EXHIBIT 10.22
$200,000,000
VARCO INTERNATIONAL, INC.
7 1/4% Senior Notes due 2011
PURCHASE AGREEMENT
April 26, 2001
Credit Suisse First Boston Corporation
Salomon Smith Barney Inc.
RBC Dominion Securities Corporation
Simmons & Company International
As Purchasers
c/o Credit Suisse First Boston Corporation
Eleven Madison Avenue,
New York, N.Y. 10010-3629
Dear Sirs:
1. Introductory. Varco International, Inc., a Delaware corporation (the
"Company"), proposes, subject to the terms and conditions stated herein, to
issue and sell to the several initial purchasers named in Schedule A hereto (the
"Purchasers") $200,000,000 principal amount of its 7 1/4% Senior Notes due 2011
(the "Notes") to be issued under an indenture (the "Indenture"), among the
Company, the Guarantors (as defined herein) and Bank of New York Trust Company
of Florida, as Trustee (the "Trustee"). The United States Securities Act of 1933
is herein referred to as the "Securities Act."
Initially, the Notes will be guaranteed (the "Guarantees" and together with
the Notes, the "Offered Securities") on a senior unsecured basis by Varco I/P,
Inc.; Tubo-FGS, LLC; Tuboscope (Holding U.S.) Inc.; Fiber Glass Systems
Holdings, LLC; Fiber Glass Systems, LP; Varco, LP; Quality Tubing Inc.;
Tuboscope Pipeline Services Inc.; and Environmental Procedures Inc.
(collectively, the "Guarantors" and, together with the Company, the "Issuers").
The Issuers hereby agree with the several Purchasers as follows:
2. Representations and Warranties of the Issuers. The Issuers, jointly
and severally, represent and warrant to, and agree with, the several Purchasers
that:
(a) A preliminary offering circular and an offering circular relating
to the Offered Securities to be offered by the Purchasers have been
prepared by the Company. Such preliminary offering circular and offering
circular, as supplemented as of the date of this Agreement, together with
the documents incorporated by reference therein and any other document
approved by the Company for use in connection with the contemplated resale
of the Offered Securities are hereinafter collectively referred to as the
"Offering Document". On the date of this Agreement, the Offering Document
does not include any untrue statement of a material fact or omit to state
any material fact necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading. The
preceding sentence does not apply to statements in or omissions from the
Offering Document based upon written information furnished to the Company
by any Purchaser through Credit Suisse First Boston Corporation ("CSFBC")
specifically for use therein, it being understood and agreed that the only
such information is that described as such in Section 7(b) hereof. Except
as disclosed in the Offering Document, on the date of this Agreement, the
Company's Annual Report on Form 10-K most recently filed with the
Securities and Exchange Commission (the "Commission") and all subsequent
reports (collectively, the "Exchange Act Reports") which have been filed by
the Company with the Commission or sent to stockholders pursuant to the
Securities Exchange Act of 1934 (the "Exchange Act") do not include any
untrue statement of a material fact or omit to state any material fact
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading. Such documents, when they were
filed with the Commission, conformed in all material respects to the
requirements of the Exchange Act and the rules and regulations of the
Commission thereunder.
(b) The Company has been duly incorporated and is an existing
corporation in good standing under the laws of the State of Delaware, with
corporate power and authority to own its properties and conduct its
business as described in the Offering Document; and the Company is duly
qualified to do business as a foreign corporation in good standing in all
other jurisdictions in which its ownership or lease of property or the
conduct of its business requires such qualification, except where the
failure so to qualify would not have a material adverse effect on the
condition (financial or other), business, properties or results of
operations of the Company and its subsidiaries taken as a whole ("Material
Adverse Effect").
(c) Each Guarantor and each Significant Subsidiary (as defined in
Regulation S-X under the Securities Act) of the Company has been duly
organized and is an existing entity in good standing under the laws of the
jurisdiction of its organization, with power and authority to own its
properties and conduct its business as described in the Offering Document;
and each Guarantor and each Significant Subsidiary of the Company is duly
qualified to do business as a foreign corporation, partnership or limited
liability company in good standing in all other jurisdictions in which its
ownership or lease of property or the conduct of its business requires such
qualification, except where the failure to so qualify would not have a
Material Adverse Effect; all of the issued and outstanding capital stock or
other equity interests of each Guarantor and each Significant Subsidiary of
the Company has been duly authorized and validly issued and is fully paid
and nonassessable; and the capital stock or other equity interests of each
Guarantor and each Significant Subsidiary owned by the Company, directly or
through subsidiaries, is owned free from liens, encumbrances and defects.
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(d) (1) The Indenture has been duly authorized by each of the Issuers;
(2) the Notes and the Guarantees have been duly authorized by the Company
and each of the Guarantors, respectively; and (3) when the Notes and the
Guarantees are delivered and paid for pursuant to this Agreement on the
Closing Date (as defined below), (i) the Indenture will have been duly
executed and delivered by each of the Issuers, (ii) the Notes and the
Guarantees will have been duly executed, authenticated, issued and
delivered by the Company and each of the Guarantors, respectively, and will
conform to the description thereof contained in the Offering Document,
(iii) the Indenture and the Notes will constitute valid and legally binding
obligations of the Company enforceable against the Company in accordance
with their terms, subject to bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium and similar laws of general applicability
relating to or affecting creditors' rights and to general equity principles
and (iv) the Indenture and the Guarantees will constitute valid and binding
obligations of each of the Guarantors enforceable against each Guarantor in
accordance with their terms, subject to bankruptcy, insolvency, fraudulent
transfer, reorganization, moratorium and similar laws of general
applicability relating to or affecting creditors' rights and to general
equity principles.
