As filed with the Securities and Exchange Commission on July 24, 2013
Registration No. 333-188536
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Amendment No. 3
to
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
Franks International N.V.
(Exact name of registrant as specified in its charter)
The Netherlands | 1389 | 98-1107145 | ||
(State or other jurisdiction of incorporation or organization) |
(Primary Standard Industrial Classification Code Number) |
(IRS Employer Identification No.) |
Prins Bernhardplein 200
1097 JB Amsterdam, The Netherlands
+31 (0)20 52 14 777
(Address, including zip code, and telephone number, including area code, of registrants principal executive offices)
Brian D. Baird
Vice President and Chief Legal Officer
Prins Bernhardplein 200
1097 JB Amsterdam, The Netherlands
+31 (0)20 52 14 777
(Name, address, including zip code, and telephone number, including area code, of agent for service)
Copies to:
Douglas E. McWilliams Jeffery K. Malonson Vinson & Elkins L.L.P. 1001 Fannin, Suite 2500 Houston, Texas 77002-6760 (713) 758-2222 |
Sean T. Wheeler Latham & Watkins LLP 811 Main Street, Suite 3700 Houston, Texas 77002 (713) 546-5400 |
Approximate date of commencement of proposed sale to the public : As soon as practicable after the effective date of this Registration Statement.
If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933 check the following box: ¨
If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ¨
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ¨
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of large accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act.
Large accelerated filer | ¨ | Accelerated filer | ¨ | |||
Non-accelerated filer | x (Do not check if a smaller reporting company) | Smaller reporting company | ¨ |
The registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until this Registration Statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.
The information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.
Subject to Completion, dated July 24, 2013
PROSPECTUS
Shares
Franks International N.V.
Common Stock
This is the initial public offering of Franks International N.V. We are offering shares of our common stock. No public market currently exists for our common stock.
We have applied to list our common stock on the New York Stock Exchange under the symbol FI.
We anticipate that the initial public offering price will be between $ and $ per share.
Investing in our common stock involves risks. Please read Risk Factors beginning on page 16.
Per share | Total | |||||||
Price to the public |
$ | $ | ||||||
Underwriting discounts and commissions(1) |
$ | $ | ||||||
Proceeds to us, before expenses |
$ | $ |
(1) | Please read Underwriting for a description of all underwriting compensation payable in connection with this offering. |
We have granted the underwriters the option to purchase additional shares of common stock on the same terms and conditions set forth above if the underwriters sell more than shares of common stock in this offering.
Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or passed on the adequacy or accuracy of this prospectus. Any representation to the contrary is a criminal offense.
The underwriters expect to deliver the shares on or about , 2013.
Barclays |
Credit Suisse |
Simmons & Company International |
Citigroup |
Morgan Stanley | Goldman, Sachs & Co. | UBS Investment Bank |
Capital One Southcoast |
Tudor, Pickering, Holt & Co. |
Global Hunter Securities |
Johnson Rice & Company L.L.C. |
FBR | Scotiabank / Howard Weil |
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You should rely only on the information contained in this prospectus and any free writing prospectus prepared by us or on our behalf or to which we have referred you. We have not, and the underwriters have not, authorized anyone to provide you with information different from that contained in this prospectus and any free writing prospectus. We are offering to sell shares of common stock and seeking offers to buy shares of common stock only in jurisdictions where offers and sales are permitted. The information in this prospectus is accurate only as of the date of this prospectus, regardless of the time of delivery of this prospectus or any sale of the common stock.
Until , 2013, all dealers that buy, sell or trade our common stock, whether or not participating in this offering, may be required to deliver a prospectus. This requirement is in addition to the dealers obligation to deliver a prospectus when acting as underwriters and with respect to their unsold allotments or subscriptions.
Industry and Market Data
A portion of the market data and certain other statistical information used throughout this prospectus is based on independent industry publications, government publications or other published independent sources. Some data is also based on our good faith estimates and our managements understanding of industry conditions. While we are not aware of any misstatements regarding our market, industry or similar data presented herein, such data involve risks and uncertainties and are subject to change based on various factors, including those discussed under the headings Cautionary Note Regarding Forward-Looking Statements and Risk Factors in this prospectus.
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This summary provides a brief overview of information contained elsewhere in this prospectus. Because it is abbreviated, this summary does not contain all of the information that you should consider before investing in our common stock. You should read the entire prospectus carefully before making an investment decision, including the information presented in Risk Factors, Cautionary Note Regarding Forward-Looking Statements and Managements Discussion and Analysis of Financial Condition and Results of Operations and the historical combined and pro forma financial statements and related notes thereto included elsewhere in this prospectus. Unless otherwise indicated, information presented in this prospectus assumes that the underwriters option to purchase additional shares of common stock is not exercised. We have provided definitions for certain industry terms used in this prospectus in the Glossary beginning on page A-1 of this prospectus.
In this prospectus, unless the context otherwise requires, the terms we, us, our, Franks International and the Company when used in a historical context refer to the combined businesses of Franks International N.V. (FINV), Franks International, Inc. (FII), Franks Casing Crew and Rental Tools, Inc. (FCC), Franks Tong Service, Inc. (FTS) and their wholly owned subsidiaries, prior to the transactions being entered into in connection with this offering as described in Organizational Structure. When used in the present tense, the terms we, us, our, Franks International and the Company refer to FINV and its consolidated subsidiaries, following the reorganization and transactions described in Organizational Structure.
Franks International
Overview
We are a 75 year-old, industry-leading global provider of highly engineered tubular services to the oil and gas industry. We provide our services to leading exploration and production companies in both offshore and onshore environments, with a focus on complex and technically demanding wells. We believe that we are one of the largest global providers of tubular services to the oil and gas industry.
Tubular services involve the handling and installation of multiple joints of pipe to establish a cased wellbore and the installation of smaller diameter pipe inside a cased wellbore to provide a conduit for produced oil and gas to reach the surface. The casing of a wellbore isolates the wellbore from the surrounding geologic formations and water table, provides well structure and pressure integrity, and allows well operators to target specific zones for production. Given the central role that our services play in the structural integrity, reliability and safety of a well, and the importance of efficient tubular services to managing the overall cost of a well, we believe that our role is vital to the overall process of producing oil and gas. For more information regarding tubular services, see BusinessIndustryTubular Services.
Our specially trained employees provide our services using a suite of highly technical, purpose-built equipment, much of which we design and manufacture for our proprietary use. Most of our manufactured equipment and products use patented, advanced technologies that enable us to service complex wells, increase efficiency, enhance well integrity and improve safety. We currently have 104 U.S. patents and 136 related international patents and 37 U.S. patent applications pending and 111 related international patent applications pending for equipment that our engineers have developed.
Recent developments in well construction and completion requirements have resulted in increased technical demands associated with tubular services. For onshore wells, these developments include long horizontal laterals
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and deviated well bores that seek to maximize the wells exposure to hydrocarbon-bearing geologic formations. In the offshore environment, these developments include increasing water and well depths, which require lengthier and heavier strings, as well as tubular handling equipment capable of accommodating a more complex array of equipment and hydraulic control lines that are deployed inside the well. We believe that we are a market leader in the development of equipment and services that facilitate and accommodate recent developments in well construction and completion requirements, and this is reflected in our extensive suite of patent-protected, innovative products and equipment. We continuously work with our customers to develop new products, improve efficiency and safety and solve complex well construction and completion problems.
In addition to our tubular handling equipment, we also design and manufacture certain products that we sell or rent directly to external customers, including large outside diameter (OD) pipe connectors and casing attachments. We also provide specialized fabrication and welding services in support of deep water projects in the U.S. Gulf of Mexico, including drilling and production risers, flowlines and pipeline end terminations, as well as long length tubulars (up to 300 feet in length) for use as caissons or pilings. Finally, we distribute large OD pipe manufactured by third parties, and generally maintain an inventory of this pipe in order to support our pipe sales and distribution operations.
Spears & Associates, Inc. (Spears) estimates that the global market for tubular services (excluding product sales) was approximately $3.3 billion in annual revenues in 2012 and will grow to $3.8 billion in 2013. Spears projects that this market will grow at an annual rate of approximately 11% between 2012 and 2015. There are a limited number of companies that provide these services on a global basis. We serve our customers through a network of over 90 sales and support offices in approximately 60 countries. Our customer base includes major international oil companies, such as Anadarko, BP, Chevron, ConocoPhillips, ExxonMobil, Shell, Total and Murphy Oil Corporation, and national oil companies, such as PDVSA, Statoil and Saudi Aramco, as well as numerous independent oil and gas producers.
We believe we differentiate ourselves from our competitors on the basis of the quality and reliability of our service, our proprietary technology, and our ability to perform in the most demanding environments, including deep water and ultra-deep water projects. Our expertise stems from years of experience, a focus on technical innovation and our highly trained and dedicated workforce. Representative examples of the trusted, critical services we have been selected to provide to our customers include:
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In March 2013, we successfully completed the casing installation for the Chevron Northwood well in the Green Canyon Block 945 area of the Gulf of Mexico, to a total depth of 31,866 feet in a water depth of 6,000 feet, which is the deepest oil and gas well of which we are aware. |
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In August 2012, we broke our own record for greatest hook load recorded at approximately 1,140 tons while lifting 24,500 feet of combined casing and landing string for Shells Stones 4 well in the U.S. Gulf of Mexico. |
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In June 2010, we successfully provided all tubular services for the relief well drilled by BP to contain the Macondo well in the U.S. Gulf of Mexico. |
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In 2006, we were selected to provide tubular installation services on the BP Shah Deniz project in offshore Azerbaijan, which is an ongoing multiple well project. We believe we were selected for the project due to our highly regarded technical capabilities, including our proprietary Fluid Grip Power Tong gripping technology combined with our Collar Load Support tubular handling system. These proprietary technologies are critical for this project due to their ability to provide zero marking handling of the specialized corrosion resistant alloy (CRA) completion tubulars required in wells with high hydrogen sulfide content. CRA services have also been increasingly common in other corrosive high-pressure, high-temperature applications, both onshore and offshore. |
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We have a long history of strong revenue growth. Our revenue grew by 43% to $1,055.9 million for the twelve months ended December 31, 2012 compared to $739.1 million for the twelve months ended December 31, 2011, and Adjusted EBITDA grew by 79% to $446.6 million from $249.5 million over the same period. During the twelve months ended December 31, 2012, 45% of our revenue was generated outside North America, and 69% was generated from products and services provided offshore. For an explanation of how we calculate Adjusted EBITDA, see Summary Historical Combined and Unaudited Pro Forma Financial DataNon-GAAP Financial Measures.
Competitive Strengths
We believe that we are well positioned to execute our strategy based on the following competitive strengths:
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Global market leader . We are a leading provider of tubular services in many of the regions in which we operate, including the U.S. Gulf of Mexico and almost every significant international offshore market, almost all of the major U.S. onshore resource basins and in targeted active international onshore regions. Moreover, we believe that we are one of only a few tubular service companies with true global capabilities. According to Spears, we have the number one or number two market share in each of the U.S. and international markets, both onshore and offshore. We currently provide our services in approximately 60 countries on six continents. Our customers include most of the worlds largest integrated oil companies and many of the largest national oil companies. We have no significant customer or geographic concentration. Our global presence allows us to quickly expand to additional regions that experience increases in drilling and production activity. |
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Focused service provider with highly differentiated engineering capabilities . We have an in-house engineering team responsible for developing new products that add value to our service capabilities and expand our portfolio of products and services. Our engineers typically work closely with our field personnel and customers in order to identify specific equipment needs related to the services we provide. We believe that we are a market leader in the development of equipment and services that facilitate and accommodate recent developments in well construction and completion requirements, and this is reflected in our extensive suite of patent-protected, innovative products and equipment. We believe that our engineering expertise and our service and product line focus give us a competitive advantage in quickly designing and manufacturing custom solutions in response to our customers unique requirements and applications. We have received a number of customer and industry awards recognizing the achievements of our engineering group and our custom designed solutions. |
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Favorable reputation developed over eight decades . We believe our customers select Franks International because of our reputation for safety, reliability, quality service and proprietary technology. While generally a small portion of the overall well cost, properly performed tubular services are critical to protecting the producers investment in the well, as well as its safe operation during production. The economic stakes are especially high for deep water wells, where day rates for offshore drilling rigs and other associated services can approach $1 million per day, and a producers investment in a single offshore well can exceed $80 million. The difference between efficiently executed tubular services and less efficiently executed services can save producers days or even weeks, which can translate directly into significant and measurable savings. The producers environmental, safety and regulatory risks associated with operating offshore are also heightened. In connection with their customer feedback-based survey, EnergyPoint Research has ranked Franks International first in customer satisfaction in one or more oilfield service or product categories every year since 2004, the first year in which the survey was conducted. Our reputation for safety is further demonstrated by our ability to meet and exceed the stringent safety requirements of our customers, some of which have been Franks International customers for over 40 years. |
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Strong position in favorable deep water offshore markets . We believe Franks International will continue to benefit from the continued development of oil and gas resources located offshore. As a result of the long development lead times associated with deep water projects, they are generally less likely to be cancelled or delayed due to volatility in commodity or financial markets. Also, due to their technical complexity and often remote locations, offshore projects typically provide us with a greater opportunity to differentiate our capabilities from those of our competitors. According to Spears, offshore development spending will increase at an annual rate of approximately 12% between 2011 and 2018. Approximately 67% of our services revenue from external customers in 2012 was generated from offshore services, and our global market share in offshore services was approximately 29% in 2012, according to Spears. Moreover, the significant majority of our offshore services revenue in 2012 was from deep water markets. We believe the economic opportunity for deep water services will continue to be favorable given the technical challenges associated with constructing and completing wells offshore, and the risk of potential negative economic consequences to our customers if tubular services are poorly performed. |
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Attractive financial results reflect value of our differentiated and critical services . For the year ended December 31, 2012 and the three months ended March 31, 2013, our Adjusted EBITDA margin was approximately 42% and 43%, respectively, which we believe reflects the economic value to our customers of our differentiated and critical services and the benefits of a diversified, global customer base. Because our business is not capital intensive, we generate significant free cash flow. Consequently, we intend to pay a regular quarterly dividend on our common stock of $ per share. As of March 31, 2013, after giving effect to this offering, we expect to have approximately $ million of cash and cash equivalents and approximately $ million of outstanding indebtedness. |
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Significant experience selectively acquiring and integrating companies . We have a long history of evaluating and acquiring companies that expand or complement our geographic footprint and product and service offerings. Since 1982, we have successfully acquired and integrated more than 50 private companies. We believe that being a public company will enhance our acquisition strategy and allow us to target larger acquisition candidates. |
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Experienced management team with proven track record . Our executive officers and senior operational managers have extensive experience at Franks International and in the oilfield service industry generally. Our executive officers and senior operational managers have an average of 25 years of experience in the oilfield services industry with us. Our chief executive officer, Keith Mosing, is a third generation owner and manager who successfully led our expansion into international operations. The Mosing family will continue to own the majority equity interest in us following the completion of this offering, which we believe aligns their interests with the interests of our public investors. |
Business Strategy
Our objective is to maximize shareholder value by expanding our leading global oilfield services company and continuing to supply high-quality services and products to our customers. We intend to accomplish that objective by capitalizing on the key long-term industry growth trends through the execution of the following strategies:
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Continue to focus on customer service . We have a long track record of being responsive to our customers unique requirements. We believe that focusing on our customers needs and continuing to provide industry-leading technological and safety innovations will enable us to expand our customer base and increase our revenues. |
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Sustain our track record of technical innovation . Our team of over 70 in-house engineers and engineering technicians works to develop new products and technologies and provides operational support. We currently have 104 U.S. patents and 136 related international patents and 37 U.S. patent applications pending and 111 related international patent applications pending for equipment that our |
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engineers have developed. In addition, we currently have more than 50 new technologies and product improvements under development. We have developed strong working relationships with oil and gas producers throughout the world, many of which have approached us with requests for solutions to specific well construction and completion challenges. To address these needs, we continue to invest in new product engineering capabilities. In addition to our own efforts to continuously enhance our equipment and procedures, we expect to continue to develop innovative products and solutions driven by our customers needs. |
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Pursue disciplined growth organically and through acquisitions . We intend to selectively pursue acquisitions that complement our geographic footprint and product and service offerings, with a focus on businesses that would benefit from our global presence and international sales capabilities. We intend to continue to grow organically by leveraging our customer base, investing in additional equipment and geographically expanding our existing global facilities in order to continue to grow our cash flows and satisfy incremental customer demand. |
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Maintain and expand our worldwide presence . We are committed to being on the ground in strategic markets to provide services on a global basis. We intend to build upon our existing presence in Africa, the Asia-Pacific region, the Middle East, North America, the North Sea and South America through deployment of sales, distribution, and service resources. We believe this organic expansion will provide more points of contact with our customers, allowing us to respond more quickly to their needs. |
Segments
We conduct our business through three operating segments:
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International Services. We currently provide our services in approximately 60 countries on six continents. Our customers in these international markets are primarily large exploration and production companies, including integrated oil and gas companies and national oil and gas companies, with a significant focus on complex, high profile projects. Our International Services segment accounted for approximately 49% and 50%, respectively, of our Adjusted EBITDA in 2012 and the first three months of 2013. Approximately 82% and 83%, respectively, of our revenue from external customers in this segment was generated in offshore markets in 2012 and the first three months of 2013, the significant majority of which was from deep water markets. |
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U.S. Services. Approximately 51% and 63%, respectively, of our 2012 and first quarter 2013 U.S. Services segment revenue from external customers was generated in the technically challenging deep water areas of the U.S. Gulf of Mexico. In addition, we have a significant presence in almost all of the active onshore oil and gas drilling regions in the U.S., including the Permian Basin, Bakken Shale, Barnett Shale, Eagle Ford Shale, Haynesville Shale, Marcellus Shale and Utica Shale. Our U.S. Services segment accounted for approximately 45% and 42%, respectively, of our Adjusted EBITDA in 2012 and the first three months of 2013. |
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Pipe and Products . We also design and manufacture certain products that we sell or rent directly to external customers, including large OD pipe connectors and casing attachments. We also provide specialized fabrication and welding services in support of deep water projects in the U.S. Gulf of Mexico, including drilling and production risers, flowlines and pipeline end terminations, as well as long length tubulars (up to 300 feet in length) for use as caissons or pilings. Finally, we distribute large OD pipe manufactured by third parties. A significant majority of our sales to external customers occur in deep water markets. Our Pipe and Products segment accounted for approximately 6% and 8%, respectively, of our Adjusted EBITDA in 2012 and the first three months of 2013. |
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Trends in the Industry
We believe that the following trends will positively affect the oilfield services industry, and consequently the demand for tubular installation services, in the coming years.
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Increasing global demand for crude oil and natural gas has spurred increases in energy development spending . The crude oil and natural gas industry benefits from increased consumption of hydrocarbons, caused in part by the industrialization of China, India and other developing countries. Spears estimates that annual global spending on drilling and development activities increased from $236 billion in 2009 to $326 billion in 2012, and is projected to increase to $482 billion in 2018, representing a compound annual growth rate of approximately 8% from 2009 to 2018. |
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Significant new well development is required to replace naturally declining production . Despite elevated exploration and development activity in recent years, oil supply has only experienced modest gains, highlighting the difficulty in overcoming the natural decline rates of large legacy fields. The International Energy Agency (the IEA) estimates that in order to overcome the decline in production from existing fields, and to keep pace with projected demand increases, new production of approximately 40 million barrels of oil per day (an amount equal to nearly 60% of 2011 global oil production) must be added by 2035. A significant number of new wells will be required to make up for declines in production from existing fields and the projected increase in global oil demand. |
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Increasing offshore and deep water drilling and development activity . Worldwide offshore rig counts continue to increase as crude oil supply and demand fundamentals encourage new drilling. Moreover, many of these new rigs are bigger and more efficient and designed to drill deeper to previously unrecoverable reserves. According to the IEA, 55% of remaining recoverable conventional oil outside of the Organization of Petroleum Exporting Countries (OPEC) is offshore. According to Spears, offshore spending will increase from $80.1 billion in 2011 to $179.7 billion in 2018, a compound annual growth rate of 12%. Offshore discoveries are expected to play an important role in the future, particularly deep water discoveries at depths greater than 1,000 feet. |
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Increasing complexity and costs of well construction . As conventional sources of oil and gas are depleted, the oil and gas industry continues to develop new technologies and techniques that allow operators to develop a wider range of unconventional oil and gas resources, such as oil and gas shales. Certain of these techniques include drilling deeper and horizontal well paths with long lateral lengths and multi-stage completions, often in high temperature and high pressure environments. These types of unconventional drilling generally require additional tubular services compared to conventional drilling, and tubular installation services have become increasingly complex to execute, and have required the development of new techniques and specialized tools. |
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Heightened focus on quality, safety and environmental factors . Our customers are increasingly focused on the quality of wellbore construction, operational safety and environmental stewardship, particularly in offshore environments where we routinely operate. The tubular services we provide are critical in achieving these goals. As such, our reputation as a high-quality, trusted service provider positions us well to benefit from this trend. |
Recent Developments
While we have not finalized our financial statements or results of operations for the quarter ended June 30, 2013, the following preliminary information reflects managements estimates with respect to such period based on currently available information.
In June 2013, we sold a component of our Pipe and Products segment that manufactured centralizers for sales to third parties. That sale is expected to result in a pre-tax gain of approximately $41 million. The
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attributable operations and the gain will be reported as discontinued operations. Revenues associated with this component were $16.9 million and $4.2 million for the year ended December 31, 2012 and three months ended March 31, 2013, respectively.
Based upon our preliminary analysis, we currently expect revenues from continuing operations of between $288.0 million and $298.0 million for the three months ended June 30, 2013 compared to revenues of $262.7 million for the three months ended June 30, 2012. The estimated increase was primarily the result of increased demand for our services and products and an increase in international pipe sales. Based upon our preliminary analysis, we currently expect income from continuing operations of between $99.0 million and $104.0 million for the three months ended June 30, 2013, compared to income from continuing operations of $89.2 million for the three months ended June 30, 2012. Income from continuing operations for the second quarter of 2013 was positively affected by the estimated increase in revenue on comparable cost of revenues and an increase in other income, which is expected to include the receipt of approximately $3 million of underpaid royalty payments.
We are currently in the process of preparing our combined financial statements as of and for the six months ended June 30, 2013. These financial statements are not currently available and are not expected to be available and filed with the Securities and Exchange Commission (the SEC) until after consummation of this offering. Estimates of financial results and position are inherently uncertain and subject to change, and adjustments may arise and actual results may differ materially from these estimates. The preliminary financial data included in this prospectus has been prepared by, and is the responsibility of, management. PricewaterhouseCoopers LLP has not audited, reviewed, compiled or performed any procedures with respect to the accompanying preliminary financial data. Accordingly, PricewaterhouseCoopers LLP does not express an opinion or any other form of assurance with respect thereto. You are cautioned not to place undue reliance on these estimates. This information is a summary of estimated financial data and should be read in conjunction with the Risk Factors, Summary Historical Combined and Unaudited Pro Forma Financial Data, Managements Discussion and Analysis of Financial Conditional and Results of Operations, and our unaudited and audited combined financial statements and the accompanying notes appearing elsewhere in this prospectus.
Business History
We believe that our long and successful history in the industry is a testament to the quality of the services and the innovative technology that we provide our customers. Franks International traces its roots to the founding of FCC by Frank Mosing in 1938. In 1950, Donald E. Mosing joined his father in the business. Later, Donalds younger brothers, Billy and Larry, joined their father and brother to help manage the growing operations. As an engineering and safety innovator, Donald was a driving force for many years in the development of many of our proprietary tools and processes, and he is named as an inventor on 45 of the U.S. patents that have been issued to us. In 1973, Donald Keith Mosing, Donald E. Mosings eldest son, established our third office, in Alvin, Texas. Keith Mosing quickly embarked on the expansion of operations across North America and into South America, Asia, Europe, Africa and the Middle East. Our international operations were formally organized into a separate company in 1981, with Keith Mosing being named Chairman, President and Chief Executive Officer. Since the early 1980s, our U.S. and international operations have continued to grow, both organically and through strategic acquisitions. Upon Donalds retirement in July 2011, Keith Mosing was named Chairman, President and Chief Executive Officer of the U.S. operations. Until this offering, we have been owned solely by members of the Mosing family.
Risk Factors
An investment in our common stock involves a number of risks. You should carefully consider the risks described in Risk Factors, in addition to the other information contained in this prospectus, including Managements Discussion and Analysis of Financial Condition and Results of Operations and our combined financial statements and related notes, before investing in our common stock. These risks could materially affect our business, financial condition and results of operations, and cause the trading price of our common stock to decline. You could lose part or all of your investment. You should bear in mind, in reviewing this prospectus,
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that past experience is no indication of future performance. You should read the section titled Cautionary Note Regarding Forward-Looking Statements for a discussion of what types of statements are forward-looking statements, as well as the significance of such statements in the context of this prospectus.
Organization
The diagram below depicts our simplified organizational structure immediately following the completion of this offering (assuming that the underwriters option to purchase additional shares of common stock is not exercised and without giving effect to the grant of restricted stock units representing an aggregate of shares of common stock (based upon the midpoint of the price range set forth on the cover page of this prospectus) to our officers and employees concurrently with this offering as described in Compensation Discussion and AnalysisComponents of Our Executive Compensation ProgramLong-Term Incentive Plan):
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Following completion of this offering, FINV, the issuer of common stock in this offering, will act as a holding company whose sole material assets will consist of indirect general and limited partnership interests in Franks International C.V. (FICV). As the indirect sole shareholder of the general partner of FICV, FINV will be responsible for all operational, management and administrative decisions relating to FICVs business and will consolidate the financial results of FICV and its subsidiaries.
The articles of association of FINV authorize two classes of stock, common stock and Series A preferred stock. See Description of Capital Stock. Only common stock will be sold to investors pursuant to this offering. Shares of our common stock will also be held indirectly by members of the Mosing family through FWW B.V. (FWW). Shares of Series A preferred stock will be held by Mosing Holdings, Inc. (Mosing Holdings) as described below. Each share of Series A preferred stock will have a liquidation preference equal to its par value of 0.01 per share (or approximately in the aggregate) and will be entitled to an annual dividend equal to 0.25% of its par value (or approximately per annum in the aggregate). Additionally, each share of Series A preferred stock will entitle its holder to vote together with the common stock as a single class on all matters presented to FINVs shareholders for their vote. The common stock and the preferred stock are collectively referred to herein as the FINV Stock.
FICV is a newly formed limited partnership that was formed to act as a holding company of various U.S. and foreign operating companies engaged in our business. Prior to this offering, our foreign operating companies have been owned directly or indirectly by FINV, and our U.S. operating companies have been owned directly or indirectly by Mosing Holdings, which is owned by members of the Mosing family. In connection with this offering, FINV will contribute all of our foreign operating subsidiaries and a portion of the proceeds from this offering to FICV, and Mosing Holdings will contribute all of our U.S. operating subsidiaries (excluding certain assets that generate a de minimis amount of revenue, including aircraft, real estate and life insurance policies) to FICV. We intend to enter into real estate lease agreements and an aviation services agreement with customary terms for continued use of the real estate and aircraft. See Certain Relationships and Related Party TransactionsTransactions with Our Directors, Executive Officers and Affiliates.
In exchange for this contribution (and after giving effect to this offering assuming the underwriters option to purchase additional shares of common stock is not exercised),
(i) | FINV will (indirectly) hold a % limited partnership interest and a % general partnership interest in FICV; and |
(ii) | Mosing Holdings will hold a % limited partnership interest in FICV. |
In order to give Mosing Holdings a percentage vote in FINV that is equal to the percentage limited partnership interest in FICV that Mosing Holdings will receive in exchange for its contribution to FICV, Mosing Holdings will also receive shares of Series A preferred stock of FINV in the exchange.
Following the completion of this offering, the Mosing family will own, indirectly through Mosing Holdings and FWW, FINV Stock and FICV limited partnership interests that in the aggregate will represent approximately % of the economic interests in and voting power of our combined company (or % if the underwriters option to purchase additional shares of common stock is exercised in full).
For purposes of any transfer or exchange of Series A preferred stock and limited partnership interests in FICV, the articles of association of FINV and the partnership agreement of FICV contain provisions linking each share of Series A preferred stock in FINV to a proportionate portion of the limited partnership interest in FICV held by Mosing Holdings or its permitted transferee, which portion at any time will equal the total limited partnership interest in FICV held by Mosing Holdings or its permitted transferee divided by the total number of issued and outstanding shares of Series A preferred stock of FINV (each such portion being referred to as an
9
FICV Portion). Shares of Series A preferred stock cannot be transferred unless simultaneously with an equal number of FICV Portions and vice versa.
Mosing Holdings (or any of its permitted transferees) will have the right (the Conversion Right) to convert all or a portion of its Series A preferred stock into FINV common stock by delivery to FINV of an equivalent number of FICV Portions. In connection with such conversion, Mosing Holdings or its permitted transferees will also be entitled to receive an amount of cash equal to the par value of each share of Series A preferred stock so converted plus any accrued but unpaid dividends thereon.
The above mechanism is subject to customary conversion rate adjustments for stock splits, stock dividends and reclassifications.
See Certain Relationships and Related Party TransactionsLimited Partnership Agreement of FICV.
Also in connection with our formation transactions, we will enter into a Tax Receivable Agreement with Mosing Holdings. This agreement generally will provide for the payment by FINV of 85% of actual reductions, if any, in payments of U.S. federal, state and local income tax or franchise tax (which reductions we refer to as cash savings) in periods after this offering as a result of (i) the tax basis increases from the transfer of FICV interests to us in connection with a conversion of shares of Series A preferred stock into shares of our common stock and (ii) imputed interest deemed to be paid by us as a result of, and additional tax basis arising from, any payments we make under the Tax Receivable Agreement. FINV will retain the benefit of the remaining 15% of these cash savings. See Certain Relationships and Related Party TransactionsTax Receivable Agreement.
Corporate Information
Our principal executive offices are located at Prins Bernhardplein 200, 1097 JB Amsterdam, The Netherlands, and our telephone number at that address is +31 (0)20 52 14 777. Our primary U.S. offices are located at 10260 Westheimer Rd., Houston, Texas 77042, and our telephone number at that address is (281) 966-7300. Our website is located at www.franksinternational.com . We expect to make our periodic reports and other information filed or furnished to the SEC available free of charge through our website as soon as reasonably practicable after those reports and other information are electronically filed with or furnished to the SEC. Information on our website or any other website is not incorporated by reference herein and does not constitute a part of this prospectus.
10
The Offering
Common stock offered by us |
shares ( shares if the underwriters option to purchase additional shares of common stock is exercised in full). | |
Over-allotment option |
We have granted the underwriters the option to purchase up to an additional shares of common stock if the underwriters sell more than shares of common stock in this offering. | |
Common stock to be outstanding after the offering |
shares ( shares if the underwriters option to purchase additional shares of common stock is exercised in full), without giving effect to the grant of restricted stock units representing an aggregate of shares of common stock (based upon the midpoint of the price range set forth on the cover page of this prospectus) to our officers and employees concurrently with this offering as described in Compensation Discussion and AnalysisComponents of Our Executive Compensation ProgramLong-Term Incentive Plan. |
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Series A preferred stock to be outstanding after the offering |
shares, all of which will be held by Mosing Holdings. The number of shares of Series A preferred stock held by Mosing Holdings immediately following the completion of this offering will represent a percentage of the total number of shares of FINV Stock equal to the percentage interest Mosing Holdings has in FICV. |
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Voting power of common stock after giving effect to this offering |
% (or 100% if all outstanding shares of Series A preferred stock are converted), without giving effect to the grant of restricted stock units representing an aggregate of shares of common stock (based upon the midpoint of the price range set forth on the cover page of this prospectus) to our officers and employees concurrently with this offering as described in Compensation Discussion and AnalysisComponents of Our Executive Compensation ProgramLong-Term Incentive Plan. |
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Voting power of Series A preferred stock after giving effect to this offering |
% (or none if all outstanding shares of Series A preferred stock are converted), without giving effect to the grant of restricted stock units representing an aggregate of shares of common stock (based upon the midpoint of the price range set forth on the cover page of this prospectus) to our officers and employees concurrently with this offering as |
11
described in Compensation Discussion and AnalysisComponents of Our Executive Compensation ProgramLong-Term Incentive Plan. | ||
Use of proceeds |
We expect to receive net proceeds of approximately $ million from the sale of the common stock by us in this offering, assuming an initial public offering price of $ per share (the midpoint of the price range set forth on the cover page of this prospectus) and after deducting estimated expenses payable by us and underwriting discounts and commissions. Each $1.00 increase (decrease) in the public offering price would increase (decrease) our net proceeds by approximately $ million. We intend to use the net proceeds from this offering to repay in full the outstanding notes payable to FWW, under which there was an aggregate of $443.7 million outstanding as of March 31, 2013. Any remaining net proceeds (including any proceeds attributable to the underwriters exercise of their option to purchase additional shares of common stock) will be contributed to FICV. FICV will use any such proceeds for general corporate purposes. See Use of Proceeds. | |
Dividend policy |
Following the completion of this offering, we intend to pay a regular quarterly dividend on our common stock of $ per share. | |
Listing and trading symbol |
We have applied to list our shares of common stock on the New York Stock Exchange (the NYSE) under the symbol FI. | |
Risk factors |
You should carefully read and consider the information beginning on page 16 of this prospectus set forth under the heading Risk Factors and all other information set forth in this prospectus before deciding to invest in our common stock. |
12
Summary Historical Combined and Unaudited Pro Forma Financial Data
The following table shows summary historical combined financial data of Franks International as of and for the years ended December 31, 2010, 2011 and 2012. The summary historical combined financial data of Franks International as of December 31, 2011 and 2012 and for the years ended December 31, 2010, 2011 and 2012 has been derived from our audited financial statements and the related notes thereto included elsewhere in this prospectus. The audited financial data as of December 31, 2010 has been derived from our audited combined financial statements and related notes thereto that are not included in this prospectus. The summary historical combined financial data presented as of March 31, 2013 and for the three months ended March 31, 2012 and 2013 are derived from the unaudited historical combined financial statements included elsewhere in this prospectus. Under the combined method of accounting, the historical consolidated financial statements of FINV, FII, FCC and FTS and their wholly owned subsidiaries are combined as if Franks International operated as a single entity. All intercompany accounts and transactions have been eliminated for purposes of preparing these combined financial statements.
The summary unaudited pro forma financial data presented below has been derived by the application of pro forma adjustments to the historical combined statements of Franks International included elsewhere in this prospectus. The summary unaudited pro forma financial data for the year ended December 31, 2012 and as of and for the three months ended March 31, 2013 give effect to our reorganization in connection with this offering as described in Organizational Structure and the use of the estimated net proceeds from this offering as described in Use of Proceeds as if all such transactions had occurred on January 1, 2012, in the case of the unaudited pro forma condensed statement of income, and on March 31, 2013, in the case of the unaudited pro forma condensed balance sheet.
You should read these tables in conjunction with Managements Discussion and Analysis of Financial Condition and Results of Operations, which includes a discussion of factors materially affecting the comparability of the information presented, Organizational Structure, Selected Historical Combined and Unaudited Pro Forma Financial Data and our historical and pro forma financial statements and notes thereto included elsewhere in this prospectus. Our summary unaudited pro forma financial data is presented for informational purposes only. The pro forma adjustments are based upon available information and certain assumptions that we believe are reasonable. Our summary unaudited pro forma financial data does not purport to represent what our results of operations or financial position would have been if we operated as a public company during the period presented and may not be indicative of our future performance.
13
FINV | ||||||||||||||||||||||||||||
Franks International | Pro Forma | |||||||||||||||||||||||||||
Year Ended December 31, |
Three Months Ended
March 31, |
Year Ended
December 31, 2012 |
Three Months
Ended March 31, 2013 |
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2010 | 2011 | 2012 | 2012 | 2013 | ||||||||||||||||||||||||
Statements of income data (in thousands): |
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Revenues: |
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Equipment rentals and services |
$ | 490,902 | $ | 613,541 | $ | 880,084 | $ | 203,755 | $ | 205,878 | $ | $ | ||||||||||||||||
Products |
117,306 | 125,534 | 175,841 | 36,773 | 30,882 | |||||||||||||||||||||||
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Total revenues |
608,208 | 739,075 | 1,055,925 | 240,528 | 236,760 | |||||||||||||||||||||||
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Operating expenses: |
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Cost of revenues, exclusive of depreciation and amortization |
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Equipment rentals and services |
222,345 | 256,515 | 314,950 | 72,731 | 75,781 | |||||||||||||||||||||||
Products |
70,697 | 76,368 | 119,527 | 24,184 | 18,019 | |||||||||||||||||||||||
General and administrative expenses |
134,449 | 160,506 | 187,033 | 41,608 | 44,145 | |||||||||||||||||||||||
Depreciation and amortization |
48,197 | 54,581 | 66,215 | 15,424 | 17,783 | |||||||||||||||||||||||
(Gain) loss on sale of assets |
(164 | ) | (47 | ) | (2,608 | ) | 195 | 23 | ||||||||||||||||||||
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Operating income |
132,684 | 191,152 | 370,808 | 86,386 | 81,009 | |||||||||||||||||||||||
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Other income (expense): |
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Other income |
3,906 | 3,786 | 12,189 | 670 | 2,127 | |||||||||||||||||||||||
Interest income (expense), net |
(1,658 | ) | (655 | ) | 264 | 260 | (201 | ) | ||||||||||||||||||||
Foreign currency gain (loss) |
(1,930 | ) | (3,209 | ) | (450 | ) | 2,626 | (3,587 | ) | |||||||||||||||||||
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Total other income (expense) |
318 | (78 | ) | 12,003 | 3,556 | (1,661 | ) | |||||||||||||||||||||
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Income before income tax |
133,002 | 191,074 | 382,811 | 89,942 | 79,348 | |||||||||||||||||||||||
Income tax expense |
14,601 | 20,287 | 31,877 | 7,687 | 6,303 | |||||||||||||||||||||||
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Net income |
118,401 | 170,787 | 350,934 | 82,255 | 73,045 | |||||||||||||||||||||||
Non-controlling interest |
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Net income attributable to Franks International |
118,401 | 170,787 | 350,934 | 82,255 | 73,045 | |||||||||||||||||||||||
Preferred stock dividends |
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Net income attributable to common stockholders |
$ | 118,401 | $ | 170,787 | $ | 350,934 | $ | 82,255 | $ | 73,045 | $ | $ | ||||||||||||||||
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Balance sheet data (as of period end) (in thousands): |
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Total assets |
$ | 710,543 | $ | 847,500 | $ | 1,107,961 | $ | 1,129,318 | $ | |||||||||||||||||||
Long-term debtexcluding affiliates |
46,579 | 9,204 | 7,368 | 5,858 | ||||||||||||||||||||||||
Long-term debtaffiliate(1) |
907 | 3,618 | 469,268 | 448,838 | ||||||||||||||||||||||||
Total liabilities(2) |
174,530 | 180,372 | 660,973 | 635,667 | ||||||||||||||||||||||||
Total stockholders equity |
536,013 | 667,128 | 446,988 | 493,651 | ||||||||||||||||||||||||
Other financial data (in thousands): |
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Net cash provided by operating activities |
$ | 163,414 | $ | 180,710 | $ | 344,776 | $ | 78,669 | $ | 50,664 | ||||||||||||||||||
Net cash used in investing activities |
(69,130 | ) | (126,655 | ) | (182,533 | ) | (47,541 | ) | (42,014 | ) | ||||||||||||||||||
Net cash used in financing activities |
(79,261 | ) | (71,874 | ) | (107,210 | ) | (14,742 | ) | (44,235 | ) | ||||||||||||||||||
Adjusted EBITDA(3) (unaudited) |
184,623 | 249,472 | 446,604 | 102,675 | 100,942 | $ | $ |
(1) | In 2012, FINV made a non-cash distribution of $484.0 million to its owners in the form of two unsecured promissory notes payable. As of December 31, 2012 and March 31, 2013, there was an aggregate of approximately $464.0 million and $443.7 million, respectively, outstanding under these notes. |
(2) | Includes Series A preferred stock. |
(3) | Adjusted EBITDA is a non-GAAP financial measure. For a definition and a reconciliation of Adjusted EBITDA to our net income, see Non-GAAP Financial Measure below. |
14
Non-GAAP Financial Measures
Adjusted EBITDA is a supplemental non-GAAP financial measure that is used by management and external users of our financial statements, such as industry analysts, investors, lenders and rating agencies.
We define Adjusted EBITDA as net income before net interest income or expense, depreciation and amortization, income tax benefit or expense, asset impairments, gain or loss on sale of assets, foreign currency gain or loss and other non-cash adjustments. We define Adjusted EBITDA margin as Adjusted EBITDA divided by revenues. Adjusted EBITDA is not a measure of net income or cash flows as determined by U.S. generally accepted accounting principles (GAAP).
Management believes Adjusted EBITDA is useful because it allows us to more effectively evaluate our operating performance and compare the results of our operations from period to period without regard to our financing methods or capital structure. We exclude the items listed above from net income in arriving at Adjusted EBITDA because these amounts can vary substantially from company to company within our industry depending upon accounting methods and book values of assets, capital structures and the method by which the assets were acquired. Adjusted EBITDA and Adjusted EBITDA margin have limitations as analytical tools and should not be considered as an alternative to, or more meaningful than, operating income, net income or cash flows from operating activities as determined in accordance with GAAP or as an indicator of our operating performance or liquidity. Certain items excluded from Adjusted EBITDA are significant components in understanding and assessing a companys financial performance, such as a companys cost of capital and tax structure, as well as the historic costs of depreciable assets, none of which are components of Adjusted EBITDA. Our computations of Adjusted EBITDA may not be comparable to other similarly titled measures of other companies. We believe that Adjusted EBITDA is a widely followed measure of operating performance and may also be used by investors to measure our ability to meet debt service requirements.
The following table presents a reconciliation of the non-GAAP financial measure of Adjusted EBITDA to the GAAP financial measure of net income.
FINV | ||||||||||||||||||||||||||||
Franks International | Pro Forma | |||||||||||||||||||||||||||
Year Ended December 31, |
Three Months Ended
March 31, |
Year Ended
December 31, 2012 |
Three Months
Ended March 31, 2013 |
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2010 | 2011 | 2012 | 2012 | 2013 | ||||||||||||||||||||||||
Adjusted EBITDA Reconciliation (in thousands): |
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Net income |
$ | 118,401 | $ | 170,787 | $ | 350,934 | $ | 82,255 | $ | 73,045 | $ | $ | ||||||||||||||||
Interest (income) expense, net |
1,658 | 655 | (264 | ) | (260 | ) | 201 | |||||||||||||||||||||
Depreciation and amortization |
48,197 | 54,581 | 66,215 | 15,424 | 17,783 | |||||||||||||||||||||||
Income tax expense |
14,601 | 20,287 | 31,877 | 7,687 | 6,303 | |||||||||||||||||||||||
(Gain) loss on sale of assets |
(164 | ) | (47 | ) | (2,608 | ) | 195 | 23 | ||||||||||||||||||||
Foreign currency (gain) loss |
1,930 | 3,209 | 450 | (2,626 | ) | 3,587 | ||||||||||||||||||||||
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Adjusted EBITDA |
$ | 184,623 | $ | 249,472 | $ | 446,604 | $ | 102,675 | $ | 100,942 | $ | $ | ||||||||||||||||
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15
You should carefully consider the risks described below before making an investment decision. Our business, financial condition and results of operations could be materially adversely affected by any of these risks. The trading price of our common stock could decline due to any of these risks, and you may lose all or part of your investment.
Risks Related to Our Business
Our business depends on the level of activity in the oil and gas industry, which is significantly affected by volatile oil and gas prices and other factors.
Our business depends on the level of activity in oil and gas exploration, development and production in market sectors worldwide. Oil and gas prices and market expectations of potential changes in these prices significantly affect this level of activity. However, higher commodity prices do not necessarily translate into increased drilling activity, since customers expectations of future commodity prices typically drive demand for our services. The availability of quality drilling prospects, exploration success, relative production costs, the stage of reservoir development and political and regulatory environments also affect the demand for our services. Worldwide military, political and economic events have in the past contributed to oil and gas price volatility and are likely to do so in the future. The demand for our services may be affected by numerous factors, including:
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the level of worldwide oil and gas exploration and production; |
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the cost of exploring for, producing and delivering oil and gas; |
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demand for energy, which is affected by worldwide economic activity and population growth; |
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the level of excess production capacity; |
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the discovery rate of new oil and gas reserves; |
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the ability of OPEC to set and maintain production levels for oil; |
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the level of production by non-OPEC countries; |
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U.S. and global political and economic uncertainty, socio-political unrest and instability or hostilities; |
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demand for, availability of and technological viability of, alternative sources of energy; and |
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technological advances affecting energy exploration, production, transportation and consumption. |
Demand for our offshore services substantially depends on the level of activity in offshore oil and gas exploration, development and production. The level of offshore activity is historically cyclical and characterized by large fluctuations in response to relatively minor changes in a variety of factors, including oil and gas prices, which could have a material adverse effect on our business, financial condition and results of operations.
A significant amount of our U.S. onshore business is focused on unconventional shale resource plays. The demand for those services is substantially affected by oil and gas prices and market expectations of potential changes in these prices. If commodity prices were to go below a certain threshold for an extended period of time, demand for our services in the U.S. onshore market would be greatly reduced, potentially having a material adverse effect on our business, financial condition and results of operations.
The oil and gas industry has historically experienced periodic downturns, which have been characterized by reduced demand for oilfield services and downward pressure on the prices we charge. A significant downturn in the oil and gas industry will adversely affect the demand for oilfield services and our business, financial condition and results of operations.
16
Physical dangers are inherent in our operations and may expose us to significant potential losses. Personnel and property may be harmed during the process of drilling for oil and gas.
Drilling for and producing oil and gas, and the associated services that we provide, include inherent dangers that may lead to property damage, personal injury, death or the discharge of hazardous materials into the environment. Many of these events are outside our control. Typically, we provide services at a well site where our personnel and equipment are located together with personnel and equipment of our customers and third parties, such as other service providers. At many sites, we depend on other companies and personnel to conduct drilling operations in accordance with appropriate safety standards. From time to time, personnel are injured or equipment or property is damaged or destroyed as a result of accidents, failed equipment, faulty products or services, failure of safety measures, uncontained formation pressures, or other dangers inherent in drilling for oil and gas. Any of these events can be the result of human error. With increasing frequency, our services are deployed on more challenging prospects, particularly deep water offshore drilling sites, where the occurrence of the types of events mentioned above can have an even more catastrophic impact on people, equipment and the environment. Such events may expose us to significant potential losses, which could adversely affect our business, financial condition and results of operations.
We are vulnerable to risks associated with our offshore operations that could negatively impact our business, financial condition and results of operations.
We conduct offshore operations in the U.S. Gulf of Mexico and almost every significant international offshore market, including West Africa, Latin America, Europe, the Asia Pacific region and several other producing regions. Our operations and financial results could be significantly impacted by conditions in some of these areas because we are vulnerable to certain unique risks associated with operating offshore, including those relating to:
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hurricanes and other adverse weather conditions; |
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terrorist attacks, such as piracy; |
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failure of offshore equipment and facilities; |
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local and international political and economic conditions and policies and regulations related to offshore drilling; |
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unavailability of offshore drilling rigs in the markets that we operate; |
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the cost of offshore exploration for, and production and transportation of, oil and gas; |
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successful exploration for, and production and transportation of, oil and gas from onshore sources; |
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the availability and rate of discovery of new oil and gas reserves in offshore areas; and |
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the ability of oil and gas companies to generate or otherwise obtain funds for exploration and production. |
While the impact of these factors is difficult to predict, any one or more of these factors could adversely affect our business, financial condition and results of operations.
Our international operations and revenue expose us to political, economic and other uncertainties inherent to international business.
We have substantial international operations, and we intend to grow those operations further. For the year ended December 31, 2012 and the three months ended March 31, 2013, international operations accounted for approximately 44% and 47%, respectively, of our revenue. Our international operations are subject to a number of risks inherent in any business operating in foreign countries, including, but not limited to, the following:
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political, social and economic instability; |
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potential expropriation, seizure or nationalization of assets; |
17
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deprivation of contract rights; |
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increased operating costs; |
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inability to collect revenues due to shortages of convertible currency; |
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unwillingness of foreign governments to make new onshore and offshore areas available for drilling; |
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civil unrest and protests, strikes, acts of terrorism, war or other armed conflict; |
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import/export quotas; |
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confiscatory taxation or other adverse tax policies; |
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continued application of foreign tax treaties; |
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currency exchange controls; |
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currency exchange rate fluctuations and devaluations; |
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restrictions on the repatriation of funds; and |
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other forms of government regulation which are beyond our control. |
Instability and disruptions in the political, regulatory, economic and social conditions of the foreign countries in which we conduct business, including economically and politically volatile areas such as Africa, the Middle East, Latin America and the Asia Pacific region, could cause or contribute to factors that could have an adverse effect on the demand for the products and services we provide. Worldwide political, economic, and military events have contributed to oil and gas price volatility and are likely to continue to do so in the future. Depending on the market prices of oil and gas, oil and gas exploration and development companies may cancel or curtail their drilling programs, thereby reducing demand for our services.
Additionally, our competitiveness in international market areas may be adversely affected by regulations that promote or incentivize, among other things, the:
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awarding of contracts to local contractors; and |
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establishment of foreign subsidiaries with significant ownership positions reserved by the foreign government for local citizens. |
While the impact of these factors is difficult to predict, any one or more of these factors could adversely affect our business, financial condition and results of operations.
To compete in our industry, we must continue to develop new technologies and products to support our tubular services, secure and maintain patents related to our current and new technologies and products as well as protect and enforce our intellectual property rights.
The markets for our tubular services are characterized by continual technological developments. While we believe that the proprietary products we have developed provide us with technological advances in providing services to our customers, substantial improvements in the scope and quality of the products in the market we operate may occur over a short period of time. If we are not able to develop commercially competitive products in a timely manner in response, our ability to service our customers demands may be adversely affected. Our future ability to develop new products in order to support our services depends on our ability to:
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design and produce products that allow us to meet the needs of our customers; and |
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obtain and maintain patent protection. |
18
We may encounter resource constraints, technical barriers, or other difficulties that would delay introduction of new services and related products in the future. Our competitors may introduce new products or obtain patents before we do and achieve a competitive advantage. Additionally, the time and expense invested in product development may not result in commercial applications.
We currently hold multiple U.S. and international patents and have multiple pending patent applications for products and processes. Patent rights give the owner of a patent the right to exclude third parties from making, using, selling, and offering for sale the inventions claimed in the patents in the applicable country. Patent rights do not necessarily grant the owner of a patent the right to practice the invention claimed in a patent, but merely the right to exclude others from practicing the invention claimed in the patent. It may also be possible for a third party to design around our patents. Furthermore, patent rights have strict territorial limits. Some of our work will be conducted in international waters and would, therefore, not fall within the scope of any countrys patent jurisdiction. We may not be able to enforce our patents against infringement occurring in international waters and other non-covered territories. Also, we do not have patents in every jurisdiction in which we conduct business and our patent portfolio will not protect all aspects of our business and may relate to obsolete or unusual methods, which would not prevent third parties from entering the same market.
We attempt to limit access to and distribution of our technology by customarily entering into confidentiality agreements with our employees, customers and potential customers and suppliers. However, our rights in our confidential information, trade secrets, and confidential know-how will not prevent third parties from independently developing similar information. Publicly available information (e.g. information in expired issued patents, published patent applications, and scientific literature) can also be used by third parties to independently develop technology. We cannot provide assurance that this independently developed technology will not be equivalent or superior to our proprietary technology.
In addition, we may become involved in legal proceedings from time to time to protect and enforce our intellectual property rights. Third parties from time to time may initiate litigation against us by asserting that the conduct of our business infringes, misappropriates or otherwise violates intellectual property rights. We may not prevail in any such legal proceedings related to such claims, and our products and services may be found to infringe, impair, misappropriate, dilute or otherwise violate the intellectual property rights of others. Any legal proceeding concerning intellectual property could be protracted and costly and is inherently unpredictable and could have a material adverse effect on our business, regardless of its outcome. Further, our intellectual property rights may not have the value that management believes them to have and such value may change over time as we and others develop new product designs and improvements.
Our tubular services may be adversely affected by various laws and regulations in countries in which we operate relating to the equipment and operation of drilling units, oil and gas exploration and development, as well as import and export activities.
Governments in some foreign countries have been increasingly active in regulating and controlling the ownership of concessions and companies holding concessions, the exploration for oil and gas and other aspects of the oil and gas industries in their countries, including local content requirements for participating in tenders for certain tubular services. We operate in several of these countries, including Angola, Nigeria, Indonesia, Malaysia, Brazil and Canada. Many governments favor or effectively require that contracts be awarded to local contractors or require foreign contractors to employ citizens of, or purchase supplies from, a particular jurisdiction. These practices may result in inefficiencies or put us at a disadvantage when we bid for contracts against local competitors.
In addition, the shipment of goods, services and technology across international borders subjects us to extensive trade laws and regulations. Our import and export activities are governed by unique customs laws and regulations in each of the countries where we operate. Moreover, many countries control the import and export of certain goods, services and technology and impose related import and export recordkeeping and reporting obligations. Governments also may impose economic sanctions against certain countries, persons and other
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entities that may restrict or prohibit transactions involving such countries, persons and entities, and we are also subject to the U.S. anti-boycott law. In addition, certain anti-dumping regulations in the foreign countries in which we operate may prohibit us from purchasing pipe from certain suppliers.
The laws and regulations concerning import and export activity, recordkeeping and reporting, import and export control and economic sanctions are complex and constantly changing. These laws and regulations may be enacted, amended, enforced or interpreted in a manner materially impacting our operations. The global economic downturn may increase some foreign governments efforts to enact, enforce, amend or interpret laws and regulations as a method to increase revenue. Materials that we import can be delayed and denied for varying reasons, some of which are outside our control and some of which may result from failure to comply with existing legal and regulatory regimes. Shipping delays or denials could cause unscheduled operational downtime. Any failure to comply with these applicable legal and regulatory obligations also could result in criminal and civil penalties and sanctions, such as fines, imprisonment, debarment from government contracts, seizure of shipments and loss of import and export privileges.
We may be exposed to unforeseen risks in our services and product manufacturing, which could adversely affect our results of operations.
We operate a number of manufacturing facilities to support our tubular services. In addition, we also manufacture certain products, including large OD pipe connectors and casing attachments that we sell directly to external customers. The equipment and management systems necessary for such operations may break down, perform poorly or fail, resulting in fluctuations in manufacturing efficiencies. Additionally, some of our U.S. onshore business may be conducted under fixed price or turnkey contracts. Under fixed price contracts, we agree to perform a defined scope of work for a fixed price. Prices for these contracts are based largely upon estimates and assumptions relating to project scope and specifications, personnel and material needs.
Fluctuations in our manufacturing process and inaccurate estimates and assumptions used in our projects may occur due to factors out of our control, resulting in cost overruns, which we may be required to absorb and could have a material adverse effect on our business, financial condition and results of operations. Such fluctuations or incorrect estimates may affect our ability to deliver services and products to our customers on a timely basis and we may suffer financial penalties and a diminution of our commercial reputation and future product orders, which could adversely affect our business, financial condition and results of operations.
We may be unable to employ a sufficient number of skilled and qualified workers to sustain or expand our current operations.
The delivery of our tubular services requires personnel with specialized skills and experience. Our ability to be productive and profitable will depend upon our ability to employ and retain skilled workers. In addition, our ability to expand our operations depends in part on our ability to increase the size of our skilled labor force. The demand for skilled workers is high, the supply is limited, and the cost to attract and retain qualified personnel has increased over the past few years. In addition, we are currently a party to collective bargaining or similar agreements in certain international areas in which we operate, which could result in increases in the wage rates that we must pay to retain our employees. Furthermore, a significant increase in the wages paid by competing employers could result in a reduction of our skilled labor force, increases in the wage rates that we must pay, or both. If any of these events were to occur, our capacity could be diminished, our ability to respond quickly to customer demands or strong market conditions may be inhibited and our growth potential could be impaired, any of which could have a material adverse effect on our business, financial condition and results of operations.
We operate in an intensively competitive industry, and if we fail to compete effectively, our business will suffer.
Our competitors may attempt to increase their market share by reducing prices, or our customers may adopt competing technologies. The drilling industry is driven primarily by cost minimization, and our strategy is aimed at
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reducing drilling costs through the application of new technologies. Our competitors, many of whom have a more diverse product line and access to greater amounts of capital than we do, have the ability to compete against the cost savings generated by our technology by reducing prices and by introducing competing technologies. Our competitors may also have the ability to offer bundles of products and services to customers that we do not offer. We have limited resources to sustain prolonged price competition and maintain the level of investment required to continue the commercialization and development of our new technologies. Any failure to continue to do so could adversely affect our business, financial condition or results of operations.
Our business depends upon our ability to source low cost raw materials and components, such as steel castings and forgings. Increased costs of raw materials and other components may result in increased operating expenses.
Our ability to source low cost raw materials and components, such as steel castings and forgings, is critical to our ability to manufacture our drilling products competitively and, in turn, our ability to provide onshore and offshore drilling services. Should our current suppliers be unable to provide the necessary raw materials or components or otherwise fail to deliver such materials and components timely and in the quantities required, resulting delays in the provision of products or services to customers could have a material adverse effect on our business.
In particular, we have experienced increased costs in recent years due to rising steel prices. There is also strong demand within the industry for forgings, castings and outsourced coating services necessary for us to make our products. We cannot assure that we will be able to continue to purchase these raw materials on a timely basis or at historical prices. Our results of operations may be adversely affected by our inability to manage the rising costs and availability of raw materials and components used in our products.
Our tubular services are provided in connection with operations that are subject to potential hazards inherent in the oil and gas industry, and as a result, we are exposed to potential liabilities that may affect our financial condition and reputation.
Our tubular services are provided in connection with potentially hazardous drilling, completion and production applications in the oil and gas industry where an accident can potentially have catastrophic consequences. This is particularly true in deep water operations, where we are increasingly providing more tubular services. Risks inherent to these applications, such as equipment malfunctions and failures, equipment misuse and defects, explosions, blowouts and uncontrollable flows of oil, gas or well fluids and natural disasters, on land or in deep water or shallow-water environments, can cause personal injury, loss of life, suspension of operations, damage to formations, damage to facilities, business interruption and damage to or destruction of property, surface water and drinking water resources, equipment and the environment. If our services fail to meet specifications or are involved in accidents or failures, we could face warranty, contract, fines or other litigation claims, which could expose us to substantial liability for personal injury, wrongful death, property damage, loss of oil and gas production, pollution and other environmental damages. Our insurance policies may not be adequate to cover all liabilities. Further, insurance may not be generally available in the future or, if available, insurance premiums may make such insurance commercially unjustifiable. Moreover, even if we are successful in defending a claim, it could be time-consuming and costly to defend.
In addition, the frequency and severity of such incidents will affect operating costs, insurability and relationships with customers, employees and regulators. In particular, our customers may elect not to purchase our services if they view our safety record as unacceptable, which could cause us to lose customers and substantial revenues. In addition, these risks may be greater for us because we may acquire companies that have not allocated significant resources and management focus to safety and have a poor safety record requiring rehabilitative efforts during the integration process and we may incur liabilities for losses before such rehabilitation occurs.
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The imposition of stringent restrictions or prohibitions on offshore drilling by any governing body may have a material adverse effect on our business.
Events in recent years have heightened environmental and regulatory concerns about the oil and gas industry. From time to time, governing bodies have enacted and may propose legislation or regulations that would materially limit or prohibit offshore drilling in certain areas. If laws are enacted or other governmental action is taken that restrict or prohibit offshore drilling in our expected areas of operation, our expected future growth in offshore services could be reduced and our business could be materially adversely affected.
For example, the U.S. governmental, regulatory and industry response to the Deepwater Horizon drilling rig accident in April 2010 and resulting oil spill could have a prolonged and material adverse impact on drilling operations in the U.S. Gulf of Mexico. Following the April 2010 fire and explosion aboard the Deepwater Horizon drilling platform and subsequent release of oil from the Macondo well in the U.S. Gulf of Mexico, the federal Bureau of Ocean Energy Management, Regulation and Enforcement (BOEMRE) issued a moratorium on deep water drilling activities in the U.S. Gulf of Mexico, which was lifted on October 12, 2010, and also implemented a series of environmental, technological and safety measures intended to improve offshore safety systems and environmental protection. The safety regulations require operators to, among other things, submit independent third-party reports on the design and operation of blowout preventers (BOPs) and other well control systems, and conduct tests on the functionality of well control systems. Additional regulations address new standards for certain equipment involved in the construction of offshore wells, especially BOPs, and require operators to implement and enforce a safety and environmental management system, including regular third-party audits of safety procedures and drilling equipment to assure that offshore rig personnel and equipment remain in compliance with the new regulations. Each operator is also required to demonstrate that it has in place written and enforceable procedures, pursuant to applicable regulations, that ensure containment in the event of a deep water blowout. In October 2011, BOEMRE was separated into two federal bureaus, the Bureau of Ocean Energy Management (BOEM), which handles offshore leasing, resource evaluation, review and administration of oil and gas exploration and development plans, renewable energy development, National Environmental Policy Act analysis and environmental studies, and the Bureau of Safety and Environmental Enforcement (BSEE), which is responsible for the safety and enforcement functions of offshore oil and gas operations, including the development and enforcement of safety and environmental regulations, permitting of offshore exploration, development and production activities, inspections, offshore regulatory programs, oil spill response and newly formed training and environmental compliance programs.
The U.S. Gulf of Mexico represents a significant portion of the industrys existing deep water demand, and we expect the provision of tubular services there to continue to account for a meaningful portion of our business. The legal and regulatory developments since the Deepwater Horizon incident have created significant uncertainty regarding the outlook of offshore drilling activity in the U.S. Gulf of Mexico and possible implications for regions outside of the U.S. Gulf of Mexico. If the new regulations, operating procedures and possibility of increased legal liability are viewed by our current or future customers as a significant impairment to expected profitability on drilling projects in the U.S. Gulf of Mexico, deep water drillships and other floating rigs could depart the U.S. Gulf of Mexico, which would likely affect the global supply and demand balance for our services. In addition to the new safety requirements issued by BOEMRE, the BSEE could issue additional safety and environmental guidelines or regulations for drilling in the U.S. Gulf of Mexico that could disrupt or delay drilling operations, increase the cost of drilling operations or reduce the area of operations for deep water drilling, and other governments could take similar actions. All of these uncertainties could result in increased future operating costs, including insurance costs, which we may not be able to pass through to our customers.
We may not be fully indemnified against financial losses in all circumstances where damage to or loss of property, personal injury, death or environmental harm occur.
As is customary in our industry, our contracts typically provide that our customers indemnify us for claims arising from the injury or death of their employees, the loss or damage of their equipment, damage to the
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reservoir and pollution emanating from the customers equipment or from the reservoir (including uncontained oil flow from a reservoir). Conversely, we typically indemnify our customers for claims arising from the injury or death of our employees, the loss or damage of our equipment, or pollution emanating from our equipment. Our contracts typically provide that our customer will indemnify us for claims arising from catastrophic events, such as a well blowout, fire or explosion.
Our indemnification arrangements may not protect us in every case. For example, from time to time (i) we may enter into contracts with less favorable indemnities or perform work without a contract that protects us, (ii) our indemnity arrangements may be held unenforceable in some courts and jurisdictions or (iii) we may be subject to other claims brought by third parties or government agencies. Furthermore, the parties from which we seek indemnity may not be solvent, may become bankrupt, may lack resources or insurance to honor their indemnities, or may not otherwise be able to satisfy their indemnity obligations to us. The lack of enforceable indemnification could expose us to significant potential losses.
Further, our assets generally are not insured against loss from political violence such as war, terrorism or civil unrest. If any of our assets are damaged or destroyed as a result of an uninsured cause, we could recognize a loss of those assets.
We may incur liabilities, fines, penalties or additional costs, or we may be unable to provide services to certain customers, if we do not maintain safe operations.
If we fail to comply with safety regulations or maintain an acceptable level of safety in connection with our tubular services, we may incur fines, penalties or other liabilities or may be held criminally liable. We expect to incur additional costs over time to upgrade equipment or conduct additional training or otherwise incur costs in connection with compliance with safety regulations. Failure to maintain safe operations or achieve certain safety performance metrics could disqualify us from doing business with certain customers, particularly major oil companies. Because we provide tubular services to a large number of major oil companies, any such failure could adversely affect our business, financial condition and results of operations.
The industry in which we operate is undergoing continuing consolidation that may impact results of operations.
Some of our largest customers have consolidated and are using their size and purchasing power to achieve economies of scale and pricing concessions. This consolidation may result in reduced capital spending by such customers or the acquisition of one or more of our other primary customers, which may lead to decreased demand for our products and services. If we cannot maintain sales levels for customers that have consolidated or replace such revenues with increased business activities from other customers, this consolidation activity could have a significant negative impact on our business, financial condition and results of operations. We are unable to predict what effect consolidations in the industries may have on prices, capital spending by customers, selling strategies, competitive position, ability to retain customers or ability to negotiate favorable agreements with customers.
Our operations and our customers operations are subject to a variety of governmental laws and regulations that may increase our costs, limit the demand for our services and products or restrict our operations.
Our business and our customers businesses may be significantly affected by:
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federal, state and local and non-U.S. laws and other regulations relating to oilfield operations, worker safety and protection of the environment; |
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changes in these laws and regulations; and |
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the level of enforcement of these laws and regulations. |
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In addition, we depend on the demand for our tubular services from the oil and gas industry. This demand is affected by changing taxes, price controls and other laws and regulations relating to the oil and gas industry in general. For example, the adoption of laws and regulations curtailing exploration and development drilling for oil and gas for economic or other policy reasons could adversely affect our operations by limiting demand for our products. In addition, some non-U.S. countries may adopt regulations or practices that give advantage to indigenous oil companies in bidding for oil leases, or require indigenous companies to perform oilfield services currently supplied by international service companies. To the extent that such companies are not our customers, or we are unable to develop relationships with them, our business may suffer. We cannot determine the extent to which our future operations and earnings may be affected by new legislation, new regulations or changes in existing regulations.
Because of our non-U.S. operations and sales, we are also subject to changes in non-U.S. laws and regulations that may encourage or require hiring of local contractors or require non-U.S. contractors to employ citizens of, or purchase supplies from, a particular jurisdiction. If we fail to comply with any applicable law or regulation, our business, financial condition and results of operations may be adversely affected.
An inability to obtain visas and work permits for our employees on a timely basis could negatively affect our operations and have an adverse effect on our business.
Our ability to provide services worldwide depends on our ability to obtain the necessary visas and work permits for our personnel to travel in and out of, and to work in, the jurisdictions in which we operate. Governmental actions in some of the jurisdictions in which we operate may make it difficult for us to move our personnel in and out of these jurisdictions by delaying or withholding the approval of these permits. If we are not able to obtain visas and work permits for the employees we need for conducting our tubular services on a timely basis, we might not be able to perform our obligations under our contracts, which could allow our customers to cancel the contracts. If our customers cancel some of our contracts, and we are unable to secure new contracts on a timely basis and on substantially similar terms, our business, financial condition and results of operations could be materially adversely affected.
Our operations are subject to environmental and operational safety laws and regulations that may expose us to significant costs and liabilities.
Our operations are subject to numerous stringent and complex laws and regulations governing the discharge of materials into the environment, health and safety aspects of our operations, or otherwise relating to human health and environmental protection. These laws and regulations may, among other things, regulate the management and disposal of hazardous and non-hazardous wastes; require acquisition of environmental permits related to our operations; restrict the types, quantities, and concentrations of various materials that can be released into the environment; limit or prohibit operational activities in certain ecologically sensitive and other protected areas; regulate specific health and safety criteria addressing worker protection; require compliance with operational and equipment standards; impose testing, reporting and record-keeping requirements; and require remedial measures to mitigate pollution from former and ongoing operations. Failure to comply with these laws and regulations or to obtain or comply with permits may result in the assessment of administrative, civil and criminal penalties, imposition of remedial or corrective action requirements and the imposition of injunctions to prohibit certain activities or force future compliance. Certain environmental laws may impose joint and several liability, without regard to fault or legality of conduct, on classes of persons who are considered to be responsible for the release of a hazardous substance into the environment.
The trend in environmental regulation has been to impose increasingly stringent restrictions and limitations on activities that may impact the environment. The implementation of new laws and regulations could result in materially increased costs, stricter standards and enforcement, larger fines and liability and increased capital expenditures and operating costs, particularly for our customers.
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Our operations in countries outside of the United States are subject to a number of U.S. federal laws and regulations, including restrictions imposed by the Foreign Corrupt Practices Act, as well as trade sanctions administered by the Office of Foreign Assets Control and the Commerce Department.
Local laws and customs in many countries differ significantly from those in the United States. In many countries, particularly in those with developing economies, it is common to engage in business practices that are prohibited by U.S. regulations applicable to us. The United States Foreign Corrupt Practices Act (FCPA) and similar anti-bribery laws in other jurisdictions, including the UK Bribery Act 2010 and the United Nations Convention Against Corruption, prohibit corporations and individuals, including us and our employees, from engaging in certain accounting practices or activities to obtain or retain business or to influence a person working in an official capacity. We do business and may do additional business in the future in countries and regions in which we may face, directly or indirectly, corrupt demands by officials, tribal or insurgent organizations, or private entities. Thus, we face the risk of unauthorized payments or offers of payments by one of our employees, contractors and agents, even though these parties are not always subject to our control. It is our policy to implement compliance procedures to prohibit these practices. However, our existing safeguards and any future improvements may prove to be less than effective, and our employees, contractors, and agents may engage in conduct for which we might be held responsible, regardless of whether such conduct occurs within or outside the United States. We may also be held responsible for any violations by an acquired company that occur prior to an acquisition, or subsequent to the acquisition but before we are able to institute our compliance procedures. In addition, our non-U.S. competitors that are not subject to the FCPA or similar laws may be able to secure business or other preferential treatment in such countries by means that such laws prohibit with respect to us. A violation of any of these laws, even if prohibited by our policies, may result in severe criminal or civil sanctions and other penalties, and could have a material adverse effect on our business. Actual or alleged violations could damage our reputation, be expensive to defend, and impair our ability to do business.
Compliance with U.S. regulations on trade sanctions and embargoes administered by the United States Department of the Treasurys Office of Foreign Assets Control (OFAC) also poses a risk to us. We cannot provide products or services to certain countries subject to U.S. trade sanctions. Furthermore, the laws and regulations concerning import activity, export recordkeeping and reporting, export control and economic sanctions are complex and constantly changing. Any failure to comply with applicable legal and regulatory trading obligations could result in criminal and civil penalties and sanctions, such as fines, imprisonment, debarment from governmental contracts, seizure of shipments and loss of import and export privileges.
Compliance with and changes in laws could be costly and could affect operating results.
We have operations in the U.S. and in approximately 60 countries that can be impacted by expected and unexpected changes in the legal and business environments in which we operate. Political instability and regional issues in many of the areas in which we operate may contribute to such changes with greater significance or frequency. Our ability to manage our compliance costs and compliance programs will impact our ability to meet our earnings goals. Compliance-related issues could also limit our ability to do business in certain countries. Changes that could impact the legal environment include new legislation, new regulations, new policies, investigations and legal proceedings and new interpretations of existing legal rules and regulations, in particular, changes in export control laws or exchange control laws, additional restrictions on doing business in countries subject to sanctions and changes in laws in countries where we operate or intend to operate.
Restrictions on emissions of greenhouse gases could increase our operating costs or reduce demand for our products.
Environmental advocacy groups and regulatory agencies in the United States and other countries have focused considerable attention on emissions of carbon dioxide, methane and other greenhouse gases and their potential role in climate change. The U.S. Environmental Protection Agency (the EPA) has already begun to regulate greenhouse gas emissions under existing provisions of the federal Clean Air Act, and the state of
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California has established a cap-and-trade program requiring state-wide annual reductions in emission of greenhouse gasses. In addition, from time to time there have been proposals to impose a carbon tax based on the carbon content of combusted fuels. The adoption of additional legislation or regulatory programs to reduce emissions of greenhouse gases could require us to incur increased operating costs to comply with new emissions-reduction or reporting requirements. Any such legislation or regulatory programs could also increase the cost of consuming, and thereby reduce demand for, hydrocarbons that our customers produce. Consequently, legislation and regulatory programs to reduce emissions of greenhouse gases could have an adverse effect on our business, financial condition and results of operations. Finally, some scientists have concluded that increasing concentrations of greenhouse gases in the Earths atmosphere may produce climate changes that have significant physical effects, such as increased frequency and severity of storms, droughts, and floods and other climatic events.
We face risks related to natural disasters and pandemic diseases, which could result in severe property damage or materially and adversely disrupt our operations and affect travel required for our worldwide operations.
Some of our operations involve risks of, among other things, property damage, which could curtail our operations. For example, disruptions in operations or damage to a manufacturing plant could reduce our ability to produce products and satisfy customer demand. In particular, we have offices and manufacturing facilities in Houston, Texas and Lafayette, Louisiana and in various places throughout the Gulf Coast region of the United States. These offices and facilities are particularly susceptible to severe tropical storms and hurricanes, which may disrupt our operations. If one or more manufacturing facilities we own are damaged by severe weather or any other disaster, accident, catastrophe or event, our operations could be significantly interrupted. Similar interruptions could result from damage to production or other facilities that provide supplies or other raw materials to our plants or other stoppages arising from factors beyond our control. These interruptions might involve significant damage to, among other things, property, and repairs might take from a week or less for a minor incident to many months or more for a major interruption.
In addition, a portion of our business involves the movement of people and certain parts and supplies to or from foreign locations. Any restrictions on travel or shipments to and from foreign locations, due to the occurrence of natural disasters such as earthquakes, floods or hurricanes, or an epidemic or outbreak of diseases, including the H1N1 virus and the avian flu, in these locations, could significantly disrupt our operations and decrease our ability to provide services to our customers. In addition, our local workforce could be affected by such an occurrence or outbreak which could also significantly disrupt our operations and decrease our ability to provide services to our customers.
Our exposure to currency exchange rate fluctuations may result in fluctuations in our cash flows and could have an adverse effect on our financial condition and results of operations.
From time to time, fluctuations in currency exchange rates could be material to us depending upon, among other things, the principal regions in which we provide tubular services. For each of the year ended December 31, 2012 and the three months ended March 31, 2013, on a U.S. dollar-equivalent basis, approximately 25% of our revenue was represented by currencies other than the U.S. dollar. In particular, we are sensitive to fluctuations in currency exchange rates between the U.S. dollar and each of the Euro, Norwegian Krone, British Pound, Venezuelan Bolivar and Brazilian Real. There may be instances in which costs and revenue will not be matched with respect to currency denomination. As a result, to the extent that we continue our expansion on a global basis, as expected, we expect that increasing portions of revenue, costs, assets and liabilities will be subject to fluctuations in foreign currency valuations. We may experience economic loss and a negative impact on earnings or net assets solely as a result of foreign currency exchange rate fluctuations. Further, the markets in which we operate could restrict the removal or conversion of the local or foreign currency, resulting in our inability to hedge against these risks.
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Seasonal and weather conditions could adversely affect demand for our services and operations.
Weather can have a significant impact on demand as consumption of energy is seasonal, and any variation from normal weather patterns, such as cooler or warmer summers and winters, can have a significant impact on demand. Adverse weather conditions, such as hurricanes in the U.S. Gulf of Mexico or typhoons in the Asia Pacific region, may interrupt or curtail our operations, or our customers operations, cause supply disruptions and result in a loss of revenue and damage to our equipment and facilities, which may or may not be insured. Extreme winter conditions in Canada, Russia or the North Sea may interrupt or curtail our operations, or our customers operations, in those areas and result in a loss of revenue.
Legislation or regulations restricting the use of hydraulic fracturing could reduce demand for our services.
Hydraulic fracturing is an important and common practice in the oil and gas industry. The process involves the injection of water, sand and chemicals under pressure into a formation to fracture the surrounding rock and stimulate production of hydrocarbons. Certain environmental advocacy groups and regulatory agencies have suggested that additional federal, state and local laws and regulations may be needed to more closely regulate the hydraulic fracturing process, and have made claims that hydraulic fracturing techniques are harmful to surface water and drinking water resources and may cause earthquakes. Various governmental entities (within and outside the United States) are in the process of studying, restricting, regulating or preparing to regulate hydraulic fracturing, directly or indirectly. For example, the EPA has already begun to regulate certain hydraulic fracturing operations involving diesel under the Underground Injection Control program of the federal Safe Drinking Water Act, and is conducting a study to determine if additional regulation of hydraulic fracturing is warranted. The adoption of legislation or regulatory programs that restrict hydraulic fracturing could adversely affect, reduce or delay well drilling and completion activities, increase the cost of drilling and production, and thereby reduce demand for our services.
Customer credit risks could result in losses.
The concentration of our customers in the energy industry may impact our overall exposure to credit risk as customers may be similarly affected by prolonged changes in economic and industry conditions. Those countries that rely heavily upon income from hydrocarbon exports would be hit particularly hard by a drop in oil prices. Further, laws in some jurisdictions in which we operate could make collection difficult or time consuming. We perform ongoing credit evaluations of our customers and do not generally require collateral in support of our trade receivables. While we maintain reserves for potential credit losses, we cannot assure such reserves will be sufficient to meet write-offs of uncollectible receivables or that our losses from such receivables will be consistent with our expectations.
We may be unable to identify or complete acquisitions.
We expect that acquisitions will be an important element of our business strategy going forward. We can give no assurance that we will be able to integrate successfully the assets and operations of acquired businesses with our own business. Any inability on our part to integrate and manage the growth of acquired businesses may have a material adverse effect on our business, financial condition and results of operations. We can give no assurance that we will be able to identify and acquire additional businesses in the future on terms favorable to us.
Our executive officers and certain key personnel are critical to our business, and these officers and key personnel may not remain with us in the future.
Our future success depends in substantial part on our ability to hire and retain our executive officers and other key personnel. In particular, we are highly dependent on our executive officers, particularly Donald Keith Mosing, our Chairman, Chief Executive Officer and President. These individuals possess extensive expertise, talent and leadership, and they are critical to our success. The diminution or loss of the services of these individuals, or other integral key personnel affiliated with entities that we acquire in the future, could have a
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material adverse effect on our business. Furthermore, we may not be able to enforce all of the provisions in any employment agreement we have entered into with certain of our executive officers, and such employment agreements may not otherwise be effective in retaining such individuals. In addition, we may not be able to retain key employees of entities that we acquire in the future. This may impact our ability to successfully integrate or operate the assets we acquire.
Control of oil and gas reserves by state-owned oil companies may impact the demand for our services and create additional risks in our operations.
Much of the worlds oil and gas reserves are controlled by state-owned oil companies, and we provide tubular services for a number of those companies. State-owned oil companies may require their contractors to meet local content requirements or other local standards, such as joint ventures, that could be difficult or undesirable for us to meet. The failure to meet the local content requirements and other local standards may adversely impact our operations in those countries. In addition, our ability to work with state-owned oil companies is subject to our ability to negotiate and agree upon acceptable contract terms.
Risks Related to Our Organizational Structure
We are a holding company and our sole material asset after completion of this offering will be our indirect equity interest in FICV, and we are accordingly dependent upon distributions from FICV to pay taxes, make payments under the tax receivable agreement, and pay dividends.
We will be a holding company and will have no material assets other than our indirect equity interest in FICV. See Organizational Structure. We have no independent means of generating revenue. We intend to cause FICV to make distributions to us and Mosing Holdings in an amount sufficient to cover (i) all applicable taxes at assumed tax rates, (ii) payments under the tax receivable agreement we intend to enter into with Mosing Holdings and (iii) dividends, if any, declared by us. To the extent that we need funds and FICV or its subsidiaries is restricted from making such distributions under applicable law or regulation or under the terms of their financing or other contractual arrangements, or is otherwise unable to provide such funds, it could materially adversely affect our liquidity and financial condition.
The Mosing family will hold a majority of the combined voting power of the FINV Stock and, accordingly, will have substantial control over our management and affairs.
Immediately following the completion of this offering, the Mosing family will hold approximately % of the combined voting power of the FINV Stock (or % if the underwriters exercise their option to purchase additional shares of common stock in full) through FWW and Mosing Holdings. Accordingly, the Mosing family will have the ability to elect all of the members of both our management board and supervisory board, and thereby to control our management and affairs. Moreover, pursuant to our amended and restated articles of association, our board of directors will consist of no more than nine individuals. The Mosing family will have the right to recommend one director for nomination to the supervisory board for each 10% of the outstanding FINV Stock they collectively beneficially own, up to a maximum of five directors. The remaining directors will be nominated by our supervisory board. At the completion of this offering, our supervisory board will consist of four members, three of whom are members of the Mosing family and are also employees of us or one of our affiliates, including our chief executive officer. As a result, members of the Mosing family will have substantial influence over our operations and potential conflicts may arise, including with respect to matters related to the compensation of our chief executive officer and the other members of the Mosing family who serve on our supervisory board. In addition, the Mosing family will be able to determine the outcome of all matters requiring shareholder approval, including mergers, amendments of our articles of association and other material transactions, and will be able to cause or prevent a change in the composition of both our management board and supervisory board or a change in control of our company that could deprive our shareholders of an opportunity to receive a premium for their common stock as part of a sale of our company. The existence of significant
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shareholders may also have the effect of deterring hostile takeovers, delaying or preventing changes in control or changes in management, or limiting the ability of our other shareholders to approve transactions that they may deem to be in the best interests of our company. So long as the Mosing family continues to own a significant amount of the FINV Stock, even if such amount represents less than 50% of the aggregate voting power, it will continue to be able to strongly influence all matters requiring shareholder approval, regardless of whether or not other shareholders believe that the transaction is in their own best interests.
Pursuant to a voting agreement that will be entered into among Mosing Holdings, FWW and members of the Mosing family, each shareholder will agree to vote all of their shares of common stock and Series A preferred stock for the election of directors of our supervisory board and management board in the manner specified by a designated shareholder representative, which will initially be Keith Mosing, our chief executive officer. See Certain Relationships and Related Person TransactionsVoting Agreement.
The Mosing family may have interests that conflict with holders of shares of our common stock.
Immediately following the completion of this offering, the Mosing family will indirectly own % of the limited partnership interests in FICV. Because they hold a portion of their ownership interest in our business through FICV, rather than through FINV, the Mosing family may have conflicting interests with holders of shares of our common stock. For example, the Mosing family may have different tax positions from us which could influence their decisions regarding whether and when to cause us to dispose of assets, whether and when to cause us to incur new or refinance existing indebtedness, especially in light of the existence of the tax receivable agreement that we intend to enter into in connection with this offering. In addition, the structuring of future transactions may take into consideration the Mosing familys tax or other considerations even where no similar benefit would accrue to us. See Certain Relationships and Related Person TransactionsTax Receivable Agreement.
We will be required under the tax receivable agreement to pay Mosing Holdings or its permitted transferees for certain tax benefits we may claim, and the amounts we may pay could be significant.
We intend to enter into the tax receivable agreement with Mosing Holdings. This agreement generally will provide for the payment by us of 85% of actual reductions, if any, in payments of U.S. federal, state and local income tax or franchise tax (which reductions we refer to as cash savings) in periods after this offering as a result of (i) the tax basis increases resulting from the transfer of FICV interests to us in connection with a conversion of shares of Series A Preferred Stock into shares of our common stock and (ii) imputed interest deemed to be paid by us as a result of, and additional tax basis arising from, payments under the tax receivable agreement. In addition, the tax receivable agreement will provide for interest earned from the due date (without extensions) of the corresponding tax return to the date of payment specified by the tax receivable agreement.
The payment obligations under the tax receivable agreement are our obligations and are not obligations of FICV. The term of the tax receivable agreement will commence upon the completion of this offering and will continue until all such tax benefits have been utilized or expired, unless we exercise our right to terminate the tax receivable agreement.
Estimating the amount of payments that may be made under the tax receivable agreement is by its nature imprecise, insofar as the calculation of amounts payable depends on a variety of factors. The actual increase in tax basis, as well as the amount and timing of any payments under the tax receivable agreement, will vary depending upon a number of factors, including the timing of exchanges, the relative value of our U.S. and international assets at the time of the exchange, the price of shares of our common stock at the time of the exchange, the extent to which such exchanges are taxable, the amount and timing of the taxable income we realize in the future and the tax rate then applicable, our use of loss carryovers and the portion of our payments under the tax receivable agreement constituting imputed interest or depreciable or amortizable basis. We expect that the payments that we will be required to make under the tax receivable agreement will be substantial. There
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may be a substantial negative impact on our liquidity if, as a result of timing discrepancies or otherwise, (i) the payments under the tax receivable agreement exceed the actual benefits we realize in respect of the tax attributes subject to the tax receivable agreement or (ii) distributions to us by FICV are not sufficient to permit us to make payments under the tax receivable agreement subsequent to the payment of our taxes and other obligations. The payments under the tax receivable agreement will not be conditioned upon a holder of rights under a tax receivable agreement having a continued ownership interest in either FICV or us. While we may defer payments under the tax receivable agreement to the extent we do not have sufficient cash to make such payments, except in the case of an acceleration of payments thereunder occurring in connection with an early termination of the tax receivable agreement or certain mergers or changes of control, any such unpaid obligation will accrue interest. Additionally, during any such deferral period, we will be prohibited from paying dividends on our common stock. See Certain Relationships and Related Person TransactionsTax Receivable Agreement.
In certain cases, payments under the tax receivable agreement to Mosing Holdings or its permitted transferees may be accelerated or significantly exceed the actual benefits, if any, we realize in respect of the tax attributes subject to the tax receivable agreement.
The tax receivable agreement provides that we may terminate it early. If we elect to terminate the tax receivable agreement early, we would be required to make an immediate payment equal to the present value of the anticipated future tax benefits subject to the tax receivable agreement (based upon certain assumptions and deemed events set forth in the tax receivable agreement, including the assumption that we have sufficient taxable income to fully utilize such benefits and that any interests in FICV that Mosing Holdings or its transferees own on the termination date are deemed to be exchanged on the termination date). Any early termination payment may be made significantly in advance of the actual realization, if any, of such future benefits. In addition, payments due under the tax receivable agreement will be similarly accelerated following certain mergers or other changes of control. In these situations, our obligations under the tax receivable agreement could have a substantial negative impact on our liquidity and could have the effect of delaying, deferring or preventing certain mergers, asset sales, other forms of business combinations or other changes of control. For example, if the tax receivable agreement were terminated immediately after this offering, the estimated termination payment would be approximately $ million (calculated using a discount rate of %). The foregoing number is merely an estimate and the actual payment could differ materially. There can be no assurance that we will be able to finance our obligations under the tax receivable agreement. If we were unable to finance our obligations due under the tax receivable agreement, we would be in breach of the agreement. Any such breach could adversely affect our business, financial condition or results of operations.
Payments under the tax receivable agreement will be based on the tax reporting positions that we will determine. Although we are not aware of any issue that would cause the Internal Revenue Service (the IRS) to challenge a tax basis increase or other benefits arising under the tax receivable agreement, the holders of rights under the tax receivable agreement will not reimburse us for any payments previously made under the tax receivable agreement if such basis increases or other benefits are subsequently disallowed, except that excess payments made to any such holder will be netted against payments otherwise to be made, if any, to such holder after our determination of such excess. As a result, in such circumstances, we could make payments that are greater than our actual cash tax savings, if any, and may not be able to recoup those payments, which could adversely affect our liquidity.
Risks Related to Our Common Stock
The initial public offering price of our common stock may not be indicative of the market price of our common stock after this offering. In addition, an active liquid trading market for our common stock may not develop and our common stock price may be volatile.
Prior to this offering, our common stock was not traded on any market. An active and liquid trading market for our common stock may not develop or be maintained after this offering. Liquid and active trading markets usually result in less price volatility and more efficiency in carrying out investors purchase and sale orders. The
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market price of our common stock could vary significantly as a result of a number of factors, some of which are beyond our control. In the event of a drop in the market price of our common stock, you could lose a substantial part or all of your investment in our common stock. The initial public offering price will be negotiated between us and representatives of the underwriters, based on numerous factors which we discuss in the Underwriting section of this prospectus, and may not be indicative of the market price of our common stock after this offering. Consequently, you may not be able to sell shares of our common stock at prices equal to or greater than the price paid by you in the offering.
The following factors could affect our common stock price:
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our operating and financial performance; |
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quarterly variations in the rate of growth of our financial indicators, such as net income per share, net income, Adjusted EBITDA and revenues; |
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changes in revenue or earnings estimates or publication of reports by equity research analysts; |
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speculation in the press or investment community; |
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sales of our common stock by us or other shareholders, or the perception that such sales may occur; |
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general market conditions, including fluctuations in commodity prices; and |
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U.S. and international economic, legal and regulatory factors unrelated to our performance. |
The trading markets in general have experienced extreme volatility that has often been unrelated to the operating performance of particular companies. These broad market fluctuations may adversely affect the trading price of our common stock.
We will incur increased costs as a result of being a public company.
As a privately held company, we have not been responsible for the corporate governance and financial reporting practices and policies required of a publicly traded company. As a publicly traded company with listed equity securities we will need to comply with new laws, regulations and requirements, including corporate governance provisions of the Sarbanes-Oxley Act of 2002, and rules and regulations of the SEC and the NYSE, as well as the relevant provisions under Dutch law. Complying with these statutes, regulations and requirements will occupy a significant amount of time of our management board and supervisory board and will significantly increase our costs and expenses. Among other things, we will need to:
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institute a more comprehensive compliance function; |
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design, establish, evaluate and maintain a system of internal controls over financial reporting in compliance with the requirements of Section 404 of the Sarbanes-Oxley Act of 2002 and the related rules and regulations of the SEC and the Public Company Accounting Oversight Board (the PCAOB); |
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comply with rules promulgated by the NYSE; |
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prepare and distribute periodic public reports in compliance with our obligations under the federal securities laws; |
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establish new internal policies, such as those relating to disclosure controls and procedures and insider trading; |
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involve and retain to a greater degree outside counsel and accountants in the above activities; and |
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establish an investor relations function. |
These factors could also make it more difficult for us to attract and retain qualified members of our supervisory board, particularly to serve on our Audit Committee, qualified executive officers and key personnel.
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Future sales of our common stock in the public market could lower our stock price, and any additional capital raised by us through the sale of equity may dilute your ownership in us.
We may sell additional shares of common stock in subsequent public offerings. After the completion of this offering, we will have outstanding shares of our common stock and outstanding shares of Series A preferred stock that are convertible into an equivalent number of shares of common stock. Following the completion of this offering, members of the Mosing family will own, indirectly through FWW and Mosing Holdings, shares of common stock and all of our shares of Series A preferred stock. Together, these shares will represent approximately % of our total outstanding FINV Stock (assuming no exercise of the underwriters option to purchase additional shares of common stock). All of these shares will be subject to a lock-up agreement as described in Underwriting, but may be sold into the market in the future.
As soon as practicable after this offering, we intend to file a registration statement with the SEC on Form S-8 providing for the registration of shares of our common stock issued or reserved for issuance under our stock incentive plan and shares of our common stock issued or reserved for issuance under our employee stock purchase plan. Subject to the satisfaction of vesting conditions and the expiration of lock-up agreements, shares registered under this registration statement on Form S-8 will be available for resale immediately in the public market without restriction.
We cannot predict the size of future issuances of our common stock or the effect, if any, that future issuances and sales of shares of our common stock will have on the market price of our common stock. Sales of substantial amounts of our common stock (including shares issued in connection with an acquisition), or the perception that such sales could occur, may adversely affect prevailing market prices of our common stock.
Our declaration of dividends is within the discretion of our management board, with the approval of our supervisory board, and subject to certain limitations under Dutch law, and there can be no assurance that we will pay dividends.
Our dividend policy is within the discretion of our management board, with the approval of our supervisory board, and will depend upon various factors, including our results of operations, financial condition, capital requirements and investment opportunities. We can provide no assurance that we will pay dividends on our common stock. No dividends on our common stock will accrue in arrears. In addition, Dutch law contains certain restrictions on a companys ability to pay cash dividends, and we can provide no assurance that those restrictions will not prevent us from paying a dividend in future periods. See Description of Capital StockDividends.
As a Dutch public company with limited liability, the rights of our shareholders may be different from the rights of shareholders in companies governed by the laws of U.S. jurisdictions.
We are a Dutch public company with limited liability ( naamloze vennootschap ). Our corporate affairs are governed by our articles of association and by the laws governing companies incorporated in The Netherlands. The rights of shareholders and the responsibilities of members of our management board and supervisory board may be different from those in companies governed by the laws of U.S. jurisdictions.
For example, resolutions of the general meeting of shareholders may be taken with majorities different from the majorities required for adoption of equivalent resolutions in, for example, Delaware corporations. Although shareholders will have the right to approve legal mergers or demergers, Dutch law does not grant appraisal rights to a companys shareholders who wish to challenge the consideration to be paid upon a legal merger or demerger of a company.
In addition, if a third party is liable to a Dutch company, under Dutch law shareholders generally do not have the right to bring an action on behalf of the company or to bring an action on their own behalf to recover damages sustained as a result of a decrease in value, or loss of an increase in value, of their ordinary shares. Only in the event that the cause of liability of such third party to the company also constitutes a tortious act directly
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against such shareholder and the damages sustained are permanent, may that shareholder have an individual right of action against such third party on its own behalf to recover damages. The Dutch Civil Code provides for the possibility to initiate such actions collectively. A foundation or an association whose objective, as stated in its articles of association, is to protect the rights of persons having similar interests may institute a collective action. The collective action cannot result in an order for payment of monetary damages but may result in a declaratory judgment ( verklaring voor recht ), for example declaring that a party has acted wrongfully or has breached a fiduciary duty. The foundation or association and the defendant are permitted to reach (often on the basis of such declaratory judgment) a settlement which provides for monetary compensation for damages. A designated Dutch court may declare the settlement agreement binding upon all the injured parties, whereby an individual injured party will have the choice to opt-out within the term set by the court (at least three months). Such individual injured party, may also individually institute a civil claim for damages within the before mentioned term.
Furthermore, certain provisions of Dutch corporate law have the effect of concentrating control over certain corporate decisions and transactions in the hands of our management board and supervisory board. As a result, holders of our shares may have more difficulty in protecting their interests in the face of actions by members of our management board and supervisory board than if we were incorporated in the United States.
In the performance of its duties, our management board and supervisory board will be required by Dutch law to act in the interest of the company and its affiliated business, and to consider the interests of our company, our shareholders, our employees and other stakeholders in all cases with reasonableness and fairness. It is possible that some of these parties will have interests that are different from, or in addition to, interests of our shareholders.
Our articles of association and Dutch corporate law contain provisions that may discourage a takeover attempt.
Provisions contained in the amended and restated articles of association that we intend to adopt in connection with this offering and the laws of The Netherlands could make it more difficult for a third party to acquire us, even if doing so might be beneficial to our shareholders. Provisions of our articles of association impose various procedural and other requirements, which could make it more difficult for shareholders to effect certain corporate actions. Among other things, these provisions:
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authorize our management board, with the approval of our supervisory board, for a period of five years from the date of the offering to issue preferred stock, including for defensive purposes, and shares of common stock, in each case without shareholder approval; and |
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do not provide for shareholder action by written consent, thereby requiring all shareholder actions to be taken at a general meeting of shareholders. |
These provisions, alone or together, could delay hostile takeovers and changes in control of our company or changes in our management. See Description of Capital StockAnti-Takeover Provisions.
It may be difficult for you to obtain or enforce judgments against us or some of our executive officers and directors and some of our named experts in the United States or The Netherlands.
We were formed under the laws of The Netherlands and, as such, the rights of holders of our ordinary shares and the civil liability of our directors will be governed by the laws of The Netherlands and our amended and restated articles of association. Some of the named experts referred to in this prospectus are not residents of the United States and some of our directors and executive officers and some of our assets and some of the assets of our directors and executive officers are located outside the United States.
In the absence of an applicable convention between the United States and The Netherlands providing for the reciprocal recognition and enforcement of judgments (other than arbitration awards and divorce decrees) in civil
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and commercial matters, a judgment rendered by a court in the United States will not automatically be recognized by the courts of The Netherlands. In principle, the courts of The Netherlands will be free to decide, at their own discretion, if and to what extent a judgment rendered by a court in the United States should be recognized in The Netherlands. In general terms, Dutch courts tend to grant the same judgment without re-litigating on the merits if the following three cumulative minimum conditions are met:
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the judgment was rendered by the foreign court that was (based on internationally accepted grounds) competent to take cognizance of the matter; |
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the judgment is the outcome of a proper judicial procedure ( behoorlijke rechtspleging ); and |
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the judgment is not manifestly incompatible with the public policy ( openbare orde ) of The Netherlands. |
Without prejudice to the above, in order to obtain enforcement of a judgment rendered by a United States court in The Netherlands, a claim against the relevant party on the basis of such judgment should be brought before the competent court of The Netherlands. During the proceedings such court will assess, when requested, whether a foreign judgment meets the above conditions. In the affirmative, the court may order that substantive examination of the matter shall be dispensed with. In such case, the court will confine itself to an order reiterating the foreign judgment against the party against whom it had been obtained.
Otherwise, a new substantive examination will take place in the framework of the proceedings. In all of the above situations, when applying the law of any jurisdiction (including The Netherlands), Dutch courts may give effect to the mandatory rules of the laws of another country with which the situation has a close connection, if and insofar as, under the law of the latter country, those rules must be applied regardless of the law applicable to the contract or legal relationship. In considering whether to give effect to these mandatory rules of such third country, regard shall be given to the nature, purpose and the consequences of their application or non-application. Moreover, a Dutch court may give effect to the rules of the laws of The Netherlands in a situation where they are mandatory irrespective of the law otherwise applicable to the documents or legal relationship in question. The application of a rule of the law of any country that otherwise would govern an obligation may be refused by the courts of The Netherlands if such application is manifestly incompatible with the public policy ( openbare orde ) of The Netherlands.
Under our amended and restated articles of association, we will indemnify and hold our officers and directors harmless against all claims and suits brought against them, subject to limited exceptions. Under our amended and restated articles of association, to the extent allowed by law, the rights and obligations among or between us, any of our current or former directors, officers and employees and any current or former shareholder will be governed exclusively by the laws of The Netherlands and subject to the jurisdiction of Dutch courts, unless those rights or obligations do not relate to or arise out of their capacities listed above. Although there is doubt as to whether U.S. courts would enforce such provision in an action brought in the United States under U.S. securities laws, this provision could make judgments obtained outside of The Netherlands more difficult to have recognized and enforced against our assets in The Netherlands or jurisdictions that would apply Dutch law. Insofar as a release is deemed to represent a condition, stipulation or provision binding any person acquiring our ordinary shares to waive compliance with any provision of the Securities Act or of the rules and regulations of the SEC, such release will be void.
Purchasers of common stock will experience immediate and substantial dilution.
Assuming an initial public offering price of $ per share (the mid-point of the price range set forth on the cover page of this prospectus), purchasers of our common stock in this offering will experience an immediate and substantial dilution of $ per share in the net tangible book value per share of common stock from the initial public offering price, and our pro forma net tangible book value as of March 31, 2013, after giving effect to this offering, would be $ per share. In addition, our amended and restated articles of association allow us to issue significant numbers of additional shares, including shares that may be issued under our long-term incentive plans. We expect to grant restricted stock units representing an aggregate of shares of common stock (based upon the midpoint of the price range set forth on the cover page of this prospectus) to our officers
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and employees concurrently with this offering as described in Compensation Discussion and AnalysisComponents of Our Executive Compensation ProgramLong-Term Incentive Plan. See Dilution for a complete description of the calculation of net tangible book value.
We will be a controlled company within the meaning of the NYSE rules and will qualify for and have the ability to rely on exemptions from certain NYSE corporate governance requirements.
Because the Mosing family will beneficially own a majority of our outstanding common stock following the completion of this offering, we will be a controlled company as that term is set forth in Section 303A of the NYSE Listed Company Manual. Under the NYSE rules, a company of which more than 50% of the voting power is held by another person or group of persons acting together is a controlled company and may elect not to comply with certain NYSE corporate governance requirements, including:
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the requirement that a majority of its supervisory board consist of independent directors; |
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the requirement that its nominating and governance committee be composed entirely of independent directors with a written charter addressing the committees purpose and responsibilities; and |
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the requirement that its compensation committee be composed entirely of independent directors with a written charter addressing the committees purpose and responsibilities. |
These requirements will not apply to us as long as we remain a controlled company. Following the completion of this offering, and so long as members of the Mosing family control the outstanding common stock and Series A preferred stock representing at least a majority of the outstanding voting power in FINV, we have the option to utilize these exemptions. Accordingly, should we choose to utilize such exemptions, you may not have the same protections afforded to shareholders of companies that are subject to all of the corporate governance requirements of the NYSE. The significant ownership interest held by members of the Mosing family could adversely affect investors perceptions of our corporate governance. See ManagementBoard Structure.
Tax Risks
Changes in tax laws, treaties or regulations or adverse outcomes resulting from examination of our tax returns could adversely affect our financial results.
Our future effective tax rates could be adversely affected by changes in tax laws, treaties and regulations, both in the United States and internationally. Tax laws, treaties and regulations are highly complex and subject to interpretation. Consequently, we are subject to changing tax laws, treaties and regulations in and between countries in which we operate or are resident. Our income tax expense is based upon the interpretation of the tax laws in effect in various countries at the time that the expense was incurred. A change in these tax laws, treaties or regulations, or in the interpretation thereof, could result in a materially higher tax expense or a higher effective tax rate on our worldwide earnings. If any country successfully challenges our income tax filings based on our structure, or if we otherwise lose a material tax dispute, our effective tax rate on worldwide earnings could increase substantially and our financial results could be materially adversely affected.
U.S. tax authorities could treat us as a passive foreign investment company, which could have adverse U.S. federal income tax consequences to U.S. holders.
A foreign corporation will be treated as a passive foreign investment company, or PFIC, for U.S. federal income tax purposes if either (1) at least 75% of its gross income for any taxable year consists of certain types of passive income or (2) at least 50% of the average value of the corporations assets for any taxable year produce or are held for the production of those types of passive income. For purposes of these tests, passive income includes dividends, interest and gains from the sale or exchange of investment property and rents and royalties other than certain rents and royalties which are received from unrelated parties in connection with the active conduct of a trade or business, but does not include income derived from the performance of services. U.S.
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shareholders of a PFIC are subject to a disadvantageous U.S. federal income tax regime with respect to the income derived by the PFIC, the distributions they receive from the PFIC, and the gain, if any, they derive from the sale or other disposition of their interests in the PFIC.
We believe that we will not be a PFIC for the current taxable year or for any future taxable year. However, this involves a facts and circumstances analysis and it is possible that the IRS would not agree with our conclusion, or the U.S. tax laws could change significantly. See Certain U.S. Federal Income Tax ConsiderationsPFIC Status and Significant Tax Consequences.
U.S. anti-inversion tax laws could negatively affect our results and could result in a reduced amount of foreign tax credit for U.S. Holders.
Under rules contained in U.S. tax law, we would be subject to tax as a U.S. corporation in the event the we acquire substantially all of the assets of a U.S. corporation and the equity owners of that U.S. corporation own at least 80% (calculated without regard for any stock issued in a public offering) of our stock by reason of holding stock in the U.S. corporation. For purposes of applying these rules, the rights associated with the Series A preferred stock and the interests in FICV would likely result in the holders thereof being deemed to own our common stock under the stock equivalent portion of the rules.
We will acquire the assets of Mosing Holdings (a U.S. corporation); however, the ownership of Mosing Holdings in our stock, taking into account common stock that Mosing Holdings is deemed to own under the stock equivalent rules, is substantially below the 80% standard for the application of the rules. Accordingly, we do not believe these rules should apply.
There can be no assurance that the IRS will not challenge our determination that these rules are inapplicable. In the event that these rules were applicable, we would be subject to U.S. federal income tax on our worldwide income, which would negatively impact our cash available for distribution and the value of our common stock. Application of the rules could also adversely affect the ability of a U.S. Holder (as defined in Certain U.S. Federal Income Tax Considerations) to obtain a U.S. tax credit with respect to any Dutch withholding tax imposed on distributions.
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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus contains forward-looking statements that are subject to a number of risks and uncertainties, many of which are beyond our control. All statements, other than statements of historical fact included in this prospectus, regarding our strategy, future operations, financial position, estimated revenues and losses, projected costs, prospects, plans and objectives of management are forward-looking statements. When used in this prospectus, the words could, believe, anticipate, intend, estimate, expect, may, continue, predict, potential, project and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain such identifying words.
Forward-looking statements appear in a number of places in this prospectus, including Prospectus Summary, Risk Factors, Dividend Policy, Managements Discussion and Analysis of Financial Condition and Results of Operations and Business and may include statements about, among other things:
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our business strategy and prospects for growth; |
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our cash flows and liquidity; |
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our financial strategy, budget, projections and operating results; |
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the amount, nature and timing of capital expenditures; |
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the availability and terms of capital; |
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competition and government regulations; and |
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general economic conditions. |
Although we believe that the expectations reflected in such forward-looking statements are reasonable, we cannot give any assurance that such expectations will prove correct. The forward-looking statements involve risks and uncertainties. Important factors that could cause actual results to differ materially from our expectations included, but are not limited to, the following:
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the level of activity in the oil and gas industry; |
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the volatility of oil and gas prices; |
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unique risks associated with our offshore operations; |
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political, economic and regulatory uncertainties in our international operations; |
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our ability to develop new technologies and products; |
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our ability to protect our intellectual property rights; |
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our ability to employ and retain skilled and qualified workers; |
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the level of competition in our industry; |
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operational safety laws and regulations; |
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weather conditions and natural disasters; and |
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other factors discussed in Risk Factors, Managements Discussion and Analysis of Financial Condition and Results of Operations and elsewhere in this prospectus. |
All forward-looking statements speak only as of the date of this prospectus; we disclaim any obligation to update these statements unless required by law and we caution you not to place undue reliance on them. It is not possible for our management to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements that we make. These cautionary statements qualify all forward-looking statements attributable to us or persons acting on our behalf.
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The diagram below depicts our simplified organizational structure immediately following the completion of this offering (assuming that the underwriters option to purchase additional shares of common stock is not exercised and without giving effect to the grant of restricted stock units representing an aggregate of shares of common stock (based upon the midpoint of the price range set forth on the cover page of this prospectus) to our officers and employees concurrently with this offering as described in Compensation Discussion and AnalysisComponents of Our Executive Compensation ProgramLong-Term Incentive Plan):
Franks International N.V.
Following completion of this offering, FINV, the issuer of common stock in this offering, will act as a holding company whose sole material assets will consist of indirect general and limited partnership interests in
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FICV. As the indirect sole shareholder of the general partner of FICV, FINV will be responsible for all operational, management and administrative decisions relating to FICVs business and will consolidate the financial results of FICV and its subsidiaries.
The articles of association of FINV authorize two classes of stock, common stock and Series A preferred stock. See Description of Capital Stock. Only common stock will be sold to investors pursuant to this offering. Shares of our common stock will also be held indirectly by members of the Mosing family through FWW.
Shares of Series A preferred stock will be held by Mosing Holdings as described below. Each share of Series A preferred stock will have a liquidation preference equal to its par value of 0.01 per share (or approximately in the aggregate) and will be entitled to an annual dividend equal to 0.25% of its par value (or approximately per annum in the aggregate). Additionally, each share of Series A preferred stock will entitle its holder to vote together with the common stock as a single class on all matters presented to FINVs shareholders for their vote.
Formation of FICV
FICV is a newly formed limited partnership that was formed to act as a holding company of various U.S. and foreign operating companies engaged in our business. Prior to this offering, our foreign operating companies have been owned directly or indirectly by FINV, and our U.S. operating companies have been owned directly or indirectly by Mosing Holdings, which is owned by members of the Mosing family. In connection with this offering, FINV will contribute all of our foreign operating subsidiaries and a portion of the proceeds from this offering to FICV, and Mosing Holdings will contribute all of our U.S. operating subsidiaries (excluding certain assets that generate a de minimis amount of revenue, including aircraft, real estate and life insurance policies) to FICV. We intend to enter into real estate lease agreements and an aviation services agreement with customary terms for continued use of the real estate and aircraft. See Certain Relationships and Related Party TransactionsTransactions with Our Directors, Executive Officers and Affiliates.
In exchange for this contribution (and after giving effect to this offering assuming the underwriters option to purchase additional shares of common stock is not exercised),
(i) | FINV will (indirectly) hold a % limited partnership interest and a % general partnership in FICV; and |
(ii) | Mosing Holdings will hold a % limited partnership interest in FICV. |
In order to give Mosing Holdings a percentage vote in FINV that is equal to the percentage limited partnership interest in FICV that Mosing Holdings will receive in exchange for its contribution to FICV, Mosing Holdings will also receive shares of Series A preferred stock of FINV in the exchange.
Following the completion of this offering, the Mosing family will own, indirectly through Mosing Holdings and FWW, FINV Stock and FICV limited partnership interests that in the aggregate will represent approximately % of the economic interests in and voting power of our combined company (or % if the underwriters option to purchase additional shares of common stock is exercised in full).
For purposes of any transfer or exchange of Series A preferred stock and limited partnership interests in FICV, the articles of association of FINV and the partnership agreement of FICV contain provisions linking each share of Series A preferred stock in FINV to a proportionate portion of the limited partnership interest in FICV held by Mosing Holdings or its permitted transferee, which portion at any time will equal the total limited partnership interest in FICV held by Mosing Holdings or its permitted transferee divided by the total number of issued and outstanding shares of Series A preferred stock of FINV (each such portion being referred to as an FICV Portion). Shares of Series A preferred stock cannot be transferred unless simultaneously with an equal number of FICV Portions and vice versa.
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Mosing Holdings (or any of its permitted transferees) will have the right to convert all or a portion of its Series A preferred stock into FINV common stock by delivery to FINV of an equivalent number of FICV Portions. In connection with such conversion, Mosing Holdings or its permitted transferees will also be entitled to receive an amount of cash equal to the par value of each share of Series A preferred stock so converted plus any accrued but unpaid dividends thereon.
The above mechanism is subject to customary conversion rate adjustments for stock splits, stock dividends and reclassifications.
See Certain Relationships and Related Party TransactionsLimited Partnership Agreement of FICV.
Offering
Only common stock will be sold to investors pursuant to this offering. Immediately following the completion of this offering, there will be shares of common stock issued and outstanding (or shares of common stock if the underwriters exercise in full their option to purchase additional shares of common stock). We estimate that our net proceeds from this offering, after deducting estimated underwriting discounts and commissions and other offering related expenses, will be approximately $ million (or $ million if the underwriters exercise in full their option to purchase additional shares of common stock). A portion of the proceeds of this offering will be used to repay in full the outstanding notes payable to FWW, under which there was an aggregate of $443.7 million outstanding as of March 31, 2013. FINV will contribute any remaining proceeds (including any proceeds attributable to the underwriters exercise of their option to purchase additional shares of common stock) to FICV. Following any such contribution, FINVs percentage ownership interest in FICV will equal the percentage of outstanding FINV Stock represented by FINVs outstanding common stock.
As a result of the formation of FICV and the offering described above (and prior to any conversions of shares of Series A preferred stock into shares of our common stock):
|
the investors in this offering will collectively own shares of common stock (or shares of common stock if the underwriters exercise in full their option to purchase additional shares of common stock), and FINV will hold an interest in FICV that is equal to the percentage of the total number of outstanding shares of FINV Stock represented by our common stock; |
|
Mosing Holdings will hold shares of Series A preferred stock and an interest in FICV that is equal to the percentage of the total number of outstanding shares of FINV Stock represented by such shares of Series A preferred stock; |
|
the investors in this offering will collectively hold % (or % if the underwriters exercise in full their option to purchase additional shares of common stock) of the voting power in FINV; and |
|
the Mosing Family, through their ownership of Mosing Holdings and FWW, will hold % (or % if the underwriters exercise in full their option to purchase additional shares of common stock) of the voting power in FINV. |
Holding Company Structure
Following completion of this offering, FINV will act as a holding company whose sole material assets will consist of indirect general and limited partnership interests in FICV. As the owner of the general partner of FICV, FINV will be responsible for all operational, management and administrative decisions relating to FICVs business and will consolidate the financial results of FICV and its subsidiaries.
Our post-offering organizational structure will allow the Mosing Family to retain a portion of their equity ownership in our company through FICV, an entity that is classified as a partnership for U.S. federal income tax purposes, with the remainder of their ownership being in the form of common stock of FINV. Investors in this
40
offering will, by contrast, hold all of their equity ownership in the form of shares of common stock of FINV, which is classified as a corporation for U.S. federal income tax purposes. We believe that the members of the Mosing family generally find it advantageous to hold their equity interests in an entity that is not taxable as a corporation for U.S. federal income tax purposes. The Mosing family, like FINV, will generally incur U.S. federal, state and local income taxes on their proportionate share of any taxable income of FICV.
FINVs articles of association and FICVs limited partnership agreement will provide for customary mechanisms to ensure that (i) FINVs percentage interest in FICV will always equal the percentage of the total number of outstanding shares of FINV Stock represented by our outstanding common stock and (ii) Mosing Holdings (together with any permitted transferees) percentage interest in FICV will always equal the percentage of the total number of outstanding shares of FINV Stock represented by our outstanding Series A preferred stock.
FINV will generally be subject to U.S. federal, state and local income taxes on its proportionate share of FICVs taxable income attributable to U.S. operations. FINV may also incur U.S. branch profits tax on its proportionate share of FICVs taxable income attributable to U.S. operations. The U.S. branch profits tax is imposed on a non-U.S. corporations dividend equivalent amount, which generally consists of the corporations after-tax earnings and profits (as determined under U.S. federal income tax principles) that are effectively connected with the corporations U.S. trade or business but are not reinvested in a U.S. business. The limited partnership agreement of FICV provides for distributions to be made at the discretion of the general partner on a pro rata basis to the holders of interests in FICV for purposes of funding the holders tax obligations with respect to the income of FICV allocated to them. Generally, these tax distributions will be computed based on our estimate of the taxable income of FICV allocable to a holder multiplied by an assumed tax rate equal to the highest effective marginal combined U.S. federal, state and local income tax rate prescribed for an individual resident in Louisiana. See Certain Relationships and Related Person TransactionsLimited Partnership Agreement of FICV.
In connection with our formation transactions, we will enter into a tax receivable agreement with Mosing Holdings. This agreement generally will provide for the payment by FINV of 85% of actual reductions, if any, in payments of U.S. federal, state and local income tax or franchise tax (which reductions we refer to as cash savings) in periods after this offering as a result of (i) the tax basis increases resulting from the transfer of FICV interests to us in connection with a conversion of shares of Series A preferred stock into shares of our common stock and (ii) imputed interest deemed to be paid by us as a result of, and additional tax basis arising from, any payments we make under the tax receivable agreement. FINV will retain the benefit of the remaining 15% of these cash savings. See Certain Relationships and Related Party TransactionsTax Receivable Agreement.
41
We expect to receive net proceeds of approximately $ million from the sale of the common stock by us in this offering, assuming an initial public offering price of $ per share (the midpoint of the price range set forth on the cover page of this prospectus) and after deducting estimated expenses payable by us and underwriting discounts and commissions of approximately $ million. We intend to use the net proceeds from this offering to repay in full the outstanding notes payable to FWW, under which there was an aggregate of $443.7 million outstanding as of March 31, 2013. Any remaining net proceeds (including any proceeds attributable to the underwriters exercise of their option to purchase additional shares of common stock) will be contributed to FICV. FICV will use any such proceeds for general corporate purposes.
The notes payable to FWW each bore interest at a rate of 0.24% per annum as of March 31, 2013. The $320.0 million note is payable on demand, and the $220.0 million note matures in December 2020. The notes payable were issued in order to fund a distribution of $484.0 million to the owners of FINV.
An increase or decrease in the initial public offering price of $1.00 per share of common stock would cause the net proceeds that we will receive from the offering, after deducting estimated expenses and underwriting discounts and commissions, to increase or decrease by approximately $ million.
Following the completion of this offering, we intend to pay a regular quarterly dividend on our common stock of $ per share, or an aggregate of approximately $ million on an annual basis. However, our future dividend policy is within the discretion of our management board, with the approval of our supervisory board, and will depend upon various factors, including our results of operations, financial condition, capital requirements and investment opportunities. In addition, each share of Series A preferred stock will have a liquidation preference equal to its par value of 0.01 per share and will be entitled to an annual dividend equal to 0.25% of its par value. Based upon the number of Series A preferred shares outstanding upon completion of this offering, this amount would be in the aggregate. We will only be able to pay dividends from our available cash on hand and funds received from FICV. FICVs ability to make distributions to us will depend on many factors, including the performance of our business in the future. In order to make these distributions on our common stock and Series A preferred stock, we expect that FICV will be required to distribute approximately $ million pro rata to holders of FICV interests. This aggregate amount would have represented approximately % of our pro forma net income and % of our pro forma Adjusted EBITDA for the year ended December 31, 2012. See Managements Discussion and Analysis of Financial Condition and Results of OperationsLiquidity and Capital ResourcesLiquidity.
42
The following table sets forth our capitalization as of March 31, 2013:
|
for Franks International; and |
|
on a pro forma basis after giving effect to the restructuring transactions described in Organizational Structure and the sale of shares of common stock in this offering at the initial public offering price of $ per share (the midpoint of the estimated price range set forth on the cover page of this prospectus), after deducting underwriting discounts and estimated offering expenses and the application of the net proceeds as set forth in Use of Proceeds. |
You should read the following table in conjunction with Organizational Structure, Use of Proceeds, Selected Historical Combined and Unaudited Pro Forma Financial Data, Managements Discussion and Analysis of Financial Condition and Results of Operations and our historical combined financial statements and related notes thereto appearing elsewhere in this prospectus.
As of March 31, 2013 | ||||||||
Franks
International |
Pro Forma | |||||||
(in thousands) | ||||||||
Cash and cash equivalents (1) |
$ | 123,392 | $ | |||||
|
|
|
|
|||||
Long-term debt, including current maturities: |
||||||||
Lines of credit |
$ | 2,000 | $ | |||||
Notes payableexcluding affiliates |
2,981 | |||||||
Notes payableaffiliated (2)(3) |
448,838 | |||||||
Equipment financing and other(3) |
877 | |||||||
|
|
|
|
|||||
Total long-term debt |
454,696 | |||||||
|
|
|
|
|||||
Series A preferred stock: |
||||||||
Series A preferred stock, 0.01 par value; no shares authorized or issued and outstanding (actual); shares authorized (as adjusted); shares issued and outstanding (as adjusted) |
| |||||||
|
|
|
|
|||||
Stockholders equity: |
||||||||
Common stock, 0.01 par value; 240,000,000 shares authorized (actual); 48,096,000 shares issued and outstanding (actual); shares authorized (as adjusted); shares issued and outstanding (as adjusted) |
803 | (4) | ||||||
Additional paid-in capital |
1,409 | |||||||
Retained earnings |
491,145 | |||||||
Accumulated other comprehensive income |
294 | |||||||
Non-controlling interest (5) |
| |||||||
|
|
|
|
|||||
Total stockholders equity |
493,651 | |||||||
|
|
|
|
|||||
Total capitalization |
$ | 948,347 | $ | |||||
|
|
|
|
(1) | As of June 30, 2013, our cash and cash equivalents totaled $ million. |
(2) | In 2012, FINV made a non-cash distribution of $484.0 million to its owners in the form of two unsecured promissory notes payable. As of March 31, 2013 and June 30, 2013, there was an aggregate of approximately $443.7 million and $ million, respectively outstanding under these notes. |
(3) | In connection with the restructuring transactions described in Organizational Structure, certain adjustments have been made to these line items in an aggregate amount of approximately $ million. |
(4) | Represents the common stock of FINV, FII, FCC and FTS. See Note 11 to our audited combined financial statements included elsewhere in this prospectus. |
(5) | Reflects the portion of FICV that will be owned by Mosing Holdings upon completion of this offering. See Organizational Structure. |
43
Purchasers of common stock in this offering will experience immediate and substantial dilution in the net tangible book value per share of the common stock for accounting purposes. Our net tangible book value as of March 31, 2013, after giving pro forma effect to the reorganization transactions as described in Organizational Structure was approximately $ million, or $ per share of common stock. Pro forma net tangible book value per share is determined by dividing our pro forma tangible net worth (tangible assets less total liabilities) by the total number of outstanding shares of common stock that will be outstanding immediately prior to the closing of this offering. After giving pro forma effect to the reorganization transactions as described in Organizational Structure and as adjusted for the sale of the shares in this offering and assuming the receipt of the estimated net proceeds (after deducting estimated discounts and expenses of this offering), our adjusted pro forma net tangible book value as of March 31, 2013 would have been approximately $ million, or $ per share. This represents an immediate increase in the net tangible book value of $ per share to our existing shareholders and an immediate dilution (i.e., the difference between the offering price and the adjusted pro forma net tangible book value after this offering) to new investors purchasing shares in this offering of $ per share. The following table illustrates the per share dilution to new investors purchasing shares in this offering (assuming that 100% of our Series A preferred shares have been exchanged for common stock):
Assumed initial public offering price per share |
$ | |||
Pro forma net tangible book value per share as of March 31, 2013 (after giving effect to the reorganization transactions as described in Organizational Structure) |
||||
Increase per share attributable to new investors in this offering |
||||
As adjusted pro forma net tangible book value per share after giving effect to this offering |
||||
Dilution in pro forma net tangible book value per share to new investors in this offering |
$ |
The following table summarizes, on an adjusted pro forma basis as of March 31, 2013, the total number of shares of common stock owned by existing shareholders (assuming that 100% of our Series A preferred shares have been exchanged for common stock) and to be owned by the new investors in this offering, the total consideration paid, and the average price per share paid by our existing shareholders and to be paid by the new investors in this offering at $ , the midpoint of the range of the initial public offering prices set forth on the cover page of this prospectus, calculated before deduction of estimated discounts and commissions:
Shares Acquired | Total Consideration |
Average Price
Per Share |
||||||||||||||||
Number | Percent | Amount | Percent | |||||||||||||||
Existing shareholders |
% | $ | % | $ | ||||||||||||||
New investors in this offering |
||||||||||||||||||
Total |
% | $ | % | $ |
A $1.00 increase or decrease in the assumed initial public offering price of $ per share, which is the midpoint of the range set forth on the cover page of this prospectus, would increase or decrease our as adjusted pro forma net tangible book value as of March 31, 2013 by approximately $ million, the as adjusted pro forma net tangible book value per share after this offering by $ per share and the dilution in pro forma as adjusted net tangible book value per share to new investors in this offering by $ per share, assuming the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us.
44
SELECTED HISTORICAL COMBINED AND UNAUDITED PRO FORMA FINANCIAL DATA
The following table shows selected historical combined financial data of Franks International as of and for the years ended December 31, 2008, 2009, 2010, 2011 and 2012. The selected historical financial data as of December 31, 2011 and 2012 and for the years ended December 31, 2010, 2011 and 2012 are derived from our audited historical combined financial statements and related notes thereto included elsewhere in this prospectus. The selected historical financial data as of December 31, 2008, 2009 and 2010 and for the years ended December 31, 2008 and 2009 are derived from our audited historical combined financial statements and related notes thereto that are not included in this prospectus. The summary historical combined financial data presented as of March 31, 2013 and for the three months ended March 31, 2012 and 2013 are derived from the unaudited historical combined financial statements included elsewhere in this prospectus. Under the combined method of accounting, the historical consolidated financial statements of FINV, FII, FCC, and FTS and their wholly owned subsidiaries are combined as if Franks International operated as a single entity. All intercompany accounts and transactions have been eliminated for purposes of preparing these combined financial statements.
The selected unaudited pro forma financial data presented below has been derived by the application of pro forma adjustments to the historical combined financial statements of Franks International included elsewhere in this prospectus. The selected unaudited pro forma financial data for the year ended December 31, 2012 and as of and for the three months ended March 31, 2013 give effect to our reorganization in connection with this offering as described in Organizational Structure and the use of the estimated net proceeds from this offering as described in Use of Proceeds as if all such transactions had occurred on January 1, 2012, in the case of the unaudited pro forma statement of operations, and on March 31, 2013, in the case of the unaudited pro forma balance sheet.
You should read these tables in conjunction with Managements Discussion and Analysis of Financial Condition and Results of Operations, which includes a discussion of factors materially affecting the comparability of the information presented, Organizational Structure and our historical and pro forma financial statements and notes thereto included elsewhere in this prospectus. Our selected unaudited pro forma financial data is presented for informational purposes only. The pro forma adjustments are based upon available information and certain assumptions that we believe are reasonable. Our selected unaudited pro forma financial data does not purport to represent what our results of operations or financial position would have been if we operated as a public company during the period presented and may not be indicative of our future performance.
45
FINV | ||||||||||||||||||||||||||||||||||||
Franks International | Pro Forma | |||||||||||||||||||||||||||||||||||
Year Ended December 31, |
Three Months Ended
March 31, |
Year
Ended
December 31, 2012 |
Three
Months
Ended March 31, 2013 |
|||||||||||||||||||||||||||||||||
2008 | 2009 | 2010 | 2011 | 2012 | 2012 | 2013 | ||||||||||||||||||||||||||||||
Statements of income data (in thousands): |
||||||||||||||||||||||||||||||||||||
Revenues: |
||||||||||||||||||||||||||||||||||||
Equipment rentals and services |
$ | 572,160 | $ | 428,476 | $ | 490,902 | $ | 613,541 | $ | 880,084 | $ | 203,755 | $ | 205,878 | $ | $ | ||||||||||||||||||||
Products |
152,163 | 89,307 | 117,306 | 125,534 | 175,841 | 36,773 | 30,882 | |||||||||||||||||||||||||||||
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|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
Total revenues |
724,323 | 517,783 | 608,208 | 739,075 | 1,055,925 | 240,528 | 236,760 | |||||||||||||||||||||||||||||
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|
|
|
|
|
|
|
|
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|
|
|
|
|
|
|
|
|||||||||||||||||||
Operating expenses: |
||||||||||||||||||||||||||||||||||||
Cost of revenues, exclusive of depreciation and amortization |
||||||||||||||||||||||||||||||||||||
Equipment rentals and services |
200,624 | 161,920 | 222,345 | 256,515 | 314,950 | 72,731 | 75,781 | |||||||||||||||||||||||||||||
Products |
168,278 | 102,694 | 70,697 | 76,368 | 119,527 | 24,184 | 18,019 | |||||||||||||||||||||||||||||
General and administrative expenses |
112,288 | 113,851 | 134,449 | 160,506 | 187,033 | 41,608 | 44,145 | |||||||||||||||||||||||||||||
Depreciation and amortization |
39,013 | 45,769 | 48,197 | 54,581 | 66,215 | 15,424 | 17,783 | |||||||||||||||||||||||||||||
Impairment of goodwill and intangible assets |
| 9,438 | | | | | | |||||||||||||||||||||||||||||
(Gain) loss on sale of assets |
(364 | ) | (16 | ) | (164 | ) | (47 | ) | (2,608 | ) | 195 | 23 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
Operating income |
204,484 | 84,127 | 132,684 | 191,152 | 370,808 | 86,386 | 81,009 | |||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
Other income (expense): |
||||||||||||||||||||||||||||||||||||
Other income |
5,192 | 4,972 | 3,906 | 3,786 | 12,189 | 670 | 2,127 | |||||||||||||||||||||||||||||
Interest income (expense), net |
(2,584 | ) | (1,840 | ) | (1,658 | ) | (655 | ) | 264 | 260 | (201 | ) | ||||||||||||||||||||||||
Impairment of investment |
(3,797 | ) | | | | | | | ||||||||||||||||||||||||||||
Foreign currency gain (loss) |
(8,648 | ) | 559 | (1,930 | ) | (3,209 | ) | (450 | ) | 2,626 | (3,587 | ) | ||||||||||||||||||||||||
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
Total other income (expense) |
(9,837 | ) | 3,691 | 318 | (78 | ) | 12,003 | 3,556 | (1,661 | ) | ||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
Income before income tax |
194,647 | 87,818 | 133,002 | 191,074 | 382,811 | 89,942 | 79,348 | |||||||||||||||||||||||||||||
Income tax expense |
22,006 | 13,340 | 14,601 | 20,287 | 31,877 | 7,687 | 6,303 | |||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
Net income |
172,641 | 74,478 | 118,401 | 170,787 | 350,934 | 82,255 | 73,045 | |||||||||||||||||||||||||||||
Non-controlling interest |
| | | | | | | |||||||||||||||||||||||||||||
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
Net income attributable to Franks International |
172,641 | 74,478 | 118,401 | 170,787 | 350,934 | 82,255 | 73,045 | |||||||||||||||||||||||||||||
Preferred stock dividends |
| | | | | | | |||||||||||||||||||||||||||||
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
Net income attributable to common stockholders |
$ | 172,641 | $ | 74,478 | $ | 118,401 | $ | 170,787 | $ | 350,934 | $ | 82,255 | $ | 73,045 | $ | $ | ||||||||||||||||||||
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46
FINV | ||||||||||||||||||||||||||||||||||||
Franks International | Pro Forma | |||||||||||||||||||||||||||||||||||
Year Ended December 31, |
Three Months Ended
March 31, |
Year
Ended
December 31, 2012 |
Three
Months
Ended March 31, 2013 |
|||||||||||||||||||||||||||||||||
2008 | 2009 | 2010 | 2011 | 2012 | 2012 | 2013 | ||||||||||||||||||||||||||||||
Balance sheet data (as of period end) (in thousands): |
||||||||||||||||||||||||||||||||||||
Total assets |
$ | 661,740 | $ | 649,915 | $ | 710,543 | $ | 847,500 | $ | 1,107,961 | $ | 1,129,318 | $ | |||||||||||||||||||||||
Long-term debtexcluding affiliates |
71,011 | 57,108 | 46,579 | 9,204 | 7,368 |
|
5,858
|
|
||||||||||||||||||||||||||||
Long-term debtaffiliate(1) |
978 | 810 | 907 | 3,618 | 469,268 |
|
448,838
|
|
||||||||||||||||||||||||||||
Total liabilities(2) |
179,136 | 165,608 | 174,530 | 180,372 | 660,973 | 635,667 | ||||||||||||||||||||||||||||||
Total stockholders equity |
482,604 | 484,307 | 536,013 | 667,128 | 446,988 | 493,651 | ||||||||||||||||||||||||||||||
Other financial data (in thousands): |
||||||||||||||||||||||||||||||||||||
Net cash provided by operating activities |
$ | 209,603 | $ | 141,444 | $ | 163,414 | $ | 180,710 | $ | 344,776 | $ | 78,669 | $ | 50,664 | ||||||||||||||||||||||
Net cash used in investing activities |
(83,509 | ) | (64,520 | ) | (69,130 | ) | (126,655 | ) | (182,533 | ) | (47,541 | ) | (42,014 | ) | ||||||||||||||||||||||
Net cash used in financing activities |
(109,394 | ) | (92,834 | ) | (79,261 | ) | (71,874 | ) | (107,210 | ) | (14,742 | ) | (44,235 | ) | ||||||||||||||||||||||
Adjusted EBITDA(3) (unaudited) |
248,325 | 144,290 | 184,623 | 249,472 | 446,604 | 102,675 | 100,942 | $ | $ |
(1) | In 2012, FINV made a non-cash distribution of $484.0 million to its owners of FINV in the form of two unsecured promissory notes payable. As of December 31, 2012 and March 31, 2013, there was an aggregate of approximately $464.0 million and $443.7 million, respectively, outstanding under these notes. |
(2) | Includes Series A preferred stock. |
(3) | Adjusted EBITDA is a non-GAAP financial measure. For a definition and a reconciliation of Adjusted EBITDA to our net income, see Non-GAAP Financial Measure below. |
47
Non-GAAP Financial Measures
Adjusted EBITDA is a supplemental non-GAAP financial measure that is used by management and external users of our financial statements, such as industry analysts, investors, lenders and rating agencies.
We define Adjusted EBITDA as net income before net interest income or expense, depreciation and amortization, income tax benefit or expense, asset impairments, gain or loss on sale of assets, foreign currency gain or loss and other non-cash adjustments. We define Adjusted EBITDA margin as Adjusted EBITDA divided by revenues. Adjusted EBITDA is not a measure of net income or cash flows as determined by U.S. GAAP.
Management believes Adjusted EBITDA is useful because it allows us to more effectively evaluate our operating performance and compare the results of our operations from period to period without regard to our financing methods or capital structure. We exclude the items listed above from net income in arriving at Adjusted EBITDA because these amounts can vary substantially from company to company within our industry depending upon accounting methods and book values of assets, capital structures and the method by which the assets were acquired. Adjusted EBITDA and Adjusted EBITDA margin have limited use as analytical tools and should not be considered as an alternative to, or more meaningful than, operating income, net income or cash flows from operating activities as determined in accordance with GAAP or as an indicator of our operating performance or liquidity. Certain items excluded from Adjusted EBITDA are significant components in understanding and assessing a companys financial performance, such as a companys cost of capital and tax structure, as well as the historic costs of depreciable assets, none of which are components of Adjusted EBITDA. Our computations of Adjusted EBITDA may not be comparable to other similarly titled measures of other companies. We believe that Adjusted EBITDA is a widely followed measure of operating performance and may also be used by investors to measure our ability to meet debt service requirements.
FINV | ||||||||||||||||||||||||||||||||||||
Franks International | Pro Forma | |||||||||||||||||||||||||||||||||||
Year Ended December 31, |
Three Months Ended
March 31, |
Year
Ended
December 31, 2012 |
Three
Months
Ended March 31, 2013 |
|||||||||||||||||||||||||||||||||
2008 | 2009 | 2010 | 2011 | 2012 | 2012 | 2013 | ||||||||||||||||||||||||||||||
Adjusted EBITDA Reconciliation (in thousands): |
||||||||||||||||||||||||||||||||||||
Net income |
$ | 172,641 | $ | 74,478 | $ | 118,401 | $ | 170,787 | $ | 350,934 | $ | 82,255 | $ | 73,045 | $ | $ | ||||||||||||||||||||
Interest (income) expense, net |
2,584 | 1,840 | 1,658 | 655 | (264 | ) | (260 | ) | 201 | |||||||||||||||||||||||||||
Depreciation and amortization |
39,013 | 45,769 | 48,197 | 54,581 | 66,215 | 15,424 | 17,783 | |||||||||||||||||||||||||||||
Income tax expense |
22,006 | 13,340 | 14,601 | 20,287 | 31,877 | 7,687 | 6,303 | |||||||||||||||||||||||||||||
Impairment of goodwill and intangible assets |
| 9,438 | | | | | | |||||||||||||||||||||||||||||
Impairment of investment |
3,797 | | | | | | | |||||||||||||||||||||||||||||
(Gain) loss on sale of assets |
(364 | ) | (16 | ) | (164 | ) | (47 | ) | (2,608 | ) | 195 | 23 | ||||||||||||||||||||||||
Foreign currency (gain) loss |
8,648 | (559 | ) | 1,930 | 3,209 | 450 | (2,626 | ) | 3,587 | |||||||||||||||||||||||||||
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Adjusted EBITDA |
$ | 248,325 | $ | 144,290 | $ | 184,623 | $ | 249,472 | $ | 446,604 | $ | 102,675 | $ | 100,942 | $ | $ | ||||||||||||||||||||
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48
MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Investors should read the following information together with Prospectus SummarySummary Historical Combined and Unaudited Pro Forma Financial Data, Selected Historical Combined and Unaudited Pro Forma Financial Data and the financial statements and the notes thereto included elsewhere in this prospectus. This discussion and analysis contains forward-looking statements, which involve risks and uncertainties, including those described under the captions Risk Factors and Cautionary Note Regarding Forward Looking Statements and elsewhere in this prospectus. Our actual results may differ materially from those anticipated in these forward-looking statements. The financial information contained in the following discussion is based on our audited financial statements for the years ended December 31, 2010, 2011 and 2012, the unaudited financial statements for the three months ended March 31, 2012 and 2013 and the unaudited pro forma financial information for the year ended December 31, 2012 and the three months ended March 31, 2013.
Overview
We are a 75 year-old, industry-leading global provider of highly engineered tubular services to the oil and gas industry. We provide our services to leading exploration and production companies in both offshore and onshore environments, with a focus on complex and technically demanding wells. We believe that we are one of the largest global providers of tubular services to the oil and gas industry.
We conduct our business through three operating segments:
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International Services. We currently provide our services in approximately 60 countries on six continents. Our customers in these international markets are primarily large exploration and production companies, including integrated oil and gas companies and national oil and gas companies, with a significant focus on complex, high profile projects. Our International Services segment accounted for approximately 49% and 50%, respectively, of our Adjusted EBITDA in 2012 and the first three months of 2013. Approximately 82% and 83%, respectively, of our revenue from external customers in this segment was generated in offshore markets in 2012 and the first three months of 2013, the significant majority of which was from deep water markets. |
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U.S. Services. Approximately 51% and 63%, respectively, of our 2012 and first quarter 2013 U.S. Services segment revenue from external customers was generated in the technically challenging deep water areas of the U.S. Gulf of Mexico. In addition, we have a significant presence in almost all of the active onshore oil and gas drilling regions in the U.S., including the Permian Basin, Bakken Shale, Barnett Shale, Eagle Ford Shale, Haynesville Shale, Marcellus Shale and Utica Shale. Our U.S. Services segment accounted for approximately 45% and 42%, respectively, of our Adjusted EBITDA in 2012 and the first three months of 2013. |
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Pipe and Products. We also design and manufacture certain products that we sell or rent directly to external customers, including large OD pipe connectors and casing attachments. We also provide specialized fabrication and welding services in support of deep water projects in the U.S. Gulf of Mexico, including drilling and production risers, flowlines and pipeline end terminations, as well as long length tubulars (up to 300 feet in length) for use as caissons or pilings. Finally, we distribute large OD pipe manufactured by third parties. A significant majority of our sales to external customers occur in deep water markets. Our Pipe and Products segment accounted for approximately 6% and 8%, respectively, of our Adjusted EBITDA in 2012 and the first three months of 2013. |
How We Generate Our Revenue
A significant majority of our services revenues are derived primarily from two sources:
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personnel rates for our specially trained employees who perform tubular services for our customers; and |
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rental rates for the suite of products and equipment that our employees use to perform tubular services. |
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In addition, our customers typically reimburse us for transportation costs that we incur in connection with transporting our products and equipment from our staging areas to the customers job sites.
In contrast, our Pipe and Products revenues are derived from sales of certain products, including large OD pipe connectors, casing attachments and large OD pipe manufactured by third parties, directly to external customers.
As described below under U.S. Services, we have some exposure to footage-based rates and blended (one for both personnel and equipment) rates in our U.S. Services segment for certain onshore regions, but we do not have any meaningful exposure to fixed price contracts in either of our services segments. We believe that our lack of exposure to the market risk associated with fixed price contracts is an important component of our profitability.
International Services
In our International Services segment, we typically enter into contracts with our customers relating to the provision of tubular services for multiple wells, with terms ranging from three to five years. Though these contracts are usually terminable on 60 days notice, the frequency with which such contracts are terminated is typically limited by the time and expense required for customers to change service providers, including the cost of transporting equipment and personnel to remote international locations. Many of our international services arrangements provide for up to 180 days notice to us prior to the commencement of a project. Due to the high costs associated with drilling offshore wells, minimum government commitments for international oil companies to retain leases, the extent of well construction planning required to design and secure manufactured materials and the other logistical challenges of operating in many foreign countries, the market for international services is usually less susceptible to short-term fluctuations in demand as compared to our services provided in the U.S.
In a typical international arrangement, we provide our customers with a package of equipment which is dedicated to the customers rig. We also assign dedicated, specialized personnel to the customers rig. For certain large projects, this may include multiple crews that can rotate shifts during the provision of tubular services. During the time that our equipment is in use, we charge our customers full working personnel and rental rates, and we may also charge the customer a lower, standby rate for the time the equipment is dedicated to the customer but not in use. Given the long-term nature of our international projects, a large portion of the personnel and equipment rates charged to customers are monthly rates. More than 75% of our International Services revenue during each of 2012 and the first three months of 2013 were denominated in U.S. dollars.
In areas where we can access equipment that is located in the U.S., such as Latin America, we sometimes provide services on a callout basis, where we would be required to perform tubular services on shorter notice. The rates that we charge under callout arrangements are typically higher than standby rates, and we are able to use and rent the same equipment to multiple customers in a given time period, allowing us to complete more jobs for a greater number of customers.
U.S. Services
In contrast to our International Services, our customer contracts in the U.S. Services segment are typically managed on a well-by-well basis. In addition, though we are able to charge day rates for products and equipment in our U.S. Gulf of Mexico operations, the standby periods are typically much shorter than those provided for in our International Service contracts. Services in our U.S. Services segment are usually performed on a callout basis, where we are required to arrive at a customers site within a matter of days.
The typical U.S. Services arrangement relates to a specific tubular service project for a particular well. Moreover, the casing and tubing portions of a project may be tendered for and awarded separately. Given the shorter-term nature of our U.S. projects, the rates charged to customers are hourly rates for personnel and day rates for equipment. Rather than being on standby for potentially long periods of time, our employees and equipment in
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the U.S. Services segment instead typically make discrete trips, as necessary to the customers well site to perform the tubular services. As a result, our standby revenue is significantly lower in onshore and offshore portions of our U.S. Services segment as compared to our International Services segment. Although we generate lower standby revenues than in our International Services segment, we seek to optimize utilization of our personnel and equipment to allow us to earn full working rates on as many jobs for as many customers as possible.
In comparison to our International Services segment, we face a much larger number of small, regional competitors in the U.S. As a consequence, the bidding process is much more competitive. In order to be awarded certain projects, we sometimes enter into other contractual arrangements, including:
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blended rate arrangements, where we charge one hourly rate for both the required equipment and the personnel necessary to complete the project; or |
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footage-based rate arrangements. |
Contracts and Liability
Most of our services are performed pursuant to master service agreements that we have entered into with our customers. We have maintained master service agreements with Chevron, BP, Shell, Exxon Mobil and other customers for over 20 years. We strive to negotiate the terms of these and our other contracts to be consistent with what we consider to be best practices. The general industry practice is for oilfield service providers, like us, to be responsible for their own products and services and for our customers to retain liability for drilling and related operations. Consistent with this practice, we generally take responsibility for our own people and property, while our customers, such as the operator of a well, take responsibility for their own people, property and all liabilities related to the well and subsurface operations, regardless of either partys negligence. In general, any material limitations on indemnifications to us from our customers in support of this allocation of responsibility arise only by applicable statutes. More recently, certain of our customers have begun to move more toward fault-based approaches for liability and indemnity.
Certain states in which we operate, such as Texas, Louisiana, Wyoming, and New Mexico, have enacted oil and gas specific statutes that void any indemnity agreement that attempts to relieve a party from liability resulting from its own negligence (anti-indemnity statutes). These statutes can void the allocation of liability agreed to in a contract; however, both the Texas and Louisiana anti-indemnity statutes include important exclusions. The Louisiana statute does not apply to property damage, and the Texas statute allows mutual indemnity agreements that are supported by insurance and has exclusions, which include, among other things, loss or liability for property damage that results from pollution and the cost of control of a wild well.
How We Evaluate Our Operations
We manage our business through three operating segments. We have focused on implementing financial reporting and controls in our operations to increase the availability of critical information necessary to support informed decision making. We use a number of financial and operational measures to routinely analyze and evaluate the performance of our business, including the following:
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revenue; |
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Adjusted EBITDA and Adjusted EBITDA margin; and |
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safety performance. |
Revenue
We analyze our revenue growth by comparing actual monthly revenue to our internal projections for each month to assess our performance. We also assess incremental changes in our monthly revenue across our operating segments to identify potential areas for improvement. Our revenue for the three months ended
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March 31, 2013 decreased $3.8 million, or 2%, from our revenue for the three months ended March 31, 2012. Our revenue for the year ended December 31, 2012 increased by $316.9 million, or 43%, from our revenue for the year ended December 31, 2011. Similarly, our revenue for the year ended December 31, 2011 increased by $130.9 million, or 22%, from our revenue for the year ended December 31, 2010.
Adjusted EBITDA and Adjusted EBITDA Margin
We define Adjusted EBITDA as net income before net interest income or expense, depreciation and amortization, income tax benefit or expense, asset impairments, gain or loss on sale of assets, foreign currency gain or loss and other non-cash adjustments. Adjusted EBITDA margin reflects our Adjusted EBITDA as a percentage of our revenues. We review Adjusted EBITDA and Adjusted EBITDA margin on both a combined basis and on a segment basis. We use Adjusted EBITDA and Adjusted EBITDA margin to assess our financial performance because it allows us to compare our operating performance on a consistent basis across periods by removing the effects of our capital structure (such as varying levels of interest expense), asset base (such as depreciation and amortization) and items outside the control of our management team (such as income tax rates). We present Adjusted EBITDA and Adjusted EBITDA margin on a combined basis and on a segment basis because we believe they provide a more complete understanding of the factors and trends affecting our business as compared to measures calculated under GAAP alone.
