolving Loans in accordance with clause (w), (x) or (y)
below, extend the Revolving Commitment Termination Date and the Maturity Date
for Revolving Loans; and (iii) the Borrowers shall, pursuant to a notice (an
"Election Notice") delivered to the Agent, the Accepting Lenders and the
Declining Lenders not fewer than ten (10) Business Days prior to the Election
Effective Date, either:
(w) elect to extend the Revolving Commitment Termination Date and
the Maturity Date for Revolving Loans with respect to the Accepting Lenders
and direct the Declining Lenders to terminate their Commitments, which
termination shall become effective on the Election Effective Date. On such
Election Effective Date (A) the Borrowers shall deliver notice of the
effectiveness of such termination to the Declining Lenders and to the
Agent, (B) the Borrowers shall pay in full in immediately available funds
all Obligations of the Borrowers hereunder including, without limitation,
all breakage fees provided for in Section 2.13 and all other costs, fees
and expenses payable and owing to each such Declining Lender hereunder and
otherwise cause the Declining Lenders no longer to have any liability or
obligation under or with respect to any Letter of Credit issued hereunder,
whether by termination, cancellation, expiration or amendment of all such
Letters of Credit, replacement of such Letters of Credit or otherwise, and
upon the events described in this clause (x), the Declining Lenders shall
cease to be a "Lender" hereunder for all purposes, other than for purposes
of Sections 2.13, 3.3, 8.3 and 10.13 and shall cease to have any
obligations or any Commitment hereunder, other than to the Agent pursuant
to Section 9.6 and to the Borrowers pursuant to Section 10.15, and the
Agent shall promptly notify the Accepting Lenders and the Borrowers of the
new Total Commitment Amount and the respective Percentages of each
Accepting Lender. So long as (A) no Default or Event of Default has
occurred and is continuing, and (B) the aggregate principal amount of the
Revolving Loans of all Lenders and other Revolving Obligations outstanding
of the Borrowers do not exceed the new Revolving Credit Commitment Amount,
the Agent shall reallocate the Percentage of each Lender in the Letters of
Credit issued hereunder at such time; or
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(x) elect to extend the Revolving Commitment Termination Date and
the Maturity Date for Revolving Loans with respect to (x) the Accepting
Lenders and (y) all of the Reduced Declining Lenders and direct any
Declining Lenders to terminate their respective Commitments, which
termination shall become effective on the Election Effective Date; provided
that effective on the Election Effective Date, the Total Commitment Amount
shall be reduced to the lower of (A) the lowest Total Commitment Amount
proposed by a Reduced Declining Lender in the notice provided pursuant to
Section 2.7(a) and (B) the aggregate of the Designated Commitments of all
Accepting Lenders and all Reduced Declining Lenders and each remaining
Lender's Percentage shall be adjusted to equal the quotient of (1) such
Lender's Designated Commitment divided by (2) the reduced Total Commitment
Amount. On such Election Effective Date, the Borrowers shall pay in full,
in immediately available funds, all Obligations of the Borrowers hereunder
including, without limitation, all breakage fees provided for in Section
2.13 and all other costs, fees and expenses payable to each Declining
Lender hereunder and otherwise cause such Declining Lenders no longer to
have any liability or obligation under or with respect to any Letter of
Credit issued hereunder, whether by termination, cancellation, expiration
or amendment of all such Letters of Credit, replacement of such Letters of
Credit or otherwise and pay to the Reduced Declining Lenders and the
Accepting Lenders such amounts as are necessary to cause the amounts owing
to the Reduced Declining Lenders and the Accepting Lenders to reflect their
reduced Commitments and their new Percentages thereafter; each Declining
Lender as is terminating its respective Commitments shall cease to be a
"Lender" hereunder for all purposes, other than for purposes of Sections
2.13, 3.3, 8.3 and 10.13 and shall cease to have any obligations or any
Commitment hereunder, other than to the Agent pursuant to Section 9.6 and
to the Borrowers pursuant to Section 10.15; and the Agent shall promptly
notify the Accepting Lenders, the Reduced Declining Lenders and the
Borrowers of the new Total Commitment Amount and the respective Percentages
of each Lender. So long as (A) no Default or Event of Default has occurred
and is continuing, and (B) the aggregate principal amount of the Revolving
Loans of all Lenders and other Revolving Obligations outstanding of the
Borrowers do not exceed the new Revolving Credit Commitment Amount, the
Agent shall reallocate the Percentage of each Lender in the Letters of
Credit issued hereunder at such time; or
(y) elect to extend the Revolving Commitment Termination Date and
the Maturity Date for Revolving Loans with respect to the Accepting Lenders
and the Reduced Declining Lenders, and to replace one or more of the
Reduced Declining Lenders or the Declining Lenders effective on the
Election Effective Date, with one or more banks reasonably acceptable to
the Agent; provided that (A) if one or more Lenders shall be a Reduced
Declining Lender that is not being replaced, then effective on the Election
Effective Date, the Total Commitment Amount shall be reduced to the lower
of (1) the lowest Total Commitment Amount proposed by a Reduced Declining
Lender that is not being replaced and (2) the aggregate of the Designated
Commitments of all Accepting Lenders and the Reduced Declining Lenders that
are not being replaced; (B) on such date the Borrowers shall pay in
immediately available funds to such Reduced Declining Lenders that are not
being replaced and to the Accepting Lenders such amounts as are necessary
to cause amounts owing to such Reduced Declining Lenders and the
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<PAGE>
Accepting Lenders to reflect their reduced Commitments and their new
Percentages thereafter; (C) the replacement banks shall purchase the Note
or Notes of the Declining Lender or Lenders being replaced and such
Declining Lender's or Lenders' rights hereunder, without recourse or
expense to, or warranty by, such Declining Lender or Lenders being replaced
for a purchase price equal to the sum of the aggregate outstanding
principal amount of the Note or Notes payable to the Declining Lender or
Lenders, such Declining Lender's or Lenders' respective Percentage of any
outstanding Reimbursement Obligations, any accrued but unpaid interest on
such Note or Notes and such Reimbursement Obligations, and any accrued but
unpaid fees in respect of such Declining Lender's or Lenders' outstanding
Borrowings and percentage of Commitments hereunder, and such replacement
banks shall assume such Declining Lender's or Lenders' respective
Percentage with respect to any outstanding Letters of Credit hereunder; (D)
all Obligations of the Borrowers owing under or in connection with this
Agreement and the Credit Documents to the Declining Lender or Lenders being
replaced (including, without limitation, all breakage fees provided for in
Section 2.13 and all other costs, fees and expenses payable to each
Declining Lender hereunder) shall be paid by the Borrowers in full in
immediately available funds to such Declining Lender or Lenders being
replaced concurrently with such replacement; and (E) upon the payment of
such amounts, the replacement banks shall each constitute a "Lender"
hereunder and the Declining Lenders or Lenders being replaced shall no
longer constitute a "Lender" hereunder (other than for purposes of Sections
2.13, 3.3, 8.3 and 10.13) and shall no longer have any obligations
hereunder, other than to the Agent pursuant to Section 9.6 and to the
Borrowers pursuant to Section 10.15. So long as (A) no Default or Event of
Default has occurred and is continuing, and (B) the aggregate principal
amount of the Revolving Loans of all Lenders and other Revolving
Obligations outstanding of the Borrowers do not exceed the new Revolving
Credit Commitment Amount, the Agent shall reallocate the Percentage of each
Lender in the Letters of Credit issued hereunder at such time; or
(z) elect to revoke and cancel the written notice requesting the
Lenders to extend the Revolving Commitment Termination Date and the
Maturity Date for Revolving Loans for an additional one (1) year period by
giving written notice of such revocation and cancellation to the Agent
(which shall promptly notify the Lenders thereof) at least ten (10)
Business Days prior to the Revolving Commitment Termination Date and the
Maturity Date for Revolving Loans.
If the Borrowers fail to provide an Election Notice on or prior to the tenth
(10th) Business Day preceding the Revolving Commitment Termination Date and the
Maturity Date for Revolving Loans, the Borrowers shall be deemed to have revoked
and cancelled its written notice requesting the Lenders to extend the Revolving
Commitment Termination Date and the Maturity Date for Revolving Loans for an
additional one (1) year period. Upon the election by the Borrowers described in
Section 2.7(c), the Borrowers shall give prompt notice to the Agent of such
election.
(c) Term Loans. The Borrowers shall repay a portion of the Term Loans on
----------
the last Business Day of each calendar quarter (except with respect to the last
payment date which day
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shall be the applicable Maturity Date for Term Loans), commencing on September
30, 1997 ("Amortization Date"), in the amount equal to the percentage set forth
opposite such date on Schedule 2.7 multiplied by the outstanding amount of the
Term Loan as of June 30, 1997 (or, if less, the aggregate principal amount of
Term Loans then outstanding). The Borrowers shall repay in full the unpaid
principal amount of the Term Loans on the applicable Maturity Date for Term
Loans.
Section 2.8. Applicable Interest Rates. (a) Base Rate Loans. Each Base
------------------------- ---------------
Rate Loan shall bear interest (computed on the basis of a 360-day year and
actual days elapsed excluding the date of repayment) 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 Base Rate
from time to time in effect, 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, except with respect to
Eurodollar Loans funded in Pounds, in which case interest will be computed on
the basis of a 365-day year and actual days elapsed, in each case excluding the
date of repayment) 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 Adjusted LIBOR plus the Applicable Margin,
payable on each Interest Payment Date for such Loan and at maturity (whether by
acceleration or otherwise) or conversion to a Base Rate 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 the Agent's
manifest error or willful misconduct. The Agent shall give prompt telephonic,
telex or facsimile notice to the Borrowers and each Lender of the interest rate
applicable to each Loan or Reimbursement Obligation (but, if such notice is
given by telephone, the Agent shall confirm such rate in writing) promptly after
the Agent has made such determination.
Section 2.9. Default Rate. If any payment of principal on any Loan is not
------------
made when due after the expiration of the grace period therefor provided in
Section 7.1(a) (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
such principal then due is 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);
(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
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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); 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).
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 or ABN AMRO under laws
applicable to it (including the laws of the United States of America and the
State of New York 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 or
ABN AMRO that is contracted for, taken, reserved, charged or received by such
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
or ABN AMRO 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 or ABN AMRO as of the date of such
acceleration or prepayment and, if theretofore paid, shall be credited by the
Lender or ABN AMRO 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 or ABN AMRO to
the Borrowers). To the extent that Article 5069-1.04 of the Texas Revised Civil
Statutes is relevant to ABN AMRO or the Lenders for the purpose of determining
the Highest Lawful Rate, ABN AMRO 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 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 or ABN
AMRO 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 ABN AMRO
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. Tex. Rev. Civ. Stat. Ann. Art. 5069, Ch. 15 (which
regulates certain revolving credit loan accounts and revolving tri-party
accounts) shall not apply to this Agreement or the Notes.
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<PAGE>
Section 2.10. Optional Prepayments. The Borrowers shall have the
--------------------
privilege of prepaying Base Rate Loans without premium or penalty at any time in
whole or at any time and from time to time in part (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
12:00 p.m. 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
$3,000,000 (or the equivalent thereof in Pounds or Canadian Dollars, as
applicable and as determined in accordance with Section 10.19)) 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 and funding losses 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 12:00 p.m. at least three (3) Business
Days before the last Business Day of such Interest Period or the proposed
prepayment date. Any such prepayments shall be made by the payment of the
principal amount to be prepaid and accrued and unpaid interest thereon to the
date of such prepayment. Optional prepayments shall be applied as selected by
the Borrowers to the Term Loans, the Revolving Loans and the Agent Loans. Any
optional prepayments of the Term Loans shall be applied in inverse order of
maturity and amounts prepaid under the Term Loans may not be reborrowed. Any
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. Any optional prepayments of the Agent Loans shall be applied to Agent
Loans, then pro rata to the Agent Reimbursement Obligations with respect to
Agent Letters of Credit. The Borrowers may direct the application of any
optional prepayment hereunder to the Base Rate Loans or Eurodollar Loans
outstanding of the type of Loans being prepaid.
