AMENDED AND RESTATED
CREDIT AGREEMENT
BY AND AMONG
DRILEX INTERNATIONAL INC.,
DRILEX SYSTEMS, INC.,
XXXX DIRECTIONAL DRILLING COMPANY, L.L.C.,
SHAREWELL, INC.
AND
DRILEX SYSTEMS LIMITED
AND
TEXAS COMMERCE BANK NATIONAL ASSOCIATION
DATED AS OF SEPTEMBER 16, 1996
TABLE OF CONTENTS
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Page
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1. Definitions....................................................................................... 1
1.1 Defined Terms..................................................................................... 1
1.2 Other Terms and References........................................................................13
2. The Credits.......................................................................................14
2.1 Dollar Loans......................................................................................14
2.2 Letter of Credit..................................................................................14
2.3 Pound Loans.......................................................................................15
2.4 Mandatory Prepayments.............................................................................16
2.5 Voluntary Commitment Reductions...................................................................16
2.6 Commitment Fees...................................................................................16
2.7 Payments..........................................................................................16
2.8 Capital Adequacy..................................................................................17
3. Guaranty.................................................................................................17
3.1 Guaranty of Pound Note............................................................................17
3.2 Modifications, Etc................................................................................18
3.3 Waivers...........................................................................................18
3.4 Payment Guaranty..................................................................................19
3.5 Subrogation.......................................................................................19
4. Conditions...............................................................................................19
4.1 All Extensions of Credit..........................................................................19
4.2 First Loan........................................................................................20
5. Representations and Warranties...........................................................................20
5.1. Organization......................................................................................20
5.2 Financial Statements..............................................................................20
5.3 Enforceable Obligations; Authorization............................................................20
5.4 Other Debt........................................................................................21
5.5 Litigation........................................................................................21
5.6 Title.............................................................................................21
5.7 Taxes.............................................................................................21
5.8 Regulation U......................................................................................21
5.9 Subsidiaries......................................................................................21
5.10 Representations by Others.........................................................................21
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5.11 No Misrepresentation or Omission..................................................................22
6. Affirmative Covenants....................................................................................22
6.1 Taxes, Existence, Regulations, Property, etc......................................................22
6.2 Financial Statements and Information..............................................................22
6.3 Financial Tests...................................................................................23
6.4 Inspection........................................................................................23
6.5 Further Assurances................................................................................23
6.6 Books and Records.................................................................................23
6.7 Insurance.........................................................................................23
6.8 Notice of Certain Matters.........................................................................23
6.9 Use of Proceeds...................................................................................23
7. Negative Covenants.......................................................................................24
7.1 Debt..............................................................................................24
7.2 Liens.............................................................................................24
7.3 Contingent Liabilities............................................................................25
7.4 Mergers, Consolidations and Dispositions and Acquisitions of Assets...............................25
7.5 Redemption, Dividends and Distributions...........................................................26
7.6 Nature of Business................................................................................26
7.7 Transactions with Related Parties.................................................................26
7.8 Loans and Investments.............................................................................26
7.9 ERISA.............................................................................................26
7.10 Subsidiaries......................................................................................27
8. Events of Default and Remedies...........................................................................27
8.1 Events of Default.................................................................................27
8.2 Remedies Cumulative...............................................................................29
9. Miscellaneous............................................................................................29
9.1 No Waiver.........................................................................................29
9.2 Notices...........................................................................................29
9.3 Governing Law.....................................................................................30
9.4 Survival; Parties Bound; Term.....................................................................30
9.5 Counterparts......................................................................................31
9.6 Captions..........................................................................................31
9.7 Expenses..........................................................................................31
9.8 Indemnification...................................................................................32
9.9 Entire Agreement..................................................................................32
9.10 Severability......................................................................................32
9.11 Disclosures.......................................................................................32
9.12 Obligations of Dollar Borrowers Are Joint And Several.............................................32
9.13 Amendment and Restatement.........................................................................32
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Exhibit A - Dollar Note
Exhibit B - Pound Note
Exhibit C - Request for Dollar Loan
Exhibit D - Request for Pound Loan
Exhibit E - Opinion of Xxxxx & Xxxxx, L.L.P.
Exhibit F - Opinion of Xxxx Xxxxx & Co.
Exhibit G - Certificate of No Default
Exhibit H - Shareco Acquisition Notes
Exhibit I - Certain Notes Held by Dollar Borrowers
Appendix I - Subsidiaries
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CREDIT AGREEMENT
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This Credit Agreement (this "Agreement") dated as of September 16, 1996,
among DRILEX INTERNATIONAL INC. ("Parent"), a Delaware corporation (formerly
Drilex Holdings Corp.); DRILEX SYSTEMS, INC. ("DSI"), a Texas corporation; XXXX
DIRECTIONAL DRILLING COMPANY, L.L.C. ("Xxxx"), a Delaware limited liability
company; SHAREWELL, INC. ("Sharewell"), a Delaware corporation (formerly
Shareco, Inc. ("Shareco")); DRILEX SYSTEMS LIMITED ("DSL"), a company
incorporated in Scotland under the Companies Act, and TEXAS COMMERCE BANK
NATIONAL ASSOCIATION (the "Lender"), a national banking association;
W I T N E S S E T H:
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THAT, in consideration of the mutual covenants, agreements and undertakings
herein contained, the parties hereto agree as follows:
1. Definitions.
-----------
1.1 Defined Terms. Unless a particular word or phrase is otherwise
defined or the context otherwise requires, capitalized words and phrases used in
the Credit Documents have the meanings provided below.
Accounts shall have the meaning assigned to it in the Texas Business and
Commerce Code in force on the date hereof.
Accounts Component shall mean 80% of the Eligible Accounts of the Dollar
Borrowers and their Subsidiaries.
Affiliate shall mean any Person controlling, controlled by or under common
control with any other Person. For purposes of this definition, "control"
(including "controlled by" and "under common control with") means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such Person, whether through the
ownership of voting securities or otherwise.
Annual Financial Statements shall mean the annual financial statements of a
Person for its fiscal year, including all notes thereto, accompanied by a report
and opinion of independent certified public accountants satisfactory to the
Lender, which shall (a) state that such financial statements, in the opinion of
such accountants, present fairly, in all material respects, the financial
position of such Person as of the date thereof and the results of its operations
for the period
covered thereby in conformity with generally accepted accounting principles,
consistently applied, and (b) not express a doubt as to the ability of such
Person to continue as a going concern.
Application shall mean, as of any date, an application and agreement for
substantially in the form then used by the Lender in connection with its
issuance of commercial or standby (as the case may be) letters of credit; to the
extent that an Application is inconsistent with the terms of this Agreement,
this Agreement shall control.
Approved Progress Xxxxxxxx shall mean progress xxxxxxxx (not including
retention) to general contractors on projects for American Telephone & Telegraph
Company; Dow Chemical Company; Radian International, L.L.C.; MCI Communications
Corp.; Sprint Communications Company L.P.; Southwestern Xxxx Corporation;
Bellsouth Telecommunications, Inc., and their respective Affiliates.
Borrowers shall mean Parent, DSI, Xxxx, Sharewell and DSL.
Borrowing Base shall mean (a) the Accounts Component plus (b) the Inventory
Component; provided, however, that no Property of any Subsidiary organized
outside the United States shall be included in the calculation of the Borrowing
Base unless such Subsidiary is a Qualified Foreign Subsidiary.
Business Day shall mean a day when the principal banking building of the
Lender is open for business in Houston, Texas.
Capital Expenditures shall mean expenditures for fixed or capital assets
(including expenditures for maintenance, repairs and replacements) that are
required to be capitalized on a balance sheet prepared in accordance with Good
Accounting Practices, as determined in accordance with Good Accounting Practice,
excluding expenditures for the acquisition of a business and net of proceeds
from the sale of equipment which was capitalized in accordance with Good
Accounting Practices.
Cash Collateral shall mean (a) securities issued or directly, fully and
unconditionally guaranteed or insured by the USA or any agency or
instrumentality thereof (provided that the full faith and credit of the USA is
pledged in support thereof) having maturities of not more than one year from the
date of issue; (b) dollar time deposits and certificates of deposit of (1) the
Lender or (2) any commercial bank reasonably acceptable to the Lender; (c)
repurchase obligations with a term of not more than 30 days for underlying
securities of the types described in clause (a) above entered into with any bank
meeting the qualifications specified in clause (b) above, provided that the
terms of such agreements comply with the guidelines set forth in the Federal
Financial Institution Examination Counsel Supervisory Policy--Repurchase
Agreements of Depository Institutions With Securities Dealers and Others, as
adopted by the Comptroller of the Currency on October 31, 1985, and (d)
commercial paper or other Dollar obligations issued by the ultimate
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parent Corporation of (1) the Lender or (2) any commercial bank reasonably
acceptable to the Lender; provided in each case that such Investment is subject
to a Security Document, in Proper Form and in favor of the Lender, and the
interest of the Lender therein is duly perfected.
Xxxx Acquisition Documents shall mean the Posi-Trak Acquisition Note, the
Stock Acquisition Notes and the other documents and instruments executed in
connection with (i) the transactions contemplated in that certain Letter of
Intent dated August 16, 1994 executed by and between Parent and Xxxx Directional
Drilling Company, Inc., including the definitive agreement of purchase
contemplated thereby and/or (ii) the acquisition by Parent and DSI of all of the
interests of Xxxx Directional Drilling Company, Inc. in and to Xxxx. Each of
the Xxxx Acquisition Documents shall be in Proper Form.
Code shall mean the Internal Revenue Code of 1986, as amended, as now or
hereafter in effect, together with all regulations, rulings and interpretations
thereof or thereunder by the Internal Revenue Service.
Collateral shall mean all Property, tangible or intangible, real, personal
or mixed, now or hereafter subject to the Security Documents, or intended so to
be pursuant to the Credit Documents.
Commitment Fees shall have the meaning ascribed to it in Section 2.6.
Commitments shall mean the Dollar Available Commitment and the Pound
Available Commitment.
Common Stockholders' Equity shall mean the difference of (a) Equity minus
(b) preferred stock.
Corporations shall mean corporations, partnerships, limited liability
companies, joint ventures, joint stock associations, business trusts and other
business entities.
Credit Documents shall mean this Agreement, the Notes, all Applications,
all Security Documents, the Interest Rate Agreement, each Interest Rate Risk
Agreement, all instruments, certificates and agreements now or hereafter
executed or delivered to the Lender pursuant to any of the foregoing.
Debt shall mean, as of any date and for any Person, the Indebtedness of
such Person for borrowed money (including principal obligations under
capitalized leases but excluding deferred income taxes, deferred pension
liabilities and other deferred expenses and reserves).
Debt to Capitalization Ratio shall mean, as of any date, the ratio
(expressed as a percentage) of (a) Debt of Parent (on a consolidated basis) as
of such date to (b) the sum of (1)
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Debt of Parent (on a consolidated basis) as of such date plus (2) Equity of
Parent (on a consolidated basis) as of such date.