Adjusted EBITDA and Adjusted EBITDA margin have limitations as analytical tools and should not be considered as an alternative to net income, operating income, cash flow from operating activities or any other measure of financial performance or liquidity presented in accordance with GAAP. Other companies in our industry may calculate Adjusted EBITDA differently, limiting its usefulness as a comparative measure. Our Adjusted EBITDA for the three months ended March 31, 2013 decreased by $1.7 million, or 2%, from our Adjusted EBITDA for the three months ended March 31, 2012 and our Adjusted EBITDA for the year ended December 31, 2012 increased by $197.1 million, or 79%, from our Adjusted EBITDA for the year ended December 31, 2011. Our Adjusted EBITDA for the year ended December 31, 2011 increased by $64.8 million, or 35%, from our Adjusted EBITDA for the year ended December 31, 2010.
Our Adjusted EBITDA margin for the three months ended March 31, 2013 remained constant compared to the three months ended March 31, 2012 and our Adjusted EBITDA margin for the year ended December 31, 2012 increased by 25% from our Adjusted EBITDA margin for the year ended December 31, 2011. Our Adjusted EBITDA margin for the year ended December 31, 2011 increased by 11% from our Adjusted EBITDA margin for the year ended December 31, 2010.
For further discussion, including a reconciliation of our combined Adjusted EBITDA to the most comparable measure calculated in accordance with GAAP, see Selected Historical Combined and Unaudited Pro Forma Financial DataNon-GAAP Financial Measures. For a reconciliation of our Adjusted EBITDA on a segment basis to the most comparable measure calculated in accordance with GAAP, see Operating Segment Results.
Safety Performance
Maintaining a strong safety record is a critical component of our operational success. Many of our larger customers have safety standards we must satisfy before we can perform services for them. We continually monitor our safety culture through the use of employee safety surveys and trend analysis, and we modify existing programs or develop new programs according to the data obtained therefrom. We measure safety by tracking the total recordable incident rate (TRIR) and the lost time incident rate (LTIR), which are reviewed on both a monthly and rolling twelve-month basis. TRIR is a measure of the rate of recordable workplace injuries, defined below, normalized and stated on the basis of 100 workers for an annual period. The factor is derived by multiplying the number of recordable injuries in a calendar year by the number of employee hours worked per year (i.e., the total hours for the number of full-time equivalent employees multiplied by 2,000 hours per year) and dividing this value by the total hours actually worked in the year. A recordable injury includes occupational
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death, nonfatal occupational illness and other occupational injuries that involve loss of consciousness, restriction of work or motion, transfer to another project, or medical treatment other than first aid. LTIR is a measure of the frequency of incidents, such as injuries, per 200,000 man hours. LTIR is calculated by multiplying the total number of lost time cases under the federal Occupational Safety and Health Act (OSHA) by 200,000, and dividing that number by the total number of man hours worked by a specific group of employees. The table below presents our worldwide TRIR and LTIR for the years ended December 31, 2012, 2011 and 2010:
Year Ended December 31, | ||||||||||||
2010 | 2011 | 2012 | ||||||||||
TRIR |
2.03 | 2.15 | 1.89 | |||||||||
LTIR |
0.53 | 0.73 | 0.50 |
Key Drivers Affecting our Results of Operations
Our results of operations and financial condition are affected by numerous factors, including those described above in Risk Factors, elsewhere in this prospectus and those described below:
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General level of drilling activity . Demand for our services depends primarily upon the capital spending of oil and gas companies and the level of drilling activity in the U.S. and internationally. Higher activity levels can lead to greater utilization of our equipment and personnel by our customers. Because a large portion of our costs are fixed, our Adjusted EBITDA margins typically improve when more of our resources are commercially deployed. |
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Impact of service mix . Generally, offshore projects are more complex than onshore projects, and we typically have a greater opportunity to differentiate our capabilities compared to our competitors. Consequently, our revenue and profit opportunity per well is greater when offshore services are a relatively larger component of our revenue than onshore services. Similarly, because our equipment costs are typically fixed while our personnel costs are typically variable, our profit opportunity per well is greater when equipment rental is a larger component of a customer invoice relative to the personnel costs. |
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Size and complexity of projects . Our revenue and profit opportunity per well is higher for more complex wells. Onshore, our revenue and profit potential is greatest for horizontal shale wells with extended laterals. Offshore, our revenue and profit potential is greatest for deep wells with multiple casing strings and casing diameters. |
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Timing of projects . Our results of operations in a particular period can be impacted by the timing of the start-up and completion of large projects, particularly international offshore projects where we bill our customers a monthly rate for our personnel and equipment and our standby availability. |
General Trends and Outlook
We believe the long-term outlook for the tubular services businesses is favorable. For a more fulsome description of the trends in our industry, see BusinessIndustryTrends in the Industry.
Factors Affecting Comparability of Historical Financial Results
Our pro forma results of operations and our future results of operations may not be comparable to our historical results of operations for the periods presented, primarily for the reasons described below:
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The historical combined financial statements included in this prospectus are based on the financial statements of Franks International, prior to our reorganization in connection with this offering as described in Organizational Structure. For example, in connection with the reorganization, Mosing Holdings will cause our U.S. operating subsidiaries to distribute certain assets that generate a de minimis amount of revenue, including aircraft, real estate and life insurance policies and associated accounts receivable. Accordingly, these assets will not be contributed to FICV in connection with the |
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reorganization. As a result, we intend to enter into real estate lease agreements with customary terms for continued use of the real estate, under which we will incur additional rental expense of approximately $3.8 million per year. In addition, we will enter into an aviation services agreement with customary terms for continued use of the aircraft, under which we will incur additional charter service expense of approximately $1.1 million per year. As a result, the historical financial data may not give you an accurate indication of what our actual results would have been if the transactions described in Organizational Structure had been completed at the beginning of the periods presented or of what our future results of operations are likely to be. |
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The tax receivable agreement generally will provide for the payment by FINV of 85% of actual reductions, if any, in payments of U.S. federal, state and local income tax or franchise tax (which reductions we refer to as cash savings) in periods after this offering as a result of (i) the tax basis increases resulting from the transfer of FICV interests to us in connection with a conversion of shares of Series A preferred stock into shares of our common stock and (ii) imputed interest deemed to be paid by FINV as a result of, and additional tax basis arising from, payments under the tax receivable agreement. In addition, the tax receivable agreement will provide for interest earned from the due date (without extensions) of the corresponding tax return to the date of payment specified by the tax receivable agreement. We will record 85% of the estimated tax benefit as an increase to amounts payable under the tax receivable agreement as a liability. See Certain Relationships and Related Person TransactionsTax Receivable Agreement. |
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We expect that our general and administrative (G&A) expenses will increase as a result of this offering. Specifically, we will incur certain expenses related to being a publicly traded company, including expenses to comply with reporting obligations under the Securities Exchange Act of 1934, as amended (the Exchange Act), expenses associated with Sarbanes-Oxley Act compliance, expenses associated with listing on the NYSE, independent auditors fees, legal fees, investor relations expenses, registrar and transfer agent fees, director and officer liability insurance costs and director compensation. |
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As described in Compensation Discussion and AnalysisComponents of Our Executive Compensation ProgramLong-Term Incentive Plan, concurrently with this offering, we expect to grant restricted stock units to certain of our officers and employees valued at an aggregate of $78 million under our LTIP. It is expected that the initial restricted stock unit awards to our CEO and our Named Executive Officers (as well as our other executive officers and our employees serving as first-level vice presidents) will vest 20% per year over the first three years, with the remaining 40% vesting on March 31, 2017. We expect that the initial restricted stock unit awards to our other officers and employees will vest ratably over a three-year period. Accordingly, assuming they all vest in accordance with their vesting schedule, this grant of restricted stock units will result in a charge of $20.3 million in each of 2014, 2015 and 2016 and $17.0 million in 2017. Although we have not historically paid equity compensation, we expect that, going forward, equity will comprise a portion of our compensation program. We cannot, however, predict the amount of future equity awards or the effect of any potential equity awards on our overall compensation structure, and, as a result, cannot accurately predict the effects of future equity compensation on our financial statements or future results of operations. |
Our future results will depend on our ability to efficiently manage our combined operations and execute our business strategy.
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Historical Financial and Operating Data
The following table presents our combined results for the periods presented (in thousands):
Year Ended December 31, |
Three Months Ended
March 31, |
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2010 | 2011 | 2012 | 2012 | 2013 | ||||||||||||||||
Revenues: |
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Equipment rentals and services |
$ | 490,902 | $ | 613,541 | $ | 880,084 | $ | 203,755 | $ | 205,878 | ||||||||||
Products(1) |
117,306 | 125,534 | 175,841 | 36,773 | 30,882 | |||||||||||||||
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Total revenues |
608,208 | 739,075 | 1,055,925 | 240,528 | 236,760 | |||||||||||||||
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Operating expenses: |
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Cost of revenues, exclusive of depreciation and amortization |
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Equipment rentals and services |
222,345 | 256,515 | 314,950 | 72,731 | 75,781 | |||||||||||||||
Products |
70,697 | 76,368 | 119,527 | 24,184 | 18,019 | |||||||||||||||
General and administrative expenses |
134,449 | 160,506 | 187,033 | 41,608 | 44,145 | |||||||||||||||
Depreciation and amortization |
48,197 | 54,581 | 66,215 | 15,424 | 17,783 | |||||||||||||||
(Gain) loss on sale of assets |
(164 | ) | (47 | ) | (2,608 | ) | 195 | 23 | ||||||||||||
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Operating income |
132,684 | 191,152 | 370,808 | 86,386 | 81,009 | |||||||||||||||
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Other income (expense): |
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Other income |
3,906 | 3,786 | 12,189 | 670 | 2,127 | |||||||||||||||
Interest income (expense), net |
(1,658 | ) | (655 | ) | 264 | 260 | (201 | ) | ||||||||||||
Foreign currency gain (loss) |
(1,930 | ) | (3,209 | ) | (450 | ) | 2,626 | (3,587 | ) | |||||||||||
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Total other income (expense) |
318 | (78 | ) | 12,003 | 3,556 | (1,661 | ) | |||||||||||||
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Income before income tax expense |
133,002 | 191,074 | 382,811 | 89,942 | 79,348 | |||||||||||||||
Income tax expense |
14,601 | 20,287 | 31,877 | 7,687 | 6,303 | |||||||||||||||
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Net income |
$ | 118,401 | $ | 170,787 | $ | 350,934 | $ | 82,255 | $ | 73,045 | ||||||||||
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(1) | Combined products revenue includes a small amount of revenues attributable to the U.S. Services and International Services segments. |
Combined Results of Operations
Three Months Ended March 31, 2013 Compared to Three Months Ended March 31, 2012
Revenues. Revenues for the three months ended March 31, 2013 decreased by $3.8 million, or 2%, to $236.7 million from $240.5 million for the three months ended March 31, 2012. The decrease was primarily due to lower external revenues of $5.9 million in our Pipe and Products segment, which was negatively affected by the BSEEs temporary shut-down of more than 20 rigs in the Gulf of Mexico in February 2013 in order for operators to replace bolts in subsea equipment that had been determined by regulators to be defective. Partially offsetting this decrease was an increase in external revenues of $1.4 million in our International Services segment.
Cost of revenues, exclusive of depreciation and amortizatio n . Cost of revenues for the three months ended March 31, 2013 decreased by $3.1 million, or 3%, to $93.8 million from $96.9 million for the three months
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ended March 31, 2012. The decrease was primarily attributable to decreases in pipe inventory and equipment rentals resulting from the decrease in drilling activity described above.
General and administrative expenses. G&A expenses for the three months ended March 31, 2013 increased by $2.5 million, or 6%, to $44.1 million from $41.6 million for the three months ended March 31, 2012 primarily due to an increase in bad debt expense of $1.5 million related to a customer in Venezuela and compensation related costs of $1.5 million.
Depreciation and amortization. Depreciation and amortization for the three months ended March 31, 2013 increased by $2.4 million, or 15%, to $17.8 million from $15.4 million for the three months ended March 31, 2012. The increase was primarily attributable to assets placed in service in the last nine months of 2012 and in the first quarter of 2013.
Other income . Other income for the three months ended March 31, 2013 increased by $1.4 million, or 217%, to $2.1 million from $0.7 million for the three months ended March 31, 2012 due to a value added tax refund related to prior periods.
Foreign currency (gain) loss . Foreign currency loss for the three months ended March 31, 2013 increased by $6.2 million, or 237%, to a $3.6 million loss from a $2.6 million gain for the three months ended March 31, 2012. The increase in foreign currency loss was due to unfavorable fluctuations in foreign currency exchange rates and a $1.8 million charge related to the devaluation of the Venezuelan Bolivar in the first quarter of 2013. See Note 1 to our unaudited combined financial statements included elsewhere in this prospectus.
Income tax expense. Income tax expense for the three months ended March 31, 2013 decreased by $1.4 million, or 18%, to $6.3 million from $7.7 million for the three months ended March 31, 2012. We are subject to many U.S. and foreign tax jurisdictions and many tax agreements and treaties among the various taxing authorities. Our operations in these different jurisdictions are taxed on various bases such as income before taxes, deemed profits (which is generally determined using a percentage of revenues rather than profits), and withholding taxes based on revenues; consequently, the relationship between our pre-tax income or loss from operations and our income tax benefit or provision varies from period to period.
Year Ended December 31, 2012 Compared to Year Ended December 31, 2011
Revenues . Revenues for the year ended December 31, 2012 increased by $316.8 million, or 43%, to $1,055.9 million from $739.1 million for the year ended December 31, 2011. The increase was primarily attributable to higher revenues of $163.3 million and $52.0 million from our U.S. Services and Pipe and Products segments, respectively, as the demand continued to increase after the repeal of the Macondo-related drilling moratorium. Increased activity levels in our International Services segment comprised approximately $103.3 million of the increase.
Cost of revenues, exclusive of depreciation and amortization . Cost of revenues for the year ended December 31, 2012 increased by $101.6 million, or 31%, to $434.5 million from $332.9 million for the year ended December 31, 2011. The increase was primarily attributable to increases in the cost of products, equipment rentals and services ($73.0 million) and compensation-related costs ($28.6 million) due to the aforementioned increase in drilling activity.
General and administrative expenses. G&A expenses for the year ended December 31, 2012 increased by $26.5 million, or 17%, to $187.0 million from $160.5 million for the year ended December 31, 2011. The increase supported the growth in our business, and as a result of such growth, we experienced approximately $22.7 million in higher compensation related costs.
Depreciation and amortization. Depreciation and amortization for the year ended December 31, 2012 increased by $11.6 million, or 21%, to $66.2 million from $54.6 million for the year ended December 31, 2011. The increase was primarily attributable to increased capital expenditures during 2011 and 2012.
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Other income . Other income for the year ended December 31, 2012 increased by $8.4 million, or 222%, to $12.2 million from $3.8 million for the year ended December 31, 2011. The increase was due to a $4.0 million gain on the exchange of an investment and $4.9 million in death benefit proceeds from the passing of a related party.
Interest income (expense), net . Interest income (expense), net for the year ended December 31, 2012 increased by $0.9 million, or 140%, to $0.3 million of income from $0.6 million of expense for the year ended December 31, 2011. The increase was due to an increase in interest income and a decrease in interest expense due to lower borrowing levels.
Foreign currency loss . Foreign currency loss for the year ended December 31, 2012 decreased by $2.7 million, or 86%, to $0.5 million from $3.2 million for the year ended December 31, 2011. The decrease in foreign currency loss was due to favorable fluctuations in foreign currency exchange rates.
Income tax expense. Income tax expense for the year ended December 31, 2012 increased by $11.6 million, or 57%, to $31.9 million from $20.3 million for the year ended December 31, 2011. We are subject to many U.S. and foreign tax jurisdictions and many tax agreements and treaties among the various taxing authorities. Our operations in these different jurisdictions are taxed on various bases such as income before taxes, deemed profits (which is generally determined using a percentage of revenues rather than profits), and withholding taxes based on revenues; consequently, the relationship between our pre-tax income or loss from operations and our income tax benefit or provision varies from period to period.
Year Ended December 31, 2011 Compared to Year Ended December 31, 2010
Revenues. Revenues for the year ended December 31, 2011 increased by $130.9 million, or 22%, to $739.1 million from $608.2 million for the year ended December 31, 2010. The increase was primarily attributable to higher revenues of $76.1 million from increased drilling activity by customers in our International Services segment. Our U.S. Services segment contributed $45.0 million to the increase as permitting activity in the U.S. Gulf of Mexico started to rise following the repeal of the Macondo-related drilling moratorium in October 2010.
Cost of revenues, exclusive of depreciation and amortization. Cost of revenues for the year ended December 31, 2011 increased by $39.9 million, or 14%, to $332.9 million from $293.0 million for the year ended December 31, 2010. The increase was primarily attributable to increases in the costs of products, equipment rentals and services ($13.1 million) and compensation-related costs ($26.7 million) due to the aforementioned increase in drilling activity.
General and administrative expenses. G&A expenses for the year ended December 31, 2011 increased by $26.1 million, or 19%, to $160.5 million from $134.4 million for the year ended December 31, 2010. The increase in G&A expenses included higher benefits and compensation-related costs ($6.8 million), taxes ($5.4 million) and bad debt expense ($2.1 million).
Depreciation and amortization. Depreciation and amortization for the year ended December 31, 2011 increased by $6.4 million, or 13%, to $54.6 million from $48.2 million for the year ended December 31, 2010. The increase was primarily attributable to increased capital expenditures during 2011.
Interest income (expense), net . Interest income (expense), net for the year ended December 31, 2011 decreased by $1.0 million, or 60%, to $0.6 million from $1.6 million for the year ended December 31, 2010. The decrease was due to lower borrowing levels, primarily driven by our improved cash levels.
Foreign currency loss . Foreign currency loss for the year ended December 31, 2011 increased by $1.3 million, or 66%, to $3.2 million from $1.9 million for the year ended December 31, 2010. The increase in foreign currency loss was due to unfavorable fluctuations in foreign currency exchange rates.
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Income tax expense. Income tax expense for the year ended December 31, 2011 increased by $5.7 million, or 39%, to $20.3 million from $14.6 million for the year ended December 31, 2010. We are subject to many U.S. and foreign tax jurisdictions and many tax agreements and treaties among the various taxing authorities. Our operations in these different jurisdictions are taxed on various bases such as income before taxes, deemed profits (which is generally determined using a percentage of revenues rather than profits), and withholding taxes based on revenues; consequently, the relationship between our pre-tax income or loss from continuing operations and our income tax benefit or provision varies from period to period.
Operating Segment Results
The following table presents revenues and Adjusted EBITDA by segment, and a reconciliation of Adjusted EBITDA to net income, which is the most comparable GAAP financial measure (in thousands):
Year Ended December 31, |
Three Months Ended
March 31, |
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2010 | 2011 | 2012 | 2012 | 2013 | ||||||||||||||||
Revenues: |
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International Services |
$ | 289,597 | $ | 366,106 | $ | 469,464 | $ | 109,538 | $ | 111,303 | ||||||||||
U.S. Services |
231,913 | 277,286 | 444,568 | 101,369 | 102,722 | |||||||||||||||
Pipe and Products |
126,196 | 147,335 | 214,686 | 45,299 | 45,004 | |||||||||||||||
Intersegment purchases |
(39,498 | ) | (51,652 | ) | (72,793 | ) | (15,678 | ) | (22,269 | ) | ||||||||||
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Total revenue |
$ | 608,208 | $ | 739,075 | $ | 1,055,925 | $ | 240,528 | $ | 236,760 | ||||||||||
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Year Ended December 31, |
Three Months Ended
March 31, |
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2010 | 2011 | 2012 | 2012 | 2013 | ||||||||||||||||
Segment Adjusted EBITDA: |
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International Services |
$ | 118,487 | $ | 153,064 | $ | 219,199 | $ | 51,815 | $ | 49,959 | ||||||||||
U.S. Services |
36,417 | 72,141 | 199,397 | 44,610 | 42,794 | |||||||||||||||
Pipe and Products |
29,731 | 24,267 | 28,038 | 6,259 | 8,337 | |||||||||||||||
Corporate and other (1) |
(12 | ) | | (30 | ) | (9 | ) | (148 | ) | |||||||||||
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Adjusted EBITDA Total |
184,623 | 249,472 | 446,604 | 102,675 | 100,942 | |||||||||||||||
Interest income (expense), net |
(1,658 | ) | (655 | ) | 264 | 260 | (201 | ) | ||||||||||||
Income tax expense |
(14,601 | ) | (20,287 | ) | (31,877 | ) | (7,687 | ) | (6,303 | ) | ||||||||||
Depreciation and amortization |
(48,197 | ) | (54,581 | ) | (66,215 | ) | (15,424 | ) | (17,783 | ) | ||||||||||
Gain (loss) on sale of assets |
164 | 47 | 2,608 | (195 | ) | (23 | ) | |||||||||||||
Foreign currency gain (loss) |
(1,930 | ) | (3,209 | ) | (450 | ) | 2,626 | (3,587 | ) | |||||||||||
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Net income |
$ | 118,401 | $ | 170,787 | $ | 350,934 | $ | 82,255 | $ | 73,045 | ||||||||||
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(1) | Corporate and other represents amounts not directly associated with an operating segment. |
Three Months Ended March 31, 2013 Compared to Three Months Ended March 31, 2012
International Services
Revenue for the International Services segment increased by $1.8 million for the three months ended March 31, 2013, or 1.6%, compared to the same period in 2012, primarily as a result of increased service volume due to additional contracts and increased demand for our services from existing customers in our West Africa region.
Adjusted EBITDA for the International Services segment decreased by $1.9 million for the three months ended March 31, 2013, or 3.6%, compared to the same period in 2012, primarily due to the purchase of centralizers for resale ($0.4 million), additional bad debt expense ($1.5 million) and an increase in management fees ($0.9 million), partially offset by the $1.8 million increase in revenue described above.
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U.S. Services
Revenue for the U.S. Services segment increased by $1.3 million for the three months ended March 31, 2013, or 1%, compared to the same period in 2012 primarily due to $13.1 million of higher offshore services provided on production platforms. This increase was substantially offset by an $11.7 million decrease as a result of an 11% decline in average onshore rig counts in areas in which we operate.
Adjusted EBITDA for the U.S. Services segment decreased by $1.8 million for the three months ended March 31, 2013, or 4%, compared to the same period in 2012 primarily as a result of increases in cost of revenues and G&A of approximately $2.3 million related to contract labor, insurance and compensation. Partially offsetting this decrease was the increase in U.S. Services segment revenue described above.
Pipe and Products
Revenue for the Pipe and Products segment remained relatively constant, decreasing by $0.3 million for the three months ended March 31, 2013, or 0.7%, compared to the same period in 2012. Included in this decrease are lower revenues of $5.9 million in our pipe sales resulting from the temporary shut-down of more than 20 Gulf of Mexico rigs during February 2013, partially offset by an increase in sales of approximately $5.7 million to our International Services and U.S. Services segments from our manufacturing component.
Adjusted EBITDA for the Pipe and Products segment increased by $2.1 million for the three months ended March 31, 2013, or 33.2%, compared to the same period in 2012 due primarily to decreases in the cost of pipe.
Year Ended December 31, 2012 Compared to Year Ended December 31, 2011
International Services
Revenue for the International Services segment increased by $103.4 million, or 28%, compared to 2011, primarily as a result of additional contracts and increased demand for our services from existing customers in our Europe, Far East and Africa regions of approximately $56.7 million. In Latin America, we experienced an increase in tubular services performed on a callout basis of approximately $14.0 million. The remainder of the decrease is attributable to increased demand from our other international regions.
Adjusted EBITDA for the International Services segment increased by $66.1 million, or 43%, compared to 2011, primarily as a result of the $103.4 million revenue increase described above. Partially offsetting this increase were higher freight, transportation and repairs and maintenance expenses as demand for our services in the deep water offshore markets increased. The number of employees in the International Services segment increased 19% in 2012 compared to 2011 which initiated higher compensation related costs of approximately $24.5 million.
U.S. Services
Revenue for the U.S. Services segment increased by $167.3 million, or 60%, compared to 2011 primarily as a result of increased services volume due to increased permit activity in the U.S. Gulf of Mexico following the October 2010 repeal of the Macondo-related drilling moratorium.
Adjusted EBITDA for the U.S. Services segment increased by $127.3 million, or 176%, compared to 2011 primarily as a result of the $167.3 million revenue increase described above and an increase in other income of $9.1 million. Partially offsetting this increase was a $23.4 million increase in cost of revenues in 2012 due to increases in product costs and salaries and wages. G&A expenses increased $25.7 million in 2012 due primarily to higher compensation related to the increase in employees in the segment.
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Pipe and Products
Revenue for the Pipe and Products segment increased by $67.3 million, or 46%, compared to 2011 primarily as a result of increased permit activity in the U.S. Gulf of Mexico following the October 2010 repeal of the Macondo-related drilling moratorium. Increased sales with U.S. customers of approximately $40.2 million and an increase in activity in our international markets of approximately $16.8 million also contributed to the increase.
Adjusted EBITDA for the Pipe and Products segment increased by $3.8 million, or 16%, compared to 2011 primarily as a result of the $67.3 million revenue increase described above. Partially offsetting this increase was an increase in cost of revenues including higher materials costs of approximately $49.3 million and higher direct labor costs of approximately $7.8 million. In addition, G&A expenses increased approximately $3.3 million due to higher compensation related costs.
Year Ended December 31, 2011 Compared to Year Ended December 31, 2010
International Services
Revenue for the International Services segment increased by $76.5 million, or 26%, compared to 2010 primarily as a result of additional demand for our services from existing major customers in all regions of approximately $46.7 million and new contracts in Latin America of approximately $26.0 million.
Adjusted EBITDA for the International Services segment increased by $34.6 million, or 29%, compared to 2010 primarily as a result of the $76.5 million revenue increase described above. Partially offsetting this increase was an increase in compensation related costs of approximately $19.2 million as a result of a larger workforce in the segment as well as other operating costs of $11.0 million related to the increase in activity.
U.S. Services
Revenue for the U.S. Services segment increased by $45.4 million, or 20%, compared to 2010 due primarily to an increase in rig count from 2010 to 2011 as permitting activity in the Gulf of Mexico began to rise following the repeal of the Macondo related drilling moratorium.
Adjusted EBITDA for the U.S. Services segment increased by $35.7 million, or 98%, compared to 2010 primarily as a result of the $45.4 million increase in revenue described above. Partially offsetting this increase was an increase in compensation-related expenses of $12.2 million.
Pipe and Products
Revenue for the Pipe and Products segment increased by $21.1 million, or 17%, compared to 2010 primarily as a result of increased permit activity in the U.S. Gulf of Mexico following the October 2010 repeal of the Macondo-related drilling moratorium.
Adjusted EBITDA for the Pipe and Products segment decreased by $5.5 million, or 18%, compared to 2010 due primarily to an increase in materials costs and manufacturing costs of approximately $18.3 million and higher G&A compensation related costs of approximately $6.7 million partially offset by the $21.1 million increase in revenue described above.
Liquidity and Capital Resources
Liquidity
Our primary sources of liquidity to date have been intra-company borrowings, borrowings under our credit facilities and cash flows from operations. Our primary uses of capital have been for organic growth capital expenditures and acquisitions. We continually monitor potential capital sources, including equity and debt financing, in order to meet our investment and target liquidity requirements.
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Our total 2013 capital expenditure budget is $200.3 million, of which $164.0 million is for the purchase and manufacture of equipment and $36.3 million is for the purchase or construction of facilities. Our 2013 capital expenditure budget does not include any provision for acquisitions. While we have budgeted $200.3 million for the year ending December 31, 2013, the actual amount of capital expenditures for the manufacture of equipment may fluctuate based on market conditions. During the year ended December 31, 2012 and the three months ended March 31, 2013, we invested $180.2 million and $40.5 million, respectively, in capital expenditures, which was funded from internally generated funds. We believe the remaining net proceeds from this offering after repayment in full of the notes payable to FWW, together with cash flows from operations and additional borrowings under our credit facilities, should be sufficient to fund our capital expenditure requirements for the remainder of 2013.
The limited partnership agreement of FICV provides for distributions to be made on a pro rata basis to the holders of FICV interests (which holders, as of the completion of the offering, will consist of Mosing Holdings and FINV) for purposes of funding the holders tax obligations with respect to the income of FICV allocated to them. Generally, these tax distributions will be computed based on our estimate of the taxable income of FICV allocable to a holder of FICV interests multiplied by an assumed tax rate equal to the highest effective marginal combined U.S. federal, state and local income tax rate prescribed for an individual resident in Louisiana.
Following the completion of this offering, we intend to pay a regular quarterly dividend on our common stock of $ per share, or an aggregate of approximately $ million on an annual basis. However, our future dividend policy is within the discretion of our management board, with the approval of our supervisory board, and will depend upon various factors, including our results of operations, financial condition, capital requirements and investment opportunities. No dividends on our common stock will accrue in arrears. In addition, each share of Series A preferred stock will have a liquidation preference equal to its par value of 0.01 per share and will be entitled to an annual dividend equal to 0.25% of its par value. Based upon the number of Series A preferred shares outstanding upon completion of this offering, this amount would be in the aggregate. We will only be able to pay dividends from our available cash on hand and funds received from FICV. FICVs ability to make distributions to us will depend on many factors, including the performance of our business in the future. In order to make these distributions on our common stock and Series A preferred stock, we expect that FICV will be required to distribute approximately $ million pro rata to holders of FICV interests. This aggregate amount would have represented approximately % of our pro forma net income and % of our pro forma Adjusted EBITDA for the year ended December 31, 2012.
Because we expect that the tax distribution to us from FICV will exceed our actual tax liabilities, we intend to use a portion of that distribution to fund part of our expected dividend. Any remaining cash needed to pay the dividend would be funded out of additional discretionary distributions from FICV, which are in our control subject to the availability of sufficient liquidity. Though we have not historically paid a regular quarterly dividend on our common stock, we have paid substantial tax and other distributions to our equity owners, including in the form of notes payable to FWW, on a relatively frequent basis. We believe that our historical cash flows would have been, and our expected future cash flows will be, sufficient to fund the amount of our expected future dividend on our common stock. See Certain Relationships and Related Party TransactionsLimited Partnership Agreement of FICV.
In addition, in the future, we expect to make payments pursuant to the tax receivable agreement that we intend to enter into with Mosing Holdings in connection with this offering, but we do not expect any such payments will have a material impact on our liquidity. We have the ability to elect to defer payments (which would accrue interest) to the extent we have not received sufficient cash distributions from FICV to satisfy our obligations thereunder, except in the case of an acceleration of payments thereunder occurring in connection with an early termination of the tax receivable agreement or a change in control of our company. If we were to defer substantial payment obligations on an ongoing basis under the tax receivable agreement, the accrual of those obligations would reduce the availability of cash for other purposes and we would be prohibited from paying dividends on our common stock. See Risk FactorsRisks Related to Our Organizational StructureWe will be required under the tax receivable agreement to pay Mosing Holdings or its permitted transferees for certain tax
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benefits we may claim, and the amounts we may pay could be significant, Risk FactorsRisks Related to Our Organizational StructureIn certain cases, payments under the tax receivable agreement to Mosing Holdings or its permitted transferees may be accelerated or significantly exceed the actual benefits, if any, we realize in respect of the tax attributes subject to the tax receivable agreement and Certain Relationships and Related Party TransactionsTax Receivable Agreement.
Existing Indebtedness
In 2012, we made a non-cash distribution of $484.0 million to the owners of FINV in the form of two unsecured promissory notes payable. As of December 31, 2012 and March 31, 2013, there was an aggregate of approximately $464.0 million and $443.7 million, respectively, outstanding under the notes payable to FWW. Interest is charged on the notes at the applicable short-term monthly applicable federal rate as published by the Internal Revenue Service. As of December 31, 2012 and March 31, 2013, $320.0 million is included in current portion of notes payable to affiliates because it is due on demand and $144.0 million and $123.7 million, respectively, is included in notes payable to affiliates on the combined balance sheets. We intend to use a portion of the net proceeds from this offering to repay in full these outstanding notes payable.
In 2012, we issued a note payable to our chief executive officer, in an amount of $2.88 million in connection with a deferred bonus payment. As of December 31, 2012 and March 31, 2013, there was $2.88 million outstanding under this note payable. We also had various other notes payable totaling $3.2 million and $1.8 million at December 31, 2012 and March 31, 2013, respectively. These notes mature in 2013 with interest rates of 3% per annum.
We have financed certain business acquisitions. At December 31, 2012 and March 31, 2013, the aggregate outstanding balance of the finance agreements for such acquisitions was $1.3 million and $1.2 million, respectively, with interest rates ranging from 5% to 6% per annum. The finance agreements are due on demand in 2011 and have maturity dates ranging from September 2016 to October 2018.
In addition, we have financed certain aircraft through credit agreements. The aggregate outstanding balance of these credit agreements was $0.8 million at December 31, 2012 and March 31, 2013, with a fixed interest rate 5% per annum payable monthly. The credit agreements mature in August 2013 and the notes are secured by the aircraft. In connection with the reorganization described in Organizational Structure, Mosing Holdings will cause our U.S. operating subsidiaries to distribute certain assets that generate a de minimis amount of revenue, including the aircraft. Accordingly, the aircraft will not be contributed to FICV and we will no longer be responsible for payments under the credit facilities associated with the aircraft upon completion of this offering.
We have two revolving credit facilities, with available borrowing capacities of $40.0 million and $5.0 million, which mature on August 31, 2014 and February 19, 2016, respectively. Interest is paid monthly on the unpaid balance of the $40.0 million line of credit at the London Interbank Offering Rate plus approximately 2.5% per annum. Interest is paid on the unpaid balance of the $5.0 million line of credit at the prime rate, which equates to 4.5% with the applicable margin included. The aggregate outstanding balance under the credit facilities was $2.0 million as of March 31, 2013. The revolving credit facilities have certain financial covenants. As of March 31, 2013, we were in compliance with all financial covenants. In addition, we had outstanding letters of credit of $5.9 million as of March 31, 2013. In connection with this offering, we intend to repay any outstanding indebtedness in full and terminate our existing revolving credit facilities.
New Credit Facilities
In connection with this offering, FICV intends to enter into two revolving credit facilities with Amegy Bank, National Association, as Administrative Agent and Capital One, National Association, as Syndication Agent, and certain other financial institutions. The credit agreements will provide for (i) a $100 million revolving credit facility, including up to $20 million for letters of credit and up to $10 million in swingline loans, which
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will mature in July 2018 (the Five Year Facility) and (ii) a $100 million revolving credit facility that will mature in July 2014 (the One Year Facility and, together with the Five Year Facility, the Credit Facilities). Subject to the terms of the credit agreements, we have the ability to increase the commitments under the Credit Facilities by $150 million. As of the closing of this offering, we do not expect to have any outstanding indebtedness under the Credit Facilities.
It is anticipated that future borrowings under the Credit Facilities will be available for working capital and general corporate purposes, including capital expenditures and for the issuance of letters of credit. The availability of the Credit Facilities is subject to certain conditions precedent, including the closing of this offering.
The credit agreements contain various covenants that, among other things, limit our ability to grant certain liens, make certain loans and investments, enter into mergers or acquisitions unless certain conditions are satisfied, enter into hedging transactions unless certain conditions are satisfied, change our lines of business, prepay certain indebtedness, enter into certain burdensome agreements, enter into certain affiliate transactions or engage in certain asset dispositions. Additionally, the credit agreements limit our ability to incur additional indebtedness subject to certain exceptions.
The credit agreements also contain financial covenants, which, among other things, require us, on a consolidated basis, to maintain specified financial ratios or conditions summarized as follows:
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Total consolidated funded debt to adjusted EBITDA (defined as the Leverage Ratio in the credit agreements) of not more than 2.50 to 1.0; and |
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EBITDA to interest expense (defined as the Interest Coverage Ratio in the credit agreements) of not less than 3.0 to 1.0. |
The obligations under the credit agreements are unsecured, and all of the obligations under the Credit Facilities are guaranteed by FICVs subsidiaries.
Interest is payable quarterly for base rate loans and at the end of applicable interest periods for Eurodollar loans, except that if the interest period for a Eurodollar loan is longer than three months, interest is paid at the end of each three-month period. In addition, the unused portion of the Credit Facilities will be subject to a commitment fee of up to 0.375%.
If an event of default exists under the credit agreements, the lenders have the right to accelerate the maturity of the obligations outstanding under the credit agreements and exercise other rights and remedies. Each of the following constitutes an event of default under the credit agreements:
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representations and warranties in the credit agreements or other loan documents being incorrect or misleading in any material respect; |
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failure to pay any principal when due or any interest, fees or other amount within certain grace periods; |
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failure to perform or otherwise comply with the covenants in the credit agreements or other loan documents, subject, in certain instances, to grace periods; |
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the actual or asserted invalidity of any material provisions of the guarantees of the indebtedness under the credit agreements; |
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default by us or our restricted subsidiaries on the payment of any other indebtedness with a principal amount in excess of $10 million, any default in the performance of any obligation or condition with respect to such indebtedness beyond the applicable grace period if the effect of the default is to permit or cause the acceleration of the indebtedness, or such indebtedness will be declared due and payable prior to its scheduled maturity; |
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bankruptcy or insolvency events involving us or our restricted subsidiaries; |
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the entry, and failure to pay, of one or more adverse judgments in excess of $10 million, upon which enforcement proceedings are commenced or that are not stayed pending appeal; and |
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the occurrence of a change in control (as defined in the Credit Facilities). |
Cash Flows from Operating, Investing and Financing Activities
Cash flows provided by (used in) operations by type of activity were as follows for the periods indicated (in thousands):
Year Ended December 31, |
Three Months Ended
March 31, |
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2010 | 2011 | 2012 | 2012 | 2013 | ||||||||||||||||
Operating activities |
$ | 163,414 | $ | 180,710 | $ | 344,776 | $ | 78,669 | $ | 50,664 | ||||||||||
Investing activities |
(69,130 | ) | (126,655 | ) | (182,533 | ) | (47,541 | ) | (42,014 | ) | ||||||||||
Financing activities |
(79,261 | ) | (71,874 | ) | (107,210 | ) | (14,742 | ) | (44,235 | ) | ||||||||||
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15,023 | (17,819 | ) | 55,033 | 16,386 | (35,585 | ) | ||||||||||||||
Effect of exchange rate changes on cash activities |
285 | 2,305 | (737 | ) | (1,933 | ) | 6,032 | |||||||||||||
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Increase (decrease) in cash and cash equivalents |
$ | 15,308 | $ | (15,514 | ) | $ | 54,296 | $ | 14,453 | $ | (29,553 | ) | ||||||||
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Statements of cash flows for entities with international operations that are local currency functional exclude the effects of the changes in foreign currency exchange rates that occur during any given year, as these are non-cash changes. As a result, changes reflected in certain accounts on the combined statements of cash flows may not reflect the changes in corresponding accounts on the combined balance sheets.
Operating Activities
Cash flow from operating activities was $50.7 million for the three months ended March 31, 2013 as compared to $78.7 million in the comparable period in 2012. The decrease in 2012 was due primarily to a decrease in net income and payments of accrued expenses and other current liabilities.
Cash flow from operating activities was $344.8 million for the year ended December 31, 2012 as compared to $180.7 million in 2011 and $163.4 million in 2010. The increase in 2012 was due primarily to the increase in profitability as a result of the increased permit activity from the repeal of the Macondo-related moratorium in the U.S. Gulf of Mexico that occurred in late 2010. The increase in 2011 was due primarily to higher revenues partially offset by an increase in accounts receivable.
Investing Activities
Cash flow used in investing activities was $42.0 million for the three months ended March 31, 2013 as compared to $47.5 million in the comparable period in 2012. The decrease in 2013 was due primarily to decreases in capital expenditures.
Cash flow used in investing activities was $182.5 million for the year ended December 31, 2012 as compared to $126.7 million in 2011 and $69.1 million in 2010. The increases in 2012 and 2011 were primarily due to increases in capital expenditures to ensure that we maintain the appropriate levels and types of machinery and equipment to support our expanding business.
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Financing Activities
Cash flow used in financing activities was $44.2 million for the three months ended March 31, 2013 as compared to $14.7 million in the comparable period in 2012. The increase in 2013 was due primarily to $20.3 million in payments related to the FWW note.
Cash used in financing activities was $107.2 million for the year ended December 31, 2012 as compared to $71.9 million in 2011 and $79.3 million in 2010. The increase in 2012 was primarily due to an increase in stockholder distributions partially offset by an increase in borrowings from our revolving credit facilities. The decrease in 2011 was primarily due to a decrease in stockholder distributions, partially offset by an increase in borrowings under our lines of credit and proceeds from the reissuance of stock.
Contractual Obligations
We lease several facilities worldwide and accommodations for certain employees located outside of the U.S. under noncancelable operating leases.
The following table presents our contractual obligations and contingent commitments by period as of December 31, 2012, on a pro forma basis to give effect to our reorganization in connection with this offering as described in Organizational Structure and the use of the estimated net proceeds from this offering as described in Use of Proceeds as if all such transactions had occurred on January 1, 2012. Our obligations to make payments in the future may vary due to certain assumptions including the duration of our obligations and anticipated actions by third parties.
Payments Due by Period | ||||||||||||||||||||
Total |
Less than
1 year |
1-3 years | 3-5 years |
More than
5 years |
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(in thousands) | ||||||||||||||||||||
Long-term debt and capital lease obligations (1) |
$ | 9,430 | $ | 8,379 | $ | 1,051 | $ | | $ | | ||||||||||
Interest payments (2) |
382 | 277 | 101 | 4 | | |||||||||||||||
Noncancelable operating leases (3) |
26,696 | 4,955 | 7,301 | 5,523 | 8,917 | |||||||||||||||
Uncertain tax positions |
3,913 | | | | 3,913 | |||||||||||||||
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Total |
$ | 40,421 | $ | 13,611 | $ | 8,453 | $ | 5,527 | $ | 12,830 | ||||||||||
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(1) | Amounts represent the expected cash payments of principal amounts associated with our long-term debt and capital lease obligations. |
(2) | Amounts represent the expected cash payments for interest on our long-term debt and capital lease obligations. The interest amount calculated is based on the assumption that the amount outstanding and the interest rate charged both remain at their current levels. |
(3) | Upon consummation of our initial public offering, we will incur additional rental expense and charter service expense of approximately $3.8 million and $1.1 million per year, respectively, due to the distribution of the real estate and aircraft to Mosing Holdings, Inc. These amounts are not included in the table above as the terms of such new agreements are not yet known. |
Off-Balance Sheet Arrangements
At March 31, 2013, we had no off-balance sheet debt or arrangements.
Critical Accounting Policies
The preparation of combined financial statements in conformity with GAAP requires management to select appropriate accounting principles from those available, to apply those principles consistently and to make reasonable estimates and assumptions that affect revenues and associated costs as well as reported amounts of
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assets and liabilities, and related disclosure of contingent assets and liabilities. Certain accounting policies involve judgments and uncertainties. We evaluate estimates and assumptions on a regular basis. We base our respective estimates on historical experience and various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from the estimates and assumptions used in preparation of our combined financial statements. We consider the following policies to be the most critical to understanding the judgments that are involved and the uncertainties that could impact our results of operations, financial condition and cash flows.
Revenue Recognition
All revenue is recognized when all of the following criteria have been met: (1) evidence of an arrangement exists; (2) delivery to and acceptance by the customer has occurred; (3) the price of the customer is fixed or determinable; and (4) collectability is reasonably assured, as follows:
Services Revenue. We provide tubular services to clients in the oil and gas industry. We perform services either under direct service purchase orders or master service agreements. Service revenue is recognized when services have been performed or rendered.
Rental Revenue. We design and manufacture a suite of highly technical equipment and products that we rent to our customers in connection with providing our services, including high-end, proprietary tubular handling equipment. We rent our products either under direct rental agreements or with customers with rental agreements in place. Revenue from rental agreements is recognized as earned over the rental period.
For customers contracted under direct service purchase orders and direct rental agreements, an accrual is recorded in unbilled accounts receivable for revenue earned but not yet invoiced.
Pipe and Products Revenue. Revenue on pipe and products sales is recognized when the product has shipped and significant risks of ownership have passed to the customer. The sales arrangements typically do not include right of return or other similar provisions or other post-delivery obligations. In some regions, customers have a right of return due to purchasing of excess products and deliverability limitations of products in remote locations. When the likelihood of a return exists on a sale, a determination of this portion of revenue is reclassified to unearned revenue until such time as the product is returned or no return occurs.
Income Taxes
The liability method is used for determining our income tax provisions, under which current and deferred tax liabilities and assets are recorded in accordance with enacted tax laws and rates. Under this method, the amounts of deferred tax liabilities and assets at the end of each period are determined using the tax rate expected to be in effect when taxes are actually paid or recovered. Valuation allowances are established to reduce deferred tax assets when it is more likely than not that some portion or all of the deferred tax assets will not be realized. In determining the need for valuation allowances, we have considered and made judgments and estimates regarding estimated future taxable income and ongoing prudent and feasible tax planning strategies. These estimates and judgments include some degree of uncertainty, and changes in these estimates and assumptions could require us to adjust the valuation allowances for our deferred tax assets. Historically, changes to valuation allowances have been caused by major changes in the business cycle in certain countries and changes in local country law. The ultimate realization of the deferred tax assets depends on the generation of sufficient taxable income in the applicable taxing jurisdictions.
Through FICV, we operate in approximately 60 countries under many legal forms. As a result, we are subject to the jurisdiction of numerous U.S. and foreign tax authorities, as well as to tax agreements and treaties among these governments. Our operations in these different jurisdictions are taxed on various bases: actual
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income before taxes, deemed profits (which are generally determined using a percentage of revenue rather than profits) and withholding taxes based on revenue. Determination of taxable income in any jurisdiction requires the interpretation of the related tax laws and regulations and the use of estimates and assumptions regarding significant future events such as the amount, timing and character of deductions, permissible revenue recognition methods under the tax law and the sources and character of income and tax credits. Changes in tax laws, regulations, agreements and treaties, foreign currency exchange restrictions or our level of operations or profitability in each taxing jurisdiction could have an impact on the amount of income taxes that we provide during any given year.
Our tax filings for various periods are subject to audit by the tax authorities in most jurisdictions where we conduct business. These audits may result in assessments of additional taxes that are resolved with the authorities or through the courts. We believe these assessments may occasionally be based on erroneous and even arbitrary interpretations of local tax law. Resolution of these situations inevitably includes some degree of uncertainty; accordingly, we provide taxes only for the amounts we believe will ultimately result from these proceedings. The resulting change to our tax liability, if any, is dependent on numerous factors including, among others, the amount and nature of additional taxes potentially asserted by local tax authorities; the willingness of local tax authorities to negotiate a fair settlement through an administrative process; the impartiality of the local courts; the number of countries in which we do business; and the potential for changes in the tax paid to one country to either produce, or fail to produce, an offsetting tax change in other countries. Our experience has been that the estimates and assumptions we have used to provide for future tax assessments have proven to be appropriate. However, past experience is only a guide, and the potential exists that the tax resulting from the resolution of current and potential future tax controversies may differ materially from the amount accrued.
In addition to the aforementioned assessments that have been received from various tax authorities, we also provide for taxes for uncertain tax positions where formal assessments have not been received. The determination of these liabilities requires the use of estimates and assumptions regarding future events. Once established, we adjust these amounts only when more information is available or when a future event occurs necessitating a change to the reserves such as changes in the facts or law, judicial decisions regarding the application of existing law or a favorable audit outcome. We believe that the resolution of tax matters will not have a material effect on our combined financial condition, although a resolution could have a material impact on our consolidated statements of income for a particular period and on our effective tax rate for any period in which such resolution occurs.
Recent Accounting Pronouncements
In February 2013, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2013-02, Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income (AOCI). This ASU requires entities to present separately, among other items, the amount of the change that is due to reclassifications, and the amount that is due to current period other comprehensive income. We adopted the new presentation requirements in the notes to our financial statements in the first quarter of 2013, but otherwise there was no impact our combined financial position, results of operations or cash flows as there are currently no items reclassified from AOCI.
In September 2011, the FASB issued an accounting standards update which provides, subject to certain conditions, the option to perform a qualitative, rather than quantitative, assessment of goodwill to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. This update was effective and adopted by us in the first quarter of 2012 and did not have a material impact on our combined financial position, results of operations or cash flows.
In June 2011, the FASB issued an accounting standards update which revises the manner in which entities present comprehensive income in their financial statements. The new guidance requires entities to report components of comprehensive income in either (1) a continuous statement of comprehensive income or (2) a separate but consecutive statement. Under the two-statement approach, the first statement would include components of net income, which is
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consistent with the income statement format previously used by us, and the second statement would include components of other comprehensive income (OCI). The update does not change the items that must be reported in OCI and must be applied retrospectively for all periods presented in the financial statements. This update was effective and adopted by us in the first quarter of 2012 and impacted our financial statement presentation, but otherwise did not impact our combined financial position, results of operations or cash flows.
In May 2011, the FASB issued an accounting standards update which amends the definition of fair value measurement principles and disclosure requirements to eliminate differences between U.S. GAAP and International Financial Reporting Standards. The update requires new quantitative and qualitative disclosures about the sensitivity of recurring Level 3 measurement disclosures, as well as disclosures of transfers between Level 1 and Level 2 of the fair value hierarchy. This update was effective and adopted by us in the first quarter of 2012 and impacted our disclosures, but otherwise did not impact our combined financial position, results of operations or cash flows.
Quantitative and Qualitative Disclosures about Market Risk
We are exposed to certain market risks that are inherent in our financial instruments and arise from changes in foreign currency exchange rates and interest rates. A discussion of our market risk exposure in financial instruments is presented below.
Foreign Currency Exchange Rates
We operate in virtually every oil and natural gas exploration and production region in the world. In some parts of the world, the currency of our primary economic environment is the U.S. dollar, and we use the U.S. dollar as our functional currency. In other parts of the world, such as Europe, Norway, Venezuela and Brazil, we conduct our business in currencies other than the U.S. dollar, and the functional currency is the applicable local currency.
Assets and liabilities of entities for which the functional currency is the local currency are translated into U.S. dollars using the exchange rates in effect at the balance sheet date, resulting in translation adjustments that are reflected in accumulated other comprehensive income (loss) in the shareholders equity section on our combined balance sheets. A portion of our net assets are impacted by changes in foreign currencies in relation to the U.S. dollar. We recorded a $4.3 million adjustment to decrease our equity account for the three months ended March 31, 2013 to reflect the change in the U.S. dollar against various foreign currencies.
For the three months ended March 31, 2013, on a U.S. dollar-equivalent basis, approximately 25% of our revenue was represented by currencies other than the U.S. dollar. However, no single foreign currency represented more than 5% of our revenue. A hypothetical 10% decrease in the exchange rates for each of the foreign currencies in which a portion of our revenues is denominated would result in a 1.5% decrease in our overall revenues for the three months ended March 31, 2013.
Devaluation of Venezuelan Bolivar Fuerte
In February 2013, the Venezuelan government announced a devaluation of the Bolivar Fuerte (Bolivar), resulting in the exchange rate declining from 4.3 to 6.3 Bolivars per U.S. Dollar. As a result of the devaluation, the Company recorded a foreign currency loss of $1.8 million during the three months ended March 31, 2013, related to the remeasurement of the Bolivar-denominated net monetary assets of the companys Venezuelan operations as of the date of the devaluation.
Interest Rate Risk
We are exposed to changes in interest rates on our floating rate borrowings under our revolving credit facilities and under our notes payable to FWW. Although we do not currently utilize interest rate derivative instruments to reduce interest rate exposure, we may do so in the future.
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As of March 31, 2013, we had approximately $443.7 million in outstanding borrowings in the form of two promissory notes payable to FWW or its affiliate. We intend to use a portion of the net proceeds from this offering to repay in full these outstanding notes payable. Interest is charged on the notes at the applicable short-term monthly applicable federal rate as published by the Internal Revenue Service. The impact of a 1% increase in interest rates on these notes payable as of March 31, 2013 would have resulted in a $1.1 million increase in interest expense.
Customer Credit Risk
Financial instruments that potentially subject us to concentrations of credit risk are trade receivables. We extend credit to customers and other parties in the normal course of business. We have established various procedures to manage our credit exposure, including credit evaluations and maintaining an allowance for doubtful accounts.
We are also exposed to credit risk because our customers are concentrated in the oil and natural gas industry. This concentration of customers may impact overall exposure to credit risk, either positively or negatively, because our customers may be similarly affected by changes in economic and industry conditions, including sensitivity to commodity prices. While current energy prices are important contributors to positive cash flow for our customers, expectations about future prices and price volatility are generally more important for determining future spending levels. However, any prolonged increase or decrease in oil and natural gas prices affects the levels of exploration, development and production activity, as well as the entire health of the oil and natural gas industry, and can therefore negatively impact spending by our customers.
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Overview
We are a 75 year-old, industry-leading global provider of highly engineered tubular services to the oil and gas industry. We provide our services to leading exploration and production companies in both offshore and onshore environments, with a focus on complex and technically demanding wells. We believe that we are one of the largest global providers of tubular services to the oil and gas industry.
Tubular services involve the handling and installation of multiple joints of pipe to establish a cased wellbore and the installation of smaller diameter pipe inside a cased wellbore to provide a conduit for produced oil and gas to reach the surface. The casing of a wellbore isolates the wellbore from the surrounding geologic formations and water table, provides well structure and pressure integrity, and allows well operators to target specific zones for production. Given the central role that our services play in the structural integrity, reliability and safety of a well, and the importance of efficient tubular services to managing the overall cost of a well, we believe that our role is vital to the overall process of producing oil and gas. For more information regarding tubular services, see IndustryTubular Services.
Our specially trained employees provide our services using a suite of highly technical, purpose-built equipment, much of which we design and manufacture for our proprietary use. Most of our manufactured equipment and products use patented, advanced technologies that enable us to service complex wells, increase efficiency, enhance well integrity and improve safety. We currently have 104 U.S. patents and 136 related international patents and 37 U.S. patent applications pending and 111 related international patent applications pending for equipment that our engineers have developed.
Recent developments in well construction and completion requirements have resulted in increased technical demands associated with tubular services. For onshore wells, these developments include long horizontal laterals and deviated well bores that seek to maximize the wells exposure to hydrocarbon-bearing geologic formations. In the offshore environment, these developments include increasing water and well depths, which require lengthier and heavier strings, as well as tubular handling equipment capable of accommodating a more complex array of equipment and hydraulic control lines that are deployed inside the well. We believe that we are a market leader in the development of equipment and services that facilitate and accommodate recent developments in well construction and completion requirements and this is reflected in our extensive suite of patent-protected, innovative products and equipment. We continuously work with our customers to develop new products, improve efficiency and safety and solve complex well construction and completion problems.
In addition to our tubular handling equipment, we also design and manufacture certain products that we sell or rent directly to external customers, including large OD pipe connectors and casing attachments. We also provide specialized fabrication and welding services in support of deep water projects in the U.S. Gulf of Mexico, including drilling and production risers, flowlines and pipeline end terminations, as well as long length tubulars (up to 300 feet in length) for use as caissons or pilings. Finally, we distribute large OD pipe manufactured by third parties, and generally maintain an inventory of this pipe in order to support our pipe sales and distribution operations.
Spears estimates that the global market for tubular services (excluding product sales) was approximately $3.3 billion in annual revenues in 2012 and will grow to $3.8 billion in 2013. Spears projects that this market will grow at an annual rate of approximately 11% between 2012 and 2015. There are a limited number of companies that provide these services on a global basis. We serve our customers through a network of over 90 sales and support offices in approximately 60 countries. Our customer base includes major international oil companies, such as Anadarko, BP, Chevron, ConocoPhillips, ExxonMobil, Shell, Total and Murphy Oil Corporation, and national oil companies, such as PDVSA, Statoil and Saudi Aramco, as well as numerous independent oil and gas producers.
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We believe we differentiate ourselves from our competitors on the basis of the quality and reliability of our service, our proprietary technology, and our ability to perform in the most demanding environments, including deep water and ultra-deep water projects. Our expertise stems from years of experience, a focus on technical innovation and our highly trained and dedicated workforce. Representative examples of the trusted, critical services we have been selected to provide to our customers include:
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In March 2013, we successfully completed the casing installation for the Chevron Northwood well in the Green Canyon Block 945 area of the Gulf of Mexico, to a total depth of 31,866 feet in a water depth of 6,000 feet, which is the deepest oil and gas well of which we are aware. |
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In August 2012, we broke our own record for greatest hook load recorded at approximately 1,140 tons while lifting 24,500 feet of combined casing and landing string for Shells Stones 4 well in the U.S. Gulf of Mexico. |
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In June 2010, we successfully provided all tubular services for the relief well drilled by BP to contain the Macondo well in the U.S. Gulf of Mexico. |
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In 2006, we were selected to provide tubular installation services on the BP Shah Deniz project in offshore Azerbaijan, which is an ongoing multiple well project. We believe we were selected for the project due to our highly regarded technical capabilities, including our proprietary Fluid Grip Power Tong gripping technology combined with our Collar Load Support tubular handling system. These proprietary technologies are critical for this project due to their ability to provide zero marking handling of the specialized CRA completion tubulars required in wells with high hydrogen sulfide content. CRA services have also been increasingly common in other corrosive high-pressure, high-temperature applications, both onshore and offshore. |
We have a long history of strong revenue growth. Specifically, as depicted in the chart below, our revenues have grown sequentially in all but one of the past 10 years.
Our results over this period were driven by a number of factors:
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Acquisitions that increased our geographic footprint in the onshore market in the continental United States . As a consequence of these acquisitions, we were well positioned to benefit from the significant increase in drilling and development activity in most of the nations unconventional shale basins over the past decade. |
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Increasing complexity in offshore well design . Over the course of the past decade, offshore wells have become increasingly complex. In order to manage fluid pressure and well integrity, offshore wells are often drilled and completed in stages with multiple casing strings being required. In addition, offshore wells increasingly include the placement of a number of gauges, sensors, valves and hydraulic control |
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lines deployed inside the well. The need to accommodate these developments has increased the technical requirements and complexity of tubular services, and therefore our revenue opportunity. |
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Growing international presence . Our ability to operate on a global basis provides a significant competitive advantage. Our customer base includes major international oil companies, such as Anadarko, BP, Chevron, ConocoPhillips, ExxonMobil, Shell and Total, and national oil companies, such as PDVSA, Statoil and Saudi Aramco. To better serve these customers, we developed a network of over 90 sales and support offices in approximately 60 countries. We have grown our international presence so that we can participate in their offshore development projects in locations such as East and West Africa, the Asia-Pacific region, the Middle East, the North Sea and South America. |
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Increasing deep water drilling activity and the impact of the global financial crisis and the Macondo incident . Because of our strong market share in offshore tubular services, we have benefited from growing deep water drilling activity in recent years. Our revenue was affected by the global financial crisis in 2009, notably in the U.S. onshore market, and by the Macondo incident in 2010, which dampened our offshore results in the U.S. Gulf of Mexico in large part because of the drilling moratorium that was imposed. Consistent with other service providers, our business activity in the U.S. Gulf of Mexico began to recover to pre-Macondo levels in 2011, a year after the moratorium was lifted. Worldwide offshore rig counts continue to increase as crude oil supply and demand fundamentals encourage new drilling. Offshore discoveries are expected to play an important role in the future, particularly deep water discoveries. |
Our revenue grew by 43% to $1,055.9 million for the twelve months ended December 31, 2012 compared to $739.1 million for the twelve months ended December 31, 2011, and Adjusted EBITDA grew by 79% to $446.6 million from $249.5 million over the same period. During the twelve months ended December 31, 2012, 45% of our revenue was generated outside North America, and 69% was generated from products and services provided offshore. For an explanation of how we calculate Adjusted EBITDA, see Selected Historical Combined and Unaudited Pro Forma Financial DataNon-GAAP Financial Measures.
Competitive Strengths
We believe that we are well positioned to execute our strategy based on the following competitive strengths:
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Global market leader . We are a leading provider of tubular services in many of the regions in which we operate, including the U.S. Gulf of Mexico and almost every significant international offshore market, almost all of the major U.S. onshore resource basins and in targeted active international onshore regions. Moreover, we believe that we are one of only a few tubular service companies with true global capabilities. According to Spears, we have the number one or number two market share in each of the U.S. and international markets, both onshore and offshore. We currently provide our services in approximately 60 countries on six continents. Our customers include most of the worlds largest integrated oil companies and many of the largest national oil companies. We have no significant customer or geographic concentration. Our global presence allows us to quickly expand to additional regions that experience increases in drilling and production activity. |
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Focused service provider with highly differentiated engineering capabilities . We have an in-house engineering team responsible for developing new products that add value to our service capabilities and expand our portfolio of products and services. Our engineers typically work closely with our field personnel and customers in order to identify specific equipment needs related to the services we provide. We believe that we are a market leader in the development of equipment and services that facilitate and accommodate recent developments in well construction and completion requirements, and this is reflected in our extensive suite of patent-protected, innovative products and equipment. We believe that our engineering expertise and our service and product line focus give us a competitive advantage in quickly designing and manufacturing custom solutions in response to our customers unique requirements and applications. We have received a number of customer and industry awards recognizing the achievements of our engineering group and our custom designed solutions. |
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Favorable reputation developed over eight decades . We believe our customers select Franks International because of our reputation for safety, reliability, quality service and proprietary technology. While generally a small portion of the overall well cost, properly performed tubular services are critical to protecting the producers investment in the well, as well as its safe operation during production. The economic stakes are especially high for deep water wells, where day rates for offshore drilling rigs and other associated services can approach $1 million per day, and a producers investment in a single offshore well can exceed $80 million. The difference between efficiently executed tubular services and less efficiently executed services can save producers days or even weeks, which can translate directly into significant and measurable savings. The producers environmental, safety and regulatory risks associated with operating offshore are also heightened. In connection with their customer feedback-based survey, EnergyPoint Research has ranked Franks International first in customer satisfaction in one or more oilfield service or product categories every year since 2004, the first year in which the survey was conducted. Our reputation for safety is further demonstrated by our ability to meet and exceed the stringent safety requirements of our customers, some of which have been Franks International customers for over 40 years. |
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Strong position in favorable deep water offshore markets . We believe Franks International will continue to benefit from the continued development of oil and gas resources located offshore. As a result of the long development lead times associated with deep water projects, they are generally less likely to be cancelled or delayed due to volatility in commodity or financial markets. Also, due to their technical complexity and often remote locations, offshore projects typically provide us with a greater opportunity to differentiate our capabilities from those of our competitors. According to Spears, offshore development spending will increase at an annual rate of approximately 12% between 2011 and 2018. Approximately 67% of our services revenue from external customers in 2012 was generated from offshore services, and our global market share in offshore services was approximately 29% in 2012, according to Spears. Moreover, the significant majority of our offshore services revenue in 2012 was from deep water markets. We believe the economic opportunity for deep water services will continue to be favorable given the technical challenges associated with constructing and completing wells offshore, and the risk of potential negative economic consequences to our customers if tubular services are poorly performed. |
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Attractive financial results reflect value of our differentiated and critical services . For the year ended December 31, 2012 and the three months ended March 31, 2013, our Adjusted EBITDA margin was approximately 42% and 43%, respectively, which we believe reflects the economic value to our customers of our differentiated and critical services and the benefits of a diversified, global customer base. Because our business is not capital intensive, we generate significant free cash flow. Consequently, we intend to pay a regular quarterly dividend on our common stock of $ per share. As of March 31, 2013, after giving effect to this offering, we expect to have approximately $ million of cash and cash equivalents and approximately $ million of outstanding indebtedness. |
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Significant experience selectively acquiring and integrating companies . We have a long history of evaluating and acquiring companies that expand or complement our geographic footprint and product and service offerings. Since 1982, we have successfully acquired and integrated more than 50 private companies. We believe that being a public company will enhance our acquisition strategy and allow us to target larger acquisition candidates. |
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Experienced management team with proven track record . Our executive officers and senior operational managers have extensive experience at Franks International and in the oilfield service industry generally. Our executive officers and senior operational managers have an average of 25 years of experience in the oilfield services industry with us. Our chief executive officer, Keith Mosing, is a third generation owner and manager who successfully led our expansion into international operations. The Mosing family will continue to own the majority equity interest in us following the completion of this offering, which we believe aligns their interests with the interests of our public investors. |
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Business Strategy
Our objective is to maximize shareholder value by expanding our leading global oilfield services company and continuing to supply high-quality services and products to our customers. We intend to accomplish that objective by capitalizing on the key long-term industry growth trends through the execution of the following strategies:
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Continue to focus on customer service . We have a long track record of being responsive to our customers unique requirements. We believe that focusing on our customers needs and continuing to provide industry-leading technological and safety innovations will enable us to expand our customer base and increase our revenues. |
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Sustain our track record of technical innovation . Our team of over 70 in-house engineers and engineering technicians works to develop new products and technologies and provides operational support. We currently have 104 U.S. patents and 136 related international patents and 37 U.S. patent applications pending and 111 related international patent applications pending for equipment that our engineers have developed. In addition, we currently have more than 50 new technologies and product improvements under development. We have developed strong working relationships with oil and gas producers throughout the world, many of which have approached us with requests for solutions to specific well construction and completion challenges. To address these needs, we continue to invest in new product engineering capabilities. In addition to our own efforts to continuously enhance our equipment and procedures, we expect to continue to develop innovative products and solutions driven by our customers needs. |
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Pursue disciplined growth organically and through acquisitions . We intend to selectively pursue acquisitions that complement our geographic footprint and product and service offerings, with a focus on businesses that would benefit from our global presence and international sales capabilities. We intend to continue to grow organically by leveraging our customer base, investing in additional equipment and geographically expanding our existing global facilities in order to continue to grow our cash flows and satisfy incremental customer demand. |
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Maintain and expand our worldwide presence . We are committed to being on the ground in strategic markets to provide services on a global basis. We intend to build upon our existing presence in Africa, the Asia-Pacific region, the Middle East, North America, the North Sea and South America through deployment of sales, distribution, and service resources. We believe this organic expansion will provide more points of contact with our customers, allowing us to respond more quickly to their needs. |
Segments
We conduct our business through three operating segments:
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International Services. We currently provide our services in approximately 60 countries on six continents. Our customers in these international markets are primarily large exploration and production companies, including integrated oil and gas companies and national oil and gas companies, with a significant focus on complex, high profile projects. Our International Services segment accounted for approximately 49% and 50%, respectively, of our Adjusted EBITDA in 2012 and the first three months of 2013. Approximately 82% and 83%, respectively, of our revenue from external customers in this segment was generated in offshore markets in 2012 and in the first three months of 2013, the significant majority of which was from deep water markets. |
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U.S. Services. Approximately 51% and 63%, respectively, of our 2012 and first quarter 2013 U.S. Services segment revenue from external customers was generated in the technically challenging deep water areas of the U.S. Gulf of Mexico. In addition, we have a significant presence in almost all of the active onshore oil and gas drilling regions in the U.S., including the Permian Basin, Bakken Shale, Barnett Shale, Eagle Ford Shale, Haynesville Shale, Marcellus Shale and Utica Shale. Our U.S. Services segment accounted for approximately 45% and 42%, respectively, of our Adjusted EBITDA in 2012 and the first three months of 2013. |
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Pipe and Products . We also design and manufacture certain products that we sell or rent directly to external customers, including large OD pipe connectors and casing attachments. We also provide specialized fabrication and welding services in support of deep water projects in the U.S. Gulf of Mexico, including drilling and production risers, flowlines and pipeline end terminations, as well as long length tubulars (up to 300 feet in length) for use as caissons or pilings. Finally, we distribute large OD pipe manufactured by third parties. A significant majority of our sales to external customers occur in deep water markets. Our Pipe and Products segment accounted for approximately 6% and 8%, respectively, of our Adjusted EBITDA in 2012 and the first three months of 2013. |
Industry
Overview
We provide highly engineered tubular services to the oil and gas industry. Tubular services involve the handling and installation of multiple joints of pipe to establish a cased wellbore and the installation of smaller diameter completion tubing inside a cased wellbore to provide a conduit for produced oil and gas to reach the surface. The casing of a wellbore isolates the well, provides well structural and pressure integrity, and allows well operators to target specific zones for production. Given the central role that these services play in the structural integrity, reliability and safety of a well, and the importance of efficient tubular services to managing the overall cost of a well, we believe that tubular services are vital to the overall process of producing oil and gas.
Spears estimates that the global market for tubular services (excluding product sales) was approximately $3.3 billion in annual revenues in 2012 and will grow to $3.8 billion in 2013. Spears projects that this market will grow at an annual rate of approximately 11% between 2012 and 2015.
The tubular services sector of the oilfield services and equipment industry includes large and international companies (including ourselves, Weatherford International and Baker Hughes) as well as smaller, independent companies that operate primarily on a U.S. onshore basis. We believe a significant portion of the growth and opportunity for expansion in the industry exists for providers that possess the scale, the global reach and the technological sophistication to compete in a rapidly advancing industry, as further described in Trends in the Industry.
We believe that customers of oilfield services and products select providers of tubular services based on a number of factors, including price, international capability, availability of tools, range of services provided, intellectual property, technological sophistication, rigorous quality systems and reliability of equipment, along with reputation and safety record. We believe that we are well-positioned to compete on a global basis in all of these dimensions. See Competitive Strengths.
Tubular Services
The drilling process creates an open borehole through numerous rock formations that reaches the targeted reservoir. Left alone, the raw surface of the borehole typically cannot support itself. Casing is a tubular steel open-ended pipe run into the borehole. One of its main functions is to provide the structural and pressure integrity to the well. Once cemented in place, the casing serves as the rigid wall of the well from the wellhead down to the bottom of the well.
In addition to providing stabilization and keeping the sides of the well from collapsing, casing protects ground water aquifers through which the well is drilled. It also protects the hydrocarbons produced by the well from outside contaminants. The production tubing forms the conduit for production of hydrocarbons and, with the wellhead equipment, facilitates control of the well and the rate of production. Tubular services involve the use of highly specialized tools to handle and install multiple strings of pipe to establish a cased wellbore coupled with the installation of smaller diameter completion tubing inside the cased wellbore to provide a conduit for produced oil and gas to reach the surface.
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Casing is steel pipe that is manufactured in sections, or joints, that are typically 40 feet long and screwed together to specified parameters of torque or rotations to form longer lengths of casing, called casing strings. Most casing has male threads on each end. Typically, a collar or coupling, composed of a short cylindrical steel sleeve that is slightly larger in diameter than the casing and has female threads, is used to connect the two male joint ends. A thread compound is applied to the connection to provide lubrication and ensure a tight seal.
Connecting Joints of Casing
The casing operation is managed from the rig floor, as one or more joints at a time are connected by specialized powered pipe wrenches called power tongs. Typically hanging above the rig floor or on motorized track systems, power tongs screw each subsequent joint to the casing string and can also be used with computerized instrumentation to monitor, assess and control the joint make-up in accordance with the connection manufacturers recommendations.
A specialized cement cone known as a guide float shoe is connected to the first casing string to help guide the casing into the borehole and allow drilling mud to remain in the casing string to equalize pressure. Additionally, along the outside of the casing, numerous spring-like centralizers are attached to the casing string to help position the casing string in the center of the borehole to facilitate uniform distribution of cement around and between the outside of the casing and the borehole.
Casing strings are run into the borehole and officially landed when the weight of the casing string is transferred to the casing hangers, which are located at the top of the well to suspend the casing. After the casing has been run, cement slurry is pumped through the string of casing, then run up and around the space between the borehole and the outside of the casing and allowed to harden to permanently fix the casing in place.
The well is typically drilled in stages. Typically, a borehole is drilled to a certain depth, cased and cemented, and then the borehole is drilled deeper, cased and cemented again, and so on. Each time the well is cased, a smaller diameter casing is used in the following stage.
The largest diameter casing is called conductor pipe, which typically ranges from 30 to 42 inches in diameter for offshore wells, and 16 inches in diameter for onshore wells. The next casing string is the surface
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casing, which can run several thousand feet in length. The last type of casing string that is run into the well, and therefore the smallest in diameter, is the production string. The production string is run directly into the producing reservoir. Subsequent strings of casing referred to as protection or intermediate casing and liners, are run into separate challenging areas or problem zones, including areas of high pressure or lost circulation.
In an alternate method of well completion, sometimes a liner string is run into the borehole instead of a casing string. While a liner string is very similar to casing string in that it is made up of separate joints of casing, the liner string does not extend over the entire depth of the well, rather it hangs from the bottom of the previously installed casing string, down to the bottom of the borehole. A liner string is hung in the well by a liner hanger, and then cemented into place. In some cases the liner string is tied back to the wellhead before well completion.
One of the most common challenges in the casing process can be that the casing string becomes stuck before it reaches the bottom of the wellbore. The typical solution for this problem is to retrieve the casing string for some vertical distance, then attempt to run it downhole again. Rotating, or reaming, the casing while it is being run is an effective method for minimizing the risk of stuck pipe. The circulation of drilling fluids in the wellbore also helps to speed the casing operation and prevent stuck pipe.
All of these problems result in non-productive time, during which the wells owner is incurring day rate-based costs for the drilling rig and other onsite services, but during which the wells drilling to completion is not making progress. An effective and efficiently managed casing process benefits the wells operator by minimizing non-productive time.
The process for casing deep water wells includes a number of complexities that are not typically experienced with respect to onshore or shallow water wells. The seafloor may be thousands of feet below the rig. In order to bridge the distance between the drilling rig, which is at the ocean surface, and the well, which begins at the seafloor, the casing process typically involves using a string of tubulars known as a landing string. A landing string is typically composed of high strength pipe similar to drill pipe. The high strength, comparatively low weight landing string is assembled joint-by-joint and is attached to the top of the casing string to lower the casing string and land it in the wellhead. The landing string not only saves the cost of a length of casing to reach
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the sea floor, but is also designed for repeated assembly and disassembly making retrieval easier. However, the handling of the landing string with the weight of the heavy casing suspended below it requires specialized equipment and expertise to avoid failure, which at a minimum, would likely result in non-productive time and, at worst, cause damage to the well and critical infrastructure below.
Casing strings in deep water wells generally are longer and heavier than those used in onshore or shallow water wells, and require equipment that can handle string weights of up to 1,250 tons without crushing the casing at the point of suspension or allowing the casing to slip.
Additionally, deep water wells are generally characterized by increased geological complexity as compared to onshore or shallow water depth wells and typically require many casing or liner strings to allow for mud weight changes. In deep water wells, it is common to use as many as ten tubular strings, including contingencies, compared with the five or fewer strings typically used in shallower or onshore wells. With an increase in the number of strings used, there are tight tolerances in the well and additional attention to quality assurance is required. The graphic below depicts the significantly greater number of casing strings in deep water as compared to onshore wells:
To prevent wear and withstand a long production life, which can extend beyond 20 years, high specification tubulars are frequently used for critical well sections. In recent years, certain deep water well completions have utilized numerous pressure containment and flow control valves, and downhole pressure and downhole temperature measurement devices, all of which require control lines with the ability to communicate with subsea wellhead controls. When making up and running the completion tubing string into a well, specialized equipment is required to accommodate the control lines and other hardware in order ensure that the control lines are not damaged during the running process. The need to accommodate these developments has increased the technical requirements and complexity of tubular installation services.
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Due to the complexity of drilling in deep water, the cost substantially exceeds that experienced in onshore operations, with aggregate costs approaching $1 million per day for the drilling rig and related services. The high cost of drilling in offshore environments makes it even more important for efficient tubular services in order to minimize time spent on this activity. Spears estimates that the average Gulf of Mexico well requires $2.1 million of tubular services, while the average cost for tubular services for an onshore well in the U.S. is often less than $50,000.
Trends in the Industry
We believe that the following trends will positively affect the oilfield services industry, and consequently the demand for tubular installation services, in the coming years.
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Increasing global demand for crude oil and natural gas has spurred increases in energy development spending . The crude oil and natural gas industry benefits from increased consumption of hydrocarbons, caused in part by the industrialization of China, India and other developing countries. Spears estimates that annual global spending on drilling and development activities increased from $236 billion in 2009 to $326 billion in 2012, and is projected to increase to $482 billion in 2018, representing a compound annual growth rate of approximately 8% from 2009 to 2018. According to the IEA, under current policies, global energy demand will be approximately 18,676 million tons of oil equivalent (Mtoe) by 2035, or about 47% greater than in 2010. |
Global Energy Demand (Mtoe)
Source: International Energy Agency (2012 World Energy Outlook)
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Global Oilfield Equipment and Service Market
(excludes Russia, China and Central Asia)
Source: Spears & Associates, Inc. 2012 Oilfield Market Report
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Significant new well development is required to replace naturally declining production . Despite elevated exploration and development activity in recent years, oil supply has only experienced modest gains, highlighting the difficulty in overcoming the natural decline rates of large legacy fields. The IEA estimates that in order to overcome the decline in production from existing fields, and to keep pace with projected demand increases, new production of approximately 40 million barrels of oil per day (an amount equal to nearly 60% of 2011 global oil production) must be added by 2035. A significant number of new wells will be required to make up for declines in production from existing fields and the projected increase in global oil demand. |
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Increasing offshore and deep water drilling and development activity . Worldwide offshore rig counts continue to increase as crude oil supply and demand fundamentals encourage new drilling. Moreover, many of these new rigs are bigger and more efficient and designed to drill deeper to previously unrecoverable reserves. According to the IEA, 55% of remaining recoverable conventional oil outside of the OPEC is offshore. According to Spears, offshore spending will increase from $80.1 billion in 2011 to $179.7 billion in 2018, a compound annual growth rate of 12%. Offshore discoveries are expected to play an important role in the future, particularly deep water discoveries at depths greater than 1,000 feet. |
Global Offshore Equipment and Service Market
(excludes Russia, China and Central Asia)
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Source: Spears & Associates, Inc. 2012 Oilfield Market Report
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Increasing complexity and costs of well construction . As conventional sources of oil and gas are depleted, the oil and gas industry continues to develop new technologies and techniques that allow operators to develop a wider range of unconventional oil and gas resources, such as oil and gas shales. Certain of these techniques include drilling deeper and horizontal well paths with long lateral lengths and multi-stage completions, often in high temperature and high pressure environments. These types of unconventional drilling generally require additional tubular services compared to conventional drilling, and tubular installation services have become increasingly complex to execute, and have required the development of new techniques and specialized tools. |
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Heightened focus on quality, safety and environmental factors . Our customers are increasingly focused on the quality of wellbore construction, operational safety and environmental stewardship, particularly in offshore environments where we routinely operate. The tubular services we provide are critical in achieving these goals. As such, our reputation as a high-quality, trusted service provider positions us well to benefit from this trend. |
Our Operations
The table below provides a summary of the percentage contributions from our three operating segments and our primary geographic markets for the periods indicated.
Year Ended December 31, |
Three Months
Ended March 31, |
|||||||||||||||||||
2010 | 2011 | 2012 | 2012 | 2013 | ||||||||||||||||
Adjusted EBITDA by segment: |
||||||||||||||||||||
International Services |
64 | % | 61 | % | 49 | % | 51 | % | 50 | % | ||||||||||
U.S. Services |
20 | % | 29 | % | 45 | % | 43 | % | 42 | % | ||||||||||
Pipe and Products |
16 | % | 10 | % | 6 | % | 6 | % | 8 | % | ||||||||||
Revenue by geographic area: |
||||||||||||||||||||
United States |
52 | % | 51 | % | 56 | % | 52 | % | 49 | % | ||||||||||
Africa |
17 | % | 16 | % | 16 | % | 16 | % | 19 | % | ||||||||||
Latin America |
11 | % | 12 | % | 10 | % | 11 | % | 10 | % | ||||||||||
Europe |
10 | % | 10 | % | 10 | % | 10 | % | 9 | % | ||||||||||
Far East |
4 | % | 5 | % | 5 | % | 5 | % | 5 | % | ||||||||||
Other |
6 | % | 6 | % | 3 | % | 6 | % | 8 | % | ||||||||||
For additional information regarding our operating segments, see Note 16 to our audited combined financial statements included elsewhere in this prospectus.
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Tubular Services
We are a leading provider of tubular services in many of the regions in which we operate, including the U.S. Gulf of Mexico and almost every significant international offshore market, almost all of the major U.S. resource basins and in targeted active international onshore regions. A presentation of our tubular services revenue by geographic area is set forth below:
Franks International
2012 Tubular Services Revenue by Region 1
¹ | Excludes Pipe and Products revenue. |
² | Other includes Canada and the Middle East. |
We provide highly engineered tubular services to leading exploration and production companies in both offshore and onshore environments, with a focus on complex and technically demanding wells. Our specially trained employees provide our services with the aid of a suite of highly technical, purpose-built equipment that we design and manufacture for our proprietary use. Most of our manufactured equipment and products use patented, advanced technologies that enable us to service complex wells, increase efficiency, enhance well integrity and improve safety. We continuously work with our customers to develop new products and enhance existing equipment to improve efficiency and safety and also in response to problems encountered in challenging drilling environments. For example, a substantial portion of the rigs scheduled for delivery within the next two years are dual activity rigs, which are designed with two masts to simultaneously conduct multiple independent complementing activities. We have developed patented handling technology that allows the casing to be connected into triple joints in the auxiliary mast area and, once the well section is drilled to its targeted depth, triple joints can be safely maneuvered over the well bore and installed into the well. Use of this technology in connection with dual activity rigs can save 30% or more of rig time during casing running activity.
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The following table provides information about our primary products and equipment that complement our tubular services offerings as of June 11, 2013:
Product
|
Description |
Advantages of
Our
|
Related Patents(1) | |||||||||
U.S. | International | |||||||||||
Issued | Pending | Issued | Pending | |||||||||
Top Drive Mounted Casing Running Tools | Used to hoist single joints of casing, makeup of casing connections, lower and rotate casing string in the wellbore while simultaneously circulating drilling fluid |
Grip tubulars internally or externally
Replace certain traditionally manually operated equipment with a single fully mechanized and remotely controlled system, which reduces the risk of injury to personnel
Provides for simultaneous rotation of the pipe and/or circulation while raising or lowering the string, which reduces the risk of stuck pipe
Ability to rotate and/or circulate while lowering or raising which reduces the risk of stuck pipe |
14 | 4 | 31 | 8 | ||||||
Extended Range Slip Type Elevators and Spiders | Innovative pipe handling tools that are used to hoist and support tubular strings in order to lower the string into the wellbore or support the string at the rig floor. The extended range feature allows multiple pipe sizes which may be present in a single string to be gripped effectively without the need to change out or adjust equipment at pipe size changeover points |
Reduces the risks associated with changing out equipment or reconfiguring a tool in the midst of running a string
Capitalizes on many of the innovations developed over the past three decades of Franks development of handling tools, while significantly expanding the functionality and value to the client
Maximum load capabilities of 1,250 tons
|
8 | 3 | 9 | 13 | ||||||
Elevators | Clamps that hoist casing and tubing for raising or lowering into the borehole |
Working load ratings exceeding 1,250 tons, which is of great value in deep and ultra-deep water operations
Versatility to perform multiple tasks as a single apparatus
Tools incorporate elevator/spider interlocking feature which detects when proper engagement with the tubular string has been achieved, thereby allowing the companion tool to be released from engagement with the tubular string. This feature assures that at all times either the elevator or the spider has a secure grip on the string prior to the companion tool being allowed to open, which provides for a safer tubular running system
Improved resistance to the crushing of tubulars at high loads
|
25 | 13 | 26 | 47 |
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Product
|
Description |
Advantages of
Our
|
Related Patents(1) | |||||||||
U.S. | International | |||||||||||
Issued | Pending | Issued | Pending | |||||||||
Spiders | Companion tools to the Elevators, these tools suspend the tubular string from the drill floor while the next joint in the assembly is made up (or backed out) |
Improved resistance to crushing of the tubular at high loads
Tools incorporate elevator/spider interlocking feature which detects when proper engagement with the tubular string has been achieved, thereby allowing the companion tool to be released from engagement with the tubular string. This feature assures that at all times either the elevator or the spider has a secure grip on the string prior to the companion tool being allowed to open, which provides for a safer tubular running system |
20 | 11 | 12 | 24 | ||||||
An array of powered and automated positioning systems, which allow for minimal floor personnel to operate the equipment
|
||||||||||||
Landing String Handling Equipment | Special purpose elevators and spiders of ultrahigh load capacity for suspending, lowering and raising of landing strings with heavy casing strings for demanding deep water applications |
1,250 ton load rated elevators and spiders
Equipped with patented elevator/spider interlock system |
2 | 3 | 7 | 4 | ||||||
Power Tongs | Powered pipe wrenches that are used to rotate pipe joints together and apply designated makeup torque in order to achieve pressure tight sealing and structural integrity at the threaded connections |
Tubular Reducer kit provides ability to reconfigure conventional power tongs to grip and rotate range of smaller diameter tubulars
Automatic disabling upon sensing slippage between the gripping elements and the tubular |
5 | | 14 | 3 | ||||||
Hammer Accessories |
Hammers are powered devices that apply high impact forces to the top of a tubular string in order to drive it into the earth. Hammers are used to drive conductor strings which are the first string of pipe installed at the commencement of a well (typically used in onshore and in shallow water offshore). |
Complete line of accessories and related products for conductor driving services, including high-penetration Speedshoe, deviated conductors and drivepipe whipstocks |
2 | | 4 | | ||||||
CRA Makeup and Handing Tools | CRA tubulars frequently used as completion tubing in harsh corrosive well environments. For CRA tubulars to deliver maximum resistance to injurious corrosion the installation process must be accomplished without mechanical damage associated with the conventional gripping elements found in industry standard elevators, spiders and power tongs. |
Collar Load Support (CLS) system does not use toothed inserts to support the load
Reduced Penetration tooling for conventional slip systems minimizes the severity of damaged from toothed inserts
FluidGrip TM gripping systems for power tongs and backup tongs complement CLS and reduced penetration elevator and spider systems in applying torque to the tubular without damaging its surface |
3 | | 8 | 2 |
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Product
|
Description |
Advantages of
Our
|
Related Patents(1) | |||||||||
U.S. | International | |||||||||||
Issued | Pending | Issued | Pending | |||||||||
Completions Tubing Installation Equipment | Spiders purpose designed to accommodate running complex completion strings with simultaneous running of control lines and associated hardware along with control line manipulator systems. |
Safely manipulate control lines during running of the string into the wellbore, avoiding expensive damage and potential rework |
10 | 2 | 18 | 8 | ||||||
Downhole Drilling Tools | Suite of products directed to efficiency improvements during drilling. |
Reduction in adverse effects caused by vibration of the drill bit during drilling, extending life of downhole equipment and improved bore hole quality |
7 | 4 | 24 | 22 |
(1) | Includes patents and applications that apply to more than one product family. |
Pipe and Products
In addition to our services offering, we design and manufacture casing attachments, fabricate subsea equipment and distribute large OD pipe. Our products are sold directly to external customers.
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Fabricated pipe accessories . We manufacture and sell large OD pipe accessories to precise client specifications to facilitate transportation, handling and installation. These accessories include a complete range of innovative threaded connectors for large OD pipe that eliminate a number of customer concerns with other connector technology, such as (i) risk of premature back-out during driving or throughout the wells service life, (ii) vulnerability to vibrations, (iii) risk of leaks during service and (iv) installation time and cost effectiveness. The use of connectors of this type on large OD pipe eliminates the need to weld joints of pipe together, which cuts down on customers rig time and expense. To service this product line, we operate our four stock point and fabrication facilities located in Lafayette, Houma, and the Port of New Iberia, Louisiana and Alvin, Texas. |
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Deep water fabrication . We also provide specialized fabrication and welding services in support of deep water projects in the U.S. Gulf of Mexico, including drilling and production risers, flowlines and pipeline end terminations, as well as long length tubulars (up to 300 feet in length) for use as caissons or pilings. In addition to these core fabrication and welding services, we provide logistical support services such as spreader bars, bolster frames, barge loading and riser project installation services. |
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Large OD pipe . We distribute large OD pipe on behalf of third party manufacturers to a variety of external customers. The pipe we distribute is primarily used as conductor pipe and surface casing, which are typically the first casing strings installed in an offshore well. We manufacture large OD threaded connectors that are typically welded to the large OD pipe we distribute. We generally maintain an inventory of pipe in order to support our pipe sales and distribution operations. |
New Product Development and Intellectual Property
Our sales and earnings are influenced by our ability to successfully provide the high-level tubular services our customers demand, which in turn relies on our ability to develop new technology and products. Much of our product development occurs in response to specific customer requests, in which case we are typically able to pass costs along to the customer. However, we have also historically dedicated additional resources toward the development of new technology and equipment to enhance the effectiveness, safety and efficiency of the services we provide. Since most of our new product development is in response to a specific customer engagement, we have not incurred significant research and development expenses during the three most recent fiscal years. Although certain of our competitors may spend greater amounts on research and development, we believe that
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our product development efforts are greatly enhanced by the investments of management time and energy we make to improve our customer service and to work with our customers on their specific product needs and challenges.
We hold rights, through patents and patent license agreements, to patented or patent-pending technologies for certain innovations that we believe will have application to our businesses. We pursue patent protection in appropriate jurisdictions where we believe our innovations could have significant potential application to our core businesses. We also generally retain all intellectual property rights to our technology through technology ownership agreements or arrangements with our employees, suppliers, consultants and other third parties with whom we do business. We currently have 104 U.S. patents and 136 related international patents and 37 U.S. patent applications pending and 111 related international patent applications pending for equipment that our engineers have developed.
Although in the aggregate our patents and licenses are important to us, we do not regard any single patent or license as critical or essential to our business as a whole. Of greatest importance to our development efforts is our ability to preserve excellent customer relations and stay close enough to our customers operations so that we can observe opportunities to make changes to our service offerings (and the products that support them) that would yield the maximum benefit to our customers. Although we highly value our proprietary products and technology, we also depend on our technological capabilities, customer service oriented culture and application of our know-how to distinguish ourselves from our competitors. We also consider the service we provide to our customers and the technical knowledge and skill of our personnel to be more important than our registered intellectual property in our ability to compete. While we stress the importance of our research and development programs, the technical challenges and market uncertainties associated with the development and successful introduction of new and updated services are such that we cannot assure you that we will realize any particular amount of future revenue from the services and related products resulting from our research and development programs.
Customers
Our customers consist primarily of oil and gas exploration and production companies, both U.S. and international, including major and independent companies, national oil companies and, on occasion, other service companies that have contractual obligations to provide casing and handling services. Demand for our services depends primarily upon the capital spending of oil and gas companies and the level of drilling activity in the U.S. and internationally. We do not believe the loss of any of our individual customers would have a material adverse effect on our business. No single customer accounted for more than 10% of our revenue for the years ended December 31, 2010 and 2011 and one customer accounted for approximately 11% of our revenue for the year ended December 31, 2012.
International Services Segment
The top five customers in our international services segment accounted for an aggregate of approximately 38% of the segments revenue for the year ended December 31, 2012, with no other customers representing 10% or more of that segments revenue.
U.S. Services Segment
The top five customers in our U.S. Services segment accounted for an aggregate of approximately 37% of the segments revenue during the year ended December 31, 2012. Other than Chevron, which accounted for approximately 20% of that segments revenue for the year ended December 31, 2012, no other customers represented 10% or more of that segments revenue.
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Pipe and Products Segment
The top five customers of our Pipe and Products segment accounted for an aggregate of approximately 31% of the segments revenue during the year ended December 31, 2012. Other than Shell, which accounted for approximately 12% of that segments revenue for the year ended December 31, 2012, no other customers represented 10% or more of that segments revenue.
Seasonality
A substantial portion of our business is not significantly impacted by changing seasons. A small portion of the revenue we generate from selected international operations may benefit from higher first quarter activity levels, as operators take advantage of the winter freeze to gain access to remote drilling and production areas. In the past, some of our revenue in Canada has declined during the second quarter due to warming weather conditions that resulted in thawing, softer ground, difficulty accessing drill sites and road bans that curtailed drilling activity.
Competition
The markets in which we operate are competitive. We compete with a number of companies, some of which have financial and other resources greater than us. The principal competitive factors in our markets are the quality, price and availability of products and services and a companys responsiveness to customer needs and reputation for safety. In general, we face a larger number of smaller, more regionally-specific customers in U.S. onshore market as compared to offshore markets, where larger competitors dominate.
We believe several factors give us a strong competitive position. In particular, we believe our products and services in each segment fulfill our customers requirements for international capability, availability of tools, range of services provided, intellectual property, technological sophistication, rigorous quality systems and availability of equipment, along with reputation and safety record. We seek to differentiate ourselves from our competitors by providing a rapid response to the needs of our customers, a high level of customer service and innovative product development initiatives. Although we have no single competitor across all of our product lines, we believe that Weatherford International represents our most direct competitor across our segments for providing tubular services on an aggregate, global basis.
International Services Segment
We hold established market leading positions in several of our core international service regions. The most significant competitors we have across our international service lines are Weatherford International and, to a lesser extent, Baker Hughes.
U.S. Services Segment
We hold established market leading positions in several of our core U.S. service regions, and we compete with a large number of relatively smaller competitors. The most significant competitor we have across our U.S. service lines is Weatherford International and, to a lesser extent, Tesco Corporation. We also face numerous regional competitors in each of our U.S. onshore service regions.
Pipe and Products Segment
We hold established market leading positions in several of our core product offerings, and we compete with a small number of competitors. The most significant competitors we have across our Pipe and Products segment are National Oilwell Varco, Dril-Quip and GE VetcoGray.
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Properties
In order to design, manufacture and service the proprietary products that support our tubular services business, as well as those that we offer for sale directly to external customers, we maintain several manufacturing and service facilities around the world. Though our manufacturing and service capabilities are primarily concentrated in the U.S., we currently provide our services in approximately 60 countries.
Following the completion of our corporate reorganization, as described in Organizational Structure, our major facilities owned or leased by us will be as follows:
Location |
Leased or
owned |
Principal/Most Significant Use |
||||
Houston, Texas |
Leased | Corporate office | ||||
Lafayette, Louisiana |
Leased | Manufacturing and engineering | ||||
Aberdeen, Scotland |
Owned | Regional operations and administration | ||||
Dubai |
Owned | Regional operations and administration | ||||
Singapore |
Owned | Regional operations and administration | ||||
Mumbai |
Owned | Administration |
We intend to enter into real estate lease agreements with customary terms for continued use of the real estate we will no longer own following completion of our corporate reorganization, including our Houston, Texas and Lafayette, Louisiana facilities. See Organizational Structure.
Our largest manufacturing facility is located in Lafayette, Louisiana, where we manufacture a substantial portion of our pipe handling tools. The facility serves our U.S. Services segment in the U.S. Gulf of Mexico, and is our global headquarters for the design and manufacture of our equipment. The Lafayette facility is situated on a total of 151 acres. The main facility occupies 135 acres and the remaining acreage is dedicated to pipe storage located offsite, within Lafayette. There are a total of 16 buildings onsite and 11 buildings offsite. Our manufacturing operations occupy 11 of the 16 buildings, with the remaining buildings dedicated to administration, training and other operational tasks. The main administrative building within the facility is approximately 40,000 square feet.
Suppliers and Raw Materials
We acquire component parts, products and raw materials from suppliers, including foundries, forge shops, and original equipment manufacturers. The prices we pay for our raw materials may be affected by, among other things, energy, steel and other commodity prices, tariffs and duties on imported materials and foreign currency exchange rates. Certain of our component parts, products or specific raw materials are only available from a limited number of suppliers.
Our ability to source low cost raw materials and components, such as steel castings and forgings, is critical to our ability to manufacture our drilling products competitively and, in turn, our ability to provide onshore and offshore drilling services. In order to purchase raw materials and components in a cost effective manner we have developed a broad international sourcing capability and we maintain quality assurance and testing programs to analyze and test these raw materials and components.
We have experienced increased costs in recent years due to rising steel prices. There is also strong demand within the industry for forgings, castings and outsourced coating services necessary for us to make our products. We cannot assure that we will be able to continue to purchase these raw materials on a timely basis or at historical prices. We generally try to purchase our raw materials from multiple suppliers so we are not dependent on any one supplier, but this is not always possible.
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Inventories and Working Capital
An important consideration for many of our customers in selecting a vendor is timely availability of the product. Often customers will pay a premium for earlier or immediate availability because of the cost of delays in critical operations. We aim to stock certain of our consumable products in regional warehouses around the world so we can have these products available for our customers when needed. This availability is especially critical for our proprietary products, causing us to carry substantial inventories for these products. For critical capital items in which demand is expected to be strong, we often build certain items before we have a firm order. Having such goods available on short notice can be of great value to our customers.
Employees
As of March 31, 2013, we had approximately 4,100 employees worldwide. We are a party to collective bargaining or other similar agreements in certain international areas in which we operate, such as Brazil, the Far East and Europe. We consider our relations with our employees to be satisfactory.
Operating Risk and Insurance
We maintain insurance coverage of types and amounts that we believe to be customary and reasonable for companies of our size and with similar operations. In accordance with industry practice, however, we do not maintain insurance coverage against all of the operating risks to which our business is exposed. Therefore, there is a risk our insurance program may not be sufficient to cover any particular loss or all losses.
Currently, our insurance program includes, among other things, general liability, umbrella liability, sudden and accidental pollution, personal property, vehicle, workers compensation, and employers liability coverage. Our insurance includes various limits and deductibles or retentions, which must be met prior to or in conjunction with recovery.
Business History
FINV was formed in 2006 as a Dutch company with limited liability ( naamloze vennootschap ). We believe that our long and successful history in the industry is a testament to the quality of the services and the innovative technology that we provide our customers. Franks International traces its roots to the founding of FCC by Frank Mosing in 1938. In 1950, Donald E. Mosing joined his father in the business. Later, Donalds younger brothers, Billy and Larry, joined their father and brother to help manage the growing operations. As an engineering and safety innovator, Donald was a driving force for many years in the development of many of our proprietary tools and processes, and he is named as an inventor on 45 of the U.S. patents that have been issued to us. In 1973, Donald Keith Mosing, Donald E. Mosings eldest son, established our third office, in Alvin, Texas. Keith Mosing quickly embarked on the expansion of operations across North America and into South America, Asia, Europe, Africa and the Middle East. Our international operations were formally organized into a separate company in 1981, with Keith Mosing being named Chairman, President and Chief Executive Officer. Since the early 1980s, our U.S. and international operations have continued to grow, both organically and through strategic acquisitions. Upon Donalds retirement in July 2011, Keith Mosing was named Chairman, President and Chief Executive Officer of the U.S. operations. We now operate in nearly every region of the world with significant oil and gas drilling activity. We currently provide our services in approximately 60 countries on six continents.
Environmental, Health and Safety Regulation
Our operations are subject to numerous stringent and complex laws and regulations governing the discharge of materials into the environment, health and safety aspects of our operations, or otherwise relating to human health and environmental protection. Failure to comply with these laws or regulations or to obtain or comply with permits may result in the assessment of administrative, civil and criminal penalties, imposition of remedial or corrective action requirements, and the imposition of orders or injunctions to prohibit or restrict certain activities or force future compliance.
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The trend in environmental regulation has been to impose increasingly stringent restrictions and limitations on activities that may impact the environment, and thus, any changes in environmental laws and regulations or in enforcement policies that result in more stringent and costly waste handling, storage, transport, disposal, or remediation requirements could have a material adverse effect on our operations and financial position. Moreover, accidental releases or spills of regulated substances may occur in the course of our operations, and we cannot assure you that we will not incur significant costs and liabilities as a result of such releases or spills, including any third-party claims for damage to property, natural resources or persons.
The following is a summary of the more significant existing environmental, health and safety laws and regulations to which our business operations are subject and for which compliance could have a material adverse impact on our capital expenditures, results of operations or financial position.
Hazardous Substances and Waste
The Resource Conservation and Recovery Act (RCRA) and comparable state statutes, regulate the generation, transportation, treatment, storage, disposal and cleanup of hazardous and non-hazardous wastes. Under the auspices of the EPA, the individual states administer some or all of the provisions of RCRA, sometimes in conjunction with their own, more stringent requirements. We are required to manage the transportation, storage and disposal of hazardous and non-hazardous wastes in compliance with RCRA.
The Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA), also known as the Superfund law, imposes joint and several liability, without regard to fault or legality of conduct, on classes of persons who are considered to be responsible for the release of a hazardous substance into the environment. These persons include the owner or operator of the site where the release occurred, and anyone who disposed or arranged for the disposal of a hazardous substance released at the site. We currently own, lease, or operate numerous properties that have been used for manufacturing and other operations for many years. We also contract with waste removal services and landfills. These properties and the substances disposed or released on them may be subject to CERCLA, RCRA and analogous state laws. Under such laws, we could be required to remove previously disposed substances and wastes, remediate contaminated property, or perform remedial operations to prevent future contamination. In addition, it is not uncommon for neighboring landowners and other third parties to file claims for personal injury and property damage allegedly caused by hazardous substances released into the environment.
Water Discharges
The Federal Water Pollution Control Act (the Clean Water Act) and analogous state laws impose restrictions and strict controls with respect to the discharge of pollutants, including spills and leaks of oil and other substances, into waters of the United States. The discharge of pollutants into regulated waters is prohibited, except in accordance with the terms of a permit issued by the EPA or an analogous state agency. A responsible party includes the owner or operator of a facility from which a discharge occurs. The Clean Water Act and analogous state laws provide for administrative, civil and criminal penalties for unauthorized discharges and, together with the Oil Pollution Act of 1990, impose rigorous requirements for spill prevention and response planning, as well as substantial potential liability for the costs of removal, remediation, and damages in connection with any unauthorized discharges.
Air Emissions
The federal Clean Air Act and comparable state laws regulate emissions of various air pollutants through air emissions permitting programs and the imposition of other emission control requirements. In addition, the EPA has developed, and continues to develop, stringent regulations governing emissions of toxic air pollutants at specified sources. Non-compliance with air permits or other requirements of the federal Clean Air Act and associated state laws and regulations can result in the imposition of administrative, civil and criminal penalties, as well as the issuance of orders or injunctions limiting or prohibiting non-compliant operations. In August 2012,
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the EPA adopted new regulations restricting emissions of volatile organic compounds in connection with the drilling and completion of oil and gas wells, which will require operators to purchase emissions control equipment and make process changes that may increase the costs of well drilling and completion activities.
Climate Change
In December 2009, the EPA determined that emissions of carbon dioxide, methane and other greenhouse gases present an endangerment to public health and the environment because emissions of such gases are, according to the EPA, contributing to warming of the Earths atmosphere and other climatic changes. Based on these findings, the EPA has begun adopting and implementing regulations to restrict emissions of greenhouse gases under existing provisions of the federal Clean Air Act. The EPA recently adopted two sets of rules regulating greenhouse gas emissions under the Clean Air Act, one of which requires a reduction in emissions of greenhouse gases from motor vehicles and the other of which regulates emissions of greenhouse gases from certain large stationary sources, effective January 2, 2011. The EPA has also adopted rules requiring the reporting of greenhouse gas emissions from specified large greenhouse gas emission sources in the United States, including petroleum refineries, on an annual basis, beginning in 2011 for emissions occurring after January 1, 2010, as well as onshore oil and gas production facilities, on an annual basis, beginning in 2012 for emissions occurring in 2011.
In addition, the United States Congress has from time to time considered adopting legislation to reduce emissions of greenhouse gases and almost one-half of the states have already taken legal measures to reduce emissions of greenhouse gases primarily through the planned development of greenhouse gas emission inventories and/or regional greenhouse gas cap and trade programs. Most of these cap and trade programs work by requiring major sources of emissions, such as electric power plants, or major producers of fuels, such as refineries and gas processing plants, to acquire and surrender emission allowances. The number of allowances available for purchase is reduced each year in an effort to achieve the overall greenhouse gas emission reduction goal.
The adoption of legislation or regulatory programs to reduce emissions of greenhouse gases could require us to incur increased operating costs, such as costs to purchase and operate emissions control systems, to acquire emissions allowances or comply with new regulatory or reporting requirements. Any such legislation or regulatory programs could also increase the cost of consuming, and thereby reduce demand for, the oil and gas produced by our customers. Consequently, legislation and regulatory programs to reduce emissions of greenhouse gases could have an adverse effect on our business, financial condition and results of operations. Finally, it should be noted that some scientists have concluded that increasing concentrations of greenhouse gases in the Earths atmosphere may produce climate changes that have significant physical effects, such as increased frequency and severity of storms, droughts, and floods and other climatic events. If any such effects were to occur, they could have an adverse effect on our business, financial condition and results of operations.
Employee Health and Safety
We are subject to a number of federal and state laws and regulations, including OSHA and comparable state statutes, establishing requirements to protect the health and safety of workers. In addition, the OSHA hazard communication standard, the EPA community right-to-know regulations under Title III of the federal Superfund Amendment and Reauthorization Act and comparable state statutes require that information be maintained concerning hazardous materials used or produced in our operations and that this information be provided to employees, state and local government authorities and the public. Substantial fines and penalties can be imposed and orders or injunctions limiting or prohibiting certain operations may be issued in connection with any failure to comply with laws and regulations relating to worker health and safety.
We also operate in non-U.S. jurisdictions, which may impose similar liabilities against us.
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Legal Proceedings
We are the subject of lawsuits and claims arising in the ordinary course of business from time to time. Management cannot predict the ultimate outcome of such lawsuits and claims. While the lawsuits and claims are asserted for amounts that may be material should an unfavorable outcome be the result, management does not currently expect that these matters will have a material adverse effect on our financial position or results of operations.
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Board Structure
Our board currently consists of one member, Mr. Donald Keith Mosing. Prior to the completion of this offering, we intend to appoint at least one additional director to our existing board, Sheldon Erikson, who will then join our supervisory board and serve as a member of our audit committee, as described below. At the completion of this offering, we will create a two-tier board structure, consisting of a management board and a supervisory board, each of which must consist of at least one member under our articles of association.
Supervisory Board
Under Dutch law, the supervisory boards duties include supervising and advising the management board in performing its management tasks. The supervisory board is expected to exercise oversight of management with the companys interests in mind. The number of members of our supervisory board is determined from time to time at a general meeting of our shareholders upon a proposal by the supervisory board, but will not be greater than nine. We expect to increase the number of members on our supervisory board prior to or in connection with the completion of this offering. As described below, at the completion of this offering, our supervisory board will consist of four members, three of whom are members of the Mosing family, including our chief executive officer.
We intend to appoint independent directors to our supervisory board contemporaneously with and following the completion of this offering. We also expect that our supervisory board will review the independence of our current supervisory director using the independence standards of the NYSE.
In evaluating supervisory director candidates, we will assess whether a candidate possesses the integrity, judgment, knowledge, experience, skills and expertise that are likely to enhance the supervisory boards ability to oversee and direct our affairs and business, including, when applicable, to enhance the ability of committees of the supervisory board to fulfill their duties and the quality of the supervisory boards deliberations and decisions. In evaluating supervisory directors, we will consider diversity in its broadest sense, including persons diverse in perspectives, personal and professional experiences, geography, gender, race and ethnicity. In addition, pursuant to our amended and restated articles of association, the Mosing family will have the right to recommend one director for nomination to the supervisory board for each 10% of the outstanding FINV Stock they collectively beneficially own, up to a maximum of five directors.
Management Board
The management boards sole member will be our wholly owned subsidiary, Franks International Management B.V. As a managing director, Franks International Management B.V.s duties will include the management of the company, consulting with the supervisory board on important matters and submitting certain important decisions to the supervisory board for its prior approval.
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Executive Officers and Supervisory Directors
Set forth below are the names, ages and positions of our executive officers, supervisory directors and supervisory director nominees as of July 15, 2013. All supervisory directors are elected for a term of one year to serve until their successors are elected and qualified or upon earlier of death, disability, resignation or removal. All executive officers hold office until their successors are elected and qualified or upon earlier of death, disability, resignation or removal. There are no family relationships among any of our supervisory directors or executive officers. The address of each supervisory director and executive officer is 10260 Westheimer Rd., Houston, Texas 77042.
Name |
Age |
Position |
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Donald Keith Mosing |
62 | Chairman of the Supervisory Board, Director, Chief Executive Officer and President | ||
Robert R. Gilbert |
58 | Executive Vice President and Chief Operating OfficerU.S. Services and Pipe and Products | ||
C. Michael Webre |
57 | Vice President of Engineering | ||
Mark G. Margavio |
51 | Chief Financial Officer | ||
Brian D. Baird |
49 | Chief Legal Officer | ||
W. John Walker |
47 | Vice President of International Operations | ||
Sheldon Erikson |
71 | Supervisory Director Nominee | ||
Kirkland D. Mosing |
54 | Supervisory Director Nominee | ||
Steven B. Mosing |
57 | Supervisory Director Nominee |
Donald Keith Mosing . Mr. Mosing currently serves as the Chairman of our supervisory board, our Chief Executive Officer and President. Mr. Mosing began working for the family company in 1965 at age 14. Mr. Mosing established our third office, and first outside of Louisiana, in 1973, and then led the expansion of our operations across North America and into South America, Asia, Europe, Africa, the Middle East and Australia. Our international operations were formally organized into a separate company in 1981, with Mr. Mosing serving as the Chairman, President and Chief Executive Officer. Mr. Mosing was named Chairman, President and Chief Executive Officer of all of our U.S. companies in July 2011, upon the retirement of his father, Donald E. Mosing. Mr. Mosing attended the University of Louisiana at Lafayette and Embry-Riddle Aeronautical University, where he graduated with a Bachelor of Science degree.
Robert R. Gilbert . Mr. Gilbert currently serves as our Executive Vice President and Chief Operating OfficerU.S. Services and Pipe and Products, a position he has held since July 2011. Prior to serving in his current position, Mr. Gilbert was our Vice President of Operations and Sales from 1997 to 2011, concentrating on our U.S. operations, and served as our Executive Administrator and advisor to Engineering from 1980 to 1997. Mr. Gilbert received both his Bachelor of Science degree in Mechanical Engineering and Master of Business Administration degree from the University of Louisiana at Lafayette. Mr. Gilbert is currently a member of the Lafayette Chamber of Commerce, the American Society of Mechanical Engineers and the American Association of Drilling Engineers, and is an associate member of the Society of Petroleum Engineers. Mr. Gilbert was the first engineer hired by Donald E. Mosing, Keith Mosings father, and has been associated with a broad range of our U.S. divisions and operations.
C. Michael Webre . Mr. Webre currently serves as our Vice President of Engineering, a position he has held since 2002. Mr. Webre has served in various capacities since first joining the Franks corporate family in 1979, including Mechanical Engineer, Senior Mechanical Engineer and Engineering Manager. Mr. Webre received both his Bachelor of Science degree in Mechanical Engineering and Master of Science degree in Engineering Systems from the University of Louisiana at Lafayette. Mr. Webre is a licensed Professional Engineer and is a member of the Society of Petroleum Engineers, American Society of Mechanical Engineers and the American Welding Society.
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Mark G. Margavio . Mr. Margavio currently serves as our Chief Financial Officer, a position he has held since 2003. Prior to serving in his current position, Mr. Margavio was our Vice President of Finance from 2002 until 2003. Prior to joining Franks International, Mr. Margavio was the Chief Financial Officer for Transoceanic Shipping Company, a global logistics company, from 1997 to 2002. From 1982 to 1997, Mr. Margavio held various positions in investments, treasury and finance, including Senior Lead Analyst in Treasury and Corporate Finance for Entergy Corporation and Director of Acquisition for RPC Inc. Mr. Margavio received his Bachelor of Arts degree in Economics from Southeastern Louisiana University and his Master of Business Administration degree from the University of New Orleans. Mr. Margavio earned his Certified Public Accountant designation in 1994. He also has received designations as a Certified Treasury Professional, Certified Cash Manager and Registered Investment Advisor.
Brian D. Baird . Mr. Baird currently serves as our Vice President, Chief Legal Officer and Secretary, a position he has held since April 2005. Prior to joining Franks International in 2005, Mr. Baird was Vice President, General Counsel and Secretary of Pantellos, a Houston-based supply chain services and electronic marketplace company owned by 20 of the largest publically owned electric utility companies. Earlier in his career, Mr. Baird practiced law with the law firms of Boyar & Miller from 1991 to 2001 and with Jenkens & Gilchrist from 1989 to 1991. He received both his Doctor of Jurisprudence in 1989 and his Bachelor of Business Administration degree in Finance in 1986 from the University of Texas. Mr. Bairds legal background is broad-based with emphasis on mergers and acquisitions, corporate finance, venture capital, technology and e-commerce, commercial real estate, oilfield services and general corporate law. For 2013, Mr. Baird is serving as President of the Houston Chapter of the General Counsel Forum, and has served on its Board of Directors since 2010.
W. John Walker . Mr. Walker currently serves as our Vice President of International Operations, a position that he has held since August 2012. Prior to serving in his current position, Mr. Walker served as the Vice President of North America from 2004 to 2012, and he assumed the additional responsibilities of Vice President of Brazil in July 2009. Mr. Walker also served as the Regional Manager of the Asia Pacific and Middle East divisions from 1999 to 2003. Mr. Walker entered the North Sea oil industry and served in several technical as well as supervisory field roles after obtaining an Ordinary National Certificate in Electrical and Electronic Engineering in 1982 from Aberdeen Technical College in Scotland. Mr. Walker has over 29 years of industry experience and has held positions across the world, including in Europe, North Africa, the Asia-Pacific region and the Middle East.
Kirkland D. Mosing . Mr. Mosing will be appointed to serve on our supervisory board in connection with the completion of this offering. Mr. Mosing has served as a technical sales representative for FCC and has been involved in sales technical support efforts since 1986, with a focus on hammer sales, pipe sales and CRT tools in the Lafayette, Louisiana and Dallas, Texas areas. Mr. Mosing has a Doctor of Veterinary Medicine from Louisiana State University. Mr. Mosing was selected as a Supervisory Director Nominee because of his extensive experience and familiarity with the Franks companies.
Steven B. Mosing . Mr. Mosing will be appointed to serve on our supervisory board in connection with the completion of this offering. Mr. Mosing has served on the board of directors for FCC and FTS since 2000. Additionally, Mr. Mosing is currently a director of Shoreline Energy LLC, an independent exploration and production company. Mr. Brent Mosing began his career with Franks full time in 1978 and has held various positions, including field sales, office sales, information technology and marketing. Mr. Mosing received his Bachelor of Science Degree in Economics from the University of Louisiana at Lafayette in 1978 and his Master of Business Administration from the Northwestern State University in 1993. Mr. Mosing was selected as a Supervisory Director Nominee because of his extensive experience and familiarity with the Franks companies.
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Sheldon Erikson . Mr. Erikson will be appointed to serve on our existing board prior to completion of this offering and will serve on our supervisory board following its creation. Mr. Erikson served as the Chairman, President and Chief Executive Officer of Cameron International Corporation from the time of its creation in 1995 through 2008, and currently serves on Cameron International Corporations board of directors. Prior to assuming his leadership role with Cameron, Mr. Erikson had a long and distinguished career in the energy and manufacturing sectors. He was Chairman of the Board, President and Chief Executive Officer of The Western Company of North America, an international petroleum service company engaged in pressure pumping, well stimulating and cementing and offshore drilling. Previously, he was President of the Joy Petroleum Equipment Group of Joy Manufacturing Company. Mr. Erikson is also a director of Endeavour International Corporation, an oil and gas exploration and production company; Rockwood Holdings, Inc., a company in the specialty chemicals and advanced materials businesses; General Partner of Red Rock Interests, a private company; and has been a director of Triton Energy Company and Spinnaker Exploration Company, both oil and gas exploration companies, Layne Christensen Co., a provider of services and related products for the water, mineral and energy markets, and NCI Building Systems, a provider of products and services for the construction industry. He also serves on the boards of the National Petroleum Council, American Petroleum Institute, National Ocean Industries Association and the Petroleum Equipment Suppliers Association, of which he is a past chairman. He also serves in positions of leadership in charitable and non-profit organizations, including The University of Texas MD Anderson Cancer Center and the Texas Heart Institute. He has an M.B.A. from the Harvard Graduate School of Business Administration and studied engineering and economics at the University of Illinois. Mr. Erikson was selected as a Supervisory Director Nominee because he has extensive experience in the oil and gas industry and serving on the boards of publicly traded companies.
Status as a Controlled Company
Following the completion of this offering, we intend to elect to be treated as a controlled company as that term is set forth in Section 303A of the NYSE Listed Company Manual. Under the NYSE rules, a controlled company may elect not to comply with certain NYSE corporate governance requirements, including: (1) the requirement that a majority of our supervisory board consist of independent directors, (2) the requirement that our nominating and governance committee be composed entirely of independent directors with a written charter addressing the committees purpose and responsibilities, and (3) the requirement that our compensation committee be composed entirely of independent directors with a written charter addressing the committees purpose and responsibilities. Notwithstanding our status as a controlled company, we will remain subject to the NYSE corporate governance standard that requires us to have an audit committee composed entirely of independent directors. As a result, we must have at least one independent director on the audit committee of our supervisory board by the date our common stock is listed on the NYSE, at least two independent directors within 90 days of the listing date and at least three independent directors within one year of the listing date.
Once we cease to be a controlled company, our supervisory board will be required to have a compensation committee and a nominating and governance committee, each with at least one independent director. Within 90 days of ceasing to be a controlled company, we will be required to have each of a compensation committee and a nominating and governance committee with a majority of independent directors, and within one year of ceasing to be a controlled company, a majority of our supervisory board must be comprised of independent directors.
Committees of the Supervisory Board
Upon the conclusion of this offering, we intend to have an audit committee, and in the event we are no longer a controlled company, a compensation committee and nominating and governance committee, of our supervisory board, and may have such other committees as the supervisory board shall determine from time to time. We anticipate that each of the standing committees of the supervisory board will have the composition and responsibilities described below.
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Audit Committee
We will establish an audit committee prior to completion of this offering. Rules implemented by the NYSE and SEC require us to have an audit committee comprised of at least three directors who meet the independence and experience standards established by the NYSE and the Exchange Act, subject to transitional relief during the one-year period following the completion of this offering. Prior to the completion of this offering, Mr. Erickson will be appointed the chairman and sole member of the audit committee of our existing board. Following this offering, he will fill the same position on our supervisory board. As required by the rules of the SEC and listing standards of the NYSE, the audit committee will consist solely of independent directors. SEC rules also require that a public company disclose whether or not its audit committee has an audit committee financial expert as a member. An audit committee financial expert is defined as a person who, based on his or her experience, possesses the attributes outlined in such rules. We anticipate that Mr. Erickson will satisfy the definition of audit committee financial expert.
This committee will oversee, review, act on and report on various auditing and accounting matters to our supervisory board, including: the selection of our independent accountants, the scope of our annual audits, fees to be paid to the independent accountants, the performance of our independent accountants and our accounting practices. In addition, the audit committee will oversee our compliance programs relating to legal and regulatory requirements. Upon formation of the audit committee, we expect to adopt an audit committee charter defining the committees primary duties in a manner consistent with the rules of the SEC and the NYSE market standards.
Compensation Committee
Because we will be a controlled company within the meaning of the NYSE corporate governance standards, we will not be required to, and will not, have a compensation committee.
If and when we are no longer a controlled company, we will be required to establish a compensation committee. We anticipate that such a compensation committee would consist of three directors, each of whom will be independent under the rules of the SEC. As required by the rules of the SEC and listing standards of the NYSE, a majority of the compensation committee would be independent directors. This committee would establish salaries, incentives and other forms of compensation for officers and other employees. Our compensation committee would also administer our incentive compensation and benefit plans. Upon formation of a compensation committee, we expect to adopt a compensation committee charter defining the committees primary duties in a manner consistent with the rules of the SEC and applicable stock exchange or market standards.
Nominating and Governance Committee
Because we will be a controlled company within the meaning of the NYSE corporate governance standards, we will not be required to, and will not, have a nominating and corporate governance committee. While we are a controlled company, our supervisory board will identify and evaluate potential candidates for nomination as a director and recommend any such candidates to our supervisory board.
If and when we are no longer a controlled company, we will be required to establish a nominating and corporate governance committee. We anticipate that such a nominating and corporate governance committee would consist of three directors. As required by the rules of the SEC and listing standards of the NYSE, the nominating and corporate governance committee would consist of a majority of independent directors. This committee would identify, evaluate and recommend qualified nominees to serve on our supervisory board, develop and oversee our internal corporate governance processes and maintain a management succession plan. Upon formation of a nominating and corporate governance committee, we would expect to adopt a nominating and corporate governance committee charter defining the committees primary duties in a manner consistent with the rules of the SEC and applicable stock exchange or market standards.
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Compensation Committee Interlocks and Insider Participation
Because we will be a controlled company within the meaning of the NYSE corporate governance standards, we will not be required to, and will not initially, have a compensation committee. None of our executive officers serve on the board of directors or compensation committee of a company that has an executive officer that serves on our board or compensation committee. No member of our supervisory board is an executive officer of a company in which one of our executive officers serves as a member of the board of directors or compensation committee of that company. At the completion of this offering, our supervisory board will consist of four members, three of whom are members of the Mosing family, including our chief executive officer.
Risk Oversight
The supervisory board is actively involved in oversight of risks that could affect us. Following the completion of this offering, this oversight function will be conducted primarily through the audit committee, but the full supervisory board will retain responsibility for general oversight of risks. The audit committee will be charged with oversight of our system of internal controls and risks relating to financial reporting, legal, regulatory and accounting compliance. Our supervisory board will continue to satisfy its oversight responsibility through full reports from the audit committee chair regarding the committees considerations and actions, as well as through regular reports directly from officers responsible for oversight of particular risks. In addition, we have internal audit systems in place to review adherence to policies and procedures, which are supported by a separate internal audit department.
Code of Ethics for Chief Executive Officer, Chief Financial Officer, Controller and Certain Other Officers
Prior to the closing of this offering, our supervisory board will adopt a Code of Ethics for our Chief Executive Officer, our Chief Financial Officer and all other financial and accounting officers. Following adoption of the Code of Ethics, any change to, or waiver from, the Code of Ethics will be promptly disclosed as required by applicable U.S. federal securities laws and the corporate governance rules of the NYSE.
Code of Conduct
Prior to the closing of this offering, our supervisory board will adopt a Code of Business Conduct and Ethics applicable to our employees, supervisory directors, managing directors and officers, in accordance with applicable U.S. federal securities laws and the corporate governance rules of the NYSE. Following adoption of the Code of Business Conduct and Ethics, any change to, or waiver from, this Code of Business Conduct and Ethics may be made only by our supervisory board and will be promptly disclosed as required by applicable U.S. federal securities laws and the corporate governance rules of the NYSE.
Corporate Governance Guidelines
Prior to the closing of this offering, our supervisory board will adopt corporate governance guidelines in accordance with the corporate governance rules of the NYSE.
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COMPENSATION DISCUSSION AND ANALYSIS
This Compensation Discussion and Analysis (this CD&A) provides information regarding the executive compensation program for our principal executive officer, our principal financial officer, and our three other highest compensated executive officers at the end of the last completed fiscal year (the Named Executive Officers) and is intended to provide perspective regarding our executive compensation program, including our philosophy, objectives, compensation processes, and key components of compensation.
The following individuals were our Named Executive Officers as of December 31, 2012:
|
Donald Keith Mosing, Chairman of the supervisory board, Director, Chief Executive Officer (CEO) and President; |
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Mark G. Margavio, Chief Financial Officer (CFO); |
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W. John Walker, Vice President of International Operations; |
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Robert R. Gilbert, Executive Vice President and Chief Operating Officer U.S. Services and Pipe and Products; and |
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C. Michael Webre, Vice President of Engineering. |
Although this CD&A focuses on our executive compensation program during the last fiscal year, we also describe compensation actions taken before or after the last completed fiscal year to the extent such discussion enhances the understanding of our executive compensation disclosure. In connection with this offering, we expect to adjust our compensation practices going forward in order to make them more appropriate for a public company. This CD&A discusses our compensatory practices in place during 2012 and highlights the changes we expect to implement upon the consummation of this offering.
Overview of Executive Compensation and our Compensation Process
As a private company, our compensation arrangements with our Named Executive Officers have been determined on an individual basis, generally based on negotiations between the individual and our CEO, and in consultation with our CFO or Director of Human Resources when appropriate. Our CEOs compensation arrangements were historically determined based on direct negotiations with the Board of Directors of FII (the FII Board), which consisted of Kirkland D. Mosing, Steven B. Mosing, and our CEO, with our CEO abstaining from all discussions and decisions related to his own compensation. Our Named Executive Officers compensation has generally been reviewed and adjusted on an annual basis.
Although we have not historically had a formal compensation committee, our CEO, our CFO, our Chief Operating Officer and our Director of Human Resources together have historically operated as an informal compensation committee, together with the FII Board (less our CEO) with respect to our CEOs compensation, for purposes of designing our compensation program. Following the completion of this offering, we expect to be a controlled company within the meaning of the NYSE corporate governance standards. If we are a controlled company, we will not be required to have a compensation committee composed entirely of independent directors. If we do not form a formal compensation committee comprised entirely of independent directors, we intend to continue to rely on our informal compensation committee process. Future independent directors that we add to our supervisory board may be included in this process. See ManagementStatus as a Controlled Company for additional information regarding our status as a controlled company.
The main components of our executive compensation program have historically consisted of the following components, which are described in greater detail below:
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base salary; |
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annual cash incentive awards; |
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deferred compensation and long-term incentive compensation; |
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severance benefits; and |
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limited perquisites. |
As described in greater detail below, our annual cash incentive award program has consisted of annual discretionary cash bonuses, while our long-term incentive awards have consisted of discretionary company contributions to the Franks Executive Deferred Compensation Plan (the Deferred Compensation Plan), which is subject to time-based vesting. In addition, three of our Named Executive Officers have existing employment agreements that provide for severance pay in the event of certain qualifying terminations of employment.
The decisions regarding the various levels and forms of compensation for the Named Executive Officers were made in the discretion of our CEO (in consultation with the other members of our existing informal compensation committee) with respect to the other Named Executive Officers and by the FII Board (less the CEO) with respect to our CEO. Factors considered in making this determination included overall market conditions, our CEOs or FII Boards sense of the amounts necessary to remain competitive in the marketplace, the particular Named Executive Officers collaboration and teamwork skills, and for all of the Named Executive Officers other than our CEO and CFO, the financial performance of the business or geographical unit led by the Named Executive Officer as compared to the performance of the market in our industry. Consideration has also historically been given to the compensation received by the individual in prior years relative to performance in those years versus the performance of the individual in the most recent fiscal year. Since we have not historically provided any of the Named Executive Officers with grants of equity, we have previously focused on annual bonuses and Deferred Compensation Plan contributions to incentivize short-term and long-term performance. While our historical compensation decisions may have been based on more of a subjective assessment, we anticipate that our future compensation decisions will be guided by more qualitative and quantitative analysis.
Through our informal compensation committee, we have begun the process of analyzing our executive compensation program with the goal of modifying it to be more suitable for a public company. To aid in this process, we have engaged Meridian Consultants, LLC (Meridian), a nationally recognized compensation consulting firm with experience in assisting similar U.S. companies that provide services to the oil and gas industry. We are working with Meridian to refine our executive compensation arrangements to ensure that (i) our total executive compensation is in line with the executive compensation among our peer group and (ii) our overall compensation aligns our executives interests with those of our stockholders by tying a meaningful portion of each executives cash and equity compensation to the achievement of performance targets and by including time-based vesting requirements in our long-term equity incentive compensation awards. The process of modifying our executive compensation policies and practices is still underway, but we have received recommendations from Meridian that we expect will be used to implement new compensation arrangements in connection with this offering. Although Messrs. Mosing, Gilbert, and Webre all have existing employment agreements, all of our Named Executive Officers will enter into new employment agreements in connection with this offering, which are described in more detail below in Components of Our Compensation Program Severance Benefits and in Potential Payments Upon Termination or a Change in Control.
Goals of the Compensation Program
We are focused on establishing an executive compensation program that is intended to attract, motivate, and retain key executives and to reward executives for creating and increasing the value of our company. These objectives are taken into consideration when creating our compensation arrangements, when setting each element of compensation under those programs, and when determining the proper mix of the various compensation elements for each of our Named Executive Officers. We periodically reevaluate whether our compensation programs and the levels of pay awarded under each element of compensation achieve these objectives. For example, we concluded that our decision to list our shares on a public stock exchange will change the duties and responsibilities of our executive officers and may change the group of companies with which we compete for executive talent such that a formal reevaluation was advisable.
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To ensure we continue to meet our compensation objectives as a public company, we are working closely with Meridian and using market data to develop an understanding of the current compensation practices among our peers and to ensure that our executive compensation program is competitive within the industry. In furtherance of this goal, we have identified, with Meridians assistance, an initial peer group consisting of the following 17 companies in order to create a broad sample for purposes of evaluating compensation practices:
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C&J Energy Services, Inc. |
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Core Laboratories N.V. |
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Dresser-Rand Group Inc. |
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Dril-Quip, Inc. |
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Exterran Holdings, Inc. |
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Forum Energy Technologies, Inc. |
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Helix Energy Solutions Group, Inc. |
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Hercules Offshore, Inc. |
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Hornbeck Offshore Services, Inc. |
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Lufkin Industries Inc. (subsequently acquired) |
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Newpark Resources, Inc. |
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Noble Corp |
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Oceaneering International, Inc. |
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Precision Drilling Corporation |
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Rowan Companies plc |
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RPC, Inc. |
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SEACOR Holdings Inc. |
Meridian worked with our informal compensation committee to select this group of publicly traded companies from the same or similar industry and within a certain range of our annual revenue to serve as our peer group for purposes of obtaining data regarding the compensation practices of our peers.
In order to ensure that our total compensation program is competitive with our peers following the completion of this offering, we expect that our existing informal compensation committee will approve targeting overall compensation of our Named Executive Officers (other than our CEO) at or near the 50th percentile of our peer group companies, and we expect that the FII Board (minus our CEO) will approve targeting overall compensation of our CEO at or near the 75th percentile of our peer group companies. However, we expect that our supervisory board, following the completion of this offering, will make a final determination regarding the precise allocation of this total targeted compensation among the various compensation elements.
We are also seeking to more closely align our executives interests with those of our shareholders through the use of long-term incentive plan awards. We feel that this reevaluation of our compensation programs and each of the elements of our compensation scheme is necessary to ensure that our programs continue to meet the objectives we have set in the context of a growing, publicly traded company. This review may result in substantial changes to our executive compensation programs, which will be disclosed as they are implemented.
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Components of Our Executive Compensation Program
The employment agreements that our Named Executive Officers (other than Messrs. Margavio and Walker) have previously entered into provide for three principal elements of compensation: base salary, cash bonuses, and severance pay. Cash bonuses have been paid annually on a discretionary basis for each of the Named Executive Officers except Mr. Mosing, whose annual cash bonus is paid pursuant to a specific formula based on company performance measures. In addition, our Named Executive Officers are eligible to participate in the Deferred Compensation Plan, which provides for annual discretionary company contributions that vest at the end of a five-year period. We believe this mix of compensation has historically aligned our executives compensation with our short-term and long-term goals. While we feel that the employment agreements have historically been beneficial to both the executive and the company, each of our Named Executive Officers will enter into new employment agreements that are better suited for a public company and reflective of the executives role going-forward.
Below is a description of each of the principal elements of our current compensation program and our current view on these elements. We recognize that in connection with the review our informal compensation committee is undertaking with Meridian, the goals themselves and the methods of implementing those goals may change.
Base Salary
Each Named Executive Officers base salary is a fixed component of compensation for each year for performing specific job responsibilities. It represents the minimum income a Named Executive Officer may receive in any year. Base salaries have typically been reviewed in September or October of each year for each Named Executive Officer based on company performance, cost-of-living adjustments, and personal performance. Any resulting base salary adjustments typically occur in November. Base salaries are also re-evaluated at the time of any promotion or significant change in job responsibilities. Historically, base salary review has been made by the informal compensation committee for each of the Named Executive Officers other than the CEO and the CFO, by our CEO for our CFO, and by the FII Board (less the CEO) for our CEO. Under the terms of Mr. Mosings current employment agreement, his base salary can be increased, but generally not decreased (except in response to unusual economic conditions and only if the reduction is consistent with the percentage reduction applied to other executive employees), following review and determination by the FII Board, which review was historically required to occur annually or more frequently from time to time in the discretion of the FII Board. Under the terms of the current employment agreements for Messrs. Gilbert and Webre, base compensation (defined as including salary, bonus, automobile allowance, and benefits accrued as of the effective date of the agreements) shall not be reduced during any annual review except by mutual agreement of the parties. In November, our annual base salary review resulted in implementation of the following base salary adjustments for each of our Named Executive Officers: $762,023 for Mr. Mosing; $307,743 for Mr. Margavio; $355,446 for Mr. Walker; $409,164 for Mr. Gilbert; and $378,446 for Mr. Webre.
In connection with this offering, we anticipate that the informal compensation committee of our existing board of directors (and the FII Board, less our CEO, with respect to the CEO) will analyze the appropriateness of the base salary for each of our Named Executive Officers in light of the base salaries of the peer group we identify with the assistance of Meridian, both on a stand-alone basis and as a component of total compensation. We expect that this review will result in the establishment of the following annual base salaries for our Named Executive Officers, to be effective upon the closing of the offering: $950,000 for Mr. Mosing; $350,000 for Mr. Margavio; $375,000 for Mr. Walker; $409,164 for Mr. Gilbert; and $378,446 for Mr. Webre. In the future, we expect our supervisory board will review base salaries on an annual basis to determine if the companys financial and operating performance, as well as the executive officers personal performance and the cost of living factor, support any adjustment to the executives base salary. The employment agreements for each of our Named Executive Officers will provide that base salary may be increased, but generally not decreased (except by up to 10% as part of similar reductions applicable to all similarly situated executives) by the supervisory board.
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Cash Bonus
Our annual bonus program is intended to reward our executives for personal and company performance. Generally, in determining the amount of each executives annual bonus, we have previously considered company growth and earnings for the year, as well as the employees performance, the employees past bonus compensation, and market compensation. While each of these factors has been taken into account, our CEO has historically had full discretion to award any level of annual bonus, including awarding no bonus, to each of the other Named Executive Officers. In contrast, Mr. Mosings current employment agreement provides that his annual bonus will be equal to at least 2% of our annual EBITDA. Going forward, Mr. Mosings employment agreement will not provide for a bonus based upon our annual EBITDA, or any other single performance metric.
The determination of the amount of any annual bonus that will be paid to a Named Executive Office has historically been made by our CEO with respect to the other four Named Executive Officers and by the FII Board (less our CEO) with respect to Mr. Mosing (subject to the minimum annual bonus required by Mr. Mosings existing employment agreement). Other than with respect to Mr. Mosing, annual bonuses have historically been paid in November of each year, based on performance for the fiscal year.
We intend to continue to provide annual incentive cash bonuses to reward achievement of financial or operational goals so that total compensation reflects actual company and individual performance. Following the conclusion of our informal compensation committees review of our compensation policies with data supplied by Meridian, our annual bonus program may significantly change. We expect that our compensation committee or supervisory board may establish performance goals (with threshold, target and maximum levels) to be used following the offering in determining cash bonuses that may become payable at threshold, target, and maximum amounts and which will align our executive officers compensation with the performance of the company as a whole. We expect that any such goals will be established in connection with the review of the data provided by Meridian.
Deferred Compensation Plan
We have historically offered long-term incentives to each of our Named Executive Officers other than Mr. Mosing (whose long-term incentives are achieved through his ownership interests) through discretionary company contributions under our Deferred Compensation Plan. These contributions vest in full after five years and serve as a long-term retention tool. Historically, each April, our informal compensation committee recommends for approval by the CEO the amount of the discretionary company contribution to be made on behalf of each Named Executive Officer other than Mr. Mosing, and this amount is contributed to the applicable Named Executive Officers Deferred Compensation Plan account each May. Going forward, we expect that our supervisory board will make these determinations. While Mr. Mosing is eligible, under the terms of the Deferred Compensation Plan, to receive a company contribution in our discretion, we have not historically credited him with any such contributions under this plan.
The Deferred Compensation Plan also allows each Named Executive Officer, including Mr. Mosing, to elect to defer a percentage of his compensation (defined as the Named Executive Officers base salary, bonus, commission, and any other cash or equity-based compensation approved by the plans administrative committee) until the executives termination of employment or until a future date specified by the executive at the time of his deferral election.
To create additional incentives for our executive officers to continue to grow our company, we are in the process of evaluating a formal long-term incentive plan and an employee stock purchase plan intended to satisfy the requirements of section 423 of the Code (ESPP), both of which we intend to adopt in connection with this offering. We expect that both the ESPP and the long-term incentive plan will be adopted by our existing board and approved by our stockholders prior to the completion of this offering. We believe that having an equity component to our compensation program is vital to align our executive officers interests with our equity holders
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interests through shared ownership, and the new employment agreements we intend to execute with each of our Named Executive Officers are expected to allow awards to be granted to each Named Executive Officer under the long-term incentive plan, as determined by our supervisory board (or a designated committee thereof), in its sole discretion.
Long-Term Incentive Plan
Based on our discussions with Meridian, we expect to adopt an omnibus long-term incentive plan (the LTIP) that will provide for the grant of a variety of awards. We anticipate that in connection with or after the closing of this offering, the supervisory board will grant restricted stock unit awards to certain of our employees (including the Named Executive Officers) that are key to our operations, as well as to our supervisory boards outside directors, pursuant to the LTIP described below. Concurrently with this offering, we expect to grant stock-settled Restricted Stock Units (RSUs) to our officers and employees valued at an aggregate of $78,000,000 under our LTIP. This will include RSUs granted to our Named Executive Officers in the following amounts: For our CEO, an RSU award valued at $25,000,000, with the number of RSUs subject to the award calculated based on the fair market value of our common stock on the date of grant, and for the remaining Named Executive Officers (as well as our other executive officers and employees serving as first-level vice presidents (the Officer Group)), RSU awards valued at a total of $17,500,000 for the entire group (with the total number of RSUs being granted to this group determined under the same formula as described above for the CEO, and with each executive officers individual RSU allocation being determined by our CEO). Based on the midpoint of the price range set forth on the cover page of this prospectus, the RSUs to be granted to our officers and employees will represent an aggregate of approximately shares of common stock, including RSUs representing approximately shares of common stock to be granted to our CEO and RSUs representing approximately shares of common stock to be granted to the remaining Named Executive Officers (as well as our Officer Group). It is expected that the initial RSU awards to our CEO and the Named Executive Officers (as well as our Officer Group) will vest 20% per year over the first three years, with the remaining 40% vesting on March 31, 2017. We expect that the initial RSU awards granted to our other officers and employees will vest ratably over a three-year period. We anticipate that any such equity awards granted to our officers and outside directors in the future will be subject to time-based vesting; however, except as described above with respect to the initial grants made to our Named Executive Officers in connection with this offering, the board has not yet made final determinations as to the number of awards to be granted, when the awards will be granted, or the schedule on which the awards will become vested. A form of the award agreement that is expected to be used for these grants has been filed as an exhibit to the registration statement of which this prospectus is a part.
The description of the LTIP set forth below is a summary of the expected material features of the plan. This summary, however, does not purport to be a complete description of all the provisions of the LTIP that we intend to adopt. This summary is qualified in its entirety by reference to the LTIP, a form of which has been filed as an exhibit to the registration statement of which this prospectus is a part. Because the LTIP has not yet been adopted, the description below merely reflects current expectations with respect to the terms and conditions of the LTIP. The terms and conditions described below should be read in that context and remain subject to change unless and until we adopt the LTIP.
Overview
The LTIP will provide us with the flexibility to make grants of stock options (both incentive stock options and options that do not constitute incentive stock options), restricted stock, restricted stock units, dividend equivalents, performance awards, annual incentive awards, bonus stock awards, or other stock-based awards. All officers and employees of FINV or its subsidiaries, as well as other individuals who provide services to us or our subsidiaries (including directors), will be eligible to receive awards under the LTIP. The LTIP will expire upon the earlier of (i) its termination by our supervisory board, (ii) the date common stock is no longer available under the LTIP for grants of awards, or (iii) the tenth anniversary of the effective date of the LTIP.
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Administration of LTIP
The LTIP will initially be administered by our supervisory board or a designated committee thereof (the Committee). Under the terms of the LTIP, the Committee will have the power to (1) adopt, amend, and rescind administrative and interpretative rules and regulations relating to the LTIP, (2) determine which eligible individuals will be granted awards under the LTIP and the time or times at which such awards will be granted, (3) determine the amount of cash and/or the number of shares of common stock that will be subject to each award under the LTIP, (4) determine the terms and provisions of each award agreement, (5) accelerate the time of vesting or exercisability of any award that has been granted under the LTIP, (6) construe the respective award agreements and the LTIP, (7) make determinations of the fair market value of the common stock pursuant to the LTIP, (8) delegate its duties under the LTIP (including, but not limited to, the authority to grant awards) to such agents as it may appoint from time to time and (9) make all other determinations, perform all other acts, and exercise all other powers and authority necessary or advisable for administering the LTIP, including the delegation of those ministerial acts and responsibilities as the Committee deems appropriate.
Shares Available for Awards Under the LTIP
Pursuant to the LTIP, we expect the aggregate maximum number of shares of our common stock that may be issued under the LTIP will not exceed 20,000,000. Shares of common stock cancelled, settled in cash, forfeited, or withheld to satisfy exercise prices or tax withholding obligations will be available for delivery pursuant to other awards. The common stock delivered pursuant to such awards may be common stock acquired in the open market or acquired from any affiliate or other person, or any combination of the foregoing, as determined in the discretion of the Committee. Further, we expect that the following limitations will apply with respect to awards granted under the LTIP to the extent the awards will be subject to the restrictions under section 162(m) of the Internal Revenue Code of 1986, as amended (the Code) that apply to compensation paid following the reliance period described in Treasury Regulation §1.162-27(f) and granted to a covered employee as defined under section 162(m) of the Code:
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The maximum number of shares of our common stock that may be subject to awards denominated in shares of our common stock granted to any one individual during any one calendar year in the term of the LTIP (excluding awards granted in connection with this offering) may not exceed 2,500,000 shares; and |
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A maximum amount of $50,000,000 may be granted to any one individual during any calendar year with respect to awards either designated to be paid only in cash or for which the settlement is not based on a number of shares of our common stock (with such value determined on the date of grant). |
The LTIP will provide that if we effect a subdivision or consolidation or an extraordinary cash dividend on the shares of our common stock, the number of shares of stock subject to the award, and the purchase price thereunder (if applicable) will be proportionately adjusted. If we recapitalize, reclassify, or otherwise change our capital structure, outstanding awards will be adjusted so that the award will thereafter cover the number and class of shares to which the holder would have been entitled if he had been the holder of record of the shares covered by such award immediately prior to the recapitalization, reclassification, or other change in our capital structure. Further, the aggregate number of shares available under the LTIP and the individual award limitations described above will also be appropriately adjusted.
Types of LTIP Awards
At the discretion of our Committee, we expect that awards under the LTIP may be granted in the forms described below. Each award will be evidenced by an award agreement setting forth the specific terms and conditions applicable to the award.
Options. The LTIP will provide for the granting of incentive stock options or options that do not constitute incentive stock options. The Committee will determine the terms of any stock options granted under the LTIP,
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including the purchase price and when such options become vested and exercisable. The Committee will also determine the term of each option (up to a maximum term of 10 years), the time at which an option may be exercised, and the method by which payment of the purchase price may be made.
Stock Appreciation Rights. Stock appreciation rights allow the recipient to receive the appreciation in the fair market value of our common stock between the date of grant and the exercise date. The Committee will determine the terms of any stock appreciation rights, including when such rights become vested and exercisable and whether to pay the appreciation in cash, in shares of our common stock, or a combination thereof. The term of each stock appreciation right may not exceed 10 years from the date of grant.
Restricted Stock. Pursuant to a grant of restricted stock, shares of our common stock may be issued or delivered to participants, subject to certain restrictions on the disposition thereof and certain obligations to forfeit the shares to us as may be determined in the discretion of the Committee. The restrictions on disposition and the forfeiture restriction for restricted stock may lapse at such times and under such circumstances (including based on achievement of performance goals and/or future service requirements) or in such installments as the Committee may determine. The recipient may not sell, transfer, pledge, exchange, hypothecate, or otherwise dispose of the shares until the expiration of the restriction period. However, upon the issuance of shares of our common stock pursuant to a restricted stock award, except as otherwise determined by the Committee, the holder will have all the rights of a holder of our common stock with respect to the shares, including the right to vote the shares and to receive all dividends and other distributions paid with respect to the shares. Dividends made on restricted stock may or may not be subjected to the same vesting provisions as the restricted stock, depending on the terms of the award agreement pursuant to which the restricted stock award is granted.
Restricted Stock Units. A restricted stock unit is a notional share of our common stock that entitles the grantee to receive a share of our common stock upon the vesting of the restricted stock unit or, in the discretion of the Committee, the cash equivalent to the value of a share of our common stock. The Committee may determine to make grants of restricted stock units under the LTIP to participants containing such terms as it determines. The Committee will determine the period over which restricted stock units granted to participants will vest. Like restricted stock, restricted stock units may vest over time, pursuant to performance criteria, or based on a combination of service and performance.
Dividend Equivalents. The Committee, in its discretion, may grant dividend equivalent rights (either in tandem to other awards or on a stand-alone basis) that entitle the holder to receive cash, shares of our common stock, or other awards equal to any dividends made on a specified number of shares of common stock.