Section 2.11. 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 Revolving Credit Commitment 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 Lenders as a
prepayment of the Revolving Loans and, if all Revolving Loans have been paid, a
pre-funding of Letters of Credit. If the aggregate principal amount of
outstanding Term Loans shall at any time for any reason exceed the Term Credit
Commitment 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 Lenders as a prepayment of the Term Loans. If the aggregate
principal amount of outstanding Agent Loans and Agent L/C Obligations shall at
any time for any reason exceed the Agent Commitment Amount then in effect, the
Borrowers shall, immediately and without notice or demand, pay the amount of
such excess to the Agent for the benefit of the Agent, as a prepayment of the
Agent Loans and, if all Agent Loans have been paid, a pre-funding of Agent
Letters of Credit. Any mandatory prepayment of Loans pursuant hereto shall not
be limited by the notice provision for prepayments set forth in Section 2.10,
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 Loans prepaid and any applicable breakage fees and funding losses
pursuant to Section 2.13.
(b) (i) Within ten (10) Business Days after receipt by Holdings, the
Borrowers or any of their Subsidiaries of Net Cash Proceeds from any Transfer of
an asset or group of assets
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<PAGE>
(except Transfers permitted by Section 6.19) with cumulative proceeds in excess
of $10,000,000 in any fiscal year, the Borrowers shall make a mandatory
prepayment of the Term Loans, which mandatory prepayment shall be applied in
inverse order of maturity, in an amount equal to the Net Cash Proceeds from such
Transfer, and (ii) within ten (10) Business Days after receipt by Holdings, the
Borrowers or any of their Subsidiaries of the proceeds of insurance on or
condemnation of any property, the Borrowers shall make a mandatory prepayment of
the Term Loans of such funds, which mandatory prepayment shall be applied in
inverse order of maturity, unless such proceeds are segregated in a special
account denoted as insurance or condemnation proceeds and used promptly for
replacement or reconstruction of such property; provided, however, the Borrowers
shall not be required to make the mandatory prepayments required in (i) or (ii)
above to the extent such proceeds are reinvested in a Permitted Business within
six (6) months of the receipt of such proceeds. Amounts prepaid under the Term
Loans may not be reborrowed. After the Term Loans have been paid in full, the
Borrowers shall not be required to make any further mandatory prepayments
pursuant to this Section 2.11(b).
(c) Beginning on September 30, 1997, and on each Amortization Date
thereafter, if Holdings has a Total Funded Debt to Total Capital Ratio which is
greater than 35% for the preceding fiscal quarter, the Borrowers shall make a
mandatory prepayment of the Term Loans (which mandatory prepayment shall be
applied in inverse order of maturity to the last four (4) scheduled Term Loan
payments), in an amount equal to 50% of Excess Cash Flow of Holdings and its
Subsidiaries for such preceding fiscal quarter. Amounts prepaid under the Term
Loans may not be reborrowed. After the last four (4) scheduled Term Loan
payments have been paid in full, the Borrowers shall not be required to make any
further mandatory prepayments of Excess Cash Flow.
Section 2.12. The Notes. (a) The Revolving Loans outstanding to the
---------
Borrowers from each Lender shall be evidenced by three promissory notes of the
Borrowers payable to such Lender in the forms of Exhibits 2.12A (Dollars), 2.12B
(Pounds) and 2.12C (Canadian Dollars), respectively (each a "Revolving Note").
The Term Loans outstanding to the Borrowers from each Lender shall be evidenced
by a single promissory note of the Borrowers payable to such Lender in the form
of Exhibit 2.12D (each a "Term Note"). The Agent Revolving Loans outstanding to
the Borrowers from ABN AMRO shall be evidenced by a single promissory note of
the Borrowers payable to ABN AMRO in the form of Exhibit 2.12E (the "Agent
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, 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.
54
<PAGE>
Section 2.13. Breakage Fees. If any Lender incurs any loss, cost or
-------------
expense (including, without limitation, 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:
(i) 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);
(ii) any failure to make a principal payment of a Eurodollar Loan on the
due date therefor; or
(iii) any failure by the Borrowers to borrow, continue, prepay or convert
to 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 (including the Multicurrency Funding Limit) or the Term
Credit Commitments without premium or penalty, in whole or in part, any partial
termination to be (i) in an amount not less than $5,000,000 as determined by the
Borrowers and in integral multiples of $5,000,000, and (ii) allocated ratably
among the Lenders in proportion to their respective Revolving Credit Commitments
and among the Lenders in proportion to their respective Term Credit 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, 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, and the Term Credit Commitment Amount may not be reduced to an amount
less than the sum of the aggregate principal amount of outstanding Term Loans,
in each case after converting, if necessary, any such outstanding Obligations to
Dollars in accordance with Section 10.19 and 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 whose long-term senior unsecured debt rating
is rated A or above from either S&P or Moody's or such other bank 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
55
<PAGE>
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 Lender of any such termination of the Revolving Credit
Commitments or Term Credit Commitments, as applicable. Any termination of
Revolving Credit Commitments or Term Credit Commitments, as applicable, pursuant
to this Section 2.14 is permanent and may not be reinstated. 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 ABN AMRO, to terminate or reduce
the Agent Credit Commitment without premium or penalty, in whole or in part;
provided that the Agent Commitment Amount may not be reduced to an amount less
than the sum of the aggregate principal amount of outstanding Agent Loans plus
the aggregate undrawn face amount of outstanding Agent Letters of Credit plus
any unpaid Agent Reimbursement Obligations with respect to Agent Letters of
Credit. Any termination of Agent Credit Commitment pursuant to this Section
2.14 is permanent and may not be reinstated.
SECTION 3. FEES AND PAYMENTS.
Section 3.1. Fees. (a) Commitment Fee. For the period from the Effective
---- --------------
Date to and including the Revolving Commitment Termination Date with respect to
the Revolving Credit Commitment Amount, and the Term Commitment Termination Date
with respect to the Term Credit Commitment Amount, the Borrowers shall pay (i)
to the Agent for the ratable account of the Lenders, a commitment fee (computed
on a basis of a 360-day year and actual days elapsed) on the sum of (x) an
amount equal to the average daily difference between the Revolving Credit
Commitment Amount and the outstanding Revolving Obligations, plus (y) an amount
equal to the average daily difference between the Term Credit Commitment Amount
and the outstanding Term Loans, and (ii) to ABN AMRO for its own account, a
commitment fee (computed on a basis of 360-day year and actual days elapsed) on
an amount equal to the average daily difference between the Agent Commitment
Amount and the outstanding Agent Revolving Obligations, such commitment fees to
be calculated, for any day, at such times as the relevant Total Funded Debt to
Total Capital Ratio is in one of the following ranges, based upon the percentage
per anum set forth opposite such Total Funded Debt to Total Capital Ratio set
forth below times such sum:
<TABLE>
<CAPTION>
Total Funded Debt to Total Capital Ratio Commitment Fee
---------------------------------------- --------------
<S> <C>
Less than 30% 0.175%
Equal to or greater than 30% 0.200%
but less than 35%
Equal to or greater than 35% 0.250%
but less than 37.5%
Equal to or greater than 37.5% 0.250%
but less than 40%
Equal to or greater than 40% 0.250%
but less than 45%
Equal to or greater than 45% 0.375%
</TABLE>
56
<PAGE>
For the period from the Effective Date through the date the Borrowers are to
provide the Agent with the financial statements for the fiscal quarter ending
June 30, 1996, as required by Section 6.7(a)(i), the commitment fees shall be
calculated as provided above based upon a commitment fee percentage of 0.250%
per annum. Such fees shall be payable in arrears commencing on September 30,
1996, and on the last Business Day of each calendar quarter thereafter and on
the Maturity Date for Revolving Loans, the Maturity Date for Agent Loans, and on
June 30, 1997, with respect to the Term Loans, as applicable, unless the
Revolving Credit Commitment, the Agent Credit Commitment or the Term Credit
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. Any change to the commitment fee as a result of a change in
the Total Funded Debt to Total Capital Ratio shall be effective as of the date
provided in the definition of Applicable Margin.
(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 (pro rated, if necessary for any portion
of such quarter) (i) for the ratable account of the Lenders and (ii) to the
Agent for its own account, as the case may be, a non-refundable fee equal to the
greater of (x) $500, or (y) the face amount of such Letter of Credit or Agent
Letter of Credit times the Applicable Margin, calculated in each case on the
basis of a 360-day year and actual days elapsed and based on the then scheduled
expiration date of the Letter of Credit or the Agent Letter of Credit, as the
case may be. Thereafter, such fees shall be payable by the Borrowers in advance
on the last Business Day of each calendar quarter of each year commencing with
the next succeeding calendar quarter, with the last such payment on the date any
such Letter of Credit or Agent Letter of Credit expires. For any Letter of
Credit issued with a face amount in Pounds or Canadian Dollars, the fees shall
be converted into Dollars in accordance with Section 10.19 as of two (2) days
before the issuance date thereof, and thereafter five (5) days before any fee
with respect thereto shall be due and payable hereunder. 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, 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 each of the Agent and the
----------
Syndication Agent the fees agreed to between the Agent and Holdings and the
Syndication Agent and Holdings pursuant to the Fee Letters, and any other fees
from time to time agreed to by Holdings or the Borrowers and the Agent or the
Syndication Agent.
Section 3.2. Place and Application of Payments. (a) All payments of
---------------------------------
principal of and interest on the Loans, the Reimbursement Obligations, and all
other amounts payable by the Borrowers under the Credit Documents shall be made
by the Borrowers to the Agent by no later than 1:30 p.m. 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. If the
Borrowers do not, or are unable for any reason to, effect payment of a Revolving
Loan or Reimbursement Obligation to the Lenders in the applicable currency or if
the Borrowers shall default in the
57
<PAGE>
payment when due of any payment in such currency, the Lenders may, at their
option, require such payment to be made to the Lenders in the Dollar equivalent
of such currency determined in accordance with Section 10.19. With respect to
any amount due and payable in Pounds or Canadian Dollars, the Borrowers agree to
hold the Lenders harmless from any losses incurred by the Lenders arising from
any change in the value of Dollars in relation to such currency between the date
such payment became due and the date of payment thereof. The Agent will, on the
same day each payment is received, cause to be distributed like funds in like
currency 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 order set forth in Section 7.7. 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 to the Agent or any Lender 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 such
Guarantor makes any payment, or (in each case) any political subdivision or
taxing authority thereof or therein, excluding, in the case of each Lender and
the Agent, taxes, assessments or other governmental charges
(i) imposed on, based upon, or measured by its income, and branch
profits, franchise and similar taxes imposed on it, by any jurisdiction in
which the Agent or such Lender, as the case may be, is incorporated or
maintains its principal place of business or Lending Office or which
subjects the Agent or such Lender to tax by reason of a connection between
the taxing jurisdiction and the Agent or such Lender (other than a
connection resulting from the transactions contemplated by this Agreement);
(ii) imposed as a result of a connection between the taxing jurisdiction
and the Agent or such Lender, as the case may be, other than a connection
resulting from the transactions contemplated by this Agreement;
(iii) imposed as a result of the transfer by such Lender of its interest
in this Agreement or any other Credit Document or a designation by such
Lender (other than pursuant to Section 3.3(d) hereof) of a new Lending
Office (other than taxes imposed as a result of any change in treaty, law
or regulation after such transfer of the Lender's interest in this
Agreement or any Credit Document or designation of a new Lending Office);
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<PAGE>
(iv) imposed by the United States of America upon a Lender organized under
the laws of a jurisdiction outside of the United States, except to the
extent that such tax is imposed or increased as a result of any change in
applicable law, regulation or treaty (other than any addition of or change
in any "anti-treaty shopping," "limitation of benefits," or similar
provision applicable to a treaty) after the date hereof, in the case of
each Lender originally a party hereto or, in the case of any Purchasing
Lender (as defined in Section 10.10), after the date on which it becomes a
Lender;
(v) which would not have been imposed but for (a) the failure of the Agent
or any Lender, as the case may be, to provide (x) an Internal Revenue
Service Form 1001 or 4224, as the case may be, or any substitute or
successor form prescribed by the Internal Revenue Service pursuant to
Section 3.3(b) below, or (y) any other certification, documentation or
proof which is reasonably requested by the Borrower, or (b) a determination
by a taxing authority or a court of competent jurisdiction that a
certification, documentation or other proof provided by such Lender or the
Agent to establish an exemption from such tax, assessment or other
governmental charge is false
(all such non-excluded taxes, assessments or other governmental charges and
liabilities being hereinafter referred to as "Indemnified Taxes"). If any such
withholding is so required, such Borrower 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 the Agent and each Lender is free and clear of such
Indemnified Taxes (including Indemnified Taxes on such additional amount) and is
equal to the amount that the Agent or such Lender (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 Indemnified Taxes, penalties or interest, such
Borrower 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 Borrower or Guarantor pays any Indemnified Taxes, penalties or interest, it
shall deliver official tax receipts evidencing the payment or certified copies
thereof, or other satisfactory evidence of payment if such tax receipts have not
yet been received by such Borrower or such Guarantor (with such tax receipts to
be promptly delivered when actually received), to the Agent or the Lender 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 Effective 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 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
59
<PAGE>
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 the Agent any form or certificate that such Lender is obligated to
submit pursuant to Section 3.3(b) 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 the 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.