(e) No consent, approval, authorization, or order of, or filing with,
any governmental agency or body or any court is required for the
consummation of the transactions contemplated by this Agreement in
connection with the issuance and sale of the Offered Securities by the
Company.
(f) The execution, delivery and performance of the Indenture and this
Agreement by the Issuers, and the issuance and sale of the Offered
Securities by the Issuers and compliance with the terms and provisions
thereof will not result in a breach or violation of any of the terms and
provisions of, or constitute a default under, (i) the charter or by-laws or
comparable governing documents of the Company or the respective Guarantors
or (ii) any statute, rule, regulation or order of any governmental agency
or body or any court, domestic or foreign, having jurisdiction over the
Company or any subsidiary of the Company or any of their properties, or,
except for that certain Amended and Restated Credit Agreement dated as of
February 9, 1998 (the "Credit Agreement") among the Company and the lenders
thereunder, any agreement or instrument to which the Company or any such
subsidiary is a party or by which the Company or any such subsidiary is
bound or to which any of the properties of the Company or any such
subsidiary is subject, except, in the case of clause (ii), for such
breaches, violations or defaults which do not individually or in the
aggregate cause a Material Adverse Effect. The Issuers have full power and
authority to authorize, issue and sell the Offered Securities as
contemplated by this Agreement.
(g) This Agreement has been duly authorized, executed and delivered
by the Company and each of the Guarantors.
(h) Except as disclosed in the Offering Document, the Company and its
subsidiaries have good and marketable title to all real properties and all
other material
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properties and assets owned by them, in each case free from liens,
encumbrances and defects that would materially affect the value thereof or
materially interfere with the use made or to be made thereof by them; and
except as disclosed in the Offering Document, the Company and its
subsidiaries hold any leased real or material personal property under valid
and enforceable leases with no exceptions that would materially interfere
with the use made or to be made thereof by them.
(i) The Company and its subsidiaries possess adequate certificates,
authorities or permits issued by appropriate governmental agencies or
bodies necessary to conduct the business now operated by them and have not
received any notice of proceedings relating to the revocation or
modification of any such certificate, authority or permit that, if
determined adversely to the Company or any of its subsidiaries, would
individually or in the aggregate have a Material Adverse Effect.
(j) No labor dispute with the employees of the Company or any
subsidiary exists or, to the knowledge of the Company, is imminent that
might have a Material Adverse Effect.
(k) The Company and its subsidiaries own, possess or can acquire on
reasonable terms, adequate trademarks, trade names and other rights to
inventions, know-how, patents, copyrights, confidential information and
other intellectual property (collectively, "intellectual property rights")
necessary to conduct the business now operated by them, or presently
employed by them, and, except as disclosed in the Offering Document, have
not received any notice of infringement of or conflict with asserted rights
of others with respect to any intellectual property rights that, if
determined adversely to the Company or any of its subsidiaries, would
individually or in the aggregate have a Material Adverse Effect.
(l) Except as disclosed in the Offering Document, neither the Company
nor any of its subsidiaries is in violation of any statute, rule,
regulation, decision or order of any governmental agency or body or any
court, domestic or foreign, relating to the use, disposal or release of
hazardous or toxic substances or relating to the protection or restoration
of the environment or human exposure to hazardous or toxic substances
(collectively, "environmental laws"), owns or operates any real property
contaminated with any substance that is subject to any environmental laws,
is liable for any off-site disposal or contamination pursuant to any
environmental laws, or is subject to any claim relating to any
environmental laws, which violation, contamination, liability or claim
would individually or in the aggregate have a Material Adverse Effect; and
the Company is not aware of any pending investigation which might lead to
such a claim.
(m) Except as disclosed in the Offering Document, there are no
pending actions, suits or proceedings against or affecting the Company, any
of its subsidiaries or any of their respective properties that, if
determined adversely to the Company or any of its subsidiaries, would
individually or in the aggregate have a Material Adverse Effect, or would
materially and adversely affect the ability of the Company to perform its
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obligations under the Indenture or this Agreement, or which are otherwise
material in the context of the sale of the Offered Securities; and no such
actions, suits or proceedings are, to the Company's knowledge, threatened
or contemplated.
(n) The financial statements included in the Offering Document
present fairly the financial position of the Company and its consolidated
subsidiaries as of the dates shown and their results of operations and cash
flows for the periods shown, and such financial statements have been
prepared in conformity with the generally accepted accounting principles in
the United States applied on a consistent basis.
(o) Except as disclosed in the Offering Document (but without regard
to Exchange Act Reports filed, or any other document used in connection
with the contemplated resale of the Offered Securities, in either case,
after the filing of the Company's Current Report on Form 8-K filed April
25, 2001 and dated April 24, 2001) since the date of the latest audited
financial statements in the Offering Document there has been no material
adverse change, nor any development or event involving a prospective
material adverse change, in the condition (financial or other), business,
properties or results of operations of the Company and its subsidiaries
taken as a whole and there has been no dividend or distribution of any kind
declared, paid or made by the Company on any class of its capital stock.
(p) None of the Issuers is an open-end investment company, unit
investment trust or face-amount certificate company that is or is required
to be registered under Section 8 of the United States Investment Company
Act of 1940 (the "Investment Company Act); and none of the Issuers is nor,
after giving effect to the offering and sale of the Offered Securities and
the application of the proceeds thereof as described in the Offering
Document, will be an "investment company" as defined in the Investment
Company Act.
(q) No securities of the same class (within the meaning of Rule
144A(d)(3) under the Securities Act) as the Offered Securities are listed
on any national securities exchange registered under Section 6 of the
Exchange Act or quoted in a U.S. automated inter-dealer quotation system.