Performance and Annual Incentive Awards. For awards granted under the LTIP that are based upon performance criteria specified by the Committee, the Committee will establish the maximum number of shares of common stock subject to, or the maximum value of, each performance award and the performance period over which the performance applicable to the award will be measured. The performance measures to which a performance award are subject will be determined by the Committee and will be based on one or more of the following performance measures: (1) earnings per share; (2) increase in revenues; (3) increase in cash flow; (4) increase in cash flow from operations; (5) increase in cash flow return; (6) return on net assets; (7) return on assets; (8) return on investment; (9) return on capital; (10) return on equity; (11) economic value added; (12) operating margin; (13) contribution margin; (14) net income; (15) net income per share; (16) pretax earnings; (17) pretax earnings before interest, depreciation and amortization; (18) pretax operating earnings after interest expense and before incentives, service fees, and extraordinary or special items; (19) total stockholder return; (20) debt reduction; (21) market share; (22) change in the fair market value of our common stock; (23) operating income; (24) objective safety measures such as the total recordable incident rate or the lost time incident rate; (25) other objective measures related to completion of projects; and (26) any of the above goals determined on an absolute or relative basis or as compared to the performance of a published or special index deemed applicable by the Committee, including, but not limited to, the Standard & Poors 500 Stock Index or a group of comparable companies. Any of these metrics may be subject to adjustment as provided in the LTIP.
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Payment of a performance award may be made in cash, shares of our common stock, or a combination thereof, as determined by the Committee. The Committee may establish a performance pool, which shall be an unfunded pool, for purposes of measuring the achievement of a performance goal or goals based on one or more criteria set forth above during the given performance period (which may be a single calendar year or multiple years). The Committee may specify the amount of a performance pool as a percentage of any of such criteria, a percentage in the excess of a threshold amount, or as another amount which need not bear a strictly mathematical relationship to such criteria.
Bonus Stock Awards. Bonus stock awards are unrestricted shares of our common stock that are subject to such terms and conditions as the Committee may determine. They need not be subject to performance criteria or objectives or to forfeiture.
Other Stock-Based Awards. The Committee, in its discretion, may also grant to participants an award denominated or payable in, referenced to, or otherwise based on or related to the value of our common stock.
Change in Control
The LTIP will provide that, upon a change in control (as defined in the LTIP), the Committee, in its sole discretion, may accelerate the vesting and exercise date of options and stock appreciation rights, cancel options and stock appreciation rights and cause us to make payments in respect thereof in cash or adjust the outstanding options and stock appreciation rights as appropriate to reflect the change in control. In addition, under the LTIP, upon the occurrence of a change in control, the Committee will be permitted to fully vest any awards then outstanding (including restricted stock, restricted stock units, and performance awards) or make such other adjustments to awards as it deems appropriate.
Amendment and Termination of the LTIP
Our supervisory board, in its discretion, will be permitted to terminate the LTIP at any time with respect to any shares of our common stock for which awards have not been granted. Our supervisory board will also be permitted to alter or amend the LTIP or any part thereof or award thereunder from time to time; provided that no change to the LTIP or such award may be made that would materially impair the rights of a participant with respect to any previously granted and outstanding award without the consent of the applicable participant. To the extent any amendment to the LTIP requires stockholder approval pursuant to any applicable federal or state law or regulation or the rule of any stock exchange or automated quotation system on which our common stock may then be listed or quoted, including any increase in any share limitation, such amendment will be subject to the approval of our stockholders. No awards may be granted under the LTIP on or after the tenth anniversary of its effective date.
Employee Stock Purchase Plan
As described above, we expect that our supervisory board will adopt an ESPP and that our existing shareholders will approve such plan prior to the completion of this offering, in order to enable eligible employees (including our Named Executive Officers) to purchase shares of our common stock at a discount following the date of this offering. Purchases will be accomplished through participation in discrete offering periods. This ESPP is intended to qualify as an employee stock purchase under section 423 of the Code. We expect to reserve a maximum of 3,000,000 shares of our common stock for issuance under the ESPP, subject to appropriate adjustments to reflect changes in our common stock caused by certain events like stock splits or a change in control. The number of shares of stock that may be granted to any single participant in any single option period will be subject to certain limitations set forth in the plan.
Severance Benefits
We currently maintain employment agreements with all of our Named Executive Officers other than Messrs. Margavio and Walker. Mr. Mosings employment agreement includes an initial term of six years, with
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automatic extensions for additional one-year periods unless either party provides at least 90 days advance written notice of its intent to terminate the employment relationship as of the end of the term. Under this automatic renewal feature, Mr. Mosings employment agreement has currently been extended through December 31, 2013. Mr. Gilbert and Mr. Webre have entered into an employment agreement with an initial term of three years, with automatic extensions on a month-to-month basis until either party provides at least 10 days advance written notice of its intent to terminate the Agreement. These two executives have concluded their initial terms and are currently under monthly renewal.
The employment agreements for these three Named Executive Officers contain certain severance protections that are described in more detail below in Potential Payments Upon Termination or a Change in Control. Generally, the executives who are a part of these agreements are entitled to receive, upon a qualifying termination of employment, cash payments of up to three times the sum of the executives base salary and bonus and continued medical care coverage for a specific post-termination period. In addition, Mr. Mosing is entitled to accelerated vesting of any outstanding incentive compensation or stock option awards.
We believe that severance protection provisions create important retention tools for us, as post-termination payments allow employees to leave our employment with value in the event of certain terminations of employment that were beyond their control. Post-termination payments allow management to focus their attention and energy on making the best objective business decisions that are in our interest without allowing personal considerations to cloud the decision-making process. In addition, the employment agreements preclude the executives from soliciting employees or competing with us for a period of two years following termination of employment (one year in the case of Mr. Mosing). In connection with the review performed by Meridian, we have evaluated the employment agreements and severance provided to determine whether the agreements will meet our requirements as a public company. Based on this review, we intend that all of our Named Executive Officers will enter into new employment agreements meeting these requirements in connection with this offering. We anticipate that, under the new employment agreements, each Named Executive Officer will be entitled to certain severance benefits upon a qualifying termination of employment, as described in more detail below in Potential Payments Upon Termination or a Change in Control. We anticipate that the new employment agreements will continue to preclude the executives, including Mr. Mosing, from soliciting employees or competing with us for a period of two years following termination of employment.
Perquisites and Other Compensation Elements
We offer participation in broad-based retirement, health and welfare plans to all of our employees. We currently maintain a plan intended to provide benefits under section 401(k) of the Code where employees are allowed to contribute portions of their base compensation into a retirement account (the 401(k) Plan). We provide a matching contribution at the rate of 75% of the first $4,000 deferred by an employee (i.e., up to $3,000 in matching contributions). Our 401(k) Plan is designed to encourage all employees, including the participating Named Executive Officers, to save for the future.
We have historically provided limited perquisites for our Named Executive Officers. We believe that providing perquisites such as an automobile allowance, and in some cases, club dues, is an important component of compensation and necessary to compete for top management. However, our perquisite practice is also being re-evaluated as part of our compensation evaluation process with Meridian. Under the new employment agreements that we intend to adopt for each of our Named Executive Officers, we anticipate that each Named Executive Officer will receive the benefit of a life insurance policy providing an aggregate death benefit of not less than $1,000,000 and that Mr. Mosing will also be entitled, during the term of his employment, to personal use of corporate aircraft, subject to certain annual limitations and other restrictions, as well as to continued payment of monthly country club dues.
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How Elements of Our Compensation Program Are Related to Each Other
The approximate allocation of compensation elements in the 2012 compensation packages for each Named Executive Officer is as follows:
Donald Keith Mosing | Mark G. Margavio | W. John Walker | Robert R. Gilbert | C. Michael Webre | ||||||||||||||||
Base Salary |
8 | % | 54 | % | 28 | % | 57 | % | 56 | % | ||||||||||
Bonus or Annual Cash Incentive Awards |
92 | % | 34 | % | 57 | % | 32 | % | 33 | % | ||||||||||
Deferred Compensation Plan Contributions |
| 9 | % | 13 | % | 8 | % | 8 | % | |||||||||||
Perquisites and other compensation |
* | % | 3 | % | 2 | % | 3 | % | 3 | % | ||||||||||
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Total |
100 | % | 100 | % | 100 | % | 100 | % | 100 | % | ||||||||||
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* | Represents less than 1% |
Following our review of our compensation programs with Meridian, we expect that these allocations may change.
Accounting and Tax Considerations
Section 162(m) of the Code limits the deductibility of certain compensation expenses in excess of $1,000,000 to certain of our executive officers in any fiscal year. Compensation that is performance based is excluded from this limitation. For compensation to be performance based, it must meet certain criteria, including being payable only upon the attainment of predetermined, objective performance goals based upon performance criteria approved by our stockholders and having such goals be established and the attainment of which certified by a committee of our supervisory board that consists only of outside directors. While the tax impact of any compensation arrangement is one factor to be considered, such impact is evaluated in light of our overall compensation philosophy and objectives. We believe that maintaining the discretion to evaluate the performance of our executive officers is an important part of our responsibilities and benefits our public stockholders, and therefore, we may award compensation to our Named Executive Officers that is not fully deductible if we determine that such compensation is consistent with our compensation philosophy and benefits our stockholders. Regardless, section 162(m) of the Code provides that certain compensation of corporations which are privately held and which become publicly held in an initial public offering will not be subject to the deduction limitations of section 162(m) for a transition period following such initial public offering. We anticipate that our annual bonuses and certain awards of equity compensation may satisfy the requirements of this exception during the transition period.
Section 409A of the Code requires that nonqualified deferred compensation be deferred and paid under plans or arrangements that satisfy the requirements of the statute with respect to the timing of deferral elections, timing of payments, and certain other matters. Failure to satisfy these requirements can expose employees and other service providers to accelerated income tax liabilities and penalty taxes and interest on their vested compensation under such plans. Accordingly, as a general matter, it is our intention to design and administer our compensation and benefits plans and arrangements for all of our employees and other service providers, including our executive officers, so that they are either exempt from, or satisfy the requirements of, section 409A of the Code.
Any equity awards that may be granted to our employees, including our executive officers, pursuant to the long-term incentive plan we intend to adopt in connection with the offering will be reflected in our consolidated financial statements, based upon the applicable accounting guidance, at fair market value on the grant date in accordance with FASB Accounting Standards Codification, Topic 718, CompensationStock Compensation.
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Risk Assessment
Our existing board of directors has reviewed our compensation policies as generally applicable to our employees and believes that our policies do not encourage excessive and unnecessary risk-taking and that the level of risk that they do encourage is not reasonably likely to have a material adverse effect on us. In addition, the following specific factors, in particular, reduce the likelihood of excessive risk-taking:
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our overall compensation levels are competitive with the market; and |
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our compensation mix is balanced among (i) fixed components, like salary and benefits, and (ii) annual incentives that reward our overall financial and business performance, business unit financial performance, operational measures, and individual performance. |
In summary, although a portion of the compensation provided to our Named Executive Officers may be based on our performance and on the individual successes of the employee, we believe our compensation programs do not encourage excessive and unnecessary risk-taking by executive officers (or other employees) because these programs are designed to encourage employees to remain focused on both our short- and long-term operational and financial goals. Further, facets of compensation that incentivize our executives but mitigate risk-taking will be one of the many factors considered by our informal compensation committee and the FII Board during its review of our current compensation programs and during the design of new programs that may become effective in connection with this offering. In the future, the compensation committee or our supervisory board will seek to ensure that any changes made to our compensation programs following the completion of this offering do not encourage excessive and unnecessary risk-taking and that any level of risk that they do encourage is not reasonably likely to have a material adverse effect on us.
Stock Ownership Guidelines
Stock ownership guidelines have not currently been implemented for our Named Executive Officers or directors. We will continue to periodically review best practices and re-evaluate our position with respect to stock ownership guidelines.
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Summary Compensation Table
The table below sets forth the annual compensation earned during 2012 by our Named Executive Officers, as of December 31, 2012:
Name and Principal Position |
Year |
Salary
($)(1) |
Bonus
($)(2) |
Non-Equity
Incentive Plan Compensation ($)(3) |
Nonqualified
Deferred Compensation Earnings ($)(4) |
All Other
Compensation ($)(5) |
Total ($) | |||||||||||||||||||||
Donald Keith Mosing Chairman of the supervisory board, Director, Chief Executive Officer and President |
2012 | 746,782 | | 9,050,000 | 547,069 | 30,825 | 10,374,676 | |||||||||||||||||||||
Mark G. Margavio Chief Financial Officer |
2012 | 287,239 | 184,000 | | 68,935 | 66,000 | 606,174 | |||||||||||||||||||||
W. John Walker Vice President of International Operations |
2012 | 223,730 | 450,000 | | 91,881 | 113,000 | 878,611 | |||||||||||||||||||||
Robert R. Gilbert Executive Vice President and Chief Operating Officer U.S. Services and Pipe and Products |
2012 | 382,354 | 212,100 | | 62,247 | 72,662 | 728,363 | |||||||||||||||||||||
C. Michael Webre Vice President of Engineering |
2012 | 361,340 | 213,000 | | 32,367 | 66,000 | 672,707 |
(1) | The amounts reflected in this column include total annual salary for 2012, regardless of whether any of these amounts were deferred under our deferred compensation arrangements. |
(2) | The amounts reflected in this column are the discretionary cash bonuses that were paid in November 2012 with respect to 2012. |
(3) | The amount reflected in this column for Mr. Mosing reflects the performance-based bonus amount for 2012, which is based on a percentage of our EBITDA for the year. This amount was settled in December 2012 based on year-end EBITDA projections. |
(4) | The amounts reflected in this column reflect the portion of the earnings that accrued under the Deferred Compensation Plan in 2012 that were determined to be above-market or preferential under the SECs rules, using 120% of the applicable federal long-term rate as the reference rate. |
(5) | The amounts reflected in this column include the specific items reflected in the following table. The annual perquisite amounts include an automobile allowance for each named executive officer ($12,000), the expensing of gasoline purchases and tolls for the executives personal use of his car ($1,000), and for Messrs. Mosing and Gilbert, the payment of monthly country club dues (annualized at $14,825 and $5,662, respectively). |
Company
Contributions Under Deferred Compensation Plan ($) |
Employer
Matching Contributions Under 401(k) Plan ($) |
Perquisites
($) |
Total ($) | |||||||||||||
Donald Keith Mosing |
| 3,000 | 27,825 | 30,825 | ||||||||||||
Mark G. Margavio |
50,000 | 3,000 | 13,000 | 66,000 | ||||||||||||
W. John Walker |
100,000 | | 13,000 | 113,000 | ||||||||||||
Robert R. Gilbert |
50,000 | 3,000 | 18,662 | 71,662 | ||||||||||||
Michael Webre |
50,000 | 3,000 | 13,000 | 66,000 |
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Grants of Plan-Based Awards for 2012
Estimated Future
Payouts
Under Non-Equity Incentive Plan Awards |
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Name |
Target | |||
Donald Keith Mosing (1) |
$ | | ||
Mark G. Margavio |
| |||
W. John Walker |
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Robert R. Gilbert |
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C. Michael Webre |
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(1) | Pursuant to the terms of his current employment agreement, Mr. Mosing was entitled in 2012 to an annual bonus award in an amount equal to 2% of our EBITDA for the year. This amount was not subject to any threshold or maximum levels, and since we did not establish an EBIDTA target for the year, there was accordingly, no targeted bonus amount for Mr. Mosing. |
Narrative Description to the Summary Compensation Table and the Grants of Plan-Based Awards Table for the 2012 Fiscal Year
Employment Agreements. As noted above, three of our Named Executive Officers are currently party to an employment agreement with us. Under these employment agreements, Messrs. Mosing, Gilbert, and Webre are entitled to certain base salary, annual bonus payment, and perquisite protections. For example, in each of these employment agreements, the Named Executive Officers base compensation can generally be increased but not decreased during the term of the employment agreements. For this purpose, base compensation is defined in the employment agreements of Messrs. Gilbert and Webre as including the executive officers salary, annual bonus, automobile allowance, and other accrued benefits as of the effective date of the agreement. In addition, Mr. Mosings Employment Agreement currently provides for an annual bonus that is equal to 2% of our EBITDA for the year, which annual bonus can never be less than the percentage of base salary awarded to any other executive officer as a bonus for the same year. Finally, each of these executive officers is also entitled to a monthly automobile allowance under their employment agreements. However, as discussed in the Compensation Discussion & Analysis section above, it is expected that these Named Executive Officers will enter into new employment agreements in connection with this offering that will supersede the existing arrangements.
Grants of Plan Based Awards. We previously have not maintained an equity compensation plan and accordingly did not grant any equity-based compensation awards to any Named Executive Officer for 2012. The only grant of any plan-based awards that was made for 2012 was for Mr. Mosings annual bonus award, which is described in more detail in the note to the Grants of Plan Based Awards table.
Pension Benefits
We maintain the 401(k) Plan for our employees, including our Named Executive Officers, as well as the Deferred Compensation Plan, but at this time, we do not sponsor or maintain a pension plan for any of our employees.
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Non-Qualified Deferred Compensation Table
Name and Principal Position |
Executive
Contributions in Last FY ($)(1) |
Registrant
Contributions in Last FY ($)(2) |
Aggregate
Earnings in Last FY ($)(3) |
Aggregate
Withdrawals/ Distributions ($)(4) |
Aggregate
Balance at Last FYE ($)(5) |
|||||||||||||||
Donald Keith Mosing |
214,211 | | 757,609 | | 7,882,581 | |||||||||||||||
Mark G. Margavio |
10,000 | 50,000 | 85,357 | 9,890 | 653,938 | |||||||||||||||
W. John Walker |
360,000 | 100,000 | 128,172 | | 1,596,267 | |||||||||||||||
Robert R. Gilbert |
83,548 | 50,000 | 87,498 | | 1,009,260 | |||||||||||||||
C. Michael Webre |
30,000 | 50,000 | 44,215 | | 486,171 |
(1) | The amounts reflected in this column are included in the Summary Compensation Table as part of the executive officers base salary and/or bonus. Participants may elect to defer up to 75% of their base salary and up to 100% of bonus, commissions, or any such other cash or equity-based compensation as may be approved for deferral by the plans administrative committee. |
(2) | The amounts reported in this column are included in the Summary Compensation Table (see the All Other Compensation table in Note 4 to the Summary Compensation Table). Company contributions are credited to participant accounts from year to year at the sole discretion of the employer and vest in full (along with related earnings on these contributions) after 5 years of credited service. |
(3) | This column represents the aggregate earnings for 2012 for each Named Executive Officers account under the plan and includes earnings on the executives elective deferrals (which earnings are 100% vested), as well as on the companys discretionary contributions (which earnings are subject to a five-year vesting schedule). Earnings are calculated based on the executives elections from available deemed investment options offered under the plan. The deemed investment options are selected by the plans administrative committee, which can add or remove deemed investment options from the plans menu from time to time. Participants can select and change their deemed investment allocations at any time. |
(4) | This column reflects the aggregate withdrawals or distributions from the plan for each Named Executive Officer in 2012. Distributions are made in accordance with the Named Executive Officers distribution elections; participants can elect to receive distributions upon retirement or other termination of employment or upon a specified future date. Upon the officers death or disability, all amounts credited to the participant under the plan are accelerated and paid out. Amounts may also be distributed on an account of an unforeseeable emergency or to comply with the terms of a qualified domestic relations order. There are various forms of payment that apply to different types of contributions and different types of payment events under the plan; these range from single lump sum payments to equal annual installments over a period from two to ten years, to a combination of forms (i.e., a partial lump sum, with the balance paid in equal annual installments over a specified number of years). |
(5) | This column reflects the dollar amount of the total balance in each Named Executive Officers account under the plan as of the end of 2012. Some of these amounts are attributable to company contributions and therefore remain subject to the vesting requirements described in Note 2 to this table above. |
Potential Payments Upon Termination or a Change in Control
Current Employment Agreements
Under the terms of Mr. Mosings current employment agreement, upon a termination by the company without good cause (as such term is defined below), the executive is entitled to continue to receive his full salary and benefits (including payment of any annual bonuses) for a period of three years following his termination date, and any outstanding incentive or stock option awards held by the executive will become immediately vested. If Mr. Mosings employment is terminated by us without good cause within the two-year period following a change in control (as such term is defined in the agreement), or if Mr. Mosing terminates employment following a change in control on account of certain events that constitute good reason under the employment agreement, then (a) he will be entitled to receive a cash lump sum payment equal to three times the
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amount of his base salary for the year of the termination, plus three times the amount of his prior year bonus payment (which bonus amount shall be deemed to equal one-fourth of the executives base salary for the year in the event no bonus was awarded for the prior year), (b) he will receive continued medical care coverage (including for any covered spouse and/or dependents) for a period of three years following his termination of employment (or until the executive becomes employed by another employer sponsoring a medical plan, if earlier), along with a tax gross-up for any taxable medical benefits, and (c) any outstanding incentive compensation or stock option plan awards held by Mr. Mosing shall become immediately vested.
The employment agreements with Messrs. Gilbert and Webre provide a severance payment equal to three (3) times the sum of the executives base salary, automobile allowance, annual bonus, and benefits accrued on the effective date of the agreement upon a termination of employment by us without cause (as such term is defined below), plus payment of COBRA premiums for 12 months following the termination of employment. If the executive resigns for good reason (as such term is defined below) within three years following a change of control (as such term is defined below), he is entitled to continue receiving his base compensation in accordance with the companys standard payroll practices until the earlier of 12 months following termination of employment or the date that the executive commences full-time employment with another employer (and to also receive payment of COBRA premiums during this same period). If the executives employment is terminated due to his death or disability (as such term is defined in the employment agreement), he will be entitled to a lump sum payment equal to his pro-rata portion of the annual bonus for the year of such termination, based on his length of service in such year.
The following terms are defined under the current employment agreements for Messrs. Mosing, Gilbert, and Webre, as described below:
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Good Cause includes the following circumstances under Mr. Mosings employment agreement, if such circumstances (other than item (a) below) are not cured within 10 business days following written notice from the board that describes the failure in reasonable detail and indicates the steps the employer requires as part of its cure: (a) conviction of either a felony involving moral turpitude or any crime in connection with the executives employment with us that causes us a substantial detriment (does not include traffic offenses), (b) actions or inactions that clearly are contrary to our best interests; (c) the executives willful failure to take lawful actions that are necessary for implementation of any policies established by our board that have been communicated to the executive in writing or that are reflected in the meeting minutes of any board meeting that executive has attended; (d) executives continued failure to attend to his duties as an executive officer, following written notice from the board regarding this failure; or (e) any condition that resulted from the executives substantial dependence on alcohol, any narcotic drug, or any other controlled or illegal substance. |
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Cause includes the following circumstances under the employment agreements for each of Messrs. Gilberts and Webre: (a) misconduct; (b) misappropriation of our assets; (c) conviction of, or a plea of guilty or no contest to, any felony under any federal or state laws; (d) commission of the act of any fraud against or appropriation of any property belonging to us; (e) a material breach of any confidentiality or proprietary information agreement between the executive and our company; and (f) continued unsatisfactory performance after being provided a written warning and at least 30 days to improve performance. |
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Good reason shall exist under Mr. Mosings termination if, following a change in control, any of the following occur, as compared to such circumstances existing prior to the change in control: (a) a reduction of the executives base salary or potential bonus level or any incentive compensation or stock option plan benefit; (b) a relocation of the executives office (or of the principal executive office) to a location that is more than 35 miles from the prior location; (c) requiring the executive to travel to a substantially greater extent to perform the same duties; (d) failing to provide the executive with substantially equivalent benefits as those enjoyed by the executive under the companys health and welfare programs, disability plans, and incentive compensation or stock option plans in which the executive was previously participating; (e) materially reducing any such benefits or depriving the |
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executive of any material fringe benefit enjoyed by the executive; (f) failing to provide the executive with at least the same number of paid vacation days to which the executive is entitled on the basis of years of service (giving credit for time served at prior employers); or (g) the executives voluntary termination of employment within two years following the change in control as a result of the executives good faith determination that as a result of the change in control, the executive can no longer adequately exercise the authorities, functions, or duties attached to the executives position as an executive officer of the company. |
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Good reason under the employment agreements of Messers. Gilbert and Webre include a resignation within 60 days of any of the following events (a) a reduction in salary or bonus; (b) a change in the executives position with our company or a successor company that substantially reduces the executives duties or responsibilities; (c) a change in title without the express written consent; or (d) a requirement that the executive relocate his place of employment outside of the United States. |
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Disability for purposes of the employment agreements for Messrs. Gilbert and Webre means the executives inability to carry out his material duties under the agreement for more than six months in any 12 consecutive month period as a result of his incapacity due to mental or physical illness or injury. |
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Change in control for purposes of Mr. Mosings employment agreement shall generally mean (a) the obtaining by any party or group of 50% or more of our voting shares pursuant to a tender offer; (b) members of our board fail to constitute a majority of the members of our board following a shareholder meeting that involves a contest for the election of directors; (c) we execute an agreement for the sale of all of our assets to an unrelated purchaser; (d) we adopt a plan of dissolution of liquidation; or (e) we enter into an agreement for a merger or consolidation in which we are not the surviving corporation or in which less than 50% of the surviving corporations outstanding voting stock is held by our prior shareholders. |
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Change of control for purposes of the employment agreements of Messrs. Gilbert and Webre shall mean (a) the sale, transfer, or other disposition of all or substantially all of the assets of FCC, or (b) the public offering for sale of FCCs stock. |
Deferred Compensation Plan
Each of the Named Executive Officers is entitled to accelerated vesting of the amount of any unvested company discretionary contributions that have been credited to the officers account under the Deferred Compensation Plan upon the occurrence of the earliest of the death of the executive while actively employed, the disability of the executive, a change in control, or an involuntary termination of employment other than for cause. For purposes of this accelerated vesting provision, the following definitions apply:
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Disability means that the participant is, by reason of any medically determinable physical or mental impairment which can be expected to result in death or last for a continuous period of not less than 12 months: (a) unable to engage in any substantial gainful activity, or (b) receiving income replacement benefits for a period of not less than three months under one of our accident or health plans. |
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Change in control for purposes of the Deferred Compensation Plan means a change in the ownership of the employer, a change in the effective control of the employer, or a change in the ownership of a substantial portion of the assets of the employer, all as defined under section 409A of the Code. |
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Cause means the participants conviction of a felony or other crime; the participants commission of any act against the company constituting willful misconduct, dishonesty, fraud, theft, or embezzlement; the participants failure to perform any material services, duties, or responsibilities or to comply with the policies or procedures established by the company; the participants breach of any agreement entered into with the company prior to or within one year following a termination of employment; the participants dependence on any addictive substance; the destruction of or material change to the companys property caused by willful or grossly negligent conduct; or the willful engaging by the participant in any other conduct that is demonstrably injurious to the company. |
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The following summaries and table describe and quantify the potential payments and benefits that we would provide to our Named Executive Officers in connection with a termination of employment and/or change in control, pursuant to the terms of the existing employment agreements that were in effect on December 31, 2012 for each of Messrs. Mosing, Gilbert, and Webre. Note, however, that we expect these existing Employment Agreements to be superseded by new employment agreements that are expected to be entered into in connection with this offering. Accordingly, the amounts that our Named Executive Officers may become entitled to in connection with a termination of employment and/or change in control following the offering may differ significantly from the amounts reflected in the table below:
Executive |
Termination of
Employment by us Without Cause ($)(1) |
Termination of
Employment for Death ($)(2) |
Termination
of
Employment by Executive for Good Reason following a Change in Control ($)(3) |
Change in
Control or Liquidity Event (Without a Termination of Employment) ($)(4) |
||||||||||||
Donald Keith Mosing(5) |
27,485,268 | 9,844,958 | 16,821,760 | | ||||||||||||
Mark G. Margavio |
230,800 | 230,800 | | 230,800 | ||||||||||||
W. John Walker |
363,840 | 363,840 | | 363,840 | ||||||||||||
Robert R. Gilbert |
2,090,730 | 170,003 | 639,859 | 170,003 | ||||||||||||
C. Michael Webre |
2,010,976 | 179,709 | 610,714 | 179,709 |
(1) | Mr. Mosings termination payment includes a present value calculation on the 36-month payments. For purposes of calculating the present value, a discount rate of 5% and monthly compounding were applied, and all compensation and benefits were treated as being payable on the first of each month throughout the 36-month term beginning January 1, 2013. For Messrs. Gilbert and Webre, present value calculations (applying the same discount rate and compounding factors) were only applied to the value of the health premiums for the 12-month period because the other payments payable under their employment agreements are payable in a lump sum payment. For each of the Named Executive Officers other than Mr. Mosing, the amounts in this column also include the amounts of unvested company discretionary contributions under the Deferred Compensation Plan that will become vested upon an involuntary termination without cause. |
(2) | Although the existing employment agreements for each of Messrs. Gilbert and Webre provide for a pro-rata annual bonus payment for the year of the executive officers termination of employment by reason of death or disability, because such termination date is assumed for purposes of this table to be December 31, 2012, and bonuses for such year were already paid in full prior to such date, no amount is included in this column for payments made under the existing employment agreements for these executive officers. Payments on account of Mr. Mosings death have been calculated in the form of a lump sum payment equal to the sum of his annual base salary (as in effect on December 31, 2012), his annual bonus (assuming the same annual bonus payment for 2013 as occurred for 2012), and annual car allowance; plus the present value of continued health coverage for 12 months following termination (assuming a 5% discount rate and monthly compounding). For each of the Named Executive Officers other than Mr. Mosing, payments in this column also reflect the amount of their Deferred Compensation Plan contributions that will become vested upon the executives death or disability. |
(3) | The amount reflected in this column for Mr. Mosing is payable in a lump sum payment (except for the cost of continued health insurance coverage for a period of 36 months, which was calculated using the same present value factors described in note 1 above) and includes a tax gross-up on his medical insurance premium payments, which was calculated assuming a 35% marginal tax bracket. The amounts for Messrs. Gilbert and Webre represent the present value (using the same discount rate and compounding assumptions described in the notes above) of salary, annual bonus, automobile allowance, and health insurance coverage for a period of 12 months. |
(4) | The amounts in this column reflect the amount of company discretionary contributions to the Deferred Compensation Plan that will become vested upon a change in control. |
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(5) | For purposes of calculating the potential payments to Mr. Mosing upon a qualifying termination of employment, the annual bonus payment received by Mr. Mosing with respect to 2012 was used to calculate the severance amount for a termination by us without cause. In calculating the severance amount for a termination following a change in control, the annual bonus payment received by Mr. Mosing with respect to 2011 was used, as prescribed by the terms of his employment agreement, which require the prior year bonus amount to be included in the severance multiple for such circumstances. |
New Employment Agreements
We intend to adopt new employment agreements for each of our Named Executive Officers that will provide for certain payments upon a qualifying termination of employment. The description of the new employment agreements set forth below is a summary of the expected material features of the agreements regarding potential payments upon termination or a change in control. This summary, however, does not purport to be a complete description of all the provisions of the agreements that we intend to enter into with the executives. This summary is qualified in its entirety by reference to the employment agreements, forms of which for each of our CEO and our other Named Executive Officers have been filed as exhibits to the registration statement of which this prospectus is a part. Because the employment agreements have not yet been executed, the description below merely reflects current expectations with respect to the terms and conditions of the employment agreements. The terms and conditions described below should be read in that context and remain subject to change unless and until the parties execute new employment agreements.
Under the terms of the new employment agreements, we anticipate that each Named Executive Officer will be entitled to receive only the following amounts (the Accrued Rights) upon a termination by the company for cause (as such term is defined below), upon a termination of employment by reason of death, disability, or expiration of the term of the employment agreement, or upon the executives termination without good reason (as such term is defined below): (a) payment of all accrued and unpaid base salary to the date of termination, (b) reimbursement of all incurred but unreimbursed business expenses to which the executive would have been entitled to reimbursement, and (c) benefits to which the executive is entitled under the terms of any applicable benefit plan or program.
Under the terms of the new employment agreements, we anticipate that each Named Executive Officer will be entitled to receive the following amounts upon a termination by the executive for good reason (as such term is defined below) or by the company without cause (as such term is defined below): (a) the Accrued Rights; (b) any earned but unpaid annual bonus for the prior year; (c) a prorated annual bonus for the year of termination; and (d) a severance payment equal to two times (three times for Mr. Mosing, as well as for the other Named Executive Officers in the event of a termination within 12 months following a change in control as such term is defined below) the sum of the executives base salary on the date of termination and the average annual bonus for the three prior calendar years. We anticipate that Named Executive Officers other than Mr. Mosing will also be entitled to payment of COBRA premiums for 18 months for the executive and the executives spouse and eligible dependents.
We anticipate that the following terms will be defined under the new employment agreements for the Named Executive Officers, as described below:
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Cause means a determination by the company that the executive (a) has engaged in gross negligence, gross incompetence, or misconduct in the performance of the executives duties to us, (b) has failed without proper legal reason to perform the executives duties and responsibilities to us, (c) has breached any material provision of the employment agreement or any written agreement or corporate policy or code of conduct established by us, (d) has engaged in conduct that is, or could reasonably expected to be, materially injurious to us, (e) has committed an act of theft, fraud, embezzlement, misappropriation, or breach of a fiduciary duty to us, or (f) has been convicted of, pleaded no contest to, or received adjudicated probation or deferred adjudication in connection with a crime involving fraud, dishonesty, |
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or moral turpitude or any felony (or a crime of similar import in a foreign jurisdiction). We anticipate that Mr. Mosing will be allowed a 30-day period to cure items (a) through (d), above. |
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Good reason means (a) a material diminution in the executives base salary (as defined in the employment agreements), other than as a part of one or more decreases that (i) shall not exceed, in the aggregate, more than 10% of the base salary as in effect on the date immediately prior to such decrease, and (ii) are applied similarly to all of our similarly situated executives; (b) a material diminution in the executives authority, duties, or responsibilities, including, for Mr. Mosing only, due to our engagement of an outside management firm to provide management services or a removal of Mr. Mosing from service as Chairman of the Board (except if such removal occurs due to his resignation from the board or removal by the board for cause); (c) for Mr. Mosing only, a requirement that he report to any corporate officer or other employee instead of reporting directly to our board; (d) the involuntary relocation of the geographic location of the executives principal place of employment by more than 75 miles from the location of the executives principal place of employment as of the effective date of the employment agreement; or (e) for Mr. Mosing only, any material breach by the Company or its affiliates of its obligations under his employment agreement. |
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Change in control generally means (a) a merger, consolidation, or sale of all or substantially all of our assets if (i) our shareholders do not continue to own at least 50% of the voting power of the resulting entity in substantially the same proportions that they owned our equity securities prior to the transaction or event or (ii) the members of our board immediately prior to the transaction or event do not constitute at least a majority of the board of directors of the resulting entity immediately after the transaction or event; (b) the dissolution or liquidation of the company; (c) when any person, entity, or group (other than members of the Mosing family and/or related persons or entities) acquires or gains ownership or control of more than 50% of the combined voting power of the outstanding securities of the company, or (d) as a result of or in connection with a contested election of directors, the persons who were members of our board immediately before such election cease to constitute a majority of the board. |
Director Compensation
During 2012, we did not pay fees to members of our board. Going forward, our existing board believes that attracting and retaining qualified non-employee directors will be critical to our future value, growth, and governance. Our supervisory board also believes that the compensation package for our non-employee directors should require a significant portion of the total compensation to be equity-based to align the interests of these directors with our stockholders. Following this offering, we expect that our supervisory board will share in that belief. We have reviewed with Meridian the non-employee director compensation paid by our peer group. Based on this review, following the consummation of this offering, we expect to implement an annual retainer compensation package for the non-employee directors valued at approximately $150,000, of which $50,000 would be paid in the form of an annual cash retainer, and the remaining $100,000 would be paid in a grant of restricted stock units under the LTIP. In addition, we expect to pay the audit committee chairman and each audit committee member an annual amount of $20,000 and $10,000, respectively. We currently expect to pay meeting fees in the amount of $1,500 for attendance at each board meeting.
Directors who are also our employees will not receive any additional compensation for their service on the supervisory board.
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CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
The descriptions set forth below are qualified in their entirety by reference to the applicable agreements.
Limited Partnership Agreement of FICV
As a result of the transactions described in Organizational Structure, FINV will act as a holding company whose sole material assets will consist of indirect general and limited partnership interests in FICV. As the indirect sole shareholder of the general partner of FICV, FINV will be responsible for all operational, management and administrative decisions relating to FICVs business and will consolidate the financial results of FICV and its subsidiaries.
FICV is a newly formed limited partnership that was formed to act as a holding company of various U.S. and foreign operating companies engaged in our business. Prior to this offering, our foreign operating companies have been owned directly or indirectly by FINV, and our U.S. operating companies have been owned directly or indirectly by Mosing Holdings, which is owned by members of the Mosing family. In connection with this offering, FINV will contribute all of our foreign operating subsidiaries and a portion of the proceeds from this offering to FICV, and Mosing Holdings will contribute all of our U.S. operating subsidiaries (excluding certain assets that generate a de minimis amount of revenue, including aircraft, real estate and life insurance policies) to FICV. We intend to enter into real estate lease agreements and an aviation services agreement with customary terms for continued use of the real estate and aircraft. See Transactions with Our Directors, Executive Officers and Affiliates.
In exchange for this contribution (and after giving effect to this offering assuming the underwriters option to purchase additional shares of common stock is not exercised),
(i) FINV will (indirectly) hold a % limited partnership interest and a % general partnership interest in FICV; and
(ii) Mosing Holdings will hold a % limited partnership interest in FICV.
In accordance with the limited partnership agreement, net profits and net losses of FICV will be allocated to its members on a pro rata basis in accordance with their respective percentage of interest in FICV. Accordingly, net profits and net losses of FICV will initially be allocated, % to FINV (of which % relates to the limited partnership interest and % relates to the general partnership interest held indirectly by FINV) and % to Mosing Holdings (or % and %, respectively, if the underwriters option to purchase additional shares of common stock is exercised in full).
FINV will generally be subject to U.S. federal, state and local income taxes on its proportionate share of FICVs taxable income attributable to U.S. operations. FINV may also incur U.S. branch profits tax on its proportionate share of FICVs taxable income attributable to U.S. operations. The U.S. branch profits tax is imposed on a non-U.S. corporations dividend equivalent amount, which generally consists of the corporations after-tax earnings and profits (as determined under U.S. federal income tax principles) that are effectively connected with the corporations U.S. trade or business but are not reinvested in a U.S. business. The limited partnership agreement of FICV provides for distributions to be made at the discretion of the general partner on a pro rata basis to the holders of FICV interests for purposes of funding the holders tax obligations with respect to the income of FICV allocated to them. Generally, these tax distributions will be computed based on our estimate of the taxable income of FICV allocable to a holder of FICV interests multiplied by an assumed tax rate equal to the highest effective marginal combined U.S. federal, state and local income tax rate prescribed for an individual resident in Louisiana.
FINVs articles of association and FICVs limited partnership agreement will provide for customary mechanisms to ensure that (i) FINVs percentage interest in FICV will always equal the percentage of the total number of outstanding shares of FINV Stock represented by our outstanding common stock and (ii) Mosing
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Holdings (together with any permitted transferees) percentage interest in FICV will always equal the percentage of the total number of outstanding shares of FINV common stock represented by our outstanding Series A preferred stock. In this regard, the FICV limited partnership agreement will provide that at any time FINV issues a share of its common stock, the net proceeds received by FINV with respect to such share, if any, shall be concurrently transferred to FICV and FICV will issue to FINV an additional percentage interest in FICV such that FINVs total interest in FICV will be equal to (i) the total number of shares of FINV common stock issued and outstanding divided by (ii) the total number of issued and outstanding FINV Stock, in each case taking into account the newly issued shares of common stock. Conversely, if at any time, any shares of common stock of FINV are redeemed, FICV shall, immediately prior to such redemption, redeem a proportionate percentage of interest in FICV held indirectly by FINV, upon the same terms and for the same price, as the shares of FINV common stock are redeemed.
Mosing Holdings (or any of its permitted transferees) will have the right to convert all or a portion of its Series A preferred stock into FINV common stock by delivery to FINV of an equivalent number of FICV Portions. In connection with such conversion, Mosing Holdings or its permitted transferees will also be entitled to receive an amount of cash equal to the par value of each share of Series A preferred stock so converted plus any accrued but unpaid dividends thereon.
The above mechanism is subject to customary conversion rate adjustments for stock splits, stock dividends and reclassifications.
The form of limited partnership agreement of FICV is filed as an exhibit to the registration statement of which this prospectus forms a part, and the foregoing description of the limited partnership agreement is qualified in its entirety by reference thereto.
Tax Receivable Agreement
As described in Limited Partnership Agreement of FICV, in the future, Mosing Holdings and its permitted transferees may exchange their FICV Portions for cash accompanied by the conversion of such shares into shares of our common stock on a one-for-one basis, subject to customary conversion rate adjustments for stock splits, stock dividends and reclassifications and other similar transactions (the Exchange). FICV intends to make an election under Section 754 of the Code effective for each taxable year in which an Exchange occurs. Pursuant to the Section 754 election, each future Exchange is expected to result in an adjustment to the tax basis of the tangible and intangible assets of FICV, and these adjustments will be allocated to FINV. Certain of the adjustments to the tax basis of the tangible and intangible assets of FICV described above would not have been available absent these future Exchanges. The anticipated basis adjustments are expected to reduce the amount of tax that FINV would otherwise be required to pay in the future. These basis adjustments may also decrease gains (or increase losses) on future dispositions of certain capital assets to the extent tax basis is allocated to those capital assets.
FINV intends to enter into the tax receivable agreement with Mosing Holdings. This agreement generally will provide for the payment by FINV of 85% of actual reductions, if any, in payments of U.S. federal, state and local income tax or franchise tax (which reductions we refer to as cash savings) in periods after this offering as a result of (i) the basis increases resulting from the Exchanges and (ii) imputed interest deemed to be paid by FINV as a result of, and additional tax basis arising from, payments under the tax receivable agreement. In addition, the tax receivable agreement will provide for payment by FINV of interest earned from the due date (without extensions) of the corresponding tax return to the date of payment specified by the tax receivable agreement.
The payment obligations under the tax receivable agreement are FINVs obligations and are not obligations of FICV. The term of the tax receivable agreement will commence upon the completion of this offering and will continue until all such tax benefits have been utilized or expired, unless FINV exercises its right to terminate the tax receivable agreement.
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Estimating the amount of payments that may be made under the tax receivable agreement is by its nature imprecise, insofar as the calculation of amounts payable depends on a variety of factors. The actual increase in tax basis, as well as the amount and timing of any payments under the tax receivable agreement, will vary depending upon a number of factors, including the timing of exchanges, the relative value of FINVs U.S. and international assets at the time of the exchange, the price of FINVs common stock at the time of the exchange, the extent to which such exchanges are taxable, the amount and timing of the taxable income FINV realizes in the future and the tax rate then applicable, FINVs use of loss carryovers and the portion of its payments under the tax receivable agreement constituting imputed interest or depreciable or amortizable basis. FINV expects that the payments that it will be required to make under the tax receivable agreement will be substantial. There may be a substantial negative impact on our liquidity if, as a result of timing discrepancies or otherwise, (i) the payments under the tax receivable agreement exceed the actual benefits we realize in respect of the tax attributes subject to the tax receivable agreement and/or (ii) distributions to us by FICV are not sufficient to permit us to make payments under the tax receivable agreement subsequent to the payment of taxes and other obligations. The payments under the tax receivable agreement will not be conditioned upon a holder of rights under a tax receivable agreement having a continued ownership interest in either FICV or FINV.
The tax receivable agreement provides that we may terminate it early. If FINV elects to terminate the tax receivable agreement early, it would be required to make an immediate payment equal to the present value of the anticipated future tax benefits subject to the tax receivable agreement (based upon certain assumptions and deemed events set forth in the tax receivable agreement, including the assumption that it has sufficient taxable income to fully utilize such benefits and that any FICV interests that Mosing Holdings or its transferees own on the termination date are deemed to be exchanged on the termination date). Any early termination payment may be made significantly in advance of the actual realization, if any, of such future benefits. In addition, payments due under the tax receivable agreement will be similarly accelerated following certain mergers or other changes of control. In these situations, FINVs obligations under the tax receivable agreement could have a substantial negative impact on FINVs liquidity and could have the effect of delaying, deferring or preventing certain mergers, asset sales, other forms of business combinations or other changes of control.
Payments under the tax receivable agreement will be based on the tax reporting positions that FINV will determine. Although FINV is not aware of any issue that would cause the IRS to challenge a tax basis increase or other benefits arising under the tax receivable agreement, the holders of rights under the tax receivable agreement will not reimburse FINV for any payments previously made under the tax receivable agreement if such basis increases or other benefits are subsequently disallowed, except that excess payments made to any such holder will be netted against payments otherwise to be made, if any, to such holder after our determination of such excess. As a result, in such circumstances, FINV could make payments that are greater than our actual cash tax savings, if any, and may not be able to recoup those payments, which could adversely affect FINVs liquidity.
Decisions made by Mosing Holdings and certain members of the Mosing family in the course of running our business, such as with respect to mergers, asset sales, other forms of business combinations or other changes in control, may influence the timing and amount of payments that are received by Mosing Holdings or its permitted transferees under the tax receivable agreement. For example, the earlier disposition of assets following an exchange or acquisition transaction will generally accelerate payments under the tax receivable agreement and increase the present value of such payments, and the disposition of assets before an exchange or acquisition transaction will increase Mosing Holdings tax liability without giving rise to any rights of Mosing Holdings to receive payments under the tax receivable agreement.
Payments under the tax receivable agreement, if any, will be made pro rata among all parties to the tax receivable agreement entitled to payments on an annual basis to the extent we have sufficient taxable income to utilize the increased tax benefits. The availability of sufficient taxable income to utilize the increased tax benefits will not be determined until such time as the financial results for the year in question are known and tax estimates prepared, which typically occurs within 90 days after the end of the applicable calendar year.
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Payments are generally due under the tax receivable agreement within five days following the determination of the applicable tax benefit, which generally is required to occur within 60 days of the filing of FINVs tax return for the taxable year with respect to which the payment obligation arises, although interest on such payments will begin to accrue at a rate of interest equal to LIBOR plus 5% from the due date. Except in cases where FINV elects to terminate the tax receivable agreement early, the tax receivable agreement is terminated early due to certain mergers or other changes of control or FINV has available cash but fails to make payments when due, generally FINV may elect to defer payments under the tax receivable agreement if it does not have available cash to satisfy its payment obligations under the tax receivable agreement or if FINVs contractual obligations limit its ability to make these payments. Any such deferred payments would accrue interest at a rate of interest equal to LIBOR plus 5%. FINV has no present intention to defer payments under the tax receivable agreement.
Because FINV is a holding company with no operations of its own, its ability to make payments under the tax receivable agreement is dependent on the ability of FICV to make distributions to it in an amount sufficient to cover FINVs obligations under such agreements; this ability, in turn, may depend on the ability of FICVs subsidiaries to provide payments to it. The ability of FICV and its subsidiaries to make such distributions will be subject to, among other things, the applicable provisions of Dutch law that may limit the amount of funds available for distribution and restrictions in our debt instruments. To the extent that FINV is unable to make payments under the tax receivable agreement for any reason, such payments will be deferred and will accrue interest until paid, and FINV will be prohibited from paying dividends on its common stock.
The form of the tax receivable agreement is filed as an exhibit to the registration statement of which this prospectus forms a part, and the foregoing description of the tax receivable agreement is qualified by reference thereto.
FICV Management Agreement
We will enter into an FICV management agreement with Franks International LP B.V., Franks International Management B.V. and Mosing Holdings, which constitute the partners in FICV, with respect to the operation and management of FICV in order to facilitate the activities of FINV as a publicly traded company. The FICV management agreement provides for the consent of the FICV partners to facilitate (i) FINVs percentage interest in FICV remaining equal to the percentage of the total number of outstanding shares of FINV Stock represented by our outstanding common stock and (ii) Mosing Holdings (together with any permitted transferees) percentage interest in FICV remaining equal to the percentage of the total number of outstanding shares of FINV Stock represented by our outstanding Series A preferred stock. Please see Limited Partnership Agreement of FICV.
The form of FICV management agreement is filed as an exhibit to the registration statement of which this prospectus forms a part, and the foregoing description of the FICV management agreement is qualified in its entirety by reference thereto.
Transactions with Our Directors, Executive Officers and Affiliates
In connection with the reorganization described in Organizational Structure, Mosing Holdings will cause our U.S. operating subsidiaries to distribute certain assets that generate a de minimis amount of revenue, including aircraft, real estate and life insurance policies. Accordingly, these assets will not be contributed to FICV in connection with the reorganization. As a result, we intend to enter into real estate lease agreements with customary terms for continued use of the real estate, under which we will incur additional rental expense of approximately $3.8 million per year. In addition, we will enter into an aviation services agreement with customary terms for continued use of the aircraft, under which we will incur additional charter service expense of approximately $1.1 million per year.
We have engaged in transactions with certain of our directors, executive officers and affiliates. In 2012, we made distributions of two promissory notes to Ginsoma C.V. (Ginsoma) and FWW, which are entities
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controlled by the Mosing family, in an aggregate amount of $484.0 million. Subsequent to its issuance, the promissory note payable to Ginsoma was assigned to FWW. As of December 31, 2012 and March 31, 2013, there was an aggregate of approximately $464.0 million and $443.7 million, respectively, outstanding under the notes payable to FWW. Interest is charged on the notes at the applicable short-term monthly applicable federal rate as published by the Internal Revenue Service. The notes payable to FWW bore interest at a rate of 0.24% per annum as of March 31, 2013. As of December 31, 2012 and March 31, 2013, $320.0 million is included in current portion of notes payable to affiliates because it is due on demand and $144.0 million and $123.7 million, respectively, is included in notes payable to affiliates on the combined balance sheets. During the year ended December 31, 2012, we made payments of approximately $58.0 million, which consisted of $57.4 million in principal and $0.6 million in interest. Subsequent to March 31, 2013, we made a payment of approximately $28.5 million to reduce the amount outstanding under the notes payable. We intend to use a portion of the net proceeds from this offering to repay in full these outstanding notes payable.
In addition, in 2012, we issued a note payable to our chief executive officer, in an amount of $2.88 million in connection with a deferred bonus payment. As of December 31, 2012 and March 31, 2013, there was $2.88 million outstanding under the note payable. We made no payments of principal or interest under the note payable during the year ended December 31, 2012. As of March 31, 2013, the note payable bore interest at a rate of 3.5% per annum and matures in September 2013.
In 2011, we issued various notes payable to certain members of the Mosing family in connection with our purchase of aircraft. The table below presents information regarding these notes payable:
Related Party |
Note
Payable Amount |
Amount
Outstanding at December 31, 2012 |
Amount
Outstanding at March 31, 2013 |
Payments Made During the Year Ended
December 31, 2012 |
||||||||||||||||||||
Principal | Interest | Total | ||||||||||||||||||||||
Donald Keith Mosing chief executive officer |
$ | 1,000,000 | $ | 772,881 | $ | 725,732 | $ | 182,822 | $ | 43,633 | $ | 226,455 | ||||||||||||
William B. Mosing sibling of our chief executive officer |
1,000,000 | 772,881 | 725,732 | 182,822 | 43,633 | 226,455 | ||||||||||||||||||
Gregory S. Mosing sibling of our chief executive officer |
500,000 | 386,440 | 362,866 | 91,411 | 21,817 | 113,228 | ||||||||||||||||||
Sharon M. Miller cousin of our chief executive officer |
500,000 | 386,440 | 362,866 | 91,411 | 21,817 | 113,228 | ||||||||||||||||||
Alice M. Mosing spouse of our chief executive officer |
100,000 | 77,288 | 72,573 | 18,282 | 4,363 | 22,645 | ||||||||||||||||||
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|
|
|
|
|
|
|
|
|
|
|
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Total |
$ | 3,100,000 | $ | 2,395,930 | $ | 2,249,769 | $ | 566,748 | $ | 135,263 | $ | 702,011 | ||||||||||||
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As of March 31, 2013, each of the notes payable bore interest at a rate 5.0% per annum and each of the notes payable matures in 2016.
We have entered into various operating leases with Mosing Land & Cattle Company of Texas, LLC, Mosing Properties LP, and Western Airways, Inc., each of which are entities owned by our chief executive officer and certain other members of the Mosing family to lease office space and aircraft from such entities. Rent expense related to these leases was $2.8 million, $2.8 million and $3.0 million for the years ended December 31, 2010, 2011 and 2012, respectively and $0.7 million and $0.8 million for the three months ended March 31, 2012 and 2013, respectively. The expiration date of the operating leases currently in place ranges from 2013 to 2017, unless otherwise extended.
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As of December 31, 2012 and March 31, 2013, subsidiaries of Mosing Holdings, which will be a significant shareholder following this offering, had receivables totaling $5.6 million and $5.8 million, respectively, due from our chief executive officer and certain members of the Mosing family relating to amounts owed to such subsidiaries for split-dollar life insurance policy premiums that they maintain. The table below presents additional information regarding the split-dollar life insurance policy premiums:
Related Party |
Amount Outstanding
at December 31, 2012 |
Amount Outstanding
at March 31, 2013 |
||||||
Donald Keith Mosing chief executive officer |
$ | 1,054,866 | $ | 1,054,866 | ||||
William B. Mosing sibling of our chief executive officer |
1,055,584 | 1,055,584 | ||||||
Gregory S. Mosing sibling of our chief executive officer |
418,200 | 418,200 | ||||||
Alice M. Mosing spouse of our chief executive officer |
504,681 | 504,681 | ||||||
Kirkland D. Mosing cousin of our chief executive officer and Supervisory Director Nominee |
377,647 | 440,588 | ||||||
Steven B. Mosing cousin of our chief executive officer and Supervisory Director Nominee |
600,000 | 600,000 | ||||||
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|
|
|
|||||
Total |
$ | 4,010,978 | $ | 4,073,919 | ||||
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|
|
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The receivables will be collected either directly from the executive officer, if employment terminates other than by death, or from the executive officers beneficiary, if employment terminates due to death of the executive officer.
In 2012, we received a death benefit payment of $4.9 million related to the passing of Larry Mosing, our chief executive officers uncle. In connection with the reorganization described in Organizational Structure, Mosing Holdings will cause our U.S. operating subsidiaries to distribute these split-dollar life insurance policies and the associated accounts receivable, such that they will not be contributed to FICV. Accordingly, upon completion of this offering, we will no longer maintain or record receivables related to these split-dollar life insurance policies.
In June 2013, Mosing Holdings made a distribution in an aggregate amount of $46.5 million to its owners.
Registration Rights Agreement
Mosing Holdings and FWW and certain of their transferees will enter into a registration rights agreement with FINV. The registration rights agreement will cover all shares of Series A preferred stock and shares of common stock owned by Mosing Holdings and FWW, respectively. Pursuant to this agreement, the parties to the agreement may cause FINV to register their shares of common stock under the Securities Act and to maintain a shelf registration statement effective with respect to such shares.
The form of registration rights agreement is filed as an exhibit to the registration statement of which this prospectus forms a part, and the foregoing description of the registration rights agreement is qualified by reference thereto.
Voting Agreement
Mosing Holdings, FWW and certain members of the Mosing family will enter into a voting agreement pursuant to which each shareholder will agree to vote all of their shares of common stock and Series A preferred stock for the election of directors in the manner specified by a designated shareholder representative, which will initially be Keith Mosing, our chief executive officer.
The form of voting agreement is filed as an exhibit to the registration statement of which this prospectus forms a part, and the foregoing description of the voting agreement is qualified by reference thereto.
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Procedures for Approval of Related Person Transactions
A Related Party Transaction is a transaction, arrangement or relationship in which we or any of our subsidiaries was, is or will be a participant, the amount of which involved exceeds $120,000, and in which any related person had, has or will have a direct or indirect material interest. A Related Person means:
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any person who is, or at any time during the applicable period was, one of our executive officers or one of our directors; |
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any person who is known by us to be the beneficial owner of more than 5% of our common stock; |
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any immediate family member of any of the foregoing persons, which means any child, stepchild, parent, stepparent, spouse, sibling, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law or sister-in-law of a director, executive officer or a beneficial owner of more than 5% of our common stock, and any person (other than a tenant or employee) sharing the household of such director, executive officer or beneficial owner of more than 5% of our common stock; and |
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any firm, corporation or other entity in which any of the foregoing persons is a partner or principal or in a similar position or in which such person has a 10% or greater beneficial ownership interest. |
Our supervisory board intends to adopt a written related party transactions policy prior to the completion of this offering. Pursuant to this policy, the audit committee will review all material facts of all Related Party Transactions and either approve or disapprove entry into the Related Party Transaction, subject to certain limited exceptions. In determining whether to approve or disapprove entry into a Related Party Transaction, the audit committee expects to take into account, among other factors, the following: (1) whether the Related Party Transaction is on terms no less favorable than terms generally available to an unaffiliated third party under the same or similar circumstances and (2) the extent of the Related Persons interest in the transaction. Further, the policy would require that all Related Party Transactions required to be disclosed in our filings with the SEC be so disclosed in accordance with applicable laws, rules and regulations.
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The following table sets forth information with respect to the beneficial ownership of our common stock and Series A preferred stock by:
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each person known to us to beneficially own more than 5% of our common stock or our Series A preferred stock; |
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each of our named executive officers; |
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each member of our supervisory board and management board and any director nominees; and |
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all of our directors and executive officers as a group. |
The number of shares of our common stock and Series A preferred stock outstanding and the percentage of beneficial ownership before and after the consummation of the offering set forth below is presented as of July 15, 2013, after giving effect to the reorganization as described in Organizational Structure.
Beneficial ownership is determined in accordance with the rules of the SEC. These rules generally attribute beneficial ownership of securities to persons who possess sole or shared voting power or investment power with respect to such securities. Except as otherwise indicated, the persons or entities listed below have sole voting and investment power with respect to all shares of our common stock beneficially owned by them, except to the extent this power may be shared with a spouse. All information with respect to beneficial ownership has been furnished by the respective directors, executive officers, or 5% or more stockholders, as the case may be.
Unless otherwise indicated by us, the address of each person or entity named in the table is 10260 Westheimer Rd., Houston, Texas 77042.
Name of Beneficial Owner |
Common Stock to be
Beneficially Owned(1) |
Series A Preferred
Stock to be Beneficially Owned(2) |
Percentage of Total
FINV Stock to be Beneficially Owned(4) |
|||||||||||||
Number | %(3) | Number | %(3) | |||||||||||||
5% shareholders: |
||||||||||||||||
FWW B.V. (5) |
% | % | % | |||||||||||||
Mosing Holdings, Inc. (6) |
% | % | % | |||||||||||||
Directors and Named Executive Officers: |
||||||||||||||||
Donald Keith Mosing (5)(6)(7)(8) |
% | % | % | |||||||||||||
Sheldon Erikson |
% | % | % | |||||||||||||
Kirkland D. Mosing (6) |
% | % | % | |||||||||||||
Steven B. Mosing (6) |
% | % | % | |||||||||||||
Franks International Management B.V. (8) |
% | % | % | |||||||||||||
Mark G. Margavio (9) |
% | % | % | |||||||||||||
W. John Walker (9) |
% | % | % | |||||||||||||
Robert R. Gilbert (9) |
% | % | % | |||||||||||||
C. Michael Webre (9) |
% | % | % | |||||||||||||
All directors, director nominees and executive officers as a group (10 persons) (9) |
% | % | % |
* | Represents less than 1%. |
(1) | Excludes shares of common stock that may be deemed to be beneficially owned by such persons due to their beneficial ownership of shares of Series A preferred stock, which are convertible into an equivalent number of shares of common stock. See Description of Capital StockConversion Right. |
(2) | Each share of Series A preferred stock will entitle its holder to vote together with the common stock as a single class on all matters presented to FINVs shareholders for their vote. |
(3) | Assumes no exercise of the underwriters option to purchase an additional shares of common stock. |
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(4) | Represents percentage of voting power of our common stock and Series A preferred stock voting together as a single class. |
(5) | FWW B.V. is a Dutch company with limited liability. FWW B.V. is controlled by two managing directors, including Donald Keith Mosing. The address of FWW B.V. is Prins Bernhardplein 200, 1097 JB Amsterdam, The Netherlands. |
(6) | Mosing Holdings, Inc. is a Delaware corporation owned by the Mosing Family. Mosing Holdings, Inc. is controlled by three directors, including Donald Keith Mosing, Kirkland D Mosing and Steven B. Mosing. None of the three directors individually has the power to vote, dispose or direct the disposition of, the shares of common stock held by Mosing Holdings as a result of their directorships. |
(7) | Pursuant to a voting agreement that will be entered into among Mosing Holdings, FWW B.V. and certain members of the Mosing Family, the shareholders party to the agreement will agree to vote all of their shares of common stock and Series A preferred stock for the election of directors in the manner specified by a designated shareholder representative, which will initially be Mr. Mosing. As such, Mr. Mosing is entitled to vote on decisions to vote, or to direct the voting of, the shares of common stock held by FWW B.V. and Mosing Holdings. Mr. Mosing disclaims beneficial ownership of such shares except to the extent of his pecuniary interest. |
Excludes a grant of restricted stock units representing an aggregate of shares of common stock (based upon the midpoint of the price range set forth on the cover page of this prospectus) that will be made to Mr. Mosing concurrently with this offering. The restricted stock units began vesting (and shares of common stock will be issued) one year from the date of grant. See Compensation Discussion and AnalysisComponents of Our Executive Compensation ProgramLong-Term Incentive Plan.
(8) | Franks International Management B.V., a wholly owned subsidiary and the sole member of our management board, is controlled by two managing directors, including Donald Keith Mosing. The address of Franks International Management B.V. is Prins Bernhardplein 200, 1097 JB Amsterdam, The Netherlands. |
(9) | Excludes a grant of restricted stock units representing an aggregate of shares of common stock (based upon the midpoint of the price range set forth on the cover page of this prospectus) that will be made to our executive officers and certain other officers concurrently with this offering. The restricted stock units begin vesting (and shares of common stock will be issued) one year from the date of grant. See Compensation Discussion and AnalysisComponents of Our Executive Compensation ProgramLong Term Incentive Plan. |
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The material provisions of our articles of association to be amended and restated prior to the closing of this offering and particular provisions of Dutch law relevant to our statutory existence and the Dutch Corporate Governance Code are summarized below. This summary does not restate our articles of association or relevant Dutch law in their entirety. While we believe that this summary contains all of the information about the articles of association important to your decision to subscribe for the common shares, it does not include all of the provisions that you may feel are important. The articles of association, and not this summary, will define your rights as a holder of shares of our common stock.
Authorized Capital
Our articles of association will authorize up to two classes of shares of capital stock, consisting of our common stock and our Series A preferred stock. Following the completion of this offering (assuming that the underwriters option to purchase additional shares of our common stock is not exercised), our authorized capital stock will consist of shares, divided into:
Series |
Nominal Value
per Share |
Number of Shares
Authorized |
Number of Shares
Outstanding |
|||||
Common stock |
| 0.01 | ||||||
Series A preferred stock |
| 0.01 |
Following the completion of this offering, all of our shares of Series A preferred stock will be held by Mosing Holdings, Inc.
Under Dutch law, our authorized capital stock is the maximum capital that we may issue without amending our articles of association. An amendment of our articles of association would require a resolution from the general meeting of shareholders.
Our articles of association are registered at the Trade Register in Amsterdam, and an English translation has been filed with the SEC as an exhibit to the registration statement of which this prospectus forms a part. Our file number with the Trade Register is 34241787.
Issuance of Capital Stock
Under Dutch law, we may only issue capital stock pursuant to a resolution of the general meeting of shareholders, unless another corporate body has been designated to do so by a resolution of the general meeting of shareholders or by our articles of association.
Our management board will be designated by the articles of association for a period of five years from the closing of this offering to issue shares and grant rights to subscribe for shares up to the amount of unissued shares in our authorized capital stock, subject to the approval of our supervisory board. The designation may be extended from time to time, with periods not exceeding five years, by a resolution of the general meeting of shareholders adopted with a simple majority. If authority is not delegated to another corporate body, the general meeting of shareholders may only decide to issue shares and grant rights to subscribe for shares at the proposal of the supervisory board.
Pre-Emptive Rights
Under Dutch law, in the event of an issuance of shares of common stock, each holder of common stock will have a pro rata preemptive right based on the number of shares of common stock held by such shareholder. Preemptive rights do not apply with respect to the issuance of preferred stock, or to shares of common stock issued against contributions other than in cash or shares of common stock issued to our employees or the
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employees of one of our group companies. Our management board will be authorized by the articles of association for a period of five years from the date of the offering to limit or exclude any pre-emptive rights to which shareholders may be entitled in connection with the issuance of shares, subject to the approval of our supervisory board. The above authority to limit or exclude pre-emptive rights can only be exercised if at that time the authority to issue shares is in full force and effect. The authority to limit or exclude pre-emptive rights may be extended from time to time, with periods not exceeding five years, by a resolution of the general meeting of shareholders adopted with a simple majority. If authority is not delegated to another corporate body, the general meeting of shareholders may only decide to limit or exclude pre-emptive rights at the proposal of the management board, which proposal shall be approved by our supervisory board.
Repurchase of Shares of Capital Stock
Under Dutch law, a public company with limited liability ( naamloze vennootschap ) may acquire its own shares, subject to certain provisions of Dutch law and the articles of association. We may acquire our own shares either without paying any consideration, or in the event any consideration must be paid only if (i) our shareholders equity less the acquisition price is not less than the sum of paid-up and called-up capital and any reserve required to be maintained by law or our articles of association, (ii) we and our subsidiaries would not thereafter hold or hold shares as a pledgee with an aggregate par value exceeding 50% of our issued capital stock and (iii) the general meeting of shareholders has authorized the management board to effect such acquisitions, subject to the approval of our supervisory board. Our shareholders will authorize the acquisition of our own shares up to the maximum number allowed under Dutch law for a period of 18 months from the date of the offering for a price per share between $0.01 and 120% of the price on the NYSE at the close of the business day prior to the day of the repurchase for the shares of common stock and for a price per share between $0.01 and 120% of the amount paid up on such shares for the Series A preferred stock.
Conversion Right
For purposes of any transfer or conversion of Series A preferred stock and limited partnership interests in FICV, our articles of association and the partnership agreement of FICV contain provisions linking each share of Series A preferred stock to a proportionate portion of the holders limited partnership interest in FICV, which portion at any time will equal the holders total limited partnership interest in FICV divided by the total number of issued and outstanding shares of Series A preferred stock of FINV (each such portion being referred to as an FICV Portion). Shares of Series A preferred stock cannot be transferred unless simultaneously with an equal number of FICV Portions and vice versa.
Holders of our Series A preferred stock will have the right to convert all or a portion of their Series A preferred stock into FINV common stock by delivery to FINV of an equivalent number of FICV Portions. In connection with such conversion, Mosing Holdings or its permitted transferees will also be entitled to receive an amount of cash equal to the par value of each share of Series A preferred stock so converted plus any accrued but unpaid dividends thereon.
The above mechanism is subject to customary conversion rate adjustments for stock splits, stock dividends and reclassifications.
Capital Reduction
Subject to Dutch law and our articles of association, pursuant to a proposal of the management board, which proposal shall be approved by our supervisory board, the general meeting of shareholders may resolve to reduce the outstanding capital stock by cancellation of shares or by reducing the nominal value of the shares by means of an amendment to our articles of association. Dutch law requires that this resolution be adopted by an absolute majority of votes cast, or by a two-thirds majority of the votes cast, if less than half of the issued capital stock is present or represented at the meeting.
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Dividends
Following the completion of this offering, we intend to pay a regular quarterly dividend on our common stock of $ per share, or an aggregate of approximately $ million in the aggregate on an annual basis. However, our future dividend policy is within the discretion of our management board, with the approval of our supervisory board, and will depend upon various factors, including our results of operations, financial condition, capital requirements and investment opportunities. No dividends on our common stock will accrue in arrears. In addition, each share of Series A preferred stock will have a liquidation preference equal to its par value of 0.01 per share and will be entitled to an annual dividend equal to 0.25% of its par value. Based upon the number of Series A preferred shares outstanding upon completion of this offering, this amount would be in the aggregate. We will only be able to pay dividends from our available cash on hand and funds received from FICV. FICVs ability to make distributions to us will depend on many factors, including the performance of our business in the future. In order to make these distributions on our common stock and Series A preferred stock, we expect that FICV will be required to distribute approximately $ million pro rata to holders of FICV interests. This aggregate amount would have represented approximately % of our pro forma net income and % of our pro forma Adjusted EBITDA for the year ended December 31, 2012. See Dividend Policy and Managements Discussion and Analysis of Financial Condition and Results of OperationsLiquidity and Capital ResourcesLiquidity.
Subject to certain exceptions, Dutch law provides that dividends may only be paid out of profits as shown in our annual financial statements as adopted by the general meeting of shareholders. Moreover, dividends may be distributed only to the extent the shareholders equity exceeds the sum of the amount of paid-up capital and any reserves that must be maintained under the law or our articles of association. Interim dividends may be declared as provided in the articles of association and may be distributed to the extent that the shareholders equity exceeds the amount of the paid-up capital plus any reserves that must be maintained under the law or the articles of association as apparent from a statement of assets and liabilities prepared on the basis of generally accepted accounting principles. Interim dividends should be regarded as advances on the final dividend that a company intends to declare with respect to the ongoing financial year orif the annual accounts have not yet been adoptedthe previous financial year.
Should it be determined that any distribution made was not permitted, the shareholders or any other person entitled to profits must repay the dividends declared to the extent such shareholder or person was or ought to have been aware that the distribution was not permitted.
Pursuant to our articles of association, the management board, subject to the approval of our supervisory board, will decide what portion of our profit is to be held as reserves. Holders of our common stock are not entitled to any dividends unless declared by our management board.
General Meeting of Shareholders
Procedures and Admissions
Pursuant to our articles of association, general meetings of shareholders will be held in Amsterdam, The Netherlands in the municipality in which the company has its statutory seat, or at Schiphol ( Municipality of Haarlemmermeer ). A general meeting of shareholders shall be held at least once a year within the period required by Dutch law, which is currently no later than six months after the end of our financial year, unless our articles of association provide for a shorter period.
Extraordinary general meetings of shareholders shall be held as frequently as needed; however they must be convened by the management board and/or the supervisory board. Our management board and/or the supervisory board must give public notice of a general meeting of shareholders or an extraordinary meeting of shareholders, by at least such number of days prior to the day of the meeting as required by Dutch law, which is currently fifteen days.
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The agenda for a meeting of shareholders must contain such items as the management board, supervisory board or the person or persons convening the meeting determine. The agenda shall also include any matter, the consideration of which has been requested by one or more shareholders, representing alone or jointly with others at least such percentage of the issued capital stock as determined by Dutch law, which is currently set at one percent, or a value of at least 50 million. The request to consider such matter should have been received by us no later than on the 60th day prior to the day of the meeting accompanied by a statement containing the reasons for the request.
The agenda for the annual general meeting of shareholders shall contain, among other items, items placed on the agenda in accordance with Dutch law and our articles of association, the consideration of the annual report, the discussion and adoption of our annual accounts, our policy regarding dividends and reserves and the proposal to pay a dividend (if applicable), proposals relating to the composition of the management board and supervisory board, including the filling of any vacancies on those boards, the proposals placed on the agenda by those boards, including but not limited to a proposal to grant discharge to the members of the management board for their management and the supervisory board for their supervision during the financial year, together with the items proposed by shareholders in accordance with provisions of Dutch law and our articles of association.
Shareholders are entitled to attend our general meeting of shareholders, to address the general meeting of shareholders and to vote, either in person or represented by a person holding a written proxy. The requirement that a proxy must be in written form is also fulfilled when it is recorded electronically.
The holder of a right of usufruct or a pledgee with voting rights is entitled to request an item to be placed on the agenda of the general meeting of shareholders, to attend the general meeting of shareholders, to address the general meeting of shareholders and to vote.
Under Dutch law, shareholders resolutions may be adopted in writing without holding a meeting of shareholders, provided that (i) the articles of association explicitly allow such practice, (ii) all shareholders agree on this practice for decision making and (ii) all shareholders are in favor of the resolution to be adopted. Our articles of association, however, will not provide for shareholder action by written consent as it is not practicable for a listed company.
Members of the management board and supervisory board are authorized to attend general meetings of shareholders. They have an advisory vote. The general meeting of shareholders is presided over by the chairman. In the absence of the chairman, one of the other supervisory directors presides over the meeting.
Voting Rights
Under Dutch law, each share of common stock confers the right to cast one vote at the general meeting of shareholders. Each shareholder may cast as many votes as it holds shares. Pursuant to our articles of association, each share (whether common or preferred) will confer the right to cast one vote. Following the completion of this offering, the holders of our common stock and our Series A preferred stock will vote together as a single class on matters presented to the shareholders. Resolutions by the general meeting of shareholders must be adopted by an absolute majority of votes cast, unless another standard of votes and / or a quorum is required by virtue of Dutch law or our articles of association. There is no required quorum under Dutch law for shareholder action at a properly convened shareholder meeting, except in specific instances prescribed by Dutch law or our articles of association.
Each shareholder has the right to participate in, address and exercise its right to vote at the general meeting of shareholders in person or by written proxy or by electronic means of communication, subject to certain conditions for the use of electronic means of voting set by or pursuant to the articles of association.
No votes may be cast at a general meeting of shareholders on the shares held by us or our subsidiaries. Nonetheless, the holders of a right of usufruct and the holders of a right of pledge in respect of the shares held by
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us or our subsidiaries in our capital stock are not excluded from the right to vote on such shares, if the right of usufruct or the right of pledge was granted prior to the time such shares were acquired by us or any of our subsidiaries. Neither we nor our subsidiaries may cast votes in respect of a share on which we or such subsidiary holds a right of usufruct or a right of pledge.
Under Dutch law, our management board is not required to set a record date for a general meeting to determine those shareholders that are entitled to vote at the general meeting. If our management board determines in the future to include a record date in a notice for convening a general meeting, Dutch law requires that the record date be on the 28th day prior to the date of the general meeting. Shareholders as of the record date shall be deemed entitled to attend and to vote at the general meeting. There is no specific provision in Dutch law relating to adjournment of the general meeting of shareholders.
Nomination Right
Pursuant to our amended and restated articles of association, our supervisory board will consist of up to nine members. The Mosing family will have the right to recommend one director for nomination to the supervisory board for each 10% of our outstanding common stock they collectively beneficially own, up to a maximum of five directors. Our supervisory board will nominate the remaining directors.
Shareholder Vote on Certain Reorganizations
Under Dutch law, the approval of our general meeting of shareholders is required for any significant change in the identity of us or our business.
Appraisal Rights
Subject to certain exceptions, Dutch law does not recognize the concept of appraisal or dissenters rights.
Anti-Takeover Provisions
Under Dutch law, protective measures against takeovers are possible and permissible, within the boundaries set by Dutch law and Dutch case law.
The following resolutions and provisions of our articles of association may have the effect of making a takeover of our company more difficult or less attractive, including:
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our management board, subject to the approval of our supervisory board, will be designated to issue shares and grant rights to subscribe for shares in the form of common or preferred stock, up to the amount of our authorized capital stock and to limit or exclude pre-emptive rights on shares, both for a period of five years from the date of the offering; and |
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shareholder action by written consent will not be permitted, thereby requiring all shareholder actions to be taken at a general meeting of shareholders. |
As described above, we have adopted an anti-takeover measure providing our management board, subject to the approval of our supervisory board, with the ability to issue, without shareholder approval, preferred stock or to grant a foundation to be established the right to subscribe to preferred stock, up to a maximum equal to 100% of issued capital, other than such preferred stock, at the time of issue of the preferred stock. Preferred stock is a separate class of our equity securities. The price that will be due by the foundation for these preferred shares should equal their nominal value. It is permitted that a maximum of to 75% of the nominal value of the shares shall be paid up upon our request. As voting rights in us relate to nominal value, and common stock tends to be issued or traded against an amount (potentially significantly) in excess of nominal value, preferred stock issued against nominal value or less will have significant relative voting power. The preferred stock can accordingly be used as a defensive measure. These shares would typically have both a liquidation and dividend preferred over
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the common stock and the Series A preferred stock and otherwise accrue cash dividends at a fixed rate. Our management board, subject to the approval of our supervisory board, is authorized by our shareholders to issue these shares in the future in order to protect us from influences that do not serve our best interests and that threaten to undermine our continuity, independence and identity. These influences may result from a third party acquiring a significant amount of our shares of common stock, the announcement of a public offer or other concentration of control or any other form of unreasonable pressure exercised on us to amend our strategic polices. If it is determined to issue the preferred stock to such a foundation, the foundations articles of association will provide that it shall endeavor to serve our best interests, our associated business and all parties connected to us, warding off as much as possible any influences that conflict with these interests and threaten to undermine our continuity, independence and identity. This foundation shall operate independently of us.
Subject to the limits of NYSE listing rules, the preferred stock described above would vote together with the shares of common stock and the Series A preferred stock on matters submitted to shareholders for approval and have the same number of votes per share as the number of shares of common stock and the Series A preferred stock with a nominal value which in the aggregate equals the nominal value of such a preferred share. By issuing the preferred stock in the appropriate number, this antitakeover measure may result in the holders of such preferred stock having voting power equal to all issued shares of common stock and Series A preferred stock. This anti-takeover measure can be used to provide time for our management board and supervisory board to negotiate the terms of a possible transaction that is in the best interest of all our stakeholders. In the event of a hostile takeover bid, in general, our management board and supervisory board still have the duty to act in the interest of our company and all its stakeholders.
Inspection of Books and Records
The management board provides all information required by Dutch law at the general meeting of shareholders and makes the information available to individual shareholders at the office of the company with copies available upon request. The part of our shareholders register kept in The Netherlands is available for inspection by the shareholders.
Amendment of the Articles of Association
The general meeting of shareholders will be able to effect an amendment of the articles of association only upon a proposal of our management board, which proposal shall be approved by our supervisory board. A proposal to amend the articles of association whereby any change would be made in the rights which vest in the holders of shares in a specific class in their capacity as such, shall require the prior approval of the meeting of the holders of the shares of that specific class.
Dissolution, Merger or Demerger
The general meeting of shareholders will only be able to effect a dissolution of the company. The liquidation of the company shall be carried out by the managing directors under the supervision of the supervisory board, if and to the extent the general meeting of shareholders has not appointed one or more other liquidators.
Under Dutch law, a resolution for a legal merger ( juridische fusie ) or legal demerger ( juridische splitsing ) is adopted in the same manner as a resolution to amend the articles of association. The general meeting of shareholders may, in accordance with the relevant merger proposal by the management board, adopt a resolution for a legal merger or legal demerger by an absolute majority of the votes cast, unless less than half of the issued capital stock is present or represented at the meeting, in which case a two-thirds majority is required.
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Shareholder Suits
If a third party is liable to a Dutch company, under Dutch law generally shareholders do not have the right to bring an action on behalf of the company or bring an action on their own behalf to recover damages sustained as a result of a decrease in value, or loss of an increase in value, of their stock. Only in the event that the cause for the liability of such third party to the company also constitutes a tortious act directly against such shareholder and the damages sustained are permanent may that shareholder have an individual right of action against such third party on its own behalf to recover such damages. The Dutch Civil Code provides for the possibility to initiate such actions collectively. A foundation or an association whose objective, as stated in its articles of association, is to protect the rights of a group of persons having similar interests may institute a collective action. The collective action cannot result in an order for payment of monetary damages but may result in a declaratory judgment ( verklaring voor recht ), for example, declaring that a party has acted wrongfully or has breached fiduciary duty. The foundation or association and the defendant are permitted to reach (often on the basis of such declaratory judgment) a settlement, which provides for monetary compensation of damages. A designated Dutch court may declare the settlement agreement binding upon all the injured parties whereby an individual injured party will have the choice to opt-out within the term set by the court (at least three months). Such individual injured party may also individually institute a civil claim for damages within the aforementioned term.
Squeeze-Out
Under Dutch law, a shareholder who holds at least 95% of our issued capital for its own account may institute proceedings against the other shareholders jointly for the transfer of their shares to the shareholder. The proceedings are held before the Enterprise Division ( Ondernemingskamer ) of the Court of Appeal in Amsterdam, which may award the claim for squeeze-out in relation to all minority shareholders and will determine the price to be paid for the shares, if necessary after appointment of one or three experts who will render an opinion to the Enterprise Chamber on the value of the shares. The court shall disallow the proceedings against all other defendants if (i) notwithstanding compensation, a defendant would sustain serious tangible loss by the transfer; (ii) the defendant is the holder of a share in which a special right of control of the company is vested under the articles of association; or (iii) a claimant has, as against a defendant, renounced his power to institute such proceedings. Once the order for transfer has become final, the acquirer must give written notice of the price and the date on which and the place where the price is payable to the minority shareholders whose addresses are known to the acquirer. Unless all addresses are known to the acquirer, it must also publish the same in a daily newspaper with nationwide distribution.
Transfer Agent and Registrar
We anticipate that the transfer agent and registrar for our common stock will be American Stock Transfer & Trust Company, LLC.
Listing
We have applied to list our common stock on the NYSE under the symbol FI.
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SHARES ELIGIBLE FOR FUTURE SALE
Upon the completion of this offering, there will be shares of common stock outstanding, of which will be owned by FWW and shares of Series A preferred stock that are convertible into common stock, all of which are owned by Mosing Holdings. The sale of these shares could have an adverse impact on the price of our common stock or on any trading market that may develop.
The shares of common stock to be sold in this offering will generally be freely transferable without restriction or further registration under the Securities Act. However, any shares of common stock held by an affiliate of ours may not be resold publicly except in compliance with the registration requirements of the Securities Act or under an exemption from the registration requirements of the Securities Act pursuant to Rule 144 or otherwise. Rule 144 permits securities acquired by an affiliate of ours to be sold into the market in an amount that does not exceed, during any three-month period, the greater of:
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1% of the total number of the class of securities outstanding; or |
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the average weekly reported trading volume of our common stock for the four calendar weeks prior to the sale. |
Sales under Rule 144 by our affiliates are also subject to specific manner of sale provisions, holding period requirements, notice requirements and the availability of current public information about us. A person who is not deemed to have been an affiliate of ours at any time during the three months preceding a sale, and who has beneficially owned the shares for at least six months, would be entitled to sell those shares under Rule 144 without regard to the volume, manner of sale and notice requirements of Rule 144 so long as we comply with the current public information requirement for the next six months after the six-month holding period expires.
Lock-Up Agreements
We, all of our directors and executive officers, FWW and Mosing Holdings, have agreed not to sell any common stock for a period of 180 days from the date of this prospectus, subject to certain exceptions and extensions. See Underwriting for a description of these lock-up provisions.
Stock Issuable Under Employee Plans
We intend to file a registration statement on Form S-8 under the Securities Act to register shares of common stock issuable under our long-term incentive plan and shares of our common stock issued or reserved for issuance under our employee stock purchase plan. This registration statement is expected to be filed following the effective date of the registration statement of which this prospectus is a part and will be effective upon filing. Accordingly, shares issued under such registration statement will be available for sale in the open market following the effective date, unless such shares are subject to vesting restrictions with us, Rule 144 restrictions applicable to our affiliates or the lock-up restrictions described above.
Registration Rights
Mosing Holdings and FWW and certain of their transferees will enter into a registration rights agreement with us. Pursuant to this agreement, the parties to the agreement may cause us to register their shares of common stock under the Securities Act and to maintain a shelf registration statement effective with respect to such shares. For a description of the registration rights agreement, see Certain Relationships and Related Party TransactionsRegistration Rights Agreement.
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CERTAIN NETHERLANDS INCOME AND ESTATE TAX CONSIDERATIONS
The information given below is neither intended as tax advice nor purports to describe all of the tax considerations that may be relevant to a prospective holder of common stock. All statements as to matters of law and legal conclusions, but not as to factual matters, contained in this discussion, unless otherwise noted, are the opinions of Van Campen Liem (Liem & Partners N.V.) and are based on the accuracy of representations made by us. Prospective holders of common stock are advised to consult their tax counsel with respect to the tax consequences of acquiring, holding and/or disposing of common stock.
Introduction
This taxation summary solely addresses the principal Dutch tax consequences of the acquisition, ownership and disposal of common stock. It does not consider every aspect of taxation that may be relevant to a particular holder of common stock under special circumstances or who is subject to special treatment under applicable law. Where in this summary English terms and expressions are used to refer to Dutch concepts, the meaning to be attributed to such terms and expressions shall be the meaning to be attributed to the equivalent Dutch concepts under Dutch tax law.
This summary does not address the tax consequences of a holder of common stock who is an individual, either resident or non-resident in The Netherlands, and who has a substantial interest (in Dutch: aanmerkelijk belang ) in us within the meaning of the Dutch Income Tax Act 2001 (in Dutch: Wet inkomstenbelasting 2001 ). Generally, if a person holds an interest in us, such interest forms part of a substantial interest, or a deemed substantial interest, in us if any or more of the following circumstances is present:
1. | If he/she, either alone or, in the case of an individual, together with his/her partner (in Dutch: partner ) within the meaning article 5a of the Dutch General Tax Act (in Dutch: Algemene wet inzake rijksbelastingen ) in combination with article 1.2 of the Dutch Income Tax Act, if any, or pursuant to article 2.14a of the Dutch Income Tax Act 2001 owns or is deemed to own, directly or indirectly, either a number of shares in us representing five per cent or more of our total issued and outstanding capital (or the issued and outstanding capital of any class of our shares), or rights to acquire, directly or indirectly, shares, whether or not already issued, representing five per cent or more of our total issued and outstanding capital (or the issued and outstanding capital of any class of our shares), or profit participating certificates (in Dutch: winstbewijzen ), relating to five per cent or more of our annual profit or to five per cent of our liquidation proceeds. |
2. | If the shares, profit participating certificates or rights to acquire shares in us are held or deemed to be held as a deemed substantial interest following the application of a non-recognition provision. |
3. | If the partner of the holder of common stock or any of the relatives by blood or by marriage in the direct line (including foster-children) or of those of the partner of the holder of common stock has a substantial interest (as described under 1 and 2 above) in us. |
For purposes of Dutch personal income tax and corporate income tax, common stock legally owned by a third party, such as a trustee, foundation or similar entity or arrangement, may under certain circumstances have to be allocated to the (deemed) settler, grantor or similar organisor (Settlor) or, upon the death of the Settlor, his/her beneficiaries in proportion to their entitlement to the estate of the Settlor of such trust or similar arrangement.
This summary does not address the tax consequences of holders of common stock receiving income or realizing capital gains in their capacity as future, present or past employee (in Dutch: werknemer ) or member of a management board (in Dutch: bestuurder ), or supervisory director (in Dutch: commissaris ).
This summary is based on the tax laws and principles (unpublished case law not included) in The Netherlands as in effect on the date of this Prospectus, which are subject to changes that could prospectively or retrospectively affect the stated tax consequences. Where in this summary the terms The Netherlands and Dutch are used, these refer solely to the European part of the Kingdom of The Netherlands.
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Dividend Withholding Tax
General
We are generally required to withhold Dutch dividend withholding tax at a rate of 15% from dividends distributed by us.
The concept dividends distributed by us as used in this section includes, but is not limited to, the following:
(a) | distributions is cash or in kind, deemed and constructive distributions and repayments of paid-in capital which is not recognized for Dutch dividend withholding tax purposes; |
(b) | liquidation proceeds, proceeds of redemption of common stock or, as a rule consideration for the repurchase of common stock by us in excess of the average paid-in capital recognized for Dutch dividend withholding tax purposes; |
(c) | the par value of the common stock issued to a holder of common stock or an increase of the par value of common stock, to the extent that it does not appear that a contribution, recognized for Dutch dividend withholding tax purposes, has been made or will be made; and |
(d) | partial repayment of capital, which is recognized as paid-in for Dutch dividend withholding tax purposes, if and to the extent that there are net profits (in Dutch: zuivere winst ), unless (a) the general meeting of shareholders has resolved in advance to make such repayment and (b) the par value of the shares concerned has been reduced by an equal amount by way of an amendment to our articles of association. |
Holders of Common Stock Resident in The Netherlands
A Dutch resident individual (other than a non-Dutch resident individual who has elected to be treated as a resident of The Netherlands for Dutch income tax purposes) or a Dutch resident corporate entity, can generally credit Dutch dividend withholding tax against his/her/its Dutch income tax or his/her/its Dutch corporate income tax liability, as applicable, and is generally entitled to a refund in the form of a negative assessment of Dutch income tax or Dutch corporate income tax, as applicable, insofar such dividend withholding tax, together with any other creditable domestic and/or foreign taxes, exceeds his/her/its aggregate Dutch income tax or Dutch corporate income tax liability, respectively.
If and to the extent that such holder of common stock is eligible for the application of the participation exemption with respect to the common stock, dividends distributed by us are in principle exempt from Dutch dividend withholding tax.
An exemption from Dutch dividend withholding tax and/or the availability of a credit or refund of Dutch dividend withholding tax withheld shall only apply if the holder of common stock is the beneficial owner (in Dutch: uiteindelijk gerechtigde ) of dividend distributed by us. A recipient is not considered the beneficial owner of the dividend if, as a consequence of a combination of transactions,
(i) a person (other than the holder of a dividend coupon), directly or indirectly, party or wholly benefits from the dividends;
(ii) such person directly or indirectly retains or acquires a comparable interest in the common stock; and
(iii) such person is entitled to a less favourable exemption, reduction, refund or credit of dividend withholding tax than the recipient of the dividend distribution.
The term combination of transactions includes transactions that have been entered into in anonymity of a regulated stock market, the sole acquisition of one or more dividend coupons and the establishment of short-term rights or the common stock (e.g. usufruct).
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An individual who is not resident or deemed to be resident in The Netherlands, that has elected to be treated as a resident of The Netherlands for Dutch income tax purposes, may be eligible for relief from Dutch dividend withholding tax on the same conditions as an individual who is a non-resident holder of common stock, as discussed below.
Holders of Common Stock Resident Outside The Netherlands
A non-resident holder of common stock, which is resident in the non-European part of the Kingdom of The Netherlands or in a country that has concluded a tax treaty with The Netherlands, may be eligible for a full or partial relief from Dutch dividend withholding tax, provided such relief is timely and duly claimed. Pursuant to domestic rules to avoid dividend stripping, Dutch dividend withholding tax relief will only be available to the non-resident holder of common stock if he/she/it is the beneficial owner of the dividends distributed by us. The Dutch tax authorities have taken the position that this beneficial ownership test can also be applied to deny relief from Dutch dividend withholding tax under tax treaties and the Tax Arrangement for the Kingdom (in Dutch: Belastingregeling voor het Koninkrijk ).
In addition, a non-resident holder of common stock that is not an individual, is entitled to an exemption from Dutch dividend withholding tax, provided that each of the following tests are satisfied:
1. | the non-resident holder of common stock is, according to the tax law of a Member State of the European Union or a state designated by a ministerial decree, that is a party to the Agreement regarding the European Economic Area, resident there and it is not transparent for tax purposes according to the tax law of such state; |
2. | anyone or more of the following threshold conditions are satisfied: |
a. | at the time the dividend is distributed by us, the non-resident holder of common stock holds shares representing at least five per cent of our nominal paid-up capital; or |
b. | the non-resident holder of common stock has held shares representing at least five per cent of our nominal paid-up capital for a continuous period of more than one year at any time during four years preceding the time the dividend is distributed by us; or |
c. | the non-resident holder of common stock is connected with us within the meaning of article 10a, paragraph 4 of the Dutch Corporate Income Tax Act 1969 (in Dutch: Wet op de Vennootschapsbelasting 1969 ); or |
d. | an entity connected with the non-resident holder of common stock within the meaning of article 10a, paragraph 4 of the Dutch Corporate Income Tax Act 1969 holds at the time of the dividends distributed by us, shares representing at least five per cent of our nominal paid-up capital; |
3. | the non-resident holder of common stock is not considered to be resident outside the Member States of the European Union or the states designated by ministerial decree, that are party to the Agreement regarding the European Economic Area, under the terms of a tax treaty concluded with a third state; and |
4. | the non-resident holder of common stock does not perform a similar function as an investment institution (in Dutch: beleggingsinstelling ) as meant by article 6a or article 28 of the Dutch Corporate Income Tax Act 1969. |
The exemption from Dutch dividend withholding tax is not available to a non-resident holder of common stock if pursuant to a provision for the prevention of fraud or abuse included in a tax treaty between The Netherlands and the country of residence of the non-resident holder of common stock, the non-resident holder of common stock is not entitled to the reduction of Dutch tax on dividends provided for by such treaty. Furthermore, the exemption from Dutch dividend withholding tax will only be available if the non-resident holder of common stock is the beneficial owner (as described above) of dividends distributed by us. A non-resident holder of common stock which is resident in a Member State of the European Union with which The Netherlands has concluded a tax treaty that provides for a reduction of Dutch tax on dividends based on the
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ownership of the number of voting rights, the test under 2.a. above is also satisfied if the non-resident holder of common stock owns at least five per cent of the voting rights in us.
A non-resident holder of common stock which is subject to Dutch income tax or Dutch corporate income tax in respect of any benefits derived or deemed to be derived from common stock, including any capital gain realized on the disposal thereof, can generally credit Dutch dividend withholding tax against its Dutch income tax or its Dutch corporate income tax liability, as applicable, and is generally entitled to a refund pursuant to a negative tax assessment if and to the extent the Dutch dividend withholding tax, together with any other creditable domestic and/or foreign taxes, exceeds its aggregate Dutch income tax or its aggregate Dutch corporate income tax liability, respectively.
Taxes on Income and Capital Gains
Resident Holders of Common Stock
Individuals
A holder of common stock, who is an individual resident or deemed to be resident in The Netherlands, or who has elected to be taxed as a resident of The Netherlands for Dutch personal income tax purposes, will be subject to regular Dutch personal income tax at progressive rates (up to a maximum rate of 52%) under the Dutch Income Tax Act 2001 on the income derived from the common stock and gains realized upon the redemption of the common stock if:
(a) | the individual is an entrepreneur (In Dutch: ondernemer ) and has an enterprise to which the common stock are attributable or the individual is, other than as shareholder, co-entitled to the net worth of an enterprise (in Dutch: medegerechtigde ), to which enterprise the common stock are attributable; or |
(b) | such income or gain forms a benefit from miscellaneous activities (in Dutch: resultaat uit overige werkzaamheden ), which, for instance, would be the case if the activities with respect to the common stock exceed regular active portfolio management (in Dutch: normal actief vermogensbeheer) or if the income and gains are derived from the holding, whether directly or indirectly, of (a combination of) shares, debt claims or other rights (together a lucrative interest, in Dutch lucratief belang ) that the holder thereof has acquired under certain circumstances based on which such income and gains are intended to be a remuneration for work or services performed by such holder (or a related person) in The Netherlands, whether within or outside an employment relation, where such lucrative interest provided the holder thereof, economically speaking, with certain benefits that have a relation to the relevant work or services. |
If neither condition (a) or (b) applies, and the individual that holds the common stock does not hold a substantial interest (as discussed above), he/she must determine his/her taxable income with regard to the common stock on the basis of a deemed return on income from savings and investments (in Dutch: sparen en beleggen ), rather than on the basis of income actually received or gains actually realized. This deemed return on income from savings and investments has been fixed at a rate of 4% of the individuals yield basis (in Dutch: rendementsgrondslag ) at the beginning of the calendar year, insofar as the individuals yield basis exceeds a certain threshold. The individuals yield basis is determined as the fair market value of certain qualifying assets held by the individual less the fair market value of certain qualifying liabilities at the beginning of the calendar year.
Corporate Entities
A holder of shares that is resident or deemed to be resident in The Netherlands for Dutch corporate income tax purposes, and that is:
(i) | a corporation; |
(ii) | another entity with a capital divided into shares; |
(iii) | a cooperative (association); or |
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(iv) | another legal entity that has an enterprise or an interest in an enterprise to which the common stock are attributable, |
but which is not,
(v) | a qualifying pension fund; |
(vi) | a qualifying investment fund (under article 6a or 28 of the Dutch Corporate Income Tax Act); or |
(vii) | another entity exempt from corporate income tax, |
will, in general, be subject to regular Dutch corporate income tax, levied at a rate of 25% (20% over profits up to 200,000) over income derived from the common stock and gains realized upon acquisition, redemption and disposal of common stock.
If and to the extent that such holder of common stock is eligible for the application of the participation exemption with respect to the common stock, income derived from the common stock and gains and losses (with the exception of liquidation losses under strict conditions) realized on the common stock may be exempt from Dutch corporate income tax.
Non-resident Holders of Common Stock
Individuals
A holder of common stock, who is an individual not resident or deemed to be resident in The Netherlands, and who has not elected to be taxed as a resident of The Netherlands for Dutch income tax purposes, will not be subject to any Dutch taxes on income or capital gains in respect of dividends distributed by us or in respect of any gain realized on the disposal of common stock (other than dividend withholding tax as described above), unless:
(a) | such holder has an enterprise or an interest in an enterprise that is, in whole or in part, carried on through a permanent establishment or a permanent representative in The Netherlands and to which enterprise or part of an enterprise, as the case may be, the common stock are attributable; and/or |
(b) | such income or gain forms a benefit from miscellaneous activities (in Dutch: resultaat uit overige werkzaamheden ) which, for instance, would be the case if the activities with respect to the common stock exceed regular active portfolio management in The Netherlands or if the income and gains are derived from the holding, whether directly or indirectly, of (a combination of) shares, debt claims or other rights (together a lucrative interest, in Dutch lucratief belang ) that the holder thereof has acquired under certain circumstances based on which such income and gains are intended to be a remuneration for work or services performed by such holder (or a related person) in The Netherlands, whether within or outside an employment relation, where such lucrative interest provided the holder thereof, economically speaking, with certain benefits that have a relation to the relevant work or services. |
If either of the abovementioned conditions (a) or (b) applies, the income or gains in respect of dividends distributed by us or in respect of any capital gain realized on the disposal of common stock will in general be subject to Dutch personal income tax at the progressive rates up to 52%.
Corporate Entities
A holder of shares that is a legal entity, another entity with a capital divided into shares, an association, a foundation or a trust, not resident or deemed to be resident in The Netherlands for Dutch corporate income tax purposes, will not be subject to any Dutch taxes on income or capital gains in respect of dividends distributed by us or in respect of any gain realized on the disposal of common stock (other than dividend withholding tax as described above), except if:
(1) | such holder has an enterprise or an interest in an enterprise that is, in whole or in part, carried on through a permanent establishment or a permanent representative in The Netherlands and to which enterprise or part of an enterprise, as the case may be, the common stock are attributable; |
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(2) | such holder has a substantial interest or a deemed substantial interest in us within the meaning of Chapter 4 of the Dutch Income Tax Act 2001, that (i) is held with the avoidance of income tax or dividend withholding tax as (one of) the main purpose(s) and (ii) does not form part of the assets of an enterprise; or |
(3) | such holder is an entity resident of Aruba, Curaçao or Saint Martin with a permanent establishment or permanent representative in Bonaire, Saint Eustatius or Saba to which such income or gain is attributable, and the permanent establishment or permanent representative would be deemed to be resident of the Netherlands for Dutch corporate income tax purposes (i) had the permanent establishment been a corporate entity (in Dutch: lichaam ), or (ii) had the activities of the permanent representative been conducted by a corporate entity, respectively. |
If one of the abovementioned conditions applies, income derived from the common stock and gains realized on the common stock will, in general, be subject to regular corporate income tax levied at a rate of 25% (20% over profits up to 200,000), except that a holder referred to under (2) above will generally be subject to an effective corporate income tax rate of 15% on dividend income only if it holds the substantial interest in us only with the purpose of avoiding dividend withholding tax and not with (one of) the main purposes to avoid income tax.
Gift or Inheritance Taxes
If you dispose of common stock by way of gift, in form or in substance, or if you die, no Dutch gift or Dutch inheritance tax, as applicable, will be due, unless:
(i) | you are, or you were, resident or deemed to be resident in The Netherlands for purposes of Dutch gift tax or Dutch inheritance tax, as applicable; or |
(ii) | in the case of a gift of common stock by an individual who at the date of the gift was neither resident nor deemed to be resident in The Netherlands (i) such individual dies within 180 days after the date of the gift, while being resident or deemed to be resident in The Netherlands; or (ii) the gift of common stock is made under a condition precedent and the holder of these shares is resident, or is deemed to be resident, in The Netherlands at the time the condition is fulfilled. |
For purposes of the above, a gift of common stock made under a condition precedent (In Dutch: opschortende voorwaarde ) is deemed to be made at the time the condition precedent is satisfied.
For purposes of Dutch gift, or inheritance taxes, an individual not holding the Dutch nationality will be deemed to be resident in The Netherlands, inter alia, if he or she has been resident in The Netherlands at any time during the ten years preceding the date of the gift or his or her death. Additionally, for purposes of Dutch gift tax, an individual not holding the Dutch nationality will be deemed to be resident in The Netherlands if he or she has been resident in The Netherlands at any time during the twelve months preceding the date of the gift. Applicable tax treaties may override deemed residency in The Netherlands.
Value Added Tax
In general, no Dutch value added tax will arise in respect of payments in consideration for the issue of the common stock or in respect of a cash payment made under the common stock, or in respect of the transfer of the common stock.
Other Taxes and Duties
No Dutch registration tax, capital tax, custom duty, transfer tax, stamp duty or any other similar tax or duty, other than court fees, will be payable in The Netherlands in respect of or in connection with the subscription, issue, placement, allotment, delivery or transfer of common stock.
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CERTAIN U.S. FEDERAL INCOME TAX CONSIDERATIONS
The following discussion is a summary of certain U.S. federal income tax considerations applicable to the purchase, ownership and disposition of the common stock by U.S. Holders (as defined below) (i) who are residents of the United States for purposes of the U.S.-Netherlands Income Tax Convention (the U.S.-Netherlands Tax Treaty), (ii) whose common stock is not, for purposes of the U.S.-Netherlands Tax Treaty, effectively connected with a permanent establishment in The Netherlands and (iii) who otherwise qualify for the full benefits of the U.S.-Netherlands Tax Treaty. No rulings have been or will be sought from the IRS with respect to any of the U.S. federal income tax issues discussed in this summary, however, and as a result, there can be no assurance that the IRS will not successfully challenge the conclusions reached in this summary. All statements as to matters of law and legal conclusions, but not as to factual matters, contained in this discussion, unless otherwise noted, are the opinions of Vinson & Elkins L.L.P. and are based on the accuracy of representations made by us. This summary is not exhaustive of all possible U.S. federal income tax considerations applicable to ownership of the common stock.
This summary is based on the Code, the Treasury Regulations promulgated thereunder, IRS rulings and official pronouncements, judicial decisions and the U.S.-Netherlands Tax Treaty, all as in effect on the date of this prospectus and all of which are subject to change, possibly with retroactive effect, or different interpretations, which could affect the accuracy of the statements and conclusions set forth below. FINV undertakes no obligation to update or otherwise revise this summary.
This summary applies only to U.S. Holders (as defined below) that hold the common stock as capital assets within the meaning of Section 1221 of the Code (generally, property held for investment). This summary does not address any U.S. federal estate and gift or alternative minimum tax consequences, U.S. state or local, or non-U.S. tax consequences to any particular investor, or the tax consequences to persons subject to special treatment under U.S. federal income tax laws, such as:
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banks and certain other financial institutions; |
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insurance companies; |
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regulated investment companies; |
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real estate investment trusts; |
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dealers or traders in securities or currencies; |
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brokers; |
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traders that elect to mark-to-market their investments; |
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tax-exempt organizations, retirement plans, individual retirement accounts and other tax-deferred accounts; |
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persons holding common stock as part of a hedge, straddle, conversion, constructive sale or other synthetic security or integrated transaction; |
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persons whose functional currency for U.S. federal income tax purposes is not the U.S. dollar; |
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persons who own, actually or under applicable constructive ownership rules, 10% or more of our common stock; or |
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persons who are former citizens or former long-term residents of the United States (U.S. expatriates). |
As used in this discussion, a U.S. Holder is any beneficial owner of common stock that is for U.S. federal income tax purposes:
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a citizen or resident of the United States (as determined under U.S. federal income tax rules); |
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a corporation (including an entity classified as an association subject to tax as a corporation for U.S. federal income tax purposes) that is created or organized in or under the laws of the United States or of a political subdivision thereof (or the District of Columbia); |
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an estate whose income is subject to U.S. federal income taxation regardless of its source; or |
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any trust if (1) a U.S. court is able to exercise primary supervision over the administration of such trust and one or more U.S. persons have the authority to control all substantial decisions of the trust, or (2) it has a valid election in place to be treated as a U.S. person for U.S. federal income tax purposes. |
If an entity or arrangement classified as a partnership for U.S. federal income tax purposes holds common stock, the U.S. federal income tax treatment of a partner generally will depend upon the status of the partner and the activities of the partnership. A partner of a partnership holding common stock should consult its own tax advisor regarding the U.S. federal income tax consequences to the partner of the acquisition, ownership and disposition of common stock by the partnership.
Taxation of Distributions from FINV
Subject to the PFIC rules discussed below, the gross amount (i.e., before Dutch withholding tax) of distributions paid by FINV to a U.S. Holder with respect to common stock generally will be treated as a dividend to the extent paid out of the FINVs current or accumulated earnings and profits (as determined under U.S. federal income tax principles). Such dividend generally will be includible in a U.S. Holders gross income in accordance with the U.S. Holders method of accounting. U.S. Holders that are corporations will not be entitled to claim a dividends received deduction with respect to dividends they receive from FINV because FINV is not a U.S. corporation. Dividends received with respect to common stock generally will be treated as foreign-source passive category income for purposes of computing allowable foreign tax credits for U.S. federal income tax purposes. However, as described below in Foreign Tax Credit Limitations, all or a portion of such dividends could be treated as U.S.-source income.
Dividends to a U.S. Holder in excess of the FINVs earnings and profits will be treated first as a tax-free return of capital to the extent of the U.S. Holders tax basis in common stock and will reduce (but not below zero) such basis (thereby increasing the amount of gain or decreasing the amount of loss that a U.S. Holder would recognize on a subsequent disposition of common stock). A distribution in excess of earnings and profits and the U.S. Holders tax basis in common stock will be treated as gain from the sale or exchange of such common stock, the consequences of which are described below under Taxation of Sale, Exchange or Other Taxable Disposition of Common Stock. FINV intends to calculate its earnings and profits under U.S. federal income tax principles, so that U.S. Holders can determine the portion of dividends on common stock that will be treated as a dividend.
Dividends received from FINV by a U.S. Holder who is an individual, trust or estate (a U.S. Individual Holder) generally will continue to be treated as qualified dividend income, which is currently taxable to such U.S. Individual Holder at preferential capital gain tax rates, provided that (i) FINV is a qualified foreign corporation; (ii) FINV is not a PFIC for the taxable year during which the dividend is paid or the immediately preceding taxable year (which management of FINV does not believe FINV is, has been or will be, as discussed below under PFIC Status and Significant Tax Consequences); (iii) the U.S. Individual Holder has owned the common stock for more than 60 days during the 121-day period beginning 60 days before the date on which the common stock become ex-dividend (and has not entered into certain risk limiting transactions with respect to such common stock); and (iv) the U.S. Individual Holder is not under an obligation to make related payments with respect to positions in substantially similar or related property. A foreign corporation is treated as a qualified foreign corporation with respect to dividends paid by that corporation on shares that are readily tradable on an established securities market in the United States. U.S. Treasury Department guidance indicates that our common stock, which we intend to list on the NYSE, will be readily tradable on an established securities market in the United States as a result of such listing. There can be no assurance that our common stock will be considered readily tradable on an established securities market in later years.
There is no assurance that any dividends paid on common stock will be eligible for taxation at preferential capital gains tax rates in the hands of a U.S. Individual Holder, and any dividends paid on common stock that are
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not eligible for these preferential rates will be taxed as ordinary income to a U.S. Individual Holder. U.S. Individual Holders should consult their tax advisors regarding the availability of the preferential rates applicable to qualified dividend income for any dividends FINV pays with respect to the common stock.
Taxation of Sale, Exchange or Other Taxable Disposition of Common Stock
Subject to the PFIC rules discussed below, upon the sale, exchange or other taxable disposition of a share of common stock, a U.S. Holder generally will recognize gain or loss equal to the difference between the amount realized upon the sale, exchange or other disposition and such U.S. Holders adjusted tax basis in the share. The U.S. Holders adjusted tax basis in the share of common stock will generally equal the cost of such share, reduced by any dividends treated as a tax-free return of capital as discussed above under Taxation of Dividends from FINV. Such gain or loss generally will be capital gain or loss and generally will be long-term capital gain or loss if the U.S. Holders holding period for the share of common stock exceeds one year on the date of the sale or disposition. Certain U.S. Holders (including individuals) may be eligible for preferential rates of U.S. federal income tax in respect of long-term capital gains. A U.S. Holders ability to deduct capital losses is subject to limitations. Such capital gain or loss generally will be treated as U.S. source income or loss, as applicable, for U.S. foreign tax credit purposes.
PFIC Status and Significant Tax Consequences
In general, a non-U.S. corporation is a PFIC for any taxable year in which either:
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at least 75% of its gross income (including its proportionate share of the gross income of any other corporation in which it owns, directly or indirectly, 25% or more (by value) of such corporations stock) for such taxable year consists of certain types of passive income (e.g., dividends, interest, capital gains, royalties and, the excess of gains over losses from sales of commodities); or |
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at least 50% of the average value of its assets (including its proportionate share of the assets of any other corporation in which it owns, directly or indirectly, 25% or more (by value) of such corporations stock) is attributable to assets that produce, or are held for the production of, passive income. |
If FINV were to be treated as a PFIC for any taxable year, a U.S. Holder generally would be subject to adverse rules resulting in increased tax liability with respect to (1) any excess distribution (i.e., the portion of any dividends received by the U.S. Holder on its common stock in a taxable year in excess of 125% of the average annual dividends received by the U.S. Holder in the three preceding taxable years, or, if shorter, the U.S. Holders holding period for its common stock), and (2) any gain realized on the sale, exchange or other disposition of its common stock. In addition, the U.S. Holder would be required to file an annual report with the IRS.
Under the special rules applicable to PFICs:
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any excess distribution (as described above) or gain would be allocated ratably over the U.S. Holders aggregate holding period for common stock; |
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the amount allocated to the current taxable year and any taxable year prior to the taxable year FINV was first treated as a PFIC with respect to the U.S. Holder would be taxed as ordinary income; and |
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the amount allocated to each of the other taxable years would be subject to tax at the highest rate of tax in effect for the applicable class of taxpayers for that year, and an interest charge for the deemed deferral benefit would be imposed with respect to the resulting tax attributable to each such other taxable year. Certain elections may be available to mitigate the tax consequences of PFIC status. |
Based on estimates of FINVs gross income, the nature and value of its assets, the manner in which it conducts its business, and the expectation for the manner in which such business will be conducted in the future, FINV does not believe it is a PFIC, and it does not expect to become a PFIC in the future. However, there is no
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definitive guidance regarding the treatment of FINVs income or assets, or the characterization of power generation activities more generally, for purposes of the applicable PFIC tests. Furthermore, no assurance can be given that FINVs manner of operation, or the composition of its income or assets, will not change in the future. Consequently, no assurance can be given that FINV is not and will not be a PFIC in the future.
If FINV were to be treated as a PFIC for any taxable year, a U.S. Holder would be subject to different taxation rules if the U.S. Holder were to make an election to treat FINV as a Qualified Electing Fund or were to make a mark-to-market election with respect to the common stock.
The PFIC rules are very complex and are not described completely herein. U.S. Holders are urged to consult their own tax advisors regarding the PFIC rules.
Foreign Tax Credit Limitations
U.S. Holders may be subject to Dutch withholding tax on distributions paid with respect to common stock. Subject to certain conditions and limitations, including any applicable foreign tax credit limitations, such withholding taxes may be treated as foreign taxes eligible for credit against a U.S. Holders U.S. federal income tax liability. If it is determined that U.S. persons own 50% or more of the common stock, then for purposes of computing a U.S. Holders foreign tax credit limitation, at least a portion of the dividends paid with respect to the common stock may be U.S.-source income if more than a de minimis amount of FINVs earnings and profits out of which the dividends are paid is from sources within the United States. A U.S. Holder may be unable to determine what portion of a dividend from FINV is treated as foreign-source income for foreign tax credit purposes. To the extent that a U.S. Holder is unable to establish that all or any portion of a dividend from FINV is foreign-source income, the value of any potential foreign tax credit attributable to foreign withholding taxes on FINVs dividends could be limited. In addition, foreign taxes may not be eligible for credit to the extent they could have been reduced pursuant to the U.S.-Netherlands Tax Treaty.
To the extent that distributions paid with respect to common stock are in excess of FINVs current and accumulated earnings and profits and in excess of adjusted basis, such distributions are treated as gain from the sale or disposition of the common stock. Consequently, such distributions would generally not give rise to foreign source income. Any Dutch withholding tax imposed on such distributions would generally not qualify for the foreign tax credit unless such credit could be applied (subject to applicable limitations) against U.S. federal income tax due on other foreign source income in the appropriate category for foreign tax credit purposes.
The rules governing foreign tax credits are complex and are not described completely herein. U.S. Holders are urged to consult their own tax advisors regarding the availability of foreign tax credits in their particular circumstances.
3.8% Medicare Tax on Unearned Income
Certain U.S. Holders that are individuals, trusts or estates will be subject to an additional 3.8% Medicare tax on unearned income, which generally will include dividends received and gain recognized with respect to common stock. For U.S. Individual Holders, the additional Medicare tax applies to the lesser of (i) net investment income, or (ii) the excess of modified adjusted gross income over $200,000 ($250,000 if married and filing jointly or $125,000 if married and filing separately). Net investment income generally equals a holders gross investment income reduced by the deductions that are allocable to such income. Investment income generally includes passive income such as interest, dividends, annuities, royalties, rents and capital gains. U.S. holders are urged to consult their own tax advisors regarding the implications of this additional Medicare tax to their particular circumstances.
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Information Reporting and Backup Withholding
Distributions paid with respect to common stock and proceeds from a sale, exchange or redemption of common stock made within the United States or through certain U.S.-related financial intermediaries may be subject to information reporting to the IRS and possible U.S. backup withholding. Backup withholding will not apply, however, to a U.S. Holder who furnishes a correct taxpayer identification number and makes any other required certification on IRS Form W-9 or that is a corporation or entity that is otherwise exempt from backup withholding. U.S. Holders who are exempt from backup withholding should still complete IRS Form W-9 to avoid possible erroneous backup withholding. U.S. Holders of common stock should consult their tax advisors regarding the application of the U.S. information reporting and backup withholding rules. A substitute IRS Form W-9 is attached hereto as Exhibit III.
Backup withholding is not an additional tax. Amounts withheld as backup withholding may be credited against such holders U.S. federal income tax liability, and such holder may obtain a refund of any excess amounts withheld under the backup withholding rules by filing an appropriate claim for refund with the IRS and furnishing any required information in a timely manner.
A U.S. Holder that purchases common stock from FINV pursuant to this offering generally will be required to file Form 926 with the IRS with respect to such purchase if the amount of cash paid by the holder to FINV pursuant to this offering exceeds $100,000. For purposes of determining the total dollar value of common stock purchased by a U.S. Holder in this offering, common stock purchased by certain related parties (including family members) are included. Substantial penalties may be imposed upon a U.S. Holder who fails to comply with this reporting obligation. Each U.S. Holder should consult its own tax advisor as to the possible obligation to file IRS Form 926.
In addition, under U.S. federal income tax law and temporary and proposed Treasury Regulations, individual citizens or residents of the United States who hold certain specified foreign financial assets that exceed certain thresholds (the lowest being holding specified foreign financial assets with an aggregate value in excess of: (1) $50,000 on the last day of the tax year, or (2) $75,000 at any time during the tax year) are required to report information relating to such assets. The definition of specified foreign financial assets generally includes not only financial accounts maintained in foreign financial institutions, but also, unless held in accounts maintained by a financial institution, any stock or security issued by a non-U.S. person, any financial instrument or contract held for investment that has an issuer or counterparty other than a U.S. person, and any interest in a foreign entity. U.S. Individual Holders may be subject to these reporting requirements unless their common stock is held in an account at a U.S. financial institution. Significant penalties may apply for failure to satisfy the reporting obligations described above. U.S. Holders should consult with their own tax advisors regarding their reporting obligations, if any, as a result of their purchase, ownership or disposition of common stock.
THE DISCUSSION ABOVE IS A GENERAL SUMMARY. IT DOES NOT COVER ALL TAX MATTERS THAT MAY BE IMPORTANT TO YOU. PROSPECTIVE INVESTORS SHOULD CONSULT THEIR TAX ADVISORS REGARDING THE APPLICATION OF THE U.S. FEDERAL TAX RULES TO THEIR PARTICULAR CIRCUMSTANCES AS WELL AS THE STATE, LOCAL, NON-U.S. AND OTHER TAX CONSEQUENCES TO THEM OF THE PURCHASE, OWNERSHIP AND DISPOSITION OF COMMON STOCK.
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Barclays Capital Inc., Credit Suisse Securities (USA) LLC, Simmons & Company International, Citigroup Global Markets Inc., Morgan Stanley & Co. LLC, Goldman, Sachs & Co. and UBS Securities LLC are acting as joint book-running managers of this offering and Barclays Capital Inc., Credit Suisse Securities (USA) LLC and Simmons & Company International are acting as representatives of the underwriters named below. Under the terms of an underwriting agreement, which is filed as an exhibit to the registration statement relating to this prospectus, each of the underwriters named below has severally agreed to purchase from us the respective number of shares of common stock shown opposite its name below:
Underwriters |
Number of
Shares |
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Barclays Capital Inc. |
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Credit Suisse Securities (USA) LLC |
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Simmons & Company International |
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Citigroup Global Markets Inc. |
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Morgan Stanley & Co. LLC |
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Goldman, Sachs & Co. |
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UBS Securities LLC |
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Capital One Southcoast, Inc. |
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Tudor, Pickering, Holt & Co. Securities, Inc. |
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Global Hunter Securities, LLC |
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Johnson Rice & Company L.L.C. |
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FBR Capital Markets & Co. |
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Scotia Capital (USA) Inc. |
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Total |
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The underwriters are obligated to purchase all of the shares of common stock offered hereby (other than those shares covered by their option to purchase additional shares of common stock as described below), if any of the shares of common stock are purchased. The underwriting agreement provides that the underwriters obligation to purchase the shares of common stock depends on the satisfaction of the conditions contained in the underwriting agreement, including:
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the representations and warranties made by us to the underwriters are true; |
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there is no material change in our business or the financial markets; and |
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we deliver customary closing documents to the underwriters. |
Commissions and Expenses
The following table summarizes the underwriting discounts and commissions we will pay to the underwriters. These amounts are shown assuming both no exercise and full exercise of the underwriters option to purchase additional shares of common stock. The underwriting fee is the difference between the initial price to the public and the amount the underwriters pay to us for the shares.
No
Exercise |
Full
Exercise |
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Per share |
$ | $ | ||||||
Total |
$ | $ |
We also have agreed to reimburse the underwriters for up to $30,000 of any fees and expenses of counsel related to the review by the Financial Industry Regulatory Authority, Inc., or FINRA, of the terms of sale of the common stock offered hereby.
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The representatives of the underwriters have advised us that the underwriters propose to offer the shares of common stock directly to the public at the public offering price on the cover of this prospectus and to selected dealers, which may include the underwriters, at such offering price less a selling concession not in excess of $ per share. After the offering, the representatives may change the offering price and other selling terms. Sales of shares made outside of the United States may be made by affiliates of the underwriters.
The expenses of the offering that are payable by us are estimated to be $ million (excluding underwriting discounts and commissions).
Option to Purchase Additional Shares
We have granted the underwriters an option exercisable for 30 days after the date of the underwriting agreement, to purchase, from time to time, in whole or in part, up to an aggregate of shares at the public offering price less underwriting discounts and commissions. This option may be exercised if the underwriters sell more than shares of common stock in connection with this offering. To the extent that this option is exercised, each underwriter will be obligated, subject to certain conditions, to purchase its pro rata portion of these additional shares based on the underwriters underwriting commitment in the offering as indicated in the table at the beginning of this Underwriting section.
Lock-Up Agreements
We, all of our directors and executive officers and certain of our principal shareholders, including FWW and Mosing Holdings, have agreed that, subject to certain exceptions, without the prior written consent of Barclays Capital Inc. and Credit Suisse Securities (USA) LLC, we and they will not directly or indirectly, (1) offer for sale, sell, pledge, or otherwise dispose of (or enter into any transaction or device that is designed to, or could be expected to, result in the disposition by any person at any time in the future of) any shares of common stock (including, without limitation, shares of common stock that may be deemed to be beneficially owned by us or them in accordance with the rules and regulations of the SEC and shares of common stock that may be issued upon exercise of any options or warrants) or securities convertible into or exercisable or exchangeable for common stock, (2) enter into any swap or other derivatives transaction that transfers to another, in whole or in part, any of the economic consequences of ownership of the common stock, (3) make any demand for or exercise any right or file or cause to be filed a registration statement, including any amendments thereto, with respect to the registration of any shares of common stock or securities convertible, exercisable or exchangeable into common stock or any of our other securities, or (4) publicly disclose the intention to do any of the foregoing for a period of 180 days after the date of this prospectus. The lock-up agreements will not restrict the transfer of common stock as bona fide gifts, so long as, among other things, the transferee agrees to be bound by the restrictions in the lock-up agreements. Subject to certain restrictions, the lock-up agreements also will not restrict the establishment of a trading plan pursuant to Rule 10b5-1 under the Exchange Act for the transfer of shares of our common stock.
The 180-day restricted period described in the preceding paragraph will be extended if:
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during the last 17 days of the 180-day restricted period we issue an earnings release or material news or a material event relating to us occurs; or |
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prior to the expiration of the 180-day restricted period, we announce that we will release earnings results during the 16-day period beginning on the last day of the 180-day period, |
in which case the restrictions described in the preceding paragraph will continue to apply until the expiration of the 18-day period beginning on the issuance of the earnings release or the announcement of the material news or occurrence of a material event, unless such extension is waived in writing by Barclays Capital Inc. and Credit Suisse Securities (USA) LLC.
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Barclays Capital Inc. and Credit Suisse Securities (USA) LLC may release the common stock and other securities subject to the lock-up agreements described above in whole or in part at any time with or without notice. When determining whether or not to release common stock and other securities from lock-up agreements, Barclays Capital Inc. and Credit Suisse Securities (USA) LLC will consider, among other factors, the holders reasons for requesting the release, the number of shares of common stock and other securities for which the release is being requested and market conditions at the time.
As described below under Directed Share Program, any participants in the Directed Share Program shall be subject to a 180-day lock up with respect to any shares sold to them pursuant to that program. This lock up will have similar restrictions and an identical extension provision as the lock-up agreement described above. Any shares sold in the Directed Share Program to our directors or officers shall be subject to the lock-up agreement described above.
Offering Price Determination
Prior to this offering, there has been no public market for our common stock. The initial public offering price was negotiated among the representatives and us. In determining the initial public offering price of our common stock, the representatives considered:
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the history and prospects for the industry in which we compete; |
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our financial information; |
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the ability of our management and our business potential and earning prospects; |
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the prevailing securities markets at the time of this offering; and |
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the recent market prices of, and the demand for, publicly traded shares of generally comparable companies. |
Indemnification
We and certain of our affiliates have agreed to indemnify the underwriters against certain customary liabilities, including liabilities under the Securities Act and liabilities incurred in connection with the directed share program referred to below, and to contribute to payments that the underwriters may be required to make for these liabilities.
Directed Share Program
At our request, the underwriters have reserved for sale at the initial public offering price up to shares offered hereby for officers, directors, employees and certain other persons associated with us. The number of shares available for sale to the general public will be reduced to the extent such persons purchase such reserved shares. Any reserved shares not so purchased will be offered by the underwriters to the general public on the same basis as the other shares offered hereby. Any participants in this program shall be prohibited from selling, pledging or assigning any shares sold to them pursuant to this program for a period of 180 days after the date of this prospectus. This 180-day lock up period shall be extended with respect to our issuance of an earnings release or if a material news or a material event relating to us occurs, in the same manner as described above under Lock-Up Agreements.
Stabilization, Short Positions and Penalty Bids
The representatives may engage in stabilizing transactions, short sales and purchases to cover positions created by short sales, and penalty bids or purchases for the purpose of pegging, fixing or maintaining the price of the common stock, in accordance with Regulation M under the Exchange Act:
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Stabilizing transactions permit bids to purchase the underlying security so long as the stabilizing bids do not exceed a specified maximum. |
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A short position involves a sale by the underwriters of shares in excess of the number of shares the underwriters are obligated to purchase in the offering, which creates the syndicate short position. This short position may be either a covered short position or a naked short position. In a covered short position, the number of shares involved in the sales made by the underwriters in excess of the number of shares they are obligated to purchase is not greater than the number of shares that they may purchase by exercising their option to purchase additional shares of common stock. In a naked short position, the number of shares involved is greater than the number of shares in their option to purchase additional shares of common stock. The underwriters may close out any short position by either exercising their option to purchase additional shares of common stock and/or purchasing shares of common stock in the open market. In determining the source of shares to close out the short position, the underwriters will consider, among other things, the price of shares available for purchase in the open market as compared to the price at which they may purchase shares through their option to purchase additional shares of common stock. A naked short position is more likely to be created if the underwriters are concerned that there could be downward pressure on the price of the shares in the open market after pricing that could adversely affect investors who purchase in the offering. |
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Syndicate covering transactions involve purchases of the common stock in the open market after the distribution has been completed in order to cover syndicate short positions. |
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Penalty bids permit the representatives to reclaim a selling concession from a syndicate member when the common stock originally sold by the syndicate member is purchased in a stabilizing or syndicate covering transaction to cover syndicate short positions. |
These stabilizing transactions, syndicate covering transactions and penalty bids may have the effect of raising or maintaining the market price of our common stock or preventing or retarding a decline in the market price of the common stock. As a result, the price of the common stock may be higher than the price that might otherwise exist in the open market. These transactions may be effected on the NYSE or otherwise and, if commenced, may be discontinued at any time.
Neither we nor any of the underwriters make any representation or prediction as to the direction or magnitude of any effect that the transactions described above may have on the price of the common stock. In addition, neither we nor any of the underwriters make representation that the representatives will engage in these stabilizing transactions or that any transaction, once commenced, will not be discontinued without notice.
Electronic Distribution
A prospectus in electronic format may be made available on the Internet sites or through other online services maintained by one or more of the underwriters and/or selling group members participating in this offering, or by their affiliates. In those cases, prospective investors may view offering terms online and, depending upon the particular underwriter or selling group member, prospective investors may be allowed to place orders online. The underwriters may agree with us to allocate a specific number of shares for sale to online brokerage account holders. Any such allocation for online distributions will be made by the representatives on the same basis as other allocations.
Other than the prospectus in electronic format, the information on any underwriters or selling group members web site and any information contained in any other web site maintained by an underwriter or selling group member is not part of the prospectus or the registration statement of which this prospectus forms a part, has not been approved and/or endorsed by us or any underwriter or selling group member in its capacity as underwriter or selling group member and should not be relied upon by investors.
New York Stock Exchange
We have applied to list our shares of common stock for quotation on the NYSE under the symbol FI. In connection with that listing, the underwriters will undertake to sell the minimum number of shares of common stock to the minimum number of beneficial owners necessary to meet the NYSE listing requirements.
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Discretionary Sales
The underwriters have informed us that they do not intend to confirm sales to discretionary accounts that exceed 5% of the total number of shares offered by them.
Stamp Taxes
If you purchase shares of common stock offered in this prospectus, you may be required to pay stamp taxes and other charges under the laws and practices of the country of purchase, in addition to the offering price listed on the cover page of this prospectus.
Relationships
Certain of the underwriters and their affiliates have engaged, and may in the future engage, in investment banking transactions with us in the ordinary course of their business. They have received, and expect to receive, customary compensation and expense reimbursement for these investment banking transactions.
In addition, in the ordinary course of their business activities, the underwriters and their affiliates may make or hold a broad array of investments and actively trade debt and equity securities (or related derivative securities) and financial instruments (including bank loans) for their own account and for the accounts of their customers. Such investments and securities activities may involve securities and/or instruments of ours or our affiliates. The underwriters and their affiliates may also make investment recommendations and/or publish or express independent research views in respect of such securities or financial instruments and may hold, or recommend to clients that they acquire, long and/or short positions in such securities and instruments.
Selling Restrictions
European Economic Area
In relation to each member state of the European Economic Area which has implemented the Prospectus Directive (each, a Relevant Member State), including each Relevant Member State that has implemented the 2010 PD Amending Directive with regard to persons to whom an offer of securities is addressed and the denomination per unit of the offer of securities (each, an Early Implementing Member State), with effect from and including the date on which the Prospectus Directive is implemented in that Relevant Member State (the Relevant Implementation Date), no offer of shares will be made to the public in that Relevant Member State (other than offers (the Permitted Public Offers) where a prospectus will be published in relation to the shares that has been approved by the competent authority in a Relevant Member State or, where appropriate, approved in another Relevant Member State and notified to the competent authority in that Relevant Member State, all in accordance with the Prospectus Directive), except that with effect from and including that Relevant Implementation Date, offers of shares may be made to the public in that Relevant Member State at any time:
(a) | to qualified investors as defined in the Prospectus Directive, including: |
(i) | (in the case of Relevant Member States other than Early Implementing Member States), legal entities which are authorized or regulated to operate in the financial markets or, if not so authorized or regulated, whose corporate purpose is solely to invest in securities, or any legal entity which has two or more of (i) an average of at least 250 employees during the last financial year; (ii) a total balance sheet of more than 43.0 million and (iii) an annual turnover of more than 50.0 million as shown in its last annual or consolidated accounts; or |
(ii) | (in the case of Early Implementing Member States), persons or entities that are described in points (1) to (4) of Section I of Annex II to Directive 2004/39/EC, and those who are treated on request as professional clients in accordance with Annex II to Directive 2004/39/EC, or recognized as eligible counterparties in accordance with Article 24 of Directive 2004/39/EC unless they have requested that they be treated as non-professional clients; |
151
(b) | to fewer than 100 (or, in the case of Early Implementing Member States, 150) natural or legal persons (other than qualified investors as defined in the Prospectus Directive), as permitted in the Prospectus Directive, subject to obtaining the prior consent of the representatives for any such offer; or |
(c) | in any other circumstances falling within Article 3(2) of the Prospectus Directive, provided that no such offer of shares shall result in a requirement for the publication of a prospectus pursuant to Article 3 of the Prospectus Directive or of a supplement to a prospectus pursuant to Article 16 of the Prospectus Directive. |
Each person in a Relevant Member State (other than a Relevant Member State where there is a Permitted Public Offer) who initially acquires any shares or to whom any offer is made will be deemed to have represented, acknowledged and agreed that (A) it is a qualified investor, and (B) in the case of any shares acquired by it as a financial intermediary, as that term is used in Article 3(2) of the Prospectus Directive, (x) the shares acquired by it in the offering have not been acquired on behalf of, nor have they been acquired with a view to their offer or resale to, persons in any Relevant Member State other than qualified investors as defined in the Prospectus Directive, or in circumstances in which the prior consent of the Subscribers has been given to the offer or resale, or (y) where shares have been acquired by it on behalf of persons in any Relevant Member State other than qualified investors as defined in the Prospectus Directive, the offer of those shares to it is not treated under the Prospectus Directive as having been made to such persons.
For the purpose of the above provisions, the expression an offer to the public in relation to any shares in any Relevant Member State means the communication in any form and by any means of sufficient information on the terms of the offer of any shares to be offered so as to enable an investor to decide to purchase any shares, as the same may be varied in the Relevant Member State by any measure implementing the Prospectus Directive in the Relevant Member State and the expression Prospectus Directive means Directive 2003/71 EC (including the 2010 PD Amending Directive, in the case of Early Implementing Member States) and includes any relevant implementing measure in each Relevant Member State and the expression 2010 PD Amending Directive means Directive 2010/73/EU.
United Kingdom
This prospectus is only being distributed to, and is only directed at, persons in the United Kingdom that are qualified investors within the meaning of Article 2(1)(e) of the Prospectus Directive (Qualified Investors) that are also (i) investment professionals falling within Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (the Order) or (ii) high net worth entities, and other persons to whom it may lawfully be communicated, falling within Article 49(2)(a) to (d) of the Order (all such persons together being referred to as relevant persons). This prospectus and its contents are confidential and should not be distributed, published or reproduced (in whole or in part) or disclosed by recipients to any other persons in the United Kingdom. Any person in the United Kingdom that is not a relevant person should not act or rely on this document or any of its contents.
Australia
No prospectus or other disclosure document (as defined in the Corporations Act 2001 (Cth) of Australia (Corporations Act)) in relation to the shares has been or will be lodged with the Australian Securities &
Investments Commission (ASIC). This document has not been lodged with ASIC and is only directed to certain categories of exempt persons. Accordingly, if you receive this document in Australia:
(a) | you confirm and warrant that you are either: |
(i) | a sophisticated investor under section 708(8)(a) or (b) of the Corporations Act; |
152
(ii) | a sophisticated investor under section 708(8)(c) or (d) of the Corporations Act and that you have provided an accountants certificate to us which complies with the requirements of section 708(8)(c)(i) or (ii) of the Corporations Act and related regulations before the offer has been made; |
(iii) | a person associated with the company under section 708(12) of the Corporations Act; or |
(iv) | a professional investor within the meaning of section 708(11)(a) or (b) of the Corporations Act, and to the extent that you are unable to confirm or warrant that you are an exempt sophisticated investor, associated person or professional investor under the Corporations Act any offer made to you under this document is void and incapable of acceptance; and |
(b) | you warrant and agree that you will not offer any of the shares for resale in Australia within 12 months of those shares being issued unless any such resale offer is exempt from the requirement to issue a disclosure document under section 708 of the Corporations Act. |
Hong Kong
The shares may not be offered or sold in Hong Kong, by means of any document, other than (a) to professional investors as defined in the Securities and Futures Ordinance (Cap. 571, Laws of Hong Kong) and any rules made under that Ordinance or (b) in other circumstances which do not result in the document being a prospectus as defined in the Companies Ordinance (Cap. 32, Laws of Hong Kong) or which do not constitute an offer to the public within the meaning of that Ordinance. No advertisement, invitation or document relating to the shares may be issued or may be in the possession of any person for the purpose of the issue, whether in Hong Kong or elsewhere, which is directed at, or the contents of which are likely to be read by, the public in Hong Kong (except if permitted to do so under the laws of Hong Kong) other than with respect to the shares which are intended to be disposed of only to persons outside Hong Kong or only to professional investors as defined in the Securities and Futures Ordinance (Cap. 571, Laws of Hong Kong) or any rules made under that Ordinance.
India
This prospectus has not been and will not be registered as a prospectus with the Registrar of Companies in India or with the Securities and Exchange Board of India. This prospectus or any other material relating to these securities is for information purposes only and may not be circulated or distributed, directly or indirectly, to the public or any members of the public in India and in any event to not more than 50 persons in India. Further, persons into whose possession this prospectus comes are required to inform themselves about and to observe any such restrictions. Each prospective investor is advised to consult its advisors about the particular consequences to it of an investment in these securities. Each prospective investor is also advised that any investment in these securities by it is subject to the regulations prescribed by the Reserve Bank of India and the Foreign Exchange Management Act and any regulations framed thereunder.
Japan
No securities registration statement (SRS) has been filed under Article 4, Paragraph 1 of the Financial Instruments and Exchange Law of Japan (Law No. 25 of 1948, as amended) (FIEL) in relation to the shares. The shares are being offered in a private placement to qualified institutional investors (tekikaku-kikan-toshika) under Article 10 of the Cabinet Office Ordinance concerning Definitions provided in Article 2 of the FIEL (the Ministry of Finance Ordinance No. 14, as amended) (QIIs), under Article 2, Paragraph 3, Item 2 i of the FIEL. Any QII acquiring the shares in this offer may not transfer or resell those shares except to other QIIs.
Korea
The shares may not be offered, sold and delivered directly or indirectly, or offered or sold to any person for reoffering or resale, directly or indirectly, in Korea or to any resident of Korea except pursuant to the applicable
153
laws and regulations of Korea, including the Korea Securities and Exchange Act and the Foreign Exchange Transaction Law and the decrees and regulations thereunder. The shares have not been registered with the Financial Services Commission of Korea for public offering in Korea. Furthermore, the shares may not be resold to Korean residents unless the purchaser of the shares complies with all applicable regulatory requirements (including but not limited to government approval requirements under the Foreign Exchange Transaction Law and its subordinate decrees and regulations) in connection with the purchase of the shares.
Singapore
This prospectus has not been registered as a prospectus with the Monetary Authority of Singapore. Accordingly, this prospectus and any other document or material in connection with the offer or sale, or invitation for subscription or purchase, of the shares may not be circulated or distributed, nor may the shares be offered or sold, or be made the subject of an invitation for subscription or purchase, whether directly or indirectly, to persons in Singapore other than (i) to an institutional investor under Section 274 of the Securities and Future Act, Chapter 289 of Singapore (the SFA), (ii) to a relevant person as defined in Section 275(2) of the SFA, or any person pursuant to Section 275 (1A), and in accordance with the conditions, specified in Section 275 of the SFA or (iii) otherwise pursuant to, and in accordance with the conditions of, any other applicable provision of the SFA.
Where the shares are subscribed and purchased under Section 275 of the SFA by a relevant person which is:
(a) | a corporation (which is not an accredited investor (as defined in Section 4A of the SFA)) the sole business of which is to hold investments and the entire share capital of which is owned by one or more individuals, each of whom is an accredited investor; or |
(b) | a trust (where the trustee is not an accredited investor (as defined in Section 4A of the SFA)) whose sole whole purpose is to hold investments and each beneficiary is an accredited investor, shares, debentures and units of shares and debentures of that corporation or the beneficiaries rights and interest (howsoever described) in that trust shall not be transferable within six months after that corporation or that trust has acquired the shares under Section 275 of the SFA except: |
(i) | to an institutional investor under Section 274 of the SFA or to a relevant person (as defined in Section 275(2) of the SFA) and in accordance with the conditions, specified in Section 275 of the SFA; |
(ii) | (in the case of a corporation) where the transfer arises from an offer referred to in Section 275(1A) of the SFA, or (in the case of a trust) where the transfer arises from an offer that is made on terms that such rights or interests are acquired at a consideration of not less than S$200,000 (or its equivalent in a foreign currency) for each transaction, whether such amount is to be paid for in cash or by exchange of securities or other assets; |
(iii) | where no consideration is or will be given for the transfer; or |
(iv) | where the transfer is by operation of law. |
By accepting this prospectus, the recipient hereof represents and warrants that he is entitled to receive it in accordance with the restrictions set forth above and agrees to be bound by limitations contained herein. Any failure to comply with these limitations may constitute a violation of law.
154
Certain legal matters in connection with this offering relating to United States law and certain matters relating to United States federal income taxation will be passed upon for us by Vinson & Elkins L.L.P., Houston, Texas. The validity of the common stock being offered by this prospectus and other legal matters concerning this offering relating to Dutch law will be passed upon for us by Van Campen Liem, Amsterdam, The Netherlands. Certain legal matters in connection with this offering will be passed upon for the underwriters by Latham & Watkins LLP, Houston, Texas.
The audited combined financial statements of Franks International N.V. as of December 31, 2011 and 2012 and for each of the three years in the period ended December 31, 2012 included in this prospectus have been so included in reliance on the report of PricewaterhouseCoopers LLP, an independent registered public accounting firm given on the authority of such firm as experts in auditing and accounting.
155
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the SEC a registration statement on Form S-1 (including the exhibits, schedules and amendments thereto) under the Securities Act, with respect to the shares of our common stock offered hereby. This prospectus does not contain all of the information set forth in the registration statement and the exhibits and schedules thereto. For further information with respect to us and the common stock offered hereby, we refer you to the registration statement and the exhibits and schedules filed therewith. Statements contained in this prospectus as to the contents of any contract, agreement or any other document are summaries of the material terms of this contract, agreement or other document. With respect to each of these contracts, agreements or other documents filed as an exhibit to the registration statement, reference is made to the exhibits for a more complete description of the matter involved. A copy of the registration statement, and the exhibits and schedules thereto, may be inspected without charge at the public reference facilities maintained by the SEC at 100 F Street NE, Washington, D.C. 20549. Copies of these materials may be obtained, upon payment of a duplicating fee, from the Public Reference Section of the SEC at 100 F Street NE, Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further information on the operation of the public reference facility. The SEC maintains a website that contains reports, proxy and information statements and other information regarding registrants that file electronically with the SEC. The address of the SECs website is www.sec.gov .
After we have completed this offering, we will file annual, quarterly and current reports, proxy statements and other information with the SEC. We expect to make our periodic reports and other information filed with or furnished to the SEC available, free of charge, through our website, as soon as reasonably practicable after those reports and other information are electronically filed with or furnished to the SEC. Information on our website or any other website is not incorporated by reference into this prospectus and does not constitute a part of this prospectus. We will provide electronic or paper copies of our filings free of charge upon request.
156
FRANKS INTERNATIONAL
F-1
FRANKS INTERNATIONAL
UNAUDITED PRO FORMA CONDENSED FINANCIAL STATEMENTS
The following unaudited pro forma condensed financial statements of Franks International (the Company) reflect the historical combined financial statements of Franks International on a pro forma basis. Under the combined method of accounting, the historical consolidated financial statements of Franks International N.V., Franks International, Inc., Franks Casing Crew and Rental Tools, Inc. and Franks Tong Service, Inc. and their wholly owned subsidiaries are combined as if Franks International operated as a single entity.
The pro forma adjustments give effect to (i) the carve-out distribution of certain assets and liabilities from the Companys U.S. operating subsidiaries to Mosing Holdings, Inc., (ii) the corporate reorganization described in Organizational Structure and (iii) the issuance and sale of sale of shares of the Companys common stock to the public for estimated net proceeds of $ million and the application by the Company of the net proceeds from such issuance as described in Use of Proceeds.
The unaudited pro forma condensed balance sheet is based on Franks Internationals unaudited historical combined balance sheet as of March 31, 2013 and includes the pro forma adjustments summarized above as if they had occurred on March 31, 2013.
The unaudited pro forma condensed statement of income for the year ended December 31, 2012 is based on Franks Internationals audited historical combined statement of income and the unaudited pro forma condensed statement of income for the three months ended March 31, 2013 is based on Franks International unaudited historical combined statement of income. The pro forma adjustments summarized above are included as if they had occurred on January 1, 2012.
In addition, an additional set of pro forma condensed financial statements has also been prepared reflecting an alternative scenario under which, in addition to the adjustments discussed above, additional adjustments were made to reflect the full conversion of shares of Series A preferred stock into FINV common stock (the Conversion Right).
The unaudited pro forma condensed financial statements should be read in conjunction with the notes accompanying these unaudited pro forma condensed financial statements and with Franks Internationals historical combined financial statements and related notes found elsewhere in this prospectus.
The pro forma adjustments to the audited financial statements are based on currently available information and certain estimates and assumptions. The actual effect of the pro forma adjustments discussed in the accompanying notes ultimately may differ from the unaudited pro forma adjustments included herein. However, management believes that the assumptions used to prepare the pro forma adjustments provide a reasonable basis for presenting the significant effects as currently contemplated and that the unaudited pro forma adjustments are factually supportable, give appropriate effect to the expected impact of events that are directly attributable to the pro forma adjustments, and reflect those items expected to have a continuing impact on the Company.
The unaudited pro forma condensed financial statements are not necessarily indicative of the results that actually would have occurred if the Company had completed the transactions on the dates indicated or that could be achieved in the future.
Upon completion of this offering, the Company anticipates that general and administrative expenses will increase as a result of being a publicly traded company, including: expenses associated with annual and quarterly reporting; tax return preparation expenses; Sarbanes-Oxley compliance expenses; expenses associated with listing on the New York Stock Exchange; independent auditor fees; legal fees; investor relations expenses; and registrar and transfer agent fees. The unaudited pro forma financial statements do not reflect these additional public company costs.