(d) Refund of Taxes. If any Lender or the Agent receives a refund of any
---------------
Indemnified Tax or any tax referred to in Section 10.3 with respect to which any
Borrower or any Guarantor has paid any amount pursuant to this Section 3.3 or
Section 10.3, such Lender or the Agent shall pay the amount of such refund
(including any interest received with respect thereto) to such Borrower or such
Guarantor.
SECTION 4. CONDITIONS.
Section 4.1. Conditions Precedent to Initial Borrowing. The obligation of
-----------------------------------------
each Lender to advance the initial Loans hereunder and of the Agent to issue any
Letter of Credit or Agent Letter of Credit on the Initial Borrowing Date is
subject to the following conditions precedent, all in form and substance
satisfactory to the Lenders (and which shall be evidenced by the making of such
Loan(s) and, if applicable, the issuance of such Letter(s) of Credit or Agent
Letter(s) of Credit) and in sufficient number of signed counterparts, where
applicable, to provide one for each Lender (except for the Notes, of which only
one original shall be signed for each Lender):
(a) The Agent shall have received:
(i) Notes. The duly executed Notes of the Borrowers;
-----
(ii) Stock Pledge Agreements. The duly executed Stock Pledge
-----------------------
Agreements from Tuboscope Vetco International Inc. and Drexel Holdings,
Inc. 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 pledges, 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) Guaranties. The duly executed Parent Company Guaranty and the
----------
Limited Subsidiary Guaranty of each Subsidiary Guarantor in substantially
the forms of Exhibits 4.1B and 4.1C, as applicable;
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<PAGE>
(iv) Opinions of Counsel. The opinions of Vinson & Elkins and James
-------------------
F. Maroney, III, legal counsel to the Credit Parties, in substantially the
forms attached as Exhibit 4.1D, as applicable, and covering such additional
matters as the Lenders may reasonably require;
(v) Certificates of Officers of Credit Parties. Certificates of
------------------------------------------
the Secretary or Assistant Secretary and the President or Vice President of
each Credit Party containing specimen signatures of the persons authorized
to execute Credit Documents on each Credit Party's behalf or any other
documents provided for herein, 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, (y) copies of each Credit Party's Certificate or Articles of
Incorporation and Bylaws or other governing documents, certified by the
Secretary of State or other applicable entity of such Credit Party's
jurisdiction of organization, and (z) a certificate of existence and good
standing from the appropriate governing agency of such Credit Party's
jurisdiction of organization and of all jurisdictions where such Credit
Party is authorized to do business;
(vi) Certificate of Financial Condition. A certificate of the Chief
----------------------------------
Financial Officer or Vice President-Controller of Holdings and the
Borrowers documenting the solvency of Holdings, the Borrowers and their
Subsidiaries on a consolidated basis and certifying as true, correct and
complete the most recent financial statements described in Section 5.9;
(vii) Insurance Certificate. An insurance certificate dated within
---------------------
ten (10) days of the Effective Date from each of McGriff, Seibels, Barbara
and Colvin and the Borrowers describing in reasonable detail the insurance
maintained by Holdings, the Borrowers and their Subsidiaries as required by
the Credit Documents;
(viii) Fees. Payment of all fees and all expenses incurred through
----
the Effective Date then due and owing to the Agent and the Syndication
Agent pursuant to this Agreement and the Fee Letters;
(ix) Compliance Certificate. A duly executed Compliance
----------------------
Certificate;
(x) Consents. Certified copies of all documents evidencing any
--------
necessary corporate action, consents and governmental approvals (if any)
taken or obtained by any Credit Party with respect to the Credit Documents;
(xii) Releases. Evidence that all obligations under the Prior
--------
Tuboscope Credit Facility and Drexel Credit Facility have been or will be
paid in full and evidence that all Liens under the Prior Tuboscope Credit
Facility and Drexel Credit Facility have been or will be released promptly;
and
(xi) Other Documents. Such other documents as the Agent may
---------------
reasonably request.
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(b) All legal matters incident to the execution and delivery of the Credit
Documents shall be satisfactory to the Agent.
Section 4.2. Conditions Precedent to all Borrowings. In the case of each
--------------------------------------
advance of a Borrowing hereunder (including the issuance of, increase in the
amount of, or extension of the expiration date of, a Letter of Credit or Agent
Letter of Credit and including the initial Borrowing hereunder):
(a) Notices. In the case of a Borrowing, the Agent shall have received
-------
the Borrowing Request required by Section 2.5, and in the case of the issuance,
extension or increase of Letter of Credit or Agent Letter of Credit, the Agent
shall have received a duly completed Issuance Request and Application for such
Letter of Credit or Agent Letter of Credit, as the case may be, meeting the
requirements of Section 2.2;
(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 time of such new Borrowing, except as a result of the transactions
expressly permitted hereunder or thereunder and 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 in all material respects as of such earlier
date;
(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 Holdings, the Borrowers or any of their
Subsidiaries or any Unrestricted Subsidiary, which could reasonably be expected
to have a Material Adverse Effect; 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 could reasonably be expected to have a Material Adverse Effect;
(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 and shall not be prohibited by any other
legal requirement (including Regulations G, T and X) imposed by the banking laws
of the United States of America, 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 has occurred no event or effect that
-----------------------
has had or could reasonably be expected to have a Material Adverse Effect.
Each request for the advance of 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 an Agent Letter of Credit shall be deemed to be a representation
and warranty by the Borrowers on the date of such Borrowing, or issuance of,
increase in the amount of, or extension of the expiration date of,
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such Letter of Credit or Agent Letter of Credit, as the case may be, (a) that
all conditions precedent to such Borrowing have been satisfied or fulfilled
unless the Borrowers give to the Lenders written notice to the contrary, in
which case none of the Lenders shall be required to fund such advances and the
Agent shall not be required to issue, increase the amount of or extend the
expiration date of such Letter of Credit unless the Majority Lenders shall have
previously waived in writing such non-compliance. In the event that any of the
conditions specified in Section 4.2(c) are not satisfied, the Borrowers may not
convert any Base Rate Loan into a Eurodollar Loan or continue any Eurodollar
Loan and may only convert or continue any Eurodollar Loan into or as a Base Rate
Loan, subject to the applicability of the provisions of Section 2.8 regarding
default rates of interest. Further, in such case, any Eurodollar Loan which has
not been accelerated pursuant to the terms hereof shall automatically convert
into a Base Rate Loan at the end of the applicable Interest Period unless prior
to time, the conditions specified in Section 4.2(c) shall have been satisfied or
waived pursuant to the terms hereof.
Section 4.3. Conditions Subsequent.
---------------------
(a) Lien Searches. Within thirty (30) days of the Initial Borrowing Date,
-------------
the Borrowers shall provide the Agent with the results of UCC searches as
reasonably satisfactory to the Agent showing no Liens against any properties of
Holdings, the Borrowers and their Subsidiaries other than Permitted Liens, and
if any Liens other than Permitted Liens are then in existence, then Borrowers
shall obtain the release or termination of any such Liens within fifteen (15)
days.
(b) Stock Pledges. Within thirty (30) days of the Initial Borrowing Date,
-------------
the Borrowers shall deliver to the Agent evidence reasonably satisfactory to the
Agent that the pledge of sixty-six percent (66%) of the stock in all foreign
Material Subsidiaries as of the Effective Date has been perfected under the laws
of the applicable jurisdiction.
SECTION 5. REPRESENTATIONS AND WARRANTIES.
Each of the Borrowers 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
(or other Person) in good standing under the laws of the jurisdiction of its
organization; (ii) has all necessary corporate power (or comparable power, in
the case of a Material Subsidiary that is not a corporation) 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 except where the
failure to be so licensed or qualified or to be in good standing, as the case
may be, could not reasonably be expected to have a Material Adverse Effect.
(b) As of the Initial Borrowing Date, Holdings has no Subsidiaries other
than the Borrowers and the Subsidiaries listed on Schedule 5.1, 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
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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; Validity. 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 (or comparable action, in the case of a
Credit Party that is not a corporation) to authorize the execution, 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 nor
------------
performance (to the best of their knowledge) 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 by it of the transactions contemplated
herein or therein, will (i) contravene any applicable provision of any law,
statute, rule or regulation, or any applicable 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 result in the creation or imposition of (or the obligation
to create or impose) any Lien other than any Permitted Lien 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
----------
(including, without limitation, derivative or injunctive actions) pending or, to
the best knowledge of the Borrowers, threatened, involving Holdings, the
Borrowers or any of their Subsidiaries that could reasonably be expected to have
a Material Adverse Effect, except as set forth in Schedule 5.4.
Section 5.5. Use of Proceeds; Margin Regulations. (a) The proceeds of
-----------------------------------
the Revolving Credit and the Agent Swing Line may be used to (i) provide working
capital, including the issuance of Letters of Credit and Agent Letters of
Credit, and otherwise for general corporate purposes, and (ii) for Acquisitions
as provided herein. The proceeds of the Term Loans may only be used to (i)
refinance outstanding Indebtedness under the Prior Tuboscope Credit Facility and
the Drexel Credit Facility, and (ii) to escrow for, prepay or refinance
(pursuant to the terms hereof) the Subordinated Debt.
(b) Neither Holdings, the Borrower, nor any of their Subsidiaries are
engaged in the business of extending credit for the purpose of purchasing or
carrying margin stock. 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), to extend credit for the purpose of purchasing
or carrying any "margin stock," or for a purpose which violates Regulations G,
T, U or X of the Board of Governors of the Federal Reserve System.
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<PAGE>
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.
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, taken as a whole, on the date of such information and not
incomplete by omitting to state any material fact necessary to make the
information therein not misleading at such time in light of the circumstances
under which such information was provided. The Agent and each Lender
acknowledges that the projections heretofore or hereafter furnished by Holdings,
the Borrowers or any of their Material Subsidiaries in writing to the Agent or
any Lender will be accurate and correct, to the best of such entity's knowledge,
without guaranteeing the results of such projections.
Section 5.9. Financial Statements. The financial statements heretofore
--------------------
delivered to the Lenders (i) for Holdings' fiscal year ending December 31, 1995,
for DOS' fiscal year ending March 31, 1996, and Holdings' fiscal quarter ending
March 31, 1996, have been prepared in accordance with GAAP applied on a basis
consistent, except as otherwise noted therein, with that of such entity for the
previous fiscal year, and (ii) for periods ending on or after June 30, 1996,
will be prepared in accordance with GAAP applied on a basis consistent with
Holdings' financial statements for the previous fiscal quarter or year, as the
case may be, except as otherwise noted therein. Each of such annual and
quarterly financial statements fairly presents on a consolidated basis the
financial position of Holdings or DOS, as applicable, 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. The pro forma starting
balance sheet and financial statements of Holdings which were part of the July
1996 Confidential Information Memorandum provided to the Lenders have been
prepared on a basis consistent, except as otherwise noted therein, with the
financial statements of Holdings for the fiscal quarter ended March 31, 1996.
Holdings, the Borrowers and their Subsidiaries, taken as a whole, 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 occurred no event or
--------------------------
effect that has had, or to the best knowledge of the Borrowers could reasonably
be expected to have, a Material Adverse Effect.
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<PAGE>
Section 5.11. Labor Controversies. There are no labor controversies
-------------------
pending or, to the best knowledge of 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 governmental taxes, rates, assessments, fees, charges and levies
(collectively, "Taxes") 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.