Dollar Available Commitment shall mean the Commitment of the Lender to make
Dollar Loans described in Section 2.1; at any time, the Dollar Available
Commitment is (a) the lesser of (1) the Maximum Dollar Commitment at such time
and (2) the Dollar Borrowing Base at such time minus (b) the Letter of Credit
Exposure at such time.
Dollar Borrowers shall mean Parent, DSI, Xxxx and Sharewell.
Dollar Borrowing Base shall mean (a) the Borrowing Base minus (b) the
Dollar Equivalent of the outstanding principal balance of the Pound Note.
Dollar Equivalent shall mean the equivalent in Dollars of Pounds as
determined by using the quoted spot rate at which the Lender (or any Affiliate
of the Lender) offers to exchange Dollars for Pounds in New York City at 10:00
a.m. (Houston time) two Business Days before the date on which such equivalent
is to be determined.
Dollar Exposure shall mean the sum of (a) the outstanding principal balance
of the Dollar Note plus (b) the Letter of Credit Exposure.
Dollar Loans shall mean the Loans described in Section 2.1.
Dollar Note shall mean the promissory note of the Dollar Borrowers
described in Section 2.1, and any and all renewals, extensions, modifications,
rearrangements and replacements thereof and any and all substitutions therefor.
Dollars and $ shall mean the lawful currency of the USA.
EBITDA shall mean Net Income after taxes, plus (a) depreciation, depletion,
obsolescence and amortization of Property (including goodwill and other
intangibles); (b) tax expense; (c) interest expense, (d) minority interests, and
(e) capitalized lease expense, all determined in accordance with Good Accounting
Practice.
Eligible Accounts shall mean all Qualifying Accounts Receivable of the
Dollar Borrowers and their Subsidiaries which are not more than 90 days (or 120
days, if a Foreign Account Debtor) past invoice date, excluding (a) those
Accounts which are obligations of Affiliates of any Borrower; (b) all Accounts
of an Account debtor if 20% or more (measured by amount) of such Accounts (not
including retainage) are outstanding more than 90 days (or 120 days, if such
Account debtor is a Foreign Account Debtor) after the invoice date thereof; (c)
the excess of all Accounts of an Account debtor and its Affiliates over 20% of
all Accounts of all Dollar Borrowers (on a consolidated basis) if such
concentration with respect to an Account debtor has been in
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continuous effect for more than 90 days; (d) progress xxxxxxxx other than
Approved Progress Xxxxxxxx, and (e) those Accounts which are obligations of the
USA and its instrumentalities.
Equity shall mean stockholders equity, including (a) preferred stock; (b)
common stock; (c) paid in capital in excess of par; (d) retained earnings (net
of any reserves of retained earnings), and (e) cumulative translation
adjustment.
ERISA shall mean the Employee Retirement Income Security Act of 1974, as
amended from time to time, and all rules, regulations, rulings and
interpretations adopted by the Internal Revenue Service or the Department of
Labor thereunder.
Event of Default shall mean any of the events specified as an event of
default in any Credit Document, provided there has been satisfied any
requirement in connection with such event for the giving of notice, or the lapse
of time, or the happening of any further condition, event or act, and Default
shall mean any of such events, whether or not any such requirement has been
satisfied.
Financial Statements shall mean the financial statements of a Person,
including all notes (if any) thereto, which shall include a balance sheet as of
the date of such financial statements and an income statement and a statement of
cash flows for the fiscal period (quarter, year-to-date or year, as the case may
be) then ending, all setting forth in comparative form the corresponding figures
from such period of the preceding year and prepared in accordance with Good
Accounting Practice.
Financing Statements shall mean all such Uniform Commercial Code financing
statements as the Lender shall reasonably require, in Proper Form, duly executed
by the Dollar Borrowers or others to give notice of and to perfect or continue
perfection of the Lender's security interest in all Collateral.
Fixed Charge Coverage Ratio shall mean, as of any date, the ratio of (a)
the difference of (1) EBITDA minus (2) cash tax expense to (b) Fixed Charges, in
each case of Parent (on a consolidated basis). For purposes of this ratio, (i)
EBITDA and cash tax expense shall be computed as of any date for the 12 months
ending on such date (but if such date is before October 5, 1996, then EBITDA of
ENSCO Technology Company shall be included in the foregoing calculation of
Parent as if it had been acquired and consolidated 12 months prior to the
calculation date) and (ii) Fixed Charges shall be computed as of any date for
the 12 months ending on such date (but for months prior to July 2, 1996, such
calculation shall exclude all scheduled principal payments and cash interest
expense on the Loans, those certain promissory notes dated as of September 30,
1995 and January 1, 1996 executed by the Parent payable to the order of ENSCO
Technology Company in the original principal amounts of $2,500,000 and
$3,561,000, respectively, and that certain promissory note dated as of September
29, 1995 executed by the Dollar Borrowers payable to the order of Lender in the
original principal amount of $17,450,000).
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Fixed Charges shall mean (a) scheduled principal payments (not including
mandatory prepayments based on financial results) on all Debt other than the
Loans; (b) cash interest expense; (c) Net Capital Expenditures, and (d)
dividends (other than stock dividends) by Parent to any of its shareholders to
the extent actually distributed or paid.
Foreign Account Debtor shall mean any Person other than (a) an individual
living in the USA; (b) a Corporation organized under the laws of the USA or one
of the States of the USA, or (c) a Person with substantial Property in the USA.
Good Accounting Practice shall mean generally accepted accounting
principles consistently applied (except for changes approved by such Person's
independent auditors and with prior written notice to the Lender).
Governmental Authority shall mean any foreign governmental authority, the
United States of America, any State of the United States and any political
subdivision of any of the foregoing, and any agency, department, commission,
board, bureau, court or other tribunal having jurisdiction over the Lender or
any Borrower, any Subsidiary of any Borrower or their respective Property.
Indebtedness shall mean and include, without duplication, (a) all items
which in accordance with Good Accounting Practice would be included on the
liability side of a balance sheet on the date as of which Indebtedness is to be
determined (excluding capital stock, minority interests, surplus, surplus
reserves, deferred credits, accrued taxes and other accruals in the ordinary
course of business that do not relate to borrowed money); (b) all guaranties,
endorsements and other contingent obligations in respect of, or any obligations
to purchase or otherwise acquire, items described in clause (a) above of others,
and (c) all items described in clauses (a) and (b) above secured by any Lien
existing on any interest of the Person with respect to which Indebtedness is
being determined in Property owned subject to such Lien whether or not the
Indebtedness secured thereby shall have been assumed; provided that such term
shall not mean or include any Indebtedness in respect of which monies sufficient
to pay and discharge the same in full (either on the expressed date of maturity
thereof or on such earlier date as such Indebtedness may be duly called for
redemption and payment) shall be deposited with a depository, agency or trustee
acceptable to the Lender in trust for the payment thereof.
Interest Rate Agreement shall mean that certain Interest Rate Agreement of
even date herewith among the Borrowers and the Lender relating to the Notes.
Interest Rate Risk Agreement shall mean an interest rate swap agreement,
interest rate cap agreement or similar arrangement entered into between any
Borrower and one or more financial institutions for the purpose of reducing such
Borrower's exposure to interest rate risk and not for speculative purposes, as
it may from time to time be amended, modified, restated or supplemented from
time to time.
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Interest Rate Risk Indebtedness shall mean all obligations and Indebtedness
of any Borrower with respect to the program for the hedging of interest rate
risk provided for in any Interest Rate Risk Agreement.
Inventory shall have the meaning assigned to it in the Texas Business and
Commerce Code in force on the date hereof.
Inventory Component shall mean the lesser of (i) the Accounts Component
or (ii) the Possible Inventory Component.
Investment shall mean the purchase or other acquisition of any securities
or Debt of, or the making of any loan, advance, transfer of Property or capital
contribution to, or the incurring of any liability, contingently or otherwise,
in respect of the Debt of, any Person.
Legal Requirement shall mean any law, statute, ordinance, decree,
requirement, order, judgment, rule, regulation (or interpretation of any of the
foregoing) of, and the terms of any license or permit issued by, any
Governmental Authority.
Letter of Credit Commitment shall mean the least of (a) the Maximum
Commitment; (b) the Dollar Borrowing Base and (c) $3,000,000.
Letter of Credit Exposure shall mean, as of any date, the aggregate
outstanding face amount of all Letters of Credit as of such date.
Letters of Credit shall mean all letters of credit issued pursuant to this
Agreement.
Lien shall mean any mortgage, pledge, charge, encumbrance, security
interest, collateral assignment or other lien or restriction of any kind,
whether based on common law, constitutional provision, statute or contract to
secure the payment or performance of an obligation to a third party, and shall
include any such reservations, exceptions, encroachments, easements, rights of
way, covenants, conditions, restrictions, leases and other title exceptions.
Loan shall mean each advance of funds pursuant to this Agreement.
Maximum Commitment shall mean $15,000,000, subject to reduction as provided
in Section 2.5.
Maximum Dollar Commitment shall mean (a) the Maximum Commitment minus (b)
the Dollar Equivalent of the outstanding principal balance of the Pound Note.
Maximum Pound Commitment shall mean the lesser of (a) the Possible Pound
Commitment and (b) the Nominal Pound Commitment.
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Net Capital Expenditures shall mean, for any period, the excess (if any) of
(a) Capital Expenditures of such period over (b) the net cash proceeds received
by the Dollar Borrowers in connection with the sale of their common stock,
preferred stock and Subordinated Indebtedness and applied, during such period,
to pay Capital Expenditures minus expenditures for the acquisition of a business
during such period; in no event may "Net Capital Expenditures" be negative.
"Net Capital Expenditures" shall not include Capital Expenditures which are paid
by customers of the applicable Borrower resulting from "lost in hole" equipment.
The computation under item (b) above shall specifically include expenditures for
certain measurement-while-drilling equipment amounting to $2,378,000 for the
month of September, 1996 and $2,336,000 for the month of November, 1996.
Net Income shall mean gross revenues and other proper income credits, less
all proper income charges, including taxes on income, all determined in
accordance with Good Accounting Practice; provided that there shall not be
included in such revenues (a) any income representing the excess of equity in
any Subsidiary at the date of acquisition over the investment in such
Subsidiary; (b) any equity in the undistributed earnings of any Person which is
not a Subsidiary; (c) any earnings of any Subsidiary for any period prior to the
date such Subsidiary was acquired; (d) any gains resulting from the write-up of
assets; (e) any proceeds of any life insurance policy, or (f) any gain which is
classified as "extraordinary" in accordance with Good Accounting Practice; and
provided further that capital gains may be included in revenues only to the
extent of capital losses.
Nominal Pound Commitment shall mean (Pounds)750,000, subject to reduction
as provided in Section 2.5.
Notes shall mean the Dollar Note and the Pound Note.
Obligations shall mean the obligations of the Borrowers for the Loans, the
Letter of Credit Exposure and the other amounts payable by the Borrowers under
this Agreement or the other Credit Documents.