(r) The offer and sale of the Offered Securities in the manner
contemplated by this Agreement and the Offering Document will be exempt
from the registration requirements of the Securities Act by reason of
Section 4(2) thereof and Regulation S thereunder and it is not necessary to
qualify an indenture in respect of the Offered Securities under the United
States Trust Indenture Act of 1939, as amended (the "Trust Indenture Act").
(s) Neither the Company, nor any of its affiliates, nor any person
acting on its or their behalf (i) has, within the six-month period prior to
the date hereof, offered or sold in the United States or to any U.S. person
(as such terms are defined in Regulation S under the Securities Act) the
Offered Securities or any security of the same class or series as the
Offered Securities or (ii) has offered or will offer or sell the Offered
Securities (A) in the United States by means of any form of general
solicitation or general advertising within
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the meaning of Rule 502(c) under the Securities Act or (B) with respect to
any such securities sold in reliance on Rule 903 of Regulation S
("Regulation S") under the Securities Act, by means of any directed selling
efforts within the meaning of Rule 902(b) of Regulation S. The Company, its
affiliates and any person acting on its or their behalf have complied and
will comply with the offering restrictions requirement of Regulation S. The
Company has not entered and will not enter into any contractual arrangement
with respect to the distribution of the Offered Securities except for this
Agreement.
(t) The Company is subject to Section 13 or 15(d) of the Exchange
Act.
(u) There is no "substantial U.S. market interest" as defined in Rule
902(j) of Regulation S in the Company's debt securities.
(v) As of the Closing Date, the Guarantors will include all of the
guarantors under the Credit Agreement.
3. Purchase, Sale and Delivery of Offered Securities. On the basis of the
representations, warranties and agreements herein contained, but subject to the
terms and conditions herein set forth, the Issuers agree to sell to the
Purchasers, and the Purchasers agree, severally and not jointly, to purchase
from the Issuers, at a purchase price of 7 1/4% of the principal amount thereof,
the respective principal amounts of Notes (together with Guarantees) set forth
opposite the names of the several Purchasers in Schedule A hereto.
The Issuers will deliver against payment of the purchase price the Offered
Securities in the form of one or more permanent global securities in definitive
form (the "Global Securities") deposited with the Trustee as custodian for The
Depository Trust Company ("DTC") and registered in the name of Cede & Co., as
nominee for DTC. Interests in any permanent Global Securities will be held only
in book-entry form through DTC, except in the limited circumstances described in
the Offering Document. Payment for the Offered Securities shall be made by the
Purchasers in Federal (same day) funds by official check or checks or wire
transfer to an account at a bank acceptable to CSFBC drawn to the order of the
Company at the office of Simpson Thacher & Bartlett at 9:00 A.M., (New York
time), on May 1, 2001 , or at such other time not later than seven full business
days thereafter as CSFBC and the Company determine, such time being herein
referred to as the "Closing Date", against delivery to the Trustee as custodian
for DTC of the Global Securities representing all of the Offered Securities. The
Global Securities will be made available for checking at the above office of
Simpson Thacher & Bartlett at least 24 hours prior to the Closing Date.
4. Representations by Purchasers; Resale by Purchasers. (a) Each Purchaser
severally represents and warrants to the Issuers that it is an "accredited
investor" within the meaning of Regulation D under the Securities Act.
(b) Each Purchaser severally acknowledges that the Offered Securities
have not been registered under the Securities Act and may not be offered or
sold within the United States or to, or for the account or benefit of, U.S.
persons except pursuant to an
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exemption from the registration requirements of the Securities Act. Each
Purchaser severally represents and agrees that it has offered and sold the
Offered Securities, and will offer and sell the Offered Securities (i) as
part of its distribution at any time, only in accordance with Rule 903 or
Rule 144A under the Securities Act ("Rule 144A"). Accordingly, neither such
Purchaser nor its affiliates, nor any persons acting on its or their
behalf, have engaged or will engage in any directed selling efforts with
respect to the Offered Securities, and such Purchaser, its affiliates and
all persons acting on its or their behalf have complied and will comply
with the offering restrictions requirement of Regulation S.
Terms used in this subsection (b) have the meanings given to them by
Regulation S.
(c) Each Purchaser severally agrees that it and each of its
affiliates has not entered and will not enter into any contractual
arrangement with respect to the distribution of the Offered Securities
except for any such arrangements with the other Purchasers or affiliates of
the other Purchasers or with the prior written consent of the Company.
(d) Each Purchaser severally agrees that it and each of its
affiliates will not offer or sell the Offered Securities in the United
States by means of any form of general solicitation or general advertising
within the meaning of Rule 502(c) under the Securities Act, including, but
not limited to (i) any advertisement, article, notice or other
communication published in any newspaper, magazine or similar media or
broadcast over television, radio or the Internet, or (ii) any seminar or
meeting whose attendees have been invited by any general solicitation or
general advertising. Each Purchaser severally agrees, with respect to
resales made in reliance on Rule 144A of any of the Offered Securities, to
deliver either with the confirmation of such resale or otherwise prior to
settlement of such resale a notice to the effect that the resale of such
Offered Securities has been made in reliance upon the exemption from the
registration requirements of the Securities Act provided by Rule 144A.
(e) Each of the Purchasers severally represents and agrees that (i)
it has not offered or sold and prior to the date six months after the date
of issue of the Offered Securities will not offer or sell any Offered
Securities to persons in the United Kingdom except to persons whose
ordinary activities involve them in acquiring, holding, managing or
disposing of investments (as principal or agent) for the purposes of their
businesses or otherwise in circumstances which have not resulted and will
not result in an offer to the public in the United Kingdom within the
meaning of the Public Offers of Securities Regulations 1995; (ii) it has
complied and will comply with all applicable provisions of the Financial
Services Act 1986 with respect to anything done by it in relation to the
Offered Securities in, from or otherwise involving the United Kingdom; and
(iii) it has only issued or passed on and will only issue or pass on in the
United Kingdom any document received by it in connection with the issue of
the Offered Securities to a person who is of a kind described in Article
11(3) of the Financial Services Act 1986
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(Investment Advertisements) (Exemptions) Order 1996 or is a person to whom
such document may otherwise lawfully be issued or passed on.