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 under Title IV of ERISA to the PBGC or a Plan 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 and
as disclosed in the financial statements of Holdings or the Borrowers for the
fiscal quarter ending March 31, 1996, described in Section 5.9.
Section 5.14. Security Interests. On and after the Effective Date, each
------------------
of the Stock Pledge Agreements creates, upon the filing of properly completed
UCC financing statements in the appropriate domestic jurisdictions or other
registration documents in the appropriate foreign jurisdictions or possession of
the Collateral by the Agent if necessary to perfect a security interest in such
Collateral, in favor of the Agent and the Lenders as security for the
Obligations, a valid and enforceable perfected first priority security interest
in and Lien on all of the Collateral described therein, 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. Except as disclosed on Schedule 5.16, all
--------------
outstanding shares of Holdings, 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 Holdings, 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.
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Section 5.17. Intellectual Property. Except as disclosed on Schedule
---------------------
5.17, 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. Ownership of Property. The Borrowers and each domestic
---------------------
Material Subsidiary has good and marketable title to or a valid leasehold
interest in all of its property and good title to, or a valid leasehold interest
in, all of its other property, and each foreign Material Subsidiary owns or has
a valid leasehold interest in all of its property and owns or has a valid
leasehold interest in, all of its other properties, in each case, except to the
extent, in the aggregate, no Material Adverse Effect could reasonably be
expected to result therefrom, subject to no Liens except Permitted Liens.
Section 5.19. 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, with respect to the conduct of their businesses
and the ownership of their properties, except for such instances of non-
compliance as could not reasonably be expected to, individually or in the
aggregate, have a Material Adverse Effect.
Section 5.20. Environmental Matters. (a) Except as described in Schedule
---------------------
5.20, 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 the Borrowers, there are no pending, past or threatened
Environmental Claims against Holdings, the Borrowers or any of their
Subsidiaries or any property owned or operated by Holdings, the Borrowers or any
of their Subsidiaries except as described in Schedule 5.20. To the best
knowledge of Holdings and the Borrowers, except as disclosed on Schedule 5.20,
there are no conditions or occurrences on any 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 property that could reasonably be
expected (i) to form the basis of an Environmental Claim against Holdings, the
Borrowers or any of their Subsidiaries or any property owned or operated by
Holdings, the Borrowers or any of their Subsidiaries that individually or in the
aggregate could reasonably be expected to have a Material Adverse Effect, or
(ii) to cause any such property to be subject to any material restrictions on
the ownership, occupancy, use or transferability of such property by Holdings,
the Borrowers or any of their Subsidiaries under any applicable Environmental
Law.
(b) Except as disclosed on Schedule 5.20 and except as could not
reasonably be expected to have a Material Adverse Effect or to materially impair
the ability of Holdings, the Borrowers or any of the 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 knowledge of the
Borrowers (i) Hazardous Materials have not at any time been generated, used,
treated or stored on, or transported to or from, any property owned or operated
by Holdings, the Borrowers or any of their Subsidiaries in a manner that has
violated or could reasonably be expected to violate any Environmental Law, and
(ii) Hazardous Materials have not at any time
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been released on or from any property owned or operated by Holdings, the
Borrowers or any of their Subsidiaries.
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 6.16(c) through (m)) of Holdings, the Borrowers and their
Subsidiaries on the Effective Date after giving effect to the anticipated use of
the proceeds of the Loans made on the Initial Borrowing Date, in each case
showing the aggregate principal amount thereof, the name of the respective
borrower and any other entity which directly or indirectly guaranteed such
Indebtedness and the scheduled payments of 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, all outstanding 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 and no default or event of default has occurred and is
continuing pursuant to the terms of the Subordinated Indenture; provided,
however that if a Default shall have occurred in the Indenture solely as a
result of a breach of either Sections 10.7 or 10.8 therein, the Borrowers must
escrow for, prepay or refinance (pursuant to the terms hereof) the Subordinated
Debt or otherwise cure such default to the reasonable satisfaction of the Agent
before any further Borrowings (including the issuance of Letters of Credit or
Agent Letters of Credit) are made hereunder.
SECTION 6. COVENANTS.
Each of the Borrowers 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 or Agent Credit Commitment is
outstanding hereunder:
Section 6.1. Corporate Existence. Each of Holdings, the Borrowers and
-------------------
their Material Subsidiaries will preserve and maintain its existence except (i)
for the dissolution of any Material Subsidiaries whose assets are transferred to
the Borrowers or any of their Material Subsidiaries, (ii) as otherwise expressly
permitted herein, and (iii) 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.
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Section 6.3. Taxes. Each of Holdings, the Borrowers and their Material
-----
Subsidiaries will duly pay and discharge all Taxes 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 or otherwise with respect to each Plan of a character which
if unpaid or unperformed might result in the imposition of a material Lien
against any properties or assets of Holdings, the Borrowers and their
Subsidiaries 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) Holdings', the Borrowers' or any of their
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 benefit under a welfare plan benefit (as defined in ERISA). The
Borrowers will also promptly notify the Agent of (i) any material contributions
to any Foreign Plan that have not been made by the required due date for such
contribution if such default could reasonably be expected to have a Material
Adverse Effect; (ii) any Foreign Plan that is not funded to the extent required
by the law of the jurisdiction whose law governs such Foreign Plan based on the
actuarial assumptions reasonably used at any time if such underfunding (together
with any penalties likely to result) could reasonably be expected to have a
Material Adverse Effect; and (iii) any material change anticipated to any
Foreign Plan that could reasonably be expected to have a Material Adverse
Effect.
Section 6.5. Burdensome Restrictions, Etc. Promptly upon the existence or
-----------------------------
occurrence thereof, the Borrowers shall give to the Agent written notice of the
existence or occurrence of (i) any contractual obligation or the adoption of any
new requirement of law which could reasonably be expected to have a Material
Adverse Effect, and (ii) the existence or occurrence of any strike, slow down or
work stoppage which could reasonably be expected to have a Material Adverse
Effect.
Section 6.6. Insurance. Each of Holdings, the Borrowers and their
---------
Material Subsidiaries will maintain or cause to be maintained with responsible
insurance companies, insurance against any loss or damage to all insurable
property and assets owned by it, such insurance to be of a character and in or
in excess of such amounts as are customarily maintained by well-insured
companies similarly situated and operating like property or assets (subject to
self-insured retentions), all of which policies shall provide that no policy
shall terminate without at least thirty (30) days' advance written notice to the
Agent and be 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
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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 6.6.
Section 6.7. Financial Reports and Other Information. (a) Holdings, the
---------------------------------------
Borrowers and their Subsidiaries and the Unrestricted 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 and the
Unrestricted Subsidiaries as any Lender may reasonably request; and, without any
request, will furnish to the Agent:
(i) 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,
in each case, subject to normal year-end audit adjustments and omission of
any footnotes as permitted by the SEC;
(ii) 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 fiscal year and setting forth
consolidated comparative figures for the preceding fiscal year and
comparable budgeted figures for such fiscal year and certified 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 acceptable to the Agent and in the form filed with the SEC;
(iii) promptly after presentation to the Board of Directors of
Holdings, a projection for such year or the next year, as applicable, of
Holdings' and its Subsidiaries' consolidated balance sheet and consolidated
income, retained earnings and cash flows showing such projected budget for
each fiscal quarter of Holdings and its Subsidiaries ending during such
year or the next year, as applicable, and for Holdings' and its
Subsidiaries' fiscal year-to-date at the end of each fiscal quarter; and
(iv) 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.
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The Agent will forward promptly to the Lenders the information provided by the
Borrowers pursuant to (i) through (iv) above.
(b) Each financial statement furnished to the Lenders pursuant to
subsections (i) and (ii) of Section 6.7(a) shall be in a form which shall
contain calculations (i) excluding the effects of any Unrestricted Subsidiaries,
(ii) separately stating all information required by such subsections for all
Unrestricted Subsidiaries, (iii) separately stating any eliminations used in
order to calculate the consolidated balance sheet, and (iv) stating aggregated
figures matching the consolidated statements of Holdings in the form filed with
the SEC. Each such financial statement shall also be accompanied by (i) a
written certificate signed by Holdings' and the Borrowers' chief financial
officer, in his capacity as such, to the effect that (x) 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 (y) 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 (ii) a Compliance Certificate in the
form of Exhibit 6.7 showing the Borrowers' compliance with the covenants set
forth herein. Together with the financial statements required pursuant to
subsections (i) and (ii) of Section 6.7(a), the Borrowers shall furnish to the
Lenders a certificate of the chief financial officer of the Borrowers reporting
all Transfers of assets effected by Holdings, the Borrowers and their
Subsidiaries during the fiscal year covered by such financial statements,
including the asset value of such assets and the amounts received by Holdings,
the Borrowers and their Subsidiaries with respect to such Transfers, and such
other information regarding such transactions as the Agent may reasonably
request.
(c) Each projection furnished to the Lenders pursuant to subsection (iii)
of Section 6.7(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 (i) it has been prepared on the basis of Holdings' and the
Borrowers' historical financial statements and records, and (ii) it reflects the
reasonable assumptions of Holdings' and the Borrowers' management as to the
matters set forth therein.
(d) Promptly upon receipt thereof, the Borrowers will provide the Agent
with a copy of each report or "management letter" submitted to Holdings, the
Borrowers, any of their Material Subsidiaries or any Unrestricted Subsidiary by
its independent accountants or auditors in connection with any annual, interim
or special audit made by them of the books and records of Holdings, the
Borrowers, any of their Material Subsidiaries, or any Unrestricted Subsidiary.
(e) Promptly after obtaining knowledge of any of the following, 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, any of their Subsidiaries or any Unrestricted
Subsidiary or any property
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owned or operated by Holdings, the Borrowers, any of their Subsidiaries, or
any Unrestricted Subsidiary;
(ii) any condition or occurrence on any property owned or operated
by Holdings, the Borrowers, any of their Subsidiaries or any Unrestricted
Subsidiary that results in material noncompliance by Holdings, the
Borrowers, any of their Subsidiaries or any Unrestricted Subsidiary with
any Environmental Law;
(iii) the taking of any material removal or remedial action in
response to the actual or alleged presence of any Hazardous Material on any
property owned or operated by Holdings, the Borrowers, any of their
Subsidiaries or any Unrestricted Subsidiary.
In addition, the Borrowers shall provide the Agent with copies of all
Environmental Claims and responses thereto by Holdings, the Borrowers, any of
their Subsidiaries or any Unrestricted Subsidiary 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 (who will in turn provide notice to the Lenders
thereof): (i) any pending or threatened litigation against Holdings, the
Borrowers, any of their Subsidiaries or any Unrestricted Subsidiary asserting
any claim or claims against any of same in excess of $5,000,000 in the
aggregate; (ii) the occurrence of any mandatory prepayment event, Default, Event
of Default or default or event of default under the Subordinated Indenture;
(iii) any litigation or governmental proceeding of the type described in Section
5.4; (iv) any circumstance that has had or reasonably threatens a Material
Adverse Effect; and (v) any event which would result in a breach of, or
reasonably threatens a breach of, Sections 6.22, 6.23 or 6.24.
Section 6.8. Lender Inspection Rights. Upon reasonable notice from the
------------------------
Agent or any Lender, 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, any of their Subsidiaries or any Unrestricted
Subsidiary, to examine all of their books and records, 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 the Borrowers each authorize 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. Any such inspection shall be at the expense of the
Borrowers up to one (1) time a year, and if conducted any more frequently, at
the expense of the Agent or the Lender conducting such inspection unless a
Default or Event of Default shall have occurred and be continuing, in which
event such inspection shall be at the expense of the Borrowers.
Section 6.9. 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 oilfield services and oilfield equipment manufacturing
businesses and except for the application of
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acquired, existing and developed technologies to industries and markets outside
of such business (each, a "Permitted Business").