F-2
FRANKS INTERNATIONAL
UNAUDITED PRO FORMA CONDENSED BALANCE SHEET
March 31, 2013
(in thousands)
FINV
Historical |
Distribution of
Assets and Liabilities |
Reorganization
Transactions |
FINV
Pro Forma |
Offering
Related Adjustments |
FINV
As Adjusted for Offering |
|||||||||||||||||||
Assets |
||||||||||||||||||||||||
Current assets: |
||||||||||||||||||||||||
Cash and cash equivalents |
$ | 123,392 | $ | | $ | $ | $ | (f) | $ | |||||||||||||||
(g) | ||||||||||||||||||||||||
Accounts receivable, net |
319,057 | (6,769 | )(a) | |||||||||||||||||||||
Inventories |
128,471 | | ||||||||||||||||||||||
Other current assets |
15,556 | (2,750 | )(a) | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total current assets |
586,476 | (9,519 | ) | |||||||||||||||||||||
Property, plant and equipment, net |
449,789 | (24,702 | )(a) | |||||||||||||||||||||
Goodwill |
15,239 | | ||||||||||||||||||||||
Intangible assets |
1,595 | | ||||||||||||||||||||||
Other assets, net |
76,219 | (29,367 | )(a) | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total assets |
$ | 1,129,318 | $ | (63,588 | ) | $ | $ | $ | $ | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Liabilities and Shareholders Equity |
||||||||||||||||||||||||
Current liabilities: |
||||||||||||||||||||||||
Current portion of long-term debt |
$ | 4,815 | $ | (799 | )(a) | $ | $ | $ | ||||||||||||||||
Current portion of notes payable affiliates |
323,476 | (595 | )(a) | (g) | ||||||||||||||||||||
Accounts payable |
26,134 | (2 | )(a) | |||||||||||||||||||||
Accrued expenses and other current liabilities |
115,797 | |||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total current liabilities |
470,222 | (1,396 | ) | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Long-term debt |
||||||||||||||||||||||||
Long-term debt |
1,043 | | ||||||||||||||||||||||
Notes payableaffiliates |
125,362 | (1,654 | )(a) | (g) | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total long-term debt |
126,405 | (1,654 | ) | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Deferred tax liability, net |
6,029 | | ||||||||||||||||||||||
Other non-current liabilities |
33,011 | | ||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total liabilities |
635,667 | (3,050 | ) | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Series A preferred stock |
| | (d) | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Shareholders equity |
||||||||||||||||||||||||
Common stock |
803 | | (f) | |||||||||||||||||||||
Additional paid-in capital |
1,409 | | (d) | (f) | ||||||||||||||||||||
Retained earnings |
491,145 | (60,538 | )(a) | (c) | ||||||||||||||||||||
Accumulated other comprehensive income |
294 | | (c) | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total shareholders equity |
493,651 | (60,538 | ) | |||||||||||||||||||||
Non-controlling interest |
| | (c) | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total shareholders equity |
493,651 | (60,538 | ) | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total liabilities and shareholders equity |
$ | 1,129,318 | $ | (63,588 | ) | $ | $ | $ | $ | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these unaudited pro forma condensed financial statements.
F-3
FRANKS INTERNATIONAL
UNAUDITED PRO FORMA CONDENSED STATEMENT OF INCOME
For the Year Ended December 31, 2012
(In thousands, except per share data)
FINV
Historical |
Distribution of
Assets and Liabilities |
Reorganization
Transactions |
FINV
Pro Forma |
Offering
Related Adjustments |
FINV
As Adjusted for Offering |
|||||||||||||||||||
Revenues |
||||||||||||||||||||||||
Equipment rentals and services |
$ | 880,084 | $ | (1,146 | )(a) | $ | $ | $ | $ | |||||||||||||||
Products |
175,841 | | ||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total revenues |
1,055,925 | (1,146 | ) | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Operating expenses |
||||||||||||||||||||||||
Cost of revenues, exclusive of depreciation and amortization |
||||||||||||||||||||||||
Equipment rentals and services |
314,950 | | ||||||||||||||||||||||
Products |
119,527 | | ||||||||||||||||||||||
General and administrative |
187,033 | (3,580 | )(a) | |||||||||||||||||||||
4,956 | (b) | |||||||||||||||||||||||
Depreciation and amortization |
66,215 | (2,067 | )(a) | |||||||||||||||||||||
Gain on sale of assets |
(2,608 | ) | | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Operating income (loss) |
370,808 | (455 | ) | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Other income (expense): |
||||||||||||||||||||||||
Other income |
12,189 | | ||||||||||||||||||||||
Interest income (expense), net |
264 | 204 | (a) | (g) | ||||||||||||||||||||
Foreign currency loss |
(450 | ) | | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total other income (expense) |
12,003 | 204 | ||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Income (loss) before income taxes |
382,811 | (251 | ) | |||||||||||||||||||||
Income tax expense |
31,877 | | (e) | (g) | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Net income |
350,934 | (251 | ) | |||||||||||||||||||||
Non-controlling interest |
| | (c) | (g) | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Net income (loss) attributable to Franks International |
350,934 | (251 | ) | |||||||||||||||||||||
Preferred stock dividends |
| | (d) | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Net income (loss) attributable to common shareholders |
$ | 350,934 | $ | (251 | ) | $ | $ | $ | $ | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Basic and diluted earnings per share |
$ | |||||||||||||||||||||||
|
|
|||||||||||||||||||||||
Basic and diluted weighted average shares common stock outstanding |
||||||||||||||||||||||||
|
|
The accompanying notes are an integral part of these unaudited pro forma condensed financial statements.
F-4
FRANKS INTERNATIONAL
UNAUDITED PRO FORMA CONDENSED STATEMENT OF INCOME
For the Three Months Ended March 31, 2013
(In thousands, except per share data)
FINV
Historical |
Distribution of
Assets and Liabilities |
Reorganization
Transactions |
FINV
Pro Forma |
Offering
Related Adjustments |
FINV
As Adjusted for Offering |
|||||||||||||||||||
Revenues |
||||||||||||||||||||||||
Equipment rentals and services |
$ | 205,878 | $ | (235 | )(a) | $ | $ | $ | $ | |||||||||||||||
Products |
30,882 | | ||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total revenues |
236,760 | (235 | ) | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Operating expenses |
||||||||||||||||||||||||
Cost of revenues, excluding depreciation and amortization |
||||||||||||||||||||||||
Equipment rentals and services |
75,781 | | ||||||||||||||||||||||
Products |
18,019 | | ||||||||||||||||||||||
General and administrative |
44,145 | 50 | (a) | |||||||||||||||||||||
1,239 | (b) | |||||||||||||||||||||||
Depreciation and amortization |
17,783 | (419 | )(a) | |||||||||||||||||||||
Loss on sale of assets |
23 | | ||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Operating income (loss) |
81,009 | (1,105 | ) | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Other income (expense): |
||||||||||||||||||||||||
Other income |
2,127 | | ||||||||||||||||||||||
Interest income (expense), net |
(201 | ) | 34 | (a) | (g) | |||||||||||||||||||
Foreign currency loss |
(3,587 | ) | | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
(1,661 | ) | 34 | ||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Income (loss) before income taxes |
79,348 | (1,071 | ) | |||||||||||||||||||||
Income tax expense |
6,303 | | (e) | (g) | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Net income |
73,045 | (1,071 | ) | |||||||||||||||||||||
Non-controlling interest |
| | (c) | (g) | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Net income (loss) attributable to Franks International |
73,045 | (1,071 | ) | |||||||||||||||||||||
Preferred stock dividends |
| | (d) | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Net income (loss) attributable to common stockholders |
$ | 73,045 | $ | (1,071 | ) | $ | $ | $ | $ | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Basic and diluted earnings per share |
$ | |||||||||||||||||||||||
|
|
|||||||||||||||||||||||
Basic and diluted weighted average shares common stock outstanding |
||||||||||||||||||||||||
|
|
The accompanying notes are an integral part of these unaudited pro forma condensed financial statements.
F-5
FRANKS INTERNATIONAL
UNAUDITED PRO FORMA CONDENSED BALANCE SHEET
March 31, 2013
(in thousands)
FINV
As Adjusted for Offering |
Exercise of
Conversion Rights |
FINV
As Adjusted for Conversion |
||||||||||
Assets |
||||||||||||
Current assets: |
||||||||||||
Cash and cash equivalents |
$ | $ | $ | |||||||||
Accounts receivable, net |
||||||||||||
Inventories |
||||||||||||
Other current assets |
||||||||||||
|
|
|
|
|
|
|||||||
Total current assets |
||||||||||||
Property, plant and equipment, net |
||||||||||||
Goodwill |
||||||||||||
Intangible assets |
||||||||||||
Deferred tax asset |
(h) | |||||||||||
Other assets, net |
||||||||||||
|
|
|
|
|
|
|||||||
$ | $ | $ | ||||||||||
|
|
|
|
|
|
|||||||
Liabilities and Stockholders Equity |
||||||||||||
Current liabilities: |
||||||||||||
Current portion of long-term debt |
$ | $ | $ | |||||||||
Current portion of notes payableaffiliates |
||||||||||||
Accounts payable |
||||||||||||
Accrued expenses and other current liabilities |
||||||||||||
|
|
|
|
|
|
|||||||
Total current liabilities |
||||||||||||
|
|
|
|
|
|
|||||||
Long-term debt |
||||||||||||
Long-term debt |
||||||||||||
Notes payableaffiliates |
||||||||||||
|
|
|
|
|
|
|||||||
Total long-term debt |
||||||||||||
|
|
|
|
|
|
|||||||
Deferred tax liability, net |
||||||||||||
Other non-current liabilities |
(h) | |||||||||||
|
|
|
|
|
|
|||||||
Total liabilities |
||||||||||||
|
|
|
|
|
|
|||||||
Series A preferred stock |
(h) | |||||||||||
|
|
|
|
|
|
|||||||
Stockholders equity |
||||||||||||
Common stock |
(h) | |||||||||||
Additional paid-in capital |
(h) | |||||||||||
Retained earnings |
(h) | |||||||||||
Accumulated other comprehensive income |
(h) | |||||||||||
|
|
|
|
|
|
|||||||
Total stockholders equity |
||||||||||||
Non-controlling interest |
(h) | |||||||||||
|
|
|
|
|
|
|||||||
Total stockholders equity |
||||||||||||
|
|
|
|
|
|
|||||||
Total liabilities and stockholders equity |
$ | $ | $ | |||||||||
|
|
|
|
|
|
The accompanying notes are an integral part of these unaudited pro forma condensed financial statements.
F-6
FRANKS INTERNATIONAL
UNAUDITED PRO FORMA CONDENSED STATEMENT OF INCOME
For the Year Ended December 31, 2012
(In thousands, except per share data)
FINV
As Adjusted for Offering |
Exercise of
Conversion Rights |
FINV
As Adjusted for Conversion |
||||||||||
Revenues |
||||||||||||
Equipment rentals and services |
$ | $ | $ | |||||||||
Products |
||||||||||||
|
|
|
|
|
|
|||||||
Total revenues |
||||||||||||
|
|
|
|
|
|
|||||||
Operating expenses |
||||||||||||
Cost of revenues, excluding depreciation and amortization |
||||||||||||
Equipment rentals and services |
||||||||||||
Products |
||||||||||||
General and administrative |
||||||||||||
Depreciation and amortization |
||||||||||||
Gain on sale of assets |
||||||||||||
|
|
|
|
|
|
|||||||
Operating income |
||||||||||||
|
|
|
|
|
|
|||||||
Other income (expense): |
||||||||||||
Other income |
||||||||||||
Interest income (expense), net |
||||||||||||
Foreign currency loss |
||||||||||||
|
|
|
|
|
|
|||||||
|
|
|
|
|
|
|||||||
Income before income taxes |
||||||||||||
Income tax expense |
(h) | |||||||||||
|
|
|
|
|
|
|||||||
Net income |
||||||||||||
Non-controlling interest |
(h) | |||||||||||
|
|
|
|
|
|
|||||||
Net income attributable to Franks International |
||||||||||||
Preferred stock dividends |
||||||||||||
|
|
|
|
|
|
|||||||
Net income attributable to common stockholders |
$ | $ | $ | |||||||||
|
|
|
|
|
|
|||||||
Basic and diluted earnings per share |
$ | |||||||||||
|
|
|||||||||||
Basic and diluted weighted average shares common stock outstanding |
||||||||||||
|
|
The accompanying notes are an integral part of these unaudited pro forma condensed financial statements.
F-7
FRANKS INTERNATIONAL
UNAUDITED PRO FORMA CONDENSED STATEMENT OF INCOME
For the Three Months Ended March 31, 2013
(In thousands, except per share data)
FINV
As Adjusted for Offering |
Exercise of
Conversion Rights |
FINV
As Adjusted for Conversion |
||||||||||
Revenues |
||||||||||||
Equipment rentals and services |
$ | $ | $ | |||||||||
Products |
||||||||||||
|
|
|
|
|
|
|||||||
Total revenues |
||||||||||||
|
|
|
|
|
|
|||||||
Operating expenses |
||||||||||||
Cost of revenues, excluding depreciation and amortization |
||||||||||||
Equipment rentals and services |
||||||||||||
Products |
||||||||||||
General and administrative |
||||||||||||
Depreciation and amortization |
||||||||||||
Loss on sale of assets |
||||||||||||
|
|
|
|
|
|
|||||||
Operating income |
||||||||||||
|
|
|
|
|
|
|||||||
Other income (expense): |
||||||||||||
Other income |
||||||||||||
Interest income (expense), net |
||||||||||||
Foreign currency loss |
||||||||||||
|
|
|
|
|
|
|||||||
Total other income (expense) |
||||||||||||
|
|
|
|
|
|
|||||||
Income before income taxes |
||||||||||||
Income tax expense |
(h) | |||||||||||
|
|
|
|
|
|
|||||||
Net income |
||||||||||||
Non-controlling interest |
(h) | |||||||||||
|
|
|
|
|
|
|||||||
Net income attributable to Franks International |
||||||||||||
Preferred stock dividends |
||||||||||||
|
|
|
|
|
|
|||||||
Net income attributable to common stockholders |
$ | $ | $ | |||||||||
|
|
|
|
|
|
|||||||
Basic and diluted earnings per share |
$ | |||||||||||
|
|
|||||||||||
Basic and diluted weighted average shares common stock outstanding |
||||||||||||
|
|
The accompanying notes are an integral part of these unaudited pro forma condensed financial statements.
F-8
FRANKS INTERNATIONAL
NOTES TO UNAUDITED PRO FORMA CONDENSED FINANCIAL STATEMENTS
Note 1Basis of Presentation
Under the combined method of accounting, the historical consolidated financial statements of Franks International N.V., Franks International, Inc., Franks Casing Crew and Rental Tools, Inc. and Franks Tong Service, Inc. and their wholly owned subsidiaries are combined as if Franks International operated as a single entity.
The unaudited pro forma condensed balance sheet of Franks International (the Company) as of March 31, 2013 is based on Franks Internationals unaudited historical combined balance sheet and includes pro forma adjustments to give effect to the transactions as described below as if they had occurred on March 31, 2013.
The unaudited pro forma condensed statement of income for the year ended December 31, 2012 is based on Franks Internationals audited historical combined statement of income and the unaudited pro forma condensed statement of income for the three months ended March 31, 2013 is based on Franks International unaudited historical combined statement of income. The pro forma adjustments are included to give effect to the transactions as described below as if they had occurred on January 1, 2012.
The unaudited pro forma financial statements give effect to the following transactions:
|
the carve-out distribution of certain assets and liabilities from the Companys U.S. operating subsidiaries to Mosing Holdings, Inc.; |
|
the corporate reorganization (the Reorganization) described in Organizational Structure; and |
|
the issuance and sale by the Company of shares of common stock to the public, representing % of the voting interest in the Company, at an assumed initial offering price of $ per share (the midpoint of the price range set forth on the cover page of this prospectus) and the application by the Company of the net proceeds from such issuance (the Offering) as described in Use of Proceeds. |
Note 2Pro Forma Adjustments and Assumptions
Distribution of Assets and Liabilities to Mosing Holdings, Inc.
(a) | Adjustments to reflect the assets and liabilities that will be distributed to Mosing Holdings, Inc. These assets and liabilities relate to (i) Franks Internationals aviation ownership and operations, (ii) split-dollar life insurance policies and associated accounts receivable held for the Companys chief executive officer and other members of the Mosing family and (iii) certain real estate. Revenues and expenses associated with the assets and liabilities to be distributed are also being eliminated from the Companys pro forma statement of income. |
F-9
FRANKS INTERNATIONAL
NOTES TO UNAUDITED PRO FORMA CONDENSED FINANCIAL STATEMENTS
The primary components of this adjustment include (in thousands):
Balance Sheet Item |
Description |
Amount | ||||
Accounts receivable, net |
Miscellaneous accounts receivable with Mosing Holdings, Inc. | $ | 6,769 | |||
Other current assets |
Note receivable related to life insurance | 2,750 | ||||
Property, plant & equipment |
Aircraft, net | 2,538 | ||||
Property, plant & equipment |
Buildings, net | 16,897 | ||||
Property, plant & equipment |
Land | 4,754 | ||||
Property, plant & equipment |
Leasehold improvements | 513 | ||||
|
|
|||||
Property, plant & equipment total |
24,702 | |||||
|
|
|||||
Other assets, net |
Investment in KM Partners | 2,549 | ||||
Other assets, net |
Split dollar life insurance | 20,546 | ||||
Other assets, net |
Receivable with Mosing Properties | 500 | ||||
Other assets, net |
Notes receivable related to life insurance | 5,772 | ||||
|
|
|||||
Other assets, net total |
29,367 | |||||
|
|
(b) | As a result of the distribution of the real estate and aviation assets to Mosing Holdings, Inc., the Company will enter into real estate lease agreements pursuant to which the Company will incur additional rental expense of approximately $3.8 million per year for continued use of the real estate. In addition, the Company will enter into an aviation services agreement pursuant to which the Company will incur additional charter service expense of approximately $1.1 million per year for continued use of the aircraft. |
Reorganization
(c) | Reflects the pro forma adjustments to non-controlling interest, retained earnings and income attributable to non-controlling interest to reflect the ownership interest of Franks International C.V. (FICV) that will not be owned by the Company. |
Following the Reorganization and the Offering, the Company will be a holding company, with its sole material assets being its indirect ownership of % of the limited partnership interests and % of the general partnership interest of FICV. Mosing Holdings, Inc. will own the remaining % of the limited partnership interests. |
In addition, the Company will also indirectly own the general partnership interests of FICV. As the owner of the general partner of FICV, the Company will control the business and affairs of FICV and its subsidiaries. The Company will consolidate all financial results of FICV and its subsidiaries, and it will recognize as non-controlling interest the % limited partnership interest that Mosing Holdings, Inc. will hold in FICV. |
(d) | Reflects the issuance to Mosing Holdings, Inc. of shares of FINV Series A preferred stock as part of the Reorganization. The annual aggregate dividend requirement on the shares of Series A preferred stock of approximately is based on the stated dividend rate on the Series A preferred stock of 0.25%. |
(e) | Reflects incremental income taxes based on the tax consequences of the Reorganization. |
F-10
FRANKS INTERNATIONAL
NOTES TO UNAUDITED PRO FORMA CONDENSED FINANCIAL STATEMENTS
Offering
(f) | Reflects the proceeds to the Company of $ million from the issuance and sale of million shares of common stock in the Offering at an assumed initial public offering price of $ per share (the midpoint of the price range set forth on the cover page of this prospectus), net of aggregate offering costs of $ million. |
(g) | Reflects the repayment of the notes payable to FWW B.V., which is controlled by the Mosing family, and the elimination of the related interest expense. |
Exercise of Conversion Rights
(h) | Reflects the exercise of all of the Conversion Rights held by the Series A preferred stockholders into shares of FINV common stock and the related delivery of all of their interests in FICV. |
(i) | Future conversions of our Series A preferred stock by our existing stockholders could result in changes to our deferred tax asset, deferred tax liabilities and amounts owed under our tax receivable agreement. These adjustments give effect to the tax receivable agreement (as described in Certain Relationships and Related TransactionsTax Receivable Agreement) assuming all of the Series A preferred stock is converted into FINV common stock concurrent with the offering. These adjustments are based on the following assumptions: |
|
we will record an increase of $ million in deferred tax assets for the estimated income tax effect of the increase in the tax basis of the purchased interests, based on an effective income tax rate of % (which includes a provision for U.S. federal, state and local income taxes). The deferred assets arise from taxable temporary differences primarily related to additional tax over book basis in intangible assets and property, plant and equipment; |
|
we will record $ million, representing 85% of the estimated realizable tax benefit resulting from the increase in the tax basis of the purchased interests as noted above, as an increase to the liability under the tax receivable agreement; |
|
we will record a decrease of $ million to additional paid-in capital which is an amount equal to the difference between the increase in deferred tax assets and the increase in the liability due to existing owners under the tax receivable agreement; and |
|
there are no material changes in the relevant tax law and that we earn sufficient taxable income in each year to realize the full tax benefit of the amortization of our assets. |
Note 3Pro Forma Earnings Per Share
Pro forma earnings per share is determined by dividing the pro forma net income attributable to common shareholders by the number of common shares expected to be outstanding following the offering. All shares were assumed to have been outstanding since January 1, 2012.
F-11
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Stockholders of Franks International N.V.
In our opinion, the accompanying combined balance sheets and the related combined results of operations, comprehensive income, stockholders equity and cash flows present fairly, in all material respects, the financial position of Franks International N.V. (the Company) at December 31, 2012 and 2011, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2012 in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of the Companys management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
/s/ PricewaterhouseCoopers LLP
Houston, Texas
May 10, 2013
F-12
FRANKS INTERNATIONAL
(In thousands)
December 31, | ||||||||
2011 | 2012 | |||||||
Assets |
||||||||
Current assets: |
||||||||
Cash and cash equivalents |
$ | 98,649 | $ | 152,945 | ||||
Accounts receivable, net |
233,945 | 313,657 | ||||||
Inventories |
92,073 | 108,543 | ||||||
Other current assets |
17,187 | 16,632 | ||||||
|
|
|
|
|||||
Total current assets |
441,854 | 591,777 | ||||||
Property, plant and equipment, net |
324,881 | 426,500 | ||||||
Goodwill |
15,239 | 15,239 | ||||||
Intangible assets, net |
3,261 | 1,832 | ||||||
Other assets |
62,265 | 72,613 | ||||||
|
|
|
|
|||||
Total assets |
$ | 847,500 | $ | 1,107,961 | ||||
|
|
|
|
|||||
Liabilities and Stockholders Equity |
||||||||
Current liabilities: |
||||||||
Current portion of long-term debt and capital lease obligations |
$ | 5,264 | $ | 6,317 | ||||
Current portion of notes payableaffiliated |
567 | 323,476 | ||||||
Accounts payable |
20,065 | 19,377 | ||||||
Accrued and other current liabilities |
116,343 | 127,799 | ||||||
|
|
|
|
|||||
Total current liabilities |
142,239 | 476,969 | ||||||
|
|
|
|
|||||
Long-term debt: |
||||||||
Long-term debt and capital lease obligations |
3,940 | 1,051 | ||||||
Notes payableaffiliated |
3,051 | 145,792 | ||||||
|
|
|
|
|||||
Total long-term debt |
6,991 | 146,843 | ||||||
|
|
|
|
|||||
Deferred tax liabilities |
5,178 | 6,575 | ||||||
Other non-current liabilities |
25,964 | 30,586 | ||||||
|
|
|
|
|||||
Total liabilities |
180,372 | 660,973 | ||||||
|
|
|
|
|||||
Commitments and contingencies |
| | ||||||
Stockholders equity: |
||||||||
Common stock |
803 | 803 | ||||||
Additional paid-in capital |
1,409 | 1,409 | ||||||
Retained earnings |
660,474 | 440,399 | ||||||
Accumulated other comprehensive income |
4,442 | 4,377 | ||||||
|
|
|
|
|||||
Total stockholders equity |
667,128 | 446,988 | ||||||
|
|
|
|
|||||
Total liabilities and stockholders equity |
$ | 847,500 | $ | 1,107,961 | ||||
|
|
|
|
The accompanying notes are an integral part of these combined financial statements.
F-13
FRANKS INTERNATIONAL
(In thousands)
Year Ended December 31, | ||||||||||||
2010 | 2011 | 2012 | ||||||||||
Revenues: |
||||||||||||
Equipment rentals and services |
$ | 490,902 | $ | 613,541 | $ | 880,084 | ||||||
Products |
117,306 | 125,534 | 175,841 | |||||||||
|
|
|
|
|
|
|||||||
Total revenues |
608,208 | 739,075 | 1,055,925 | |||||||||
|
|
|
|
|
|
|||||||
Operating expenses: |
||||||||||||
Cost of revenues, exclusive of depreciation and amortization Equipment rentals and services |
222,345 | 256,515 | 314,950 | |||||||||
Products |
70,697 | 76,368 | 119,527 | |||||||||
General and administrative expenses |
134,449 | 160,506 | 187,033 | |||||||||
Depreciation and amortization |
48,197 | 54,581 | 66,215 | |||||||||
Gain on sale of assets |
(164 | ) | (47 | ) | (2,608 | ) | ||||||
|
|
|
|
|
|
|||||||
Operating income |
132,684 | 191,152 | 370,808 | |||||||||
|
|
|
|
|
|
|||||||
Other income (expense): |
||||||||||||
Other income |
3,906 | 3,786 | 12,189 | |||||||||
Interest income (expense), net |
(1,658 | ) | (655 | ) | 264 | |||||||
Foreign currency loss |
(1,930 | ) | (3,209 | ) | (450 | ) | ||||||
|
|
|
|
|
|
|||||||
Total other income (expense) |
318 | (78 | ) | 12,003 | ||||||||
|
|
|
|
|
|
|||||||
Income before income tax expense |
133,002 | 191,074 | 382,811 | |||||||||
Income tax expense |
14,601 | 20,287 | 31,877 | |||||||||
|
|
|
|
|
|
|||||||
Net income |
$ | 118,401 | $ | 170,787 | $ | 350,934 | ||||||
|
|
|
|
|
|
The accompanying notes are an integral part of these combined financial statements.
F-14
FRANKS INTERNATIONAL
COMBINED STATEMENTS OF COMPREHENSIVE INCOME
(In thousands)
Year Ended December 31, | ||||||||||||
2010 | 2011 | 2012 | ||||||||||
Net income |
$ | 118,401 | $ | 170,787 | $ | 350,934 | ||||||
Other comprehensive income (loss): |
||||||||||||
Foreign currency translation adjustments, net of tax |
236 | (2,734 | ) | (178 | ) | |||||||
Unrealized gain on marketable securities, net of tax |
271 | 301 | 113 | |||||||||
|
|
|
|
|
|
|||||||
Total other comprehensive income (loss) |
507 | (2,433 | ) | (65 | ) | |||||||
|
|
|
|
|
|
|||||||
Comprehensive income |
$ | 118,908 | $ | 168,354 | $ | 350,869 | ||||||
|
|
|
|
|
|
The accompanying notes are an integral part of these combined financial statements.
F-15
FRANKS INTERNATIONAL
COMBINED STATEMENTS OF STOCKHOLDERS EQUITY
(In thousands)
Common
Stock |
Treasury
Stock |
Additional
Paid-In Capital |
Retained
Earnings |
Accumulated
Other Comprehensive Income |
Total
Stockholders Equity |
|||||||||||||||||||
Balances at December 31, 2009 |
$ | 803 | $ | (1,317 | ) | $ | | $ | 478,453 | $ | 6,368 | $ | 484,307 | |||||||||||
Net income |
| | | 118,401 | | 118,401 | ||||||||||||||||||
Foreign currency translation adjustments |
| | | | 236 | 236 | ||||||||||||||||||
Unrealized gain on marketable securities |
| | | | 271 | 271 | ||||||||||||||||||
Distributions to stockholders |
| | | (67,202 | ) | | (67,202 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Balances at December 31, 2010 |
803 | (1,317 | ) | | 529,652 | 6,875 | 536,013 | |||||||||||||||||
Net income |
| | | 170,787 | | 170,787 | ||||||||||||||||||
Foreign currency translation adjustments |
| | | | (2,734 | ) | (2,734 | ) | ||||||||||||||||
Unrealized gain on marketable securities |
| | | | 301 | 301 | ||||||||||||||||||
Reissuance of stock |
| 1,317 | 1,409 | | | 2,726 | ||||||||||||||||||
Distributions to stockholders |
| | | (39,965 | ) | | (39,965 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Balances at December 31, 2011 |
803 | | 1,409 | 660,474 | 4,442 | 667,128 | ||||||||||||||||||
Net income |
| | | 350,934 | | 350,934 | ||||||||||||||||||
Foreign currency translation adjustments |
| | | | (178 | ) | (178 | ) | ||||||||||||||||
Unrealized gain on marketable securities |
| | | | 113 | 113 | ||||||||||||||||||
Distributions to stockholders |
| | | (571,009 | ) | | (571,009 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Balances at December 31, 2012 |
$ | 803 | $ | | $ | 1,409 | $ | 440,399 | $ | 4,377 | $ | 446,988 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these combined financial statements.
F-16
FRANKS INTERNATIONAL
COMBINED STATEMENTS OF CASH FLOWS
(In thousands)
Year Ended December 31, | ||||||||||||
2010 | 2011 | 2012 | ||||||||||
Cash flows from operating activities |
||||||||||||
Net income |
$ | 118,401 | $ | 170,787 | $ | 350,934 | ||||||
Adjustments to reconcile net income to cash provided by operating activities |
||||||||||||
Depreciation and amortization |
48,197 | 54,581 | 66,215 | |||||||||
Deferred tax provision |
236 | (412 | ) | 1,449 | ||||||||
Provision for (recovery of) bad debts |
585 | 2,486 | (389 | ) | ||||||||
Gain on sale of assets |
(164 | ) | (47 | ) | (2,608 | ) | ||||||
Changes in fair value of marketable securities |
(1,180 | ) | 688 | (2,058 | ) | |||||||
Gain on exchange of investment |
| | (3,997 | ) | ||||||||
Decrease (increase) in value of life insurance policies |
(420 | ) | 731 | 254 | ||||||||
Changes in operating assets and liabilities |
||||||||||||
Accounts receivable |
(27,799 | ) | (72,266 | ) | (76,729 | ) | ||||||
Inventories |
7,640 | (4,606 | ) | (15,351 | ) | |||||||
Other current assets |
(4,889 | ) | (2,681 | ) | 845 | |||||||
Other assets |
(1,270 | ) | 403 | (173 | ) | |||||||
Accounts payable |
2,581 | 5,274 | (533 | ) | ||||||||
Accrued expenses and other current liabilities |
11,594 | 24,167 | 22,255 | |||||||||
Other noncurrent liabilities |
9,922 | 1,445 | 4,662 | |||||||||
Other |
(20 | ) | 160 | | ||||||||
|
|
|
|
|
|
|||||||
Net cash provided by operating activities |
163,414 | 180,710 | 344,776 | |||||||||
|
|
|
|
|
|
|||||||
Cash flows from investing activities |
||||||||||||
Purchase of property, plant and equipment |
(57,263 | ) | (117,883 | ) | (180,187 | ) | ||||||
Proceeds from sale of equipment |
545 | 391 | 5,259 | |||||||||
Purchase of marketable securities |
(4,385 | ) | (4,518 | ) | (2,757 | ) | ||||||
Premiums on life insurance policies |
(2,989 | ) | (3,698 | ) | (3,088 | ) | ||||||
Investment in affiliates |
(1,635 | ) | | | ||||||||
Other |
(3,403 | ) | (947 | ) | (1,760 | ) | ||||||
|
|
|
|
|
|
|||||||
Net cash used in investing activities |
(69,130 | ) | (126,655 | ) | (182,533 | ) | ||||||
|
|
|
|
|
|
|||||||
Cash flows from financing activities |
||||||||||||
Repayments of borrowings |
(12,659 | ) | (39,735 | ) | (36,191 | ) | ||||||
Proceeds from borrowings |
600 | 5,100 | 15,996 | |||||||||
Proceeds from reissuance of stock |
| 2,726 | | |||||||||
Distributions to stockholders |
(67,202 | ) | (39,965 | ) | (87,015 | ) | ||||||
|
|
|
|
|
|
|||||||
Net cash used in financing activities |
(79,261 | ) | (71,874 | ) | (107,210 | ) | ||||||
Effect of exchange rate changes on cash |
285 | 2,305 | (737 | ) | ||||||||
|
|
|
|
|
|
|||||||
Net increase (decrease) in cash |
15,308 | (15,514 | ) | 54,296 | ||||||||
Cash and cash equivalents at beginning of year |
98,855 | 114,163 | 98,649 | |||||||||
|
|
|
|
|
|
|||||||
Cash and cash equivalents at end of year |
$ | 114,163 | $ | 98,649 | $ | 152,945 | ||||||
|
|
|
|
|
|
|||||||
Supplemental cash flow information: |
||||||||||||
Cash paid for interest |
$ | 2,332 | $ | 710 | $ | 1,434 | ||||||
Cash paid for income tax |
6,141 | 6,624 | 8,292 | |||||||||
Non-cash transactions: |
||||||||||||
Change in accounts payable related to capital expenditures |
$ | (2,258 | ) | $ | 10,997 | $ | (10,943 | ) | ||||
Insurance premium financed by note payable |
2,015 | 1,777 | | |||||||||
Notes issued as payment of distribution to owners |
| | 483,994 |
The accompanying notes are an integral part of these combined financial statements.
F-17
FRANKS INTERNATIONAL
NOTES TO COMBINED FINANCIAL STATEMENTS
Note 1Summary of Business and Basis of Presentation
Franks International is a global provider of highly engineered tubular services to the oil and gas industry. Franks International provides services to leading exploration and production companies in both offshore and onshore environments, with a focus on complex and technically demanding wells.
The combined financial statements for the three years ended December 31, 2012 include the activities of Franks International N.V. (FINV), a Netherlands corporation, Franks International, Inc. (FII), Franks Casing Crew and Rental Tools, Inc. (FCC), Franks Tong Service, Inc. (FTS) and their wholly owned subsidiaries (collectively, the Company). Under this combined method of accounting, the historical combined financial statements of FINV are combined with FII, FCC and FTS. All intercompany accounts and transactions have been eliminated for purposes of preparing these combined financial statements.
The accounting and reporting policies of the Company conform to accounting principles generally accepted in the United States of America (US GAAP). The policies that materially affect the determination of financial position, results of operations and cash flows are summarized below.
The combined financial statements have been prepared on a historical cost basis and in accordance with US GAAP, using the United States dollar as the reporting currency.
Note 2Summary of Significant Accounting Policies
Accounting Estimates
The preparation of combined financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and the disclosure of contingent assets and liabilities at the date of the combined financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates.
Accounts Receivable
The Company extends credit to customers in the normal course of business. The Company estimates its bad debt exposure each period and records a bad debt provision for accounts receivable it believes it may not collect in full.
Cash and Cash Equivalents
The Company considers all highly liquid financial instruments purchased with an original maturity of three months or less to be cash equivalents. Throughout the year, the Company has cash balances in excess of federally insured limits deposited with various financial institutions. The Company has not experienced any losses in such accounts and believes it is not exposed to any significant credit risk on cash and cash equivalents.
F-18
FRANKS INTERNATIONAL
NOTES TO COMBINED FINANCIAL STATEMENTS
Comprehensive Income
Accounting standards on reporting comprehensive income require that certain items, including foreign currency translation adjustments and unrealized gains and losses on marketable securities be presented as components of comprehensive income. The cumulative amounts recognized by the Company under these standards are reflected in the combined balance sheet as accumulated other comprehensive income, a component of shareholders equity.
December 31, | ||||||||
2011 | 2012 | |||||||
Foreign currency translation adjustments |
$ | 4,367 | $ | 4,189 | ||||
Unrealized gain on marketable securities |
75 | 188 | ||||||
|
|
|
|
|||||
Total accumulated other comprehensive income |
$ | 4,442 | $ | 4,377 | ||||
|
|
|
|
Contingencies
Certain conditions may exist as of the date the Companys combined financial statements are issued that may result in a loss to the Company, but which will only be resolved when one or more future events occur or fail to occur. The Companys management, with input from legal counsel, assesses such contingent liabilities, and such assessment inherently involves an exercise in judgment. In assessing loss contingencies related to legal proceedings pending against the Company or unasserted claims that may result in proceedings, the Companys management, with input from legal counsel, evaluates the perceived merits of any legal proceedings or unasserted claims as well as the perceived merits of the amount of relief sought or expected to be sought therein.
If the assessment of a contingency indicates it is probable a material loss has been incurred and the amount of liability can be estimated, then the estimated liability would be accrued in the Companys combined financial statements. If the assessment indicates a potentially material loss contingency is not probable but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent liability, together with an estimate of the range of possible loss if determinable and material, is disclosed.
Loss contingencies considered remote are generally not disclosed unless they involve guarantees, in which case the guarantees would be disclosed.
Fair Value of Financial Instruments
The Companys financial instruments consist primarily of cash and cash equivalents, trade accounts receivable, available-for-sale securities, obligations under trade accounts payable and short and long-term debt. Due to their short-term nature, the carrying values for cash and cash equivalents, trade accounts receivable and trade accounts payable approximate fair value. Refer to Note 10 for the fair values of the Companys available-for-sale securities and other obligations.
Foreign Currency Translations and Transactions
Results of operations for foreign subsidiaries with functional currencies other than the U.S. dollar are translated using average exchange rates during the period. Assets and liabilities of these foreign subsidiaries are translated using the exchange rates in effect at the balance sheet dates. Gains and losses resulting from these translations are included in accumulated other comprehensive income within stockholders equity.
F-19
FRANKS INTERNATIONAL
NOTES TO COMBINED FINANCIAL STATEMENTS
For those foreign subsidiaries that have designated the U.S. dollar as the functional currency, gains and losses resulting from balance sheet remeasurement of foreign operations are included in the combined statements of income as incurred. Gains and losses resulting from transactions denominated in a foreign currency are also included in the combined statements of income as incurred.
Goodwill
Goodwill is not subject to amortization and is tested for impairment annually or more frequently if events or changes in circumstances indicate that the asset might be impaired. A qualitative assessment is allowed to determine if goodwill is potentially impaired. The qualitative assessment determines whether it is more likely than not that a reporting units fair value is less than its carrying amount. If it is more likely that not that the fair value of the reporting unit is less than the carrying amount, then the two step impairment test is performed. First, the fair value of each reporting unit is compared to its carrying value to determine whether an indication of impairment exists. If impairment is indicated, then the fair value of the reporting units goodwill is determined by allocating the units fair value to its assets and liabilities (including any unrecognized intangible assets) as if the reporting unit had been acquired in a business combination. The amount of impairment for goodwill is measured as the excess of its carrying value over its fair value. The Company completes its assessment of goodwill impairment as of December 31 each year. No impairment was recorded for the years ended December 31, 2010, 2011 and 2012. The Companys goodwill is allocated to its segments as follows: U.S. Services approximately $11.3 million; Pipe and Products approximately $3.9 million. The inputs used in the determination of fair value are generally level 3 inputs. See Note 10 for a discussion of fair value measures.
Impairment of Long-Lived Assets
Long-lived assets, which include property, plant and equipment, and certain other assets to be held and used by the Company, are reviewed when events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable based on estimated future cash flows. If this assessment indicates that the carrying values will not be recoverable, as determined based on undiscounted cash flows over the remaining useful lives, an impairment loss is recognized based on fair value of the asset.
Income Taxes
The Company operates under many legal forms in approximately 60 countries. As a result, the Company is subject to many U.S. and foreign tax jurisdictions and many tax agreements and treaties among the various taxing authorities. The Companys operations in these different jurisdictions are taxed on various bases such as income before taxes, deemed profits (which is generally determined using a percentage of revenues rather than profits), and withholding taxes based on revenues. Determination of taxable income in any jurisdiction requires the interpretation of the related tax laws and regulations and the use of estimates and assumptions regarding significant future events. Changes in tax laws, regulations, agreements and treaties, foreign currency exchange restrictions, or the Companys level of operations or profitability in each taxing jurisdiction could have an impact upon the amount of income taxes that the Company provides during any given year.
Effective January 1, 2008, the Company elected Subchapter S status for its U.S. entities, which has been approved by the Internal Revenue Service. A Subchapter S corporation is a flow through entity for U.S. federal income tax purposes and generally is not subject to a corporate level U.S. federal income tax.
The Company provides for income tax expense based on the liability method of accounting for income taxes based on the authoritative accounting guidance. Deferred tax assets and liabilities are recorded based upon temporary differences between the tax basis of assets and liabilities and their carrying values for financial
F-20
FRANKS INTERNATIONAL
NOTES TO COMBINED FINANCIAL STATEMENTS
reporting purposes, and are measured using the enacted marginal rates and laws that will be in effect when the differences are expected to reverse. Deferred tax expense or benefit is the result of changes in deferred tax assets and liabilities during the period. The impact of an uncertain tax position taken or expected to be taken on an income tax return is recognized in the financial statements at the largest amount that is more likely than not to be sustained upon examination by the relevant taxing authority.
Intangible Assets
Intangible assets are comprised of licenses, customer relationships and tradenames. Identifiable intangible assets are amortized using the straight-line method over the estimated useful lives of the assets. The Company evaluates impairment of its intangible assets on an individual basis whenever circumstances indicate that the carrying value may not be recoverable. Intangible assets deemed to be impaired are written down to their fair value discounted cash flows and, if available, comparable market values.
Inventories
Inventories are stated at the lower of cost (primarily average cost) or market value. Work in progress and finished goods include the cost of materials, labor, and manufacturing overhead. Inventory placed in service is either capitalized and included in equipment or expensed based upon the Companys capitalization policies.
Marketable Securities
The Companys marketable securities in certificates of deposit, debt securities and publicly traded equity securities as an indirect result of strategic investments are classified as available-for-sale and are reported at fair value. See Note 7Other Assets.
The marketable securities are held within a Rabbi Trust for the purpose of paying future Executive Deferred Compensation benefit obligations. Unrealized gains and losses are reported as a component of stockholders equity. Realized gains and losses on marketable securities are included in other income on the Companys combined statements of income, net when realized. Any impairment loss to reduce an investments carrying amount to its fair market value is recognized in income when a decline in the fair market value of an individual security below its cost or carrying value is determined to be other than temporary. Realized gains on investments were $1.2 million and $2.1 million for the years ended December 31, 2010 and 2012, respectively. Realized losses on investments were $0.7 million for the year ended December 31, 2011.
Property, Plant and Equipment
Property, plant and equipment are stated at cost less accumulated depreciation. Expenditures for significant improvements and betterments are capitalized when they extend the useful life of the asset. Expenditures for minor improvements and routine repairs and maintenance, which do not improve or extend the life of the related assets, are expensed when incurred. When properties or equipment are sold, retired or otherwise disposed of, the related cost and accumulated depreciation are removed from the books and the resulting gain or loss is recognized on the combined statements of income.
Depreciation on fixed assets is computed using the straight-line method over the estimated useful lives of the individual assets. Leasehold improvements are amortized on a straight-line basis over the shorter of their estimated useful lives or the lease term. The depreciation of fixed assets recorded under capital lease agreements is included in depreciation expense.
F-21
FRANKS INTERNATIONAL
NOTES TO COMBINED FINANCIAL STATEMENTS
Recent Accounting Pronouncements
In February 2013, the Financial Accounting Standards Board (FASB) issued an accounting standards update which adds new disclosure requirements for items reclassified out of accumulated other comprehensive income. The update requires entities to disclose additional information about reclassification adjustments, including changes in accumulated other comprehensive income balances by component and significant items reclassified out of accumulated other comprehensive income. The update will be effective for the Company in the first quarter of 2013, but early adoption is permitted. The update will impact the Companys disclosures and will not have a material impact on its combined financial position, results of operations or cash flows.
In September 2011, the FASB issued an accounting standards update which provides, subject to certain conditions, the option to perform a qualitative, rather than quantitative, assessment of goodwill to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. This update was effective and adopted by the Company in the first quarter of 2012 and did not have a material impact on its combined financial position, results of operations or cash flows.
In June 2011, the FASB issued an accounting standards update which revises the manner in which entities present comprehensive income in their financial statements. The new guidance requires entities to report components of comprehensive income in either (1) a continuous statement of comprehensive income or (2) a separate but consecutive statement. Under the two-statement approach, the first statement would include components of net income, which is consistent with the income statement format previously used by the Company, and the second statement would include components of other comprehensive income (OCI). The update does not change the items that must be reported in OCI and must be applied retrospectively for all periods presented in the financial statements. This update was effective and adopted by the Company in the first quarter of 2012 and impacted the Companys financial statement presentation, but otherwise did not impact its combined financial position, results of operations or cash flows.
In May 2011, the FASB issued an accounting standards update which amends the definition of fair value measurement principles and disclosure requirements to eliminate differences between U.S. GAAP and International Financial Reporting Standards. The update requires new quantitative and qualitative disclosures about the sensitivity of recurring Level 3 measurement disclosures, as well as disclosures of transfers between Level 1 and Level 2 of the fair value hierarchy. This update was effective and adopted by the Company in the first quarter of 2012 and impacted the Companys disclosures, but otherwise did not impact the Companys combined financial position, results of operations or cash flows.
Revenue Recognition
All revenue is recognized when all of the following criteria have been met: (1) evidence of an arrangement exists; (2) delivery to and acceptance by the customer has occurred; (3) the price of the customer is fixed or determinable; and (4) collectability is reasonably assured, as follows:
Services Revenue. The Company provides tubular services to clients in the oil and gas industry. The Company performs services either under direct service purchase orders or master service agreements. Service revenue is recognized when services have been performed or rendered.
Rental Revenue. The Company designs and manufactures a suite of highly technical equipment and products that it rents to its customers in connection with providing its services, including high-end, proprietary tubular handling equipment. The Company rents its products either under direct rental agreements or with customers with rental agreements in place. Revenue from rental agreements is recognized as earned over the rental period.
F-22
FRANKS INTERNATIONAL
NOTES TO COMBINED FINANCIAL STATEMENTS
For customers contracted under direct service purchase orders and direct rental agreements, an accrual is recorded in unbilled accounts receivable for revenue earned but not yet invoiced.
Pipe and Products Revenue. Revenue on pipe and products sales is recognized when the product has shipped and significant risks of ownership have passed to the customer. The sales arrangements typically do not include right of return or other similar provisions or other post-delivery obligations. In some regions, customers have a right of return due to purchasing of excess products and deliverability limitations of products in remote locations. When the likelihood of a return exists on a sale, a determination of this portion of revenue is reclassified to unearned revenue until such time when the product is returned or no return occurs.
Risks and Uncertainties
Financial instruments, which potentially subject the Company to concentrations of credit risk, consist principally of trade accounts receivable. No one individual customer accounted for more than 10% of revenue in 2010 and 2011, while one customer accounted for approximately 11% of the Companys revenue for the year ended December 31, 2012. No customers accounted for more than 10% of receivables as of December 31, 2011 and 2012. The Companys customers operate in the oil and gas industry. The Companys business depends on the level of activity in oil and gas exploration, development and production in market sectors worldwide. Oil and gas prices and market expectations of potential changes in these prices significantly affect this level of activity. Demand for the Companys offshore services substantially depends on the level of activity in offshore oil and gas exploration, development and production. The level of offshore activity is historically cyclical and characterized by large fluctuations in response to relatively minor changes in a variety of factors, including oil and gas prices, which could have a material adverse effect on the Companys business, financial condition and results of operations. The Company mitigates its exposure to credit risk by performing ongoing credit evaluations of its customer base.
The Companys international operations are subject to a number of risks inherent in any business operating in foreign countries, including, but not limited to, political, social and economic instability, potential expropriation, seizure or nationalization of assets, deprivation of contract rights, civil unrest and protests, strikes, acts of terrorism, war or other armed conflict, import/export quotas, confiscatory taxation or other adverse tax policies and other forms of government regulation which are beyond the Companys control. Instability and disruptions in the political, regulatory, economic and social conditions of the foreign countries in which the Company conducts business, including economically and politically volatile areas such as Africa, the Middle East, Latin America and the Asia Pacific region, could cause or contribute to factors that could have an adverse effect on the demand for the products and services the Company provides. Worldwide political, economic, and military events have contributed to oil and gas price volatility and are likely to continue to do so in the future. Depending on the market prices of oil and gas, oil and gas exploration and development companies may cancel or curtail their drilling programs, thereby reducing demand for the Companys services. While the impact of these factors is difficult to predict, any one or more of these factors could adversely affect the Companys business, financial condition and results of operations.
F-23
FRANKS INTERNATIONAL
NOTES TO COMBINED FINANCIAL STATEMENTS
Note 3Accounts Receivable, net
Accounts receivable at December 31, 2011 and 2012 were as follows (in thousands):
December 31, | ||||||||
2011 | 2012 | |||||||
Trade accounts receivable, net of allowance of $4,655 and $1,697, respectively |
$ | 169,139 | $ | 188,095 | ||||
Unbilled receivables |
54,225 | 108,713 | ||||||
Affiliated (1) |
1,169 | 4,551 | ||||||
Other receivables |
9,412 | 12,298 | ||||||
|
|
|
|
|||||
Total accounts receivable |
$ | 233,945 | $ | 313,657 | ||||
|
|
|
|
(1) | Amounts represent expenditures on behalf of non-consolidated affiliates. |
Note 4Inventories
Inventories at December 31, 2011 and 2012 were as follows (in thousands):
December 31, | ||||||||
2011 | 2012 | |||||||
Pipe and connectors |
$ | 74,613 | $ | 87,083 | ||||
Finished goods |
7,118 | 6,985 | ||||||
Work in progress |
772 | 2,411 | ||||||
Raw materials, components and supplies |
9,570 | 12,064 | ||||||
|
|
|
|
|||||
Total inventories |
$ | 92,073 | $ | 108,543 | ||||
|
|
|
|
Note 5Property, Plant and Equipment
The following is a summary of property, plant and equipment at December 31, 2011 and 2012 (in thousands):
Estimated
Useful Lives in Years |
December 31, | |||||||||||
2011 | 2012 | |||||||||||
Land |
| $ | 19,319 | $ | 21,344 | |||||||
Buildings and improvements |
39 | 53,292 | 82,005 | |||||||||
Rental machinery and equipment |
7 | 471,318 | 563,368 | |||||||||
Machinery and equipment-other |
7 | 46,368 | 43,086 | |||||||||
Furniture, fixtures and computers |
5 | 13,827 | 16,707 | |||||||||
Automobiles and other vehicles |
5 | 53,551 | 55,481 | |||||||||
Leasehold improvements |
7 | 3,861 | 4,843 | |||||||||
Construction in progress - machinery and equipment |
| 38,545 | 62,122 | |||||||||
|
|
|
|
|||||||||
700,081 | 848,956 | |||||||||||
Less: Accumulated depreciation |
(375,200 | ) | (422,456 | ) | ||||||||
|
|
|
|
|||||||||
Total property, plant and equipment, net |
$ | 324,881 | $ | 426,500 | ||||||||
|
|
|
|
Depreciation expense was approximately $46.4 million, $52.9 million and $64.8 million for the years ended December 31, 2010, 2011 and 2012, respectively.
F-24
FRANKS INTERNATIONAL
NOTES TO COMBINED FINANCIAL STATEMENTS
Note 6Intangible Assets
Intangible assets at December 31, 2011 and 2012 consist of the following (in thousands):
December 31, | ||||||||
2011 | 2012 | |||||||
Trade name |
$ | 2,730 | $ | 2,725 | ||||
Accumulated amortization |
(2,707 | ) | (2,725 | ) | ||||
|
|
|
|
|||||
Net carrying amount |
23 | | ||||||
|
|
|
|
|||||
Customer relationships |
8,498 | 8,498 | ||||||
Accumulated amortization |
(7,059 | ) | (8,006 | ) | ||||
|
|
|
|
|||||
Net carrying amount |
1,439 | 492 | ||||||
|
|
|
|
|||||
License agreement |
4,957 | 4,957 | ||||||
Accumulated amortization |
(3,158 | ) | (3,617 | ) | ||||
|
|
|
|
|||||
Net carrying amount |
1,799 | 1,340 | ||||||
|
|
|
|
|||||
Total intangible assets |
$ | 3,261 | $ | 1,832 | ||||
|
|
|
|
Amortization expense was approximately $1.8 million, $1.7 million and $1.4 million for the years ended December 31, 2010, 2011 and 2012, respectively.
Expected aggregate amortization of intangible assets is as follows (in thousands):
Year Ending December 31, |
||||
2013 |
$ | 857 | ||
2014 |
554 | |||
2015 |
421 | |||
|
|
|||
Total |
$ | 1,832 | ||
|
|
Note 7Other Assets
Other assets at December 31, 2011 and 2012 consist of the following (in thousands):
December 31, | ||||||||
2011 | 2012 | |||||||
Split-dollar life insurance |
$ | 15,966 | $ | 18,799 | ||||
Marketable securitiesdeferred compensation plan (1) |
31,686 | 36,479 | ||||||
Notes receivableaffiliates |
6,045 | 6,939 | ||||||
Other |
8,568 | 10,396 | ||||||
|
|
|
|
|||||
Total other assets |
$ | 62,265 | $ | 72,613 | ||||
|
|
|
|
(1) | See Note 15Employee Benefit Plans. |
F-25
FRANKS INTERNATIONAL
NOTES TO COMBINED FINANCIAL STATEMENTS
Note 8Accrued and Other Current Liabilities
Accrued and other current liabilities at December 31, 2011 and 2012 consist of the following (in thousands):
December 31, | ||||||||
2011 | 2012 | |||||||
Accrued compensation |
$ | 15,671 | $ | 23,978 | ||||
Accrued property and other taxes |
19,059 | 23,847 | ||||||
Deferred revenue |
34,771 | 23,172 | ||||||
Accrued inventory |
4,440 | 17,273 | ||||||
Other accrued purchases |
42,402 | 39,529 | ||||||
|
|
|
|
|||||
Total accrued and other current liabilities |
$ | 116,343 | $ | 127,799 | ||||
|
|
|
|
Note 9Long-Term Debt
The following is a summary of long-term debt at December 31, 2011 and 2012 (in thousands):
December 31, | ||||||||
2011 | 2012 | |||||||
Lines of credit |
$ | 4,000 | $ | 2,000 | ||||
Notes payable |
4,162 | 4,464 | ||||||
Equipment financing |
1,042 | 818 | ||||||
Other |
| 86 | ||||||
|
|
|
|
|||||
9,204 | 7,368 | |||||||
Less: current portion |
(5,264 | ) | (6,317 | ) | ||||
|
|
|
|
|||||
Long-term portion |
3,940 | 1,051 | ||||||
|
|
|
|
|||||
Notes payableaffiliated |
3,618 | 469,268 | ||||||
Less: current portion |
(567 | ) | (323,476 | ) | ||||
|
|
|
|
|||||
Long-term portion |
3,051 | 145,792 | ||||||
|
|
|
|
|||||
Total long-term debt |
$ | 6,991 | $ | 146,843 | ||||
|
|
|
|
Lines of Credit
The Company has two revolving lines of credit of $40.0 million and $5.0 million, which mature on August 31, 2014 and February 19, 2016, respectively. Interest is paid monthly on the unpaid balance of the $40.0 million line of credit at the London Interbank Offering Rate plus approximately 2.5% per annum. Interest is paid on the unpaid balance of the $5.0 million line of credit at the prime rate, which equates to 4.5% with the applicable margin included. The aggregate outstanding balance for the credit agreements was $4.0 million and $2.0 million as of December 31, 2011 and 2012, respectively. In addition, the Company had outstanding letters of credit of $5.2 million as of December 31, 2012. The lines of credit have certain financial covenants. As of December 31, 2012, the Company was in compliance with all financial covenants.
Notes Payable
The Company has various notes payable totaling $2.5 million and $3.2 million at December 31, 2011 and 2012, respectively. These notes mature in 2013 with interest rates of 3.0% per annum.
F-26
FRANKS INTERNATIONAL
NOTES TO COMBINED FINANCIAL STATEMENTS
The Company has financed certain business acquisitions. At December 31, 2011 and 2012, the aggregate outstanding balance of the finance agreements was $1.7 million and $1.3 million, with interest rates ranging from 5% and 6% per annum. The finance agreements are due on demand and have maturity dates ranging from September 2016 to October 2018.
Equipment Financing
The Company has financed certain aircraft through credit agreements. The aggregate outstanding balance of these credit agreements was $1.0 million and $0.8 million at December 31, 2011 and 2012, respectively, with a fixed interest rate 5.0% per annum payable monthly. The credit agreements mature in August 2013. The notes are secured by the aircraft.
Notes PayableAffiliated
In 2012, the Company made a non-cash distribution of $484.0 million to the owners of the Company in the form of two unsecured promissory notes payable to FWW B.V. Interest is charged on the notes at the applicable short-term monthly applicable federal rate (commonly known as the AFR Rate) as published by the Internal Revenue Service. The average interest rate was 0.22% during 2012. As of December 31, 2012, $320.0 million is included in current portion of notes payableaffiliates because it is due on demand and $144.0 million is included in notes payableaffiliated on the combined balance sheets. The Company also has various notes payableaffiliated of $3.6 million and $5.3 million at December 31, 2011 and 2012, respectively.
The following table presents the scheduled maturities of principal amounts of the Companys debt obligations for the next five years and in total thereafter (in thousands):
Year Ending December 31, |
||||
2013 |
$ | 329,793 | ||
2014 |
1,661 | |||
2015 |
674 | |||
2016 |
516 | |||
Thereafter |
143,992 | |||
|
|
|||
Total |
$ | 476,636 | ||
|
|
Note 10Fair Value Measurements
The Company follows fair value measurement authoritative accounting guidance for measuring fair values of assets and liabilities in financial statements. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price). The Company utilizes market data or assumptions that market participants who are independent, knowledgeable and willing and able to transact would use in pricing the asset or liability, including assumptions about risk and the risks inherent in the inputs to the valuation technique. The Company is able to classify fair value balances based on the observability of these inputs. The authoritative guidance for fair value measurements establishes three levels of the fair value hierarchy, defined as follows:
|
Level 1: Unadjusted, quoted prices for identical assets or liabilities in active markets. |
|
Level 2: Quoted prices in markets that are not considered to be active or financial instruments for which all significant inputs are observable, either directly or indirectly for substantially the full term of the asset or liability. |
F-27
FRANKS INTERNATIONAL
NOTES TO COMBINED FINANCIAL STATEMENTS
|
Level 3: Significant, unobservable inputs for use when little or no market data exists, requiring a significant degree of judgment. |
The hierarchy gives the highest priority to Level 1 measurements and the lowest priority to Level 3 measurements. Depending on the particular asset or liability, input availability can vary depending on factors such as product type, longevity of a product in the market and other particular transaction conditions. In some cases, certain inputs used to measure fair value may be categorized into different levels of the fair value hierarchy. For disclosure purposes under the accounting guidance, the lowest level that contains significant inputs used in valuation should be chosen.
Financial Assets and Liabilities
A summary of financial assets and liabilities that are measured at fair value on a recurring basis as of December 31, 2011 and 2012 were as follows (in thousands):
Quoted Prices
in Active Markets |
Significant
Other Observable Inputs |
Significant
Unobservable Inputs |
Total | |||||||||||||
(Level 1) | (Level 2) | (Level 3) | ||||||||||||||
December 31, 2011 |
||||||||||||||||
Assets: |
||||||||||||||||
Investments available-for-sale: |
||||||||||||||||
Marketable securitiesdeferred compensation plan |
$ | 31,686 | $ | | $ | | $ | 31,686 | ||||||||
Marketable securitiesother |
227 | | | 227 | ||||||||||||
Liabilities: |
||||||||||||||||
Marketable securitiesdeferred compensation plan |
25,740 | | | 25,740 | ||||||||||||
December 31, 2012 |
||||||||||||||||
Assets: |
||||||||||||||||
Investments available-for-sale: |
||||||||||||||||
Marketable securitiesdeferred compensation plan |
$ | 36,479 | $ | | $ | | $ | 36,479 | ||||||||
Marketable securitiesother |
3,717 | | | 3,717 | ||||||||||||
Liabilities: |
||||||||||||||||
Marketable securitiesdeferred compensation plan |
30,143 | | | 30,143 |
The Companys investments associated with its deferred compensation plan consist of marketable securities and mutual funds that are publicly traded and for which market prices are readily available. Other marketable securities are included in other assets on the combined balance sheets.
Assets and Liabilities Measured at Fair Value on a Non-recurring Basis
The Company applies the provisions of the fair value measurement standard to its non-recurring, non-financial measurements including business combinations as well as impairment related to goodwill and other long-lived assets. For business combinations, the purchase price is allocated to the assets acquired and liabilities assume based on a discounted cash flow model for most intangibles as well as market assumptions for the valuation of equipment and other fixed assets. The Company utilizes a discounted cash flow model in evaluating impairment considerations related to goodwill and long-lived assets. Given the unobservable nature of the inputs, the discounted cash flow models are deemed to use Level 3 inputs.
F-28
FRANKS INTERNATIONAL
NOTES TO COMBINED FINANCIAL STATEMENTS
Fair Value of Long-Term Debt
The carrying values and fair values of the Companys long-term debt at December 31, 2011 and 2012 were as follows (in thousands):
December 31, 2011 | December 31, 2012 | |||||||||||||||
Carrying
Value |
Fair
Value |
Carrying
Value |
Fair
Value |
|||||||||||||
Lines of credit |
$ | 3,000 | $ | 3,000 | $ | 1,000 | $ | 1,000 | ||||||||
Notes payable |
940 | 940 | | | ||||||||||||
Capital lease obligations |
| | 51 | 51 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
$ | 3,940 | $ | 3,940 | $ | 1,051 | $ | 1,051 | |||||||||
|
|
|
|
|
|
|
|
The carrying values on the Companys combined balance sheet of its cash and cash equivalents, trade accounts receivable, other current assets, accounts payable and accrued and other current liabilities approximates fair values due to their short maturities; therefore, they are excluded from the foregoing table.
The carrying value of the Companys lines of credit approximates fair value because of its variable rate structure. The fair value of the capital lease and business acquisition financing were estimated to not be materially different from the carrying amount.
Transactions involving related parties cannot be presumed to be carried out on an arms-length basis, as the requisite conditions of competitive, free-market dealings may not exist. Representations about transactions with related parties, if made, shall not imply that the related party transactions were consummated on terms equivalent to those that prevail in arms-length transactions unless such representations can be substantiated. It is not practical to determine the fair value of the long-term portion of the notes payable to FWW B.V. due to its related party nature.
Note 11Common Stock
At December 31, 2011 and 2012, the Companys common stock consisted of the following (in thousands, except per share information):
Par Value
Per Share |
Shares |
Common
Stock |
||||||||||||||
Authorized | Issued | |||||||||||||||
FINV |
| 0.0100 | 240,000 | 48,096 | $ | 617 | ||||||||||
FII |
$ | 1.0000 | 100 | 10 | 10 | |||||||||||
FCC |
$ | 0.0380 | 10,000 | 2,000 | 76 | |||||||||||
FTS |
$ | 1.0000 | 100 | 100 | 100 | |||||||||||
|
|
|
|
|
|
|||||||||||
250,200 | 50,206 | $ | 803 | |||||||||||||
|
|
|
|
|
|
Note 12Related Party Transactions
The Company has engaged in certain transactions with other companies related to the Company by common ownership. The Company has entered into various operating leases with an affiliated partnership to lease office space from the partnership. Rent expense related to these leases was $2.8 million, $2.8 million and $3.0 million for the years ended December 31, 2010, 2011 and 2012, respectively.
F-29
FRANKS INTERNATIONAL
NOTES TO COMBINED FINANCIAL STATEMENTS
The Company had receivables totaling $4.9 million and $5.6 million at December 31, 2011 and 2012, respectively, due from our chief executive officer and certain members of the Mosing family, relating to amounts owed to the Company for split-dollar life insurance policy premiums that the Company maintains. The Company will collect the receivable either directly from the executive officer, if employment terminates other than by death, or from the executive officers beneficiary, if employment terminates due to death of the executive officer. The receivables are recorded in other assets on the combined balance sheets. The cash surrender value of $16.0 million and $18.8 million related to such policies is recorded in other assets as of December 31, 2011 and 2012, respectively. The Company recorded an unrealized gain of $0.5 million for the year ended December 31, 2010 and unrealized losses of $0.7 million and $0.3 million for the years ended December 31, 2011 and 2012, respectively, in general and administrative expenses on the combined statements of income. In 2012, the Company received a death benefit payment of $4.9 million related to the passing of a related party which is included in other income on the combined statements of income.
In addition, the Company has two outstanding notes payable to FWW B.V. See Note 9Long-Term Debt.
Note 13Income Taxes
Income before income tax expense was comprised of the following for the periods indicated (in thousands):
Year Ended December 31, | ||||||||||||
2010 | 2011 | 2012 | ||||||||||
United States |
$ | 33,745 | $ | 64,252 | $ | 192,545 | ||||||
Foreign |
99,257 | 126,822 | 190,266 | |||||||||
|
|
|
|
|
|
|||||||
Income before income tax expense |
$ | 133,002 | $ | 191,074 | $ | 382,811 | ||||||
|
|
|
|
|
|
Income taxes have been provided for based upon the tax laws and rates in the countries in which operations are conducted and income is earned. Components of income tax expense consist of the following for the periods indicated (in thousands):
Year Ended December 31, | ||||||||||||
2010 | 2011 | 2012 | ||||||||||
Current |
||||||||||||
U.S. federal |
$ | 119 | $ | 68 | $ | 63 | ||||||
U.S. state and local |
45 | 92 | | |||||||||
Foreign |
14,201 | 20,539 | 30,365 | |||||||||
|
|
|
|
|
|
|||||||
Total current |
14,365 | 20,699 | 30,428 | |||||||||
|
|
|
|
|
|
|||||||
Deferred |
||||||||||||
U.S. federal |
(119 | ) | (62 | ) | (63 | ) | ||||||
Foreign |
355 | (350 | ) | 1,512 | ||||||||
|
|
|
|
|
|
|||||||
Total deferred |
236 | (412 | ) | 1,449 | ||||||||
|
|
|
|
|
|
|||||||
Total income tax expense |
$ | 14,601 | $ | 20,287 | $ | 31,877 | ||||||
|
|
|
|
|
|
F-30
FRANKS INTERNATIONAL
NOTES TO COMBINED FINANCIAL STATEMENTS
Foreign taxes were incurred in the following regions for the periods indicated (in thousands):
Year Ended December 31, | ||||||||||||
2010 | 2011 | 2012 | ||||||||||
Latin America |
$ | 1,625 | $ | 5,992 | $ | 11,996 | ||||||
West Africa |
5,686 | 5,978 | 9,104 | |||||||||
Middle East |
976 | 1,665 | 3,751 | |||||||||
Europe |
992 | 1,677 | 1,707 | |||||||||
Far East |
982 | 1,630 | 2,172 | |||||||||
Other |
4,295 | 3,247 | 3,147 | |||||||||
|
|
|
|
|
|
|||||||
Total foreign income tax expense |
$ | 14,556 | $ | 20,189 | $ | 31,877 | ||||||
|
|
|
|
|
|
A reconciliation of the differences between the income tax provision computed at the U.S. statutory rate and the reported provision for income taxes is as follows (in thousands):
Year Ended December 31, | ||||||||||||
2010 | 2011 | 2012 | ||||||||||
Income tax expense at U.S. statutory rate |
$ | 46,551 | $ | 66,876 | $ | 133,984 | ||||||
Benefit of pass through entity status |
(11,766 | ) | (22,353 | ) | (66,593 | ) | ||||||
Taxes on foreign earnings at less than the U.S. statutory rate |
(20,184 | ) | (24,236 | ) | (35,514 | ) | ||||||
|
|
|
|
|
|
|||||||
Total income tax expense |
$ | 14,601 | $ | 20,287 | $ | 31,877 | ||||||
|
|
|
|
|
|
Deferred tax assets and liabilities are recorded for the anticipated future tax effects of temporary differences between the financial statement basis and tax basis of the Companys assets and liabilities using the applicable tax rates in effect at year-end. A valuation allowance is recorded when it is not more likely than not that some or all of the benefit from the deferred tax asset will be realized. Significant components of deferred tax assets and liabilities are as follows (in thousands):
December 31, | ||||||||
2011 | 2012 | |||||||
Deferred tax assets |
||||||||
Current |
||||||||
Other |
$ | | $ | 94 | ||||
Noncurrent |
||||||||
Property and equipment |
144 | 324 | ||||||
|
|
|
|
|||||
Total deferred tax assets |
144 | 418 | ||||||
|
|
|
|
|||||
Deferred tax liabilities |
||||||||
Current |
||||||||
Property and equipment |
| (21 | ) | |||||
Noncurrent |
||||||||
Property and equipment |
(5,322 | ) | (6,899 | ) | ||||
|
|
|
|
|||||
Total deferred liabilities |
(5,322 | ) | (6,920 | ) | ||||
|
|
|
|
|||||
Net deferred tax liabilities |
$ | (5,178 | ) | $ | (6,502 | ) | ||
|
|
|
|
F-31
FRANKS INTERNATIONAL
NOTES TO COMBINED FINANCIAL STATEMENTS
It is the Companys intention to permanently reinvest undistributed earnings and profits from the subsidiaries of the combined companies operations that have been generated through December 31, 2012 and future plans do not demonstrate a need to repatriate the foreign amounts to fund U.S. operations. In the event of distribution of those earnings in the form of dividends or otherwise, the Company would not be subject to either U.S. income taxes nor foreign withholding taxes payable to certain foreign entities.
A tabular reconciliation of the total amounts of uncertain tax positions at the beginning and end of the period is as follows: (in thousands):
Gross
Unrecognized Tax Benefits, Excluding Interest and Penalties |
Interest and
Penalties |
Total Gross
Unrecognized Tax Benefits |
||||||||||
Balance at December 31, 2011 |
$ | 1,796 | $ | | $ | 1,796 | ||||||
Increase in prior year tax positions |
1,553 | 564 | 2,117 | |||||||||
|
|
|
|
|
|
|||||||
Balance at December 31, 2012 |
$ | 3,349 | $ | 564 | $ | 3,913 | ||||||
|
|
|
|
|
|
Substantially all of the uncertain tax positions, if recognized in the future, would impact the Companys effective tax rate. The Company has elected to classify interest and penalties incurred on income taxes as income tax expense. The Company had no changes to its uncertain tax positions in 2010 and 2011 and no interest or penalties on income taxes were recorded during the years ended December 31, 2010 and 2011.
The Company files income tax returns in various international tax jurisdictions. As of December 31, 2012, the tax years 2006 through 2012 remain open to examination in the major foreign taxing jurisdictions to which the Company is subject. There are currently no U.S. Federal or state audits or examinations underway.
Note 14Commitments and Contingencies
Commitments
The Company is committed under various noncancelable operating lease agreements primarily related to facilities and equipment that expire at various dates throughout the next several years. Future minimum lease commitments under noncancelable operating leases with initial or remaining terms of one year or more at December 31, 2012, are as follows (in thousands):
Year Ending December 31, |
||||
2013 |
$ | 4,955 | ||
2014 |
4,060 | |||
2015 |
3,241 | |||
2016 |
2,775 | |||
2017 |
2,748 | |||
Thereafter |
8,917 | |||
|
|
|||
Total future lease commitments |
$ | 26,696 | ||
|
|
Total rent expense incurred under operating leases was $5.2 million, $5.8 million and $8.4 million for the years ended December 31, 2010, 2011 and 2012, respectively.
F-32
FRANKS INTERNATIONAL
NOTES TO COMBINED FINANCIAL STATEMENTS
Contingencies
The Company is the subject of other lawsuits and claims arising in the ordinary course of business. Management cannot predict the ultimate outcome of such lawsuits and claims. While the lawsuits and claims are asserted for amounts that may be material should an unfavorable outcome be the result, management does not expect that these matters will have a material adverse effect on the Companys financial position or results of operations.
Note 15Employee Benefit Plans
U.S. Benefit Plans
401(k) Savings and Investment Plan . FII, FCC and FTS administer separate 401(k) savings and investment plans (the Plans) as part of the employee benefits package. Employees are required to complete six months of service before becoming eligible to participate in the Plans. Under the terms of the Plans, the Company matches 75% of employee contributions up to $3,000 annually. The Companys matching contributions to the Plans totaled $2.5 million, $2.6 million and $2.9 million for the years ended December 31 2010, 2011 and 2012, respectively.
Executive Deferred Compensation Plan . The Company and certain affiliates adopted the Franks Executive Deferred Compensation Plan (EDC Plan) effective December 20, 2004. The purpose of the EDC Plan is to provide participants with an opportunity to defer receipt of a portion of their salary, bonus, and other specified cash compensation. Participant contributions are immediately vested. Company contributions vest after five years of service. All participant benefits under this EDC Plan shall be paid directly from the general funds of the applicable participating subsidiary or a grantor trust, commonly referred to as a Rabbi Trust, created for the purpose of informally funding the EDC Plan, and other than such Rabbi Trust, no special or separate fund shall be established and no other segregation of assets shall be made to assure payment. The assets of the Company EDC Plans trust is invested in a corporate owned split-dollar life insurance policy and an amalgamation of mutual funds (Note 7).
The Company recorded compensation expense related to the vesting of the Companys contribution of $2.5 million, $2.6 million and $4.8 million for the years ended December 31, 2010, 2011 and 2012, respectively. The total liability recorded at December 31, 2011 and 2012, related to the EDC Plan was $25.7 million and $30.1 million, respectively, and was included in other noncurrent liabilities on the combined balance sheets.
Foreign Benefit Plans
The Company sponsors certain benefit plans as dictated by host country law. The Company recorded expense related to foreign benefit plans of $1.6 million, $1.7 million and $2.4 million for the years ended December 31, 2010, 2011 and 2012, respectively.
Note 16Segment Information
Reporting Segments
Operating segments are defined as components of an enterprise for which separate financial information is available that is regularly evaluated by the chief operating decision maker (CODM) in deciding how to allocate resources and assess performance. The Company is comprised of three reportable segments: International Services, U.S. Services and Pipe and Products.
F-33
FRANKS INTERNATIONAL
NOTES TO COMBINED FINANCIAL STATEMENTS
The International Services segment provides tubular services in international offshore markets and in several onshore international regions. The Companys customers in these international markets are primarily large exploration and production companies, including blue-chip integrated oil and gas companies and national oil and gas companies.
The U.S. Services segment provides tubular running services in almost all of the active onshore oil and gas drilling regions in the U.S., including the Permian Basin, Bakken Shale, Barnett Shale, Eagleford Shale, Haynesville Shale, Marcellus Shale and Utica Shale, as well as in the U.S. Gulf of Mexico.
The Pipe and Products segment designs and manufactures certain products that the Company sells or rents directly to external customers, including large OD pipe connectors and casing attachments. Finally, the Company distributes large OD pipe manufactured by third parties that the Company has equipped with weld-on end connections.
Adjusted EBITDA
The Company defines Adjusted EBITDA as net income before net interest income or expense, depreciation and amortization, income tax benefit or expense, asset impairments, gain or loss on sale of assets, foreign currency gain or loss and other non-cash adjustments. The Companys CODM uses Adjusted EBITDA as the primary measure of segment reporting performance.
The following table presents a reconciliation of Adjusted EBITDA to net income (in thousands):
Year Ended December 31, | ||||||||||||
2010 | 2011 | 2012 | ||||||||||
Segment Adjusted EBITDA: |
||||||||||||
International Services |
$ | 118,487 | $ | 153,064 | $ | 219,199 | ||||||
U.S. Services |
36,417 | 72,141 | 199,397 | |||||||||
Pipe and Products |
29,731 | 24,267 | 28,038 | |||||||||
Corporate and other |
(12 | ) | | (30 | ) | |||||||
|
|
|
|
|
|
|||||||
Adjusted EBITDA Total |
184,623 | 249,472 | 446,604 | |||||||||
Interest income (expense), net |
(1,658 | ) | (655 | ) | 264 | |||||||
Income tax expense |
(14,601 | ) | (20,287 | ) | (31,877 | ) | ||||||
Depreciation and amortization |
(48,197 | ) | (54,581 | ) | (66,215 | ) | ||||||
Gain on sale of assets |
164 | 47 | 2,608 | |||||||||
Foreign currency loss |
(1,930 | ) | (3,209 | ) | (450 | ) | ||||||
|
|
|
|
|
|
|||||||
Net income |
$ | 118,401 | $ | 170,787 | $ | 350,934 | ||||||
|
|
|
|
|
|
F-34
FRANKS INTERNATIONAL
NOTES TO COMBINED FINANCIAL STATEMENTS
The following tables set forth certain financial information with respect to the Companys reportable segments. Included in Corporate and Other are intersegment eliminations and amounts not directly associated with an operating segment (in thousands):
International
Services |
U.S.
Services |
Pipe and
Products |
Corporate
and Other |
Total | ||||||||||||||||
Year Ended December 31, 2010 |
||||||||||||||||||||
Revenue from external customers |
$ | 289,183 | $ | 214,360 | $ | 104,665 | $ | | $ | 608,208 | ||||||||||
Inter-segment revenues |
414 | 17,553 | 21,531 | (39,498 | ) | | ||||||||||||||
Adjusted EBITDA |
118,487 | 36,417 | 29,731 | (12 | ) | 184,623 | ||||||||||||||
Depreciation and amortization |
18,540 | 26,457 | 3,200 | | 48,197 | |||||||||||||||
Property, plant and equipment |
116,879 | 115,983 | 19,729 | | 252,591 | |||||||||||||||
Capital expenditures |
34,313 | 21,605 | 1,345 | | 57,263 | |||||||||||||||
Year Ended December 31, 2011 |
||||||||||||||||||||
Revenue from external customers |
$ | 365,278 | $ | 259,396 | $ | 114,401 | $ | | $ | 739,075 | ||||||||||
Inter-segment revenues |
828 | 17,890 | 32,934 | (51,652 | ) | | ||||||||||||||
Adjusted EBITDA |
153,064 | 72,141 | 24,267 | | 249,472 | |||||||||||||||
Depreciation and amortization |
23,702 | 27,378 | 3,501 | | 54,581 | |||||||||||||||
Property, plant and equipment |
164,709 | 138,339 | 21,833 | | 324,881 | |||||||||||||||
Capital expenditures |
63,285 | 49,097 | 5,501 | | 117,883 | |||||||||||||||
Year Ended December 31, 2012 |
||||||||||||||||||||
Revenue from external customers |
$ | 467,126 | $ | 422,522 | $ | 166,277 | $ | | $ | 1,055,925 | ||||||||||
Inter-segment revenues |
2,338 | 22,046 | 48,409 | (72,793 | ) | | ||||||||||||||
Adjusted EBITDA |
219,199 | 199,397 | 28,038 | (30 | ) | 446,604 | ||||||||||||||
Depreciation and amortization |
31,931 | 30,230 | 4,054 | | 66,215 | |||||||||||||||
Property, plant and equipment |
222,197 | 181,830 | 22,473 | | 426,500 | |||||||||||||||
Capital expenditures |
98,781 | 75,342 | 6,064 | | 180,187 |
The CODM does not review total assets by segment as part of the financial information provided; therefore, no asset information is provided in the above table.
Geographic Areas
Revenue and property, plant and equipment by geographic area were as follows for the periods indicated (in thousands):
Year Ended December 31, | ||||||||||||
2010 | 2011 | 2012 | ||||||||||
Revenue: |
||||||||||||
United States |
$ | 301,002 | $ | 361,408 | $ | 560,559 | ||||||
Europe/Middle East/Africa |
182,812 | 215,110 | 287,433 | |||||||||
Latin America |
63,166 | 90,409 | 107,112 | |||||||||
Other countries |
61,228 | 72,148 | 100,821 | |||||||||
|
|
|
|
|
|
|||||||
$ | 608,208 | $ | 739,075 | $ | 1,055,925 | |||||||
|
|
|
|
|
|
The revenue generated in The Netherlands was immaterial for the years ended December 31, 2010, 2011 and 2012. Other than the United States, no individual country represented more than 10% of the Companys revenue for each of the years ended December 31, 2010, 2011 and 2012.
F-35
FRANKS INTERNATIONAL
NOTES TO COMBINED FINANCIAL STATEMENTS
December 31, | ||||||||
2011 | 2012 | |||||||
Long-Lived Assets (PP&E) |
||||||||
United States |
$ | 160,172 | $ | 204,303 | ||||
International |
164,709 | 222,197 | ||||||
|
|
|
|
|||||
$ | 324,881 | $ | 426,500 | |||||
|
|
|
|
Based on the unique nature of the operating structure of the Company, revenue generating assets are interchangeable between international countries and are not separately identifiable. Revenues from customers and long-lived assets in the Netherlands were insignificant in each of the years presented.
Note 17Subsequent Events
The Venezuelan government has devalued the Bolivar a number of times, including a recent devaluation on February 8, 2013. As a result of the 2013 valuation, the Company estimates a non-deductible foreign exchange loss of approximately $2.0 million in the first quarter of 2013.
F-36
FRANKS INTERNATIONAL
(In thousands)
(Unaudited)
December 31,
2012 |
March 31,
2013 |
|||||||
Assets |
||||||||
Current assets: |
||||||||
Cash and cash equivalents |
$ | 152,945 | $ | 123,392 | ||||
Accounts receivables, net |
313,657 | 319,057 | ||||||
Inventories |
108,543 | 128,471 | ||||||
Other current assets |
16,632 | 15,556 | ||||||
|
|
|
|
|||||
Total current assets |
591,777 | 586,476 | ||||||
Property, plant and equipment, net |
426,500 | 449,789 | ||||||
Goodwill |
15,239 | 15,239 | ||||||
Intangible assets, net |
1,832 | 1,595 | ||||||
Other assets |
72,613 | 76,219 | ||||||
|
|
|
|
|||||
Total assets |
$ | 1,107,961 | $ | 1,129,318 | ||||
|
|
|
|
|||||
Liabilities and Stockholders Equity |
||||||||
Current liabilities: |
||||||||
Current portion of long-term debt and capital lease obligation |
$ | 6,317 | $ | 4,815 | ||||
Current portion of notes payableaffiliated |
323,476 | 323,476 | ||||||
Accounts payable |
19,377 | 26,134 | ||||||
Accrued and other current liabilities |
127,799 | 115,797 | ||||||
|
|
|
|
|||||
Total current liabilities |
476,969 | 470,222 | ||||||
|
|
|
|
|||||
Long-term debt: |
||||||||
Long-term debt and capital lease obligation |
1,051 | 1,043 | ||||||
Notes payableaffiliated |
145,792 | 125,362 | ||||||
|
|
|
|
|||||
Total long-term debt |
146,843 | 126,405 | ||||||
|
|
|
|
|||||
Deferred tax liabilities |
6,575 | 6,029 | ||||||
Other non-current liabilities |
30,586 | 33,011 | ||||||
|
|
|
|
|||||
Total liabilities |
660,973 | 635,667 | ||||||
|
|
|
|
|||||
Commitments and contingencies |
| | ||||||
Stockholders equity |
||||||||
Common stock |
803 | 803 | ||||||
Additional paid-in capital |
1,409 | 1,409 | ||||||
Retained earnings |
440,399 | 491,145 | ||||||
Accumulated other comprehensive income |
4,377 | 294 | ||||||
|
|
|
|
|||||
Total stockholders equity |
446,988 | 493,651 | ||||||
|
|
|
|
|||||
Total liabilities and stockholders equity |
$ | 1,107,961 | $ | 1,129,318 | ||||
|
|
|
|
The accompanying notes are an integral part of these combined financial statements.
F-37
FRANKS INTERNATIONAL
(In thousands)
(Unaudited)
Three Months Ended
March 31, |
||||||||
2012 | 2013 | |||||||
Revenues: |
||||||||
Equipment rentals and services |
$ | 203,755 | $ | 205,878 | ||||
Products |
36,773 | 30,882 | ||||||
|
|
|
|
|||||
Total revenue |
240,528 | 236,760 | ||||||
|
|
|
|
|||||
Operating expenses: |
||||||||
Cost of revenues, exclusive of depreciation and amortization |
||||||||
Equipment rentals and services |
72,731 | 75,781 | ||||||
Products |
24,184 | 18,019 | ||||||
General and administrative expenses |
41,608 | 44,145 | ||||||
Depreciation and amortization |
15,424 | 17,783 | ||||||
Loss on sale of assets |
195 | 23 | ||||||
|
|
|
|
|||||
Operating income |
86,386 | 81,009 | ||||||
|
|
|
|
|||||
Other income (expense): |
||||||||
Other income |
670 | 2,127 | ||||||
Interest income (expense), net |
260 | (201 | ) | |||||
Foreign currency gain (loss) |
2,626 | (3,587 | ) | |||||
|
|
|
|
|||||
Total other income (expense) |
3,556 | (1,661 | ) | |||||
|
|
|
|
|||||
Income before income tax expense |
89,942 | 79,348 | ||||||
Income tax expense |
7,687 | 6,303 | ||||||
|
|
|
|
|||||
Net income |
$ | 82,255 | $ | 73,045 | ||||
|
|
|
|
The accompanying notes are an integral part of these combined financial statements.
F-38
FRANKS INTERNATIONAL
COMBINED STATEMENTS OF COMPREHENSIVE INCOME
(In thousands)
(Unaudited)
Three Months Ended
March 31, |
||||||||
2012 | 2013 | |||||||
Net income |
$ | 82,255 | $ | 73,045 | ||||
Other comprehensive income (loss): |
||||||||
Foreign currency translation adjustments, net of tax |
660 | (4,276 | ) | |||||
Unrealized gain on marketable securities, net of tax |
38 | 193 | ||||||
|
|
|
|
|||||
Total other comprehensive income (loss) |
698 | (4,083 | ) | |||||
|
|
|
|
|||||
Comprehensive income |
$ | 82,953 | $ | 68,962 | ||||
|
|
|
|
The accompanying notes are an integral part of these combined financial statements.
F-39
FRANKS INTERNATIONAL
COMBINED STATEMENTS OF STOCKHOLDERS EQUITY
(In thousands)
(Unaudited)
Common
Stock |
Additional
Paid-In Capital |
Retained
Earnings |
Accumulated
Other Comprehensive Income |
Total
Stockholders Equity |
||||||||||||||||
Balances at December 31, 2012 |
$ | 803 | $ | 1,409 | $ | 440,399 | $ | 4,377 | $ | 446,988 | ||||||||||
Net income |
| | 73,045 | | 73,045 | |||||||||||||||
Foreign currency translation adjustments |
| | | (4,276 | ) | (4,276 | ) | |||||||||||||
Unrealized gain on marketable securities |
| | | 193 | 193 | |||||||||||||||
Distributions to stockholders |
| | (22,299 | ) | | (22,299 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Balances at March 31, 2013 |
$ | 803 | $ | 1,409 | $ | 491,145 | $ | 294 | $ | 493,651 | ||||||||||
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these combined financial statements.
F-40
FRANKS INTERNATIONAL
COMBINED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Three Months Ended
March 31, |
||||||||
2012 | 2013 | |||||||
Cash flows from operating activities |
||||||||
Net income |
$ | 82,255 | $ | 73,045 | ||||
Adjustments to reconcile net income to cash provided by operating activities |
||||||||
Depreciation and amortization |
15,424 | 17,783 | ||||||
Venezuelan currency devaluation charge |
| 1,755 | ||||||
Deferred tax provision |
(90 | ) | (167 | ) | ||||
Provision for (recovery of) bad debts |
(164 | ) | 1,343 | |||||
Loss on sale of assets |
195 | 23 | ||||||
Changes in fair value of marketable securities |
(1,457 | ) | (1,314 | ) | ||||
Increase in value of life insurance policies |
| (847 | ) | |||||
Changes in operating assets and liabilities |
||||||||
Accounts receivable |
(23,885 | ) | (19,715 | ) | ||||
Inventories |
(11,191 | ) | (20,097 | ) | ||||
Other current assets |
2,053 | 1,112 | ||||||
Other assets |
(316 | ) | 119 | |||||
Accounts payable |
5,252 | 7,075 | ||||||
Accrued expenses and other current liabilities |
7,864 | (11,876 | ) | |||||
Other noncurrent liabilities |
2,729 | 2,425 | ||||||
|
|
|
|
|||||
Net cash provided by operating activities |
78,669 | 50,664 | ||||||
|
|
|
|
|||||
Cash flows from investing activities |
||||||||
Purchase of property, plant and equipment |
(43,919 | ) | (40,511 | ) | ||||
Proceeds from sale of equipment |
27 | 49 | ||||||
Purchase of marketable securities |
(566 | ) | (330 | ) | ||||
Premiums on life insurance policies |
(1,648 | ) | (1,222 | ) | ||||
Other |
(1,435 | ) | | |||||
|
|
|
|
|||||
Net cash used in investing activities |
(47,541 | ) | (42,014 | ) | ||||
|
|
|
|
|||||
Cash flows from financing activities |
||||||||
Repayments of borrowings |
(1,723 | ) | (21,936 | ) | ||||
Proceeds from borrowings |
10,000 | | ||||||
Distributions to stockholders |
(23,019 | ) | (22,299 | ) | ||||
|
|
|
|
|||||
Net cash used in financing activities |
(14,742 | ) | (44,235 | ) | ||||
Effect of exchange rate changes on cash due to Venezuelan devaluation |
| 575 | ||||||
Effect of exchange rate changes on cash |
(1,933 | ) | 5,457 | |||||
|
|
|
|
|||||
Net increase (decrease) in cash |
14,453 | (29,553 | ) | |||||
Cash and cash equivalents at beginning of period |
98,649 | 152,945 | ||||||
|
|
|
|
|||||
Cash and cash equivalents at end of period |
$ | 113,102 | $ | 123,392 | ||||
|
|
|
|
The accompanying notes are an integral part of these combined financial statements.
F-41
FRANKS INTERNATIONAL
NOTES TO COMBINED FINANCIAL STATEMENTS (UNAUDITED)
Note 1Basis of Presentation and Significant Accounting Policies
Nature of Business
Franks International is a global provider of highly engineered tubular services to the oil and gas industry. Franks International provides services to leading exploration and production companies in both offshore and onshore environments with a focus on complex and technically demanding wells.
Basis of Presentation
The combined financial statements for the three months ended March 31, 2012 and 2013 include the activities of Franks International N.V. (FINV), a Netherlands corporation, Franks International, Inc. (FII), Franks Casing Crew and Rental Tools, Inc. (FCC), Franks Tong Service, Inc. (FTS) and their wholly owned subsidiaries (collectively, the Company). Under this combined method of accounting, the historical combined financial statements of FINV are combined with FII, FCC and FTS. All intercompany accounts and transactions have been eliminated for purposes of preparing these combined financial statements.
Certain information and footnote disclosures required by generally accepted accounting principles in the United States of America (GAAP) for complete annual financial statements have been omitted and, therefore, it is suggested that these interim financial statements be read in conjunction with the Companys audited financial statements for the year ended December 31, 2012 located elsewhere in this prospectus. In the opinion of management, these financial statements, which have been prepared pursuant to the rules of the Securities and Exchange Commission (the SEC) and GAAP for interim financial reporting, reflect all adjustments, which consisted only of normal recurring adjustments which were necessary for a fair statement of the interim periods presented. The results of operations for interim periods are not necessarily indicative of those for a full year.
The combined financial statements have been prepared on a historical cost basis using the United States dollar as the reporting currency.
Venezuelan Currency Devaluation
In February 2013, the Venezuelan government announced a devaluation of the Bolivar Fuerte (Bolivar), resulting in the exchange rate declining from 4.3 to 6.3 Bolivars per U.S. Dollar. As a result of the devaluation, the Company recorded a foreign currency loss of $1.8 million during the three months ended March 31, 2013, related to the remeasurement of the Bolivar-denominated net monetary assets of the Companys Venezuelan operations as of the date of the devaluation. In future periods, foreign exchange gains (losses) arising due to the appreciation (depreciation) of the Bolivar versus the U.S. Dollar will result in benefits (charges) to the statements of income based on the value of the Bolivar-denominated net monetary assets at the time when such exchange rate changes become effective.
Recent Accounting Pronouncements
In February 2013, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2013-02, Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income (AOCI). This ASU requires entities to present separately, among other items, the amount of the change that is due to reclassifications, and the amount that is due to current period other comprehensive income. The Company adopted this guidance during the first quarter of 2013 which did not have a material impact on its combined financial position, results of operations or cash flows as there are currently no items reclassified from AOCI.
F-42
FRANKS INTERNATIONAL
NOTES TO COMBINED FINANCIAL STATEMENTS (UNAUDITED)
Note 2Accounts Receivable, net
Accounts receivable at December 31, 2012 and March 31, 2013 were as follows (in thousands):
December 31,
2012 |
March 31,
2013 |
|||||||
Trade accounts receivable, net of allowance of $1,697 and $2,953, respectively |
$ | 188,095 | $ | 207,515 | ||||
Unbilled receivables |
108,713 | 96,509 | ||||||
Affiliated (1) |
4,551 | 5,464 | ||||||
Other receivables |
12,298 | 9,569 | ||||||
|
|
|
|
|||||
Total accounts receivable |
$ | 313,657 | $ | 319,057 | ||||
|
|
|
|
(1) | Amounts represent expenditures on behalf of non-consolidated affiliates. |
Note 3Inventories
Inventories at December 31, 2012 and March 31, 2013 were as follows (in thousands):
December 31,
2012 |
March 31,
2013 |
|||||||
Pipe and connectors |
$ | 87,083 | $ | 108,075 | ||||
Finished goods |
6,985 | 7,368 | ||||||
Work in progress |
2,411 | 697 | ||||||
Raw materials, components and supplies |
12,064 | 12,331 | ||||||
|
|
|
|
|||||
Total inventories |
$ | 108,543 | $ | 128,471 | ||||
|
|
|
|
Note 4Property, Plant and Equipment
The following is a summary of property, plant and equipment at December 31, 2012 and March 31, 2013 (in thousands):
Estimated
Useful Lives in Years |
December 31,
2012 |
March 31,
2013 |
||||||||||
Land |
| $ | 21,344 | $ | 21,177 | |||||||
Buildings and improvements |
39 | 82,005 | 81,028 | |||||||||
Rental machinery and equipment |
7 | 563,368 | 583,201 | |||||||||
Machinery and equipmentother |
7 | 43,086 | 48,001 | |||||||||
Furniture, fixtures and computers |
5 | 16,707 | 17,528 | |||||||||
Automobiles and other vehicles |
5 | 55,481 | 55,650 | |||||||||
Leasehold improvements |
7 | 4,843 | 4,893 | |||||||||
Construction in progressmachinery and equipment |
| 62,122 | 75,077 | |||||||||
|
|
|
|
|||||||||
848,956 | 886,555 | |||||||||||
Less: Accumulated depreciation |
(422,456 | ) | (436,766 | ) | ||||||||
|
|
|
|
|||||||||
Total property, plant and equipment, net |
$ | 426,500 | $ | 449,789 | ||||||||
|
|
|
|
F-43
FRANKS INTERNATIONAL
NOTES TO COMBINED FINANCIAL STATEMENTS (UNAUDITED)
Note 5Other Assets
Other assets at December 31, 2012 and March 31, 2013 consist of the following (in thousands):
December 31,
2012 |
March 31,
2013 |
|||||||
Split-dollar life insurance |
$ | 18,799 | $ | 20,546 | ||||
Marketable securities held in Rabbi Trust (1) |
36,479 | 38,124 | ||||||
Notes receivableaffiliates (2) |
6,939 | 7,099 | ||||||
Other |
10,396 | 10,450 | ||||||
|
|
|
|
|||||
Total other assets |
$ | 72,613 | $ | 76,219 | ||||
|
|
|
|
(1) | See Note 8Fair Value Measurements. |
(2) | Represents amounts due from family members related to split-dollar life insurance policy premiums that the Company maintains. |
Note 6Accrued and Other Current Liabilities
Accrued and other current liabilities at December 31, 2012 and March 31, 2013 consist of the following (in thousands):
December 31,
2012 |
March 31,
2013 |
|||||||
Accrued compensation |
$ | 23,978 | $ | 17,541 | ||||
Accrued property and other taxes |
23,847 | 22,960 | ||||||
Deferred revenue |
23,172 | 37,865 | ||||||
Accrued inventory |
17,273 | 4,076 | ||||||
Other accrued purchases |
39,529 | 33,355 | ||||||
|
|
|
|
|||||
Total accrued and other current liabilities |
$ | 127,799 | $ | 115,797 | ||||
|
|
|
|
Note 7Long-term Debt
The following is summary of long-term debt at December 31, 2012 and March 31, 2013 (in thousands):
December 31,
2012 |
March 31,
2013 |
|||||||
Lines of credit |
$ | 2,000 | $ | 2,000 | ||||
Notes payable |
4,464 | 2,981 | ||||||
Equipment financing |
818 | 799 | ||||||
Other |
86 | 78 | ||||||
|
|
|
|
|||||
7,368 | 5,858 | |||||||
Less: current portion |
(6,317 | ) | (4,815 | ) | ||||
|
|
|
|
|||||
Long-term portion |
1,051 | 1,043 | ||||||
|
|
|
|
|||||
Notes payableaffiliated |
469,268 | 448,838 | ||||||
Less: current portion |
(323,476 | ) | (323,476 | ) | ||||
|
|
|
|
|||||
Long-term portion |
145,792 | 125,362 | ||||||
|
|
|
|
|||||
Total long-term debt |
$ | 146,843 | $ | 126,405 | ||||
|
|
|
|
F-44
FRANKS INTERNATIONAL
NOTES TO COMBINED FINANCIAL STATEMENTS (UNAUDITED)
Lines of Credit
The Company has two revolving credit facilities, with available borrowing capacities of $40.0 million and $5.0 million, which mature on August 31, 2014 and February 19, 2016, respectively. Interest is paid monthly on the unpaid balance of the $40.0 million line of credit at the London Interbank Offering Rate plus approximately 2.5% per annum. Interest is paid on the unpaid balance of the $5.0 million line of credit at the prime rate, which equates to 4.5% with the applicable margin included. The aggregate outstanding balance under the credit facilities was $2.0 million as of December 31, 2012 and March 31, 2013. The revolving credit facilities have certain financial covenants. As of March 31, 2013, the Company was in compliance with all financial covenants. In addition, we had outstanding letters of credit of $5.9 million as of March 31, 2013.
Notes Payable
The Company has various notes payable totaling $3.2 million and $1.8 million at December 31, 2012 and March 31, 2013, respectively. These notes mature in 2013 with interest rates of 3.0% per annum.
The Company has financed certain business acquisitions. At December 31, 2012 and March 31, 2013, the aggregate outstanding balance of the finance agreements was $1.3 million and $1.2 million, respectively, with interest rates ranging from 5% to 6% per annum. The finance agreements are due on demand and have maturity dates ranging from September 2016 to October 2018.
Equipment Financing
The Company has financed certain aircraft through credit agreements. The aggregate outstanding balance of these credit agreements was $0.8 million at December 31, 2012 and March 31, 2013, with a fixed interest rate of 5.0% per annum payable monthly. The credit agreements mature in August 2013. The notes are secured by the aircraft.
Notes PayableAffiliated
In 2012, the Company made a non-cash distribution of $484.0 million to the owners of the Company in the form of two unsecured promissory notes payable to FWW.B.V. Interest is charged on the notes at the applicable short-term monthly applicable federal rate (commonly known as the AFR Rate) as published by the Internal Revenue Service. As of December 31, 2012 and March 31, 2013, $320.0 million is included in current portion of notes payableaffiliates because it is due on demand and $144.0 million and $123.7 million, respectively, is included in notes payableaffiliated on the combined balance sheets. The Company also has various notes payable affiliated of $5.3 million and $5.1 million at December 31, 2012 and March 31, 2013, respectively.
Note 8Fair Value Measurements
The Company follows fair value measurement authoritative accounting guidance for measuring fair values of assets and liabilities in financial statements. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price). The Company utilizes market data or assumptions that market participants who are independent, knowledgeable and willing and able to transact would use in pricing the asset or liability, including assumptions about risk and the risks inherent in the inputs to the valuation technique. The Company is able to classify fair
F-45
FRANKS INTERNATIONAL
NOTES TO COMBINED FINANCIAL STATEMENTS (UNAUDITED)
value balances based on the observability of these inputs. The authoritative guidance for fair value measurements establishes three levels of the fair value hierarchy, defined as follows:
|
Level 1: Unadjusted, quoted prices for identical assets or liabilities in active markets. |
|
Level 2: Quoted prices in markets that are not considered to be active or financial instruments for which all significant inputs are observable, either directly or indirectly for substantially the full term of the asset or liability. |
|
Level 3: Significant, unobservable inputs for use when little or no market data exists, requiring a significant degree of judgment. |
The hierarchy gives the highest priority to Level 1 measurements and the lowest priority to Level 3 measurements. Depending on the particular asset or liability, input availability can vary depending on factors such as product type, longevity of a product in the market and other particular transaction conditions. In some cases, certain inputs used to measure fair value may be categorized into different levels of the fair value hierarchy. For disclosure purposes under the accounting guidance, the lowest level that contains significant inputs used in valuation should be chosen.
Financial Assets and Liabilities
A summary of financial assets and liabilities that are measured at fair value on a recurring basis as of December 31, 2012 and March 31, 2013 were as follows (in thousands):
Quoted Prices
in Active Markets |
Significant
Other Observable Inputs |
Significant
Unobservable Inputs |
||||||||||||||
(Level 1) | (Level 2) | (Level 3) | Total | |||||||||||||
December 31, 2012 |
||||||||||||||||
Assets: |
||||||||||||||||
Investments available-for-sale: |
||||||||||||||||
Marketable securitiesdeferred compensation plan |
$ | 36,479 | $ | | $ | | $ | 36,479 | ||||||||
Marketable securitiesother |
3,717 | | | 3,717 | ||||||||||||
Liabilities: |
||||||||||||||||
Marketable securitiesdeferred compensation plan |
30,143 | | | 30,143 | ||||||||||||
March 31, 2013 |
||||||||||||||||
Assets: |
||||||||||||||||
Investments available-for-sale: |
||||||||||||||||
Marketable securitiesdeferred compensation plan |
$ | 38,124 | $ | | $ | | $ | 38,124 | ||||||||
Marketable securitiesother |
3,910 | | | 3,910 | ||||||||||||
Liabilities: |
||||||||||||||||
Marketable securitiesdeferred compensation plan |
32,649 | | | 32,649 |
The Companys investments associated with its deferred compensation plan consist of marketable securities and mutual funds that are publicly traded and for which market prices are readily available. Other marketable securities are included in other assets on the combined balance sheets.
F-46
FRANKS INTERNATIONAL
NOTES TO COMBINED FINANCIAL STATEMENTS (UNAUDITED)
Assets and Liabilities Measured at Fair Value on a Non-recurring Basis
The Company applies the provisions of the fair value measurement standard to its non-recurring, non-financial measurements including business combinations as well as impairment related to goodwill and other long-lived assets. For business combinations, the purchase price is allocated to the assets acquired and liabilities assumed based on a discounted cash flow model for most intangibles as well as market assumptions for the valuation of equipment and other fixed assets. The Company utilizes a discounted cash flow model in evaluating impairment considerations related to goodwill and long-lived assets. Given the unobservable nature of the inputs, the discounted cash flow models are deemed to use Level 3 inputs. There were no non-recurring measurements during the interim periods presented.
Fair Value of Long-Term Debt
The carrying values and fair values of the Companys long-term debt at December 31, 2012 and March 31, 2013 were as follows (in thousands):
December 31, 2012 | March 31, 2013 | |||||||||||||||
Carrying
Value |
Fair
Value |
Carrying
Value |
Fair
Value |
|||||||||||||
Lines of credit |
$ | 1,000 | $ | 1,000 | $ | 1,000 | $ | 1,000 | ||||||||
Capital lease obligations |
51 | 51 | 43 | 43 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
$ | 1,051 | $ | 1,051 | $ | 1,043 | $ | 1,043 | |||||||||
|
|
|
|
|
|
|
|
The carrying values on the Companys combined balance sheet of its cash and cash equivalents, trade accounts receivable, other current assets, accounts payable and accrued and other current liabilities approximates fair values due to their short maturities; therefore, they are excluded from the foregoing table.
The carrying value of the Companys lines of credit approximates fair value because of its variable rate structure. The fair value of the capital lease was estimated to not be materially different from the carrying amount.
Transactions involving related parties cannot be presumed to be carried out on an arms-length basis, as the requisite conditions of competitive, free-market dealings may not exist. It is not practical to determine the fair value of the long-term portion of the notes payable to FWW B.V. due to its related party nature.
Note 9Common Stock
At December 31, 2012 and March 31, 2013, the Companys common stock consisted of the following (in thousands, except per share information):
Par Value
Per Share |
Shares |
Common
Stock |
||||||||||||||
Authorized | Issued | |||||||||||||||
FINV |
| 0.0100 | 240,000 | 48,096 | $ | 617 | ||||||||||
FII |
$ | 1.0000 | 100 | 10 | 10 | |||||||||||
FCC |
$ | 0.0380 | 10,000 | 2,000 | 76 | |||||||||||
FTS |
$ | 1.0000 | 100 | 100 | 100 | |||||||||||
|
|
|
|
|
|
|||||||||||
250,200 | 50,206 | $ | 803 | |||||||||||||
|
|
|
|
|
|
F-47
FRANKS INTERNATIONAL
NOTES TO COMBINED FINANCIAL STATEMENTS (UNAUDITED)
Note 10Related Party Transactions
The Company has engaged in certain transactions with other companies related to the Company by common ownership. The Company has entered into various operating leases with an affiliated partnership to lease office space from the partnership. Rent expense related to these leases was $0.7 million $0.8 million for the three months ended March 31, 2012 and 2013, respectively.
The Company had receivables totaling $5.6 million and $5.8 million at December 31, 2012 and March 31, 2013, respectively, due from our chief executive officer and certain members of the Mosing family, relating to amounts owed to the Company for split-dollar life insurance policy premiums that the Company maintains. The Company will collect the receivable either directly from the executive officer, if employment terminates other than by death, or from the executive officers beneficiary, if employment terminates due to death of the executive officer. The receivables are recorded in other assets on the combined balance sheets. The cash surrender value of $18.8 million and $20.5 million related to such policies is recorded in other assets as of December 31, 2012 and March 31, 2013, respectively. The Company recorded an unrealized gain of $0.8 million for the three months ended March 31, 2013 in general and administrative expenses on the combined statements of income.
In addition, the Company has two outstanding notes payable to FWW B.V. See Note 7Long-Term Debt.
Note 11Income Taxes
As of March 31, 2013, there were no significant changes to the Companys unrecognized tax benefits as reported in its audited financial statements for the year ended December 31, 2012.
The Companys effective tax rate on income before income taxes for the three months ended March 31, 2012 and 2013 was 8.5% and 7.9%, respectively. The tax rate for the three months ended March 31, 2012 and 2013 is lower than the U.S. statutory income tax rate of 35% due to the Companys Subchapter S status for its U.S. entities as well as lower statutory tax rates in certain foreign jurisdictions where the Company operates. A Subchapter S corporation is a flow through entity for U.S. federal income tax purposes and generally is not subject to a corporate level U.S. federal income tax.
Note 12Commitments and Contingencies
The Company is the subject of lawsuits and claims arising in the ordinary course of business. Management cannot predict the ultimate outcome of such lawsuits and claims. While the lawsuits and claims are asserted for amounts that may be material should an unfavorable outcome be the result, management does not expect that these matters will have a material adverse effect on the Companys financial position or results of operations.
Note 13Segment Information
Adjusted EBITDA
The Company defines Adjusted EBITDA as net income before net interest income or expense, depreciation and amortization, income tax benefit or expense, asset impairments, gain or loss on sale of assets, foreign currency gain or loss and other non-cash adjustments. The Companys chief operating decision maker (CODM) uses Adjusted EBITDA as the primary measure of segment reporting performance.
F-48
FRANKS INTERNATIONAL
NOTES TO COMBINED FINANCIAL STATEMENTS (UNAUDITED)
The following table presents a reconciliation of Adjusted EBITDA to net income (in thousands):
Three Months Ended
March 31, |
||||||||
2012 | 2013 | |||||||
Segment Adjusted EBITDA: |
||||||||
International Services |
$ | 51,815 | $ | 49,959 | ||||
U.S. Services |
44,610 | 42,794 | ||||||
Pipe and Products |
6,259 | 8,337 | ||||||
Corporate and other |
(9 | ) | (148 | ) | ||||
|
|
|
|
|||||
Adjusted EBITDA Total |
102,675 | 100,942 | ||||||
Interest income (expense), net |
260 | (201 | ) | |||||
Income tax expense |
(7,687 | ) | (6,303 | ) | ||||
Depreciation and amortization |
(15,424 | ) | (17,783 | ) | ||||
Loss on sale of assets |
(195 | ) | (23 | ) | ||||
Foreign currency gain (loss) |
2,626 | (3,587 | ) | |||||
|
|
|
|
|||||
Net income |
$ | 82,255 | $ | 73,045 | ||||
|
|
|
|
The following tables set forth certain financial information with respect to the Companys reportable segments. Included in Corporate and Other are intersegment eliminations and costs associated with activities of a general nature (in thousands):
International
Services |
U.S.
Services |
Pipe and
Products |
Corporate
and Other |
Total | ||||||||||||||||
Three Months Ended March 31, 2012 |
||||||||||||||||||||
Revenue from external customers |
$ | 109,035 | $ | 96,820 | $ | 34,673 | $ | | $ | 240,528 | ||||||||||
Inter-segment revenues |
503 | 4,549 | 10,626 | (15,678 | ) | | ||||||||||||||
Adjusted EBITDA |
51,815 | 44,610 | 6,259 | (9 | ) | 102,675 | ||||||||||||||
Three Months Ended March 31, 2013 |
||||||||||||||||||||
Revenue from external customers |
$ | 110,488 | $ | 97,557 | $ | 28,715 | $ | | $ | 236,760 | ||||||||||
Inter-segment revenues |
815 | 5,165 | 16,289 | (22,269 | ) | | ||||||||||||||
Adjusted EBITDA |
49,959 | 42,794 | 8,337 | (148 | ) | 100,942 |
Note 14Subsequent Event
In June 2013, the Company sold a component of its Pipe and Products segment, which is expected to result in an estimated gain of approximately $41.0 million in the second quarter ended June 30, 2013. Revenues associated with the component were $16.9 million and $4.2 million for the year ended December 31, 2012 and three months ended March 31, 2013, respectively.
F-49
Selected Industry Terms
The following industry terms defined in this section are used throughout this prospectus:
Blowout Preventer (BOP) . A large valve at the top of a well that may be closed to regain control of a reservoir if the drilling crew or other wellsite personnel lose control of formation fluids.
Bottomhole assembly . Lower portion of the drill string, consisting of the drill bit, drill collars, heavy-weight drill pipe and stroking tools. Also includes various tools to enable directional drilling if required.
Casing . Large-diameter pipe lowered into an openhole wellbore and cemented in place.
Cementing . The process of pumping cement between the outside of an installed string of casing and wellbore.
Completion . A generic term used to describe the assembly of downhole tubulars and equipment required to enable safe and efficient production from an oil or gas well.
Control line . A small-diameter hydraulic line used to operate downhole completion equipment.
Connector . A small joint of pipe used to connect two tubular components.
Drilling Rig . The machine used to drill a wellbore.
Drill Bit . Tool attached to the bottom of a drill string that serves as the cutting or boring element used to drill the wellbore.
Drill Floor . The elevated platform where the majority of activity by a drilling rig crew occurs during drilling and casing operations, including make-up and breakout of tubulars and supervision and monitoring of the drilling process.
Drill Pipe . Heavy tubular steel conduit fitted with special threaded ends called tool joints. The drill pipe connects the surface equipment with the bottomhole assembly, both to pump drilling fluid to the drill bit and to raise, lower and rotate the bottomhole assembly.
Drill String . The combination of the drillpipe and the bottomhole assembly.
Elevator . A set of clamps that grip tubulars so that the tubulars can be raised or lowered into the wellbore.
Hook Load . The total force pulling down on the hook, including the weight of the drill string and any ancillary equipment, reduced by any force that tends to reduce that weight such as friction along the wellbore wall (especially in deviated wells) and buoyant forces on the drill string caused by its immersion in drilling fluid.
Hydrocarbon . A naturally occurring organic compound comprising hydrogen and carbon. Hydrocarbons can be as simple as methane, but many are highly complex molecules, and can occur as gases, liquids or solids. Petroleum is a complex mixture of hydrocarbons. The most common hydrocarbons are natural gas, oil and coal.
Landing String . A long string of drill pipe used to lower blowout preventer stacks and casing strings to the ocean floor from an offshore drilling rig.
Make-Up and Breakout . Process of spinning and torquing when connecting and disconnecting tubulars.
Pipe Handling . Equipment used to move and connect tubulars.
Rotary Table . Machine embedded into drill floor used to rotate the drill string.
Slips . Wedge-shaped pieces of metal with gripping elements that are used to hold tubulars in place or to prevent tubulars from slipping down into the wellbore.
A-1
Spider . A circular steel device that holds slips supporting a suspended string of drill pipe, casing, or tubing from the drill floor.
Tongs . Large wrenches used for torquing when making-up or breaking-out tubulars.
Top Drive . Machine used to rotate the drill string by attaching to the top of the drillpipe without the use of the rotary table.
Tubing . String of pipe set inside the well casing, through which a reservoirs oil or natural gas is produced.
Tubulars . Drill pipe, casing, tubing, or other piping placed in the wellbore.
Wellbore . The physical hole drilled from surface into the hydrocarbon reservoir.
A-2
Shares
Franks International N.V.
Common Stock
Prospectus
, 2013
Barclays
Credit Suisse
Simmons & Company
International
Citigroup
Morgan Stanley
Goldman, Sachs & Co.
UBS Investment Bank
Capital One Southcoast
Tudor, Pickering, Holt & Co.
Global Hunter Securities
Johnson Rice & Company L.L.C.
FBR
Scotiabank / Howard Weil
You should rely only on the information contained in this prospectus or in any free writing prospectus Franks International may authorize to be delivered to you. Until , 2013 (25 days after the date of this prospectus), federal securities laws may require all dealers that effect transactions in the trust units, whether or not participating in this offering, to deliver a prospectus. This is in addition to the dealers obligation to deliver a prospectus when acting as underwriters and with respect to their unsold allotments or subscriptions.
Part II
Information not required in prospectus
Item 13. | Other Expenses of Issuance and Distribution |
The following table sets forth an itemized statement of the amounts of all expenses (excluding underwriting discounts and commissions) payable by us in connection with the registration of the common stock offered hereby. With the exception of the SEC registration fee, the New York Stock Exchange listing fee and the FINRA filing fee, the amounts set forth below are estimates.
SEC registration fee |
$ | 68,200 | ||
FINRA filing fee |
75,500 | |||
NYSE listing fee |
* | |||
Accountants fees and expenses |
* | |||
Legal fees and expenses |
* | |||
Printing and engraving expenses |
* | |||
Transfer agent and registrar fees |
* | |||
Miscellaneous |
* | |||
|
|
|||
Total |
$ | * | ||
|
|
* | To be filed by amendment. |
Item 14. | Indemnification of Directors and Officers |
Our directors and executive officers will enter into indemnification agreements with us. The agreements provide, to the fullest extent permitted by our amended and restated articles of association and the law of The Netherlands, that we will indemnify the directors and executive officers against any and all liabilities, claims, judgments, fines, penalties, interest and expenses, including attorneys fees, incurred in connection with any expected, threatened, pending or completed action, investigation or other proceeding, whether civil, criminal or administrative, involving a director or an executive officer by reason of his position as director or officer.
The articles of association provide that we will, to the full extent permitted by the law of The Netherlands, as amended from time to time, indemnify, and advance expenses to, each of its now acting and former management board and supervisory board members, officers, employees and agents, whenever any such person is made a party, or threatened to be made a party, in any action, suit or proceeding by reason of his service with us. The articles of association also provide that we may purchase and maintain directors and officers liability insurance.
In any underwriting agreement we enter into in connection with the sale of common stock being registered hereby, the underwriters will agree to indemnify, under certain conditions, us, our directors, our officers and persons who control us, within the meaning of the Securities Act, against certain liabilities.
Item 15. | Recent Sales of Unregistered Securities. |
There have been no sales of unregistered securities within the past three years.
II-1
Item 16. | Exhibits and Financial Statement Schedules |
(a) Exhibits
Exhibit number |
Description |
|||
**1.1 |
Form of Underwriting Agreement |
|||
**3.1 |
Articles of Association of Franks International N.V. |
|||
**3.2 |
Form of Amended and Restated Articles of Association of Franks International N.V. |
|||
**5.1 | Form of Opinion of Van Campen Liem (Liem & Partners N.V.) | |||
**8.1 | Form of Opinion of Van Campen Liem (Liem & Partners N.V.) regarding certain Netherlands tax matters | |||
**8.2 | Form of Opinion of Vinson & Elkins L.L.P. regarding certain U.S. tax matters | |||
10.1 | Form of 5-Year Credit Agreement, among Franks International C.V., Amegy Bank National Association, as Administration Agent, and Capital One, National Association, as Syndication Agent and certain other lenders party thereto | |||
10.2 | Form of 364-Day Credit Agreement, among Franks International C.V., Amegy Bank National Association, as Administration Agent, and certain other lenders party thereto | |||
**10.3 | Form of Indemnification Agreement | |||
**10.4 | Form of Long-Term Incentive Plan | |||
**10.5 | Form of Restricted Stock Unit Agreement (for non-employee directors) | |||
**10.6 | Form of Restricted Stock Unit Agreement (for employees) | |||
**10.7 | Form of Employment Agreement for D. Keith Mosing | |||
**10.8 | Form of Employment Agreement for each of Robert R. Gilbert, C. Michael Webre, Mark G. Margavio, Brian D. Baird and W. John Walker | |||
**10.9 | Form of Registration Rights Agreement | |||
**10.10 | Form of Tax Receivable Agreement | |||
10.11 | Global Transaction Agreement, dated as of July 22, 2013, between Franks International N.V. and Mosing Holdings, Inc. | |||
10.12 | Voting Agreement, dated as of July 22, 2013, by and among Ginsoma Family C.V., FWW B.V., Mosing Holdings, Inc., and certain other parties thereto. | |||
**10.13 | Form of FICV Management Agreement | |||
**10.14 |
Form of Limited Partnership Agreement of Franks International C.V. |
|||
21.1 | List of Subsidiaries of Franks International N.V. | |||
23.1 | Consent of PricewaterhouseCoopers LLP | |||
**23.2 | Consent of Van Campen Liem (Liem & Partners N.V.) (included as part of Exhibit 5.1 hereto) | |||
**23.3 | Consent of Van Campen Liem (Liem & Partners N.V.) (included as part of Exhibit 8.1 hereto) | |||
**23.4 | Consent of Vinson & Elkins L.L.P. (included as part of Exhibit 8.2 hereto) | |||
**99.1 | Consent of Spears and Associates, Inc. | |||
**99.2 | Consent of Sheldon Erikson, as Director Nominee | |||
**99.3 | Consent of Kirkland D. Mosing, as Director Nominee | |||
**99.4 | Consent of Steven B. Mosing, as Director Nominee |
** | Previously filed |
| Management contract or compensatory plan or arrangement. |
II-2
Item 17. | Undertakings |
The undersigned registrant hereby undertakes to provide to the underwriters at the closing specified in the underwriting agreement certificates in such denominations and registered in such names as required by the underwriters to permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act, the information omitted from the form of prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities Act, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.
II-3
Signatures
Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Houston, State of Texas, on July 24, 2013.
FRANKS INTERNATIONAL N.V. | ||
By: |
/s/ Donald Keith Mosing | |
Donald Keith Mosing |
||
Chairman of the Board, Director,
Chief Executive Officer and President |
Pursuant to the requirements of the Securities Act of 1933, as amended, this Registration Statement has been signed below by the following persons in the capacities and the dates indicated.
Name |
Title |
Date | ||
/s/ Donald Keith Mosing Donald Keith Mosing |
Chairman of the Board, Director, Chief Executive Officer and President (Principal Executive Officer) |
July 24, 2013 | ||
/s/ Mark G. Margavio Mark G. Margavio |
Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer) |
July 24, 2013 |
II-4
INDEX TO EXHIBITS
Exhibit number |
Description |
|||
**1.1 | Form of Underwriting Agreement | |||
**3.1 | Articles of Association of Franks International N.V. | |||
**3.2 | Form of Amended and Restated Articles of Association of Franks International N.V. | |||
**5.1 | Form of Opinion of Van Campen Liem (Liem & Partners N.V.) | |||
**8.1 | Form of Opinion of Van Campen Liem (Liem & Partners N.V.) regarding certain Netherlands tax matters | |||
**8.2 | Form of Opinion of Vinson & Elkins L.L.P. regarding certain U.S. tax matters | |||
10.1 | Form of 5-Year Credit Agreement, among Franks International C.V., Amegy Bank National Association, as Administration Agent, and Capital One, National Association, as Syndication Agent and certain other lenders party thereto | |||
10.2 | Form of 364-Day Credit Agreement, among Franks International C.V., Amegy Bank National Association, as Administration Agent, and certain other lenders party thereto | |||
**10.3 | Form of Indemnification Agreement | |||
**10.4 | Form of Long-Term Incentive Plan | |||
**10.5 | Form of Restricted Stock Unit Agreement (for non-employee directors) | |||
**10.6 | Form of Restricted Stock Unit Agreement (for employees) | |||
**10.7 | Form of Employment Agreement for D. Keith Mosing | |||
**10.8 | Form of Employment Agreement for each of Robert R. Gilbert, C. Michael Webre, Mark G. Margavio, Brian D. Baird and W. John Walker | |||
**10.9 | Form of Registration Rights Agreement | |||
**10.10 | Form of Tax Receivable Agreement | |||
10.11 | Global Transaction Agreement, dated as of July 22, 2013, between Franks International N.V. and Mosing Holdings, Inc. | |||
10.12 | Voting Agreement, dated as of July 22, 2013, by and among Ginsoma Family C.V., FWW B.V., Mosing Holdings, Inc., and certain other parties thereto. | |||
**10.13 | Form of FICV Management Agreement | |||
**10.14 | Form of Limited Partnership Agreement of Franks International C.V. | |||
21.1 | List of Subsidiaries of Franks International N.V. | |||
23.1 | Consent of PricewaterhouseCoopers LLP | |||
**23.2 | Consent of Van Campen Liem (Liem & Partners N.V.) (included as part of Exhibit 5.1 hereto) | |||
**23.3 | Consent of Van Campen Liem (Liem & Partners N.V.) (included as part of Exhibit 8.1 hereto) | |||
**23.4 | Consent of Vinson & Elkins L.L.P. (included as part of Exhibit 8.2 hereto) | |||
**99.1 | Consent of Spears and Associates, Inc. | |||
**99.2 | Consent of Sheldon Erikson, as Director Nominee | |||
**99.3 | Consent of Kirkland D. Mosing, as Director Nominee | |||
**99.4 | Consent of Steven B. Mosing, as Director Nominee |
** | Previously filed |
| Management contract or compensatory plan or arrangement. |
II-5
Exhibit 10.1
FORM OF
U.S. $100,000,000
REVOLVING CREDIT AGREEMENT
Dated as of August , 2013
among
FRANKS INTERNATIONAL MANAGEMENT B.V.
acting as sole general partner and on behalf of
the limited partnership ( commanditaire vennootschap )
FRANKS INTERNATIONAL C.V.,
as Borrower,
AMEGY BANK NATIONAL ASSOCIATION,
as Administrative Agent, Issuing Bank and Swingline Facility Lender
CAPITAL ONE, NATIONAL ASSOCIATION
as Syndication Agent
AMEGY BANK, NATIONAL ASSOCIATION
and
CAPITAL ONE, NATIONAL ASSOCIATION
as Co-Lead Arrangers and
Joint Book Runners
and
THE LENDERS PARTY HERETO
TABLE OF CONTENTS
P AGE | ||||||
ARTICLE I | ||||||
D EFINITIONS | ||||||
Section 1.01 |
Defined Terms | 2 | ||||
Section 1.02 |
Terms Generally | 26 | ||||
Section 1.03 |
Effectuation of Transfers | 26 | ||||
ARTICLE II | ||||||
T HE C REDITS | ||||||
Section 2.01 |
Commitments | 27 | ||||
Section 2.02 |
Loans and Borrowings | 27 | ||||
Section 2.03 |
Requests for Borrowings | 27 | ||||
Section 2.04 |
Reserved | 28 | ||||
Section 2.05 |
Revolving Letters of Credit | 28 | ||||
Section 2.06 |
Funding of Borrowings | 32 | ||||
Section 2.07 |
Interest Elections | 33 | ||||
Section 2.08 |
Termination and Reduction of Commitments | 34 | ||||
Section 2.09 |
Repayment of Loans; Evidence of Debt | 34 | ||||
Section 2.10 |
Repayment of Loans | 35 | ||||
Section 2.11 |
Prepayment of Loans | 35 | ||||
Section 2.12 |
Fees | 36 | ||||
Section 2.13 |
Interest | 37 | ||||
Section 2.14 |
Alternate Rate of Interest | 38 | ||||
Section 2.15 |
Increased Costs | 38 | ||||
Section 2.16 |
Break Funding Payments | 39 | ||||
Section 2.17 |
Taxes | 39 | ||||
Section 2.18 |
Payments Generally; Pro Rata Treatment; Sharing of Set-offs | 41 | ||||
Section 2.19 |
Mitigation Obligations; Replacement of Lenders | 43 | ||||
Section 2.20 |
Increase in Revolving Facility Commitments | 44 | ||||
Section 2.21 |
Illegality | 45 | ||||
Section 2.22 |
Defaulting Lenders | 46 | ||||
Section 2.23 |
Swingline Facility | 48 | ||||
ARTICLE III | ||||||
R EPRESENTATIONS AND W ARRANTIES | ||||||
Section 3.01 |
Organization; Powers | 50 | ||||
Section 3.02 |
Authorization | 50 | ||||
Section 3.03 |
Enforceability | 51 | ||||
Section 3.04 |
Governmental Approvals | 51 | ||||
Section 3.05 |
Financial Statements | 51 | ||||
Section 3.06 |
No Material Adverse Effect | 51 | ||||
Section 3.07 |
Title to Properties; Possession Under Leases | 51 | ||||
Section 3.08 |
Litigation; Compliance with Laws | 52 | ||||
Section 3.09 |
Federal Reserve Regulations | 53 |
i
Section 3.10 |
Investment Company Act | 53 | ||||
Section 3.11 |
Use of Proceeds | 53 | ||||
Section 3.12 |
Tax Returns | 53 | ||||
Section 3.13 |
No Material Misstatements | 53 | ||||
Section 3.14 |
Employee Benefit Plans | 54 | ||||
Section 3.15 |
Environmental Matters | 54 | ||||
Section 3.16 |
Reserved | 54 | ||||
Section 3.17 |
Reserved | 54 | ||||
Section 3.18 |
Solvency | 54 | ||||
Section 3.19 |
Labor Matters | 55 | ||||
Section 3.20 |
Insurance | 55 | ||||
Section 3.21 |
Status as Senior Debt | 55 | ||||
Section 3.22 |
Material Contracts | 55 | ||||
Section 3.23 |
Foreign Corrupt Practices | 55 | ||||
Section 3.24 |
OFAC | 56 | ||||
ARTICLE IV | ||||||
C ONDITIONS TO C REDIT E VENTS | ||||||
Section 4.01 |
All Credit Events | 56 | ||||
Section 4.02 |
First Credit Event | 57 | ||||
ARTICLE V | ||||||
A FFIRMATIVE C OVENANTS | ||||||
Section 5.01 |
Existence; Businesses and Properties | 59 | ||||
Section 5.02 |
Insurance | 60 | ||||
Section 5.03 |
Taxes; Payment of Obligations | 60 | ||||
Section 5.04 |
Financial Statements, Reports, Etc. | 60 | ||||
Section 5.05 |
Litigation and Other Notices | 62 | ||||
Section 5.06 |
Compliance with Laws | 62 | ||||
Section 5.07 |
Maintaining Records; Access to Properties and Inspections | 62 | ||||
Section 5.08 |
Use of Proceeds | 62 | ||||
Section 5.09 |
Compliance with Environmental Laws | 62 | ||||
Section 5.10 |
Further Assurances; Additional Loan Parties | 63 | ||||
Section 5.11 |
Fiscal Year | 63 | ||||
ARTICLE VI | ||||||
N EGATIVE C OVENANTS | ||||||
Section 6.01 |
Indebtedness | 63 | ||||
Section 6.02 |
Liens | 65 | ||||
Section 6.03 |
Sale and Lease-back Transactions | 68 | ||||
Section 6.04 |
Investments, Loans and Advances | 68 | ||||
Section 6.05 |
Mergers, Consolidations, Sales of Assets and Acquisitions | 70 | ||||
Section 6.06 |
Dividends and Distributions | 71 | ||||
Section 6.07 |
Transactions with Affiliates | 72 | ||||
Section 6.08 |
Business of the Borrower and the Subsidiaries | 74 | ||||
Section 6.09 |
Limitation on Modifications of Indebtedness; Modifications of Certificate of Incorporation, By-laws and Certain Other Agreements; etc. | 74 | ||||
Section 6.10 |
Leverage Ratio | 75 | ||||
Section 6.11 |
Interest Coverage Ratio | 76 | ||||
Section 6.12 |
Swap Agreements | 76 |
ii
ARTICLE VII | ||||||
E VENTS OF D EFAULT | ||||||
Section 7.01 |
Events of Default | 76 | ||||
ARTICLE VIII | ||||||
T HE A DMINISTRATIVE A GENT | ||||||
Section 8.01 |
Appointment and Authority | 78 | ||||
Section 8.02 |
Rights as a Lender | 78 | ||||
Section 8.03 |
Exculpatory Provisions | 79 | ||||
Section 8.04 |
Reliance by Administrative Agent | 79 | ||||
Section 8.05 |
Delegation of Duties | 80 | ||||
Section 8.06 |
Resignation of the Administrative Agent | 80 | ||||
Section 8.07 |
Non-Reliance on the Administrative Agent, Other Lenders and Other Issuing Banks | 81 | ||||
Section 8.08 |
No Other Duties, Etc. | 81 | ||||
Section 8.09 |
Administrative Agent May File Proofs of Claim | 81 | ||||
Section 8.10 |
Guaranty Matters | 82 | ||||
Section 8.11 |
Reserved | 82 | ||||
Section 8.12 |
Indemnification | 82 | ||||
Section 8.13 |
Appointment of Supplemental Administrative Agent | 82 | ||||
Section 8.14 |
Withholding | 83 | ||||
Section 8.15 |
Enforcement | 83 | ||||
ARTICLE IX | ||||||
M ISCELLANEOUS | ||||||
Section 9.01 |
Notices | 84 | ||||
Section 9.02 |
Survival of Agreement | 84 | ||||
Section 9.03 |
Binding Effect | 85 | ||||
Section 9.04 |
Successors and Assigns | 85 | ||||
Section 9.05 |
Expenses; Indemnity | 88 | ||||
Section 9.06 |
Right of Set-off | 89 | ||||
Section 9.07 |
Applicable Law | 89 | ||||
Section 9.08 |
Waivers; Amendment | 89 | ||||
Section 9.09 |
Interest Rate Limitation | 91 | ||||
Section 9.10 |
Entire Agreement | 92 | ||||
Section 9.11 |
Waiver of Jury Trial | 92 | ||||
Section 9.12 |
Severability | 93 | ||||
Section 9.13 |
Counterparts | 94 | ||||
Section 9.14 |
Headings | 94 | ||||
Section 9.15 |
Jurisdiction; Consent to Service of Process | 94 | ||||
Section 9.16 |
Confidentiality | 94 | ||||
Section 9.17 |
Communications | 95 | ||||
Section 9.18 |
Release of Guarantees | 96 | ||||
Section 9.19 |
U.S.A. PATRIOT Act and Similar Legislation | 97 | ||||
Section 9.20 |
Judgment | 97 |
iii
Section 9.21 |
Reserved | 97 | ||||
Section 9.22 |
No Fiduciary Duty | 97 | ||||
Section 9.23 |
Application of Funds | 97 | ||||
Section 9.24 |
Imaging of Documents | 98 | ||||
Section 9.25 |
Keepwell | 98 |
iv
Exhibits and Schedules
Exhibit A | Form of Assignment and Acceptance | |
Exhibit B | Form of Prepayment Notice | |
Exhibit C-1 | Form of Borrowing Request | |
Exhibit C-2 | Form of Swingline Facility Borrowing Request | |
Exhibit D | Form of Interest Election Request | |
Exhibit E | Form of Guaranty Agreement | |
Exhibit F | Form of Solvency Certificate | |
Exhibit G | Form of Revolving Note | |
Exhibits H-1-4 | Forms of U.S. Tax Compliance Certificate | |
Exhibit I | Form of Administrative Questionnaire | |
Exhibit J | Form of Notice of Revolving Facility Commitment Increase | |
Exhibit K | Form of Credit Agreement Joinder | |
Schedule 2.01 | Commitments | |
Schedule 3.04 | Governmental Approvals | |
Schedule 3.07(e) | Condemnation Proceedings | |
Schedule 3.07(g) | Subsidiaries | |
Schedule 3.08(a) | Litigation | |
Schedule 3.12 | Taxes | |
Schedule 3.15 | Environmental Matters | |
Schedule 3.20 | Insurance | |
Schedule 3.22 | Material Contracts | |
Schedule 6.01 | Indebtedness | |
Schedule 6.02(a) | Liens | |
Schedule 6.04 | Investments | |
Schedule 6.07 | Transactions with Affiliates |
v
THIS REVOLVING CREDIT AGREEMENT dated as of August , 2013 (as amended, amended and restated, supplemented or otherwise modified, this Agreement ), is among FRANKS INTERNATIONAL MANAGEMENT B.V., a private limited liability company organized and existing under the laws of the Netherlands ( FIMBV ), acting as sole general partner and on behalf of FRANKS INTERNATIONAL C.V., a limited partnership ( commanditaire vennootschap ) formed and entered into under the laws of The Netherlands ( Franks International C.V. and, FIMBV acting as sole general partner and on behalf of Franks International C.V., the Borrower ), the LENDERS party hereto from time to time, and AMEGY BANK NATIONAL ASSOCIATION, a national banking association ( Amegy ), as administrative agent (in such capacity, together with any successor administrative agent appointed pursuant to the provisions of Article VIII, the Administrative Agent ) and CAPITAL ONE, NATIONAL ASSOCIATION, a national banking association, as syndication agent (in such capacity, the Syndication Agent ).
W I T N E S S E T H:
WHEREAS, the Borrower has requested that the Lenders extend credit in the form of Revolving Facility Loans and Revolving Letters of Credit at any time and from time to time prior to the Revolving Facility Maturity Date, in an aggregate principal amount at any time outstanding not in excess of U.S. $100,000,000.
NOW, THEREFORE, the Lenders are willing to extend such credit to the Borrower on the terms and subject to the conditions set forth herein. Accordingly, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
Section 1.01 Defined Terms. As used in this Agreement, the following terms shall have the meanings specified below:
ABR Borrowing shall mean a Borrowing comprised of ABR Loans.
ABR Loan shall mean any Loan bearing interest at a rate determined by reference to the Alternate Base Rate in accordance with the provisions of Article II.
Adjusted Eurodollar Rate shall mean for any Interest Period with respect to any Eurodollar Loan, an interest rate per annum (rounded upwards, if necessary, to the next 1/100 of 1.00%) equal to (a) the Eurodollar Rate for such Interest Period multiplied by (b) the Statutory Reserves.
Administrator shall have the meaning assigned to such term in Section 9.11(b)(ii).
Administrative Agent shall have the meaning assigned to such term in the introductory paragraph of this Agreement.
Administrative Agent Default Period shall mean, with respect to the Administrative Agent, any time when the Administrative Agent is a Defaulting Lender and is not performing its role as the Administrative Agent hereunder and under the other Loan Documents.
Administrative Agent Fees shall have the meaning assigned to such term in Section 2.12(d).
Administrative Questionnaire shall mean an Administrative Questionnaire in substantially the form of Exhibit I or any other form approved by the Administrative Agent.
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Affiliate shall mean, when used with respect to a specified Person, another Person that directly, or indirectly through one or more intermediaries, Controls or is Controlled by or is under common Control with the Person specified.
Agent Parties shall have the meaning assigned to such term in Section 9.17(c).
Agreement shall have the meaning assigned to such term in the introductory paragraph of this Agreement.
Alternate Base Rate shall mean the greatest of (i) the Prime Rate per annum , (ii) the Federal Funds Effective Rate plus 0.50% per annum , and (iii) the Adjusted Eurodollar Rate as of such date for a one-month Interest Period plus 1.00% per annum. Any change in the Alternate Base Rate due to a change in the Prime Rate, the Federal Funds Effective Rate or the Adjusted Eurodollar Rate shall be effective from and including the date of such change in the Prime Rate, the Federal Funds Effective Rate or the Adjusted Eurodollar Rate, respectively.
Applicable Margin shall mean for any day, (i) on and prior to the Trigger Date, (x) with respect to any Eurodollar Loan, 1.50% per annum and (y) with respect to any ABR Loan, 0.50% per annum and (ii) after the Trigger Date, the applicable margin per annum set forth below under the caption Revolving Facility Loans ABR Loan Spread , Swingline Facility Loans ABR Loan Spread , Revolving Facility Loans Eurodollar Loan Spread and Commitment Fee , as applicable, based upon the Leverage Ratio as of the last date of the most recent fiscal quarter of the Borrower:
Leverage Ratio: |
Revolving
Facility Loans ABR Loan Spread |
Revolving
Facility Loans Eurodollar Loan Spread and |
Swingline
Facility Loans ABR Loan Spread |
Commitment
Fee |
||||||||||||
Category 1: Greater than 1.50 to 1.00 |
1.50 | % | 2.50 | % | 1.50 | % | 0.375 | % | ||||||||
Category 2: Greater than 0.50 to 1.00 but less than or equal to 1.50 to 1.00 |
1.00 | % | 2.00 | % | 1.00 | % | 0.375 | % | ||||||||
Category 3: Less than or equal to 0.50 to 1.00 |
0.50 | % | 1.50 | % | 0.50 | % | 0.250 | % |
For purposes of the foregoing, (1) the Leverage Ratio shall be determined as of the end of each fiscal quarter of the Borrowers fiscal year based upon the consolidated financial information of FINV and its Subsidiaries (including the Borrower) delivered pursuant to Section 5.04(a) or (b) and (2) each change in the Applicable Margin resulting from a change in the Leverage Ratio shall be effective on the first Business Day after the date of delivery to the Administrative Agent of such consolidated financial information indicating such change and ending on the date immediately preceding the effective date of the next such change; provided that the Leverage Ratio shall be deemed to be in Category 1 at the option of the Administrative Agent or the Required Lenders, at any time during which the Borrower fails to deliver the consolidated financial information when required to be delivered pursuant to Section 5.04(a) or (b), during the period from the expiration of the time for delivery thereof until such consolidated financial information is delivered.
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Notwithstanding anything to the contrary contained above in this definition or elsewhere in this Agreement, if it is subsequently determined that the computation of the Leverage Ratio set forth in a certificate of a Financial Officer of the Borrower delivered to the Administrative Agent is inaccurate for any reason and the result thereof is that the Lenders received interest or fees for any period based on an Applicable Margin that is less than that which would have been applicable had the Leverage Ratio been accurately determined, then, for all purposes of this Agreement, the Applicable Margin for any day occurring within the period covered by such certificate of a Financial Officer of the Borrower shall retroactively be deemed to be the relevant percentage as based upon the accurately determined Leverage Ratio for such period, and any shortfall in the interest or fees theretofore paid by the Borrower for the relevant period pursuant to Section 2.12 and Section 2.13 as a result of the miscalculation of the Leverage Ratio shall be deemed to be (and shall be) due and payable under the relevant provisions of Section 2.12 or Section 2.13, as applicable, at the time the interest or fees for such period were required to be paid pursuant to said Section (and shall remain due and payable until paid in full), in accordance with the terms of this Agreement); provided that, notwithstanding the foregoing, so long as an Event of Default described in Section 7.01(h) or (i) has not occurred with respect to the Borrower, such shortfall shall be due and payable five (5) Business Days following the determination described above.
Amegy shall have the meaning assigned to such term in the introductory paragraph of this Agreement.
Approved Fund shall have the meaning assigned to such term in Section 9.04(b).
Asset Acquisition shall mean any acquisition of all or substantially all of the assets of, or all of the Equity Interests (other than directors qualifying shares) in a Person or division or line of business of a Person in respect of which the aggregate consideration exceeds U.S. $30,000,000.
Asset Disposition shall mean any sale, transfer or other disposition by a Loan Party or any Subsidiary of the Borrower to any Person other than a Loan Party or a Subsidiary of the Borrower to the extent otherwise permitted hereunder of any asset or group of related assets (other than inventory or other assets sold, transferred or otherwise disposed of in the ordinary course of business) in one or a series of related transactions, the Net Proceeds from which exceed U.S. $30,000,000.
Assignment and Acceptance shall mean an assignment and acceptance entered into by a Lender and an assignee, and accepted by the Administrative Agent, Swingline Facility Lender, Issuing Bank and the Borrower (if required pursuant to Section 9.04(b)), in substantially the form of Exhibit A or such other form as shall be approved by the Administrative Agent.
Availability Period shall mean the period from the Closing Date to but excluding the earlier of the Revolving Facility Maturity Date and the date of termination of the Revolving Facility Commitments.
Available Unused Commitment shall mean, with respect to a Revolving Facility Lender (other than the Swingline Facility Lender), at any time of determination, an amount equal to the amount by which (a) the Revolving Facility Commitment of such Revolving Facility Lender at such time exceeds (b) the Revolving Facility Credit Exposure of such Revolving Facility Lender at such time and with respect to the Revolving Facility Lender that is the Swingline Facility Lender, at any time of determination, an amount equal to the amount by which (i) the Revolving Facility Commitment of the Swingline Facility Lender, at such time exceeds (ii) the sum of (1) the Revolving Facility Credit Exposure of the Swingline Facility Lender plus (2) the Swingline Facility Credit Exposure of the Swingline Facility Lender at such time.
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Basel III the comprehensive set of capital, liquidity and other regulatory reform measures developed by the Basel Committee on Banking Supervision, as implemented by the U.S. federal banking agencies.
Benefitting Loan Party means a Loan Party for which funds or other support are necessary for such Loan Party to constitute an Eligible Contract Participant.
Board shall mean the Board of Governors of the Federal Reserve System of the United States.
Borrower shall have the meaning assigned to such term in the introductory paragraph to this Agreement, it being understood, however, that for purpose of Sections 5 and 6 of this Agreement such term shall be deemed to include Franks International C.V.
Borrower Materials shall have the meaning assigned to such term in Section 9.17(b).
Borrowing shall mean a group of Loans of a single Type under the Revolving Facility made on a single date to the Borrower and, in the case of Eurodollar Loans, as to which a single Interest Period is in effect.
Borrowing Minimum shall mean (a) in the case of a Revolving Facility Borrowing comprised entirely of Eurodollar Loans, U.S. $1,000,000 and (b) in the case of a Revolving Facility Borrowing comprised entirely of ABR Loans, U.S. $1,000,000; provided if a Loan Party and Swingline Facility Lender enter into a cash management or similar arrangement pursuant to which the Swingline Facility Lender makes daily advances to a Loan Party and such Loan Party authorizes the Swingline Facility Lender to automatically deduct payments owing by it from specified accounts of a Loan Party in connection with daily repayments of Swingline Facility Loans, no Borrowing Minimum will be applicable.
Borrowing Multiple shall mean (a) in the case of a Revolving Facility Borrowing comprised entirely of Eurodollar Loans, U.S. $500,000 and (b) in the case of a Revolving Facility Borrowing comprised entirely of ABR Loans, U.S. $500,000; provided if a Loan Party and Swingline Facility Lender enter into a cash management or similar arrangement pursuant to which the Swingline Facility Lender makes daily advances to a Loan Party and such Loan Party authorizes the Swingline Facility Lender to automatically deduct payments owing by it from specified accounts of a Loan Party in connection with daily repayments of Swingline Facility Loans, no Borrowing Multiple will be applicable.
Borrowing Request shall mean a request by the Borrower for a Revolving Facility Borrowing in accordance with the terms of Section 2.03 and substantially in the form of Exhibit C-1 .
Business Day shall mean any day of the year, other than a Saturday, Sunday or other day on which banks are required or authorized to close in New York, New York or Houston, Texas, and, where used in the context of Eurodollar Loans, is also a day on which dealings are carried on in the London interbank market.
Calculation Period shall mean, as of any date of determination, the period of four consecutive fiscal quarters ending on such date or, if such date is not the last day of a fiscal quarter, ending on the last day of the fiscal quarter of the Borrower most recently ended prior to such date.
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Capital Lease Obligations of any Person shall mean the obligations of such Person to pay rent or other amounts under any lease of (or other arrangement conveying the right to use) real or personal property, or a combination thereof, which obligations are required to be classified and accounted for as capital leases on a balance sheet of such Person under GAAP and, for purposes hereof, the amount of such obligations at any time shall be the capitalized amount thereof at such time determined in accordance with GAAP. Anything in this Agreement to the contrary notwithstanding, any obligation of a Person under a lease (whether existing now or entered into in the future) that is not (or would not be) required to be classified and accounted for as a capital lease on the balance sheet of such Person under GAAP as in effect at the time such lease is entered into shall not be treated as a Capital Lease Obligation solely as a result of (x) the adoption of any changes in, or (y) changes in the application of, GAAP after such lease is entered into.
Change in Control means the occurrence of any of the following: (a) at any time on or after consummation of an initial public offering of the common equity of FINV, any Person or group (within the meaning of Rule 13d-5 of the Exchange Act as in effect on the Closing Date), other than the Mosing Family, shall own beneficially (within the meaning of Rule 13d-5 of the Exchange Act as in effect on the Closing Date), directly or indirectly, in the aggregate Equity Interests representing 50% or more of the aggregate ordinary voting power represented by the issued and outstanding Equity Interests of FINV; or (b) FINV shall cease to own beneficially (within the meaning of Rule 13d-5 of the Exchange Act as in effect on the Closing Date), directly or indirectly, in the aggregate Equity Interests representing 50% or more of the issued and outstanding Equity Interests of Borrower.