Organizational Documents shall mean, with respect to (a) a corporation, the
certificate of incorporation, articles of incorporation and bylaws of such
corporation; (b) a partnership, the partnership agreement establishing such
partnership; (c) a joint venture, the joint venture agreement establishing such
joint venture; (d) a trust, the instrument establishing such trust, and (e) any
other type of entity, the analogous documents creating such entity and by which
it is governed; in each case including any and all modifications thereof as of
the date of the Credit Document referring to such Organizational Document and
any and all future modifications thereof which are consented to by the Lender.
Permitted Dividends shall mean (i) dividends paid by any Subsidiary of a
Borrower to such Borrower (or to a Subsidiary of such Borrower, in the case of
indirect Subsidiaries of such Borrower), (ii) dividends paid by any Subsidiary
of a Borrower to a holder of a minority interest
8
in such Subsidiary, but not exceeding the pro rata equivalent of dividends paid
by such Subsidiary during the applicable period pursuant to clause (i) of this
definition (i.e. if dividends of $900,000 are paid by such Subsidiary during the
applicable period pursuant to clause (i) of this definition, a 10% minority
shareholder shall be permitted to receive a dividend of $100,000 [($900,000 /
90) x 10]); provided, however, that the right to pay dividends to a minority
shareholder pursuant to this clause (ii) shall be suspended at such time as the
aggregate dividends paid by the applicable Subsidiary shall reduce such
Subsidiary's Equity to zero, and (iii) dividends paid by Parent not exceeding,
in any fiscal year, the Net Income of Parent for such fiscal year. Permitted
Dividends may be distributed so long as no Default or Event of Default shall
have occurred hereunder.
Permitted Investment Securities shall mean (a) readily marketable
securities issued or fully guaranteed by the United States of America or any
agency thereof; (b) commercial paper rated "P-2" or better by Xxxxx'x Investors
Service, Inc. or "A-2" or better by Standard and Poor's Ratings Services (or
their equivalent by another nationally recognized statistical ratings
organization); (c) certificates of deposit or repurchase certificates issued by
financial institutions reasonably acceptable to the Lender, all of the foregoing
not having a maturity of more than one year from the date of issuance thereof;
(d) repurchase agreements with respect to (and secured by a pledge of)
securities described in clauses (a) through (c) above and entered into with any
commercial bank described in clause (c) above or any securities broker-dealer of
recognized regional or national standing; (e) money market or mutual funds
sponsored by any securities broker-dealer of recognized national standing (or an
affiliate thereof) having an investment policy that requires substantially all
of the invested assets of such fund to be invested in Investments described in
any one or more of the foregoing clauses of this definition, and (f) securities
received in settlement of liabilities created in the ordinary course of
business.
Permitted Liens shall mean the Liens permitted by Section 7.2 hereof.
Person shall mean any individual, Corporation, trust, unincorporated
organization, Governmental Authority or any other form of entity.
Plan shall mean any plan subject to Title IV of ERISA and maintained for
employees of the Borrower or of any member of a "controlled group of
corporations", as such term is defined in the Code, of which any Borrower or any
of their respective Subsidiaries is a part, or any such plan to which any of
them is required to contribute on behalf of its employees.
Posi-Trak Acquisition Note shall mean a promissory note, in Proper Form, in
a principal amount not exceeding $1,333,340 executed or to be executed by Parent
payable to Posi-Trak Mud Motors, Inc.
Possible Inventory Component shall mean 35% of the net book value of the
Inventory of the Dollar Borrowers and their Subsidiaries.
9
Possible Pound Commitment shall mean the Sterling Equivalent of (a) the
Maximum Commitment minus (b) the Dollar Exposure.
Pound Available Commitment shall mean the Commitment of the Lender to make
Pound Loans described in Section 2.3; at any time, the Pound Available
Commitment is the lesser of (a) the Maximum Pound Commitment and (b) the Pound
Borrowing Base.
Pound Borrowing Base shall mean the Sterling Equivalent of (a) the
Borrowing Base minus (b) the Dollar Exposure.
Pound Loans shall mean the Loans described in Section 2.3.
Pound Note shall mean the promissory note of DSL described in Section 2.3,
and any and all renewals, extensions, modifications, rearrangements and
replacements thereof and any and all substitutions therefor.
Pounds and (Pounds) shall mean the lawful currency of the United Kingdom.
Proper Form shall mean in form and substance reasonably satisfactory to the
Lender.
Property shall mean any interest in any kind of property or asset, whether
real, personal or mixed, tangible or intangible.
Qualified Foreign Subsidiary shall mean (i) Drilex Systems, S.A., (ii) any
Subsidiary of a Dollar Borrower organized in the United Kingdom or Canada and
(iii) such other Subsidiaries of a Dollar Borrower organized outside the United
States as the Lender may from time to time approve.
Qualifying Accounts Receivable shall mean all Accounts meeting all of the
following criteria as of the date of any determination of Qualifying Accounts
Receivable: (a) the Account shall be (1) due and payable not more than 60 days
from the date of the invoice or agreement evidencing same and (2) billed within
60 days after the shipment of the goods or the rendering of services giving rise
to the Account; (b) the Account shall arise from the performance of services by
the obligee of the Account which have been fully and satisfactorily performed,
or from the absolute sale of goods by the obligee of the Account in which such
obligee had the sole and complete ownership, and the goods have been shipped and
delivered to the Account debtor, evidencing which such obligee has possession of
shipping and delivery receipts; (c) the Account is not subject to set-off,
counterclaim, defense, allowance or adjustment other than discounts for prompt
payment shown on the invoice or to dispute, objection or complaint by the
Account debtor concerning its liability on the Account, and the goods, the sale
of which gave rise to the Account, have not been returned, rejected, lost or
damaged; (d) the Account arose in the ordinary course of business of the obligee
thereon, and (e) no notice of bankruptcy, insolvency or financial embarrassment
of the Account debtor has been received by the obligee of such Account; provided
10
that each determination of a Qualifying Account Receivable shall exclude any
portion of an Account which is to be retained pending the completion of the
relevant project.
Quarterly Financial Statements shall mean the quarterly Financial
Statements of a Person.
Secretary's Certificate shall mean a certificate of the Secretary or an
Assistant Secretary (or similar officer) of a Corporation as to (a) the
resolutions of the Board of Directors (or similar body) of such Corporation
authorizing the execution, delivery and performance of the Credit Documents to
be delivered by such Corporation; (b) the incumbency and signature of the
officer of such Corporation executing such Credit Documents on behalf of such
Corporation, and (c) the Organizational Documents of such Corporation.
Security Documents shall mean this Agreement and any and all other
agreements, deeds of trust, mortgages, chattel mortgages, security agreements,
pledges, guaranties, assignments of production or proceeds of production,
assignments of income, assignments of contract rights, assignments of
partnership interest, assignments of royalty interests, assignments of
performance, completion or surety bonds, standby agreements, subordination
agreements, undertakings and other instruments and Financing Statements now or
hereafter executed and delivered by any Person (other than solely by the Lender
and/or any other creditor participating in the Loans evidenced by the Notes or
any collateral or security therefor) in connection with, or as security for the
payment or performance of, any indebtedness under this Agreement.
Shareco Acquisition Documents shall mean the Shareco Acquisition Notes and
the other documents and instruments executed in connection with the transactions
contemplated in that certain Stock Purchase Agreement dated May 5, 1995 executed
by and between Parent and the holders of shares and options to purchase shares
of Shareco. Each of the Shareco Acquisition Documents shall be in Proper Form.
Shareco Acquisition Notes shall mean the promissory notes described on
Exhibit H hereto.
Shareco (UK) shall mean Sharewell Horizontal Systems, Ltd., a company
incorporated under the laws of the United Kingdom.
Sterling Equivalent shall mean the equivalent in Pounds of Dollars as
determined by using the quoted spot rate at which the Lender (or any Affiliate
of the Lender) offers to exchange Pounds for Dollars in New York City at 10:00
a.m. (Houston time) two Business Days before the date on (or as of) which such
equivalent is to be determined.
Stock Acquisition Notes shall mean promissory notes, in Proper Form, in an
aggregate principal amount not exceeding $2,154,000 executed or to be executed
by Parent payable to Xxxx Directional Drilling Company, Inc. executed in
connection with the acquisition by Parent and DSI of all of the interests of
Xxxx Directional Drilling Company, Inc. in and to Xxxx.
11
Subsidiary shall mean, as to a particular parent Corporation, any
Corporation of which 50% or more of the indicia of equity rights (whether
outstanding capital stock or otherwise) is at the time directly or indirectly
owned by, such parent Corporation, or by one or more of its Affiliates.
Subordinated Indebtedness shall mean all Indebtedness of any Dollar
Borrower, now or hereafter existing, which is subordinated (on terms and
conditions acceptable to the Lender and by documents in Proper Form) to all
Indebtedness of the Dollar Borrowers to the Lender.
Tangible Net Worth shall mean the difference of (a) Parent's Common
Stockholders' Equity (on a consolidated basis) minus (b) all of its intangibles,
including (1) deferred charges; and (2) the aggregate of all amounts appearing
on the assets side of any such balance sheet for franchises, licenses, permits,
patents, patent applications, copyrights, trademarks, trade names, goodwill,
treasury stock, experimental or organizational expenses and other like
intangibles.
Tangible Net Worth Increment shall mean, for any fiscal year (or portion
thereof) of Parent, the sum of (1) the aggregate of the net cash proceeds
received by the Dollar Borrowers in connection with the sale of their common
stock, preferred stock and Subordinated Indebtedness during such year (or the
applicable portion thereof) plus (2) either (a) 50% of the aggregate Net Income
of Parent (on a consolidated basis) for such year (or the applicable portion
thereof), if Parent (on a consolidated basis) has an aggregate positive Net
Income for such year (or the applicable portion thereof), or (b) in all other
cases, zero.
Tangible Net Worth Requirement shall mean, as of any date, (a) for the
period from the date hereof through December 31, 1996, $32,000,000, (b) for the
Parent's fiscal year 1997, the sum of $32,000,000 plus the Tangible Net Worth
Increment (on a consolidated basis) for the third and fourth fiscal quarters of
the Parent's fiscal year 1996 (but excluding from said Tangible Net Worth
Increment the net cash proceeds from the Parent's initial public offering of
common stock on July 9, 1996) and (c) for each subsequent fiscal year of the
Parent, beginning on January 1, 1998, the sum of the Tangible Net Worth
Requirement for the Parent's fiscal year 1997 plus the aggregate of the Tangible
Net Worth Increments for the Parent's fiscal year 1997 and all subsequent
completed fiscal years of Parent (on a consolidated basis).
Termination Date shall mean the earlier of (a) September 30, 1999 or (b)
the date specified by the Lender in accordance with Section 8.1.
Unused Dollar Commitment shall mean, as of any date, the difference of (a)
the Dollar Available Commitment minus (b) the outstanding principal balance of
the Dollar Note.
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Unused Maximum Commitment shall mean, as of any date, the difference of (a)
the Maximum Commitment minus (b) the sum of (1) the Dollar Exposure plus (2) the
Dollar Equivalent of the outstanding principal balance of the Pound Note.