Section 6.10. Interest Rate Protection. The Borrowers will no later than
------------------------
one (1) year following the Effective Date enter into one or more Interest Rate
Protection Agreements providing the Borrowers protection against increases in
interest rates on at least fifty percent (50%) of the outstanding balance of the
Term Loans and will maintain such protection for a period of not less than three
(3) years. If ABN AMRO 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. New Subsidiaries. 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 of the
obligations under this Agreement and the Notes within thirty (30) days following
such formation or acquisition pursuant to a Limited Subsidiary Guaranty
substantially in the form of Exhibit 4.1C hereto. Each of Holdings and the
Borrowers shall pledge (i) all of the capital stock owned by it of any direct
domestic Material Subsidiary until the Subordinated Debt is paid or refinanced
in full pursuant to the terms hereof, in which case such stock shall be released
by the Agent, and (ii) all of the capital stock owned by it of, but in no event
more than sixty-six percent (66%) of the capital stock, of any foreign
Subsidiary of any of Holdings or 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 Stock Pledge
Agreement substantially in the form of Exhibit 4.1A hereto, 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 within thirty (30) days following such formation or
acquisition.
Section 6.12. 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 of their Subsidiaries to (i) pay
dividends or make any other distributions on its capital stock, or any other
interest or participation in its profits, owned by Holdings or any of the
Borrowers or pay any Indebtedness owed to Holdings or any of the Borrowers, or
(ii) make loans or advances to the Borrowers or any of their Subsidiaries,
except in either case for restrictions existing under or by reason of applicable
law, this Agreement and the other Credit Documents or in the Subordinated Debt
documents and except for any restrictions existing in connection with any
Subsidiary acquired by any of Holdings or the Borrowers after the Effective
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 Loan to such Subsidiary even if otherwise permitted by this
Agreement.
(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
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such purpose, except: (i) Holdings may redeem, purchase or otherwise acquire
its capital stock or declare and pay dividends on its capital stock from and
after the date all mandatory prepayments from Excess Cash Flow have been made by
the Borrowers as required by Section 2.11(c), and the Borrowers may declare and
pay dividends on their capital stock from and after such date to Holdings, so
long as the Borrowers maintain (after giving effect to any such redemption,
purchase or acquisition or the payment of any such distribution or dividend) a
ratio of Total Funded Debt to Total Capital of no greater than 40%; (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 any of the Borrowers; (iii)
scheduled interest payments may be made on the Subordinated Debt and the
Subordinated Debt may be prepaid; (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 6.20 and upon the reasonable request of the
Agent, the Borrowers shall provide calculations in reasonable detail setting
forth such ordinary course items; and (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; in each case so long as no Default or Event of Default shall have
occurred and be continuing or would occur as a result of such redemption,
purchase, acquisition or payment.
(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 6.15(e), (f) or (g), 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 6.13. 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 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
(or the other Person will thereby become a Subsidiary); (ii) Sections 6.11 and
6.12(a) are complied with to the extent applicable; (iii) Holdings, such
Borrower or such Subsidiary has the power and authority under the pertinent
agreement and under applicable law to subject the assets of such acquired Person
to the provisions of this Agreement and such assets are so subjected to the
provisions of this Agreement; (iv) the nature of the business of such acquired
Person is a Permitted Business; (v) such merger, consolidation, purchase or
Acquisition is non-hostile in nature; (vi) the Borrowers shall have delivered to
the Agent within ten (10) Business Days prior to the consummation of any
Acquisition a report
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signed by an executive officer of the Borrower in the form of Exhibit 6.13 which
shall contain a certification that the purchase price of such Acquisition does
not exceed $40,000,000 and which shall contain calculations demonstrating on a
pro forma basis (x) the Borrowers' compliance with Section 6.23 (such
calculation to include pro forma Indebtedness incurred or assumed in connection
with such Acquisition) and Section 6.24 and (y) that the ratio of EBITDA to
Consolidated Interest Expense plus all dividends paid by Holdings as permitted
herein shall not be less than 3:0 to 1:0 immediately after the consummation of
such Acquisition (such calculations to use historical EBITDA and dividends paid
for the prior twelve (12)-month period except for (i) the normalization of
dividends, distributions or bonuses to any prior owner and of corporate overhead
costs that will not recur after the Acquisition date, and (2) any appropriate
adjustments for non-GAAP reporting and such calculations to include pro forma
interest expense for the following twelve (12)-month period with respect to any
Indebtedness incurred or assumed in connection with such Acquisition) all as
reasonably satisfactory to the Agent; and (vii) 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;
(b) 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;
Holdings or 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 Subsidiary 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, any of the Borrowers or Holdings; in each case so long as (i) (x) if
the transaction is with Holdings and Holdings shall be the surviving entity to
any such merger or consolidation and (y) any Subsidiary which is the surviving
entity to a merger or consolidation with any Borrower, or which acquires all or
substantially all the assets thereof, assumes the Obligations of any such
Borrower hereunder, and, if required by the Agent, an opinion of counsel to such
surviving entity is rendered to the Lenders with respect to such assumption in
form and substance reasonably satisfactory to the Agent, (ii) Sections 6.11 and
6.12(a) are complied with to the extent applicable, and (iii) 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 however (x) 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; and (y) no direct foreign Material
Subsidiary may sell all or substantially all of its assets to an indirect
foreign Subsidiary, or merge into or consolidate with any indirect foreign
Subsidiary, unless the direct foreign Material Subsidiary shall be the surviving
corporation or unless the aggregate amount of all such sales, or the assets of
any such direct foreign Material Subsidiaries so merged or consolidated into an
indirect foreign Subsidiary, as the case may be, during the term of this
Agreement shall not exceed $20,000,000 (in each case valued at fair market value
as determined by the Borrowers with the consent of the Agent, which consent
shall not be unreasonably withheld); and
(c) any majority ownership of any 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; and
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(d) any other Transfers permitted hereunder.
Except as otherwise permitted in this Section 6.13, (i) Holdings shall not
issue, sell or dispose of any capital stock of the Borrowers or any other
Material Subsidiaries and (ii) neither the Borrowers nor any of the Subsidiaries
of Holdings shall issue, sell or dispose of any capital stock of any other
Subsidiary unless the Net Cash Proceeds are made as a prepayment of the Term
Loans pursuant to Section 2.11.
Section 6.14. Environmental Laws. Holdings, the Borrowers and their
------------------
Subsidiaries shall comply with all Environmental Laws applicable to or affecting
the properties or business operations of Holdings, the Borrowers or any
Subsidiary except as could not reasonably be expected to have a Material Adverse
Effect.
Section 6.15. Liens. The Borrowers 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 of their Subsidiaries, except the
following (collectively, the "Permitted Liens"):
(a) Liens arising in the ordinary course of business by operation of law
in connection with workers' 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 (or to obtain letters of credit in connection with) bids,
performance bonds, contracts or leases to which Holdings, the Borrowers or their
Subsidiaries are 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, materialmen, 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;
(c) Inchoate Liens under ERISA and liens for Taxes 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 for 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, costs, fees and penalties, if any) of Holdings, the Borrowers and
their Subsidiaries secured by such Liens shall not exceed $5,000,000 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
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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 6.16(g);
(f) Liens securing indebtedness permitted by Section 6.16(m) and to the
extent included in Section 6.16(m), Section 6.16(l), up to an aggregate amount
of $20,000,000, provided that such Liens do not encumber cash, deposit accounts,
Cash Equivalents, accounts receivable, stock or interests in the Borrowers or
any Subsidiaries of Holdings or the Borrowers (including, without limitation,
Collateral), or any other Investments permitted hereunder;
(g) Liens existing on the date hereof and listed on Schedule 6.15;
(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 (e) 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 such
extension, renewal or replacement is limited to the property already subject to
the Lien so extended, renewed or replaced;
(i) Liens on property (other than Collateral) securing Indebtedness
aggregating no greater than $1,000,000, with no one Lien securing Indebtedness
in an amount greater than $500,000, 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;
(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;
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(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) and Liens under any conditional sale or title
retention agreements entered into in the ordinary course of business;
(q) Liens of no greater than $500,000 in the aggregate on the assets
(other than Collateral) of any Subsidiary;
(r) rights of lessees of equipment owned by Holdings, any of the Borrowers
or any of their Subsidiaries; and
(s) Liens on the stock or assets of Unrestricted Subsidiaries.
Section 6.16. 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 Effective 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 subsequent extensions, renewals or
refinancings thereof so long as (i) 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, (ii)
the other terms and conditions thereof are no more onerous than the terms and
conditions of the Subordinated Debt and (iii) the Indebtedness is subordinated
to the Obligations hereunder upon terms and conditions reasonably satisfactory
to the Agent; and any guaranty of Holdings of any such Indebtedness so long as
any such guaranty is 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 6.15 (other than Section 6.15(f));
(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 $2,000,000
at any one time outstanding;
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(h) unsecured intercompany loans and advances to any of the Borrowers or
any Subsidiaries of Holdings, and unsecured intercompany loans from any of such
Subsidiaries to any of the Borrowers or any other such Subsidiaries except as
expressly restricted hereunder;
(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 not for speculative purposes and
in accordance with customary industry practice;
(j) Indebtedness under unsecured overdraft lines of credit; provided that
the aggregate amount of such Indebtedness shall not exceed $10,000,000 at any
time outstanding;
(k) Indebtedness of Unrestricted Subsidiaries, provided that, the obligee
thereof has no recourse of any nature (including, but not limited to, as a
result of a performance or payment Guaranty) to Holdings, the Borrowers or any
of their Subsidiaries;
(l) unsecured Indebtedness assumed or seller financing incurred in
connection with an Acquisition; provided that such Indebtedness is subordinated
to the Obligations hereunder on terms and conditions reasonably satisfactory to
the Agent; and provided further that such seller financing may be secured
provided that such secured seller financing shall be included as other
Indebtedness under Section 6.16(m) and not this Section 6.16(l); and
(m) other Indebtedness not otherwise covered by this Section 6.16 not to
exceed $20,000,000 at any time outstanding; provided that the terms and
conditions of such Indebtedness are no more onerous than the terms and
conditions of the Obligations hereunder and no payments or prepayments can be
made thereon so long as a Default or Event of Default shall have occurred and be
continuing hereunder.
Section 6.17. 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, indebtedness, obligations or securities of, or
any other interest in, or make any capital contribution to, any Person (any of
the foregoing, an "Investment") except:
(a) Investments in Cash Equivalents and deposit accounts;
(b) receivables owing to Holdings, the Borrowers or their Subsidiaries
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 6.20;
(c) Investments 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 6.16(d);
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(e) deposits made in the ordinary course of business consistent with past
practices to secure the performance of leases;
(f) unsecured intercompany loans, advances and capital contributions by
Holdings, the Borrowers and their Subsidiaries to any of the Borrowers or any
Subsidiaries of Holdings, and unsecured intercompany loans from any of such
Subsidiaries to any of the Borrowers or any such other Subsidiaries except as
expressly restricted hereunder;
(g) loans and advances by Holdings, the Borrowers and their Subsidiaries
to employees of Holdings, the Borrowers and their Subsidiaries for (i) short-
term loans in an aggregate amount of no greater than $500,000 at any one time
outstanding and in an amount no greater than $50,000 for any Person, and (ii)
moving and travel expenses and other similar expenses; in each case incurred in
the ordinary course of business;
(h) joint ventures between any foreign Subsidiary of the Borrowers and any
other Person;
(i) 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;
(j) 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;
(k) as permitted by Sections 6.12 or 6.13; and
(l) Investments in Unrestricted Subsidiaries and Investments in minority
interests in entities engaged primarily in a Permitted Business, provided that
none of Holdings, the Borrowers or any of their Subsidiaries shall be liable for
any Indebtedness or other obligations of any of such Unrestricted Subsidiaries
or entities and all such Investments (including any future required capital
contributions) do not exceed in the aggregate $10,000,000 at any time
outstanding, the value of such Investments if not made in cash to be agreed upon
by the Borrowers and the Agent at the time of such Investment, or, if required
by the Agent, to be determined by a third party appraiser to be agreed upon by
the Borrowers and the Agent (or selected by the Agent if such agreement is not
reached).
Section 6.18. 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 other comparable corporate governance documents
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 nor the Borrowers shall amend or
modify, or permit the amendment or modification of, any provision of the
Subordinated Debt or any other Indebtedness permitted under Section 6.16(c) or
Holdings' guaranty of the Subordinated Debt or any other Indebtedness permitted
under Section 6.16(c) in any way adverse to the interests of the Lenders.