Change in Law shall mean (a) the adoption or implementation of any treaty, law, rule or regulation after the Closing Date, (b) any change in law, rule or regulation or in the interpretation or application thereof by any Governmental Authority after the Closing Date or (c) compliance by any Lender or Issuing Bank (or, for purposes of Section 2.15(b), by any lending office of such Lender or Issuing Bank or by such Lenders or Issuing Banks holding company, if any) with any written request, guideline or directive (whether or not having the force of law but if not having the force of law, then being one with which the relevant party would customarily comply) of any Governmental Authority made or issued after the Closing Date; provided , that notwithstanding anything herein to the contrary, (x) the Dodd-Frank Wall Street Reform and Consumer Protection Act and all requests, rules, guidelines or directives thereunder or issued in connection therewith and (y) all requests, rules, guidelines or directives promulgated by the Bank for International Settlements, the Basel Committee on Banking Supervision (or any successor or similar authority) or the United States regulatory authorities, in each case pursuant to Basel III, shall in each case be deemed to be a Change in Law, regardless of the date enacted, adopted or issued; and, provided, further, that the increased costs associated with a Change in Law based on the foregoing clauses (x) and (y) may only be imposed to the extent the applicable Lender imposes the same charges on other similarly situated borrowers under comparable credit facilities.
Closing Date shall mean August , 2013, and Closing shall mean the making of the initial Loans on the Closing Date hereunder.
Code shall mean the Internal Revenue Code of 1986, as amended from time to time.
Commitment Fee shall have the meaning assigned to such term in Section 2.12(a).
Commitments shall mean (a) with respect to any Lender, such Lenders Revolving Facility Commitment and Incremental Revolving Facility Commitment, (b) with respect to the Swingline Facility Lender, such Swingline Facility Lenders Swingline Facility Commitment and (c) with respect to any Issuing Bank, its Revolving L/C Commitment.
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Commodity Exchange Act means the Commodity Exchange Act (7 U.S.C. § 1 et seq.), as amended and any successor statute.
Communications shall have the meaning assigned to such term in Section 9.17(a).
Consolidated Funded Debt at any date shall mean (without duplication) all Indebtedness consisting of Capital Lease Obligations, Indebtedness for borrowed money and Indebtedness in respect of the deferred purchase price of property or services (other than (a) trade accounts payable in the ordinary course of business and not past due for more than ninety (90) days unless being contested by such Person in good faith by appropriate proceedings diligently conducted, (b) deferred compensation payable to directors, partners, members, officers or employees of FINV or any of its Subsidiaries and (c) any purchase price adjustment or earnout, except to the extent that the amount payable pursuant to such purchase price adjustment is determinable and is not paid when due (giving effect to any applicable grace period)), of the Loan Parties and Borrowers Subsidiaries determined on a consolidated basis on such date.
Consolidated Net Income shall mean, for any period, the aggregate of the Net Income of FINV and its Subsidiaries for such period determined on a consolidated basis; provided, however , that
(a) any net after-tax extraordinary, unusual or nonrecurring gains or losses (less all fees and expenses related thereto) or income, expenses or charges (including, without limitation, expenses or charges related to any offering of Equity Interests of any Loan Party or the Borrowers Subsidiaries, any Investment, acquisition or Indebtedness permitted to be incurred hereunder (in each case, whether or not successful), including all fees, expenses and charges related to the Transactions), in each case, shall be excluded; provided that, with respect to each nonrecurring item, the Borrower shall have delivered to the Administrative Agent an officers certificate specifying and quantifying such item and stating that such item is a nonrecurring item,
(b) any net after-tax income or loss from discontinued operations and any net after-tax gain or loss on disposal of discontinued operations shall be excluded,
(c) any net after-tax gain or loss (including the effect of all fees and expenses or charges relating thereto) attributable to business dispositions or asset dispositions other than in the ordinary course of business (as determined in good faith by the governing body of the Borrower) shall be excluded,
(d) any net after-tax income or loss (including the effect of all fees and expenses or charges relating thereto) attributable to the refinancing, modification of or early extinguishment of indebtedness (including any net after-tax income or loss attributable to the repayment of obligations under Swap Agreements) shall be excluded,
(e) the Net Income for such period of any Person that is not a Subsidiary of a Loan Party, or that is accounted for by the equity method of accounting, shall be included only to the extent of the amount of dividends or distributions or other payments paid in cash (or to the extent converted into cash) to a Loan Party or a Subsidiary thereof in respect of such period,
(f) the Net Income for such period of any Subsidiary (that is not a Loan Party) of a Loan Party shall be excluded to the extent that the declaration or payment of dividends or similar distributions by such Subsidiary of its Net Income is not at the date of determination permitted without any prior governmental approval (which has not been obtained) or, directly or indirectly, by the operation of the terms of its organizational documents or any agreement, instrument, judgment, decree, order, statute, rule, or governmental regulation applicable to that Subsidiary or its stockholders, partners or members, unless such restriction with respect to the payment of dividends or similar distributions has been legally waived or complied with,
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(g) Consolidated Net Income for such period shall not include the cumulative effect of a change in accounting principles during such period,
(h) any non-cash charges from the application of the purchase method of accounting in connection with the Transactions or any future acquisition, to the extent such charges are deducted in computing such Consolidated Net Income, shall be excluded,
(i) any non-cash expenses (including, without limitation, write-downs and impairment of property, plant, equipment, goodwill and intangibles and other long-lived assets), any non-cash gains or losses on interest rate and foreign currency derivatives and any foreign currency transaction gains or losses and any foreign currency exchange translation gains or losses that arise on consolidation of integrated operations shall be excluded, and
(j) any long-term incentive plan accruals and any non-cash compensation expense realized from grants of stock or unit appreciation or similar rights, stock or unit options, any restricted stock or unit plan or other rights to officers, directors, and employees (or persons holding similar positions or performing similar functions for non-corporate entities) of any Loan Party or any of Borrowers Subsidiaries shall be excluded.
Consolidated Total Assets shall mean, as of any date, the total assets of FINV and its consolidated Subsidiaries (including Borrower), determined in accordance with GAAP, in each case as set forth on the consolidated balance sheet of FINV as of such date.
Control shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of a Person, whether through the ownership of voting securities, by contract or otherwise, and Controlling and Controlled shall have meanings correlative thereto.
Credit Agreement Joinder shall mean the credit agreement joinder described in Section 2.20(a) and being substantially in the form of Exhibit K , together with all amendments, modifications, replacements, extensions and rearrangements thereof.
Credit Event shall have the meaning assigned to such term in Article IV.
Default shall mean any event or condition which constitutes an Event of Default or which upon notice, lapse of time or both, unless cured or waived, would become an Event of Default.
Defaulting Lender shall mean any Lender that (a) has failed to perform any of its funding obligations under this Agreement, including with respect to Loans and participations in Letters of Credit and Swingline Facility Loans within three Business Days of the date when due, unless the subject of a good faith dispute, (b) has notified the Borrower or the Administrative Agent that it does not intend to comply with its funding obligations under this Agreement or has made a public statement to such effect with respect to its funding obligations under this Agreement (and such notice or public statement has not been withdrawn), (c) has failed, within three Business Days after request by the Administrative Agent (whether acting on its own behalf or at the reasonable request of the Borrower (it being understood that the Administrative Agent shall comply with any such reasonable request)), to confirm in a manner satisfactory to the Administrative Agent that it will comply with its funding obligations (d) has otherwise failed to pay over to the Administrative Agent or any other Lender any other amount required to be paid by it hereunder within three Business Days of the date when due, unless the subject of a good faith
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dispute or subsequently cured, or (e) has, or has a direct or indirect parent company that has, become the subject of a proceeding under any bankruptcy or insolvency laws, or has had appointed for it a receiver, custodian, conservator, trustee, administrator, assignee for the benefit of creditors or similar Person charged with reorganization or liquidation of its business or assets, including the Federal Deposit Insurance Corporation or any other state or federal regulatory authority acting in such a capacity, or has taken any action in furtherance of, or indicating its consent to, approval of or acquiescence in any such proceeding or appointment; provided that a Lender shall not be a Defaulting Lender solely as the result of the acquisition or maintenance of an ownership interest in such Lender or its direct or indirect parent company or the exercise of control over a Lender or its direct or indirect parent by a Governmental Authority so long as such ownership interest does not result in or provide such Lender with immunity from the jurisdiction of courts within the United States or from the enforcement of judgments or writs of attachment on its assets or permit such Lender (or such Governmental Authority) to reject, repudiate, disavow or disaffirm any contracts or agreements made with such Lender.
Dispute shall have the meaning assigned to such term in Section 9.11(b)(i).
EBITDA shall mean, with respect to FINV and its Subsidiaries (including the Borrower) on a consolidated basis for any period, the Consolidated Net Income of FINV and its Subsidiaries for such period plus (a) the sum of (in each case without duplication and to the extent the respective amounts described in subclauses (i) through (vii) of this clause (a) reduced such Consolidated Net Income for the respective period for which EBITDA is being determined (but excluding any non-cash item to the extent it represents an accrual or reserve for a potential cash charge in any future period or amortization of a prepaid cash item that was paid in a prior period)):
(i) provision for Taxes based on income, profits, losses or capital of FINV and its Subsidiaries for such period (adjusted for the tax effect of all adjustments made to Consolidated Net Income),
(ii) Interest Expense of FINV and its Subsidiaries that are Loan Parties for such period (net of interest income of the General Partner and such Subsidiaries for such period) and to the extent not reflected in Interest Expense, costs of surety bonds in connection with financing activities,
(iii) depreciation, amortization (including, without limitation, amortization of intangibles and deferred financing fees) and other non-cash expenses (including, without limitation write-downs and impairment of property, plant, equipment, goodwill and intangibles and other long-lived assets and the impact of purchase accounting on FINV and its Subsidiaries for such period),
(iv) gain or loss on sale of assets of FINV and its Subsidiaries,
(v) foreign currency gain or loss by FINV and its Subsidiaries,
(vi) other non-cash adjustments (e.g., stock compensation expense as a result of the long term incentive plan), and
(vii) extraordinary losses and unusual or non-recurring cash charges;
minus (b) to the extent such amounts increased such Consolidated Net Income for the respective period for which EBITDA is being determined, non-cash items increasing Consolidated Net Income of FINV and its Subsidiaries for such period (but excluding any such items which represent the reversal in such period of any accrual of, or cash reserve for, anticipated cash charges in any prior period where such accrual or reserve is no longer required).
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Eligible Assignee shall mean a Person that is (a) a Lender, (b) an Affiliate of a Lender, (c) an Approved Fund, and (d) a financial institution approved by (i) the Administrative Agent and each Issuing Bank and (ii) unless an Event of Default has occurred and is continuing, the Borrower (such approval not to be unreasonably withheld or delayed).
Eligible Contract Participant means an eligible contract participant as defined in the Commodity Exchange Act and the regulations thereunder.
Environment shall mean ambient air, surface water and groundwater (including potable water, navigable water and wetlands), the land surface or subsurface strata or sediment and natural resources such as flora and fauna.
Environmental Claim shall mean any and all actions, suits, demands, claims, liens, notices of non-compliance or violation, notices of liability or potential liability, investigations, proceedings, consent orders or consent agreements relating in any way to any actual or alleged violation of Environmental Law or any Release or threatened Release of, or exposure to, Hazardous Materials.
Environmental Event shall have the meaning assigned to such term in Section 7.01(m).
Environmental Law shall mean, collectively, all applicable federal, state, provincial, local or foreign laws, including common law, ordinances, regulations, rules, codes, orders, judgments or other legally enforceable requirements or rules of law that relate to (a) the prevention, abatement or elimination of pollution, or the protection of the Environment or human health and (b) the use, generation, handling, treatment, storage, disposal, Release or transportation of, or exposure to, Hazardous Materials, including the Comprehensive Environmental Response Compensation and Liability Act, 42 U.S.C. §§ 9601 et seq. , the Endangered Species Act, 16 U.S.C. §§ 1531 et seq. , the Solid Waste Disposal Act, as amended by the Resource Conservation and Recovery Act, 42 U.S.C. §§ 6901 et seq. , the Clean Air Act, 42 U.S.C. §§ 7401 et seq. , the Clean Water Act, 33 U.S.C. §§ 1251 et seq. , the Toxic Substances Control Act, 15 U.S.C. §§ 2601 et seq. , the National Environmental Policy Act, 42 U.S.C. §§ 4321 et seq. , and the Emergency Planning and Community Right to Know Act, 42 U.S.C. §§ 11001 et seq. , each as amended, and their foreign, state, provincial or local counterparts or equivalents.
Equity Interests of any Person shall mean any and all shares, interests, rights to purchase, warrants, options, participation or other equivalents of or interests in (however designated) equity of such Person, including any preferred stock, any limited or general partnership interest, any limited liability company membership interest and any unlimited liability company membership interests.
ERISA shall mean the Employee Retirement Income Security Act of 1974, as amended from time to time, the regulations promulgated thereunder and any successor thereto.
ERISA Affiliate shall mean any trade or business (whether or not incorporated) that, together with the Loan Parties, is treated as a single employer under Section 414(b) or (c) of the Code, or, solely for purposes of Section 302 of ERISA and Section 412 of the Code, is treated as a single employer under Section 414 of the Code.
ERISA Event shall mean: (a) a Reportable Event; (b) the failure to meet the minimum funding standard of Sections 412 or 430 of the Code or Sections 302 or 303 of ERISA with respect to any Plan (whether or not waived in accordance with Section 412(c) of the Code or Section 302(c) of ERISA) or the
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failure to make by its due date a required installment under Section 430(j) of the Code with respect to any Plan or the failure to make any required contribution to a Multiemployer Plan; (c) a determination that any Plan is in at risk status (as defined in Section 430 of the Code or Section 303 of ERISA); (d) the incurrence by any Loan Party or any ERISA Affiliate of any liability under Title IV of ERISA; (e) the receipt by any Loan Party or any ERISA Affiliate from the PBGC or a plan administrator of any notice relating to an intention to terminate any Plan, or to appoint a trustee to administer any Plan under Section 4042 of ERISA; (f) a determination that any Multiemployer Plan is in critical or endangered status under Section 432 of the Code or Section 305 of ERISA; (g) the incurrence by any Loan Party or any ERISA Affiliate of any liability with respect to the withdrawal or partial withdrawal from any Plan or Multiemployer Plan; (h) the receipt by any Loan Party or any ERISA Affiliate of any notice, or the receipt by any Multiemployer Plan from any Loan Party or any ERISA Affiliate of any notice, concerning the imposition of Withdrawal Liability or a determination that a Multiemployer Plan is insolvent or in reorganization, within the meaning of Title IV of ERISA; or (i) the occurrence of a nonexempt prohibited transaction (within the meaning of Section 4975 of the Code or Section 406 of ERISA) which could reasonably be expected to result in liability to the any Loan Party.
Eurodollar Borrowing shall mean a Borrowing comprised of Eurodollar Loans.
Eurodollar Loan shall mean any Revolving Facility Loan bearing interest at a rate determined by reference to the Adjusted Eurodollar Rate in accordance with the provisions of Article II.
Eurodollar Rate shall mean for any Interest Period with respect to any Eurodollar Loan, a rate per annum offered for U.S. Dollar deposits in an amount comparable to the principal amount of the applicable Eurodollar Loan for a period of time equal to the applicable Interest Period as of 11:00 a.m. City of London, England time two (2) Business Days prior to the first date of such Interest Period as shown on the display designated as British Bankers Association Interest Settlement Rates on the Bloomberg System ( Bloomberg ); provided, however , that if such rate is not available on Bloomberg, then such offered rate shall be otherwise independently determined by the Administrative Agent from an alternate, substantially similar independent source available to Administrative Agent and recognized in the banking industry.
Eurodollar Revolving Facility Borrowing shall mean a Borrowing comprised of Eurodollar Loans.
Event of Default shall have the meaning assigned to such term in Section 7.01.
Exchange Act shall mean the Securities Exchange Act of 1934, as amended and any successor statute.
Excluded Swap Obligation means, with respect to any Loan Party individually determined on a Loan Party by Loan Party basis, any Swap Obligation, if and to the extent that, all or a portion of the joint and several liability or the guaranty of such Loan Party for, or the grant by such Loan Party of a security interest or other Lien to secure, such Swap Obligation (or any guarantee thereof) is or becomes illegal under the Commodity Exchange Act or any rule, regulation or order of the Commodity Futures Trading Commission (or the application or official interpretation of any thereof) by virtue of such Loan Partys failure for any reason to constitute an Eligible Contract Participant at the time such guarantee or the grant of such security interest or other Lien becomes effective with respect to, or any other time such Loan Party is by virtue of such guarantee or grant of such security interest or other Lien otherwise deemed to enter into, such Swap Obligation. If a Swap Obligation arises under a master agreement governing more than one swap, such exclusion shall apply only to the portion of such Swap Obligation that is attributable to swaps for which such guarantee, security interest or other Lien is or becomes illegal.
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Excluded Taxes shall mean, with respect to the Administrative Agent, any Lender, any Issuing Bank or any other recipient of any payment to be made by or on account of any obligation of any Loan Party hereunder (a) income, franchise and similar Taxes, in each case imposed on (or measured by) net income, net profits or capital by the United States (or any state or other subdivision thereof) or by the jurisdiction (or any political jurisdiction thereof) under the laws of which such recipient is organized, resident or doing business, or in which its principal office or, in the case of any Lender or Issuing Bank, in which its applicable lending office, is located or any jurisdiction in which such recipient has a present or former connection (other than any such connection arising solely from actions taken under the Loan Documents) is located, (b) any branch profits Tax or any similar Tax that is imposed by any jurisdiction described in clause (a) above, (c) any withholding Tax imposed on amounts payable to or for the account of a recipient with respect to an interest in a Loan or Commitment pursuant to a law that is in effect at the time the Administrative Agent, Lender, Issuing Bank or other recipient acquires an interest in such Loan or Commitment (other than in the case of an assignee pursuant to a request by a Loan Party under Section 2.19(b)) or designates a new lending office, except to the extent that such Lender or Issuing Bank or other recipient in the case of a designation of a new lending office, or its assignor, in the case of assignment, was entitled, at the time of designation of such new lending office (or assignment), to receive additional amounts with respect to such withholding Tax pursuant to Section 2.17(a) or Section 2.17(c), (d) any backup withholding Tax, (e) any withholding Taxes attributable to such Lenders or such other recipients failure (other than as a result of a Change in Law) to comply with Section 2.17(e), and (f) any withholding Tax imposed under FATCA.
FATCA means Sections 1471 through 1474 of the Code, as of the Closing Date (or any amended or successor version that is substantively comparable and not materially more onerous to comply with), any current or future regulations or official interpretations thereof, any agreements entered into pursuant to Section 1471(b)(1) of the Code and any fiscal or regulatory legislation, rules or practices adopted pursuant to any intergovernmental agreement entered into in connection with the implementation of such Sections of the Code.
Family Member shall mean a spouse, lineal ancestor, lineal descendant, legally adopted child, brother or sister of a Person, or a lineal descendant or legally adopted child of a brother or sister of a Person.
FCPA means the Foreign Corrupt Practices Act of 1977.
Federal Funds Effective Rate shall mean, for any day, the weighted average (rounded upward, if necessary, to the next 1/100 of 1%) of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers, as published on the next succeeding Business Day by the Federal Reserve Bank of New York, or, if such rate is not so published for any day which is a Business Day, the average (rounded upward, if necessary, to the next 1/100 of 1%) of the quotations for the day of such transactions received by the Administrative Agent from three Federal funds brokers of recognized standing selected by it.
Fee Letter shall mean that certain Engagement Letter dated June 21, 2013 among Amegy, Capital One, National Association and the Borrower.
Fees shall mean the Commitment Fees, the Revolving L/C Participation Fees, the Issuing Bank Fees, the Administrative Agent Fees and any other fees payable under the Fee Letter.
FIMBV shall have the meaning assigned to such term in the introductory paragraph to this Agreement.
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Financial Officer of any Person shall mean the Chief Financial Officer, principal accounting officer, Treasurer, Assistant Treasurer or Controller of such Person.
Financial Performance Covenants shall mean the covenants of the Borrower set forth in Sections 6.10 and 6.11.
FINV shall mean Franks International N.V., a limited liability company organized under the laws of the Netherlands.
Franks International C.V. shall have the meaning assigned to such term in the introductory paragraph to this Agreement.
GAAP shall have the meaning assigned to such term in Section 1.02.
Governmental Authority shall mean any federal, state, provincial, local or foreign court or governmental agency, authority, instrumentality or regulatory or legislative body.
Guarantee of or by any Person (the guarantor ) shall mean (a) any obligation, contingent or otherwise, of the guarantor guaranteeing or having the economic effect of guaranteeing any Indebtedness of any other Person (the primary obligor ) in any manner, whether directly or indirectly, and including any obligation of the guarantor, direct or indirect, (i) to purchase or pay (or advance or supply funds for the purchase or payment of) such Indebtedness (whether arising by virtue of partnership arrangements, by agreement to keep well, to purchase assets, goods, securities or services, to take or pay or otherwise) or to purchase (or to advance or supply funds for the purchase of) any security for the payment of such Indebtedness, (ii) to purchase or lease property, securities or services for the purpose of assuring the owner of such Indebtedness of the payment thereof, (iii) to maintain working capital, equity capital or any other financial statement condition or liquidity of the primary obligor so as to enable the primary obligor to pay such Indebtedness, (iv) entered into for the purpose of assuring in any other manner the holders of such Indebtedness of the payment thereof or to protect such holders against loss in respect thereof (in whole or in part) or (v) as an account party in respect of any letter of credit or letter of guaranty issued to support such Indebtedness, or (b) any Lien on any assets of the guarantor securing any Indebtedness (or any existing right, contingent or otherwise, of the holder of Indebtedness to be secured by such a Lien) of any other Person, whether or not such Indebtedness is assumed by the guarantor; provided, however , that the term Guarantee shall not include endorsements for collection or deposit, in either case in the ordinary course of business, or customary and reasonable indemnity obligations in effect on the Closing Date or entered into in connection with any acquisition or disposition of assets permitted under this Agreement.
Guaranty Agreement shall mean the Guaranty Agreement, as amended, supplemented or otherwise modified from time to time, substantially in the form of Exhibit E , among the Loan Parties and the Administrative Agent, and any other guarantee that may be executed after the Closing Date in favor of, and in form and substance acceptable to, the Administrative Agent.
Hazardous Materials shall mean all pollutants, contaminants, wastes, chemicals, materials, substances and constituents, including explosive or radioactive substances or petroleum or petroleum distillates or breakdown constituents, friable asbestos or friable asbestos containing materials, polychlorinated biphenyls or radon gas, of any nature, in each case subject to regulation pursuant to, or which can give rise to liability under, any Environmental Law.
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Highest Lawful Rate shall means, with respect to each Lender, the maximum nonusurious interest rate, if any, that at any time or from time to time may be contracted for, taken, reserved, charged or received on the Notes or on other Obligations under laws applicable to such Lender which are presently in effect or, to the extent allowed by law, under such applicable laws which may hereafter be in effect and which allow a higher maximum nonusurious interest rate than applicable laws allow as of the date hereof.
Increased Amount Date shall have the meaning assigned to such term in Section 2.20.
Incremental Loans shall have the meaning assigned to such term in Section 2.20.
Incremental Revolving Facility Commitments shall have the meaning assigned to such term in Section 2.20.
Incremental Revolving Facility Lender shall have the meaning assigned to such term in Section 2.20.
Indebtedness of any Person shall mean, without duplication, (a) all obligations of such Person for borrowed money, (b) all obligations of such Person evidenced by bonds, debentures, notes or similar instruments, (c) all obligations of such Person under conditional sale or other title retention agreements relating to property or assets purchased by such Person, (d) all obligations of such Person issued or assumed as the deferred purchase price of property or services (other than trade liabilities and intercompany liabilities incurred in the ordinary course of business and maturing within 365 days after the incurrence thereof), (e) all Guarantees by such Person of Indebtedness of others, (f) all Capital Lease Obligations of such Person, (g) all payments that such Person would have to make in the event of an early termination, on the date Indebtedness of such Person is being determined, in respect of outstanding Swap Agreements (such payments in respect of any Swap Agreement with a counterparty being calculated subject to and in accordance with any netting provisions in such Swap Agreement), (h) the principal component of all obligations, contingent or otherwise, of such Person (i) as an account party in respect of letters of credit (other than any letters of credit, bank guarantees or similar instrument in respect of which a back-to-back letter of credit has been issued under or permitted by this Agreement) and (ii) in respect of bankers acceptances. The Indebtedness of any Person shall include the Indebtedness of any partnership in which such Person is a general partner, other than to the extent that the instrument or agreement evidencing such Indebtedness expressly limits the liability of such Person in respect thereof.
Indemnified Taxes shall mean all Taxes, other than Excluded Taxes, imposed on or with respect to any payment made by or on account of any obligation of any Loan Party under any Loan Document.
Indemnitee shall have the meaning assigned to such term in Section 9.05(b).
Information shall have the meaning assigned to such term in Section 3.13(a).
Interest Coverage Ratio shall mean the ratio, for the period of four fiscal quarters ended on, or if such date of determination is not the end of a fiscal quarter, most recently prior to the date on which such determination is to be made of (a) EBITDA to (b) Interest Expense; provided that to the extent any Asset Disposition or any Asset Acquisition (or any similar transaction or transactions for which a waiver or a consent of the Required Lenders pursuant to Section 6.04 or 6.05 has been obtained) or incurrence or repayment of Indebtedness (excluding normal fluctuations in revolving Indebtedness incurred for working capital purposes) has occurred during the relevant Test Period, the Interest Coverage Ratio shall be determined for the respective Test Period on a Pro Forma Basis for such occurrences.
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Interest Election Request shall mean a request by the Borrower to convert or continue a Borrowing in accordance with Section 2.07, in substantially the form of Exhibit D .
Interest Expense shall mean, with respect to any Person for any period, the sum of (a) interest expense of such Person for such period on a consolidated basis, including (i) the amortization of debt discounts, (ii) the amortization of all fees (including fees with respect to Swap Agreements) payable in connection with the incurrence of Indebtedness to the extent included in interest expense, (iii) the portion of any payments or accruals with respect to Capital Lease Obligations allocable to interest expense, and (iv) redeemable preferred stock dividend expenses, and (b) capitalized interest of such Person. For purposes of the foregoing, interest expense shall be determined after giving effect to any net payments made or received and costs incurred by the Borrower and its Subsidiaries with respect to Swap Agreements.
Interest Payment Date shall mean (a) with respect to any Eurodollar Loan, the last day of the Interest Period applicable to the Borrowing of which such Loan is a part and, in the case of a Eurodollar Borrowing with an Interest Period of more than three months duration, each day that would have been an Interest Payment Date had successive Interest Periods of three months duration been applicable to such Borrowing and, in addition, the date of any refinancing or conversion of such Borrowing with or to a Borrowing of a different Type, (b) with respect to any ABR Loan (other than a Swingline Facility Loan), the last Business Day of each calendar quarter, and (c) with respect to any Swingline Facility Loan, the day such Swingline Facility Loan is paid.
Interest Period shall mean, as to any Borrowing consisting of a Eurodollar Loan, the period commencing on the date of such Borrowing or on the last day of the immediately preceding Interest Period applicable to such Borrowing, as applicable, and ending on the numerically corresponding day (or, if there is no numerically corresponding day, on the last day) in the calendar month that is 1, 2, 3 or 6 months thereafter, as the Borrower may elect, or the date any Eurodollar Borrowing is converted to an ABR Borrowing in accordance with Section 2.07 or repaid or prepaid in accordance with Section 2.09, 2.10 or 2.11; provided that, (a) if any Interest Period for a Eurodollar Loan would end on a day other than a Business Day, such Interest Period shall be extended to the next succeeding Business Day unless such next succeeding Business Day would fall in the next calendar month, in which case such Interest Period shall end on the next preceding Business Day, (b) any Interest Period that begins on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period) shall end on the last Business Day of the calendar month at the end of such Interest Period, and (c) no Interest Period shall extend beyond the Revolving Facility Maturity Date. Interest shall accrue from and including the first day of an Interest Period to but excluding the last day of such Interest Period.
Investment shall have the meaning assigned to such term in Section 6.04.
IRS means the United States Internal Revenue Service.
Issuing Bank shall mean Amegy and each other Issuing Bank designated pursuant to Section 2.05(k), in each case in its capacity as an issuer of Revolving Letters of Credit hereunder, and its successors in such capacity as provided in Section 2.05(i). An Issuing Bank may, in its discretion, arrange for one or more Revolving Letters of Credit to be issued by Affiliates of such Issuing Bank, in which case the term Issuing Bank shall include any such Affiliate with respect to Revolving Letters of Credit issued by such Affiliate.
Issuing Bank Fees shall have the meaning assigned to such term in Section 2.12(c).
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JAMS shall have the meaning assigned to such term in Section 9.11(b)(ii).
Lender shall mean each financial institution listed on Schedule 2.01 , as well as any Person (other than a natural person) that becomes a Lender hereunder pursuant to Section 9.04. Unless the context otherwise requires, the term Lender includes the Swingline Facility Lender.
Leverage Ratio shall mean, on any date, the ratio of (a) Consolidated Funded Debt as of such date to (b) EBITDA for the period of four consecutive fiscal quarters of FINV most recently ended as of such date, all determined on a consolidated basis in accordance with GAAP; provided that to the extent any Asset Disposition or any Asset Acquisition (or any similar transaction or transactions that require a waiver or a consent of the Required Lenders pursuant to Section 6.04 or Section 6.05) or incurrence or repayment of Indebtedness (excluding normal fluctuations in revolving Indebtedness incurred for working capital purposes) has occurred during the relevant Test Period, the Leverage Ratio shall be determined for the respective Test Period on a Pro Forma Basis for such occurrences.
Lien shall mean, with respect to any asset, (a) any mortgage, deed of trust, lien, hypothecation, pledge, encumbrance, charge or security interest in or on such asset, (b) the interest of a vendor or a lessor under any conditional sale agreement, capital lease or title retention agreement (or any financing lease having substantially the same economic effect as any of the foregoing) relating to such asset and (c) in the case of securities (other than securities representing an interest in a joint venture that is not a Subsidiary of a Loan Party), any purchase option, call or similar right of a third party with respect to such securities.
Loan Documents shall mean this Agreement, the Notes, the Revolving Letters of Credit and the Guaranty Agreement.
Loan Parties shall mean the Borrower and each Material Subsidiary.
Loans shall mean the Revolving Facility Loans and the Swingline Facility Loans.
Margin Stock shall have the meaning assigned to such term in Regulation U.
Material Adverse Effect shall mean the existence of events and/or conditions that have had or could reasonably be expected to have (i) a materially adverse effect on the business, operations, properties, assets or financial condition of the Loan Parties, taken as a whole, or (ii) a material impairment of the validity or enforceability of, or a material impairment of the material rights, remedies or benefits available to the Lenders, any Issuing Bank or the Administrative Agent under any Loan Document.
Material Indebtedness shall mean Indebtedness (other than Loans and Letters of Credit hereunder and other than Indebtedness owing by a Loan Party pursuant to the 364-Day Credit Facility) of a Loan Party in an aggregate principal amount exceeding U.S. $30,000,000.
Material Subsidiary shall mean any Subsidiary of the Borrower that is a Significant Subsidiary as defined in Rule 1-02(w) of Regulation S-X.
Moodys shall mean Moodys Investors Service, Inc.
Mosing Family shall mean, collectively, Mosing Holdings, Inc., a Delaware corporation, FWW B.V., a private limited liability company organized and existing under the laws of the Netherlands, Ginsoma Family C.V., a limited partnership established under the laws of the Netherlands and each of the persons listed on Exhibit A to the deed of amendment to the articles of association of FINV dated as of August [ ], 2013 and each of their Affiliates, Family Members or trusts set up for the benefit of any of the persons listed on such Exhibit.
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Multiemployer Plan shall mean a multiemployer plan as defined in Section 4001(a)(3) of ERISA subject to the provisions of Title IV of ERISA and in respect of any Loan Party or any ERISA Affiliate is an employer as defined in Section 3(5) of ERISA.
Net Income shall mean, with respect to any Person, the net income (loss) of such Person, determined in accordance with GAAP and before any reduction in respect of preferred stock dividends.
Net Proceeds shall mean 100% of the cash proceeds actually received by a Loan Party or any Subsidiary of the Borrower (including any cash payments received by way of deferred payment of principal pursuant to a note or installment receivable or purchase price adjustment receivable or otherwise and including casualty insurance settlements and condemnation awards, but only as and when received) from any loss, damage, destruction or condemnation of, or any sale, transfer or other disposition (including any sale and leaseback of assets) to any Person of any asset or assets of a Loan Party or any such Subsidiary of the Borrower (other than those pursuant to Section 6.05(a), (b), (c), (e), (f), (h), (i), or (j)) net of (i) attorneys fees, accountants fees, investment banking fees, sales commissions, survey costs, title insurance premiums, and related search and recording charges, transfer taxes, deed or mortgage recording taxes, required debt payments and required payments of other obligations relating to the applicable asset and any cash reserve for adjustment in respect of the sale price of such asset established in accordance with GAAP, including without limitation, pension and post-employment benefit liabilities and liabilities related to environmental matters or against any indemnification obligations associated with such transaction, other customary expenses and brokerage, consultant and other customary fees actually incurred in connection therewith, and (ii) Taxes paid or payable as a result thereof.
Non-Consenting Lender shall have the meaning assigned to such term in Section 2.19(c).
Non-U.S. Lender shall have the meaning assigned to such term in Section 2.17(e).
Notice of Revolving Facility Commitment Increase shall mean the notice of the Borrower described in Section 2.20(a) and being substantially in the form of Exhibit J .
Notes shall mean the promissory notes of the Borrower described in Section 2.09(e) and being substantially in the form of Exhibit G , together with all amendments, modifications, replacements, extensions and rearrangements thereof.
Obligations shall mean (i) all obligations and liabilities of any Loan Party under any Swap Agreement entered into on or after the Closing Date between such Loan Party and any Person that, at the time such obligation was entered into, was a Lender or Affiliate of a Lender hereunder; provided that, notwithstanding anything to the contrary, with respect to any Loan Party that is not an Eligible Contract Participant, the Obligations of such Loan Party shall exclude any Excluded Swap Obligations of such Loan Party and (ii) all amounts owing to any of the Administrative Agent, any Issuing Bank, any Lender or the Swingline Facility Lender pursuant to the terms of this Agreement or any other Loan Document or pursuant to the terms of any Guarantee thereof, including, without limitation, with respect to any Loan or Revolving Letter of Credit, together with the due and punctual performance of all other obligations of the Borrower and the other Loan Parties under or pursuant to the terms of this Agreement or the other Loan Documents, in each case whether direct or indirect (including those acquired by assumption), absolute or contingent, due or to become due, now existing or hereafter arising, and including interest and fees that accrue after the commencement by or against any Loan Party or any Affiliate thereof of any proceeding under any bankruptcy or insolvency laws naming such Person as the debtor in such proceeding, regardless of whether such interest and fees are allowed claims in such proceeding.
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OFAC means the U.S. Treasury Departments Office of Foreign Assets Control.
Other Taxes shall mean any and all present or future stamp or documentary taxes or any other excise or property, intangible or mortgage recording taxes, charges or similar levies arising from any payment made hereunder or from the execution, delivery or enforcement of, or otherwise with respect to, the Loan Documents (other than any such Taxes imposed with respect to an assignment, other than an assignment pursuant to Section 2.19(b)).
Participant shall have the meaning assigned to such term in Section 9.04(c)(i).
Participant Register shall have the meaning assigned to such term in Section 9.04(c)(i).
PBGC shall mean the Pension Benefit Guaranty Corporation referred to and defined in ERISA.
Permitted Business Acquisition shall mean any acquisition of all or substantially all the assets of, or all the Equity Interests (other than directors qualifying shares) in, a Person or division or line of business of a Person, other than such acquisition of, or of the assets or Equity Interests of, any Loan Party, if (a) such acquisition was not preceded by, or effected pursuant to, an unsolicited or hostile offer, (b) such acquired Person, division or line of business of a Person is, or is engaged in, any business or business activity conducted by the Borrower and its Subsidiaries on the Closing Date and any business or business activities incidental or related thereto, or any business or activity that is reasonably similar thereto or a reasonable extension, development or expansion thereof or ancillary thereto, and (c) immediately after giving effect thereto: (i) no Default or Event of Default shall have occurred and be continuing or would result therefrom; (ii) all transactions related thereto shall be consummated in accordance with applicable laws; and (iii) (A) the Leverage Ratio, on a Pro Forma Basis after giving effect to such acquisition or formation, recomputed as at the last day of the most recently ended fiscal quarter of FINV, is less than 2.00 to 1.00, and, if the total consideration in respect of such acquisition (or acquisitions) exceeds U.S. $30,000,000, the Borrower shall have delivered to the Administrative Agent a certificate of a Responsible Officer of the Borrower to such effect, together with all relevant financial information for such Subsidiary or assets, and (B) any acquired or newly formed Subsidiary of the Borrower shall not be liable for any Indebtedness (except for Indebtedness permitted by Section 6.01).
Permitted Liens shall mean those Liens and other encumbrances permitted by Section 6.02.
Permitted Investments shall mean:
(a) direct obligations of the United States or any agency thereof or obligations guaranteed by the United States or any agency thereof, in each case with maturities not exceeding two years;
(b) time deposit accounts, certificates of deposit and money market deposits maturing within 180 days of the date of acquisition thereof issued by a bank or trust company that is organized under the laws of the United States or any state thereof, having capital, surplus and undivided profits in excess of U.S. $250,000,000 and whose long-term debt, or whose parent holding companys long-term debt, is rated A (or such similar equivalent rating or higher) by at least one nationally recognized statistical rating organization (as defined in Rule 436 under the Securities Act);
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(c) repurchase obligations with a term of not more than 180 days for underlying securities of the types described in clause (a) above entered into with a bank meeting the qualifications described in clause (b) above;
(d) commercial paper, maturing not more than one year after the date of acquisition, issued by a corporation (other than an Affiliate of the Borrower) organized and in existence under the laws of the United States with a rating at the time as of which any investment therein is made of P-1 (or higher) according to Moodys, or A-1 (or higher) according to S&P;
(e) securities with maturities of two years or less from the date of acquisition issued or fully guaranteed by any state, commonwealth or territory of the United States or by any political subdivision or taxing authority thereof, and rated at least A by S&P or A-2 by Moodys;
(f) shares of mutual funds whose investment guidelines restrict 95% of such funds investments to those satisfying the provisions of clauses (a) through (e) above;
(g) money market funds that (i) comply with the criteria set forth in Rule 2a-7 under the Investment Company Act of 1940, (ii) are rated AAA by S&P and Aaa by Moodys and (iii) have portfolio assets of at least U.S. $500,000,000; and
(h) time deposit accounts, certificates of deposit and money market deposits in an aggregate face amount not in excess of 1/2 of 1% of the Consolidated Total Assets of the Borrower and its Subsidiaries, on a consolidated basis, as of the end of the Borrowers most recently completed fiscal year.
Permitted Refinancing Indebtedness shall mean any Indebtedness issued in exchange for, or the net proceeds of which are used to extend, refinance, renew, replace, defease or refund (collectively, to Refinance ), the Indebtedness being Refinanced (or previous refinancings thereof constituting Permitted Refinancing Indebtedness); provided that (a) FINV and its Subsidiaries shall be in compliance, on a Pro Forma Basis after giving effect to such Permitted Refinancing Indebtedness, with the Financial Performance Covenants recomputed as at the last day of the most recently ended fiscal quarter of FINV and its Subsidiaries, (b) the principal amount (or accreted value, if applicable) of such Permitted Refinancing Indebtedness does not exceed the principal amount (or accreted value, if applicable) of the Indebtedness so Refinanced (plus unpaid accrued interest, breakage costs and premium thereon and reasonable transaction expenses with respect thereto), (c) the average life to maturity of such Permitted Refinancing Indebtedness is greater than or equal to that of the Indebtedness being Refinanced, (d) if the Indebtedness being Refinanced is subordinated in right of payment to the Obligations under this Agreement, such Permitted Refinancing Indebtedness shall be subordinated in right of payment to the Obligations on terms at least as favorable to the Lenders, taken as a whole, as those contained in the documentation governing the Indebtedness being Refinanced, (e) no Permitted Refinancing Indebtedness shall have different obligors, or greater guarantees or security, than the Indebtedness being Refinanced (other than any after-acquired or established Subsidiary that pursuant to the terms of the Indebtedness being extended, refinanced, renewed or replaced would have been required to become an obligor thereunder), and (f) if the Indebtedness being Refinanced is secured by any collateral, such Permitted Refinancing Indebtedness may be secured by such collateral on terms no less favorable in any material respect to the Lenders, taken as a whole, than those contained in the documentation governing the Indebtedness being Refinanced.
Permitted Senior Unsecured Debt shall mean unsecured senior Indebtedness issued by the Borrower and/or a finance company that is an Affiliate of the Borrower (i) the terms of which (1) do not provide for any scheduled repayment, mandatory redemption or sinking fund obligation prior to the date
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that is 91 days after the Revolving Facility Maturity Date, (2) do not contain covenants that, taken as a whole, are more restrictive than those set forth in this Agreement and the other Loan Documents, (3) provide for covenants and events of default customary for Indebtedness of a similar nature as such Permitted Senior Unsecured Debt and (ii) in respect of which no Subsidiary of the Borrower that is not a guarantor under the Loan Documents is a guarantor; provided that immediately prior to and after giving effect on a Pro Forma Basis to any incurrence of Permitted Senior Unsecured Debt, no Default or Event of Default shall have occurred and be continuing or would result therefrom and the Borrower would be in compliance on a Pro Forma Basis with the Financial Performance Covenants as of the most recently completed fiscal quarter for which financial statements are available.
Person shall mean any natural person, corporation, business trust, joint venture, association, company, partnership, limited liability company, individual or family trust, or Governmental Authority.
Plan shall mean any employee pension benefit plan subject to the provisions of Title IV of ERISA or Section 412 or 430 of the Code or Section 302 of ERISA and in respect of which any Loan Party or any ERISA Affiliate is (or if such plan were terminated would under Section 4069 of ERISA be deemed to be) an employer as defined in Section 3(5) of ERISA.
Platform shall have the meaning assigned to such term in Section 9.17(b).
primary obligor shall have the meaning given such term in the definition of the term Guarantee.
Prime Rate shall mean for any day, the prime rate of interest per annum published from time to time in the Bonds, Rates & Yields section of The Wall Street Journal or in any successor publication to The Wall Street Journal. Borrower understands that the Prime Rate may not be the best, lowest, or most favored rate, and any representation or warranty in that regard is expressly disclaimed. Borrower acknowledges that (i) if more than one prime rate is published at any time by The Wall Street Journal, the highest of such prime rates shall constitute the Prime Rate hereunder, and (ii) if at any time The Wall Street Journal ceases to publish a prime rate, the Administrative Agent shall have the right to select a substitute rate that the Administrative Agent determines, in the exercise of its reasonable commercial discretion, to be comparable to such prime rate, and the substituted rate as so selected, upon the sending of written notice thereof to Borrower, shall constitute the Prime Rate hereunder. Upon each increase or decrease hereafter in the Prime Rate, the rate of interest upon the unpaid principal balance of the ABR Loans shall be increased or decreased by the same amount as the increase or decrease in the Prime Rate, such increase or decrease to become effective as of the day of each such change in the Prime Rate and without notice to Borrower or any other Person. The Prime Rate is a reference rate and does not necessarily represent the lowest or best rate actually charged to any customer of any Lender. The Lenders may make commercial loans or other loans at rates of interest at, above or below the Prime Rate.
Pro Forma Basis shall mean, as to any Person, for any events as described in clauses (a) and (b) below that occur subsequent to the commencement of a period for which the financial effect of such events is being calculated, and giving effect to the events for which such calculation is being made, such calculation as will give pro forma effect to such events as if such events occurred on the first day of the four consecutive fiscal quarter period ended on or before the occurrence of such event (the Reference Period ):
(a) in making any determination of EBITDA on a Pro Forma Basis, pro forma effect shall be given to any Asset Disposition and to any Asset Acquisition (or any similar transaction or transactions that require a waiver or consent of the Required Lenders pursuant to Section 6.04 or 6.05), in each case that occurred during the Reference Period (or, unless the context otherwise requires, occurring during the Reference Period or thereafter and through and including the date upon which the respective Asset Acquisition or Asset Disposition is consummated); and
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(b) in making any determination on a Pro Forma Basis, (x) all Indebtedness (including Indebtedness incurred or assumed and for which the financial effect is being calculated, whether incurred under this Agreement or otherwise, but excluding normal fluctuations in revolving Indebtedness incurred for working capital purposes) incurred or permanently repaid during the Reference Period shall be deemed to have been incurred or repaid at the beginning of such period, (y) Interest Expense of such Person attributable to interest on any Indebtedness, for which pro forma effect is being given as provided in preceding clause (x), bearing floating interest rates shall be computed on a pro forma basis as if the rates that would have been in effect during the period for which pro forma effect is being given had been actually in effect during such periods and (z) with respect to distributions made pursuant to Section 6.06(e), pro forma effect shall be given to the decrease in cash and Permitted Investments resulting from such distributions.
Pro forma calculations made pursuant to the definition of the term Pro Forma Basis shall be determined in good faith by a Responsible Officer of the Borrower and, for any fiscal period ending on or prior to the first anniversary of an Asset Acquisition or Asset Disposition (or any similar transaction or transactions that require a waiver or consent of the Required Lenders pursuant to Section 6.04 or 6.05), may include adjustments to reflect operating expense reductions and other operating improvements or synergies reasonably expected to result from such Asset Acquisition, Asset Disposition or other similar transaction, to the extent that the Borrower delivers to the Administrative Agent (i) a certificate of a Financial Officer of the Borrower setting forth such operating expense reductions and other operating improvements or synergies and (ii) information and calculations supporting in reasonable detail such estimated operating expense reductions and other operating improvements or synergies.
Projections shall mean the projections and any forward-looking statements (including statements with respect to booked business) of the Borrower and its Subsidiaries furnished to the Lenders or the Administrative Agent by or on behalf of the Borrower or any of its Subsidiaries prior to the Closing Date.
Property means any interest in any kind of property or asset, whether real, personal or mixed, tangible or intangible.
Public Lender shall have the meaning assigned to such term in Section 9.17(b).
Qualified ECP Credit Party means, with respect to any Benefitting Loan Party in respect of any Swap Obligation, each Loan Party that, at the time of the guarantee by such Benefitting Loan Party of such Swap Obligation is entered into or becomes effective with respect to, or at any other time such Benefitting Loan Party is by virtue of such guarantee deemed to enter into, such Swap Obligation, constitutes an Eligible Contract Participant and can cause such Benefitting Loan Party to qualify as an Eligible Contract Participant at such time by entering into a keepwell under Section 1a(18)(A)(v)(II) of the Commodity Exchange Act.
Reference Period shall have the meaning assigned to such term in the definition of the term Pro Forma Basis.
Refinance shall have the meaning assigned to such term in the definition of the term Permitted Refinancing Indebtedness, and Refinanced shall have a meaning correlative thereto.
Register shall have the meaning assigned to such term in Section 9.04(b)(iv).
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Regulation D shall mean Regulation D of the Board as from time to time in effect and all official rulings and interpretations thereunder or thereof.
Regulation U shall mean Regulation U of the Board as from time to time in effect and all official rulings and interpretations thereunder or thereof.
Regulation X shall mean Regulation X of the Board as from time to time in effect and all official rulings and interpretations thereunder or thereof.
Related Parties shall mean, with respect to any specified Person, such Persons Affiliates and the respective partners, directors, officers, employees, members, managers and agents of such Person and such Persons Affiliates.
Release shall mean any placing, spilling, leaking, seepage, pumping, pouring, emitting, emptying, discharging, injecting, escaping, leaching, dumping, disposing or depositing in, into or onto the Environment.
Remaining Present Value shall mean, as of any date with respect to any lease, the present value as of such date of the scheduled future lease payments with respect to such lease, determined with a discount rate equal to a market rate of interest for such lease reasonably determined at the time such lease was entered into.
Reportable Event shall mean any reportable event as defined in Section 4043(c) of ERISA or the regulations issued thereunder, other than those events as to which the 30-day notice period has been waived, with respect to a Plan.
Required Lenders shall mean, at any time, Lenders having (a) Loans outstanding, (b) Revolving L/C Exposures, (c) Swingline Facility Credit Exposure, and (d) Available Unused Commitments, that taken together, represent more than 50% of the sum of all (w) Loans outstanding, (x) Revolving L/C Exposures, (y) Swingline Facility Credit Exposure and (z) the total Available Unused Commitments at such time.
Responsible Officer of any Person shall mean any executive officer, Financial Officer, director, general partner, managing member or sole member of such Person and any other officer or similar official thereof responsible for the administration of the obligations of such Person in respect of this Agreement.
Revolving Facility shall mean the Revolving Facility Commitments and the extensions of credit made hereunder by the Revolving Facility Lenders.
Revolving Facility Borrowing shall mean a Borrowing comprised of Revolving Facility Loans.
Revolving Facility Commitment shall mean, with respect to each Revolving Facility Lender, the commitment of such Revolving Facility Lender to make Eurodollar Loans and ABR Loans pursuant to Section 2.01 representing the maximum aggregate permitted amount of such Revolving Facility Lenders Revolving Facility Credit Exposure hereunder, as such commitment may be (a) reduced from time to time pursuant to Section 2.08 and (b) reduced or increased from time to time pursuant to assignments by or to such Lender under Section 9.04. The initial amount of each Revolving Facility Lenders Revolving Facility Commitment is set forth on Schedule 2.01 , or in the Assignment and Acceptance pursuant to which such Revolving Facility Lender shall have assumed its Revolving Facility Commitment, as applicable. The aggregate amount of the Revolving Facility Commitments on the Closing Date is U.S. $100,000,000. To the extent applicable, Revolving Facility Commitments shall include the Incremental Revolving Facility Commitments of any Incremental Revolving Facility Lender.
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Revolving Facility Credit Exposure shall mean, at any time, the sum of (a) the aggregate principal amount of the Revolving Facility Loans outstanding at such time and (b) the Revolving L/C Exposure at such time. The Revolving Facility Credit Exposure of any Revolving Facility Lender at any time shall be the sum of (a) the aggregate principal amount of such Revolving Facility Lenders Revolving Facility Loans outstanding at such time and (b) such Revolving Facility Lenders Revolving Facility Percentage of the Revolving L/C Exposure at such time.
Revolving Facility Lender shall mean a Lender with a Revolving Facility Commitment or with outstanding Revolving Facility Loans (including any Incremental Revolving Facility Lender).
Revolving Facility Loan shall mean a Loan made to the Borrower by a Revolving Facility Lender pursuant to Section 2.01 or an Incremental Revolving Facility Lender pursuant to Section 2.20. Each Revolving Facility Loan shall be a Eurodollar Loan or an ABR Loan.
Revolving Facility Maturity Date shall mean August , 2018 (or if such date is not a Business Day, the next succeeding Business Day, unless such Business Day is in the next calendar month, in which case the next preceding Business Day).
Revolving Facility Percentage shall mean, with respect to any Revolving Facility Lender, the percentage of the total Revolving Facility Commitments represented by such Lenders Revolving Facility Commitment. If the Revolving Facility Commitments have terminated or expired, the Revolving Facility Percentages shall be determined based upon the Revolving Facility Commitments most recently in effect, giving effect to any assignments pursuant to Section 9.04.
Revolving L/C Commitment shall mean, with respect to each Issuing Bank, the commitment of such Issuing Bank to issue Revolving Letters of Credit pursuant to Section 2.05, as such commitment may be (a) ratably reduced from time to time upon any reduction in the Revolving Facility Commitments pursuant to Section 2.08 and (b) reduced or increased from time to time pursuant to assignments by or to such Issuing Bank under Section 9.04. The amount of each Issuing Banks Revolving L/C Commitment as of the Closing Date is set forth in Schedule 2.01 , or in the Assignment and Acceptance pursuant to which such Issuing Bank shall have assumed its Revolving L/C Commitment, as applicable. The aggregate amount of the Revolving L/C Commitments of the Issuing Bank on the date hereof is U.S. $20,000,000.
Revolving L/C Disbursement shall mean a payment or disbursement made by an Issuing Bank pursuant to a Revolving Letter of Credit.
Revolving L/C Exposure shall mean at any time the sum of (a) the aggregate undrawn amount of all Revolving Letters of Credit outstanding at such time and (b) the aggregate principal amount of all Revolving L/C Disbursements that have not yet been reimbursed at such time. The Revolving L/C Exposure of any Revolving Facility Lender at any time shall mean its Revolving Facility Percentage of the aggregate Revolving L/C Exposure at such time.
Revolving L/C Participation Fees shall have the meaning set forth in Section 2.12(b).
Revolving L/C Reimbursement Obligation shall mean the Borrowers obligation to repay Revolving L/C Disbursements as provided in Sections 2.05(e) and (f).
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Revolving Letter of Credit shall mean any commercial/documentary letter of credit or standby letter of credit issued pursuant to Section 2.05.
S&P shall mean Standard & Poors Ratings Services, Inc., a division of The McGraw-Hill Companies, Inc.
Sale and Lease-Back Transaction shall have the meaning assigned to such term in Section 6.03.
SEC shall mean the Securities and Exchange Commission or any successor thereto.
Securities Act shall mean the Securities Act of 1933, as amended and any successor statute.
Statutory Reserves shall mean a fraction (expressed as a decimal), the numerator of which is the number one and the denominator of which is the number one minus the aggregate of the maximum reserve percentages (including any marginal, special, emergency or supplemental reserves) expressed as a decimal established by the Board and any other banking authority, domestic or foreign, to which the Administrative Agent, any Lender or any Issuing Bank (including any branch, Affiliate or other fronting office making or holding a Loan or issuing a Revolving Letter of Credit) is subject for eurocurrency funding (currently referred to as Eurocurrency Liabilities in Regulation D). Eurodollar Loans shall be deemed to constitute eurocurrency funding and to be subject to such reserve requirements without benefit of or credit for proration, exemptions or offsets that may be available from time to time to the Administrative Agent, any Lender or any Issuing Bank under such Regulation D or any comparable regulation. Statutory Reserves shall be adjusted automatically on and as of the effective date of any change in any reserve percentage.
Subordinated Intercompany Debt shall have the meaning assigned to such term in Section 6.01(e).
Subsidiary shall mean, with respect to any Person (herein referred to as the parent ), any corporation, partnership, association, joint venture, limited liability company or other business entity of which securities or other ownership interests representing more than 50% of the equity or more than 50% of the ordinary voting power or more than 50% of the general partnership interests are, at the time any determination is being made, directly or indirectly, owned, Controlled or held by such Person. Unless otherwise specified, all references herein to a Subsidiary or to Subsidiaries shall refer to a Subsidiary or Subsidiaries of the Borrower.
Supplemental Administrative Agent shall have the meaning assigned to such term in Section 8.13(a).
Swap Agreement shall mean any agreement with respect to any swap, forward, future or derivative transaction or option or similar agreement involving, or settled by reference to, one or more rates, currencies, commodities, equity or debt instruments or securities, or economic, financial or pricing indices or measures of economic, financial or pricing risk or value or any similar transaction or any combination of these transactions, provided that no phantom stock or similar plan providing for payments only on account of services provided by current or former directors, officers, employees or consultants of the Borrower or any of its Subsidiaries shall be a Swap Agreement.
Swap Obligation means, with respect to any Loan Party, any obligation to pay or perform under any agreement, contract or transaction that constitutes a swap within the meaning of section 1a(47) of the Commodity Exchange Act, including any such obligation comprised of a guaranty or a security interest or other Lien.
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Swap Provider means any Lender or any Affiliate of a Lender who has entered into a Swap Agreement with Borrower or its Subsidiaries pursuant to the terms of this Agreement.
Swingline Facility shall mean the Swingline Facility Commitment and the extensions of credit made hereunder by the Swingline Facility Lender.
Swingline Facility Borrowing shall mean a Borrowing comprised of a Swingline Facility Loan.
Swingline Facility Borrowing Request shall mean a request by the Borrower for a Swingline Facility Borrowing in accordance with the terms of Section 2.23 and substantially in the form of Exhibit C-2 .
Swingline Facility Commitment shall mean, with respect to the Swingline Facility Lender, the commitment of such Swingline Facility Lender to make ABR Loans pursuant to Section 2.23 representing the maximum aggregate permitted amount of such Swingline Facility Lenders Swingline Facility Credit Exposure hereunder. The amount of the Swingline Facility Lenders Swingline Facility Commitment on the Closing Date is U.S. $10,000,000.
Swingline Facility Credit Exposure shall mean, with respect to the Swingline Facility Lender, at any time, the aggregate principal amount of the Swingline Facility Loans outstanding at such time. The Swingline Facility Credit Exposure of any Revolving Facility Lender other than the Swingline Facility Lender at any time shall be its Revolving Facility Percentage of the total Swingline Facility Credit Exposure at such time.
Swingline Facility Lender shall mean Amegy.
Swingline Facility Loan shall mean a Loan made to the Borrower by the Swingline Facility Lender pursuant to Section 2.23. Each Swingline Facility Loan shall be an ABR Loan.
Syndication Agent shall have the meaning assigned to such term in the introductory paragraph of this Agreement.
Taxes shall mean any and all present or future taxes, levies, imposts, duties, deductions, charges or withholdings (including backup withholding) imposed by any Governmental Authority and any and all additions to tax, interest and penalties related thereto.
Test Period shall mean, at any date of determination, the most recently completed four consecutive fiscal quarters of FINV ending on or prior to such date.
364-Day Credit Facility means the revolving credit facility of the Borrower under that certain 364-Day Revolving Credit Agreement dated as of August , 2013, among the Borrower, Amegy Bank National Association, as administrative agent, and the lenders party thereto, together with any and all other amendments and supplements thereto.
Transactions shall mean, collectively, the transactions to occur on, prior to or immediately after the Closing Date pursuant to the Loan Documents, including (a) the execution and delivery of the Loan Documents and the initial borrowings hereunder; (b) the execution and delivery of the loan documents pertaining to the 364-Day Credit Facility; and (c) the payment of all fees and expenses owing in connection with the foregoing.
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Trigger Date shall mean the first date of delivery of financial statements after the Closing Date pursuant to Section 5.04(a) or (b).
Type, when used in respect of any Loan or Borrowing, shall refer to the Rate by reference to which interest on such Loan or on the Loans comprising such Borrowing is determined. For purposes hereof, the term Rate shall include the Adjusted Eurodollar Rate and the Alternate Base Rate.
UCC shall mean the Uniform Commercial Code as in effect in the applicable jurisdiction.
United States means the United States of America.
U.S. Dollars or U.S.$ shall mean the lawful currency of the United States.
U.S.A. PATRIOT Act shall have the meaning assigned to such term in Section 3.08(a).
Wholly Owned Subsidiary of any Person shall mean a Subsidiary of such Person, all of the Equity Interests of which (other than directors qualifying shares or nominee or other similar shares required pursuant to applicable law) are owned, directly or indirectly, by such Person or any other Wholly Owned Subsidiary of such Person.
Withholding Agent shall have the meaning assigned to it in Section 2.17(a).
Withdrawal Liability shall mean liability to a Multiemployer Plan as a result of a complete or partial withdrawal from such Multiemployer Plan, as such terms are defined in Part I of Subtitle E of Title IV of ERISA.
Section 1.02 Terms Generally . The definitions set forth or referred to in Section 1.01 shall apply equally to both the singular and plural forms of the terms defined. Whenever the context may require, any pronoun shall include the corresponding masculine, feminine and neuter forms. The words include, includes and including shall be deemed to be followed by the phrase without limitation. All references herein to Articles, Sections, Exhibits and Schedules shall be deemed references to Articles and Sections of, and Exhibits and Schedules to, this Agreement unless the context shall otherwise require. Except as otherwise expressly provided herein, any reference in this Agreement to any Loan Document shall mean such document as amended, restated, supplemented or otherwise modified from time to time. Except as otherwise expressly provided herein, all financial statements to be delivered pursuant to this Agreement shall be prepared in accordance with United States generally accepted accounting principles applied on a consistent basis ( GAAP ) and all terms of an accounting or financial nature shall be construed and interpreted in accordance with GAAP, as in effect from time to time.
Section 1.03 Effectuation of Transfers . Each of the representations and warranties of the Borrower contained in this Agreement (and all corresponding definitions) are made after giving effect to the Transactions, unless the context otherwise requires.
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ARTICLE II
THE CREDITS
Section 2.01 Commitments . Subject to the terms and conditions set forth herein, each Revolving Facility Lender agrees to make Revolving Facility Loans, in each case from time to time during the Availability Period, comprised of Eurodollar Loans and ABR Loans to the Borrower in U.S. Dollars in an aggregate principal amount that will not result in (i) such Lenders Revolving Facility Credit Exposure exceeding such Lenders Revolving Facility Commitment and (ii) the Revolving Facility Credit Exposure exceeding the total Revolving Facility Commitments. Within the foregoing limits and subject to the terms and conditions set forth herein, the Borrower may borrow, prepay and reborrow Revolving Facility Loans. The Revolving Facility shall be available as ABR Loans or Eurodollar Loans.
Section 2.02 Loans and Borrowings . (a) Each Loan to the Borrower shall be made as part of a Borrowing consisting of Loans of the same Type and in the same currency made by the Lenders ratably in accordance with their respective Commitments under the Revolving Facility; provided, however, that Revolving Facility Loans shall be made by the Revolving Facility Lenders ratably in accordance with their respective Revolving Facility Percentages on the date such Loans are made hereunder. The failure of any Lender to make any Loan or fund its participation in any Swingline Facility Loan required to be made by it shall not relieve any other Lender of its obligations hereunder; provided that the Commitments of the Lenders are several and no Lender shall be responsible for any other Lenders failure to make Loans or fund participations in Revolving L/C Disbursements or Swingline Facility Loans as required.
(b) Each Borrowing shall be comprised entirely of ABR Loans or Eurodollar Loans as the Borrower may request in accordance herewith.
(c) At the commencement of each Interest Period for any Eurodollar Borrowing, such Borrowing shall be in an aggregate amount that is an integral multiple of the Borrowing Multiple and not less than the Borrowing Minimum. At the time that each ABR Borrowing by the Borrower is made, such Borrowing shall be in an aggregate amount that is an integral multiple of the Borrowing Multiple and not less than the Borrowing Minimum; provided that an ABR Borrowing may be in an aggregate amount that is equal to the entire unused balance of the Revolving Facility Commitments or that is required to finance the reimbursement of a Revolving L/C Disbursement as contemplated by Section 2.05(e) or to finance its purchase of a risk participation in a Swingline Facility Loan as contemplated by Section 2.23(c). Borrowings of more than one Type may be outstanding at the same time; provided that there shall not at any time be more than a total of five (5) Interest Periods in respect of Borrowings outstanding under the Revolving Facility.
(d) Notwithstanding any other provision of this Agreement, the Borrower shall not be entitled to request, or to elect to convert or continue, any Borrowing if the Interest Period requested with respect thereto would end after the Revolving Facility Maturity Date.
Section 2.03 Requests for Borrowings . To request a Revolving Facility Borrowing, the Borrower shall notify the Administrative Agent of such request by telephone (i) in the case of a Borrowing consisting of Eurodollar Loans, not later than 10:00 a.m., Houston, Texas time, three (3) Business Days before the date of the proposed Borrowing or (ii) in the case of a Borrowing consisting of ABR Loans, not later than 11:00 a.m., Houston, Texas time on the date of such Borrowing. Each such telephonic Borrowing Request shall be irrevocable and shall be confirmed promptly (but in any event on the same day) by hand delivery or telecopy to the Administrative Agent of a written Borrowing Request signed by the Borrower. Each such telephonic and written Borrowing Request shall specify the following information in compliance with Section 2.02:
(a) the aggregate amount of the requested Borrowing;
(b) the date of such Borrowing, which shall be a Business Day;
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(c) whether such Borrowing is to be an ABR Borrowing or a Eurodollar Borrowing;
(d) in the case of a Borrowing consisting of a Eurodollar Loan, the initial Interest Period to be applicable thereto; and
(e) the location and number of the Borrowers account to which funds are to be disbursed.
If no election as to the Type of Borrowing is specified, then the requested Borrowing shall be an ABR Borrowing. If no Interest Period is specified with respect to any requested Eurodollar Borrowing, then the Borrower shall be deemed to have selected an Interest Period of one months duration. Promptly following receipt of a Borrowing Request in accordance with this Section, the Administrative Agent shall advise each Lender of the details thereof and of the amount of such Lenders Loan to be made as part of the requested Borrowing.
Section 2.04 Reserved .
Section 2.05 Revolving Letters of Credit . (a) General . Subject to the terms and conditions set forth herein, the Borrower may request the issuance of Revolving Letters of Credit denominated in U.S. Dollars for its own account or on behalf of any other Loan Party in a form reasonably acceptable to the applicable Issuing Bank, at any time and from time to time during the Availability Period and prior to the date that is five (5) Business Days prior to the Revolving Facility Maturity Date. In the event of any inconsistency between the terms and conditions of this Agreement and the terms and conditions of any form of letter of credit application or other agreement submitted by the Borrower to, or entered into by the Borrower with, an Issuing Bank relating to any Revolving Letter of Credit, the terms and conditions of this Agreement shall control.
(b) Notice of Issuance, Amendment, Renewal, Extension; Certain Conditions . To request the issuance of a Revolving Letter of Credit (or the amendment, renewal (other than an automatic renewal in accordance with paragraph (c) of this Section) or extension of an outstanding Revolving Letter of Credit), the Borrower shall hand deliver or telecopy (or transmit by electronic communication, if arrangements for doing so have been approved by the applicable Issuing Bank) to the applicable Issuing Bank and the Administrative Agent two (2) Business Days in advance of the requested date of issuance, amendment, renewal or extension, a notice requesting the issuance of a Revolving Letter of Credit, or identifying the Revolving Letter of Credit to be amended, renewed or extended, and specifying the date of issuance, amendment, renewal or extension (which shall be a Business Day), the date on which such Revolving Letter of Credit is to expire (which shall comply with paragraph (c) of this Section), the amount of such Revolving Letter of Credit, the name and address of the beneficiary thereof and such other information as shall be necessary to issue, amend, renew or extend such Revolving Letter of Credit. If requested by the applicable Issuing Bank, the Borrower also shall submit a letter of credit application on such Issuing Banks standard form in connection with any request for a Revolving Letter of Credit. A Revolving Letter of Credit shall be issued, amended, renewed or extended only if (and upon issuance, amendment, renewal or extension of each Revolving Letter of Credit the Borrower shall be deemed to represent and warrant that), after giving effect to such issuance, amendment, renewal or extension, (i) the Revolving Facility Credit Exposure shall not exceed the total Revolving Facility Commitments and (ii) the aggregate available amount of all Revolving Letters of Credit issued by any Issuing Bank shall not exceed such Issuing Banks Revolving L/C Commitment.
(c) Expiration Date . Each Revolving Letter of Credit shall expire at or prior to the close of business on the earlier of (A) unless the applicable Issuing Bank agrees to a later expiration date, the date one (1) year after the date of the issuance of such Revolving Letter of Credit (or, in the case of
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any renewal or extension thereof, one year after such renewal or extension) and (B) the date that is five (5) Business Days prior to the Revolving Facility Maturity Date; provided that any Revolving Letter of Credit with a one-year tenor may provide for the automatic renewal thereof for additional one-year periods (which, in no event, shall extend beyond the date referred to in clause (B) of this paragraph (c)).
(d) Participations . By the issuance of a Revolving Letter of Credit (or an amendment to a Revolving Letter of Credit increasing the amount thereof) and without any further action on the part of the applicable Issuing Bank or the Revolving Facility Lenders, such Issuing Bank hereby grants to each Revolving Facility Lender, and each Revolving Facility Lender hereby acquires from such Issuing Bank, a participation in such Revolving Letter of Credit equal to such Revolving Facility Lenders Revolving Facility Percentage of the aggregate amount available to be drawn under such Revolving Letter of Credit. In consideration and in furtherance of the foregoing, each Revolving Facility Lender hereby absolutely and unconditionally agrees to pay to the Administrative Agent in U.S. Dollars such Revolving Facility Lenders Revolving Facility Percentage of each Revolving L/C Disbursement made by such Issuing Bank not reimbursed by the Borrower on the date due as provided in paragraph (e) of this Section, or of any reimbursement payment required to be refunded to the Borrower for any reason. Each Revolving Facility Lender acknowledges and agrees that its obligation to acquire participations pursuant to this paragraph in respect of Revolving Letters of Credit is absolute and unconditional and shall not be affected by any circumstance whatsoever, including any amendment, renewal or extension of any Revolving Letter of Credit or the occurrence and continuance of a Default or Event of Default or reduction or termination of the Commitments, and that each such payment shall be made without any offset, abatement, withholding or reduction whatsoever.
(e) Reimbursement . If the applicable Issuing Bank shall make any Revolving L/C Disbursement in respect of a Revolving Letter of Credit, the Borrower shall reimburse such Revolving L/C Disbursement by paying to the Administrative Agent an amount equal to such Revolving L/C Disbursement in U.S. Dollars, not later than 2:00 p.m., Houston, Texas time, on the Business Day immediately following the date the Borrower receives notice under paragraph (g) of this Section of such Revolving L/C Disbursement; provided that the Borrower may, subject to the conditions to borrowing set forth herein, request in accordance with Section 2.03 that such payment be financed with an ABR Loan in an equivalent amount, and, in each case to the extent so financed, the Borrowers obligation to make such payment shall be discharged and replaced by the resulting Loan or Borrowing, as applicable. If the Borrower fails to reimburse any Revolving L/C Disbursement when due, then the Administrative Agent shall promptly notify the applicable Issuing Bank and each other Revolving Facility Lender of the applicable Revolving L/C Disbursement, the payment then due from the Borrower and, in the case of a Revolving Facility Lender, such Lenders Revolving Facility Percentage thereof. Promptly following receipt of such notice, each Revolving Facility Lender shall pay to the Administrative Agent in U.S. Dollars its Revolving Facility Percentage of the payment then due from the Borrower, in the same manner as provided in Section 2.06 with respect to Loans made by such Lender (and Section 2.06 shall apply, mutatis mutandis , to the payment obligations of the Revolving Facility Lenders), and the Administrative Agent shall promptly pay to the applicable Issuing Bank in U.S. Dollars the amounts so received by it from the Revolving Facility Lenders. Promptly following receipt by the Administrative Agent of any payment from the Borrower pursuant to this paragraph, the Administrative Agent shall distribute such payment to the applicable Issuing Bank or, to the extent that Revolving Facility Lenders have made payments pursuant to this paragraph to reimburse such Issuing Bank, then to such Lenders and such Issuing Bank as their interests may appear. Any payment made by a Revolving Facility Lender pursuant to this paragraph to reimburse an Issuing Bank for any Revolving L/C Disbursement (other than the funding of an ABR Loan as contemplated above) shall not constitute a Loan and shall not relieve the Borrower of its obligation to reimburse such Revolving L/C Disbursement.
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(f) Obligations Absolute . The obligation of the Borrower to reimburse Revolving L/C Disbursements as provided in paragraph (e) of this Section shall be absolute, unconditional and irrevocable, and shall be performed strictly in accordance with the terms of this Agreement under any and all circumstances whatsoever and irrespective of (i) any lack of validity or enforceability of any Revolving Letter of Credit or this Agreement, or any term or provision therein, (ii) any draft or other document presented under a Revolving Letter of Credit proving to be forged, fraudulent or invalid in any respect or any statement therein being untrue or inaccurate in any respect, (iii) payment by the applicable Issuing Bank under a Revolving Letter of Credit against presentation of a draft or other document that does not strictly comply with the terms of such Revolving Letter of Credit or (iv) any other event or circumstance whatsoever, whether or not similar to any of the foregoing, that might, but for the provisions of this Section, constitute a legal or equitable discharge of, or provide a right of setoff against, the Borrowers obligations hereunder; provided that, in each case, payment by the Issuing Bank shall not have constituted gross negligence or willful misconduct. Neither the Administrative Agent, the Lenders nor any Issuing Bank, nor any of their Related Parties, shall have any liability or responsibility by reason of or in connection with the issuance or transfer of any Revolving Letter of Credit or any payment or failure to make any payment thereunder (irrespective of any of the circumstances referred to in the preceding sentence), or any error, omission, interruption, loss or delay in transmission or delivery of any draft, notice or other communication under or relating to any Revolving Letter of Credit (including any document required to make a drawing thereunder), any error in interpretation of technical terms or any consequence arising from causes beyond the control of such Issuing Bank; provided that the foregoing shall not be construed to excuse the applicable Issuing Bank from liability to the Borrower to the extent of any direct damages (as opposed to consequential or exemplary damages, claims in respect of which are hereby waived by the Borrower to the extent permitted by applicable law) suffered by the Borrower that are determined by a court having jurisdiction to have been caused by (A) such Issuing Banks failure to exercise reasonable care when determining whether drafts and other documents presented under a Revolving Letter of Credit comply with the terms thereof or (B) such Issuing Banks wrongful refusal to issue a Revolving Letter of Credit in accordance with the terms of this Agreement. The parties hereto expressly agree that, in the absence of gross negligence or willful misconduct on the part of the applicable Issuing Bank, such Issuing Bank shall be deemed to have exercised reasonable care in each such determination and each refusal to issue a Revolving Letter of Credit. In furtherance of the foregoing and without limiting the generality thereof, the parties agree that, with respect to documents presented which appear on their face to be in substantial compliance with the terms of a Revolving Letter of Credit, the applicable Issuing Bank may, in its sole discretion, either accept and make payment upon such documents without responsibility for further investigation, regardless of any notice or information to the contrary, or refuse to accept and make payment upon such documents if such documents are not in strict compliance with the terms of such Revolving Letter of Credit.
(g) Disbursement Procedures . The applicable Issuing Bank shall, promptly following its receipt thereof, examine all documents purporting to represent a demand for payment under a Revolving Letter of Credit. Such Issuing Bank shall promptly notify the Administrative Agent and the Borrower by telephone (confirmed by telecopy) of such demand for payment and whether such Issuing Bank has made or will make a Revolving L/C Disbursement thereunder; provided that any failure to give or delay in giving such notice shall not relieve the Borrower of its obligation to reimburse such Issuing Bank and the Revolving Facility Lenders with respect to any such Revolving L/C Disbursement.
(h) Interim Interest . If an Issuing Bank shall make any Revolving L/C Disbursement, then, unless the Borrower shall reimburse such Revolving L/C Disbursement in full on the date such Revolving L/C Disbursement is made, the unpaid amount thereof shall bear interest, for each day from and including the date such Revolving L/C Disbursement is made to but excluding the date that the Borrower reimburses such Revolving L/C Disbursement, at the rate per annum equal to the rate per annum then applicable to ABR Loans; provided that, if such Revolving L/C Disbursement is not
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reimbursed by the Borrower when due pursuant to paragraph (e) of this Section, then Section 2.13(c) shall apply. Interest accrued pursuant to this paragraph shall be for the account of the applicable Issuing Bank, except that interest accrued on and after the date of payment by any Revolving Facility Lender pursuant to paragraph (e) of this Section to reimburse such Issuing Bank shall be for the account of such Revolving Facility Lender to the extent of such payment.
(i) Replacement of an Issuing Bank . An Issuing Bank may be replaced at any time by written agreement among the Borrower, the Administrative Agent, the replaced Issuing Bank and the successor Issuing Bank. The Administrative Agent shall notify the Lenders of any such replacement of an Issuing Bank. At the time any such replacement shall become effective, the Borrower shall pay all unpaid fees accrued for the account of the replaced Issuing Bank pursuant to Section 2.12. From and after the effective date of any such replacement, (i) the successor Issuing Bank shall have all the rights and obligations of the replaced Issuing Bank under this Agreement with respect to Revolving Letters of Credit to be issued thereafter and (ii) references herein to the term Issuing Bank shall be deemed to refer to such successor or to any previous Issuing Bank, or to such successor and all previous Issuing Banks, as the context shall require. After the replacement of an Issuing Bank hereunder, the replaced Issuing Bank shall remain a party hereto and shall continue to have all the rights and obligations of such Issuing Bank under this Agreement with respect to Revolving Letters of Credit issued by it prior to such replacement but shall not be required to issue additional Revolving Letters of Credit.
(j) Cash Collateralization . If any Event of Default shall occur and be continuing, (i) in the case of an Event of Default described in Section 7.01(h) or 7.01(i), as provided in the following proviso, and (ii) in the case of any other Event of Default, on the third Business Day following the date on which the Borrower receives notice from the Administrative Agent demanding the deposit of cash collateral pursuant to this paragraph, the Borrower shall deposit in an account with the Administrative Agent (or an account in the name of the Administrative Agent with another institution designated by the Administrative Agent), in the name of the Administrative Agent and for the benefit of the Lenders, an amount in cash in U.S. Dollars equal to the aggregate Revolving L/C Exposure of the Lenders as of such date plus any accrued and unpaid interest thereon; provided that, upon the occurrence of any Event of Default with respect to the Borrower described in clause (h) or (i) of Section 7.01, the obligation to deposit such cash collateral shall become effective immediately, and such deposit shall become immediately due and payable in U.S. Dollars, without demand or other notice of any kind. The Borrower also shall deposit cash collateral pursuant to this paragraph as and to the extent required by Section 2.11(b) and/or Section 2.22(c)(ii). Each such deposit pursuant to this paragraph or pursuant to Section 2.11(b) and/or Section 2.22(c)(ii) shall be held by the Administrative Agent as collateral for the payment and performance of the obligations of the Borrower under this Agreement. The Administrative Agent shall control, including the exclusive right of withdrawal, such account. Other than any interest earned on the investment of such deposits, which investments shall be made at the option and sole discretion of (A) for so long as an Event of Default shall be continuing, the Administrative Agent and (B) at any other time, the Borrower, in each case, in term deposits constituting Permitted Investments and at the risk and expense of the Borrower, such deposits shall not bear interest. Interest or profits, if any, on such investments shall accumulate in such account. Moneys in such account shall be applied by the Administrative Agent to reimburse each Issuing Bank for Revolving L/C Disbursements for which such Issuing Bank has not been reimbursed (or to repay the Swingline Facility Lender for Swingline Facility Loans which have not been purchased by a Defaulting Lender and remain outstanding) and, to the extent not so applied, shall be held for the satisfaction of the Revolving L/C Reimbursement Obligations of the Borrower for the Revolving L/C Exposure at such time or, if the maturity of the Loans to the Borrower has been accelerated (but subject to the consent of Revolving Facility Lenders with Revolving L/C Exposure representing greater than 50% of the total Revolving L/C Exposure), be applied to satisfy other obligations of the Borrower under this Agreement. If the Borrower is required to provide an amount of cash collateral hereunder as a result of the occurrence of an Event of Default, such amount (to the extent
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not applied as aforesaid) shall be returned to the Borrower within three (3) Business Days after all Events of Default have been cured or waived. If the Borrower is required to provide an amount of cash collateral hereunder pursuant to Section 2.11(b), such amount together with interest thereon (to the extent not applied as aforesaid) shall be returned to the Borrower as and to the extent that, after giving effect to such return, the Borrower would remain in compliance with Section 2.11(b) and no Event of Default shall have occurred and be continuing. If the Borrower is required to provide an amount of cash collateral hereunder pursuant to Section 2.22(c)(ii), such amount together with interest thereon (to the extent not applied as aforesaid) shall be returned to the Borrower as and when the Defaulting Lender is deemed, in accordance with Section 2.22(f), to have adequately remedied all matters that caused such Lender to be a Defaulting Lender; provided no Event of Default shall have occurred and be continuing.
(k) Additional Issuing Banks . From time to time, the Borrower may by notice to the Administrative Agent designate up to two Lenders that agree (in their sole discretion) to act in such capacity and are reasonably satisfactory to the Administrative Agent as additional Issuing Banks. Each such additional Issuing Bank shall execute a counterpart of this Agreement upon the approval of the Administrative Agent (which approval shall not be unreasonably withheld) and shall thereafter be an Issuing Bank hereunder for all purposes.
(l) Reporting . Each Issuing Bank shall (i) provide to the Administrative Agent copies of any notice received from the Borrower pursuant to Section 2.05(b) no later than the next Business Day after receipt thereof, (ii) provide the Administrative Agent with a copy of the Revolving Letter of Credit, or the amendment, renewal or extension of the Revolving Letter of Credit, as applicable, on the Business Day on which such Issuing Bank issues, amends, renews or extends any Revolving Letter of Credit, (iii) on each Business Day on which such Issuing Bank makes any Revolving L/C Disbursement, advise the Administrative Agent of the date of such Revolving L/C Disbursement and the amount of such Revolving L/C Disbursement and (iv) on any other Business Day, furnish the Administrative Agent with such other information as the Administrative Agent shall reasonably request. If requested by any Lender, the Administrative Agent shall provide copies to such Lender of the documents referred to in clause (ii) of the preceding sentence.
Section 2.06 Funding of Borrowings . (a) Each Lender shall make each Loan to be made by it to the Borrower hereunder on the proposed date thereof by wire transfer of immediately available funds by 11:00 a.m., Houston, Texas time, to the account of the Administrative Agent most recently designated by it for such purpose by notice to the Lenders; provided that Swingline Facility Loans shall be made as provided in Section 2.23(b). The Administrative Agent will make such Loans available to the Borrower by promptly crediting the amounts so received, in like funds, to such account of the Borrower as is designated by the Borrower in the Borrowing Request; provided that ABR Loans made to finance the reimbursement of a Revolving L/C Disbursement and reimbursements as provided in Section 2.05(e) shall be remitted by the Administrative Agent to the applicable Issuing Bank.
(b) Unless the Administrative Agent shall have received notice from a Lender prior to the proposed time of any Borrowing that such Lender will not make available to the Administrative Agent such Lenders share of such Borrowing, the Administrative Agent may assume that such Lender has made such share available on such date in accordance with paragraph (a) of this Section and may, in reliance upon such assumption, make available to the Borrower a corresponding amount. In such event, if a Lender has not in fact made its share of the applicable Borrowing available to the Administrative Agent, then the applicable Lender and the Borrower severally agree to pay to the Administrative Agent forthwith on demand (without duplication) such corresponding amount with interest thereon, for each day from and including the date such amount is made available to the Borrower to but excluding the date of payment to the Administrative Agent, at (i) in the case of such Lender, the greater of the Federal Funds Effective Rate and a rate determined by the Administrative Agent in accordance with banking industry rules on
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interbank compensation or (ii) in the case of the Borrower, the interest rate applicable to ABR Loans. If such Lender pays such amount to the Administrative Agent, then such amount shall constitute such Lenders Loan included in such Borrowing.
Section 2.07 Interest Elections . (a) Each Borrowing initially shall be of the Type specified in the applicable Borrowing Request and, in the case of a Eurodollar Borrowing, shall have an initial Interest Period as specified in such Borrowing Request. Thereafter, the Borrower may elect to convert such Borrowing to a different Type or to continue such Borrowing and, in the case of a Eurodollar Borrowing, may elect Interest Periods therefor, all as provided in this Section. The Borrower may elect different options with respect to different portions of the affected Borrowing, in which case each such portion shall be allocated ratably among the Lenders holding the Loans comprising such Borrowing, and the Loans comprising each such portion shall be considered a separate Borrowing. This Section 2.07, as it refers to Types of Loans, shall not apply to Swingline Facility Loans, which may not be converted or continued.
(b) To make an election pursuant to this Section, the Borrower shall notify the Administrative Agent of such election by telephone by the time that a Borrowing Request would be required under Section 2.03 if the Borrower were requesting a Borrowing of the Type resulting from such election to be made on the effective date of such election. Each such telephonic Interest Election Request shall be irrevocable and shall be confirmed promptly (but in any event on the same day) by hand delivery or telecopy to the Administrative Agent of a written Interest Election Request signed by the Borrower.
(c) Each telephonic and written Interest Election Request shall specify the following information in compliance with Section 2.02:
(i) the Borrowing to which such Interest Election Request applies and, if different options are being elected with respect to different portions thereof, the portions thereof to be allocated to each resulting Borrowing (in which case the information to be specified pursuant to clauses (iii) and (iv) below shall be specified for each resulting Borrowing);
(ii) the effective date of the election made pursuant to such Interest Election Request, which shall be a Business Day;
(iii) whether the resulting Borrowing is to be an ABR Borrowing or a Eurodollar Borrowing; and
(iv) if the resulting Borrowing is a Eurodollar Borrowing, the Interest Period to be applicable thereto after giving effect to such election.
If any such Interest Election Request made by the Borrower requests a Eurodollar Borrowing but does not specify an Interest Period, then the Borrower shall be deemed to have selected an Interest Period of one months duration.
(d) Promptly following receipt of an Interest Election Request, the Administrative Agent shall advise each Lender to which such Interest Election Request relates of the details thereof and of such Lenders portion of each resulting Borrowing.
(e) If the Borrower fails to deliver a timely Interest Election Request with respect to one of its Eurodollar Borrowings prior to the end of the Interest Period applicable thereto, then, unless such Borrowing is repaid as provided herein, at the end of such Interest Period, the Borrower shall be deemed to have converted such Borrowing to an ABR Borrowing. Notwithstanding any contrary
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provision hereof, if an Event of Default has occurred and is continuing and the Administrative Agent, at the written request (including a request through electronic means) of the Required Lenders (unless such Event of Default is an Event of Default under Section 7.01(h) or (i), in which case no such request shall be required), so notifies the Borrower, then, so long as an Event of Default is continuing, (i) no outstanding Borrowing may be converted to or continued as a Eurodollar Borrowing and (ii) unless repaid, each Eurodollar Borrowing shall be converted to an ABR Borrowing at the end of the Interest Period applicable thereto.
Section 2.08 Termination and Reduction of Commitments . (a) Unless previously terminated, the Revolving Facility Commitments shall terminate on the Revolving Facility Maturity Date.
(b) The Borrower may at any time terminate, or from time to time reduce, the Revolving Facility Commitments; provided that (i) each reduction of the Revolving Facility Commitments shall be in an amount that is an integral multiple of U.S. $1,000,000 and not less than U.S. $5,000,000 (or, if less, the remaining amount of the Revolving Facility Commitments), and (ii) the Borrower shall not terminate or reduce the Revolving Facility Commitments if, after giving effect to any concurrent prepayment of the Revolving Facility Loans by the Borrower in accordance with Section 2.11, the sum of (x) the Revolving Facility Credit Exposure plus (y) the Swingline Facility Credit Exposure would exceed the total Revolving Facility Commitments .
(c) The Borrower shall notify the Administrative Agent of any election to terminate or reduce the Revolving Facility Commitments under paragraph (b) of this Section at least three (3) Business Days prior to the effective date of such termination or reduction, specifying such election and the effective date thereof. Promptly following receipt of any notice, the Administrative Agent shall advise the Lenders of the contents thereof. Each notice delivered by the Borrower pursuant to this Section shall be irrevocable; provided that a notice of termination of the Revolving Facility Commitments delivered by the Borrower may state that such notice is conditioned upon the effectiveness of other credit facilities, in which case such notice may be revoked by the Borrower (by notice to the Administrative Agent on or prior to the specified effective date) if such condition is not satisfied. Any termination or reduction of the Revolving Facility Commitments shall be permanent; provided that a notice of termination of Revolving Facility Commitments may state that such notice is conditioned upon the effectiveness of another credit facility or facilities as specified therein, in which case such notice may be revoked by the Borrower (by notice to the Administrative Agent on or prior to the specified effective date) if such condition is not satisfied. Each reduction of the Revolving Facility Commitments shall be made ratably among the Lenders in accordance with their respective Revolving Facility Commitments.
Section 2.09 Repayment of Loans; Evidence of Debt . (a) The Borrower hereby unconditionally promises to pay (i) to the Administrative Agent for the account of each Revolving Facility Lender the then unpaid principal amount of each Revolving Facility Loan on the Revolving Facility Maturity Date, and (ii) to the Swingline Facility Lender the then unpaid principal amount of each Swingline Facility Loan on the earlier of the Revolving Facility Maturity Date and the first date after such Swingline Facility Loan is made that is the 15th or last day of a calendar month and is at least two Business Days after such Swingline Facility Loan is made; provided that on each date that a Revolving Facility Loan is made, the Borrower shall repay all Swingline Facility Loans then outstanding; provided further , that all Loans shall be paid on such earlier date upon which the maturity of the Loans shall have been accelerated pursuant to Section 7.01.
(b) Each Lender shall maintain in accordance with its usual practice an account or accounts evidencing the indebtedness of the Borrower to such Lender resulting from each Loan made by such Lender, including the amounts of principal and interest payable and paid to such Lender from time to time hereunder.
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(c) The Administrative Agent shall maintain accounts in which it shall record (i) the amount of each Loan made hereunder and the Type thereof and the Interest Period (if any) applicable thereto, (ii) the amount of any principal or interest due and payable or to become due and payable to each Lender hereunder, and (iii) any amount received by the Administrative Agent hereunder for the account of the Lenders and each Lenders share thereof.
(d) The entries made in the accounts maintained pursuant to paragraph (b) or (c) of this Section shall be prima facie evidence absent manifest error of the existence and amounts of the obligations recorded therein; provided that the failure of any Lender or the Administrative Agent to maintain such accounts or any error therein shall not in any manner affect the obligation of the Borrower to repay the Loans made in accordance with the terms of this Agreement.
(e) Loans made by a Lender shall be evidenced by a promissory note substantially in the form of Exhibit G . The Borrower shall prepare, execute and deliver to each Lender a Note payable to such Lender. Thereafter, the Loans evidenced by such Note and interest thereon shall at all times (including, to the extent requested by any assignee, after assignment pursuant to Section 9.04) be represented by one or more Notes in such form payable to the payee named therein.
Section 2.10 Repayment of Loans . (a) To the extent not previously paid, all Revolving Facility Loans and all Swingline Facility Loans shall be due and payable on the Revolving Facility Maturity Date.
(b) Prior to any repayment of any Revolving Facility Borrowing, the Borrower shall select the Revolving Facility Borrowing or Revolving Facility Borrowings to be repaid and shall notify the Administrative Agent by telephone (confirmed by telecopy) of such selection not later than 1:00 p.m., Houston, Texas time, (i) in the case of an ABR Borrowing, one Business Day before the scheduled date of such repayment and (ii) in the case of a Eurodollar Borrowing, three Business Days before the scheduled date of such repayment. Each repayment of a Revolving Facility Borrowing shall be applied to the Revolving Facility Loans included in the repaid Revolving Facility Borrowing such that each Revolving Facility Lender receives its ratable share of such repayment (based upon the respective Revolving Facility Credit Exposures of the Revolving Facility Lenders at the time of such repayment).
(c) Prior to any repayment of any Swingline Facility Borrowing, the Borrower shall notify the Administrative Agent by telephone (confirmed by telecopy) not later than 1:00 p.m., Houston, Texas time, one Business Day before the scheduled date of such repayment.
Section 2.11 Prepayment of Loans . (a) The Borrower shall have the right at any time and from time to time to prepay Revolving Facility Loans in whole or in part, without premium or penalty (but subject to Section 2.16), in an aggregate principal amount that is an integral multiple of the Borrowing Multiple and not less than the Borrowing Minimum or, if less, the amount outstanding, subject to prior notice in the form of Exhibit B hereto provided in accordance with Section 2.10(b). The Borrower shall have the right at any time and from time to time to prepay Swingline Facility Loans to the Swingline Facility Lender in whole or in part, without premium or penalty, in an aggregate principal amount that is an integral multiple of the Borrowing Multiple and not less than the Borrowing Minimum or, if less, the amount outstanding, subject to prior notice in the form of Exhibit B hereto provided in accordance with Section 2.10(c).
(b) If on any date, the Administrative Agent notifies the Borrower that the Revolving Facility Credit Exposure exceeds the aggregate Revolving Facility Commitments of the Lenders on such date, the Borrower shall, as soon as practicable and in any event within two Business Days following such date, prepay the outstanding principal amount of any Revolving Facility Loans (and, to the extent after
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giving effect to such prepayment, the Revolving Facility Credit Exposure still exceeds the aggregate Revolving Facility Commitments of the Lenders, deposit cash collateral in an account with the Administrative Agent (or an account in the name of the Administrative Agent with another institution designated by the Administrative Agent) pursuant to Section 2.05(j)) such that the aggregate amount so prepaid by the Borrower and cash collateral so deposited in an account with the Administrative Agent (or an account in the name of the Administrative Agent with another institution designated by the Administrative Agent) pursuant to Section 2.05(j)) shall be sufficient to reduce such sum to an amount not to exceed the aggregate Revolving Facility Commitments of the Lenders on such date together with any interest accrued to the date of such prepayment on the aggregate principal amount of Revolving Facility Loans prepaid. The Administrative Agent shall give prompt notice of any prepayment required under this Section 2.11(b) to the Borrower and the Lenders.
(c) In the event of any termination of all the Revolving Facility Commitments, the Borrower shall, on the date of such termination, repay or prepay all its outstanding Revolving Facility Loans and terminate all its outstanding Revolving Letters of Credit and/or cash collateralize such Revolving Letters of Credit in accordance with Section 2.05(j). If as a result of any partial reduction of the Revolving Facility Commitments, the aggregate Revolving Facility Exposure would exceed the aggregate Revolving Facility Commitments of all Revolving Facility Lenders after giving effect thereto, then the Borrower shall, on the date of such reduction, repay or prepay Revolving Facility Loans and/or cash collateralize Revolving Letters of Credit in an amount sufficient to eliminate such excess.
Section 2.12 Fees . (a) The Borrower agrees to pay to each Lender, without duplication of any other amounts paid to such Lender (other than any Defaulting Lender), through the Administrative Agent, three Business Days after the last day of March, June, September and December in each year, and on the date on which the Revolving Facility Commitments of all the Lenders shall be terminated as provided herein, a commitment fee (a Commitment Fee ) on the daily amount of the Available Unused Commitment of such Lender during the preceding quarter up until the last day of such quarter (or other period commencing with the Closing Date (or the last date on which such fee was paid) and ending with the last day of such quarter or the Revolving Facility Maturity Date or the date on which the last of the Commitments of such Lender shall be terminated, as applicable) at the applicable Commitment Fee specified in the definition of Applicable Margin.
All Commitment Fees shall be computed on the basis of the actual number of days elapsed in a year of 360 days. The Commitment Fee due to each Lender shall begin to accrue on the Closing Date and shall cease to accrue on the date on which the last of the Commitments of such Lender shall be terminated as provided herein.
(b) The Borrower from time to time agrees to pay to each Revolving Facility Lender (other than any Defaulting Lender), through the Administrative Agent, three Business Days after the last day of March, June, September and December of each year and on the date on which the Revolving Facility Commitments of all the Lenders shall be terminated as provided herein, a fee (a Revolving L/C Participation Fee ) on such Lenders Revolving Facility Percentage of the daily aggregate Revolving L/C Exposure (excluding the portion thereof attributable to unreimbursed Revolving L/C Disbursements), during the preceding quarter (or shorter period commencing with the Closing Date (or the last date on which such fee was paid) and ending with the last day of such quarter or the Revolving Facility Maturity Date or the date on which the Revolving Facility Commitments shall be terminated, as applicable) at (x) in the case of standby letters of credit, the rate per annum equal to the Revolving Facility Loans Eurodollar Spread specified in the definition of Applicable Margin for Eurodollar Revolving Facility Borrowings effective for each day in such period and (y) in the case of documentary or commercial letters of credit, 1% per annum.
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(c) The Borrower from time to time agrees to pay to each Issuing Bank, for its own account, (x) on the last Business Day of March, June, September and December of each year and on the date on which the Revolving Facility Commitments of all the Lenders shall terminate as provided herein, a fronting fee in an amount equal to the greater of $300 or 0.125% per annum of the daily average stated amount of such Revolving Letter of Credit, in respect of each Revolving Letter of Credit issued by such Issuing Bank for the period from and including the date of issuance of such Revolving Letter of Credit to and including the termination of such Revolving Letter of Credit, plus (y) in connection with the issuance, amendment or transfer of any such Revolving Letter of Credit or any Revolving L/C Disbursement thereunder, such Issuing Banks customary documentary and processing charges (collectively, Issuing Bank Fees ). All Revolving L/C Participation Fees and Issuing Bank Fees that are payable on a per annum basis shall be computed on the basis of the actual number of days elapsed in a year of 360 days.
(d) The Borrower agrees to pay to the Administrative Agent, for the account of the Administrative Agent, the fee set forth in the Fee Letter at the times specified therein or such other administrative fee as agreed between the Borrower and the Administrative Agent in writing (such fees, the Administrative Agent Fees ) and to pay all other fees due and payable pursuant to the Fee Letter.
(e) All Fees shall be paid on the dates due, in immediately available funds, to the Administrative Agent for distribution, if and as appropriate, among the Lenders, except that Issuing Bank Fees shall be paid directly to the applicable Issuing Banks. Once paid, none of the Fees shall be refundable under any circumstances.
Section 2.13 Interest . (a) The Borrower shall pay interest on the unpaid principal amount of each ABR Loan and each Swingline Facility Loan at the Alternate Base Rate plus the Applicable Margin.
(b) The Borrower shall pay interest on the unpaid principal amount of each Eurodollar Loan at the Adjusted Eurodollar Rate for the Interest Period in effect for such Eurodollar Loan plus the Applicable Margin.
(c) Notwithstanding the foregoing, if any principal of or interest on any Loan or any Fees or other amount payable by the Borrower hereunder is not paid when due, whether at stated maturity, upon acceleration or otherwise, the Borrower shall pay interest on such overdue amount, after as well as before judgment, at a rate per annum equal to (x) in the case of overdue principal of any Loan, 2.00% plus the rate otherwise applicable to such Loan as provided in the preceding paragraphs of this Section or (y) in the case of any other amount, 2.00% plus the rate applicable to ABR Loans with respect to the Revolving Facility in paragraph (a) of this Section; provided that this paragraph (c) shall not apply to any Default or Event of Default that has been waived by the Lenders pursuant to Section 9.08.
(d) Accrued interest on each Revolving Facility Loan shall be payable by the Borrower in arrears on each Interest Payment Date for such Revolving Facility Loan upon termination of the Revolving Facility Commitments and upon the Revolving Facility Maturity Date; provided that (x) interest accrued pursuant to paragraph (c) of this Section shall be payable on demand, (y) in the event of any repayment or prepayment of any Revolving Facility Loan (other than a prepayment of an ABR Loan), accrued interest on the principal amount repaid or prepaid shall be payable on the date of such repayment or prepayment and (z) in the event of any conversion of any Eurodollar Loan prior to the end of the current Interest Period therefor, accrued interest on such Revolving Facility Revolving Facility Loan shall be payable on the effective date of such conversion. Accrued interest on each Swingline Facility Loan shall be payable by the Borrower upon the earliest to occur of (i) repayment of the Swingline Facility Loan, (ii) termination of the Swingline Facility Commitment and (iii) the Revolving Facility Maturity Date.
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(e) All computations of interest shall be made by the Administrative Agent taking into account the actual number of days occurring in the period for which such interest is payable pursuant to this Section, and (i) if based on the Alternate Base Rate (if based on the Prime Rate), a year of 365 days or 366 days, as the case may be; or (ii) otherwise, on the basis of a year of 360 days.
Section 2.14 Alternate Rate of Interest . If prior to the commencement of any Interest Period for a Eurodollar Borrowing:
(a) the Administrative Agent determines (which determination shall be conclusive absent manifest error) that adequate and reasonable means do not exist for ascertaining the Adjusted Eurodollar Rate for such Interest Period; or
(b) the Administrative Agent is advised by the Required Lenders that the Eurodollar Rate for such Interest Period will not adequately and fairly reflect the cost to such Lenders of making or maintaining their Loans included in such Borrowing for such Interest Period; then the Administrative Agent shall give written notice thereof to the Borrower and the Lenders as promptly as practicable thereafter and, until the Administrative Agent notifies the Borrower and the Lenders that the circumstances giving rise to such notice no longer exist, (x) any Interest Election Request that requests the conversion of any Borrowing to, or continuation of any Borrowing as, a Eurodollar Borrowing shall be ineffective and such Borrowing shall be converted to an ABR Borrowing on the last day of the Interest Period applicable thereto, and (y) if any Borrowing Request requests a Eurodollar Borrowing, such Borrowing shall be made as an ABR Borrowing or shall be made as a Borrowing bearing interest at such rate as the Required Lenders shall agree adequately reflects the costs to the Revolving Facility Lenders of making the Loans comprising such Borrowing.
Section 2.15 Increased Costs . (a) If any Change in Law shall:
(i) impose, modify or deem applicable any reserve, special deposit, FDIC insurance or similar requirement against assets of, deposits with or for the account of, or credit extended by, any Lender (except any such reserve requirement reflected in the Adjusted Eurodollar Rate) or Issuing Bank; or
(ii) impose on any Lender or Issuing Bank or the London interbank market any tax, costs, expenses or other condition affecting this Agreement or Loans made by such Lender or any Revolving Letter of Credit or participation therein (except in each case (A) for Indemnified Taxes indemnified pursuant to Section 2.17 and (B) Excluded Taxes);
and the result of any of the foregoing shall be to increase the cost to such Lender of making or maintaining any Loan (or of maintaining its obligation to make any such Loan) to the Borrower or to increase the cost to such Lender or Issuing Bank of participating in, issuing or maintaining any Revolving Letter of Credit or to reduce the amount of any sum received or receivable by such Lender or Issuing Bank hereunder (whether of principal, interest or otherwise) (except in each case (A) for Indemnified Taxes indemnified pursuant to Section 2.17 and (B) Excluded Taxes), then the Borrower will pay to such Lender or Issuing Bank, as applicable, such additional amount or amounts as will compensate such Lender or Issuing Bank, as applicable, for such additional costs incurred or reduction suffered in connection therewith.
(b) If any Lender or Issuing Bank determines that any Change in Law regarding capital requirements has or would have the effect of reducing the rate of return on such Lenders or Issuing Banks capital or on the capital of such Lenders or Issuing Banks holding company, if any, as a consequence of this Agreement or any of the Loans made by, or participations in Letters of Credit held by,
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such Lender, or the Letters of Credit issued by such Issuing Bank or as a consequence of the Commitments to make any of the foregoing, to a level below that which such Lender or such Issuing Bank or such Lenders or such Issuing Banks holding company could have achieved but for such Change in Law (taking into consideration such Lenders or such Issuing Banks policies and the policies of such Lenders or such Issuing Banks holding company with respect to capital adequacy), then from time to time the Borrower shall pay to such Lender or such Issuing Bank, as applicable, such additional amount or amounts as will compensate such Lender or such Issuing Bank or such Lenders or such Issuing Banks holding company for any such reduction suffered in connection therewith.
(c) A certificate of a Lender or an Issuing Bank setting forth the amount or amounts necessary to compensate such Lender or Issuing Bank or its holding company, as applicable, as specified in paragraph (a) or (b) of this Section shall be delivered to the Borrower and shall be conclusive absent manifest error. The Borrower shall pay such Lender or Issuing Bank, as applicable, the amount shown as due on any such certificate within 10 days after receipt thereof.
(d) Promptly after any Lender or any Issuing Bank has determined that it will make a request for increased compensation pursuant to this Section 2.15, such Lender or Issuing Bank shall notify the Borrower thereof. Failure or delay on the part of any Lender or Issuing Bank to demand compensation pursuant to this Section shall not constitute a waiver of such Lenders or Issuing Banks right to demand such compensation; provided that the Borrower shall not be required to compensate a Lender or an Issuing Bank pursuant to this Section for any increased costs or reductions incurred more than 180 days prior to the date that such Lender or Issuing Bank, as applicable, notifies the Borrower of the Change in Law giving rise to such increased costs or reductions and of such Lenders or Issuing Banks intention to claim compensation therefor; provided further that, if the Change in Law giving rise to such increased costs or reductions is retroactive, then the 180-day period referred to above shall be extended to include the period of retroactive effect thereof.
Section 2.16 Break Funding Payments . In the event of (a) the payment of any principal of any Eurodollar Loan other than on the last day of an Interest Period applicable thereto (including as a result of an Event of Default), (b) the conversion of any Eurodollar Loan other than on the last day of the Interest Period applicable thereto, (c) the failure to borrow, convert, continue or prepay any Eurodollar Loan on the date specified in any notice delivered pursuant hereto or (d) the assignment of any Eurodollar Loan other than on the last day of the Interest Period applicable thereto as a result of a request by the Borrower pursuant to Section 2.19, then, in any such event, the Borrower shall compensate each Lender for the loss, cost and expense attributable to such event. In the case of a Eurodollar Loan, such loss, cost or expense to any Lender shall be deemed to be the amount determined by such Lender to be the excess, if any, of (i) the amount of interest which would have accrued on the principal amount of such Loan had such event not occurred, at the Eurodollar Rate that would have been applicable to such Loan, for the period from the date of such event to the last day of the then current Interest Period therefor (or, in the case of a failure to borrow, convert or continue a Eurodollar Loan, for the period that would have been the Interest Period for such Loan), over (ii) the amount of interest which would accrue on such principal amount for such period at the interest rate which such Lender would bid were it to bid, at the commencement of such period, for deposits in U.S. Dollars of a comparable amount and period from other banks in the Eurodollar market. A certificate of any Lender setting forth any amount or amounts that such Lender is entitled to receive pursuant to this Section shall be delivered to the Borrower and shall be conclusive absent manifest error. The Borrower shall pay such Lender the amount shown as due on any such certificate within 10 days after receipt thereof.
Section 2.17 Taxes . (a) Any and all payments by or on account of any obligation of any Loan Party under any Loan Document shall be made free and clear of and without deduction or withholding for any Taxes, except as required by applicable law. If a Loan Party, the Administrative
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Agent or any other Person acting on behalf of the Administrative Agent in regards to payments hereunder (a Withholding Agent ) shall be required by applicable law to deduct Taxes from such payments, the applicable Withholding Agent shall be entitled to make such deduction or withholding and, if such Tax is an Indemnified Tax, then the sum payable by the Loan Party shall be increased as necessary so that after making all required deductions (including deductions of Indemnified Taxes applicable to additional sums payable under this Section) the Administrative Agent, Lender, or Issuing Bank, as applicable, receives an amount equal to the sum it would have received had no such deductions or withholdings for Indemnified Taxes been made, and such Withholding Agent shall timely pay the full amount deducted to the relevant Governmental Authority in accordance with applicable law.
(b) In addition, each Loan Party shall pay any Other Taxes payable on account of any obligation of such Loan Party and upon the execution, delivery or enforcement of, or otherwise with respect to, the Loan Documents, to the relevant Governmental Authority in accordance with applicable law.
(c) Each Loan Party shall indemnify the Administrative Agent, each Lender and each Issuing Bank, within 30 days after written demand therefor, for the full amount of any Indemnified Taxes or Other Taxes (other than Indemnified Taxes or Other Taxes resulting from gross negligence or willful misconduct of the Administrative Agent, such Lender or such Issuing Bank, and without duplication of any amounts indemnified under Section 2.17(a)) paid by the Administrative Agent or such Lender or Issuing Bank, as applicable, on or with respect to any payment by or on account of any obligation of such Loan Party under, or otherwise with respect to, any Loan Document (including Indemnified Taxes or Other Taxes imposed or asserted on or attributable to amounts payable under this Section) and any reasonable expenses arising therefrom or with respect thereto, whether or not such Indemnified Taxes or Other Taxes were correctly or legally imposed or asserted by the relevant Governmental Authority; provided however, that a Loan Party shall not be required to make any payment pursuant to this Section 2.17(c) if the Administrative Agent or such Lender or Issuing Bank, as the case may be, makes demand for such payment more than 180 days after the earlier of (i) the date on which the relevant Governmental Authority makes written demand upon such Person for payment of such Indemnified Taxes or Other Taxes, and (ii) the date on which such Person has made payment of such Indemnified Taxes or Other Taxes (except that, if the Indemnified Taxes or Other Taxes imposed or asserted giving rise to such claims are retroactive, then the 180-day period referred to above shall be extended to include the period of retroactive effort thereof). A certificate as to the amount of such payment or liability and setting forth in reasonable detail the basis and calculation for such payment or liability delivered to such Loan Party by a Lender or an Issuing Bank, or by the Administrative Agent on its own behalf or on behalf of a Lender or an Issuing Bank, shall be conclusive absent manifest error of the Lender, the Issuing Bank or the Administrative Agent, as applicable.
(d) As soon as practicable after any payment of Indemnified Taxes or Other Taxes by a Loan Party to a Governmental Authority, such Loan Party shall deliver to the Administrative Agent the original or a certified copy of a receipt issued by such Governmental Authority evidencing such payment, a copy of the return reporting such payment or other evidence of such payment reasonably satisfactory to the Administrative Agent.
(e) Each Lender or Issuing Bank that is not a United States Person as defined in Section 7701(a)(30) of the Code (a Non-U.S. Lender ) shall, to the extent it may lawfully do so, deliver to the Borrower and the Administrative Agent, at the time or times reasonably requested by the Borrower or the Administrative Agent, two copies of U.S. Internal Revenue Service Form W-8BEN (claiming the benefits of an applicable income tax treaty), W-8EXP, W-8IMY (together with any required attachments) or Form W-8ECI, or, in the case of a Non-U.S. Lender claiming exemption from U.S. federal withholding Tax under Section 871(h) or 881(c) of the Code with respect to payments of portfolio interest, a
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statement substantially in the form of any of Exhibits H-1-4 (as applicable) and a Form W-8BEN, or any subsequent versions thereof or successors thereto, properly completed and duly executed by such Non-U.S. Lender (with any other required forms attached) claiming complete exemption from or a reduced rate of U.S. federal withholding Tax on all payments by the Borrower under this Agreement and the other Loan Documents. Each Lender or Issuing Bank that is not a Non-U.S. Lender shall deliver to the Borrower and the Administrative Agent, at the time or times reasonably requested by the Borrower or the Administrative Agent, two copies of U.S. Internal Revenue Service Form W-9, properly completed and duly executed by such Lender or Issuing Bank, claiming complete exemption (or otherwise establishing an exemption) from U.S. backup withholding on all payments under this Agreement and the other Loan Documents. Such forms shall be delivered by each Lender or Issuing Bank, to the extent it may lawfully do so, on or before the date it becomes a party to this Agreement. In addition, each Lender or Issuing Bank, to the extent it may lawfully do so, shall deliver such forms promptly upon the obsolescence or invalidity of any form previously delivered by such Lender or Issuing Bank. Each Lender or Issuing Bank shall promptly notify the Borrower and the Administrative Agent at any time it determines that it is no longer in a position to provide any previously delivered certificate to the Borrower or the Administrative Agent (or any other form of certification adopted by the U.S. taxing authorities for such purpose). Without limiting the foregoing, any Lender or Issuing Bank that is entitled to an exemption from or reduction of withholding Tax otherwise indemnified against by a Loan Party pursuant to this Section 2.17 with respect to payments under any Loan Document shall deliver to the Borrower or the relevant Governmental Authority (with a copy to the Administrative Agent), to the extent such Lender or Issuing Bank is legally entitled to do so, at the time or times prescribed by applicable law such properly completed and executed documentation prescribed by applicable law as may reasonably be requested by the Borrower or the Administrative Agent to permit such payments to be made without such withholding Tax or at a reduced rate; provided that in such Lenders or Issuing Banks judgment such completion, execution or submission would not materially prejudice such Lender or Issuing Bank.
(f) If the Administrative Agent, any Lender or Issuing Bank determines, in good faith and in its sole discretion, that it has received a refund of Indemnified Taxes or Other Taxes as to which it has been indemnified by a Loan Party or with respect to which a Loan Party has paid additional amounts pursuant to this Section 2.17, it shall pay over such refund to such Loan Party (but only to the extent of indemnity payments made, or additional amounts paid, by such Loan Party under this Section 2.17 with respect to the Indemnified Taxes or Other Taxes giving rise to such refund), net of all out-of-pocket expenses of the Administrative Agent, such Lender or Issuing Bank (including any Taxes imposed with respect to such refund) as is determined by the Administrative Agent, such Lender or Issuing Bank in good faith and in its sole discretion, and without interest (other than any interest paid by the relevant Governmental Authority with respect to such refund); provided that such Loan Party, upon the request of the Administrative Agent, any Lender or Issuing Bank, agrees to repay as soon as reasonably practicable the amount paid over to such Loan Party (plus any penalties, interest or other charges imposed by the relevant Governmental Authority) to the Administrative Agent, such Lender or Issuing Bank in the event the Administrative Agent, such Lender or Issuing Bank is required to repay such refund to such Governmental Authority. This paragraph shall not be construed to require the Administrative Agent, any Lender or Issuing Bank to make available its Tax returns (or any other information relating to its Taxes which it deems confidential) to the Loan Parties or any other Person.
(g) For purposes of this Section 2.17, the term Lender includes any Issuing Bank and the term applicable law includes FATCA.
Section 2.18 Payments Generally; Pro Rata Treatment; Sharing of Set-offs . (a) Unless otherwise specified, the Borrower shall make each payment required to be made by it hereunder (whether of principal, interest, fees or reimbursement of Revolving L/C Disbursements, or of amounts payable under Section 2.15, 2.16 or 2.17, or otherwise) prior to 1:00 p.m., Houston, Texas time, on the
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date when due, in immediately available funds, without condition or deduction for any defense, recoupment, set-off or counterclaim. Any amounts received after such time on any date may, in the discretion of the Administrative Agent, be deemed to have been received on the next succeeding Business Day for purposes of calculating interest thereon. All such payments shall be made to the Administrative Agent to the applicable account designated to the Borrower by the Administrative Agent, except payments to be made directly to the Swingline Facility Lender or applicable Issuing Bank as expressly provided herein and except that payments pursuant to Sections 2.15, 2.16, 2.17 and 9.05 shall be made directly to the Persons entitled thereto. The Administrative Agent shall distribute any such payments received by it for the account of any other Person to the appropriate recipient promptly following receipt thereof. If any payment hereunder shall be due on a day that is not a Business Day, the date for payment shall be extended to the next succeeding Business Day, and, in the case of any payment accruing interest, interest thereon shall be payable for the period of such extension. All payments hereunder of (i) principal or interest in respect of any Loan or (ii) Revolving L/C Reimbursement Obligations shall in each case be made in U.S. Dollars. All payments of other amounts due hereunder or under any other Loan Document shall be made in U.S. Dollars. Any payment required to be made by the Administrative Agent hereunder shall be deemed to have been made by the time required if the Administrative Agent shall, at or before such time, have taken the necessary steps to make such payment in accordance with the regulations or operating procedures of the clearing or settlement system used by the Administrative Agent to make such payment.
(b) If at any time insufficient funds are received by and available to the Administrative Agent from the Borrower to pay fully all amounts of principal, unreimbursed Revolving L/C Disbursements, interest and fees then due from the Borrower hereunder, such funds shall be applied (i) first , towards payment of interest and fees then due from the Borrower hereunder, ratably among the parties entitled thereto in accordance with the amounts of interest and fees then due to such parties, and (ii) second , towards payment of principal and unreimbursed Revolving L/C Disbursements then due from the Borrower hereunder, ratably among the parties entitled thereto in accordance with the amounts of principal and unreimbursed Revolving L/C Disbursements then due to such parties.
(c) If any Lender shall, by exercising any right of set-off or counterclaim, through the application of any proceeds of collateral or otherwise, obtain payment in respect of any principal of or interest on any of its Revolving Facility Loans or participations in Revolving L/C Disbursements resulting in such Lender receiving payment of a greater proportion of the aggregate amount of its Revolving Facility Loans and participations in Revolving L/C Disbursements and accrued interest thereon than the proportion received by any other Lender, then the Lender receiving such greater proportion shall purchase (for cash at face value) participations in Revolving Facility Loans and participations in Revolving L/C Disbursements of other Lenders to the extent necessary so that the benefit of all such payments shall be shared by the Lenders ratably in accordance with the aggregate amount of principal of and accrued interest on their respective Revolving Facility Loans and participations in Revolving L/C Disbursements; provided that (i) if any such participations are purchased and all or any portion of the payment giving rise thereto is recovered, such participations shall be rescinded and the purchase price restored to the extent of such recovery, without interest, and (ii) the provisions of this paragraph (c) shall not be construed to apply to any payment made by the Borrower pursuant to and in accordance with the express terms of this Agreement or any payment obtained by a Lender as consideration for the assignment of or sale of a participation in any of its Loans or participations in Revolving L/C Disbursements to any assignee or participant, other than to the Borrower or any Loan Party (as to which the provisions of this paragraph (c) shall apply). The Borrower consents to the foregoing and agrees, to the extent it may effectively do so under applicable law, that any Lender acquiring a participation pursuant to the foregoing arrangements may exercise against the Borrower rights of set-off and counterclaim with respect to such participation as fully as if such Lender were a direct creditor of the Borrower in the amount of such participation.
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(d) Unless the Administrative Agent shall have received notice from the Borrower prior to the date on which any payment by the Borrower is due to the Administrative Agent for the account of the Lenders or the applicable Issuing Bank hereunder that the Borrower will not make such payment, the Administrative Agent may assume that the Borrower has made such payment on such date in accordance herewith and may, in reliance upon such assumption, distribute to the Lenders or the applicable Issuing Bank, as applicable, the amount due. In such event, if the Borrower has not in fact made such payment, then each of the Lenders or the applicable Issuing Bank, as applicable, severally agrees to repay to the Administrative Agent forthwith on demand the amount so distributed to such Lender or Issuing Bank with interest thereon, for each day from and including the date such amount is distributed to it to but excluding the date of payment to the Administrative Agent, at the greater of the Federal Funds Effective Rate and a rate determined by the Administrative Agent in accordance with banking industry rules on interbank compensation.
(e) If any Lender shall fail to make any payment required to be made by it pursuant to Section 2.05(d) or (e), 2.06(b), 2.18(d) or 2.23(c), then the Administrative Agent may, in its discretion (notwithstanding any contrary provision hereof), apply any amounts thereafter received by the Administrative Agent for the account of such Lender to satisfy such Lenders obligations under such Sections until all such unsatisfied obligations are fully paid.
Section 2.19 Mitigation Obligations; Replacement of Lenders . (a) If any Lender requests compensation under Section 2.15, or if any Loan Party is required to pay any additional amount to any Lender or any Governmental Authority for the account of any Lender pursuant to Section 2.17, then such Lender shall use reasonable efforts to designate a different lending office for funding or booking its Loans hereunder or to assign its rights and obligations hereunder to another of its offices, branches or Affiliates, if, in the reasonable judgment of such Lender, such designation or assignment (i) would eliminate or reduce amounts payable pursuant to Section 2.15 or 2.17, as applicable, in the future and (ii) would not subject such Lender to any unreimbursed cost or expense and would not otherwise be disadvantageous to such Lender in any material respect. The Borrower hereby agrees to pay all reasonable costs and expenses incurred by any Lender in connection with any such designation or assignment.
(b) If any Lender requests compensation under Section 2.15, or if any Loan Party is required to pay any Indemnified Taxes or additional amount to any Lender or any Governmental Authority for the account of any Lender pursuant to Section 2.17, and, in each case, such Lender has declined or is unable to designate a different lending office in accordance with Section 2.19(a), or is a Defaulting Lender, then such Loan Party may, at its sole expense and effort, upon notice to such Lender and the Administrative Agent, require such Lender to assign and delegate, without recourse (in accordance with and subject to the restrictions contained in Section 9.04, all its interests, rights (other than its existing rights to payments pursuant to Section 2.15 or 2.17) and obligations under this Agreement to an assignee that shall assume such obligations (which assignee may be another Lender, if a Lender accepts such assignment); provided that (i) such Loan Party shall have received the prior written consent of the Administrative Agent and, solely in the case of an assignment of Revolving Facility Commitments and/or Revolving Facility Loans, the Swingline Facility Lender and each Issuing Bank, which consent shall not unreasonably be withheld or delayed, (ii) such Lender shall have received payment of an amount equal to the outstanding principal of its Loans and participations in Revolving L/C Disbursements, accrued interest thereon, accrued fees and all other amounts payable to it hereunder, from the assignee (to the extent of such outstanding principal and accrued interest and fees) or such Loan Party (in the case of all other amounts), (iii) in the case of any such assignment resulting from a claim for compensation under Section 2.15 or payments required to be made pursuant to Section 2.17, such assignment will result in a reduction in such compensation or payments and (iv) such assignment does not conflict with applicable law. Nothing in this Section 2.19 shall be deemed to prejudice any rights that any Loan Party may have against any Lender that is a Defaulting Lender.
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(c) If any Lender (such Lender, a Non-Consenting Lender ) has failed to consent to a proposed amendment, waiver, discharge or termination which pursuant to the terms of Section 9.08 requires the consent of all of the Lenders affected and with respect to which the Required Lenders shall have granted their consent, then provided no Event of Default then exists, the Borrower shall have the right (unless such Non-Consenting Lender grants such consent) to replace such Non-Consenting Lender by requiring such Non-Consenting Lender to assign its Loans and Commitments hereunder to one or more Eligible Assignees and, solely in the case of an assignment of Revolving Facility Commitments and/or Revolving Facility Loans the Swingline Facility Lender and each Issuing Bank, provided that: (i) all Obligations of the Borrower owing to such Non-Consenting Lender being replaced shall be paid in full to such Non-Consenting Lender concurrently with such assignment, and (ii) the replacement Lender shall purchase the foregoing by paying to such Non-Consenting Lender a price equal to the principal amount thereof plus accrued and unpaid interest thereon. In connection with any such assignment the Borrower, Administrative Agent, such Non-Consenting Lender and the replacement Lender shall otherwise comply with Section 9.04.
Section 2.20 Increase in Revolving Facility Commitments . (a) At any time after the Closing Date and prior to the Revolving Facility Maturity Date, the Borrower may, by delivery of a Notice of Revolving Facility Commitment Increase to the Administrative Agent, elect to increase the existing Revolving Facility Commitments (any such increase, the Incremental Revolving Facility Commitments ), such increase, in an aggregate principal amount not to exceed U.S. $150,000,000 or a lesser amount in integral multiples of U.S. $5,000,000. The Notice of Revolving Facility Commitment Increase shall specify the date (an Increased Amount Date ) on which the Borrower proposes that the Incremental Revolving Facility Commitments shall be made available, which shall be a date not less than 10 Business Days after the date on which such Notice of Revolving Facility Commitment Increase is delivered to the Administrative Agent. The Borrower shall notify the Administrative Agent in the Notice of Revolving Facility Commitment Increase of the identity of each Revolving Facility Lender or other Eligible Assignee (which in any event shall not be the Borrower or an Affiliate of the Borrower) (each, an Incremental Revolving Facility Lender , as applicable) to whom the Incremental Revolving Facility Commitments have been (in accordance with the prior sentence) allocated and the amounts of such allocations, subject to the consent of the Administrative Agent, Swingline Facility Lender and the Issuing Banks if such consent is required pursuant to Section 9.04, in each case, such consent not to be unreasonably withheld or delayed; provided that any Lender approached to provide all or a portion of the Incremental Revolving Facility Commitments may elect or decline, in its sole and absolute discretion, to provide an Incremental Revolving Facility Commitment. Such Incremental Revolving Facility Commitments shall become effective as of such Increased Amount Date; provided that (i) no Default or Event of Default shall exist on such Increased Amount Date before or after giving effect to such Incremental Revolving Facility Commitments; (ii) the representations and warranties contained in Article III and the other Loan Documents shall be true and correct in all material respects (unless qualified by materiality or Material Adverse Effect, in which case accuracy of such qualified representations and warranties shall be true and correct in all respects) on and as of the Increased Amount Date, except to the extent that such representations and warranties specifically refer to an earlier date, in which case they shall have been true and correct in all material respects as of such earlier date; (iii) the Borrower and its Subsidiaries shall be in compliance, on a Pro Forma Basis after giving effect to such Incremental Revolving Facility Commitments, with the covenants contained in Section 6.10 and Section 6.11 recomputed as at the last day of the most recently ended fiscal quarter of the Borrower and its Subsidiaries; (iv) such increase in the Incremental Revolving Facility Commitments shall be evidenced by one or more Credit Agreement Joinders executed and delivered to Administrative Agent by each Incremental Revolving Facility Lender, as applicable, and each shall be recorded in the Register, and each
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Incremental Revolving Facility Lender shall be subject to the requirements set forth in Section 2.17(e); (v) the Borrower shall make any payments required pursuant to Section 2.16 in connection with the provisions of the Incremental Revolving Facility Commitments; (vi) the Borrower and its Affiliates shall not be permitted to commit to or participate in any Incremental Revolving Facility Commitments and (vii) the Applicable Margin for any Revolving Facility Loans made pursuant to this Section 2.20 (an Incremental Loan ) shall be the same as the then applicable Applicable Margin for the Revolving Facility and any upfront fees for any Incremental Revolving Facility Commitments shall be subject to agreement between the Administrative Agent and the Borrower. Each of the parties hereto hereby agrees that, upon the effectiveness of any joinder agreements in connection with any Incremental Revolving Facility Commitments as described in the preceding sentence, this Agreement shall be deemed amended to the extent (but only to the extent) necessary to reflect the existence and terms of the Incremental Revolving Facility Commitments, and the Administrative Agent and the Borrower may revise this Agreement to evidence such amendments without the consent of any Lender.
(b) On any Increased Amount Date on which Incremental Revolving Facility Commitments are effected, subject to the satisfaction of the foregoing terms and conditions, (i) each of the existing Revolving Facility Lenders shall assign to each of the Incremental Revolving Facility Lenders, and each of the Incremental Revolving Facility Lenders shall purchase from each of the existing Revolving Facility Lenders, at the principal amount thereof, such interests in the outstanding Revolving Facility Loans and participations in Revolving Letters of Credit outstanding on such Increased Amount Date that will result in, after giving effect to all such assignments and purchases, such Revolving Facility Loans and participations in Revolving Letters of Credit being held by existing Revolving Facility Lenders and Incremental Revolving Facility Lenders ratably in accordance with their Revolving Facility Commitments after giving effect to the addition of such Incremental Revolving Facility Commitments to the Revolving Facility Commitments, (ii) each Incremental Revolving Facility Commitment shall be deemed for all purposes a Revolving Facility Commitment and each Loan made thereunder shall be deemed, for all purposes, a Revolving Facility Loan and have the same terms as any existing Revolving Facility Loan and (iii) each Incremental Revolving Facility Lender shall become a Lender with respect to the Revolving Facility Commitments and all matters relating thereto.
(c) The Administrative Agent shall notify the Lenders promptly upon receipt of a Notice of Revolving Facility Commitment Increase and, in respect thereof, the Incremental Revolving Facility Commitments and the Incremental Revolving Facility Lenders.
(d) As a condition precedent to the Borrowers incurrence of additional Indebtedness pursuant to this Section 2.20, the Borrower shall, and shall cause each Loan Party to, enter into, and deliver to the Administrative Agent, reaffirmations of the guarantees made by the Loan Parties under the Guaranty Agreement in a form reasonably satisfactory to the Administrative Agent.
Section 2.21 Illegality . If any Lender reasonably determines that any Change in Law has made it unlawful, or that any Governmental Authority has asserted after the Closing Date that it is unlawful, for any Lender or its applicable lending office to make or maintain any Eurodollar Loans, then, on notice thereof by such Lender to the Borrower through the Administrative Agent, any obligations of such Lender to make or continue Eurodollar Loans or to convert ABR Borrowings to Eurodollar Borrowings, as the case may be, shall be suspended until such Lender notifies the Administrative Agent and the Borrower that the circumstances giving rise to such determination no longer exist. Upon receipt of such notice, the Borrower shall, upon demand from such Lender (with a copy to the Administrative Agent), convert all such Eurodollar Borrowings of such Lender to ABR Borrowings on the last day of the Interest Period therefor, if such Lender may lawfully continue to maintain such Eurodollar Borrowings to such day, or immediately, if such Lender may not lawfully continue to maintain such Loans. Upon any such prepayment or conversion, the Borrower shall also pay accrued interest on the amount so prepaid or converted.
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Section 2.22 Defaulting Lenders . Notwithstanding any provision of this Agreement to the contrary, if any Lender becomes a Defaulting Lender, then the following provisions shall apply for so long as such Lender is a Defaulting Lender:
(a) fees shall cease to accrue on the unfunded portion of the Commitments of such Defaulting Lender pursuant to Section 2.12(a);
(b) the aggregate principal amount of Loans, Revolving L/C Exposures and Available Unused Commitment of such Defaulting Lender shall not be included in determining whether all Lenders, Required Lenders or affected Lenders have taken or may take any action hereunder (including any consent to any amendment or waiver pursuant to Section 9.08); provided that (i) any waiver, amendment or modification requiring the consent of all Lenders or each affected Lender which affects such Defaulting Lender differently than other affected Lenders shall require the consent of such Defaulting Lender, (ii) the Commitment of such Defaulting Lender may not be increased or extended without the consent of such Defaulting Lender and (iii) any amendment that reduces the principal amount of, or rate of interest on, any Loan made by such Defaulting Lender, shall require the consent of such Defaulting Lender;
(c) if any Revolving L/C Exposure or Swingline Facility Credit Exposure exists at the time a Lender becomes a Defaulting Lender then:
(i) all or any part of such Revolving L/C Exposure and Swingline Facility Credit Exposure shall be reallocated among the non-Defaulting Lenders in accordance with their respective Revolving Facility Percentages but only to the extent (x) such reallocation does not cause the aggregate Revolving Facility Credit Exposure of any non-Defaulting Lender to exceed such non-Defaulting Lenders Revolving Facility Commitment and (y) the conditions set forth in Section 4.01 are satisfied at such time;
(ii) if the reallocation described in clause (i) above cannot, or can only partially, be effected, the Borrower shall within five Business Days following notice by the Administrative Agent cash collateralize such Defaulting Lenders Revolving L/C Exposure and/or Swingline Facility Credit Exposure (after giving effect to any partial reallocation pursuant to clause (i) above) in accordance with the procedures set forth in Section 2.05(j) for so long as such Revolving L/C Exposure and/or Swingline Facility Credit Exposure is outstanding;
(iii) if the Borrower cash collateralizes any portion of such Defaulting Lenders Revolving L/C Exposure pursuant to Section 2.22(c)(ii), the Borrower shall not be required to pay any fees to such Defaulting Lender pursuant to Section 2.12 with respect to such Defaulting Lenders Revolving L/C Exposure during the period such Defaulting Lenders Revolving L/C Exposure is cash collateralized;
(iv) if the Revolving L/C Exposure of the non-Defaulting Lenders is reallocated pursuant to Section 2.22(c)(i), then the fees payable to the Lenders pursuant to Section 2.12 shall be adjusted in accordance with such non-Defaulting Lenders Revolving Facility Percentage; and
(v) if any Defaulting Lenders Revolving L/C Exposure is neither cash collateralized nor reallocated pursuant to Section 2.22(c)(i) or (ii), then, without prejudice to any rights or remedies of any Issuing Bank or any Lender hereunder, all facility fees that otherwise would have
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been payable to such Defaulting Lender (solely with respect to the portion of such Defaulting Lenders Revolving L/C Commitment that was utilized by such Revolving L/C Exposure) and all Revolving L/C Participation Fees payable under Section 2.12(b) with respect to such Defaulting Lenders Revolving L/C Exposure shall be payable to the applicable Issuing Bank until such Revolving L/C exposure is cash collateralized and/or reallocated;
(d) so long as any Lender is a Defaulting Lender, no Issuing Bank shall be required to issue, amend or increase any Revolving Letter of Credit, unless it is satisfied that the related exposure will be 100% covered by the Revolving Facility Commitments of the non-Defaulting Lenders or cash collateral will be provided by the Borrower in accordance with Section 2.22(c)(ii), and participating interests in any such newly issued or increased Revolving Letter of Credit shall be allocated among non-Defaulting Lenders in a manner consistent with Section 2.22(c)(i) (and Defaulting Lenders shall not participate therein); and
(e) Any payment of principal, interest, fees or other amounts received by the Administrative Agent for the account of such Defaulting Lender shall be applied at such time or times as may be determined by the Administrative Agent as follows: (i) first , to the payment of any amounts owing by such Defaulting Lender to the Administrative Agent hereunder, (ii) second , to the payment on a pro rata basis of any amounts owing by such Defaulting Lender to any Issuing Bank or Swingline Facility Lender, (iii) third , as the Borrower may request (so long as no Default or Event of Default exists), to the funding of any Loan in respect of which that Defaulting Lender has failed to fund its portion thereof as required by this Agreement, (iv) fourth , if so determined by the Administrative Agent or requested by an Issuing Bank or Swingline Facility Lender, held in such account as cash collateral for future funding obligations of the Defaulting Lender in respect of any existing or future participating interest in any Revolving Letter of Credit or Swingline Facility Loans, (v) fifth , to the payment of any amounts owing to the Lenders, Swingline Facility Lender or an Issuing Bank as a result of any judgment of a court of competent jurisdiction obtained by any Lender, Swingline Facility Lender or such Issuing Bank against such Defaulting Lender as a result of such Defaulting Lenders breach of its obligations under this Agreement, (vi) sixth , so long as no Default or Event of Default exists, to the payment of any amounts owing to the Borrower as a result of any judgment of a court of competent jurisdiction obtained by the Borrower against that Defaulting Lender as a result of that Defaulting Lenders breach of its obligations under this Agreement and (vii) seventh , to such Defaulting Lender or as otherwise directed by a court of competent jurisdiction, provided , with respect to this clause (vii), that if such payment is (x) a prepayment of the principal amount of any Loans in respect of which a Defaulting Lender has not funded its participation obligations and (y) made at a time when the conditions set forth in Section 4.01 are satisfied, such payment shall be applied solely to prepay the Loans of, and reimbursement obligations owed to, all non-Defaulting Lenders pro rata prior to being applied to the prepayment of any Loans, or reimbursement obligations owed to, any Defaulting Lender. Any payments, prepayments or other amounts paid or payable to a Defaulting Lender that are applied (or held) to pay amounts owed by a Defaulting Lender or to post cash collateral pursuant to Section 2.05(j) shall be deemed paid to and redirected by that Defaulting Lender, and each Lender irrevocably consents hereto.
(f) In the event that the Administrative Agent, the Borrower, Swingline Facility Lender and each Issuing Bank each agrees that a Defaulting Lender has adequately remedied all matters that caused such Lender to be a Defaulting Lender, then the Revolving Facility Credit Exposure of the Lenders shall be readjusted to reflect the inclusion of such Lenders Revolving Facility Commitment and on such date such Lender shall purchase at par such of the Loans of the other Lenders (or such of the Swingline Facility Loans of the Swingline Facility Lender) as the Administrative Agent shall determine may be necessary in order for such Lender to hold such Loans in accordance with its Revolving Facility Percentage; provided that no adjustments will be made retroactively with respect to fees accrued or payments made by or on behalf of Borrower while that Lender was a Defaulting Lender; and provided,
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further, that except to the extent otherwise expressly agreed by the affected parties, no change hereunder from Defaulting Lender to Lender will constitute a waiver or release of any claim of any party hereunder arising from that Lenders having been a Defaulting Lender.
Section 2.23 Swingline Facility .
(a) Subject to the terms and conditions set forth herein, the Swingline Facility Lender agrees, in reliance upon the agreements of the other Revolving Facility Lenders set forth in this Section 2.23, to make loans (each such loan, a Swingline Facility Loan ) to the Borrower from time to time on any Business Day during the Availability Period in an aggregate amount not to exceed at any time outstanding U.S. $10,000,000, notwithstanding the fact that such Swingline Facility Loans, when aggregated with the Revolving Facility Percentage of the Revolving Credit Facility Exposure of the Lender acting as Swingline Facility Lender, may exceed the amount of such Lenders Revolving Facility Exposure Commitment; provided, however , that after giving effect to any Swingline Facility Loan, (i) the Revolving Facility Credit Exposure shall not exceed the total Revolving Facility Commitments, and (ii) the aggregate Revolving Facility Credit Exposure of any Lender shall not exceed such Lenders Revolving Facility Commitment, and provided , further , that the Borrower shall not use the proceeds of any Swingline Facility Loan to refinance any outstanding Swingline Facility Loan. Within the foregoing limits, and subject to the other terms and conditions hereof, the Borrower may borrow under this Section 2.23, prepay under Section 2.11, and reborrow under this Section 2.23. Each Swingline Facility Loan shall be an ABR Loan. Immediately upon the making of a Swingline Facility Loan, each Revolving Facility Lender shall be deemed to, and hereby irrevocably and unconditionally agrees to, purchase from the Swingline Facility Lender a risk participation in such Swingline Facility Loan in an amount equal to the product of such Lenders Revolving Facility Percentage times the amount of such Swingline Facility Loan.
(b) Each Swing Line Borrowing shall be made upon the Borrowers irrevocable notice to the Swingline Facility Lender and the Administrative Agent, which may be given by telephone. Each such notice must be received by the Swingline Facility Lender and the Administrative Agent not later than 11:00 a.m. on the requested borrowing date, and shall specify (i) the amount to be borrowed, which shall be a minimum of $100,000, and (ii) the requested borrowing date, which shall be a Business Day. Each such telephonic notice must be confirmed promptly by delivery to the Swingline Facility Lender and the Administrative Agent of a written Swingline Facility Borrowing Request, appropriately completed and signed by the Borrower. Promptly after receipt by the Swingline Facility Lender of any telephonic Swingline Facility Borrowing Request, the Swingline Facility Lender will confirm with the Administrative Agent (by telephone or in writing) that the Administrative Agent has also received such Swingline Facility Borrowing Request and, if not, the Swingline Facility Lender will notify the Administrative Agent (by telephone or in writing) of the contents thereof. Unless the Swingline Facility Lender has received notice (by telephone or in writing) from the Administrative Agent (including at the request of any Lender) prior to noon on the date of the proposed Swing Line Borrowing (A) directing the Swingline Facility Lender not to make such Swingline Facility Loan as a result of the limitations set forth in the first proviso to the first sentence of Section 2.23, or (B) that one or more of the applicable conditions specified in Section 4.01 is not then satisfied, then, subject to the terms and conditions hereof, the Swingline Facility Lender will, not later than 3:00 p.m. on the borrowing date specified in such Swingline Facility Borrowing Request, make the amount of its Swingline Facility Loan available to the Borrower at its office by crediting the account of the Borrower on the books of the Swingline Facility Lender in immediately available funds.
(c) The Swingline Facility Lender at any time in its sole and absolute discretion may request, on behalf of the Borrower (and Borrower hereby irrevocably authorizes the Swingline Facility Lender to so request on its behalf), that each Lender make an ABR Loan in an amount equal to such Lenders
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Revolving Facility Percentage of the amount of Swingline Facility Loans then outstanding. Such request shall be made in writing (which written request shall be deemed to be a Borrowing Request for purposes hereof) and in accordance with the requirements of Section 2.03, without regard to the minimum and multiples specified therein for the principal amount of ABR Loans, but subject to the unutilized portion of the Revolving Facility Commitments and the conditions set forth in Section 4.01. The Swingline Facility Lender shall furnish the Borrower with a copy of the applicable Borrowing Request promptly after delivering such notice to the Administrative Agent. Each Revolving Facility Lender shall make an amount equal to its Revolving Facility Percentage of the amount specified in such Borrowing Request available to the Administrative Agent in immediately available funds for the account of the Swingline Facility Lender at the Administrative Agents Office not later than 1:00 p.m. on the day specified in such Borrowing Request, whereupon, subject to Section 2.23(c), each Revolving Facility Lender that so makes funds available shall be deemed to have made an ABR Loan to the Borrower in such amount. The Administrative Agent shall remit the funds so received to the Swingline Facility Lender.
(d) If for any reason any Swingline Facility Loan cannot be refinanced by such an ABR Loan in accordance with Section 2.23(c), the request for an ABR Loan submitted by the Swingline Facility Lender as set forth herein shall be deemed to be a request by the Swingline Facility Lender that each of the Revolving Facility Lenders fund its risk participation in the relevant Swingline Facility Loan and each Revolving Facility Lenders payment to the Administrative Agent for the account of the Swingline Facility Lender pursuant to Section 2.23(c) shall be deemed payment in respect of such participation.
(e) If any Revolving Facility Lender fails to make available to the Administrative Agent for the account of the Swingline Facility Lender any amount required to be paid by such Revolving Facility Lender pursuant to the foregoing provisions of this Section 2.23 by the time specified in Section 2.23, the Swingline Facility Lender shall be entitled to recover from such Revolving Facility Lender (acting through the Administrative Agent), on demand, such amount with interest thereon for the period from the date such payment is required to the date on which such payment is immediately available to the Swingline Facility Lender at a rate per annum equal to the greater of the Federal Funds Rate and a rate determined by the Swingline Facility Lender in accordance with banking industry rules on interbank compensation, plus any administrative, processing or similar fees customarily charged by the Swingline Facility Lender in connection with the foregoing. If such Revolving Facility Lender pays such amount (with interest and fees as aforesaid), the amount so paid shall constitute such Revolving Facility Lenders Revolving Facility Loan included in the relevant Revolving Facility Borrowing or funded participation in the relevant Swingline Facility Loan, as the case may be. A certificate of the Swingline Facility Lender submitted to any Revolving Facility Lender (through the Administrative Agent) with respect to any amounts owing under this clause (e) shall be conclusive absent manifest error.
(f) Each Revolving Facility Lenders obligation to make Revolving Facility Loans or to purchase and fund risk participations in Swingline Facility Loans pursuant to this Section 2.23 shall be absolute and unconditional and shall not be affected by any circumstance, including (A) any setoff, counterclaim, recoupment, defense or other right which such Revolving Facility Lender may have against the Swingline Facility Lender, the Borrower or any other Person for any reason whatsoever, (B) the occurrence or continuance of a Default, or (C) any other occurrence, event or condition, whether or not similar to any of the foregoing; provided, however , that each Revolving Facility Lenders obligation to make Revolving Facility Loans pursuant to this Section 2.23 is subject to the conditions set forth in Section 4.02. No such funding of risk participations shall relieve or otherwise impair the obligation of the Borrower to repay Swingline Facility Loans, together with interest as provided herein.
(g) At any time after any Revolving Facility Lender has purchased and funded a risk participation in a Swingline Facility Loan, if the Swingline Facility Lender receives any payment on account of such Swingline Facility Loan, the Swingline Facility Lender will distribute to such Revolving Facility Lender its Revolving Facility Percentage thereof in the same funds as those received by the Swingline Facility Lender.
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(h) If any payment received by the Swingline Facility Lender in respect of principal or interest on any Swingline Facility Loan is required to be returned by the Swingline Facility Lender under any circumstances (including pursuant to any settlement entered into by the Swingline Facility Lender in its discretion), each Revolving Facility Lender shall pay to the Swingline Facility Lender its Revolving Facility Percentage thereof on demand of the Administrative Agent, plus interest thereon from the date of such demand to the date such amount is returned, at a rate per annum equal to the Federal Funds Rate. The Administrative Agent will make such demand upon the request of the Swingline Facility Lender. The obligations of the Revolving Facility Lenders under this clause shall survive the payment in full of the Obligations and the termination of this Agreement.
(i) The Swingline Facility Lender shall be responsible for invoicing the Borrower for interest on the Swingline Facility Loans. Until each Revolving Facility Lender funds its ABR Loan or risk participation pursuant to this Section 2.23 to refinance such Revolving Facility Lenders Revolving Facility Percentage of any Swingline Facility Loan, interest in respect of such Revolving Facility Percentage shall be solely for the account of the Swingline Facility Lender.
(j) The Borrower shall make all payments of principal and interest in respect of the Swingline Facility Loans directly to the Swingline Facility Lender.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
The Borrower represents and warrants to each of the Lenders with respect to each of the Loan Parties, and with respect to each of Borrowers Subsidiaries other than Subsidiaries that are Loan Parties, to the extent applicable, that:
Section 3.01 Organization; Powers. Each Loan Party (a) is duly organized, validly existing and (if applicable) in good standing under the laws of the jurisdiction of its organization except for such failure to be in good standing which could not reasonably be expected to have a Material Adverse Effect, (b) has all requisite power and authority to own its property and assets and to carry on its business as now conducted, (c) is qualified to do business in each jurisdiction where such qualification is required, except where the failure to so qualify could not reasonably be expected to have a Material Adverse Effect and (d) has the power and authority to execute, deliver and perform its obligations under each of the Loan Documents and each other agreement or instrument contemplated thereby to which it is or will be a party and, in the case of the Borrower, to borrow and otherwise obtain credit hereunder. Franks International C.V. is duly formed and entered into as a contract governed by the laws of the Netherlands and, in absence of Franks International C.V. having separate legal personality under the laws of the Netherlands, Franks International Management B.V. acting as its sole general partner is the sole party authorized to act on behalf of Franks International C.V. and shall hold title to any and all assets contributed to or acquired on behalf of Franks International C.V.
