<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[x] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934. For the quarterly period ended March 31, 1999.
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934. For the transition period from ________ to _________.
Commission file number 001-13553
BAYARD DRILLING TECHNOLOGIES, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 73-1508021
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
515 W. GREENS ROAD, SUITE 1200 73116-1679
HOUSTON, TEXAS (Zip Code)
(Address of principal executive offices)
(281) 874-0035
(Registrant's telephone number, including area code)
4005 NW EXPRESSWAY, SUITE 550E
OKLAHOMA CITY, OKLAHOMA
(Former name, former address and former fiscal year, if changed since
last report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES X NO
--- ---
Outstanding shares of the registrant's common stock, par value $.10 per share,
at April 30, 1999: 1,000
EXPLANATORY NOTE: On April 7, 1999, Bayard Drilling Technologies, Inc. merged
with Nabors Acquisition Corp. VII, a wholly owned subsidiary of Nabors
Industries, Inc. At the effective time of the merger, Bayard was the surviving
corporation in the merger, and became a wholly owned subsidiary of Nabors
Industries. At the effective time of the merger, each Bayard share ceased to be
outstanding and instead represented a right to receive .3375 shares of Nabors
Industries common stock and $.30 in cash. As a result, Bayard's common stock is
no longer registered under the Securities and Exchange Act of 1934, as amended.
However, pursuant to an outstanding indenture, Bayard remains contractually
obligated to file periodic reports with the Securities and Exchange Commission.
This filing is made pursuant to this obligation.
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BAYARD DRILLING TECHNOLOGIES, INC.
INDEX
<TABLE>
<CAPTION>
PAGE NO.
<S> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Balance Sheets - March 31, 1999 and December 31, 1998...........................................1
Statements of Operations - Three months ended March 31, 1999 and 1998.......................... 2
Statements of Cash Flows - Three months ended March 31, 1999 and 1998...........................3
Notes to Financial Statements ..................................................................4
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations...........................................................................6
PART II. OTHER INFORMATION
Item 2. Changes in Securities and Use of Proceeds.......................................................10
Item 4. Submission of Matters to a Vote of Security Holders........................................... 10
Item 6. Exhibits and reports on Form 8-K................................................................10
Signatures...................................................................................................11
</TABLE>
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
BAYARD DRILLING TECHNOLOGIES, INC.
BALANCE SHEETS
(In thousands, except per share data)
<TABLE>
<CAPTION>
ASSETS
DECEMBER 31, MARCH 31,
1998 1999
------------ ----------
<S> <C> <C>
CURRENT ASSETS:
Cash .................................................................... $ 2,553 $ 2,379
Accounts receivable ..................................................... 12,800 6,722
Prepaid expenses and other current assets ............................... 1,838 549
---------- ----------
Total current assets .......................................... 17,191 9,650
Property, plant and equipment, net ........................................... 285,316 280,422
Goodwill, net of accumulated amortization of $1,247 at
December 31, 1998 and $1,465 at March 31, 1999........................... 11,832 11,615
Other assets ................................................................. 5,001 4,147
---------- ----------
Total assets .................................................. $ 319,340 $ 305,834
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable ........................................................ $ 9,783 $ 6,287
Accrued liabilities ..................................................... 5,164 8,129
Current portion of long-term debt ....................................... 6,050 6,070
---------- ----------
Total current liabilities ..................................... 20,997 20,486
Deferred income tax liabilities .............................................. 10,448 5,999
Other long-term liabilities .................................................. 3,207 3,207
Long-term debt, less current maturities ...................................... 111,683 110,166
---------- ----------
Total liabilities ............................................. 146,335 139,858
---------- ----------
Commitments and Contingencies
STOCKHOLDERS' EQUITY:
Preferred stock, $0.01 par value, 20,000 shares authorized; none
issued or outstanding ............................................. -- --
Common stock, $0.01 par value, 100,000 shares authorized; 18,200 shares
issued and outstanding at December 31, 1998;
18,269 at March 31, 1999 .......................................... 182 183
Additional paid-in capital (net of deferred compensation of $206 at
December 31, 1998 and $193 at March 31, 1999) ..................... 180,525 180,753
Accumulated deficit ..................................................... (7,702) (14,960)
---------- ----------
Total stockholders' equity ........................................ 173,005 165,976
---------- ----------
Total liabilities and stockholders' equity ........................ $ 319,340 $ 305,834
========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
1
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BAYARD DRILLING TECHNOLOGIES, INC.
STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
1998 1999
---------- ----------
<S> <C> <C>
REVENUES:
Drilling ........................................ $ 23,962 $ 10,976
---------- ----------
COST AND EXPENSES:
Drilling ........................................ 17,221 12,688
General and administrative ...................... 755 2,341
Depreciation and amortization ................... 3,169 3,388
---------- ----------
Total costs and expenses ................... 21,145 18,417
---------- ----------
Operating income (loss) .................... 2,817 (7,441)
---------- ----------
OTHER INCOME (EXPENSE):
Interest expense ................................ (367) (3,225)
Interest income ................................. 496 40
Other ........................................... 86 (1,081)
---------- ----------
Total other income (expense) ............... 215 (4,266)
---------- ----------
Earnings (loss) before income taxes .................. 3,032 (11,707)
Income tax (benefit) - deferred ..................... 1,275 (4,449)
---------- ----------
Net earnings (loss) .................................. $ 1,757 $ (7,258)
========== ==========
EARNINGS (LOSS) PER SHARE:
Basic ........................................... $ .10 $ (.40)
========== ==========
Diluted ......................................... $ 10 $ (.40)
========== ==========
Weighted average common shares
outstanding, basic ............................. 18,184 18,269
========== ==========
Weighted average common shares
outstanding, diluted ........................... 18,488 18,269
========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
2
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BAYARD DRILLING TECHNOLOGIES, INC.
STATEMENTS OF CASH FLOWS
(In thousands)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
------------------------
1998 1999
---------- ----------
<S> <C> <C>
NET CASH PROVIDED BY OPERATING ACTIVITIES $ 6,975 $ 67
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of property and equipment ....................... (27,094) (910)
Proceeds from sale of assets ................................ 63 1,948
Purchase of investments ..................................... 355 --
---------- ----------
Net cash (used for) provided by investing activities (26,676) 1,038
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from exercise of options ........................... -- 216
Payments on long-term debt .................................. (1,863) (1,495)
---------- ----------
Net cash used for financing activities ........... (1,863) (1,279)
---------- ----------
Net change in cash ................................................... (21,564) (174)
Cash at beginning of period .......................................... 49,302 2,553
---------- ----------
Cash at end of period ................................................ $ 27,738 $ 2,379
========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
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BAYARD DRILLING TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 1 INTERIM FINANCIAL INFORMATION
The unaudited condensed consolidated financial statements of Bayard
Drilling Technologies, Inc. ("Bayard" or the "Company"), are prepared in
conformity with generally accepted accounting principles ("GAAP"), but do not
purport to be a complete presentation inasmuch as all note disclosures required
by GAAP are not included. Reference is made to the Company's 1998 Annual Report
on Form 10-K for additional note disclosures.
In the opinion of management, the condensed consolidated financial
statements contain all adjustments, consisting only of normal recurring
adjustments, necessary to present fairly the financial position of the Company
as of March 31, 1999, and the results of its operations and its cash flows for
the periods ended March 31, 1999 and 1998 in accordance with GAAP. Interim
results for the three months ended March 31, 1999 are not necessarily indicative
of results which will be realized for the full year ending December 31, 1999.
NOTE 2 LITIGATION
A purported class action lawsuit is pending against the Company,
certain directors and officers of the Company, the managing underwriters of the
Company's initial public offering, and certain former stockholders of the
Company, alleging violations of federal securities laws in connection with the
initial public offering. The lawsuit, Yuan v. Bayard Drilling Technologies,
Inc., et al. ("Yuan"), was filed on February 3, 1998 in the United States
District Court for the Western District of Oklahoma. The principal plaintiff in
Yuan is Tom Yuan. The defendants in this case include Bayard, Chesapeake, Energy
Spectrum LLC, certain former directors and officers of the Company (James E.
Brown, David E. Grose, Carl B. Anderson, III, Merrill A. Miller, Jr., Sidney L.
Tassin, Lew O. Ward, Mike Mullen), Roy T. Oliver, and the underwriters in the
offering (Donaldson, Lufkin & Jenrette Securities Corporation, Lehman Brothers,
Inc., Prudential Securities, Inc., Rauscher Pierce Refsnes, Inc. (a predecessor
to Dain Rauscher Incorporated) and Raymond James & Associates, Inc.).
The plaintiffs in this lawsuit purport to sue on their own behalf and
on behalf of all persons who purchased shares of Bayard common stock on or
traceable to the initial public offering. In the lawsuit, plaintiffs allege
claims against all defendants under the Securities Act of 1933. The plaintiffs
allege that the registration statement and prospectus for the initial public
offering contained materially false and misleading information and omitted to
disclose material facts. In particular, the plaintiffs allege that such
registration statement and prospectus failed to disclose financial difficulties
of Chesapeake, the Company's largest customer, and the effects of such
difficulties on Chesapeake's ability to continue to provide the Company with
substantial drilling contracts. The complaint further alleges that the Company
failed to disclose pre-offering negotiations with R. T. Oliver Drilling, Inc.,
whom the plaintiffs allege was a related party, for the purchase of drilling
rigs. In addition, the complaint allege that the Company failed to disclose that
its growth strategy required costly refurbishment of older drilling rigs that
would dramatically increase the Company's costs, which could not be sustained by
internally generated cash flow. Plaintiffs are seeking rescission and damages.
Two other related suits, Khan v. Bayard Drilling Technologies, Inc., et
al. ("Khan") and Burkett v. Bayard Drilling Technologies, Inc., et al.
("Burkett"), which were filed in District Court in and for Oklahoma County,
State of Oklahoma on January 14, 1998 and February 2, 1998, respectively, and
alleged essentially the same claims as Yuan. These suits were consolidated with
Yaun, and the plaintiffs in Khan and Burkett, along with others, have been
appointed as lead plaintiffs in the Yuan federal court suit. An amended
consolidated complaint was filed on July 30, 1998, and a motion to dismiss has
been filed by the Company and the other defendants and is currently pending
before the court.
The Company is also involved in litigation arising from time to time in
the ordinary course of its business, including workers' compensation claims and
disputes arising out of its drilling activities. Such disputes include two
claims filed against the Company and Marathon Oil Company on November 13, 1998
and February 17, 1999 in the District Court of Washita County in the State of
Oklahoma. Eldred L. and Patricia A. Schneberger and Irene F. and
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<PAGE> 7
James H. Howard, the plaintiffs in these lawsuits, seek remedies including an
order of abatement and actual, consequential and punitive damages for losses
allegedly incurred in connection with a drilling project that utilized one of
Bayard's rigs. These lawsuits are in preliminary stages with initial discovery
commencing, thus the Company is unable to estimate the potential for liability
on these claims.
The Company believes the allegations in the lawsuits referenced above
are without merit and is defending vigorously the claims brought against it. The
Company is unable, however, to predict the outcome of these lawsuits or the
costs to be incurred in connection with their defense and there can be no
assurance that this litigation will be resolved in the Company's favor. An
adverse result or prolonged litigation could have a material adverse effect on
the Company's financial position or results of operations.
NOTE 3 SUBSEQUENT EVENTS
On April 7, 1999, Nabors Industries, Inc. ("Nabors") and Bayard
completed the merger of Bayard and a special purpose subsidiary of Nabors. As a
result of the merger, Bayard stockholders received .3375 shares of Nabors common
stock and $.30 cash for each share of Bayard common stock outstanding
immediately prior to the merger. After the merger, Bayard had outstanding 1,000
shares of common stock, par value $.10 per share, all of which were issued to
Nabors. All of the Company's debt, including the $100.0 million 11% senior notes
due 2005 (the "11% Notes") remained an obligation of Bayard following the
merger. The merger will be accounted for under the purchase method of
accounting. The total purchase price will be allocated to net assets based on
their estimated fair values, which will result in an approximate $110.0 million
to $120.0 million reduction in property, plant and equipment.
As of March 31, 1999, the Company's primary bank debt facilities
consisted of a term loan (the "Term Loan") under an agreement (the "Term Loan
Agreement") with CIT and Fleet Capital Corporation ("Fleet") and a $10 million
revolving loan facility under a revolving loan agreement with Fleet (the
"Revolving Loan Agreement"). As of March 31, 1999, $14.3 million was outstanding
on the Term Loan and approximately $1.3 million in letters of credit were
outstanding on the revolving loan facility. Both the Term Loan Agreement and the
Revolving Loan Agreement terms required that the Company obtain the consent of
CIT and Fleet prior to the merger with Nabors. In obtaining the required
consents, the Company agreed to pay off the Term Loan and cancel the revolving
credit facility. During April 1999, the Company prepaid the balance of the Term
Loan using proceeds from an asset sale to a subsidiary of Nabors. The assets
were sold at their fair market value pursuant to an appraisal by an independent,
certified appraiser. In May 1999, the Company cancelled the revolving credit
facility and used proceeds from the sale to pay the prepayment penalty and to
collateralize the $1.3 million in letters of credit outstanding under the
revolving credit facility.
On May 7, 1999, the Company offered to purchase any and all of its
outstanding 11% Notes at a purchase price, in cash, equal to 101% of the
aggregate principal amount, plus accrued interest (the "Offer"). The Offer will
expire at 5:00 P.M. New York City time on June 7, 1999, unless the Company at
its sole discretion extends such date. The Company does not currently have
sufficient funds available to make the June 30, 1999 interest payment on the 11%
Notes, and it is unlikely to be able to do so. Although the Company does not
currently have sufficient funds to consummate the Offer, Nabors has indicated to
the Company that it is prepared, subject to the execution of mutually
satisfactory agreements and compliance with applicable contractual obligations,
to make funds available in exchange for assets of the Company having a fair
market value equal to the funds required. Except as set forth above, Nabors has
advised the Company that it is not prepared (1) to advance or make funds
available to the Company to meet any financial obligations, including making
funds available on any of the 11% Notes, making funds available for the June 30,
1999 interest payment on the 11% Notes or otherwise making funds available to
the Company, or (2) to assume any of the Company's debt obligations or other
liabilities. Nabors has stated to the Company that it reserves the right to
change this position, in its sole and absolute discretion.
5
<PAGE> 8
BAYARD DRILLING TECHNOLOGIES, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
GENERAL
On April 7, 1999, Nabors Industries, Inc. ("Nabors") and Bayard
completed the merger of Bayard and a special purpose subsidiary of Nabors. As a
result of the merger, Bayard stockholders received .3375 shares of Nabors common
stock and $.30 cash for each share of Bayard common stock outstanding
immediately prior to the merger. After the merger, Bayard had outstanding 1,000
shares of common stock, par value $.10 per share, all of which were issued to
Nabors. All of the Company's debt, including the $100.0 million 11% senior notes
due 2005 (the "11% Notes") remained an obligation of Bayard following the
merger. The merger will be accounted for under the purchase method of
accounting. The total purchase price will be allocated to net assets based on
their estimated fair values, which will result in an approximate $110.0 million
to $120.0 million reduction in property, plant and equipment.
DOMESTIC LAND DRILLING INDUSTRY OVERVIEW
The significant decline in crude oil prices that began during the
fourth quarter of 1997 has resulted in the continued reduction in the demand for
drilling services in all of the Company's areas of operation. The decline in oil
prices stemmed from a reduction in demand growth rates brought about by the
Asian recession and three consecutively warmer than normal winters in North
America. Additionally, the supply of crude oil increased as a result of
increased production quotas by the Organization of Petroleum Exporting Countries
(OPEC) and renewed production by Iraq. The resulting excess supply of crude oil
caused significant declines in crude oil prices throughout 1998. During the
fourth quarter of 1998, crude oil prices averaged $12.90 per barrel,
representing historically low inflation adjusted levels. Although crude oil
prices showed some improvement by the end of the Current Quarter, the Current
Quarter average was only $13.14 per barrel. Natural gas prices were also lower
than the prior year comparable period as warmer than normal winters in North
America during 1997, 1998 and 1999 weakened demand. The reduced prices for oil
and gas led to sharp declines in the demand for drilling services on a worldwide
basis, as oil and gas companies significantly reduced capital spending for
exploration, development and production activities. The total active US land rig
count has continued to decline throughout the Current Quarter, reaching
historically low levels by quarter end. These factors have resulted in a
reduction in the Company's rig utilization and rig dayrates as compared to the
prior year period. The Company cannot predict the future level of demand for its
contract drilling services, future conditions in the contract drilling industry
or future contract drilling rates, however, the Company does not expect any
improvements in rig utilization or profitability in the near future.
FINANCIAL CONDITION AND LIQUIDITY
The sharp decline in the demand for the Company's drilling services has
severely effected the Company's cash flows and liquidity. The Company's
operations generated cash of only $67,000 for the three months ended March 31,
1999. Based on current market conditions, it is unlikely that cash generated
from operations will improve during the second quarter of 1999 and is more
likely to deteriorate further.
On May 7, 1999, the Company offered to purchase any and all of its
outstanding 11% Notes at a purchase price, in cash, equal to 101% of the
aggregate principal amount, plus accrued interest (the "Offer"). The Offer will
expire at 5:00 P.M. New York City time on June 7, 1999, unless the Company at
its sole discretion extends such date. The Company does not currently have
sufficient funds available to make the June 30, 1999 interest payment on the 11%
Notes, and it is unlikely to be able to do so unless additional asset sales are
made. Although the Company does not currently have sufficient funds to
consummate the Offer, Nabors has indicated to the Company that it is prepared,
subject to the execution of mutually satisfactory agreements and compliance with
applicable contractual obligations, to make funds available in exchange for
assets of the Company having a fair market value equal to the funds required.
Except as set forth above, Nabors has advised the Company that it is not
prepared (1) to advance or make funds available to the Company to meet any
financial obligations, including making funds available on any of the 11% Notes,
making funds available for the June 30, 1999 interest payment on the 11% Notes
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<PAGE> 9
or otherwise making funds available to the Company, or (2) to assume any of the
Company's debt obligations or other liabilities. Nabors has stated to the
Company that it reserves the right to change this position, in its sole and
absolute discretion, however, there can be no assurance that Nabors will do so.
As of March 31, 1999, the Company's primary bank debt facilities
consisted of a term loan (the "Term Loan") under an agreement (the "Term Loan
Agreement") with CIT and Fleet Capital Corporation ("Fleet") and a $10 million
revolving loan facility under a revolving loan agreement with Fleet (the
"Revolving Loan Agreement"). As of March 31, 1999, $14.3 million was outstanding
on the Term Loan and approximately $1.3 million in letters of credit were
outstanding on the revolving loan facility. Both the Term Loan Agreement and the
Revolving Loan Agreement terms required that the Company obtain the consent of
CIT and Fleet prior to the merger with Nabors. In obtaining the required
consents, the Company agreed to pay off the Term Loan and cancel the revolving
credit facility. During April 1999, the Company prepaid the balance of the Term
Loan using proceeds from an asset sale to a subsidiary of Nabors. The assets
were sold at their fair market value pursuant to an appraisal by an independent,
certified appraiser. In May 1999, the Company cancelled the revolving credit
facility and used proceeds from the sale to pay the prepayment penalty and to
collateralize the $1.3 million in letters of credit outstanding under the
revolving credit facility.