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Section 6.19. Transfer of Assets. Holdings, the Borrowers and their
------------------
Subsidiaries shall not permit any Transfer of an asset of Holdings, the
Borrowers or any of their Subsidiaries except:
(a) Transfers of inventory and mill equipment and other assets in the
ordinary course of business;
(b) the discounting and sale of trade accounts receivable of foreign
account debtors of the Borrowers and such Subsidiaries consistent with the
Borrowers' and such 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) Transfers of any assets among Holdings, any of the Borrowers or any of
their Subsidiaries, 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 domestic Material Subsidiary 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 and except as provided in Section
6.13(b);
(e) any Transfers permitted by Sections 6.12 or 6.13;
(f) the Transfers of any assets not otherwise covered by this Section 6.19
(including the sale and leaseback of assets) 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 2.11;
(g) the Liens permitted by Section 6.15; and
(h) the sale and license back of licenses, patents or other intellectual
property.
Section 6.20. 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 or
series of related transactions or arrangements which in the aggregate would be
material 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 such entity's business and upon fair
and reasonable terms no less favorable to such entity than would be able to be
obtained in a comparable arm's-length transaction with a Person other than an
Affiliate.
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Section 6.21. Compliance with Laws. Without limiting any of the other
--------------------
covenants of Holdings, the Borrowers and their Subsidiaries in this Section 6,
Holdings, the Borrowers and their Subsidiaries shall conduct their businesses
and otherwise be, in compliance with all applicable laws, regulations,
ordinances and orders of any governmental or judicial authorities; provided,
however, that this Section 6.21 shall not require Holdings, the Borrowers or any
of their Subsidiaries to comply with any such law, regulation, ordinance or
order if (i) 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 (ii) the failure to comply therewith could not
reasonably be expected to have a Material Adverse Effect.
Section 6.22. Interest Coverage Ratio. The Borrowers will not permit the
-----------------------
Interest Coverage Ratio at any time to be less than 2:5 to 1:0.
Section 6.23. Total Funded Debt to Total Capital Ratio. The Borrowers
----------------------------------------
will maintain a ratio of Total Funded Debt to Total Capital of (i) no greater
than 50% during the period from the Effective Date through December 31, 1997,
(ii) no greater than 45% during the period from January 1, 1998 through December
31, 1998, and (iii) no greater than 40% during the period from January 1, 1999,
until the final Maturity Date for all Loans.
Section 6.24. Minimum Tangible Net Worth. The Borrowers will maintain a
--------------------------
minimum Tangible Net Worth of not less than the Minimum Amount. The term
"Minimum Amount" means, as of any date of determination, an amount equal to the
sum of (i) an amount equal to 90% of Tangible Net Worth as of the Effective
Date, plus (ii) for each full fiscal year ended prior to (but not on) such date
of determination, an amount equal to 50% of Consolidated Net Income for such
full fiscal year, if positive, plus (iii) for the fiscal year during which such
date of determination falls, an amount equal to the amount of any equity
issuance by Holdings, plus (iv) 90% of Tangible Net Worth of any entity acquired
in an Acquisition for which Holdings uses the pooling of interest method of
accounting in accordance with GAAP.
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 by the Borrowers 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 by the Borrowers in the observance or performance of any
covenant set forth in Sections 6.12, 6.13, 6.19, 6.22, 6.23 or 6.24;
(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;
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(d) default by any Credit Party 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;
(e) any representation or warranty made herein or in any other Credit
Document by Holdings, any of the Borrowers or any of their Subsidiaries proves
untrue in any material respect as of the date of the issuance or making, or
deemed issuance or making thereof;
(f) default occurs or the occurrence of an event or condition the effect
of which after the passage of any applicable grace period would result in a
default in the payment when due of Indebtedness, including, without limitation,
the Subordinated Debt, in an aggregate principal amount of $5,000,000 or more of
Holdings, the Borrowers or any of their Subsidiaries 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 of their Material Subsidiaries
(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)
generally does not pay, or admits its inability generally to pay, its debts as
they become due, (iii) makes a general 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 7.1(h);
(h) a custodian, receiver, trustee, examiner, liquidator or similar
official is appointed for Holdings, any of the Borrowers or any of their
Subsidiaries or any substantial part of its property, or a proceeding described
in Section 7.1(g)(v) is instituted against Holdings, any of the Borrowers or any
of their Material Subsidiaries, 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 of their Subsidiaries fails
within thirty (30) days (or such earlier date as any steps to execute on such
judgment or order take place) to pay, bond or otherwise discharge, or to obtain
an indemnity against on terms and conditions satisfactory to the Majority
Lenders in their sole discretion, any judgment or order for the payment of money
in excess of $5,000,000 which is uninsured or underinsured by at least such
amount (provided 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
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expiration of such time period or resolution of such proceeding), 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 $5,000,000 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 $5,000,000 (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 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;
(l) any event of default or default described in any Interest Rate
Protection Agreement or futures agreement permitted pursuant to Section 6.16(i)
with any Lender shall occur after any applicable grace period therefor; or
(m) any Person or two or more Persons acting in concert, other than (a)
L.E. Simmons, (b) SCF-III L.P., (c) D.O.S. Partners, Ltd., (d) Kadoorie McAulay
International Ltd., (e) Actinium Holding Corporation, (f) Baker Hughes
Incorporated or (g) any Affiliates of the Persons listed in (a) - (f), shall
acquire beneficial ownership (within the meaning of Rule 13d-3 of the Securities
Exchange Act of 1934), directly or indirectly, of securities of Holdings (or
other securities convertible into such securities) representing fifty percent
(50%) or more of the combined voting power of all outstanding securities of
Holdings entitled to vote in the election of directors, other than securities
having such power only by reason of the happening of a contingency.
Section 7.2. Non-Bankruptcy Defaults. When any Event of Default other
-----------------------
than those described in subsections (g) or (h) 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 Agent Credit
Commitment 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 Majority Lenders, demand that the Borrowers immediately pay to
the Agent (to be held
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by the Agent pursuant to Section 7.4) the full amount then available for drawing
under each or any outstanding 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 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 Lenders (or on its own behalf with respect to Agent Letters of Credit),
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 or Agent Letter of Credit. The Agent, after
giving notice to the Borrowers pursuant to Section 7.1(c) or (d) 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 with
respect to any of the Borrowers, 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, the
Borrowers acknowledging that the 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 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 due and unpaid Obligations (collectively, the
"Collateralized 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, as pledgee hereunder. If and when
requested by the Borrowers, the Agent shall invest and reinvest funds held in
the Collateral Account from time to time in Cash Equivalents specified from time
to time by the Borrowers, 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 Collateralized
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Obligations due and owing from the Borrowers to the Agent or Lenders. When and
if (i) the Borrowers shall have made payment of all Collateralized Obligations
then due and payable, (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, Agent Credit Commitment, 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) and 7.2 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 fully documented expenses incurred or paid by the Agent or
such Lender, including reasonable attorneys' fees and court costs, 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 the occurrence of and during the continuance of an Event of Default, any
payment to the Agent or any Lender hereunder or under the Parent Company
Guaranty or any Limited Subsidiary Guaranty or from the proceeds of any
Collateral or any cash Collateral such payment 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 and out-of-pocket
costs and expenses of the Agent, including, without limitation, reasonable
attorneys' fees and out of pocket costs and expenses as provided for 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
Agreement or the Lenders under this Agreement or any other Credit Document;
(b) Second, to the payment of any and all reasonable costs and expenses of
the Lenders or any Lender, including, without limitation, reasonable attorneys'
fees and out-of-pocket costs and expenses as provided for 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 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 each such Lender bears to the
aggregate amount of the costs and expenses unpaid to all Lenders collectively,
until all such fees, costs and expenses have been paid in full;
(c) Third, to the payment of any due and unpaid fees to the Agent or any
Lender as provided for by this Agreement or any other Credit Document, pro rata
--- ----
in the proportion in which the amount of such fees due and unpaid to the Agent
and each such Lender bears to the aggregate amount of the fees due and unpaid to
the Agent and all Lenders collectively, until all such fees have been paid in
full;
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(d) Fourth, 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;
(e) Fifth, to the payment of the outstanding due and payable 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 (if Section 7.4(a) has
not been complied with), 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 (if Section 7.4(a) has not been
complied with) 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 (if Section 7.4(a)
has not been complied with) 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;
(f) Sixth, to the payment of any other outstanding Obligations then due
and payable, pro rata in the proportion in which the outstanding Obligations
--- ----
owing to each such Lender bears to the aggregate amount of such Obligations
until all Obligations have been paid in full; and
(g) Seventh, to the Borrowers or as the Borrowers may direct.
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 fund loans in Canadian Dollars or
Pounds and make, continue or convert Loans into Eurodollar Loans under this
Agreement shall be suspended until it is no longer unlawful for such Lender to
make or maintain Eurodollar Loans. The Borrowers shall prepay on demand the
outstanding principal 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
----------------------------------------------------------
Rate. 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 the Adjusted LIBOR Rate or such rate will not
accurately reflect the cost to the Majority Lenders of funding Eurodollar
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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 fund loans in
Canadian Dollars or Pounds and make, continue or convert Loans into 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, 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 of that type (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, issue Agent 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, Agent Letters of Credit or
participations therein, 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 of that type (or its Lending Office) or imposes on
any Lender of that type (or its Lending Office) or on the interbank market
any other condition affecting its Eurodollar Loans, its Letters of Credit,
its 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, issue Agent Letters of Credit or
to participate in any thereof;
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 or participation therein, or issuing or
maintaining an Agent Letter of Credit, 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.
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(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
adequacy 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 such
Lender's capital, or on the capital of any corporation controlling such Lender,
as a consequence of its obligations hereunder to a level below that which such
Lender could have achieved but for such adoption, change or compliance (taking
into consideration such Lender's policies with respect to capital adequacy) by
an amount deemed by such Lender to be material, then from time to time, within
fifteen (15) days after demand in reasonable detail by such Lender (with a copy
to the Agent), the Borrowers shall pay to such Lender such additional amount or
amounts as will compensate 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 sole judgment of such Lender, be otherwise disadvantageous
to it; provided that, the foregoing shall not in any way affect the rights of
any Lender or the obligations of the Borrowers under this Section 8.3, and
provided further that no Lender shall be obligated to make its Eurodollar Loans
hereunder at any office located in the United States. A certificate of 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 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.
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Section 8.6. Substitution of Lender. If (i) any Lender has demanded
----------------------
compensation or given notice of its intention to demand compensation under
Section 8.3, or (ii) 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 10.10, as applicable, provided that all such Lender's
Commitments are replaced and such Lender is paid any amounts which it is owed
pursuant to Sections 2.13, 3.3, 7.6, 8.3 and 10.13. Any such replaced Lender
shall retain the benefit of Sections 3.3 and 10.13.
SECTION 9. THE AGENT.
Section 9.1. Appointment and Authorization of Agent. Each Lender hereby
--------------------------------------
appoints ABN AMRO Bank N.V. as the Agent and the Collateral Agent under the
Credit Documents and hereby authorizes the Agent and the Collateral Agent to
take such action as Agent or the Collateral Agent on its behalf and to exercise
such powers under the Credit Documents as are delegated to the Agent and the
Collateral Agent by the terms thereof, together with such powers as are
reasonably incidental thereto.
Section 9.2. Rights and Powers. The Agent and the Collateral 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 or the Collateral Agent, and the Agent, the Collateral 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 or the Collateral Agent
under the Credit Documents. The term Lender as used in all Credit Documents,
unless the context otherwise clearly requires, includes the Agent and the
Collateral Agent in its individual capacity as a Lender, including its capacity
as a Lender under the Agent Swing Line. References herein to the Agent's and
the Collateral Agent's Loans, or to the amount owing to the Agent and the
Collateral Agent for which an interest rate is being determined, refer to the
Agent and the Collateral Agent in its individual capacity as a Lender.