Section 3.02 Authorization . The execution, delivery and performance by the Borrower and each Loan Party of each of the Loan Documents to which it is a party, and the borrowings hereunder and the Transactions (a) have been duly authorized by all necessary corporate, stockholder, limited liability company or partnership action required to be obtained by the Borrower and such Loan Parties and (b) will not (i) violate (A) any provision of law, statute, rule or regulation, or of the certificate or articles of incorporation or other constitutive documents or by-laws of the Borrower or any such Loan Party, (B) any applicable order of any court or any rule, regulation or order of any Governmental
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Authority or (C) any provision of any indenture, lease, agreement or other instrument to which the Borrower or any such Loan Party is a party or by which any of them or any of their respective property is or may be bound, (ii) be in conflict with, result in a breach of or constitute (alone or with notice or lapse of time or both) a default under, give rise to a right of or result in any cancellation or acceleration of any right or obligation (including any payment) or to a loss of a material benefit under any such indenture, lease, agreement or other instrument, where any such conflict, violation, breach or default referred to in clause (i) or (ii) of this clause (b), could reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect, or (c) will not result in the creation or imposition of any Lien upon or with respect to any property or assets now owned or hereafter acquired by the Borrower or any such Loan Party, other than the Liens permitted by Section 6.02.
Section 3.03 Enforceability . This Agreement has been duly executed and delivered by the Borrower and constitutes, and each other Loan Document when executed and delivered by each Loan Party that is party thereto will constitute, a legal, valid and binding obligation of such Loan Party enforceable against each such Loan Party in accordance with its terms, subject to (a) the effects of bankruptcy, insolvency, moratorium, reorganization, fraudulent conveyance or other laws affecting creditors rights generally and (b) general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law).
Section 3.04 Governmental Approvals . No action, consent or approval of, registration or filing with or any other action by any Governmental Authority is or will be required in connection with the Transactions except for such consents, authorizations, filings or other actions that have either (i) been made or obtained and are in full force and effect or (ii) are listed on Schedule 3.04 , and (iii) such actions, consents, approvals, registrations or filings, the failure to be obtained or made which could not reasonably be expected to have a Material Adverse Effect.
Section 3.05 Financial Statements . There has heretofore been furnished to the Lenders the following (and the following representations and warranties are made with respect thereto):
The unaudited pro forma consolidated balance sheet of FINV as of December 31, 2012, prepared giving effect to the Transactions as if the Transactions had occurred on such date. Such pro forma consolidated balance sheet (i) was prepared in good faith based on assumptions that are believed by the Borrower to be reasonable as of the Closing Date (it being understood that such assumptions are based on good faith estimates with respect to certain items and that the actual amounts of such items on the Closing Date is subject to variation), (ii) accurately reflects all adjustments necessary to give effect to the Transactions and (iii) presents fairly, in all material respects, the pro forma financial position of the Borrower and its Subsidiaries as of December 31, 2012, as if the Transactions had occurred on such date.
Section 3.06 No Material Adverse Effect . Since December 31, 2012, there has been no event or occurrence which has resulted in, individually or in the aggregate, any Material Adverse Effect.
Section 3.07 Title to Properties; Possession Under Leases . (a) The Loan Parties have good and valid title to all of their properties and assets, subject solely to Permitted Liens and except where the failure to have such title could not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect. The Loan Parties have maintained, in all material respects and in accordance with normal industry practice, all of the machinery, equipment, vehicles, facilities and other tangible personal property now owned or leased by the Loan Parties that is necessary to conduct their business as it is now conducted.
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(b) Each Loan Party has complied with all obligations under all leases to which it is a party, except where the failure to comply could not have a Material Adverse Effect, and all such leases are in full force and effect, except leases in respect of which the failure to be in full force and effect could not reasonably be expected to have a Material Adverse Effect. The Loan Parties enjoy peaceful and undisturbed possession under all such leases, other than leases in respect of which the failure to enjoy peaceful and undisturbed possession could not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect.
(c) The Loan Parties have good title to or valid leasehold interests (subject to Permitted Liens) in all real property owned by them, except as could not reasonably be expected to have a Material Adverse Effect.
(d) Each Loan Party owns or possesses, or has the right to use or could obtain ownership or possession of or a right to use, on terms not materially adverse to it, all patents, trademarks, service marks, trade names and copyrights necessary for the present conduct of its business, without any known conflict with the rights of others, and free from any burdensome restrictions, except where such conflicts and restrictions could not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect.
(e) Reserved.
(f) Reserved.
(g) Schedule 3.07(g) sets forth as of the Closing Date (i) the name and jurisdiction of incorporation, formation or organization of each Loan Party, (ii) as to each such Subsidiary of Borrower, the percentage of each class of Equity Interests owned by the Borrower or by any such Subsidiary, indicating the ownership thereof, and (iii) the total assets (excluding intangible assets and intercompany investments) of each Loan Party (other than the Borrower) that will execute the Guaranty Agreement as of the Closing Date and the percentage of each such Loan Partys total assets to the Borrowers Consolidated Total Assets.
Section 3.08 Litigation; Compliance with Laws . (a) Except as set forth on Schedule 3.08(a) , there are no actions, suits, investigations or proceedings at law or in equity or by or on behalf of any Governmental Authority or in arbitration now pending against, or, to the knowledge of the Borrower, threatened in writing against or affecting, any Loan Party or any business, property or rights of any such Person (i) as of the Closing Date, that involve any Loan Document or the Transactions or (ii) which individually or in the aggregate could reasonably be expected to have a Material Adverse Effect or which could reasonably be expected, individually or in the aggregate, to materially adversely affect the Transactions. No Loan Party, nor any of its Affiliates, is in violation of any laws relating to terrorism or money laundering, including Executive Order No. 13224 on Terrorist Financing, effective September 23, 2001, and the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001, Public Law 107-56 (signed into law on October 26, 2001) (the U.S.A. PATRIOT Act ).
(b) (i) No Loan Party nor any of their respective properties or assets is in violation of (nor will the continued operation of their material properties and assets as currently conducted violate) any currently applicable law, rule or regulation or any restriction of record or agreement affecting any material real property nor is any Loan Party in default with respect to any judgment, writ, injunction or decree of any Governmental Authority, where such violation or default could reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect, and (ii) each Loan Party holds all permits, licenses, registrations, certificates, approvals, consents, clearances and other authorizations from
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any Governmental Authority required under any currently applicable law, rule or regulation for the operation of its business as presently conducted, except as could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.
Section 3.09 Federal Reserve Regulations . (a) Neither the Borrower nor any Loan Party is engaged principally, or as one of its important activities, in the business of extending credit for the purpose of purchasing or carrying Margin Stock.
(b) No part of the proceeds of any Loan will be used, whether directly or indirectly, and whether immediately, incidentally or ultimately, (i) to purchase or carry Margin Stock or to extend credit to others for the purpose of purchasing or carrying Margin Stock or to refund indebtedness originally incurred for such purpose, or (ii) for any purpose that entails a violation of, or that is inconsistent with, the provisions of the Regulations of the Board, including Regulation U or Regulation X.
Section 3.10 Investment Company Act . None of the Loan Parties is an investment company as defined in, or subject to regulation under, the Investment Company Act of 1940, as amended.
Section 3.11 Use of Proceeds . The Borrower will use the proceeds of the Revolving Facility Loans, Swingline Facility Loans and may request the issuance of Revolving Letters of Credit, solely for working capital and other general corporate purposes including capital expenditures and to pay fees and expenses incurred in connection with the Transactions.
Section 3.12 Tax Returns . Except as set forth on Schedule 3.12 , each of the Borrower and Borrowers Subsidiaries (i) has timely filed or caused to be timely filed all U.S. federal, state, local and non-U.S. Tax returns required to have been filed by it and each such Tax return is complete and accurate in all material respects and (ii) has timely paid or caused to be timely paid all Taxes due and payable by it and all other Taxes or assessments, except in each case referred to in clauses (i) or (ii) above, (1) if the failure to comply would not cause a Material Adverse Effect or (2) if the Taxes or assessments are being contested in good faith by appropriate proceedings in accordance with Section 5.03 and for which the Borrower or any of Borrowers Subsidiaries (as the case may be) has set aside on its books adequate reserves in accordance with GAAP.
Section 3.13 No Material Misstatements . (a) All written information (other than the Projections, estimates and information of a general economic nature) (the Information ) concerning the Borrower and Borrowers Subsidiaries, the Transactions and any other transactions contemplated hereby prepared by the Borrower or any Loan Party and delivered to the Administrative Agent or to the Administrative Agent on behalf of the Lenders in connection with the Transactions or the other transactions contemplated hereby, when taken as a whole, was true and correct in all material respects, as of the date such Information was furnished to the Administrative Agent or the Lenders, as the case may be, and as of the Closing Date, and did not contain any untrue statement of a material fact as of any such date or omit to state any material fact necessary in order to make the statements contained therein not materially misleading in light of the circumstances under which such statements were made.
(b) The Projections prepared by or on behalf of the Borrower or any of its representatives and that have been made available to any Lender or the Administrative Agent in connection with the Transactions or the other transactions contemplated hereby (i) have been prepared in good faith based upon assumptions believed by the Borrower to be reasonable as of the date such Projections were furnished to the Lenders (it being recognized by the Administrative Agent and the Lenders, however, that projections as to future events are not to be viewed as facts and that results during the period(s) covered by such projections may differ from the projected results and that such differences may be material and that the Loan Parties make no representation that such projections will be realized), and (ii) as of the Closing Date, have not been modified in any material respect by the Borrower.
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Section 3.14 Employee Benefit Plans . (a) Each Plan has been administered in compliance with the applicable provisions of ERISA and the Code (and the regulations and published interpretations thereunder) except for such noncompliance that could not reasonably be expected to have a Material Adverse Effect. No ERISA Event has occurred or is reasonably expected to occur that, when taken together with all other ERISA Events which have occurred or for which liability is reasonably expected to occur, could reasonably be expected to result in a Material Adverse Effect.
Section 3.15 Environmental Matters . Except as set forth on Schedule 3.15 or for matters that could not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect (i) no written notice of a request for information, order, complaint, Environmental Claim or penalty has been received by Borrower or any of Borrowers Subsidiaries, and there are no judicial or administrative actions, suits or proceedings pending or, to the knowledge of the Borrower, threatened against the Borrower or any of Borrowers Subsidiaries which allege a violation of or liability under any Environmental Laws, in each case relating to the Borrower or any of Borrowers Subsidiaries, (ii) Borrower and each of Borrowers Subsidiaries have timely applied for, or obtained, and as applicable maintains in full force and effect, all permits, registrations and licenses to the extent necessary for the conduct of its businesses and operations as currently conducted to comply with all Environmental Laws and is, and, within all surviving periods of applicable statutes of limitation, has been, in compliance with the terms and conditions of such permits, registrations and licenses, and with all Environmental Laws, (iii) none of the Borrower nor any of Borrowers Subsidiaries is conducting or funding or known by Borrower to be responsible under Environmental Law for any investigation, remediation, remedial action or cleanup of any Release or threatened Release of Hazardous Materials arising from any of their operations, (iv) there has been no Release or threatened Release of Hazardous Materials at any property currently or, to the knowledge of the Borrower, formerly owned, operated or leased by the Borrower or any of Borrowers Subsidiaries that would reasonably be expected to give rise to any liability of the Borrower or any of Borrowers Subsidiaries under any Environmental Laws or Environmental Claim against the Borrower or any of Borrowers Subsidiaries, and, to the knowledge of Borrower, no Hazardous Material have been transported for disposal to or Released at any location offsite real properties of Borrower or any of Borrowers Subsidiaries in a manner that would reasonably be expected to give rise to any liability of the Borrower or any of Borrowers Subsidiaries under any Environmental Laws or Environmental Claim against the Borrower or any of Borrowers Subsidiaries, (v) none of the Borrower nor any of Borrowers Subsidiaries has entered into any written agreement or contract to assume, guarantee or indemnify a third party for any Environmental Claims, and (vi) to the knowledge of the Borrower, there are not currently and there have not been any underground storage tanks owned or operated by the Borrower or any of Borrowers Subsidiaries on the Borrowers or any Borrowers Subsidiarys real property. Representations and warranties of the Borrower or any of Borrowers Subsidiaries with respect to environmental matters are limited to those in this Section 3.15.
Section 3.16 Reserved .
Section 3.17 Reserved .
Section 3.18 Solvency . (a) Immediately after giving effect to the Transactions (i) the fair value of the assets (for the avoidance of doubt, calculated to include goodwill and other intangibles) of the Loan Parties on a consolidated basis, at a fair valuation, will exceed the debts and liabilities, direct, subordinated, contingent or otherwise, of the Loan Parties on a consolidated basis; (ii) the present fair saleable value of the property of the Loan Parties on a consolidated basis will be greater than the amount that will be required to pay the probable liability of the Loan Parties on a consolidated basis, on their
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debts and other liabilities, direct, subordinated, contingent or otherwise, as such debts and other liabilities become absolute and matured; (iii) the Loan Parties on a consolidated basis will be able to pay their debts and liabilities, direct, subordinated, contingent or otherwise, as such debts and liabilities become absolute and matured; and (iv) the Loan Parties on a consolidated basis will not have unreasonably small capital with which to conduct the businesses in which they are engaged as such businesses are now conducted and are proposed to be conducted following the Closing Date.
(b) The Borrower does not intend to, and does not believe that it nor any of its Subsidiaries will, incur debts beyond its ability to pay such debts as they mature, taking into account the timing and amounts of cash to be received by it or any such Subsidiary and the timing and amounts of cash to be payable on or in respect of its Indebtedness or the Indebtedness of any such Subsidiary.
Section 3.19 Labor Matters. There are no strikes pending or, to the knowledge of any Responsible Officer of the Borrower, threatened against the Borrower or any of Borrowers Subsidiaries that, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect. The hours worked and payments made to employees of the Borrower and Borrowers Subsidiaries have not been in violation in any material respect of the Fair Labor Standards Act or any other applicable law dealing with such matters, except where such violation, either individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect. All material payments due from the Borrower or any of Borrowers Subsidiaries or for which any claim may be made against the Borrower or any of Borrowers Subsidiaries, on account of wages and employee health and welfare insurance and other benefits have been paid or accrued as a liability on the books of the Borrower or such Subsidiary to the extent required by GAAP. Consummation of the Transactions will not give rise to a right of termination or right of renegotiation on the part of any union under any collective bargaining agreement to which the Borrower or any of Borrowers Subsidiaries (or any predecessor) is a party or by which the Borrower or any of Borrowers Subsidiaries (or any predecessor) is bound, other than collective bargaining agreements that, individually or in the aggregate, are not material to the Borrower and Borrowers Subsidiaries, taken as a whole.
Section 3.20 Insurance . Schedule 3.20 sets forth a true, complete and correct description of all material insurance maintained by or on behalf of the Borrower and its Subsidiaries as of the Closing Date. As of such date, such insurance is in full force and effect. The Borrower believes that the insurance maintained by or on behalf of it and the Subsidiaries is adequate.
Section 3.21 Status as Senior Debt . The Obligations shall rank pari passu with any other senior Indebtedness or securities of the Borrower and shall constitute senior indebtedness of the Borrower and its Subsidiaries under and as defined in any documentation documenting any junior indebtedness of the Borrower or the Subsidiaries.
Section 3.22 Material Contracts . Other than as set forth on Schedule 3.22 , as of the Closing Date there are no contracts or agreements to which the Borrower or any of its Subsidiaries is a party, that, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect, or that, if terminated or if a default occurs thereunder, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect.
Section 3.23 Foreign Corrupt Practices . Neither the Borrower nor any of its Subsidiaries, nor, to the knowledge of any Responsible Officer of the Borrower, any director, officer or Affiliate of the Borrower or any of its Subsidiaries is aware of or has taken any action, directly or indirectly, that would result in a material violation by such Persons of the FCPA, including without limitation, making use of the mails or any means or instrumentality of
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interstate commerce corruptly in furtherance of an offer, payment, promise to pay or authorization of the payment of any money, or other property, gift, promise to give, or authorization of the giving of anything of value to any foreign official (as such term is defined in the FCPA) or any foreign political party or official thereof or any candidate for foreign political office, in contravention of the FCPA; and, the Borrower, its Subsidiaries and their respective Affiliates have conducted their business in material compliance with the FCPA and have instituted and maintain policies and procedures designed to ensure, and which are reasonably expected to continue to ensure, continued compliance therewith.
Section 3.24 OFAC . Neither the Borrower nor any of its Subsidiaries, nor any director, officer or Affiliate of the Borrower or any of its Subsidiaries is currently subject to any material U.S. sanctions administered by OFAC, and the Borrower will not directly or indirectly use the proceeds from the Loans or any Revolving Letter of Credit or lend, contribute or otherwise make available such proceeds to any Subsidiary, joint venture partner or other Person, for the purpose of financing the activities of any Person currently subject to any U.S. sanctions administered by OFAC.
ARTICLE IV
CONDITIONS TO CREDIT EVENTS
The obligations of (a) the Lenders to make Loans, (b) any Issuing Bank to issue, amend, extend or renew any Revolving Letter of Credit hereunder, or (c) the Swingline Facility Lender to make Swingline Facility Loans (each of (a), (b) and (c), a Credit Event ) are subject to the satisfaction of the following conditions:
Section 4.01 All Credit Events . On the date of each Credit Event (other than a Borrowing on the Closing Date (except with respect to clause (a) below)):
(a) The Administrative Agent shall have received, in the case of a Borrowing, a Borrowing Request as required by Section 2.03, in the case of a Swingline Facility Borrowing, a Swingline Facility Borrowing Request as required by Section 2.23(b) or, in the case of the issuance of a Revolving Letter of Credit, the applicable Issuing Bank and the Administrative Agent shall have received a notice requesting the issuance of such Revolving Letter of Credit as required by Section 2.05(b) (in the case of any Revolving Letter of Credit).
(b) The representations and warranties set forth in Article III hereof shall be true and correct in all material respects (unless qualified by materiality or Material Adverse Effect, in which case the accuracy of such qualified representations and warranties shall be true and correct in all respects) on and as of the date of such Credit Event (other than an amendment, extension or renewal of a Revolving Letter of Credit without any increase in the stated amount of such Revolving Letter of Credit), as applicable, with the same effect as though made on and as of such date, except to the extent such representations and warranties expressly relate to an earlier date (in which case such representations and warranties shall be true and correct in all material respects as of such earlier date).
(c) At the time of and immediately after such Credit Event (other than an amendment, extension or renewal of a Revolving Letter of Credit without any increase in the stated amount of such Revolving Letter of Credit), as applicable, no Event of Default or Default shall have occurred and be continuing.
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Each Credit Event (other than an amendment, extension or renewal of a Revolving Letter of Credit without any increase in the stated amount of such Revolving Letter of Credit) shall be deemed to constitute a representation and warranty by the Borrower on the date of such Credit Event as to the matters specified in paragraphs (b) and (c) of this Section 4.01.
Section 4.02 First Credit Event . On the Closing Date:
(a) The Administrative Agent (or its counsel) shall have received from (i) each party hereto either (a) a counterpart of this Agreement signed on behalf of such party or (b) written evidence satisfactory to the Administrative Agent (which may include telecopy transmission, or electronic transmission of a PDF copy, of a signed signature page of this Agreement) that such party has signed a counterpart of this Agreement, (ii) Borrower duly executed Notes payable to the order of each Lender in a principal amount equal to its Revolving Facility Commitment dated as of the Closing Date, and (iii) each party thereto duly executed counterparts (in such number as may be requested by the Administrative Agent) of the Guaranty Agreement.
(b) The Administrative Agent shall have received, on behalf of itself, the Lenders and each Issuing Bank on the Closing Date, favorable written opinions of Vinson & Elkins L.L.P., special U.S. counsel for the Loan Parties, Van Campen Liem, special Dutch counsel for Franks International C.V. and Oilfield Equipment Rental B.V., and special British Virgin Islands counsel for Franks International West Africa (BVI) Limited and Franks International (BVI) Limited, each in form and substance reasonably satisfactory to the Administrative Agent (A) dated the Closing Date, (B) addressed to each Issuing Bank on the Closing Date, the Administrative Agent and the Lenders and (C) in form and substance reasonably satisfactory to the Administrative Agent and covering such matters relating to the Loan Documents as the Administrative Agent shall reasonably request, and each Loan Party hereby instructs its counsel to deliver such opinions.
(c) The Administrative Agent shall have received in the case of each Loan Party each of the following:
(i) a copy of the certificate or articles of incorporation, partnership agreement or limited liability agreement, including all amendments thereto, or other relevant constitutional documents under applicable law of each Loan Party, (A) in case of a company organized under the laws of the Netherlands, issued as a true copy by the relevant civil-law notary, with an excerpt from the trade register in the Netherlands, (B) in the case of any other corporation, certified as of a recent date by the Secretary of State (or other similar official) and a certificate as to the good standing (to the extent such concept or a similar concept exists under the laws of such jurisdiction) of each such Loan Party as of a recent date from such Secretary of State (or other similar official) or (C) in the case of a partnership of or limited liability company, certified by the Secretary or Assistant Secretary, or the general partner, managing member or sole member, of each such Loan Party; and
(ii) a certificate of the Secretary, Assistant Secretary, Director, President or similar officer or the general partner, managing member or sole member, of each Loan Party, in each case dated the Closing Date and certifying:
(A) that attached thereto is a true and complete copy of the by-laws (or partnership agreement, memorandum and articles of association, limited liability company agreement or other equivalent governing documents) of such Loan Party as in effect on the Closing Date and at all times since a date prior to the date of the resolutions described in clause (B) below,
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(B) that attached thereto is a true and complete copy of resolutions duly adopted by the governing body of such Loan Party (or its managing general partner or managing member) authorizing the execution, delivery and performance of the Loan Documents to which such Person is a party and, in the case of the Borrower, the borrowings hereunder, and that such resolutions have not been modified, rescinded or amended and are in full force and effect on the Closing Date,
(C) that the certificate or articles of incorporation, partnership agreement or limited liability agreement of such Loan Party has not been amended since the date of the last amendment thereto disclosed pursuant to clause (i) above,
(D) as to the incumbency and specimen signature of each officer or director executing any Loan Document or any other document delivered in connection herewith on behalf of such Loan Party, and
(E) as to the absence of any pending proceeding for the dissolution or liquidation of such Loan Party or, to the knowledge of such Person, threatening the existence of such Loan Party.
(d) The Administrative Agent shall have received a certificate from a Responsible Officer of the Borrower certifying that the Borrower has received all governmental and third party consents, licenses, and approvals necessary for the consummation of the Transactions, all of which shall be in form and substance satisfactory to the Administrative Agent (or a statement that no such governmental or third party consents, licenses or approvals are required).
(e) The Lenders shall have received the financial statements referred to in Section 3.05.
(f) After giving effect to the Transactions, no Loan Party shall have any outstanding preferred equity or Indebtedness other than (i) the Loans and other extensions of credit under this Agreement and (ii) other Indebtedness permitted pursuant to Section 6.01.
(g) The Lenders shall have received a solvency certificate substantially in the form of Exhibit F and signed by the chief financial officer or another Responsible Officer of the Borrower confirming the solvency of the Borrower and the Borrowers Subsidiaries on a consolidated basis after giving effect to the Transactions.
(h) There shall not have occurred since December 31, 2012, any event or condition that has had or would reasonably be expected, either individually or in the aggregate, to have a Material Adverse Effect.
(i) The Administrative Agent shall have received all fees payable thereto or to any Lender on or prior to the Closing Date and, to the extent invoiced, all other amounts due and payable pursuant to the Loan Documents on or prior to the Closing Date, including, to the extent invoiced, reimbursement or payment of all reasonable out-of-pocket expenses required to be reimbursed or paid by the Loan Parties hereunder or under any Loan Document.
(j) The Administrative Agent shall have received a certificate signed by a Responsible Officer of the Borrower as to the matters set forth in clauses (f) and (h) of this Section 4.02.
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(k) The Administrative Agent shall have received all documentation and other information required by regulatory authorities with respect to the Borrower and other Loan Parties under applicable know your customer and anti-money laundering rules and regulations, including without limitation the U.S. PATRIOT Act.
(l) The Administrative Agent shall have received evidence of insurance naming the Administrative Agent as additional insured with customary endorsements on Borrowers liability insurance.
(m) The Administrative Agent and each Lender shall have completed their due diligence to their satisfaction.
(n) The Administrative Agent shall have received evidence (i) that contemporaneously with the this Agreement becoming effective, Franks International N.V. has closed its initial public offering, (ii) that FINV has contributed to Borrower all of FINVs non-U.S. Subsidiaries and Mosing Holdings, Inc. has contributed all of its U.S. Subsidiaries to Franks International C.V. (excluding certain de minimis Subsidiaries) and Franks International C.V. has issued 100% of its general partnership interest to the Borrower as more fully described in FINVs Registration Statement on Form S-1, as amended, and (iii) all of Borrowers Indebtedness described in clauses (a) and (b) of the definition of Indebtedness has been repaid in full.
The Administrative Agent is hereby authorized and directed to declare this Agreement effective when the conditions set forth in Section 4.02 have been satisfied to the reasonable satisfaction of the Administrative Agent or waived as permitted herein. Such declaration shall be final, conclusive and binding upon the Administrative Agent, the Borrower and the Lenders for all purposes.
ARTICLE V
AFFIRMATIVE COVENANTS
The Borrower covenants and agrees with each Lender that so long as this Agreement shall remain in effect and until the Commitments have been terminated and the principal of and interest on each Loan, all Fees and all other expenses or amounts then due and payable under any Loan Document shall have been paid in full and all Revolving Letters of Credit have been canceled or have expired and all amounts drawn thereunder have been reimbursed in full or cash collateralized in a manner reasonably satisfactory to the Administrative Agent, unless the Required Lenders shall otherwise consent in writing, the Borrower will, and will cause each Loan Party (and, to the extent expressly set forth below, other applicable Subsidiaries) to:
Section 5.01 Existence; Businesses and Properties. (a) Do or cause to be done all things necessary to preserve, renew and keep in full force and effect its legal existence and good standing, except as otherwise expressly permitted under Section 6.05, and except for the liquidation or dissolution of any such Subsidiary if the assets of such Subsidiary to the extent they exceed estimated liabilities are acquired by the Borrower or a Wholly Owned Subsidiary of the Borrower in such liquidation or dissolution.
(b) Do or cause to be done all things necessary to (i) in the Borrowers reasonable business judgment obtain, preserve, renew, extend and keep in full force and effect the permits, franchises, authorizations, patents, trademarks, service marks, trade names, copyrights, licenses and rights with respect thereto necessary to the normal conduct of its business, (ii) comply in all material respects with all material applicable laws, rules, regulations and judgments, writs, injunctions, decrees, permits, licenses
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and orders of any Governmental Authority, whether now in effect or hereafter enacted and (iii) at all times maintain and preserve all property necessary to the normal conduct of its business and keep such property in good repair, working order and condition and from time to time make, or cause to be made, all needful and proper repairs, renewals, additions, improvements and replacements thereto necessary in order that the business carried on in connection therewith, if any, may be properly conducted at all times (in each case except as expressly permitted by this Agreement); in each case in this paragraph (b) except where the failure to do so could not reasonably be expected to have a Material Adverse Effect.
Section 5.02 Insurance . Keep its insurable properties insured at all times by financially sound and reputable insurers in such amounts as shall be customary for similar businesses and maintain such other reasonable insurance (including, to the extent consistent with past practices, self-insurance), of such types, to such extent and against such risks, as is customary with companies in the same or similar businesses and maintain such other insurance as may be required by law or any other Loan Document and cause Administrative Agent to be named as an additional insured on all liability policies.
Section 5.03 Taxes; Payment of Obligations. Pay and discharge promptly when due all material Taxes, assessments and governmental charges or levies imposed upon it or upon its income or profits or in respect of its property, before the same shall become delinquent or in default, as well as all lawful claims for labor, materials and supplies or otherwise that, if unpaid, might give rise to a Lien upon such properties or any part thereof; provided, however , that such payment and discharge shall not be required with respect to any such Tax, assessment, charge, levy or claim to the extent that (i) the validity or amount thereof shall be contested in good faith by appropriate proceedings, and the Borrower or the affected Subsidiary of the Borrower, as applicable, shall have set aside on its books reserves in accordance with GAAP with respect thereto, (ii) the aggregate amount of such Taxes, assessments, charges, levies or claims does not exceed U.S. $10,000,000, or (iii) if the failure to pay, discharge or otherwise satisfy such Taxes, assessments, charges, levies or claims obligation could not reasonably be expected to have a Material Adverse Effect. Pay, discharge or otherwise satisfy at or before maturity or before they become delinquent, as the case may be, the Obligations and all its other material obligations of whatever nature, except where the amount or validity thereof is currently being contested in good faith by appropriate proceedings and reserves in conformity with GAAP with respect thereto have been provided on the books of the Borrower or the affected Subsidiary of the Borrower or if the failure to pay, discharge or otherwise satisfy such obligation could not reasonably be expected to have a Material Adverse Effect.
Section 5.04 Financial Statements, Reports, Etc. . Furnish to the Administrative Agent (which will promptly furnish such information to the Lenders):
(a) as soon as available, but in any event within one hundred twenty (120) days after the end of each fiscal year of FINV, a consolidated balance sheet and related statements of operations, cash flows and owners equity showing the financial position of FINV and its Subsidiaries (including the Borrower) as of the close of such fiscal year and the consolidated results of their operations during such year and setting forth in comparative form the corresponding figures for the prior fiscal year, all audited by PricewaterhouseCoopers LLP or other independent accountants of recognized international standing reasonably acceptable to the Administrative Agent and accompanied by an opinion of such accountants (which shall not be qualified in any material respect) to the effect that such consolidated financial statements fairly present, in all material respects, the financial position and results of operations of FINV and its Subsidiaries on a consolidated basis in accordance with GAAP;
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(b) as soon as available, but in any event within one forty-five (45) days after the end of each fiscal quarter of FINV, a consolidated balance sheet and related statements of operations and cash flows showing the financial position of FINV and its Subsidiaries (including the Borrower) as of the close of such fiscal quarter and the consolidated results of their operations during such fiscal quarter and the then-elapsed portion of the fiscal year and setting forth in comparative form the corresponding figures for the corresponding periods of the prior fiscal year, all certified by a Financial Officer of the Borrower, as fairly presenting, in all material respects, the financial position and results of operations of FINV and its Subsidiaries on a consolidated basis in accordance with GAAP (subject to normal year-end audit adjustments and the absence of footnotes);
(c) (x) concurrently with any delivery of financial statements under (a) or (b) above, a certificate of a Financial Officer of the Borrower (i) certifying that no Event of Default or Default has occurred or, if such an Event of Default or Default has occurred, specifying the nature and extent thereof and any corrective action taken or proposed to be taken with respect thereto and (ii) setting forth a computation of the Financial Performance Covenants in detail reasonably satisfactory to the Administrative Agent and (y) concurrently with any delivery of financial statements under (a) above, a certificate of its independent accounting firm stating whether they obtained knowledge during the course of their examination of such statements of any Default or Event of Default under Section 6.10 or 6.11 (which certificate may be limited to accounting matters and disclaims responsibility for legal interpretations);
(d) promptly after the same become publicly available, copies of all periodic and other available reports, proxy statements and, to the extent requested by the Administrative Agent, other materials filed by the Borrower or any of its Subsidiaries with the SEC, or distributed to its equityholders generally, if and as applicable;
(e) reserved;
(f) promptly, a copy of all reports submitted to the governing body (or any committee thereof) of the Borrower or any of its Subsidiaries in connection with any material interim or special audit made by independent accountants of the books of the Borrower or any of its Subsidiaries;
(g) promptly, from time to time, such other information regarding the operations, business affairs and financial condition of the Borrower or any of its Subsidiaries, or compliance with the terms of any Loan Document, or such consolidating financial statements, as in each case the Administrative Agent may reasonably request (for itself or on behalf of any Lender);
(h) promptly upon request by the Administrative Agent, copies of: (i) each Schedule B (Actuarial Information) to the annual report (Form 5500 Series) filed with the Internal Revenue Service with respect to a Plan; (ii) the most recent actuarial valuation report for any Plan; (iii) all notices received from a Multiemployer Plan sponsor or a Plan sponsor or any governmental agency concerning an ERISA Event; and (iv) such other documents or governmental reports or filings relating to any Plan or Multiemployer Plan as the Administrative Agent shall reasonably request; and
(i) no later than 90 days following the first day of each fiscal year of the Borrower, a budget for the Borrower and its consolidated Subsidiaries.
Documents required to be delivered pursuant this Section 5.04 may be delivered electronically and, in the case of Sections 5.04(d) shall be deemed to have been delivered if such documents, or one or more annual, quarterly or other reports or filings containing such documents, (i) shall have been posted or provided a link to on FINVs website on the Internet at the website at http://www.franksinternational.com/ , (ii) shall be available on the website of the SEC at http://www.sec.gov or (iii) shall have been posted on FINVs behalf on SyndTrak or another website, if any, to which each Lender and the Administrative Agent have access (whether a commercial, third-party website or whether sponsored by the Administrative Agent).
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Section 5.05 Litigation and Other Notices . Furnish to the Administrative Agent written notice of the following promptly after any Responsible Officer of the Borrower or any Subsidiary obtains actual knowledge thereof:
(a) any Event of Default or Default, specifying the nature and extent thereof and the corrective action (if any) proposed to be taken with respect thereto;
(b) the filing or commencement of, or any written notice of intention of any Person to file or commence, any action, suit or proceeding, whether at law or in equity or by or before any Governmental Authority or in arbitration, against the Borrower or any of its Subsidiaries which, if adversely determined, could reasonably be expected to have a Material Adverse Effect;
(c) any other development specific to the Borrower or any of its Subsidiaries that has had, or could reasonably be expected to have, a Material Adverse Effect; and
(d) the occurrence of any ERISA Event that, together with all other ERISA Events that have occurred, could reasonably be expected to have a Material Adverse Effect.
Section 5.06 Compliance with Laws . Comply with all laws, rules, regulations and orders of any Governmental Authority applicable to it or its property (owned or leased), including ERISA, except where the failure to do so, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect; provided that this Section 5.06 shall not apply to Environmental Laws, which are the subject of Section 5.09, or to laws related to Taxes, which are the subject of Section 5.03.
Section 5.07 Maintaining Records; Access to Properties and Inspections . Maintain all financial records in accordance with GAAP and permit any Persons designated by the Administrative Agent or, upon the occurrence and during the continuance of an Event of Default, any Lender to visit and inspect the financial records and the properties of the Borrower or any of its Subsidiaries at reasonable times, upon reasonable prior notice, and as often as reasonably requested and to make extracts from and copies of such financial records, and permit any Persons designated by the Administrative Agent or, upon the occurrence and during the continuance of an Event of Default, any Lender upon reasonable prior notice and at such Lenders expense to discuss the affairs, finances and condition of the Borrower or any of the Subsidiaries with the officers thereof, managing member or sole member thereof, and independent accountants therefor (subject to reasonable requirements of confidentiality, including requirements imposed by law or by contract); provided that, during any calendar year absent the occurrence and continuation of an Event of Default, only one (1) visit by the Administrative Agent shall be at the Borrowers expense; provided , further , that when an Event of Default exists, the Administrative Agent or any Lender may do any of the foregoing at the expense of the Borrower.
Section 5.08 Use of Proceeds . Use the proceeds of the Loans and the issuance of Letters of Credit solely for the purposes described in Section 3.11.
Section 5.09 Compliance with Environmental Laws . Comply, cause all of the Borrowers Subsidiaries to comply with all Environmental Laws applicable to its business, operations and properties; apply for and, as applicable, obtain and maintain in full force and effect all material authorizations, registrations, licenses and permits required pursuant to Environmental Law for its business, operations and properties; and perform any investigation, remedial action or cleanup required as a result of the Release of any Hazardous Materials as required of Borrower or any of Borrowers
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Subsidiaries pursuant to Environmental Laws except that Borrower and all of the Borrowers Subsidiaries are not required to perform such investigation, remedial action or cleanup to the extent that Borrower reasonably believes in good faith that one or more Persons other than Borrower or Borrowers Subsidiaries is responsible for such performance and Borrower or any of the Borrowers Subsidiaries pursue actions in a timely manner to compel such Persons to conduct such investigation, remedial action or cleanup; and further, except, in each case with respect to this Section 5.09, to the extent the failure to do so could not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect.
Section 5.10 Further Assurances; Additional Loan Parties . (a) Execute any and all further documents, financing statements, agreements and instruments, and take all such further actions, that may be required under any applicable law, or that the Administrative Agent may reasonably request, all at the expense of the applicable Loan Parties, and provide to the Administrative Agent, from time to time upon reasonable request, evidence reasonably satisfactory to the Administrative Agent as to the compliance of the Loan Parties with the requirements of the Loan Documents.
(b) At all times the percentage of Borrowers Consolidated Total Assets owned by Loan Parties shall be at least 75% of Borrowers Consolidated Total Assets. If Borrower forms or acquires any additional direct or indirect Material Subsidiary, within 10 Business Days after the date of formation or acquisition of such Subsidiary, Borrower will cause such Subsidiary to execute a joinder to the Guaranty Agreement and become a Loan Party. If through growth in a Subsidiarys business, or as a result of any conveyance, purchase, assignment, transfer or other acquisition of assets, or otherwise, a Subsidiary which was not previously a Loan Party becomes a Material Subsidiary, Borrower will cause such Subsidiary to execute a joinder to the Guaranty Agreement and become a Loan Party.
(c) In the case of any Loan Party, (i) furnish to the Administrative Agent prompt written notice of any change (A) in such Loan Partys corporate or organization name, or (B) in such Loan Partys identity or organizational structure.
Section 5.11 Fiscal Year . Cause its fiscal year to end on December 31, unless otherwise required by the Code.
ARTICLE VI
NEGATIVE COVENANTS
The Borrower covenants and agrees with each Lender that so long as this Agreement shall remain in effect and until the Commitments have been terminated and the principal of and interest on each Loan, all Fees and all other expenses or amounts then due and payable under any Loan Document have been paid in full and all Revolving Letters of Credit have been canceled or have expired and all amounts drawn thereunder have been reimbursed in full or cash collateralized in a manner reasonably satisfactory to the Administrative Agent, unless the Required Lenders shall otherwise consent in writing, the Borrower will not, and will not cause or permit any Loan Party to:
Section 6.01 Indebtedness . Incur, create, assume or permit to exist any Indebtedness, except:
(a) Indebtedness existing on the Closing Date and set forth on Schedule 6.01 (excluding Indebtedness under clause (b) of this Section 6.01) and any Permitted Refinancing Indebtedness incurred to Refinance such Indebtedness (other than intercompany Indebtedness Refinanced with Indebtedness owed to a Person not affiliated with the Borrower or any Subsidiary of the Borrower);
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(b) Indebtedness created hereunder and under the other Loan Documents;
(c) Indebtedness of the Loan Parties pursuant to Swap Agreements permitted by Section 6.12;
(d) Indebtedness owed to (including obligations in respect of letters of credit or bank guarantees or similar instruments for the benefit of) any Person providing workers compensation, health, disability or other employee benefits or property, casualty or liability insurance to a Loan Party pursuant to reimbursement or indemnification obligations to such Person; provided that upon the incurrence of Indebtedness with respect to reimbursement obligations regarding workers compensation claims, such obligations are reimbursed not later than 30 days following such incurrence;
(e) Indebtedness of a Loan Party owing to the Borrower or any Subsidiary of the Borrower to the extent permitted by Section 6.04, provided that Indebtedness of any Loan Party to any Subsidiary that is not a Loan Party in excess of $50,000,000 in the aggregate (the Subordinated Intercompany Debt ) shall be subordinated to the Obligations on terms reasonably satisfactory to the Administrative Agent;
(f) Indebtedness in respect of performance bonds, warranty bonds, bid bonds, appeal bonds, surety bonds, labor bonds and completion or performance guarantees and similar obligations, in each case provided in the ordinary course of business, including those incurred to secure health, safety and environmental obligations in the ordinary course of business and Indebtedness arising out of advances on exports, advances on imports, customer prepayments and similar transactions in the ordinary course of business and consistent with past practice;
(g) Indebtedness arising from the honoring by a bank or other financial institution of a check, draft or similar instrument drawn against insufficient funds in the ordinary course of business or other cash management services in the ordinary course of business, provided that (x) such Indebtedness (other than credit or purchase cards) is extinguished within five Business Days of its incurrence and (y) such Indebtedness in respect of credit or purchase cards is extinguished within 60 days from its incurrence;
(h) (i) Indebtedness of a Subsidiary acquired after the Closing Date or a Person merged into, amalgamated or consolidated with a Loan Party after the Closing Date and Indebtedness assumed in connection with the acquisition of assets, which Indebtedness in each case, exists at the time of such acquisition, merger, amalgamation or consolidation and is not created in contemplation of such event and where such acquisition, merger, amalgamation or consolidation is permitted by this Agreement and (ii) any Permitted Refinancing Indebtedness incurred to Refinance such Indebtedness, provided that, solely with respect to a Person being merged into, amalgamated or consolidated with a Loan Party and Indebtedness being assumed in connection with the acquisition of assets, the aggregate principal amount of such Indebtedness at the time of, and after giving effect to, such acquisition, merger, amalgamation or consolidation, such assumption or such incurrence, as applicable would not exceed U.S. $30,000,000;
(i) Capital Lease Obligations and purchase money Indebtedness incurred by any Loan Party prior to or within 90 days after the acquisition, lease or improvement of the respective asset permitted under this Agreement in order to finance such acquisition, lease or improvement, and any Permitted Refinancing Indebtedness in respect thereof, in an aggregate principal amount that at the time of, and after giving effect to, the incurrence thereof would not exceed U.S. $25,000,000;
(j) Capital Lease Obligations incurred by any Loan Party in respect of any Sale and Lease-Back Transaction that is permitted under Section 6.03;
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(k) other unsecured Indebtedness, in an aggregate principal amount at any time outstanding pursuant to this Section 6.01(k) not to exceed U.S. $50,000,000;
(l) Guarantees (i) by any Loan Party of any Indebtedness of any other Loan Party or any other Subsidiary of the Borrower and (ii) by any Subsidiary that is not a Loan Party of Indebtedness of the Borrower or any of its Subsidiaries; provided that Guarantees by any Loan Party under this Section 6.01(l) of any other Indebtedness of a Person that is subordinated to other Indebtedness of such Person shall be expressly subordinated to the Obligations on terms consistent with those used, or to be used, for Subordinated Intercompany Debt;
(m) Indebtedness arising from agreements of any Loan Party providing for indemnification, adjustment of purchase price, earn outs or similar obligations, in each case, incurred or assumed in connection with the disposition of any business, assets or a Subsidiary of Borrower, other than Guarantees of Indebtedness incurred by any Person acquiring all or any portion of such business, assets or a Subsidiary of the Borrower for the purpose of financing such acquisition;
(n) Indebtedness supported by a Revolving Letter of Credit, in a principal amount not in excess of the stated amount of such Revolving Letter of Credit;
(o) Indebtedness consisting of Permitted Senior Unsecured Debt in an aggregate principal amount not to exceed U.S. $200,000,000;
(p) Indebtedness of the Loan Parties pursuant to the 364-Day Credit Facility and any Permitted Refinancing Indebtedness incurred to Refinance such Indebtedness;
(q) (i) Indebtedness incurred and/or assumed in connection with Section 6.04(j); provided that the aggregate amount of such Indebtedness outstanding pursuant to this Section 6.01(q) shall not exceed U.S. $100,000,000 and (ii) any Permitted Refinancing Indebtedness incurred to Refinance such Indebtedness;
(r) Indebtedness consisting of insurance premium financing arrangements; and
(s) all premium (if any), interest (including post-petition interest), fees, expenses, charges and additional or contingent interest on obligations described in paragraphs (a) through (r) above.
Section 6.02 Liens . Create, incur, assume or permit to exist any Lien on any property or assets (including stock or other securities of any Person, including of any Subsidiaries) at the time owned by it or on any income or revenues or rights in respect of any thereof, except (without duplication):
(a) Liens on property or assets of the Loan Parties existing on the Closing Date and set forth on Schedule 6.02(a) ; provided that such Liens shall secure only those obligations that they secure on the Closing Date (and extensions, renewals and refinancings of such obligations permitted by Section 6.01(a)) and shall not subsequently apply to any other property or assets of any Loan Party;
(b) Liens on property or assets of the Loan Parties securing Indebtedness owing under the 364-Day Credit Facility (and extensions, renewals and refinancings of such Indebtedness permitted by Section 6.01(p)); provided such Liens secure the Obligations on a pari passu basis;
(c) any Lien on any property or asset of a Loan Party securing Indebtedness or Permitted Refinancing Indebtedness permitted by Section 6.01(h), provided that (i) such Lien does not apply to any other property or assets of the Loan Party not securing such Indebtedness at the date of the
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acquisition of such property or asset (other than after-acquired property subjected to a Lien securing Indebtedness and other obligations incurred prior to such date and which Indebtedness and other obligations are permitted hereunder that require a pledge of after-acquired property, it being understood that such requirement shall not be permitted to apply to any property to which such requirement would not have applied but for such acquisition), (ii) such Lien is not created in contemplation of or in connection with such acquisition and (iii) in the case of a Lien securing Permitted Refinancing Indebtedness, such Lien is permitted in accordance with clause (e) of the definition of the term Permitted Refinancing Indebtedness;
(d) Liens for Taxes, assessments or other governmental charges or levies not yet delinquent or that are being contested in compliance with Section 5.03;
(e) Liens imposed by law (including, without limitation, Liens in favor of customers for equipment under order or in respect of advances paid in connection therewith) such as landlords, carriers, warehousemens, mechanics, materialmens, repairmens, construction or other like Liens arising in the ordinary course of business and securing obligations that are not overdue by more than 45 days or that are being contested in good faith by appropriate proceedings and in respect of which, if applicable, the applicable Loan Party shall have set aside on its books reserves in accordance with GAAP;
(f) (i) pledges and deposits made in the ordinary course of business in compliance with the Federal Employers Liability Act or any other workers compensation, unemployment insurance and other social security laws or regulations under U.S. or foreign law and deposits securing liability to insurance carriers under insurance or self-insurance arrangements in respect of such obligations and (ii) pledges and deposits securing liability for reimbursement or indemnification obligations of (including obligations in respect of letters of credit or bank guarantees for the benefit of) insurance carriers providing property, casualty or liability insurance to any Loan Party;
(g) deposits to secure the performance of bids, trade contracts (other than for Indebtedness), leases (other than Capital Lease Obligations), statutory obligations, surety and appeal bonds, costs of litigation where required by law, performance and return of money bonds, warranty bonds, bids, leases, government contracts, trade contracts, completion or performance guarantees and other obligations of a like nature incurred in the ordinary course of business, including those incurred to secure health, safety and environmental obligations in the ordinary course of business;
(h) zoning restrictions, by-laws and other ordinances of Governmental Authorities, easements, trackage rights, leases (other than Capital Lease Obligations), licenses, permits, special assessments, development agreements, deferred services agreements, restrictive covenants, owners association encumbrances, rights-of-way, restrictions on use of real property and other similar encumbrances that do not render title unmarketable and that, in the aggregate, do not interfere in any material respect with the ordinary conduct of the business of any Loan Party or would not result in a Material Adverse Effect;
(i) purchase money security interests in equipment or other property or improvements thereto acquired (or, in the case of improvements, constructed) by a Loan Party (including the interests of vendors and lessors under conditional sale and title retention agreements); provided that (i) such security interests secure Indebtedness permitted by Section 6.01(i) (including any Permitted Refinancing Indebtedness in respect thereof), (ii) such security interests are incurred, and the Indebtedness secured thereby is created, within 90 days after such acquisition (or construction), (iii) the Indebtedness secured thereby does not exceed 100% of the cost of such equipment or other property or improvements at the time of such acquisition (or construction), including transaction costs incurred by the Loan Party in connection with such acquisition (or construction) and (iv) such security interests do not
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apply to any other property or assets of the Loan Party (other than to accessions to such equipment or other property or improvements); provided further that individual financings of equipment provided by a single lender may be cross-collateralized to other financings of equipment provided solely by such lender;
(j) Liens arising out of capitalized lease transactions permitted under Section 6.03, so long as such Liens attach only to the property sold and being leased in such transaction and any accessions thereto or proceeds thereof and related property;
(k) Liens securing judgments that do not constitute an Event of Default under Section 7.01(j);
(l) reserved;
(m) any interest or title of, or Liens created by, a lessor under any leases or subleases entered into by any Loan Party, as tenant, in the ordinary course of business;
(n) Liens that are contractual rights of set-off (i) relating to the establishment of depository relations with banks or securities intermediaries not given in connection with the issuance of Indebtedness, (ii) relating to pooled deposit or sweep accounts of any Loan Party to permit satisfaction of overdraft or similar obligations incurred in the ordinary course of business of such Loan Party or (iii) relating to purchase orders and other agreements entered into with customers of any Loan Party in the ordinary course of business;
(o) Liens arising solely by virtue of any statutory or common law provision relating to security intermediaries or bankers liens, rights of set-off or similar rights;
(p) reserved;
(q) licenses of intellectual property granted in the ordinary course of business;
(r) Liens in favor of customs and revenue authorities arising as a matter of law to secure payment of customs duties in connection with the importation of goods, machinery or other equipment;
(s) Liens solely on any cash earnest money deposits made by a Loan Party in connection with any letter of intent or purchase agreement permitted hereunder;
(t) Liens arising from precautionary UCC financing statement filings regarding operating leases entered into by a Loan Party in the ordinary course of business;
(u) Liens securing insurance premium financing arrangements, provided that such Lien is limited to the applicable insurance contracts;
(v) Liens given to a public utility or any Governmental Authority when required by such utility or Governmental Authority in connection with the operations of a Loan Party;
(w) Liens in connection with subdivision agreements, site plan control agreements, development agreements, facilities sharing agreements, cost sharing agreements and other similar agreements in connection with the use of real property;
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(x) Liens in favor of any tenant, occupant or licensee under any lease, occupancy agreement or license with a Loan Party;
(y) Liens restricting or prohibiting access to or from lands abutting controlled access highways or covenants affecting the use to which lands may be put;
(z) Liens incurred or pledges or deposits made in favor of a Governmental Authority to secure the performance of a Loan Party under any Environmental Law to which any assets of such Person are subject;
(aa) Liens consisting of minor irregularities in title, boundaries, or other minor survey defects, easements, leases, restrictions, servitudes, licenses, permits, reservations, exceptions, zoning restrictions, rights-of-way, conditions, covenants, mineral or royalty rights or reservations or oil, gas and mineral leases and rights of others in any property of a Loan Party, including rights of eminent domain (including those for streets, roads, bridges, railroads, electric transmission and distribution lines, telegraph and telephone lines, flood control, air rights, water rights, rights of others with respect to navigable waters, sewage and drainage rights) that exist as of the Closing Date or at the time the affected property is acquired, or are granted by a Loan Party in the ordinary course of business and other similar charges or encumbrances which do not secure the payment of Indebtedness and otherwise do not materially interfere with the occupation, use and enjoyment by a Loan Party of any property in the normal course of business or materially impair the value thereof;
(bb) Liens upon specific items of inventory or other goods and proceeds of the Borrower or any of Borrowers Subsidiaries securing such Persons obligations in respect of bankers acceptances issued or created for the account of such Person to facilitate the purchase, shipment or storage of such inventory or other goods;
(cc) licenses granted in the ordinary course of business and leases of property of the Loan Parties that are not material to the business and operations of the Loan Parties; and
(dd) Liens on existing and future cash, U.S. government securities, and letters of credit securing or supporting Swap Agreements.
Section 6.03 Sale and Lease-back Transactions . Enter into any arrangement, directly or indirectly, with any Person whereby it shall sell or transfer any property, real or personal, used or useful in its business, whether now owned or hereafter acquired, and thereafter rent or lease such property or other property that it intends to use for substantially the same purpose or purposes as the property being sold or transferred (a Sale and Lease-Back Transaction ), provided that a Sale and Lease-Back Transaction shall be permitted so long as at the time the lease in connection therewith is entered into, and after giving effect to the entering into of such lease, the Remaining Present Value of such lease (together with the Remaining Present Value of outstanding leases previously entered into under this Section 6.03) would not exceed U.S. $25,000,000.
Section 6.04 Investments, Loans and Advances . Purchase, hold or acquire (including pursuant to any merger or amalgamation with a Person that is not a Subsidiary immediately prior to such merger) any Equity Interests, evidences of Indebtedness or other securities of, make or permit to exist any loans or advances (other than intercompany current liabilities incurred in the ordinary course of business in connection with the cash management operations of the Borrower and its Subsidiaries, which cash management operations shall not extend to any other Person) to or Guarantees of the obligations of, or make or permit to exist any investment or any other interest (each, an Investment ), in any other Person, except:
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(a) Investments (including, but not limited to, Investments in Equity Interests, intercompany loans, and Guarantees of Indebtedness otherwise expressly permitted hereunder) by (i) Loan Parties in Subsidiaries that are not Loan Parties in an aggregate amount (valued at the time of the making thereof and without giving effect to any write-downs or write-offs thereof) not to exceed an amount equal to the sum of, without duplication, U.S. $50,000,000 plus any return of capital actually received by the respective investors in respect of investments previously made by them pursuant to this clause 6.04(a)(i) plus, an amount equal to the fair market value of any assets or property that is contributed or transferred from any Subsidiary that is not a Loan Party to any Loan Party from and after the Closing Date and (ii) Loan Parties in other Loan Parties;
(b) Permitted Investments and Investments that were Permitted Investments when made;
(c) Investments arising out of the receipt by a Loan Party of noncash consideration for the sale of assets permitted under Section 6.05;
(d) (i) loans and advances to employees of the Borrower or any of its Subsidiaries not to exceed U.S. $10,000,000 in the aggregate at any time outstanding (calculated without regard to write-downs or write-offs thereof) and (ii) advances of payroll payments and expenses to employees of the Borrower or any of its Subsidiaries;
(e) accounts receivable arising and trade credit granted in the ordinary course of business and any securities received in satisfaction or partial satisfaction thereof from financially troubled account debtors to the extent reasonably necessary in order to prevent or limit loss and any prepayments and other credits to suppliers made in the ordinary course of business;
(f) Swap Agreements permitted pursuant to Section 6.12;
(g) Investments existing on the Closing Date and set forth on Schedule 6.04 ;
(h) Investments resulting from pledges and deposits referred to in Section 6.02(f), (g) and (dd);
(i) so long as immediately before and after giving effect to such Investment no Default or Event of Default has occurred and is continuing, other Investments by the Loan Parties in an aggregate amount at any time outstanding (valued at the time of the making thereof, and without giving effect to any write-downs or write-offs thereof or any increases in value thereof) not to exceed the greater of U.S. $100,000,000 and 5.0% of Consolidated Total Assets;
(j) Investments constituting Permitted Business Acquisitions, so long as any Person acquired in connection with such Permitted Business Acquisitions and each of such Persons Subsidiaries guarantees the Obligations to the extent required by Section 5.10;
(k) additional Investments to the extent made with proceeds of Equity Interests of the Borrower or capital contributions;
(l) Investments (including, but not limited to, Investments in Equity Interests, intercompany loans, and Guarantees of Indebtedness otherwise expressly permitted hereunder) after the Closing Date by Subsidiaries that are not Loan Parties in any Loan Party or other Subsidiaries;
(m) reserved;
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(n) Investments received in connection with the bankruptcy or reorganization of, or settlement of delinquent accounts and disputes with or judgments against, customers and suppliers, in each case in the ordinary course of business;
(o) Investments of a Subsidiary of the Borrower acquired after the Closing Date or of a corporation merged or amalgamated or consolidated into the Borrower or merged or amalgamated into or consolidated with a Subsidiary of the Borrower in accordance with Section 6.05 after the Closing Date to the extent that such Investments were not made in contemplation of or in connection with such acquisition, merger or consolidation and were in existence on the date of such acquisition, merger, amalgamation or consolidation; and
(p) Guarantees by a Loan Party of operating leases (other than Capital Lease Obligations) or of other obligations that do not constitute Indebtedness, in each case entered into by any Subsidiary of the Borrower in the ordinary course of business.
Section 6.05 Mergers, Consolidations, Sales of Assets and Acquisitions . Merge into, amalgamate with or consolidate with any other Person, or permit any other Person to merge into, amalgamate with or consolidate with it, or sell, transfer, lease or otherwise dispose of (in one transaction or in a series of transactions) all or any part of its assets (whether now owned or hereafter acquired), or issue, sell, transfer or otherwise dispose of any Equity Interests of a Loan Party or preferred equity interests of a Loan Party, or purchase, lease or otherwise acquire (in one transaction or a series of transactions) all or any substantial part of the assets of any other Person, except that this Section shall not prohibit:
(a) (i) the purchase and sale of inventory, supplies, materials and equipment and the purchase and sale of rights or licenses or leases of intellectual property, in each case in the ordinary course of business by the Loan Party, (ii) the sale of any other asset in the ordinary course of business by a Loan Party, (iii) the sale of surplus, obsolete or worn out equipment or other property in the ordinary course of business by a Loan Party or (iv) the sale of Permitted Investments in the ordinary course of business;
(b) if at the time thereof and immediately after giving effect thereto no Event of Default shall have occurred and be continuing, (i) the merger or consolidation of any Subsidiary of the Borrower into the Borrower in a transaction in which the Borrower is the surviving entity, (ii) the merger or consolidation of any Subsidiary of the Borrower into or with any Loan Party in a transaction in which the surviving or resulting entity is a Loan Party, (iii) the merger, amalgamation or consolidation of any Subsidiary of the Borrower that is not a Loan Party into or with any other Subsidiary of the Borrower that is not a Loan Party, or (iv) the liquidation, winding up, or dissolution of any Subsidiary of the Borrower or (v) the change in form of entity of the Borrower or any Subsidiary if the Borrower determines in good faith that such change in form is in the best interests of the Borrower and is not materially disadvantageous to the Lenders taken as a whole; for the avoidance of doubt it is agreed that [Franks International Trinidad Unlimited], [Franks International Ecuador, C.A.] and [Franks International Venezuela 2] may change their form of entity after the Closing Date;
(c) sales, transfers, leases or other dispositions to the Borrower or a Subsidiary of the Borrower (upon voluntary liquidation or otherwise); provided that if as a result thereof any Subsidiary not previously a Material Subsidiary becomes a Material Subsidiary, such Subsidiary complies with the provisions of Section 5.10(b);
(d) Sale and Lease-Back Transactions permitted by Section 6.03;
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(e) Investments permitted by Section 6.04, Liens permitted by Section 6.02 and dividends permitted by Section 6.06;
(f) the sale of defaulted receivables in the ordinary course of business and not as part of an accounts receivables financing transaction;
(g) sales, transfers, leases or other dispositions of assets not otherwise permitted by this Section 6.05; provided that the aggregate gross proceeds (including noncash proceeds) of any or all assets sold, transferred, leased or otherwise disposed of in reliance upon this paragraph (g) shall not exceed, in any fiscal year of the Borrower, 10.0% of Consolidated Total Assets as of the end of the immediately preceding fiscal year; and provided further that after giving effect thereto, no Default or Event of Default shall have occurred;
(h) any merger or consolidation in connection with a Permitted Business Acquisition, provided that following any such merger or consolidation (i) involving the Borrower, the Borrower is the surviving corporation and (ii) involving a Subsidiary, the surviving or resulting entity shall be a Subsidiary;
(i) licensing and cross-licensing arrangements involving any technology or other intellectual property of any Loan Party in the ordinary course of business; and
(j) abandonment, cancellation or disposition of any intellectual property of any Loan Party in the ordinary course of business.
Notwithstanding anything to the contrary contained in Section 6.05 above, (i) the Borrower may, so long as no Event of Default shall have occurred and be continuing or would result therefrom, sell, grant or otherwise issue Equity Interests to members of management of the Borrower or any of the Subsidiaries of the Borrower pursuant to stock option, stock ownership, stock incentive or similar plans, (ii) no sale, transfer or other disposition of assets shall be permitted by this Section 6.05 (other than sales, transfers, leases or other dispositions to the Borrower or any of its Subsidiaries pursuant to paragraph (c) hereof) unless such disposition is for fair market value, (iii) no sale, transfer or other disposition of assets shall be permitted by paragraph (a) or (d) of this Section 6.05 unless such disposition is for at least 51% cash consideration and (iv) no sale, transfer or other disposition of assets in excess of U.S. $10,000,000 shall be permitted by paragraph (g) of this Section 6.05 unless such disposition is for at least 51% cash consideration; provided that for purposes of clauses (iii) and (iv), the amount of any secured Indebtedness or other Indebtedness of a Subsidiary of the Borrower that is not a Loan Party (as shown on the Borrowers or such Subsidiarys most recent balance sheet or in the notes thereto) that is assumed by the transferee of any such assets shall be deemed to be cash.
Section 6.06 Dividends and Distributions . Declare or pay, directly or indirectly, any dividend or make any other distribution (by reduction of capital or otherwise), whether in cash, property, securities or a combination thereof, with respect to any of its Equity Interests (other than dividends and distributions on Equity Interests payable solely by the issuance of additional shares of Equity Interests of the Person paying such dividends or distributions) or directly or indirectly redeem, purchase, retire or otherwise acquire for value any shares of any class of its Equity Interests or set aside any amount for any such purpose; provided, however , that:
(a) the Borrower and any Subsidiary of the Borrower may declare and pay dividends to, repurchase its Equity Interests from, or make other distributions to, the Borrower or any Subsidiary (or, in the case of Subsidiaries that are not Wholly Owned Subsidiaries of the Borrower, to the Borrower or any Subsidiary that is a direct or indirect parent of such Subsidiary and to each other owner of Equity Interests of such Subsidiary on a pro rata basis (or more favorable basis from the perspective of the Borrower or such Subsidiary) based on their relative ownership interests);
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(b) the Borrower and each of the Subsidiaries may repurchase, redeem or otherwise acquire or retire to finance any such repurchase, redemption or other acquisition or retirement for value any Equity Interests of the Borrower or any of the Subsidiaries held by any current or former officer, director, consultant, or employee (or persons holding similar positions or performing similar functions for non-corporate entities) of the Borrower or any Subsidiary of the Borrower or, to the extent such Equity Interests were issued as compensation for services rendered on behalf of the Borrower or any Subsidiary of the Borrower, pursuant to any equity subscription agreement, stock option agreement, shareholders, members or partnership agreement or similar agreement, plan or arrangement or any Plan and the Borrower and Subsidiaries may declare and pay dividends to the Borrower or any other Subsidiary of the Borrower the proceeds of which are used for such purposes, provided that the aggregate amount of such purchases or redemptions in cash under this paragraph (b) shall not exceed in any fiscal year U.S. $3,000,000 (plus the amount of net proceeds (x) received by the Borrower during such calendar year from sales of Equity Interests of the Borrower to directors, consultants, officers or employees (or persons holding similar positions or performing similar functions for non-corporate entities) of the Borrower or any of its Affiliates in connection with permitted employee compensation and incentive arrangements and (y) of any key-man life insurance policies received during such calendar year) which, if not used in any year, may be carried forward to any subsequent calendar year;
(c) noncash repurchases, redemptions or exchanges of Equity Interests deemed to occur upon exercise of stock options or exchange of exchangeable shares if such Equity Interests represent a portion of the exercise price of such options;
(d) provided no Default or Event of Default then exists or would result therefrom, the Borrower may declare and pay dividends or make other distributions from the proceeds of any issuance of Equity Interests permitted to be made under this Agreement;
(e) the Borrower may from time to time declare or make a distribution on or with respect to the Equity Interests of the Borrower during any fiscal quarter provided no Default or Event of Default then exists or would result therefrom;
(f) Franks International C.V. may reimburse FIMBV for all costs and expenses incurred by FIMBV that are directly attributable to the operation of Franks International C.V., including costs for engaging third parties such as consultants, attorneys and accountants; and
(g) Franks International C.V. may reimburse FINV for all of its general, administrative, overhead and other indirect costs and expenses, including (i) those costs and expenses attributable to operating as a publicly traded company, (ii) costs of securities offerings, (iii) board of directors compensation and meeting costs, (iv) costs of periodic reports to shareholders, (v) litigation costs and damages arising from litigation, (vi) accounting and legal costs and (vii) franchise taxes.
Section 6.07 Transactions with Affiliates . (a) Sell or transfer any property or assets to, or purchase or acquire any property or assets from, or otherwise engage in any other transaction with, any of its Affiliates, unless such transaction is upon terms no less favorable in any material respect taken as a whole to the applicable Loan Party than would be obtained in a comparable arms-length transaction with a Person that is not an Affiliate; provided that this clause (a) shall not apply to the indemnification of directors or officers (or persons holding similar positions or performing similar functions for non-corporate entities) of a Loan Party in accordance with customary practice.
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(b) The foregoing paragraph (a) shall not prohibit, to the extent otherwise permitted under this Agreement,
(i) any issuance of securities, or other payments, awards or grants in cash, securities or otherwise pursuant to, or the funding of, employment arrangements, stock options, stock ownership plans, including restricted stock plans, stock grants, directed share programs and other equity based plans customarily maintained by similar companies and the granting and performance of registration rights approved by the governing body of any Loan Party,
(ii) transactions between or among the Borrower and any of its Subsidiaries or between or among any of the Subsidiaries of the Borrower,
(iii) any indemnification agreement or any similar arrangement entered into with directors, officers, consultants and employees (or persons holding similar positions or performing similar functions for non-corporate entities) of the Borrower or any of their Affiliates in the ordinary course of business and the payment of fees and indemnities to directors, officers, consultants and employees (or persons holding similar positions or performing similar functions for non-corporate entities) of the Borrower and the Subsidiaries in the ordinary course of business and, to the extent such fees and indemnities are directly attributable to services rendered on behalf of the Borrower and its Subsidiaries,
(iv) reserved,
(v) any employment agreement or employee benefit plan entered into by the Borrower or any of their Affiliates in the ordinary course of business or consistent with past practice and payments pursuant thereto,
(vi) transactions otherwise permitted under Section 6.06 and Investments permitted by Section 6.04; provided that this clause (vi) shall not apply to any Investment, whether direct or indirect, in either (x) Persons that were not Subsidiaries immediately prior to such Investment or (y) Persons that are not Subsidiaries immediately after such Investment,
(vii) reserved,
(viii) reserved,
(ix) the existence of, or the performance by the Borrower or any of the Subsidiaries of its obligations under the terms of any agreement contemplated thereunder to which it is a party as of the Closing Date, provided , however , that the existence of, or the performance by the Borrower or any Subsidiary of obligations under any future amendment to any such existing agreement or under any similar agreement entered into after the Closing Date shall only be permitted by this clause (ix) to the extent that the terms of any such amendment or new agreement are not otherwise materially disadvantageous to the Lenders,
(x) transactions with any Affiliate for the purchase or sale of goods, products, parts and services entered into in the ordinary course of business in a manner consistent with past practice,
(xi) any transaction in respect of which the Borrower delivers to the Administrative Agent (for delivery to the Lenders) a letter addressed to a Subsidiary from an accounting, appraisal or investment banking firm, in each case of nationally recognized standing that is (A) in
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the good faith determination of the Borrower qualified to render such letter and (B) reasonably satisfactory to the Administrative Agent, which letter states that such transaction is on terms that are no less favorable to the applicable Subsidiary, than would be obtained in a comparable arms-length transaction with a Person that is not an Affiliate, and
(xii) guarantees of payment or performance by any Loan Party of any Subsidiary of the Borrower that is not a Loan Party in the ordinary course of business.
Section 6.08 Business of the Borrower and the Subsidiaries . Notwithstanding any other provisions hereof, (a) no Subsidiary of the Borrower shall engage at any time in any line of business substantially different from the line of business conducted by the Borrower and its Subsidiaries on the Closing Date and any business or business activities incidental or related thereto, or any business or activity that is reasonably similar thereto or a reasonable extension, development or expansion thereof or ancillary thereto and (b) with respect to the Borrower, engage in any business, operations or activity, or hold any material property, other than (i) holding Equity Interests of its Subsidiaries, (ii) issuing, selling and redeeming its own Equity Interests, (iii) paying Taxes, (iv) holding partners meetings, preparing partnership and similar records and other activities required to maintain its separate partnership or other legal structure, (v) preparing reports to, and preparing and making notices to and filings with, Governmental Authorities and to its holders of Equity Interests or Indebtedness, (vi) receiving, and holding proceeds of, dividends and distributions from the its Subsidiaries and distributing the proceeds thereof to the extent not prohibited by Section 6.06, (vii) as necessary to consummate any Permitted Business Acquisition, (viii) guaranteeing Indebtedness permitted by Section 6.01, and (ix) other activities related or incidental to any of the foregoing.
Section 6.09 Limitation on Modifications of Indebtedness; Modifications of Certificate of Incorporation, By-laws and Certain Other Agreements; etc. . (a) Amend or modify or grant any waiver or release under or terminate in any manner the articles or certificate of incorporation or by-laws, partnership agreement or limited liability company operating agreement of any Loan Party, in each case, if such amendment, modification, waiver, release or termination could reasonably be expected to result in a Material Adverse Effect;
(b) (i) Make, or agree or offer to pay or make, directly or indirectly, any payment or other distribution (whether in cash, securities or other property) of or in respect of principal of or interest on Permitted Senior Unsecured Debt or any payment or other distribution (whether in cash, securities or other property), including any sinking fund or similar deposit, on account of the purchase, redemption, retirement, acquisition, cancellation or termination of any Permitted Senior Unsecured Debt, except for (A) payments of regularly scheduled interest, (B) payments made solely with the proceeds from the issuance of common Equity Interests or from equity contributions, (C) (1) prepayments made with the proceeds of any Permitted Refinancing Indebtedness in respect thereof or (2) prepayments with the proceeds of any non-cash interest bearing Equity Interests issued for such purchase that are not redeemable prior to the date that is six months following the Revolving Facility Maturity Date and that have terms and covenants no more restrictive in any material respect taken as a whole than the Permitted Senior Unsecured Debt being so refinanced, and (D) any mandatory payments required in respect of Permitted Senior Unsecured Debt in accordance with the terms thereof; or
(ii) Amend or modify, or permit the amendment or modification of, any provision of any Permitted Senior Unsecured Debt or any agreement relating thereto other than amendments or modifications that are not materially adverse to the Lenders.
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(c) Enter into any agreement or instrument that by its terms restricts (i) the payment of dividends or distributions or the making of cash advances to a Loan Party by Borrower or a Subsidiary or (ii) the granting of Liens by a Loan Party to the Administrative Agent for the benefit of the Lenders, except, in each case, restrictions existing by reason of:
(A) restrictions imposed by applicable law;
(B) contractual encumbrances or restrictions, such as negative pledge agreements, in effect on the Closing Date under any agreements related to any permitted renewal, extension or refinancing of any Indebtedness existing on the Closing Date that does not expand the scope of any such encumbrance or restriction beyond that in effect on the Closing Date;
(C) any restriction on a Subsidiary imposed pursuant to an agreement entered into for the sale or disposition of all or substantially all the Equity Interests or assets of such Subsidiary pending the closing of such sale or disposition;
(D) customary provisions in joint venture agreements and other similar agreements applicable to joint ventures entered into in the ordinary course of business;
(E) any restrictions imposed by any agreement relating to secured Indebtedness permitted by this Agreement to the extent that such restrictions apply only to the property or assets securing such Indebtedness;
(F) customary provisions contained in leases or licenses of intellectual property and other similar agreements entered into in the ordinary course of business;
(G) customary provisions restricting subletting or assignment of any lease governing a leasehold interest;
(H) customary provisions restricting assignment of any agreement entered into in the ordinary course of business;
(I) customary restrictions and conditions contained in any agreement relating to the sale of any asset permitted under Section 6.05 pending the consummation of such sale;
(J) in the case of any Person that becomes a Subsidiary after the Closing Date, any agreement in effect at the time such Person so becomes a Subsidiary, so long as such agreement was not entered into in contemplation of such Person becoming such a Subsidiary; or
(K) restrictions imposed by any Permitted Senior Unsecured Debt that are substantially similar to restrictions set forth in this Agreement and in any case do not restrict the granting of Liens to the Administrative Agent for the benefit of the Lenders.
(d) change or permit any material change to be made in its accounting and bookkeeping system from that used in prior periods except in accordance with GAAP.
Section 6.10 Leverage Ratio . Beginning with the fiscal quarter ending September 30, 2013, for any Test Period, permit the Leverage Ratio on the last day of any fiscal quarter, to be in excess of 2.50:1.00.
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Section 6.11 Interest Coverage Ratio . Beginning with the fiscal quarter ending September 30, 2013, for any Test Period, permit the Interest Coverage Ratio on the last day of any fiscal quarter to be less than 3.00:1.00.
Section 6.12 Swap Agreements . Enter into any Swap Agreement, other than (a) Swap Agreements entered into in the ordinary course of business to hedge or mitigate risks to which any Loan Party is exposed in the conduct of its business or the management of its liabilities, and (b) Swap Agreements entered into in order to effectively cap, collar or exchange interest rates (from fixed to floating rates, from one floating rate to another floating rate or otherwise) with respect to any interest-bearing liability or investment of any Loan Party, which in the case of each of clauses (a) and (b) are entered into for bona fide risk mitigation purposes and that are not speculative in nature.
ARTICLE VII
EVENTS OF DEFAULT
Section 7.01 Events of Default . In case of the happening of any of the following events ( Events of Default ):
(a) any representation or warranty made or deemed made by a Loan Party in any Loan Document or in any report, certificate, financial statement or other instrument furnished in connection with or pursuant to any Loan Document shall prove to have been false or misleading in any respect material to the Borrowers creditworthiness or to the rights or interests of the Lenders when made or deemed made by such Loan Party;
(b) default shall be made in the payment of any principal of any Loan or the reimbursement with respect to any Revolving L/C Disbursement when and as the same shall become due and payable, whether at the due date thereof or at a date fixed for prepayment thereof or by acceleration thereof or otherwise;
(c) default shall be made in the payment of any interest on any Loan or on any Revolving L/C Disbursement or in the payment of any Fee or any other amount (other than an amount referred to in paragraph (b) above) due under any Loan Document, when and as the same shall become due and payable, and such default shall continue unremedied for a period of five (5) days;
(d) default shall be made in the due observance or performance by any Loan Party of any covenant, condition or agreement contained in Section 5.01(a) (with respect to the Borrower), 5.05(a), 5.08 or in Article VI;
(e) default shall be made in the due observance or performance by any Loan Party of any covenant, condition or agreement of such Person contained in any Loan Document (other than those specified in paragraphs (b), (c) and (d) above) and such default shall continue unremedied for a period of 60 days after notice thereof from the Administrative Agent or any Lender to the Borrower;
(f) (i) (x) any event or condition occurs that results in any Material Indebtedness becoming due prior to its scheduled maturity or (y) any Loan Party fails to comply with any of its covenants or agreements under any agreement or instrument relating to any of its Material Indebtedness and such failure enables or permits (with all applicable grace periods having expired) the holder or holders of any Material Indebtedness or any trustee or agent on its or their behalf to cause any Material Indebtedness to become due, or to require the prepayment, repurchase, redemption or defeasance thereof, prior to its scheduled maturity or (ii) any Loan Party shall fail to pay the principal of any Material Indebtedness at the stated final maturity thereof; provided that this clause (f) shall not apply to (A)
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secured Indebtedness that becomes due as a result of the voluntary sale or transfer of the property or assets securing such Indebtedness if such sale or transfer is permitted hereunder and under the documents providing for such Indebtedness and (B) Indebtedness that is being contested in good faith by appropriate proceedings;
(g) there shall have occurred a Change in Control;
(h) an involuntary proceeding shall be commenced or an involuntary petition shall be filed in a court of competent jurisdiction seeking (i) relief in respect of any Loan Party, or of a substantial part of the property or assets of any Loan Party, taken as a whole, under Title 11 of the United States Code, as now constituted or hereafter amended or any other federal, state or foreign bankruptcy, insolvency, receivership or similar law, (ii) the appointment of a receiver, trustee, custodian, sequestrator, conservator or similar official for any Loan Party or for a substantial part of the property or assets of any Loan Party, taken as a whole, or (iii) the winding-up or liquidation of any Loan Party (except, in the case of any Subsidiary, in a transaction permitted by Section 6.05); and such proceeding or petition shall continue undismissed for 60 days or an order or decree approving or ordering any of the foregoing shall be entered;
(i) any Loan Party shall (i) voluntarily commence any proceeding or file any petition seeking relief under Title 11 of the United States Code, as now constituted or hereafter amended, or any other federal, state or foreign bankruptcy, insolvency, receivership or similar law, (ii) consent to the institution of, or fail to contest in a timely and appropriate manner, any proceeding or the filing of any petition described in paragraph (h) above, (iii) apply for, request or consent to the appointment of a receiver, trustee, custodian, sequestrator, conservator or similar official for any Loan Party or for a substantial part of the property or assets of any Loan Party, taken as a whole, (iv) file an answer admitting the material allegations of a petition filed against it in any such proceeding, (v) make a general assignment for the benefit of creditors or (vi) become unable, admit in writing its inability or fail generally to pay its debts as they become due;
(j) the failure by any Loan Party to pay one or more final judgments aggregating in excess of U.S. $30,000,000 (net of any amounts which are covered by insurance or bonded), which judgments are not discharged or effectively waived or stayed for a period of 30 consecutive days, or any action shall be legally taken by a judgment creditor to levy upon assets or properties of any Loan Party to enforce any such judgment;
(k) one or more ERISA Events shall have occurred that, when taken together with all other ERISA Events that have occurred, could reasonably be expected to result in a Material Adverse Effect;
(l) (i) any Loan Document shall for any reason be asserted in writing by any Loan Party not to be a legal, valid and binding obligation of any party thereto, or (ii) the Guarantees by any Loan Party of any of the Obligations shall cease to be in full force and effect (other than in accordance with the terms thereof);
(m) (A) any Environmental Claim against any Loan Party or (B) in the absence of any Environmental Claim against any Loan Party, to the knowledge of the Borrower, occurrence of a Release or threatened Release of Hazardous Materials (1) at, under, on or from any real property currently owned, leased or operated by Borrower or any of Borrowers Subsidiaries, or (2) to the extent such Release or threatened Release arose from the operations of Borrower or any of Borrowers Subsidiaries, or any predecessor of any Loan Party at, under, on or from any real property (x) formerly owned, leased or operated by Borrower or any of Borrowers Subsidiaries or any predecessor of any Loan Party, or (y)
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any property offsite the property of Borrower or any of Borrowers Subsidiaries or any predecessor of any Loan Party to which any Loan Party has sent Hazardous Materials for treatment, storage or disposal, (each, an Environmental Event ) shall have occurred that, when taken together with all other unresolved Environmental Events that have occurred would reasonably be expected to result in a Material Adverse Effect; or
(n) an Event of Default (as defined in the 364-Day Credit Facility) shall occur and be continuing.
then, and in every such event (other than an event with respect to a Loan Party described in paragraph (h) or (i) above), and at any time thereafter during the continuance of such event, the Administrative Agent may, or at the request of the Required Lenders shall, by notice to the Borrower, take any or all of the following actions, at the same or different times: (i) terminate forthwith the Commitments, (ii) declare the Loans then outstanding to be forthwith due and payable in whole or in part, whereupon the principal of the Loans so declared to be due and payable, together with accrued interest thereon and any unpaid accrued Fees and all other liabilities of the Borrower accrued hereunder and under any other Loan Document, shall become forthwith due and payable, without presentment, demand, protest, notice of intent to accelerate, notice of acceleration or any other notice of any kind, all of which are hereby expressly waived by the Borrower, anything contained herein or in any other Loan Document to the contrary notwithstanding and (iii) demand cash collateral pursuant to Section 2.05(j); and in any event described in paragraph (h) or (i) above, the Commitments shall automatically terminate, the principal of the Loans then outstanding, together with accrued interest thereon and any unpaid accrued Fees and all other liabilities of the Borrower accrued hereunder and under any other Loan Document, shall automatically become due and payable and the Administrative Agent shall be deemed to have made a demand for cash collateral to the full extent permitted under Section 2.05(j), without presentment, demand, protest, notice of intent to accelerate, notice of acceleration or any other notice of any kind, all of which are hereby expressly waived by the Borrower, anything contained herein or in any other Loan Document to the contrary notwithstanding.
ARTICLE VIII
THE ADMINISTRATIVE AGENT
Section 8.01 Appointment and Authority . (a) Each of the Lenders and the Issuing Banks hereby irrevocably appoints Amegy to act on its behalf as the Administrative Agent hereunder and under the other Loan Documents and authorizes the Administrative Agent to take such actions on its behalf and to exercise such powers as are delegated to the Administrative Agent by the terms hereof or thereof, together with such actions and powers as are reasonably incidental thereto.
(b) The provisions of this Article are solely for the benefit of the Administrative Agent, any appointees thereof, the Lenders and the Issuing Banks, and no Loan Party shall have rights as a third party beneficiary of any of such provisions.
Section 8.02 Rights as a Lender . Any Person serving as the Administrative Agent hereunder shall have the same rights and powers in its capacity as a Lender as any other Lender, and may exercise the same as though it were not the Administrative Agent, and the term Lender or Lenders shall, unless otherwise expressly indicated or unless the context otherwise requires, include a Person serving as the Administrative Agent hereunder in its individual capacity. Such Person and its Affiliates may accept deposits from, lend money to, act as the financial advisor or in any other advisory capacity for and generally engage in any kind of business with the Borrower or any Subsidiary or other Affiliate thereof as if such Person were not the Administrative Agent hereunder and without any duty to account therefor to the Lenders.
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Section 8.03 Exculpatory Provisions . The Administrative Agent shall not have any duties or obligations except those expressly set forth herein and in the other Loan Documents. Without limiting the generality of the foregoing, the Administrative Agent:
(a) shall not be subject to any fiduciary or other implied duties, regardless of whether a Default or Event of Default has occurred and is continuing;
(b) shall not have any duty to take any discretionary action or exercise any discretionary powers, except discretionary rights and powers expressly contemplated hereby or by the other Loan Documents that the Administrative Agent is required to exercise as directed in writing by the Required Lenders (or such other number or percentage of the Lenders as shall be expressly provided for herein or in the other Loan Documents), provided that the Administrative Agent shall not be required to take any action that, in its opinion or the opinion of its counsel, may expose the Administrative Agent to liability or that is contrary to any Loan Document or applicable law;
(c) shall not, except as expressly set forth herein and in the other Loan Documents, have any duty to disclose, and shall not be liable for the failure to disclose, any information relating to the Borrower or any of its Affiliates that is communicated to or obtained by the Person serving as the Administrative Agent or any of its Affiliates in any capacity;
(d) shall not be liable for any action taken or not taken by it (i) with the consent or at the request of the Required Lenders (or such other number or percentage of the Lenders as shall be necessary, or as the Administrative Agent shall believe in good faith shall be necessary, under the circumstances as provided in Sections 9.08 and 7.01) or (ii) in the absence of its own gross negligence or willful misconduct;
(e) shall not be responsible for or have any duty to ascertain or inquire into (i) any statement, warranty or representation made in or in connection with this Agreement or any other Loan Document, (ii) the contents of any certificate, report or other document delivered hereunder or thereunder or in connection herewith or therewith, (iii) the performance or observance of any of the covenants, agreements or other terms or conditions set forth herein or therein or the occurrence of any Default, (iv) the validity, enforceability, effectiveness or genuineness of this Agreement, any other Loan Document or any other agreement, instrument or document, or (iv) the satisfaction of any condition set forth in Article IV or elsewhere herein, other than to confirm receipt of items expressly required to be delivered to the Administrative Agent; and
(f) shall not be deemed to have knowledge of any Default or Event of Default unless and until notice describing such Default or Event of Default is given to the Administrative Agent by the Borrower, a Lender or an Issuing Bank.
Section 8.04 Reliance by Administrative Agent . The Administrative Agent shall be entitled to rely upon, and shall not incur any liability for relying upon, any notice, request, certificate, consent, statement, instrument, document or other writing (including any electronic message, Internet or intranet website posting or other distribution) believed by it to be genuine and to have been signed, sent or otherwise authenticated by the proper Person. The Administrative Agent also may rely upon any statement made to it orally or by telephone and believed by it to have been made by the proper Person, and shall not incur any liability for relying thereon. In determining compliance with any condition hereunder to the making of a Loan or issuance of a Revolving Letter of Credit that by its terms must be fulfilled to the satisfaction of a Lender or an Issuing Bank, the Administrative Agent may presume that such condition is satisfactory to such Lender or Issuing Bank unless the Administrative Agent shall have received notice to the contrary from such Lender or Issuing Bank prior to the making of such Loan or
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issuance of a Revolving Letter of Credit, as applicable. The Administrative Agent may consult with legal counsel (who may be counsel for the Borrower), independent accountants and other experts selected by it, and shall not be liable for any action taken or not taken by it in accordance with the advice of any such counsel, accountants or experts.
Section 8.05 Delegation of Duties . The Administrative Agent may perform any and all of its duties and exercise its rights and powers hereunder or under any other Loan Document by or through any one or more sub-agents appointed by the Administrative Agent. The Administrative Agent and any such sub-agent may perform any and all of its duties and exercise its rights and powers by or through their respective Related Parties. The exculpatory provisions of this Article shall apply to any such sub-agent and to the Related Parties of the Administrative Agent and any such sub-agent, and shall apply to their respective activities in connection with the syndication of the credit facilities provided for herein as well as activities as the Administrative Agent.
Section 8.06 Resignation of the Administrative Agent . The Administrative Agent may at any time give notice of its resignation to the Lenders, Issuing Banks and the Borrower. Upon receipt of any such notice of resignation, the Required Lenders shall have the right to appoint a successor with the consent of the Borrower (not to be unreasonably withheld or delayed) (unless a Default or Event of Default shall have occurred and be continuing, in which event no consent of the Borrower is required), which shall be a financial institution with an office in the United States, or an Affiliate of any such financial institution with an office in the United States. During the Administrative Agent Default Period, the Borrower and the Required Lenders may remove the Administrative Agent subject to the execution and delivery by the Borrower and the Required Lenders of removal and liability release agreements reasonably satisfactory to the Administrative Agent, which removal shall be effective upon the acceptance of appointment by a successor as the Administrative Agent. Upon any proposed removal of the Administrative Agent during the Administrative Agent Default Period, the Required Lenders shall have the right to appoint a successor with the consent of the Borrower (not to be unreasonably withheld or delayed) (unless a Default or Event of Default shall have occurred and be continuing, in which event no consent of the Borrower is required), which shall be a financial institution with an office in the United States, or an Affiliate of any such financial institution with an office in the United States. In the case of the resignation of the Administrative Agent, if no such successor shall have been so appointed by the Required Lenders and the Borrower and shall have accepted such appointment within 30 days after the retiring Administrative Agent gives notice of its resignation, then such resignation shall nonetheless become effective in accordance with such notice and (a) the retiring Administrative Agent shall be discharged from its duties and obligations hereunder and under the other Loan Documents, (b) all payments, communications and determinations provided to be made by, to or through the Administrative Agent shall instead be made by or to each Lender or Issuing Bank directly, until such time as the Required Lenders and the Borrower appoint a successor Administrative Agent as provided for above in this Section and (c) the Borrower and the Lenders agree that in no event shall the retiring Administrative Agent or any of its Affiliates or any of their respective officers, directors, employees, agents advisors or representatives have any liability to the Loan Parties, any Lender or any other Person or entity for damages of any kind, including, without limitation, direct or indirect, special, incidental or consequential damages, losses or expenses (whether in tort, contract or otherwise) arising out of the failure of a successor Administrative Agent to be appointed and to accept such appointment. Upon the acceptance of a successors appointment as Administrative Agent hereunder, such successor shall succeed to and become vested with all of the rights, powers, privileges and duties of the retiring (or retired) or removed Administrative Agent, and the retiring or removed Administrative Agent shall be discharged from all of its duties and obligations hereunder and under the other Loan Documents (if not already discharged therefrom as provided above in this Section). The fees payable by the Borrower to a successor Administrative Agent shall be the same as those payable to its predecessor unless otherwise agreed between the Borrower and such successor. After the retiring Administrative Agents resignation or
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removal hereunder and under the other Loan Documents, the provisions of this Article (including Section 8.12) and Section 9.05 shall continue in effect for the benefit of such retiring or removed Administrative Agent, its sub-agents and their respective Related Parties in respect of any actions taken or omitted to be taken by any of them while the retiring or removed Administrative Agent was acting as Administrative Agent.
Section 8.07 Non-Reliance on the Administrative Agent, Other Lenders and Other Issuing Banks . Each Lender and each Issuing Bank acknowledges that it has, independently and without reliance upon the Administrative Agent or any other Lender or Issuing Bank or any of their Related Parties and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement. Each Lender and each Issuing Bank also acknowledges that it will, independently and without reliance upon the Administrative Agent or any other Lender or Issuing Bank or any of their Related Parties and based on such documents and information as it shall from time to time deem appropriate, continue to make its own decisions in taking or not taking action under or based upon this Agreement, any other Loan Document or any related agreement or any document furnished hereunder or thereunder.
Section 8.08 No Other Duties, Etc . . Anything herein to the contrary notwithstanding, the Administrative Agent shall not have any powers, duties or responsibilities under this Agreement or any of the other Loan Documents, except in its capacity, as applicable, as the Administrative Agent, a Lender or an Issuing Bank hereunder.
Section 8.09 Administrative Agent May File Proofs of Claim . In case of the pendency of any proceeding under any federal, state or foreign bankruptcy, insolvency, receivership or similar law or any other judicial proceeding relative to any Loan Party, the Administrative Agent (irrespective of whether the principal of any Loan shall then be due and payable as herein expressed or by declaration or otherwise and irrespective of whether the Administrative Agent shall have made any demand on the Borrower) shall be entitled and empowered, by intervention in such proceeding or otherwise:
(a) to file and prove a claim for the whole amount of the principal and interest owing and unpaid in respect of the Loans and all other Obligations that are owing and unpaid and to file such other documents as may be necessary or advisable in order to have the claims of the Lenders, the Issuing Banks and the Administrative Agent (including any claim for the reasonable compensation, expenses, disbursements and advances of the Lenders, the Issuing Banks and the Administrative Agent and their respective agents and counsel and all other amounts due the Lenders, the Issuing Banks and the Administrative Agent under Sections 2.12, 8.12, and 9.05) allowed in such judicial proceeding; and
(b) to collect and receive any monies or other property payable or deliverable on any such claims and to distribute the same;
and any custodian, receiver, assignee, trustee, liquidator, sequestrator or other similar official in any such judicial proceeding is hereby authorized by each Lender and each Issuing Bank to make such payments to the Administrative Agent and, if the Administrative Agent shall consent to the making of such payments directly to the Lenders and the Issuing Banks, to pay to the Administrative Agent any amount due for the reasonable compensation, expenses, disbursements and advances of the Administrative Agent and its agents and counsel, and any other amounts due the Administrative Agent under Sections 2.12, 8.12, and 9.05.
Nothing contained herein shall be deemed to authorize the Administrative Agent to authorize or consent to or accept or adopt on behalf of any Lender or any Issuing Bank any plan of reorganization, arrangement, adjustment or composition affecting the Obligations or the rights of any Lender or any Issuing Bank to authorize the Administrative Agent to vote in respect of the claim of any Lender or any Issuing Bank in any such proceeding.
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Section 8.10 Guaranty Matters . Each of the Lenders and each of the Issuing Banks irrevocably authorizes the Administrative Agent to release guarantees created by the Loan Documents in accordance with the provisions of Section 9.18. Upon request by the Administrative Agent at any time, the Required Lenders will confirm in writing Administrative Agents authority provided for in the previous sentence.
Section 8.11 Reserved .
Section 8.12 Indemnification . Each Lender and Issuing Bank agrees (i) to reimburse the Administrative Agent, on demand, in the amount of its pro rata share based on its Commitments hereunder or if such Commitments shall have expired or been terminated, in accordance with the respective principal amounts of its applicable outstanding Loans or portion of outstanding Revolving L/C Disbursements owed to it, as applicable, of any reasonable expenses incurred for the benefit of the Lenders and the Issuing Banks by the Administrative Agent, including reasonable counsel fees and compensation of agents and employees paid for services rendered on behalf of the Lenders and the Issuing Banks, which shall not have been reimbursed by the Borrower within 10 Business Days of written demand therefor and (ii) to indemnify and hold harmless the Administrative Agent and any of its directors, officers, employees or agents, on demand, in the amount of such pro rata share, from and against any and all liabilities, Taxes, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever which may be imposed on, incurred by or asserted against it in its capacity as Administrative Agent or any of them in any way relating to or arising out of this Agreement or any other Loan Document or any action taken or omitted by it or any of them under this Agreement or any other Loan Document, to the extent the same shall not have been reimbursed by the Borrower, provided that no Lender or Issuing Bank shall be liable to the Administrative Agent for any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements to the extent found in a final non-appealable judgment by a court of competent jurisdiction to have resulted primarily from the gross negligence or wilful misconduct of the Administrative Agent or any of its directors, officers, employees or agents.
Section 8.13 Appointment of Supplemental Administrative Agent . (a) It is the purpose of this Agreement and the other Loan Documents that there shall be no violation of any law of any jurisdiction denying or restricting the right of banking corporations or associations or other institutions to transact business as agent or trustee in such jurisdiction. It is recognized that in case of litigation under this Agreement or any of the other Loan Documents, and in particular in case of the enforcement of any of the Loan Documents, or in case the Administrative Agent deems that by reason of any present or future law of any jurisdiction it may not exercise any of the rights, powers or remedies granted herein or in any of the other Loan Documents or take any other action which may be desirable or necessary in connection therewith, it may be necessary that the Administrative Agent appoint an additional institution as a separate trustee, co-trustee, administrative agent, collateral agent, collateral sub-agent or collateral co-agent (any such additional individual or institution being referred to herein individually as a Supplemental Administrative Agent and collectively as Supplemental Administrative Agents ).
(b) In the event that the Administrative Agent appoints a Supplemental Administrative Agent, (i) each and every right, power, privilege or duty expressed or intended by this Agreement or any of the other Loan Documents to be exercised by or vested in or conveyed to the Administrative Agent shall be exercisable by and vest in such Supplemental Administrative Agent to the extent, and only to the extent, necessary to enable such Supplemental Administrative Agent to exercise such rights, powers and privileges and to perform such duties, and every covenant and obligation
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contained in the Loan Documents and necessary to the exercise or performance thereof by such Supplemental Administrative Agent shall run to and be enforceable by either the Administrative Agent or such Supplemental Administrative Agent, and (ii) the provisions of this Article and of Section 9.05 that refer to the Administrative Agent shall inure to the benefit of such Supplemental Administrative Agent and all references therein to the Administrative Agent shall be deemed to be references to the Administrative Agent and/or such Supplemental Administrative Agent, as the context may require.
(c) Should any instrument in writing from any Loan Party be required by any Supplemental Administrative Agent so appointed by the Administrative Agent for more fully and certainly vesting in and confirming to it such rights, powers, privileges and duties, such Loan Party shall execute, acknowledge and deliver any and all such instruments promptly upon request by the Administrative Agent. In case any Supplemental Administrative Agent, or a successor thereto, shall die, become incapable of acting, resign or be removed, all the rights, powers, privileges and duties of such Supplemental Administrative Agent, to the extent permitted by law, shall vest in and be exercised by the Administrative Agent until the appointment of a new Supplemental Administrative Agent.
Section 8.14 Withholding . To the extent required by any applicable law, the Administrative Agent may withhold from any payment to any Lender or Issuing Bank an amount equivalent to any applicable withholding Tax. If any payment has been made to any Lender or Issuing Bank by the Administrative Agent without the applicable withholding Tax being withheld from such payment and the Administrative Agent has paid over the applicable withholding Tax to the Internal Revenue Service or any other Governmental Authority, or the Internal Revenue Service or any other Governmental Authority asserts a claim that the Administrative Agent did not properly withhold Tax from amounts paid to or for the account of any Lender or Issuing Bank because the appropriate form was not delivered or was not properly executed or because such Lender or Issuing Bank failed to notify the Administrative Agent of a change in circumstance which rendered the exemption from, or reduction of, withholding Tax ineffective or for any other reason, such Lender or Issuing Bank shall indemnify the Administrative Agent fully for all amounts paid, directly or indirectly, by the Administrative Agent as Tax or otherwise, including any penalties or interest and together with all expenses (including legal expenses and out-of-pocket expenses) incurred.
Section 8.15 Enforcement . Notwithstanding anything to the contrary contained herein or in any other Loan Document, the authority to enforce rights and remedies hereunder and under the other Loan Documents against the Loan Parties or any of them shall be vested exclusively in, and all actions and proceedings at law in connection with such enforcement shall be instituted and maintained exclusively by, the Administrative Agent in accordance with Section 7.01 for the benefit of all the Lenders and the Issuing Banks, as applicable; provided , however, that the foregoing shall not prohibit (a) the Administrative Agent from exercising on its own behalf the rights and remedies that inure to its benefit (solely in its capacity as Administrative Agent) hereunder and under the other Loan Documents, (b) any Lender or Issuing Bank from exercising setoff rights in accordance with Section 9.06 (subject to the terms of Section 2.18(c)), or (c) any Lender or Issuing Bank from filing proofs of claim or appearing and filing pleadings on its own behalf during the pendency of a proceeding relative to any Loan Party under any federal, state or foreign bankruptcy, insolvency, receivership or similar law; and provided , further , that if at any time there is no Person acting as the Administrative Agent hereunder and under the other Loan Documents, then (i) the Required Lenders shall have the rights otherwise ascribed to the Administrative Agent pursuant to Section 7.01 (ii) in addition to the matters set forth in clauses (b) and (c) of the preceding proviso and subject to Section 2.18(c), any Lender or Issuing Bank may, with the consent of the Required Lenders, enforce any rights and remedies available to it and as authorized by the Required Lenders.
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ARTICLE IX
MISCELLANEOUS
Section 9.01 Notices . (a) Notices and other communications provided for herein shall be in writing and shall be delivered by hand or overnight courier service, mailed by certified or registered mail or sent by telecopy, as follows:
(i) if to the Borrower, to Franks International C.V., 10260 Westheimer Road, Houston, Texas 77042 attention: , fax: , e-mail: ,
(ii) if to the Administrative Agent, to Amegy at 4400 Post Oak Parkway, Houston, Texas 77027, Attention: Brad Ellis; fax: (713) 561-0345, e-mail: brad.ellis@amegybank.com;
(iii) if to the Swingline Facility Lender, to Amegy at 4400 Post Oak Parkway, Houston, Texas 77027, Attention: Brad Ellis; fax: (713) 561-0345, e-mail: brad.ellis@amegybank.com; and
(iv) if to an Issuing Bank or any Lender, to the address, telecopier number, electronic mail address or telephone number specified in its Administrative Questionnaire.
(b) Notices and other communications to the Lenders hereunder may be delivered or furnished by electronic communications pursuant to procedures approved by the Administrative Agent; provided that the foregoing shall not apply to service of process, or to notices pursuant to Article II unless otherwise agreed by the Administrative Agent and the applicable Lender. Each of the Administrative Agent and the Borrower may, in its discretion, agree to accept notices and other communications to it hereunder by electronic communications pursuant to procedures approved by it; provided further that approval of such procedures may be limited to particular notices or communications.
(c) All notices and other communications given to any party hereto in accordance with the provisions of this Agreement shall be deemed to have been given on the date of receipt if delivered by hand or overnight courier service or sent by telecopy or (to the extent permitted by paragraph (b) above) electronic means prior to 4:00 p.m. (Houston, Texas time) on such date, or on the date five Business Days after dispatch by certified or registered mail if mailed, in each case delivered, sent or mailed (properly addressed) to such party as provided in this Section 9.01 or in accordance with the latest unrevoked direction from such party given in accordance with this Section 9.01.
(d) Any party hereto may change its address or telecopy number for notices and other communications hereunder by notice to the other parties hereto.
Section 9.02 Survival of Agreement . All covenants, agreements, representations and warranties made by the Borrower and the other Loan Parties herein, in the other Loan Documents and in the certificates or other instruments prepared or delivered in connection with or pursuant to this Agreement or any other Loan Document shall be considered to have been relied upon by the Lenders, the Swingline Facility Lender and each Issuing Bank and shall survive the making by the Lenders of the Loans, the making by the Swingline Facility Lender of Swingline Facility Loans, the execution and delivery of the Loan Documents and the issuance of the Letters of Credit, regardless of any investigation made by such Persons or on their behalf, and shall continue in full force and effect as long as the principal of or any accrued interest on any Loan or Revolving L/C Disbursement or any Fee or any other amount payable under this Agreement or any other Loan Document is outstanding and unpaid or any Revolving Letter of Credit is outstanding and so long as the Commitments have not been terminated. Without prejudice to the survival of any other agreements contained herein, indemnification and reimbursement
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obligations contained herein (including pursuant to Sections 2.15, 2.17 and 9.05) shall survive the payment in full of the principal and interest hereunder, the expiration of the Letters of Credit and the termination of the Commitments or this Agreement.
Section 9.03 Binding Effect . This Agreement shall become effective when it shall have been executed by the Borrower and the Administrative Agent and when the Administrative Agent shall have received copies hereof which, when taken together, bear the signatures of each of the other parties hereto, and thereafter shall be binding upon and inure to the benefit of the Borrower, each Issuing Bank, the Administrative Agent and each Lender and their respective permitted successors and assigns.
Section 9.04 Successors and Assigns. (a) The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns permitted hereby (including any Affiliate of any Issuing Bank that issues any Revolving Letter of Credit), except that (i) the Borrower may not assign or otherwise transfer any of its rights or obligations hereunder without the prior written consent of each Lender (and any attempted assignment or transfer by the Borrower without such consent shall be null and void) and (ii) no Lender may assign or otherwise transfer its rights or obligations hereunder except in accordance with this Section. Nothing in this Agreement, expressed or implied, shall be construed to confer upon any Person (other than the parties hereto, their respective successors and assigns permitted hereby (including any Affiliate of any Issuing Bank that issues any Revolving Letter of Credit), Participants (to the extent provided in paragraph (c) of this Section), the Lenders (including the Swingline Facility Lender), the Administrative Agent, each Issuing Bank and, to the extent expressly contemplated hereby, the Related Parties of each of the Administrative Agent, each Issuing Bank, and the Lenders (including the Swingline Facility Lender), and the Indemnitees) any legal or equitable right, remedy or claim under or by reason of this Agreement.
(b) (i) Subject to the conditions set forth in paragraph (b)(ii) below, any Lender may assign to one or more Eligible Assignees all or a portion of its rights and obligations under this Agreement (including all or a portion of its Commitment and the Loans at the time owing to it) with the prior written consent (such consent not to be unreasonably withheld or delayed) of:
(A) the Borrower; provided that no consent of the Borrower shall be required for an assignment to a Lender or, if an Event of Default has occurred and is continuing, any other assignee;
(B) the Administrative Agent;
(C) the Swingline Facility Lender; and
(D) each Issuing Lender.
(ii) Assignments shall be subject to the following additional conditions:
(A) except in the case of an assignment to a Lender, an Affiliate of a Lender or an Approved Fund, an assignment of the entire remaining amount of the assigning Lenders Commitment or contemporaneous assignments to related Approved Funds that equal at least U.S. $2,500,000 in the aggregate, the amount of the Commitment and/or Loans, as applicable, of the assigning Lender subject to each such assignment (determined as of the date the Assignment and Acceptance with respect to such assignment is delivered to the Administrative Agent) shall not be less than U.S. $5,000,000 and increments of U.S. $1,000,000 in excess thereof unless the Borrower and the Administrative Agent otherwise consent; provided that no such consent of the Borrower shall be required if an Event of Default has occurred and is continuing;
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(B) each partial assignment shall be made as an assignment of a proportionate part of all the assigning Lenders rights and obligations in respect of the Revolving Facility under this Agreement;
(C) the parties to each assignment shall execute and deliver to the Administrative Agent an Assignment and Acceptance;
(D) the assignee, if it shall not be a Lender, shall deliver to the Administrative Agent an Administrative Questionnaire and any other administrative information that the Administrative Agent may reasonably request;
(E) no such assignment shall be made to the Borrower or any of its Affiliates, or a Defaulting Lender; and
(F) notwithstanding anything to the contrary herein, no such assignment shall be made to a natural person.
For purposes of this Section 9.04(b), the term Approved Fund shall have the following meaning:
Approved Fund shall mean any Person (other than a natural person) that is engaged in making, purchasing, holding or investing in bank loans and similar extensions of credit in the ordinary course and that is administered or managed by a Lender, an Affiliate of a Lender or an entity or an Affiliate of an entity that administers or manages a Lender.
(iii) Subject to acceptance and recording thereof pursuant to paragraph (b)(iv) of this Section, from and after the effective date specified in each Assignment and Acceptance the assignee thereunder shall be a party hereto and, to the extent of the interest assigned by such Assignment and Acceptance, have the rights and obligations of a Lender under this Agreement, and the assigning Lender hereunder shall, to the extent of the interest assigned by such Assignment and Acceptance, be released from its obligations under this Agreement (and, in the case of an Assignment and Acceptance covering all of the assigning Lenders rights and obligations under this Agreement, such Lender shall cease to be a party hereto but shall continue to be entitled to the benefits of Sections 2.15, 2.16, 2.17 and 9.05). Any assignment or transfer by a Lender of rights or obligations under this Agreement that does not comply with this Section 9.04 shall not be effective as an assignment hereunder.
(iv) The Administrative Agent, acting for this purpose as an agent of the Borrower, shall maintain at one of its offices a copy of each Assignment and Acceptance delivered to it and a register for the recordation of the names and addresses of the Lenders, and the Commitment of, and principal amount (and stated interest) of the Loans and Revolving L/C Disbursements owing to, each Lender pursuant to the terms hereof from time to time (the Register ). The entries in the Register shall be conclusive, and the Borrower, the Administrative Agent, each Issuing Bank and the Lenders shall treat each Person whose name is recorded in the Register pursuant to the terms hereof as a Lender hereunder for all purposes of this Agreement, notwithstanding notice to the contrary. The Register shall be available for inspection by the Borrower, any Issuing Bank and any Lender, at any reasonable time and from time to time upon reasonable prior notice.
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(v) The parties to each assignment shall execute and deliver to the Administrative Agent a processing and recordation fee in the amount of $3,500; provided , however , that the Administrative Agent may, in its sole discretion, elect to waive such processing and recordation fee in the case of any assignment. Upon its receipt of a duly completed Assignment and Acceptance executed by an assigning Lender and an assignee, any administrative information reasonably requested by the Administrative Agent (unless the assignee shall already be a Lender hereunder), any written consent to such assignment required by paragraph (b) of this Section, and the processing and recordation fee referred to above (unless waived as set forth above), the Administrative Agent shall accept such Assignment and Acceptance and record the information contained therein in the Register. No assignment shall be effective for purposes of this Agreement unless it has been recorded in the Register as provided in this paragraph.
(c) (i) Any Lender may, without the consent of the Borrower, the Administrative Agent or any Issuing Bank, sell participations to one or more banks or other entities (a Participant ) in all or a portion of such Lenders rights and obligations under this Agreement (including all or a portion of its Commitment and the Loans and Revolving L/C Disbursements owing to it); provided that (A) such Lenders obligations under this Agreement shall remain unchanged, (B) such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations, (C) the Borrower, the Administrative Agent, each Issuing Bank and the other Lenders shall continue to deal solely and directly with such Lender in connection with such Lenders rights and obligations under this Agreement and (D) such Lender shall maintain a register on which it enters the name and address of each Participant and the principal amounts (and stated interest) of each Participants interest in the Loans (or other rights or obligations) held by it (a Participant Register) , which entries shall be conclusive absent manifest error. The Lender shall permit Borrower to review the Participant Register and to disclose information in the Participant Register to the extent that such disclosure is necessary to establish that such Commitments, Loans, Revolving Letters of Credit or other obligations are in registered form under Section 5f.103-1(c) of the United States Treasury Regulations. Any agreement or instrument (oral or written) pursuant to which a Lender sells such a participation shall provide that such Lender shall retain the sole right to exercise rights under and to enforce this Agreement and the other Loan Documents and to approve any amendment, modification or waiver of any provision of this Agreement and the other Loan Documents; provided that (x) such agreement or instrument may provide that such Lender will not, without the consent of the Participant, agree to any amendment, modification or waiver described in clause (i) through (vii) of the first proviso to Section 9.08(b) that affects such Participant and (y) no other agreement (oral or written) in respect of the foregoing with respect to such Participant may exist between such Lender and such Participant. Subject to paragraph (c)(ii) of this Section, the Borrower agrees that each Participant shall be entitled to the benefits (and subject to the requirements and limitations) of Sections 2.15, 2.16 and 2.17 to the same extent as if it were the Lender from whom it obtained its participation and had acquired its interest by assignment pursuant to paragraph (b) of this Section. To the extent permitted by law, each Participant also shall be entitled to the benefits of Section 9.06 as though it were a Lender, provided such Participant agrees to be subject to Section 2.18(c) as though it were a Lender.
(ii) A Participant shall not be entitled to receive any greater payment under Section 2.15, 2.16 or 2.17 than the applicable Lender would have been entitled to receive with respect to the participation sold to such Participant, unless the sale of the participation to such Participant is made with the Borrowers prior written consent (which shall not be unreasonably withheld or delayed) and the Borrower may withhold its consent if a Participant would be entitled to require greater payment than the applicable Lender under such Sections. A Participant that would be a Non-U.S.Lender if it were a Lender shall not be entitled to the benefits of Section 2.17 to the extent such Participant fails to comply with Section 2.17(e) as though it were a Lender.
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(d) Any Lender may at any time pledge or assign a security interest in all or any portion of its rights under this Agreement and its Note, if any, to secure obligations of such Lender, including any pledge or assignment to secure obligations to a Federal Reserve Bank or other central bank, and this Section shall not apply to any such pledge or assignment of a security interest; provided that no such pledge or assignment of a security interest shall release a Lender from any of its obligations hereunder or substitute any such pledgee or assignee for such Lender as a party hereto, and any such pledgee (other than a pledgee that is the Federal Reserve Bank or another central bank) shall acknowledge in writing that its rights under such pledge are in all respects subject to the limitations applicable to the pledging Lender under this Agreement or the other Loan Documents.
Section 9.05 Expenses; Indemnity . (a) The Borrower agrees to pay all reasonable and documented out-of-pocket expenses incurred by the Administrative Agent and its Affiliates in connection with the preparation of this Agreement and the other Loan Documents, or by the Administrative Agent and its Affiliates in connection with the syndication of the Commitments or the administration of this Agreement or in connection with any amendments, modifications or waivers of the provisions hereof or thereof (whether or not the Transactions hereby contemplated shall be consummated) or incurred by the Administrative Agent and its Affiliates or any Lender in connection with the enforcement or protection of their rights in connection with, or any workout or restructuring involving, this Agreement and the other Loan Documents, in connection with the Loans made or the Letters of Credit issued hereunder, including the reasonable fees, charges and disbursements of Thompson & Knight LLP, special counsel for the Administrative Agent, and, in connection with any such enforcement or protection, the reasonable fees, charges and disbursements of any other counsel; provided , that, absent any conflict of interest the Administrative Agent shall not be entitled to indemnification for the fees, charges or disbursements of more than one counsel in each jurisdiction.
(b) The Borrower agrees to indemnify the Administrative Agent, each Issuing Bank, the Swingline Facility Lender, each Lender and each Related Party of any of the foregoing Persons (each such Person being called an Indemnitee ) against, and to hold each Indemnitee harmless from, any and all losses, claims, damages, liabilities and related expenses, including reasonable and documented counsel fees, charges and disbursements, including legal fees and settlement costs, incurred by or asserted against any Indemnitee arising out of, in any way connected with, or as a result of (i) the execution or delivery of this Agreement or any other Loan Document or any agreement or instrument contemplated hereby or thereby, the performance by the parties hereto and thereto of their respective obligations hereunder and thereunder or the consummation of the Transactions and the other transactions contemplated hereby or thereby, (ii) the use of the proceeds of the Loans or the use of any Revolving Letter of Credit or (iii) any claim, litigation, investigation or proceeding relating to any of the foregoing, whether or not the Borrower, Borrowers Subsidiaries or any Indemnitee initiated or is a party thereto, provided that such indemnity shall not, as to any Indemnitee, be available to the extent that such losses, claims, damages, liabilities or related expenses are determined in a final nonappealable judgment by a court of competent jurisdiction to have resulted from the gross negligence or willful misconduct of such Indemnitee. Subject to and without limiting the generality of the foregoing sentence, the Borrower agrees to indemnify each Indemnitee against, and hold each Indemnitee harmless from, any and all losses, claims, damages, liabilities and related expenses, including reasonable and documented counsel or consultant fees, charges and disbursements, incurred by or asserted against any Indemnitee arising out of, in any way connected with, or as a result of (A) any Environmental Event or Environmental Claim to the extent related in any way to the Borrower or any of its Subsidiaries or any other Loan Party, or (B) any actual or alleged presence, Release or threatened Release of Hazardous Materials (1) at, under, on or from any real property currently owned, leased or operated by the Borrower or any of its Subsidiaries or any other Loan Party, or (2) to the extent such presence, Release or threatened Release arose from the operations of Borrower or any of its Subsidiaries or any other Loan Party, or any predecessor of any Loan Party at, under, on or from any real property, (x) formerly owned, leased or operated by Borrower or any of its Subsidiaries or any other Loan Party or any predecessor of any Loan Party, or (y) any property offsite the property of Borrower or any of its Subsidiaries or any other Loan Party or any predecessor of any Loan Party to which the Borrower or
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any of its Subsidiaries or any other Loan Party has sent Hazardous Materials for treatment, storage or disposal, provided that such indemnity shall not, as to any Indemnitee, be available to the extent that such losses, claims, damages, liabilities or related expenses are determined by a court of competent jurisdiction to have resulted from the gross negligence or willful misconduct of such Indemnitee or any of its Related Parties or would have arisen as against the Indemnitee regardless of this Agreement or any other Loan Document or any Borrowings hereunder. In no event shall any Indemnitee be liable to any Loan Party for any consequential, indirect, special or punitive damages. No Indemnitee shall be liable for any damages arising from the use by unintended recipients of any information or other materials distributed to such unintended recipients by such Indemnitee through telecommunications, electronic or other information transmission systems in connection with this Agreement or the other Loan Documents or the transactions contemplated hereby or thereby other than for direct or actual damages resulting from the gross negligence or willful misconduct of such Indemnitee as determined by a court of competent jurisdiction. The provisions of this Section 9.05 shall remain operative and in full force and effect regardless of the expiration of the term of this Agreement, the consummation of the Transactions contemplated hereby, the repayment of any of the Obligations, the invalidity or unenforceability of any term or provision of this Agreement or any other Loan Document, or any investigation made by or on behalf of the Administrative Agent, any Issuing Bank, the Swingline Facility Lender or any Lender. All amounts due under this Section 9.05 shall be payable on written demand therefor accompanied by reasonable documentation with respect to any reimbursement, indemnification or other amount requested.
(c) This Section 9.05 shall not apply to Taxes.
Section 9.06 Right of Set-off . If an Event of Default shall have occurred and be continuing, each Lender and each Issuing Bank is hereby authorized at any time and from time to time, to the fullest extent permitted by law, to set off and apply any and all deposits (general or special, time or demand, provisional or final) at any time held and other indebtedness at any time owing by such Lender or such Issuing Bank to or for the credit or the account of any Loan Party or any other Subsidiary of Borrower, against any and all obligations of the Loan Parties, now or hereafter existing under this Agreement or any other Loan Document held by such Lender or such Issuing Bank, irrespective of whether or not such Lender or such Issuing Bank shall have made any demand under this Agreement or such other Loan Document and although the obligations may be unmatured. The rights of each Lender and each Issuing Bank under this Section 9.06 are in addition to other rights and remedies (including other rights of set-off) that such Lender or such Issuing Bank may have.
Section 9.07 Applicable Law . THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF TEXAS.
Section 9.08 Waivers; Amendment . (a) No failure or delay of the Administrative Agent, any Issuing Bank or any Lender in exercising any right or power hereunder or under any Loan Document shall operate as a waiver thereof, nor shall any single or partial exercise of any such right or power, or any abandonment or discontinuance of steps to enforce such a right or power, preclude any other or further exercise thereof or the exercise of any other right or power. The rights and remedies of the Administrative Agent, each Issuing Bank and the Lenders hereunder and under the other Loan Documents are cumulative and are not exclusive of any rights or remedies that they would otherwise have. No waiver of any provision of this Agreement or any other Loan Document or consent to any departure by the Borrower or any other Loan Party therefrom shall in any event be effective unless the same shall be permitted by paragraph (b) below, and then such waiver or consent shall be effective only in the specific instance and for the purpose for which given. No notice or demand on the Borrower or any other Loan Party in any case shall entitle such Person to any other or further notice or demand in similar or other circumstances.
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(b) Neither this Agreement nor any other Loan Document nor any provision hereof or thereof may be waived, amended or modified except in the case of this Agreement and any other Loan Document, pursuant to an agreement or agreements in writing entered into by the Borrower and the Required Lenders (or the Administrative Agent with the consent of the Required Lenders); provided, however , that no such agreement shall
(i) decrease or forgive the principal amount of, or extend the final maturity of, or decrease the rate of interest on, any Loan or any Revolving L/C Disbursement, without the prior written consent of each Lender directly affected thereby; provided that any amendment to the financial covenant definitions in this Agreement shall not constitute a reduction in the rate of interest for purposes of this clause (i),
(ii) increase or extend the Commitment of any Lender or decrease the Commitment Fees or Revolving L/C Participation Fees or other fees payable to any Lender without the prior written consent of such Lender (it being understood that waivers or modifications of conditions precedent, covenants, Defaults or Events of Defaults shall not constitute an increase in the Commitments of any Lender),
(iii) extend any date on which any scheduled payment of interest on any Loan, Revolving L/C Disbursement or any Fees is due, without the prior written consent of each Lender adversely affected thereby,
(iv) amend or modify the provisions of Section 2.18(b) or (c) in a manner that would by its terms alter the pro rata sharing of payments required thereby, without the prior written consent of each Lender adversely affected thereby,
(v) extend the stated expiration date of any Revolving Letter of Credit beyond the Revolving Maturity Date, without the prior written consent of each Lender directly affected thereby,
(vi) amend or modify the provisions of this Section or the definition of the terms Required Lenders or any other provision hereof specifying the number or percentage of Lenders required to waive, amend or modify any rights hereunder or make any determination or grant any consent hereunder, without the prior written consent of each Lender adversely affected thereby (it being understood that, with the consent of the Required Lenders, additional extensions of credit pursuant to this Agreement may be included in the determination of the Required Lenders on substantially the same basis as the Loans and Commitments are included on the Closing Date),
(vii) release any Loan Party (except in connection with a sale permitted pursuant to Section 6.05) without the prior written consent of each Lender and Issuing Bank, and
(viii) amend or modify the provisions of Section 4.01 or 4.02;
provided further that no such agreement shall amend, modify or otherwise affect the rights or duties of the Administrative Agent, the Swingline Facility Lender or an Issuing Bank hereunder or under the other Loan Documents without the prior written consent of such Administrative Agent, Swingline Facility Lender or an Issuing Bank, as applicable. Each Lender shall be bound by any waiver, amendment or modification authorized by this Section 9.08 and any consent by any Lender pursuant to this Section 9.08 shall bind any assignee of such Lender,
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(c) Reserved.
(d) Reserved.
(e) Notwithstanding the foregoing, (i) technical and conforming modifications to the Loan Documents may be made with the consent of the Borrower and the Administrative Agent to the extent necessary to integrate any Incremental Revolving Facility Commitments on the terms and conditions provided for in Section 2.20 and (ii) any Loan Document may be amended, modified, supplemented or waived with the written consent of the Administrative Agent and the Borrower without the need to obtain the consent of any Lender if such amendment, modification, supplement or waiver is executed and delivered in order to cure an ambiguity, omission, mistake or defect in such Loan Document; provided that in connection with this clause (ii), in no event will the Administrative Agent be required to substitute its judgment for the judgment of the Lenders or the Required Lenders, and the Administrative Agent may in all circumstances seek the approval of the Required Lenders, the affected Lenders or all Lenders in connection with any such amendment, modification, supplement or waiver.
Section 9.09 Interest Rate Limitation . It is the intention of the parties hereto that each Lender shall conform strictly to usury laws applicable to it. Accordingly, if the transactions contemplated hereby would be usurious as to any Lender under laws applicable to it (including the laws of the United States of America, the State of Texas or any other jurisdiction whose laws may be mandatorily applicable to such Lender notwithstanding the other provisions of this Agreement), then, in that event, notwithstanding anything to the contrary in any of the Loan Documents or any agreement entered into in connection with or as security for the Notes, it is agreed as follows: (i) the aggregate of all consideration which constitutes interest under law applicable to any Lender that is contracted for, taken, reserved, charged or received by such Lender under any of the Loan Documents or agreements or otherwise in connection with the Notes shall under no circumstances exceed the maximum amount allowed by such applicable law, and any excess shall be canceled automatically and if theretofore paid shall be credited by such Lender on the principal amount of the Obligations (or, to the extent that the principal amount of the Obligations shall have been or would thereby be paid in full, refunded by such Lender to the Borrower); and (ii) in the event that the maturity of the Notes is accelerated by reason of an election of the holder thereof resulting from any Event of Default under this Agreement or otherwise, or in the event of any required or permitted prepayment, then such consideration that constitutes interest under law applicable to any Lender may never include more than the maximum amount allowed by such applicable law, and excess interest, if any, provided for in this Agreement or otherwise shall be canceled automatically by such Lender as of the date of such acceleration or prepayment and, if theretofore paid, shall be credited by such Lender on the principal amount of the Obligations (or, to the extent that the principal amount of the Obligations shall have been or would thereby be paid in full, refunded by such Lender to the Borrower). All sums paid or agreed to be paid to any Lender for the use, forbearance or detention of sums due hereunder shall, to the extent permitted by law applicable to such Lender, be amortized, prorated, allocated and spread throughout the stated term of the Loans evidenced by the Notes until payment in full so that the rate or amount of interest on account of any Loans hereunder does not exceed the maximum amount allowed by such applicable law. If at any time and from time to time (i) the amount of interest payable to any Lender on any date shall be computed at the Highest Lawful Rate applicable to such Lender pursuant to this Section 9.09 and (ii) in respect of any subsequent interest computation period the amount of interest otherwise payable to such Lender would be less than the amount of interest payable to such Lender computed at the Highest Lawful Rate applicable to such Lender, then the amount of interest payable to such Lender in respect of such subsequent interest computation period shall continue to be computed at the Highest Lawful Rate applicable to such Lender until the total amount of interest payable to such Lender shall equal the total amount of interest which would have been payable to such Lender if the total amount of interest had been computed without giving effect to this Section 9.09. To the extent that Chapter 303 of the Texas Finance Code is relevant for the purpose of determining the Highest Lawful
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Rate applicable to a Lender, such Lender elects to determine the applicable rate ceiling under such Chapter by the weekly ceiling from time to time in effect. Chapter 346 of the Texas Finance Code does not apply to the Borrowers obligations hereunder.
Section 9.10 Entire Agreement . This Agreement, the other Loan Documents and the agreements regarding certain Fees referred to herein constitute the entire contract between the parties relative to the subject matter hereof. Any previous agreement among or representations from the parties or their Affiliates with respect to the subject matter hereof is superseded by this Agreement and the other Loan Documents. Notwithstanding the foregoing, the Fee Letter shall survive the execution and delivery of this Agreement and remain in full force and effect. Nothing in this Agreement or in the other Loan Documents, expressed or implied, is intended to confer upon any party other than the parties hereto and thereto any rights, remedies, obligations or liabilities under or by reason of this Agreement or the other Loan Documents.
Section 9.11 Waiver of Jury Trial . (a) EACH PARTY HERETO HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS. EACH PARTY HERETO (i) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (ii) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS, AS APPLICABLE, BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 9.11.
(b) Arbitration.
(i) If a claim, dispute, or controversy arises between us with respect to or arising out of this Agreement or any other Loan Document (all of the foregoing, a Dispute ), and only if a jury trial waiver is not permitted by applicable Law or ruling by a court, any of the parties hereto may require that the Dispute be resolved by binding arbitration before a single arbitrator at the request of any party. By agreeing to arbitrate a Dispute, each party gives up any right that party may have to a jury trial, as well as other rights that party would have in court that are not available or are more limited in arbitration, such as the rights to discovery and to appeal.
(ii) Arbitration shall be commenced by filing a petition with, and in accordance with the applicable arbitration rules of, the Judicial Arbitration and Mediation Services ( JAMS ) or National Arbitration Forum ( Administrator ) as selected by the initiating party. If the parties agree, arbitration may be commenced by appointment of a licensed attorney who is selected by the parties and who agrees to conduct the arbitration without an Administrator. Disputes include matters (i) relating to a deposit account, application for or denial of credit, enforcement of any of the obligations the parties owe to each other, compliance with applicable laws and/or regulations, performance or services provided under any agreement by any party, (ii) based on or arising from an alleged tort, or (iii) involving any parties employees, agents, Affiliates, or assigns. However, Disputes do not include the validity, enforceability, meaning, or scope of this arbitration provision and such matters may be determined only by a court. If a third party is a party to a Dispute, each party will consent to including the third party in the arbitration proceeding for resolving the Dispute with the third party. Venue for the arbitration proceeding shall be at a location determined by mutual agreement of the parties or, if no agreement, in Houston, Texas.
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(iii) After entry of an arbitration order, the non-moving party shall commence arbitration. The moving party shall, at its discretion, also be entitled to commence arbitration but is under no obligation to do so, and the moving party shall not in any way be adversely prejudiced by electing not to commence arbitration. The arbitrator: (i) will hear and rule on appropriate dispositive motions for judgment on the pleadings, for failure to state a claim, or for full or partial summary judgment; (ii) will render a decision and any award applying applicable law; (iii) will give effect to any limitations period in determining any Dispute or defense; (iv) shall enforce the doctrines of compulsory counterclaim, res judicata, and collateral estoppel, if applicable; (v) with regard to motions and the arbitration hearing, shall apply rules of evidence governing civil cases; and (vi) will apply the law of the State of Texas. Filing of a petition for arbitration shall not prevent any party from (x) seeking and obtaining from a court of competent jurisdiction (notwithstanding ongoing arbitration) provisional or ancillary remedies including but not limited to injunctive relief, property preservation orders, foreclosure, eviction, attachment, replevin, garnishment, and/or the appointment of a receiver, (y) pursuing non-judicial foreclosure, or (z) availing itself of any self-help remedies such as setoff and repossession. The exercise of such rights shall not constitute a waiver of the right to submit any Dispute to arbitration.
(iv) Judgment upon an arbitration award may be entered in any court having jurisdiction except that, if the arbitration award exceeds U.S. $4,000,000, any party shall be entitled to a de novo appeal of the award before a panel of three arbitrators. To allow for such appeal, if the award (including Administrators, arbitrators, and attorneys fees and costs) exceeds U.S. $4,000,000, the arbitrator will issue a written, reasoned decision supporting the award, including a statement of authority and its application to the Dispute. A request for de novo appeal must be filed with the arbitrator within 30 days following the date of the arbitration award; if such a request is not made within that time period, the arbitration decision shall become final and binding. On appeal, the arbitrators shall review the award de novo, meaning that they shall reach their own findings of fact and conclusions of law rather than deferring in any manner to the original arbitrator. Appeal of an arbitration award shall be pursuant to the rules of the Administrator or, if the Administrator has no such rules, then the JAMS arbitration appellate rules shall apply.
(v) Arbitration under this provision concerns a transaction involving interstate commerce and shall be governed by the Federal Arbitration Act, 9 U.S.C. § 1 et seq. This arbitration provision shall survive any termination, amendment, or expiration of this Agreement. If the terms of this provision vary from the Administrators rules, this arbitration provision shall control.
(c) CLASS ACTION WAIVER . EACH PARTY WAIVES THE RIGHT TO LITIGATE IN COURT OR ARBITRATE ANY CLAIM OR DISPUTE AS A CLASS ACTION, EITHER AS A MEMBER OF A CLASS OR AS A REPRESENTATIVE, OR TO ACT AS A PRIVATE ATTORNEY GENERAL.
(d) Reliance. Each party (i) certifies that no one has represented to such party that the other parties would not seek to enforce jury and class action waivers in the event of suit, and (ii) acknowledges that it and the other parties have been induced to enter into this Agreement by, among other things, the mutual waivers, agreements, and certifications in this section.
Section 9.12 Severability . In the event any one or more of the provisions contained in this Agreement or in any other Loan Document should be held invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein and therein shall not in any way be affected or impaired thereby. The parties shall endeavour in good-faith negotiations to replace the invalid, illegal or unenforceable provisions with valid provisions the economic effect of which comes as close as possible to that of the invalid, illegal or unenforceable provisions.
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Section 9.13 Counterparts . This Agreement may be executed in two or more counterparts, each of which shall constitute an original but all of which, when taken together, shall constitute but one contract, and shall become effective as provided in Section 9.03. Delivery of an executed counterpart to this Agreement by facsimile transmission or an electronic transmission of a PDF copy thereof shall be as effective as delivery of a manually signed original. Any such delivery shall be followed promptly by delivery of the manually signed original.
Section 9.14 Headings . Article and Section headings and the Table of Contents used herein are for convenience of reference only, are not part of this Agreement and are not to affect the construction of, or to be taken into consideration in interpreting, this Agreement.
Section 9.15 Jurisdiction; Consent to Service of Process . (a) Each of the Borrower, the Administrative Agent, the Swingline Facility Lender, the Issuing Bank and the Lenders hereby irrevocably and unconditionally submits, for itself and its property, to the exclusive jurisdiction of any Texas State court or federal court of the United States sitting in Houston, Texas, and any appellate court from any thereof, in any action or proceeding arising out of or relating to this Agreement or the other Loan Documents, or for recognition or enforcement of any judgment, and each of the parties hereto hereby irrevocably and unconditionally agrees that all claims in respect of any such action or proceeding may be heard and determined in such Texas State or, to the extent permitted by law, in such federal court. The Borrower further irrevocably consents to the service of process in any action or proceeding in such courts by the mailing thereof by any parties thereto by registered or certified mail, postage prepaid, to the Borrower at the address specified for the Loan Parties in Section 9.01. Each of the parties hereto agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. Nothing in this Agreement (other than Section 8.09) shall affect any right that any Lender or any Issuing Bank may otherwise have to bring any action or proceeding relating to this Agreement or the other Loan Documents against the Borrower or any Loan Party or their properties in the courts of any jurisdiction.
(b) Each of the Borrower, the Administrative Agent, the Swingline Facility Lender, the Issuing Banks and the Lenders hereby irrevocably and unconditionally waives, to the fullest extent it may legally and effectively do so, any objection which it may now or hereafter have to the laying of venue of any suit, action or proceeding arising out of or relating to this Agreement or the other Loan Documents in any Texas State or federal court sitting in Houston, Texas. Each of the parties hereto hereby irrevocably waives, to the fullest extent permitted by law, the defense of an inconvenient forum to the maintenance of such action or proceeding in any such court.
Section 9.16 Confidentiality . Each of the Lenders, each Issuing Bank and the Administrative Agent agrees that it shall maintain in confidence any information relating to the Borrower and its Subsidiaries and their respective Affiliates furnished to it by or on behalf of the Borrower or the other Loan Parties or such Subsidiary or Affiliate (other than information that (x) has become generally available to the public other than as a result of a disclosure by such party in breach of this Agreement, (y) has been independently developed by such Lender, such Issuing Bank or the Administrative Agent without violating this Section 9.16 or (z) was available to such Lender, such Issuing Bank or the Administrative Agent from a third party having, to such Persons actual knowledge, no obligations of confidentiality to the Borrower or any of its Subsidiaries or any such Affiliate) and shall not reveal the same other than to its directors, trustees, officers, employees, agents and advisors with a need to know or to any Person that approves or administers the Loans on behalf of such Lender or Issuing Bank (so long as each such Person shall have been instructed to keep the same confidential in accordance with this
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Section 9.16), except: (i) to the extent necessary to comply with law or any legal process or the regulatory or supervisory requirements of any Governmental Authority (including bank examiners), the National Association of Insurance Commissioners or of any securities exchange on which securities of the disclosing party or any Affiliate of the disclosing party are listed or traded, (ii) as part of reporting or review procedures to Governmental Authorities (including bank examiners) or the National Association of Insurance Commissioners, (iii) to its parent companies, Affiliates or auditors (so long as each such Person shall have been instructed to keep the same confidential in accordance with this Section 9.16), (iv) in connection with the exercise of any remedies under any Loan Document or in order to enforce its rights under any Loan Document in a legal proceeding, (v) to any prospective assignee of, or prospective Participant in, any of its rights under this Agreement (so long as such Person shall have been instructed to keep the same confidential in accordance with this Section 9.16 or on terms at least as restrictive as those set forth in this Section 9.16) and (vi) to any direct or indirect contractual counterparty in Swap Agreements or such contractual counterpartys professional advisor (so long as each such contractual counterparty agrees to be bound by the provisions of this Section 9.16 or on terms at least as restrictive as those set forth in Section 9.16 and each such professional advisor shall have been instructed to keep the same confidential in accordance with this Section 9.16). If a Lender, an Issuing Bank or the Administrative Agent is requested or required to disclose any such information (other than to its bank examiners and similar regulators, or to internal or external auditors) pursuant to or as required by law or legal process or subpoena to the extent reasonably practicable, it shall give prompt notice thereof to the Borrower so that the Borrower may seek an appropriate protective order and such Lender, Issuing Bank or the Administrative Agent will cooperate with the Borrower (or the applicable Subsidiary or Affiliate) in seeking such protective order.
Section 9.17 Communications . (a) Delivery . (i) Each Loan Party hereby agrees that it will use all reasonable efforts to provide to the Administrative Agent all information, documents and other materials that it is obligated to furnish to the Administrative Agent pursuant to this Agreement and any other Loan Document, including, without limitation, all notices, requests, financial statements, financial and other reports, certificates and other information materials, but excluding any such communication that (A) relates to a request for a new, or a conversion of an existing, borrowing or other extension of credit (including any election of an interest rate or interest period relating thereto), (B) relates to the payment of any principal or other amount due under this Agreement prior to 4:00 p.m. (Houston, Texas time) on the scheduled date therefor, (C) provides notice of any Default or Event of Default under this Agreement or (D) is required to be delivered to satisfy any condition precedent to the effectiveness of this Agreement and/or any borrowing or other extension of credit hereunder (all such non-excluded communications collectively, the Communications ), by transmitting the Communications in an electronic/soft medium in a format reasonably acceptable to the Administrative Agent at the address referenced in Section 9.01(a)(ii). Nothing in this Section 9.17 shall prejudice the right of the Administrative Agent or any Lender or Issuing Bank or any Loan Party to give any notice or other communication pursuant to this Agreement or any other Loan Document in any other manner specified in this Agreement or any other Loan Document.
(ii) Each Lender agrees that notice to it (as provided in the next sentence) specifying that the Communications have been posted to the Platform (as defined below) shall constitute effective delivery of the Communications to such Lender for purposes of the Loan Documents. Each Lender agrees (A) to notify the Administrative Agent in writing (including by electronic communication) from time to time of such Lenders e-mail address to which the foregoing notice may be sent by electronic transmission and (B) that the foregoing notice may be sent to such e-mail address.
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(b) Posting . Each Loan Party further agrees that the Administrative Agent may make the Communications available to the Lenders by posting the Communications on Intralinks or a substantially similar electronic transmission system (the Platform ). The Borrower hereby acknowledges that (i) the Administrative Agent will make available to the Lenders materials and/or information provided by or on behalf of the Borrower hereunder (collectively, Borrower Materials ) by posting the Borrower Materials on the Platform and (ii) certain of the Lenders (each, a Public Lender ) may have personnel who do not wish to receive material non-public information with respect to the Loan Parties or their Affiliates, or the respective securities of any of the foregoing, and who may be engaged in investment and other market-related activities with respect to such Persons securities. The Borrower hereby agrees that it will use commercially reasonable efforts to identify that portion of the Borrower Materials that may be distributed to the Public Lenders and that (w) all such Borrower Materials shall be clearly and conspicuously marked PUBLIC which, at a minimum, shall mean that the word PUBLIC shall appear prominently on the first page thereof; (x) by marking Borrower Materials PUBLIC, the Borrower shall be deemed to have authorized the Administrative Agent, the Issuing Banks and the Lenders to treat such Borrower Materials as not containing any material non-public information (although it may be sensitive and proprietary) with respect to the Loan Parties or their Affiliates or their respective securities for purposes of United States Federal and state securities laws; (y) all Borrower Materials marked PUBLIC are permitted to be made available through a portion of the Platform designated Public Side Information; and (z) the Administrative Agent shall be entitled to treat any Borrower Materials that are not marked PUBLIC as being suitable only for posting on a portion of the Platform not designated Public Side Information. Notwithstanding the foregoing, the Borrower shall not be under any obligation to mark any Borrower Materials PUBLIC to the extent the Borrower determines that such Borrower Materials contain material non-public information with respect to the Loan Parties or their Affiliates or their respective securities for purposes of United States Federal and state securities laws.
(c) Platform. The Platform is provided as is and as available. The Agent Parties (as defined below) do not warrant the accuracy or completeness of the Communications, or the adequacy of the Platform and expressly disclaim liability for errors or omissions in the Communications. No warranty of any kind, express, implied or statutory, including, without limitation, any warranty of merchantability, fitness for a particular purpose, non-infringement of third party rights or freedom from viruses or other code defects, is made by the Administrative Agent Party in connection with the Communications or the Platform. In no event shall the Administrative Agent, any of its Affiliates or any of their respective officers, directors, employees, agents advisors or representatives (collectively, Agent Parties ) have any liability to the Loan Parties, any Lender or Issuing Bank or any other Person or entity for damages of any kind, including, without limitation, direct or indirect, special, incidental or consequential damages, losses or expenses (whether in tort, contract or otherwise) arising out of any Loan Partys or the Administrative Agents transmission of communications through the internet, except to the extent the liability of the Administrative Agent Party is found in a final non-appealable judgment by a court of competent jurisdiction to have resulted primarily from the Administrative Agent Partys gross negligence or willful misconduct.
Section 9.18 Release of Guarantees . In the event that any Loan Party conveys, sells, leases, assigns, transfers or otherwise disposes of all or any portion of its assets (including the Equity Interests of any of its Subsidiaries) to a Person that is not (and is not required to become) a Loan Party in a transaction not prohibited by the Loan Documents, the Administrative Agent shall promptly (and the Lenders hereby authorize the Administrative Agent to) take such action and execute any such documents as may be reasonably requested by the Borrower and at the Borrowers expense to release any guarantees of the Obligations, by a Person that ceases to be a Subsidiary of the Borrower as a result of a transaction described above. The Guaranty Agreement and the guarantees made therein shall terminate, and each Loan Party shall automatically be released from its obligations thereunder, when all the Obligations are paid in full in cash and all Commitments are terminated (other than (A) contingent indemnification obligations and (B) obligations and liabilities under Revolving Letters of Credit as to which arrangements satisfactory to the Issuing Banks shall have been made). At such time, the Administrative Agent agrees to take such actions as are reasonably requested by the Borrower at the Borrowers expense to evidence and effectuate such termination and release of the guarantee created by the Guarantee Agreement.
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Section 9.19 U.S.A. PATRIOT Act and Similar Legislation . Each Lender and Issuing Bank hereby notifies each Loan Party that pursuant to the requirements of the U.S.A. PATRIOT Act and similar legislation, as applicable, it is required to obtain, verify and record information that identifies the Loan Parties, which information includes the name and address of each Loan Party and other information that will allow the Lenders to identify such Loan Party in accordance with such legislation. Each Loan Party agrees to furnish such information promptly upon request of a Lender. Each Lender shall be responsible for satisfying its own requirements in respect of obtaining all such information.
Section 9.20 Judgment . If for the purposes of obtaining judgment in any court it is necessary to convert a sum due hereunder in one currency into another currency, the parties hereto agree, to the fullest extent that they may effectively do so, that the rate of exchange used shall be that at which in accordance with normal banking procedures the Administrative Agent could purchase the first mentioned currency with such other currency at the Administrative Agents principal office in Houston, Texas on the Business Day preceding that on which final judgment is given.
Section 9.21 Reserved .
Section 9.22 No Fiduciary Duty . The Administrative Agent, each Lender, each Issuing Bank and their respective Affiliates (collectively, solely for purposes of this paragraph, the Lenders ), may have economic interests that conflict with those of the Borrower and the other Loan Parties. The Borrower hereby agrees that subject to applicable law, nothing in the Loan Documents or otherwise will be deemed to create an advisory, fiduciary or agency relationship or fiduciary or other implied duty between the Lenders and the Loan Parties, their equityholders or their Affiliates. The Borrower hereby acknowledges and agrees that (i) the transactions contemplated by the Loan Documents are arms-length commercial transactions between the Lenders, on the one hand, and the Loan Parties, on the other, (ii) in connection therewith and with the process leading to such transaction none of the Lenders is acting as the agent or fiduciary of any Loan Party, its management, equityholders, creditors or any other person, (iii) no Lender has assumed an advisory or fiduciary responsibility in favor of any Loan Party with respect to the transactions contemplated hereby or the process leading thereto (irrespective of whether any Lender or any of its Affiliates has advised or is currently advising such Loan Party on other matters) or any other obligation to any Loan Party except the obligations expressly set forth in the Loan Documents, (iv) the Borrower and each other Loan Party has consulted its own legal and financial advisors to the extent it has deemed appropriate and (v) the Lenders may be engaged in a broad range of transactions that involve interests that differ from those of the Borrower and its Affiliates and no Lender has an obligation to disclose any such interests to the Borrower or its Affiliates. The Borrower further acknowledges and agrees that it is responsible for making its own independent judgment with respect to such transactions and the process leading thereto.
Section 9.23 Application of Funds . After the exercise of remedies provided for in Section 7.01 (or after the Loans have automatically become immediately due and payable), any amounts received by the Administrative Agent on account of the Obligations shall be applied by the Administrative Agent in the following order:
(a) First , to payment of that portion of the Obligations constituting fees, indemnities, expenses and other amounts (including fees, charges and disbursements of counsel to the Administrative Agent) payable to the Administrative Agent in its capacity as such;
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(b) Second , to payment of that portion of the Obligations constituting fees, indemnities and other amounts (other than principal, interest and Revolving L/C Participation Fees) payable to the Lenders and the Issuing Banks (including fees, charges and disbursements of counsel to the respective Lenders and the Issuing Banks) arising under the Loan Documents, ratably among them in proportion to the respective amounts described in this clause Second payable to them;
(c) Third , to payment of that portion of the Obligations constituting accrued and unpaid Revolving L/C Participation Fees and interest on the Loans, interest on Revolving L/C Disbursements and interest on other Obligations arising under the Loan Documents, ratably among the Lenders and the Issuing Banks in proportion to the respective amounts described in this clause Third payable to them;
(d) Fourth , to payment of that portion of the Obligations constituting unpaid principal of the Loans and Revolving L/C Reimbursement Obligations, ratably among the Lenders and the Issuing Banks in proportion to the respective amounts described in this clause Fourth held by them;
(e) Fifth , to the Administrative Agent for the account of the Issuing Banks, to cash collateralize that portion of Revolving L/C Exposure comprised of the aggregate undrawn amount of Revolving Letters of Credit; and
(f) Last , the balance, if any, after all of the Obligations have been indefeasibly paid in full, to the Borrower or as otherwise required by law.
Subject to Section 2.05(j) , amounts used to cash collateralize the aggregate undrawn amount of Revolving Letters of Credit pursuant to clause Fifth above shall be applied to satisfy drawings under such Revolving Letters of Credit as they occur. If any amount remains on deposit as cash collateral after all Revolving Letters of Credit have either been fully drawn or expired, such remaining amount shall be applied to the other Obligations, if any, in the order set forth above.
Section 9.24 Imaging of Documents . Each Loan Party and each Lender understands and agrees that (a) Administrative Agents document retention policy involves the imaging of executed Loan Documents and the destruction of the paper originals, and (b) each Loan Party and each Lender waives any right that it may have to claim that the imaged copies of the Loan Documents are not originals.
Section 9.25 Keepwell . (a) (a) Borrower represents that it is a Qualified ECP Credit Party. Borrower hereby guarantees the payment and performance of all Obligations of each Loan Party (other than the Borrower) and absolutely, unconditionally and irrevocably undertakes to provide such funds or other support as may be needed from time to time by each Benefitting Loan Party in order for such Benefitting Loan Party to honor its obligations (without giving effect to Section 9.25(b)) under the Guaranty Agreement including obligations with respect to Swap Agreements (provided, however, that Borrower shall only be liable under this Section 9.25(a) for the maximum amount of such liability that can be hereby incurred without rendering its obligations under this Section 9.25(a), or otherwise under this Agreement or any Loan Document, as it relates to such Benefitting Loan Party, voidable under applicable law relating to fraudulent conveyance or fraudulent transfer, and not for any greater amount). The obligations of the Borrower under this Section 9.25(a) shall remain in full force and effect until all Obligations are paid in full to the Lenders, the Administrative Agent and all Swap Providers, and all of the Lenders Commitments are terminated. The Borrower intends that this Section 9.25(a) constitute, and this Section 9.25(a) shall be deemed to constitute, a keepwell, support, or other agreement for the benefit of each Benefitting Loan Party for all purposes of Section 1a(18)(A)(v)(II) of the Commodity Exchange Act.