Unused Pound Commitment shall mean, as of any date, the difference of (a)
the Pound Available Commitment minus (b) the then-outstanding principal balance
of the Pound Note.
USA shall mean the United States of America.
1.2 Other Terms and References. Except where specifically otherwise
provided in the Credit Documents:
(a) Each of the following terms shall have the meaning ascribed to it in
the Texas Uniform Commercial Code on the date hereof:
accessions, continuation statement, fixtures, general intangibles, goods,
proceeds, security interest and security agreement.
(b) Any term defined in the Interest Rate Agreement and used in this
Agreement but not otherwise defined herein shall have the meaning ascribed to it
in the Interest Rate Agreement.
(c) Any accounting term not otherwise defined shall have the meaning
ascribed to it under Good Accounting Practice.
(d) All financial measurements shall be computed without duplication, on a
consolidated basis (unless otherwise specified) and in accordance with Good
Accounting Practice. All calculations of amounts and ratios with respect to each
covenant contained in the Credit Documents shall be carried out to the precision
implied in such covenant; e.g., if a ratio is expressed in a covenant as "at
least 1.00 to 1" then such ratio shall be rounded to the nearest 0.01, while if
a ratio is expressed in a covenant as "at least 1.0 to 1" then such ratio shall
be rounded to the nearest 0.1.
(e) Unless otherwise specified, all references to time shall be references
to Houston time.
(f) Wherever the term "including" or any of its correlatives appears in a
Credit Document, it shall be read as if it were written "including (by way of
example and without limiting the generality of the subject or concept referred
to)".
(g) Wherever the word "herein" or "hereof" is used in a Credit Document, it
is a reference to that entire Credit Document and not just to the subdivision of
it in which the word is used.
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(h) References in a Credit Document to Section and Article numbers are
references to the Sections and Articles, respectively, of such Credit Document.
(i) References in a Credit Document to Exhibits, Schedules, Riders, Annexes
and Appendices are to the Exhibits, Schedules, Riders, Annexes and Appendices to
such Credit Document, and they shall be deemed incorporated into such Credit
Document by reference.
(j) Any term defined in the Credit Documents which refers to a particular
agreement, instrument or document shall also mean, refer to and include all
modifications, amendments, supplements, restatements, renewals, extensions and
substitutions of the same; provided that nothing in this Section shall be
construed to authorize any such modification, amendment, supplement,
restatement, renewal, extension or substitution except as may be permitted by
other provisions of the Credit Documents.
(k) Defined terms may be used in the singular or plural, as the context
requires.
(l) The pronouns used in the Credit Documents are in the neuter gender but
shall be construed as feminine, masculine or neuter, as the context requires.
2. The Credits.
-----------
2.1 Dollar Loans. Subject to the terms and conditions hereof, the Lender
agrees to make Dollar Loans to the Dollar Borrowers from time to time before the
Termination Date, not to exceed at any one time outstanding the Dollar Available
Commitment, the Dollar Borrowers having the right to borrow, repay and reborrow.
Each Dollar Loan shall be in an amount of at least $250,000 or the Unused Dollar
Commitment, whichever is less. Each repayment of the Dollar Loans shall be in
an amount of at least $250,000 or the principal balance of the Dollar Note,
whichever is less. The Dollar Loans shall be evidenced by the Dollar Note
substantially in the form of Exhibit A.
2.2 Letter of Credit.
-----------------
(a) Issuance. Subject to the terms and conditions hereof, the Lender
agrees to issue Letters of Credit for the account of the Dollar Borrowers from
time to time before the Termination Date, in such face amount, with such expiry
date (provided that no Letter of Credit shall have an expiry date beyond one
year from the date of issuance) and for the benefit of such beneficiary as the
Dollar Borrowers may designate in the related Application; provided that (x) the
Letter of Credit Exposure may never exceed the Letter of Credit Commitment and
(y) the principal balance of the Dollar Note shall not exceed the Dollar
Available Commitment after giving effect to such Letter of Credit.
(b) Fees. As a condition precedent to the issuance of each Letter of
Credit, the Dollar Borrowers agree to pay the Lender the (1) usual and customary
fees of the Lender for each
14
issuance, extension, amendment and wire advice of and drawing under a Letter of
Credit and (2) a fee equal to the greater of (i) $250 for each Letter of Credit
or (ii) 1% per annum (calculated on the basis of the actual number of days to
elapse in a year composed of 360 days) of the face amount of such Letter of
Credit to its date of expiry.
(c) Cash Collateral. Upon the occurrence of the Termination Date (whether
by the passage of time or otherwise), the Dollar Borrowers will immediately
either (1) provide the Lender with Cash Collateral in an amount equal to the
Letter of Credit Exposure at such time or (2) provide the Lender with one or
more back-up letters of credit, with face amounts corresponding to the
outstanding face amounts of the outstanding Letters of Credit and expiry dates
at least one month beyond the expiry dates of the corresponding outstanding
Letters of Credit, such back-up letters of credit to be in Proper Form and
issued by financial institutions acceptable to the Lender. If the Letter of
Credit Exposure ever exceeds the Letter of Credit Commitment, the Dollar
Borrowers will immediately (1) provide the Lender with Cash Collateral equal to
the amount of such excess or (2) obtain from the beneficiaries of Letters of
Credit a reduction in the aggregate amount of such Letters of Credit at least
equal to the amount of such excess (or a combination thereof). In the event
that any Borrower deposits Cash Collateral pursuant to the immediately preceding
sentence and the Letter of Credit Exposure is thereafter reduced below the
Letter of Credit Commitment at such time, the Lender will upon request of the
Borrowers promptly return to the Borrowers Cash Collateral in the amount of such
shortfall.
(d) Additional Conditions. The issuance by the Lender of each Letter of
Credit shall be subject to the additional conditions precedent that (1) such
Letter of Credit shall be in such form and contain such terms as shall be
reasonably satisfactory to the Lender; (2) the Dollar Borrowers shall have
executed and delivered such other instruments and agreements relating to such
Letter of Credit as the Lender shall have reasonably requested, and (3) the
terms of such Letter of Credit are not inconsistent with the terms of this
Agreement.
(e) Indemnification. The Dollar Borrowers hereby indemnify, release and
hold the Lender and its shareholders, directors, officers, employees and agents
harmless from and against any and all claims and damages, losses, liabilities,
costs or expenses which any of them may incur (or which may be claimed against
any of them by any Person whatsoever) to which any of them may become subject
arising out of or based upon the execution and delivery or transfer of or
payment or failure to pay under any Letter of Credit, WHETHER THROUGH THE
ALLEGED OR ACTUAL NEGLIGENCE OF SUCH PERSON OR OTHERWISE; except and to the
extent that the same results from the willful misconduct, gross negligence or
bad faith of such Person.
2.3 Pound Loans. Subject to the terms and conditions hereof, the Lender
agrees to make Pound Loans to DSL from time to time before the Termination Date,
not to exceed at any one time outstanding the Pound Available Commitment, DSL
having the right to borrow, repay and reborrow. Each Pound Loan shall be in an
amount of at least (Pounds)100,000 or the Unused Pound Commitment, whichever is
less. Each repayment of the Pound Loans shall be in an amount of
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at least (Pounds)100,000 or the principal balance of the Pound Note, whichever
is less. The Pound Loans shall be evidenced by the Pound Note, substantially in
the form of Exhibit B.
2.4 Mandatory Prepayments. If the principal balance of the Dollar Note
ever exceeds the Dollar Available Commitment or the principal balance of the
Pound Note ever exceeds the Pound Available Commitment, then the relevant
Borrower shall immediately (1) make a prepayment on the relevant Note in the
amount of such excess or (2) obtain from the beneficiaries of any outstanding
Letters of Credit a reduction in the aggregate amount of such Letters of Credit
(or a combination thereof).
2.5 Voluntary Commitment Reductions. At any time and from time to time,
upon five Business Days' notice, (a) the Dollar Borrowers may reduce the Maximum
Commitment by an integral multiple of $500,000; (b) DSL may reduce the Nominal
Pound Commitment by an integral multiple of (Pounds)250,000; (c) the Dollar
Borrowers may terminate the Dollar Commitment, and (d) DSL may terminate the
Pound Commitment; provided that such reduction or termination (x) may not cause
(1) the maximum amount permissible to be outstanding under either Note pursuant
to the terms of the Credit Documents to be less than the then-outstanding
principal balance of such Note or (2) the Letter of Credit Exposure to exceed
the Letter of Credit Commitment and (y) shall be permanent, and the relevant
Commitment may not thereafter be increased or restored.
2.6 Commitment Fees. In consideration of (a) the Maximum Commitment, the
Dollar Borrowers agree to pay a fee of 1/4% per annum on the daily average
Unused Maximum Commitment; such fee (the "Commitment Fee") shall be (x) computed
on the basis of the actual number of days elapsed in a year composed of 360 days
and (y) payable in arrears on the last Business Day of each January, April, July
and October and on the Termination Date. From the effective day of any
reduction or termination in accordance with Section 2.5, the several obligations
of the Dollar Borrowers to pay the Commitment Fee shall be correspondingly
reduced.
2.7 Payments. Unless otherwise expressly provided therein, all payments
of principal, interest and other fees and amounts due from any Borrower under
the Credit Documents shall be made in immediately available funds to the Lender
at its principal banking building in Houston, Xxxxxx County, Texas, by no later
than 12:00 noon on the date when due; each payment made after that time shall be
considered for all purposes (including the payment of interest, to the extent
not prohibited by law) as having been made on the next succeeding Business Day.
If any payment or prepayment becomes due and payable on a day which is not a
Business Day, then the date for the payment thereof shall be extended to the
next succeeding Business Day, and interest shall be payable thereon at the then-
applicable rate per annum during such extension. All amounts paid or payable
under the Credit Documents (a) by the Dollar Borrowers shall be denominated in
Dollars, and any payment in Pounds shall be credited for the Dollar Equivalent
thereof, and (b) by DSL shall be denominated in Pounds, and any payment in
Dollars shall be credited for the Sterling Equivalent thereof.
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2.8 Capital Adequacy.
(a) If after the date of this Agreement, the Lender shall have determined
that the adoption or effectiveness of any applicable law, rule or regulation
regarding capital adequacy, or any change therein, 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 Lender with any request or directive regarding
capital adequacy (whether or not having the force of law) of any such
Governmental Authority, central bank or comparable agency, has or would have the
effect of reducing the rate of return on the Lender's capital as a consequence
of its obligations under the Credit Documents to a level below that which the
Lender could have achieved but for such adoption, change or compliance (taking
into consideration the Lender's policies with respect to capital adequacy) by an
amount reasonably deemed by the Lender to be material, then from time to time,
the Dollar Borrowers shall pay to the Lender such additional amount or amounts
as will compensate the Lender for such reduction.