From December 31, 1998 to March 31, 1999, the Company's working capital
position decreased by $7.0 million to a deficit of $10.8 million. This was
primarily the result of lower accounts receivable balances and less cash being
received as a result of the decline in drilling activity.
Operating Activities
During the three months ended March 31, 1999 ("Current Quarter"), net
cash provided by operating activities totaled $67,000. The Company generated a
net loss before non-cash deferred income tax benefits of $11.7 million. The loss
included depreciation expense of $3.4 million, which represents a non-cash item.
Working capital changes provided cash of $7.5 million.
Investing Activities
During the Current Quarter, the Company invested $.9 million in fixed
assets and $2.0 million in cash was provided from sales of assets.
Financing Activities
During the Current Quarter, the Company's payments under the Loan
Agreements totaled $1.5 million.
RESULTS OF OPERATIONS
Revenues decreased approximately $13.0 million, or 54%, to $11.0
million for the Current Quarter, from $24.0 million for the prior year period.
Revenues decreased due to lower rig utilization, which averaged 29% during the
Current Quarter, compared to 85% during the prior year period. Additionally,
average dayrates were lower during the Current Quarter as compared to the prior
year period. The decrease in rig utilization and dayrates was the result of the
reduced demand for drilling services stemming from the sharp declines in oil and
gas prices throughout 1998 and 1999, as the Company's customers reduced spending
for exploration, development and production activities. As of March 31, 1999,
the Company had 73 rigs available for service.
The gross margin percentage decreased during the Current Quarter to a
negative 16% from 28% for the prior year period. This decrease related to lower
average dayrates, costs associated with stacking rigs and significant bad debt
expense all resulting from the deterioration of market conditions.
General and administrative expense remained fairly constant for the
Current Quarter, as compared to the same period of 1998, before inclusion of
approximately $1.6 million for the acceleration of amortization of certain
prepaid costs, the write off of certain merger costs, the write off of certain
legal action costs and the write down of certain asset values.
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Depreciation and amortization expense increased by $.2 million, or 7%,
to $3.4 million for the Current Quarter, as compared to $3.2 million for the
prior year period. The increase was primarily due to additions to property,
plant and equipment during 1998.
Interest expense was $3.2 million for the Current Quarter as compared
to $.4 million for prior year period due to interest associated with the 11%
Notes issued during June 1998.
Other expense increased for the Current Quarter as compared to the
prior year period, due to a reduction in interest income and the recording of a
loss on the sale of assets.
For the Current Quarter, the income tax benefit was $4.4 million
compared to the income tax expense of $1.3 million for the prior year period.
This benefit was due to the loss before income taxes recognized in the amount of
$11.7 million for the Current Quarter versus the earnings before income taxes
recognized in the amount of $3.0 million for the prior year period.
YEAR 2000 ISSUE AND COMPLIANCE PROGRAM
As a result of the merger with Nabors, the Company has been included in
the Year 2000 compliance program of Nabors.
Background - The Year 2000 problem ("Y2K") refers to the fact that a
number of computers, computer programs and other equipment with embedded chips
or processors (referred to collectively as "Systems") in use today, use two
digits rather than four digits to define the applicable year. Any Systems that
are date sensitive may recognize a date of "00" as the year 1900 rather than the
year 2000. This could result in miscalculations or System failures causing
disruptions of operations, as well as potentially exposing the Company to third
party liability.
Y2K Compliance Program - Nabors has initiated a Y2K compliance program
to ensure that all of the critical Systems and processes that are under its
direct control remain functional. Nabors has organized a task force of key
employees and engaged an outside consultant to assist in the management of its
Y2K compliance program. Nabors' Y2K compliance program focuses on Nabors'
Systems as well as the Systems of key third party service providers, product
suppliers and customers. The first phase of the program consisted of
inventorying or identifying all Systems. The identified Systems are being
prioritized and all critical Systems are being assessed for Y2K compliance as
part of the second phase of the program. In the third phase, Systems have been
or will be remediated or replaced as necessary and contingency plans will be
developed if deemed appropriate. The fourth phase involves testing all critical
systems to ensure Y2K compliance. Nabors has substantially completed the
inventory and assessment phases of the program and is moving forward with the
remediation and testing phases as necessary. Nabors anticipates the entire
program being completed well in advance of the year 2000.
Critical Systems - The Systems that are critical to Nabors' operations
include both its accounting and administrative Systems and its operational
Systems. Upgrades to a number of Nabors' accounting and administrative Systems
in the ordinary course of business have had the added benefit of resolving
certain Y2K compliance issues. Accordingly, Nabors believes its critical
accounting and administrative Systems, which consists primarily of computer
hardware and software, to be substantially Y2K compliant. Nabors' critical
operational Systems consist primarily of Systems in use on Nabors' drilling
rigs. Nabors has completed an inventory of each drilling rig's critical Systems
and has substantially completed assessing these Systems for Y2K compliance.
Nabors' mechanical rigs appear to be Y2K compliant. Currently, Nabors is not in
a position to reasonably predict the likely worst case Y2K scenario for its SCR
drilling rigs, but expects to be able to do so following the completion of its
drilling rig assessment on or about June 30, 1999.
Key Third Parties - Third parties that are key to Nabors' operations
include suppliers that provide capital equipment and other supplies and services
essential to the operation of Nabors' drilling rigs or business, and customers
that provide a source of revenue and cash flow to Nabors. Any significant Y2K
disruptions of Nabors' key suppliers and customers could adversely impact
Nabors' financial condition, results of operations or cash flows. Nabors is
directly contacting key suppliers and customers and is reviewing published
information of various suppliers to determine the state of their Y2K readiness.
Because Nabors must rely on representations made by key
8
<PAGE> 11
third parties with respect to their state of Y2K readiness, it cannot guarantee
that all of the Systems of key third parties that are relied upon by Nabors will
remain functional. Nabors has substantially completed identifying and contacting
all key third parties with respect to their Y2K readiness.
Costs - To date, the incremental costs incurred by Nabors that relate
solely to the Y2K compliance program have not been and are not expected to be
material. These costs are exclusive of upgrades made to Nabors' Systems in the
ordinary course of business and consist primarily of fees paid to an outside
consultant and internal employee time. Nabors does not separately track the
internal costs incurred for the Y2K project, which consist primarily of payroll
and related costs associated with employee time. Based upon Nabors' current
assessments, the costs to complete Nabors' Y2K compliance program will not have
a material effect on Nabors' financial condition, results of operations or cash
flows. All current and future costs related to Nabors' Y2K compliance program
have been and are expected to be funded with cash generated from Nabors'
operations.
Risks - There are numerous uncertainties that make the ultimate impact
of Y2K disruptions in the United States or other countries where Nabors operates
difficult to predict. While Nabors will obtain representations from key third
parties with respect to their Y2K readiness, there will be certain Systems or
processes relied on by Nabors that are outside of Nabors' control. The failure
by key third parties to correct their Y2K issues could adversely effect Nabors.
Additionally, Nabors could be unsuccessful in identifying and remediating or
replacing all of its non-compliant Systems, and as such, Nabors' financial
condition, results of operations and cash flows could be materially impacted.
While Nabors does not currently anticipate any catastrophic System failures, no
assurances can be made that such failures will not ultimately occur.
Contingency Plans - If during the course of Nabors' assessment of its
critical Systems, it is determined that the risk of Y2K disruptions is
significant, contingency plans will be developed as appropriate. Such plans
might include the use of alternative service providers or product suppliers.
Currently, Nabors does not have any contingency plans in place based on current
Y2K readiness assessments.
FORWARD-LOOKING STATEMENTS
The statements in this document that relate to matters that are not
historical facts are "forward-looking statements" within the meaning of Section
27A of the Securities Exchange Act of 1934. When used in this document, words
such as "anticipate", "believe", "expect", "plan", "intend", "estimate",
"project", "will", "could", "may", "predict" and similar expressions are
intended to identify forward-looking statements. Future events and actual
results may differ materially from the results set forth or implied in the
forward-looking statements. Factors that might cause such a difference include:
o fluctuations in worldwide prices of oil and natural gas and demand
for oil and natural gas;
o fluctuations in levels of oil and gas exploration and development
activities;
o fluctuations in the demand for contract drilling services;
o the existence of competitors, technological changes and
developments in the industry;
o the existence of operating risks inherent in the contract drilling
industry;
o the existence of regulatory uncertainties;
o the possibility of political instability in any of the countries in
which Nabors does business; and
o year 2000 issues and general economic conditions.
The Company's businesses depend, to a large degree, on the level of
spending by oil and gas companies for exploration, development and production
activities. Therefore, a sustained increase or decrease in the price of oil or
natural gas, which could have a material impact on exploration, development and
production activities, also could materially affect the Company's financial
condition, results of operations and cash flows.
9
<PAGE> 12
PART II. OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
On April 7, 1999, Bayard merged with a special purpose subsidiary of
Nabors. As a result of the merger, Bayard stockholders are entitled to receive
.3375 shares of Nabors common stock and $.30 cash for each share of Bayard
common stock.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
At the Special Meeting of Stockholders held on March 16, 1999,
12,061,255 shares were present in person and by proxy, constituting 66.27% of
the outstanding common stock of the Company entitled to vote. The sole matter
voted upon at the meeting was the adoption of the merger agreement entered into
among Nabors, a subsidiary of Nabors and the Company. The merger agreement was
adopted at the meeting and received the following votes:
For: 11,887,873
Against: 131,247
Withheld: 42,135
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
Exhibit
Number Description
------- -----------
3.1 Restated Certificate of Incorporation of the Company.
3.2 Amended and Restated Bylaws of the Company, as adopted April
7, 1999.
4.1 First Supplemental Indenture dated as of April 7, 1999 to the
Indenture dated as of June 26, 1998, among the Company and its
subsidiary guarantors, and U.S. Trust Company of Texas, N.A..
10.1 Agreement for Purchase and Sale of Drilling Equipment, dated
as of April 7, 1999, between Bayard Drilling L.P. and Nabors
Drilling USA, Inc.
10.2 Master Rig Lease and Management Services Agreement, dated as
of April 7, 1999, between Bayard Drilling L.P. and Nabors
Drilling USA, Inc.
27.1 Financial Data Schedule.
99.1 Change of Control Notice and Offer to Purchase of the Company
dated May 7, 1999.
(b) REPORTS ON FORM 8-K
No reports on Form 8-K were filed during the three months ended March 31, 1999.
10
<PAGE> 13
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
BAYARD DRILLING TECHNOLOGIES, INC.
DATE May 17, 1999 /s/ Daniel McLachlin
--------------------------- -------------------------------------
Daniel McLachlin
President
DATE May 17, 1999 /s/ Michael Harwell
--------------------------- -------------------------------------
Michael Harwell
Vice President and Treasurer
11
<PAGE> 14
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<S> <C>
3.1 Restated Certificate of Incorporation of the Company.
3.2 Amended and Restated Bylaws of the Company, as adopted April
7, 1999.
4.1 First Supplemental Indenture dated as of April 7, 1999 to the
Indenture dated as of June 26, 1998, among the Company and its
subsidiary guarantors, and U.S. Trust Company of Texas, N.A..
10.1 Agreement for Purchase and Sale of Drilling Equipment, dated
as of April 7, 1999, between Bayard Drilling L.P. and Nabors
Drilling USA, Inc.
10.2 Master Rig Lease and Management Services Agreement, dated as
of April 7, 1999, between Bayard Drilling L.P. and Nabors
Drilling USA, Inc.
27.1 Financial Data Schedule.
99.1 Change of Control Notice and Offer to Purchase of the Company
dated May 7, 1999.
</TABLE>
<PAGE> 1
EXHIBIT 3.1
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
BAYARD DRILLING TECHNOLOGIES, INC.
(FILED APRIL 7, 1999)
FIRST: The name of the Corporation is Bayard Drilling Technologies, Inc.
SECOND: The address of its registered office in the State of Delaware is
c/o The Corporation Trust Company, 1209 Orange Street, in the City of
Wilmington, County of New Castle, Delaware 19801. The name of its registered
agent at such address is The Corporation Trust Company.
THIRD: The nature of the business or purposes to be conducted or promoted
is to engage in any lawful act or activity for which corporations may be
organized under the General Corporation Law of the State of Delaware.
FOURTH: The total number of shares of stock which the Corporation shall
have authority to issue is 1,000 shares of common stock, par value $.10 per
share.
FIFTH: In furtherance and not in limitation of the powers conferred by
statute, the board of directors is expressly authorized to make, alter or repeal
the by-laws of the Corporation.
SIXTH: Elections of directors need not be written ballot unless the by-laws
of the Corporation shall so provide.
SEVENTH: Whenever a compromise or arrangement is proposed between the
Corporation and its creditors or any class of them and/or between the
Corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware may, on the application in a summary
way of the Corporation or of any creditor or stockholder thereof or on the
application of any receiver or receivers appointed for the Corporation under the
provisions of Section 291 of Title 8 of the Delaware Code or on the application
of trustees in dissolution or of any receiver or receivers appointed for the
Corporation under the provisions of Section 279 of Title 8 of the Delaware Code,
order a meeting of the creditors or class of creditors, and/or of the
stockholders or class of stockholders of the Corporation, as the case may be, to
be summoned in such manner as the said court directs. If a majority in number
representing three-fourths in value of the creditors or class of creditors,
and/or of the stockholders or class of stockholders of the Corporation, as the
case may be, agree to any compromise or arrangement and to any reorganization of
the Corporation as a consequence of such compromise or arrangement, the said
compromise or arrangement and the said reorganization shall, if sanctioned by
the court to which the said application has been made,
<PAGE> 2
be binding on all the creditors or class of creditors, and/or on all the
stockholders or class of stockholders, of the Corporation, as the case may be,
and also on the Corporation.
EIGHTH: The Corporation reserves the right to amend, alter, change or
repeal any provision contained in this Certificate of Incorporation, in the
manner now or hereafter prescribed by statute, and all rights conferred upon
stockholders herein are granted subject to this reservation.
NINTH: No director of the Corporation shall be personally liable to the
Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, except for liability (i) for any breach of the director's
duty of loyalty to the Corporation or its stockholders, (ii) for acts or
omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) under Section 174 of the Delaware General
Corporation Law or (iv) for any transaction from which the director derived an
improper personal benefit. No repeal or amendment of this Article Ninth shall
adversely affect any rights of any person pursuant to this Article Ninth which
existed at the time of such repeal or amendment with respect to acts or
omissions occurring prior to such repeal or amendment.
TENTH: The Corporation shall indemnify any person who was, is, or is
threatened to be made a party to a proceeding (as hereinafter defined) by reason
of the fact that he or she (i) is or was a director or officer of the
Corporation or (ii) while a director or officer of the Corporation, is or was
serving at the request of the Corporation as a director, officer, partner,
venturer, proprietor, trustee, employee, agent or similar functionary of another
foreign or domestic corporation, limited liability company, association,
partnership, joint venture, sole proprietorship, trust, employee benefit plan
or other enterprise, entity or organization, to the fullest extent permitted
under the General Corporation Law of the State of Delaware, as the same exists
or may hereafter be amended. Such right shall be a contract right and as such
shall run to the benefit of any director or officer who is elected and accepts
the position of director or officer of the Corporation or elects to continue to
serve as a director or officer of the Corporation while this Article Tenth is
in effect. Any repeal or amendment of this Article Tenth shall be prospective
only and shall not limit the rights of any such director or officer or the
obligations of the Corporation with respect to any claim arising from or
related to the services of such director or officer in any of the foregoing
capacities prior to any such repeal or amendment to this Article Tenth. Such
right shall include the right to be paid by the Corporation expenses (including
attorneys' fees) incurred in defending any such proceeding in advance of its
final disposition to the maximum extent permitted under the General Corporation
Law of the State of Delaware, as the same exists or may hereafter be amended.
If a claim for indemnification or advancement of expenses hereunder is not paid
in full by the Corporation within 60 days after a written claim has been
received by the Corporation, the claimant may at any time thereafter bring suit
against the Corporation to recover the unpaid amount of the claim, and, if
successful in whole or in part, the claimant shall also be entitled to be paid
the expenses of prosecuting such claim. It shall be a defense to any such
action that such indemnification is not permitted under the General Corporation
Law of the State of Delaware, but the burden of proving such defense shall be
on the Corporation. Neither the failure of the Corporation (including its board
of directors or any committee thereof, independent legal counsel or
stockholders) to have made its determination prior to the commencement of such
action that indemnification of the claimant is permissible in the circumstances
nor an actual determination by the Corporation (including its board of
2
<PAGE> 3
directors or any committee thereof, independent legal counsel or stockholders)
that such indemnification is not permissible shall be a defense to the action
or create a presumption that such indemnification is not permissible. In the
event of the death of any person having a right of indemnification under the
foregoing provisions, such right shall inure to the benefit of his or her
heirs, executors, administrators and personal representatives. The rights
conferred above shall not be exclusive of any other right which any person may
have or hereafter acquire under any statute, bylaw, resolution of stockholders
or directors, agreement of otherwise.
The Corporation may additionally indemnify any employee or agent of the
Corporation to the fullest extent permitted by law.
As used herein, the term "proceeding" means any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative,
arbitrative or investigative, any appeal in such an action, suit or proceeding,
and any inquiry or investigation that could lead to such an action, suit or
proceeding.
3
<PAGE> 1
EXHIBIT 3.2
[ADOPTED APRIL 7, 1999]
BY-LAWS
OF
BAYARD DRILLING TECHNOLOGIES, INC.
(the "Corporation")
----------------------------------------------
ARTICLE I
OFFICES
SECTION 1. Principal Office.
The principal office of the Corporation shall be at such place as the Board of
Directors may from time to time determine, but until a change is effected, such
principal office shall be at 515 West Greens Road, Suite 1200, Houston, Texas
77067.
SECTION 2. Other Offices.
The Corporation may also have other offices at such places, within or without
the State of Delaware, as the Board of Directors may from time to time determine
or as the business of the Corporation may require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
SECTION 1. Time and Place of Meetings.
A meeting of stockholders for any purpose may be held at such time and place,
within or without the State of Delaware, as shall be stated on the notice
thereof or in a duly executed waiver of notice thereof.
SECTION 2. Annual Meeting.
The annual meeting of the stockholders of the Corporation shall be held on the
first Tuesday of June in each year if not a legal holiday, and if a legal
holiday, then on the next succeeding day which is not a legal holiday at such
place, either within or without the State of Delaware, and at such time and as
set forth in the notice of the meeting or in a duly executed waiver of notice
thereof, for the election of the Board of Directors and for the transaction of
such other business as may properly be brought before the meeting. In the event
the annual meeting is not held on the date above provided, the Board of
Directors shall cause the meeting to be held as soon thereafter as may be
convenient. Such subsequent meeting shall be called in the same manner as
hereinafter provided for special meetings of stockholders.