5. Certain Agreements of the Company. The Issuers agree with the several
Purchasers that:
(a) The Company will advise CSFBC promptly of any proposal to amend
or supplement the Offering Document and will not effect such amendment or
supplementation without CSFBC's consent, which consent will not be
unreasonably withheld. If, at any time prior to the completion of the
resale of the Offered Securities by the Purchasers, any event occurs as a
result of which the Offering Document as then amended or supplemented would
include an untrue statement of a material fact or omit to state any
material fact necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading, the
Company promptly will notify CSFBC of such event and promptly will prepare,
at its own expense, an amendment or supplement which will correct such
statement or omission. Neither CSFBC's consent to, nor the Purchasers'
delivery to offerees or investors of, any such amendment or supplement
shall constitute a waiver of any of the conditions set forth in Section 6.
(b) The Company will furnish to CSFBC copies of any preliminary
offering circular, the Offering Document and all amendments and supplements
to such documents, in each case as soon as available and in such quantities
as CSFBC requests, and the Company will furnish to CSFBC on the date hereof
three copies of the Offering Document. At any time when the Company is not
subject to Section 13 or 15(d) of the Exchange Act, the Company will
promptly furnish or cause to be furnished to CSFBC (and, upon request, to
each of the other Purchasers) and, upon request of holders and prospective
purchasers of the Offered Securities, to such holders and purchasers,
copies of the information required to be delivered to holders and
prospective purchasers of the Offered Securities pursuant to Rule
144A(d)(4) under the Securities Act (or any successor provision thereto) in
order to permit compliance with Rule 144A in connection with resales by
such holders of the Offered Securities. The Company will pay the expenses
of printing and distributing to the Purchasers all such documents.
(c) The Issuers will arrange for the qualification of the Offered
Securities for sale and the determination of their eligibility for
investment under the laws of such jurisdictions in the United States and
Canada as CSFBC designates and will continue such qualifications in effect
so long as required for the resale of the Offered Securities by the
Purchasers, provided that the Issuers will not be required to qualify as a
foreign corporation or to file a general consent to service of process in
any such state.
(d) During the period of ten years hereafter or such shorter period
as the Notes are outstanding, the Company will furnish to CSFBC and, upon
request, to each of the other Purchasers, as soon as practicable after the
end of each fiscal year, a copy of its annual report to stockholders for
such year; and the Company will furnish to CSFBC and,
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upon request, to each of the other Purchasers (i) as soon as available, a
copy of each report and any definitive proxy statement of the Company filed
with the Commission under the Exchange Act or mailed to stockholders, and
(ii) from time to time, such other information concerning the Issuers as
CSFBC may reasonably request.
(e) During the period of two years after the Closing Date the Company
will, upon request, furnish to CSFBC, each of the other Purchasers and any
holder of Offered Securities a copy of the restrictions on transfer
applicable to the Offered Securities.
(f) During the period of two years after the Closing Date the Issuers
will not, and will not permit any of their affiliates (as defined in Rule
144 under the Securities Act) to, resell any of the Offered Securities that
have been reacquired by any of them.
(g) During the period of two years after the Closing Date, none of
the Issuers will be or become, an open-end investment company, unit
investment trust or face-amount certificate company that is or is required
to be registered under Section 8 of the Investment Company Act.
(h) The Company will pay all expenses incidental to the performance
of its obligations under this Agreement, the Indenture and the Registration
Rights Agreement, including (i) the fees and expenses of the Trustee and
its professional advisers; (ii) all expenses in connection with the
execution, issue, authentication, packaging and initial delivery of the
Offered Securities and, as applicable, the Exchange Securities (as defined
in the Registration Rights Agreement), the preparation and printing of this
Agreement, the Registration Rights Agreement, the Offered Securities, the
Indenture, the Offering Document and amendments and supplements thereto,
and any other document relating to the issuance, offer, sale and delivery
of the Offered Securities and, as applicable, the Exchange Securities;
(iii) the cost of any advertising approved by the Company in connection
with the issue of the Offered Securities or the Exchange Securities; (iv)
any expenses (including fees and disbursements of counsel) incurred in
connection with qualification of the Offered Securities or the Exchange
Securities for sale under the laws of such jurisdictions in the United
States and Canada as CSFBC designates and the printing of memoranda
relating thereto; (v) any fees charged by investment rating agencies for
the rating of the Securities or the Exchange Securities; (vi) expenses
incurred in distributing preliminary offering circulars and the Offering
Document (including any amendments and supplements thereto) to the
Purchasers; and (vii) all fees and expenses of its counsel. The Company
will also pay or reimburse the Purchasers (to the extent incurred by them)
for all travel expenses of the Company's officers and employees and any
other expenses of the Company in connection with attending or hosting
meetings with prospective purchasers of the Offered Securities from the
Purchasers. Such amount may be deducted from the purchase price for the
Offered Securities set forth in Section 3 hereof.
(i) In connection with the offering, until CSFBC shall have notified
the Company and the other Purchasers of the completion of the resale of the
Offered
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Securities, neither the Issuers nor any of their affiliates has or will,
either alone or with one or more other persons, bid for or purchase for any
account in which it or any of its affiliates has a beneficial interest any
Offered Securities or attempt to induce any person to purchase any Offered
Securities; and neither it nor any of its affiliates will make bids or
purchases for the purpose of creating actual, or apparent, active trading
in, or of raising the price of, the Offered Securities.