(b) A certificate of the Lender setting forth such amount or amounts as
shall be necessary to compensate the Lender as specified in Section 2.8 (a)
shall be delivered as soon as practicable to the Dollar Borrowers and shall be
conclusive and binding, absent manifest error. The Dollar Borrowers shall pay
the Lender the amount shown as due on any such certificate within 15 days after
the Lender delivers such certificate. In preparing such certificate, the Lender
may employ such assumptions and allocations of costs and expenses as it shall in
good xxxxx xxxx reasonable and may use any reasonable averaging and attribution
method.
(c) A Dollar Borrower's obligations under this Section shall survive the
payment of the such Dollar Borrower's Loans and the termination of such Dollar
Borrower's Commitment; provided that any request for compensation pursuant to
this Section must be made on or before six (6) months after the Lender incurs
the applicable material reduction in rate of return or the Lender shall be
deemed to have waived the right to such compensation.
3. Guaranty.
3.1 Guaranty of Pound Note. The Dollar Borrowers unconditionally
guarantee unto the Lender the payment of the principal of and accrued interest
on the Pound Note when due (whether at the stated maturity, by acceleration or
otherwise) and all other amounts owing by DSL to the Lender pursuant to the
Credit Documents, all in accordance with the terms thereof (collectively, the
"Pound Obligations"). This guaranty is unconditional and absolute, and if for
any reason all or any portion of the Pound Obligations shall not be paid
promptly when due, the Dollar Borrowers will immediately pay the same to the
Lender, regardless of any defense, right of set-off or counterclaim which DSL
may have or assert, and regardless of whether the Lender or any other Person
shall have taken any steps to enforce any rights against DSL or any other Person
to collect such sum, and regardless of any other condition or contingency. This
guaranty
17
by the Dollar Borrowers shall also cover all reasonable expenses incurred by the
Lender in enforcing payment of the Pound Obligations, including this Article.
3.2 Modifications, Etc. The obligations, covenants, agreements and duties
of the Dollar Borrowers under this Article shall in no way be affected or
impaired by reason of the happening from time to time of any of the following
with respect to the Credit Documents, without the necessity of any notice to, or
further consent of, the Dollar Borrowers, to the fullest extent permitted by
applicable law: (a) the release or waiver, by operation of law or otherwise, of
the performance or observance by DSL or any other co-guarantor, surety, endorser
or other obligor of any express or implied agreement, covenant, term or
condition in any Credit Document to be performed or observed by such party; (b)
the extension of the time for the payment of all or any portion of the Pound
Obligations or the extension of time for the performance of any other
obligations of DSL under, arising out of, or in connection with the Credit
Documents; (c) the supplementing, modification or amendment (whether material or
otherwise) of any of the Credit Documents (with respect to the obligations of
DSL) or any of the obligations of DSL or any other surety or co-guarantor for
DSL set forth in the Credit Documents; (d) any failure, omission, delay or lack
of diligence on the part of the Lender or any other Person, to enforce, assert
or exercise any right, privilege, power or remedy conferred on the Lender or any
other Person in any of the Credit Documents, or any action on the part of the
Lender or such other Person granting indulgence or extension of any kind; (e)
the release of any Lien or the release, modification, waiver or failure to
enforce any Lien, insurance agreement, bond or other guaranty, surety or
indemnity agreement whatsoever; (f) the release, modification, waiver or failure
to enforce any right, benefit, privilege or interest under any contract or
agreement, under which the rights of DSL under the Credit Documents or any other
obligor have been collateral or absolutely assigned, or a Lien which has been
granted, to the Lender as direct or indirect security for payment of all or any
part of the Pound Obligations or performance of any obligations of DSL under the
Credit Documents; (g) the voluntary or involuntary liquidation, dissolution,
sale of any collateral, marshaling of assets and liabilities, receivership,
insolvency, bankruptcy, assignment for the benefit of creditors, reorganization,
arrangement, composition or readjustment of debt of, or other similar
proceedings affecting, DSL under the Credit Documents, or any other surety or
co-guarantor for DSL under the Credit Documents or any of the Property of DSL or
of any other surety or co-guarantor for DSL under the Credit Documents; (h) any
invalidity of or defect or deficiency in any of the Credit Documents or failure
to acquire, perfect or maintain perfection of any Lien securing payment of the
Pound Obligations, or any portion thereof, or performance of DSL's or any other
Person's obligations under the Credit Documents, or (i) the settlement or
compromise of all or any part of Pound Obligations.
3.3 Waivers. The Dollar Borrowers hereby waive, to the fullest extent
permitted by applicable law, (a) marshaling of assets and liabilities; (b) sale
in inverse order of alienation; (c) notice of acceptance of this guaranty and of
any liability to which it applies or may apply; (d) presentment; (e) demand for
payment; (f) protest; (g) notice of nonpayment; (h) notice of dishonor; (i)
notice of acceleration; (j) notice of intent to accelerate; (k) all other
notices and demands, collection suit and the taking of any other action by the
Lender, and (l) all rights to
18
which it may be entitled under any applicable suretyship law, including Article
34 of the Texas Business and Commerce Code; Section 17.001 of the Texas Civil
Practice and Remedies Code, and Rule 31 of the Texas Rules of Civil Procedure.
3.4 Payment Guaranty. This is a guaranty of payment and not of
collection, and the Dollar Borrowers waive any right to require that any action
be brought against DSL or any other Person. Should the Lender seek to enforce
the obligations of the Dollar Borrowers under this Article by action in any
court, the Dollar Borrowers waive any necessity, substantive or procedural, that
a judgment previously be rendered against DSL or any other Person or that DSL or
any other Person be joined in such cause or that a separate action be brought
against DSL or any other Person; the obligations of the Dollar Borrowers under
this Article are several from those of DSL or any other Person, including any
other surety or co-guarantor for DSL, and are primary obligations concerning
which the Dollar Borrowers are each a principal obligor. All waivers herein
contained shall be without prejudice to the Lender at its option to proceed
against the Dollar Borrowers, DSL or any other Person, whether by separate
action or by joinder. The Dollar Borrowers agree that this guaranty shall not
be discharged except by (a) payment of the Pound Note in full; (B) termination
of all obligations of the Lender to make Pound Loans, and (c) complete
performance of all obligations of the Dollar Borrowers contained in this
Article.
3.5 Subrogation. Notwithstanding any payment or payments made by the
Dollar Borrowers under this Article or any set-off or application of funds of
the Dollar Borrowers by the Lender with respect to the Pound Note, the Dollar
Borrowers shall not be entitled to exercise any subrogation in respect of the
rights of the Lender against DSL or any collateral security or rights of offset
held by the Lender for the payment of the obligations of DSL under the Credit
Documents until such time as all Indebtedness owing to the Lender under this
Agreement and the other Credit Documents shall have been paid in full and the
obligation of the Lender to make further advances hereunder shall have
terminated.
4. Conditions.
4.1 All Extensions of Credit. The obligation of the Lender to make any
Loan or issue any Letter of Credit is subject to (a) the accuracy in all
material respects of all representations and warranties of the Borrowers on the
date of such extension of credit; (b) the performance in all material respects
by the Borrowers of their respective obligations under the Credit Documents, and
(c) the satisfaction in all material respects of the following further
conditions: (1) the Lender shall have received the following, all of which shall
be duly executed and in Proper Form: (A) in the case of a Dollar Loan, a Request
for Dollar Loan, substantially in the form of Exhibit C, no later than the
applicable Rate Designation Date; (B) in the case of a Pound Loan, a Request for
Pound Loan, substantially in the form of Exhibit D, no later than the applicable
Rate Designation Date; (C) in the case of a Letter of Credit, the Lender shall
have received the related Application at least three Business Days before the
date (which shall be a Business Day) the Letter of Credit is to be issued, and
(D) such other documents as the Lender may reasonably require; (2) before such
extension of credit, there shall have occurred, in the sole opinion of the
Lender, no material
19
adverse change in the assets, liabilities, financial condition, business or
affairs of the Dollar Borrowers and their Subsidiaries, taken as a whole; (3) no
Default or Event of Default shall have occurred and be continuing, and (4) such
extension of credit shall not be prohibited by, or subject the Lender to any
penalty or onerous condition under, any Legal Requirement.
4.2 First Loan. In addition to the matters described in Section 4.1, the
obligation of the Lender to make the first Loan hereunder is subject to the
receipt by the Lender of each of the following, in Proper Form: (a) the Notes;
(b) a Secretary's Certificate for each Borrower; (c) a certificate from the
appropriate Governmental Authorities as to the existence, authority to do
business and good standing of the Borrowers; (d) legal opinions from Xxxxx &
Xxxxx, L.L.P. and Xxxx Xxxxx & Co. substantially in the forms of Exhibits E and
F, respectively, and (e) a calculation of the initial Dollar Borrowing Base and
the initial Pound Borrowing Base, and to the further condition that, at the time
of the initial Loan, all legal matters incident to the transactions herein
contemplated shall be satisfactory to Liddell, Sapp, Zivley, Hill & XxXxxx,
L.L.P, counsel for the Lender.
5. Representations and Warranties.
To induce the Lender to enter into this Agreement and to make the Loans and
issue the Letters of Credit, the Borrowers represent and warrant as follows:
5.1 Organization. Each of the Dollar Borrowers and their Subsidiaries (a)
is duly organized, validly existing and in good standing under the laws of the
jurisdiction of its organization; (b) has all power and authority to conduct its
business as presently conducted, and (c) is duly qualified to do business and in
good standing in all jurisdictions where such qualification is necessary or
desirable and where the failure to be so qualified would reasonably be expected
to have a material adverse effect on the assets, liabilities, financial
condition, business or affairs of the Dollar Borrowers and their Subsidiaries,
taken as a whole.
5.2 Financial Statements. The Financial Statements delivered to the
Lender fairly present, in all material respects, in accordance with Good
Accounting Practice, the financial condition and the results of operations of
the Dollar Borrowers and their Subsidiaries as at the dates and for the periods
indicated. Except as heretofore disclosed to the Lender, no material adverse
change has occurred in the assets, liabilities, financial condition, business or
affairs of the Dollar Borrowers and their Subsidiaries, taken as a whole, since
the dates of such Financial Statements. None of the Borrowers is subject to any
instrument or agreement materially and adversely affecting its financial
condition, business or affairs.
5.3 Enforceable Obligations; Authorization. The Credit Documents are
legal, valid and binding obligations of the Borrowers, enforceable in accordance
with their respective terms, except as may be limited by bankruptcy, insolvency
and other similar laws affecting creditors' rights generally and by general
equitable principles. The execution, delivery and performance of the Credit
Documents (a) have all been duly authorized by all necessary action; (b) are
within the
20
power and authority of the Borrowers; (c) do not and will not contravene or
violate any applicable Legal Requirement or the Organizational Documents of the
Borrowers; (d) do not and will not result in the breach of, or constitute a
default under, any agreement or instrument by which any Borrower or any of their
respective Property may be bound or affected, and (e) do not and will not result
in the creation of any Lien upon any Property of any of the Borrowers except as
expressly contemplated therein. All necessary permits, registrations and
consents for such making and performance have been obtained.