<PAGE> 2
SECTION 3. Special Meetings.
Special meetings of the stockholders, unless otherwise prescribed by statute,
may be called at any time for any purpose or purposes by the Board and shall be
held at such place, either within or without the State of Delaware, and at such
hour as may be designated by the Board in the notice of the meeting; provided,
however, that the time so fixed shall permit the giving of notice as provided in
Section 4 of this Article II, unless such notice is waived as provided by law or
by these Restated By-Laws. At a special meeting only such matters as may be
specified in the notice thereof shall be considered. Special meetings shall also
be called and held in such cases and in such manner as may be specifically
required by law or by the Certificate of Incorporation.
SECTION 4. Notice of Meetings.
Written notice of each meeting of the stockholders, which shall state the place,
date and hour of the meeting and, in the case of a special meeting or where
otherwise required by law, the purpose or purposes for which it is called, shall
be given, unless a different period is required by law, not less than 10 nor
more than 60 days before the date of such meeting, by or at the direction of the
person calling the meeting, to each stockholder entitled to vote at such
meeting. If mailed, the notice of a meeting of stockholders shall be deemed to
be given when deposited in the United States mail, postage prepaid, directed to
the stockholder at his address as it appears on the records of the Corporation.
No business other than that stated in the notice shall be transacted at any
meeting without the unanimous consent of all the stockholders entitled to vote
thereat. Any such notice for any meeting other than the annual meeting shall, if
issued at the direction of the Board, so indicate. When a meeting is adjourned
to another time or place, notice need not be given if the time and place thereof
are announced at the meeting at which the adjournment is taken. If the
adjournment is for more than 30 days after the date of the original meeting, or
if after the adjournment a new record date is fixed for the adjourned meeting, a
notice of the adjourned meeting shall be given to each stockholder of record
entitled to vote at the meeting.
SECTION 5. Quorum.
Except as otherwise required by law, the Certificate of Incorporation or these
By-Laws, at all meetings of the stockholders, the holders of a majority of the
shares issued and outstanding and entitled to vote shall be present in person or
represented by proxy in order to constitute a quorum for the transaction of any
business. The holders of a plurality of the shares present in person or
represented by proxy and entitled to vote thereat, whether or not a quorum shall
be present, may adjourn the meeting from time to time, to a specified date or
place. At any such adjourned meeting at which a quorum may be present, the
Corporation may transact any business which might have been transacted at the
original meeting.
As to any matter with respect to which a separate class vote is required by the
Certificate of Incorporation, the holders of one-third of the shares of such
class which are then outstanding and entitled to vote shall be present in person
or represented by proxy in order to constitute a quorum for the purpose of any
separate vote required by such class.
The absence from any meeting of the number of shares required by law, the
Certificate of Incorporation or these By-Laws for action upon one matter shall
not prevent action at such meeting upon any other matter or matters which may
properly come before the meeting, if the number of shares required in respect of
such other matters shall be present.
2
<PAGE> 3
SECTION 6. Organization.
At each meeting of the stockholders, the President or, in his absence or
inability to act, the most senior Vice President or, in his absence or inability
to act, any person as may be designated by the Board of Directors or, in the
absence of such designation, a chairman to be chosen at the meeting by the
majority of those stockholders present in person or represented by proxy shall
act as chairman of the meeting. The Secretary or, in his absence or inability to
act, an Assistant Secretary, or in his absence or inability to act, any person
as may be designated from time to time by the Board of Directors shall act as
secretary of each meeting of stockholders and keep the minutes thereof; if no
such person is present or has been chosen, the holders of record of a majority
of shares of stock present in person or represented by proxy and entitled to
vote at the meeting shall choose any person present to act as secretary of the
meeting.
SECTION 7. Order of Business.
The order of business at all meetings of the stockholders shall be as determined
by the chairman of the meeting.
SECTION 8. Voting and Required Vote.
At each meeting of stockholders, each stockholder shall be entitled to one vote
for each share of capital stock held by such stockholder except as otherwise
provided in the Certificate of Incorporation. Except as otherwise provided in
the Certificate of Incorporation, and subject to statute, at each meeting of
stockholders if there shall be a quorum, the affirmative vote of the holders of
a majority of shares present in person or represented by proxy and entitled to
vote thereat, shall decide all matters brought before such meeting.
SECTION 9. Proxies.
Each stockholder entitled to vote at any meeting of stockholders or to express
consent or dissent to corporate action in writing without a meeting may
authorize another person or persons to act for him by proxy. Any such proxy
shall be delivered to the secretary of such meeting at or prior to the time
designated in the order of business for so delivering such proxies. Each such
proxy shall be in writing and executed by the stockholder or his duly authorized
attorney-in-fact, but no such proxy shall be voted after three years from its
date unless such proxy provides for a longer period. A duly executed proxy shall
be irrevocable if it states that it is irrevocable and if, and only as long as,
it is coupled with an interest sufficient in law to support an irrevocable
power. A proxy may be made irrevocable regardless of whether the interest with
which it is coupled is an interest in the stock itself or an interest in the
Corporation generally.
SECTION 10. List of Stockholders.
A complete list of the stockholders entitled to vote at any meeting, arranged in
alphabetical order, with the address of each, and the number of shares held by
each, shall be prepared, or shall be caused to be prepared, by the Secretary and
shall be open to examination of any stockholder, for any purpose germane to the
meeting, during ordinary business hours, for a period of at least ten days prior
to the meeting, either at a place within the city in which the meeting is to be
held, which place shall be specified in the notice of the meeting, or, if not so
specified, at the place where the meeting is to be held. The list shall also be
produced and kept at the place of the meeting during the whole time thereof, and
may be inspected by any stockholder who is present. The stock ledger shall be
the only evidence as to the stockholders entitled to examine the stock ledger,
the list required by these By-Laws or the books of the Corporation, or to vote
in person or by proxy at any meeting of the stockholders.
3
<PAGE> 4
SECTION 11. Voting by Fiduciaries, Pledgors and Joint Owners.
Persons holding stock in a fiduciary capacity shall be entitled to vote the
shares so held. Persons whose stock is pledged shall be entitled to vote, unless
in the transfer by the pledgor on the books of the Corporation he has expressly
empowered the pledgee to vote thereon, in which case only the pledgee, or his
proxy, may represent such stock and vote thereon.
If shares or other securities having voting power stand of record in the names
of two or more persons, whether fiduciaries, members of a partnership, joint
tenants, tenants-in-common, tenants by the entirety or otherwise, or if two or
more persons have the same fiduciary relationship respecting the same shares,
unless the Secretary is given written notice to the contrary and is furnished
with a copy of the instrument or order appointing them or creating the
relationship wherein it is so provided, their acts with respect to voting shall
have the following effect:
(a) if only one votes, his act binds all;
(b) if more than one votes, the act of the majority so voting
binds all;
(c) if more than one votes, but the vote is evenly split on any
particular matter, each faction may vote the securities in
question proportionally, or any person voting the shares, or a
beneficiary, if any, may apply to the Court of Chancery or
such other court as may have jurisdiction to appoint an
additional person to act with the persons so voting the
shares, which shall then be voted as determined by a majority
of such persons and the person appointed by the Court. If the
instrument so filed shows that any such tenancy is held in
unequal interest, a majority or even-split for the purpose of
this paragraph shall be a majority or even-split in interest.
SECTION 12. Consent of Stockholders in Lieu of Meeting.
Unless otherwise provided by the Certificate of Incorporation, any action
required or permitted to be taken at any annual or special meeting of
stockholders of the Corporation may be taken without a meeting, without prior
notice and without a vote, if a consent in writing, setting forth the action so
taken, shall be signed by all of the holders of outstanding stock.
ARTICLE III
BOARD OF DIRECTORS
SECTION 1. General Powers.
The business and affairs of the Corporation shall be managed by or under the
direction of a Board of Directors, which may exercise all such authority and
powers of the Corporation and do all such lawful acts and things as are not by
statute, by the Certificate of Incorporation or by these By-Laws directed or
required to be exercised or done by the stockholders or such other persons as
provided therein.
SECTION 2. Number of Directors.
The number of Directors shall be determined from time to time by resolution of
the Board of Directors in accordance with the terms of the Certificate of
Incorporation.
4
<PAGE> 5
SECTION 3. Resignations.
Any Director may resign at any time upon written notice to the Board of
Directors, the President or the Secretary. Any such resignation shall take
effect at the time specified therein or, if the time when it shall become
effective shall not be specified therein, immediately upon its receipt thereof
by the Board of Directors or by any such officer.
SECTION 4. Annual Meetings.
The annual meeting of the Board of Directors for the purpose of organizing the
Board, appointing officers and members of committees and transacting other
business, shall be held immediately following the annual meeting of the
stockholders at the same place where such meeting of stockholders shall be held.
No notice shall be required for any such meeting if held immediately after the
adjournment, and at the site, of the meeting of the stockholders. If not so
held, notice shall be given in the same manner as required for special meetings
of the Board of Directors.
SECTION 5. Regular Meetings.
Additional regular meetings of the Board may be held without notice at such time
and place (within or without the State of Delaware) as shall from time to time
be determined by the Board of Directors.
SECTION 6. Special Meetings.
Special meetings of the Board may be called at any time by the Chairman of the
Board, the Vice Chairman, the President or any Vice President or by two or more
Directors and shall be held at such time and place (within or without the State
of Delaware) as may be fixed by the person or persons calling the meeting;
provided, however, that the time so fixed shall permit the giving of notice as
provided in Section 7 of this Article III.
SECTION 7. Notice of Special Meetings.
Notice of the time and place of each special meeting of the Board of Directors
shall be mailed, postage prepaid to each director, addressed to him at his
address as it appears on the records of the Corporation, by first-class mail, at
least three days before the day on which such meeting is to be held, or shall be
sent addressed to him at such place by telegraph, telex, cable or wireless, or
be delivered to him personally or by telephone, no later than the day before the
day on which the meeting is to be held, and the method used for notice of such
special meeting need not be the same for each Director being notified. Except as
otherwise required by law, the Certificate of Incorporation or these By-Laws,
such notice need not state the purpose or purposes of such meeting thereof.
SECTION 8. Organization.
The Board of Directors shall select a chairman of the meeting from among the
Directors present to preside over the meeting. The Secretary or, in his absence
or inability to act, an Assistant Secretary, or in his absence or inability to
act, another Director selected by the Board shall act as secretary of the
meeting and keep the minutes thereof; if no such person is present or has been
chosen, the holders of record of a majority of shares of stock present in person
or represented by proxy and entitled to vote at the meeting shall choose any
person present to act as secretary of the meeting.
5
<PAGE> 6
SECTION 9. Quorum.
At all meetings of the Board of Directors the presence in person of one-third of
the total number of Directors constituting the entire Board of Directors,
whether then in office or not, shall be necessary and sufficient to constitute a
quorum for the transaction of any business by the Board of Directors at such
meeting, except as otherwise provided by law, the Certificate of Incorporation
or these By-Laws. At any meeting of the Board of Directors, no action shall be
taken (except adjournment, in the manner provided below) until after a quorum
has been established, except as otherwise provided by law, the Certificate of
Incorporation or these By-Laws.
Except as otherwise provided by law, the Certificate of Incorporation or these
By-Laws, the act of a majority of Directors who are present at a meeting at
which a quorum previously has been established (or at any adjournment of such
meeting, provided that a quorum shall have previously been established at such
adjourned meeting) shall be the act of the Board of Directors, regardless of
whether or not a quorum is present at the time such action is taken. In
determining the number of directors who are present at the time any such action
is taken, any Director who is in attendance at such meeting but who, for just
cause, is disqualified to vote on such matter, shall not be considered as being
present at the time of such action for the purpose of establishing the number of
votes required to take action on any matter submitted to the Board of Directors,
but shall be considered as being present for purposes of determining the
existence of a quorum.
In the event a quorum cannot be established at the beginning of a meeting, a
majority of the Directors present at the meeting, or the Secretary of the
Corporation, if there be no Director present, may adjourn the meeting from time
to time until a quorum be present. Only such notice of such adjournment need be
given as the Board of Directors may from time to time prescribe.
SECTION 10. Regulations.
The Board of Directors may adopt such rules and regulations for the conduct of
its meetings and for the management of the business and affairs of the
Corporation as it may deem proper and not inconsistent with law, the Certificate
of Incorporation and these By-Laws.
SECTION 11. Written Consent in Lieu of Meeting.
Any action required or permitted to be taken at any meeting of the Board of
Directors may be taken without a meeting if all members of the Board then in
office consent thereto in writing, provided that the number of such members is
sufficient to constitute a quorum for such action, and the writing or writings
are filed with the minutes of proceedings of the Board of Directors.
SECTION 12. Telephonic Participation.
Any and all members of the Board of Directors may participate in a meeting of
the Board by means of a conference telephone or similar communications equipment
by means of which all persons participating in such meeting shall hear each
other; participation in a meeting pursuant to this Section shall constitute
presence in person at such meeting.
SECTION 13. Compensation.
Directors shall be entitled to such compensation for their services as Directors
and to such reimbursement for any reasonable expense incurred in attending
meetings of the Board of Directors as may from time to time be fixed by the
Board of Directors. The compensation of Directors may be on such basis as is
determined by the Board of Directors. Any Director may waive compensation for
any meeting. Any Director receiving compensation under these provisions
6
<PAGE> 7
shall not be barred from serving the Corporation in any other capacity and
receiving compensation and reimbursement for reasonable expenses for such other
services.
ARTICLE IV
COMMITTEES
SECTION 1. Committees.
The Board of Directors may appoint such committees as it shall deem advisable
and with such rights, powers, and authority as it shall prescribe. Each such
committee shall consist of one or more Directors. Unless otherwise provided by
the Board of Directors, a majority of the members of each such other committee
shall constitute a quorum, and the acts of a majority of the members present at
a meeting at which a quorum is present shall be the act of such committee.
SECTION 2. Vacancies; Committee Changes.
In the absence or disqualification of a member of any committee, the member or
members thereof present at any meeting and not disqualified from voting, whether
or not he or they constitute a quorum, may unanimously appoint another member of
the Board of Directors to act at the meeting in the place of any such absent or
disqualified member.
The Board of Directors shall have the power at any time to fill vacancies in, to
change the membership of, and to discharge, any committee or any member of any
committee.
SECTION 3. Compensation.
Members of any committee shall be entitled to such compensation for their
services as members of the committee and to such reimbursement for any
reasonable expenses incurred in attending committee meetings as may from time to
time be fixed by the Board of Directors. Any committee member may waive
compensation for any meeting. Any committee member receiving compensation under
these provisions shall not be barred from serving the Corporation in any other
capacity and from receiving compensation and reimbursement of reasonable
expenses for such other services.
SECTION 4. Telephonic Participation.
Any and all members of any committee designated by the Board of Directors may
participate in a meeting of such committee by means of conference telephone or
similar communications equipment by means of which all persons participating in
such meeting can hear each other, and participation in such a meeting pursuant
to this Section shall constitute presence in person at such meeting.
SECTION 5. Action by Consent.
Any action required or permitted to be taken at any meeting of any committee of
the Board of Directors may be taken without a meeting if a written consent
thereto shall be signed by all members of the committee then in office, provided
that the number of such members is sufficient to constitute a quorum for such
action, if any, and such written consent is filed with the minutes of its
proceedings.
7
<PAGE> 8
ARTICLE V
NOTICES
SECTION 1. Waiver of Notice.
Whenever any notice is required to be given by law, the Certificate of
Incorporation or these By-Laws, a written waiver thereof; signed by the person
or persons entitled to such notice, whether before or after the time stated
therein, shall be deemed equivalent to such notice. Neither the business to be
transacted at, nor the purpose of any regular or special meeting of
stockholders, any meeting of other security holders, the Board of Directors, or
any committee of the Board of Directors need be specified in any written waiver
of notice unless so required by law, the Certificate of Incorporation or these
By-Laws.
SECTION 2. Attendance at Meeting.
Attendance of a person at any meeting, whether of stockholders or other security
holders (in person or by proxy), or the Board of Directors or any committee of
the Board of Directors, shall constitute a waiver of notice of such meeting,
except when such person attends such meeting for the express purpose of
objecting, and objects, at the beginning of the meeting, to the transaction of
any business on the ground that the meeting is not legally called or convened.
ARTICLE VI
OFFICERS
SECTION 1. Number and Qualifications.
The officers of the Corporation shall include the President and a Secretary, and
may include one or more Vice Presidents, a Treasurer, and such other officers as
may be elected or appointed in accordance with the provisions of Section 2 of
this Article VI. Any number of offices, except the offices of President and
Secretary, may be held by the same person.
SECTION 2. Selection, Term of Office and Qualification.
The officers shall be elected from time to time by the Board of Directors at its
first regular meeting after each annual meeting of stockholders. Each officer
shall hold his office until his successor is elected and qualified or until he
shall resign in the manner provided in Section 3 of this Article VI, or until he
shall have been removed in the manner provided in Section 4 of this Article VI,
or until his death. Other officers, including without limitation one or more
Assistant Treasurers and one or more Assistant Secretaries shall be chosen in
such manner, hold office for such period, have such authority, perform such
duties and be subject to removal as may be prescribed by the Board of Directors.
SECTION 3. Resignations.
Any officer may resign at any time upon written notice to the Board of
Directors, the President or the Secretary. Any such resignation shall take
effect at the time specified therein or, if the time when it shall become
effective shall not be specified therein, immediately upon its receipt thereof
by the Board of Directors or any such officer.
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<PAGE> 9
SECTION 4. Removal.
Any officer may be removed at any time, either with or without cause, by the
Board of Directors; and any officer not elected by the Board of Directors may be
removed in such manner as may be determined by the Board of Directors. Removal
from office however, shall not prejudice the contract rights, if any, of the
person removed except as provided in such contract.
SECTION 5. Vacancies.
Any vacancy occurring in any office of the Corporation which is required by
Section 2 of this Article VI to be elected by the Board of Directors, whether by
death, resignation, removal or otherwise, shall be filled for the unexpired
portion of the term by the Board of Directors. A vacancy in any other office
shall be filled in such manner as may be determined by the Board of Directors.
SECTION 6. The President.
The President shall be chief executive officer of the Corporation and shall
have, subject to the control of the Board of Directors, general and active
management of the business of the Corporation and the general and active
supervision and direction over the business operations and affairs of the
Corporation and over its several officers, agents and employees. He shall,
unless also a Director, be an ex officio member of all committees of the Board.
In general, he shall have such other powers and shall perform such other duties
as usually pertain to the office of President or as from time to time may be
assigned to him by the Board or these By-Laws.
SECTION 7. Vice President.
The Vice President or, in the event there be more than one, the Vice Presidents
in the order designated, or in the absence of any designation, in the order of
their seniority, shall have such powers and perform such duties as from time to
time may be assigned to him by the Board.
SECTION 8. The Treasurer and Assistant Treasurers.