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(b) Notwithstanding any other provisions of this Agreement or any other Loan Document, Obligations guaranteed by any Loan Party shall exclude all Excluded Swap Obligations with respect to such Loan Party.
[SIGNATURE PAGES FOLLOW]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and delivered as of the date first above written.
FRANKS INTERNATIONAL MANAGEMENT B.V., acting on behalf of and as sole general partner of FRANKS INTERNATIONAL C.V., as Borrower | ||
By: |
|
|
Name: | ||
Title: | ||
AMEGY BANK NATIONAL ASSOCIATION, as Administrative Agent, Swingline Facility Lender and Issuing Bank | ||
By: |
|
|
Name: | ||
Title: | ||
CAPITAL ONE, NATIONAL ASSOCIATION, as Syndication Agent and a Lender | ||
By: |
|
|
Name: | ||
Title: |
Signature Page
Franks International Multi-Year
Credit Agreement
Exhibit 10.2
FORM OF
U.S. $100,000,000
364-DAY REVOLVING CREDIT AGREEMENT
Dated as of August __, 2013
among
FRANKS INTERNATIONAL MANAGEMENT B.V.
acting as sole general partner and on behalf of
the limited partnership (commanditaire vennootschap)
FRANKS INTERNATIONAL C.V.,
as Borrower,
AMEGY BANK NATIONAL ASSOCIATION,
as Administrative Agent
CAPITAL ONE, NATIONAL ASSOCIATION
as Syndication Agent
AMEGY BANK, NATIONAL ASSOCIATION
and
CAPITAL ONE, NATIONAL ASSOCIATION
as Co-Lead Arrangers and
Joint Book Runners
and
THE LENDERS PARTY HERETO
TABLE OF CONTENTS
P AGE |
||||||
ARTICLE I | ||||||
D EFINITIONS | ||||||
Section 1.01 |
Defined Terms |
2 | ||||
Section 1.02 |
Terms Generally |
24 | ||||
Section 1.03 |
Effectuation of Transfers |
24 | ||||
ARTICLE II | ||||||
T HE C REDITS | ||||||
Section 2.01 |
Commitments |
24 | ||||
Section 2.02 |
Loans and Borrowings |
25 | ||||
Section 2.03 |
Requests for Borrowings |
25 | ||||
Section 2.04 |
Reserved |
26 | ||||
Section 2.05 |
Reserved |
26 | ||||
Section 2.06 |
Funding of Borrowings |
26 | ||||
Section 2.07 |
Interest Elections |
26 | ||||
Section 2.08 |
Termination and Reduction of Commitments |
27 | ||||
Section 2.09 |
Repayment of Loans; Evidence of Debt |
28 | ||||
Section 2.10 |
Repayment of Loans |
28 | ||||
Section 2.11 |
Prepayment of Loans |
29 | ||||
Section 2.12 |
Fees |
29 | ||||
Section 2.13 |
Interest |
29 | ||||
Section 2.14 |
Alternate Rate of Interest |
30 | ||||
Section 2.15 |
Increased Costs |
30 | ||||
Section 2.16 |
Break Funding Payments |
31 | ||||
Section 2.17 |
Taxes |
32 | ||||
Section 2.18 |
Payments Generally; Pro Rata Treatment; Sharing of Set-offs |
34 | ||||
Section 2.19 |
Mitigation Obligations; Replacement of Lenders |
35 | ||||
Section 2.20 |
Reserved |
36 | ||||
Section 2.21 |
Illegality |
36 | ||||
Section 2.22 |
Defaulting Lenders |
36 | ||||
Section 2.23 |
Reserved |
37 | ||||
ARTICLE III | ||||||
R EPRESENTATIONS AND W ARRANTIES | ||||||
Section 3.01 |
Organization; Powers |
37 | ||||
Section 3.02 |
Authorization |
38 | ||||
Section 3.03 |
Enforceability |
38 | ||||
Section 3.04 |
Governmental Approvals |
38 | ||||
Section 3.05 |
Financial Statements |
38 | ||||
Section 3.06 |
No Material Adverse Effect |
38 | ||||
Section 3.07 |
Title to Properties; Possession Under Leases |
39 | ||||
Section 3.08 |
Litigation; Compliance with Laws |
39 | ||||
Section 3.09 |
Federal Reserve Regulations |
40 |
i
Section 3.10 |
Investment Company Act |
40 | ||||
Section 3.11 |
Use of Proceeds |
40 | ||||
Section 3.12 |
Tax Returns |
40 | ||||
Section 3.13 |
No Material Misstatements |
40 | ||||
Section 3.14 |
Employee Benefit Plans |
41 | ||||
Section 3.15 |
Environmental Matters |
41 | ||||
Section 3.16 |
Reserved |
41 | ||||
Section 3.17 |
Reserved |
41 | ||||
Section 3.18 |
Solvency |
42 | ||||
Section 3.19 |
Labor Matters |
42 | ||||
Section 3.20 |
Insurance |
42 | ||||
Section 3.21 |
Status as Senior Debt |
42 | ||||
Section 3.22 |
Material Contracts |
42 | ||||
Section 3.23 |
Foreign Corrupt Practices |
43 | ||||
Section 3.24 |
OFAC |
43 | ||||
ARTICLE IV | ||||||
C ONDITIONS TO C REDIT E VENTS | ||||||
Section 4.01 |
All Credit Events |
43 | ||||
Section 4.02 |
First Credit Event |
43 | ||||
ARTICLE V | ||||||
A FFIRMATIVE C OVENANTS | ||||||
Section 5.01 |
Existence; Businesses and Properties |
46 | ||||
Section 5.02 |
Insurance |
46 | ||||
Section 5.03 |
Taxes; Payment of Obligations |
47 | ||||
Section 5.04 |
Financial Statements, Reports, Etc. |
47 | ||||
Section 5.05 |
Litigation and Other Notices |
48 | ||||
Section 5.06 |
Compliance with Laws |
49 | ||||
Section 5.07 |
Maintaining Records; Access to Properties and Inspections |
49 | ||||
Section 5.08 |
Use of Proceeds |
49 | ||||
Section 5.09 |
Compliance with Environmental Laws |
49 | ||||
Section 5.10 |
Further Assurances; Additional Loan Parties |
49 | ||||
Section 5.11 |
Fiscal Year |
50 | ||||
ARTICLE VI | ||||||
N EGATIVE C OVENANTS | ||||||
Section 6.01 |
Indebtedness |
50 | ||||
Section 6.02 |
Liens |
52 | ||||
Section 6.03 |
Sale and Lease-back Transactions |
55 | ||||
Section 6.04 |
Investments, Loans and Advances |
55 | ||||
Section 6.05 |
Mergers, Consolidations, Sales of Assets and Acquisitions |
57 | ||||
Section 6.06 |
Dividends and Distributions |
58 | ||||
Section 6.07 |
Transactions with Affiliates |
59 | ||||
Section 6.08 |
Business of the Borrower and the Subsidiaries |
61 | ||||
Section 6.09 |
Limitation on Modifications of Indebtedness; Modifications of Certificate of Incorporation, By-laws and Certain Other Agreements; etc. |
61 | ||||
Section 6.10 |
Leverage Ratio |
62 |
ii
Section 6.11 |
Interest Coverage Ratio |
62 | ||||
Section 6.12 |
Swap Agreements |
62 | ||||
ARTICLE VII | ||||||
E VENTS OF D EFAULT | ||||||
Section 7.01 |
Events of Default |
63 | ||||
ARTICLE VIII | ||||||
T HE A DMINISTRATIVE A GENT | ||||||
Section 8.01 |
Appointment and Authority |
65 | ||||
Section 8.02 |
Rights as a Lender |
65 | ||||
Section 8.03 |
Exculpatory Provisions |
65 | ||||
Section 8.04 |
Reliance by Administrative Agent |
66 | ||||
Section 8.05 |
Delegation of Duties |
66 | ||||
Section 8.06 |
Resignation of the Administrative Agent |
67 | ||||
Section 8.07 |
Non-Reliance on the Administrative Agent and Other Lenders |
67 | ||||
Section 8.08 |
No Other Duties, Etc. |
68 | ||||
Section 8.09 |
Administrative Agent May File Proofs of Claim |
68 | ||||
Section 8.10 |
Guaranty Matters |
68 | ||||
Section 8.11 |
Reserved |
68 | ||||
Section 8.12 |
Indemnification |
68 | ||||
Section 8.13 |
Appointment of Supplemental Administrative Agent |
69 | ||||
Section 8.14 |
Withholding |
70 | ||||
Section 8.15 |
Enforcement |
70 | ||||
ARTICLE IX | ||||||
M ISCELLANEOUS | ||||||
Section 9.01 |
Notices |
70 | ||||
Section 9.02 |
Survival of Agreement |
71 | ||||
Section 9.03 |
Binding Effect |
71 | ||||
Section 9.04 |
Successors and Assigns |
71 | ||||
Section 9.05 |
Expenses; Indemnity |
74 | ||||
Section 9.06 |
Right of Set-off |
75 | ||||
Section 9.07 |
Applicable Law |
76 | ||||
Section 9.08 |
Waivers; Amendment |
76 | ||||
Section 9.09 |
Interest Rate Limitation |
77 | ||||
Section 9.10 |
Entire Agreement |
78 | ||||
Section 9.11 |
Waiver of Jury Trial |
78 | ||||
Section 9.12 |
Severability |
80 | ||||
Section 9.13 |
Counterparts |
80 | ||||
Section 9.14 |
Headings |
80 | ||||
Section 9.15 |
Jurisdiction; Consent to Service of Process |
80 | ||||
Section 9.16 |
Confidentiality |
80 | ||||
Section 9.17 |
Communications |
81 | ||||
Section 9.18 |
Release of Guarantees |
82 | ||||
Section 9.19 |
U.S.A. PATRIOT Act and Similar Legislation |
83 | ||||
Section 9.20 |
Judgment |
83 | ||||
Section 9.21 |
Reserved |
83 |
iii
Section 9.22 |
No Fiduciary Duty |
83 | ||||
Section 9.23 |
Application of Funds |
84 | ||||
Section 9.24 |
Imaging of Documents |
84 | ||||
Section 9.25 |
Keepwell |
84 |
iv
Exhibits and Schedules
Exhibit A | Form of Assignment and Acceptance | |
Exhibit B | Form of Prepayment Notice | |
Exhibit C-1 | Form of Borrowing Request | |
Exhibit D | Form of Interest Election Request | |
Exhibit E | Form of Guaranty Agreement | |
Exhibit F | Form of Solvency Certificate | |
Exhibit G | Form of Revolving Note | |
Exhibits H-1-4 | Forms of U.S. Tax Compliance Certificate | |
Exhibit I | Form of Administrative Questionnaire | |
Schedule 2.01 | Commitments | |
Schedule 3.04 | Governmental Approvals | |
Schedule 3.07(e) | Condemnation Proceedings | |
Schedule 3.07(g) | Subsidiaries | |
Schedule 3.08(a) | Litigation | |
Schedule 3.12 | Taxes | |
Schedule 3.15 | Environmental Matters | |
Schedule 3.20 | Insurance | |
Schedule 3.22 | Material Contracts | |
Schedule 6.01 | Indebtedness | |
Schedule 6.02(a) | Liens | |
Schedule 6.04 | Investments | |
Schedule 6.07 | Transactions with Affiliates |
v
THIS 364DAY REVOLVING CREDIT AGREEMENT dated as of August , 2013 (as amended, amended and restated, supplemented or otherwise modified, this Agreement ), is among FRANKS INTERNATIONAL MANAGEMENT B.V., a private limited liability company organized and existing under the laws of the Netherlands ( FIMBV ), acting as sole general partner and on behalf of FRANKS INTERNATIONAL C.V., a limited partnership ( commanditaire vennootschap ) formed and entered into under the laws of The Netherlands ( Franks International C.V. and, FIMBV acting as sole general partner and on behalf of Franks International C.V., the Borrower ), the LENDERS party hereto from time to time, and AMEGY BANK NATIONAL ASSOCIATION, a national banking association ( Amegy ), as administrative agent (in such capacity, together with any successor administrative agent appointed pursuant to the provisions of Article VIII, the Administrative Agent ) and CAPITAL ONE, NATIONAL ASSOCIATION, a national banking association, as syndication agent (in such capacity, the Syndication Agent ).
W I T N E S S E T H:
WHEREAS, the Borrower has requested that the Lenders extend credit in the form of Revolving Facility Loans at any time and from time to time prior to the Revolving Facility Maturity Date, in an aggregate principal amount at any time outstanding not in excess of U.S. $100,000,000.
NOW, THEREFORE, the Lenders are willing to extend such credit to the Borrower on the terms and subject to the conditions set forth herein. Accordingly, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
Section 1.01 Defined Terms . As used in this Agreement, the following terms shall have the meanings specified below:
ABR Borrowing shall mean a Borrowing comprised of ABR Loans.
ABR Loan shall mean any Loan bearing interest at a rate determined by reference to the Alternate Base Rate in accordance with the provisions of Article II.
Adjusted Eurodollar Rate shall mean for any Interest Period with respect to any Eurodollar Loan, an interest rate per annum (rounded upwards, if necessary, to the next 1/100 of 1.00%) equal to (a) the Eurodollar Rate for such Interest Period multiplied by (b) the Statutory Reserves.
Administrator shall have the meaning assigned to such term in Section 9.11(b)(ii).
Administrative Agent shall have the meaning assigned to such term in the introductory paragraph of this Agreement.
Administrative Agent Default Period shall mean, with respect to the Administrative Agent, any time when the Administrative Agent is a Defaulting Lender and is not performing its role as the Administrative Agent hereunder and under the other Loan Documents.
Administrative Agent Fees shall have the meaning assigned to such term in Section 2.12(d).
Administrative Questionnaire shall mean an Administrative Questionnaire in substantially the form of Exhibit I or any other form approved by the Administrative Agent.
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Affiliate shall mean, when used with respect to a specified Person, another Person that directly, or indirectly through one or more intermediaries, Controls or is Controlled by or is under common Control with the Person specified.
Agent Parties shall have the meaning assigned to such term in Section 9.17(c).
Agreement shall have the meaning assigned to such term in the introductory paragraph of this Agreement.
Alternate Base Rate shall mean the greatest of (i) the Prime Rate per annum , (ii) the Federal Funds Effective Rate plus 0.50% per annum , and (iii) the Adjusted Eurodollar Rate as of such date for a one-month Interest Period plus 1.00% per annum. Any change in the Alternate Base Rate due to a change in the Prime Rate, the Federal Funds Effective Rate or the Adjusted Eurodollar Rate shall be effective from and including the date of such change in the Prime Rate, the Federal Funds Effective Rate or the Adjusted Eurodollar Rate, respectively.
Applicable Margin shall mean for any day, (i) on and prior to the Trigger Date, (x) with respect to any Eurodollar Loan, 1.50% per annum and (y) with respect to any ABR Loan, 0.50% per annum and (ii) after the Trigger Date, the applicable margin per annum set forth below under the caption Revolving Facility Loans ABR Loan Spread and Revolving Facility Loans Eurodollar Loan Spread , as applicable, based upon the Leverage Ratio as of the last date of the most recent fiscal quarter of the Borrower:
Leverage Ratio: |
Revolving Facility Loans
ABR Loan Spread |
Revolving Facility Loans
Eurodollar Loan Spread |
||||||
Category 1: Greater than 1.50 to 1.00 |
1.50 | % | 2.50 | % | ||||
Category 2: Greater than 0.50 to 1.00
|
1.00 | % | 2.00 | % | ||||
Category 3: Less than or equal to 0.50 to 1.00 |
0.50 | % | 1.50 | % |
For purposes of the foregoing, (1) the Leverage Ratio shall be determined as of the end of each fiscal quarter of the Borrowers fiscal year based upon the consolidated financial information of FINV and its Subsidiaries (including the Borrower) delivered pursuant to Section 5.04(a) or (b) and (2) each change in the Applicable Margin resulting from a change in the Leverage Ratio shall be effective on the first Business Day after the date of delivery to the Administrative Agent of such consolidated financial information indicating such change and ending on the date immediately preceding the effective date of the next such change; provided that the Leverage Ratio shall be deemed to be in Category 1 at the option of the Administrative Agent or the Required Lenders, at any time during which the Borrower fails to deliver the consolidated financial information when required to be delivered pursuant to Section 5.04(a) or (b), during the period from the expiration of the time for delivery thereof until such consolidated financial information is delivered.
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Notwithstanding anything to the contrary contained above in this definition or elsewhere in this Agreement, if it is subsequently determined that the computation of the Leverage Ratio set forth in a certificate of a Financial Officer of the Borrower delivered to the Administrative Agent is inaccurate for any reason and the result thereof is that the Lenders received interest for any period based on an Applicable Margin that is less than that which would have been applicable had the Leverage Ratio been accurately determined, then, for all purposes of this Agreement, the Applicable Margin for any day occurring within the period covered by such certificate of a Financial Officer of the Borrower shall retroactively be deemed to be the relevant percentage as based upon the accurately determined Leverage Ratio for such period, and any shortfall in the interest theretofore paid by the Borrower for the relevant period pursuant to Section 2.12 and Section 2.13 as a result of the miscalculation of the Leverage Ratio shall be deemed to be (and shall be) due and payable under the relevant provisions of Section 2.12 or Section 2.13, as applicable, at the time the interest for such period were required to be paid pursuant to said Section (and shall remain due and payable until paid in full), in accordance with the terms of this Agreement); provided that, notwithstanding the foregoing, so long as an Event of Default described in Section 7.01(h) or (i) has not occurred with respect to the Borrower, such shortfall shall be due and payable five (5) Business Days following the determination described above.
Amegy shall have the meaning assigned to such term in the introductory paragraph of this Agreement.
Approved Fund shall have the meaning assigned to such term in Section 9.04(b).
Asset Acquisition shall mean any acquisition of all or substantially all of the assets of, or all of the Equity Interests (other than directors qualifying shares) in a Person or division or line of business of a Person in respect of which the aggregate consideration exceeds U.S. $30,000,000.
Asset Disposition shall mean any sale, transfer or other disposition by a Loan Party or any Subsidiary of the Borrower to any Person other than a Loan Party or a Subsidiary of the Borrower to the extent otherwise permitted hereunder of any asset or group of related assets (other than inventory or other assets sold, transferred or otherwise disposed of in the ordinary course of business) in one or a series of related transactions, the Net Proceeds from which exceed U.S. $30,000,000.
Assignment and Acceptance shall mean an assignment and acceptance entered into by a Lender and an assignee, and accepted by the Administrative Agent and the Borrower (if required pursuant to Section 9.04(b)), in substantially the form of Exhibit A or such other form as shall be approved by the Administrative Agent.
Availability Period shall mean the period from the Closing Date to but excluding the earlier of the Revolving Facility Maturity Date and the date of termination of the Revolving Facility Commitments.
Available Unused Commitment shall mean, with respect to a Revolving Facility Lender, at any time of determination, an amount equal to the amount by which the Revolving Facility Commitment of such Revolving Facility Lender at such time exceeds the Revolving Facility Credit Exposure of such Revolving Facility Lender at such time.
Basel III the comprehensive set of capital, liquidity and other regulatory reform measures developed by the Basel Committee on Banking Supervision, as implemented by the U.S. federal banking agencies.
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Benefitting Loan Party means a Loan Party for which funds or other support are necessary for such Loan Party to constitute an Eligible Contract Participant.
Board shall mean the Board of Governors of the Federal Reserve System of the United States.
Borrower shall have the meaning assigned to such term in the introductory paragraph to this Agreement, it being understood, however, that for purpose of Sections 5 and 6 of this Agreement such term shall be deemed to include Franks International C.V.
Borrower Materials shall have the meaning assigned to such term in Section 9.17(b).
Borrowing shall mean a group of Loans of a single Type under the Revolving Facility made on a single date to the Borrower and, in the case of Eurodollar Loans, as to which a single Interest Period is in effect.
Borrowing Minimum shall mean (a) in the case of a Revolving Facility Borrowing comprised entirely of Eurodollar Loans, U.S. $1,000,000 and (b) in the case of a Revolving Facility Borrowing comprised entirely of ABR Loans, U.S. $1,000,000.
Borrowing Multiple shall mean (a) in the case of a Revolving Facility Borrowing comprised entirely of Eurodollar Loans, U.S. $500,000 and (b) in the case of a Revolving Facility Borrowing comprised entirely of ABR Loans, U.S. $500,000.
Borrowing Request shall mean a request by the Borrower for a Revolving Facility Borrowing in accordance with the terms of Section 2.03 and substantially in the form of Exhibit C .
Business Day shall mean any day of the year, other than a Saturday, Sunday or other day on which banks are required or authorized to close in New York, New York or Houston, Texas, and, where used in the context of Eurodollar Loans, is also a day on which dealings are carried on in the London interbank market.
Calculation Period shall mean, as of any date of determination, the period of four consecutive fiscal quarters ending on such date or, if such date is not the last day of a fiscal quarter, ending on the last day of the fiscal quarter of the Borrower most recently ended prior to such date.
Capital Lease Obligations of any Person shall mean the obligations of such Person to pay rent or other amounts under any lease of (or other arrangement conveying the right to use) real or personal property, or a combination thereof, which obligations are required to be classified and accounted for as capital leases on a balance sheet of such Person under GAAP and, for purposes hereof, the amount of such obligations at any time shall be the capitalized amount thereof at such time determined in accordance with GAAP. Anything in this Agreement to the contrary notwithstanding, any obligation of a Person under a lease (whether existing now or entered into in the future) that is not (or would not be) required to be classified and accounted for as a capital lease on the balance sheet of such Person under GAAP as in effect at the time such lease is entered into shall not be treated as a Capital Lease Obligation solely as a result of (x) the adoption of any changes in, or (y) changes in the application of, GAAP after such lease is entered into.
Change in Control means the occurrence of any of the following: (a) at any time on or after consummation of an initial public offering of the common equity of FINV, any Person or group (within the meaning of Rule 13d-5 of the Exchange Act as in effect on the Closing Date), other than the Mosing Family, shall own beneficially (within the meaning of Rule 13d-5 of the Exchange Act as in effect on the
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Closing Date), directly or indirectly, in the aggregate Equity Interests representing 50% or more of the aggregate ordinary voting power represented by the issued and outstanding Equity Interests of FINV; or (b) FINV shall cease to own beneficially (within the meaning of Rule 13d-5 of the Exchange Act as in effect on the Closing Date), directly or indirectly, in the aggregate Equity Interests representing 50% or more of the issued and outstanding Equity Interests of Borrower.
Change in Law shall mean (a) the adoption or implementation of any treaty, law, rule or regulation after the Closing Date, (b) any change in law, rule or regulation or in the interpretation or application thereof by any Governmental Authority after the Closing Date or (c) compliance by any Lender (or, for purposes of Section 2.15(b), by any lending office of such Lender or by such Lenders holding company, if any) with any written request, guideline or directive (whether or not having the force of law but if not having the force of law, then being one with which the relevant party would customarily comply) of any Governmental Authority made or issued after the Closing Date; provided , that notwithstanding anything herein to the contrary, (x) the Dodd-Frank Wall Street Reform and Consumer Protection Act and all requests, rules, guidelines or directives thereunder or issued in connection therewith and (y) all requests, rules, guidelines or directives promulgated by the Bank for International Settlements, the Basel Committee on Banking Supervision (or any successor or similar authority) or the United States regulatory authorities, in each case pursuant to Basel III, shall in each case be deemed to be a Change in Law, regardless of the date enacted, adopted or issued; and, provided, further, that the increased costs associated with a Change in Law based on the foregoing clauses (x) and (y) may only be imposed to the extent the applicable Lender imposes the same charges on other similarly situated borrowers under comparable credit facilities.
Closing Date shall mean August __, 2013, and Closing shall mean the making of the initial Loans on the Closing Date hereunder.
Code shall mean the Internal Revenue Code of 1986, as amended from time to time.
Commitments shall mean with respect to any Lender, such Lenders Revolving Facility Commitment.
Commodity Exchange Act means the Commodity Exchange Act (7 U.S.C. § 1 et seq.), as amended and any successor statute.
Communications shall have the meaning assigned to such term in Section 9.17(a).
Consolidated Funded Debt at any date shall mean (without duplication) all Indebtedness consisting of Capital Lease Obligations, Indebtedness for borrowed money and Indebtedness in respect of the deferred purchase price of property or services (other than (a) trade accounts payable in the ordinary course of business and not past due for more than ninety (90) days unless being contested by such Person in good faith by appropriate proceedings diligently conducted, (b) deferred compensation payable to directors, partners, members, officers or employees of FINV or any of its Subsidiaries and (c) any purchase price adjustment or earnout, except to the extent that the amount payable pursuant to such purchase price adjustment is determinable and is not paid when due (giving effect to any applicable grace period)), of the Loan Parties and Borrowers Subsidiaries determined on a consolidated basis on such date.
Consolidated Net Income shall mean, for any period, the aggregate of the Net Income of FINV and its Subsidiaries for such period determined on a consolidated basis; provided, however, that
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(a) any net after-tax extraordinary, unusual or nonrecurring gains or losses (less all fees and expenses related thereto) or income, expenses or charges (including, without limitation, expenses or charges related to any offering of Equity Interests of any Loan Party or the Borrowers Subsidiaries, any Investment, acquisition or Indebtedness permitted to be incurred hereunder (in each case, whether or not successful), including all fees, expenses and charges related to the Transactions), in each case, shall be excluded; provided that, with respect to each nonrecurring item, the Borrower shall have delivered to the Administrative Agent an officers certificate specifying and quantifying such item and stating that such item is a nonrecurring item,
(b) any net after-tax income or loss from discontinued operations and any net after-tax gain or loss on disposal of discontinued operations shall be excluded,
(c) any net after-tax gain or loss (including the effect of all fees and expenses or charges relating thereto) attributable to business dispositions or asset dispositions other than in the ordinary course of business (as determined in good faith by the governing body of the Borrower) shall be excluded,
(d) any net after-tax income or loss (including the effect of all fees and expenses or charges relating thereto) attributable to the refinancing, modification of or early extinguishment of indebtedness (including any net after-tax income or loss attributable to the repayment of obligations under Swap Agreements) shall be excluded,
(e) the Net Income for such period of any Person that is not a Subsidiary of a Loan Party, or that is accounted for by the equity method of accounting, shall be included only to the extent of the amount of dividends or distributions or other payments paid in cash (or to the extent converted into cash) to a Loan Party or a Subsidiary thereof in respect of such period,
(f) the Net Income for such period of any Subsidiary (that is not a Loan Party) of a Loan Party shall be excluded to the extent that the declaration or payment of dividends or similar distributions by such Subsidiary of its Net Income is not at the date of determination permitted without any prior governmental approval (which has not been obtained) or, directly or indirectly, by the operation of the terms of its organizational documents or any agreement, instrument, judgment, decree, order, statute, rule, or governmental regulation applicable to that Subsidiary or its stockholders, partners or members, unless such restriction with respect to the payment of dividends or similar distributions has been legally waived or complied with,
(g) Consolidated Net Income for such period shall not include the cumulative effect of a change in accounting principles during such period,
(h) any non-cash charges from the application of the purchase method of accounting in connection with the Transactions or any future acquisition, to the extent such charges are deducted in computing such Consolidated Net Income, shall be excluded,
(i) any non-cash expenses (including, without limitation, write-downs and impairment of property, plant, equipment, goodwill and intangibles and other long-lived assets), any non-cash gains or losses on interest rate and foreign currency derivatives and any foreign currency transaction gains or losses and any foreign currency exchange translation gains or losses that arise on consolidation of integrated operations shall be excluded, and
(j) any long-term incentive plan accruals and any non-cash compensation expense realized from grants of stock or unit appreciation or similar rights, stock or unit options, any restricted stock or unit plan or other rights to officers, directors, and employees (or persons holding similar positions or performing similar functions for non corporate entities) of any Loan Party or any of Borrowers Subsidiaries shall be excluded.
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Consolidated Total Assets shall mean, as of any date, the total assets of FINV and its consolidated Subsidiaries (including Borrower), determined in accordance with GAAP, in each case as set forth on the consolidated balance sheet of FINV as of such date.
Control shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of a Person, whether through the ownership of voting securities, by contract or otherwise, and Controlling and Controlled shall have meanings correlative thereto.
Credit Event shall have the meaning assigned to such term in Article IV.
Default shall mean any event or condition which constitutes an Event of Default or which upon notice, lapse of time or both, unless cured or waived, would become an Event of Default.
Defaulting Lender shall mean any Lender that (a) has failed to perform any of its funding obligations under this Agreement within three Business Days of the date when due, unless the subject of a good faith dispute, (b) has notified the Borrower or the Administrative Agent that it does not intend to comply with its funding obligations under this Agreement or has made a public statement to such effect with respect to its funding obligations under this Agreement (and such notice or public statement has not been withdrawn), (c) has failed, within three Business Days after request by the Administrative Agent (whether acting on its own behalf or at the reasonable request of the Borrower (it being understood that the Administrative Agent shall comply with any such reasonable request)), to confirm in a manner satisfactory to the Administrative Agent that it will comply with its funding obligations (d) has otherwise failed to pay over to the Administrative Agent or any other Lender any other amount required to be paid by it hereunder within three Business Days of the date when due, unless the subject of a good faith dispute or subsequently cured, or (e) has, or has a direct or indirect parent company that has, become the subject of a proceeding under any bankruptcy or insolvency laws, or has had appointed for it a receiver, custodian, conservator, trustee, administrator, assignee for the benefit of creditors or similar Person charged with reorganization or liquidation of its business or assets, including the Federal Deposit Insurance Corporation or any other state or federal regulatory authority acting in such a capacity, or has taken any action in furtherance of, or indicating its consent to, approval of or acquiescence in any such proceeding or appointment; provided that a Lender shall not be a Defaulting Lender solely as the result of the acquisition or maintenance of an ownership interest in such Lender or its direct or indirect parent company or the exercise of control over a Lender or its direct or indirect parent by a Governmental Authority so long as such ownership interest does not result in or provide such Lender with immunity from the jurisdiction of courts within the United States or from the enforcement of judgments or writs of attachment on its assets or permit such Lender (or such Governmental Authority) to reject, repudiate, disavow or disaffirm any contracts or agreements made with such Lender.
Dispute shall have the meaning assigned to such term in Section 9.11(b)(i).
EBITDA shall mean, with respect to FINV and its Subsidiaries (including the Borrower) on a consolidated basis for any period, the Consolidated Net Income of FINV and its Subsidiaries for such period plus (a) the sum of (in each case without duplication and to the extent the respective amounts described in subclauses (i) through (vii) of this clause (a) reduced such Consolidated Net Income for the respective period for which EBITDA is being determined (but excluding any non-cash item to the extent it represents an accrual or reserve for a potential cash charge in any future period or amortization of a prepaid cash item that was paid in a prior period)):
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(i) provision for Taxes based on income, profits, losses or capital of FINV and its Subsidiaries for such period (adjusted for the tax effect of all adjustments made to Consolidated Net Income),
(ii) Interest Expense of FINV and its Subsidiaries that are Loan Parties for such period (net of interest income of the General Partner and such Subsidiaries for such period) and to the extent not reflected in Interest Expense, costs of surety bonds in connection with financing activities,
(iii) depreciation, amortization (including, without limitation, amortization of intangibles and deferred financing fees) and other non-cash expenses (including, without limitation write-downs and impairment of property, plant, equipment, goodwill and intangibles and other long-lived assets and the impact of purchase accounting on FINV and its Subsidiaries for such period),
(iv) gain or loss on sale of assets of FINV and its Subsidiaries,
(v) foreign currency gain or loss by FINV and its Subsidiaries,
(vi) other non-cash adjustments (e.g., stock compensation expense as a result of the long term incentive plan), and
(vii) extraordinary losses and unusual or non-recurring cash charges;
minus (b) to the extent such amounts increased such Consolidated Net Income for the respective period for which EBITDA is being determined, non-cash items increasing Consolidated Net Income of FINV and its Subsidiaries for such period (but excluding any such items which represent the reversal in such period of any accrual of, or cash reserve for, anticipated cash charges in any prior period where such accrual or reserve is no longer required).
Eligible Assignee shall mean a Person that is (a) a Lender, (b) an Affiliate of a Lender, (c) an Approved Fund, and (d) a financial institution approved by (i) the Administrative Agent and (ii) unless an Event of Default has occurred and is continuing, the Borrower (such approval not to be unreasonably withheld or delayed).
Eligible Contract Participant means an eligible contract participant as defined in the Commodity Exchange Act and the regulations thereunder.
Environment shall mean ambient air, surface water and groundwater (including potable water, navigable water and wetlands), the land surface or subsurface strata or sediment and natural resources such as flora and fauna.
Environmental Claim shall mean any and all actions, suits, demands, claims, liens, notices of non-compliance or violation, notices of liability or potential liability, investigations, proceedings, consent orders or consent agreements relating in any way to any actual or alleged violation of Environmental Law or any Release or threatened Release of, or exposure to, Hazardous Materials.
Environmental Event shall have the meaning assigned to such term in Section 7.01(m).
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Environmental Law shall mean, collectively, all applicable federal, state, provincial, local or foreign laws, including common law, ordinances, regulations, rules, codes, orders, judgments or other legally enforceable requirements or rules of law that relate to (a) the prevention, abatement or elimination of pollution, or the protection of the Environment or human health, and (b) the use, generation, handling, treatment, storage, disposal, Release or transportation of, or exposure to, Hazardous Materials, including the Comprehensive Environmental Response Compensation and Liability Act, 42 U.S.C. §§ 9601 et seq. , the Endangered Species Act, 16 U.S.C. §§ 1531 et seq. , the Solid Waste Disposal Act, as amended by the Resource Conservation and Recovery Act, 42 U.S.C. §§ 6901 et seq. , the Clean Air Act, 42 U.S.C. §§ 7401 et seq. , the Clean Water Act, 33 U.S.C. §§ 1251 et seq. , the Toxic Substances Control Act, 15 U.S.C. §§ 2601 et seq. , the National Environmental Policy Act, 42 U.S.C. §§ 4321 et seq. , and the Emergency Planning and Community Right to Know Act, 42 U.S.C. §§ 11001 et seq. , each as amended, and their foreign, state, provincial or local counterparts or equivalents.
Equity Interests of any Person shall mean any and all shares, interests, rights to purchase, warrants, options, participation or other equivalents of or interests in (however designated) equity of such Person, including any preferred stock, any limited or general partnership interest, any limited liability company membership interest and any unlimited liability company membership interests.
ERISA shall mean the Employee Retirement Income Security Act of 1974, as amended from time to time, the regulations promulgated thereunder and any successor thereto.
ERISA Affiliate shall mean any trade or business (whether or not incorporated) that, together with the Loan Parties, is treated as a single employer under Section 414(b) or (c) of the Code, or, solely for purposes of Section 302 of ERISA and Section 412 of the Code, is treated as a single employer under Section 414 of the Code.
ERISA Event shall mean: (a) a Reportable Event; (b) the failure to meet the minimum funding standard of Sections 412 or 430 of the Code or Sections 302 or 303 of ERISA with respect to any Plan (whether or not waived in accordance with Section 412(c) of the Code or Section 302(c) of ERISA) or the failure to make by its due date a required installment under Section 430(j) of the Code with respect to any Plan or the failure to make any required contribution to a Multiemployer Plan; (c) a determination that any Plan is in at risk status (as defined in Section 430 of the Code or Section 303 of ERISA); (d) the incurrence by any Loan Party or any ERISA Affiliate of any liability under Title IV of ERISA; (e) the receipt by any Loan Party or any ERISA Affiliate from the PBGC or a plan administrator of any notice relating to an intention to terminate any Plan, or to appoint a trustee to administer any Plan under Section 4042 of ERISA; (f) a determination that any Multiemployer Plan is in critical or endangered status under Section 432 of the Code or Section 305 of ERISA; (g) the incurrence by any Loan Party or any ERISA Affiliate of any liability with respect to the withdrawal or partial withdrawal from any Plan or Multiemployer Plan; (h) the receipt by any Loan Party or any ERISA Affiliate of any notice, or the receipt by any Multiemployer Plan from any Loan Party or any ERISA Affiliate of any notice, concerning the imposition of Withdrawal Liability or a determination that a Multiemployer Plan is insolvent or in reorganization, within the meaning of Title IV of ERISA; or (i) the occurrence of a nonexempt prohibited transaction (within the meaning of Section 4975 of the Code or Section 406 of ERISA) which could reasonably be expected to result in liability to the any Loan Party.
Eurodollar Borrowing shall mean a Borrowing comprised of Eurodollar Loans.
Eurodollar Loan shall mean any Revolving Facility Loan bearing interest at a rate determined by reference to the Adjusted Eurodollar Rate in accordance with the provisions of Article II.
Eurodollar Rate shall mean for any Interest Period with respect to any Eurodollar Loan, a rate per annum offered for U.S. Dollar deposits in an amount comparable to the principal amount of the applicable Eurodollar Loan for a period of time equal to the applicable Interest Period as of 11:00 a.m.
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City of London, England time two (2) Business Days prior to the first date of such Interest Period as shown on the display designated as British Bankers Association Interest Settlement Rates on the Bloomberg System ( Bloomberg ); provided, however , that if such rate is not available on Bloomberg, then such offered rate shall be otherwise independently determined by the Administrative Agent from an alternate, substantially similar independent source available to Administrative Agent and recognized in the banking industry.
Eurodollar Revolving Facility Borrowing shall mean a Borrowing comprised of Eurodollar Loans.
Event of Default shall have the meaning assigned to such term in Section 7.01.
Exchange Act shall mean the Securities Exchange Act of 1934, as amended and any successor statute.
Excluded Swap Obligation means, with respect to any Loan Party individually determined on a Loan Party by Loan Party basis, any Swap Obligation, if and to the extent that, all or a portion of the joint and several liability or the guaranty of such Loan Party for, or the grant by such Loan Party of a security interest or other Lien to secure, such Swap Obligation (or any guarantee thereof) is or becomes illegal under the Commodity Exchange Act or any rule, regulation or order of the Commodity Futures Trading Commission (or the application or official interpretation of any thereof) by virtue of such Loan Partys failure for any reason to constitute an Eligible Contract Participant at the time such guarantee or the grant of such security interest or other Lien becomes effective with respect to, or any other time such Loan Party is by virtue of such guarantee or grant of such security interest or other Lien otherwise deemed to enter into, such Swap Obligation. If a Swap Obligation arises under a master agreement governing more than one swap, such exclusion shall apply only to the portion of such Swap Obligation that is attributable to swaps for which such guarantee, security interest or other Lien is or becomes illegal.
Excluded Taxes shall mean, with respect to the Administrative Agent, any Lender or any other recipient of any payment to be made by or on account of any obligation of any Loan Party hereunder (a) income, franchise and similar Taxes, in each case imposed on (or measured by) net income, net profits or capital by the United States (or any state or other subdivision thereof) or by the jurisdiction (or any political jurisdiction thereof) under the laws of which such recipient is organized, resident or doing business, or in which its principal office or, in the case of any Lender, in which its applicable lending office, is located or any jurisdiction in which such recipient has a present or former connection (other than any such connection arising solely from actions taken under the Loan Documents) is located, (b) any branch profits Tax or any similar Tax that is imposed by any jurisdiction described in clause (a) above, (c) any withholding Tax imposed on amounts payable to or for the account of a recipient with respect to an interest in a Loan or Commitment pursuant to a law that is in effect at the time the Administrative Agent, Lender or other recipient acquires an interest in such Loan or Commitment (other than in the case of an assignee pursuant to a request by a Loan Party under Section 2.19(b)) or designates a new lending office, except to the extent that such Lender or other recipient in the case of a designation of a new lending office, or its assignor, in the case of assignment, was entitled, at the time of designation of such new lending office (or assignment), to receive additional amounts with respect to such withholding Tax pursuant to Section 2.17(a) or Section 2.17(c), (d) any backup withholding Tax, (e) any withholding Taxes attributable to such Lenders or such other recipients failure (other than as a result of a Change in Law) to comply with Section 2.17(e), and (f) any withholding Tax imposed under FATCA.
FATCA means Sections 1471 through 1474 of the Code, as of the Closing Date (or any amended or successor version that is substantively comparable and not materially more onerous to comply with), any current or future regulations or official interpretations thereof, any agreements entered
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into pursuant to Section 1471(b)(1) of the Code and any fiscal or regulatory legislation, rules or practices adopted pursuant to any intergovernmental agreement entered into in connection with the implementation of such Sections of the Code.
Family Member shall mean a spouse, lineal ancestor, lineal descendant, legally adopted child, brother or sister of a Person, or a lineal descendant or legally adopted child of a brother or sister of a Person.
FCPA means the Foreign Corrupt Practices Act of 1977.
Federal Funds Effective Rate shall mean, for any day, the weighted average (rounded upward, if necessary, to the next 1/100 of 1%) of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers, as published on the next succeeding Business Day by the Federal Reserve Bank of New York, or, if such rate is not so published for any day which is a Business Day, the average (rounded upward, if necessary, to the next 1/100 of 1%) of the quotations for the day of such transactions received by the Administrative Agent from three Federal funds brokers of recognized standing selected by it.
Fee Letter shall mean that certain Engagement Letter dated June 21, 2013 among Amegy, Capital One, National Association and the Borrower.
Fees shall mean the Administrative Agent Fees and any other fees payable under the Fee Letter.
FIMBV shall have the meaning assigned to such term in the introductory paragraph to this Agreement.
Financial Officer of any Person shall mean the Chief Financial Officer, principal accounting officer, Treasurer, Assistant Treasurer or Controller of such Person.
Financial Performance Covenants shall mean the covenants of the Borrower set forth in Sections 6.10 and 6.11.
FINV shall mean Franks International N.V., a limited liability company organized under the laws of the Netherlands.
Franks International C.V. shall have the meaning assigned to such term in the introductory paragraph to this Agreement.
GAAP shall have the meaning assigned to such term in Section 1.02.
Governmental Authority shall mean any federal, state, provincial, local or foreign court or governmental agency, authority, instrumentality or regulatory or legislative body.
Guarantee of or by any Person (the guarantor ) shall mean (a) any obligation, contingent or otherwise, of the guarantor guaranteeing or having the economic effect of guaranteeing any Indebtedness of any other Person (the primary obligor ) in any manner, whether directly or indirectly, and including any obligation of the guarantor, direct or indirect, (i) to purchase or pay (or advance or supply funds for the purchase or payment of) such Indebtedness (whether arising by virtue of partnership arrangements, by agreement to keep well, to purchase assets, goods, securities or services, to take or pay or otherwise) or to purchase (or to advance or supply funds for the purchase of) any security for the payment of such Indebtedness, (ii) to purchase or lease property, securities or services for the purpose of assuring the
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owner of such Indebtedness of the payment thereof, (iii) to maintain working capital, equity capital or any other financial statement condition or liquidity of the primary obligor so as to enable the primary obligor to pay such Indebtedness, (iv) entered into for the purpose of assuring in any other manner the holders of such Indebtedness of the payment thereof or to protect such holders against loss in respect thereof (in whole or in part) or (v) as an account party in respect of any letter of credit or letter of guaranty issued to support such Indebtedness, or (b) any Lien on any assets of the guarantor securing any Indebtedness (or any existing right, contingent or otherwise, of the holder of Indebtedness to be secured by such a Lien) of any other Person, whether or not such Indebtedness is assumed by the guarantor; provided, however , that the term Guarantee shall not include endorsements for collection or deposit, in either case in the ordinary course of business, or customary and reasonable indemnity obligations in effect on the Closing Date or entered into in connection with any acquisition or disposition of assets permitted under this Agreement.
Guaranty Agreement shall mean the Guaranty Agreement, as amended, supplemented or otherwise modified from time to time, substantially in the form of Exhibit E , among the Loan Parties and the Administrative Agent, and any other guarantee that may be executed after the Closing Date in favor of, and in form and substance acceptable to, the Administrative Agent.
Hazardous Materials shall mean all pollutants, contaminants, wastes, chemicals, materials, substances and constituents, including explosive or radioactive substances or petroleum or petroleum distillates or breakdown constituents, friable asbestos or friable asbestos containing materials, polychlorinated biphenyls or radon gas, of any nature, in each case subject to regulation pursuant to, or which can give rise to liability under, any Environmental Law.
Highest Lawful Rate shall means, with respect to each Lender, the maximum nonusurious interest rate, if any, that at any time or from time to time may be contracted for, taken, reserved, charged or received on the Notes or on other Obligations under laws applicable to such Lender which are presently in effect or, to the extent allowed by law, under such applicable laws which may hereafter be in effect and which allow a higher maximum nonusurious interest rate than applicable laws allow as of the date hereof.
Indebtedness of any Person shall mean, without duplication, (a) all obligations of such Person for borrowed money, (b) all obligations of such Person evidenced by bonds, debentures, notes or similar instruments, (c) all obligations of such Person under conditional sale or other title retention agreements relating to property or assets purchased by such Person, (d) all obligations of such Person issued or assumed as the deferred purchase price of property or services (other than trade liabilities and intercompany liabilities incurred in the ordinary course of business and maturing within 365 days after the incurrence thereof), (e) all Guarantees by such Person of Indebtedness of others, (f) all Capital Lease Obligations of such Person, (g) all payments that such Person would have to make in the event of an early termination, on the date Indebtedness of such Person is being determined, in respect of outstanding Swap Agreements (such payments in respect of any Swap Agreement with a counterparty being calculated subject to and in accordance with any netting provisions in such Swap Agreement), (h) the principal component of all obligations, contingent or otherwise, of such Person (i) as an account party in respect of letters of credit (other than any letters of credit, bank guarantees or similar instrument in respect of which a back-to-back letter of credit has been issued under or permitted by this Agreement) and (ii) in respect of bankers acceptances. The Indebtedness of any Person shall include the Indebtedness of any partnership in which such Person is a general partner, other than to the extent that the instrument or agreement evidencing such Indebtedness expressly limits the liability of such Person in respect thereof.
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Indemnified Taxes shall mean all Taxes, other than Excluded Taxes, imposed on or with respect to any payment made by or on account of any obligation of any Loan Party under any Loan Document.
Indemnitee shall have the meaning assigned to such term in Section 9.05(b).
Information shall have the meaning assigned to such term in Section 3.13(a).
Interest Coverage Ratio shall mean the ratio, for the period of four fiscal quarters ended on, or if such date of determination is not the end of a fiscal quarter, most recently prior to the date on which such determination is to be made of (a) EBITDA to (b) Interest Expense; provided that to the extent any Asset Disposition or any Asset Acquisition (or any similar transaction or transactions for which a waiver or a consent of the Required Lenders pursuant to Section 6.04 or 6.05 has been obtained) or incurrence or repayment of Indebtedness (excluding normal fluctuations in revolving Indebtedness incurred for working capital purposes) has occurred during the relevant Test Period, the Interest Coverage Ratio shall be determined for the respective Test Period on a Pro Forma Basis for such occurrences.
Interest Election Request shall mean a request by the Borrower to convert or continue a Borrowing in accordance with Section 2.07, in substantially the form of Exhibit D .
Interest Expense shall mean, with respect to any Person for any period, the sum of (a) interest expense of such Person for such period on a consolidated basis, including (i) the amortization of debt discounts, (ii) the amortization of all fees (including fees with respect to Swap Agreements) payable in connection with the incurrence of Indebtedness to the extent included in interest expense, (iii) the portion of any payments or accruals with respect to Capital Lease Obligations allocable to interest expense, and (iv) redeemable preferred stock dividend expenses, and (b) capitalized interest of such Person. For purposes of the foregoing, interest expense shall be determined after giving effect to any net payments made or received and costs incurred by the Borrower and its Subsidiaries with respect to Swap Agreements.
Interest Payment Date shall mean (a) with respect to any Eurodollar Loan, the last day of the Interest Period applicable to the Borrowing of which such Loan is a part and, in the case of a Eurodollar Borrowing with an Interest Period of more than three months duration, each day that would have been an Interest Payment Date had successive Interest Periods of three months duration been applicable to such Borrowing and, in addition, the date of any refinancing or conversion of such Borrowing with or to a Borrowing of a different Type and (b) with respect to any ABR Loan, the last Business Day of each calendar quarter.
Interest Period shall mean, as to any Borrowing consisting of a Eurodollar Loan, the period commencing on the date of such Borrowing or on the last day of the immediately preceding Interest Period applicable to such Borrowing, as applicable, and ending on the numerically corresponding day (or, if there is no numerically corresponding day, on the last day) in the calendar month that is 1, 2, 3 or 6 months thereafter, as the Borrower may elect, or the date any Eurodollar Borrowing is converted to an ABR Borrowing in accordance with Section 2.07 or repaid or prepaid in accordance with Section 2.09, 2.10 or 2.11; provided that, (a) if any Interest Period for a Eurodollar Loan would end on a day other than a Business Day, such Interest Period shall be extended to the next succeeding Business Day unless such next succeeding Business Day would fall in the next calendar month, in which case such Interest Period shall end on the next preceding Business Day, (b) any Interest Period that begins on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period) shall end on the last Business Day of the calendar month at the end of such Interest Period, and (c) no Interest Period shall extend beyond the Revolving Facility Maturity Date. Interest shall accrue from and including the first day of an Interest Period to but excluding the last day of such Interest Period.
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Investment shall have the meaning assigned to such term in Section 6.04.
IRS means the United States Internal Revenue Service.
JAMS shall have the meaning assigned to such term in Section 9.11(b)(ii).
Lender shall mean each financial institution listed on Schedule 2.01, as well as any Person (other than a natural person) that becomes a Lender hereunder pursuant to Section 9.04.
Leverage Ratio shall mean, on any date, the ratio of (a) Consolidated Funded Debt as of such date to (b) EBITDA for the period of four consecutive fiscal quarters of FINV most recently ended as of such date, all determined on a consolidated basis in accordance with GAAP; provided that to the extent any Asset Disposition or any Asset Acquisition (or any similar transaction or transactions that require a waiver or a consent of the Required Lenders pursuant to Section 6.04 or Section 6.05) or incurrence or repayment of Indebtedness (excluding normal fluctuations in revolving Indebtedness incurred for working capital purposes) has occurred during the relevant Test Period, the Leverage Ratio shall be determined for the respective Test Period on a Pro Forma Basis for such occurrences.
Lien shall mean, with respect to any asset, (a) any mortgage, deed of trust, lien, hypothecation, pledge, encumbrance, charge or security interest in or on such asset, (b) the interest of a vendor or a lessor under any conditional sale agreement, capital lease or title retention agreement (or any financing lease having substantially the same economic effect as any of the foregoing) relating to such asset and (c) in the case of securities (other than securities representing an interest in a joint venture that is not a Subsidiary of a Loan Party), any purchase option, call or similar right of a third party with respect to such securities.
Loan Documents shall mean this Agreement, the Notes and the Guaranty Agreement.
Loan Parties shall mean the Borrower and each Material Subsidiary.
Loans shall mean the Revolving Facility Loans.
Margin Stock shall have the meaning assigned to such term in Regulation U.
Material Adverse Effect shall mean the existence of events and/or conditions that have had or could reasonably be expected to have (i) a materially adverse effect on the business, operations, properties, assets or financial condition of the Loan Parties, taken as a whole, or (ii) a material impairment of the validity or enforceability of, or a material impairment of the material rights, remedies or benefits available to the Lenders or the Administrative Agent under any Loan Document.
Material Indebtedness shall mean Indebtedness (other than Loans and other than Indebtedness owing by a Loan Party pursuant to the Multi-Year Credit Facility) of a Loan Party in an aggregate principal amount exceeding U.S. $30,000,000.
Material Subsidiary shall mean any Subsidiary of the Borrower that is a Significant Subsidiary as defined in Rule 1-02(w) of Regulation S-X.
Moodys shall mean Moodys Investors Service, Inc.
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Mosing Family shall mean, collectively, Mosing Holdings, Inc., a Delaware corporation, FWW B.V., a private limited liability company organized and existing under the laws of the Netherlands, Ginsoma Family C.V., a limited partnership established under the laws of the Netherlands and each of the persons listed on Exhibit A to the deed of amendment to the articles of association of FINV dated as of August [__], 2013 and each of their Affiliates, Family Members or trusts set up for the benefit of any of the persons listed on such Exhibit.
Multiemployer Plan shall mean a multiemployer plan as defined in Section 4001(a)(3) of ERISA subject to the provisions of Title IV of ERISA and in respect of any Loan Party or any ERISA Affiliate is an employer as defined in Section 3(5) of ERISA.
Multi-Year Credit Facility means the revolving credit facility of the Borrower under that certain Revolving Credit Agreement dated as of August __, 2013, among the Borrower, Amegy Bank National Association, as administrative agent, and the lenders party thereto, together with any and all other amendments and supplements thereto.
Multi-Year Credit Facility Maturity Date means the Revolving Facility Maturity Date of the Multi-Year Credit Facility.
Net Income shall mean, with respect to any Person, the net income (loss) of such Person, determined in accordance with GAAP and before any reduction in respect of preferred stock dividends.
Net Proceeds shall mean 100% of the cash proceeds actually received by a Loan Party or any Subsidiary of the Borrower (including any cash payments received by way of deferred payment of principal pursuant to a note or installment receivable or purchase price adjustment receivable or otherwise and including casualty insurance settlements and condemnation awards, but only as and when received) from any loss, damage, destruction or condemnation of, or any sale, transfer or other disposition (including any sale and leaseback of assets) to any Person of any asset or assets of a Loan Party or any such Subsidiary of the Borrower (other than those pursuant to Section 6.05(a), (b), (c), (e), (f), (h), (i), or (j)) net of (i) attorneys fees, accountants fees, investment banking fees, sales commissions, survey costs, title insurance premiums, and related search and recording charges, transfer taxes, deed or mortgage recording taxes, required debt payments and required payments of other obligations relating to the applicable asset and any cash reserve for adjustment in respect of the sale price of such asset established in accordance with GAAP, including without limitation, pension and post-employment benefit liabilities and liabilities related to environmental matters or against any indemnification obligations associated with such transaction, other customary expenses and brokerage, consultant and other customary fees actually incurred in connection therewith, and (ii) Taxes paid or payable as a result thereof.
Non-Consenting Lender shall have the meaning assigned to such term in Section 2.19(c).
Non-U.S. Lender shall have the meaning assigned to such term in Section 2.17(e).
Notes shall mean the promissory notes of the Borrower described in Section 2.09(e) and being substantially in the form of Exhibit G , together with all amendments, modifications, replacements, extensions and rearrangements thereof.
Obligations shall mean (i) all obligations and liabilities of any Loan Party under any Swap Agreement entered into on or after the Closing Date between such Loan Party and any Person that, at the time such obligation was entered into, was a Lender or Affiliate of a Lender hereunder; provided that, notwithstanding anything to the contrary, with respect to any Loan Party that is not an Eligible Contract Participant, the Obligations of such Loan Party shall exclude any Excluded Swap Obligations of such
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Loan Party and (ii) all amounts owing to any of the Administrative Agent or any Lender pursuant to the terms of this Agreement or any other Loan Document or pursuant to the terms of any Guarantee thereof, including, without limitation, with respect to any Loan, together with the due and punctual performance of all other obligations of the Borrower and the other Loan Parties under or pursuant to the terms of this Agreement or the other Loan Documents, in each case whether direct or indirect (including those acquired by assumption), absolute or contingent, due or to become due, now existing or hereafter arising, and including interest and fees that accrue after the commencement by or against any Loan Party or any Affiliate thereof of any proceeding under any bankruptcy or insolvency laws naming such Person as the debtor in such proceeding, regardless of whether such interest and fees are allowed claims in such proceeding.
OFAC means the U.S. Treasury Departments Office of Foreign Assets Control.
Other Taxes shall mean any and all present or future stamp or documentary taxes or any other excise or property, intangible or mortgage recording taxes, charges or similar levies arising from any payment made hereunder or from the execution, delivery or enforcement of, or otherwise with respect to, the Loan Documents (other than any such Taxes imposed with respect to an assignment, other than an assignment pursuant to Section 2.19(b)).
Participant shall have the meaning assigned to such term in Section 9.04(c)(i).
Participant Register shall have the meaning assigned to such term in Section 9.04(c)(i).
PBGC shall mean the Pension Benefit Guaranty Corporation referred to and defined in ERISA.
Permitted Business Acquisition shall mean any acquisition of all or substantially all the assets of, or all the Equity Interests (other than directors qualifying shares) in, a Person or division or line of business of a Person, other than such acquisition of, or of the assets or Equity Interests of, any Loan Party, if (a) such acquisition was not preceded by, or effected pursuant to, an unsolicited or hostile offer, (b) such acquired Person, division or line of business of a Person is, or is engaged in, any business or business activity conducted by the Borrower and its Subsidiaries on the Closing Date and any business or business activities incidental or related thereto, or any business or activity that is reasonably similar thereto or a reasonable extension, development or expansion thereof or ancillary thereto, and (c) immediately after giving effect thereto: (i) no Default or Event of Default shall have occurred and be continuing or would result therefrom; (ii) all transactions related thereto shall be consummated in accordance with applicable laws; and (iii) (A) the Leverage Ratio, on a Pro Forma Basis after giving effect to such acquisition or formation, recomputed as at the last day of the most recently ended fiscal quarter of FINV, is less than 2.00 to 1.00, and, if the total consideration in respect of such acquisition (or acquisitions) exceeds U.S. $30,000,000, the Borrower shall have delivered to the Administrative Agent a certificate of a Responsible Officer of the Borrower to such effect, together with all relevant financial information for such Subsidiary or assets, and (B) any acquired or newly formed Subsidiary of the Borrower shall not be liable for any Indebtedness (except for Indebtedness permitted by Section 6.01).
Permitted Liens shall mean those Liens and other encumbrances permitted by Section 6.02.
Permitted Investments shall mean:
(a) direct obligations of the United States or any agency thereof or obligations guaranteed by the United States or any agency thereof, in each case with maturities not exceeding two years;
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(b) time deposit accounts, certificates of deposit and money market deposits maturing within 180 days of the date of acquisition thereof issued by a bank or trust company that is organized under the laws of the United States or any state thereof, having capital, surplus and undivided profits in excess of U.S .$250,000,000 and whose long-term debt, or whose parent holding companys long-term debt, is rated A (or such similar equivalent rating or higher) by at least one nationally recognized statistical rating organization (as defined in Rule 436 under the Securities Act);
(c) repurchase obligations with a term of not more than 180 days for underlying securities of the types described in clause (a) above entered into with a bank meeting the qualifications described in clause (b) above;
(d) commercial paper, maturing not more than one year after the date of acquisition, issued by a corporation (other than an Affiliate of the Borrower) organized and in existence under the laws of the United States with a rating at the time as of which any investment therein is made of P-1 (or higher) according to Moodys, or A-1 (or higher) according to S&P;
(e) securities with maturities of two years or less from the date of acquisition issued or fully guaranteed by any state, commonwealth or territory of the United States or by any political subdivision or taxing authority thereof, and rated at least A by S&P or A-2 by Moodys;
(f) shares of mutual funds whose investment guidelines restrict 95% of such funds investments to those satisfying the provisions of clauses (a) through (e) above;
(g) money market funds that (i) comply with the criteria set forth in Rule 2a-7 under the Investment Company Act of 1940, (ii) are rated AAA by S&P and Aaa by Moodys and (iii) have portfolio assets of at least U.S. $500,000,000; and
(h) time deposit accounts, certificates of deposit and money market deposits in an aggregate face amount not in excess of 1/2 of 1% of the Consolidated Total Assets of the Borrower and its Subsidiaries, on a consolidated basis, as of the end of the Borrowers most recently completed fiscal year.
Permitted Refinancing Indebtedness shall mean any Indebtedness issued in exchange for, or the net proceeds of which are used to extend, refinance, renew, replace, defease or refund (collectively, to Refinance ), the Indebtedness being Refinanced (or previous refinancings thereof constituting Permitted Refinancing Indebtedness); provided that (a) FINV and its Subsidiaries shall be in compliance, on a Pro Forma Basis after giving effect to such Permitted Refinancing Indebtedness, with the Financial Performance Covenants recomputed as at the last day of the most recently ended fiscal quarter of FINV and its Subsidiaries, (b) the principal amount (or accreted value, if applicable) of such Permitted Refinancing Indebtedness does not exceed the principal amount (or accreted value, if applicable) of the Indebtedness so Refinanced (plus unpaid accrued interest, breakage costs and premium thereon and reasonable transaction expenses with respect thereto), (c) the average life to maturity of such Permitted Refinancing Indebtedness is greater than or equal to that of the Indebtedness being Refinanced, (d) if the Indebtedness being Refinanced is subordinated in right of payment to the Obligations under this Agreement, such Permitted Refinancing Indebtedness shall be subordinated in right of payment to the Obligations on terms at least as favorable to the Lenders, taken as a whole, as those contained in the documentation governing the Indebtedness being Refinanced, (e) no Permitted Refinancing Indebtedness shall have different obligors, or greater guarantees or security, than the Indebtedness being Refinanced (other than any after-acquired or established Subsidiary that pursuant to the terms of the Indebtedness being extended, refinanced, renewed or replaced would have been required to become an obligor
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thereunder), and (f) if the Indebtedness being Refinanced is secured by any collateral, such Permitted Refinancing Indebtedness may be secured by such collateral on terms no less favorable in any material respect to the Lenders, taken as a whole, than those contained in the documentation governing the Indebtedness being Refinanced.
Permitted Senior Unsecured Debt shall mean unsecured senior Indebtedness issued by the Borrower and/or a finance company that is an Affiliate of the Borrower (i) the terms of which (1) do not provide for any scheduled repayment, mandatory redemption or sinking fund obligation prior to the date that is 91 days after the Revolving Facility Maturity Date, (2) do not contain covenants that, taken as a whole, are more restrictive than those set forth in this Agreement and the other Loan Documents, (3) provide for covenants and events of default customary for Indebtedness of a similar nature as such Permitted Senior Unsecured Debt and (ii) in respect of which no Subsidiary of the Borrower that is not a guarantor under the Loan Documents is a guarantor; provided that immediately prior to and after giving effect on a Pro Forma Basis to any incurrence of Permitted Senior Unsecured Debt, no Default or Event of Default shall have occurred and be continuing or would result therefrom and the Borrower would be in compliance on a Pro Forma Basis with the Financial Performance Covenants as of the most recently completed fiscal quarter for which financial statements are available.
Person shall mean any natural person, corporation, business trust, joint venture, association, company, partnership, limited liability company, individual or family trust, or Governmental Authority .
Plan shall mean any employee pension benefit plan subject to the provisions of Title IV of ERISA or Section 412 or 430 of the Code or Section 302 of ERISA and in respect of which any Loan Party or any ERISA Affiliate is (or if such plan were terminated would under Section 4069 of ERISA be deemed to be) an employer as defined in Section 3(5) of ERISA.
Platform shall have the meaning assigned to such term in Section 9.17(b).
primary obligor shall have the meaning given such term in the definition of the term Guarantee.
Prime Rate shall mean for any day, the prime rate of interest per annum published from time to time in the Bonds, Rates & Yields section of The Wall Street Journal or in any successor publication to The Wall Street Journal. Borrower understands that the Prime Rate may not be the best, lowest, or most favored rate, and any representation or warranty in that regard is expressly disclaimed. Borrower acknowledges that (i) if more than one prime rate is published at any time by The Wall Street Journal, the highest of such prime rates shall constitute the Prime Rate hereunder, and (ii) if at any time The Wall Street Journal ceases to publish a prime rate, the Administrative Agent shall have the right to select a substitute rate that the Administrative Agent determines, in the exercise of its reasonable commercial discretion, to be comparable to such prime rate, and the substituted rate as so selected, upon the sending of written notice thereof to Borrower, shall constitute the Prime Rate hereunder. Upon each increase or decrease hereafter in the Prime Rate, the rate of interest upon the unpaid principal balance of the ABR Loans shall be increased or decreased by the same amount as the increase or decrease in the Prime Rate, such increase or decrease to become effective as of the day of each such change in the Prime Rate and without notice to Borrower or any other Person. The Prime Rate is a reference rate and does not necessarily represent the lowest or best rate actually charged to any customer of any Lender. The Lenders may make commercial loans or other loans at rates of interest at, above or below the Prime Rate.
Pro Forma Basis shall mean, as to any Person, for any events as described in clauses (a) and (b) below that occur subsequent to the commencement of a period for which the financial effect of such events is being calculated, and giving effect to the events for which such calculation is being made, such
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calculation as will give pro forma effect to such events as if such events occurred on the first day of the four consecutive fiscal quarter period ended on or before the occurrence of such event (the Reference Period ):
(a) in making any determination of EBITDA on a Pro Forma Basis, pro forma effect shall be given to any Asset Disposition and to any Asset Acquisition (or any similar transaction or transactions that require a waiver or consent of the Required Lenders pursuant to Section 6.04 or 6.05), in each case that occurred during the Reference Period (or, unless the context otherwise requires, occurring during the Reference Period or thereafter and through and including the date upon which the respective Asset Acquisition or Asset Disposition is consummated); and
(b) in making any determination on a Pro Forma Basis, (x) all Indebtedness (including Indebtedness incurred or assumed and for which the financial effect is being calculated, whether incurred under this Agreement or otherwise, but excluding normal fluctuations in revolving Indebtedness incurred for working capital purposes) incurred or permanently repaid during the Reference Period shall be deemed to have been incurred or repaid at the beginning of such period, (y) Interest Expense of such Person attributable to interest on any Indebtedness, for which pro forma effect is being given as provided in preceding clause (x), bearing floating interest rates shall be computed on a pro forma basis as if the rates that would have been in effect during the period for which pro forma effect is being given had been actually in effect during such periods and (z) with respect to distributions made pursuant to Section 6.06(e), pro forma effect shall be given to the decrease in cash and Permitted Investments resulting from such distributions.
Pro forma calculations made pursuant to the definition of the term Pro Forma Basis shall be determined in good faith by a Responsible Officer of the Borrower and, for any fiscal period ending on or prior to the first anniversary of an Asset Acquisition or Asset Disposition (or any similar transaction or transactions that require a waiver or consent of the Required Lenders pursuant to Section 6.04 or 6.05), may include adjustments to reflect operating expense reductions and other operating improvements or synergies reasonably expected to result from such Asset Acquisition, Asset Disposition or other similar transaction, to the extent that the Borrower delivers to the Administrative Agent (i) a certificate of a Financial Officer of the Borrower setting forth such operating expense reductions and other operating improvements or synergies and (ii) information and calculations supporting in reasonable detail such estimated operating expense reductions and other operating improvements or synergies.
Projections shall mean the projections and any forward-looking statements (including statements with respect to booked business) of the Borrower and its Subsidiaries furnished to the Lenders or the Administrative Agent by or on behalf of the Borrower or any of its Subsidiaries prior to the Closing Date.
Property means any interest in any kind of property or asset, whether real, personal or mixed, tangible or intangible.
Public Lender shall have the meaning assigned to such term in Section 9.17(b).
Qualified ECP Credit Party means, with respect to any Benefitting Loan Party in respect of any Swap Obligation, each Loan Party that, at the time of the guarantee by such Benefitting Loan Party of such Swap Obligation is entered into or becomes effective with respect to, or at any other time such Benefitting Loan Party is by virtue of such guarantee deemed to enter into, such Swap Obligation, constitutes an Eligible Contract Participant and can cause such Benefitting Loan Party to qualify as an Eligible Contract Participant at such time by entering into a keepwell under Section 1a(18)(A)(v)(II) of the Commodity Exchange Act.
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Reference Period shall have the meaning assigned to such term in the definition of the term Pro Forma Basis.
Refinance shall have the meaning assigned to such term in the definition of the term Permitted Refinancing Indebtedness, and Refinanced shall have a meaning correlative thereto.
Register shall have the meaning assigned to such term in Section 9.04(b)(iv).
Regulation D shall mean Regulation D of the Board as from time to time in effect and all official rulings and interpretations thereunder or thereof.
Regulation U shall mean Regulation U of the Board as from time to time in effect and all official rulings and interpretations thereunder or thereof.
Regulation X shall mean Regulation X of the Board as from time to time in effect and all official rulings and interpretations thereunder or thereof.
Related Parties shall mean, with respect to any specified Person, such Persons Affiliates and the respective partners, directors, officers, employees, members, managers and agents of such Person and such Persons Affiliates.
Release shall mean any placing, spilling, leaking, seepage, pumping, pouring, emitting, emptying, discharging, injecting, escaping, leaching, dumping, disposing or depositing in, into or onto the Environment.
Remaining Present Value shall mean, as of any date with respect to any lease, the present value as of such date of the scheduled future lease payments with respect to such lease, determined with a discount rate equal to a market rate of interest for such lease reasonably determined at the time such lease was entered into.
Reportable Event shall mean any reportable event as defined in Section 4043(c) of ERISA or the regulations issued thereunder, other than those events as to which the 30-day notice period has been waived, with respect to a Plan.
Required Lenders shall mean, at any time, Lenders having (a) Loans outstanding, and (b) Available Unused Commitments, that taken together, represent more than 50% of the sum of all (y) Loans outstanding, and (z) the total Available Unused Commitments at such time.
Responsible Officer of any Person shall mean any executive officer, Financial Officer, director, general partner, managing member or sole member of such Person and any other officer or similar official thereof responsible for the administration of the obligations of such Person in respect of this Agreement.
Revolving Facility shall mean the Revolving Facility Commitments and the extensions of credit made hereunder by the Revolving Facility Lenders.
Revolving Facility Borrowing shall mean a Borrowing comprised of Revolving Facility Loans.
Revolving Facility Commitment shall mean, with respect to each Revolving Facility Lender, the commitment of such Revolving Facility Lender to make Eurodollar Loans and ABR Loans pursuant to Section 2.01 representing the maximum aggregate permitted amount of such Revolving Facility Lenders Revolving Facility Credit Exposure hereunder, as such commitment may be (a) reduced from
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time to time pursuant to Section 2.08 and (b) reduced or increased from time to time pursuant to assignments by or to such Lender under Section 9.04. The initial amount of each Revolving Facility Lenders Revolving Facility Commitment is set forth on Schedule 2.01 , or in the Assignment and Acceptance pursuant to which such Revolving Facility Lender shall have assumed its Revolving Facility Commitment, as applicable. The aggregate amount of the Revolving Facility Commitments on the Closing Date is U.S. $100,000,000.
Revolving Facility Credit Exposure shall mean, at any time, the aggregate principal amount of the Revolving Facility Loans outstanding at such time. The Revolving Facility Credit Exposure of any Revolving Facility Lender at any time shall be the aggregate principal amount of such Revolving Facility Lenders Revolving Facility Loans outstanding at such time.
Revolving Facility Lender shall mean a Lender with a Revolving Facility Commitment or with outstanding Revolving Facility Loans.
Revolving Facility Loan shall mean a Loan made to the Borrower by a Revolving Facility Lender pursuant to Section 2.01. Each Revolving Facility Loan shall be a Eurodollar Loan or an ABR Loan.
Revolving Facility Maturity Date shall mean August __, 2014 (or if such date is not a Business Day, the next succeeding Business Day, unless such Business Day is in the next calendar month, in which case the next preceding Business Day).
Revolving Facility Percentage shall mean, with respect to any Revolving Facility Lender, the percentage of the total Revolving Facility Commitments represented by such Lenders Revolving Facility Commitment. If the Revolving Facility Commitments have terminated or expired, the Revolving Facility Percentages shall be determined based upon the Revolving Facility Commitments most recently in effect, giving effect to any assignments pursuant to Section 9.04.
S&P shall mean Standard & Poors Ratings Services, Inc., a division of The McGraw-Hill Companies, Inc.
Sale and Lease-Back Transaction shall have the meaning assigned to such term in Section 6.03.
SEC shall mean the Securities and Exchange Commission or any successor thereto.
Securities Act shall mean the Securities Act of 1933, as amended and any successor statute.
Statutory Reserves shall mean a fraction (expressed as a decimal), the numerator of which is the number one and the denominator of which is the number one minus the aggregate of the maximum reserve percentages (including any marginal, special, emergency or supplemental reserves) expressed as a decimal established by the Board and any other banking authority, domestic or foreign, to which the Administrative Agent or any Lender (including any branch, Affiliate or other fronting office making or holding a Loan) is subject for eurocurrency funding (currently referred to as Eurocurrency Liabilities in Regulation D). Eurodollar Loans shall be deemed to constitute eurocurrency funding and to be subject to such reserve requirements without benefit of or credit for proration, exemptions or offsets that may be available from time to time to the Administrative Agent or any Lender under such Regulation D or any comparable regulation. Statutory Reserves shall be adjusted automatically on and as of the effective date of any change in any reserve percentage.
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Subordinated Intercompany Debt shall have the meaning assigned to such term in Section 6.01(e).
Subsidiary shall mean, with respect to any Person (herein referred to as the parent ), any corporation, partnership, association, joint venture, limited liability company or other business entity of which securities or other ownership interests representing more than 50% of the equity or more than 50% of the ordinary voting power or more than 50% of the general partnership interests are, at the time any determination is being made, directly or indirectly, owned, Controlled or held by such Person. Unless otherwise specified, all references herein to a Subsidiary or to Subsidiaries shall refer to a Subsidiary or Subsidiaries of the Borrower.
Supplemental Administrative Agent shall have the meaning assigned to such term in Section 8.13(a).
Swap Agreement shall mean any agreement with respect to any swap, forward, future or derivative transaction or option or similar agreement involving, or settled by reference to, one or more rates, currencies, commodities, equity or debt instruments or securities, or economic, financial or pricing indices or measures of economic, financial or pricing risk or value or any similar transaction or any combination of these transactions, provided that no phantom stock or similar plan providing for payments only on account of services provided by current or former directors, officers, employees or consultants of the Borrower or any of its Subsidiaries shall be a Swap Agreement.
Swap Obligation means, with respect to any Loan Party, any obligation to pay or perform under any agreement, contract or transaction that constitutes a swap within the meaning of section 1a(47) of the Commodity Exchange Act, including any such obligation comprised of a guaranty or a security interest or other Lien.
Swap Provider means any Lender or any Affiliate of a Lender who has entered into a Swap Agreement with Borrower or its Subsidiaries pursuant to the terms of this Agreement.
Syndication Agent shall have the meaning assigned to such term in the introductory paragraph of this Agreement.
Taxes shall mean any and all present or future taxes, levies, imposts, duties, deductions, charges or withholdings (including backup withholding) imposed by any Governmental Authority and any and all additions to tax, interest and penalties related thereto.
Test Period shall mean, at any date of determination, the most recently completed four consecutive fiscal quarters of FINV ending on or prior to such date.
Transactions shall mean, collectively, the transactions to occur on, prior to or immediately after the Closing Date pursuant to the Loan Documents, including (a) the execution and delivery of the Loan Documents and the initial borrowings hereunder; (b) the execution and delivery of the loan documents pertaining to the Multi-Year Credit Facility; and (c) the payment of all fees and expenses owing in connection with the foregoing.
Trigger Date shall mean the first date of delivery of financial statements after the Closing Date pursuant to Section 5.04(a) or (b).
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Type, when used in respect of any Loan or Borrowing, shall refer to the Rate by reference to which interest on such Loan or on the Loans comprising such Borrowing is determined. For purposes hereof, the term Rate shall include the Adjusted Eurodollar Rate and the Alternate Base Rate.
UCC shall mean the Uniform Commercial Code as in effect in the applicable jurisdiction.
United States means the United States of America.
U.S. Dollars or U.S.$ shall mean the lawful currency of the United States.
U.S.A. PATRIOT Act shall have the meaning assigned to such term in Section 3.08(a).
Wholly Owned Subsidiary of any Person shall mean a Subsidiary of such Person, all of the Equity Interests of which (other than directors qualifying shares or nominee or other similar shares required pursuant to applicable law) are owned, directly or indirectly, by such Person or any other Wholly Owned Subsidiary of such Person.
Withholding Agent shall have the meaning assigned to it in Section 2.17(a).
Withdrawal Liability shall mean liability to a Multiemployer Plan as a result of a complete or partial withdrawal from such Multiemployer Plan, as such terms are defined in Part I of Subtitle E of Title IV of ERISA.
Section 1.02 Terms Generally. The definitions set forth or referred to in Section 1.01 shall apply equally to both the singular and plural forms of the terms defined. Whenever the context may require, any pronoun shall include the corresponding masculine, feminine and neuter forms. The words include, includes and including shall be deemed to be followed by the phrase without limitation. All references herein to Articles, Sections, Exhibits and Schedules shall be deemed references to Articles and Sections of, and Exhibits and Schedules to, this Agreement unless the context shall otherwise require. Except as otherwise expressly provided herein, any reference in this Agreement to any Loan Document shall mean such document as amended, restated, supplemented or otherwise modified from time to time. Except as otherwise expressly provided herein, all financial statements to be delivered pursuant to this Agreement shall be prepared in accordance with United States generally accepted accounting principles applied on a consistent basis (GAAP) and all terms of an accounting or financial nature shall be construed and interpreted in accordance with GAAP, as in effect from time to time.
Section 1.03 Effectuation of Transfers. Each of the representations and warranties of the Borrower contained in this Agreement (and all corresponding definitions) are made after giving effect to the Transactions, unless the context otherwise requires.
ARTICLE II
THE CREDITS
Section 2.01 Commitments. Subject to the terms and conditions set forth herein, each Revolving Facility Lender agrees to make Revolving Facility Loans, in each case from time to time during the Availability Period, comprised of Eurodollar Loans and ABR Loans to the Borrower in U.S. Dollars in an aggregate principal amount that will not result in (i) such Lenders Revolving Facility Credit Exposure exceeding such Lenders Revolving Facility Commitment and (ii) the Revolving Facility Credit Exposure exceeding the total Revolving Facility Commitments. Within the foregoing limits and subject to the terms and conditions set forth herein, the Borrower may borrow, prepay and reborrow Revolving Facility Loans. The Revolving Facility shall be available as ABR Loans or Eurodollar Loans.
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Section 2.02 Loans and Borrowings . (a) Each Loan to the Borrower shall be made as part of a Borrowing consisting of Loans of the same Type and in the same currency made by the Revolving Facility Lenders ratably in accordance with their respective Revolving Facility Percentages on the date such Loans are made hereunder. The failure of any Lender to make any Loan required to be made by it shall not relieve any other Lender of its obligations hereunder; provided that the Commitments of the Lenders are several and no Lender shall be responsible for any other Lenders failure to make Loans as required.
(b) Each Borrowing shall be comprised entirely of ABR Loans or Eurodollar Loans as the Borrower may request in accordance herewith.
(c) At the commencement of each Interest Period for any Eurodollar Borrowing, such Borrowing shall be in an aggregate amount that is an integral multiple of the Borrowing Multiple and not less than the Borrowing Minimum. At the time that each ABR Borrowing by the Borrower is made, such Borrowing shall be in an aggregate amount that is an integral multiple of the Borrowing Multiple and not less than the Borrowing Minimum; provided that an ABR Borrowing may be in an aggregate amount that is equal to the entire unused balance of the Revolving Facility Commitments. Borrowings of more than one Type may be outstanding at the same time; provided that there shall not at any time be more than a total of five (5) Interest Periods in respect of Borrowings outstanding under the Revolving Facility.
(d) Notwithstanding any other provision of this Agreement, the Borrower shall not be entitled to request, or to elect to convert or continue, any Borrowing if the Interest Period requested with respect thereto would end after the Revolving Facility Maturity Date.
Section 2.03 Requests for Borrowings . To request a Revolving Facility Borrowing, the Borrower shall notify the Administrative Agent of such request by telephone (i) in the case of a Borrowing consisting of Eurodollar Loans, not later than 10:00 a.m., Houston, Texas time, three (3) Business Days before the date of the proposed Borrowing or (ii) in the case of a Borrowing consisting of ABR Loans, not later than 11:00 a.m., Houston, Texas time on the date of such Borrowing. Each such telephonic Borrowing Request shall be irrevocable and shall be confirmed promptly (but in any event on the same day) by hand delivery or telecopy to the Administrative Agent of a written Borrowing Request signed by the Borrower. Each such telephonic and written Borrowing Request shall specify the following information in compliance with Section 2.02:
(a) the aggregate amount of the requested Borrowing;
(b) the date of such Borrowing, which shall be a Business Day;
(c) whether such Borrowing is to be an ABR Borrowing or a Eurodollar Borrowing;
(d) in the case of a Borrowing consisting of a Eurodollar Loan, the initial Interest Period to be applicable thereto; and
(e) the location and number of the Borrowers account to which funds are to be disbursed.
If no election as to the Type of Borrowing is specified, then the requested Borrowing shall be an ABR Borrowing. If no Interest Period is specified with respect to any requested Eurodollar Borrowing, then the Borrower shall be deemed to have selected an Interest Period of one months duration. Promptly following receipt of a Borrowing Request in accordance with this Section, the Administrative Agent shall advise each Lender of the details thereof and of the amount of such Lenders Loan to be made as part of the requested Borrowing.
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Section 2.04 Reserved .
Section 2.05 Reserved .
Section 2.06 Funding of Borrowings . (a) Each Lender shall make each Loan to be made by it to the Borrower hereunder on the proposed date thereof by wire transfer of immediately available funds by 11:00 a.m., Houston, Texas time, to the account of the Administrative Agent most recently designated by it for such purpose by notice to the Lenders. The Administrative Agent will make such Loans available to the Borrower by promptly crediting the amounts so received, in like funds, to such account of the Borrower as is designated by the Borrower in the Borrowing Request.
(b) Unless the Administrative Agent shall have received notice from a Lender prior to the proposed time of any Borrowing that such Lender will not make available to the Administrative Agent such Lenders share of such Borrowing, the Administrative Agent may assume that such Lender has made such share available on such date in accordance with paragraph (a) of this Section and may, in reliance upon such assumption, make available to the Borrower a corresponding amount. In such event, if a Lender has not in fact made its share of the applicable Borrowing available to the Administrative Agent, then the applicable Lender and the Borrower severally agree to pay to the Administrative Agent forthwith on demand (without duplication) such corresponding amount with interest thereon, for each day from and including the date such amount is made available to the Borrower to but excluding the date of payment to the Administrative Agent, at (i) in the case of such Lender, the greater of the Federal Funds Effective Rate and a rate determined by the Administrative Agent in accordance with banking industry rules on interbank compensation or (ii) in the case of the Borrower, the interest rate applicable to ABR Loans. If such Lender pays such amount to the Administrative Agent, then such amount shall constitute such Lenders Loan included in such Borrowing.
Section 2.07 Interest Elections . (a) Each Borrowing initially shall be of the Type specified in the applicable Borrowing Request and, in the case of a Eurodollar Borrowing, shall have an initial Interest Period as specified in such Borrowing Request. Thereafter, the Borrower may elect to convert such Borrowing to a different Type or to continue such Borrowing and, in the case of a Eurodollar Borrowing, may elect Interest Periods therefor, all as provided in this Section. The Borrower may elect different options with respect to different portions of the affected Borrowing, in which case each such portion shall be allocated ratably among the Lenders holding the Loans comprising such Borrowing, and the Loans comprising each such portion shall be considered a separate Borrowing.
(b) To make an election pursuant to this Section, the Borrower shall notify the Administrative Agent of such election by telephone by the time that a Borrowing Request would be required under Section 2.03 if the Borrower were requesting a Borrowing of the Type resulting from such election to be made on the effective date of such election. Each such telephonic Interest Election Request shall be irrevocable and shall be confirmed promptly (but in any event on the same day) by hand delivery or telecopy to the Administrative Agent of a written Interest Election Request signed by the Borrower.
(c) Each telephonic and written Interest Election Request shall specify the following information in compliance with Section 2.02:
(i) the Borrowing to which such Interest Election Request applies and, if different options are being elected with respect to different portions thereof, the portions thereof to be allocated to each resulting Borrowing (in which case the information to be specified pursuant to clauses (iii) and (iv) below shall be specified for each resulting Borrowing);
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(ii) the effective date of the election made pursuant to such Interest Election Request, which shall be a Business Day;
(iii) whether the resulting Borrowing is to be an ABR Borrowing or a Eurodollar Borrowing; and
(iv) if the resulting Borrowing is a Eurodollar Borrowing, the Interest Period to be applicable thereto after giving effect to such election.
If any such Interest Election Request made by the Borrower requests a Eurodollar Borrowing but does not specify an Interest Period, then the Borrower shall be deemed to have selected an Interest Period of one months duration.
(d) Promptly following receipt of an Interest Election Request, the Administrative Agent shall advise each Lender to which such Interest Election Request relates of the details thereof and of such Lenders portion of each resulting Borrowing.
(e) If the Borrower fails to deliver a timely Interest Election Request with respect to one of its Eurodollar Borrowings prior to the end of the Interest Period applicable thereto, then, unless such Borrowing is repaid as provided herein, at the end of such Interest Period, the Borrower shall be deemed to have converted such Borrowing to an ABR Borrowing. Notwithstanding any contrary provision hereof, if an Event of Default has occurred and is continuing and the Administrative Agent, at the written request (including a request through electronic means) of the Required Lenders (unless such Event of Default is an Event of Default under Section 7.01(h) or (i), in which case no such request shall be required), so notifies the Borrower, then, so long as an Event of Default is continuing, (i) no outstanding Borrowing may be converted to or continued as a Eurodollar Borrowing and (ii) unless repaid, each Eurodollar Borrowing shall be converted to an ABR Borrowing at the end of the Interest Period applicable thereto.
Section 2.08 Termination and Reduction of Commitments . (a) Unless previously terminated, the Revolving Facility Commitments shall terminate on the Revolving Facility Maturity Date.
(b) The Borrower may at any time terminate, or from time to time reduce, the Revolving Facility Commitments; provided that (i) each reduction of the Revolving Facility Commitments shall be in an amount that is an integral multiple of U.S. $1,000,000 and not less than U.S. $5,000,000 (or, if less, the remaining amount of the Revolving Facility Commitments), and (ii) the Borrower shall not terminate or reduce the Revolving Facility Commitments if, after giving effect to any concurrent prepayment of the Revolving Facility Loans by the Borrower in accordance with Section 2.11, the Revolving Facility Credit Exposure would exceed the total Revolving Facility Commitments .
(c) The Borrower shall notify the Administrative Agent of any election to terminate or reduce the Revolving Facility Commitments under paragraph (b) of this Section at least three (3) Business Days prior to the effective date of such termination or reduction, specifying such election and the effective date thereof. Promptly following receipt of any notice, the Administrative Agent shall advise the Lenders of the contents thereof. Each notice delivered by the Borrower pursuant to this Section shall be irrevocable; provided that a notice of termination of the Revolving Facility Commitments delivered by the Borrower may state that such notice is conditioned upon the effectiveness of other credit facilities, in which case such notice may be revoked by the Borrower (by notice to the Administrative
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Agent on or prior to the specified effective date) if such condition is not satisfied. Any termination or reduction of the Revolving Facility Commitments shall be permanent; provided that a notice of termination of Revolving Facility Commitments may state that such notice is conditioned upon the effectiveness of another credit facility or facilities as specified therein, in which case such notice may be revoked by the Borrower (by notice to the Administrative Agent on or prior to the specified effective date) if such condition is not satisfied. Each reduction of the Revolving Facility Commitments shall be made ratably among the Lenders in accordance with their respective Revolving Facility Commitments.
Section 2.09 Repayment of Loans; Evidence of Debt . (a) The Borrower hereby unconditionally promises to pay to the Administrative Agent for the account of each Revolving Facility Lender the then unpaid principal amount of each Revolving Facility Loan on the Revolving Facility Maturity Date; provided, that all Loans shall be paid on such earlier date upon which the maturity of the Loans shall have been accelerated pursuant to Section 7.01.
(b) Each Lender shall maintain in accordance with its usual practice an account or accounts evidencing the indebtedness of the Borrower to such Lender resulting from each Loan made by such Lender, including the amounts of principal and interest payable and paid to such Lender from time to time hereunder.
(c) The Administrative Agent shall maintain accounts in which it shall record (i) the amount of each Loan made hereunder and the Type thereof and the Interest Period (if any) applicable thereto, (ii) the amount of any principal or interest due and payable or to become due and payable to each Lender hereunder, and (iii) any amount received by the Administrative Agent hereunder for the account of the Lenders and each Lenders share thereof.
(d) The entries made in the accounts maintained pursuant to paragraph (b) or (c) of this Section shall be prima facie evidence absent manifest error of the existence and amounts of the obligations recorded therein; provided that the failure of any Lender or the Administrative Agent to maintain such accounts or any error therein shall not in any manner affect the obligation of the Borrower to repay the Loans made in accordance with the terms of this Agreement.
(e) Loans made by a Lender shall be evidenced by a promissory note substantially in the form of Exhibit G . The Borrower shall prepare, execute and deliver to each Lender a Note payable to such Lender. Thereafter, the Loans evidenced by such Note and interest thereon shall at all times (including, to the extent requested by any assignee, after assignment pursuant to Section 9.04) be represented by one or more Notes in such form payable to the payee named therein.
Section 2.10 Repayment of Loans . (a) To the extent not previously paid, all Revolving Facility Loans shall be due and payable on the Revolving Facility Maturity Date.
(b) Prior to any repayment of any Revolving Facility Borrowing, the Borrower shall select the Revolving Facility Borrowing or Revolving Facility Borrowings to be repaid and shall notify the Administrative Agent by telephone (confirmed by telecopy) of such selection not later than 1:00 p.m., Houston, Texas time, (i) in the case of an ABR Borrowing, one Business Day before the scheduled date of such repayment and (ii) in the case of a Eurodollar Borrowing, three Business Days before the scheduled date of such repayment. Each repayment of a Revolving Facility Borrowing shall be applied to the Revolving Facility Loans included in the repaid Revolving Facility Borrowing such that each Revolving Facility Lender receives its ratable share of such repayment (based upon the respective Revolving Facility Credit Exposures of the Revolving Facility Lenders at the time of such repayment).
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Section 2.11 Prepayment of Loans . (a) The Borrower shall have the right at any time and from time to time to prepay Revolving Facility Loans in whole or in part, without premium or penalty (but subject to Section 2.16), in an aggregate principal amount that is an integral multiple of the Borrowing Multiple and not less than the Borrowing Minimum or, if less, the amount outstanding, subject to prior notice in the form of Exhibit B hereto provided in accordance with Section 2.10(b).
(b) If on any date, the Administrative Agent notifies the Borrower that the Revolving Facility Credit Exposure exceeds the aggregate Revolving Facility Commitments of the Lenders on such date, the Borrower shall, as soon as practicable and in any event within two Business Days following such date, prepay the outstanding principal amount of any Revolving Facility Loans together with any interest accrued to the date of such prepayment on the aggregate principal amount of Revolving Facility Loans prepaid. The Administrative Agent shall give prompt notice of any prepayment required under this Section 2.11(b) to the Borrower and the Lenders.
(c) In the event of any termination of all the Revolving Facility Commitments, the Borrower shall, on the date of such termination, repay or prepay all its outstanding Revolving Facility Loans. If as a result of any partial reduction of the Revolving Facility Commitments, the aggregate Revolving Facility Exposure would exceed the aggregate Revolving Facility Commitments of all Revolving Facility Lenders after giving effect thereto, then the Borrower shall, on the date of such reduction, repay or prepay Revolving Facility Loans in an amount sufficient to eliminate such excess.
Section 2.12 Fees .
(a) Reserved.
(b) Reserved.
(c) Reserved.
(d) The Borrower agrees to pay to the Administrative Agent, for the account of the Administrative Agent, the fee set forth in the Fee Letter at the times specified therein or such other administrative fee as agreed between the Borrower and the Administrative Agent in writing (such fees, the Administrative Agent Fees ) and to pay all other fees due and payable pursuant to the Fee Letter.
(e) All Fees shall be paid on the dates due, in immediately available funds, to the Administrative Agent for distribution, if and as appropriate, among the Lenders. Once paid, none of the Fees shall be refundable under any circumstances.
Section 2.13 Interest . (a) The Borrower shall pay interest on the unpaid principal amount of each ABR Loan at the Alternate Base Rate plus the Applicable Margin.
(b) The Borrower shall pay interest on the unpaid principal amount of each Eurodollar Loan at the Adjusted Eurodollar Rate for the Interest Period in effect for such Eurodollar Loan plus the Applicable Margin.
(c) Notwithstanding the foregoing, if any principal of or interest on any Loan or any Fees or other amount payable by the Borrower hereunder is not paid when due, whether at stated maturity, upon acceleration or otherwise, the Borrower shall pay interest on such overdue amount, after as well as before judgment, at a rate per annum equal to (x) in the case of overdue principal of any Loan, 2.00% plus the rate otherwise applicable to such Loan as provided in the preceding paragraphs of this Section or (y) in the case of any other amount, 2.00% plus the rate applicable to ABR Loans with respect to the Revolving Facility in paragraph (a) of this Section; provided that this paragraph (c) shall not apply to any Default or Event of Default that has been waived by the Lenders pursuant to Section 9.08.
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(d) Accrued interest on each Revolving Facility Loan shall be payable by the Borrower in arrears on each Interest Payment Date for such Revolving Facility Loan upon termination of the Revolving Facility Commitments and upon the Revolving Facility Maturity Date; provided that (x) interest accrued pursuant to paragraph (c) of this Section shall be payable on demand, (y) in the event of any repayment or prepayment of any Revolving Facility Loan (other than a prepayment of an ABR Loan), accrued interest on the principal amount repaid or prepaid shall be payable on the date of such repayment or prepayment and (z) in the event of any conversion of any Eurodollar Loan prior to the end of the current Interest Period therefor, accrued interest on such Revolving Facility Revolving Facility Loan shall be payable on the effective date of such conversion.
(e) All computations of interest shall be made by the Administrative Agent taking into account the actual number of days occurring in the period for which such interest is payable pursuant to this Section, and (i) if based on the Alternate Base Rate (if based on the Prime Rate), a year of 365 days or 366 days, as the case may be; or (ii) otherwise, on the basis of a year of 360 days.
Section 2.14 Alternate Rate of Interest . If prior to the commencement of any Interest Period for a Eurodollar Borrowing:
(a) the Administrative Agent determines (which determination shall be conclusive absent manifest error) that adequate and reasonable means do not exist for ascertaining the Adjusted Eurodollar Rate for such Interest Period; or
(b) the Administrative Agent is advised by the Required Lenders that the Eurodollar Rate for such Interest Period will not adequately and fairly reflect the cost to such Lenders of making or maintaining their Loans included in such Borrowing for such Interest Period; then the Administrative Agent shall give written notice thereof to the Borrower and the Lenders as promptly as practicable thereafter and, until the Administrative Agent notifies the Borrower and the Lenders that the circumstances giving rise to such notice no longer exist, (x) any Interest Election Request that requests the conversion of any Borrowing to, or continuation of any Borrowing as, a Eurodollar Borrowing shall be ineffective and such Borrowing shall be converted to an ABR Borrowing on the last day of the Interest Period applicable thereto, and (y) if any Borrowing Request requests a Eurodollar Borrowing, such Borrowing shall be made as an ABR Borrowing or shall be made as a Borrowing bearing interest at such rate as the Required Lenders shall agree adequately reflects the costs to the Revolving Facility Lenders of making the Loans comprising such Borrowing.
Section 2.15 Increased Costs (a) If any Change in Law shall:
(i) impose, modify or deem applicable any reserve, special deposit, FDIC insurance or similar requirement against assets of, deposits with or for the account of, or credit extended by, any Lender (except any such reserve requirement reflected in the Adjusted Eurodollar Rate); or
(ii) impose on any Lender or the London interbank market any tax, costs, expenses or other condition affecting this Agreement or Loans made by such Lender or participation therein (except in each case (A) for Indemnified Taxes indemnified pursuant to Section 2.17 and (B) Excluded Taxes);
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and the result of any of the foregoing shall be to increase the cost to such Lender of making or maintaining any Loan (or of maintaining its obligation to make any such Loan) to the Borrower or to reduce the amount of any sum received or receivable by such Lender hereunder (whether of principal, interest or otherwise) (except in each case (A) for Indemnified Taxes indemnified pursuant to Section 2.17 and (B) Excluded Taxes), then the Borrower will pay to such Lender such additional amount or amounts as will compensate such Lender for such additional costs incurred or reduction suffered in connection therewith.
(b) If any Lender determines that any Change in Law regarding capital requirements has or would have the effect of reducing the rate of return on such Lenders capital or on the capital of such Lenders holding company, if any, as a consequence of this Agreement or any of the Loans made by such Lender or as a consequence of the Commitments to make any of the Loans, to a level below that which such Lender or such Lenders holding company could have achieved but for such Change in Law (taking into consideration such Lenders policies and the policies of such Lenders holding company with respect to capital adequacy), then from time to time the Borrower shall pay to such Lender such additional amount or amounts as will compensate such Lender or such Lenders holding company for any such reduction suffered in connection therewith.
(c) A certificate of a Lender setting forth the amount or amounts necessary to compensate such Lender or its holding company, as applicable, as specified in paragraph (a) or (b) of this Section shall be delivered to the Borrower and shall be conclusive absent manifest error. The Borrower shall pay such Lender the amount shown as due on any such certificate within 10 days after receipt thereof.
(d) Promptly after any Lender has determined that it will make a request for increased compensation pursuant to this Section 2.15, such Lender shall notify the Borrower thereof. Failure or delay on the part of any Lender to demand compensation pursuant to this Section shall not constitute a waiver of such Lenders right to demand such compensation; provided that the Borrower shall not be required to compensate a Lender pursuant to this Section for any increased costs or reductions incurred more than 180 days prior to the date that such Lender notifies the Borrower of the Change in Law giving rise to such increased costs or reductions and of such Lenders intention to claim compensation therefor; provided further that, if the Change in Law giving rise to such increased costs or reductions is retroactive, then the 180-day period referred to above shall be extended to include the period of retroactive effect thereof.
Section 2.16 Break Funding Payments . In the event of (a) the payment of any principal of any Eurodollar Loan other than on the last day of an Interest Period applicable thereto (including as a result of an Event of Default), (b) the conversion of any Eurodollar Loan other than on the last day of the Interest Period applicable thereto, (c) the failure to borrow, convert, continue or prepay any Eurodollar Loan on the date specified in any notice delivered pursuant hereto or (d) the assignment of any Eurodollar Loan other than on the last day of the Interest Period applicable thereto as a result of a request by the Borrower pursuant to Section 2.19, then, in any such event, the Borrower shall compensate each Lender for the loss, cost and expense attributable to such event. In the case of a Eurodollar Loan, such loss, cost or expense to any Lender shall be deemed to be the amount determined by such Lender to be the excess, if any, of (i) the amount of interest which would have accrued on the principal amount of such Loan had such event not occurred, at the Eurodollar Rate that would have been applicable to such Loan, for the period from the date of such event to the last day of the then current Interest Period therefor (or, in the case of a failure to borrow, convert or continue a Eurodollar Loan, for the period that would have been the Interest Period for such Loan), over (ii) the amount of interest which would accrue on such principal amount for such period at the interest rate which such Lender would bid were it to bid, at the commencement of such period, for deposits in U.S. Dollars of a comparable amount and period from other banks in the Eurodollar market. A certificate of any Lender setting forth any amount or amounts that such Lender is entitled to receive pursuant to this Section shall be delivered to the Borrower and shall be conclusive absent manifest error. The Borrower shall pay such Lender the amount shown as due on any such certificate within 10 days after receipt thereof.
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Section 2.17 Taxes . (a) Any and all payments by or on account of any obligation of any Loan Party under any Loan Document shall be made free and clear of and without deduction or withholding for any Taxes, except as required by applicable law. If a Loan Party, the Administrative Agent or any other Person acting on behalf of the Administrative Agent in regards to payments hereunder (a Withholding Agent ) shall be required by applicable law to deduct Taxes from such payments, the applicable Withholding Agent shall be entitled to make such deduction or withholding and, if such Tax is an Indemnified Tax, then the sum payable by the Loan Party shall be increased as necessary so that after making all required deductions (including deductions of Indemnified Taxes applicable to additional sums payable under this Section) the Administrative Agent or Lender, as applicable, receives an amount equal to the sum it would have received had no such deductions or withholdings for Indemnified Taxes been made, and such Withholding Agent shall timely pay the full amount deducted to the relevant Governmental Authority in accordance with applicable law.
(b) In addition, each Loan Party shall pay any Other Taxes payable on account of any obligation of such Loan Party and upon the execution, delivery or enforcement of, or otherwise with respect to, the Loan Documents, to the relevant Governmental Authority in accordance with applicable law.
(c) Each Loan Party shall indemnify the Administrative Agent and each Lender, within 30 days after written demand therefor, for the full amount of any Indemnified Taxes or Other Taxes (other than Indemnified Taxes or Other Taxes resulting from gross negligence or willful misconduct of the Administrative Agent or such Lender, and without duplication of any amounts indemnified under Section 2.17(a)) paid by the Administrative Agent or such Lender, as applicable, on or with respect to any payment by or on account of any obligation of such Loan Party under, or otherwise with respect to, any Loan Document (including Indemnified Taxes or Other Taxes imposed or asserted on or attributable to amounts payable under this Section) and any reasonable expenses arising therefrom or with respect thereto, whether or not such Indemnified Taxes or Other Taxes were correctly or legally imposed or asserted by the relevant Governmental Authority; provided however, that a Loan Party shall not be required to make any payment pursuant to this Section 2.17(c) if the Administrative Agent or such Lender, as the case may be, makes demand for such payment more than 180 days after the earlier of (i) the date on which the relevant Governmental Authority makes written demand upon such Person for payment of such Indemnified Taxes or Other Taxes, and (ii) the date on which such Person has made payment of such Indemnified Taxes or Other Taxes (except that, if the Indemnified Taxes or Other Taxes imposed or asserted giving rise to such claims are retroactive, then the 180-day period referred to above shall be extended to include the period of retroactive effort thereof). A certificate as to the amount of such payment or liability and setting forth in reasonable detail the basis and calculation for such payment or liability delivered to such Loan Party by a Lender, or by the Administrative Agent on its own behalf or on behalf of a Lender, shall be conclusive absent manifest error of the Lender or the Administrative Agent, as applicable.
(d) As soon as practicable after any payment of Indemnified Taxes or Other Taxes by a Loan Party to a Governmental Authority, such Loan Party shall deliver to the Administrative Agent the original or a certified copy of a receipt issued by such Governmental Authority evidencing such payment, a copy of the return reporting such payment or other evidence of such payment reasonably satisfactory to the Administrative Agent.
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(e) Each Lender that is not a United States Person as defined in Section 7701(a)(30) of the Code (a Non-U.S. Lender ) shall, to the extent it may lawfully do so, deliver to the Borrower and the Administrative Agent, at the time or times reasonably requested by the Borrower or the Administrative Agent, two copies of U.S. Internal Revenue Service Form W-8BEN (claiming the benefits of an applicable income tax treaty), W-8EXP, W-8IMY (together with any required attachments) or Form W-8ECI, or, in the case of a Non-U.S. Lender claiming exemption from U.S. federal withholding Tax under Section 871(h) or 881(c) of the Code with respect to payments of portfolio interest, a statement substantially in the form of any of Exhibits H-1-4 (as applicable) and a Form W-8BEN, or any subsequent versions thereof or successors thereto, properly completed and duly executed by such Non-U.S. Lender (with any other required forms attached) claiming complete exemption from or a reduced rate of U.S. federal withholding Tax on all payments by the Borrower under this Agreement and the other Loan Documents. Each Lender that is not a Non-U.S. Lender shall deliver to the Borrower and the Administrative Agent, at the time or times reasonably requested by the Borrower or the Administrative Agent, two copies of U.S. Internal Revenue Service Form W-9, properly completed and duly executed by such Lender, claiming complete exemption (or otherwise establishing an exemption) from U.S. backup withholding on all payments under this Agreement and the other Loan Documents. Such forms shall be delivered by each Lender, to the extent it may lawfully do so, on or before the date it becomes a party to this Agreement. In addition, each Lender, to the extent it may lawfully do so, shall deliver such forms promptly upon the obsolescence or invalidity of any form previously delivered by such Lender. Each Lender shall promptly notify the Borrower and the Administrative Agent at any time it determines that it is no longer in a position to provide any previously delivered certificate to the Borrower or the Administrative Agent (or any other form of certification adopted by the U.S. taxing authorities for such purpose). Without limiting the foregoing, any Lender that is entitled to an exemption from or reduction of withholding Tax otherwise indemnified against by a Loan Party pursuant to this Section 2.17 with respect to payments under any Loan Document shall deliver to the Borrower or the relevant Governmental Authority (with a copy to the Administrative Agent), to the extent such Lender is legally entitled to do so, at the time or times prescribed by applicable law such properly completed and executed documentation prescribed by applicable law as may reasonably be requested by the Borrower or the Administrative Agent to permit such payments to be made without such withholding Tax or at a reduced rate; provided that in such Lenders judgment such completion, execution or submission would not materially prejudice such Lender.
(f) If the Administrative Agent or any Lender determines, in good faith and in its sole discretion, that it has received a refund of Indemnified Taxes or Other Taxes as to which it has been indemnified by a Loan Party or with respect to which a Loan Party has paid additional amounts pursuant to this Section 2.17, it shall pay over such refund to such Loan Party (but only to the extent of indemnity payments made, or additional amounts paid, by such Loan Party under this Section 2.17 with respect to the Indemnified Taxes or Other Taxes giving rise to such refund), net of all out-of-pocket expenses of the Administrative Agent or such Lender (including any Taxes imposed with respect to such refund) as is determined by the Administrative Agent or such Lender in good faith and in its sole discretion, and without interest (other than any interest paid by the relevant Governmental Authority with respect to such refund); provided that such Loan Party, upon the request of the Administrative Agent or such Lender, agrees to repay as soon as reasonably practicable the amount paid over to such Loan Party (plus any penalties, interest or other charges imposed by the relevant Governmental Authority) to the Administrative Agent or such Lender in the event the Administrative Agent or such Lender is required to repay such refund to such Governmental Authority. This paragraph shall not be construed to require the Administrative Agent or any Lender to make available its Tax returns (or any other information relating to its Taxes which it deems confidential) to the Loan Parties or any other Person.
(g) For purposes of this Section 2.17, the term applicable law includes FATCA.
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Section 2.18 Payments Generally; Pro Rata Treatment; Sharing of Set-offs. (a) Unless otherwise specified, the Borrower shall make each payment required to be made by it hereunder (whether of principal, interest or fees, or of amounts payable under Section 2.15, 2.16 or 2.17, or otherwise) prior to 1:00 p.m., Houston, Texas time, on the date when due, in immediately available funds, without condition or deduction for any defense, recoupment, set-off or counterclaim. Any amounts received after such time on any date may, in the discretion of the Administrative Agent, be deemed to have been received on the next succeeding Business Day for purposes of calculating interest thereon. All such payments shall be made to the Administrative Agent to the applicable account designated to the Borrower by the Administrative Agent, except that payments pursuant to Sections 2.15, 2.16, 2.17 and 9.05 shall be made directly to the Persons entitled thereto. The Administrative Agent shall distribute any such payments received by it for the account of any other Person to the appropriate recipient promptly following receipt thereof. If any payment hereunder shall be due on a day that is not a Business Day, the date for payment shall be extended to the next succeeding Business Day, and, in the case of any payment accruing interest, interest thereon shall be payable for the period of such extension. All payments hereunder of principal or interest in respect of any Loan shall be made in U.S. Dollars. All payments of other amounts due hereunder or under any other Loan Document shall be made in U.S. Dollars. Any payment required to be made by the Administrative Agent hereunder shall be deemed to have been made by the time required if the Administrative Agent shall, at or before such time, have taken the necessary steps to make such payment in accordance with the regulations or operating procedures of the clearing or settlement system used by the Administrative Agent to make such payment.
(b) If at any time insufficient funds are received by and available to the Administrative Agent from the Borrower to pay fully all amounts of principal, interest and fees then due from the Borrower hereunder, such funds shall be applied (i) first , towards payment of interest and fees then due from the Borrower hereunder, ratably among the parties entitled thereto in accordance with the amounts of interest and fees then due to such parties, and (ii) second , towards payment of principal then due from the Borrower hereunder, ratably among the parties entitled thereto in accordance with the amounts of principal then due to such parties.
(c) If any Lender shall, by exercising any right of set-off or counterclaim, through the application of any proceeds of collateral or otherwise, obtain payment in respect of any principal of or interest on any of its Revolving Facility Loans resulting in such Lender receiving payment of a greater proportion of the aggregate amount of its Revolving Facility Loans and accrued interest thereon than the proportion received by any other Lender, then the Lender receiving such greater proportion shall purchase (for cash at face value) participations in Revolving Facility Loans of other Lenders to the extent necessary so that the benefit of all such payments shall be shared by the Lenders ratably in accordance with the aggregate amount of principal of and accrued interest on their respective Revolving Facility Loans; provided that (i) if any such participations are purchased and all or any portion of the payment giving rise thereto is recovered, such participations shall be rescinded and the purchase price restored to the extent of such recovery, without interest, and (ii) the provisions of this paragraph (c) shall not be construed to apply to any payment made by the Borrower pursuant to and in accordance with the express terms of this Agreement or any payment obtained by a Lender as consideration for the assignment of or sale of a participation in any of its Loans to any assignee or participant, other than to the Borrower or any Loan Party (as to which the provisions of this paragraph (c) shall apply). The Borrower consents to the foregoing and agrees, to the extent it may effectively do so under applicable law, that any Lender acquiring a participation pursuant to the foregoing arrangements may exercise against the Borrower rights of set-off and counterclaim with respect to such participation as fully as if such Lender were a direct creditor of the Borrower in the amount of such participation.
(d) Unless the Administrative Agent shall have received notice from the Borrower prior to the date on which any payment by the Borrower is due to the Administrative Agent for the account of the Lenders hereunder that the Borrower will not make such payment, the Administrative Agent may assume that the Borrower has made such payment on such date in accordance herewith and
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may, in reliance upon such assumption, distribute to the Lenders the amount due. In such event, if the Borrower has not in fact made such payment, then each of the Lenders severally agrees to repay to the Administrative Agent forthwith on demand the amount so distributed to such Lender with interest thereon, for each day from and including the date such amount is distributed to it to but excluding the date of payment to the Administrative Agent, at the greater of the Federal Funds Effective Rate and a rate determined by the Administrative Agent in accordance with banking industry rules on interbank compensation.
(e) If any Lender shall fail to make any payment required to be made by it pursuant to Section 2.06(b) or 2.18(d), then the Administrative Agent may, in its discretion (notwithstanding any contrary provision hereof), apply any amounts thereafter received by the Administrative Agent for the account of such Lender to satisfy such Lenders obligations under such Sections until all such unsatisfied obligations are fully paid.
Section 2.19 Mitigation Obligations; Replacement of Lenders . (a) If any Lender requests compensation under Section 2.15, or if any Loan Party is required to pay any additional amount to any Lender or any Governmental Authority for the account of any Lender pursuant to Section 2.17, then such Lender shall use reasonable efforts to designate a different lending office for funding or booking its Loans hereunder or to assign its rights and obligations hereunder to another of its offices, branches or Affiliates, if, in the reasonable judgment of such Lender, such designation or assignment (i) would eliminate or reduce amounts payable pursuant to Section 2.15 or 2.17, as applicable, in the future and (ii) would not subject such Lender to any unreimbursed cost or expense and would not otherwise be disadvantageous to such Lender in any material respect. The Borrower hereby agrees to pay all reasonable costs and expenses incurred by any Lender in connection with any such designation or assignment.
(b) If any Lender requests compensation under Section 2.15, or if any Loan Party is required to pay any Indemnified Taxes or additional amount to any Lender or any Governmental Authority for the account of any Lender pursuant to Section 2.17, and, in each case, such Lender has declined or is unable to designate a different lending office in accordance with Section 2.19(a), or is a Defaulting Lender, then such Loan Party may, at its sole expense and effort, upon notice to such Lender and the Administrative Agent, require such Lender to assign and delegate, without recourse (in accordance with and subject to the restrictions contained in Section 9.04, all its interests, rights (other than its existing rights to payments pursuant to Section 2.15 or 2.17) and obligations under this Agreement to an assignee that shall assume such obligations (which assignee may be another Lender, if a Lender accepts such assignment); provided that (i) such Loan Party shall have received the prior written consent of the Administrative Agent, which consent shall not unreasonably be withheld or delayed, (ii) such Lender shall have received payment of an amount equal to the outstanding principal of its Loans, accrued interest thereon, accrued fees and all other amounts payable to it hereunder, from the assignee (to the extent of such outstanding principal and accrued interest and fees) or such Loan Party (in the case of all other amounts), (iii) in the case of any such assignment resulting from a claim for compensation under Section 2.15 or payments required to be made pursuant to Section 2.17, such assignment will result in a reduction in such compensation or payments and (iv) such assignment does not conflict with applicable law. Nothing in this Section 2.19 shall be deemed to prejudice any rights that any Loan Party may have against any Lender that is a Defaulting Lender.
(c) If any Lender (such Lender, a Non-Consenting Lender ) has failed to consent to a proposed amendment, waiver, discharge or termination which pursuant to the terms of Section 9.08 requires the consent of all of the Lenders affected and with respect to which the Required Lenders shall have granted their consent, then provided no Event of Default then exists, the Borrower shall have the right (unless such Non-Consenting Lender grants such consent) to replace such Non-Consenting Lender
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by requiring such Non-Consenting Lender to assign its Loans and Commitments hereunder to one or more Eligible Assignees, provided that: (i) all Obligations of the Borrower owing to such Non-Consenting Lender being replaced shall be paid in full to such Non-Consenting Lender concurrently with such assignment, and (ii) the replacement Lender shall purchase the foregoing by paying to such Non-Consenting Lender a price equal to the principal amount thereof plus accrued and unpaid interest thereon. In connection with any such assignment the Borrower, Administrative Agent, such Non-Consenting Lender and the replacement Lender shall otherwise comply with Section 9.04.
Section 2.20 Reserved .
Section 2.21 Illegality . If any Lender reasonably determines that any Change in Law has made it unlawful, or that any Governmental Authority has asserted after the Closing Date that it is unlawful, for any Lender or its applicable lending office to make or maintain any Eurodollar Loans, then, on notice thereof by such Lender to the Borrower through the Administrative Agent, any obligations of such Lender to make or continue Eurodollar Loans or to convert ABR Borrowings to Eurodollar Borrowings, as the case may be, shall be suspended until such Lender notifies the Administrative Agent and the Borrower that the circumstances giving rise to such determination no longer exist. Upon receipt of such notice, the Borrower shall, upon demand from such Lender (with a copy to the Administrative Agent), convert all such Eurodollar Borrowings of such Lender to ABR Borrowings on the last day of the Interest Period therefor, if such Lender may lawfully continue to maintain such Eurodollar Borrowings to such day, or immediately, if such Lender may not lawfully continue to maintain such Loans. Upon any such prepayment or conversion, the Borrower shall also pay accrued interest on the amount so prepaid or converted.
Section 2.22 Defaulting Lenders . Notwithstanding any provision of this Agreement to the contrary, if any Lender becomes a Defaulting Lender , then the following provisions shall apply for so long as such Lender is a Defaulting Lender:
(a) fees shall cease to accrue on the unfunded portion of the Commitments of such Defaulting Lender pursuant to Section 2.12(a);
(b) the aggregate principal amount of Loans and Available Unused Commitment of such Defaulting Lender shall not be included in determining whether all Lenders, Required Lenders or affected Lenders have taken or may take any action hereunder (including any consent to any amendment or waiver pursuant to Section 9.08); provided that (i) any waiver, amendment or modification requiring the consent of all Lenders or each affected Lender which affects such Defaulting Lender differently than other affected Lenders shall require the consent of such Defaulting Lender, (ii) the Commitment of such Defaulting Lender may not be increased or extended without the consent of such Defaulting Lender and (iii) any amendment that reduces the principal amount of, or rate of interest on, any Loan made by such Defaulting Lender, shall require the consent of such Defaulting Lender;
(c) reserved;
(d) reserved; and
(e) Any payment of principal, interest, fees or other amounts received by the Administrative Agent for the account of such Defaulting Lender shall be applied at such time or times as may be determined by the Administrative Agent as follows: (i) first , to the payment of any amounts owing by such Defaulting Lender to the Administrative Agent hereunder, (ii) second , as the Borrower may request (so long as no Default or Event of Default exists), to the funding of any Loan in respect of which that Defaulting Lender has failed to fund its portion thereof as required by this Agreement, (iii)
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third , to the payment of any amounts owing to the Lenders as a result of any judgment of a court of competent jurisdiction obtained by any Lender against such Defaulting Lender as a result of such Defaulting Lenders breach of its obligations under this Agreement, (iv) fourth , so long as no Default or Event of Default exists, to the payment of any amounts owing to the Borrower as a result of any judgment of a court of competent jurisdiction obtained by the Borrower against that Defaulting Lender as a result of that Defaulting Lenders breach of its obligations under this Agreement and (v) fifth , to such Defaulting Lender or as otherwise directed by a court of competent jurisdiction, provided , with respect to this clause (vii), that if such payment is (x) a prepayment of the principal amount of any Loans in respect of which a Defaulting Lender has not funded its participation obligations and (y) made at a time when the conditions set forth in Section 4.01 are satisfied, such payment shall be applied solely to prepay the Loans of, and reimbursement obligations owed to, all non-Defaulting Lenders pro rata prior to being applied to the prepayment of any Loans, or reimbursement obligations owed to, any Defaulting Lender. Any payments, prepayments or other amounts paid or payable to a Defaulting Lender that are applied to pay amounts owed by a Defaulting Lender shall be deemed paid to and redirected by that Defaulting Lender, and each Lender irrevocably consents hereto.
(f) In the event that the Administrative Agent and the Borrower each agrees that a Defaulting Lender has adequately remedied all matters that caused such Lender to be a Defaulting Lender, then the Revolving Facility Credit Exposure of the Lenders shall be readjusted to reflect the inclusion of such Lenders Revolving Facility Commitment and on such date such Lender shall purchase at par such of the Loans of the other Lenders as the Administrative Agent shall determine may be necessary in order for such Lender to hold such Loans in accordance with its Revolving Facility Percentage; provided that no adjustments will be made retroactively with respect to fees accrued or payments made by or on behalf of Borrower while that Lender was a Defaulting Lender; and provided, further, that except to the extent otherwise expressly agreed by the affected parties, no change hereunder from Defaulting Lender to Lender will constitute a waiver or release of any claim of any party hereunder arising from that Lenders having been a Defaulting Lender.
Section 2.23 Reserved .
ARTICLE III
REPRESENTATIONS AND WARRANTIES
The Borrower represents and warrants to each of the Lenders with respect to each of the Loan Parties and with respect to each of Borrowers Subsidiaries other than Subsidiaries that are Loan Parties, to the extent applicable, that:
Section 3.01 Organization; Powers . Each Loan Party (a) is duly organized, validly existing and (if applicable) in good standing under the laws of the jurisdiction of its organization except for such failure to be in good standing which could not reasonably be expected to have a Material Adverse Effect, (b) has all requisite power and authority to own its property and assets and to carry on its business as now conducted, (c) is qualified to do business in each jurisdiction where such qualification is required, except where the failure to so qualify could not reasonably be expected to have a Material Adverse Effect and (d) has the power and authority to execute, deliver and perform its obligations under each of the Loan Documents and each other agreement or instrument contemplated thereby to which it is or will be a party and, in the case of the Borrower, to borrow and otherwise obtain credit hereunder. Franks International C.V. is duly formed and entered into as a contract governed by the laws of the Netherlands and, in absence of Franks International C.V. having separate legal personality under the laws of the Netherlands, Franks International Management B.V. acting as its sole general partner is the sole party authorized to act on behalf of Franks International C.V. and shall hold title to any and all assets contributed to or acquired on behalf of Franks International C.V.
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Section 3.02 Authorization . The execution, delivery and performance by the Borrower and each Loan Party of each of the Loan Documents to which it is a party, and the borrowings hereunder and the Transactions (a) have been duly authorized by all necessary corporate, stockholder, limited liability company or partnership action required to be obtained by the Borrower and such Loan Parties and (b) will not (i) violate (A) any provision of law, statute, rule or regulation, or of the certificate or articles of incorporation or other constitutive documents or by-laws of the Borrower or any such Loan Party, (B) any applicable order of any court or any rule, regulation or order of any Governmental Authority or (C) any provision of any indenture, lease, agreement or other instrument to which the Borrower or any such Loan Party is a party or by which any of them or any of their respective property is or may be bound, (ii) be in conflict with, result in a breach of or constitute (alone or with notice or lapse of time or both) a default under, give rise to a right of or result in any cancellation or acceleration of any right or obligation (including any payment) or to a loss of a material benefit under any such indenture, lease, agreement or other instrument, where any such conflict, violation, breach or default referred to in clause (i) or (ii) of this clause (b), could reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect, or (c) will not result in the creation or imposition of any Lien upon or with respect to any property or assets now owned or hereafter acquired by the Borrower or any such Loan Party, other than the Liens permitted by Section 6.02.
Section 3.03 Enforceability . This Agreement has been duly executed and delivered by the Borrower and constitutes, and each other Loan Document when executed and delivered by each Loan Party that is party thereto will constitute, a legal, valid and binding obligation of such Loan Party enforceable against each such Loan Party in accordance with its terms, subject to (a) the effects of bankruptcy, insolvency, moratorium, reorganization, fraudulent conveyance or other laws affecting creditors rights generally and (b) general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law).
Section 3.04 Governmental Approvals . No action, consent or approval of, registration or filing with or any other action by any Governmental Authority is or will be required in connection with the Transactions except for such consents, authorizations, filings or other actions that have either (i) been made or obtained and are in full force and effect or (ii) are listed on Schedule 3.04 , and (iii) such actions, consents, approvals, registrations or filings, the failure to be obtained or made which could not reasonably be expected to have a Material Adverse Effect.
Section 3.05 Financial Statements . There has heretofore been furnished to the Lenders the following (and the following representations and warranties are made with respect thereto):
The unaudited pro forma consolidated balance sheet of FINV as of December 31, 2012, prepared giving effect to the Transactions as if the Transactions had occurred on such date. Such pro forma consolidated balance sheet (i) was prepared in good faith based on assumptions that are believed by the Borrower to be reasonable as of the Closing Date (it being understood that such assumptions are based on good faith estimates with respect to certain items and that the actual amounts of such items on the Closing Date is subject to variation), (ii) accurately reflects all adjustments necessary to give effect to the Transactions and (iii) presents fairly, in all material respects, the pro forma financial position of the Borrower and its Subsidiaries as of December 31, 2012, as if the Transactions had occurred on such date.
Section 3.06 No Material Adverse Effect . Since December 31, 2012, there has been no event or occurrence which has resulted in, individually or in the aggregate, any Material Adverse Effect.
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Section 3.07 Title to Properties; Possession Under Leases . (a) The Loan Parties have good and valid title to all of their properties and assets, subject solely to Permitted Liens and except where the failure to have such title could not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect. The Loan Parties have maintained, in all material respects and in accordance with normal industry practice, all of the machinery, equipment, vehicles, facilities and other tangible personal property now owned or leased by the Loan Parties that is necessary to conduct their business as it is now conducted.
(b) Each Loan Party has complied with all obligations under all leases to which it is a party, except where the failure to comply could not have a Material Adverse Effect, and all such leases are in full force and effect, except leases in respect of which the failure to be in full force and effect could not reasonably be expected to have a Material Adverse Effect. The Loan Parties enjoy peaceful and undisturbed possession under all such leases, other than leases in respect of which the failure to enjoy peaceful and undisturbed possession could not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect.
(c) The Loan Parties have good title to or valid leasehold interests (subject to Permitted Liens) in all real property owned by them, except as could not reasonably be expected to have a Material Adverse Effect.
(d) Each Loan Party owns or possesses, or has the right to use or could obtain ownership or possession of or a right to use, on terms not materially adverse to it, all patents, trademarks, service marks, trade names and copyrights necessary for the present conduct of its business, without any known conflict with the rights of others, and free from any burdensome restrictions, except where such conflicts and restrictions could not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect.
(e) Reserved.
(f) Reserved.
(g) Schedule 3.07(g) sets forth as of the Closing Date (i) the name and jurisdiction of incorporation, formation or organization of each Loan Party, (ii) as to each such Subsidiary of Borrower, the percentage of each class of Equity Interests owned by the Borrower or by any such Subsidiary, indicating the ownership thereof, and (iii) the total assets (excluding intangible assets and intercompany investments) of each Loan Party (other than the Borrower) that will execute the Guaranty Agreement as of the Closing Date and the percentage of each such Loan Partys total assets to the Borrowers Consolidated Total Assets.
Section 3.08 Litigation; Compliance with Laws . (a) Except as set forth on Schedule 3.08(a) , there are no actions, suits, investigations or proceedings at law or in equity or by or on behalf of any Governmental Authority or in arbitration now pending against, or, to the knowledge of the Borrower, threatened in writing against or affecting, any Loan Party or any business, property or rights of any such Person (i) as of the Closing Date, that involve any Loan Document or the Transactions or (ii) which individually or in the aggregate could reasonably be expected to have a Material Adverse Effect or which could reasonably be expected, individually or in the aggregate, to materially adversely affect the Transactions. No Loan Party, nor any of its Affiliates, is in violation of any laws relating to terrorism or money laundering, including Executive Order No. 13224 on Terrorist Financing, effective September 23, 2001, and the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001, Public Law 107-56 (signed into law on October 26, 2001) (the U.S.A. PATRIOT Act ).
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(b) (i) No Loan Party nor any of their respective properties or assets is in violation of (nor will the continued operation of their material properties and assets as currently conducted violate) any currently applicable law, rule or regulation or any restriction of record or agreement affecting any material real property nor is any Loan Party in default with respect to any judgment, writ, injunction or decree of any Governmental Authority, where such violation or default could reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect, and (ii) each Loan Party holds all permits, licenses, registrations, certificates, approvals, consents, clearances and other authorizations from any Governmental Authority required under any currently applicable law, rule or regulation for the operation of its business as presently conducted, except as could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.
Section 3.09 Federal Reserve Regulations . (a) Neither the Borrower nor any Loan Party is engaged principally, or as one of its important activities, in the business of extending credit for the purpose of purchasing or carrying Margin Stock.
(b) No part of the proceeds of any Loan will be used, whether directly or indirectly, and whether immediately, incidentally or ultimately, (i) to purchase or carry Margin Stock or to extend credit to others for the purpose of purchasing or carrying Margin Stock or to refund indebtedness originally incurred for such purpose, or (ii) for any purpose that entails a violation of, or that is inconsistent with, the provisions of the Regulations of the Board, including Regulation U or Regulation X.
Section 3.10 Investment Company Act . None of the Loan Parties is an investment company as defined in, or subject to regulation under, the Investment Company Act of 1940, as amended.
Section 3.11 Use of Proceeds . The Borrower will use the proceeds of the Revolving Facility Loans solely for working capital and other general corporate purposes including capital expenditures and to pay fees and expenses incurred in connection with the Transactions.
Section 3.12 Tax Returns . Except as set forth on Schedule 3.12 , each of the Borrower and Borrowers Subsidiaries (i) has timely filed or caused to be timely filed all U.S. federal, state, local and non-U.S. Tax returns required to have been filed by it and each such Tax return is complete and accurate in all material respects and (ii) has timely paid or caused to be timely paid all Taxes due and payable by it and all other Taxes or assessments, except in each case referred to in clauses (i) or (ii) above, (1) if the failure to comply would not cause a Material Adverse Effect or (2) if the Taxes or assessments are being contested in good faith by appropriate proceedings in accordance with Section 5.03 and for which the Borrower or any of Borrowers Subsidiaries (as the case may be) has set aside on its books adequate reserves in accordance with GAAP.
Section 3.13 No Material Misstatements . (a) All written information (other than the Projections, estimates and information of a general economic nature) (the Information ) concerning the Borrower and Borrowers Subsidiaries, the Transactions and any other transactions contemplated hereby prepared by the Borrower or any Loan Party and delivered to the Administrative Agent or to the Administrative Agent on behalf of the Lenders in connection with the Transactions or the other transactions contemplated hereby, when taken as a whole, was true and correct in all material respects, as of the date such Information was furnished to the Administrative Agent or the Lenders, as the case may be, and as of the Closing Date, and did not contain any untrue statement of a material fact as of any such date or omit to state any material fact necessary in order to make the statements contained therein not materially misleading in light of the circumstances under which such statements were made.
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(b) The Projections prepared by or on behalf of the Borrower or any of its representatives and that have been made available to any Lender or the Administrative Agent in connection with the Transactions or the other transactions contemplated hereby (i) have been prepared in good faith based upon assumptions believed by the Borrower to be reasonable as of the date such Projections were furnished to the Lenders (it being recognized by the Administrative Agent and the Lenders, however, that projections as to future events are not to be viewed as facts and that results during the period(s) covered by such projections may differ from the projected results and that such differences may be material and that the Loan Parties make no representation that such projections will be realized), and (ii) as of the Closing Date, have not been modified in any material respect by the Borrower.
Section 3.14 Employee Benefit Plans . (a) Each Plan has been administered in compliance with the applicable provisions of ERISA and the Code (and the regulations and published interpretations thereunder) except for such noncompliance that could not reasonably be expected to have a Material Adverse Effect. No ERISA Event has occurred or is reasonably expected to occur that, when taken together with all other ERISA Events which have occurred or for which liability is reasonably expected to occur, could reasonably be expected to result in a Material Adverse Effect.
Section 3.15 Environmental Matters . Except as set forth on Schedule 3.15 or for matters that could not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect (i) no written notice of a request for information, order, complaint, Environmental Claim or penalty has been received by Borrower or any of Borrowers Subsidiaries, and there are no judicial or administrative actions, suits or proceedings pending or, to the knowledge of the Borrower, threatened against the Borrower or any of Borrowers Subsidiaries which allege a violation of or liability under any Environmental Laws, in each case relating to the Borrower or any of Borrowers Subsidiaries, (ii) Borrower and each of Borrowers Subsidiaries have timely applied for, or obtained, and as applicable maintains in full force and effect, all permits, registrations and licenses to the extent necessary for the conduct of its businesses and operations as currently conducted to comply with all Environmental Laws and is, and, within all surviving periods of applicable statutes of limitation, has been, in compliance with the terms and conditions of such permits, registrations and licenses, and with all Environmental Laws, (iii) none of the Borrower nor any of Borrowers Subsidiaries is conducting or funding or known by Borrower to be responsible under Environmental Law for any investigation, remediation, remedial action or cleanup of any Release or threatened Release of Hazardous Materials arising from any of their operations, (iv) there has been no Release or threatened Release of Hazardous Materials at any property currently or, to the knowledge of the Borrower, formerly owned, operated or leased by the Borrower or any of Borrowers Subsidiaries that would reasonably be expected to give rise to any liability of the Borrower or any of Borrowers Subsidiaries under any Environmental Laws or Environmental Claim against the Borrower or any of Borrowers Subsidiaries, and, to the knowledge of Borrower, no Hazardous Material have been transported for disposal to or Released at any location offsite real properties of Borrower or any of Borrowers Subsidiaries in a manner that would reasonably be expected to give rise to any liability of the Borrower or any of Borrowers Subsidiaries under any Environmental Laws or Environmental Claim against the Borrower or any of Borrowers Subsidiaries, (v) none of the Borrower nor any of Borrowers Subsidiaries has entered into any written agreement or contract to assume, guarantee or indemnify a third party for any Environmental Claims, and (vi) to the knowledge of the Borrower, there are not currently and there have not been any underground storage tanks owned or operated by the Borrower or any of Borrowers Subsidiaries on the Borrowers or any Borrowers Subsidiarys real property. Representations and warranties of the Borrower or any of Borrowers Subsidiaries with respect to environmental matters are limited to those in this Section 3.15.
Section 3.16 Reserved .
Section 3.17 Reserved .
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Section 3.18 Solvency . (a) Immediately after giving effect to the Transactions (i) the fair value of the assets (for the avoidance of doubt, calculated to include goodwill and other intangibles) of the Loan Parties on a consolidated basis, at a fair valuation, will exceed the debts and liabilities, direct, subordinated, contingent or otherwise, of the Loan Parties on a consolidated basis; (ii) the present fair saleable value of the property of the Loan Parties on a consolidated basis will be greater than the amount that will be required to pay the probable liability of the Loan Parties on a consolidated basis, on their debts and other liabilities, direct, subordinated, contingent or otherwise, as such debts and other liabilities become absolute and matured; (iii) the Loan Parties on a consolidated basis will be able to pay their debts and liabilities, direct, subordinated, contingent or otherwise, as such debts and liabilities become absolute and matured; and (iv) the Loan Parties on a consolidated basis will not have unreasonably small capital with which to conduct the businesses in which they are engaged as such businesses are now conducted and are proposed to be conducted following the Closing Date.
(b) The Borrower does not intend to, and does not believe that it nor any of its Subsidiaries will, incur debts beyond its ability to pay such debts as they mature, taking into account the timing and amounts of cash to be received by it or any such Subsidiary and the timing and amounts of cash to be payable on or in respect of its Indebtedness or the Indebtedness of any such Subsidiary.
Section 3.19 Labor Matters . There are no strikes pending or, to the knowledge of any Responsible Officer of the Borrower, threatened against the Borrower or any of Borrowers Subsidiaries that, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect. The hours worked and payments made to employees of the Borrower and Borrowers Subsidiaries have not been in violation in any material respect of the Fair Labor Standards Act or any other applicable law dealing with such matters, except where such violation, either individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect. All material payments due from the Borrower or any of Borrowers Subsidiaries or for which any claim may be made against the Borrower or any of Borrowers Subsidiaries, on account of wages and employee health and welfare insurance and other benefits have been paid or accrued as a liability on the books of the Borrower or such Subsidiary to the extent required by GAAP. Consummation of the Transactions will not give rise to a right of termination or right of renegotiation on the part of any union under any collective bargaining agreement to which the Borrower or any of Borrowers Subsidiaries (or any predecessor) is a party or by which the Borrower or any of Borrowers Subsidiaries (or any predecessor) is bound, other than collective bargaining agreements that, individually or in the aggregate, are not material to the Borrower and Borrowers Subsidiaries, taken as a whole.
Section 3.20 Insurance . Schedule 3.20 sets forth a true, complete and correct description of all material insurance maintained by or on behalf of the Borrower and its Subsidiaries as of the Closing Date. As of such date, such insurance is in full force and effect. The Borrower believes that the insurance maintained by or on behalf of it and the Subsidiaries is adequate.
Section 3.21 Status as Senior Debt . The Obligations shall rank pari passu with any other senior Indebtedness or securities of the Borrower and shall constitute senior indebtedness of the Borrower and its Subsidiaries under and as defined in any documentation documenting any junior indebtedness of the Borrower or the Subsidiaries.
Section 3.22 Material Contracts . Other than as set forth on Schedule 3.22 , as of the Closing Date there are no contracts or agreements to which the Borrower or any of its Subsidiaries is a party, that, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect, or that, if terminated or if a default occurs thereunder, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect.
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Section 3.23 Foreign Corrupt Practices . Neither, the Borrower nor any of its Subsidiaries, nor, to the knowledge of any Responsible Officer of the Borrower, any director, officer or Affiliate of the Borrower or any of its Subsidiaries is aware of or has taken any action, directly or indirectly, that would result in a material violation by such Persons of the FCPA, including without limitation, making use of the mails or any means or instrumentality of interstate commerce corruptly in furtherance of an offer, payment, promise to pay or authorization of the payment of any money, or other property, gift, promise to give, or authorization of the giving of anything of value to any foreign official (as such term is defined in the FCPA) or any foreign political party or official thereof or any candidate for foreign political office, in contravention of the FCPA; and, the Borrower, its Subsidiaries and their respective Affiliates have conducted their business in material compliance with the FCPA and have instituted and maintain policies and procedures designed to ensure, and which are reasonably expected to continue to ensure, continued compliance therewith.
Section 3.24 OFAC . Neither the Borrower nor any of its Subsidiaries, nor any director, officer or Affiliate of the Borrower or any of its Subsidiaries is currently subject to any material U.S. sanctions administered by OFAC, and the Borrower will not directly or indirectly use the proceeds from the Loans or lend, contribute or otherwise make available such proceeds to any Subsidiary, joint venture partner or other Person, for the purpose of financing the activities of any Person currently subject to any U.S. sanctions administered by OFAC.
ARTICLE IV
CONDITIONS TO CREDIT EVENTS
The obligations of the Lenders to make Loans (a Credit Event) are subject to the satisfaction of the following conditions:
Section 4.01 All Credit Events . On the date of each Credit Event (other than a Borrowing on the Closing Date (except with respect to clause (a) below)):
(a) The Administrative Agent shall have received a Borrowing Request as required by Section 2.03.
(b) The representations and warranties set forth in Article III hereof shall be true and correct in all material respects (unless qualified by materiality or Material Adverse Effect, in which case the accuracy of such qualified representations and warranties shall be true and correct in all respects) on and as of the date of such Credit Event.
(c) At the time of and immediately after such Credit Event no Event of Default or Default shall have occurred and be continuing.
Each Credit Event shall be deemed to constitute a representation and warranty by the Borrower on the date of such Credit Event as to the matters specified in paragraphs (b) and (c) of this Section 4.01.
Section 4.02 First Credit Event . On the Closing Date:
(a) The Administrative Agent (or its counsel) shall have received from (i) each party hereto either (a) a counterpart of this Agreement signed on behalf of such party or (b) written evidence satisfactory to the Administrative Agent (which may include telecopy transmission, or electronic transmission of a PDF copy, of a signed signature page of this Agreement) that such party has signed a
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counterpart of this Agreement, (ii) Borrower duly executed Notes payable to the order of each Lender in a principal amount equal to its Revolving Facility Commitment dated as of the Closing Date, and (iii) each party thereto duly executed counterparts (in such number as may be requested by the Administrative Agent) of the Guaranty Agreement.
(b) The Administrative Agent shall have received, on behalf of itself, the Lenders on the Closing Date, favorable written opinions of Vinson & Elkins L.L.P., special U.S. counsel for the Loan Parties, Van Campen Liem, special Dutch counsel for Franks International C.V. and Oilfield Equipment Rental B.V., and special British Virgin Islands counsel for Franks International West Africa (BVI) Limited and Franks International (BVI) Limited, each in form and substance reasonably satisfactory to the Administrative Agent (A) dated the Closing Date, (B) addressed to the Administrative Agent and the Lenders and (C) in form and substance reasonably satisfactory to the Administrative Agent and covering such matters relating to the Loan Documents as the Administrative Agent shall reasonably request, and each Loan Party hereby instructs its counsel to deliver such opinions.
(c) The Administrative Agent shall have received in the case of each Loan Party each of the following:
(i) a copy of the certificate or articles of incorporation, partnership agreement or limited liability agreement, including all amendments thereto, or other relevant constitutional documents under applicable law of each Loan Party, (A) in case of a company organized under the laws of the Netherlands, issued as a true copy by the relevant civil-law notary, with an excerpt from the trade register in the Netherlands, (B) in the case of any other corporation, certified as of a recent date by the Secretary of State (or other similar official) and a certificate as to the good standing (to the extent such concept or a similar concept exists under the laws of such jurisdiction) of each such Loan Party as of a recent date from such Secretary of State (or other similar official) or (C) in the case of a partnership of or limited liability company, certified by the Secretary or Assistant Secretary, or the general partner, managing member or sole member, of each such Loan Party; and
(ii) a certificate of the Secretary, Assistant Secretary, Director, President or similar officer or the general partner, managing member or sole member, of each Loan Party, in each case dated the Closing Date and certifying:
(A) that attached thereto is a true and complete copy of the by-laws (or partnership agreement, memorandum and articles of association, limited liability company agreement or other equivalent governing documents) of such Loan Party as in effect on the Closing Date and at all times since a date prior to the date of the resolutions described in clause (B) below,
(B) that attached thereto is a true and complete copy of resolutions duly adopted by the governing body of such Loan Party (or its managing general partner or managing member) authorizing the execution, delivery and performance of the Loan Documents to which such Person is a party and, in the case of the Borrower, the borrowings hereunder, and that such resolutions have not been modified, rescinded or amended and are in full force and effect on the Closing Date,
(C) that the certificate or articles of incorporation, partnership agreement or limited liability agreement of such Loan Party has not been amended since the date of the last amendment thereto disclosed pursuant to clause (i) above,
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(D) as to the incumbency and specimen signature of each officer or director executing any Loan Document or any other document delivered in connection herewith on behalf of such Loan Party, and
(E) as to the absence of any pending proceeding for the dissolution or liquidation of such Loan Party or, to the knowledge of such Person, threatening the existence of such Loan Party.
(d) The Administrative Agent shall have received a certificate from a Responsible Officer of the Borrower certifying that the Borrower has received all governmental and third party consents, licenses, and approvals necessary for the consummation of the Transactions, all of which shall be in form and substance satisfactory to the Administrative Agent (or a statement that no such governmental or third party consents, licenses or approvals are required).
(e) The Lenders shall have received the financial statements referred to in Section 3.05.
(f) After giving effect to the Transactions, no Loan Party shall have any outstanding preferred equity or Indebtedness other than (i) the Loans and other extensions of credit under this Agreement and (ii) other Indebtedness permitted pursuant to Section 6.01.
(g) The Lenders shall have received a solvency certificate substantially in the form of Exhibit F and signed by the chief financial officer or another Responsible Officer of the Borrower confirming the solvency of the Borrower and the Borrowers Subsidiaries on a consolidated basis after giving effect to the Transactions.
(h) There shall not have occurred since December 31, 2012, any event or condition that has had or would reasonably be expected, either individually or in the aggregate, to have a Material Adverse Effect.
(i) The Administrative Agent shall have received all fees payable thereto or to any Lender on or prior to the Closing Date and, to the extent invoiced, all other amounts due and payable pursuant to the Loan Documents on or prior to the Closing Date, including, to the extent invoiced, reimbursement or payment of all reasonable out-of-pocket expenses required to be reimbursed or paid by the Loan Parties hereunder or under any Loan Document.
(j) The Administrative Agent shall have received a certificate signed by a Responsible Officer of the Borrower as to the matters set forth in clauses (f) and (h) of this Section 4.02.
(k) The Administrative Agent shall have received all documentation and other information required by regulatory authorities with respect to the Borrower and other Loan Parties under applicable know your customer and anti-money laundering rules and regulations, including without limitation the U.S. PATRIOT Act.
(l) The Administrative Agent shall have received evidence of insurance naming the Administrative Agent as additional insured with customary endorsements on Borrowers liability insurance.
(m) The Administrative Agent and each Lender shall have completed their due diligence to their satisfaction.
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(n) The Administrative Agent shall have received evidence (i) that contemporaneously with the this Agreement becoming effective, Franks International N.V. has closed its initial public offering, (ii) that FINV has contributed to Borrower all of FINVs non-U.S. Subsidiaries and Mosing Holdings, Inc. has contributed all of its U.S. Subsidiaries to Franks International C.V. (excluding certain de minimis Subsidiaries) and Franks International C.V. has issued 100% of its general partnership interest to the Borrower as more fully described in FINVs Registration Statement on Form S-1, as amended, and (iii) all of Borrowers Indebtedness described in clauses (a) and (b) of the definition of Indebtedness has been repaid in full.
The Administrative Agent is hereby authorized and directed to declare this Agreement effective when the conditions set forth in Section 4.02 have been satisfied to the reasonable satisfaction of the Administrative Agent or waived as permitted herein. Such declaration shall be final, conclusive and binding upon the Administrative Agent, the Borrower and the Lenders for all purposes.
ARTICLE V
AFFIRMATIVE COVENANTS
The Borrower covenants and agrees with each Lender that so long as this Agreement shall remain in effect and until the Commitments have been terminated and the principal of and interest on each Loan, all Fees and all other expenses or amounts then due and payable under any Loan Document shall have been paid in full, unless the Required Lenders shall otherwise consent in writing, the Borrower will, and will cause each Loan Party (and, to the extent expressly set forth below, other applicable Subsidiaries) to:
Section 5.01 Existence; Businesses and Properties . (a) Do or cause to be done all things necessary to preserve, renew and keep in full force and effect its legal existence and good standing, except as otherwise expressly permitted under Section 6.05, and except for the liquidation or dissolution of any such Subsidiary if the assets of such Subsidiary to the extent they exceed estimated liabilities are acquired by the Borrower or a Wholly Owned Subsidiary of the Borrower in such liquidation or dissolution.
(b) Do or cause to be done all things necessary to (i) in the Borrowers reasonable business judgment obtain, preserve, renew, extend and keep in full force and effect the permits, franchises, authorizations, patents, trademarks, service marks, trade names, copyrights, licenses and rights with respect thereto necessary to the normal conduct of its business, (ii) comply in all material respects with all material applicable laws, rules, regulations and judgments, writs, injunctions, decrees, permits, licenses and orders of any Governmental Authority, whether now in effect or hereafter enacted and (iii) at all times maintain and preserve all property necessary to the normal conduct of its business and keep such property in good repair, working order and condition and from time to time make, or cause to be made, all needful and proper repairs, renewals, additions, improvements and replacements thereto necessary in order that the business carried on in connection therewith, if any, may be properly conducted at all times (in each case except as expressly permitted by this Agreement); in each case in this paragraph (b) except where the failure to do so could not reasonably be expected to have a Material Adverse Effect.
Section 5.02 Insurance . Keep its insurable properties insured at all times by financially sound and reputable insurers in such amounts as shall be customary for similar businesses and maintain such other reasonable insurance (including, to the extent consistent with past practices, self-insurance), of such types, to such extent and against such risks, as is customary with companies in the same or similar businesses and maintain such other insurance as may be required by law or any other Loan Document and cause Administrative Agent to be named as an additional insured on all liability policies.