Section 9.3. Action by Agent. The obligations of the Agent and the
---------------
Collateral 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 and the Collateral 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 and the Collateral 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 and the Collateral Agent be
required to take any action in violation of applicable law or of any provision
of any Credit Document, and the Agent and the Collateral 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
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and all costs, expenses, and liabilities it may incur in taking or continuing to
take any such action. The Agent and the Collateral 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 or the Collateral Agent to take specific
action, as applicable, the Agent and the Collateral Agent shall be fully
justified in using its discretion in failing to take 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 and the Collateral
-------------------------
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. Indemnification Provisions. Neither the Agent nor the
--------------------------
Collateral Agent nor any of their 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 the Collateral Agent nor any of their 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 and the Collateral Agent makes no representation of any kind or character
with respect to any such matters mentioned in this sentence. The Agent and the
Collateral 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
and the Collateral 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
and the Collateral Agent shall have no responsibility for confirming the
existence or worth of any Collateral or the accuracy of any Compliance
Certificate or other document or instrument received by it under the Credit
Documents. The Agent and the Collateral Agent may treat the payee of any Note
as the holder thereof until written notice of transfer shall have been filed
with the Agent and the Collateral Agent signed by such owner in form
satisfactory to the Agent and the Collateral Agent. Each Lender acknowledges
that it has independently and without reliance on the Agent and the Collateral
Agent or any other Lender obtained such information and made such investigations
and inquiries regarding Holdings, the Borrowers and their Subsidiaries as it
deems important, and based upon such information, investigations and inquiries
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
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Lender to keep itself informed about the creditworthiness and business
properties, assets, liabilities, condition (financial or otherwise) and
prospects of Holdings, the Borrowers and their Subsidiaries, the
creditworthiness of all account debtors of Holdings, the Borrowers and their
Subsidiaries, and the Agent and the Collateral Agent shall have no liability
whatsoever to any Lender for such matters. The Agent and the Collateral 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 and the Collateral Agent at such time, but is
voluntarily furnished to the Agent and the Collateral Agent (either in its
capacity as Agent or Collateral Agent or in its individual capacity).
Section 9.6. Indemnity. The Lenders shall ratably, in accordance with
---------
their Percentages, indemnify and hold the Agent and the Collateral 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 and the
----------------------------------------
Collateral 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 or the Collateral 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 or Collateral Agent, as the case may be. If
no successor Agent or Collateral Agent, as the case may be, shall have been so
appointed by the Majority Lenders and shall have accepted such appointment
within thirty (30) days after the retiring Agent's or Collateral Agent's giving
of notice of resignation, then the retiring Agent or Collateral Agent, as the
case may be, may, on behalf of the Lenders, appoint a successor Agent or
Collateral Agent, as the case may be, 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
$500,000,000. Upon the acceptance of its appointment as the Agent or the
Collateral Agent hereunder, such successor Agent or Collateral Agent, as the
case may be, shall thereupon succeed to and become vested with all the rights
and duties of the retiring Agent or Collateral Agent, as the case may be, under
the Credit Documents, and the retiring Agent or Collateral Agent, as the case
may be, shall be discharged from its duties and obligations thereunder. After
any retiring Agent's or Collateral Agent's resignation hereunder as Agent or
Collateral Agent, as the case may be, 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 or
Collateral Agent, as the case may be.
SECTION 10. MISCELLANEOUS.
Section 10.1. 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, right
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or remedy 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, right or remedy. To
the fullest extent permitted by applicable law, the powers, rights and remedies
under the Credit Documents of the Agent, the Collateral 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 10.2. Non-Business Day. If any payment of principal or interest
----------------
on any Loan, Reimbursement Obligation 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 in the manner set forth herein 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 10.3. Documentary Taxes. The Borrowers agree that they will pay
-----------------
any documentary, stamp or similar taxes payable with 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 10.4. 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 respect to the date as of which
they were made as long as the Borrowers have any Obligation hereunder or any
Commitment or Agent Credit Commitment hereunder is in effect.
Section 10.5. 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 3.3, Section 7.6, Section 8.3 and Section
10.13 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 10.6. 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 at any time or from time to time, without notice to the
Borrowers, to Holdings, to any Subsidiary 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, whether or
not matured, against and on account of the obligations and liabilities of any of
the Borrowers 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 (i) that Lender or that subsequent holder shall have made any
demand hereunder or (ii) the principal of or the interest on the Loans or Notes
and
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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 hereunder, 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 10.7. 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
or pursuant to Section 10.10, and to the Borrowers (duplicate copies) as
follows:
Tuboscope Vetco International Inc.
Drexel Holdings, Inc.
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 10.7, on the signature pages hereof or pursuant to
Section 10.10 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 10.7, on the signature pages hereof or
pursuant to Section 10.10 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 10.7, on the signature
pages hereof or pursuant to Section 10.10; provided that any notice given
pursuant to Section 2 shall be effective only upon receipt and, provided
further, that any notice that but for this provision
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would be effective after the close of business on a Business Day or on a day
that is not a Business Day shall be effective at the opening of business on the
next Business Day.
Section 10.8. Counterparts. This Agreement may be executed in any number
------------
of counterparts, 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 Agreement.
Section 10.9. Successors and Assigns. This Agreement shall be binding
----------------------
upon the Borrowers and their respective successors and assigns, and shall inure
to the benefit of each of the Lenders and their respective successors and
assigns, including any subsequent holder of any Note. Except as expressly
permitted in Section 6.13, none of the Borrowers may assign any of its rights or
obligations under any Credit Document without the written consent of all of the
Lenders.
Section 10.10. 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 ("Participants"),
participating interests in any Borrowing owing to such Lender, any Note held by
such Lender, any Commitment or Agent Credit 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, Agent Credit
Commitment or other interest hereunder without also selling to such Participant
the appropriate pro rata share of its Borrowings, Notes, Commitments, Agent
Credit 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 vote upon or consent to any matter to be
decided by the Lender or the Majority Lenders hereunder or under any Credit
Document or approve any amendment to or waiver of this Agreement or any other
Credit Document except to the extent such amendment or waiver would (i) increase
the amount of such Lender's Commitment or Agent Credit 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, the Parent Company Guaranty or any Limited Subsidiary 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
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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 10.6. 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 (a "Purchasing
Lender"), 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
10.10 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 eligible assignee. Notwithstanding the above, any Lender
may sell to one or more eligible assignees 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; provided that, the
Agent shall not be required to sell its Agent Revolving Obligations and its
Agent Credit Commitment at such time as it may sell any other portion of its
Borrowings, Notes, Commitments and other interests 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 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, the Notes and the other Credit Documents. 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
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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 $3,500, 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 10.10 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 L/C Obligations, (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 or such successor forms as shall be adopted
from time to time by the relevant United States taxing authorities (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.
Section 10.11. 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 the Original Commitment
Amount, the Revolving Credit Commitment Amount, the Term Credit Commitment
Amount, the Total Commitment Amount or the Agent Commitment Amount without the
consent of all Lenders or increase any Commitment of any Lender without the
consent of such Lender, (B) postpone any Maturity Date without the consent of
all Lenders (or ABN AMRO in the case of Agent Revolving Loans) or 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
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Collateral, the Parent Company Guaranty or any Limited Subsidiary Guaranty
without the consent of all the Lenders; and
(ii) no amendment or waiver shall, unless signed by each Lender, change the
provisions of this Section 10.11 or the definition of Majority Lenders or affect
the number of Lenders required to take any action under any other provision of
the Credit Documents.
Section 10.12. Headings. Section headings used in this Agreement are for
--------
reference only and shall not affect the construction of this Agreement.
Section 10.13. Legal Fees, Other Costs and Indemnification. The Borrowers,
-------------------------------------------
upon demand by the Agent, 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 thereto,
whether or not the transactions contemplated therein are consummated (provided
that the Borrowers shall be obligated hereunder to pay such fees and
disbursements for only one (1) law firm and any local counsel), and all
reasonable recording, filing, 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, the Collateral
Agent, the Syndication Agent, and their respective directors, officers,
employees and attorneys (collectively, the "Indemnified Parties"), 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, whether or not the
indemnified Person is a party thereto) which any of them may pay or incur
arising out of or relating to (a) 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 SIMPLE OR CONTRIBUTORY NEGLIGENCE OF ANY OF THE
INDEMNIFIED PARTIES AND/OR ANY OF THEIR RESPECTIVE DIRECTORS, OFFICERS,
EMPLOYEES OR ATTORNEYS, (b) any investigation of any third party or any
governmental authority involving any Lender (as a lender hereunder), the Agent
(in such capacity hereunder), the Collateral Agent (in such capacity hereunder),
or the Syndication Agent (in such capacity hereunder) and related to any use
made or proposed to be made by the Borrowers of the proceeds of the Borrowings,
or any transaction financed or to be financed in whole or in part, directly or
indirectly with the proceeds of any Borrowing, and (c) any investigation of any
third party or any governmental authority, litigation or proceeding, related to
any environmental cleanup, audit, compliance or other matter relating to any
Environmental Law or the presence of any Hazardous Material (including, without
limitation, any losses, liabilities, damages, injuries, costs, expenses or
claims asserted or arising under any Environmental Law) with respect to any of
the Borrowers, regardless of whether caused by, or within the control of, any of
the Borrowers; provided, however, that the Borrowers shall not be obligated to
indemnify any Indemnified Party for any of the foregoing arising out of such
Indemnified Party's gross negligence or willful misconduct. The Borrowers, upon
demand by the Agent, the Collateral Agent, the Syndication Agent or a Lender at
any time, shall reimburse the Agent, the Collateral Agent, the Syndication Agent
or such Lender for (i) any legal or other expenses incurred in connection with
investigating or defending against any of the foregoing except if the same is
excluded from indemnification pursuant to the provisions of the foregoing
sentence and (ii) if an Event of Default has occurred and is continuing,
reasonable fees of legal
98
<PAGE>
counsel (including the allocated costs of in-house counsel) in connection with
the Agent's, the Collateral Agent's, the Syndication Agent's or such Lender's
enforcement of their rights and remedies in the Credit Documents.
Section 10.14. 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 New York. The Borrowers hereby submit to the
nonexclusive jurisdiction of the United States District Court for the Southern
District of New York and of any New York State court sitting in the City of New
York for purposes of all legal proceedings arising out of or relating to this
Agreement, any other Credit Document or the transactions contemplated thereby.
The Borrowers irrevocably waive, to the fullest extent permitted by law, any
objection they 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 10.15. 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 (i) that has become generally available to the
public other than through the Lenders, (ii) if required or appropriate in any
examination or audit or any report, statement or testimony submitted to any
federal or state regulatory body having or claiming to have jurisdiction over
such Lender, (iii) if required or appropriate in response to any summons or
subpoena or in connection with any litigation, (iv) in order to comply with any
law, order, regulation or ruling applicable to such Lender, (v) 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 (vi) 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 10.15 prior to such transferee's receipt of any
such information.
Section 10.16. Effectiveness. This Agreement shall become effective on the
-------------
date (the "Effective Date") on which the Borrower, 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.
Section 10.17. 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.
99
<PAGE>
Section 10.18. Currency Conversion. All payments of Obligations under this
-------------------
Agreement, the Notes or any other Credit Document shall be made in Dollars,
except for Revolving Loans funded, or Reimbursement Obligations with respect to
Letters of Credit issued, in Pounds or Canadian Dollars, which shall be repaid,
including interest thereon, in the applicable currency. If any payment of any
Obligation, except for Revolving Loans funded in Pounds or Canadian Dollars or
any Reimbursement Obligation with respect to Letters of Credit issued in Pounds
or Canadian Dollars, whether through payment by the Borrowers, Holdings, any
Subsidiary Guarantor or the proceeds of any Collateral, shall be made in a
currency other than Dollars, such amount shall be converted into Dollars at the
official rate for the purchase of Dollars with the applicable currency as quoted
by the Agent in accordance with the methods customarily used by the Agent for
such purposes as of the close of business on the date of determination. If for
the purposes of obtaining any judgment or award it becomes necessary to convert
from either Pounds or Canadian Dollars into Dollars any amount in connection
with the Obligations, then the conversion shall be made as provided above on the
Business Day before the day on which the judgment or award is given. In the
event that there is a change in the rate of exchange prevailing between the
Business Day before the day on which the judgment or award is given and the date
of payment, the Borrowers will pay to the Agent such additional amounts (if any)
as may be necessary, and the Agent will pay to the Borrowers such excess amounts
(if any) as result from such change in the rate of exchange, to assure that the
amount paid on such date is the amount in Pounds or Canadian Dollars, as
applicable, which when converted at the rate of exchange described herein on the
date of payment, is the amount then due in Dollars. Any amount due from the
Borrowers under this Section 10.18 shall be due as a separate debt and shall not
be affected by judgment or award being obtained for any other sum due.