The Treasurer shall:
(a) have charge and custody of, and be responsible for, all the
funds and securities of the Corporation;
(b) keep full and accurate accounts of receipts and disbursements
in books belonging to the Corporation;
(c) cause all moneys and other valuables to be deposited to the
credit of the Corporation in such depositories as may be
designated by the Board of Directors;
(d) receive, and give receipts for moneys due and payable to the
Corporation from any source whatsoever;
(e) disburse the funds of the Corporation and supervise the
investment of its funds as ordered or authorized by the Board
of Directors, taking proper vouchers therefor;
(f) render to the President and the Board of Directors at the
regular meetings of the Board, or whenever they may request
it, an account of all his transactions as Treasurer and of the
financial condition of the Corporation; and
9
<PAGE> 10
(g) in general, have all the powers and perform all the duties
incident to the office of Treasurer and such other duties as
from time to time may be assigned to him by the Board of
Directors or the President.
The Assistant Treasurer or Assistant Treasurers, if any, shall in the absence or
disability of the Treasurer or at his request, perform his duties and exercise
his powers and authority as may be assigned to him by the Board of Directors or
the President.
SECTION 9. The Secretary and Assistant Secretaries.
The Secretary shall:
(a) attend all meetings of the Board of Directors, any committee
of the Board of Directors, stockholders and other security
holders and record all votes and the proceedings of such
meetings in minute books to be kept by him for that purpose;
(b) see that all notices are duly given in accordance with the
provisions of these By-Laws and as required by law;
(c) be custodian of the records and the seal of the Corporation
and affix and attest the seal to all stock certificates of the
Corporation (unless the seal of the Corporation on such
certificates shall be a facsimile, as hereinafter provided)
and affix and attest the seal to all other documents to be
executed on behalf of the Corporation under its seal;
(d) see that the books, reports, statements, certificates and
other documents and records required by law to be kept and
filed are properly kept and filed; and
(e) in general, have all the powers and perform all the duties
incident to the office of Secretary and such other duties as
from time to time may be assigned to him by the Board of
Directors or the President.
The Assistant Secretary or Assistant Secretaries, if any, shall, in the absence
or disability of the Secretary or at his request, perform his duties and
exercise his powers and authority as may be assigned to him by the Board of
Directors or the President.
SECTION 10. Compensation.
The compensation of all officers of the Corporation shall be fixed from time to
time by the Board of Directors; no officer of the Corporation shall be prevented
from receiving compensation because he is also a Director of the Corporation.
ARTICLE VII
CAPITAL STOCK AND DIVIDENDS
SECTION 1. Stock Certificates for Shares.
Certificates for shares of the capital stock of the Corporation shall be in such
form, not inconsistent with the Certificate of Incorporation, as shall be
approved by the Board of Directors and shall be signed by or in the name of the
corporation by the Chairman or by the President or a Vice President, and by the
Treasurer or an Assistant Treasurer, or the Secretary or an Assistant Secretary,
provided that the signatures of any such officers thereon may be facsimiles. The
seal of the Corporation, if there is one, shall be impressed, by original or by
facsimile, printed or engraved, on all such certificates. A certificate may also
be signed by the transfer agent and a
10
<PAGE> 11
registrar as the Board of Directors may determine, and in such case the
signature of the transfer agent or the registrar may also be facsimile, engraved
or printed. In case any officer, transfer agent or registrar who has signed or
whose facsimile signature has been placed upon such certificate shall have
ceased to be such officer, transfer agent or registrar before such certificate
is issued, it may nevertheless be issued by the Corporation with the same effect
as if he were such officer, transfer agent or registrar at the date of issue.
SECTION 2. Stock Records.
The Corporation shall keep at such place or places, within or without the State
of Delaware, as the Board of Directors may from time to time determine, the
stock record books in which shall be recorded the number of shares issued, the
names of the owners of the shares, the number owned by them respectively, and
the transfer of such shares with the date of transfer. Blank stock certificate
books shall be kept by the Secretary or by any officer or agent designated by
the Board.
SECTION 3. Registration of Transfers.
Registration of transfer of certificates representing shares of stock of the
Corporation shall be effected only on the books of the Corporation only upon
authorization by the registered holder thereof, or by his attorney authorized by
power of attorney duly executed and filed with the Secretary or with a
designated transfer agent or transfer clerk, and upon surrender to the
Corporation or any transfer agent of the Corporation of the certificate or
certificates being transferred, which certificate shall be properly endorsed or
accompanied by a duly executed stock transfer power and the payment of all taxes
thereon. Whenever a certificate is endorsed by or accompanied by a stock power
executed by someone other than the person or persons named in the certificate,
evidence of authority to transfer shall also be submitted with the certificate.
Whenever any transfers of shares shall be made for collateral security and not
absolutely, and both the transferor and transferee request the Corporation to do
so, such fact shall be stated in the entry of the transfer.
SECTION 4. Determination of Stockholders.
Except as otherwise provided by law, the Corporation shall be entitled to
recognize the exclusive right of a person in whose name any share or shares
stand on the record of stockholders as the owner of such share or shares for all
purposes, including, without limitation, the rights to receive dividends or
other distributions, and to vote as such owner, the Corporation may hold any
such stockholder of record liable for calls and assessments and the Corporation
shall not be bound to recognize any equitable or legal claim to or interest in
any such share or shares on the part of any other person whether or not it shall
have express or other notice thereof.
SECTION 5. Regulations Governing Issuance and Transfers of Shares.
The Board of Directors shall have the power and authority to make all such rules
and regulations, not inconsistent with these By-Laws, as it may deem expedient
concerning the issue, transfer and registration of certificates for shares of
stock of the Corporation. It may appoint, or authorize any officer or officers
to appoint, one or more transfer agents or one or more transfer clerks and one
or more registrars and may require all certificates for shares of stock to bear
the signature or signatures of any of them.
SECTION 6. Fixing of Record Date.
In order that the Corporation may determine the stockholders of record entitled
to notice of, or to vote at, any meeting of stockholders or any adjournment
thereof, or entitled to express consent to corporate action in writing without a
meeting, or entitled to receive payment of any dividend or
11
<PAGE> 12
other distribution or allotment of any rights, or entitled to exercise any
rights in respect of any change, conversion or exchange of stock or for the
purpose of any other lawful action, the Board of Directors may fix, in advance,
a record date, which shall not be more than sixty nor less than ten days before
the date of such meeting, nor more than sixty days prior to any other action.
Except as otherwise provided by law, the Certificate of Incorporation, these
By-Laws or by resolution of the Board of Directors:
(1) The record date for determining stockholders entitled to
notice of or to vote at a meeting of stockholders shall be at
the close of business on the day next preceding the day on
which notice is given, or, if notice is waived, at the close
of business on the day next preceding the day on which the
meeting is held;
(2) The record date for determining stockholders entitled to
express consent to corporate action in writing without a
meeting, when no prior action by the Board of Directors is
necessary, shall be the day on which the first written consent
is expressed; and
(3) The record date for determining stockholders for any other
purpose shall be at the close of business on the day on which
the Board adopts the resolution relating thereto.
A determination of stockholders of record entitled to notice of or to vote at a
meeting of stockholders shall apply to any adjournment of the meeting; provided,
however, that the Board may fix a new record date for the adjourned meeting.
SECTION 7. Lost, Stolen or Destroyed Stock Certificates.
The holder of any certificates representing shares of stock of the Corporation
shall immediately notify the Corporation of any loss, theft, destruction or
mutilation of such certificate, and the Board of Directors may authorize the
issuance of a new certificate of stock in lieu thereof upon satisfactory proof
of such loss, theft or destruction upon the giving of an open penalty bond with
surety satisfactory to the Treasurer and the Corporation's counsel, to protect
the Corporation or any person injured on account of the alleged loss, theft or
destruction of any such certificate or the issuance of a new certificate from
any liability or expense which it or they may incur by reason of the original
certificates remaining outstanding and upon payment of the Corporation's
reasonable costs incident thereto.
SECTION 8. Dividends and Reserves.
Subject to the provisions of law or of the Certificate of Incorporation, the
Board of Directors may, out of funds available therefor at any regular or
special meeting, declare dividends upon the capital stock of the Corporation as
and when they deem expedient. Before declaring any dividend there may be set
apart out of any funds of the Corporation available for dividends, such sum or
sums as the Board may from time to time in their discretion deem proper as a
reserve fund for working capital, to meet contingencies, or for equalizing
dividends, or for the purpose of repairing, maintaining or increasing the
property or business of the Corporation, or for such other purposes as the Board
shall deem to be in the best interests of the Corporation. The Board may, in its
discretion, modify or abolish any such reserve at any time.
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<PAGE> 13
ARTICLE VIII
GENERAL PROVISIONS
SECTION 1. Execution of Contracts, Papers and Documents.
Except as otherwise required by law, the Certificate of Incorporation or these
By-Laws, any contract or other instrument may be executed and delivered in the
name and on behalf of the Corporation by such officers or employees of the
Corporation as the Board may from time to time determine, or in the absence of
such determination, by the President. Such authority may be general or confined
to specific instances as the Board may determine. Unless authorized by the Board
or expressly permitted by these By-Laws, no officer or agent or employee shall
have any power or authority to bind the Corporation by any contract or
engagement or to pledge its credit or to incur a pecuniary liability for any
purpose.
SECTION 2. Voting Shares in Other Corporations.
The Corporation may vote any and all shares of stock and other securities having
voting rights which may at any time and from time to time be held by it in any
other corporation or corporations and such vote may be cast either in person or
by proxy by such officer of the Corporation as the Board of Directors may
appoint or, in the absence of such appointment, by the President or the
Secretary.
SECTION 3. Checks, Drafts, etc.
All checks, drafts, bills of exchange or other orders for the payment of money
out of the funds of the Corporation, and all notes or other evidences of
indebtedness of the Corporation, shall be signed in the name and on behalf of
the Corporation by such persons and in such manner as shall from time to time be
authorized by the Board.
SECTION 4. Books, Accounts and Other Records.
Except as otherwise provided by law, the books, accounts and other records of
the Corporation shall be kept at such place or places, within or without the
State of Delaware, as the Board of Directors may from time to time designate.
SECTION 5. Corporate Seal.
The Board of Directors may provide a suitable seal which shall bear the name of
the Corporation, the year of incorporation and shall include the words
"Corporate Seal, Delaware." Said seal shall be in the custody of the Secretary
of the Corporation, and may provide for one or more duplicates thereof to be
kept in the custody of such other officer or officers of the Corporation as the
Board may prescribe.
SECTION 6. Fiscal Year.
Following the fiscal year ended September 30, 1997, the fiscal year of the
Corporation shall be a period of twelve (12) calendar months beginning January 1
and ending on December 31 of each year.
13
<PAGE> 14
ARTICLE IX
TRANSACTIONS WITH DIRECTORS AND OFFICERS; INDEMNIFICATION
SECTION 1. Affiliated Transactions.
No contract or transaction between the Corporation and one or more of its
directors or officers. or between the Corporation and any other corporation,
partnership, association, or other organization in which one or more of its
Directors or officers are directors or officers or have a financial interest,
shall be void or voidable solely for this reason, or solely because the Director
or officer is present at or participates in the meeting of the Board of
Directors or committee thereof that authorizes the contract or transaction or
solely because his or their votes are counted for such purpose, if:
(a) The material facts as to his relationship or interest and as
to the contract or transaction are disclosed or are known to
the Board of Directors or the committee, and the Board of
Directors or committee in good faith authorizes the contract
or transaction by the affirmative vote of a majority of the
disinterested Directors, even though the disinterested
Directors be less than a quorum; or
(b) The material facts as to his relationship or interest and as
to the contract or transaction are disclosed or are known to
the stockholders entitled to vote thereon, and the contract or
transaction is specifically approved in good faith by the vote
of the stockholders; or
(c) The contract or transaction is fair to the Corporation as of
the time it is authorized, approved, or ratified by the Board
of Directors, a committee thereof, or the stockholders.
SECTION 2. Determining Quorum.
Common or interested Directors may be counted in determining the presence of a
quorum at a meeting of the Board of Directors or of a committee thereof which
authorized the contract or transaction.
SECTION 3. Indemnification.
(a) Each person who at any time shall serve or shall have served
as a director, officer, employee or agent of the Corporation
(including any predecessor of the Corporation), or any person
who is or was serving at the written request of the
Corporation (in accordance with written procedures adopted
from time to time by the Board of Directors) as a director,
officer, partner, venturer, proprietor, trustee, employee,
agent or similar functionary of another foreign or domestic
corporation, partnership, joint venture, sole proprietorship,
trust, employee benefit plan or other enterprise, shall be
entitled to (a) indemnification and (b) the advancement of
expenses incurred by such person from the Corporation as, and
to the fullest extent, permitted by Section 145 of the
Delaware General Corporation Law or any successor statutory
provision, as from time to time amended. The foregoing right
of indemnification and to the advancement of expenses shall
not be deemed exclusive of any other rights to which those to
be indemnified may be entitled as a matter of law or under any
agreement, vote of stockholders or disinterested directors of
the Corporation, or other arrangement.
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<PAGE> 15
(b) The Corporation may purchase and maintain insurance or another
arrangement on behalf of any person who is or was a director,
officer, employee or agent of the Corporation or who is or was
serving at the written request of the Corporation as a
director, officer, partner, venturer, proprietor, trustee,
employee, agent or similar functionary of another foreign or
domestic corporation, partnership, joint venture, sole
proprietorship, trust, employee benefit plan or other
enterprise against any liability asserted against and incurred
by such person in such capacity or arising out of such
person's status in such capacity, whether or not the
Corporation would have the power to indemnify such person
against that liability under this Section 3 or the Delaware
General Corporation Law.
ARTICLE X
AMENDMENT
The power to adopt, amend or repeal these By-Laws shall be in the stockholders
entitled to vote and may be exercised by the affirmative vote of a majority of
the stock issued and outstanding and entitled to vote thereat at any annual
meeting of the stockholders or at any special meeting thereof if notice of the
proposed amendment or repeal be contained in the notice of such special meeting.
Such power shall also be conferred upon the directors and may be exercised by
the affirmative vote of a majority of the Board at any regular meeting of the
Board or at any special meeting of the Board if notice of the proposed amendment
or repeal be contained in the notice of such special meeting, but the fact that
such power has been so conferred upon the directors shall not divest the
stockholders of the power, nor limit their power to adopt, amend or repeal these
By-Laws.
15
<PAGE> 1
EXHIBIT 4.1
[EXECUTION COPY]
================================================================================
BAYARD DRILLING TECHNOLOGIES, INC.
AND
GUARANTORS
$100,000,000
11% Senior Notes due 2005
------------------------------
FIRST SUPPLEMENTAL INDENTURE
Dated as of April 7, 1999
------------------------------
U.S. TRUST COMPANY OF TEXAS, N.A.
Trustee
================================================================================
<PAGE> 2
FIRST SUPPLEMENT INDENTURE, dated as of April 7, 1999, among Bayard Drilling
Technologies, Inc., a Delaware corporation (the "Company"), certain of the
Company's subsidiaries signatory hereto (each, a "Guarantor", collectively, the
"Guarantors") and U.S. Trust Company of Texas, N.A., as trustee (the
"Trustee").
W I T N E S S E T H:
WHEREAS, the Company, the Guarantors and the Trustee are parties to that
certain Indenture, dated as of June 26, 1998 (the "Original Indenture"),
pursuant to which the Company issued $100,000,000 in aggregate principle amount
of its 11% Senior Subordinated Notes due 2005, Series B (the "Securities");
WHEREAS, the Company intends to consummate a transaction involving the
merger (the "Merger") of Nabors Acquisition Corp. VII, a Delaware corporation
("Merger Sub"), with and into the Company pursuant to that certain Agreement
and Plan of Merger, dated as of October 19, 1998, as amended on January 15,
1999 and February 12, 1999 (as so amended, the "Merger Agreement"), by and
among Nabors Industries, Inc., a Delaware corporation, Merger Sub and the
Company;
WHEREAS, in accordance with the provisions of the Original Indenture,
holders of more than a majority in aggregate principal amount of the Notes
outstanding have provided their written consents (the "Consents") to certain
amendments to the provisions of the Original Indenture (the "Amendments"),
which are described in the Consent and Modification Letter first distributed to
certain beneficial owners of the Notes on March 30, 1999; and
WHEREAS, the Company and the Trustee, in accordance with Article 10 of the
Original Indenture and pursuant to appropriate resolutions of the Board of
Directors of the Company, have duly determined to make and execute this First
Supplemental Indenture in order to give effect to the Amendments;
NOW THEREFORE, in consideration of the premises and other good and valuable
consideration, the receipt and adequacy of which are hereby acknowledged, the
parties hereto agree as follow:
ARTICLE ONE
AMENDMENTS TO THE ORIGINAL INDENTURE
Section 1.1 Effective as of the date hereof (the "Effective
Date"), the Original Indenture is amended as follows:
<PAGE> 3
(a) Section 5.01 is amended to add a new Section 5.10(c)
to read in its entirety as follows:
"(c) Sections 5.01 and 5.02 hereof shall not apply
to the merger of Nabors Acquisition Corp. VII, a Delaware
corporation ("Merger Sub"), with and into the Company pursuant
to that certain Agreement and Plan of Merger, dated as of
October 19, 1998, as amended on January 15, 1999 and February
12, 1999, by and among Nabors Industries, Inc., a Delaware
corporation, Merger Sub and the Company."
ARTICLE TWO
AMENDMENTS TO THE ORIGINAL INDENTURE
Securities authenticated and delivered for transfer or
exchange of outstanding Securities after the Effective Date, and all Securities
presented or delivered to the Trustee on or after such date for the purpose of
being stamped, shall be stamped (unless textually revised as hereinafter
provided) by the Trustee with a notation substantially in the form as follows:
"The Indenture dated as of August 26, 1998 referred
to in this Security has been amended by a First Supplemental
Indenture dated as of April 7, 1999, pursuant to which certain
provisions of the Indenture have been amended as set forth in
such First Supplemental Indenture. Copies of the First
Supplemental Indenture are on file with, and available on
request from, the Trustee and the Company."
Any securities hereafter authenticated or delivered may be
textually revised, making changes in phraseology and form (but not in substance)
as may be appropriate so as to conform, in the opinion of the Trustee and the
Company, to the modifications made by this First Supplemental Indenture.
ARTICLE THREE
MISCELLANEOUS
SECTION 3.1 DEFINITIONS. Capitalized terms used but not defined
in this First Supplemental Indenture shall have the respective meanings
assigned to them in the Original Indenture.
SECTION 3.2 CONFLICT WITH THE TRUST INDENTURE ACT. If any
provision of this First Supplemental Indenture modifies or excludes any
provision of the Trust Indenture Act that is required under such Act to be part
of and govern this First Supplemental Indenture, the latter provision of the
Trust Indenture Act shall control. If any provision hereof modifies or
excludes any provision of the Trust Indenture Act that may be so modified or
excluded, the latter
-2-
<PAGE> 4
provision of the Trust Indenture Act shall be deemed to apply to this First
Supplemental Indenture, as so modified or excluded, as the case may be.
SECTION 3.3 SECURITIES DEEMED CONFORMED. As of the Effective
Date, the provisions of each Security then outstanding shall be deemed to be
conformed, without the necessity for any reissuance or exchange of such
Security or any other action on the part of the Holders, the Company, the
Guarantors or the Trustee, so as to reflect this First Supplemental Indenture.