(j) For a period of 60 days after the date of the initial offering of
the Offered Securities by the Purchasers, neither the Issuers nor any of
their affiliates will offer, sell, contract to sell, pledge or otherwise
dispose of, directly or indirectly, any United States dollar-denominated
debt securities issued or guaranteed by any of the Issuers and having a
maturity of more than one year from the date of issue. Neither the Issuers
nor any of their affiliates will at any time offer, sell, contract to sell,
pledge or otherwise dispose of, directly or indirectly, any securities
under circumstances where such offer, sale, pledge, contract or disposition
would cause the exemption afforded by Section 4(2) of the Securities Act or
the safe harbor of Regulation S thereunder to cease to be applicable to the
offer and sale of the Offered Securities.
6. Conditions of the Obligations of the Purchasers. The obligations of the
several Purchasers to purchase and pay for the Offered Securities will be
subject to the accuracy, as of the date of this Agreement and as of the Closing
Date, of the representations and warranties on the part of the Issuers herein
and in the Registration Rights Agreement, to the accuracy of the statements of
officers of the Issuers made pursuant to the provisions hereof, to the
performance by the Issuers of their obligations hereunder and to the following
additional conditions precedent:
(a) The Purchasers shall have received a letter, dated the date of
this Agreement, of Ernst & Young L.L.P. confirming that they are
independent auditors within the meaning of the Securities Act and the
applicable rules and regulations adopted by the Securities and Exchange
Commission ("SEC").
(i) in their opinion the consolidated financial statements audited
by them and incorporated by reference in the Offering Document comply as to
form in all material respects with the applicable accounting requirements
of the Securities Act and the related rules and regulations adopted by the
SEC;
(ii) they have read the unaudited consolidated financial statements
for the three month period ended March 31 for both 2001 and 2000 furnished
to them by officials of the Company, which are incomplete in that the
statements of cash flows and other disclosures were omitted, and agreed the
amounts contained therein to the Company's accounting records, officials of
the Company having advised them that no such consolidated financial
statements as of any date or for any period subsequent to March 31, 2001
were available;
(iii) on the basis of the procedure referred to in clause (ii) above,
inquiries of officials of the Company who have responsibility for financial
and accounting matters
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and other specified procedures, nothing came to their attention that
caused them to believe that:
(A) the unaudited financial statements referred to in clause
(ii) above do not comply as to form in all material respects with the
applicable accounting requirements of the Securities Act and the
related published rules and regulations or any material modifications
should be made to such unaudited financial statements for them to be
in conformity with generally accepted accounting principles except for
the statements of cash flows and other footnote disclosures;
(B) at March 31, 2001, there was any increase in consolidated
long-term debt or any decrease in net current assets of the Company as
compared with amounts shown in the December 31, 2000 audited
consolidated balance sheet, or for the period from January 1, 2001 to
March 31, 2001, there were any decreases, as compared with the
corresponding period in the preceding year, in consolidated revenues,
income from operations or net income;
(C) at a subsequent specified date not more than three business
days prior to the date of this Agreement, there was any increase in
consolidated long-term debt or any decrease in net current assets of
the Company as compared with the amounts shown on the unaudited
consolidated balance sheet at March 31, 2001, or for the period from
April 1, 2001 to a subsequent specified date not more that three days
prior to the date of this Agreement there was any decrease, as
compared with the corresponding period in the preceding year, in
consolidated revenues, income from operations or net income.
(b) Subsequent to the execution and delivery of this Agreement, there
shall not have occurred (i) a change in U.S. or international financial,
political or economic conditions or currency exchange rates or exchange
controls as would, in the judgment of a majority in interest of the
Purchasers, including CSFBC, be likely to prejudice materially the success
of the proposed issue, sale or distribution of the Offered Securities,
whether in the primary market or in respect of dealings in the secondary
market, or (ii) (A) any change, or any development or event involving a
prospective change, in the condition (financial or other), business,
properties or results of operations of the Company or its subsidiaries
which, in the judgment of a majority in interest of the Purchasers
including CSFBC, is material and adverse and makes it impractical or
inadvisable to proceed with completion of the offering or the sale of and
payment for the Offered Securities; (B) any downgrading in the rating of
any debt securities of the Company by any "nationally recognized
statistical rating organization" (as defined for purposes of Rule 436(g)
under the Securities Act), or any public announcement that any such
organization has under surveillance or review its rating of any debt
securities of the Company (other than an announcement with positive
implications of a possible upgrading, and no implication of a possible
downgrading, of such rating); (C) any suspension or limitation of trading
in securities generally on the New York Stock Exchange, or any setting of
minimum prices for trading on such exchange, or any
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suspension of trading of any securities of the Company on any exchange or
in the over-the-counter market; (D) any banking moratorium declared by U.S.
Federal or New York authorities; or (E) any outbreak or escalation of major
hostilities in which the United States is involved, any declaration of war
by Congress or any other substantial national or international calamity or
emergency if, in the judgment of a majority in interest of the Purchasers
including CSFBC, the effect of any such outbreak, escalation, declaration,
calamity or emergency makes it impractical or inadvisable to proceed with
completion of the offering or sale of and payment for the Offered
Securities.