Section 10.19. Dollar Equivalent Combinations. Unless otherwise provided
------------------------------
herein, to the extent that the determination of compliance with any requirement
of this Agreement requires the conversion to Dollars of foreign currency
amounts, such Dollar amount shall be computed using the Dollar equivalent of the
amount of such foreign currency at the time such item is to be calculated or is
incurred, created, transferred or sold for purposes of this Agreement. The
Dollar equivalent shall be determined by converting such currency involved in
such computation into Dollars at the spot rate for the purchase of Dollars with
the applicable currency as quoted by the Agent in accordance with the methods
customarily used by the Agent for such purposes as of the close of business on
the date of determination thereof specified herein or, if the date of
determination thereof is not otherwise specified herein, on the date two (2)
applicable Business Days prior to such determination.
Section 10.20. Change in Accounting Principles or Tax Laws. If (i) any
-------------------------------------------
change in accounting principles from those used in the preparation of the
financial statements of the Borrowers referred to in Section 5.9 is hereafter
occasioned by the promulgation of rules, regulations, pronouncements and
opinions by or required by the Financial Accounting Standards Board or the
American Institute of Certified Public Accounts (or successors thereto or
agencies with similar functions) and such change materially affects the
calculation of any component of any financial covenant, standard or term found
in this Agreement, or (ii) there is a material change in federal or foreign tax
laws which materially affects the Borrowers ability to comply with the financial
covenants, standards or terms found in this Agreement, the Borrowers and the
Majority Lenders agree to enter into negotiations in order to amend such
provisions so as to equitably reflect such changes with the desired result that
the criteria for evaluating any of
100
<PAGE>
Holdings' and its Subsidiaries' consolidated financial condition shall be the
same after such changes as if such changes had not been made. Unless and until
such provisions have been so amended, the provisions of this Agreement shall
govern.
Section 10.21. Notice. The Credit Documents constitute the entire
------
understanding among the Borrowers, 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, 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 by their duly authorized officers as of the day and
year first above written.
BORROWERS:
---------
TUBOSCOPE VETCO INTERNATIONAL INC.
By: _____________________________
Name: _____________________________
Title:_____________________________
DREXEL HOLDINGS, INC.
By: _____________________________
Name: _____________________________
Title:_____________________________
101
<PAGE>
LENDERS:
-------
Percentage of Revolving ABN AMRO BANK N.V., Houston Agency,
- -----------------------
Credit Commitment as Administrative Agent and as a Lender
- -----------------
and Term Credit
- ---------------
Commitment: 13.478260877% BY: ABN AMRO NORTH AMERICA, INC.,
- ---------- as Agent
Voting Percentage: 15.319148936%
- -----------------
By: __________________________________
Cheryl I. Lipshutz
Group Vice President and Director
Address:
- -------
ABN AMRO North America, Inc. By: __________________________________
Houston Agency Charles W. Randall
Three Riverway, Suite 1700 Senior Vice President and
Houston, TX 77056 Managing Director
Telephone: (713) 964-3351
Fax No.: (713) 629-7533
102
<PAGE>
Percentage of Revolving THE CHASE MANHATTAN BANK
- -----------------------
Credit Commitment
- -----------------
and Term Credit
- ---------------
Commitment: 13.478260877% By: _________________________________
- ---------- Name: _________________________________
Voting Percentage: 13.191489362% Title: _________________________________
- -----------------
Address:
- -------
The Chase Manhattan Bank
Attention: Mr. William Manias
707 Travis
5-TCBN-86
Houston, TX 77002
Telephone: (713) 216-6386
Fax No.: (713) 216-8870
103
<PAGE>
Percentage of Revolving ARAB BANKING CORPORATION (B.S.C.)
- -----------------------
Credit Commitment
- -----------------
and Term Credit
- ---------------
Commitment: 8.695652172% By: ________________________________________
- ----------
Name: Stephen A. Plauche
Voting Percentage: 8.510638298% Title: Vice President
- -----------------
Address:
- -------
Arab Banking Corporation (B.S.C.)
Attn: Loan Administration
277 Park Avenue
New York, New York 10172-3299
Telephone: (212) 583-4720
Fax No.: (212) 583-0921
with a copy to:
Arab Banking Corporation (B.S.C.)
Attn: Mr. Stephen Plauche
600 Travis, Suite 1900
Houston, TX 77002
Telephone: (713) 227-8444
Fax No.: (713) 227-6507
104
<PAGE>
Percentage of Revolving BANK OF AMERICA NATIONAL TRUST AND
- -----------------------
SAVINGS ASSOCIATION
Credit Commitment
- -----------------
and Term Credit
- ---------------
Commitment: 8.695652172% By:_____________________________________
- ----------
Name: Michael J. Dillon
Voting Percentage: 8.510638298% Title: Managing Director
- -----------------
Address:
- -------
Bank of America National Trust
and Savings Association
Attn: Mr. Michael J. Dillon
Three Allen Center
333 Clay, Suite 4550
Houston, TX 77002-4103
Telephone: (713) 651-4903
Fax No.: (713) 651-4808
with copy to:
Bank of America National Trust
and Savings Association
Attn: Mr. George Korolkov
1850 Gateway Blvd.
Concord, CA 94520
Telephone: (510) 675-7335
Fax No.: (510) 675-7254
105
<PAGE>
Percentage of Revolving THE BANK OF NOVA SCOTIA, ATLANTA
- -----------------------
Credit Commitment AGENCY
- -----------------
and Term Credit
- ---------------
Commitment: 8.695652172%
- ----------
By:_____________________________________
Name:___________________________________
Voting Percentage: 8.510638298% Title:__________________________________
- -----------------
Address:
- -------
The Bank of Nova Scotia,
Atlanta Agency
Attn: Ms. Phyllis Walker
600 Peachtree Street NE, Suite 2700
Atlanta, GA 30308
Telephone: (404) 877-1500
Fax No.: (404) 888-8998
with a copy to:
The Bank of Nova Scotia
Attn: Mr. Adam Dexter
1100 Louisiana, Suite 3000
Houston, TX 77002
Telephone: (713) 759-3445
Fax No.: (713) 752-2425
106
<PAGE>
Percentage of Revolving WELLS FARGO BANK (TEXAS), NATIONAL
- -----------------------
Credit Commitment ASSOCIATION
- -----------------
and Term Credit
- ---------------
Commitment: 6.086956520%
- ----------
By:_____________________________________
Name:___________________________________
Voting Percentage: 5.957446809% Title:__________________________________
- -----------------
Address:
- -------
Wells Fargo Bank (Texas), National Association
Attn: Shannon Collier
1000 Louisiana
Houston, TX 77002
Telephone: (713) 250-3704
Fax No.: (713) 250-7031
107
<PAGE>
Percentage of Revolving CREDIT LYONNAIS NEW YORK BRANCH
- -----------------------
Credit Commitment
- -----------------
and Term Credit
- ---------------
Commitment: 6.086956520%
- ----------
By:_____________________________________
Name:___________________________________
Voting Percentage: 5.957446809% Title:__________________________________
- -----------------
Address:
- -------
Credit Lyonnais
Houston Representative Office
Attn: Mr. Brian Barth
1000 Louisiana, Suite 5360
Houston, TX 77002
Telephone: (713) 751-0500
Fax No.: (713) 751-0307/0420
with a copy to:
Credit Lyonnais New York Branch
Attn: Mr. Ronald N. Finn
Legal Department
1301 Avenue of the Americas
New York, NY 10019
Telephone: (212) 261-7050
108
<PAGE>
Percentage of Revolving FIRST NATIONAL BANK OF COMMERCE
- -----------------------
Credit Commitment
- -----------------
and Term Credit
- ---------------
Commitment: 6.086956520%
- ----------
By:_____________________________________
Name:___________________________________
Voting Percentage: 5.957446809% Title:__________________________________
- -----------------
Address:
- -------
First National Bank of Commerce
Attn: Mr. J. Charles Freel, Jr.
210 Baronne Street
New Orleans, LA 70112
Telephone: (504) 561-1638
Fax No.: (504) 561-1316
109
<PAGE>
Percentage of Revolving THE FUJI BANK, LIMITED
- -----------------------
Credit Commitment
- -----------------
and Term Credit
- ---------------
Commitment: 6.086956520%
- ----------
By:_____________________________________
Name:___________________________________
Voting Percentage: 5.957446809% Title:__________________________________
- -----------------
Address:
- -------
The Fuji Bank, Limited
Attn: Mr. Mark E. Polasek
1221 McKinney Street, Suite 4100
Houston, TX 77010
Telephone: (713) 650-7863
FAX No.: (713) 759-0048
110
<PAGE>
Percentage of Revolving CREDIT SUISSE
- -----------------------
Credit Commitment
- -----------------
and Term Credit
- ---------------
Commitment: 6.086956520%
- ----------
By:_____________________________________
Name:___________________________________
Voting Percentage: 5.957446809% Title:__________________________________
- -----------------
By:_____________________________________
Name:___________________________________
Title:__________________________________
Address:
- -------
Credit Suisse
Attn: Mr. James P. Moran
1100 Louisiana, Suite 4750
Houston, TX 77002
Telephone: (713) 652-8107
Fax No.: (713) 7751-0702
111
<PAGE>
Percentage of Revolving THE BANK OF TOKYO-MITSUBISHI, LTD.
- -----------------------
Credit Commitment
- -----------------
and Term Credit
- ---------------
Commitment: 6.086956520%
- ----------
By:_____________________________________
Name:___________________________________
Voting Percentage: 5.957446809% Title:__________________________________
Address:
- -------
The Bank of Tokyo-Mitsubishi, Limited
Attn: Mr. John W. McGhee
1100 Louisiana, Suite 2800
Houston, TX 77002-5216
Telephone: (713) 655-3811
Fax No.: (713) 658-0116
112
<PAGE>
Percentage of Revolving THE YASUDA TRUST AND BANKING
- -----------------------
Credit Commitment CO., LTD.
- -----------------
and Term Credit
- ---------------
Commitment: 6.086956520%
- ----------
By:_____________________________________
Name:___________________________________
Voting Percentage: 5.957446809% Title:__________________________________
- -----------------
Address:
- -------
The Yasuda Trust and Banking Co., Ltd.
Attn: Lindsay Chu
666 Fifth Avenue, Suite 801
New York, NY 10103
Telephone: (212) 373-5725
Fax No.: (212) 373-5796
113
<PAGE>
Percentage of Revolving HIBERNIA NATIONAL BANK
- -----------------------
Credit Commitment
- -----------------
and Term Credit
- ---------------
Commitment: 4.347826086%
- ----------
By:_____________________________________
Name:___________________________________
Voting Percentage: 4.255319149% Title:__________________________________
- -----------------
Address:
- -------
Hibernia National Bank
Attn: Mr. Bruce Ross
313 Carondelet Street
New Orleans, LA 70130
Telephone: (504) 533-5806
Fax No.: (504) 533-5434
114
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
EXTRACTED FROM FORM 10Q FOR THE SIX MONTHS ENDED JUNE 30, 1996 AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 11,352
<SECURITIES> 0
<RECEIVABLES> 97,018
<ALLOWANCES> 1,976
<INVENTORY> 41,122
<CURRENT-ASSETS> 164,320
<PP&E> 211,041
<DEPRECIATION> 50,820
<TOTAL-ASSETS> 467,785
<CURRENT-LIABILITIES> 113,686
<BONDS> 121,092
0
0
<COMMON> 411
<OTHER-SE> 206,472
<TOTAL-LIABILITY-AND-EQUITY> 467,785
<SALES> 33,760
<TOTAL-REVENUES> 141,661
<CGS> 19,604
<TOTAL-COSTS> 119,728
<OTHER-EXPENSES> 348
<LOSS-PROVISION> 36
<INTEREST-EXPENSE> 6,010
<INCOME-PRETAX> 58,692
<INCOME-TAX> (1,916)
<INCOME-CONTINUING> (56,776)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (56,776)
<EPS-PRIMARY> (1.86)
<EPS-DILUTED> (1.86)
</TABLE>