SECTION 3.4 SUCCESSORS. All agreements of the Company, the
Guarantors and the Trustee in this First Supplemental Indenture and in the
Original Indenture shall bind their respective successors.
SECTION 3.5 BENEFITS OF SUPPLEMENTAL INDENTURE Nothing in this
First Supplemental Indenture, express or implied, shall give to any person,
other than the parties hereto and their successors hereunder and the Holders,
any benefit or any legal or equitable right, remedy or claim under this First
Supplemental Indenture or the Original Indenture.
SECTION 3.6 SEPARABILITY. In case any provision in this First
Supplemental Indenture, or in the Original Indenture, shall be invalid, illegal
or unenforceable, the validity, legality and enforceability of the remaining
provisions shall not in any way be affected or impaired thereby, it being
intended that all of the provisions hereof shall be enforceable to the full
extent permitted by law.
SECTION 3.7 TRUSTEE RESPONSIBILITY. The Trustee assumes no
duties, responsibilities or liabilities by reason of this First Supplemental
Indenture other than as set forth in the Original Indenture. The Trustee
assumes no responsibility for the correctness of the statements herein
contained, which shall be taken as statements of the Company and the
Guarantors. The First Supplemental Indenture is executed and accepted by the
Trustee subject to all of the terms and conditions of its acceptance of the
trust under the Original Indenture, as fully as if said terms and conditions
were herein set forth in full.
SECTION 3.8 HEADINGS. The Section headings of this First
Supplemental Indenture have been inserted for convenience of reference only,
are not to be considered a part of this First Supplemental Indenture and shall
not modify or restrict any of the terms or provisions hereof.
SECTION 3.9 MULTIPLE ORIGINALS. The parties may sign any number
of copies of this First Supplemental Indenture. Each signed copy shall be an
original, but all of them together represent the same agreement. One signed
copy is enough to prove this First Supplemental Indenture. This First
Supplemental Indenture may be executed in any number of counterparts, each of
which shall be deemed an original but all such counterparts shall together
constitute but one and the same instrument.
SECTION 3.10 GOVERNING LAW. THIS FIRST SUPPLEMENTAL INDENTURE
SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
NEW YORK BUT WITHOUT GIVING EFFECT TO APPLICABLE
- 3 -
<PAGE> 5
PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT THE APPLICATION OF THE LAWS
OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY.
- 4 -
<PAGE> 6
IN WITNESS HEREOF, the parties hereto have caused this First
Supplemental Indenture to be duly executed as of the date first above written.
COMPANY:
BAYARD DRILLING TECHNOLOGIES, INC.
By: /s/ David E. Grose
-------------------------------------------
David E. Grose
Vice President and Chief Financial Officer
GUARANTORS:
BAYARD DRILLING, L.L.C.
By: /s/ David E. Grose
-------------------------------------------
David E. Grose
Vice President and Chief Financial Officer
BAYARD DRILLING, L.P.
By: BAYARD DRILLING, L.L.C.,
its general partner
By: /s/ David E. Grose
-------------------------------------------
David E. Grose
Vice President and Chief Financial Officer
BONRAY DRILLING CORPORATION
By: /s/ David E. Grose
-------------------------------------------
David E. Grose
Vice President and Chief Financial Officer
TREND DRILLING CO.
By: /s/ David E. Grose
-------------------------------------------
David E. Grose
Vice President and Chief Financial Officer
- 5 -
<PAGE> 7
TRUSTEE:
U.S. TRUST COMPANY OF TEXAS, N.A.
By:
-------------------------------------------
Name:
-----------------------------------------
Title:
----------------------------------------
- 6 -
<PAGE> 8
TREND DRILLING CO.
By:
-------------------------------------------
David E. Grose
Vice President and Chief Financial Officer
TRUSTEE:
U.S. TRUST COMPANY OF TEXAS, N.A.
By: /s/ Melissa Scott
-------------------------------------------
Melissa Scott
Vice President
- 7 -
<PAGE> 9
STATE OF OKLAHOMA )
) ss.:
COUNTY OF OKLAHOMA )
On the 6th day of April, 1999, before me personally came David E.
Grose, to me known, who, being by me duly sworn, did depose and say that he is
Vice President and Chief Financial Officer of Bayard Drilling Technologies,
Inc., one of the corporations described in and which executed the foregoing
instrument, and that he signed his name thereto by authority of the Board of
Directors of said corporation.
/s/ Signature Illegible
----------------------------------------
My Commission Expires: 6-21-99 Notary Public
STATE OF OKLAHOMA )
) ss.:
COUNTY OF OKLAHOMA )
On the 6th day of April, 1999, before me personally came David E.
Grose, to me known, who, being by me duly sworn, did depose and say that he is
Vice President and Chief Financial Officer of Bayard Drilling, L.L.C., one of
the entities described in and which executed the foregoing instrument, and that
he signed his name thereto by authority of the ________________ of such entity.
/s/ Signature Illegible
----------------------------------------
My Commission Expires: 6-21-99 Notary Public
- 8 -
<PAGE> 10
STATE OF OKLAHOMA )
) ss.:
COUNTY OF OKLAHOMA )
On the 6th day of April, 1999, before me personally came David E.
Grose, to me known, who, being by me duly sworn, did depose and say that he is
Vice President and Chief Financial Officer of Bayard Drilling, L.L.C., the
general partner of Bayard Drilling, L.P., which is one of the entities
described in and which executed the foregoing instrument, and that he signed
his name thereto by authority of the ________________ of Bayard Drilling, L.L.C.
/s/ Signature Illegible
----------------------------------------
My Commission Expires: 6-21-99 Notary Public
STATE OF OKLAHOMA )
) ss.:
COUNTY OF OKLAHOMA )
On the 6th day of April, 1999, before me personally came David E.
Grose, to me known, who, being by me duly sworn, did depose and say that he is
Vice President and Chief Financial Officer of Bonray Drilling Corporation, one
of the corporations described in and which executed the foregoing instrument,
and that he signed his name thereto by authority of the Board of Directors of
said corporation.
/s/ Signature Illegible
----------------------------------------
My Commission Expires: 6-21-99 Notary Public
- 9 -
<PAGE> 11
STATE OF OKLAHOMA )
) ss.:
COUNTY OF OKLAHOMA )
On the 6th day of April, 1999, before me personally came David E.
Grose, to me known, who, being by me duly sworn, did depose and say that he is
Vice President and Chief Financial Officer of Trend Drilling Co., one of the
corporations described in and which executed the foregoing instrument, and that
he signed his name there by authority of the Board of Directors of said
corporation.
/s/ Signature Illegible
----------------------------------------
My Commission Expires: 6-21-99 Notary Public
STATE OF OKLAHOMA )
) ss.:
COUNTY OF OKLAHOMA )
On the ____ day of April, 1999, before me personally came
_________________, to me known, who, being by me duly sworn, did depose and say
that he is __________________ of U.S. Trust Company of Texas, N.A., one of the
entities described in and which executed the foregoing instrument, and that he
signed his name there by authority of the ______________ of such entity.
----------------------------------------
Notary Public
- 10 -
<PAGE> 12
STATE OF _______________ )
) ss.:
COUNTY OF ______________ )
On the ____ day of April, 1999, before me personally came David E.
Grose, to me known, who, being by me duly sworn, did depose and say that he is
Vice President and Chief Financial Officer of Trend Drilling Co., one of the
corporations described in and which executed the foregoing instrument, and that
he signed his name thereto by authority of the Board of Directors of said
corporation.
----------------------------------------
Notary Public
STATE OF TEXAS )
) ss.:
COUNTY OF DALLAS )
On the ____ day of April, 1999, before me personally came Melissa
Scott, to me known, who, being by me duly sworn, did depose and say that he is
Vice President of U.S. Trust Company of Texas, N.A., one of the entities
described in and which executed the foregoing instrument, and that she signed
her name thereto on behalf of such entity.
/s/ Carrie D. Oates
----------------------------------------
Notary Public
- 11 -
<PAGE> 1
EXHIBIT 10.1
AGREEMENT FOR THE PURCHASE AND SALE
OF DRILLING EQUIPMENT
This Agreement for the Purchase and Sale of Drilling Equipment (this
"Agreement") is entered as of the 7th day of April, 1999 (the "Closing Date"),
by and between NABORS DRILLING USA, INC., a Delaware corporation ("Buyer"), and
BAYARD DRILLING, L.P., a Delaware limited partnership ("Seller").
Seller is the owner of certain drilling rigs, complete with all of the
associated machinery, supplies and equipment, and certain other equipment, all
as described on Exhibit A (collectively, the "Equipment"), and Seller desires to
sell the Equipment and Buyer desires to purchase the Equipment upon the terms
and conditions specified in this agreement.
NOW THEREFORE, in consideration of the mutual promises and obligations
set forth below, Buyer and Seller agree as follows:
1. Description and Price: Seller agrees to sell and Buyer agrees to
purchase all of Seller's right, title and interest in and to the
Equipment for the total purchase price of US $16,550,200 (the "Purchase
Price"). The Purchase Price constitutes the fair market value of the
Equipment as determined pursuant to an appraisal conducted by HADCO
International dated March 1999, copies of which have been delivered to
Buyer and Seller. The Purchase Price shall be paid to Seller on the
date of this Agreement in cash by wire transfer to an account of Seller
to be specified to Buyer in writing.
2. Representations and Warranties. Each of Buyer and Seller represents and
warrants to the other that its Board of Directors has authorized and
approved this Agreement and the Purchase Price, and has determined that
the Purchase Price constitutes the fair market value for the Equipment.
3. Closing: This transaction shall be closed in Houston, Texas as of the
Closing Date.
4. Conditions of Closing: At Closing, Seller shall deliver the following
documents to Buyer:
a. Documents satisfactory to Buyer demonstrating that Seller has
good and marketable title to the Equipment and that the
Equipment is free and clear of all mortgages, liens,
encumbrances and charges of any type or description
whatsoever; and
b. An executed Bill of Sale in the form of Exhibit B.
5. Delivery: Seller shall deliver the Equipment to Buyer at its current
location on the Closing Date. It is understood that possession, title
and risk of loss of and to the Equipment is to be transferred by Seller
to Buyer upon delivery.
6. Disclaimer of Warranty: THE EQUIPMENT IS BEING PURCHASED WHERE-IS,
AS-IS AND SELLER MAKES NO WARRANTY OF ANY KIND WITH RESPECT TO THE
EQUIPMENT, WHETHER EXPRESS, IMPLIED OR STATUTORY AND SELLER EXPRESSLY
DISCLAIMS ANY AND ALL EXPRESS OR IMPLIED WARRANTIES OR CONDITIONS,
STATUTORY OR OTHERWISE, INCLUDING ANY AS TO FITNESS FOR A PARTICULAR
PURPOSE OR OTHERWISE.
7. Taxes: Buyer shall be responsible and liable for any sales taxes which
may be imposed by the State of Texas as a consequence of the purchase
and sale of the Equipment. Seller shall be responsible and liable for
the payment of all other taxes, fees, duties and charges (such as, by
way of illustration, property, use, excise, value added and other
similar taxes and/or direct or indirect sums in lieu thereof) which may
be imposed by any foreign, federal, state, county, local or other
authority as a consequence thereof, including any gross-up which may be
required to
1
<PAGE> 2
assure that Buyer does not incur any costs or expenses for such taxes,
fees, duties or charges other than sales tax specifically assumed by
Buyer under the preceding sentence. EACH PARTY SHALL INDEMNIFY, DEFEND
AND HOLD HARMLESS THE OTHER FROM AND AGAINST LIABILITY FOR TAXES IN
RESPECT OF WHICH IT HAS ASSUMED RESPONSIBILITY IN THIS CLAUSE 7.
8. Fees and Expenses: Seller shall be responsible for the payment of any
and all brokers or agents fees which may arise as a consequence of the
transaction, and Buyer shall be responsible for the payment of any and
all fees which may be associated with the conduct of searches for liens
or encumbrances of record upon the Equipment.
9. Interpretation and Modification: This writing is intended by the
parties as the final expression of their Agreement and is intended also
as a complete and exclusive statement of the terms of their Agreement.
This Agreement can be modified or rescinded only by a writing signed by
duly authorized representatives of both parties.
10. Waiver of Consequential Damages: Neither party shall be liable to the
other for special, indirect or consequential damages resulting from or
arising out of this Agreement, including, without limitation, loss of
profit or business interruptions, however same may be caused.
11. Assignment: This Agreement shall not be assigned by either Seller or
Buyer without the written consent of the other party, and no delegation
of any obligation owed, or of the performance of any obligation, by
either Seller or Buyer shall be made without the written consent of the
other party, provided, that Buyer may at any time, upon submission of
notice to Seller, assign all of its rights and delegate all of its
obligations under this Agreement and the documents referenced herein to
any of its affiliated companies. Any attempted assignment or delegation
shall be wholly void and totally ineffective for all purposes unless
made in conformity with this Clause 11.
12. Applicable Law: This Agreement shall be governed by and construed and
enforced in accordance with the laws of the State of Texas, USA as
effective and in force on the date of this Agreement (excluding any
provisions of such laws which made the laws of another jurisdiction
applicable).
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the 7th day of April, 1999.
BAYARD DRILLING, L.P.
By: BAYARD DRILLING, L.L.C.,
its general partner
By:
---------------------------
Daniel McLachlin
Manager
NABORS DRILLING USA, INC.
By:
---------------------------
Larry P. Heidt
President
2
<PAGE> 3
EXHIBIT A
EQUIPMENT
<TABLE>
<CAPTION>
ITEM DESCRIPTION FAIR MARKET VALUE
---- ----------- -----------------
<S> <C> <C>
Rig 11* Mid Continent U1220EB $1,263,100
Rig 12* Mid Continent U1220EB $1,240,000
Rig 15* Mid Continent U1220EB $1,225,000
Rig 16* Mid Continent U1220EB $1,270,100
Rig 17* Mid Continent U1220EB $1,242,500
Rig 18* Mid Continent U1220EB $1,244,600
Rig 22* National 1320UE $1,329,600
Rig 23* Gardner Denver 1500E $1,225,000
Rig 69* Mid Continent U1220EB $1,267,300
Motors Traction Motors $ 84,000
Mud Pumps Gardner Denver PZ9 $ 596,400
Generators Kato $1,620,000
SCR Houses IPS $ 980,000
Radiators Ace, Air Exchangers $ 600,000
Mud Agitators Lightin & Brandt $ 28,000
Air Compressor Quincey & G Denver $ 185,900
Swivels G Denver, Nat, Oilwell $ 70,000
Hooks BJ Hughes $ 78,700
MRO Items 1 Lot of MRO Items $1,000,000
</TABLE>
TOTAL FAIR MARKET VALUE: $16,550,200
- ----------
* Includes all associated machinery, supplies and equipment.
<PAGE> 4
EXHIBIT B
BILL OF SALE
Seller, BAYARD DRILLING, L.P., for good and valuable consideration of US
$16,550,200, the receipt and sufficiency of which is hereby acknowledged, does
hereby sell, assign, grant, transfer and bargain to Buyer, NABORS DRILLING USA,
INC. the personal property described in Exhibit A (collectively, the
"Equipment").
Seller hereby represents and warrants to Buyer that Seller is the owner of the
Equipment, that the Equipment is free and clear of all liens, attachments and
encumbrances of any type or description and that Seller has the right, power and
authority to sell the Equipment and to make this Bill of Sale.
THE EQUIPMENT IS BEING PURCHASED WHERE-IS, AS-IS AND SELLER MAKES NO WARRANTY OF
ANY KIND WITH RESPECT TO THE EQUIPMENT, WHETHER EXPRESS, IMPLIED OR STATUTORY
AND SELLER EXPRESSLY DISCLAIMS ANY AND ALL EXPRESS OR IMPLIED WARRANTIES OR
CONDITIONS, STATUTORY OR OTHERWISE, INCLUDING ANY AS TO FITNESS FOR A PARTICULAR
PURPOSE OR OTHERWISE.
Dated as of the __ day of April, 1999.
BAYARD DRILLING, L.P.
By: BAYARD DRILLING, L.L.C.,
its general partner
By: --------------------------
Daniel McLachlin
Manager
<PAGE> 1
EXHIBIT 10.2
MASTER RIG LEASE AND
MANAGEMENT SERVICES AGREEMENT
This MASTER RIG LEASE AND MANAGEMENT SERVICES AGREEMENT (the "Lease")
is made on this ____ day of April, 1999 by and between Bayard Drilling, L.P., a
Delaware limited partnership ("Lessor") and Nabors Drilling USA, Inc., a
Delaware corporation ("Lessee").
In consideration of the mutual covenants and agreements hereinafter set
forth, the parties hereto agree as follows:
1. Lease of Equipment and Management Services. Subject to, and upon all of
the terms and conditions of this Lease, Lessor hereby leases to the
Lessee, and Lessee hereby leases from Lessor, those certain oil
drilling rigs ("Drilling Rigs") and all pipe, collars, equipment,
inventories and supplies associated with the Drilling Rigs set forth in
Attachment A (the "Property"). Lessee agrees to provide such management
and administrative services as may be requested by Lessor, including
but not limited to, day-to-day operations, district office and regional
office; accounting, tax, legal, insurance and other stewardship
services as required.
2. Lease Term.
a. The initial term (the "Initial Term") of this Lease shall
commence on the date hereof and terminate on December 31,
1999. Lessee shall have the right and option to renew this
Lease for up to three successive one-year periods (the "Option
Term") following the expiration of the Initial Term. Lessee
shall be deemed to have exercised such renewal rights unless
and until it has given notice to Lessor that it desires to
terminate this Lease. This required notice must be given in
writing in accordance with Article 19 and must be received by
Lessor not less than thirty days prior to the expiration of
the Initial Term or such one-year period as applicable. If
Lessee has not given a proper notice of termination in
accordance herewith, the term of this Lease shall be extended
automatically for an additional one-year period and shall
remain in effect until the Lease is terminated by either party
by notice to the other party not less than 30 days prior to
the expiration of any such successive one-year period during
the Option Term. Any such termination shall be effective only
on the last day of the Initial Term or the last day of any
such successive one-year period during the Option Term, as the
case may be. The terms and conditions contained in this
Agreement shall govern during the Option Period. Lessee shall
have the right to terminate this Lease upon giving Lessor 30
days' prior written notice.
b. As used herein, the term "Lease Term" means, subject to
termination as provided above and in Section 11, the Initial
Term and all such successive one-year periods during the
Option Term for which this Lease is extended.
3. Rent.
a. The Lessee shall pay to the Lessor for use of the Property
during the Lease Term rent to be determined on the following
basis ("Rent"). The Rent for each Drilling Rig shall be 5% of
the Equivalent Operating Dayrate (as defined below) for such
Drilling Rig. For daywork contracts entered into by Lessee,
the Rent shall be payable for each day that Lessee receives
Operating Dayrate for the Drilling Rig. For footage and
turnkey contracts, the Rent is payable for each day the
Drilling Rig operates from spud of well through the rig
release.