5.4 Other Debt. None of the Dollar Borrowers nor any of their
Subsidiaries is in default in the payment of any other Debt or under any
agreement, mortgage, deed of trust, security agreement or lease to which it is a
party which would reasonably be expected to have a material adverse effect on
the assets, liabilities, financial condition, business or affairs of the Dollar
Borrowers and their Subsidiaries, taken as a whole.
5.5 Litigation. Except as disclosed to the Lender, there is no litigation
or administrative proceeding pending or, to the knowledge of any Borrower,
threatened against, nor any outstanding judgment, order or decree affecting, any
Dollar Borrower or any of their Subsidiaries before or by any Governmental
Authority. None of the Dollar Borrowers nor any of their Subsidiaries is in
default with respect to any judgment, order or decree of any Governmental
Authority.
5.6 Title. Except as disclosed to the Lender, the Dollar Borrowers and
each of their Subsidiaries has good and marketable title to its respective
Property, free and clear of all material Liens other than Permitted Liens.
5.7 Taxes. The Dollar Borrowers and each of their Subsidiaries has filed
all tax returns required to have been filed and paid all taxes shown thereon to
be due, except those for which extensions have been obtained and those which are
being contested in good faith.
5.8 Regulation U. None of the proceeds of any Loan will be used for the
purpose of purchasing or carrying directly or indirectly any margin stock or for
any other purpose would constitute this transaction a "purpose credit" within
the meaning of Regulation U of the Board of Governors of the Federal Reserve
System.
5.9 Subsidiaries. As of the date of this Agreement, the Dollar Borrowers
have no Subsidiaries other than as listed on Appendix I. As of the date of this
Agreement, each such Subsidiary is owned by the Dollar Borrowers in the
percentages set forth on Appendix I.
5.10 Representations by Others. All statements made by or on behalf of any
Borrower in connection with any Credit Document shall constitute representations
and warranties of the Borrowers hereunder.
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5.11 No Misrepresentation or Omission. No representation or statement by
or on behalf of any Borrower to the Lender in connection with the negotiation of
the Credit Documents or the transactions contemplated thereby as of the
respective dates of delivery thereof to the Lender (or as of the date as to
which such information speaks, as applicable), contains (or will contain) any
untrue statement of material fact, or omits (or will omit) to state a material
fact necessary to make the statements contained therein, in light of the
circumstances under which they were made, not misleading. There is no fact
(other than facts of general applicability to the Borrowers and others in the
same industry as the Borrowers) which materially and adversely affects (or in
the future may, as far as any Borrower can now foresee, materially and adversely
affect) the assets, liabilities, financial condition, business or affairs of the
Dollar Borrowers and their Subsidiaries, taken as a whole.
6. Affirmative Covenants.
Each Borrower covenants and agrees with the Lender that before the
termination of this Agreement it will do, cause each of its Subsidiaries to do,
and if necessary cause to be done, each and all of the following:
6.1 Taxes, Existence, Regulations, Property, etc. At all times (a) pay
when due all taxes and governmental charges of every kind upon it or against its
income, profits or Property, unless and only to the extent that the same shall
be contested in good faith and reserves have been established therefor; (b) do
all things necessary to preserve its corporate existence, qualifications, rights
and franchises in all jurisdictions where such qualification is necessary or
desirable and where the failure to do so would reasonably be expected to have a
material adverse effect on the assets, liabilities, financial condition,
business or affairs of the Dollar Borrowers and their Subsidiaries, taken as a
whole; (c) comply in all material respects with all applicable Legal
Requirements in respect of the conduct of its business and the ownership of its
Property where the failure to do so would reasonably be expected to have a
material adverse effect on the assets, liabilities, financial condition,
business or affairs of the Dollar Borrowers and their Subsidiaries, taken as a
whole, and (d) subject to force majeure and ordinary wear and tear, cause its
Property to be protected, maintained and kept in good repair and make all
replacements and additions to its Property as may be reasonably necessary to
conduct its business properly and efficiently.
6.2 Financial Statements and Information. Furnish to the Lender three
copies of each of the following: (a) as soon as available and in any event
within 120 days after the end of each fiscal year of the Dollar Borrowers,
Annual Financial Statements of Parent, together with a reconciliation of the
same to the Quarterly Financial Statements of the Parent with the same date; (b)
as soon as available and in any event within 45 days after the end of each
quarter of each fiscal year of the Dollar Borrowers, Quarterly Financial
Statements of the Parent; (c) concurrently with the Financial Statements
provided for in Section 6.2(b), a Certificate of No Default, substantially in
the form of Exhibit G (accompanied by evidence reasonably satisfactory to Lender
supporting the information set forth in such Certificate of No Default), and (d)
such other information
22
relating to the financial condition and affairs of the Dollar Borrowers and
their Subsidiaries as the Lender may request from time to time.
6.3 Financial Tests. Have and maintain at all times (a) a Tangible Net
Worth of Parent (on a consolidated basis) at least equal to the Tangible Net
Worth Requirement; (b) a Debt to Capitalization Ratio of Parent (on a
consolidated basis) of not more than 40%, and (c) a Fixed Charge Coverage Ratio
of Parent (on a consolidated basis) of at least 1.25 to 1.
6.4 Inspection. Permit the Lender to inspect its Property, to examine its
files, books and records and make and take away copies thereof, and to discuss
its affairs with its officers and accountants, all at such times and intervals
and to such extent during normal business hours as the Lender may reasonably
desire.
6.5 Further Assurances. Promptly execute and deliver any and all other
and further instruments which may be reasonably requested by the Lender to cure
any defect in the execution and delivery of any Credit Document or more fully to
describe particular aspects of each Borrower's agreements set forth in the
Credit Documents or so intended to be.
6.6 Books and Records. Maintain books of record and account in accordance
with Good Accounting Practice.
6.7 Insurance. Maintain insurance with such insurers, on such of its
properties, in such amounts and against such risks as is customarily maintained
by other Persons of similar size engaged in similar businesses, and furnish the
Lender satisfactory evidence thereof promptly upon request.
6.8 Notice of Certain Matters. Notify the Lender immediately upon
acquiring knowledge of the occurrence of any of the following: (a) the
institution or threatened institution of any lawsuit or administrative
proceeding (including any tax assessment) affecting any Dollar Borrower or any
of their Subsidiaries that would reasonably be expected to have a material
adverse effect on the assets, liabilities, financial condition, business or
affairs of the Dollar Borrowers and their Subsidiaries, taken as a whole; (b)
any material adverse change in the assets, liabilities, financial condition,
business or affairs of the Dollar Borrowers and their Subsidiaries, taken as a
whole, or (c) any Event of Default or any Default. A Borrower will notify the
Lender in writing at least 30 days before the date that such Borrower changes
its name or the location of its chief executive office or principal place of
business or the place where it keeps its books and records.
6.9 Use of Proceeds. The proceeds of the Loans will be used for general
corporate purposes.
23
7. Negative Covenants.
Each Borrower covenants and agrees with the Lender that before the
termination of this Agreement it will not, and will not suffer or permit any of
their Subsidiaries to, do any of the following:
7.1 Debt. Create, incur, suffer or permit to exist, or assume or
guarantee, directly or indirectly, or become or remain liable with respect to
any Debt, whether direct, indirect, absolute, contingent or otherwise, except
the following: (a) Debt to the Lender; (b) Debt secured by Liens permitted by
Section 7.2; (c) other liabilities existing on the date of this Agreement and
heretofore disclosed to the Lender, and all renewals and extensions (but not
increases) thereof; (d) current accounts payable and unsecured current
liabilities, not the result of borrowing, to vendors, suppliers and Persons
providing services, for expenditures for goods and services normally required by
it in the ordinary course of business and on ordinary trade terms; (e) unsecured
Debt owing by (1) the Dollar Borrowers to any of their Subsidiaries; (2) any of
their Subsidiaries to the Dollar Borrowers, and (3) any Subsidiary of the Dollar
Borrowers to another Subsidiary of the Dollar Borrowers; (f) the Posi-Trak
Acquisition Note and the Stock Acquisition Notes, and all renewals and
extensions (but not increases) thereof; (g) the Shareco Acquisition Notes, and
all renewals and extensions (but not increases) thereof; (h) other unsecured
Debt of Parent, not to exceed $5,000,000 in the aggregate at any one time
outstanding; (i) Interest Rate Risk Indebtedness, and (j) other unsecured Debt,
not to exceed $1,000,000 in the aggregate (for the Dollar Borrowers and their
Subsidiaries) at any one time outstanding.
7.2 Liens. Create or suffer to exist any Lien upon any of its Property
now owned or hereafter acquired, or acquire any Property upon any conditional
sale or other title retention device or arrangement or any purchase money
security agreement; or in any manner directly or indirectly sell, assign, pledge
or otherwise transfer any of its accounts or contract rights; provided that any
Dollar Borrower or any of their Subsidiaries may create or suffer to exist: (a)
materialmen's, artisans' or mechanics' Liens arising in the ordinary course of
business, and Liens for taxes, but only to the extent that payment thereof shall
not at the time be due or are being contested in good faith and by appropriate
proceeding; (b) Liens in effect on the date hereof and disclosed to the Lender,
provided that neither the Indebtedness secured thereby nor the Property covered
thereby shall increase; (c) Liens in favor of the Lender, including, without
limitation, Liens securing Interest Rate Risk Indebtedness owed to the Lender
(but not to any to any other Person); (d) purchase money Liens on Property to be
acquired, but only if (1) the Debt secured thereby does not exceed the purchase
price of such Property and (2) the aggregate amount of such Debt does not exceed
$1,000,000 in the aggregate (for the Dollar Borrowers and their Subsidiaries) at
any one time outstanding; (e) Liens covering the equity interest in Xxxx owned
by Parent and DSI and securing the Posi-Trak Acquisition Note and/or the Stock
Acquisition Notes, and all renewals and extensions (but not increases) thereof;
(f) Liens consisting of pledges or deposits made in connection with obligations
of the Borrowers or their Subsidiaries incurred in the ordinary course of
business under unemployment insurance, social security, workers' compensation
laws or similar legislation; (g) Liens consisting of security interests, pledges
or
24
deposits of property to secure the performance of bids, tenders, trade contracts
(other than contracts evidencing or constituting Indebtedness for the payment of
money), leases, licenses, franchises, performance bonds and other obligations of
a like nature incurred in the ordinary course of business; (h) Liens consisting
of deposits of property to secure (or in lieu of) surety, appeal or customer
bonds in proceedings to which the Borrowers or their Subsidiaries is a party in
the ordinary course of business; (i) Liens created by, resulting from or arising
in connection with any litigation or legal proceeding involving the Borrowers or
their Subsidiaries (excluding any attachment prior to judgment, judgment lien or
attachment in aid of execution on a judgment to the extent the amount of the
related judgments, in the aggregate, exceed $500,000 which is not covered by
insurance) which is currently being diligently contested in good faith by
appropriate proceedings; provided that adequate reserves with respect thereto
are maintained on the books of the Borrowers or their Subsidiaries in accordance
with Good Accounting Practices; (j) Liens upon any property hereafter acquired
by the Borrowers or their Subsidiaries (the "Acquiring Entity") to secure
Indebtedness in existence on the date of such acquisition (but not incurred or
created in connection with such acquisition), which Indebtedness is assumed by
such Acquiring Entity simultaneously with such acquisition, which Liens extend
only to such property so acquired and with respect to which Indebtedness none of
the Borrowers or any Subsidiary (other than the Acquiring Entity) has any
obligations; (k) normal encumbrances and restrictions on title which do not
secure Debt and which do not have a material adverse affect on the assets,
liabilities, financial condition, business or affairs of the Dollar Borrowers
and their Subsidiaries, taken as a whole, and (l) any Lien created by or
resulting from any extension, renewal, modification, refinancing, in whole or in
part, of any indebtedness or other financing giving rise to a Lien permitted by
subparagraphs (a) through (k) above, if limited to the same property or any
portion thereof subject to, and securing not more than the amount secured by,
the Lien previously securing the Indebtedness or other financing so extended,
renewed, modified or refinanced.