(c) The Purchasers shall have received an opinion, dated the Closing
Date, of Latham and Watkins, counsel for the Company, and James F. Maroney,
III, Vice President, General Counsel and Secretary to the Company,
substantially to the effect that:
(i) Each of the Company and the Guarantors has been duly
incorporated or organized, as the case may be, and is an existing
corporation, limited partnership or limited liability company in good
standing under the laws of the jurisdiction of its organization, with
corporate or partnership or limited liability company power and authority
to own its properties and conduct its business as described in the Offering
Document; and each of the Company and the Guarantors is duly qualified to
do business as a foreign corporation, limited partnership or limited
liability company in good standing in all other jurisdictions in which its
ownership or lease of property or the conduct of its business requires such
qualification;
(ii) The Indenture has been duly authorized, executed and delivered
by each of the Issuers; the Notes and the Guarantees have been duly
authorized, executed, authenticated, issued and delivered by the Company
and each of the Guarantors, respectively, and conform to the description
thereof contained in the Offering Document; the Indenture and the Notes
constitute valid and legally binding obligations of the Company,
enforceable in accordance with their terms, subject to bankruptcy,
insolvency, fraudulent transfer, reorganization, moratorium and similar
laws of general applicability relating to or affecting creditors' rights
and to general equity principles; and the Indenture and the Guarantees
constitute valid and legally binding obligations of each of the Guarantors,
enforceable in accordance with their terms, subject to bankruptcy,
insolvency, fraudulent transfer, reorganization, moratorium and similar
laws of general applicability relating to or affecting creditors' rights
and to general equity principles.
(iii) None of the Issuers are or, after giving effect to the
offering and sale of the Offered Securities and the application of the
proceeds thereof as described in the Offering Document, will be an
"investment company" as defined in the Investment Company Act.
(iv) The execution and delivery of the Indenture, the Purchase
Agreement and the Registration Rights Agreement by the Company and the
Guarantors, the sale and delivery of the Notes and the Guarantees by the
Company and the Guarantors, respectively, to the Purchasers pursuant to the
Indenture and the Purchase Agreement and the application of the proceeds
from the sale of the Notes as described in the Offering
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Document do not: (A) violate any federal or New York statute, rule or
regulation applicable to the Company or the Guarantors, (B) violate the
provisions of the Company's Certificate of Incorporation or By-laws or the
governing documents of any of the Guarantors, (C) except as disclosed in
the Offering Document, result in the breach of or a default under any
material contract listed on the exhibit index to the Company's Annual
Report on Form 10-K for the year ended December 31, 2000, or (D) require
any consents, approvals, authorizations, registrations, declarations or
filings by the Company or the Guarantors under any federal or New York
statute, rule or regulation applicable to the Company; provided that such
counsel shall express no opinion in clauses (A) and (D) of this clause (iv)
as to the application of any state securities laws or any antifraud laws,
antitrust or trade regulation laws; provided, further that such counsel's
opinions set forth in clauses (A) and (D) of this clause (iv) shall based
upon its consideration of only those statutes, rules and regulations which,
in its experience, are normally applicable to private placements of
securities.
(v) each of the Issuers has full power and authority to authorize,
issue and sell the Offered Securities as contemplated by this Agreement;
(vi) Such counsel has no reason to believe that the Offering
Document, or any amendment or supplement thereto, as of the date thereof
and as of the Closing Date, contained any untrue statement of a material
fact or omitted to state any material fact required to be stated therein or
necessary to make the statements therein not misleading; the descriptions
in the Offering Document of statutes, legal and governmental proceedings
and contracts and other documents are accurate and fairly present the
information required to be shown; it being understood that such counsel
need express no opinion as to the financial statements or other financial
data contained in the Offering Document;
(vii) This Agreement has been duly authorized, executed and delivered
by each of the Issuers; and
(viii) It is not necessary in connection with (i) the offer, sale and
delivery of the Offered Securities by the Issuers to the several Purchasers
pursuant to this Agreement or (ii) the resales of the Offered Securities by
the several Purchasers in the manner contemplated by this Agreement, to
register the Offered Securities under the Securities Act or to qualify an
indenture in respect thereof under the Trust Indenture Act.
(d) The Purchasers shall have received from Simpson Thacher &
Bartlett, counsel for the Purchasers, such opinion or opinions, dated the
Closing Date, with respect to the incorporation of the Issuers, the
validity of the Offered Securities, the Offering Document, the exemption
from registration for the offer and sale of the Offered Securities by the
Company to the several Purchasers and the resales by the several Purchasers
as contemplated hereby and other related matters as CSFBC may require, and
the Company shall have furnished to such counsel such documents as they
request for the purpose of enabling them to pass upon such matters.
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(e) The Purchasers shall have received a certificate, dated the
Closing Date, of the President or any Vice President and a principal
financial or accounting officer of the Company in which such officers, to
the best of their knowledge after reasonable investigation, shall state
that the representations and warranties of the Issuers in this Agreement
are true and correct, that the Issuers have complied with all agreements
and satisfied all conditions on its part to be performed or satisfied
hereunder at or prior to the Closing Date, and that, subsequent to the date
of the most recent financial statements in the Exchange Act Reports there
has been no material adverse change, nor any development or event involving
a prospective material adverse change, in the condition (financial or
other), business, properties or results of operations of the Company and
its subsidiaries taken as a whole except as set forth in or contemplated by
the Offering Document or as described in such certificate.
(f) The Purchasers shall have received a letter, dated the Closing
Date, of Ernst & Young L.L.P., which meets the requirements of subsection
(a) of this Section, except that the specified date referred to in such
subsection will be a date not more than three business days prior to the
Closing Date for the purposes of this subsection.
The Company will furnish the Purchasers with such conformed copies of such
opinions, certificates, letters and documents as the Purchasers reasonably
request. CSFBC may in its sole discretion waive on behalf of the Purchasers
compliance with any conditions to the obligations of the Purchasers hereunder.