For daywork contracts the Equivalent Operating Dayrate is
defined as:
<PAGE> 2
(Contract Operating Dayrate x Actual Operating Days) - (Mobilization
and Demobilization losses) Actual Operating Days
For footage and turnkey contracts the Equivalent Operating
Dayrate is defined as the Operating Dayrate for daywork
operations as specified in the contract even if such dayrate
is not used for billing purposes.
The parties acknowledge and agree that the Rent represents a
reasonable rate or rent for the Drilling Rigs after deducting
a reasonable charge for the management services provided by
Lessee hereunder.
b. Lessee shall be responsible for and shall defend and indemnify
and hold Lessor harmless from the payment of any taxes,
duties, import and export charges and other charges or fees
(and any related fines, penalties or interest) of any type or
description imposed directly or indirectly on Lessee or Lessor
by any federal, state, local, or foreign government or taxing
authority as a result of this Lease, the property, or the
operation or use of the property.
c. Interest on any past due payments under this Lease shall
accrue at the rate of 1 1/2% per month, or if such rate shall
exceed the maximum rate allowed by law, then at such maximum
rate, and shall be payable on demand. Charges for taxes,
levies, imposts, duties, fees, assessments or other charges,
penalties and interest shall be paid promptly by Lessee when
invoiced by Lessor.
4. Delivery of the Property. The Property shall be leased to Lessee, and
Lessee accepts the Property where-is, as-is.
5. Ownership and Use.
a. The Property shall at all times be the sole and exclusive
property of the Lessor. The Lessee shall have no rights or
property interest in the Property, except for the right to use
the Property in normal operations during the Lease Term.
Lessee shall not use the Property for any purpose for which it
was not designed or intended by the manufacturer thereof.
b. After prior notice to Lessor, Lessee may, at its own expense,
make alterations in or add attachments to the Property,
provided such alterations or attachments are readily removable
and do not reduce the value of the Property or interfere with
the normal and satisfactory operation or maintenance of the
Property. All such alterations and attachments shall be and
become the property of Lessor at the expiration or termination
of this Lease, or at the option of Lessee, shall be removed
and retained by Lessee provided the Property is restored, at
Lessee's expense, to its original condition, reasonable wear
and tear only excepted.
c. So long as Lessee is not in default hereunder, Lessor shall
not interfere with Lessee's use or possession of the Property
during the Lease Term.
d. The Lessee shall keep the Property free and clear from all
claims, levies, liens, encumbrances and process whatsoever
other than those arising by, through or under Lessor. The
Lessee shall give the Lessor immediate notice of any such
attachment or other judicial process affecting all or any part
of the Property and take all such action as may be necessary
to promptly remove the same.
2
<PAGE> 3
e. The Lessee shall not sublet or part with possession of the
Property or any part thereof or attempt in any other manner to
dispose of the Property or transfer or assign its rights under
this Lease without the prior consent of Lessor. No such
purported assignment, sublease or other parting with
possession of the Property shall relieve Lessee of its
liabilities and obligations under this Lease.
f. The Lessee shall use, maintain and operate the Property so as
to comply with all laws, rules and regulations (domestic or
foreign) applicable thereto and shall obtain all governmental
permits, licenses and approvals required in connection
therewith. In case any additional or other equipment,
appliance or alteration is required to be made or installed on
any item of Property in order to comply with such laws,
regulations, requirements and rules, Lessee agrees to make or
install such equipment, appliance or alteration at its own
cost and expense. To the extent that Lessee agrees to comply
with foreign laws, rules and regulations, nothing shall be
understood as an agreement by Lessee to take any action or
refrain from taking any action that would violate any law of
the United States of America or that would subject Lessee to
penalties under the law of the United States of America.
g. Lessor acknowledges and recognizes that Lessee owns and
operates its own drilling rigs ("Lessee's Rigs") in addition
to the Drilling Rigs. Lessee shall have no obligation to use
the Drilling Rigs in its drilling operations in preference to
Lessee's Rigs and shall have no obligation to obtain premium
rates for the Drilling Rigs or to use the Drilling Rigs in
preference to Lessee's Rigs for operations paying premium
rates. At all times during the Lease Term, Lessee shall, in
its sole discretion, have the right to determine whether to
use Drilling Rigs or Lessee's Rigs in any of its drilling
operations with no obligation to account to Lessor in any way.
6. DISCLAIMER OF WARRANTY. LESSOR MAKES NO WARRANTY OF ANY KIND WHATSOEVER
WITH RESPECT TO THE PROPERTY, AND ALL WARRANTIES OF QUALITY, DESIGN,
MANUFACTURE, MAINTENANCE, FITNESS FOR A PARTICULAR PURPOSE AND
MERCHANTABILITY ARE HEREBY DISCLAIMED AND EXCLUDED AND THE PROPERTY IS
PROVIDED HEREUNDER ON AN AS IS, WHERE IS BASIS.
7. Repair and Replacements. The Lessee shall maintain the Property in good
working order and shall thereafter keep and maintain the Property in
good condition and working order and, at its own cost and expense, make
all repairs, adjustments and replacements necessary for its
preservation, normal wear and tear excepted. All such replacements
shall immediately become the property of the Lessor. Lessee shall have
the right to paint the Drilling Rigs to conform to its color scheme for
rigs, but shall have the obligation to repaint the Drilling Rigs to
conform to Lessor's color scheme upon termination of the Lease Term.
8. Loss of Equipment and Insurance. Lessee shall immediately notify Lessor
of all details concerning any damage to, or loss of, the Property
arising out of any event or occurrence whatsoever, including but not
limited to, the alleged or apparent improper manufacture, functioning
or operation of the Property.
a. Until the Property is returned to Lessor, the entire risk of
loss, destruction or damage to the Property from any cause or
condition whatsoever shall be borne solely and exclusively by
the Lessee, and the Lease Term shall not terminate as a result
of such loss, destruction or damage except as provided below.
In the event a portion of the Property is lost, destroyed or
damaged beyond repair, or all or any portion of the Property
is damaged but not beyond repair, Lessee shall promptly repair
or replace such Property with similar oil drilling equipment
having a value and utility not less than those of the Property
or such portion thereof which is so lost, destroyed or
damaged. In the event all,
3
<PAGE> 4
but not part, of the Property is lost, destroyed or damaged
beyond repair, Lessee may either replace the Property as
provided above or terminate the Lease Term upon payment to the
Lessor of an amount equal to the all risk property damage
insurance required to be carried as provided in Section 8(b)
hereof. Payment of such amount to Lessor by the insurance
carrier issuing such policy or policies shall constitute
payment hereunder by Lessee. All such replacement property
shall immediately be conveyed to, and become the property of,
Lessor, free and clear of all liens, claims and encumbrances
whatsoever.
b. Until the Property is returned to Lessor, the Lessee, at its
own cost and expense, shall keep in effect with reputable
insurers acceptable to the Lessor all risk and public
liability insurance policies covering the Property and Lessor.
Such all risk coverage shall insure the Property in an amount
not less than that maintained by Lessor on the date hereof
against all risks of loss or damage from every cause
whatsoever. Such public liability insurance shall be in such
amount as is reasonably acceptable to Lessor. Evidence of such
insurance coverage shall be furnished to Lessor on the date
hereof and, from time to time, thereafter as Lessor may
demand. Such policies shall provide that no less than thirty
days' written notice shall be given Lessor prior to
cancellation of such policies for any reason. Lessee hereby
irrevocably appoints Lessor as Lessee's attorney-in-fact
coupled with an interest to make claim for, receive payment
of, and execute any and all documents that may be required to
be provided to the insurance carrier in substantiation of any
such claim for loss or damage under such all risk insurance
policy, and to endorse Lessee's name to any and all drafts or
checks in payment of the loss proceeds. All insurance policies
shall name both the Lessee and the Lessor as insured
thereunder. Each damage policy shall provide for payment of
all losses directly to the Lessor. Lessor shall remit such
amounts to Lessee upon repair or replacement of the Property
or portion thereof in respect of which such losses are paid as
provided in Section 8(a) hereof. Each liability policy shall
provide that all losses be paid on behalf of the Lessee and
the Lessor as their respective interests appear.
9. Location and Inspection. Lessee shall keep the Property in its sole
possession and control at all times. Lessor shall have the right to
inspect the Property at any time and from time to time upon reasonable
notice to the Lessee.
10. Return of the Property. Upon the expiration or termination of this
Lease, Lessee shall return the Property to Lessor at its current
location or at such other location as the parties may reasonably agree
upon. The Property shall be returned to Lessor in the same condition as
originally received by Lessee, normal wear and tear excepted.
11. Termination of the Lease. This Lease may be terminated only as follows:
a. By agreement of the parties.
b. Automatically, as to a Drilling Rig, in the event of the total
destruction of that Drilling Rig.
c. By Lessor in the event of a default as defined in Article 12
below.
d. Automatically at the end of the Lease Term.
e. By Lessee by proper notice served in accordance with the
provisions of Article 2(a).
12. Events of Default and Remedies. The occurrence of any one of the
following shall constitute as Event of Default hereunder:
4
<PAGE> 5
a. Lessee fails to pay any installment of Rent on or before the
fifth day following the date when the same becomes due and
payable;
b. Lessee attempts to remove, sell, transfer, encumber, sublet or
part with possession of the Property or any items thereof,
except as expressly permitted herein;
c. Lessee shall fail to observe or perform any of the other
obligations required to be observed or performed by Lessee
hereunder and such failure shall continue uncured for twenty
(20) days after notice thereof to Lessee by Lessor;
d. Any representation or warranty made by Lessee herein or in any
document or certificate furnished in connection herewith shall
prove incorrect in any material respect;
e. Lessee ceases doing business as a going concern, makes an
assignment for the benefit of creditors, admits in writing its
inability to pay its debts as they become due, files a
voluntary petition in bankruptcy, is adjudicated a bankrupt or
an insolvent, files a petition seeking for itself any
reorganization, arrangement, composition, readjustment,
liquidation, dissolution or similar arrangement under any
present or future statute, law or regulation or files an
answer admitting the material allegation of a petition filed
against it in any such proceeding, consents to or acquiesces
in the appointment of a trustee, receiver, or liquidator of it
or of all or any substantial part of its assets or properties,
or if it or its shareholders shall take any action looking to
its dissolution or liquidation; or
f. Within 30 days after the commencement of any proceedings
against Lessee seeking reorganization, arrangement,
readjustment, liquidation, dissolution or similar relief under
any present or future statute, law or regulation, such
proceedings shall not have been dismissed, or if within 30
days after the appointment, without Lessee's consent or
acquiescence, of any trustee, receiver or liquidator of it or
of all or any substantial part of its assets and properties,
such appointment shall not be vacated.
Upon the occurrence of an Event of Default, Lessor may, at its option,
do any or all of the following: (i) by notice to Lessee terminate the
Lease as to any or all Property; (ii) whether or not the Lease is
terminated as to any or all Property, take possession of any or all of
the Property, wherever situated, and for such purpose, enter upon any
premises without liability for so doing or Lessor may cause Lessee, and
Lessee hereby agrees, to return the Property to Lessor as provided in
this Lease; (iii) recover from Lessee, as liquidated damages, and not
as s penalty, an amount equal to the present value of all monies to be
paid by Lessee during the remainder of the Lease Term, discounted at
the rate of 10% per annum, which payment shall become immediately due
and payable; and (iv) sell, dispose of, hold, use or lease any Property
as Lessee in its sole discretion may determine without, except as
provided below, any duty to account to Lessee (and Lessor shall not be
obligated to give preference to the sale, lease or other disposition of
the Property over the sale, lease or other disposition of similar
property owned or leased by Lessor). In any event, Lessee, without
further demand, shall pay to Lessor an amount equal to all sums due and
payable for all periods up to and including the date on which Lessor
has declared this Lease to be in default.
In the event that Lessee shall have paid to Lessor the liquidated
damages referred to in clause (iii) above, Lessor hereby agrees to pay
to Lessee, promptly after receipt thereof, all rentals or proceeds
received from the reletting or sale of the Property during the balance
of the initial one-year term or the applicable successive one-year
period of the Lease Term (after deduction of all expenses incurred by
Lessor), said amount never to exceed the amount of the liquidated
damages paid by Lessee. Lessee agrees that Lessor shall have no
obligation to sell or lease the Property and shall not be required to
give preference to the sale, lease or to other disposition of the
Property over the sale, lease or other disposition of similar property
owned or leased by
5
<PAGE> 6
Lessor. Lessee shall in any event remain fully liable for reasonable
damages as provided by law and for all costs and expenses incurred by
Lessor on account of such default including, but not limited to, all
court costs and reasonable attorneys' fees. The rights afforded Lessor
hereunder shall not be deemed to be exclusive, but shall be in addition
to any rights or remedies provided by law.
13. Net Lease. Except as otherwise specifically provided in this Lease or
an Exhibit hereto, it is understood and agreed that this is a net
lease, and that, as between Lessor and Lessee, Lessee shall be
responsible for all costs and expenses of every nature whatsoever
arising out of or in connection with or related to this Lease of the
Property (including, but not limited to, transportation, transportation
insurance, rigging, drayage, packing, installation and mobilization and
demobilization charges). Lessee hereby agrees that, in the event that
Lessee fails to pay or perform any obligation under this Lease, Lessor
may, at its option, pay or perform said obligation and any payment made
or expense incurred by Lessor in connection therewith shall become
additional rent which shall be due and payable by Lessee upon demand.
14. Indemnification. Lessee hereby agrees to assume liability for, and does
hereby agree to indemnify, defend, protect, save and keep harmless
Lessor and its respective successors, assigns, legal representatives,
agents, officers, directors and employees, from and against, any and
all liabilities, obligations, losses, damages, penalties, claims,
actions, suits, costs, expenses or disbursements (including legal fees
and expenses) of any kind and nature whatsoever which may be imposed
on, incurred by or asserted against Lessor or any of its respective
successors, assigns, legal representatives, agents officers, directors
and employees (whether or not also indemnified against by the
manufacturer(s) or any other person), in any way relating to or arising
out of this Lease or any document contemplated hereof, or the
performance or enforcement of any of the terms hereof, or in any way
relating to or arising out of the lease, ownership, possession, use,
condition, operation, sale or other disposition of the Property by
Lessee or any accident in connection therewith (including, without
limitation, latent and other defects, whether or not discoverable);
provided, however, that Lessee shall not be required to indemnify
Lessor or its respective successors, assigns, legal representatives,
agents, and servants, for loss or liability in respect of any item or
Property arising from acts or events which occur after possession of
such item of Property has been returned to Lessor or loss or liability
resulting from the willful misconduct of Lessor. Lessee agrees that
Lessor shall not be liable to Lessee for any liability, claim, loss,
damage or expense of any kind or nature arising in strict liability or
caused directly or indirectly by the inadequacy of the Property for any
purpose or any deficiency or defect therein or the use or maintenance
thereof or any repairs, servicing or adjustments thereto or any delay
in providing or failure to provide any thereof or any interruption or
loss of service or use thereof or any loss of business or any other
consequential damages.
15. Severability. Any provisions of this Agreement found to prohibited by
law shall be ineffective to the extent of such prohibition without
invalidating the rest of this Agreement so long as the economic or
legal substance of the transactions contemplated hereby is not affected
in any manner materially adverse to any party hereto.
16. Governing Law. This Agreement shall be governed by and construed and
interpreted in accordance with the laws of Texas applicable to
contracts made and to be performed wholly within the State of Texas.
17. Entire Agreement. This Agreement contains the entire understanding of
the parties, and such understanding may not be modified or terminated
except in writing signed by the Parties and by any proper sublessee or
assignee.
18. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original but all of
which together shall constitute one and the same instrument.
6
<PAGE> 7
19. Notices. All notices or other communications hereunder shall be in
writing and shall be delivered personally, by telecopy or overnight
delivery service or mailed, by registered or certified mail, postage
prepaid, to the party for which it is intended at its address set forth
below or to such other address as such party shall furnish to the other
party by notice hereunder.
If to Lessee:
Nabors Drilling USA, Inc.
515 W. Greens Rd., Suite 1000
Houston, Texas 77067
Attention: President
Telecopy No.: 281.775.8147
If to Lessor:
Bayard Drilling, L.P.
515 W. Greens Rd., Suite 1200
Houston, Texas 77067
Attention: President
Telecopy No.: 281.775.8431
20. No Waiver. No waiver of any of the terms and conditions hereof shall be
effective unless in writing and signed by the party against whom such
waiver is sought to be enforced. Any waiver of the terms hereof shall
be effective only in the specific instance and for the specific purpose
given. The waiver by Lessor or Lessee of any breach of any obligation
of Lessee or Lessor shall not be deemed a waiver of such obligation or
of any subsequent breach of the same or any other obligation. The
subsequent acceptance of rental payments hereunder by Lessor shall not
be deemed a waiver of any prior existing breach by Lessee regardless of
Lessor's knowledge of such prior existing breach at the time of
acceptance of such rental payments. The rights afforded Lessor and
Lessee under this Section 20 shall not be deemed to be exclusive, but
shall be in addition to any rights or remedies provided by law.
21. Binding Effect. The provision of this Agreement shall be binding upon
and inure to the benefit of both parties and their respective legal
representatives, successors, and permitted assigns.
22. Amendment. This Lease may be modified only by mutual agreement of the
parties in writing.
23. Arbitration. Any dispute, controversy or claim arising out of or
relating to this Lease or the breach, termination or invalidity thereof
shall be settled by arbitration in accordance with the rules of the
American Arbitration Association. The number of arbitrators shall be
three and the place of arbitration shall be at Houston, Texas.
24. Third Party Beneficiary. Nothing in this Lease is attended to or shall
be construed as to create any third party beneficiary to this Lease or
otherwise confer any right in or upon any persons except the parties
hereto and the respective permitted assigns.
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<PAGE> 8
IN WITNESS WHEREOF, the Lessor and Lessee each have caused this Lease
to be duly executed by their duly authorized officers, effective as of the day
and year first above written.
NABORS DRILLING USA, INC.
-------------------------------
By: Larry P. Heidt
Title: President
BAYARD DRILLING, L.P.
By: BAYARD DRILLING, L.L.C.
-------------------------------
By: Daniel McLachlin
Title: Manager
8
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<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 2,379
<SECURITIES> 0
<RECEIVABLES> 6,722
<ALLOWANCES> 0
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<CURRENT-ASSETS> 9,650
<PP&E> 315,518
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<TOTAL-ASSETS> 305,834
<CURRENT-LIABILITIES> 20,486
<BONDS> 110,166
0
0
<COMMON> 183
<OTHER-SE> 165,793
<TOTAL-LIABILITY-AND-EQUITY> 305,834
<SALES> 10,976
<TOTAL-REVENUES> 10,976
<CGS> 12,688
<TOTAL-COSTS> 18,417
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,225
<INCOME-PRETAX> (11,707)
<INCOME-TAX> (4,449)
<INCOME-CONTINUING> (7,258)
<DISCONTINUED> 0
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<PAGE> 1
EXHIBIT 99.1
CHANGE OF CONTROL NOTICE AND OFFER TO PURCHASE
BAYARD DRILLING TECHNOLOGIES, INC.