7.3 Contingent Liabilities. Directly or indirectly guarantee the
performance or payment of, or purchase or agree to purchase, or assume or
contingently agree to become or be secondarily liable in respect of, any
obligation or liability of any other Person except for (a) the endorsement of
checks or other negotiable instruments in the ordinary course of business; (b)
guarantees, letters of credit and other such obligations in favor of the Lender;
(c) contingent obligations with respect to surety bonds obtained in the ordinary
course of business; (d) the Letters of Credit; (e) indemnities, warranties and
other contingent obligations arising in the ordinary course of business in
connection with the purchase, sale or other disposition of assets or properties
or the delivery of services; (f) indemnity obligations arising by operation of
law in the ordinary course of business; (g) other guarantees of Debt, provided
that the aggregate amount of such Debt so guaranteed may not exceed $500,000 in
the aggregate (for the Dollar Borrowers and their Subsidiaries) at any one time
outstanding, and (h) contingent obligations heretofore disclosed to the Lender.
7.4 Mergers, Consolidations and Dispositions and Acquisitions of Assets.
In any single transaction or series of transactions, directly or indirectly: (a)
liquidate or dissolve; (b) be a party to any merger or consolidation, unless a
Dollar Borrower (if any Dollar Borrower is involved in
25
the transaction) or DSL (if DSL, but no Dollar Borrower, is involved in the
transaction) is the survivor; (c) sell, convey or lease all or any substantial
part of its assets, except for sale of Inventory in the ordinary course of
business or other property not necessary or useful in the conduct of such
Person's business, or (d) except as permitted under Section 7.2, pledge,
transfer or otherwise dispose of any shares of capital stock of a Subsidiary or
any Debt of a Subsidiary, or permit any Subsidiary to issue any additional
shares of capital stock other than to the Dollar Borrowers or their
Subsidiaries, or to acquire any shares of capital stock of any Dollar Borrower
or any of their Subsidiaries.
7.5 Redemption, Dividends and Distributions. At any time (a) redeem,
retire or otherwise acquire, directly or indirectly, any shares of its capital
stock; (b) pay any dividend (except Permitted Dividends), or (c) make any other
distribution of any Property or cash to stockholders as such (except Permitted
Dividends).
7.6 Nature of Business. Change the nature of its business or enter into
any business which is substantially different from the business in which it is
presently engaged.
7.7 Transactions with Related Parties. Except for the transactions and
agreements under the Xxxx Acquisition Documents, enter into any transaction or
agreement with any officer, director or holder of any outstanding capital stock
of any Dollar Borrower or any of their Subsidiaries (or any Affiliate of any
such Person) unless the same is upon terms substantially similar to those
obtainable from wholly unrelated sources.
7.8 Loans and Investments. Make any loan, advance, extension of credit or
capital contribution to, or have any Investment in, any Person, or make any
commitment to make any such extension of credit or Investment, except (a)
Permitted Investment Securities; (b) travel advances and other prepaid business
expenses in the ordinary course of business to officers and employees; (c) the
stock of Subsidiaries as in effect on the date hereof and as heretofore
disclosed to the Lender; (d) Investments by any Borrower or any of its
Subsidiaries to or in any other Borrower; (e) other Investments (including
loans) by the Borrowers or any of their Subsidiaries, not to exceed $3,000,000
in the aggregate at any one time outstanding, in other entities which are
primarily engaged in businesses substantially similar to the businesses
conducted by the Borrowers and their Subsidiaries on the date hereof or other
businesses primarily engaged in the design, manufacture, sale or distribution of
equipment or products primarily used in the exploration for, or production or
transportation of, oil and gas or used primarily in the petrochemical, chemical,
refining, mining, environmental remediation or trenchless application business;
(f) Investments acquired in settlement of claims and disputes, and (g) the loans
evidenced by the promissory notes described on Exhibit I hereto.
7.9 ERISA. At any time permit any Plan to (a) engage in any "prohibited
transaction" as defined in ERISA; (b) incur any "accumulated funding deficiency"
as defined in ERISA, or (c) be terminated in a manner which could result in the
imposition of a Lien on any Property of any Dollar Borrower or any of their
Subsidiaries pursuant to ERISA.
26
7.10 Subsidiaries. The Borrowers will not form or acquire any
Subsidiaries without first giving the Lender prior written notice thereof. Each
Subsidiary formed or acquired after the date hereof which is organized in the
United States shall be required to execute and deliver to the Lender a guaranty,
in Proper Form, pursuant to which such Subsidiary guarantees payment of the
Obligations.
8. Events of Default and Remedies.
8.1 Events of Default. If any of the following events shall occur, then
the Lender may do any or all of the following: (1) without notice to any
Borrower, declare either or both of the Notes to be, and thereupon such Note(s)
shall forthwith become, immediately due and payable, together with all accrued
interest thereon and any Commitment Fee hereunder, without notice of any kind,
notice of acceleration or of intention to accelerate, presentment and demand or
protest, all of which are hereby expressly waived; (2) without notice to any
Borrower, terminate either or both of the Commitments; (3) by notice in writing
to the Borrowers, accelerate the Termination Date to a date as early as the date
of the notice; (4) exercise its rights of offset against each account and all
other Property of any of the Borrowers in the possession of the Lender, which
right is hereby granted by the Borrowers to the Lender, and (5) exercise any and
all other rights pursuant to the Credit Documents:
(a) A Borrower shall fail to pay or prepay any principal of the Note made
by it as and when due;
(b) A Borrower shall fail to pay any interest on the Note made by it or any
Commitment Fee or any other obligation hereunder payable by it as and within
three Business Days of when due; or
(c) Any Dollar Borrower or any of their Subsidiaries shall fail to pay at
maturity, or within any applicable period of grace, any principal of or interest
on any other Debt having a principal amount outstanding in excess of $500,000,
or an "event of default" (however denominated) shall have occurred which gives
the holder of such Debt the legal ability to accelerate its maturity; or
(d) Any representation or warranty made in connection with any Credit
Document shall prove to have been incorrect, false or misleading in any material
respect when made; or
(e) Default shall occur in the punctual and complete performance of any
covenant contained in Section 6.3 or Section 7 of this Agreement or any other
negative covenant set forth in this Agreement or in any other Credit Document;
or
(f) Default shall occur in the punctual and complete performance of any
other covenant of a Borrower or any other Person (other than the Lender)
contained in any Credit Document and
27
the same shall remain uncured for ten days after the Lender gives notice thereof
to the Borrowers; or
(g) Final judgment for the payment of money shall be rendered against any
Dollar Borrower or any of their Subsidiaries in excess of $500,000 in the
aggregate which is not covered by insurance and the same shall remain
undischarged for a period of 30 days during which execution shall not be
effectively stayed; or
(h) Any order shall be entered in any proceeding against any Dollar
Borrower or any of their Subsidiaries decreeing the dissolution, liquidation or
split-up thereof, and such order shall remain in effect for 30 days; or
(i) The occurrence of an Event of Default under any Credit Document; or
(j) Any Dollar Borrower or any of their Subsidiaries shall make a general
assignment for the benefit of creditors or shall petition or apply to any
tribunal for the appointment of a trustee, custodian, receiver or liquidator of
all or any substantial part of its business, estate or assets or shall commence
any proceeding under any bankruptcy, reorganization, arrangement, insolvency,
readjustment of debt, dissolution or liquidation law of any jurisdiction,
whether now or hereafter in effect; or
(k) Any such petition or application shall be filed or any such proceeding
shall be commenced against any Dollar Borrower or any of their Subsidiaries and
any Dollar Borrower or such Subsidiary by any act or omission shall indicate
approval thereof, consent thereto or acquiescence therein, or an order shall be
entered appointing a trustee, custodian, receiver or liquidator of all or any
substantial part of the assets of any Dollar Borrower or any of their
Subsidiaries or granting relief to any Dollar Borrower or any of their
Subsidiaries or approving the petition in any such proceeding, and such order
shall remain in effect for more than 30 days; or
(l) Any Dollar Borrower or any of their Subsidiaries shall fail generally
to pay its debts as they become due or suffer any writ of attachment or
execution or any similar process to be issued or levied against it or any
substantial part of its Property which is not released, stayed, bonded or
vacated within 30 days after its issue or levy; or
(m) Any Dollar Borrower or any of their Subsidiaries shall have concealed,
removed, or permitted to be concealed or removed, any part of its Property, with
intent to hinder, delay or defraud its creditors or any of them, or made or
suffered a transfer of any of its Property which may be fraudulent under any
bankruptcy, fraudulent conveyance or similar law; or shall have made any
transfer of its Property to or for the benefit of a creditor at a time when
other creditors similarly situated have not been paid; or
28
(n) DSI shall cease to own, directly or indirectly, all the indicia of
equity rights (whether issued and outstanding capital stock or otherwise) of
DSL; Parent shall cease to own, directly or indirectly, all the indicia of
equity rights (whether issued and outstanding capital stock or otherwise) of
DSI, Xxxx or Shareco; or
(o) any default or event of default shall occur under (1) the Posi-Trak
Acquisition Note, (2) the Stock Acquisition Notes, (3) the Shareco Acquisition
Notes, or (4) any renewal, extension, modification or supplement of any of the
foregoing, and such default or event of default shall not be cured within any
applicable cure period provided with respect thereto.
8.2 Remedies Cumulative. No remedy, right or power conferred upon the
Lender is intended to be exclusive of any other remedy, right or power given
hereunder or now or hereafter existing at law, in equity, or otherwise, and all
such remedies, rights and powers shall be cumulative.
9. Miscellaneous.
9.1 No Waiver. No waiver of any Default shall be deemed to be a waiver of
any other Default. No failure to exercise or delay in exercising any right or
power under any Credit Document shall operate as a waiver thereof, nor shall any
single or partial exercise of any such right or power preclude any further or
other exercise thereof or the exercise of any other right or power. The Lender
may remedy any Default without waiving the Default remedied. Acceptance by the
Lender of a payment in an amount less than the amount then due shall be deemed
an acceptance on account only and shall not in any way affect the existence of a
Default. No amendment, modification or waiver of any Credit Document shall be
effective unless the same is in writing and signed by the Person against whom
such amendment is sought to be enforced. No notice to or demand on a Borrower
or any other Person shall entitle any Borrower or any other Person to any
other or further notice or demand in similar or other circumstances.