7. Indemnification and Contribution.
(a) Each of the Issuers, jointly and severally, will indemnify and
hold harmless each Purchaser against any losses, claims, damages or
liabilities, joint or several, to which such Purchaser may become subject,
under the Securities Act or the Exchange Act or otherwise, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof)
arise out of or are based upon any untrue statement or alleged untrue
statement of any material fact contained in the Offering Document, or any
amendment or supplement thereto, or any related preliminary offering
circular, or arise out of or are based upon the omission or alleged
omission to state therein a material fact necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading, and will reimburse each Purchaser for any legal or
other expenses reasonably incurred by such Purchaser in connection with
investigating or defending any such loss, claim, damage, liability or
action as such expenses are incurred; provided, however, that the Issuers
will not be liable in any such case to the extent that any such loss,
claim, damage or liability arises out of or is based upon an untrue
statement or alleged untrue statement in or omission or alleged omission
from any of such documents in reliance upon and in conformity with written
information furnished to the Company by any Purchaser through CSFBC
specifically for use therein, it being understood and agreed that the only
such information consists of the information described as such in
subsection (b) below.
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(b) Each Purchaser will severally and not jointly indemnify and hold
harmless the Issuers against any losses, claims, damages or liabilities to
which the Issuers may become subject, under the Securities Act or the
Exchange Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon
any untrue statement or alleged untrue statement of any material fact
contained in the Offering Document, or any amendment or supplement thereto,
or any related preliminary offering circular, or arise out of or are based
upon the omission or the alleged omission to state therein a material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading, in each case to
the extent, but only to the extent, that such untrue statement or alleged
untrue statement or omission or alleged omission was made in reliance upon
and in conformity with written information furnished to the Company by such
Purchaser through CSFBC specifically for use therein, and will reimburse
any legal or other expenses reasonably incurred by the Company in
connection with investigating or defending any such loss, claim, damage,
liability or action as such expenses are incurred, it being understood and
agreed that the only such information furnished by any Purchaser consists
of the following information in the Offering Document furnished on behalf
of each Purchaser: the third and ninth paragraphs and the second sentence
of the eighth paragraph under the section captioned "Plan of Distribution."
(c) Promptly after receipt by an indemnified party under this Section
of notice of the commencement of any action, such indemnified party will,
if a claim in respect thereof is to be made against the indemnifying party
under subsection (a) or (b) above, notify the indemnifying party of the
commencement thereof; but the omission so to notify the indemnifying party
will not relieve the indemnified party from any liability which it may have
to any indemnified party otherwise than under subsection (a) or (b) above.
In case any such action is brought against any indemnified party and it
notifies the indemnifying party of the commencement thereof, the
indemnifying party will be entitled to participate therein and, to the
extent that it may wish, jointly with any other indemnifying party
similarly notified, to assume the defense thereof, with counsel
satisfactory to such indemnified party (who shall not, except with the
consent of the indemnified party, be counsel to the indemnifying party),
and after notice from the indemnifying party to such indemnified party of
its election so to assume the defense thereof, the indemnifying party will
not be liable to such indemnified party under this Section for any legal or
other expenses subsequently incurred by such indemnified party in
connection with the defense thereof other than reasonable costs of
investigation. No indemnifying party shall, without the prior written
consent of the indemnified party, effect any settlement of any pending or
threatened action in respect of which any indemnified party is or could
have been a party and indemnity could have been sought hereunder by such
indemnified party unless such settlement includes an unconditional release
of such indemnified party from all liability on any claims that are the
subject matter of such action and does not include a statement as to or an
admission of fault, culpability or failure to act by or on behalf of any
indemnified party.
-15-
(d) If the indemnification provided for in this Section is
unavailable or insufficient to hold harmless an indemnified party under
subsection (a) or (b) above, then each indemnifying party shall contribute
to the amount paid or payable by such indemnified party as a result of the
losses, claims, damages or liabilities referred to in subsection (a) or (b)
above (i) in such proportion as is appropriate to reflect the relative
benefits received by the Issuers on the one hand and the Purchasers on the
other from the offering of the Offered Securities or (ii) if the allocation
provided by clause (i) above is not permitted by applicable law, in such
proportion as is appropriate to reflect not only the relative benefits
referred to in clause (i) above but also the relative fault of the Issuers
on the one hand and the Purchasers on the other in connection with the
statements or omissions which resulted in such losses, claims, damages or
liabilities as well as any other relevant equitable considerations. The
relative benefits received by the Issuers on the one hand and the
Purchasers on the other shall be deemed to be in the same proportion as the
total net proceeds from the offering (before deducting expenses) received
by the Issuers bear to the total discounts and commissions received by the
Purchasers from the Issuers under this Agreement. The relative fault shall
be determined by reference to, among other things, whether the untrue or
alleged untrue statement of a material fact or the omission or alleged
omission to state a material fact relates to information supplied by the
Issuers or the Purchasers and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such untrue
statement or omission. The amount paid by an indemnified party as a result
of the losses, claims, damages or liabilities referred to in the first
sentence of this subsection (d) shall be deemed to include any legal or
other expenses reasonably incurred by such indemnified party in connection
with investigating or defending any action or claim which is the subject of
this subsection (d). Notwithstanding the provisions of this subsection (d),
no Purchaser shall be required to contribute any amount in excess of the
amount by which the total price at which the Offered Securities purchased
by it were resold exceeds the amount of any damages which such Purchaser
has otherwise been required to pay by reason of such untrue or alleged
untrue statement or omission or alleged omission. The Purchasers'
obligations in this subsection (d) to contribute are several in proportion
to their respective purchase obligations and not joint.
(e) The obligations of the Issuers under this Section shall be in
addition to any liability which the Issuers may otherwise have and shall
extend, upon the same terms and conditions, to each person, if any, who
controls any Purchaser within the meaning of the Securities Act or the
Exchange Act; and the obligations of the Purchasers under this Section
shall be in addition to any liability which the respective Purchasers may
otherwise have and shall extend, upon the same terms and conditions, to
each person, if any, who controls the Issuers within the meaning of the
Securities Act or the Exchange Act.