Change of Control Notice and Offer to Purchase for Cash
Any and All of its 11% Senior Notes due 2005
($100,000,000 Aggregate Principal Amount Outstanding)
at 101% of the Aggregate Principal Amount Thereof,
Plus Accrued and Unpaid Interest
CUSIP No.: 072700AB3
EXPIRATION DATE: JUNE 7, 1999 AT 5:00 P.M., NEW YORK CITY TIME,
UNLESS EXTENDED BY THE COMPANY IN ITS SOLE DISCRETION
Bayard Drilling Technologies, Inc. (the "Company") hereby offers to
purchase (the "Offer"), pursuant to Section 4.09 of the Indenture (as amended
and supplemented through the date hereof, the "Indenture"), dated as of June 26,
1998, between the Company, the Guarantors (as defined in the Indenture) and U.S.
Trust Company of Texas, N.A., as trustee (the "Trustee"), on the terms and
subject to the conditions set forth herein and in the accompanying Letter of
Transmittal (the "Letter of Transmittal"), any and all of its outstanding 11%
Senior Notes due 2005 (the "Notes") at a purchase price (the "Purchase Price"),
in cash, equal to 101% of the aggregate principal amount thereof ($1,010 per
$1,000 principal amount of Notes), plus accrued and unpaid interest, if any, to
the date of payment for, or deposit with U.S. Trust Company of Texas, N.A., as
depositary in the Offer (the "Depositary"), of an amount sufficient to pay for,
Notes accepted for purchase in the Offer. The date of such payment or deposit is
referred to as the "Payment Date." The Payment Date will be three business days
after the Expiration Date.
Holders of Notes should be aware of the following in making a decision
as to whether to tender Notes in the Offer:
o The Company does not currently have sufficient funds available
to make the June 30, 1999 interest payment on the Notes, and
it is unlikely to be able to do so.
o The Company does not currently have sufficient funds available
to consummate the Offer, and must find a means to finance the
amounts required to consummate the Offer prior to the Payment
Date.
o The Company's debt obligations were not assumed by Nabors
Industries, Inc. ("Nabors"), the parent corporation of the
Company, pursuant to the merger referred to below, and Nabors
is not obligated to fund payments required to be made in the
Offer by the Company.
o Nabors has funds sufficient to fund the Offer by the Company,
and has indicated to the Company that it is prepared, subject
to the execution of mutually satisfactory agreements and
compliance with applicable contractual obligations (pursuant
to the Indenture or otherwise), to make such funds available
to the Company through an asset purchase, for those holders of
Notes who tender their Notes on or prior to the Expiration
Date.
o Nabors has advised the Company that it is not prepared (1) to
advance or make funds available to the Company to meet any
financial obligations, including making funds available on any
Notes after the Payment Date, making funds available for the
June 30, 1999 interest payment on the Notes or otherwise
making funds available to the Company, or (2) to assume any of
the Company's debt obligations or other liabilities. Nabors
has stated to the Company that it reserves the right to change
this position, in its sole and absolute discretion. However,
there can be no assurance that Nabors will do so.
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<PAGE> 2
The Offer is being made in connection with the acquisition by Nabors of
the Company. The acquisition was effected through the merger on April 7, 1999 of
a wholly-owned subsidiary of Nabors, with and into the Company. As a result of
the merger, the Company became a wholly-owned subsidiary of Nabors and each
outstanding share of common stock of the Company was converted into 0.3375
shares of common stock of Nabors and $0.30 in cash, without interest. The
consummation of the merger constituted a "Change of Control" under the Indenture
and, as a result, the Company is hereby offering, pursuant to Section 4.09 of
the Indenture, on the terms and subject to the conditions set forth in this
Offer to Purchase (this "Offer to Purchase") and the Letter of Transmittal, to
purchase all Notes outstanding at the Purchase Price, plus accrued and unpaid
interest, if any, to the Payment Date.
The Offer does not constitute redemption of, or an election by the
Company to redeem, the Notes. Holders of Notes may elect to tender or not to
tender in the Offer. Neither the Company nor Nabors makes any recommendation as
to whether or not holders of Notes should tender Notes in the Offer.
THE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON JUNE 7,
1999, UNLESS SUCH DATE IS EXTENDED BY THE COMPANY IN ITS SOLE DISCRETION (SUCH
DATE, AS IT MAY BE EXTENDED, IS REFERRED TO AS THE "EXPIRATION DATE"). PURSUANT
TO THE TERMS OF THE INDENTURE, NOTES TENDERED IN THE OFFER MAY BE WITHDRAWN AT
ANY TIME PRIOR TO 5:00 P.M., NEW YORK CITY TIME, ON THE BUSINESS DAY AFTER THE
EXPIRATION DATE.
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS OFFER TO
PURCHASE AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MAY NOT BE
RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY. NEITHER THE DELIVERY OF
THIS OFFER TO PURCHASE NOR ANY PURCHASE HEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE INFORMATION HEREIN IS CORRECT AS
OF ANY TIME SUBSEQUENT TO THE DATE HEREOF, OR THAT THERE HAS BEEN NO CHANGE IN
THE AFFAIRS OF THE COMPANY AS OF SUCH DATE.
The Company is not aware of any jurisdiction in which the making of the
Offer is not in compliance with the laws of such jurisdiction. If the Company
becomes aware of any jurisdiction where the making of the Offer would not be in
compliance with such laws, the Company will make a good faith effort to comply
with any such laws or may seek to have such laws declared inapplicable to the
Offer. If, after such good faith effort, the Company cannot comply with any such
applicable laws, the Offer, as applicable, will not be made to (nor will tenders
be accepted from or on behalf of) the holders of Notes residing in each such
jurisdiction.
The date of this Offer to Purchase is May 7, 1999.
RECENT DEVELOPMENTS
On April 7, 1999, Nabors acquired all of the outstanding common stock
of the Company in a merger transaction in which a wholly-owned subsidiary of
Nabors merged with and into the Company, with the Company as the surviving
corporation in the merger. As a result of the merger, the Company became a
wholly-owned subsidiary of Nabors. All obligations of the Company prior to the
merger, including its obligations under the Indenture and the Notes, remained
the obligations of the Company after the merger. None of such obligations have
been assumed or guaranteed by Nabors in the merger.
Section 5.01 of the Indenture provides that the Company may not
consummate any merger transaction unless, immediately after giving effect to
such transaction on a pro forma basis, no event of default exists under the
Indenture and the Company is able to comply with certain financial covenants.
Since the Company was unable to comply with all of such financial covenants, the
Company sought and received the consent of holders of more than
2
<PAGE> 3
a majority of the principal amount outstanding of the Notes to an amendment to
the Indenture which provided that the provisions of Section 5.01 do not apply to
the merger. The amendment was set forth in a First Supplemental Indenture, dated
as of April 7, 1999, among the Company, the Guarantors (as defined in the
Indenture) and the Trustee. No fee was paid to the holders of the Notes who
consented to the amendment to the Indenture memorialized in the First
Supplemental Indenture. THIS DOCUMENT CONSTITUTES THE NOTICE REQUIRED BY THE
INDENTURE TO BE GIVEN TO HOLDERS OF THE NOTES UPON ANY AMENDMENT TO THE
INDENTURE.
In order to consummate the merger, the Company was required to pay down
its senior term loan agreement. To obtain sufficient funds to pay down these
facilities, the Company sold nine rigs and miscellaneous equipment having an
appraised value of $16,550,200 to an affiliate of Nabors in accordance with
Sections 4.08 and 4.09 of the Indenture. The sales price for the assets
transferred was their fair market value, as determined by an independent third
party appraiser, and the asset transfer was approved by the directors of both
the Company and the purchaser.
Immediately after the merger, the Company entered into a Master Rig
Lease and Management Services Agreement with an affiliate. Under the agreement,
the affiliate will lease, maintain and operate the Company's rigs on a
well-by-well, rig-by-rig basis. The affiliate will pay the Company a fee of 5%
of the dayrate on each working rig, an will provide office space and management
services to the Company. As a result of the agreement, the Company has
eliminated substantially all of its overhead and liability with regard to future
operations.
Prior to each of the asset sale and the execution of the Master Rig
Lease and Management Services Agreement, the Board of Directors of the Company
approved the transaction after determining that the terms thereof were no less
favorable to the Company than those that would have been obtained by the Company
in a comparable transaction with a non-affiliate.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Company has previously filed the following documents with the
Securities and Exchange Commission (the "Commission"), which are incorporated
herein by reference:
1. An Annual Report on Form 10-K for the fiscal year ended December 31,
1998; and
2. A Current Report on Form 8-K dated April 7, 1999.
In addition, any documents filed by the Company with the Commission
prior to the Expiration Date shall be deemed to be incorporated into this Offer
to Purchase, including, but not limited to, the Company's Quarterly Report on
Form 10-Q to be filed with the Commission on or before May 17, 1999. See
"Additional Information" for information about how to obtain copies of documents
filed with the Commission.
THE OFFER
GENERAL
The Company hereby makes the Offer pursuant to Section 4.09 of the
Indenture and offers, upon the terms and subject to the conditions set forth
herein and in the accompanying Letter of Transmittal, to purchase for cash all
of the outstanding Notes for the Purchase Price. The Purchase Price for Notes
tendered pursuant to the Offer is 101% of the aggregate principal amount of the
Notes ($1,010 per $1,000 principal amount thereof), plus accrued and unpaid
interest, if any, to the Payment Date. The Company will accept only tenders of
Notes or a portion thereof which are in an amount equal to $1,000 principal
amount of Notes or integral multiples thereof.
The Offer will expire at 5:00 p.m., New York City time, on the
Expiration Date. The Company will make a public announcement in the event that
it extends the Expiration Date. The Company shall have no obligation to
3
<PAGE> 4
publish, advertise or otherwise communicate such announcement other than by
issuing a notice of such extension by press release.
Pursuant to the terms of the Indenture, Notes tendered in the Offer may
be withdrawn at any time prior to 5:00 p.m., New York City time, on the business
day after the Expiration Date. Withdrawals must be made in accordance with the
procedures described under "--Withdrawal Rights."
Upon the terms of the Offer, the Company will purchase by accepting for
payment, and will pay for, all Notes properly tendered in the Offer prior to
5:00 p.m., New York City time, on the Expiration Date and not properly withdrawn
prior to 5:00 p.m., New York City time, on the business day after the Expiration
Date. Any Notes not tendered and purchased in the Offer will continue to accrue
interest in accordance with the Notes and the Indenture. Unless the Company
defaults in the payment of the Purchase Price, all Notes accepted for payment
pursuant to the Offer shall cease to accrue interest after the Payment Date.
If less than all the principal amount of any Note is validly tendered
and accepted pursuant to the Offer, the Company shall issue and the Trustee
shall authenticate and deliver to or on the order of the holder thereof, at the
expense of the Company, a new Note of authorized denominations, in a principal
amount equal to the portion of the Note not tendered or not accepted, as the
case may be, as promptly as practicable after the Expiration Date.
HOLDERS OF NOTES MAY CHOOSE TO PARTICIPATE IN THE OFFER BY COMPLETING
AND SIGNING THE LETTER OF TRANSMITTAL. HOLDERS WHO HOLD PHYSICAL CERTIFICATES
WILL ALSO BE REQUIRED TO SURRENDER THEIR NOTES, WITH THE FORM ENTITLED "OPTION
OF HOLDER TO ELECT PURCHASE" ON THE REVERSE SIDE OF THE NOTE COMPLETED, TO THE
DEPOSITARY PRIOR TO 5:00 P.M., NEW YORK CITY TIME, ON THE EXPIRATION DATE.
If fewer than all of the Notes have been tendered and purchased in the
Offer, the Company, or any affiliate of the Company, may purchase additional
Notes in the open market, in privately negotiated transactions, through
subsequent exchange or tender offers or otherwise or may seek to cause the Notes
to be retired or defeased. Any future purchases may be on the same terms or on
terms that are more or less favorable to holders of the Notes than the terms of
the Offer. Any future purchases by the Company or any affiliate will depend on
various factors at that time.
REASON FOR THE OFFER; EFFECTS OF THE OFFER
The Offer is being made pursuant to the terms of Section 4.09 of the
Indenture, which provides that, upon the occurrence of a Change of Control (as
defined below), each holder of Notes will have the right to require the Company
to repurchase all or a portion of such holder's Notes, in denominations of
$1,000 or integral multiples thereof, at the Purchase Price. A "Change of
Control" is deemed to occur under the Indenture when, among other things, (i)
the Company merges with another entity and as a result thereof less than 50% of
the outstanding voting securities of the Company are held by persons who were
stockholders of the Company immediately prior to the merger or (ii) a majority
of the persons who constitute the Board of Directors of the Company cease to
serve directors of the Company. A "Change of Control" occurred on April 7, 1999,
as a result of the consummation of the merger of Acquisition Sub with and into
the Company, with the Company continuing as the surviving corporation and a
wholly-owned subsidiary of Nabors. Upon such merger, all of the directors of the
Company prior to April 7, 1999 ceased to serve as directors of the Company. THIS
OFFER TO PURCHASE IS THE NOTICE OF THE CHANGE OF CONTROL REQUIRED TO BE SENT TO
HOLDERS OF THE NOTES PURSUANT TO SECTION 4.09 OF THE INDENTURE.
The Notes purchased in the Offer will cease to be outstanding and will
be delivered to the Trustee for cancellation immediately after such purchase.
Any Notes which remain outstanding after the consummation of the Offer will
continue to be obligations of the Company and will continue to accrue interest.
4
<PAGE> 5
The Notes are not listed on any securities exchange or quoted on any
automated quotation system such as Nasdaq. Depending upon, among other things,
the amount of Notes outstanding after the consummation of the Offer, the
liquidity of untendered Notes may be adversely affected by the Offer.
EXPIRATION DATE; EXTENSIONS; AMENDMENTS; TERMINATION
The Offer will expire on the Expiration Date, unless extended pursuant
to the procedures set forth herein. During any extension of the Offer, all Notes
previously tendered pursuant to the Offer (and not properly withdrawn) will
remain subject to the Offer and may be accepted for payment by the Company,
subject to the withdrawal rights of holders.
The Company expressly reserves the right, subject to the requirements
of Section 4.09 of the Indenture in the case of the Offer, at any time, or from
time to time, to amend the terms of the Offer in any respect.
Any extension, termination or amendment of the Offer will be followed
as promptly as practicable by a public announcement thereof. Without limiting
the manner in which the Company may choose to make a public announcement of any
extension, termination or amendment of the Offer, the Company shall have no
obligation to publish, advertise or otherwise communicate any such public
announcement, other than by issuing a press release.
ACCEPTANCE FOR PAYMENT
Upon the terms and subject to the conditions to the Offer (including if
the Offer is extended or amended, the terms of such extension or amendment), the
Company will purchase, by accepting for payment, and will pay for all Notes
properly tendered (and not properly withdrawn) pursuant to the Offer, on the
Payment Date, which shall be three business days after the Expiration Date. In
all cases, payment by the Depositary to tendering holders will be made only
after timely receipt by the Depositary of the documentation described under
"Procedures for Tendering and Withdrawing Notes--Tendering Notes."
For purposes of the Offer, the Company shall be deemed to have accepted
for payment (and thereby to have purchased) tendered Notes as, if and when the
Company gives oral or written notice to the Depositary of the Company's
acceptance of such Notes for payment. Subject to the terms and conditions of the
Offer, payment for Notes so accepted will be made by deposit of the
consideration therefor with the Depositary. The Depositary will act as agent for
tendering holders for the purpose of receiving payment from the Company and then
transmitting payment to such tendering holders.
PROCEDURES FOR TENDERING NOTES
TENDERING NOTES
The tender of Notes pursuant to any of the procedures set forth in this
Offer to Purchase and in the Letter of Transmittal will constitute a binding
agreement between the tendering holder and the Company upon the terms and
subject to the conditions of the Offer. The tender of Notes will constitute an
agreement to deliver good and marketable title to all tendered Notes prior to
the Expiration Date free and clear of all liens, charges, claims, encumbrances,
interests and restrictions of any kind.
EXCEPT AS PROVIDED IN "--GUARANTEED DELIVERY PROCEDURES," UNLESS THE
NOTES BEING TENDERED ARE DEPOSITED BY THE HOLDER WITH THE DEPOSITARY PRIOR TO
THE EXPIRATION DATE (ACCOMPANIED BY A PROPERLY COMPLETED AND DULY EXECUTED
LETTER OF TRANSMITTAL), THE COMPANY MAY, AT ITS OPTION, REJECT SUCH TENDER.
PAYMENT FOR NOTES WILL BE MADE ONLY AGAINST DEPOSIT OF TENDERED NOTES AND
DELIVERY OF ALL OTHER REQUIRED DOCUMENTS.
5
<PAGE> 6
Only record holders of Notes are authorized to tender their Notes
pursuant to the Offer. Accordingly, to properly tender Notes or cause Notes to
be tendered in the Offer, the following procedures must be followed:
Notes held through DTC. Each beneficial owner of Notes held through a
participant (a "DTC Participant") of the Depository Trust Company ("DTC") (i.e.,
a custodian bank, depositary, broker, trust company or other nominee) must
instruct such DTC Participant to cause its Notes to be tendered in accordance
with the procedures set forth in this Offer to Purchase.
Pursuant to an authorization given by DTC to the DTC Participants, each
DTC Participant that holds Notes through DTC must (i) transmit its acceptance to
the Offer through the DTC Automated Tender Offer Program ("ATOP") (for which the
transaction will be eligible), and DTC will then edit and verify the acceptance,
execute a book-entry delivery to the Depositary's account at DTC and send an
Agent's Message (as defined below) to the Depositary for its acceptance, or (ii)
comply with the guaranteed delivery procedures set forth in this Offer to
Purchase. The Depositary will (promptly after the date of this Offer to
Purchase) establish accounts at DTC for purposes of the Offer with respect to
Notes held through DTC, and any financial institution that is a DTC Participant
may make book-entry delivery of interests in Notes into the Depositary's account
through ATOP.
However, although delivery of interests in the Notes may be effected
through book-entry transfer into the Depositary's account through ATOP, an
Agent's Message in connection with such book-entry transfer, and any other
required documents, must be, in any case, transmitted to and received by the
Depositary at its address set forth on the back cover of this Offer to Purchase,
or the guaranteed delivery procedures set forth below must be complied with, in
each case, prior to the Expiration Date. Delivery of documents to DTC does not
constitute delivery to the Depositary. The confirmation of a book-entry transfer
into the Depositary's account at DTC as described above is referred to herein as
a "Book-Entry Confirmation."
The term "Agent's Message" means a message transmitted by DTC to, and
received by, the Depositary and forming a part of the Book-Entry Confirmation,
which states that DTC has received an express acknowledgment from each DTC
Participant tendering through ATOP that such DTC Participants have received a
Letter of Transmittal and agree to be bound by the terms of the Letter of
Transmittal and the Company may enforce such agreement against such DTC
Participants.