9.2 Notices. All notices under the Credit Documents shall be in writing
and either (1) delivered against receipt therefor; (2) mailed by registered or
certified mail, return receipt requested, or (3) sent by telecopy, in each case
addressed as follows:
(a) If to any Borrower, to:
Drilex International Inc.
15151 Sommermeyer
Xxxxxxx, Xxxxx 00000
Attention: Vice President, Finance and Administration
Telecopy No.: (000) 000-0000
29
(b) If to the Lender, to:
Texas Commerce Bank National Association
000 Xxxx Xxxxxx
Xxxxxxx, Xxxxx 00000
Attention: Manager, Manufacturing and Oilfield Service Division
Telecopy No.: (000) 000-0000
with a copy to:
Texas Commerce Bank National Association
P. O. Xxx 0000
Xxxxxxx, Xxxxx 00000
Attention: Manager, Loan Agreements Section
or to such other address as a party may designate. Notices shall be deemed to
have been given (whether actually received or not) when delivered (or, if
mailed, on the next Business Day); however, the notices required or permitted by
Sections 2.5 and 4.1 hereof shall be effective only when actually received by
the Lender. Actual notice, however and from whomever given or received, shall
always be effective when received.
9.3 Governing Law. Unless otherwise specified therein, each Credit
Document shall be governed by and construed in accordance with the laws of the
State of Texas and the USA. Each Borrower hereby irrevocably (a) agrees that any
legal proceeding against the Lender arising out of or in connection with any
Credit Document shall be brought in the district courts of Xxxxxx County, Texas,
or in the United States District Court for the Southern District of Texas,
Houston Division (collectively, the "Specified Courts"); (b) submits to the non-
exclusive jurisdiction of the Specified Courts; (c) agrees and consents that
service of process may be made upon it in any proceeding arising out of the
Credit Documents or any transaction contemplated thereby by service of process
as provided by Texas law; (d) waives, to the fullest extent not prohibited by
law, any objection which it may now or hereafter have to the laying of venue of
any suit, action or proceeding arising out of any Credit Document or the
transactions contemplated thereby in the Specified Courts, and (e) waives any
claim that any such suit, action or proceeding in any Specified Court has been
brought in an inconvenient forum. DSL hereby appoints DSI as DSL's agent for
service of process. All of the obligations of the Borrowers under the Credit
Documents are performable in Xxxxxx County, Texas.
9.4 Survival; Parties Bound; Term. All representations, warranties,
covenants and agreements made by or on behalf of the Borrower in connection
herewith shall survive the execution and delivery of the Credit Documents, and
shall bind the Borrowers and their respective successors, trustees, receivers
and assigns and inure to the benefit of the successors and assigns of the
Lender, provided that the separate undertakings of the Lender hereunder to make
Loans to the Borrowers shall not inure to the benefit of any successor or assign
of any Borrower. The term
30
of this Agreement shall be until the final maturity of all of the Notes, the
expiry of all Letters of Credit, the termination of all of the Commitments and
the payment of all amounts due under the Credit Documents. The Borrowers agree
that if at any time all or any part of any payment previously applied by the
Lender to any Loan or other obligation hereunder is or must be returned by or
recovered from the Lender for any reason (including the order of any bankruptcy
court), the Credit Documents shall automatically be reinstated to the same
effect as if the prior application had not been made, and each Borrower hereby
agrees to indemnify each such payee against, and to save and hold each such
payee harmless from, any required return by or recover from each such payee of
any such payment previously made by such Borrower because of such payment being
deemed preferential under applicable Legal Requirements, or for any other
reason.
9.5 Counterparts. Each Credit Document may be executed in several
identical counterparts, and by the parties thereto on separate counterparts, and
each counterpart, when so executed and delivered, shall constitute an original
instrument, and all such separate counterparts shall constitute but one and the
same instrument.
9.6 Captions. The headings and captions appearing in the Credit Documents
have been included solely for convenience and shall not be considered in
construing the Credit Documents.
9.7 Expenses. Any provision to the contrary notwithstanding, and whether
or not the transactions contemplated by this Agreement shall be consummated, the
Dollar Borrowers shall pay on demand all out-of-pocket expenses (including,
without limitation, the fees and expenses of counsel for the Lender) reasonably
incurred in connection with (a) the negotiation, preparation, execution, filing,
recording, refiling, re-recording, modification, supplementing and waiver of the
Credit Documents (provided that the Borrowers may condition their agreement to
enter into any such modification, supplement or waiver upon such expenses not
exceeding a specified amount or any similar condition); (b) the making,
servicing and collection of the Loans; (c) the evaluating, monitoring,
administering and protecting any of the Collateral; (d) the realizing upon the
Collateral and all costs and expenses relating to the Lender's exercising any of
its rights and remedies under any of the Credit Documents or at law, and (e) the
performance by the Lender (in a Borrower's name or otherwise) of any agreement,
covenant or obligations of a Borrower under the Credit Documents which such
Borrower had not performed, in each case including all appraisal fees,
consulting fees, filing fees, taxes, brokerage fees and commissions and Uniform
Commercial Code search fees; provided that no right or option granted by a
Borrower to the Lender pursuant to any Credit Document shall be deemed to impose
or admit a duty on the Lender to supervise, monitor or control any aspect of the
character or condition of any of the Collateral or any operations conducted in
connection with it for the benefit of any Borrower or any other Person.
Interest shall accrue on all such expenses from the date of demand therefor at
the lesser of (1) the Past Due Rate or (2) the Highest Lawful Rate if such
expenses are not reimbursed within 15 days after such date of demand. The
obligations of the Dollar Borrowers under Section 2.2(e), this Section and the
following Section shall survive the termination of this Agreement.
31
9.8 Indemnification. The Dollar Borrowers agree to indemnify, defend and
hold the Lender and its shareholders, directors, officers, employees and agents
(collectively, the "Indemnified Persons") harmless from and against any and all
loss, liability, obligation, damage, penalty, judgment, claim, deficiency and
expense (including interest, penalties, attorneys' fees and amounts paid in
settlement) to which any of them may become subject arising out of or based upon
the Credit Documents, WHETHER THROUGH THE ALLEGED OR ACTUAL NEGLIGENCE OF SUCH
PERSON OR OTHERWISE, except and to the extent that the same results from the
gross negligence, willful misconduct or bad faith of such Indemnified Person.
9.9 Entire Agreement. The Credit Documents embody the entire agreement
between the Borrowers and the Lender and supersedes all prior proposals,
agreements and understandings relating to the subject matter hereof.
9.10 Severability. If any provision of any Credit Document shall be
invalid, illegal or unenforceable in any respect under any applicable law, the
validity, legality and enforceability of the remaining provisions shall not be
affected or impaired thereby. Each waiver in the Credit Documents is subject to
the overriding and controlling rule that it shall be effective only if and to
the extent that (a) it is not prohibited by applicable law and (b) applicable
law neither provides for nor allows any material sanctions to be imposed against
the Lender for having bargained for and obtained it.
9.11 Disclosures. Every reference in the Credit Documents to disclosures
of any Borrower to the Lender, to the extent that such references refer to
disclosures at or before the execution of this Agreement, shall be deemed
strictly to refer only to written disclosures delivered to the Lender in an
orderly manner concurrently with the execution hereof.
9.12 Obligations of Dollar Borrowers Are Joint And Several. All of the
liabilities and obligations of the Dollar Borrowers under this Agreement and
under the other Credit Documents shall be joint and several. Each of the
Borrowers represents and warrants that such Borrower has not been required to
become jointly and severally liable for the obligations of any other Person
under this Agreement as a condition to such Borrower's receipt of any loan or
other extension of credit made pursuant to this Agreement, the Credit Documents,
or any other document executed in connection therewith.
9.13 Amendment and Restatement. This Agreement amends and restates in its
entirety that certain Credit Agreement dated September 29, 1995 executed by and
among the Lender and Drilex Systems, Inc., Drilex Holdings Corp., Sharewell,
Inc., Xxxx Directional Drilling Company, L.L.C. and Drilex Systems Limited, as
amended.
THE CREDIT DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND
MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL
AGREEMENTS OF THE PARTIES.
32
THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date set forth above.
DRILEX INTERNATIONAL INC.,
a Delaware corporation
By:/s/ Xxxx Xxxxxxx
---------------------------
Xxxx Xxxxxxx,
President
DRILEX SYSTEMS, INC.,
a Texas corporation
By:/s/ Xxxx Xxxxxxx
---------------------------
Xxxx Xxxxxxx,
President
33
XXXX DIRECTIONAL DRILLING COMPANY,
L.L.C., a Delaware limited liability company
By: Drilex International Inc., a Delaware
corporation, Member
By:/s/ Xxxx Xxxxxxx
-----------------------------
Xxxx Xxxxxxx,
President
By: Drilex Systems, Inc., a Delaware
corporation, Member
By:/s/ Xxxx Xxxxxxx
------------------------------
Xxxx Xxxxxxx,
President
SHAREWELL, INC.,
a Delaware corporation
By:/s/ Xxxx Xxxxxxx
--------------------------------
Xxxx Xxxxxxx,
Chief Executive Officer
34
DRILEX SYSTEMS LIMITED,
a company incorporated in Scotland under the
Companies Act
WITNESSES to
execution by Drilex
Systems Limited:
By:/s/ Xxxx Xxxxxxx
--------------------------------
Xxxx Xxxxxxx,
Director
/s/ G. Xxxxx Xxxxxxxxx
----------------------------
Name: G. Xxxxx Xxxxxxxxx
Address: 15151 Xxxxxxxxxxx
Xxxxxxx, Xx. 00000
Occupation: V.P. Finance
/s/ Xxxxx Xxxxxxxxxxx
---------------------------
Name: Xxxxx Xxxxxxxxxxx
Address: 00000 Xxxxxxxxxxx
Xxxxxxx, Xx 00000
Occupation: Exec. Secretary
35
TEXAS COMMERCE BANK NATIONAL
ASSOCIATION,
a national banking association
By:/s/ Xxxxxxx X. Xxxx
----------------------------
Name: Xxxxxxx X. Xxxx
--------------------------
Title: Executive Vice President
-------------------------
Exhibit A - Dollar Note
Exhibit B - Pound Note
Exhibit C - Request for Dollar Loan
Exhibit D - Request for Pound Loan
Exhibit E - Opinion of Xxxxx & Xxxxx, L.L.P.
Exhibit F - Opinion of Xxxx Xxxxx & Co.
Exhibit G - Certificate of No Default
Exhibit H - Shareco Acquisition Notes
Exhibit I - Certain Notes Held by Dollar Borrowers
Appendix I - Subsidiaries
36