8. Default of Purchasers. If any Purchaser or Purchasers default in their
obligations to purchase Offered Securities hereunder and the aggregate principal
amount of Offered Securities that such defaulting Purchaser or Purchasers agreed
but failed to purchase does not exceed 10% of the total principal amount of
Offered Securities, CSFBC may make arrangements satisfactory
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to the Company for the purchase of such Offered Securities by other persons,
including any of the Purchasers, but if no such arrangements are made by the
Closing Date, the non-defaulting Purchasers shall be obligated severally, in
proportion to their respective commitments hereunder, to purchase the Offered
Securities that such defaulting Purchasers agreed but failed to purchase. If any
Purchaser or Purchasers so default and the aggregate principal amount of
Securities with respect to which such default or defaults occur exceeds 10% of
the total principal amount of Offered Securities and arrangements satisfactory
to CSFBC and the Company for the purchase of such Offered Securities by other
persons are not made within 36 hours after such default, this Agreement will
terminate without liability on the part of any non-defaulting Purchaser or the
Company, except as provided in Section 9. As used in this Agreement, the term
"Purchaser" includes any person substituted for a Purchaser under this Section.
Nothing herein will relieve a defaulting Purchaser from liability for its
default.
9. Survival of Certain Representations and Obligations. The respective
indemnities, agreements, representations, warranties and other statements of the
Issuers or their officers and of the several Purchasers set forth in or made
pursuant to this Agreement will remain in full force and effect, regardless of
any investigation, or statement as to the results thereof, made by or on behalf
of any Purchaser, the Issuers or any of their respective representatives,
officers or directors or any controlling person, and will survive delivery of
and payment for the Offered Securities. If this Agreement is terminated pursuant
to Section 8 or if for any reason the purchase of the Offered Securities by the
Purchasers is not consummated, the Company shall remain responsible for the
expenses to be paid or reimbursed by it pursuant to Section 5 and the respective
obligations of the Issuers and the Purchasers pursuant to Section 7 shall remain
in effect. If the purchase of the Offered Securities by the Purchasers is not
consummated for any reason other than solely because of the termination of this
Agreement pursuant to Section 8 or the occurrence of any event specified in
clause (C), (D) or (E) of Section 6(b)(ii), the Company will reimburse the
Purchasers for all out-of-pocket expenses (including fees and disbursements of
counsel) reasonably incurred by them in connection with the offering of the
Offered Securities.
10. Notices. All communications hereunder will be in writing and, if sent
to the Purchasers will be mailed, delivered or telegraphed and confirmed to the
Purchasers, c/o Credit Suisse First Boston Corporation, Eleven Madison Avenue,
New York, N.Y. 10010-3629, Attention: Transactions Advisory Group, or, if sent
to the Issuers, will be mailed, delivered or telegraphed and confirmed to it at
Varco International, Inc., 2835 Holmes Road, Houston Texas, Attention: James F.
Maroney, III; provided, however, that any notice to a Purchaser pursuant to
Section 7 will be mailed, delivered or telegraphed and confirmed to such
Purchaser.
11. Successors. This Agreement will inure to the benefit of and be binding
upon the parties hereto and their respective successors and the controlling
persons referred to in Section 7, and no other person will have any right or
obligation hereunder, except that holders of Offered Securities shall be
entitled to enforce the agreements for their benefit contained in the second and
third sentences of Section 5(b) hereof against the Company as if such holders
were parties thereto.
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12. Representation of Purchasers. CSFBC will act for the several Purchasers
in connection with this purchase, and any action under this Agreement taken by
CSFBC will be binding upon all the Purchasers.
13. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, but all such
counterparts shall together constitute one and the same Agreement.
14. Applicable Law. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of New York without regard to principles
of conflicts of laws.
The Company hereby submits to the non-exclusive jurisdiction of the Federal
and state courts in the Borough of Manhattan in The City of New York in any suit
or proceeding arising out of or relating to this Agreement or the transactions
contemplated hereby.
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If the foregoing is in accordance with the Purchasers' understanding of our
agreement, kindly sign and return to us one of the counterparts hereof,
whereupon it will become a binding agreement between the Company and the several
Purchasers in accordance with its terms.
Very truly yours,
VARCO INTERNATIONAL, INC.
By: /s/ JOSEPH C. WINKLER
----------------------------------
Name: Joseph C. Winkler
Title: Executive Vice President,
Chief Financial Officer and
Treasurer
VARCO I/P, INC.
TUBO-FGS, LLC
TUBOSCOPE (HOLDING U.S.) INC.
FIBER GLASS SYSTEMS HOLDINGS, LLC
FIBER GLASS SYSTEMS, LP
VARCO, LP
QUALITY TUBING INC.
TUBOSCOPE PIPELINE SERVICES INC.
ENVIRONMENTAL PROCEDURES INC.
By: /s/ JOSEPH C. WINKLER
----------------------------------
Name: Joseph C. Winkler
Title: Vice President
The foregoing Purchase Agreement
is hereby confirmed and accepted
as of the date first above written.
Credit Suisse First Boston Corporation
Salomon Smith Barney Inc.
RBC Dominion Securities Corporation
Simmons & Company International
As the Purchasers
By: Credit Suisse First Boston Corporation
By /s/ OSMAR ABIB
--------------------------------------
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SCHEDULE A
Principal Amount of
Offered Securities
Manager Firm Securities
--------- --------------------
Credit Suisse First Boston Corporation........... $ 140,000,000
Salomon Smith Barney Inc. 30,000,000
RBC Dominion Securities Corporation 20,000,000
Simmons & Company International 10,000,000
--------------------
Total...................................... $ 200,000,000
====================
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