All Notes currently held through DTC have been issued in the form of a
global note registered in the name of Cede & Co., DTC's nominee (the "Global
Note"). At or as of the Expiration Date, DTC will deliver to the Depositary a
properly completed and duly executed Letter of Transmittal in respect of the
aggregate principal amount of Notes as to which it has delivered to DTC Agent's
Messages and Cede & Co. will deliver to the Depositary the Global Note. At or as
of the close of business on the third business day after the Expiration Date,
DTC will deliver to the Depositary a properly completed and duly executed Letter
of Transmittal in respect of the aggregate principal amount of Notes as to which
it has delivered to DTC Agent's Messages in respect of Notices of Guaranteed
Delivery as described under "--Guaranteed Delivery Procedures." Thereafter, the
aggregate principal amount of the Global Note will be reduced to represent the
aggregate principal amount of Notes held through DTC and not tendered pursuant
to the Offer and the Global Note will be returned to Cede & Co.
Notes held by Record Holders. Each record holder must complete and sign
a Letter of Transmittal, and mail or deliver such Letter of Transmittal, and any
other documents required by the Letter of Transmittal, together with
certificate(s) representing all tendered Notes, to the Depositary at its address
set forth on the back cover page of this Offer to Purchase, or the holder must
comply with the guaranteed delivery procedures set forth in this Offer to
Purchase.
All signatures on a Letter of Transmittal must be guaranteed by a
recognized participant in the Securities Transfer Agents Medallion Program, the
NYSE Medallion Signature Program or the Stock Exchange Medallion Program;
provided, however, that signatures on a Letter of Transmittal need not be
guaranteed if such Notes are tendered for the account of an Eligible Institution
(as defined herein). If a Letter of Transmittal or any Note is signed by a
trustee, executor, administrator, guardian, attorney-in-fact, agent, officer of
a corporation or other
6
<PAGE> 7
person acting in a fiduciary or representative capacity, such person must so
indicate when signing, and proper evidence satisfactory to the Company of the
authority of such person so to act must be submitted.
No alternative, conditional, irregular or contingent tenders will be
accepted (unless waived). By executing a Letter of Transmittal or transmitting
an acceptance through ATOP, each tendering holder waives any right to receive
any notice of the acceptance for purchase of its Notes.
Lost or Missing Certificates. If a record holder desires to tender
Notes pursuant to the Offer, but the certificates representing such Notes have
been mutilated, lost, stolen or destroyed, such holder should write to or
telephone the Trustee about procedures for obtaining replacement certificates
representing such Notes, arranging for indemnification or about any other matter
which requires handling by the Trustee.
Backup Federal Income Tax Withholding. Under the "backup withholding"
provisions of Federal income tax law, unless a tendering holder, or his or her
assignee (in either case, the "Payee"), satisfies the conditions described in
Instruction 5 of the Letter of Transmittal or is otherwise exempt, the aggregate
purchase price may be subject to backup withholding tax at a rate of 31%. To
prevent backup withholding, each Payee should complete and sign the Substitute
Form W-9 provided in the Letter of Transmittal. See Instruction 5 of the Letter
of Transmittal.
Effect of Letter of Transmittal. Subject to and effective upon the
acceptance for purchase of and payment for Notes tendered thereby, by executing
and delivering a Letter of Transmittal a tendering holder of Notes in the Offer
(i) irrevocably sells, assigns and transfers to the Company, all right, title
and interest in and to all the Notes tendered thereby and (ii) waives any and
all rights with respect to the Notes (including without limitation any existing
or past defaults and their consequences in respect of the Note and the Indenture
under which the Notes were issued), (iii) releases and discharges the Company
from any and all claims such holder may have now, or may have in the future
arising out of, or related to, the Notes including without limitation any claims
that such holder is entitled to receive additional principal or interest
payments with respect to the Notes or to participate in any redemption or
defeasance of the Notes and (iv) irrevocably constitutes and appoints the
Depositary the true and lawful agent and attorney-in-fact of such holder with
respect to any such tendered Notes, with full power of substitution and
resubstitution (such power of attorney being deemed to be an irrevocable power
coupled with an interest) to (a) deliver certificates representing such Notes,
or transfer ownership of such Notes, on the account books maintained by DTC,
together, in any such case, with all accompanying evidences of transfer and
authenticity, to the Company, (b) present such Notes for transfer on the
relevant security register and (c) receive all benefits or otherwise exercise
all rights of beneficial ownership of such Notes (except that the Depositary
will have no rights to, or control over, funds from the Company, except as agent
for the Company, for the purchase price for any tendered Notes that are
purchased by the Company).
All questions as to the validity, form, eligibility (including time of
receipt) and acceptance of tendered Notes in the Offer will be resolved by the
Company, whose determination will be final and binding. The Company reserves the
absolute right to reject any or all tenders that are not in proper form or the
acceptance of which may, in the opinion of counsel for the Company, be unlawful.
The Company also reserves the absolute right to waive any condition to the Offer
(except such conditions as are set forth in Section 4.09 of the Indenture) and
any irregularities or conditions of tender as to particular Notes. The Company's
interpretation of the terms and conditions of the Offer (including the
instructions in the Letter of Transmittal) will be final and binding. Unless
waived, any irregularities in connection with tenders must be cured within such
time as the Company shall determine. The Company and the Depositary shall not be
under any duty to give notification of defects in such tenders and shall not
incur liabilities for failure to give such notification. Tenders of Notes will
not be deemed to have been made until such irregularities have been cured or
waived. Any Notes received by the Depositary that are not properly tendered and
as to which the irregularities have not been cured or waived will be returned by
the Depositary to the tendering holder, unless otherwise provided in the Letter
of Transmittal, as soon as practicable following the Expiration Date.
LETTERS OF TRANSMITTAL AND NOTES MUST BE SENT ONLY TO THE DEPOSITARY.
DO NOT SEND LETTERS OF TRANSMITTAL OR NOTES TO THE COMPANY.
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THE METHOD OF DELIVERY OF NOTES AND LETTERS OF TRANSMITTAL, ANY
REQUIRED SIGNATURE GUARANTEES AND ALL OTHER REQUIRED DOCUMENTS, INCLUDING
DELIVERY THROUGH DTC AND ANY ACCEPTANCE THROUGH ATOP, IS AT THE ELECTION AND
RISK OF THE PERSONS TENDERING AND DELIVERING ACCEPTANCES OR LETTERS OF
TRANSMITTAL AND, EXCEPT AS OTHERWISE PROVIDED IN THE LETTER OF TRANSMITTAL,
DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE DEPOSITARY. IF
DELIVERY IS BY MAIL, IT IS SUGGESTED THAT THE HOLDER USE PROPERLY INSURED,
REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, AND THAT THE MAILING BE MADE
SUFFICIENTLY IN ADVANCE OF THE EXPIRATION DATE TO PERMIT DELIVERY TO THE
DEPOSITARY PRIOR TO THE EXPIRATION DATE.
GUARANTEED DELIVERY PROCEDURES
DTC Participants. A DTC Participant who wishes to cause its Notes to be
tendered in the Offer, but who cannot transmit its acceptance through ATOP prior
to the Expiration Date, may cause a tender to be effected if:
(a) guaranteed delivery is made by or through a firm
or other entity identified in Rule 17Ad-15 under the
Securities Exchange Act of 1934, as amended (an "Eligible
Institution"), including (as such terms are defined therein):
(i) a bank; (ii) a broker, dealer, municipal securities
dealer, municipal securities broker, government securities
dealer or government securities broker; (iii) a credit union;
(iv) a national securities exchange, registered securities
association or clearing agency; or (v) a savings institution
that is a participant in a Securities Transfer Association
recognized program; and
(b) prior to 5:00 p.m., New York City time, on the
Expiration Date, the Depositary receives from such Eligible
Institution a properly completed and duly executed Notice of
Guaranteed Delivery (by mail, hand delivery, facsimile
transmission or overnight courier) substantially in the form
provided herewith; and
(c) Book-Entry Confirmation of the transfer into the
Depositary's account at DTC, and all other documents required
by the Letter of Transmittal, are received by the Depositary
within two New York Stock Exchange trading days after the date
of receipt by the Depositary of such Notice of Guaranteed
Delivery, and in no event later than two business days after
the Expiration Date.
Record Holders. A record holder who wishes to tender its Notes in the
Offer but (x) whose Notes are not immediately available and will not be
available for tendering prior to the Expiration Date, or (y) who cannot deliver
its Notes, the Letter of Transmittal, or any other required documents, to the
Depositary prior to the Expiration Date, may effect a tender if:
(a) the tender is made by or through an Eligible
Institution; and
(b) prior to 5:00 p.m., New York City time, on the
Expiration Date, the Depositary receives from such Eligible
Institution a properly completed and duly executed Notice of
Guaranteed Delivery (by mail, hand delivery, facsimile
transmission or overnight courier) substantially in the form
provided herewith; and
(c) a properly completed and executed Letter of
Transmittal, as well as the certificate(s) representing all
tendered Notes in proper form for transfer, and all other
documents required by the Letter of Transmittal, are received
by the Depositary within two New York Stock Exchange trading
days after the date of receipt by the Depositary of such
Notice of Guaranteed Delivery and in no event later than two
business days after the Expiration Date.
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Under no circumstances will interest be paid by the Company by reason
of any delay in making payment to any person using the guaranteed delivery
procedures described above.
WITHDRAWAL RIGHTS
Tenders of Notes (or any portion of such Notes in integral multiples of
$1,000) in the Offer may be withdrawn at any time prior to 5:00 p.m., New York
City time on the business day after the Expiration Date.
Notes held through DTC. A DTC Participant who has transmitted its
acceptance through ATOP in respect of Notes held through DTC may, prior to 5:00
p.m., New York City time, on the business day after the Expiration Date,
withdraw the instruction given thereby by (i) withdrawing its acceptance through
ATOP, or (ii) delivering to the Depositary by mail, hand delivery or facsimile
transmission of notice of withdrawal of such instruction. Such notice of
withdrawal must contain the name and number of the DTC Participant, the
principal amount of Notes to which such withdrawal relates and the signature of
the DTC Participant. Withdrawal of such an instruction will be effective upon
receipt of such notice of withdrawal by the Depositary.
Notes held by Record Holders. A holder may withdraw its tender of Notes
from the Offer, prior to 5:00 p.m., New York City time, on the business day
after the Expiration Date, by delivering to the Depositary by mail, hand
delivery or facsimile transmission a notice of withdrawal. Any such notice of
withdrawal must (i) specify the name of the person who tendered the Notes to be
withdrawn, (ii) contain a description of the Notes to be withdrawn and identify
the certificate number or numbers shown on the particular certificates
evidencing such Notes and the aggregate principal amount represented by such
Notes and (iii) be signed by the holder of such Notes in the same manner as the
original signature on the Letter of Transmittal by which such Notes were
tendered (including any required signature guarantees), or be accompanied by (x)
documents of transfer in a form acceptable to the Company, in its sole
discretion and (y) a properly completed irrevocable proxy that authorized such
person to effect such revocation on behalf of such holder. If the Notes to be
withdrawn have been delivered or otherwise identified to the Depositary, a
signed notice of withdrawal is effective immediately upon receipt by the
Depositary even if physical release is not yet effected. Any Notes properly
withdrawn will be deemed to be not validly tendered for purposes of the Offer.
All signatures on a notice of withdrawal must be guaranteed by a
recognized participant in the Securities Transfer Agents Medallion Program, the
NYSE Medallion Signature Program or the Stock Exchange Medallion Program;
provided, however, that signatures on the notice of withdrawal need not be
guaranteed if the Notes being withdrawn are held for the account of an Eligible
Institution.
A withdrawal of an instruction or a withdrawal of a tender must be
executed by a DTC Participant or a holder, as the case may be, in the same
manner as the person's name appears on its transmission through ATOP or Letter
of Transmittal, as the case may be, to which such withdrawal relates. If a
notice of withdrawal is signed by a trustee, partner, executor, administrator,
guardian, attorney-in-fact, agent, officer of a corporation or other person
acting in a fiduciary or representative capacity, such person must so indicate
when signing and must submit with the revocation appropriate evidence of
authority to execute the notice of withdrawal. A holder or DTC Participant may
withdraw a tender only if such withdrawal complies with the provisions of this
Offer to Purchase.
A withdrawal of an instruction previously given pursuant to the
transmission of an acceptance through ATOP or a withdrawal of a tender by a
holder may be rescinded only by (i) a new transmission of acceptance through
ATOP, or (ii) execution and delivery of a new Letter of Transmittal, as the case
may be, in accordance with the procedures described herein.
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SOURCE OF FUNDS
The maximum amount of funds required by the Company to purchase all the
Notes pursuant to the Offer is approximately $101.0 million, plus accrued and
unpaid interest to the Payment Date. The Company does not currently have
sufficient funds available to consummate the Offer, and must find a means to
finance the amounts required to consummate the Offer prior to the Payment Date.
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The following discussion is a summary of certain anticipated United
States federal income tax consequences of the acceptance of the Offer by a
holder of a Note. This summary does not discuss all aspects of federal income
taxation which may be relevant to any particular holder of the Notes in light of
such holder's individual investment circumstances or to certain types of holders
subject to special tax rules (e.g., financial institutions, broker-dealers,
insurance companies, tax-exempt organizations, and foreign taxpayers), nor does
it address specific state, local or foreign tax consequences. This summary
assumes that the holders of the Notes have held their Notes as "capital assets"
under the Internal Revenue Code of 1986, as amended (the "Code"). This summary
is based on the Code and applicable Treasury Regulations, rulings,
administrative pronouncements and decisions as of the date hereof, all of which
are subject to change or differing interpretations at any time with possible
retroactive effect.
Each holder of Notes is urged to consult its own tax advisor to
determine the federal, state, local, foreign and other tax consequences to it of
the acceptance of the Offer.
SALE OF NOTES PURSUANT TO THE OFFER
The receipt of cash by a holder of the Notes in exchange for the Notes
in the Offer will be a taxable transaction for United States federal income tax
purposes. Such holder will recognize gain or loss in an amount equal to the
difference between (i) the amount of cash received (other than in respect of
accrued interest, which, if not yet included in income, will be taxed as
ordinary income) and (ii) such holder's adjusted tax basis in the Notes.
Generally, a holder's adjusted tax basis for a Note will be equal to the cost of
the Note to such holder, less payments (other than interest payments) received
on the Note. If applicable, a holder's tax basis in a Note also would be
increased by any market discount (discussed below) previously included in income
by such holder pursuant to an election to include market discount in gross
income currently as it accrues, and would be reduced by the accrual of
amortizable bond premium which the holder has previously elected to deduct from
gross income on an annual basis.
Subject to the market discount rules discussed below, such gain or loss
will be capital gain or loss and will be long-term gain or loss if such holder
has held such Notes for more than one year.
An exception to the capital gain treatment described above applies to a
holder who holds a Note with a "market discount." Market discount is the amount
by which the holder's basis in the Note immediately after its acquisition is
exceeded by the stated redemption price of the Note at maturity. However, a Note
will be considered to have no market discount if such excess is less than 1/4 of
1% of the stated redemption price of the Note at maturity multiplied by the
number of complete years from the holder's acquisition date of the Note to its
maturity date. The gain realized by the holder of a market discount Note on its
purchase by the Company will be treated as ordinary income to the extent that
market discount has accrued (on a straight line basis or, at the election of the
holder, on a constant interest basis) from the holder's acquisition date to the
date of sale, unless the holder has elected to include market discount in income
currently as it accrues. Gain in excess of such accrued market discount will be
subject to the capital gains rules described above.
INFORMATION REPORTING AND BACKUP WITHHOLDING
Payments made to a holder with respect to Notes purchased pursuant to
the Offer generally will be constitute reportable payments for U.S. federal
income tax purposes.
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<PAGE> 11
A holder who tenders its Notes may be subject to backup withholding at
the rate of 31% with respect to payments made with respect to such Notes unless
such holder (i) is a corporation or comes within certain other exempt categories
and, when required, demonstrates this fact or (ii) provides a correct taxpayer
identification number, certifies as to no loss of exemption from backup
withholding and otherwise complies with applicable requirements of the backup
withholding rules. A Substitute Form W-9 included in the Letter of Transmittal
should be completed in order to provide the information and certification
necessary to avoid backup withholding. Any amount withheld under the backup
withholding rules will be credited against the holder's U.S. federal income tax
liability.
THE FOREGOING SUMMARY DOES NOT DISCUSS ALL ASPECTS OF U.S. FEDERAL
INCOME TAXATION THAT MAY BE RELEVANT TO PARTICULAR HOLDERS OF NOTES IN LIGHT OF
THEIR PARTICULAR CIRCUMSTANCES AND INCOME TAX SITUATIONS. HOLDERS OF NOTES
SHOULD CONSULT THEIR TAX ADVISORS AS TO THE PARTICULAR TAX CONSEQUENCES TO THEM
OF THE OFFER, INCLUDING THE EFFECT OF ANY FEDERAL, STATE, LOCAL, FOREIGN OR
OTHER TAX LAWS.
THE DEPOSITARY
The Depositary for the Offer is U.S. Trust Company of Texas, N.A.. All
deliveries, correspondence and questions sent or presented to the Depositary
relating to the Offer should be directed to one of the addresses or telephone
numbers set forth on the last page of this Offer to Purchase. Requests for
information or additional copies of this Offer to Purchase and the related
Letter of Transmittal should be directed to the Depositary.
The Company will reimburse the Depositary for its reasonable
out-of-pocket expenses incurred in connection with the Offer.
Brokers, dealers, commercial banks and trust companies will be
reimbursed by the Company for customary mailing and handling expenses incurred
by them in forwarding material to their customers.
ADDITIONAL INFORMATION
The Company currently is subject to certain of the informational
requirements of the Securities Exchange Act of 1934, as amended, and in
accordance therewith, files reports and other information with the Commission.
Such reports and other information may be inspected and copied at the Public
Reference Section of the Commission at 450 Fifth Street, N.W., Washington, D.C.
20549, as well as the regional offices of the Commission at: 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661 and 7 World Trade Center, New York,
New York 10048 and may be accessed at the Commission's site on the world wide
web at http://www.sec.gov.
Copies of the materials referred to in the preceding paragraph
(including the Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1998 and its Current Report on Form 8-K dated April 7, 1999, both
of which are incorporated by reference ), as well as copies of any current
amendment or supplement to this Offer to Purchase, may be obtained by contacting
the Depositary at the address set forth on the last page of this Offer to
Purchase.
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The Depositary for the Offer is:
U.S. TRUST COMPANY OF TEXAS, N.A.
<TABLE>
<S> <C> <C>
BY MAIL: BY HAND DELIVERY: BY COURIER:
U.S. Trust Company of U.S. Trust Company of U.S. Trust Company of
Texas, N.A. Texas, N.A. Texas, N.A.
P.O. Box 841, Cooper Station 111 Broadway, Lower Level 770 Broadway, 13th Floor
New York, New York 10276 New York, New York 10006-1906 New York, New York 10003-9598
</TABLE>
CONFIRM BY TELEPHONE:
(800) 225-2398
(212) 420-6211 (facsimile)
(212) 780-0592 (facsimile)
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