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Section 5.03 Taxes; Payment of Obligations . Pay and discharge promptly when due all material Taxes, assessments and governmental charges or levies imposed upon it or upon its income or profits or in respect of its property, before the same shall become delinquent or in default, as well as all lawful claims for labor, materials and supplies or otherwise that, if unpaid, might give rise to a Lien upon such properties or any part thereof; provided, however, that such payment and discharge shall not be required with respect to any such Tax, assessment, charge, levy or claim to the extent that (i) the validity or amount thereof shall be contested in good faith by appropriate proceedings, and the Borrower or the affected Subsidiary of the Borrower, as applicable, shall have set aside on its books reserves in accordance with GAAP with respect thereto, (ii) the aggregate amount of such Taxes, assessments, charges, levies or claims does not exceed U.S. $10,000,000, or (iii) if the failure to pay, discharge or otherwise satisfy such Taxes, assessments, charges, levies or claims obligation could not reasonably be expected to have a Material Adverse Effect. Pay, discharge or otherwise satisfy at or before maturity or before they become delinquent, as the case may be, the Obligations and all its other material obligations of whatever nature, except where the amount or validity thereof is currently being contested in good faith by appropriate proceedings and reserves in conformity with GAAP with respect thereto have been provided on the books of the Borrower or the affected Subsidiary of the Borrower or if the failure to pay, discharge or otherwise satisfy such obligation could not reasonably be expected to have a Material Adverse Effect.
Section 5.04 Financial Statements, Reports, Etc. . Furnish to the Administrative Agent (which will promptly furnish such information to the Lenders):
(a) as soon as available, but in any event within one hundred twenty (120) days after the end of each fiscal year of FINV, a consolidated balance sheet and related statements of operations, cash flows and owners equity showing the financial position of FINV and its Subsidiaries (including the Borrower) as of the close of such fiscal year and the consolidated results of their operations during such year and setting forth in comparative form the corresponding figures for the prior fiscal year, all audited by PricewaterhouseCoopers LLP or other independent accountants of recognized international standing reasonably acceptable to the Administrative Agent and accompanied by an opinion of such accountants (which shall not be qualified in any material respect) to the effect that such consolidated financial statements fairly present, in all material respects, the financial position and results of operations of FINV and its Subsidiaries on a consolidated basis in accordance with GAAP;
(b) as soon as available, but in any event within one forty-five (45) days after the end of each fiscal quarter of FINV, a consolidated balance sheet and related statements of operations and cash flows showing the financial position of FINV and its Subsidiaries (including the Borrower) as of the close of such fiscal quarter and the consolidated results of their operations during such fiscal quarter and the then-elapsed portion of the fiscal year and setting forth in comparative form the corresponding figures for the corresponding periods of the prior fiscal year, all certified by a Financial Officer of the Borrower, as fairly presenting, in all material respects, the financial position and results of operations of FINV and its Subsidiaries on a consolidated basis in accordance with GAAP (subject to normal year-end audit adjustments and the absence of footnotes);
(c) (x) concurrently with any delivery of financial statements under (a) or (b) above, a certificate of a Financial Officer of the Borrower (i) certifying that no Event of Default or Default has occurred or, if such an Event of Default or Default has occurred, specifying the nature and extent thereof and any corrective action taken or proposed to be taken with respect thereto and (ii) setting forth a computation of the Financial Performance Covenants in detail reasonably satisfactory to the Administrative Agent and (y) concurrently with any delivery of financial statements under (a) above, a certificate of its independent accounting firm stating whether they obtained knowledge during the course of their examination of such statements of any Default or Event of Default under Section 6.10 or 6.11 (which certificate may be limited to accounting matters and disclaims responsibility for legal interpretations);
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(d) promptly after the same become publicly available, copies of all periodic and other available reports, proxy statements and, to the extent requested by the Administrative Agent, other materials filed by the Borrower or any of its Subsidiaries with the SEC, or distributed to its equityholders generally, if and as applicable;
(e) reserved;
(f) promptly, a copy of all reports submitted to the governing body (or any committee thereof) of the Borrower or any of its Subsidiaries in connection with any material interim or special audit made by independent accountants of the books of the Borrower or any of its Subsidiaries;
(g) promptly, from time to time, such other information regarding the operations, business affairs and financial condition of the Borrower or any of its Subsidiaries, or compliance with the terms of any Loan Document, or such consolidating financial statements, as in each case the Administrative Agent may reasonably request (for itself or on behalf of any Lender);
(h) promptly upon request by the Administrative Agent, copies of: (i) each Schedule B (Actuarial Information) to the annual report (Form 5500 Series) filed with the Internal Revenue Service with respect to a Plan; (ii) the most recent actuarial valuation report for any Plan; (iii) all notices received from a Multiemployer Plan sponsor or a Plan sponsor or any governmental agency concerning an ERISA Event; and (iv) such other documents or governmental reports or filings relating to any Plan or Multiemployer Plan as the Administrative Agent shall reasonably request; and
(i) no later than 90 days following the first day of each fiscal year of the Borrower, a budget for the Borrower and its consolidated Subsidiaries.
Documents required to be delivered pursuant this Section 5.04 may be delivered electronically and, in the case of Sections 5.04(d) shall be deemed to have been delivered if such documents, or one or more annual, quarterly or other reports or filings containing such documents, (i) shall have been posted or provided a link to on FINVs website on the Internet at the website at http://www.franksinternational.com/ , (ii) shall be available on the website of the SEC at http://www.sec.gov or (iii) shall have been posted on FINVs behalf on SyndTrak or another website, if any, to which each Lender and the Administrative Agent have access (whether a commercial, third-party website or whether sponsored by the Administrative Agent).
Section 5.05 Litigation and Other Notices . Furnish to the Administrative Agent written notice of the following promptly after any Responsible Officer of the Borrower or any Subsidiary obtains actual knowledge thereof:
(a) any Event of Default or Default, specifying the nature and extent thereof and the corrective action (if any) proposed to be taken with respect thereto;
(b) the filing or commencement of, or any written notice of intention of any Person to file or commence, any action, suit or proceeding, whether at law or in equity or by or before any Governmental Authority or in arbitration, against the Borrower or any of its Subsidiaries which, if adversely determined, could reasonably be expected to have a Material Adverse Effect;
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(c) any other development specific to the Borrower or any of its Subsidiaries that has had, or could reasonably be expected to have, a Material Adverse Effect; and
(d) the occurrence of any ERISA Event that, together with all other ERISA Events that have occurred, could reasonably be expected to have a Material Adverse Effect.
Section 5.06 Compliance with Laws . Comply with all laws, rules, regulations and orders of any Governmental Authority applicable to it or its property (owned or leased), including ERISA, except where the failure to do so, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect; provided that this Section 5.06 shall not apply to Environmental Laws, which are the subject of Section 5.09, or to laws related to Taxes, which are the subject of Section 5.03.
Section 5.07 Maintaining Records; Access to Properties and Inspections . Maintain all financial records in accordance with GAAP and permit any Persons designated by the Administrative Agent or, upon the occurrence and during the continuance of an Event of Default, any Lender to visit and inspect the financial records and the properties of the Borrower or any of its Subsidiaries at reasonable times, upon reasonable prior notice, and as often as reasonably requested and to make extracts from and copies of such financial records, and permit any Persons designated by the Administrative Agent or, upon the occurrence and during the continuance of an Event of Default, any Lender upon reasonable prior notice and at such Lenders expense to discuss the affairs, finances and condition of the Borrower or any of the Subsidiaries with the officers thereof, managing member or sole member thereof, and independent accountants therefor (subject to reasonable requirements of confidentiality, including requirements imposed by law or by contract); provided that, during any calendar year absent the occurrence and continuation of an Event of Default, only one (1) visit by the Administrative Agent shall be at the Borrowers expense; provided , further , that when an Event of Default exists, the Administrative Agent or any Lender may do any of the foregoing at the expense of the Borrower.
Section 5.08 Use of Proceeds . Use the proceeds of the Loans solely for the purposes described in Section 3.11.
Section 5.09 Compliance with Environmental Laws . Comply, cause all of the Borrowers Subsidiaries to comply with all Environmental Laws applicable to its business, operations and properties; apply for and, as applicable, obtain and maintain in full force and effect all material authorizations, registrations, licenses and permits required pursuant to Environmental Law for its business, operations and properties; and perform any investigation, remedial action or cleanup required as a result of the Release of any Hazardous Materials as required of Borrower or any of Borrowers Subsidiaries pursuant to Environmental Laws except that Borrower and all of the Borrowers Subsidiaries are not required to perform such investigation, remedial action or cleanup to the extent that Borrower reasonably believes in good faith that one or more Persons other than Borrower or Borrowers Subsidiaries is responsible for such performance and Borrower or any of the Borrowers Subsidiaries pursue actions in a timely manner to compel such Persons to conduct such investigation, remedial action or cleanup; and further, except, in each case with respect to this Section 5.09, to the extent the failure to do so could not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect.
Section 5.10 Further Assurances; Additional Loan Parties . (a) Execute any and all further documents, financing statements, agreements and instruments, and take all such further actions, that may be required under any applicable law, or that the Administrative Agent may reasonably request, all at the expense of the applicable Loan Parties, and provide to the Administrative Agent, from time to time upon reasonable request, evidence reasonably satisfactory to the Administrative Agent as to the compliance of the Loan Parties with the requirements of the Loan Documents.
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(b) At all times the percentage of Borrowers Consolidated Total Assets owned by Loan Parties shall be at least 75% of Borrowers Consolidated Total Assets. If Borrower forms or acquires any additional direct or indirect Material Subsidiary, within 10 Business Days after the date of formation or acquisition of such Subsidiary, Borrower will cause such Subsidiary to execute a joinder to the Guaranty Agreement and become a Loan Party. If through growth in a Subsidiarys business, or as a result of any conveyance, purchase, assignment, transfer or other acquisition of assets, or otherwise, a Subsidiary which was not previously a Loan Party becomes a Material Subsidiary, Borrower will cause such Subsidiary to execute a joinder to the Guaranty Agreement and become a Loan Party.
(c) In the case of any Loan Party, (i) furnish to the Administrative Agent prompt written notice of any change (A) in such Loan Partys corporate or organization name, or (B) in such Loan Partys identity or organizational structure.
Section 5.11 Fiscal Year . Cause its fiscal year to end on December 31, unless otherwise required by the Code.
ARTICLE VI
NEGATIVE COVENANTS
The Borrower covenants and agrees with each Lender that so long as this Agreement shall remain in effect and until the Commitments have been terminated and the principal of and interest on each Loan and all Fees and all other expenses or amounts then due and payable under any Loan Document have been paid in full, unless the Required Lenders shall otherwise consent in writing, the Borrower will not, and will not cause or permit any Loan Party to:
Section 6.01 Indebtedness . Incur, create, assume or permit to exist any Indebtedness, except:
(a) Indebtedness existing on the Closing Date and set forth on Schedule 6.01 (excluding Indebtedness under clause (b) of this Section 6.01) and any Permitted Refinancing Indebtedness incurred to Refinance such Indebtedness (other than intercompany Indebtedness Refinanced with Indebtedness owed to a Person not affiliated with the Borrower or any Subsidiary of the Borrower);
(b) Indebtedness created hereunder and under the other Loan Documents;
(c) Indebtedness of the Loan Parties pursuant to Swap Agreements permitted by Section 6.12;
(d) Indebtedness owed to (including obligations in respect of letters of credit or bank guarantees or similar instruments for the benefit of) any Person providing workers compensation, health, disability or other employee benefits or property, casualty or liability insurance to a Loan Party pursuant to reimbursement or indemnification obligations to such Person; provided that upon the incurrence of Indebtedness with respect to reimbursement obligations regarding workers compensation claims, such obligations are reimbursed not later than 30 days following such incurrence;
(e) Indebtedness of a Loan Party owing to the Borrower or any Subsidiary of the Borrower to the extent permitted by Section 6.04, provided that Indebtedness of any Loan Party to any Subsidiary that is not a Loan Party in excess of $50,000,000 in the aggregate (the Subordinated Intercompany Debt ) shall be subordinated to the Obligations on terms reasonably satisfactory to the Administrative Agent;
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(f) Indebtedness in respect of performance bonds, warranty bonds, bid bonds, appeal bonds, surety bonds, labor bonds and completion or performance guarantees and similar obligations, in each case provided in the ordinary course of business, including those incurred to secure health, safety and environmental obligations in the ordinary course of business and Indebtedness arising out of advances on exports, advances on imports, customer prepayments and similar transactions in the ordinary course of business and consistent with past practice;
(g) Indebtedness arising from the honoring by a bank or other financial institution of a check, draft or similar instrument drawn against insufficient funds in the ordinary course of business or other cash management services in the ordinary course of business, provided that (x) such Indebtedness (other than credit or purchase cards) is extinguished within five Business Days of its incurrence and (y) such Indebtedness in respect of credit or purchase cards is extinguished within 60 days from its incurrence;
(h) (i) Indebtedness of a Subsidiary acquired after the Closing Date or a Person merged into, amalgamated or consolidated with a Loan Party after the Closing Date and Indebtedness assumed in connection with the acquisition of assets, which Indebtedness in each case, exists at the time of such acquisition, merger, amalgamation or consolidation and is not created in contemplation of such event and where such acquisition, merger, amalgamation or consolidation is permitted by this Agreement and (ii) any Permitted Refinancing Indebtedness incurred to Refinance such Indebtedness, provided that, solely with respect to a Person being merged into, amalgamated or consolidated with a Loan Party and Indebtedness being assumed in connection with the acquisition of assets, the aggregate principal amount of such Indebtedness at the time of, and after giving effect to, such acquisition, merger, amalgamation or consolidation, such assumption or such incurrence, as applicable would not exceed U.S. $30,000,000;
(i) Capital Lease Obligations and purchase money Indebtedness incurred by any Loan Party prior to or within 90 days after the acquisition, lease or improvement of the respective asset permitted under this Agreement in order to finance such acquisition, lease or improvement, and any Permitted Refinancing Indebtedness in respect thereof, in an aggregate principal amount that at the time of, and after giving effect to, the incurrence thereof would not exceed U.S. $25,000,000;
(j) Capital Lease Obligations incurred by any Loan Party in respect of any Sale and Lease-Back Transaction that is permitted under Section 6.03;
(k) other unsecured Indebtedness, in an aggregate principal amount at any time outstanding pursuant to this Section 6.01(k) not to exceed U.S. $50,000,000;
(l) Guarantees (i) by any Loan Party of any Indebtedness of any other Loan Party or any other Subsidiary of the Borrower and (ii) by any Subsidiary that is not a Loan Party of Indebtedness of the Borrower or any of its Subsidiaries; provided that Guarantees by any Loan Party under this Section 6.01(l) of any other Indebtedness of a Person that is subordinated to other Indebtedness of such Person shall be expressly subordinated to the Obligations on terms consistent with those used, or to be used, for Subordinated Intercompany Debt;
(m) Indebtedness arising from agreements of any Loan Party providing for indemnification, adjustment of purchase price, earn outs or similar obligations, in each case, incurred or assumed in connection with the disposition of any business, assets or a Subsidiary of Borrower, other than Guarantees of Indebtedness incurred by any Person acquiring all or any portion of such business, assets or a Subsidiary of the Borrower for the purpose of financing such acquisition;
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(n) Indebtedness supported by a letter of credit issued pursuant to the Multi-Year Credit Facility, in a principal amount not in excess of the stated amount of such letter of credit;
(o) Indebtedness consisting of Permitted Senior Unsecured Debt in an aggregate principal amount not to exceed U.S. $200,000,000;
(p) Indebtedness of the Loan Parties pursuant to the Multi-Year Credit Facility and any Permitted Refinancing Indebtedness incurred to Refinance such Indebtedness;
(q) (i) Indebtedness incurred and/or assumed in connection with Section 6.04(j); provided that the aggregate amount of such Indebtedness outstanding pursuant to this Section 6.01(q) shall not exceed U.S. $100,000,000 and (ii) any Permitted Refinancing Indebtedness incurred to Refinance such Indebtedness;
(r) Indebtedness consisting of insurance premium financing arrangements; and
(s) all premium (if any), interest (including post-petition interest), fees, expenses, charges and additional or contingent interest on obligations described in paragraphs (a) through (r) above.
Section 6.02 Liens . Create, incur, assume or permit to exist any Lien on any property or assets (including stock or other securities of any Person, including of any Subsidiaries) at the time owned by it or on any income or revenues or rights in respect of any thereof, except (without duplication):
(a) Liens on property or assets of the Loan Parties existing on the Closing Date and set forth on Schedule 6.02(a) ; provided that such Liens shall secure only those obligations that they secure on the Closing Date (and extensions, renewals and refinancings of such obligations permitted by Section 6.01(a)) and shall not subsequently apply to any other property or assets of any Loan Party;
(b) Liens on property or assets of the Loan Parties securing Indebtedness owing under the Multi-Year Credit Facility (and extensions, renewals and refinancings of such Indebtedness permitted by Section 6.01(p)); provided such Liens secure the Obligations on a pari passu basis;
(c) any Lien on any property or asset of a Loan Party securing Indebtedness or Permitted Refinancing Indebtedness permitted by Section 6.01(h), provided that (i) such Lien does not apply to any other property or assets of the Loan Party not securing such Indebtedness at the date of the acquisition of such property or asset (other than after-acquired property subjected to a Lien securing Indebtedness and other obligations incurred prior to such date and which Indebtedness and other obligations are permitted hereunder that require a pledge of after-acquired property, it being understood that such requirement shall not be permitted to apply to any property to which such requirement would not have applied but for such acquisition), (ii) such Lien is not created in contemplation of or in connection with such acquisition and (iii) in the case of a Lien securing Permitted Refinancing Indebtedness, such Lien is permitted in accordance with clause (e) of the definition of the term Permitted Refinancing Indebtedness;
(d) Liens for Taxes, assessments or other governmental charges or levies not yet delinquent or that are being contested in compliance with Section 5.03;
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(e) Liens imposed by law (including, without limitation, Liens in favor of customers for equipment under order or in respect of advances paid in connection therewith) such as landlords, carriers, warehousemens, mechanics, materialmens, repairmens, construction or other like Liens arising in the ordinary course of business and securing obligations that are not overdue by more than 45 days or that are being contested in good faith by appropriate proceedings and in respect of which, if applicable, the applicable Loan Party shall have set aside on its books reserves in accordance with GAAP;
(f) (i) pledges and deposits made in the ordinary course of business in compliance with the Federal Employers Liability Act or any other workers compensation, unemployment insurance and other social security laws or regulations under U.S. or foreign law and deposits securing liability to insurance carriers under insurance or self-insurance arrangements in respect of such obligations and (ii) pledges and deposits securing liability for reimbursement or indemnification obligations of (including obligations in respect of letters of credit or bank guarantees for the benefit of) insurance carriers providing property, casualty or liability insurance to any Loan Party;
(g) deposits to secure the performance of bids, trade contracts (other than for Indebtedness), leases (other than Capital Lease Obligations), statutory obligations, surety and appeal bonds, costs of litigation where required by law, performance and return of money bonds, warranty bonds, bids, leases, government contracts, trade contracts, completion or performance guarantees and other obligations of a like nature incurred in the ordinary course of business, including those incurred to secure health, safety and environmental obligations in the ordinary course of business;
(h) zoning restrictions, by-laws and other ordinances of Governmental Authorities, easements, trackage rights, leases (other than Capital Lease Obligations), licenses, permits, special assessments, development agreements, deferred services agreements, restrictive covenants, owners association encumbrances, rights-of-way, restrictions on use of real property and other similar encumbrances that do not render title unmarketable and that, in the aggregate, do not interfere in any material respect with the ordinary conduct of the business of any Loan Party or would not result in a Material Adverse Effect;
(i) purchase money security interests in equipment or other property or improvements thereto acquired (or, in the case of improvements, constructed) by a Loan Party (including the interests of vendors and lessors under conditional sale and title retention agreements); provided that (i) such security interests secure Indebtedness permitted by Section 6.01(i) (including any Permitted Refinancing Indebtedness in respect thereof), (ii) such security interests are incurred, and the Indebtedness secured thereby is created, within 90 days after such acquisition (or construction), (iii) the Indebtedness secured thereby does not exceed 100% of the cost of such equipment or other property or improvements at the time of such acquisition (or construction), including transaction costs incurred by the Loan Party in connection with such acquisition (or construction) and (iv) such security interests do not apply to any other property or assets of the Loan Party (other than to accessions to such equipment or other property or improvements); provided further that individual financings of equipment provided by a single lender may be cross-collateralized to other financings of equipment provided solely by such lender;
(j) Liens arising out of capitalized lease transactions permitted under Section 6.03, so long as such Liens attach only to the property sold and being leased in such transaction and any accessions thereto or proceeds thereof and related property;
(k) Liens securing judgments that do not constitute an Event of Default under Section 7.01(j);
(l) reserved;
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(m) any interest or title of, or Liens created by, a lessor under any leases or subleases entered into by any Loan Party, as tenant, in the ordinary course of business;
(n) Liens that are contractual rights of set-off (i) relating to the establishment of depository relations with banks or securities intermediaries not given in connection with the issuance of Indebtedness, (ii) relating to pooled deposit or sweep accounts of any Loan Party to permit satisfaction of overdraft or similar obligations incurred in the ordinary course of business of such Loan Party or (iii) relating to purchase orders and other agreements entered into with customers of any Loan Party in the ordinary course of business;
(o) Liens arising solely by virtue of any statutory or common law provision relating to security intermediaries or bankers liens, rights of set-off or similar rights;
(p) reserved;
(q) licenses of intellectual property granted in the ordinary course of business;
(r) Liens in favor of customs and revenue authorities arising as a matter of law to secure payment of customs duties in connection with the importation of goods, machinery or other equipment;
(s) Liens solely on any cash earnest money deposits made by a Loan Party in connection with any letter of intent or purchase agreement permitted hereunder;
(t) Liens arising from precautionary UCC financing statement filings regarding operating leases entered into by a Loan Party in the ordinary course of business;
(u) Liens securing insurance premium financing arrangements, provided that such Lien is limited to the applicable insurance contracts;
(v) Liens given to a public utility or any Governmental Authority when required by such utility or Governmental Authority in connection with the operations of a Loan Party;
(w) Liens in connection with subdivision agreements, site plan control agreements, development agreements, facilities sharing agreements, cost sharing agreements and other similar agreements in connection with the use of real property;
(x) Liens in favor of any tenant, occupant or licensee under any lease, occupancy agreement or license with a Loan Party;
(y) Liens restricting or prohibiting access to or from lands abutting controlled access highways or covenants affecting the use to which lands may be put;
(z) Liens incurred or pledges or deposits made in favor of a Governmental Authority to secure the performance of a Loan Party under any Environmental Law to which any assets of such Person are subject;
(aa) Liens consisting of minor irregularities in title, boundaries, or other minor survey defects, easements, leases, restrictions, servitudes, licenses, permits, reservations, exceptions, zoning restrictions, rights-of-way, conditions, covenants, mineral or royalty rights or reservations or oil, gas and mineral leases and rights of others in any property of a Loan Party, including rights of eminent domain
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(including those for streets, roads, bridges, railroads, electric transmission and distribution lines, telegraph and telephone lines, flood control, air rights, water rights, rights of others with respect to navigable waters, sewage and drainage rights) that exist as of the Closing Date or at the time the affected property is acquired, or are granted by a Loan Party in the ordinary course of business and other similar charges or encumbrances which do not secure the payment of Indebtedness and otherwise do not materially interfere with the occupation, use and enjoyment by a Loan Party of any property in the normal course of business or materially impair the value thereof;
(bb) Liens upon specific items of inventory or other goods and proceeds of the Borrower or any of Borrowers Subsidiaries securing such Persons obligations in respect of bankers acceptances issued or created for the account of such Person to facilitate the purchase, shipment or storage of such inventory or other goods;
(cc) licenses granted in the ordinary course of business and leases of property of the Loan Parties that are not material to the business and operations of the Loan Parties; and
(dd) Liens on existing and future cash, U.S. government securities, and letters of credit securing or supporting Swap Agreements.
Section 6.03 Sale and Lease-back Transactions . Enter into any arrangement, directly or indirectly, with any Person whereby it shall sell or transfer any property, real or personal, used or useful in its business, whether now owned or hereafter acquired, and thereafter rent or lease such property or other property that it intends to use for substantially the same purpose or purposes as the property being sold or transferred (a Sale and Lease-Back Transaction ), provided that a Sale and Lease-Back Transaction shall be permitted so long as at the time the lease in connection therewith is entered into, and after giving effect to the entering into of such lease, the Remaining Present Value of such lease (together with the Remaining Present Value of outstanding leases previously entered into under this Section 6.03) would not exceed U.S. $25,000,000.
Section 6.04 Investments, Loans and Advances . Purchase, hold or acquire (including pursuant to any merger or amalgamation with a Person that is not a Subsidiary immediately prior to such merger) any Equity Interests, evidences of Indebtedness or other securities of, make or permit to exist any loans or advances (other than intercompany current liabilities incurred in the ordinary course of business in connection with the cash management operations of the Borrower and its Subsidiaries, which cash management operations shall not extend to any other Person) to or Guarantees of the obligations of, or make or permit to exist any investment or any other interest (each, an Investment ), in any other Person, except:
(a) Investments (including, but not limited to, Investments in Equity Interests, intercompany loans, and Guarantees of Indebtedness otherwise expressly permitted hereunder) by (i) Loan Parties in Subsidiaries that are not Loan Parties in an aggregate amount (valued at the time of the making thereof and without giving effect to any write-downs or write-offs thereof) not to exceed an amount equal to the sum of, without duplication, U.S. $50,000,000 plus any return of capital actually received by the respective investors in respect of investments previously made by them pursuant to this clause 6.04(a)(i) plus, an amount equal to the fair market value of any assets or property that is contributed or transferred from any Subsidiary that is not a Loan Party to any Loan Party from and after the Closing Date and (ii) Loan Parties in other Loan Parties;
(b) Permitted Investments and Investments that were Permitted Investments when made;
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(c) Investments arising out of the receipt by a Loan Party of noncash consideration for the sale of assets permitted under Section 6.05;
(d) (i) loans and advances to employees of the Borrower or any of its Subsidiaries not to exceed U.S. $10,000,000 in the aggregate at any time outstanding (calculated without regard to write-downs or write-offs thereof) and (ii) advances of payroll payments and expenses to employees of the Borrower or any of its Subsidiaries;
(e) accounts receivable arising and trade credit granted in the ordinary course of business and any securities received in satisfaction or partial satisfaction thereof from financially troubled account debtors to the extent reasonably necessary in order to prevent or limit loss and any prepayments and other credits to suppliers made in the ordinary course of business;
(f) Swap Agreements permitted pursuant to Section 6.12;
(g) Investments existing on the Closing Date and set forth on Schedule 6.04 ;
(h) Investments resulting from pledges and deposits referred to in Section 6.02(f), (g) and (dd);
(i) so long as immediately before and after giving effect to such Investment no Default or Event of Default has occurred and is continuing, other Investments by the Loan Parties in an aggregate amount at any time outstanding (valued at the time of the making thereof, and without giving effect to any write-downs or write-offs thereof or any increases in value thereof) not to exceed the greater of U.S. $100,000,000 and 5.0% of Consolidated Total Assets;
(j) Investments constituting Permitted Business Acquisitions, so long as any Person acquired in connection with such Permitted Business Acquisitions and each of such Persons Subsidiaries guarantees the Obligations to the extent required by Section 5.10;
(k) additional Investments to the extent made with proceeds of Equity Interests of the Borrower or capital contributions;
(l) Investments (including, but not limited to, Investments in Equity Interests, intercompany loans, and Guarantees of Indebtedness otherwise expressly permitted hereunder) after the Closing Date by Subsidiaries that are not Loan Parties in any Loan Party or other Subsidiaries;
(m) reserved;
(n) Investments received in connection with the bankruptcy or reorganization of, or settlement of delinquent accounts and disputes with or judgments against, customers and suppliers, in each case in the ordinary course of business;
(o) Investments of a Subsidiary of the Borrower acquired after the Closing Date or of a corporation merged or amalgamated or consolidated into the Borrower or merged or amalgamated into or consolidated with a Subsidiary of the Borrower in accordance with Section 6.05 after the Closing Date to the extent that such Investments were not made in contemplation of or in connection with such acquisition, merger or consolidation and were in existence on the date of such acquisition, merger, amalgamation or consolidation; and
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(p) Guarantees by a Loan Party of operating leases (other than Capital Lease Obligations) or of other obligations that do not constitute Indebtedness, in each case entered into by any Subsidiary of the Borrower in the ordinary course of business.
Section 6.05 Mergers, Consolidations, Sales of Assets and Acquisitions . Merge into, amalgamate with or consolidate with any other Person, or permit any other Person to merge into, amalgamate with or consolidate with it, or sell, transfer, lease or otherwise dispose of (in one transaction or in a series of transactions) all or any part of its assets (whether now owned or hereafter acquired), or issue, sell, transfer or otherwise dispose of any Equity Interests of a Loan Party or preferred equity interests of a Loan Party, or purchase, lease or otherwise acquire (in one transaction or a series of transactions) all or any substantial part of the assets of any other Person, except that this Section shall not prohibit:
(a) (i) the purchase and sale of inventory, supplies, materials and equipment and the purchase and sale of rights or licenses or leases of intellectual property, in each case in the ordinary course of business by the Loan Party, (ii) the sale of any other asset in the ordinary course of business by a Loan Party, (iii) the sale of surplus, obsolete or worn out equipment or other property in the ordinary course of business by a Loan Party or (iv) the sale of Permitted Investments in the ordinary course of business;
(b) if at the time thereof and immediately after giving effect thereto no Event of Default shall have occurred and be continuing, (i) the merger or consolidation of any Subsidiary of the Borrower into the Borrower in a transaction in which the Borrower is the surviving entity, (ii) the merger or consolidation of any Subsidiary of the Borrower into or with any Loan Party in a transaction in which the surviving or resulting entity is a Loan Party, (iii) the merger, amalgamation or consolidation of any Subsidiary of the Borrower that is not a Loan Party into or with any other Subsidiary of the Borrower that is not a Loan Party, or (iv) the liquidation, winding up, or dissolution of any Subsidiary of the Borrower or (v) the change in form of entity of the Borrower or any Subsidiary if the Borrower determines in good faith that such change in form is in the best interests of the Borrower and is not materially disadvantageous to the Lenders taken as a whole; for the avoidance of doubt it is agreed that [Franks International Trinidad Unlimited], [Franks International Ecuador, C.A.] and [Franks International Venezuela 2] may change their form of entity after the Closing Date;
(c) sales, transfers, leases or other dispositions to the Borrower or a Subsidiary of the Borrower (upon voluntary liquidation or otherwise); provided that if as a result thereof any Subsidiary not previously a Material Subsidiary becomes a Material Subsidiary, such Subsidiary complies with the provisions of Section 5.10(b);
(d) Sale and Lease-Back Transactions permitted by Section 6.03;
(e) Investments permitted by Section 6.04, Liens permitted by Section 6.02 and dividends permitted by Section 6.06;
(f) the sale of defaulted receivables in the ordinary course of business and not as part of an accounts receivables financing transaction;
(g) sales, transfers, leases or other dispositions of assets not otherwise permitted by this Section 6.05; provided that the aggregate gross proceeds (including noncash proceeds) of any or all assets sold, transferred, leased or otherwise disposed of in reliance upon this paragraph (g) shall not exceed, in any fiscal year of the Borrower, 10.0% of Consolidated Total Assets as of the end of the immediately preceding fiscal year; and provided further that after giving effect thereto, no Default or Event of Default shall have occurred;
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(h) any merger or consolidation in connection with a Permitted Business Acquisition, provided that following any such merger or consolidation (i) involving the Borrower the Borrower is the surviving corporation and (ii) involving a Subsidiary, the surviving or resulting entity shall be a Subsidiary;
(i) licensing and cross-licensing arrangements involving any technology or other intellectual property of any Loan Party in the ordinary course of business; and
(j) abandonment, cancellation or disposition of any intellectual property of any Loan Party in the ordinary course of business.
Notwithstanding anything to the contrary contained in Section 6.05 above, (i) the Borrower may, so long as no Event of Default shall have occurred and be continuing or would result therefrom, sell, grant or otherwise issue Equity Interests to members of management of the Borrower or any of the Subsidiaries of the Borrower pursuant to stock option, stock ownership, stock incentive or similar plans, (ii) no sale, transfer or other disposition of assets shall be permitted by this Section 6.05 (other than sales, transfers, leases or other dispositions to the Borrower or any of its Subsidiaries pursuant to paragraph (c) hereof) unless such disposition is for fair market value, (iii) no sale, transfer or other disposition of assets shall be permitted by paragraph (a) or (d) of this Section 6.05 unless such disposition is for at least 51% cash consideration and (iv) no sale, transfer or other disposition of assets in excess of U.S. $10,000,000 shall be permitted by paragraph (g) of this Section 6.05 unless such disposition is for at least 51% cash consideration; provided that for purposes of clauses (iii) and (iv), the amount of any secured Indebtedness or other Indebtedness of a Subsidiary of the Borrower that is not a Loan Party (as shown on the Borrowers or such Subsidiarys most recent balance sheet or in the notes thereto) that is assumed by the transferee of any such assets shall be deemed to be cash.
Section 6.06 Dividends and Distributions . Declare or pay, directly or indirectly, any dividend or make any other distribution (by reduction of capital or otherwise), whether in cash, property, securities or a combination thereof, with respect to any of its Equity Interests (other than dividends and distributions on Equity Interests payable solely by the issuance of additional shares of Equity Interests of the Person paying such dividends or distributions) or directly or indirectly redeem, purchase, retire or otherwise acquire for value any shares of any class of its Equity Interests or set aside any amount for any such purpose; provided, however, that:
(a) the Borrower and any Subsidiary of the Borrower may declare and pay dividends to, repurchase its Equity Interests from, or make other distributions to, the Borrower or any Subsidiary (or, in the case of Subsidiaries that are not Wholly Owned Subsidiaries of the Borrower, to the Borrower or any Subsidiary that is a direct or indirect parent of such Subsidiary and to each other owner of Equity Interests of such Subsidiary on a pro rata basis (or more favorable basis from the perspective of the Borrower or such Subsidiary) based on their relative ownership interests);
(b) the Borrower and each of the Subsidiaries may repurchase, redeem or otherwise acquire or retire to finance any such repurchase, redemption or other acquisition or retirement for value any Equity Interests of the Borrower or any of the Subsidiaries held by any current or former officer, director, consultant, or employee (or persons holding similar positions or performing similar functions for non corporate entities) of the Borrower or any Subsidiary of the Borrower or, to the extent such Equity Interests were issued as compensation for services rendered on behalf of the Borrower or any Subsidiary of the Borrower, pursuant to any equity subscription agreement, stock option agreement, shareholders,
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members or partnership agreement or similar agreement, plan or arrangement or any Plan and the Borrower and Subsidiaries may declare and pay dividends to the Borrower or any other Subsidiary of the Borrower the proceeds of which are used for such purposes, provided that the aggregate amount of such purchases or redemptions in cash under this paragraph (b) shall not exceed in any fiscal year U.S. $3,000,000 (plus the amount of net proceeds (x) received by the Borrower during such calendar year from sales of Equity Interests of the Borrower to directors, consultants, officers or employees (or persons holding similar positions or performing similar functions for non corporate entities) of the Borrower or any of its Affiliates in connection with permitted employee compensation and incentive arrangements and (y) of any key-man life insurance policies received during such calendar year) which, if not used in any year, may be carried forward to any subsequent calendar year;
(c) noncash repurchases, redemptions or exchanges of Equity Interests deemed to occur upon exercise of stock options or exchange of exchangeable shares if such Equity Interests represent a portion of the exercise price of such options;
(d) provided no Default or Event of Default then exists or would result therefrom, the Borrower may declare and pay dividends or make other distributions from the proceeds of any issuance of Equity Interests permitted to be made under this Agreement;
(e) the Borrower may from time to time declare or make a distribution on or with respect to the Equity Interests of the Borrower during any fiscal quarter provided no Default or Event of Default then exists or would result therefrom;
(f) Franks International C.V. may reimburse FIMBV for all costs and expenses incurred by FIMBV that are directly attributable to the operation of Franks International C.V., including costs for engaging third parties such as consultants, attorneys and accountants; and
(g) Franks International C.V. may reimburse FINV for all of its general, administrative, overhead and other indirect costs and expenses, including (i) those costs and expenses attributable to operating as a publicly traded company, (ii) costs of securities offerings, (iii) board of directors compensation and meeting costs, (iv) costs of periodic reports to shareholders, (v) litigation costs and damages arising from litigation, (vi) accounting and legal costs and (vii) franchise taxes.
Section 6.07 Transactions with Affiliates . (a) Sell or transfer any property or assets to, or purchase or acquire any property or assets from, or otherwise engage in any other transaction with, any of its Affiliates, unless such transaction is upon terms no less favorable in any material respect taken as a whole to the applicable Loan Party than would be obtained in a comparable arms-length transaction with a Person that is not an Affiliate; provided that this clause (a) shall not apply to the indemnification of directors or officers (or persons holding similar positions or performing similar functions for non-corporate entities) of a Loan Party in accordance with customary practice.
(b) The foregoing paragraph (a) shall not prohibit, to the extent otherwise permitted under this Agreement,
(i) any issuance of securities, or other payments, awards or grants in cash, securities or otherwise pursuant to, or the funding of, employment arrangements, stock options, stock ownership plans, including restricted stock plans, stock grants, directed share programs and other equity based plans customarily maintained by similar companies and the granting and performance of registration rights approved by the governing body of any Loan Party,
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(ii) transactions between or among the Borrower and any of its Subsidiaries or between or among any of the Subsidiaries of the Borrower,
(iii) any indemnification agreement or any similar arrangement entered into with directors, officers, consultants and employees (or persons holding similar positions or performing similar functions for non-corporate entities) of the Borrower or any of their Affiliates in the ordinary course of business and the payment of fees and indemnities to directors, officers, consultants and employees (or persons holding similar positions or performing similar functions for non-corporate entities) of the Borrower and the Subsidiaries in the ordinary course of business and, to the extent such fees and indemnities are directly attributable to services rendered on behalf of the Borrower and its Subsidiaries,
(iv) reserved,
(v) any employment agreement or employee benefit plan entered into by the Borrower or any of their Affiliates in the ordinary course of business or consistent with past practice and payments pursuant thereto,
(vi) transactions otherwise permitted under Section 6.06 and Investments permitted by Section 6.04; provided that this clause (vi) shall not apply to any Investment, whether direct or indirect, in either (x) Persons that were not Subsidiaries immediately prior to such Investment or (y) Persons that are not Subsidiaries immediately after such Investment,
(vii) reserved,
(viii) reserved,
(ix) the existence of, or the performance by the Borrower or any of the Subsidiaries of its obligations under the terms of any agreement contemplated thereunder to which it is a party as of the Closing Date, provided, however, that the existence of, or the performance by the Borrower or any Subsidiary of obligations under any future amendment to any such existing agreement or under any similar agreement entered into after the Closing Date shall only be permitted by this clause (ix) to the extent that the terms of any such amendment or new agreement are not otherwise materially disadvantageous to the Lenders,
(x) transactions with any Affiliate for the purchase or sale of goods, products, parts and services entered into in the ordinary course of business in a manner consistent with past practice,
(xi) any transaction in respect of which the Borrower delivers to the Administrative Agent (for delivery to the Lenders) a letter addressed to a Subsidiary from an accounting, appraisal or investment banking firm, in each case of nationally recognized standing that is (A) in the good faith determination of the Borrower qualified to render such letter and (B) reasonably satisfactory to the Administrative Agent, which letter states that such transaction is on terms that are no less favorable to the applicable Subsidiary, than would be obtained in a comparable arms-length transaction with a Person that is not an Affiliate, and
(xii) guarantees of payment or performance by any Loan Party of any Subsidiary of the Borrower that is not a Loan Party in the ordinary course of business.
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Section 6.08 Business of the Borrower and the Subsidiaries . Notwithstanding any other provisions hereof, (a) no Subsidiary of the Borrower shall engage at any time in any line of business substantially different from the line of business conducted by the Borrower and its Subsidiaries on the Closing Date and any business or business activities incidental or related thereto, or any business or activity that is reasonably similar thereto or a reasonable extension, development or expansion thereof or ancillary thereto and (b) with respect to the Borrower, engage in any business, operations or activity, or hold any material property, other than (i) holding Equity Interests of its Subsidiaries, (ii) issuing, selling and redeeming its own Equity Interests, (iii) paying Taxes, (iv) holding partners meetings, preparing partnership and similar records and other activities required to maintain its separate partnership or other legal structure, (v) preparing reports to, and preparing and making notices to and filings with, Governmental Authorities and to its holders of Equity Interests or Indebtedness, (vi) receiving, and holding proceeds of, dividends and distributions from the its Subsidiaries and distributing the proceeds thereof to the extent not prohibited by Section 6.06, (vii) as necessary to consummate any Permitted Business Acquisition, (viii) guaranteeing Indebtedness permitted by Section 6.01, and (ix) other activities related or incidental to any of the foregoing.
Section 6.09 Limitation on Modifications of Indebtedness; Modifications of Certificate of Incorporation, By-laws and Certain Other Agreements; etc. (a) . (a) Amend or modify or grant any waiver or release under or terminate in any manner the articles or certificate of incorporation or by-laws, partnership agreement or limited liability company operating agreement of any Loan Party, in each case, if such amendment, modification, waiver, release or termination could reasonably be expected to result in a Material Adverse Effect;
(b) (i) Make, or agree or offer to pay or make, directly or indirectly, any payment or other distribution (whether in cash, securities or other property) of or in respect of principal of or interest on Permitted Senior Unsecured Debt or any payment or other distribution (whether in cash, securities or other property), including any sinking fund or similar deposit, on account of the purchase, redemption, retirement, acquisition, cancellation or termination of any Permitted Senior Unsecured Debt, except for (A) payments of regularly scheduled interest, (B) payments made solely with the proceeds from the issuance of common Equity Interests or from equity contributions, (C) (1) prepayments made with the proceeds of any Permitted Refinancing Indebtedness in respect thereof or (2) prepayments with the proceeds of any non-cash interest bearing Equity Interests issued for such purchase that are not redeemable prior to the date that is six months following the Revolving Facility Maturity Date and that have terms and covenants no more restrictive in any material respect taken as a whole than the Permitted Senior Unsecured Debt being so refinanced, and (D) any mandatory payments required in respect of Permitted Senior Unsecured Debt in accordance with the terms thereof; or
(ii) Amend or modify, or permit the amendment or modification of, any provision of any Permitted Senior Unsecured Debt or any agreement relating thereto other than amendments or modifications that are not materially adverse to the Lenders.
(c) Enter into any agreement or instrument that by its terms restricts (i) the payment of dividends or distributions or the making of cash advances to a Loan Party by Borrower or a Subsidiary or (ii) the granting of Liens by a Loan Party to the Administrative Agent for the benefit of the Lenders, except, in each case, restrictions existing by reason of:
(A) restrictions imposed by applicable law;
(B) contractual encumbrances or restrictions, such as negative pledge agreements, in effect on the Closing Date under any agreements related to any permitted renewal, extension or refinancing of any Indebtedness existing on the Closing Date that does not expand the scope of any such encumbrance or restriction beyond that in effect on the Closing Date;
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(C) any restriction on a Subsidiary imposed pursuant to an agreement entered into for the sale or disposition of all or substantially all the Equity Interests or assets of such Subsidiary pending the closing of such sale or disposition;
(D) customary provisions in joint venture agreements and other similar agreements applicable to joint ventures entered into in the ordinary course of business;
(E) any restrictions imposed by any agreement relating to secured Indebtedness permitted by this Agreement to the extent that such restrictions apply only to the property or assets securing such Indebtedness;
(F) customary provisions contained in leases or licenses of intellectual property and other similar agreements entered into in the ordinary course of business;
(G) customary provisions restricting subletting or assignment of any lease governing a leasehold interest;
(H) customary provisions restricting assignment of any agreement entered into in the ordinary course of business;
(I) customary restrictions and conditions contained in any agreement relating to the sale of any asset permitted under Section 6.05 pending the consummation of such sale;
(J) in the case of any Person that becomes a Subsidiary after the Closing Date, any agreement in effect at the time such Person so becomes a Subsidiary, so long as such agreement was not entered into in contemplation of such Person becoming such a Subsidiary; or
(K) restrictions imposed by any Permitted Senior Unsecured Debt that are substantially similar to restrictions set forth in this Agreement and in any case do not restrict the granting of Liens to the Administrative Agent for the benefit of the Lenders.
(d) change or permit any material change to be made in its accounting and bookkeeping system from that used in prior periods except in accordance with GAAP.
Section 6.10 Leverage Ratio . Beginning with the fiscal quarter ending September 30, 2013, for any Test Period, permit the Leverage Ratio on the last day of any fiscal quarter, to be in excess of 2.50:1.00.
Section 6.11 Interest Coverage Ratio . Beginning with the fiscal quarter ending September 30, 2013, for any Test Period, permit the Interest Coverage Ratio on the last day of any fiscal quarter to be less than 3.00:1.00.
Section 6.12 Swap Agreements . Enter into any Swap Agreement, other than (a) Swap Agreements entered into in the ordinary course of business to hedge or mitigate risks to which any Loan Party is exposed in the conduct of its business or the management of its liabilities, and (b) Swap Agreements entered into in order to effectively cap, collar or exchange interest rates (from fixed to
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floating rates, from one floating rate to another floating rate or otherwise) with respect to any interest-bearing liability or investment of any Loan Party, which in the case of each of clauses (a) and (b) are entered into for bona fide risk mitigation purposes and that are not speculative in nature.
ARTICLE VII
EVENTS OF DEFAULT
Section 7.01 Events of Default . In case of the happening of any of the following events ( Events of Default ):
(a) any representation or warranty made or deemed made by a Loan Party in any Loan Document, or in any report, certificate, financial statement or other instrument furnished in connection with or pursuant to any Loan Document, shall prove to have been false or misleading in any respect material to the Borrowers creditworthiness or to the rights or interests of the Lenders when made or deemed made by such Loan Party;
(b) default shall be made in the payment of any principal of any Loan when and as the same shall become due and payable, whether at the due date thereof or at a date fixed for prepayment thereof or by acceleration thereof or otherwise;
(c) default shall be made in the payment of any interest on any Loan or in the payment of any Fee or any other amount (other than an amount referred to in paragraph (b) above) due under any Loan Document, when and as the same shall become due and payable, and such default shall continue unremedied for a period of five (5) days;
(d) default shall be made in the due observance or performance by any Loan Party of any covenant, condition or agreement contained in Section 5.01(a) (with respect to the Borrower), 5.05(a), 5.08 or in Article VI;
(e) default shall be made in the due observance or performance by any Loan Party of any covenant, condition or agreement of such Person contained in any Loan Document (other than those specified in paragraphs (b), (c) and (d) above) and such default shall continue unremedied for a period of 60 days after notice thereof from the Administrative Agent or any Lender to the Borrower;
(f) (i) (x) any event or condition occurs that results in any Material Indebtedness becoming due prior to its scheduled maturity or (y) any Loan Party fails to comply with any of its covenants or agreements under any agreement or instrument relating to any of its Material Indebtedness and such failure enables or permits (with all applicable grace periods having expired) the holder or holders of any Material Indebtedness or any trustee or agent on its or their behalf to cause any Material Indebtedness to become due, or to require the prepayment, repurchase, redemption or defeasance thereof, prior to its scheduled maturity or (ii) any Loan Party shall fail to pay the principal of any Material Indebtedness at the stated final maturity thereof; provided that this clause (f) shall not apply to (A) secured Indebtedness that becomes due as a result of the voluntary sale or transfer of the property or assets securing such Indebtedness if such sale or transfer is permitted hereunder and under the documents providing for such Indebtedness and (B) Indebtedness that is being contested in good faith by appropriate proceedings;
(g) there shall have occurred a Change in Control;
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(h) an involuntary proceeding shall be commenced or an involuntary petition shall be filed in a court of competent jurisdiction seeking (i) relief in respect of any Loan Party, or of a substantial part of the property or assets of any Loan Party, taken as a whole, under Title 11 of the United States Code, as now constituted or hereafter amended or any other federal, state or foreign bankruptcy, insolvency, receivership or similar law, (ii) the appointment of a receiver, trustee, custodian, sequestrator, conservator or similar official for any Loan Party or for a substantial part of the property or assets of any Loan Party, taken as a whole, or (iii) the winding-up or liquidation of any Loan Party (except, in the case of any Subsidiary, in a transaction permitted by Section 6.05); and such proceeding or petition shall continue undismissed for 60 days or an order or decree approving or ordering any of the foregoing shall be entered;
(i) any Loan Party shall (i) voluntarily commence any proceeding or file any petition seeking relief under Title 11 of the United States Code, as now constituted or hereafter amended, or any other federal, state or foreign bankruptcy, insolvency, receivership or similar law, (ii) consent to the institution of, or fail to contest in a timely and appropriate manner, any proceeding or the filing of any petition described in paragraph (h) above, (iii) apply for, request or consent to the appointment of a receiver, trustee, custodian, sequestrator, conservator or similar official for any Loan Party or for a substantial part of the property or assets of any Loan Party, taken as a whole, (iv) file an answer admitting the material allegations of a petition filed against it in any such proceeding, (v) make a general assignment for the benefit of creditors or (vi) become unable, admit in writing its inability or fail generally to pay its debts as they become due;
(j) the failure by any Loan Party to pay one or more final judgments aggregating in excess of U.S. $30,000,000 (net of any amounts which are covered by insurance or bonded), which judgments are not discharged or effectively waived or stayed for a period of 30 consecutive days, or any action shall be legally taken by a judgment creditor to levy upon assets or properties of any Loan Party to enforce any such judgment;
(k) one or more ERISA Events shall have occurred that, when taken together with all other ERISA Events that have occurred, could reasonably be expected to result in a Material Adverse Effect;
(l) (i) any Loan Document shall for any reason be asserted in writing by any Loan Party not to be a legal, valid and binding obligation of any party thereto, or (ii) the Guarantees by any Loan Party of any of the Obligations shall cease to be in full force and effect (other than in accordance with the terms thereof);
(m) (A) any Environmental Claim against any Loan Party or (B) in the absence of any Environmental Claim against any Loan Party, to the knowledge of the Borrower, occurrence of a Release or threatened Release of Hazardous Materials (1) at, under, on or from any real property currently owned, leased or operated by Borrower or any of Borrowers Subsidiaries, or (2) to the extent such Release or threatened Release arose from the operations of Borrower or any of Borrowers Subsidiaries, or any predecessor of any Loan Party at, under, on or from any real property (x) formerly owned, leased or operated by Borrower or any of Borrowers Subsidiaries or any predecessor of any Loan Party, or (y) any property offsite the property of Borrower or any of Borrowers Subsidiaries or any predecessor of any Loan Party to which any Loan Party has sent Hazardous Materials for treatment, storage or disposal, (each, an Environmental Event ) shall have occurred that, when taken together with all other unresolved Environmental Events that have occurred would reasonably be expected to result in a Material Adverse Effect; or
(n) an Event of Default (as defined in the Multi-Year Credit Facility) shall occur and be continuing.
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then, and in every such event (other than an event with respect to a Loan Party described in paragraph (h) or (i) above), and at any time thereafter during the continuance of such event, the Administrative Agent may, or at the request of the Required Lenders shall, by notice to the Borrower, take any or all of the following actions, at the same or different times: (i) terminate forthwith the Commitments, and (ii) declare the Loans then outstanding to be forthwith due and payable in whole or in part, whereupon the principal of the Loans so declared to be due and payable, together with accrued interest thereon and any unpaid accrued Fees and all other liabilities of the Borrower accrued hereunder and under any other Loan Document, shall become forthwith due and payable, without presentment, demand, protest, notice of intent to accelerate, notice of acceleration or any other notice of any kind, all of which are hereby expressly waived by the Borrower, anything contained herein or in any other Loan Document to the contrary notwithstanding; and in any event described in paragraph (h) or (i) above, the Commitments shall automatically terminate, the principal of the Loans then outstanding, together with accrued interest thereon and any unpaid accrued Fees and all other liabilities of the Borrower accrued hereunder and under any other Loan Document, shall automatically become due and payable, without presentment, demand, protest, notice of intent to accelerate, notice of acceleration or any other notice of any kind, all of which are hereby expressly waived by the Borrower, anything contained herein or in any other Loan Document to the contrary notwithstanding.
ARTICLE VIII
THE ADMINISTRATIVE AGENT
Section 8.01 Appointment and Authority . (a) Each of the Lenders hereby irrevocably appoints Amegy to act on its behalf as the Administrative Agent hereunder and under the other Loan Documents and authorizes the Administrative Agent to take such actions on its behalf and to exercise such powers as are delegated to the Administrative Agent by the terms hereof or thereof, together with such actions and powers as are reasonably incidental thereto.
(b) The provisions of this Article are solely for the benefit of the Administrative Agent, any appointees thereof and the Lenders, and no Loan Party shall have rights as a third party beneficiary of any of such provisions.
Section 8.02 Rights as a Lender . Any Person serving as the Administrative Agent hereunder shall have the same rights and powers in its capacity as a Lender as any other Lender, and may exercise the same as though it were not the Administrative Agent, and the term Lender or Lenders shall, unless otherwise expressly indicated or unless the context otherwise requires, include a Person serving as the Administrative Agent hereunder in its individual capacity. Such Person and its Affiliates may accept deposits from, lend money to, act as the financial advisor or in any other advisory capacity for and generally engage in any kind of business with the Borrower or any Subsidiary or other Affiliate thereof as if such Person were not the Administrative Agent hereunder and without any duty to account therefor to the Lenders.
Section 8.03 Exculpatory Provisions . The Administrative Agent shall not have any duties or obligations except those expressly set forth herein and in the other Loan Documents. Without limiting the generality of the foregoing, the Administrative Agent:
(a) shall not be subject to any fiduciary or other implied duties, regardless of whether a Default or Event of Default has occurred and is continuing;
(b) shall not have any duty to take any discretionary action or exercise any discretionary powers, except discretionary rights and powers expressly contemplated hereby or by the other Loan Documents that the Administrative Agent is required to exercise as directed in writing by the
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Required Lenders (or such other number or percentage of the Lenders as shall be expressly provided for herein or in the other Loan Documents), provided that the Administrative Agent shall not be required to take any action that, in its opinion or the opinion of its counsel, may expose the Administrative Agent to liability or that is contrary to any Loan Document or applicable law;
(c) shall not, except as expressly set forth herein and in the other Loan Documents, have any duty to disclose, and shall not be liable for the failure to disclose, any information relating to the Borrower or any of its Affiliates that is communicated to or obtained by the Person serving as the Administrative Agent or any of its Affiliates in any capacity;
(d) shall not be liable for any action taken or not taken by it (i) with the consent or at the request of the Required Lenders (or such other number or percentage of the Lenders as shall be necessary, or as the Administrative Agent shall believe in good faith shall be necessary, under the circumstances as provided in Sections 9.08 and 7.01) or (ii) in the absence of its own gross negligence or willful misconduct;
(e) shall not be responsible for or have any duty to ascertain or inquire into (i) any statement, warranty or representation made in or in connection with this Agreement or any other Loan Document, (ii) the contents of any certificate, report or other document delivered hereunder or thereunder or in connection herewith or therewith, (iii) the performance or observance of any of the covenants, agreements or other terms or conditions set forth herein or therein or the occurrence of any Default, (iv) the validity, enforceability, effectiveness or genuineness of this Agreement, any other Loan Document or any other agreement, instrument or document, or (iv) the satisfaction of any condition set forth in Article IV or elsewhere herein, other than to confirm receipt of items expressly required to be delivered to the Administrative Agent; and
(f) shall not be deemed to have knowledge of any Default or Event of Default unless and until notice describing such Default or Event of Default is given to the Administrative Agent by the Borrower or a Lender.
Section 8.04 Reliance by Administrative Agent . The Administrative Agent shall be entitled to rely upon, and shall not incur any liability for relying upon, any notice, request, certificate, consent, statement, instrument, document or other writing (including any electronic message, Internet or intranet website posting or other distribution) believed by it to be genuine and to have been signed, sent or otherwise authenticated by the proper Person. The Administrative Agent also may rely upon any statement made to it orally or by telephone and believed by it to have been made by the proper Person, and shall not incur any liability for relying thereon. In determining compliance with any condition hereunder to the making of a Loan that by its terms must be fulfilled to the satisfaction of a Lender, the Administrative Agent may presume that such condition is satisfactory to such Lender unless the Administrative Agent shall have received notice to the contrary from such Lender prior to the making of such Loan. The Administrative Agent may consult with legal counsel (who may be counsel for the Borrower), independent accountants and other experts selected by it, and shall not be liable for any action taken or not taken by it in accordance with the advice of any such counsel, accountants or experts.
Section 8.05 Delegation of Duties . The Administrative Agent may perform any and all of its duties and exercise its rights and powers hereunder or under any other Loan Document by or through any one or more sub-agents appointed by the Administrative Agent. The Administrative Agent and any such sub-agent may perform any and all of its duties and exercise its rights and powers by or through their respective Related Parties. The exculpatory provisions of this Article shall apply to any such sub-agent and to the Related Parties of the Administrative Agent and any such sub-agent, and shall apply to their respective activities in connection with the syndication of the credit facilities provided for herein as well as activities as the Administrative Agent.
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Section 8.06 Resignation of the Administrative Agent . The Administrative Agent may at any time give notice of its resignation to the Lenders and the Borrower. Upon receipt of any such notice of resignation, the Required Lenders shall have the right to appoint a successor with the consent of the Borrower (not to be unreasonably withheld or delayed) (unless a Default or Event of Default shall have occurred and be continuing, in which event no consent of the Borrower is required), which shall be a financial institution with an office in the United States, or an Affiliate of any such financial institution with an office in the United States. During the Administrative Agent Default Period, the Borrower and the Required Lenders may remove the Administrative Agent subject to the execution and delivery by the Borrower and the Required Lenders of removal and liability release agreements reasonably satisfactory to the Administrative Agent, which removal shall be effective upon the acceptance of appointment by a successor as the Administrative Agent. Upon any proposed removal of the Administrative Agent during the Administrative Agent Default Period, the Required Lenders shall have the right to appoint a successor with the consent of the Borrower (not to be unreasonably withheld or delayed) (unless a Default or Event of Default shall have occurred and be continuing, in which event no consent of the Borrower is required), which shall be a financial institution with an office in the United States, or an Affiliate of any such financial institution with an office in the United States. In the case of the resignation of the Administrative Agent, if no such successor shall have been so appointed by the Required Lenders and the Borrower and shall have accepted such appointment within 30 days after the retiring Administrative Agent gives notice of its resignation, then such resignation shall nonetheless become effective in accordance with such notice and (a) the retiring Administrative Agent shall be discharged from its duties and obligations hereunder and under the other Loan Documents, (b) all payments, communications and determinations provided to be made by, to or through the Administrative Agent shall instead be made by or to each Lender directly, until such time as the Required Lenders and the Borrower appoint a successor Administrative Agent as provided for above in this Section and (c) the Borrower and the Lenders agree that in no event shall the retiring Administrative Agent or any of its Affiliates or any of their respective officers, directors, employees, agents advisors or representatives have any liability to the Loan Parties, any Lender or any other Person or entity for damages of any kind, including, without limitation, direct or indirect, special, incidental or consequential damages, losses or expenses (whether in tort, contract or otherwise) arising out of the failure of a successor Administrative Agent to be appointed and to accept such appointment. Upon the acceptance of a successors appointment as Administrative Agent hereunder, such successor shall succeed to and become vested with all of the rights, powers, privileges and duties of the retiring (or retired) or removed Administrative Agent, and the retiring or removed Administrative Agent shall be discharged from all of its duties and obligations hereunder and under the other Loan Documents (if not already discharged therefrom as provided above in this Section). The fees payable by the Borrower to a successor Administrative Agent shall be the same as those payable to its predecessor unless otherwise agreed between the Borrower and such successor. After the retiring Administrative Agents resignation or removal hereunder and under the other Loan Documents, the provisions of this Article (including Section 8.12) and Section 9.05 shall continue in effect for the benefit of such retiring or removed Administrative Agent, its sub-agents and their respective Related Parties in respect of any actions taken or omitted to be taken by any of them while the retiring or removed Administrative Agent was acting as Administrative Agent.
Section 8.07 Non-Reliance on the Administrative Agent and Other Lenders . Each Lender acknowledges that it has, independently and without reliance upon the Administrative Agent or any other Lender or any of their Related Parties and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement. Each Lender also acknowledges that it will, independently and without reliance upon the Administrative Agent or any other Lender or any of their Related Parties and based on such documents and information as it shall from
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time to time deem appropriate, continue to make its own decisions in taking or not taking action under or based upon this Agreement, any other Loan Document or any related agreement or any document furnished hereunder or thereunder.
Section 8.08 No Other Duties, Etc. . Anything herein to the contrary notwithstanding, the Administrative Agent shall not have any powers, duties or responsibilities under this Agreement or any of the other Loan Documents, except in its capacity, as applicable, as the Administrative Agent or a Lender hereunder.
Section 8.09 Administrative Agent May File Proofs of Claim . In case of the pendency of any proceeding under any federal, state or foreign bankruptcy, insolvency, receivership or similar law or any other judicial proceeding relative to any Loan Party, the Administrative Agent (irrespective of whether the principal of any Loan shall then be due and payable as herein expressed or by declaration or otherwise and irrespective of whether the Administrative Agent shall have made any demand on the Borrower) shall be entitled and empowered, by intervention in such proceeding or otherwise:
(a) to file and prove a claim for the whole amount of the principal and interest owing and unpaid in respect of the Loans and all other Obligations that are owing and unpaid and to file such other documents as may be necessary or advisable in order to have the claims of the Lenders and the Administrative Agent (including any claim for the reasonable compensation, expenses, disbursements and advances of the Lenders and the Administrative Agent and their respective agents and counsel and all other amounts due the Lenders and the Administrative Agent under Sections 2.12, 8.12, and 9.05) allowed in such judicial proceeding; and
(b) to collect and receive any monies or other property payable or deliverable on any such claims and to distribute the same;
and any custodian, receiver, assignee, trustee, liquidator, sequestrator or other similar official in any such judicial proceeding is hereby authorized by each Lender to make such payments to the Administrative Agent and, if the Administrative Agent shall consent to the making of such payments directly to the Lenders, to pay to the Administrative Agent any amount due for the reasonable compensation, expenses, disbursements and advances of the Administrative Agent and its agents and counsel, and any other amounts due the Administrative Agent under Sections 2.12, 8.12, and 9.05.
Nothing contained herein shall be deemed to authorize the Administrative Agent to authorize or consent to or accept or adopt on behalf of any Lender any plan of reorganization, arrangement, adjustment or composition affecting the Obligations or the rights of any Lender to authorize the Administrative Agent to vote in respect of the claim of any Lender in any such proceeding.
Section 8.10 Guaranty Matters . Each of the Lenders irrevocably authorizes the Administrative Agent to release guarantees created by the Loan Documents in accordance with the provisions of Section 9.18. Upon request by the Administrative Agent at any time, the Required Lenders will confirm in writing Administrative Agents authority provided for in the previous sentence.
Section 8.11 Reserved .
Section 8.12 Indemnification . Each Lender agrees (i) to reimburse the Administrative Agent, on demand, in the amount of its pro rata share (based on its Commitments hereunder or if such Commitments shall have expired or been terminated, in accordance with the respective principal amounts of its applicable outstanding Loans owed to it) of any reasonable expenses incurred for the benefit of the Lenders by the Administrative Agent, including reasonable counsel fees and compensation of agents and
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employees paid for services rendered on behalf of the Lenders, which shall not have been reimbursed by the Borrower within 10 Business Days of written demand therefor and (ii) to indemnify and hold harmless the Administrative Agent and any of its directors, officers, employees or agents, on demand, in the amount of such pro rata share, from and against any and all liabilities, Taxes, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever which may be imposed on, incurred by or asserted against it in its capacity as Administrative Agent or any of them in any way relating to or arising out of this Agreement or any other Loan Document or any action taken or omitted by it or any of them under this Agreement or any other Loan Document, to the extent the same shall not have been reimbursed by the Borrower, provided that no Lender shall be liable to the Administrative Agent for any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements to the extent found in a final non-appealable judgment by a court of competent jurisdiction to have resulted primarily from the gross negligence or wilful misconduct of the Administrative Agent or any of its directors, officers, employees or agents.
Section 8.13 Appointment of Supplemental Administrative Agent . (a) It is the purpose of this Agreement and the other Loan Documents that there shall be no violation of any law of any jurisdiction denying or restricting the right of banking corporations or associations or other institutions to transact business as agent or trustee in such jurisdiction. It is recognized that in case of litigation under this Agreement or any of the other Loan Documents, and in particular in case of the enforcement of any of the Loan Documents, or in case the Administrative Agent deems that by reason of any present or future law of any jurisdiction it may not exercise any of the rights, powers or remedies granted herein or in any of the other Loan Documents or take any other action which may be desirable or necessary in connection therewith, it may be necessary that the Administrative Agent appoint an additional institution as a separate trustee, co-trustee, administrative agent, collateral agent, collateral sub-agent or collateral co-agent (any such additional individual or institution being referred to herein individually as a Supplemental Administrative Agent and collectively as Supplemental Administrative Agents ).
(b) In the event that the Administrative Agent appoints a Supplemental Administrative Agent, (i) each and every right, power, privilege or duty expressed or intended by this Agreement or any of the other Loan Documents to be exercised by or vested in or conveyed to the Administrative Agent shall be exercisable by and vest in such Supplemental Administrative Agent to the extent, and only to the extent, necessary to enable such Supplemental Administrative Agent to exercise such rights, powers and privileges and to perform such duties, and every covenant and obligation contained in the Loan Documents and necessary to the exercise or performance thereof by such Supplemental Administrative Agent shall run to and be enforceable by either the Administrative Agent or such Supplemental Administrative Agent, and (ii) the provisions of this Article and of Section 9.05 that refer to the Administrative Agent shall inure to the benefit of such Supplemental Administrative Agent and all references therein to the Administrative Agent shall be deemed to be references to the Administrative Agent and/or such Supplemental Administrative Agent, as the context may require.
(c) Should any instrument in writing from any Loan Party be required by any Supplemental Administrative Agent so appointed by the Administrative Agent for more fully and certainly vesting in and confirming to it such rights, powers, privileges and duties, such Loan Party shall execute, acknowledge and deliver any and all such instruments promptly upon request by the Administrative Agent. In case any Supplemental Administrative Agent, or a successor thereto, shall die, become incapable of acting, resign or be removed, all the rights, powers, privileges and duties of such Supplemental Administrative Agent, to the extent permitted by law, shall vest in and be exercised by the Administrative Agent until the appointment of a new Supplemental Administrative Agent.
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Section 8.14 Withholding . To the extent required by any applicable law, the Administrative Agent may withhold from any payment to any Lender an amount equivalent to any applicable withholding Tax. If any payment has been made to any Lender by the Administrative Agent without the applicable withholding Tax being withheld from such payment and the Administrative Agent has paid over the applicable withholding Tax to the Internal Revenue Service or any other Governmental Authority, or the Internal Revenue Service or any other Governmental Authority asserts a claim that the Administrative Agent did not properly withhold Tax from amounts paid to or for the account of any Lender because the appropriate form was not delivered or was not properly executed or because such Lender failed to notify the Administrative Agent of a change in circumstance which rendered the exemption from, or reduction of, withholding Tax ineffective or for any other reason, such Lender shall indemnify the Administrative Agent fully for all amounts paid, directly or indirectly, by the Administrative Agent as Tax or otherwise, including any penalties or interest and together with all expenses (including legal expenses and out-of-pocket expenses) incurred.
Section 8.15 Enforcement . Notwithstanding anything to the contrary contained herein or in any other Loan Document, the authority to enforce rights and remedies hereunder and under the other Loan Documents against the Loan Parties or any of them shall be vested exclusively in, and all actions and proceedings at law in connection with such enforcement shall be instituted and maintained exclusively by, the Administrative Agent in accordance with Section 7.01 for the benefit of all the Lenders; provided , however, that the foregoing shall not prohibit (a) the Administrative Agent from exercising on its own behalf the rights and remedies that inure to its benefit (solely in its capacity as Administrative Agent) hereunder and under the other Loan Documents, (b) any Lender from exercising setoff rights in accordance with Section 9.06 (subject to the terms of Section 2.18(c)), or (c) any Lender from filing proofs of claim or appearing and filing pleadings on its own behalf during the pendency of a proceeding relative to any Loan Party under any federal, state or foreign bankruptcy, insolvency, receivership or similar law; and provided , further , that if at any time there is no Person acting as the Administrative Agent hereunder and under the other Loan Documents, then (i) the Required Lenders shall have the rights otherwise ascribed to the Administrative Agent pursuant to Section 7.01 (ii) in addition to the matters set forth in clauses (b) and (c) of the preceding proviso and subject to Section 2.18(c), any Lender may, with the consent of the Required Lenders, enforce any rights and remedies available to it and as authorized by the Required Lenders.
ARTICLE IX
MISCELLANEOUS
Section 9.01 Notices . (a) Notices and other communications provided for herein shall be in writing and shall be delivered by hand or overnight courier service, mailed by certified or registered mail or sent by telecopy, as follows:
(i) if to the Borrower, to Franks International C.V., 10260 Westheimer Road, Houston, Texas 77042 attention: , fax: , e-mail: ,
(ii) if to the Administrative Agent, to Amegy at 4400 Post Oak Parkway, Houston, Texas 77027, Attention: Brad Ellis; fax: (713) 561-0345, e-mail: brad.ellis@amegybank.com ; and
(iii) if to any Lender, to the address, telecopier number, electronic mail address or telephone number specified in its Administrative Questionnaire.
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(b) Notices and other communications to the Lenders hereunder may be delivered or furnished by electronic communications pursuant to procedures approved by the Administrative Agent; provided that the foregoing shall not apply to service of process, or to notices pursuant to Article II unless otherwise agreed by the Administrative Agent and the applicable Lender. Each of the Administrative Agent and the Borrower may, in its discretion, agree to accept notices and other communications to it hereunder by electronic communications pursuant to procedures approved by it; provided further that approval of such procedures may be limited to particular notices or communications.
(c) All notices and other communications given to any party hereto in accordance with the provisions of this Agreement shall be deemed to have been given on the date of receipt if delivered by hand or overnight courier service or sent by telecopy or (to the extent permitted by paragraph (b) above) electronic means prior to 4:00 p.m. (Houston, Texas time) on such date, or on the date five Business Days after dispatch by certified or registered mail if mailed, in each case delivered, sent or mailed (properly addressed) to such party as provided in this Section 9.01 or in accordance with the latest unrevoked direction from such party given in accordance with this Section 9.01.
(d) Any party hereto may change its address or telecopy number for notices and other communications hereunder by notice to the other parties hereto.
Section 9.02 Survival of Agreement . All covenants, agreements, representations and warranties made by the Borrower and the other Loan Parties herein, in the other Loan Documents and in the certificates or other instruments prepared or delivered in connection with or pursuant to this Agreement or any other Loan Document shall be considered to have been relied upon by the Lenders and shall survive the making by the Lenders of the Loans and the execution and delivery of the Loan Documents, regardless of any investigation made by such Persons or on their behalf, and shall continue in full force and effect as long as the principal of or any accrued interest on any Loan or any Fee or any other amount payable under this Agreement or any other Loan Document is outstanding and unpaid and so long as the Commitments have not been terminated. Without prejudice to the survival of any other agreements contained herein, indemnification and reimbursement obligations contained herein (including pursuant to Sections 2.15, 2.17 and 9.05) shall survive the payment in full of the principal and interest hereunder and the termination of the Commitments or this Agreement.
Section 9.03 Binding Effect . This Agreement shall become effective when it shall have been executed by the Borrower and the Administrative Agent and when the Administrative Agent shall have received copies hereof which, when taken together, bear the signatures of each of the other parties hereto, and thereafter shall be binding upon and inure to the benefit of the Borrower, the Administrative Agent and each Lender and their respective permitted successors and assigns.
Section 9.04 Successors and Assigns . (a) The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns permitted hereby, except that (i) the Borrower may not assign or otherwise transfer any of its rights or obligations hereunder without the prior written consent of each Lender (and any attempted assignment or transfer by the Borrower without such consent shall be null and void) and (ii) no Lender may assign or otherwise transfer its rights or obligations hereunder except in accordance with this Section. Nothing in this Agreement, expressed or implied, shall be construed to confer upon any Person (other than the parties hereto, their respective successors and assigns permitted hereby, Participants (to the extent provided in paragraph (c) of this Section), the Lenders, the Administrative Agent and, to the extent expressly contemplated hereby, the Related Parties of each of the Administrative Agent and the Lenders and the Indemnitees) any legal or equitable right, remedy or claim under or by reason of this Agreement.
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(b) (i) Subject to the conditions set forth in paragraph (b)(ii) below, any Lender may assign to one or more Eligible Assignees all or a portion of its rights and obligations under this Agreement (including all or a portion of its Commitment and the Loans at the time owing to it) with the prior written consent (such consent not to be unreasonably withheld or delayed) of:
(A) the Borrower; provided that no consent of the Borrower shall be required for an assignment to a Lender or, if an Event of Default has occurred and is continuing, any other assignee; and
(B) the Administrative Agent.
(ii) Assignments shall be subject to the following additional conditions:
(A) except in the case of an assignment to a Lender, an Affiliate of a Lender or an Approved Fund, an assignment of the entire remaining amount of the assigning Lenders Commitment or contemporaneous assignments to related Approved Funds that equal at least U.S. $2,500,000 in the aggregate, the amount of the Commitment and/or Loans, as applicable, of the assigning Lender subject to each such assignment (determined as of the date the Assignment and Acceptance with respect to such assignment is delivered to the Administrative Agent) shall not be less than U.S. $5,000,000 and increments of U.S. $1,000,000 in excess thereof unless the Borrower and the Administrative Agent otherwise consent; provided that no such consent of the Borrower shall be required if an Event of Default has occurred and is continuing;
(B) each partial assignment shall be made as an assignment of a proportionate part of all the assigning Lenders rights and obligations in respect of the Revolving Facility under this Agreement;
(C) the parties to each assignment shall execute and deliver to the Administrative Agent an Assignment and Acceptance;
(D) the assignee, if it shall not be a Lender, shall deliver to the Administrative Agent an Administrative Questionnaire and any other administrative information that the Administrative Agent may reasonably request;
(E) no such assignment shall be made to the Borrower or any of its Affiliates, or a Defaulting Lender; and
(F) notwithstanding anything to the contrary herein, no such assignment shall be made to a natural person.
For purposes of this Section 9.04(b), the term Approved Fund shall have the following meaning:
Approved Fund shall mean any Person (other than a natural person) that is engaged in making, purchasing, holding or investing in bank loans and similar extensions of credit in the ordinary course and that is administered or managed by a Lender, an Affiliate of a Lender or an entity or an Affiliate of an entity that administers or manages a Lender.
(iii) Subject to acceptance and recording thereof pursuant to paragraph (b)(iv) of this Section, from and after the effective date specified in each Assignment and Acceptance the assignee thereunder shall be a party hereto and, to the extent of the interest assigned by such Assignment and Acceptance, have the rights and obligations of a Lender under this Agreement, and the assigning Lender hereunder shall, to the extent of the interest assigned by such Assignment and Acceptance, be released
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from its obligations under this Agreement (and, in the case of an Assignment and Acceptance covering all of the assigning Lenders rights and obligations under this Agreement, such Lender shall cease to be a party hereto but shall continue to be entitled to the benefits of Sections 2.15, 2.16, 2.17 and 9.05). Any assignment or transfer by a Lender of rights or obligations under this Agreement that does not comply with this Section 9.04 shall not be effective as an assignment hereunder.
(iv) The Administrative Agent, acting for this purpose as an agent of the Borrower, shall maintain at one of its offices a copy of each Assignment and Acceptance delivered to it and a register for the recordation of the names and addresses of the Lenders, and the Commitment of, and principal amount (and stated interest) of the Loans owing to, each Lender pursuant to the terms hereof from time to time (the Register ). The entries in the Register shall be conclusive, and the Borrower, the Administrative Agent and the Lenders shall treat each Person whose name is recorded in the Register pursuant to the terms hereof as a Lender hereunder for all purposes of this Agreement, notwithstanding notice to the contrary. The Register shall be available for inspection by the Borrower and any Lender, at any reasonable time and from time to time upon reasonable prior notice.
(v) The parties to each assignment shall execute and deliver to the Administrative Agent a processing and recordation fee in the amount of $3,500; provided , however , that the Administrative Agent may, in its sole discretion, elect to waive such processing and recordation fee in the case of any assignment. Upon its receipt of a duly completed Assignment and Acceptance executed by an assigning Lender and an assignee, any administrative information reasonably requested by the Administrative Agent (unless the assignee shall already be a Lender hereunder), any written consent to such assignment required by paragraph (b) of this Section, and the processing and recordation fee referred to above (unless waived as set forth above), the Administrative Agent shall accept such Assignment and Acceptance and record the information contained therein in the Register. No assignment shall be effective for purposes of this Agreement unless it has been recorded in the Register as provided in this paragraph.
(c) (i) Any Lender may, without the consent of the Borrower or the Administrative Agent, sell participations to one or more banks or other entities (a Participant ) in all or a portion of such Lenders rights and obligations under this Agreement (including all or a portion of its Commitment and the Loans owing to it); provided that (A) such Lenders obligations under this Agreement shall remain unchanged, (B) such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations, (C) the Borrower, the Administrative Agent and the other Lenders shall continue to deal solely and directly with such Lender in connection with such Lenders rights and obligations under this Agreement and (D) such Lender shall maintain a register on which it enters the name and address of each Participant and the principal amounts (and stated interest) of each Participants interest in the Loans (or other rights or obligations) held by it (a Participant Register) , which entries shall be conclusive absent manifest error. The Lender shall permit Borrower to review the Participant Register and to disclose information in the Participant Register to the extent that such disclosure is necessary to establish that such Commitments, Loans or other obligations are in registered form under Section 5f.103-1(c) of the United States Treasury Regulations. Any agreement or instrument (oral or written) pursuant to which a Lender sells such a participation shall provide that such Lender shall retain the sole right to exercise rights under and to enforce this Agreement and the other Loan Documents and to approve any amendment, modification or waiver of any provision of this Agreement and the other Loan Documents; provided that (x) such agreement or instrument may provide that such Lender will not, without the consent of the Participant, agree to any amendment, modification or waiver described in clause (i) through (vii) of the first proviso to Section 9.08(b) that affects such Participant and (y) no other agreement (oral or written) in respect of the foregoing with respect to such Participant may exist between such Lender and such Participant. Subject to paragraph (c)(ii) of this Section, the Borrower agrees that each Participant shall be entitled to the benefits (and subject to the requirements and limitations) of
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Sections 2.15, 2.16 and 2.17 to the same extent as if it were the Lender from whom it obtained its participation and had acquired its interest by assignment pursuant to paragraph (b) of this Section. To the extent permitted by law, each Participant also shall be entitled to the benefits of Section 9.06 as though it were a Lender, provided such Participant agrees to be subject to Section 2.18(c) as though it were a Lender.
(ii) A Participant shall not be entitled to receive any greater payment under Section 2.15, 2.16 or 2.17 than the applicable Lender would have been entitled to receive with respect to the participation sold to such Participant, unless the sale of the participation to such Participant is made with the Borrowers prior written consent (which shall not be unreasonably withheld or delayed) and the Borrower may withhold its consent if a Participant would be entitled to require greater payment than the applicable Lender under such Sections. A Participant that would be a Non-U.S.Lender if it were a Lender shall not be entitled to the benefits of Section 2.17 to the extent such Participant fails to comply with Section 2.17(e) as though it were a Lender.
(d) Any Lender may at any time pledge or assign a security interest in all or any portion of its rights under this Agreement and its Note, if any, to secure obligations of such Lender, including any pledge or assignment to secure obligations to a Federal Reserve Bank or other central bank, and this Section shall not apply to any such pledge or assignment of a security interest; provided that no such pledge or assignment of a security interest shall release a Lender from any of its obligations hereunder or substitute any such pledgee or assignee for such Lender as a party hereto, and any such pledgee (other than a pledgee that is the Federal Reserve Bank or another central bank) shall acknowledge in writing that its rights under such pledge are in all respects subject to the limitations applicable to the pledging Lender under this Agreement or the other Loan Documents.
Section 9.05 Expenses; Indemnity . (a) The Borrower agrees to pay all reasonable and documented out-of-pocket expenses incurred by the Administrative Agent and its Affiliates in connection with the preparation of this Agreement and the other Loan Documents, or by the Administrative Agent and its Affiliates in connection with the syndication of the Commitments or the administration of this Agreement or in connection with any amendments, modifications or waivers of the provisions hereof or thereof (whether or not the Transactions hereby contemplated shall be consummated) or incurred by the Administrative Agent and its Affiliates or any Lender in connection with the enforcement or protection of their rights in connection with, or any workout or restructuring involving, this Agreement and the other Loan Documents, in connection with the Loans made hereunder, including the reasonable fees, charges and disbursements of Thompson & Knight LLP, special counsel for the Administrative Agent, and, in connection with any such enforcement or protection, the reasonable fees, charges and disbursements of any other counsel; provided, that, absent any conflict of interest the Administrative Agent shall not be entitled to indemnification for the fees, charges or disbursements of more than one counsel in each jurisdiction.
(b) The Borrower agrees to indemnify the Administrative Agent, each Lender and each Related Party of any of the foregoing Persons (each such Person being called an Indemnitee ) against, and to hold each Indemnitee harmless from, any and all losses, claims, damages, liabilities and related expenses, including reasonable and documented counsel fees, charges and disbursements, including legal fees and settlement costs, incurred by or asserted against any Indemnitee arising out of, in any way connected with, or as a result of (i) the execution or delivery of this Agreement or any other Loan Document or any agreement or instrument contemplated hereby or thereby, the performance by the parties hereto and thereto of their respective obligations hereunder and thereunder or the consummation of the Transactions and the other transactions contemplated hereby or thereby, (ii) the use of the proceeds of the Loans or (iii) any claim, litigation, investigation or proceeding relating to any of the foregoing, whether or not the Borrower, Borrowers Subsidiaries or any Indemnitee initiated or is a party thereto,
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provided that such indemnity shall not, as to any Indemnitee, be available to the extent that such losses, claims, damages, liabilities or related expenses are determined in a final nonappealable judgment by a court of competent jurisdiction to have resulted from the gross negligence or willful misconduct of such Indemnitee. Subject to and without limiting the generality of the foregoing sentence, the Borrower agrees to indemnify each Indemnitee against, and hold each Indemnitee harmless from, any and all losses, claims, damages, liabilities and related expenses, including reasonable and documented counsel or consultant fees, charges and disbursements, incurred by or asserted against any Indemnitee arising out of, in any way connected with, or as a result of (A) any Environmental Event or Environmental Claim to the extent related in any way to the Borrower or any of its Subsidiaries or any other Loan Party, or (B) any actual or alleged presence, Release or threatened Release of Hazardous Materials (1) at, under, on or from any real property currently owned, leased or operated by the Borrower or any of its Subsidiaries or any other Loan Party, or (2) to the extent such presence, Release or threatened Release arose from the operations of Borrower or any of its Subsidiaries or any other Loan Party, or any predecessor of any Loan Party at, under, on or from any real property, (x) formerly owned, leased or operated by Borrower or any of its Subsidiaries or any other Loan Party or any predecessor of any Loan Party, or (y) any property offsite the property of Borrower or any of its Subsidiaries or any other Loan Party or any predecessor of any Loan Party to which the Borrower or any of its Subsidiaries or any other Loan Party has sent Hazardous Materials for treatment, storage or disposal, provided that such indemnity shall not, as to any Indemnitee, be available to the extent that such losses, claims, damages, liabilities or related expenses are determined by a court of competent jurisdiction to have resulted from the gross negligence or willful misconduct of such Indemnitee or any of its Related Parties or would have arisen as against the Indemnitee regardless of this Agreement or any other Loan Document or any Borrowings hereunder. In no event shall any Indemnitee be liable to any Loan Party for any consequential, indirect, special or punitive damages. No Indemnitee shall be liable for any damages arising from the use by unintended recipients of any information or other materials distributed to such unintended recipients by such Indemnitee through telecommunications, electronic or other information transmission systems in connection with this Agreement or the other Loan Documents or the transactions contemplated hereby or thereby other than for direct or actual damages resulting from the gross negligence or willful misconduct of such Indemnitee as determined by a court of competent jurisdiction. The provisions of this Section 9.05 shall remain operative and in full force and effect regardless of the expiration of the term of this Agreement, the consummation of the Transactions contemplated hereby, the repayment of any of the Obligations, the invalidity or unenforceability of any term or provision of this Agreement or any other Loan Document, or any investigation made by or on behalf of the Administrative Agent or any Lender. All amounts due under this Section 9.05 shall be payable on written demand therefor accompanied by reasonable documentation with respect to any reimbursement, indemnification or other amount requested.
(c) This Section 9.05 shall not apply to Taxes.
Section 9.06 Right of Set-off . If an Event of Default shall have occurred and be continuing, each Lender is hereby authorized at any time and from time to time, to the fullest extent permitted by law, to set off and apply any and all deposits (general or special, time or demand, provisional or final) at any time held and other indebtedness at any time owing by such Lender to or for the credit or the account of any Loan Party or any other Subsidiary of Borrower, against any and all obligations of the Loan Parties, now or hereafter existing under this Agreement or any other Loan Document held by such Lender, irrespective of whether or not such Lender shall have made any demand under this Agreement or such other Loan Document and although the obligations may be unmatured. The rights of each Lender under this Section 9.06 are in addition to other rights and remedies (including other rights of set-off) that such Lender may have.
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Section 9.07 Applicable Law . THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF TEXAS.
Section 9.08 Waivers; Amendment . (a) No failure or delay of the Administrative Agent or any Lender in exercising any right or power hereunder or under any Loan Document shall operate as a waiver thereof, nor shall any single or partial exercise of any such right or power, or any abandonment or discontinuance of steps to enforce such a right or power, preclude any other or further exercise thereof or the exercise of any other right or power. The rights and remedies of the Administrative Agent and the Lenders hereunder and under the other Loan Documents are cumulative and are not exclusive of any rights or remedies that they would otherwise have. No waiver of any provision of this Agreement or any other Loan Document or consent to any departure by the Borrower or any other Loan Party therefrom shall in any event be effective unless the same shall be permitted by paragraph (b) below, and then such waiver or consent shall be effective only in the specific instance and for the purpose for which given. No notice or demand on the Borrower or any other Loan Party in any case shall entitle such Person to any other or further notice or demand in similar or other circumstances.
(b) Neither this Agreement nor any other Loan Document nor any provision hereof or thereof may be waived, amended or modified except in the case of this Agreement and any other Loan Document, pursuant to an agreement or agreements in writing entered into by the Borrower and the Required Lenders (or the Administrative Agent with the consent of the Required Lenders); provided, however , that no such agreement shall
(i) decrease or forgive the principal amount of, or extend the final maturity of, or decrease the rate of interest on, any Loan without the prior written consent of each Lender directly affected thereby; provided that any amendment to the financial covenant definitions in this Agreement shall not constitute a reduction in the rate of interest for purposes of this clause (i) ,
(ii) increase or extend the Commitment of any Lender or decrease fees payable to any Lender without the prior written consent of such Lender (it being understood that waivers or modifications of conditions precedent, covenants, Defaults or Events of Defaults shall not constitute an increase in the Commitments of any Lender),
(iii) extend any date on which any scheduled payment of interest on any Loan or any Fees is due, without the prior written consent of each Lender adversely affected thereby,
(iv) amend or modify the provisions of Section 2.18(b) or (c) in a manner that would by its terms alter the pro rata sharing of payments required thereby, without the prior written consent of each Lender adversely affected thereby,
(v) reserved,
(vi) amend or modify the provisions of this Section or the definition of the terms Required Lenders or any other provision hereof specifying the number or percentage of Lenders required to waive, amend or modify any rights hereunder or make any determination or grant any consent hereunder, without the prior written consent of each Lender adversely affected thereby (it being understood that, with the consent of the Required Lenders, additional extensions of credit pursuant to this Agreement may be included in the determination of the Required Lenders on substantially the same basis as the Loans and Commitments are included on the Closing Date),
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(vii) release any Loan Party (except in connection with a sale permitted pursuant to Section 6.05) without the prior written consent of each Lender, and
(viii) amend or modify the provisions of Section 4.01 or 4.02;
provided further that no such agreement shall amend, modify or otherwise affect the rights or duties of the Administrative Agent hereunder or under the other Loan Documents without the prior written consent of such Administrative Agent. Each Lender shall be bound by any waiver, amendment or modification authorized by this Section 9.08 and any consent by any Lender pursuant to this Section 9.08 shall bind any assignee of such Lender,
(c) Reserved.
(d) Reserved.
(e) Notwithstanding the foregoing, any Loan Document may be amended, modified, supplemented or waived with the written consent of the Administrative Agent and the Borrower without the need to obtain the consent of any Lender if such amendment, modification, supplement or waiver is executed and delivered in order to cure an ambiguity, omission, mistake or defect in such Loan Document; provided that in no event will the Administrative Agent be required to substitute its judgment for the judgment of the Lenders or the Required Lenders, and the Administrative Agent may in all circumstances seek the approval of the Required Lenders, the affected Lenders or all Lenders in connection with any such amendment, modification, supplement or waiver.
Section 9.09 Interest Rate Limitation . It is the intention of the parties hereto that each Lender shall conform strictly to usury laws applicable to it. Accordingly, if the transactions contemplated hereby would be usurious as to any Lender under laws applicable to it (including the laws of the United States of America, the State of Texas or any other jurisdiction whose laws may be mandatorily applicable to such Lender notwithstanding the other provisions of this Agreement), then, in that event, notwithstanding anything to the contrary in any of the Loan Documents or any agreement entered into in connection with or as security for the Notes, it is agreed as follows: (i) the aggregate of all consideration which constitutes interest under law applicable to any Lender that is contracted for, taken, reserved, charged or received by such Lender under any of the Loan Documents or agreements or otherwise in connection with the Notes shall under no circumstances exceed the maximum amount allowed by such applicable law, and any excess shall be canceled automatically and if theretofore paid shall be credited by such Lender on the principal amount of the Obligations (or, to the extent that the principal amount of the Obligations shall have been or would thereby be paid in full, refunded by such Lender to the Borrower); and (ii) in the event that the maturity of the Notes is accelerated by reason of an election of the holder thereof resulting from any Event of Default under this Agreement or otherwise, or in the event of any required or permitted prepayment, then such consideration that constitutes interest under law applicable to any Lender may never include more than the maximum amount allowed by such applicable law, and excess interest, if any, provided for in this Agreement or otherwise shall be canceled automatically by such Lender as of the date of such acceleration or prepayment and, if theretofore paid, shall be credited by such Lender on the principal amount of the Obligations (or, to the extent that the principal amount of the Obligations shall have been or would thereby be paid in full, refunded by such Lender to the Borrower). All sums paid or agreed to be paid to any Lender for the use, forbearance or detention of sums due hereunder shall, to the extent permitted by law applicable to such Lender, be amortized, prorated, allocated and spread throughout the stated term of the Loans evidenced by the Notes until payment in full so that the rate or amount of interest on account of any Loans hereunder does not exceed the maximum amount allowed by such applicable law. If at any time and from time to time (i) the amount of interest payable to any Lender on any date shall be computed at the Highest Lawful Rate applicable to such
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Lender pursuant to this Section 9.09 and (ii) in respect of any subsequent interest computation period the amount of interest otherwise payable to such Lender would be less than the amount of interest payable to such Lender computed at the Highest Lawful Rate applicable to such Lender, then the amount of interest payable to such Lender in respect of such subsequent interest computation period shall continue to be computed at the Highest Lawful Rate applicable to such Lender until the total amount of interest payable to such Lender shall equal the total amount of interest which would have been payable to such Lender if the total amount of interest had been computed without giving effect to this Section 9.09. To the extent that Chapter 303 of the Texas Finance Code is relevant for the purpose of determining the Highest Lawful Rate applicable to a Lender, such Lender elects to determine the applicable rate ceiling under such Chapter by the weekly ceiling from time to time in effect. Chapter 346 of the Texas Finance Code does not apply to the Borrowers obligations hereunder.
Section 9.10 Entire Agreement . This Agreement, the other Loan Documents and the agreements regarding certain Fees referred to herein constitute the entire contract between the parties relative to the subject matter hereof. Any previous agreement among or representations from the parties or their Affiliates with respect to the subject matter hereof is superseded by this Agreement and the other Loan Documents. Notwithstanding the foregoing, the Fee Letter shall survive the execution and delivery of this Agreement and remain in full force and effect. Nothing in this Agreement or in the other Loan Documents, expressed or implied, is intended to confer upon any party other than the parties hereto and thereto any rights, remedies, obligations or liabilities under or by reason of this Agreement or the other Loan Documents.
Section 9.11 Waiver of Jury Trial . (a) EACH PARTY HERETO HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS. EACH PARTY HERETO (i) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (ii) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS, AS APPLICABLE, BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 9.11.
(b) Arbitration.
(i) If a claim, dispute, or controversy arises between us with respect to or arising out of this Agreement or any other Loan Document (all of the foregoing, a Dispute ), and only if a jury trial waiver is not permitted by applicable Law or ruling by a court, any of the parties hereto may require that the Dispute be resolved by binding arbitration before a single arbitrator at the request of any party. By agreeing to arbitrate a Dispute, each party gives up any right that party may have to a jury trial, as well as other rights that party would have in court that are not available or are more limited in arbitration, such as the rights to discovery and to appeal.
(ii) Arbitration shall be commenced by filing a petition with, and in accordance with the applicable arbitration rules of, the Judicial Arbitration and Mediation Services ( JAMS ) or National Arbitration Forum ( Administrator ) as selected by the initiating party. If the parties agree, arbitration may be commenced by appointment of a licensed attorney who is selected by the parties and who agrees to conduct the arbitration without an Administrator. Disputes include matters (i) relating to a deposit account, application for or denial of credit, enforcement of any of the obligations the parties owe to each other, compliance with applicable laws and/or regulations,
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performance or services provided under any agreement by any party, (ii) based on or arising from an alleged tort, or (iii) involving any parties employees, agents, Affiliates, or assigns. However, Disputes do not include the validity, enforceability, meaning, or scope of this arbitration provision and such matters may be determined only by a court. If a third party is a party to a Dispute, each party will consent to including the third party in the arbitration proceeding for resolving the Dispute with the third party. Venue for the arbitration proceeding shall be at a location determined by mutual agreement of the parties or, if no agreement, in Houston, Texas.
(iii) After entry of an arbitration order, the non-moving party shall commence arbitration. The moving party shall, at its discretion, also be entitled to commence arbitration but is under no obligation to do so, and the moving party shall not in any way be adversely prejudiced by electing not to commence arbitration. The arbitrator: (i) will hear and rule on appropriate dispositive motions for judgment on the pleadings, for failure to state a claim, or for full or partial summary judgment; (ii) will render a decision and any award applying applicable law; (iii) will give effect to any limitations period in determining any Dispute or defense; (iv) shall enforce the doctrines of compulsory counterclaim, res judicata, and collateral estoppel, if applicable; (v) with regard to motions and the arbitration hearing, shall apply rules of evidence governing civil cases; and (vi) will apply the law of the State of Texas. Filing of a petition for arbitration shall not prevent any party from (x) seeking and obtaining from a court of competent jurisdiction (notwithstanding ongoing arbitration) provisional or ancillary remedies including but not limited to injunctive relief, property preservation orders, foreclosure, eviction, attachment, replevin, garnishment, and/or the appointment of a receiver, (y) pursuing non-judicial foreclosure, or (z) availing itself of any self-help remedies such as setoff and repossession. The exercise of such rights shall not constitute a waiver of the right to submit any Dispute to arbitration.
(iv) Judgment upon an arbitration award may be entered in any court having jurisdiction except that, if the arbitration award exceeds U.S. $4,000,000, any party shall be entitled to a de novo appeal of the award before a panel of three arbitrators. To allow for such appeal, if the award (including Administrators, arbitrators, and attorneys fees and costs) exceeds U.S. $4,000,000, the arbitrator will issue a written, reasoned decision supporting the award, including a statement of authority and its application to the Dispute. A request for de novo appeal must be filed with the arbitrator within 30 days following the date of the arbitration award; if such a request is not made within that time period, the arbitration decision shall become final and binding. On appeal, the arbitrators shall review the award de novo, meaning that they shall reach their own findings of fact and conclusions of law rather than deferring in any manner to the original arbitrator. Appeal of an arbitration award shall be pursuant to the rules of the Administrator or, if the Administrator has no such rules, then the JAMS arbitration appellate rules shall apply.
(v) Arbitration under this provision concerns a transaction involving interstate commerce and shall be governed by the Federal Arbitration Act, 9 U.S.C. § 1 et seq. This arbitration provision shall survive any termination, amendment, or expiration of this Agreement. If the terms of this provision vary from the Administrators rules, this arbitration provision shall control.
(c) CLASS ACTION WAIVER . EACH PARTY WAIVES THE RIGHT TO LITIGATE IN COURT OR ARBITRATE ANY CLAIM OR DISPUTE AS A CLASS ACTION, EITHER AS A MEMBER OF A CLASS OR AS A REPRESENTATIVE, OR TO ACT AS A PRIVATE ATTORNEY GENERAL.
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(d) Reliance. Each party (i) certifies that no one has represented to such party that the other parties would not seek to enforce jury and class action waivers in the event of suit, and (ii) acknowledges that it and the other parties have been induced to enter into this Agreement by, among other things, the mutual waivers, agreements, and certifications in this section.
Section 9.12 Severability . In the event any one or more of the provisions contained in this Agreement or in any other Loan Document should be held invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein and therein shall not in any way be affected or impaired thereby. The parties shall endeavour in good-faith negotiations to replace the invalid, illegal or unenforceable provisions with valid provisions the economic effect of which comes as close as possible to that of the invalid, illegal or unenforceable provisions.
Section 9.13 Counterparts . This Agreement may be executed in two or more counterparts, each of which shall constitute an original but all of which, when taken together, shall constitute but one contract, and shall become effective as provided in Section 9.03. Delivery of an executed counterpart to this Agreement by facsimile transmission or an electronic transmission of a PDF copy thereof shall be as effective as delivery of a manually signed original. Any such delivery shall be followed promptly by delivery of the manually signed original.
Section 9.14 Headings . Article and Section headings and the Table of Contents used herein are for convenience of reference only, are not part of this Agreement and are not to affect the construction of, or to be taken into consideration in interpreting, this Agreement.
Section 9.15 Jurisdiction; Consent to Service of Process . (a) Each of the Borrower, the Administrative Agent and the Lenders hereby irrevocably and unconditionally submits, for itself and its property, to the exclusive jurisdiction of any Texas State court or federal court of the United States sitting in Houston, Texas, and any appellate court from any thereof, in any action or proceeding arising out of or relating to this Agreement or the other Loan Documents, or for recognition or enforcement of any judgment, and each of the parties hereto hereby irrevocably and unconditionally agrees that all claims in respect of any such action or proceeding may be heard and determined in such Texas State or, to the extent permitted by law, in such federal court. The Borrower further irrevocably consents to the service of process in any action or proceeding in such courts by the mailing thereof by any parties thereto by registered or certified mail, postage prepaid, to the Borrower at the address specified for the Loan Parties in Section 9.01. Each of the parties hereto agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. Nothing in this Agreement (other than Section 8.09) shall affect any right that any Lender may otherwise have to bring any action or proceeding relating to this Agreement or the other Loan Documents against the Borrower or any Loan Party or their properties in the courts of any jurisdiction.
(b) Each of the Borrower, the Administrative Agent and the Lenders hereby irrevocably and unconditionally waives, to the fullest extent it may legally and effectively do so, any objection which it may now or hereafter have to the laying of venue of any suit, action or proceeding arising out of or relating to this Agreement or the other Loan Documents in any Texas State or federal court sitting in Houston, Texas. Each of the parties hereto hereby irrevocably waives, to the fullest extent permitted by law, the defense of an inconvenient forum to the maintenance of such action or proceeding in any such court.
Section 9.16 Confidentiality . Each of the Lenders and the Administrative Agent agrees that it shall maintain in confidence any information relating to the Borrower and its Subsidiaries and their respective Affiliates furnished to it by or on behalf of the Borrower or the other Loan Parties or
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such Subsidiary or Affiliate (other than information that (x) has become generally available to the public other than as a result of a disclosure by such party in breach of this Agreement, (y) has been independently developed by such Lender or the Administrative Agent without violating this Section 9.16 or (z) was available to such Lender or the Administrative Agent from a third party having, to such Persons actual knowledge, no obligations of confidentiality to the Borrower or any of its Subsidiaries or any such Affiliate) and shall not reveal the same other than to its directors, trustees, officers, employees, agents and advisors with a need to know or to any Person that approves or administers the Loans on behalf of such Lender (so long as each such Person shall have been instructed to keep the same confidential in accordance with this Section 9.16), except: (i) to the extent necessary to comply with law or any legal process or the regulatory or supervisory requirements of any Governmental Authority (including bank examiners), the National Association of Insurance Commissioners or of any securities exchange on which securities of the disclosing party or any Affiliate of the disclosing party are listed or traded, (ii) as part of reporting or review procedures to Governmental Authorities (including bank examiners) or the National Association of Insurance Commissioners, (iii) to its parent companies, Affiliates or auditors (so long as each such Person shall have been instructed to keep the same confidential in accordance with this Section 9.16), (iv) in connection with the exercise of any remedies under any Loan Document or in order to enforce its rights under any Loan Document in a legal proceeding, (v) to any prospective assignee of, or prospective Participant in, any of its rights under this Agreement (so long as such Person shall have been instructed to keep the same confidential in accordance with this Section 9.16 or on terms at least as restrictive as those set forth in this Section 9.16) and (vi) to any direct or indirect contractual counterparty in Swap Agreements or such contractual counterpartys professional advisor (so long as each such contractual counterparty agrees to be bound by the provisions of this Section 9.16 or on terms at least as restrictive as those set forth in Section 9.16 and each such professional advisor shall have been instructed to keep the same confidential in accordance with this Section 9.16). If a Lender or the Administrative Agent is requested or required to disclose any such information (other than to its bank examiners and similar regulators, or to internal or external auditors) pursuant to or as required by law or legal process or subpoena to the extent reasonably practicable, it shall give prompt notice thereof to the Borrower so that the Borrower may seek an appropriate protective order and such Lender or the Administrative Agent will cooperate with the Borrower (or the applicable Subsidiary or Affiliate) in seeking such protective order.
Section 9.17 Communications . (a) Delivery . (i) Each Loan Party hereby agrees that it will use all reasonable efforts to provide to the Administrative Agent all information, documents and other materials that it is obligated to furnish to the Administrative Agent pursuant to this Agreement and any other Loan Document, including, without limitation, all notices, requests, financial statements, financial and other reports, certificates and other information materials, but excluding any such communication that (A) relates to a request for a new, or a conversion of an existing, borrowing or other extension of credit (including any election of an interest rate or interest period relating thereto), (B) relates to the payment of any principal or other amount due under this Agreement prior to 4:00 p.m. (Houston, Texas time) on the scheduled date therefor, (C) provides notice of any Default or Event of Default under this Agreement or (D) is required to be delivered to satisfy any condition precedent to the effectiveness of this Agreement and/or any borrowing or other extension of credit hereunder (all such non-excluded communications collectively, the Communications ), by transmitting the Communications in an electronic/soft medium in a format reasonably acceptable to the Administrative Agent at the address referenced in Section 9.01(a)(ii). Nothing in this Section 9.17 shall prejudice the right of the Administrative Agent or any Lender or any Loan Party to give any notice or other communication pursuant to this Agreement or any other Loan Document in any other manner specified in this Agreement or any other Loan Document.
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(ii) Each Lender agrees that notice to it (as provided in the next sentence) specifying that the Communications have been posted to the Platform (as defined below) shall constitute effective delivery of the Communications to such Lender for purposes of the Loan Documents. Each Lender agrees (A) to notify the Administrative Agent in writing (including by electronic communication) from time to time of such Lenders e-mail address to which the foregoing notice may be sent by electronic transmission and (B) that the foregoing notice may be sent to such e-mail address.
(b) Posting . Each Loan Party further agrees that the Administrative Agent may make the Communications available to the Lenders by posting the Communications on Intralinks or a substantially similar electronic transmission system (the Platform ). The Borrower hereby acknowledges that (i) the Administrative Agent will make available to the Lenders materials and/or information provided by or on behalf of the Borrower hereunder (collectively, Borrower Materials ) by posting the Borrower Materials on the Platform and (ii) certain of the Lenders (each, a Public Lender ) may have personnel who do not wish to receive material non-public information with respect to the Loan Parties or their Affiliates, or the respective securities of any of the foregoing, and who may be engaged in investment and other market-related activities with respect to such Persons securities. The Borrower hereby agrees that it will use commercially reasonable efforts to identify that portion of the Borrower Materials that may be distributed to the Public Lenders and that (w) all such Borrower Materials shall be clearly and conspicuously marked PUBLIC which, at a minimum, shall mean that the word PUBLIC shall appear prominently on the first page thereof; (x) by marking Borrower Materials PUBLIC, the Borrower shall be deemed to have authorized the Administrative Agent and the Lenders to treat such Borrower Materials as not containing any material non-public information (although it may be sensitive and proprietary) with respect to the Loan Parties or their Affiliates or their respective securities for purposes of United States Federal and state securities laws; (y) all Borrower Materials marked PUBLIC are permitted to be made available through a portion of the Platform designated Public Side Information; and (z) the Administrative Agent shall be entitled to treat any Borrower Materials that are not marked PUBLIC as being suitable only for posting on a portion of the Platform not designated Public Side Information. Notwithstanding the foregoing, the Borrower shall not be under any obligation to mark any Borrower Materials PUBLIC to the extent the Borrower determines that such Borrower Materials contain material non-public information with respect to the Loan Parties or their Affiliates or their respective securities for purposes of United States Federal and state securities laws.
(c) Platform. The Platform is provided as is and as available. The Agent Parties (as defined below) do not warrant the accuracy or completeness of the Communications, or the adequacy of the Platform and expressly disclaim liability for errors or omissions in the Communications. No warranty of any kind, express, implied or statutory, including, without limitation, any warranty of merchantability, fitness for a particular purpose, non-infringement of third party rights or freedom from viruses or other code defects, is made by the Administrative Agent Party in connection with the Communications or the Platform. In no event shall the Administrative Agent, any of its Affiliates or any of their respective officers, directors, employees, agents advisors or representatives (collectively, Agent Parties ) have any liability to the Loan Parties or any Lender or any other Person or entity for damages of any kind, including, without limitation, direct or indirect, special, incidental or consequential damages, losses or expenses (whether in tort, contract or otherwise) arising out of any Loan Partys or the Administrative Agents transmission of communications through the internet, except to the extent the liability of the Administrative Agent Party is found in a final non-appealable judgment by a court of competent jurisdiction to have resulted primarily from the Administrative Agent Partys gross negligence or willful misconduct.
Section 9.18 Release of Guarantees . In the event that any Loan Party conveys, sells, leases, assigns, transfers or otherwise disposes of all or any portion of its assets (including the Equity Interests of any of its Subsidiaries) to a Person that is not (and is not required to become) a Loan Party in a transaction not prohibited by the Loan Documents, the Administrative Agent shall promptly (and the
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Lenders hereby authorize the Administrative Agent to) take such action and execute any such documents as may be reasonably requested by the Borrower and at the Borrowers expense to release any guarantees of the Obligations, by a Person that ceases to be a Subsidiary of the Borrower as a result of a transaction described above. The Guaranty Agreement and the guarantees made therein shall terminate, and each Loan Party shall automatically be released from its obligations thereunder, when all the Obligations are paid in full in cash and all Commitments are terminated (other than contingent indemnification obligations). At such time, the Administrative Agent agrees to take such actions as are reasonably requested by the Borrower at the Borrowers expense to evidence and effectuate such termination and release of the guarantee created by the Guarantee Agreement.
Section 9.19 U.S.A. PATRIOT Act and Similar Legislation . Each Lender hereby notifies each Loan Party that pursuant to the requirements of the U.S.A. PATRIOT Act and similar legislation, as applicable, it is required to obtain, verify and record information that identifies the Loan Parties, which information includes the name and address of each Loan Party and other information that will allow the Lenders to identify such Loan Party in accordance with such legislation. Each Loan Party agrees to furnish such information promptly upon request of a Lender. Each Lender shall be responsible for satisfying its own requirements in respect of obtaining all such information.
Section 9.20 Judgment . If for the purposes of obtaining judgment in any court it is necessary to convert a sum due hereunder in one currency into another currency, the parties hereto agree, to the fullest extent that they may effectively do so, that the rate of exchange used shall be that at which in accordance with normal banking procedures the Administrative Agent could purchase the first mentioned currency with such other currency at the Administrative Agents principal office in Houston, Texas on the Business Day preceding that on which final judgment is given.
Section 9.21 Reserved .
Section 9.22 No Fiduciary Duty . The Administrative Agent, each Lender and their respective Affiliates (collectively, solely for purposes of this paragraph, the Lenders ), may have economic interests that conflict with those of the Borrower and the other Loan Parties. The Borrower hereby agrees that subject to applicable law, nothing in the Loan Documents or otherwise will be deemed to create an advisory, fiduciary or agency relationship or fiduciary or other implied duty between the Lenders and the Loan Parties, their equityholders or their Affiliates. The Borrower hereby acknowledges and agrees that (i) the transactions contemplated by the Loan Documents are arms-length commercial transactions between the Lenders, on the one hand, and the Loan Parties, on the other, (ii) in connection therewith and with the process leading to such transaction none of the Lenders is acting as the agent or fiduciary of any Loan Party, its management, equityholders, creditors or any other person, (iii) no Lender has assumed an advisory or fiduciary responsibility in favor of any Loan Party with respect to the transactions contemplated hereby or the process leading thereto (irrespective of whether any Lender or any of its Affiliates has advised or is currently advising such Loan Party on other matters) or any other obligation to any Loan Party except the obligations expressly set forth in the Loan Documents, (iv) the Borrower and each other Loan Party has consulted its own legal and financial advisors to the extent it has deemed appropriate and (v) the Lenders may be engaged in a broad range of transactions that involve interests that differ from those of the Borrower and its Affiliates and no Lender has an obligation to disclose any such interests to the Borrower or its Affiliates. The Borrower further acknowledges and agrees that it is responsible for making its own independent judgment with respect to such transactions and the process leading thereto.
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Section 9.23 Application of Funds . After the exercise of remedies provided for in Section 7.01 (or after the Loans have automatically become immediately due and payable), any amounts received by the Administrative Agent on account of the Obligations shall be applied by the Administrative Agent in the following order:
(a) First , to payment of that portion of the Obligations constituting fees, indemnities, expenses and other amounts (including fees, charges and disbursements of counsel to the Administrative Agent) payable to the Administrative Agent in its capacity as such;
(b) Second , to payment of that portion of the Obligations constituting fees, indemnities and other amounts (other than principal and interest) payable to the Lenders (including fees, charges and disbursements of counsel to the respective Lenders) arising under the Loan Documents, ratably among them in proportion to the respective amounts described in this clause Second payable to them;
(c) Third , to payment of that portion of the Obligations constituting accrued and unpaid interest on the Loans and interest on other Obligations arising under the Loan Documents, ratably among the Lenders in proportion to the respective amounts described in this clause Third payable to them;
(d) Fourth , to payment of that portion of the Obligations constituting unpaid principal of the Loans ratably among the Lenders in proportion to the respective amounts described in this clause Fourth held by them; and
(e) Last , the balance, if any, after all of the Obligations have been indefeasibly paid in full, to the Borrower or as otherwise required by law.
Section 9.24 Imaging of Documents. Each Loan Party and each Lender understands and agrees that (a) Administrative Agents document retention policy involves the imaging of executed Loan Documents and the destruction of the paper originals, and (b) each Loan Party and each Lender waives any right that it may have to claim that the imaged copies of the Loan Documents are not originals.
Section 9.25 Keepwell .
(a) Borrower represents that it is a Qualified ECP Credit Party. Borrower hereby guarantees the payment and performance of all Obligations of each Loan Party (other than the Borrower) and absolutely, unconditionally and irrevocably undertakes to provide such funds or other support as may be needed from time to time by each Benefitting Loan Party in order for such Benefitting Loan Party to honor its obligations (without giving effect to Section 9.25(b)) under the Guaranty Agreement including obligations with respect to Swap Agreements (provided, however, that Borrower shall only be liable under this Section 9.25(a) for the maximum amount of such liability that can be hereby incurred without rendering its obligations under this Section 9.25(a), or otherwise under this Agreement or any Loan Document, as it relates to such Benefitting Loan Party, voidable under applicable law relating to fraudulent conveyance or fraudulent transfer, and not for any greater amount). The obligations of the Borrower under this Section 9.25(a) shall remain in full force and effect until all Obligations are paid in full to the Lenders, the Administrative Agent and all Swap Providers, and all of the Lenders Commitments are terminated. The Borrower intends that this Section 9.25(a) constitute, and this Section 9.25(a) shall be deemed to constitute, a keepwell, support, or other agreement for the benefit of each Benefitting Loan Party for all purposes of Section 1a(18)(A)(v)(II) of the Commodity Exchange Act.
(b) Notwithstanding any other provisions of this Agreement or any other Loan Document, Obligations guaranteed by any Loan Party shall exclude all Excluded Swap Obligations with respect to such Loan Party.
[SIGNATURE PAGES FOLLOW]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and delivered as of the date first above written.
FRANKS INTERNATIONAL MANAGEMENT B.V., acting on behalf of and as sole general partner of FRANKS INTERNATIONAL C.V., as Borrower | ||
By: | ||
Name: | ||
Title: | ||
AMEGY BANK NATIONAL ASSOCIATION, as Administrative Agent and a Lender | ||
By: | ||
Name: | ||
Title: | ||
CAPITAL ONE, NATIONAL ASSOCIATION, as Syndication Agent and a Lender | ||
By: | ||
Name: | ||
Title: |
Exhibit 10.11
GLOBAL TRANSACTION AGREEMENT
This Global Transaction Agreement (this Agreement ), dated as of July 22, 2013, is entered into by and between Franks International N.V., a limited liability company organized and existing under the laws of The Netherlands ( FINV ), and Mosing Holdings, Inc., a Delaware corporation ( MHI ). The above-named entities are sometimes referred to in this Agreement each as a Party and collectively as the Parties . Certain capitalized terms used herein shall have the meaning assigned to such terms in Article I .
RECITALS :
WHEREAS , MHI owns all of the outstanding shares of capital stock of each of Franks International, Inc., a Texas corporation ( FII ), Franks Casing Crew & Rental Tools, Inc., a Louisiana corporation ( Franks Casing ), and Franks Tong Service, Inc., an Oklahoma corporation (together with FII and Franks Casing, the U.S. Operating Companies ); and
WHEREAS , the Parties desire to effect a public offering of interests in the combined businesses of FINV and its subsidiaries and the U.S. Operating Companies and their respective subsidiaries by means of an initial public offering of shares of common stock of FINV (the Offering ), as more fully described in the Registration Statement; and
WHEREAS , in connection with the Offering, the Parties acknowledge that certain restructuring transactions have been or will be undertaken, as more fully described in the Registration Statement (the Restructuring ); and
WHEREAS , in connection with the Offering and the Restructuring, the Parties desire to, among other things, establish the economic terms of the Restructuring and to enter into certain other agreements.
NOW, THEREFORE , in consideration of the mutual covenants, representations, warranties and agreements herein contained, the Parties hereto agree as follows:
ARTICLE I
DEFINITIONS
Commission means the United States Securities and Exchange Commission.
FWW means FWW B.V., a private limited liability company organized and existing under the laws of The Netherlands.
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Ginsoma means Ginsoma Family C.V., a limited partnership established under the laws of The Netherlands.
Notes means the unsecured promissory notes issued by FINV payable to F.W.W. B.V., which had a principal balance of $415 million as of June 30, 2013.
Registration Statement means the Registration Statement on Form S-1 initially filed with the Commission on May 10, 2013 (Registration No. 333-188536), as amended to date.
ARTICLE II
CONTRIBUTIONS, ACKNOWLEDGMENTS AND AGREEMENTS
2.01 Offering .
The Parties hereby agree that, subject to obtaining necessary corporate or other relevant approvals, general market conditions and other customary conditions, FINV shall proceed with the Offering in the manner set forth in the Registration Statement; provided that the size of the Offering and the ultimate terms thereof shall be determined by FINV; provided, further that the proceeds therefrom will be used to retire the Notes in full.
2.02 Restructuring .
FINV and MHI and each of their subsidiaries, as applicable, shall effectuate the Restructuring substantially as described in the Registration Statement, with such changes as shall mutually be agreed to in writing by each of MHI and FINV. Specifically (and without limiting the foregoing), among other things:
(a) FINV shall cause its wholly owned subsidiaries, Franks International LP B.V., a private limited liability company organized and existing under the laws of The Netherlands ( FILP ), and Franks International Management B.V. ( FIM ), a private limited liability company organized and existing under the laws of The Netherlands, to form Franks International C.V., a new limited partnership to be established under the laws of The Netherlands ( FICV );
(b) FILP shall be admitted as a limited partner of FICV;
(c) FIM shall be admitted as the sole general partner of FICV;
(d) FINV shall contribute (through FILP) all of its subsidiaries, other than FILP and FIM, to FICV;
(e) prior to the closing of the Offering, MHI shall cause the U.S. Operating Companies to distribute to MHI certain assets not intended to be contributed as part of the Restructuring, which shall primarily consist of aircraft, real estate and life insurance policies;
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(f) in connection with the closing of the Offering, MHI shall contribute all of the outstanding equity interests in each of the U.S. Operating Companies to FICV in exchange for (x) a 30.8% limited partnership interest in FICV (with FINV indirectly retaining the remaining 69.2% limited partnership interest in FICV) (subject to any further dilution of MHIs partnership interest in FICV as contemplated by Section 2.03(i) below) and (y) a number of shares of Series A preferred stock of FINV that represents 30.8% of the total number of outstanding shares of FINV common stock and Series A preferred stock after such issuance (but prior to the issuance of additional shares of common stock to the public in the Offering);
(g) the partners of FICV will enter into an amended and restated limited partnership agreement, substantially as described in the Registration Statement, with such changes as shall be mutually agreed in writing by each of MHI and FINV; and
(h) FINV will use the proceeds from the sale of its common stock in the Offering to (i) retire the Notes and (ii) make a capital contribution to FICV (though FILP) in exchange for which FILP will acquire additional limited partnership interests, such that FINVs indirect percentage interest in FICV will equal the percentage of FINVs outstanding shares of common stock and Series A preferred stock represented by shares of common stock.
2.03 Amended and Restated Articles of Association of FINV .
In connection with the closing of the Offering, FINV shall amend and restate its articles of association substantially as described in the Registration Statement, with such changes as shall mutually be agreed to in writing by each of MHI and FINV.
2.04 Tax Receivable Agreement .
In connection with the closing of the Offering, FINV, FICV and MHI shall enter into a tax receivable agreement substantially as described in the Registration Statement, with such changes as shall mutually be agreed to in writing by each of FINV, FICV and MHI.
2.05 Registration Rights Agreement .
In connection with the closing of the Offering, FINV, FWW and MHI shall enter into a registration rights agreement substantially as described in the Registration Statement, with such changes as shall mutually be agreed to in writing by each of FINV, FWW and FHI.
2.06 Voting Agreement .
In connection with the Offering, Ginsoma, FWW, MHI and certain members of the Mosing Family shall enter into a voting agreement substantially as described in the Registration Statement, with such changes as shall mutually be agreed to in writing by Ginsoma, FWW, MHI and the members of the Mosing Family party thereto.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES
3.01 Due Organization .
Each Party represents and warrants that it is an entity duly organized, validly existing and in good standing under the laws of its jurisdiction of formation, as applicable, and has power and authority to enter into this Agreement and to carry out its obligations hereunder.
3.02 Due Authorization .
Each Party represents and warrants that the execution and delivery of this Agreement by such Party have been duly authorized by all necessary action on its part and no other proceedings on its part are necessary to authorize this Agreement or any of the transactions contemplated hereby.
3.03 Due Execution .
Each Party represents and warrants that this Agreement has been duly executed and delivered by such Party and constitutes a valid and binding obligation of each of them, and is enforceable against each of them in accordance with its terms.
ARTICLE IV
CLOSING CONDITIONS
The transactions contemplated by this Agreement shall be subject to (a) the receipt of required regulatory approvals, including pursuant to the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and (b) the consummation of the Offering.
ARTICLE V
FURTHER ASSURANCES
From and after the date hereof, and without any further consideration, the Parties agree to execute, acknowledge and deliver all such additional documents, and will do all such other acts and things, all in accordance with applicable law, as may be necessary or appropriate to more fully and effectively carry out the purposes of this Agreement.
ARTICLE VI
MISCELLANEOUS
6.01 Costs .
FINV shall cause FICV to pay all expenses, fees and costs, including sales, use and similar taxes, arising out of the contributions, conveyances and deliveries to be made hereunder, and shall pay all documentary, filing, recording, transfer, deed and conveyance taxes and fees required in connection therewith. In addition, FICV shall be responsible for all costs, liabilities and expenses (including court costs and reasonable attorneys fees) incurred in connection with the delivery of any document pursuant to this Agreement.
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6.02 Headings; References; Interpretation .
All Article and Section headings in this Agreement are for convenience only and shall not be deemed to control or affect the meaning or construction of any of the provisions hereof.
6.03 Successors and Assigns .
This Agreement shall be binding upon and shall inure to the benefit of the Parties and their respective successors and assigns.
6.04 No Third Party Rights .
The provisions of this Agreement are intended to bind the Parties as to each other and are not intended to and do not create rights in any other person or confer upon any other person any benefits, rights or remedies, and no person is or is intended to be a third party beneficiary of any of the provisions of this Agreement.
6.05 Counterparts .
This Agreement may be executed in any number of counterparts, all of which together shall constitute one agreement binding on the Parties.
6.06 Governing Law .
This Agreement shall be governed by, and construed in accordance with, the laws of the State of Texas applicable to contracts made and to be performed wholly within such state, without giving effect to conflict of laws principles thereof.
6.07 Severability .
If any of the provisions of this Agreement are held by any court of competent jurisdiction to contravene, or to be invalid under, the laws of any political body having jurisdiction over the subject matter hereof, such contravention or invalidity shall not invalidate the entire Agreement. Instead, this Agreement shall be construed as if it did not contain the particular provision or provisions held to be invalid, and an equitable adjustment shall be made and necessary provision added so as to give effect to the intention of the Parties as expressed in this Agreement at the time of execution of this Agreement.
6.08 Amendment or Modification .
The Agreement may be amended or modified from time to time only by the written agreement of all of the Parties. Each such instrument shall be reduced to writing and shall be designated on its face as an amendment to this Agreement.
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6.09 Termination .
This Agreement shall automatically terminate if the Offering is not consummated by January 1, 2014.
[Signature Page Follows]
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IN WITNESS WHEREOF, this Agreement has been duly executed by the Parties as of the date first written above.
FRANKS INTERNATIONAL N.V. | ||
By: |
/s/ Donald Keith Mosing |
|
Name: Donald Keith Mosing | ||
Title: Managing Director | ||
MOSING HOLDINGS, INC. | ||
By: |
/s/ Donald Keith Mosing |
|
Name: Donald Keith Mosing | ||
Title: President |
[Signature Page to Global Transaction Agreement]
Exhibit 10.12
VOTING AGREEMENT
This Voting Agreement (this Agreement ) is entered into as of July 22, 2013 by and among: Donald Keith Mosing, acting in his capacity as general partner of and acting for the risk and account of Ginsoma Family C.V., a limited partnership established under the laws of The Netherlands ( Ginsoma ); FWW B.V., a private limited liability company organized and existing under the laws of The Netherlands ( FWW ); Mosing Holdings, Inc., a Delaware corporation ( MHI ); and the other parties that are signatories hereto (the Mosing Owners Parties ). The above are sometimes referred to in this Agreement each as a Party and collectively as the Parties . Certain capitalized and other terms used in this Agreement are defined on Schedule A hereto.
WHEREAS , the Mosing Owners Parties and certain other persons currently constitute all of the partners in Ginsoma, which is the sole shareholder of FWW, which is the sole shareholder of Franks International N.V. ( FINV ); and
WHEREAS , the Mosing Owners Parties and certain other persons also currently collectively own all of the outstanding shares of capital stock of MHI, which in turn owns all of the outstanding shares of capital stock of each of Franks International, Inc., a Texas corporation ( FII ), Franks Casing Crew & Rental Tools, Inc., a Louisiana corporation ( Franks Casing ), and Franks Tong Service, Inc., an Oklahoma corporation (together with FII and Franks Casing, the U.S. Operating Companies ); and
WHEREAS , the Parties desire to effect a public offering of interests in the combined businesses of FINV and the U.S. Operating Companies by means of an initial public offering of shares of common stock of FINV (the Offering ); and
WHEREAS, pursuant to certain transactions to be entered into in contemplation of the Offering and in connection with the Offering, certain of the Parties will receive shares of common stock of FINV ( Common Stock ) and shares of Series A preferred stock of FINV ( Preferred Stock ); and
WHEREAS , in connection with the Offering, the Parties desire to enter into this Agreement to, among other things, ensure that FINV qualifies as a controlled company as defined in the New York Stock Exchange Listed Company Manual.
NOW, THEREFORE , the Parties, intending to be legally bound, hereby agree as follows:
SECTION 1. V OTING P ROVISIONS
Section 1.1 Voting of Subject Securities . Each Party agrees that, at each annual, extraordinary or other general meeting of shareholders of FINV (or at any adjournment or postponement thereof or pursuant to any consent in lieu of a meeting or otherwise) at which members of the supervisory board or management board are to be elected, it will vote (or cause to be voted) all Subject Securities Beneficially Owned by it for the election of members of FINVs supervisory board or management board in accordance with the instructions of the Shareholder Representative.
Section 1.2 Transfer of Voting Restrictions . The Parties agree that they will not Transfer any Subject Securities to any Affiliate unless and until such transferee has agreed in writing to be bound by this Agreement by execution of a Joinder Agreement (which such execution shall be deemed, for all purposes, to be the execution of this Agreement). Notwithstanding anything to the contrary in this Agreement other than Section 3.8 , this Agreement does not restrict the ability of any Party to Transfer any Subject Securities to any non-Affiliate at any time or from time to time, and no such non-Affiliate transferee (and no Subject Securities Transferred to any non-Affiliate provided that following such Transfer no Party Beneficially Owns such Subject Securities) will be bound by this Agreement.
Section 1.3 Legends . The Parties agree that stop transfer instructions reflecting the terms of this Agreement will be given to FINVs transfer agent with respect to the Subject Securities and that there may be placed on the certificates, if any, representing all Subject Securities an appropriate legend to ensure compliance with the terms of this Agreement. Any such instructions and legends will be removed with respect to any Subject Securities as soon as reasonably practicable after the later of (a) the time this Agreement no longer applies to such Subject Securities and (b) the date that the relevant Party requests such removal by notice pursuant to this Agreement.
SECTION 2. R EPRESENTATIONS AND W ARRANTIES
Section 2.1 Due Organization . Each Party that is not a natural person represents and warrants that it is an entity duly organized, validly existing and in good standing, as applicable, under the laws of its jurisdiction of formation and has the power and authority to enter into this Agreement and to carry out its obligations hereunder.
Section 2.2 Due Authorization . Each Party represents and warrants that the execution and delivery of this Agreement by such Party have been duly authorized by all necessary action on its part and no other proceedings on its part are necessary to authorize this Agreement or any of the transactions contemplated hereby.
Section 2.3 Due Execution . Each Party represents and warrants that this Agreement has been duly executed and delivered by such Party and constitutes a valid and binding obligation of each of them, and is enforceable against each of them in accordance with its terms.
SECTION 3. M ISCELLANEOUS
Section 3.1 Effectiveness . To the extent the Offering is not consummated by January 1, 2014, the provisions of Section 1 of this Agreement shall be void and of no effect.
Section 3.2 Term . This Agreement shall terminate on the date following the Offering on which no Party Beneficially Owns any Subject Securities; provided that this Agreement shall automatically terminate if the Offering is not consummated by January 1, 2014.
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Section 3.3 Notices . Any notice, communication, request, instruction or other document required or permitted hereunder shall be given in writing and delivered in person or sent by mail (postage prepaid, return receipt requested) or facsimile to the applicable addresses set forth on the signature page to this Agreement. Any such notice shall be effective upon receipt only if received during normal business hours or, if not received during normal business hours, on the next Business Day.
Each Party may, by written notice so delivered, change its address for notice purposes hereunder.
Section 3.4 Amendments; No Waivers .
(a) Any provision of this Agreement may be amended or waived if, and only if, such amendment or waiver is in writing and signed, in the case of an amendment, by all Parties, or in the case of a waiver, by the Party against whom the waiver is to be effective.
(b) No failure or delay by any Party hereto in the exercise of any right hereunder shall impair such right or be construed as a waiver of, or acquiescence in, any breach of any representation, warranty or agreement herein, nor shall any single or partial exercise of any such right preclude other or further exercise thereof or of any other right. All rights and remedies existing under this Agreement are cumulative to, and not exclusive of, any rights or remedies otherwise available.
Section 3.5 Successors . All covenants and other agreements contained in this Agreement by or on behalf of any of the Parties bind and inure to the benefit of their respective successors whether so expressed or not.
Section 3.6 Severability . Any provision of this Agreement that is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall (to the full extent permitted by law) not invalidate or render unenforceable such provision in any other jurisdiction.
Section 3.7 Counterparts . This Agreement may be executed in any number of counterparts, each of which shall be an original but all of which together shall constitute one instrument. Each counterpart may consist of a number of copies hereof, each signed by less than all, but together signed by all, of the Parties hereto.
Section 3.8 Specific Performance . The Parties each acknowledge and agree, and agree not to assert otherwise in any proceeding, that a breach or threatened breach of any of the provisions of this Agreement by a Party will cause irreparable injury to the other Parties to this Agreement for which remedies at law would be inadequate and, in recognition of that fact, agree that, in the event of a breach or threatened breach by any of them of the provisions of this Agreement, in addition to any remedies at law, the aggrieved Party, without posting any bond and without any showing of irreparable injury, shall be entitled to obtain equitable relief in the form of specific performance, a temporary restraining order, a temporary or permanent injunction or any other equitable remedy which may then be available. The provisions of this Section 3.7 are without prejudice to any other rights that the Parties hereto may have for any breach of this Agreement. The Parties further agree not to assert in any proceeding that grounds for any equitable relief are not satisfied.
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Section 3.9 Protections and Benefits of Agreement . None of the Parties shall take any knowing or intentional action to deprive the other Parties of the benefits and protections afforded by this Agreement, including without limitation selling any of the Subject Securities to a Person that is not an Affiliate of such Party with an agreement or understanding that such Subject Securities will be re-purchased by such Party or any of its Affiliates free and clear of any restrictions contained in this Agreement or with an agreement or understanding to vote such Subject Securities in a manner directed by such party.
Section 3.10 Governing Law . This Agreement shall be construed and enforced in accordance with, and the rights of the Parties shall be governed by, the laws of the State of Texas, without regard to the conflict of law principles thereof. Any suit, action or proceeding arising out of or relating to this Agreement may be brought in any state or federal court of competent jurisdiction in Harris County, Texas, and each of the Parties hereby consents to the jurisdiction of such courts (and of the appropriate appellate courts therefrom). Each Party waives any objection which it may have now or hereafter to the laying of the venue of such action or proceeding and irrevocably submits to the jurisdiction of any such court in any such suit, action or proceeding. The Parties unconditionally waive any right to trial by jury in any such suit, action or proceeding.
Section 3.11 Additional Shares . In the event (i) of any stock dividend, stock split, recapitalization, reclassification, combination or exchange of shares of capital stock of FINV on, of or affecting a Partys Subject Shares or (ii) a Party becomes the beneficial owner of any additional shares of Common Stock, Preferred Stock or other securities of FINV entitling the holder thereof to vote or give consent with respect to the matters set forth in Section 1.1 hereof, then the terms of this Agreement shall apply to the shares of capital stock or other securities of FINV held by such Party immediately following the effectiveness of the events described in clause (i) or such Party becoming the beneficial owner thereof, as described in clause (ii). Each Party hereby agrees, while this Agreement is in effect, to notify FINV of the number of any new shares of Common Stock or Preferred Stock acquired by such party, if any, after the date hereof.
[Signature Pages Follow]
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IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be executed as of the date first referred to above.
GINSOMA FAMILY C.V. | ||
By: |
/s/ Donald Keith Mosing |
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Name: | Donald Keith Mosing | |
Title: | Sole Managing Partner |
[Signature page to Voting Agreement]
FWW B.V. | ||
By: | Donald Keith Mosing | |
Title: | Managing director A | |
Signature: |
/s/ Donald Keith Mosing |
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By: | Intertrust (Netherlands) B.V. | |
Title: | Managing director B | |
Signature: | /s/ Pieter Oosthoek | |
Name: |
Pieter Oosthoek |
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Title: | Proxy holder | |
Signature: |
/s/ D.J. Jaarsma |
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Name: |
D.J. Jaarsma |
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Title: | Proxy holder |
[Signature page to Voting Agreement]
MOSING HOLDINGS, INC. | ||
By: |
/s/ Donald Keith Mosing |
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Name: | Donald Keith Mosing | |
Title: | President |
[Signature page to Voting Agreement]
/s/ Don Mosing |
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Donald E. Mosing | ||||
Address for notice: | ||||
Attention: | ||||
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[Signature page to Voting Agreement]
/s/ Donald Keith Mosing |
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Donald Keith Mosing | ||||
Address for notice: | ||||
Attention: | ||||
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[Signature page to Voting Agreement]
/s/ William Bradford Mosing |
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William Bradford Mosing, Individually; | ||||
As Trustee for the Trust u/l/w Janice P. Mosing f/b/o | ||||
Lindsey R. Mosing; | ||||
As Trustee for the Trust u/l/w Janice P. Mosing f/b/o | ||||
Jaclyn E. Mosing; | ||||
As Trustee for the Trust u/l/w Janice P. Mosing f/b/o | ||||
Victoria R. Mosing; | ||||
As Trustee for the By-Pass Corporate Stock Trust u/l/w | ||||
Janice P. Mosing f/b/o Donald Keith Mosing; | ||||
As Trustee for the By-Pass Corporate Stock Trust u/l/w Janice P. Mosing f/b/o Gregory Stanton Mosing; and |
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As Trustee for the By-Pass Corporate Stock Trust u/l/w | ||||
Janice P. Mosing f/b/o William B. Mosing. | ||||
Address for notice: | ||||
Attention: | ||||
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THE NORTHERN TRUST COMPANY OF DELAWARE | ||||
As Trustee for The 2009 Mosing Family Delaware Dynasty Trust FBO William Bradford Mosing; | ||||
As Trustee for The 2009 Mosing Family Delaware Dynasty Trust FBO Donald Keith Mosing; | ||||
As Trustee for The 2009 Mosing Family Delaware Dynasty Trust FBO Gregory Stanton Mosing; and | ||||
As Trustee for The 2009 Mosing Family Delaware Dynasty Trust FBO Melanie Christine Mosing. | ||||
/s/ Danielle E. Merrit |
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Name: Danielle E. Merrit Title: Officer, The Northern Trust Company of Delaware |
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Address for notice: | ||||
Attention: | ||||
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Fax: |
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/s/ Gregory Stanton Mosing |
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Gregory Stanton Mosing | ||||
Address for notice: | ||||
Attention: | ||||
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/s/ Michael Frank Mosing |
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Michael Frank Mosing, Individually; | ||||
As Trustee for the Succession of Clara L. Mosing; and | ||||
As Trustee for The CLM 2009 IDG Trust. | ||||
Address for notice: | ||||
Attention: | ||||
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Phone: | ||||
Fax: |
[Signature page to Voting Agreement]
/s/ Steven Brent Mosing |
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Steven Brent Mosing, Individually; and | ||||
As Trustee for The Erich & Stephanie Mosing 1994 Trust, Share A f/b/o Erich Lloyd Mosing; | ||||
As Trustee for The Erich & Stephanie Mosing 1994 Trust, Share B f/b/o Stephanie Marie Mosing; | ||||
As Trustee for The CLM 2009 IDG Trust. | ||||
Address for notice: | ||||
Attention: | ||||
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Phone: | ||||
Fax: |
[Signature page to Voting Agreement]
/s/ Sharon Mosing Miller |
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Sharon Mosing Miller, Individually; and | ||||
As Trustee for the Succession of Timothy Dupre Mosing | ||||
Address for notice: | ||||
Attention: | ||||
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Fax: |
[Signature page to Voting Agreement]
/s/ Jeffrey Louis Mosing |
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Jeffrey Louis Mosing | ||||
Address for notice: | ||||
Attention: | ||||
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Phone: | ||||
Fax: |
[Signature page to Voting Agreement]
/s/ Kirkland David Mosing |
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Kirkland David Mosing | ||||
Address for notice: | ||||
Attention: | ||||
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[Signature page to Voting Agreement]
/s/ Kendall Garrett Mosing |
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Kendall Garrett Mosing, Individually; and | ||||
As Trustee for The DBM 2009 QSST IDG Trust u/t/a/ December 17, 2009; As Trustee for The LKM 2009 QSST IDG Trust u/t/a/ December 17, 2009. |
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Address for notice: | ||||
Attention: | ||||
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[Signature page to Voting Agreement]
DONALD K. MOSING FAMILY PARTNERSHIP, LTD. | ||
By: its General Partner, the Donald Keith Mosing Revocable Trust | ||
/s/ Donald Keith Mosing |
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Name: Donald Keith Mosing | ||
Title: Trustee | ||
Address for notice: | ||
c/o Franks International | ||
Attention: Keith Mosing | ||
10260 Westheimer, Suite 700 | ||
Houston, Texas 77042 | ||
Phone: (281) 966-7300 | ||
Fax: (281) - |
[Signature page to Voting Agreement]
Schedule A
DEFINED TERMS
For purposes of this Agreement, the following terms shall have the following meanings:
Affiliate of any specified Person means any other person which, directly or indirectly, is in control of, is controlled by, or is under common control with, such specified Person. For purposes of this definition, control of a Person means the power, direct or indirect, to direct or cause the direction of the management and policies of such Person whether by contract or otherwise; and the terms controlling and controlled have meanings correlative to the foregoing. For each Person that is an individual, the term Affiliate shall also be deemed to include any Family Member. For Ginsoma and MHI, the term Affiliate shall also be deemed to include the Mosing Owners Parties and the other partners or equity owners, as applicable, thereof.
Beneficially Own or Beneficial Ownership with respect to any securities means having beneficial ownership of such securities (as determined pursuant to Rule 13d-3 under the Exchange Act), including pursuant to any agreement, arrangement or understanding, whether or not in writing.
Business Day means any day other than a Saturday, a Sunday or a day on which commercial banks in New York, New York or Houston, Texas are required or authorized to be closed.
Exchange Act means the Securities Exchange Act of 1934, as amended.
Family Member means, with respect to each Person that is an individual, a spouse, lineal ancestor, lineal descendant, legally adopted child, brother or sister of such Person, or a lineal descendant or legally adopted child of a brother or sister of such Person.
Joinder Agreement means a Joinder Agreement in the form attached hereto as Schedule B .
Person means any individual, partnership (limited or general), joint venture, limited liability company, corporation, association, business entity, trust, business trust, unincorporated organization, government or department or agency of a government.
Shareholder Representative means (a) Donald Keith Mosing or (b) such other Person as shall be agreed upon in writing by Parties that Beneficially Own an aggregate of at least 66 2 / 3 % of the Subject Securities.
Subject Securities means any Voting Securities (including any Voting Securities into which any Subject Securities are exchanged or converted into, whether pursuant to a split, distribution, reorganization, recapitalization, merger, share exchange, amalgamation or other similar transaction) owned on the date hereof or subsequently acquired by a Party (including any party joined to this Agreement by means of a Joinder Agreement).
Schedule A
Transfer means any sale, exchange, transfer or other disposition, and to Transfer shall mean to sell, exchange, transfer or otherwise dispose of. For purposes of the first sentence of Section 1.3, Transfer includes any pledge or encumbrance and to Transfer shall include to pledge or encumber.
Voting Securities means the Common Stock, the Preferred Stock and any other equity interests that are entitled to vote with the Common Stock and the Preferred Stock in the election of supervisory and management directors of FINV.
Schedule A - 2
Schedule B
JOINDER AGREEMENT
WHEREAS , a (the Transferor is party to that certain Voting Agreement (the Voting Agreement ), dated as of [], 2013; and
WHEREAS , each Party has agreed that it will not Transfer any Subject Securities to any Affiliate unless and until such transferee has agreed in writing to be bound by the Voting Agreement by execution of a Joinder Agreement (which such execution shall be deemed, for all purposes, to be the execution of the Voting Agreement), with such transferee being deemed to be a Party for purposes of the Voting Agreement;
WHEREAS , the Transferor desires to Transfer Subject Securities to the Person named on the signature page hereto (the Transferee );
WHEREAS , the Transferee acknowledges that such Subject Securities are subject to the terms of the Voting Agreement; and
WHEREAS , the Transferee desires to be bound by the terms of the Voting Agreement.
Capitalized terms used herein and not otherwise defined herein shall have the meanings ascribed to such terms in the Voting Agreement.
NOW, THEREFORE , the Transferee hereby agrees for the benefit of the Parties and FINV, as follows:
1. Joinder . The Transferee hereby acknowledges that it has received and reviewed a copy of the Voting Agreement and all other documents it deems fit to enter into this Joinder Agreement (the Joinder Agreement ), and acknowledges and agrees (i) to join and become a party to the Voting Agreement by execution of this Joinder Agreement; (ii) to be bound by all covenants, agreements, representations, warranties, indemnities and acknowledgments attributable to the Transferor as if made by, and with respect to, such Transferee; (iii) to perform all obligations and duties required and be entitled to all the benefits of the Transferor under the Voting Agreement; and (iv) that any Subject Securities Beneficially Owned by the Transferee shall be subject to the terms and conditions of the Voting Agreement.
2. Representations and Warranties and Agreements of the Transferee . Each of the undersigned hereby represents and warrants to and agrees with the Parties that it has all requisite power and authority to execute, deliver and perform its obligations under this Joinder Agreement and to consummate the transaction contemplated hereby and that when this Joinder Agreement is executed and delivered, it will constitute a valid and legally binding agreement enforceable against the Transferee in accordance with its terms.
3. Counterparts . This Joinder Agreement may be signed in one or more counterparts (which may be delivered in original form or via facsimile), each of which shall constitute an original when so executed and all of which together shall constitute one and the same agreement.
Schedule B
Schedule B
4. Amendments . No amendment or waiver of any provision of this Joinder Agreement, nor any consent or approval to any departure therefrom, shall in any event be effective unless the same shall be in writing and signed by each of the Parties.
5. Headings . The section headings used herein are for convenience only and shall not affect the construction hereof.
6. Governing Law . This Joinder Agreement shall be construed and enforced in accordance with, and the rights of the Parties shall be governed by, the laws of the State of Texas, without regard to the conflict of law principles thereof. Any suit, action or proceeding arising out of or relating to this Joinder Agreement may be brought in any state or federal court of competent jurisdiction in Harris County, Texas, and the Transferee hereby consents to the jurisdiction of such courts (and of the appropriate appellate courts therefrom). The Transferee waives any objection which it may have now or hereafter to the laying of the venue of such action or proceeding and irrevocably submits to the jurisdiction of any such court in any such suit, action or proceeding. The Transferee unconditionally waives any right to trial by jury in any such suit, action or proceeding.
Schedule B
Schedule B
IN WITNESS WHEREOF, the undersigned has executed this agreement as of the date first written above.
TRANSFEREE: | ||
By: |
Name: |
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Address for notice: |
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Attention: |
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Phone: |
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Fax: |
Schedule B
Exhibit 21.1
LIST OF SUBSIDIARIES OF FRANKS INTERNATIONAL N.V.
Entity |
Jurisdiction |
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Franks Casing Crew & Rental Tools, LLC |
Louisiana | |
Franks International C.V. |
Netherlands | |
Franks International, LLC |
Texas | |
Franks International West Africa (BVI) Ltd |
British Virgin Islands | |
Franks Tong Service, LLC |
Oklahoma | |
Oilfield Equipment Rental B.V. |
Netherlands |
Exhibit 23.1
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We hereby consent to the use in this Registration Statement on Amendment No. 3 to Form S-1 of Franks International N.V. of our report dated May 10, 2013 relating to the combined financial statements of Franks International N.V., which appear in such Registration Statement. We also consent to the reference to us under the heading Experts in such Registration Statement.
/s/ PricewaterhouseCoopers LLP
Houston, Texas
July 24, 2013